ARRIS Announces Preliminary And Unaudited Fourth Quarter And Full Year 2012 Results

 ARRIS Announces Preliminary And Unaudited Fourth Quarter And Full Year 2012
                                   Results

PR Newswire

SUWANEE, Ga., Feb. 6, 2013

SUWANEE, Ga., Feb. 6, 2013 /PRNewswire/ --ARRIS Group, Inc. (NASDAQ: ARRS), 
today announced preliminary and unaudited financial results for the fourth
quarter and full year 2012.

Revenues in the fourth quarter 2012 were $344.0 million as compared to fourth
quarter 2011 revenues of $281.1 million and as compared to third quarter 2012
revenues of $357.5 million. Full year 2012 and 2011 revenues were $1,353.7
million and $1,088.7 million, respectively.

Adjusted net income (a non-GAAP measure) in the fourth quarter 2012 was $0.28
per diluted share, compared to $0.21 per diluted share for the fourth quarter
2011 and $0.22 per diluted share for the third quarter 2012. Adjusted net
income was $0.93 per diluted share for the full year 2012 and compares to
$0.81 per diluted share for the full year 2011.

GAAP net income in the fourth quarter 2012 was $0.13 per diluted share, as
compared to fourth quarter 2011 GAAP net loss of $(0.51) per diluted share and
third quarter 2012 GAAP net income of $0.15 per diluted share. Full year 2012
GAAP net income was $0.46 per diluted share as compared to GAAP net loss of
$(0.15) per diluted share in full year 2011. Significant GAAP items that have
been adjusted in computing adjusted net income and adjusted net income per
diluted share include: acquisition accounting impacts related to acquired
deferred revenue; amortization of intangible assets; long-term investment
impairment; loss on the sale of a product line; early pension settlement
costs; equity compensation; non-cash interest expense; acquisition and
restructuring charges; and certain discrete tax items. A reconciliation of
adjusted net income to GAAP net income per diluted share is attached to this
release and can also be found on the Company's website (www.arrisi.com).

Gross margin for the fourth quarter 2012 was 35.8%, which compares to the
fourth quarter 2011 gross margin of 37.9% and the third quarter 2012 gross
margin of 31.3%.

The Company ended the fourth quarter of 2012 with $584.0 million of cash
resources, which includes $530.1 million of cash, cash equivalents and
short-term investments, and $53.9 million of long-term marketable security
investments, as compared to $571.2 million, in the aggregate, at the end of
the third quarter of 2012. During 2012 the Company repurchased approximately
4.5 million of its shares for $51.9 million. The Company generated $11.8
million of cash from operating activities during the fourth quarter 2012 and
$84.4 million during the full year 2012, which compares to $60.9 million and
$113.2 million, respectively, during the same periods in 2011.

Order backlog at the end of the fourth quarter 2012 was $222.6 million as
compared to $148.5 million and $185.8 million at the end of the fourth quarter
2011 and the third quarter 2012, respectively. The Company's book-to-bill
ratio in the fourth quarter 2012 was 1.11 as compared to the fourth quarter
2011 of 0.98 and the third quarter 2012 of 0.82.

"I am delighted with our overall 2012 results. The past year has delivered a
24% year over year improvement in revenue and a 15% increase in our non-GAAP
EPS. Our R&D investments have allowed us to bring a number of new, well
received, products to market," said Bob Stanzione, ARRIS Chairman and CEO.
"Work on the previously announced acquisition of the Motorola Home business is
progressing and I am very excited about our prospects resulting from the
combination."

"2012 was a strong year for ARRIS. We continued to execute on our strategy,
which has resulted in improved performance," said David Potts, ARRIS EVP &
CFO. "With respect to the first quarter 2013, we now project that adjusted
non-GAAP revenues for the Company will be in the range of $350 to $370
million, which excludes a $13 million non-cash accounting impact associated
with the planned investment in ARRIS by Comcast as part of the pending
Motorola Home acquisition. As a result, GAAP revenues are expected to be in
the range of $337 to $357 million. We project that adjusted (non-GAAP) net
income per diluted share will be in the range of $0.22 to $0.26 and GAAP net
income per diluted share in the range of $0.02 to $0.06, reflecting a higher
mix of our CPE product line, as compared to the fourth quarter 2012. The EPS
guidance excludes any mark-to-market fair value adjustments related to the
Comcast investment."

ARRIS management will conduct a conference call at 5:00 pm EST, today,
Wednesday, February 6, 2013, to discuss these results in detail. You may
participate in this conference call by dialing (888) 713-4215 or (617)
213-4867 for international calls prior to the start of the call and providing
the ARRIS Group, Inc. name, conference pass code 61284341, and Bob Puccini as
the moderator. Please note that ARRIS will not accept any calls related to
this earnings release until after the conclusion of the conference call. A
replay of the conference call can be accessed approximately two hours after
the call through February 13, 2013 by dialing (888) 286-8010 or (617) 801-6888
and using the pass code 43355976. Live internet access to the call will be
available through the Investor Relations section of the Company's website at
www.arrisi.com. A replay will also be made available for a period of 12
months following the conference call on ARRIS' website at www.arrisi.com.

About ARRIS

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 converged IP video solutions, carrier-grade telephony, demand
driven video, next-generation advertising, network and workforce management
solutions, access and transport architectures and ultra high-speed data
services. Headquartered in Suwanee, GA, USA, ARRIS has R&D centers in Suwanee,
GA; Beaverton, OR; Lisle, IL; Kirkland, WA; State College, PA; Tel Aviv,
Israel; Wallingford, CT; Waltham, MA; Cork, Ireland; and Shenzhen, China, and
operates support and sales offices throughout the world. Information about
ARRIS products and services can be found at www.arrisi.com.

Forward-looking statements:

Statements made in this press release, including those related to:

  ogrowth expectations and business prospects;
  ocompletion of the Motorola Home business acquisition;
  orevenues and net income for the first quarter 2013 and beyond;
  oexpected sales levels and acceptance of new ARRIS products; and
  othe general market outlook and 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,

  oprojected results for the first quarter 2013 as well as the general
    outlook for 2013 are based on preliminary estimates, assumptions and
    projections that management believes to be reasonable at this time, but
    are beyond management's control;
  oARRIS' customers operate in a capital intensive consumer based industry,
    and the current economic uncertainty or changes in customer spending may
    adversely impact their ability or willingness to purchase the products
    that the Company offers;
  oARRIS' completion of the Motorola Home acquisition is subject to
    satisfaction of a number of conditions outside of its control, including
    receipt of necessary regulatory approvals; and
  obecause 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
current volatility in the capital markets; the potential impact on the
business of the Motorola Home acquisition, the retention of employees and the
ability of ARRIS to successfully integrate Motorola Home's business
opportunities, technology, personnel and operations; 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, 2012. 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.
PRELIMINARY CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
                         December   September  June 30,   March 31,  December
                         31,        30,                              31,
                         2012       2012       2012       2012       2011
ASSETS
Current assets:
Cash and cash            $       $       $       $       $   
equivalents              131,703    188,653    199,395    215,808    235,875
Short-term investments,  398,414    359,753    340,166    298,539    282,904
at fair value
Total cash, cash
equivalents and short    530,117    548,406    539,561    514,347    518,779
term investments
Restricted cash          4,722      4,665      3,942      3,943      4,101
Accounts receivable,     188,581    171,143    179,371    183,427    152,437
net
Other receivables       350        578        1,414      5,071      8,789
Inventories, net         133,848    137,496    102,361    105,114    115,912
Prepaids                 11,682     12,408     12,124     12,436     10,408
Current deferred income  24,944     20,787     21,972     22,068     22,048
tax assets
Other current assets     25,648     18,907     16,766     16,792     27,071
Total current assets     919,892    914,390    877,511    863,198    859,545
Property, plant and      54,378     54,593     56,175     57,810     61,375
equipment, net
Goodwill                 194,115    194,469    194,626    195,268    194,542
Intangible assets, net   94,529     102,258    110,000    117,444    124,823
Investments              86,164     57,483     70,967     82,968     71,095
Noncurrent deferred      47,431     49,589     47,228     42,106     38,433
income tax assets
Other assets             9,385      9,913      10,575     11,699     10,997
                         $        $        $        $        $  
                         1,405,894  1,382,695  1,367,082  1,370,493  1,360,810
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable         $      $      $      $      $    
                         45,719     49,061     44,800     54,576     40,671
Accrued compensation,
benefits and related     29,773     35,066     28,165     31,081     36,764
taxes
Accrued warranty         2,882      3,036      2,995      3,094      3,350
Deferred revenue         44,428     50,859     63,023     60,129     43,746
Current portion of LT    222,124    -          -          -          -
debt
Other accrued            25,795     21,768     23,980     31,054     33,325
liabilities
Total current            370,721    159,790    162,963    179,934    157,856
liabilities
Long-term debt, net of   -          218,943    215,823    212,765    209,766
current portion
Accrued pension          26,883     26,172     25,696     25,739     25,260
Accrued severance
liability, net of        4,119      3,895      3,758      3,884      4,191
current portion
Noncurrent income taxes  24,389     24,434     26,676     26,676     24,450
payable
Noncurrent deferred      351        334        340        352        337
income tax liabilities
Other noncurrent         19,043     20,362     21,039     22,372     22,745
liabilities
Total liabilities        445,506    453,930    456,295    471,722    444,605
Stockholders' equity:
Preferred stock          -          -          -          -          -
Common stock             1,488      1,479      1,473      1,467      1,449
Capital in excess of     1,285,575  1,270,561  1,259,946  1,247,763  1,245,115
par value
Treasury stock at cost   (306,330)  (306,330)  (295,960)  (280,724)  (254,409)
Unrealized gain (loss)
on marketable            206        74         211        149        (267)
securities
Unfunded pension         (8,558)    (10,231)   (10,231)   (10,231)   (10,231)
liability
Accumulated deficit      (11,809)   (26,604)   (44,468)   (59,469)   (65,268)
Cumulative translation   (184)      (184)      (184)      (184)      (184)
adjustments
Total stockholders'      960,388    928,765    910,787    898,771    916,205
equity
                         $        $        $        $        $  
                         1,405,894  1,382,695  1,367,082  1,370,493  1,360,810





ARRIS GROUP, INC.
PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
                       For the Three Months       For the Twelve Months
                       Ended December 31,         Ended December 31,
                       2012         2011          2012           2011
Net sales              $  344,003  $  281,076  $1,353,663     $1,088,685
Cost of sales          220,812      174,531       891,086        678,172
Gross margin           123,191      106,545       462,577        410,513
Operating expenses:
Selling, general, and
administrative         43,794       40,829        161,338        148,755
expenses
Research and           40,700       37,785        170,706        146,519
development expenses
Acquisition costs      5,131        2,730         5,870          3,205
Loss on sale of        -            -             337            -
product line
Restructuring charges  306          3,391         6,761          4,360
Impairment of goodwill -            88,633        -              88,633
& intangibles
Amortization of        7,729        6,817         30,294         33,649
intangible assets
                       97,660       180,185       375,306        425,121
Operating income      25,531       (73,640)      87,271         (14,608)
Other expense
(income):
Interest expense       4,546        4,258         17,797         16,939
Loss (gain) on         78           2,074         (1,405)        1,570
investments
Loss (gain) on foreign (131)        (705)         786            (580)
currency
Interest income        (993)        (715)         (3,241)        (3,154)
Loss on debt           -            -             -              19
redemption
Other (income)         (171)        (211)         (962)          (891)
expense, net
Income (loss) from
continuing operations  22,202       (78,341)      74,296         (28,511)
before income taxes
Income tax expense     7,407        (18,712)      20,837         (10,849)
(benefit)
Net income            $          $            $   53,459   $  (17,662)
                       14,795       (59,629)
Net income (loss) per
common share:
Basic                  $         $          $    0.47  $   
                       0.13        (0.51)                      (0.15)
Diluted                $         $          $    0.46  $   
                       0.13        (0.51)                      (0.15)
Weighted average
common shares:
Basic                  114,028      117,316       114,161        120,157
Diluted                117,013      117,316       116,514        120,157





ARRIS GROUP, INC.
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                   For the Three Months  For the Twelve Months
                                   Ended December 31,    Ended December 31,
                                   2012       2011       2012        2011
Operating Activities:
 Net income (loss)                 $      $       $        $  
                                   14,795     (59,629)  53,459      (17,662)
   Depreciation                    6,988      6,589      27,953      24,139
   Amortization of intangible      7,729      6,817      30,294      33,649
   assets
   Amortization of deferred        160        160        639         647
   finance fees
   Impairment of goodwill &        -          88,633     -           88,633
   intangibles
   Non-cash interest expense       3,181      2,941      12,358      11,545
   Deferred income tax provision   (3,085)    3,343      (13,989)    (12,144)
   (benefit)
   Deferred income tax related to
   goodwill & intangible           -          (25,584)   -           (25,584)
   impairment
   Stock compensation expense      6,712      5,108      27,906      22,055
   Provision for doubtful          186        201        240         200
   accounts
   Loss on debt retirement         -          -          -           19
   Loss on sale of product line    -          -          337         -
   Loss on disposal of fixed       42         10         82          16
   assets
   Loss (gain) on investments      78         2,074      (1,404)     1,570
   Excess tax benefits from        (935)      (679)      (3,549)     (3,668)
   stock-based compensation plans
 Changes in operating assets &
 liabilities, net of effects of
 acquisitions and disposals:
   Accounts receivable             (17,624)   17,794     (37,139)    (22,093)
   Other receivables               211        (1,618)    8,398       (1,635)
   Inventory                       3,648      7,862      (21,491)    (7,144)
   Accounts payable and accrued    (8,289)    6,765      (5,675)     433
   liabilities
   Other, net                      (2,004)    95         5,982       20,177
            Net cash provided by   11,793     60,882     84,401      113,153
            operating activities
Investing Activities:
 Purchases of investments          (180,582)  (49,833)   (415,930)   (277,937)
 Sales of investments              110,928    36,547     282,987     296,774
 Purchases of property &           (6,987)    (4,359)    (21,507)    (23,307)
 equipment
 Sale of property & equipment      126        14         139         84
 Acquisition, net of cash          -          (130,227)  -           (130,227)
 acquired ^(1)
 Sale of product line              -          -          3,249       -
            Net cash used in       (76,515)   (147,858)  (151,062)   (134,613)
            investing activities
Financing Activities:
 Early redemption of convertible   -          -          -           (4,984)
 notes
 Repurchase of common stock        -          (34,375)   (51,921)    (109,123)
 Excess income tax benefits from   935        679        3,549       3,668
 stock-based compensation plans
 Repurchase of shares to satisfy   (1,259)    (72)       (9,443)     (8,332)
 employee tax withholdings
 Fees and proceeds from issuance   8,096      1,960      20,304      22,985
 of common stock, net
            Net cash provided by
            (used in) financing    7,772      (31,808)   (37,511)    (95,786)
            activities
            Net increase
            (decrease) in cash and (56,950)   (118,784)  (104,172)   (117,246)
            cash equivalents
Cash and cash equivalents at       188,653    354,659    235,875     353,121
beginning of period
Cash and cash equivalents at end   $       $       $         $  
of period                          131,703    235,875    131,703    235,875
            Excludes $77,074 thousand of short and
   ^(1)     long-term investments acquired from BigBand
            in 2011





ARRIS GROUP, INC.
PRELIMINARY SUPPLEMENTAL SALES & NET INCOME RECONCILIATION
(in thousands, except per share data) (unaudited)
     (in
     thousands,    Q4 2012            YTD 2012            Q4 2011            YTD 2011
     except per
     share data)
                   Amount             Amount              Amount             Amount
     Sales        $                  $                   $                  $ 
                   344,003           1,353,663           281,076           1,088,685
     Highlighted
     items:
     Purchase
     accounting
     impacts of    432                3,412               4,332              4,332
     deferred
     revenue
     Sales
     excluding     $                  $                   $                  $ 
     highlighted   344,435           1,357,075           285,408           1,093,017
     items
                   Q4 2012            YTD 2012            Q4 2011            YTD 2011
                             Per                 Per                Per                 Per
                             Diluted             Diluted            Diluted             Diluted
                   Amount    Share    Amount     Share    Amount    Share    Amount     Share
     Net income    $                 $        $     $        $     $        $   
     (loss)        14,795   0.13     53,459           (59,629)          (17,662)  
                                                 0.46               (0.51)             (0.15)
     Highlighted
     items:
     Impacting
     gross margin:
     Purchase
     accounting
     impacts of    432       -        2,899      0.02     3,126     0.03     3,126      0.03
     deferred
     revenue
     Stock
     compensation  802       0.01     3,169      0.03     521       -        2,040      0.02
     expense
     Impacting
     operating
     expenses:
     Acquisition   5,131     0.04     5,870      0.05     2,730     0.02     3,205      0.03
     costs
     Restructuring 306       -        6,761      0.06     3,391     0.03     4,360      0.04
     Amortization
     of intangible 7,729     0.07     30,294     0.26     6,817     0.06     33,649     0.27
     assets
     Goodwill and
     intangibles   -         -        -          -        88,633    0.74     88,633     0.72
     impairment
     Loss of sale
     of product    -         -        337        -        -         -        -          -
     line
     Settlement
     charge -      3,064     0.03     3,064      0.03     -         -        -          -
     pension
     Stock
     compensation  5,910     0.05     24,737     0.21     4,586     0.04     20,014     0.16
     expense
     Impacting
     other
     (income) /
     expense:
     Non-cash
     interest      3,181     0.03     12,358     0.11     2,941     0.02     11,545     0.09
     expense
     Impairment of 67        -        533        -        3,000     0.03     3,000      0.02
     investment
     Loss on
     retirement of -         -        -          -        -         -        19         -
     debt
     Impacting
     income tax
     expense:
     Adjustments
     of income tax
     valuation     (475)     -        (4,658)    (0.04)   3,032     0.03     (2,885)    (0.02)
     allowances
     and other
     Tax impact
     related to
     goodwill and  -         -        -          -        (25,584)  (0.21)   (25,584)   (0.21)
     intangibles
     impairment
     Tax related
     to            (8,724)   (0.07)   (29,957)   (0.26)   (8,553)   (0.07)   (23,757)   (0.19)
     highlighted
     items above
     Total
     highlighted   17,423    0.15     55,407     0.48     84,640    0.71     117,365    0.96
     items
     Net income              $                $               $                $   
     excluding     $               $                $               $        
     highlighted   32,218   0.28     108,866   0.93     25,011   0.21     99,703     0.81
     items^(1)
     Weighted
     average                 114,028             114,161            117,316             120,157
     common shares
     - basic
     Weighted
     average                 117,013             116,514            119,609             122,555
     common shares
     - diluted
     See Notes to GAAP and
     Adjust Non-GAAP
     Financial Measures
^(1) Although net income for 2011 is a loss, dilutive shares are used for purposes of this
     calculation per share as earnings excluding highlighted items is net income.

Notes to GAAP to Adjusted Non-GAAP Financial Measures

The Company reports its financial results in accordance with accounting
principles generally accepted in the United States ("GAAP" or referred to
herein as "reported"). However, management believes that certain non-GAAP
financial measures provide management and other users with additional
meaningful financial information that should be considered when assessing our
ongoing performance. Our management regularly uses our supplemental non-GAAP
financial measures internally to understand, manage and evaluate our business
and make operating decisions. These non-GAAP measures are among the factors
management uses in planning for and forecasting future periods. Non-GAAP
financial measures should be viewed in addition to, and not as an alternative
to, the Company's reported results prepared in accordance with GAAP. Our
non-GAAP financial measures reflect adjustments based on the following items,
as well as the related income tax effects:

Purchase Accounting Impacts Related to Deferred Revenue: In connection with
our acquisition of BigBand, business combination rules require us to account
for the fair values of arrangements for which acceptance has not been
obtained, and post contract support in our purchase accounting. The non-GAAP
adjustment to our sales and cost of sales is intended to include the full
amounts of such revenues. We believe the adjustment to these revenues is
useful as a measure of the ongoing performance of our business. We have
historically experienced high renewal rates related to our support agreements
and our objective is to increase the renewal rates on acquired post contract
support agreements; however, we cannot be certain that our customers will
renew our contracts.

Implied Fair Value of Benefit Received by Comcast of Planned Investment in
ARRIS: In connection with our pending acquisition of Motorola Home, Comcast
was given an opportunity to invest in ARRIS. The accounting guidance requires
that we record the implied fair value of benefit received by Comcast as a
reduction in revenue. Until the closing of the deal, changes in the value of
the planned investment will be marked to market and flow through other expense
(income). We have excluded the effect of the implied fair value in
calculating our non-GAAP financial measures. We believe it is useful to
understand the effects of these items on our total revenues and other expense
(income).

Stock-Based Compensation Expense: We have excluded the effect of stock-based
compensation expenses in calculating our non-GAAP operating expenses and net
income measures. Although stock-based compensation is a key incentive offered
to our employees, we continue to evaluate our business performance excluding
stock-based compensation expenses. We record non-cash compensation expense
related to grants of options and restricted stock. Depending upon the size,
timing and the terms of the grants, the non-cash compensation expense may vary
significantly but will recur in future periods.

Acquisition Costs: We have excluded the effect of acquisition related and
other expenses and the effect of restructuring expenses in calculating our
non-GAAP operating expenses and net income measures. We incurred significant
expenses in connection with our recent acquisition of BigBand, which we
generally would not have otherwise incurred in the periods presented as part
of our continuing operations. Acquisition related expenses consist of
transaction costs, costs for transitional employees, other acquired employee
related costs, and integration related outside services. We believe it is
useful to understand the effects of these items on our total operating
expenses.

Restructuring Costs: We have excluded the effect of restructuring charges in
calculating our non-GAAP operating expenses and net income measures.
Restructuring expenses consist of employee severance, abandoned facilities,
and other exit costs. We believe it is useful to understand the effects of
these items on our total operating expenses.

Loss on Sale of Product Line: We have excluded the effect of a loss on the
sale of a product line in calculating our non-GAAP operating expenses and net
income measures. We believe it is useful to understand the effects of these
items on our total operating expenses.

Amortization of Intangible Assets: We have excluded the effect of amortization
of intangible assets in calculating our non-GAAP operating expenses and net
income measures. Amortization of intangible assets is non-cash, and is
inconsistent in amount and frequency and is significantly affected by the
timing and size of our acquisitions. Investors should note that the use of
intangible assets contributed to our revenues earned during the periods
presented and will contribute to our future period revenues as well.
Amortization of intangible assets will recur in future periods.

Impairment of Goodwill and Intangibles: We have excluded the effect of the
estimated impairment of goodwill and intangible assets in calculating our
non-GAAP operating expenses and net income (loss) measures. Although an
impairment does not directly impact the Company's current cash position, such
expense represents the declining value of the technology and other intangibles
assets that were acquired. We exclude these impairments when significant and
they are not reflective of ongoing business and operating results.

Settlement Charge - Pension: In an effort to reduce volatility and
administrative expense in connection with the Company's pension plan, we have
offered certain participants an opportunity to voluntarily elect an early
payout of their pension benefits. We exclude this charge in Non-GAAP
measures, as this is a one-time charge that is not considered by management in
their review of financial results.

Non-Cash Interest on Convertible Debt: We have excluded the effect of non-cash
interest in calculating our non-GAAP operating expenses and net income
measures. We record the accretion of the debt discount related to the equity
component non-cash interest expense. We believe it is useful to understand the
component of interest expense that will not be paid out in cash.

Impairment of Investment: We have excluded the effect of an
other-than-temporary impairment of a cost method investment in calculating our
non-GAAP financial measures. We believe it is useful to understand the effect
of this non-cash item in our other expense (income).

Loss (Gain) on Retirement of Debt: We have excluded the effect of the loss
(gain) on retirement of debt in calculating our non-GAAP financial measures.
We believe it is useful for investors to understand the effect of this
non-cash item in our other expense (income).

Income Tax Expense (Benefit): We have excluded the tax effect of the non-GAAP
items mentioned above. Additionally, we have excluded the effects of certain
tax adjustments related to state valuation allowances, research and
development tax credits and provision to return differences.

SOURCE ARRIS Group, Inc.

Website: http://www.arrisi.com
Contact: Bob Puccini, Investor Relations, +1-720-895-7787,
bob.puccini@arrisi.com