UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
ARRIS GROUP, INC. EMPLOYEE SAVINGS PLAN
of
ARRIS GROUP, INC.
A Delaware Corporation
IRS Employer Identification No. 58-2588724
SEC File Number 000-31254
3871 Lakefield Drive
Suwanee, GA 30024
(770) 622-8400
ARRIS Group, Inc. Employee Savings Plan
Audited Financial Statements and Supplemental Schedule
As of December 31, 2004 and 2003 and Year ended December 31, 2004
Contents
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Financial Statements |
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EX-23 CONSENT OF ERNST & YOUNG LLP |
Report of Independent Registered Public Accounting Firm
The Board of Directors of ARRIS Group, Inc.
and the Trustees of the ARRIS Group, Inc.
Employee Savings Plan
We have audited the accompanying statements of net assets available for benefits of ARRIS Group, Inc. Employee Savings Plan as of December 31, 2004 and 2003, and the related statements of changes in net assets available for benefits for the year ended December 31, 2004. These financial statements are the responsibility of the Plans management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plans internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plans internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2004 and 2003, and the changes in its net assets available for benefits for the year ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2004, is presented for purposes of additional analysis and is not a required part of the financial statements but are supplementary information required by the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plans management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole.
Atlanta, Georgia
June 29, 2005
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ARRIS Group, Inc.
Employee Savings Plan
Statements of Net Assets Available for Benefits
December 31 | ||||||||
2004 | 2003 | |||||||
Assets |
||||||||
Investments, at fair value |
$ | 40,941,331 | $ | 35,011,182 | ||||
Contributions receivable: |
||||||||
Participants |
| | ||||||
Employer |
| 1,000,000 | ||||||
| 1,000,000 | |||||||
Net assets available for benefits |
$ | 40,941,331 | $ | 36,011,182 | ||||
See accompanying notes.
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ARRIS Group, Inc.
Employee Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2004
Additions to net assets attributed to: |
||||
Contributions: |
||||
Participants |
$ | 3,943,747 | ||
Employer |
| |||
3,943,747 | ||||
Dividends and interest |
794,602 | |||
Net realized and unrealized appreciation in fair value of
investments |
3,212,797 | |||
Total additions |
7,951,146 | |||
Deductions from net assets attributed to: |
||||
Benefits paid to participants |
(3,014,160 | ) | ||
Administrative expenses |
(6,837 | ) | ||
Total deductions |
(3,020,997 | ) | ||
Net increase |
4,930,149 | |||
Net assets available for benefits: |
||||
Beginning of year |
36,011,182 | |||
End of year |
$ | 40,941,331 | ||
See accompanying notes.
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ARRIS Group, Inc.
Employee Savings Plan
Notes to Financial Statements
December 31, 2004
1. Description of the Plan
The following description of ARRIS Group, Inc. Employee Savings Plan (the Plan) provides only general information. Participants should refer to the Summary Plan Description and Plan document for a more complete description of the Plans provisions.
General
The Plan, a defined contribution plan covering substantially all employees of ARRIS Group, Inc. (ARRIS or the Company), is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
Contributions
Participants may contribute up to 50% of their pretax compensation in increments of 0.1%, subject to Internal Revenue Service (IRS) limitations. Until June 30, 2003, the Company contributed an amount equal to a percent of compensation depending on the participating subsidiary and active participation in the ARRIS Group, Inc. Pension Plan (Pension Plan), with a maximum range of 1.5% to 6.0% of compensation. Effective July 1, 2003, participants that were previously active participants in the Pension Plan began receiving matching contributions calculated in a similar fashion as those that were not active participants in the Pension Plan.
From July 1, 2003 through December 31, 2004, the Company suspended employer-matching contributions. As such, no employer matching contributions were made under the Plan during that period, with the exception of a $1,000,000 one-time discretionary contribution (in aggregate) for eligible employees at the end of 2003. Beginning on January 1, 2005, the Company partially reinstated the employer-match, with contributions equal to 25% of the participants contribution, with a maximum of 1.5%.
Participant Accounts
Each participants account is credited with the participants contributions, allocations of the Companys matching contributions, allocable share of investment results, and allocable share of administrative expenses not otherwise paid by the Company.
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Investment results are allocated by fund based on the ratio of a participants account invested in a particular fund to all participants investments in that fund.
Vesting
Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company contribution portion of participant accounts plus actual earnings thereon is based on years of service. Participants are fully vested after three years of credited service.
Forfeitures
During 2004, approximately $25,910 of nonvested employer contributions were forfeited by terminated Plan participants. Forfeited balances of nonvested terminated participants accounts are used to reduce Company contributions. As of December 31, 2004 and 2003, unallocated assets (e.g., forfeitures) included in investments totaled $93,188 and $64,557, respectively.
Payment of Benefits
Upon termination of service, retirement, death or permanent disability, a participant may receive a lump-sum distribution equal to the nonforfeitable portion of his/her account.
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum of the lesser of $50,000 or 50% of their vested account balances. Loan terms range from one to five years or up to ten years for the purchase of a primary residence. The loans are secured by the balance in the participants account and bear interest at the prime rate, plus 1%, in effect at the time of the disbursement of the loan. Principal and interest are paid ratably through payroll deductions.
Administrative Expenses
Substantially all expenses of administering the Plan are paid by the Company, with the exception of certain fees associated with participant loans in which case the fees are paid from the employees investments.
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Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to terminate the Plan, subject to the provisions of ERISA. In the event of Plan termination, participants will become fully vested in their accounts. The value of the trust assets and the shares of all participants and beneficiaries will be determined as of the effective date of the termination. Distributions will be made as provided in the Plan.
2. Summary of Significant Accounting Policies
Basis of Presentation
The Plans financial statements have been prepared on the accrual basis of accounting.
Investment Valuation and Income Recognition
The Plans investments in mutual funds and ARRIS common stock are stated at fair value, which is based on quoted market prices on national exchanges. Participant loans are stated at carrying value, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
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3. Investments
The fair values of individual investments that represent 5% or more of the Plans net assets are as follows:
December 31 | ||||||||
2004 | 2003 | |||||||
MFS Retirement Service MFS Emerging Growth Fund-A |
$ | 2,746,848 | $ | 2,543,363 | ||||
MFS
Retirement Service MFS Bond Fund-A |
2,160,811 | 2,342,233 | ||||||
MFS Retirement Service MFS Research Fund-A |
2,254,080 | 2,018,902 | ||||||
MFS
Retirement Service MFS Global Equity Fund-A |
2,687,353 | 2,119,226 | ||||||
MFS
Retirement Service MFS Capital Opportunity Fund-A |
2,941,311 | 2,686,166 | ||||||
MFS
Retirement Service Mass Invest Growth Stock Fund-A |
4,421,315 | 4,196,009 | ||||||
MFS
Retirement Service MFS Total Return Fund-A |
4,015,752 | 3,428,325 | ||||||
MFS Retirement Service MFS Fixed Fund-Institutional |
4,915,264 | 4,697,432 | ||||||
Scudder Equity 500 Index Fund |
3,488,668 | 3,029,980 | ||||||
ARRIS Group, Inc. common stock |
2,468,250 | 1,956,815 |
The Plans investments (including investments bought, sold, and held during the year) appreciated in fair value as follows:
Year ended | ||||
December 31, | ||||
2004 | ||||
Mutual funds |
$ | 3,155,127 | ||
Common stock |
57,670 | |||
$ | 3,212,797 | |||
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated May 5, 2003, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust is exempt from taxation. Subsequent to this determination letter by the Internal Revenue Service, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax exempt.
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5. Transactions with Parties-in-Interest
Certain Plan investments are shares of funds managed by Heritage Trust Corporation, who is the Plans Trustee and MFS Retirement Services, Inc., who is the Plans record keeper and, therefore, these transactions qualify as party-in-interest transactions.
The Plan held 527,663 and 405,843 shares of the ARRIS common stock valued at $2,468,250 and $1,956,815 at December 31, 2004 and 2003, respectively.
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ARRIS Group, Inc.
Employee Savings Plan
EIN: 58-2588724 Plan Number: 002
Schedule H, Line 4(i)
Schedule of Assets (Held at End of Year)
December 31, 2004
(c) | (d) | |||||||
(b) | Description of | Current | ||||||
(a) | Identity of Issue | Investment | Value | |||||
* | MFS Retirement Services, Inc. | MFS Emerging Growth Fund-A; 85,946 shares |
$ | 2,746,848 | ||||
Scudder Equity 500 Index Fund | Scudder Equity 500 Index Fund; 25,709 shares |
3,488,668 | ||||||
* | MFS Retirement Services, Inc. | MFS Research Fund-A; 111,699 shares |
2,254,080 | |||||
* | MFS Retirement Services, Inc. | MFS Global Equity Fund-A; 106,768 shares |
2,687,353 | |||||
* | MFS Retirement Services, Inc. | MFS Capital Opportunity Fund-A; 220,488 shares |
2,941,311 | |||||
* | MFS Retirement Services, Inc. | Mass Invest Growth Stock Fund-A; 357,712 shares |
4,421,315 | |||||
* | MFS Retirement Services, Inc. | MFS Total Return Fund-A; 250,985 shares |
4,015,752 | |||||
* | MFS Retirement Services, Inc. | MFS Bond Fund-A; 164,195 shares |
2,160,811 | |||||
* | MFS Retirement Services, Inc. | MFS Fixed Fund-Institutional; 4,915,264 shares |
4,915,264 | |||||
* | MFS Retirement Services, Inc. | MFS High Income Fund-A; 127,787 shares |
512,415 | |||||
* | MFS Retirement Services, Inc. | MFS Government Security Fund-A; 21,172 shares |
205,579 | |||||
* | MFS Retirement Services, Inc. | MFS Mid Cap Growth Fund-A; 70,133 shares |
626,989 | |||||
* | MFS Retirement Services, Inc. | MFS International Value Fund-A; 17,950 shares |
437,622 | |||||
Franklin Templeton Investments | Franklin Balance Sheet Investment Fund-A; 28,227
shares |
1,644,529 | ||||||
Liberty Funds Services, Inc. | Columbia Acorn Fund-A; 43,508 shares |
1,128,163 | ||||||
* | MFS Retirement Services, Inc. | MFS Conservative Allocation Fund-A; 7,695 shares |
87,649 | |||||
* | MFS Retirement Services, Inc. | MFS Moderate Allocation-A; 10,430 shares |
128,291 | |||||
* | MFS Retirement Services, Inc. | MFS Growth Allocation-A; 20,841 shares |
273,023 | |||||
* | MFS Retirement Services, Inc. | MFS Aggressive Growth Allocation-A; 14,080 shares |
189,241 | |||||
Lord Abbett | Lord Abbett Mid-Cap Value-A; 47,900 shares |
1,083,977 | ||||||
Van Kampen Investments | Van Kampen Growth and Income; 89,294 shares |
1,802,852 | ||||||
* | ARRIS Group, Inc. | Common stock; 527,663 shares |
2,468,250 | |||||
* | Participants | Loans receivable; interest rates range 5.00% -
10.50%; maturities within 10 years |
721,349 | |||||
$ | 40,941,331 | |||||||
* Represents a party-in-interest to the Plan
Note: | Cost information (column d) has not been included as all investments are participant directed. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee savings plan) have duly caused this annual report to be signed by the undersigned thereunto duly authorized,
ARRIS GROUP, INC. EMPLOYEE SAVINGS PLAN |
||||
By: | Administrative Committee | |||
(Plan Administrator) | ||||
/s/ LAWRENCE A. MARGOLIS | ||||
Lawrence A. Margolis | ||||
Executive Vice President, Strategic Planning, Administration, and Chief Counsel |
Dated: June 29, 2005
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