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Arris Group Inc Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: February 29, 2012 04:25PM
Arris Group Inc (ARRS) filed Annual Report for the period ended 2011-12-31. Arris Group Inc has a market cap of $1.38 billion; its shares were traded at around $11.39 with a P/E ratio of 17.7 and P/S ratio of 1.3. Arris Group Inc had an annual average earning growth of 2.8% over the past 5 years.
Highlight of Business Operations:Accounts receivable increased $22.1 million in 2011 as a result of higher sales in the fourth quarter of 2011 as compared to fourth quarter of 2010 and payment patterns of our customers.
Accounts receivable declined $18.1 million in 2010. These decreases were primarily related to lower sales in the fourth quarter of 2010 as compared to the fourth quarter of 2009, and also are impacted by the payment patterns of our customers. It is possible that both accounts receivable and DSOs may increase in future periods, particularly if we have an increase in international sales, which tend to have longer payment terms.
From time to time, we hold certain investments in the common stock of publicly-traded companies, which were classified as available-for-sale. As of December 31, 2011 and December 31, 2010, our holdings in these investments were $4.8 million and $5.8 million, respectively. Changes in the market value of these securities typically are recorded in other comprehensive income and gains or losses on related sales of these securities are recognized in income (loss).
ARRIS holds an investment in a private company. This investment is recorded using the cost method, which was $1.0 million and $4.0 million as of December 31, 2011 and 2010, respectively. Due to the fact the investment is in a private company, we are exempt from estimating the fair value on an interim basis. However, ARRIS is required to estimate the fair value if there has been an identifiable event or change in circumstance that may have a significant adverse effect on the fair value of the investment. Each quarter, we evaluate our investment for any other-than-temporary impairment, by reviewing the current revenues, bookings and long-term plan of the private company. During the evaluation perfomed as of December 31, 2011, ARRIS concluded that the private company would be depleting cash balances in early 2012. Further, ARRIS was notified that the private company intends to raise capital by offering a new round of financing to its existing and new investors in the first quarter of 2012. Without the cash proceeds from this potential financing, the private company is at risk of being unable to continue to fund its operations. ARRIS concluded that the investees need to raise further capital was an indicator of impairment and therefore, performed steps to determine the fair value of its investment in the private company. ARRIS was unable to apply traditional valuation techniques as the required inputs to these techniques are unavailable. ARRIS determined that the best estimate of the fair value of its investment was to calculate it based upon the preliminary indication of value related to the new round of financing. As a result of these considerations, ARRIS recorded an other-than-temporary impairment on its investment of $3.0 million in the fourth quarter of 2011.
We previously offered a deferred compensation arrangement, that allowed certain employees to defer a portion of their earnings and defer the related income taxes. As of December 31, 2004, the plan was frozen and no further contributions are allowed. The deferred earnings are invested in a rabbi trust. The total of net employee deferral and matching contributions, which is reflected in other long-term liabilities, was $2.6 million and $2.8 million at December 31, 2011 and 2010, respectively.
Stocks Discussed: ARRS,