Restructuring, Acquisition and Integration

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Restructuring, Acquisition and Integration

Note 13. Restructuring, Acquisition and Integration

Restructuring

The following table represents a summary of and changes to the restructuring accrual, which is primarily composed of accrued severance and other employee costs and contractual obligations that related to excess leased facilities (in thousands):

	Employee severance & termination benefits			Contractual obligations and other			Total
Balance at December 31, 2017	$	4,379		$	3,302		$	7,681
Restructuring charges		35,979			124			36,103
Cash payments / adjustments		(32,624	)		(910	)		(33,534	)
Balance at September 30, 2018	$	7,734		$	2,516		$	10,250

Employee severance and termination benefits – During the three and nine months ended September 30, 2018, ARRIS recorded restructuring charges of $4.3 million and $36.0 million related to severance and employee termination benefits for 1,069 employees. These restructuring initiatives affected all segments, except Enterprise Networks, during the period. The liability for these initiatives is expected to be settled in 2018.

In 2017, ARRIS recorded restructuring charges of $13.3 million related to severance and employee termination benefits for 195 employees. This restructuring initiative affected all segments. The liability for the initiative has been materially settled as of June 30, 2018. 

In 2016, ARRIS completed its acquisition of Pace. ARRIS initiated restructuring plans resulting from the combination that focuses on the rationalization of personnel, facilities and systems across the ARRIS organization. The estimated cost recorded during 2016 was approximately $96.3 million. The restructuring plan affected approximately 1,545 employees across the company. The remaining liability is expected to be settled in 2018.

This amount is included in the Consolidated Statement of Operations in the line item titled “Integration, acquisition, restructuring and other costs”.

Contractual obligations – ARRIS has accruals representing contractual obligations that relate to excess leased facilities. A liability for such costs is recognized and measured initially at fair value on the cease-use date based on remaining lease rentals, adjusted for the effects of any prepaid or deferred items recognized, reduced by the estimated sublease rentals that could be reasonably obtained even if it is not the intent to sublease. The fair value of these liabilities is based on a net present value model using a credit-adjusted risk-free rate. The liability will be paid out over the remainder of the leased properties’ terms, which continue through 2021. Actual sublease terms may differ from the estimates originally made by the Company. Any future changes in the estimates or in the actual sublease income could require future adjustments to the liabilities, which would impact net income in the period the adjustment is recorded. 

Acquisition

During the three and nine months ended September 30, 2018, acquisition expenses were approximately $0.1 million and $0.7 million, respectively. During the three and nine months ended September 30, 2017, acquisition expenses were approximately $2.0 million and $6.7 million, respectively. These expenses related to the acquisition of the Ruckus Networks and consisted of banker and other fees.

Integration

Integration expenses of approximately $0.7 million and $4.7 million were recorded during the three and nine months ended September 30, 2018, respectively. Integration expenses of approximately $0.3 million and $1.9 million were recorded during the three months and nine months ended September 30, 2017, respectively. These expenses related to integration-related outside services following the Ruckus Networks and Pace acquisitions.