ARRS Arris International Plc - Ordinary Shares

SUWANEE, Ga., Feb. 14 /PRNewswire-FirstCall/ -- ARRIS Group, Inc. (NASDAQ:ARRS), a global technology leader in the development of advanced cable telephony, next generation high-speed data, demand driven video solutions, operations software and broadband access equipment, today announced preliminary and unaudited financial results for the fourth quarter and full year 2007. Fourth quarter 2007 revenues of $249.6 million grew by $15.0 million or 6%, as compared to the fourth quarter 2006, but decreased by $5.1 million or 2% as compared to third quarter 2007. Fourth quarter 2007 revenues included approximately $6.6 million of post acquisition sales (December 15, 2007 - December 31, 2007) of former C-COR products. The sequential decline in revenue is predominantly the result of lower sales of E-MTAs. For full year 2007, revenues were $992.2 million, up $100.6 million or approximately 11% as compared to full year 2006 revenues. The revenue growth in 2007 was a result of continuing demand for the Company's Voice over IP (VoIP) and high speed data and video products as cable operators aggressively sign up customers for the "triple-play" offerings of voice, data and video services. Non-GAAP net income in the fourth quarter 2007 was $0.16 per diluted share, as compared to the fourth quarter 2006 of $0.32 per diluted share, and as compared to the third quarter 2007 of $0.21 per diluted share. The sequential decline quarter over quarter reflects primarily the lower revenue as well as lower margins associated with the introduction of the ARRIS Universal EdgeQAM (D5) as well as the dilutive effects of the December 2007 closing of the C-COR transaction. GAAP net income in the fourth quarter 2007 was $0.08 per diluted share, as compared to the fourth quarter 2006 of $0.64 per diluted share, and as compared to the third quarter 2007 of $0.25 per diluted share. Net income per diluted share on a non-GAAP and GAAP basis for the full year 2007 were $0.79 and $0.87, respectively, and compare to $1.04 and $1.30, respectively, in 2006. 2007 net income reflects income tax expense of approximately $41.0 million, as compared to an income tax benefit of $34.8 million in 2006 resulting from the reduction of deferred tax valuation allowances during the fourth quarter 2006. Significant non-GAAP items include: in-process research and development expense, equity compensation expense, amortization of intangibles, restructuring/product line exit accruals and adjustments, certain acquisition gains and expenses, and certain tax benefits and costs. A reconciliation of GAAP to non-GAAP earnings per share is attached to this release and also can be found on the Company's website (http://www.arrisi.com/). In conjunction with the acquisition of C-COR, the Company implemented a new organizational structure in December, 2007. As a result, effective with fourth quarter 2007 results, ARRIS began reporting financial results in three segments: Broadband Communications Systems; Access, Transport and Supplies, and Media & Communication Systems. A summary of quarterly revenue and gross margin for each of the segments for 2007 can be found on the Company's website. The Company ended 2007 with $391.8 million of cash and short-term investments, which compares to $549.2 million at the end of 2006. The Company generated $52.8 million of cash from operating activities in the fourth quarter and $63.4 million for the year. The Company used $367.6 million of cash in the fourth quarter for the acquisition of C-COR, including related expenses. The Company acquired $120.2 million of cash and short-term investments in connection with the C-COR acquisition. Order backlog at the end of 2007 was $136.7 million that included approximately $42 million of open orders from C-COR for delivery in the next twelve months. Excluding the impacts from the C-COR acquisition, the Company's book to bill ratio in the fourth quarter was approximately 1.00. At the completion of the acquisition of C-COR, the Company recorded the fair value of the assets acquired and liabilities assumed as a result of the transaction. As previously described, the revaluation of certain items will have an impact on future results when compared to historic C-COR results; most notably deferred revenue, deferred cost, amortization expense, inventory and in-process research and development expense. A summary of the anticipated impact of certain key purchase accounting items can be found on the Company's website. "2007 was a year of growth and outstanding execution on all fronts for ARRIS," said Bob Stanzione, ARRIS Chairman & CEO. "Our products achieved continued success throughout the world as we maintained our leadership position in key technology areas. 2007 was also a momentous year for ARRIS. We were able to add significant new products, enhance key customer relationships and substantially add to our outstanding talent pool as we successfully completed the acquisition of C-COR. With the integration of the two companies successfully underway, we now have a more complete portfolio of market leading voice, data, video products and software solutions that will help our customers meet the growing competitive forces that they are facing. Our new technologies have gained early technical and market acceptance and our strong cash position enabled us to make a key strategic acquisition for the future. We are pleased with the acquisition of C-COR and the opportunities in front of the new, combined Company." "As we enter 2008, we believe certain short-term dynamics may impact us, particularly in the first half of the year," said David Potts, ARRIS EVP & CFO. "While we continue to see robust demand from the majority of our customer base, we anticipate that sales to our largest customer will be lower. As a result, we now project that revenues for the Company in the first quarter 2008 will be in the range of $270 to $285 million with non-GAAP net income per diluted share in the range of $0.08 to $0.12 and GAAP net income per diluted share, in the range of $0.00 to $0.04. It is important to note that when comparing both our non-GAAP and GAAP guidance to the sum of historic ARRIS and C-COR results, earnings per share in the first quarter will be adversely affected by approximately $0.03 as a result of purchase accounting impacts, in particular deferred revenue. Looking forward, we continue to believe that demand for our products will be strong as our customers compete to deliver increasingly content rich services to their subscribers." ARRIS management will conduct a conference call at 5:00pm EST, today, Thursday, February 14, 2008, to discuss these results in detail. You may participate in this conference call by dialing 888-713-4217 or 617-213-4869 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference passcode 97486089 and Jim Bauer as the moderator. Please note that ARRIS will not accept any calls related to this earnings release until after the conclusion of the 5:00pm EST conference call. A replay of the conference call can be accessed approximately two hours after the call through Tuesday, February 19, 2008 by dialing 888-286-8010 or 617-801-6888 for international calls and using the passcode 79832180. A replay also will be made available for a period of 12 months following the conference call on ARRIS' website at http://www.arrisi.com/. ARRIS is a global communications technology company specializing in the design, engineering and supply of technology supporting triple and quad-play broadband services for residential and business customers around the world. The company supplies broadband operators with the tools and platforms they need to deliver reliable telephony, demand driven video, next-generation advertising and high-speed data services. ARRIS products expand and help grow network capacity with access and outside plant construction equipment, reliably deliver voice, video and data services and assure optimal service delivery for end customers. Headquartered in Suwanee, Georgia, USA, ARRIS has R&D centers in Atlanta, Chicago, Beaverton, State College, Wallingford, Ireland and China, and operates support and sales offices throughout the world. Information about ARRIS products and services can be found at http://www.arrisi.com/. Forward-looking statements: Statements made in this press release, including those related to: -- first quarter and 2008 revenues and net income; -- income tax expense impacts; -- impacts related to the C-COR Incorporated acquisition; -- anticipated sales to Comcast; -- expected sales levels and acceptance of certain ARRIS products; -- the general market outlook; and -- the outlook for industry trends are forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Among other things, -- projected results for the first quarter as well as the general outlook for 2008 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; -- 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 In addition to the factors set forth elsewhere in this release, other factors that could cause results to differ from current expectations include: the uncertain current economic climate and its impact on our customers' plans and access to capital; 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, including its Form 10-Q for the quarter ended September 30, 2007. In providing forward-looking statements, the Company expressly disclaims 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, 2007 2007 2007 (unaudited) (unaudited) (unaudited) ASSETS Current assets: Cash and cash equivalents $290,206 $370,708 $444,020 Short-term investments, at fair value 101,602 217,845 160,315 Total cash, cash equivalents and short-term investments 391,808 588,553 604,335 Restricted cash 6,977 3,142 3,136 Accounts receivable, net 166,953 130,216 120,680 Other receivables 4,330 5,000 6,845 Inventories, net 131,792 118,227 90,542 Prepaids 5,856 3,626 3,250 Current deferred income tax assets 44,939 19,602 23,239 Other current assets 4,841 13,703 10,773 Total current assets 757,496 882,069 862,800 Property, plant and equipment, net 59,156 31,251 30,196 Goodwill 455,352 150,569 150,569 Intangibles, net 269,893 115 172 Investments 6,285 8,916 3,151 Noncurrent deferred income tax assets - 16,238 17,294 Other assets 10,308 9,084 7,517 $1,558,490 $1,098,242 $1,071,699 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $58,852 $35,540 $46,015 Accrued compensation, benefits and related taxes 26,177 18,857 14,631 Accrued warranty 14,370 7,346 7,829 Short-term debt and capital leases 35,397 - - Other accrued liabilities 50,503 27,127 28,001 Total current liabilities 185,299 88,870 96,476 Long-term debt and capital leases, net of current portion 276,773 276,000 276,000 Accrued pension 10,455 11,810 12,778 Noncurrent income tax payable 5,686 5,262 4,334 Noncurrent deferred income tax liabilities 41,796 - - Other long-term liabilities 12,714 5,143 5,288 532,723 387,085 394,876 Stockholders' equity: Preferred stock - - - Common stock 1,356 1,104 1,102 Capital in excess of par value 1,093,498 789,348 782,717 Treasury stock (572) - - Unrealized gain (loss) on marketable securities 20 (151) - Unfunded pension losses (3,358) (4,462) (4,462) Accumulated deficit (64,993) (74,498) (102,350) Unrealized loss on derivatives - - - Cumulative translation adjustments (184) (184) (184) Total stockholders' equity 1,025,767 711,157 676,823 $1,558,490 $1,098,242 $1,071,699 ARRIS GROUP, INC. CONSOLIDATED BALANCE SHEETS (in thousands) March 31, December 31, 2007 2006 (unaudited) (audited) ASSETS Current assets: Cash and cash equivalents $441,317 $461,618 Short-term investments, at fair value 134,610 87,575 Total cash, cash equivalents and short-term investments 575,927 549,193 Restricted cash 3,128 3,124 Accounts receivable, net 125,756 115,304 Other receivables 9,888 2,556 Inventories, net 78,186 94,226 Prepaids 3,500 3,547 Current deferred income tax assets 26,818 29,285 Other current assets 4,001 3,717 Total current assets 827,204 800,952 Property, plant and equipment, net 28,076 28,287 Goodwill 150,569 150,569 Intangibles, net 230 288 Investments 3,569 3,520 Noncurrent deferred income tax assets 18,639 20,874 Other assets 7,790 9,067 $1,036,077 $1,013,557 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $41,337 $60,853 Accrued compensation, benefits and related taxes 9,991 23,269 Accrued warranty 7,968 8,234 Short-term debt and capital leases - - Other accrued liabilities 32,411 29,057 Total current liabilities 91,707 121,413 Long-term debt and capital leases, net of current portion 276,000 276,000 Accrued pension 12,420 12,061 Noncurrent income tax payable 4,334 3,041 Noncurrent deferred income tax liabilities - - Other long-term liabilities 5,606 5,621 390,067 418,136 Stockholders' equity: Preferred stock - - Common stock 1,096 1,089 Capital in excess of par value 773,839 761,500 Treasury stock - - Unrealized gain (loss) on marketable securities 1,345 1,297 Unfunded pension losses (4,462) (4,462) Accumulated deficit (125,624) (163,268) Unrealized loss on derivatives - (551) Cumulative translation adjustments (184) (184) Total stockholders' equity 646,010 595,421 $1,036,077 $1,013,557 ARRIS GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) For the Three Months For the Twelve Months Ended December 31, Ended December 31, 2007 2006 2007 2006 (Unaudited) (Unaudited) (Unaudited) (Audited) Net sales $249,561 $234,571 $992,194 $891,551 Cost of sales 185,636 165,919 718,312 639,473 Gross margin 63,925 68,652 273,882 252,078 Gross margin % 25.6% 29.3% 27.6% 28.3% Operating expenses: Selling, general, and administrative expenses 25,471 22,680 99,879 87,203 Research and development expenses 17,549 15,580 71,233 66,040 Restructuring and impairment charges 39 1,863 460 2,210 Acquired in-process research and development 6,120 - 6,120 - Amortization of intangibles 2,105 57 2,278 632 51,284 40,180 179,970 156,085 Operating income 12,641 28,472 93,912 95,993 Other expense (income): Interest expense 1,611 926 6,614 976 Loss (gain) on investments and notes receivable 282 - (4,596) 29 Loss (gain) on foreign currency (16) (417) 48 (1,360) Interest income (5,527) (4,817) (24,776) (11,174) Gain related to terminated acquisition, net of expenses - - (22,835) - Other (income) expense, net 39 (1) 370 268 Income from continuing operations before income taxes 16,252 32,781 139,087 107,254 Income tax expense (benefit) 6,556 (37,374) 40,951 (34,812) Net income from continuing operations 9,696 70,155 98,136 142,066 Income (loss) from discontinued operations (126) 97 204 221 Net income $9,570 $70,252 $98,340 $142,287 Net income per common share - basic: Net income $0.08 $0.65 $0.89 $1.33 Net income per common share - diluted: Net income $0.08 $0.64 $0.87 $1.30 Weighted average common shares: Basic 115,261 108,045 110,843 107,268 Diluted 117,060 109,739 113,027 109,490 ARRIS GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Three Months For the Twelve Months Ended December 31, Ended December 31, 2007 2006 2007 2006 (Unaudited) (Unaudited) (Unaudited) (Audited) Operating Activities: Net income $9,570 $70,252 $98,340 $142,287 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 2,849 2,552 10,852 9,787 Amortization of intangibles 2,105 57 2,278 632 Stock compensation expense 2,193 2,355 10,903 9,423 Deferred income tax and income taxes payable 901 (50,159) 7,525 (50,159) Amortization of deferred finance fees 280 139 1,116 139 Provision for doubtful accounts (344) 74 140 (174) Gain related to previously written off receivables - - (377) (1,573) Loss (gain) on disposal of fixed assets 15 (59) 182 (61) Gain on investments 282 - (4,596) 32 Gain on discontinued operations 125 (97) (205) (221) Gain related to terminated acquisition, net of expenses - - (22,835) - Write-off of acquired in- process R&D 6,120 - 6,120 - Changes in operating assets & liabilities, net of effects of acquisitions and disposals: Accounts receivable (1,963) 5,362 (17,359) (32,153) Other receivables 670 3,065 (1,774) (2,270) Inventory 14,499 6,836 (9,502) 19,683 Accounts payable and accrued liabilities 13,641 32,591 (10,744) 50,200 Excess tax benefits from stock-based compensation plans (888) (8,907) (9,157) (9,445) Prepaids and other, net 2,779 952 2,517 8,114 Net cash provided by operating activities 52,834 65,013 63,424 144,241 Investing Activities: Purchases of property, plant, and equipment (3,934) (5,648) (15,072) (12,728) Cash proceeds from sale of property & equipment - 190 3 212 Cash received related to terminated acquisition, net of expenses paid - 0 10,554 0 Cash paid for hedge related to terminated acquisition - - (26,469) - Cash paid for acquisition, net of cash acquired (318,875) - (318,875) - Cash proceeds from hedge related to terminated acquisition - - 38,750 - Purchases of available-for- sale securities (60,740) (77,575) (356,366) (129,475) Disposals of available-for- sale securities 249,315 20,000 412,217 96,150 Net cash used in investing activities (134,234) (63,033) (255,258) (45,841) Financing Activities: Payment of debt and capital lease obligations (19) - (19) - Issuance costs related to stock (653) - (653) - Proceeds from issuance of debt - 276,000 - 276,000 Deferred financing costs paid - (7,760) - (7,760) Excess tax benefits from stock- based compensation plans 888 8,907 9,157 9,445 Employer repurchase of shares to satisfy minimum tax withholdings (1) - (3,093) (2,019) Proceeds from issuance of stock and other 683 2,520 15,030 12,266 Net cash provided by financing activities 898 279,667 20,422 287,932 Net increase (decrease) in cash and cash equivalents (80,502) 281,647 (171,412) 386,332 Cash and cash equivalents at beginning of period 370,708 179,971 461,618 75,286 Cash and cash equivalents at end of period $290,206 $461,618 $290,206 $461,618 ARRIS GROUP, INC. Supplemental First Quarter Net Income Reconciliation (unaudited) Q1 EPS 2008 Guidance Estimated GAAP EPS $0.00 - $0.04 Reconciling Items Amortization of Intangibles 0.06 Stock Compensation Expense 0.01 Integration Costs 0.01 Subtotal $0.08 Estimated Non GAAP EPS $0.08 - $0.12 See the GAAP to non-GAAP EPS reconciliation for a discussion regarding management's reasoning for providing this non-GAAP financial measure ARRIS GROUP, INC. SUPPLEMENTAL NET INCOME RECONCILIATION (in thousands, except per share data) (unaudited) Q1 2007 Q2 2007 Q3 2007 Per Per Per Diluted Diluted Diluted Amount Share Amount Share Amount Share Net income $37,644 $0.34 $23,274 $0.21 $27,852 $0.25 Highlighted items: Impacting gross margin: Stock compensation expense 165 - 229 - 196 - Write-off discontinued inventory - - - - - - Impacting operating expenses: Gains related to previously written off receivables (377) - - - - - Write-off of in- process research and development Acquisition Costs Amortization of intangibles 58 - 58 - 57 - Stock compensation expense 2,491 0.02 3,149 0.03 2,480 0.02 Impacting net income (loss) from continuing operations: Gains related to terminated acquisition, net of expenses (22,835) (0.21) - - - - Gain on investments - - (1,345) (0.01) (3,519) (0.03) Impacting discontinued operations: Gains related to previously written off receivables - - - - (330) - Impacting income tax expense: Adjustments of income tax valuation allowances and research & development credits and other (3,246) (0.03) - - (3,466) (0.03) Tax related to highlighted items above 7,754 0.07 (670) (0.01) 423 - Total highlighted items (15,990) (0.14) 1,421 0.01 (4,159) (0.04) Net income excluding highlighted items $21,654 $ 0.20 $24,695 $ 0.22 $23,693 $ 0.21 Weighted average common shares - diluted 110,988 111,698 112,085 Q1 2006 Q2 2006 Q3 2006 Per Per Per Diluted Diluted Diluted Amount Share Amount Share Amount Share Net income $20,723 $0.19 $24,750 $0.23 $26,562 $0.24 Highlighted items: Impacting gross margin: Stock compensation expense 108 - 112 - 144 - Impacting operating expenses: Gains related to previously written off receivables (475) - (1,098) (0.01) - - Restructuring charges - adjustments to existing accruals 328 - 15 - 4 - Amortization of intangibles 218 - 219 - 138 - Stock compensation expense 2,140 0.02 2,281 0.02 2,283 0.02 Impacting discontinued operations: Restructuring charges - adjustments to existing accruals (21) - (88) - (15) - Impacting net income (loss) from continuing operations: Adjustments of income tax valuation allowances and research & development credits - - - - - - Total highlighted items 2,298 0.02 1,441 0.01 2,554 0.02 Net income excluding highlighted items $23,021 $ 0.21 $26,191 $ 0.24 $29,116 $ 0.27 Weighted average common shares - diluted 109,345 109,670 109,090 Q4 2007 YTD 2007 Per Diluted Per Diluted Amount Share Amount Share Net income $9,570 $0.08 $98,340 $0.87 Highlighted items: Impacting gross margin: Stock compensation expense 195 - 785 0.01 Write-off discontinued inventory 1,046 0.01 1,046 0.01 Impacting operating expenses: Gains related to previously written off receivables - - (377) - Write-off of in-process research and development 6,120 0.05 6,120 0.05 Acquisition Costs 1,415 0.01 1,415 0.01 Amortization of intangibles 2,105 0.02 2,278 0.02 Stock compensation expense 1,998 0.02 10,118 0.09 Impacting net income (loss) from continuing operations: Gains related to terminated acquisition, net of expenses - - (22,835) (0.20) Gain on investments - - (4,864) (0.04) Impacting discontinued operations: Gains related to previously written off receivables - - (330) - Impacting income tax expense: Adjustments of income tax valuation allowances and research & development credits and other (1,247) (0.01) (7,959) (0.07) Tax related to highlighted items above (2,373) (0.02) 5,134 0.05 Total highlighted items 9,259 0.08 (9,469) (0.08) Net income excluding highlighted items $18,829 $0.16 $88,871 $0.79 Weighted average common shares - diluted 117,060 113,027 Q4 2006 YTD 2006 Per Diluted Per Diluted Amount Share Amount Share Net income $70,252 $0.64 $142,287 $1.30 Highlighted items: Impacting gross margin: Stock compensation expense 142 - 506 - Impacting operating expenses: Gains related to previously written off receivables - - (1,573) (0.01) Restructuring charges - adjustments to existing accruals 1,863 0.02 2,210 0.02 Amortization of intangibles 58 - 633 0.01 Stock compensation expense 2,213 0.02 8,917 0.08 Impacting discontinued operations: Restructuring charges - adjustments to existing accruals (97) - (221) - Impacting net income (loss) from continuing operations: Adjustments of income tax valuation allowances and research & development credits (38,791) (0.35) (38,791) (0.35) Total highlighted items (34,612) (0.32) (28,319) (0.26) Net income excluding highlighted items $35,640 $0.32 $113,968 $1.04 Weighted average common shares - diluted 109,739 109,490 ARRIS believes that presenting net income and related per share amounts adjusted for the items detailed above provides meaningful information that will allow investors to more easily understand ARRIS' financial performance and compare its period-to-period results. With respect to stock compensation expense, ARRIS records non-cash compensation expense related to grants of options and restricted stock. Depending upon the size, timing and the terms of the grants, this non-cash compensation expense may vary significantly. In prior periods, ARRIS highlighted significant losses related to bad debt expense associated with certain customers. ARRIS recognized gains in Q1 of 2006 and 2007 and then again in Q3 of 2007 associated with these previously written off receivables. During the 4th quarter of 2007 ARRIS completed the C-COR acquisition. Due to the acquisition we acquired in process research and development of $6.2 million which was written off during the 4th quarter. With respect to amortization of intangibles, the intangibles being amortized relate to our recent acquisition of C-COR. The $0.9 and $0.1 million relate to inventory of a product line that management decided to discontinue. The restructuring charge and discontinued operations adjustments reflect items that, although they or similar items might recur, are of a nature and magnitude that identifying them separately provides investors with a greater ability to project ARRIS' future performance. In the second quarter of 2007, ARRIS realized a gain before tax of $1.3 million on its deferred compensation asset that had been previously recorded as an unrealized gain on the balance sheet. During the third quarter of 2007, ARRIS bought and sold investments and realized a gain of $3.5 million. In the third quarter of 2007, a tax benefit of approximately $3.5 million was recorded for a reversal of valuation allowances and research and development tax credits related to a tax credit study that was undertaken for prior years (2001 - 2006). During the first quarter of 2007, ARRIS announced that it entered into a transaction agreement with TANDBERG Television ASA, in which ARRIS was to buy all the outstanding shares of TANDBERG. ARRIS was subsequently outbid by another buyer and the transaction agreement was terminated during the first quarter 2007. ARRIS recorded gains, net before tax, of $22.8 million related to the termination of the transaction (termination fee, foreign exchange gains, and expenses). The net termination fee resulted in a capital gain which provided greater access to prior tax capital losses that had previously been viewed as more likely than not unrealizable. As a result, net income tax valuation allowances totaling $3.2 million were reversed in the first quarter 2007. During the fourth quarter 2007, ARRIS recorded severance costs of approximately $0.5 million related to a reduction in the legacy ARRIS workforce. The workforce reduction was due to an overlap of personnel following the C-COR acquisition. Also during the fourth quarter 2007, ARRIS recorded incremental costs of $0.9 million as a result of the C-COR acquisition. Lastly, during the fourth quarter of 2006, ARRIS reduced a large portion of the valuation allowances related to deferred income tax assets, based on current judgment that the benefits will be realized, and recorded a tax benefit related to research and development credits for the periods 2001 - 2006. In assessing operating performance and preparing budgets and forecasts, ARRIS' management considers performance after making these adjustments and believes that providing investors with the same information provides greater transparency and insight into management's analysis. ARRIS expects to continue providing similar information in the future with schedules reconciling the differences between GAAP and non-GAAP financial measures. DATASOURCE: ARRIS Group, Inc. CONTACT: Jim Bauer, Investor Relations of ARRIS Group, Inc., +1-678-473-2647, Web site: http://www.arrisi.com/

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