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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 11-K

 

 

ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

ARRIS TECHNOLOGY, INC. EMPLOYEE SAVINGS PLAN (formerly ARRIS

GROUP, INC. EMPLOYEE SAVINGS PLAN)

Of

ARRIS INTERNATIONAL PLC

(Exact name of registrant as specified in its charter)

 

 

 

England and Wales    001-37672    98-1241619

(State or Other Jurisdiction

of Incorporation)

  

(Commission

File Number)

  

(I.R.S. Employer

Identification No.)

3871 Lakefield Drive, Suwanee, Georgia    30024
(Address of Principal Executive Offices)    (Zip Code)

Registrant’s telephone number, including area code: (678) 473-2000

 

 

 


Table of Contents

ARRIS Technology, Inc. Employee Savings Plan

(formerly ARRIS Group, Inc. Employee Savings Plan)

Audited Financial Statements and Supplemental Schedule

As of December 31, 2017 and 2016 and for the Year Ended December 31, 2017

Contents

 

Report of Independent Registered Public Accounting Firm

     1  

Audited Financial Statements

  

Statements of Net Assets Available for Benefits

     2  

Statement of Changes in Net Assets Available for Benefits

     3  

Notes to Financial Statements

     4  

Supplemental Schedule

     9  

Schedule of Assets (Held at End of Year)

     10  

Signature

     11  

Consent of Independent Registered Public Accounting Firm

     12  

 


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Report of Independent Registered Public Accounting Firm

To the Plan Participants and the Plan Administrator of the ARRIS Technology, Inc. Employee Savings Plan

(formerly known as ARRIS Group, Inc. Employee Savings Plan)

Opinion on the Financial Statements

We have audited the accompanying statements of net assets available for benefits of ARRIS Technology, Inc. Employee Savings Plan 401(k) Plan, (the Plan) as of December 31, 2017 and 2016, and the related statement of changes in net assets available for benefits for the year ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2017 and 2016, and the changes in its net assets available for benefits for the year ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Supplemental Schedule

The accompanying supplemental schedule of schedule of assets (held at end of year) as of December 31, 2017, has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The information in the supplemental schedule is the responsibility of the Plan’s management. Our audit procedures included determining whether the information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedule. In forming our opinion on the information, we evaluated whether such information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

/s/ Ernst & Young LLP

 

We have served as the Plan’s auditor since 1994.

Atlanta, Georgia

June 28, 2018

 

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ARRIS Technology, Inc. Employee Savings Plan

(formerly ARRIS Group, Inc. Employee Savings Plan)

Statements of Net Assets Available for Benefits

(In Thousands)

 

     December 31  
     2017      2016  

Assets:

     

Investments, at fair value

   $ 554,065      $ 402,550  

Fully benefit-responsive investment contracts at contract value

     50,094        49,304  

Employer contributions receivable

     2,260        1,727  

Notes receivable from participants

     5,958        5,135  
  

 

 

    

 

 

 

Net assets available for benefits

   $ 612,377      $ 458,716  
  

 

 

    

 

 

 

See accompanying notes.

 

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ARRIS Technology, Inc. Employee Savings Plan

(formerly ARRIS Group, Inc. Employee Savings Plan)

Statement of Changes in Net Assets Available for Benefits

(In Thousands)

Year Ended December 31, 2017

 

Additions to net assets attributable to:

  

Contributions:

  

Participants

   $ 39,097  

Rollovers

     5,861  

Employer

     16,537  
  

 

 

 

Total contributions

     61,495  

Investment income:

  

Dividends and interest

     26,733  

Net appreciation in fair value of investments

     52,701  
  

 

 

 

Total investment income

     79,434  

Other income

     566  

Interest income on notes receivable

     252  
  

 

 

 

Total additions

     80,252  

Deductions from net assets attributable to:

  

Benefits paid to participants

     (51,771

Administrative expenses

     (591
  

 

 

 

Total deductions

     (52,362
  

 

 

 

Net increase in net assets (before plan transfer)

     89,385  

Transfer in from acquired plan

     64,276  

Net assets available for benefits:

  

Beginning of year

     458,716  
  

 

 

 

End of year

   $ 612,377  
  

 

 

 

See accompanying notes.

 

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ARRIS Technology, Inc. Employee Savings Plan

(formerly ARRIS Group, Inc. Employee Savings Plan),

Notes to Financial Statements

December 31, 2017

1. Explanatory Note

On January 1, 2017, the Pace Americas, LLC. 401(k) Plan (“Pace Plan”) was merged into the ARRIS Technology, Inc. Employee Savings Plan, formerly ARRIS Group, Inc, Employee Savings Plan (“the Plan”). As a result of the merger, employees of Pace Americas, LLC who were participants in the Pace Plan became eligible to participate in the Plan on January 1, 2017. The balance of $64.3 million consisting of plan assets and loan balances was transferred to the Plan and funds were allocated to each employee’s account in January 2017. In addition, contemporaneous with the merger of the two Plans, the Plan was amended to reflect the change in Plan sponsor and Plan name to ARRIS Technology, Inc. Employee Savings Plan from ARRIS Group, Inc. Employee Savings Plan.

On December 1, 2017, ARRIS completed the acquisition of Ruckus Wireless and ICX Switch business (“Ruckus Networks”). Ruckus Networks employees were eligible to participate in the Plan effective December 1, 2017. Prior to the ARRIS acquisition of Ruckus Networks, employees were able to participate in the Ruckus 401(k) plan and the Brocade 401(k) plan at different times. Employees were able to rollover their account balances, including loans from the Brocade 401(k) plan into the Plan. However, as of December 31, 2017 the assets could not be rolled over from the Ruckus 401(k) plan to the Plan.

2. Description of the Plan

The following description of the Plan provides only general information. Participants should refer to the Summary Plan Description and Plan document for a more complete description of the Plan’s provisions.

General

The Plan, a defined contribution plan covering substantially all U.S. employees of ARRIS International plc (ARRIS or the Company), is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). The Plan contains the safe harbor provisions under Section 401(k) (12) of the Internal Revenue Code.

Contributions

Participants may contribute up to 50% of their pretax compensation in increments of 0.1%, subject to Internal Revenue Service (IRS) limitations. The Plan permits participants to designate all or a portion of their contributions as after-tax Roth contributions. Participants will be automatically enrolled in the Plan if an affirmative election to participate or not participate in the Plan is not made within 45 days following hire or rehire date. Under the automatic enrollment feature 5% of compensation will be contributed to the Plan as a before-tax contribution.

Under the terms of the Plan, the Company will also make employer safe harbor matching-contributions. The Company matches 100% of a participant’s contributions up to the first 3% of compensation contributed to the Plan, plus 50% of the participant’s contributions with respect to the next 2% of compensation contributed to the Plan, for a maximum employer-matching contribution equal to 4% of compensation.

The Plan provides a true-up employer matching contribution to active participants’ accounts if, after the end of the Plan year, it is determined that a participant received less than the maximum percentage of employer-matching contributions required based on the participant’s total contributions for the year.

 

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The Company in its discretion may also make an additional discretionary contribution.

Participant Accounts

Each participant’s account is credited with the participant’s contributions, allocations of the Company’s 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 set forth in the Plan documents.

Vesting

Participants are immediately vested in their contributions plus actual earnings thereon. Employer matching contributions made on and after January 1, 2008, plus actual earnings thereon, are immediately vested at 100%. Vesting for the additional discretionary contribution is based on a schedule. Full vesting for this contribution will occur at 3 years of service.

Forfeitures

During 2017, approximately $31 thousand of nonvested employer contributions were forfeited by terminated Plan participants. Forfeited balances of nonvested terminated participants’ accounts are used to reduce Company contributions. In 2017, the Company used $21 thousand of forfeitures to offset contributions. As of December 31, 2017 and 2016, unallocated assets (e.g., forfeitures) included in investments totaled $59 thousand and $47 thousand, respectively.

Payment of Benefits

Upon termination of service, retirement, death, or permanent disability, a participant may receive a lump-sum distribution equal to the non-forfeitable portion of his/her Plan account. The Plan also provides for hardship distributions and, once a participant has attained age 59   1 2 , in-service distributions.

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. Certain loans originating from the C-COR, Incorporated Retirement Savings, and Profit Sharing Plan (Prior Plan) that were assumed by the Plan in 2008 have longer terms as was permitted under the Prior Plan at the time the loans were made. The loans are secured by the balance in the participant’s 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

The Plan incurs administrative expenses directly related to the Plan. These expenses are paid through Plan Investments and are reported on the statements of changes in net assets available for benefits as administrative expenses. Certain fees associated with participant loans are paid from the participant’s account balance. All other administrative expenses are paid by the Company on behalf of the Plan.

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 100% 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 document.

 

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3. Summary of Significant Accounting Policies

Basis of Presentation

The Plan’s financial statements have been prepared on the accrual basis of accounting.

Notes Receivable

Notes receivable represents participant loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest. Interest income on loans receivable from participants is recorded when it is earned. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2017 or 2016. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.

Investments

The Plan’s investments in mutual funds and the Company common stock fund 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.

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.

The Plan’s investment in the Prudential Stable Fund, which is a fully benefit-responsive synthetic guaranteed investment contracts (SGIC) consisting of a wrapper contract and a common collective trust is recorded at contract value. Contract value is the relevant measurement attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and fees.

Except for events which may result in termination for cause, including, but not limited to, plan termination or merger, early retirement incentive, and layoffs, the issuer may not cause the contract to be terminated at an amount other than contract value. The Plan does not believe that the occurrence of any event limiting the Plans’ ability to transact at contract value is probable.

Interest is credited on contract balances using a single “portfolio rate” approach. Under this methodology, a single interest crediting rate is applied to all contributions made to the product regardless of the timing of those contributions. Interest crediting rates are reviewed on a quarterly basis for resetting.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

4. Investments

Fair Value Measurements

Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the FASB established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities

Level 2: Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability.

 

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Level 3: Unobservable inputs for the asset or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumption about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

ARRIS International plc, Common Stock Fund

This fund represents employer securities valued at the closing price reported on the active market on which the portion of the fund provides liquidity, which enables Plan participants to transfer money daily among all investment choices. This common stock fund is classified as a Level 1 investment.

Lifecycle Funds

These funds include investments in highly diversified funds designed to remain appropriate for investors in terms of risk throughout a variety of life circumstances. These funds share the common goal of first growing and then later preserving principal and contain a mix of U.S. and international common stocks, U.S. issued bonds and cash. There are currently no redemption restrictions on these investments. The fair value of the investments in this category is determined by obtaining quoted prices on nationally recognized securities exchanges. These investments are classified as Level 1 within the valuation hierarchy.

Mutual Funds

The fair value of mutual funds is determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 input). The investment objective of the registered investment company is a combination of current income and capital growth and holds a diversified mix of domestic and international equities, domestic and international investment grade bonds, domestic high-yield bonds, and investment grade money market instruments.

The following table presents Plan assets measured at fair value on a recurring basis subject to the fair value hierarchy (in thousands):

 

     December 31, 2017  
     Level 1      Level 2      Level 3      Total  

ARRIS common stock fund

   $ 13,859      $ –        $ –        $ 13,859  

Lifecycle funds

     198,206        –          –          198,206  

Money market funds

     342,000        –          –          342,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 554,065      $ –        $ –        $ 554,065  
     December 31, 2016  
     Level 1      Level 2      Level 3      Total  

ARRIS common stock fund

   $ 13,128      $ –        $ –        $ 13,128  

Lifecycle funds

     127,415        –          –          127,415  

Money market funds

     262,007        –          –          262,007  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 402,550      $ –        $ –        $ 402,550  

 

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5. Income Tax Status

The Plan has received a determination letter from the IRS dated March 19, 2016, 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 by the IRS, the Plan was amended and restated. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualified status. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and therefore, believes the Plan, as amended and restated, is qualified and, the related trust is tax-exempt.

Accounting principles generally accepted in the United States require Plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. The Plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2017 there are no uncertain positions taken or expected to be taken. The Plan recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

6. Transactions with Parties-in-Interest

The following transactions qualify as related-party transactions; however, all of these types of transactions are exempt under the prohibited transaction rules:

 

    The Plan held ARRIS common stock fund valued at $13.9 million and $13.1 million at December 31, 2017 and 2016, respectively.

 

    Participants have loans from their fund accounts outstanding in the amount of $6.0 million and $5.1 million as of December 31, 2017 and 2016, respectively.

7. 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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Supplemental Schedule

 

 

 

 

 

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ARRIS Technology, Inc. Employee Savings Plan

(formerly ARRIS Group, Inc. Employee Savings Plan)

EIN# 36-4134221                Plan#002

Schedule H, Line 4(i) – Schedule of Assets

(Held at End of Year)

December 31, 2017

 

(a)

 

(b)

Identity of Issue

  

(c)

Description of Investment

   (e)
Current Value
 
 

Vanguard

  

Vanguard Institutional Index Fund

   $ 87,803,926  
(1)  

Prudential

  

Prudential Core Conservative Bond Fund

     50,093,591  
 

American Funds

  

American Funds 2030 Target Date Rt-R6

     46,028,973  
 

American Funds

  

American Funds 2025 Target Date Rt-R6

     37,884,962  
 

American Funds

  

American Funds 2035 Target Date Rt-R6

     32,560,787  
 

Prudential

  

Prudential Total Return Bond Z Fund

     32,087,112  
 

American Funds

  

American Funds 2020 Target Date Rt-R6

     31,044,596  
 

Wells Fargo

  

Wells Fargo Advantage Growth ADM Fund

     30,753,369  
 

American Funds

  

American Funds 2040 Target Date Rt-R6

     26,527,829  
 

American Funds

  

American Funds Cap Wld Growth & Income R4 Fund

     23,374,437  
 

T. Towe Price

  

Select T. Rowe Price/Frontier MC Gr II I

     23,242,147  
 

Invesco

  

Invesco Equally Weighted S&P 500Y Fund

     22,510,446  
 

Franklin

  

Franklin Rising Dividend Adv

     21,153,355  
 

Oakmark

  

Oakmark Equity & Income Fund

     20,270,741  
 

American

  

American Century Value Fund

     18,228,286  
 

Fidelity

  

Fidelity Advisor International Growth Fund

     16,454,578  
 

Columbia

  

Columbia Mid Cap Value Z Fund

     15,265,219  
 

Franklin

  

Franklin Small Cap Value Adv

     12,147,213  
 

ClearBridge

  

ClearBridge Small Cap Growth I

     9,953,996  
 

American Funds

  

American Funds 2045 Target Date Rt-R6

     8,797,877  
 

American Funds

  

American Century Real Estate Inv

     8,036,795  
 

American Funds

  

American Funds 2015 Target Date Rt-R6

     7,850,865  
 

American Funds

  

American Funds 2050 Target Date Rt-R6

     5,793,923  
 

American Funds

  

American Funds 2055 Target Date Rt-R6

     1,685,467  
 

American Funds

  

American Funds 2060 Target Date Rt-R6

     31,395  
(2)  

ARRIS International plc

  

Common stock fund

     13,858,676  
(2)  

ARRIS International plc

  

Short term investments and cash

     718,332  
(2)  

Participants

  

Loans receivable; interest rates range 3.25% – 6.00%; maturities through 10/03/2027

     5,958,244  
       

 

 

 
        $ 610,117,137  
       

 

 

 

 

(1) Reported at contract value

 

(2) 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 TECHNOLOGY, INC.

EMPLOYEE SAVINGS PLAN,

By:   Administrative Committee
  (Plan Administrator)

 

/s/ Patrick W. Macken

Patrick W, Macken

Senior Vice President,

General Counsel and Secretary

Dated: June 28, 2018

 

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Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-68018) pertaining to the Employees’ Savings Plan of ARRIS Technology, Inc. (formerly known as the Employees’ Savings Plan of ARRIS Group, Inc.) of our report dated June 28, 2018, with respect to the financial statements and schedule of the ARRIS Technology, Inc. Employees’ Savings Plan included in this Annual Report (Form 11-K) for the year ended December 31, 2017.

/s/ Ernst & Young LLP

Atlanta, Georgia

June 28, 2018

 

12

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