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Restructuring, Acquisition and Integration

12 Months Ended

Dec. 31, 2018

Restructuring, Acquisition and Integration

Note 14. 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			Write-off of property, plant and equipment			Total
Balance at December 31, 2016	$	27,886		$	2,243		$	—		$	30,129
Restructuring charges		13,346			5,742			1,842			20,930
Cash payments / adjustments		(35,955	)		(4,683	)		—			(40,638	)
Non-cash expense		(898	)		—			(1,842	)		(2,740	)
Balance at December 31, 2017	$	4,379		$	3,302		$	—		$	7,681

Restructuring charges		38,512			1,607			911			41,030
Cash payments / adjustments		(38,056	)		(1,149	)		—			(39,205	)
Non-cash expense		—			—			(911	)		(911	)
Balance at December 31, 2018	$	4,835		$	3,760		$	—		$	8,595

Employee severance and termination benefits — In 2018, ARRIS recorded restructuring charges of $38.5 million related to severance and employee termination benefits for 1,084 employees. These restructuring initiatives affected all segments, except Enterprise Networks. The liability for these initiatives is expected to be settled in first half of 2019.

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

In first quarter of 2016, ARRIS completed its acquisition of Pace. ARRIS initiated restructuring plans as a result of the acquisition that focused on the rationalization of personnel, facilities and systems across the ARRIS organization. The cost recorded during 2016 was approximately $96.3 million. The 2016 restructuring plan affected 1,545 positions across the Company. The liability for the plan were settled in 2018.

These amounts are included in the Consolidated Statements of Income in the line item titled “Integration, acquisition, restructuring and other costs, net”.

Contractual obligations —Contractual obligations that relate to excess leased facilities are 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. During 2018 and 2017, the Company recorded lease exist costs of $1.6 million and $5.7 million, respectively.

Write-off of property, plant and equipment — As a result of restructuring activities in 2018 effecting certain leased facilities, the Company recorded a restructuring charge of $0.9 million to write-off certain leasehold improvements associated with the facilities. As part of the restructuring plan initiated as a result of the Pace combination, the Company recorded a restructuring charge of $1.8 million in 2017 related to the write-off of property, plant and equipment associated with a closure of a facility. This restructuring plan was related to the Corporate segment.

Acquisition

Acquisition expenses were approximately $9.7 million, $74.5 million and $29.0 million for the years ended December 31, 2018, 2017 and 2016, respectively. In 2018, acquisition costs include banker fees related to the proposed CommScope transaction. In 2017, acquisition expenses included $61.5 million relates to the cash settlement of stock-based awards held by transferring employees for the Ruckus Networks acquisition. These expenses primarily related to the acquisition of Ruckus Networks and consisted of banker and other fees.

Integration

Integration expenses were approximately $4.6 million, $2.9 million and $24.2 million for the years ended December 31, 2018, 2017 and 2016, respectively. The expense was related to outside services and other integration related activities following the Ruckus Networks and Pace acquisitions.