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`Index to Financial Statements
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`UNITED STATES SECURITIES AND EXCHANGE COMMISSION
`WASHINGTON, D.C. 20549
`
`FORM 10-K
`For the fiscal year ended December 31, 2013
`
`of
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`ARRIS GROUP, INC.
`
`A Delaware Corporation
`IRS Employer Identification No. 46-1965727
`SEC File Number 000-31254
`
`3871 Lakefield Drive
`Suwanee, GA 30024
`(678) 473-2000
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`Securities registered pursuant to Section 12(b) of the Act:
`Common Stock, $0.01 par value — NASDAQ Global Market System
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`ARRIS Group, Inc. is a well-known seasoned issuer.
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`ARRIS Group, Inc. (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
`and (2) has been subject to such filing requirements for the past 90 days.
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`Except as set forth in Item 10, ARRIS Group, Inc. is unaware of any delinquent filers pursuant to Item 405 of Regulation S-K.
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`ARRIS Group, Inc. is a large accelerated filer and is not a shell company.
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`ARRIS Group, Inc is required to submit electronically and post on its corporate web site interactive data files required to be submitted and posted pursuant to
`Rule 405 of Regulation S-T.
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`The aggregate market value of ARRIS Group, Inc.’s Common Stock held by non-affiliates as of June 28, 2013 was approximately $2.0 billion (computed on
`the basis of the last reported sales price per share of such stock of $14.35 on the NASDAQ Global Market System). For these purposes, directors, officers
`and 10% shareholders have been assumed to be affiliates.
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`As of January 31, 2014, 142,397,380 shares of ARRIS Group, Inc.’s Common Stock were outstanding.
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`Portions of ARRIS Group, Inc.’s Proxy Statement for its 2014 Annual Meeting of Stockholders are incorporated by reference into Part III.
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`Table of Contents
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`Index to Financial Statements
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`TABLE OF CONTENTS
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`PART I
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` Business
` Risk Factors
` Unresolved Staff Comments
` Properties
` Legal Proceedings
` Mine Safety Disclosures
` Executive Officers and Board Committees
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`PART II
`Market for Registrant’s Common Equity, Related Stockholder Matters, Issuer Purchases of Equity Securities, and Stock
`Performance Graph
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` Selected Consolidated Historical Financial Data
` Management’s Discussion and Analysis of Financial Condition and Results of Operations
` Quantitative and Qualitative Disclosures About Market Risk
` Consolidated Financial Statements and Supplementary Data
` Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
` Controls and Procedures
` Other Information
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`PART III
` Directors, Executive Officers, and Corporate Governance
` Executive Compensation
` Security Ownership of Certain Beneficial Owners, Management and Related Stockholders Matters
` Certain Relationships, Related Transactions, and Director Independence
` Principal Accountant Fees and Services
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` Exhibits and Financial Statement Schedules
` Signatures
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`PART IV
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`i
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`ITEM 1.
`ITEM 1A.
`ITEM 1B.
`ITEM 2.
`ITEM 3.
`ITEM 4.
`ITEM 4A.
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`ITEM 5.
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`ITEM 6.
`ITEM 7.
`ITEM 7A.
`ITEM 8.
`ITEM 9.
`ITEM 9A.
`ITEM 9B.
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`ITEM 10.
`ITEM 11.
`ITEM 12.
`ITEM 13.
`ITEM 14.
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`ITEM 15.
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`Table of Contents
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`Index to Financial Statements
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`Business
`Item 1.
`As used in this Annual Report, unless the context requires otherwise, “we,” “our,” “us,” “the Company,” and “ARRIS” refer to ARRIS Group, Inc. (and
`its predecessors) and our consolidated subsidiaries.
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`PART I
`
`General
`Our principal executive offices are located at 3871 Lakefield Drive, Suwanee, Georgia 30024, and our telephone number is (678) 473-2000. We maintain
`a website at www.arrisi.com. The information contained on our website is not part of, and is not incorporated by reference into, this Form 10-K. On our
`website we provide links to copies of the annual, quarterly and current reports that we file with the Securities and Exchange Commission (“SEC”), Section 16
`reports that our officers and directors file with the SEC, any amendments to those reports, proxy materials for meetings of our shareholders, and all Company
`press releases. Investor presentations are also frequently posted on our website. Copies of our code of ethics and the charters of our standing board committees
`also are available on our website. We will provide investors copies of these documents in electronic or paper form upon request, free of charge.
`
`Glossary of Terms
`Below are commonly used acronyms in our industry and their meanings:
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`
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`Acronym
`AdVOD
`ARPU
`BEQ
`BSR
`Cable VoIP
`CAM
`CBR
`CCAP
`CE
`CMS
`CMTS
`COTS
`CPE
`CVeX
`CWDM
`DBS
`DCT
`DOCSIS
`DPI
`DRM
`DSL
`DTA
`DVB
`DVR
`DWDM
`EMTA
`EPON
`eQAM
`FPGA
`FTTH
`FTTP
`GAAP
`GHZ
`GPA
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`®
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`Terminology
`Linear and Demand Oriented Advertising
`Average Revenue Per User
`Broadband Edge QAM
`Broadband Services Router
`Cable Voice over Internet Protocol
`Cable Access Module
`Constant Bit Rate
`Converged Cable Access Platform
`Consumer Electronics
`Content Management System
`Cable Modem Termination System
`Commercial Off the Shelf
`Customer Premises Equipment
`Converged Video Exchange
`Coarse Wave Division Multiplexing
`Digital Broadcast Satellite
`Digital Consumer Terminal
`Data Over Cable Service Interface Specification
`Digital Program Insertion
`Digital Rights Management
`Digital Subscriber Line
`Digital Television Adapter
`Digital Video Broadcasting
`Digital Video Recorder
`Dense Wave Division Multiplexing
`Embedded Multimedia Terminal Adapter
`Ethernet over Passive Optical Network
`Edge Quadrature Amplitude Modulator
`Field Programmable Gate Arrays
`Fiber to the Home
`Fiber to the Premises
`Generally Accepted Accounting Principles
`Gigahertz
`General Purchase Agreements
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`Index to Financial Statements
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`Acronym
`HD
`HD-DVR
`HDTV
`HEVC
`HFC
`IFRS
`ILEC
`IP
`IPR
`IPTV
`IRD
`LAN
`Mbps
`MPEG
`MPEG-2
`MPEG-4
`M-CMTS
`MSO
`MSP
`MTA
`MVPD
`NGNA
`NDVR
`NPVR
`NSM
`NIU
`OLT
`ONU
`OEM
`OSS
`OTT
`PC
`PCS
`PCT
`PON
`PSTN
`PVR
`QAM
`QoS
`RDK
`RF
`RFOG
`RGU
`SCTE
`SD
`SDV
`SLA
`STB
`TVE
`UHD
`Triple Play
`VAR
`VOD
`VoIP
`VPN
`VSP
`VSOE
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`Terminology
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`High Definition
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`High Definition Digital Video Recorder
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`High Definition Television
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`High Efficiency Video Coding
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`Hybrid Fiber-Coaxial
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`International Financial Reporting Standards
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`Incumbent Local Exchange Carrier
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`Internet Protocol
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`Intellectual Property Rights
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`Internet Protocol Television
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`Integrated Receiver / Decoder
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`Local Area Network
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`Megabits per Second
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`Moving Picture Experts Group
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` Moving Picture Experts Group, Standard No. 2
` Moving Picture Experts Group, Standard No. 4
` Modular CMTS
`Multiple Systems Operator
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`Media Services Platform
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`Multimedia Terminal Adapter
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`Multichannel Video Programming Distributors
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`Next Generation Network Architecture
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`Network Digital Video Recorder
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`Network Personal Video Recorder
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`Network Service Manager
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`Network Interface Unit
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`Optical Line Termination
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`Optical Network Unit
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`Original Equipment manufacturer
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`Operations Support System
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`Over-the-Top
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`Personal Computer
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`Post Contract Support
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`Patent Convention Treaty
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`Passive Optical Network
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`Public-Switched Telephone Network
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`Personal Video Recorder
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`Quadrature Amplitude Modulation
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`Quality of Service
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`Reference Design Kit
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`Radio Frequency
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`Radio Frequency over Glass
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`Revenue Generating Unit
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`Society of Cable Telecommunication Engineers
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`Standard Definition
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`Switched Digital Video
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`Service Level Agreement
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`Set Top Box
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`TV Everywhere
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`Ultra High Definition
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`Bundled Offering of Internet, Telephone and TV
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`Value-Added Reseller
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`Video on Demand
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`Voice over Internet Protocol
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`Virtual Private Network
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`Video Services Platform / Video Service Provider
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`Vendor-Specific Objective Evidence
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`Index to Financial Statements
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`Overview
`ARRIS is a global media entertainment and data communications solutions provider, headquartered in Suwanee, Georgia. We operate in two business
`segments, Customer Premises Equipment (“CPE”) and Network & Cloud (“N&C”), specializing in enabling multichannel video programming distributors
`(“MVPDs”), including cable, telephone, and digital broadcast satellite operators, and media programmers to deliver rich media, voice, and IP data services to
`end consumer subscribers. We are a leading developer, manufacturer and supplier of interactive set-top boxes, end-to-end digital video and Internet Protocol
`Television (“IPTV”) distribution systems, broadband access infrastructure platforms, and associated data and voice Customer Premises Equipment. Our
`solutions are complemented by a broad array of services and systems integration that bring localized expertise to every touchpoint in the delivery process. This
`lends a customized approach to serving each of our primary markets.
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`Industry Overview
`Over the last 15 years, technology innovations have significantly improved how video is delivered to the consumer. Analog video distribution has given
`way to digital video compression, and now the use of Internet Protocol (“IP”) is further transforming how content is managed and consumed. These changes
`increase programming choices for consumers and enable new consumer experiences including Ultra High Definition TV, video anytime and anywhere and
`interactive media and broadband services. As a result, cable operators, telcos and web-based companies are compelled to continually invest and upgrade their
`network and expand their video, voice, data and mobile services. The evolution of service delivery networks is accelerating as service providers leverage all IP
`networks and enable distribution of video content to IP connected devices in and outside of the home, known as TV Everywhere (“TVE”).
`Providing these advanced services to consumers is a highly competitive business. Our customers compete aggressively to provide a range of services
`from facilities-based quad play packages (video, high-speed data, voice and mobile) to specialized web-based individual services. The competitive
`environment is driving service providers to enhance and expand their offerings by adding more high definition (“HD”) channels, and now Ultra High
`Definition content (also referred to as 4K or 8K), increasing data speeds and expanded mobile services providing converged media experiences that bridge
`conventional TV and Internet services. This, in turn, is driving service providers to regularly upgrade their video and broadband networks and in-home
`devices, such as set-top boxes, data modems and gateways.
`Although the U.S. has one of the most advanced suite of video and home entertainment offerings in the world, service providers continue to strive to
`further advance their capabilities to differentiate and gain share. U.S. Cable operators and telcos are investing extensively to deploy enhanced user interfaces,
`higher broadband speeds, additional programming, integrated home networking and monitoring services, all with higher reliability.
`While the majority of our revenues are generated in the U.S. market, our international business represented 32.1% of our sales in 2013. The majority of
`global TV households have only begun to adopt these technologies and represents an additional growth opportunity. During 2012, digital TV households that
`purchase video programming from cable, satellite and telco providers grew by approximately 17.4% worldwide (source: Television WORLD 2008 — 2018)
`and global residential broadband households grew by approximately 12.1% (source: Internet WORLD 2008 — 2018). We expect this trend to continue for
`as digital TV households are expected to grow by 30% to 35% (source: Television WORLD 2008 — 2018) and residential broadband households are expected
`to grow by 25% to 30% (source: Internet WORLD 2008 — 2018) from the end of 2012 through 2015.
`The consumer viewing experience is expanding beyond the TV and consumers now also watch video programming on IP-enabled devices, such as PCs,
`tablets and smartphones. Video delivery requires substantially more bandwidth than other data services, and its growth is driving operators to upgrade their
`network and CPE. This expanded data capacity is allowing new content providers and aggregators to use the service providers’ high speed data networks to
`provide over-the-top (“OTT”) services to consumers. These OTT providers sell content directly to the consumer and deliver it to the consumer’s IP-enabled
`devices and web-capable BluRay players,
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`TV’s and consumer-purchased set-top boxes. Competition from OTT services is driving network operators to invest to expand their content choices, upgrade
`their networks and enhance their consumer experiences across TVs, PCs and wireless devices.
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`Acquisition of Motorola Home
`On April 17, 2013, we acquired the Motorola Home business from General Instrument Holdings, Inc. (“Seller”), a subsidiary of Google, Inc for $2.4
`billion in cash and equity, subject to certain adjustments as provided for in the acquisition agreement (the “Acquisition”). We believe the Acquisition enhances
`our ability to provide next-generation consumer video products and services, supporting a more comprehensive product offering while also accelerating our
`ability to deliver a comprehensive set of industry-leading new products to a wide spectrum of customers. We more than doubled in size as a result of the
`Acquisition, which had significant effects on virtually every aspect of our business and operations and which make comparisons in this discussion to our
`historical results difficult. These impacts include:
`• Significant Increase in Scale and Geographic Footprint . Our sales increased from $1,353.7 million in 2012 to $3,620.9 million for 2013. We
`almost tripled our number of employees from approximately 2,200 employees to approximately 6,500 employees. In addition, we now have a direct
`presence in over 25 countries and channel presence in over 85 countries compared to 21 and 30, respectively, prior to the Acquisition.
`• Expansion of Customer Base and Industries That We Serve. Historically almost all of our revenues were derived from sales to cable television
`multiple system operators (“MSOs”). While MSOs remain a large and important component of our business, our operations have broadened through
`the Acquisition to include more sales to telephone companies and programmers, as well as the addition of retail distribution channels. As a result, we
`have a significantly more diverse customer base. Our top five customers following the Acquisition would have accounted for approximately 50% of
`our 2012 sales on a pro forma basis, compared with over 50% from only our two largest customers, Comcast and Time Warner Cable, prior to the
`Acquisition.
`• Additional Product Offerings. Our portfolio of products expanded as a result of the Acquisition to include a broad set-top box and video gateway
`portfolio, passive optical networks (“PON”) line and network terminals, video headend infrastructure products, multiscreen software solutions and
`DSL modems and gateways. In addition, our traditional product lines, such as broadband gateways, routers, DOCSIS cable modems, encoders and
`transcoders, have expanded, in many cases, increasing our relevance with our customers.
`• Debt. As described below under “Financial Liquidity and Capital Resources,” we entered into senior secured credit facilities to fund a portion of the
`acquisition costs and to support our on-going working capital needs. As a result, the face value of our debt increased from $232.1 million at
`December 31, 2012 to $1,752.6 million at December 31, 2013. We are subject to a number of financial covenants under the senior secured credit
`facilities that could impact our operational flexibility.
`In addition, as described below, we have realigned our reportable operating segments. Readers should consider the size and transformative nature of the
`Acquisition when reviewing this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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`New Operating Segments
`The completion of the Motorola Home acquisition changed the way that we manage and review the performance our business. As a result, beginning with
`the periods ended June 30, 2013, we report two operating segments, (1) Network & Cloud and (2) Customer Premises Equipment. Corporate and other
`expenses not included in the measure of segment contribution will be reported in an “All Other” category. A comparison of our products and the acquired
`Motorola Home products included in our new reporting segments is set forth in the table below. See Note 11 to our financial statements for additional
`information regarding this resegmentation.
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`Prior Segments
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`Motorola Home
`Network Infrastructure:
`•CMTS, Edge QAMs, HE Optics, Fiber Nodes, RF
`Amplifiers, Encoders/Decoders/Transcoders
`Convergence Experiences:
`•Service Assurance, Content Management &
`Security, Ad Insertion, Video on Demand,
`User Experience
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`ARRIS
`Broadband Communications Systems:
`•CMTS, CCAP, Edge QAMs,
`Encoder/Decoder/Transcoder
`Access, Transport & Supplies:
`•HE Optics, Fiber Nodes & RF Amplifiers
`Media & Communication Systems:
`•Service Assurance, Analytics, Workforce
`Management, Video on Demand, Ad Insertion
`& Management
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`Broadband Communications Systems:
`•Modems, EMTAs, Gateways
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`Home Devices:
`•Modems, EMTAs, Gateways, Set-top Boxes
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`New Segments
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`Network & Cloud
`(“N&C”)
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`Customer Premises Equipment
`(“CPE”)
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`Our Strategy
`Our long-term business strategy, enhanced by our 2013 acquisition of the Motorola Home business, includes growth and expansion through:
`• Leveraging ARRIS’ scale to drive profitable worldwide growth
`• Capitalizing on the evolution toward network convergence and all IP platforms to drive business growth
`• Consumer device differentiation through multiscreen enablement and personalized experiences
`• Invest to refresh and expand our product/service portfolios through organic development and partnership/acquisition; and
`• Expand our international business including exploring adjacent market opportunities
`To fulfill our strategy, we develop technology, facilitate its implementation, and enable operators to put their subscribers in control of their entertainment,
`information, and communication needs. Through a set of business solutions that respond to specific market needs, we are integrating our products, software,
`and services solutions to work with our customers as they address high-speed data deployment, HD television content expansion, on demand video delivery,
`multi-screen video, operations management, network integration, and business services opportunities.
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`Specific aspects of our strategy include:
`• Leverage ARRIS’ scale to drive profitable worldwide growth . With the acquisition of the Motorola Home business in April 2013, ARRIS has
`achieved a new level of scale to drive efficiencies. We now have an expanded portfolio, broader customer base, and larger sales team, which expose us
`to a greater portion of worldwide spending on products in our markets. We will integrate our expertise in products, network operations, and
`professional services to offer customer-focused applications for expanding network capacity, realizing the potential of TVE and multi-screen video
`including on demand programming and dynamic advertisements, and management of network devices and services.
`• Capitalize on the evolution toward network convergence and all IP platforms to drive business growth . New digital video services require
`IP-based infrastructure to reach consumers on their screen of choice. Service providers face a two-pronged challenge: meeting demand for these new
`services on legacy equipment, today, while transitioning equipment for tomorrow’s services to an all-IP model. ARRIS uniquely combines an end-to-
`end approach to the IP transition with an established footprint in the home and entrenched expertise in content delivery from the cloud to the home.
`Our end-to-end solutions give service providers a variety of choices for customizing their approach to the IP transition. They encompass network-
`based video transcoding, packaging, and compression technologies required to push delivery of new IP video formats; the cloud-based platforms to
`deliver robust and personalized user experiences; and our portfolio of video gateways that serve as the new hub for delivering IP-based entertainment
`to connected devices inside and outside the home.
`• Consumer device differentiation through multiscreen enablement and personalized experiences . The growth in connected devices is
`creating an opportunity for service providers to deliver new, more personalized content experiences to consumers across multiple screens. These
`experiences require control over content distribution and enabling the key integration points between different screens used for consumer interaction.
`These considerations provide a challenge to providers not only to support the systems and software to deliver personalized experiences across all
`devices, but to create new ways of monetizing media through subscription and targeted advertising models. ARRIS’ strategy is to leverage our
`experience in delivering a variety of content to the complex connected device ecosystem. Our hardware and software solutions in the cloud, network,
`and home provide a holistic approach to personalization that transforms the entertainment experience across the entire multiscreen environment.
`• Invest to refresh and expand our product/service portfolios through organic development and partnership/acquisition. ARRIS has a
`comprehensive and robust development program designed to deliver new products to enhance our competitiveness and growth potential. Products
`currently in development include an expansion of our cable and telco video and data CPE, enhancements to our industry-leading E6000 Converged
`Edge Router, new MPEG-4 and HEVC encoding and transcoding products, extensions to our multi-screen management, delivery and security
`software products, and additional work in our optical and HFC distribution product lines. We also regularly evaluate opportunities to acquire
`capabilities that complement our internal research and development. We expect to continue targeting acquisition candidates that have complementary
`technology, products and talent. We also expect to evaluate acquisition candidates that will enable us to expand our business internationally or enter
`adjacent markets.
`• Expand our international business including exploring adjacent market opportunities . We also are investing to grow our business globally
`to capitalize on the growth of video and data services in markets outside North America. We are leveraging our technology portfolio to capitalize on the
`growth of digital video and HDTV in Latin America, Europe, the Middle East and Africa (“EMEA”) and Asia as well as the demand for increased
`data speeds that are driving infrastructure investment. We also are pursuing a number of opportunities in new markets where customers are looking
`to deploy advanced networks to enable triple play services.
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`Index to Financial Statements
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`Our Principal Products
`We provide cable network operators, telco service providers and content programmers with a broad product offering from the headend, distribution
`network to the subscribers’ premises. A cross-section of our products in each of our two business segments Network & Cloud and Customer Premises
`Equipment, are depicted below:
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`Network & Cloud
`• CMTS/CCAP
`• Cable Operator Headend Equipment that communicates with cable modems to control the flow of data; allocates shared bandwidth and prioritizes
`and routes traffic. CCAP combines the functionality of CMTS and Edge QAM to enable voice, video and data in a converged IP network
`• Video Infrastructure
`• MVPD and Programmer Equipment that processes and packages video content for delivery over the service provider network to be received by a
`set-top box or gateway. Includes encoding, compression, transcoding, storage, policy management, security and encryption, and signal
`modulation for HFC, DSL and/or fiber networks.
`• Access & Transport
`• Equipment in the ground or on transmission poles between service providers’ headend and subscribers’ premises, as well as equipment used to
`initiate the distribution of content-carrying signals. Includes optical transmission equipment, Fiber Nodes, RF Amplifiers and metro Wi-Fi
`wireless products.
`• Global Services
`• Technical support, professional services, and system integration offerings to enable solutions sales of our end-to-end product portfolio.
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`• Cloud Solutions
`• Software products that enable providers to securely deliver rich user experiences; multiscreen recommendation, offer management, and advertising
`services; and remote management and diagnostics services to subscribers.
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`Customer Premises Equipment (CPE)
`• Set-top Boxes
`• A device installed at the subscriber’s television set and connects to the service provider network to decode secure digital video signals and render
`them as video on the television set.
`• Gateways
`• A device which connects to the service provider network and delivers video, voice, and data services throughout the subscriber’s home.
`• DSL and Cable modems
`• A device located at the subscriber’s home and connects to the cable or telco network to receive and transmit digital information between subscriber-
`owned devices and the service provider’s headend or central office, providing Internet connectivity.
`• E-MTA and Voice / Data Modems
`• A modem which also provides telephone service from the service provider throughout the home.
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`Sales and Marketing
`We are positioned to serve customers worldwide with a sales and sales engineering organization complemented by a skilled technical services team. We
`maintain offices in the U.S and many of our foreign markets. Our sales engineering team assists customers in system design and specification and can
`promptly be onsite to resolve any issues that may arise during the course of a project. Our technical services team provides professional services through
`experienced and highly skilled personnel who work with network operators to design and keep their networks operating at peak performance. Our core
`competencies include network engineering and design, project management for launching advanced applications over complex broadband networks, and
`solutions to move today’s sophisticated networks forward to Internet Protocol and digital services. Additionally, we provide 24x7 technical support, directly
`and through channel partners, as well as provide training for customers and channel partners, as required, both in our facilities and at our customers’ sites.
`We have agreements in various countries and regions with value added resellers (“VARs”), sales representatives and channel partners that extend our
`sales presence into operator markets without established sales offices. We also maintain an inside sales group that is responsible for regular phone contact with
`the customer, prompt order entry, timely and accurate delivery, and effective sales administration.
`Our marketing and product management teams focus on each of the various product categories and work with our engineers and various technology
`suppliers on new products and product enhancements. These teams are responsible for inventory levels, pricing, delivery requirements, market demand
`analysis, product positioning and advertising.
`We are committed to providing superior levels of customer service by incorporating innovative customer-centric strategies and processes supported by
`business systems designed to deliver differentiating product support and value-added services. We have implemented advanced customer relationship
`management programs to bring additional value to our customers and provide significant value to our operations management. Through these information
`systems, we can provide our customers with product information ranging from operational manuals to the latest product updates. Through on-going
`development and refinement, these programs will help to improve our productivity and enable us to further improve our customer-focused services.
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`Table of Contents
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`Index to Financial Statements
`
`Customers
`A substantial majority of our sales are to facilities-based cable and telco multi-channel video service providers worldwide. As the US
`telecommunications industry continues a trend toward consolidation, the eight largest cable and telco video system operators service approximately 90% of the
`basic video subscriber based within the US cable market (according to the NCTA), thereby making our sales to those providers critical to our success. Our
`sales are substantially dependent upon a system operator’s selection of ARRIS’ network equipment, demand for increased broadband services by subscribers,
`and general capital expenditure levels by system operators. Our three largest customers (including their affiliates, as applicable) are Comcast, Time Warner
`Cable and Verizon. From time to time, the affiliates included in our revenues from these customers have changed as a result of mergers and acquisitions.
`Therefore, the revenue for our customers for prior periods has been adjusted to include, on a comparable basis for all periods presented, the affiliates currently
`understood to be under common control. Our sales to these customers for the last three years were (in thousands, except percentages):
`
`
`
`
`
`Years ended December 31,
`
`
`
`
`
`
`
`2011
`2012
`2013
`Comcast and affiliates
`$286,139
`$ 421,173
`$674,964
`
`
`
`
`26.4%
`
`
`18.6%
`31.1%
`% of sales
`
`$ 180,740
`$243,151
`$ 359,484
`Time Warner Cable and affiliates
`
`
`
`
`16.7%
`
`
`9.9%
`18.0%
`% of sales
`
`$
`454
`$ 5,219
`$358,653
`Verizon
`
`
`
`
`—%
`
`
`9.9%
`% of sales
`0.4%
`
`ARRIS utilizes standard terms of sale. These standard terms of sale apply to all purchases except those to a few of our large customers with whom we
`have executed general purchase agreements (“GPAs”). These GPAs do not obligate the customer to a specific volume of business. The vast majority of our
`sales, whether to customers with GPAs or otherwise, result from periodic purchase orders. We have multiple agreements with our largest customers, such as
`Comcast, Time Warner Cable and Verizon, based upon their needs or as a result of prior acquisitions. We maintain these agreements in the normal course of
`our business.
`
`International Operations
`Our international revenue is generated primarily from Asia-Pacific, Europe, Middle East and Africa (“EMEA”) and Americas. The Asia-Pacific market
`includes Australia, China, Hong Kong, India, Japan, Korea, Singapore, and Taiwan. The EMEA market includes Austria, Belgium, France, Germany,
`Great Britain, Hungary, Ireland, Israel, the Netherlands, Norway, Poland, Portugal, Romania, Russia, Spain, Sweden, Switzerland and Turkey. The
`Americas market includes Argentina, Bahamas, Brazil, Canada, Chile, Colombia, Costa Rica, Ecuador, Honduras, Jamaica, Mexico, Panama, Peru and
`Puerto Rico. Revenues from international customers were approximately 32.1%, 24.6%, and 31.3% of total revenues for 2013, 2012 and 2011, respectively.
`We continue to strategically invest in worldwide marketing and sales efforts. We currently maintain international sales offices in Argentina, Brazil,
`Chile, China, Great Britain, Israel, Japan, Korea, Mexico, The Netherlands and Spain.
`
`Research and Development
`We operate in an industry that is subject to rapid changes in technology. Our ability to compete successfully depends in large part upon anticipating
`such changes. Accordingly, we engage in ongoing research and development activities in response to our customers’ needs with the intention to advance existing
`product lines and/or develop new offerings. Our primary research and development focuses include:
`• Delivering Your Media, Your Way — addressing demand for more personalized, relevant, and mobile experiences with end-to-end multiscreen
`solutions to personalize and monetize tomorrow’s content experiences.
`
`
`
`
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`9