ARRIS GROUP, INC.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
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þ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2005
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, 2005 and 2004 and Year ended December 31, 2005
Contents
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, 2005 and 2004, and the related statement of changes
in net assets available for benefits for the year ended December 31, 2005. 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, 2005 and 2004, and the
changes in its net assets available for benefits for the year ended December 31, 2005, 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, 2005, is presented for purposes of additional analysis and is not a required part of the
financial statements but is 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, is fairly stated in all material respects in relation to the
financial statements taken as a whole.
Atlanta, Georgia
June 27, 2006
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ARRIS Group, Inc.
Employee Savings Plan
Statements of Net Assets Available for Benefits
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December 31, |
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2005 |
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2004 |
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Assets |
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Investments, at fair value |
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$ |
45,586,091 |
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$ |
40,941,331 |
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Contributions receivable: |
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Participants |
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Employer |
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30,916 |
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Net assets available for benefits |
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$ |
45,617,007 |
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$ |
40,941,331 |
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See accompanying notes.
4
ARRIS Group, Inc.
Employee Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2005
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Additions to net assets attributed to: |
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Contributions: |
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Participants |
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$ |
4,378,979 |
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Employer |
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605,300 |
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4,984,279 |
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Dividends and interest |
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1,490,024 |
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Net realized and unrealized appreciation in fair value
of investments |
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1,599,490 |
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Total additions |
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8,073,793 |
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Deductions from net assets attributed to: |
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Benefits paid to participants |
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(3,392,623 |
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Administrative expenses |
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(5,494 |
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Total deductions |
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(3,398,117 |
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Net increase |
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4,675,676 |
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Net assets available for benefits: |
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Beginning of year |
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40,941,331 |
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End of year |
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$ |
45,617,007 |
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See accompanying notes.
5
ARRIS Group, Inc.
Employee Savings Plan
Notes to Financial Statements
December 31, 2005
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.
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%. Effective
January 1, 2006, the Company increased the employer-matching contribution from 25% to 50% of the
participants contribution, with a maximum of 3%. In December 2005, the Plan was also amended to
provide a true-up employer matching contribution to active participants accounts who, after the
end of the plan year it is determined, received less than the percentage of employer matching
contribution appropriate based on the employees total contributions for the year. This new
feature was effective January 1, 2005 and implemented for the 2005 plan year.
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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. Allocations are based on participant
earnings or account balances, as defined.
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 2005, approximately $25,692 of nonvested employer contributions were forfeited by terminated
Plan participants. Forfeited balances of nonvested terminated participants accounts are used to
reduce Company contributions. In 2005, the Company used $95,888 of forfeitures to offset
contributions. As of December 31, 2005 and 2004, unallocated assets (e.g., forfeitures) included
in investments totaled $51,070 and $93,188, 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 $500 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 as of the last business day of the Plan year.
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:
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December 31 |
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2005 |
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2004 |
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MFS Retirement Service MFS Emerging Growth Fund-A |
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$ |
2,643,255 |
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$ |
2,746,848 |
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MFS Retirement Service MFS Bond FundA |
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* |
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2,160,811 |
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MFS Retirement Service MFS Research Fund-A |
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* |
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2,254,080 |
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MFS Retirement Service MFS Global Equity FundA |
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2,862,278 |
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2,687,353 |
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MFS Retirement Service MFS Capital Opportunity FundA |
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2,604,287 |
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2,941,311 |
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MFS Retirement Service Mass Invest Growth Stock FundA |
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4,170,979 |
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4,421,315 |
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MFS Retirement Service MFS Total Return Fund A |
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4,282,739 |
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4,015,752 |
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MFS Retirement Service MFS Fixed Fund-Institutional |
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5,559,021 |
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4,915,264 |
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Scudder Equity 500 Index Fund |
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3,682,938 |
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3,488,668 |
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ARRIS Group, Inc. common stock |
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3,290,995 |
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2,468,250 |
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* |
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Not over 5% of Plans net assets in 2005. |
The Plans investments (including investments bought, sold, and held during the year)
appreciated in fair value as follows:
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Year ended |
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December 31, |
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2005 |
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Mutual funds |
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$ |
676,516 |
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Common stock |
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922,974 |
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$ |
1,599,490 |
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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 is currently
undergoing an audit by the Internal Revenue Service for its 2001 and 2002 plan years. The Internal Revenue Service has noted certain deficiencies in the Plan administration which could result in the disqualification of the Plan. However, the Plan
administrator has
indicated that it will take the steps required by the Internal Revenue Service, to
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maintain
the Plans qualified status. Otherwise, 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.
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 ARRIS common stock valued at $3,290,995 and $2,468,250 at December 31, 2005 and 2004,
respectively.
5. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various
risks such as interest rate, market and credit risks. Due to the level of risk associated with
certain investment securities, it is at least reasonably possible that changes in the values of
investment securities will occur in the near term and that such changes could materially affect
participants account balances and the amounts reported in the statements of net assets available
for benefits.
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ARRIS Group, Inc.
Employee Savings Plan
EIN: 58-2588724 Plan Number: 002
Schedule H, Line 4(i)
Schedule of Assets (Held at End of Year)
December 31, 2005
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(c) |
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(d) |
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(b) |
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Description of |
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Current |
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(a) |
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Identity of Issue |
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Investment |
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Value |
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* |
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MFS Retirement Services, Inc. |
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MFS Emerging Growth Fund-A |
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$ |
2,643,255 |
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Scudder Equity 500 Index Fund |
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Scudder Equity 500 Index Fund |
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3,682,938 |
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* |
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MFS Retirement Services, Inc. |
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MFS Research Fund-A |
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2,151,243 |
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* |
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MFS Retirement Services, Inc. |
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MFS Global Equity Fund-A |
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2,862,278 |
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* |
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MFS Retirement Services, Inc. |
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MFS Capital Opportunity Fund-A |
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2,604,287 |
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* |
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MFS Retirement Services, Inc. |
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Mass Invest Growth Stock Fund-A |
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4,170,979 |
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* |
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MFS Retirement Services, Inc. |
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MFS Total Return Fund-A |
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4,282,739 |
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* |
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MFS Retirement Services, Inc. |
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MFS Bond Fund-A |
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2,044,231 |
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* |
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MFS Retirement Services, Inc. |
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MFS Fixed Fund-Institutional |
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5,559,021 |
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* |
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MFS Retirement Services, Inc. |
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MFS High Income Fund-A |
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390,576 |
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* |
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MFS Retirement Services, Inc. |
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MFS Government Security Fund-A |
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446,673 |
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* |
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MFS Retirement Services, Inc. |
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MFS Mid Cap Growth Fund-A |
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554,173 |
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* |
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MFS Retirement Services, Inc. |
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MFS International Value Fund-A |
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1,123,514 |
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Franklin Templeton Investments |
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Franklin Balance Sheet Investment Fund-A |
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2,187,102 |
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Liberty Funds Services, Inc. |
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Columbia Acorn Fund-A |
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1,815,347 |
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* |
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MFS Retirement Services, Inc. |
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MFS Conservative Allocation Fund-A |
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91,879 |
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* |
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MFS Retirement Services, Inc. |
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MFS Moderate Allocation-A |
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438,545 |
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* |
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MFS Retirement Services, Inc. |
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MFS Growth Allocation-A |
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366,417 |
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* |
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MFS Retirement Services, Inc. |
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MFS Aggressive Growth Allocation-A |
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363,953 |
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Lord Abbett |
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Lord Abbett Mid-Cap Value-A |
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1,676,087 |
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Van Kampen Investments |
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Van Kampen Growth and Income |
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2,180,069 |
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* |
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ARRIS Group, Inc. |
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Common stock |
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3,290,995 |
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* |
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Participants |
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Loans receivable; interest rates range |
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5.0% - 9.0%; maturities within 10 years |
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659,790 |
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$ |
45,586,091 |
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* Represents a party-in-interest to the Plan |
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Note: Cost information (column d) has not been included as all investments are participant
directed. |
11
SIGNATURE
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,
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ARRIS GROUP, INC.
EMPLOYEE SAVINGS PLAN |
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By:
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Administrative Committee
(Plan Administrator) |
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/s/ LAWRENCE A. MARGOLIS |
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Lawrence A. Margolis
Executive Vice President,
Strategic Planning,
Administration, and Chief
Counsel |
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Dated: June 29, 2006 |
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