x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 46-4228084 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o | Smaller reporting company o |
December 31, 2015 | March 31, 2016 | ||||||
(in thousands, except per share data) | |||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 91,296 | $ | 60,713 | |||
Accounts receivable, net of allowance of $3,537 and $2,984 as of December 31, 2015 and March 31, 2016, respectively | 74,724 | 77,249 | |||||
Prepaid expenses | 14,187 | 13,884 | |||||
Other current assets | 9,724 | 8,898 | |||||
Total current assets | 189,931 | 160,744 | |||||
Property and equipment, net | 372,504 | 348,171 | |||||
Goodwill | 137,751 | 135,489 | |||||
Other intangible assets, net | 25,325 | 9,867 | |||||
Other long-term assets | 9,141 | 8,559 | |||||
Total assets | $ | 734,652 | $ | 662,830 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 18,442 | $ | 11,739 | |||
Accrued payroll and related expenses | 50,532 | 14,681 | |||||
Other accrued liabilities | 64,305 | 71,393 | |||||
Deferred revenue | 40,229 | 37,904 | |||||
Current portion of long-term debt and capital lease obligations | 6,787 | 1,864 | |||||
Total current liabilities | 180,295 | 137,581 | |||||
Long-term debt and capital lease obligations | 505,613 | 469,003 | |||||
Long-term deferred income taxes, net | 3,876 | 4,202 | |||||
Other long-term liabilities | 22,022 | 26,427 | |||||
Total liabilities | 711,806 | 637,213 | |||||
Stockholders’ equity: | |||||||
Preferred stock, $0.01 par value, 100,000 shares authorized, 0 shares issued and outstanding as of December 31, 2015 and March 31, 2016 | — | — | |||||
Common stock, $0.01 par value, 300,000 shares authorized, 200,207 and 201,397 shares issued as of December 31, 2015 and March 31, 2016, respectively, and 103,880 and 105,070 shares outstanding as of December 31, 2015 and March 31, 2016, respectively | 2,002 | 2,014 | |||||
Additional paid-in capital | 2,026,638 | 2,021,530 | |||||
Accumulated deficit | (1,260,937 | ) | (1,253,070 | ) | |||
Treasury stock, at cost, 96,327 shares as of December 31, 2015 and March 31, 2016 | (744,857 | ) | (744,857 | ) | |||
Total stockholders’ equity | 22,846 | 25,617 | |||||
Total liabilities and stockholders’ equity | $ | 734,652 | $ | 662,830 |
Three Months Ended March 31, | |||||||
2015 | 2016 | ||||||
(in thousands, except per share data) (unaudited) | |||||||
Revenues | $ | 282,447 | $ | 254,262 | |||
Operating costs and expenses: | |||||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 129,462 | 115,206 | |||||
Selling, general and administrative (exclusive of depreciation and amortization shown separately below) | 95,258 | 81,412 | |||||
Depreciation and amortization | 47,264 | 40,199 | |||||
Restructuring, acquisition and integration-related costs | 5,372 | 3,013 | |||||
Total operating costs and expenses | 277,356 | 239,830 | |||||
Income from operations | 5,091 | 14,432 | |||||
Gain on sale of business | — | 5,727 | |||||
Interest expense and other, net | (13,937 | ) | (11,109 | ) | |||
Loss on extinguishment of debt | (1,286 | ) | (232 | ) | |||
Income (loss) before income taxes | (10,132 | ) | 8,818 | ||||
Income tax provision | (351 | ) | (951 | ) | |||
Net income (loss) and comprehensive income (loss) | $ | (10,483 | ) | $ | 7,867 | ||
Net income (loss) per share | |||||||
Basic | $ | (0.10 | ) | $ | 0.08 | ||
Diluted | (0.10 | ) | 0.07 | ||||
Weighted average common shares outstanding | |||||||
Basic | 102,611 | 104,433 | |||||
Diluted | 102,611 | 107,700 | |||||
Dividends declared per share | $ | 0.05 | $ | 0.05 | |||
Three Months Ended March 31, | |||||||
2015 | 2016 | ||||||
Cash flows from operating activities: | (in thousands) (unaudited) | ||||||
Net income (loss) | $ | (10,483 | ) | $ | 7,867 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 47,264 | 40,199 | |||||
Gain on sale of business | — | (5,727 | ) | ||||
Non-cash income taxes | 185 | 298 | |||||
Stock-based compensation | 3,415 | 4,086 | |||||
Amortization of debt discount and debt issuance costs | 1,029 | 859 | |||||
Loss on extinguishment of debt | 1,286 | 232 | |||||
Other operating activities | (90 | ) | (595 | ) | |||
Decrease (increase) in accounts receivable, net | 1,674 | (6,629 | ) | ||||
(Increase) decrease in prepaid expenses and other assets | (4,537 | ) | 5,819 | ||||
Decrease in accounts payable and accrued and other liabilities | (22,437 | ) | (39,662 | ) | |||
Increase in deferred revenue | 1,559 | 3,883 | |||||
Net cash provided by operating activities | 18,865 | 10,630 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (17,529 | ) | (18,573 | ) | |||
Proceeds from sale of business | — | 26,000 | |||||
Net cash (used in) provided by investing activities | (17,529 | ) | 7,427 | ||||
Cash flows from financing activities: | |||||||
Repayment of debt and capital lease obligations | (21,938 | ) | (42,624 | ) | |||
Payment of dividends | (5,478 | ) | (6,016 | ) | |||
Net cash used in financing activities | (27,416 | ) | (48,640 | ) | |||
Net decrease in cash and cash equivalents | (26,080 | ) | (30,583 | ) | |||
Cash and cash equivalents, beginning of period | 134,133 | 91,296 | |||||
Cash and cash equivalents, end of period | $ | 108,053 | $ | 60,713 |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
(in thousands, except per share data) | |||||||
Numerator | |||||||
Net income (loss) | $ | (10,483 | ) | $ | 7,867 | ||
Denominator | |||||||
Basic weighted average common shares outstanding | 102,611 | 104,433 | |||||
Dilutive effect of Common Stock Equivalents | — | 3,267 | |||||
Diluted weighted average common shares outstanding | 102,611 | 107,700 | |||||
Basic net income (loss) per share | $ | (0.10 | ) | $ | 0.08 | ||
Diluted net income (loss) per share | $ | (0.10 | ) | $ | 0.07 |
Enterprise/ | Small | Carrier/ | |||||||||||||||||
Mid-Market | Business | Transport | Consumer | Total | |||||||||||||||
(in thousands) | |||||||||||||||||||
Balance as of December 31, 2015 | |||||||||||||||||||
Goodwill | $ | 237,982 | $ | 57,137 | $ | 98,290 | $ | 88,920 | $ | 482,329 | |||||||||
Accumulated impairment loss | (208,443 | ) | (50,045 | ) | (86,090 | ) | — | (344,578 | ) | ||||||||||
29,539 | 7,092 | 12,200 | 88,920 | 137,751 | |||||||||||||||
Goodwill disposed | (1,516 | ) | (746 | ) | — | — | (2,262 | ) | |||||||||||
Balance as of March 31, 2016 | |||||||||||||||||||
Goodwill | 236,466 | 56,391 | 98,290 | 88,920 | 480,067 | ||||||||||||||
Accumulated impairment loss | (208,443 | ) | (50,045 | ) | (86,090 | ) | — | (344,578 | ) | ||||||||||
$ | 28,023 | $ | 6,346 | $ | 12,200 | $ | 88,920 | $ | 135,489 |
As of December 31, 2015 | As of March 31, 2016 | ||||||||||||||||||||||
Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Customer relationships | $ | 346,825 | $ | (323,365 | ) | $ | 23,460 | $ | 337,397 | $ | (328,741 | ) | $ | 8,656 | |||||||||
Developed technology and software | 26,261 | (24,396 | ) | 1,865 | 25,311 | (24,100 | ) | 1,211 | |||||||||||||||
Trade name | 1,521 | (1,521 | ) | — | 1,521 | (1,521 | ) | — | |||||||||||||||
Other intangible assets, net | $ | 374,607 | $ | (349,282 | ) | $ | 25,325 | $ | 364,229 | $ | (354,362 | ) | $ | 9,867 |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
(in thousands) | |||||||
Amortization expense | $ | 16,680 | $ | 11,947 |
December 31, 2015 | March 31, 2016 | ||||||
(in thousands) | |||||||
Accrued taxes and surcharges | $ | 14,663 | $ | 14,249 | |||
Accrued communications costs | 23,201 | 19,940 | |||||
Customer-related liabilities | 7,854 | 7,356 | |||||
Accrued interest | 3,822 | 12,932 | |||||
Other | 14,765 | 16,916 | |||||
Total other accrued liabilities | $ | 64,305 | $ | 71,393 |
December 31, 2015 | March 31, 2016 | ||||||
(in thousands) | |||||||
Senior secured notes due June 2020 | $ | 300,000 | $ | 300,000 | |||
Unamortized debt issue costs on senior secured notes due June 2020 | (4,723 | ) | (4,456 | ) | |||
Senior notes due May 2019 | 173,925 | 166,945 | |||||
Unamortized discount and debt issue costs on senior notes due May 2019 | (5,393 | ) | (4,819 | ) | |||
Senior secured revolving credit facility | 35,000 | — | |||||
Capital lease obligations | 13,591 | 13,197 | |||||
Carrying value of debt and capital lease obligations | 512,400 | 470,867 | |||||
Less current portion of debt and capital lease obligations | (6,787 | ) | (1,864 | ) | |||
Long-term debt and capital lease obligations | $ | 505,613 | $ | 469,003 |
Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||
(shares and dollars in thousands) | ||||||||||||
Outstanding as of December 31, 2015 | 908 | $ | 6.52 | |||||||||
Granted | — | — | ||||||||||
Exercised | — | — | ||||||||||
Forfeited and expired | (15 | ) | 11.82 | |||||||||
Outstanding as of March 31, 2016 | 893 | 6.44 | 5.9 | $ | 210 | |||||||
Vested and expected to vest as of March 31, 2016 | 851 | 6.48 | 5.8 | $ | 194 | |||||||
Exercisable as of March 31, 2016 | 615 | 6.87 | 5.2 | $ | 105 |
Stock Options Outstanding | Stock Options Exercisable | |||||||||||||||||||||||
Weighted | ||||||||||||||||||||||||
Average | Weighted | Weighted | ||||||||||||||||||||||
Remaining | Average | Average | ||||||||||||||||||||||
Range of | Number | Contractual | Exercise | Number | Exercise | |||||||||||||||||||
Exercise Prices | Outstanding | Life | Price | Exercisable | Price | |||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
$ | 4.97 | to | $ | 4.97 | 300 | 7.8 | $ | 4.97 | 150 | $ | 4.97 | |||||||||||||
6.08 | to | 6.08 | 255 | 6.9 | 6.08 | 127 | 6.08 | |||||||||||||||||
6.90 | to | 7.51 | 221 | 5.1 | 7.45 | 221 | 7.45 | |||||||||||||||||
7.64 | to | 11.82 | 117 | 0.5 | 9.05 | 117 | 9.05 | |||||||||||||||||
4.97 | to | 11.82 | 893 | 5.9 | 6.44 | 615 | 6.87 |
Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||
(in thousands) | ||||||
Outstanding as of December 31, 2015 | 7,751 | $ | 4.58 | |||
Granted | 2,989 | 5.01 | ||||
Vested | (1,852 | ) | 4.94 | |||
Forfeited | (245 | ) | 4.53 | |||
Outstanding as of March 31, 2016 | 8,643 | $ | 4.65 |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
(in thousands) | |||||||
Integration-related costs | $ | 1,317 | $ | 1,779 | |||
Severance, retention and other employee costs | 2,901 | 891 | |||||
Facility-related costs | 1,154 | 343 | |||||
Restructuring, acquisition and integration-related costs | $ | 5,372 | $ | 3,013 |
• | Integration-related costs, such as system conversion, rebranding costs and integration-related consulting and employee costs; |
• | Severance, retention and other employee termination costs associated with acquisition and integration activities and with certain voluntary employee separations; and |
• | Facility-related costs, such as lease termination and asset impairments. |
Severance and Benefits | Facilities | Total | |||||||||
(in thousands) | |||||||||||
Balance as of December 31, 2015 | $ | 3,539 | $ | 5,542 | $ | 9,081 | |||||
Accruals | 891 | 343 | 1,234 | ||||||||
Payments | (2,420 | ) | (1,036 | ) | (3,456 | ) | |||||
Balance as of March 31, 2016 | $ | 2,010 | $ | 4,849 | $ | 6,859 |
As of December 31, 2015 | As of March 31, 2016 | ||||||||||||||
Carrying | Carrying | ||||||||||||||
Amount | Fair Value | Amount | Fair Value | ||||||||||||
(in thousands) | |||||||||||||||
Senior Secured Notes | $ | 295,277 | $ | 305,439 | $ | 295,544 | $ | 310,500 | |||||||
Senior Notes | 168,532 | 177,404 | 162,126 | 167,730 | |||||||||||
Senior secured revolving credit facility | 35,000 | 35,000 | — | — | |||||||||||
Total debt, excluding capital leases | $ | 498,809 | $ | 517,843 | $ | 457,670 | $ | 478,230 |
• | Enterprise/Mid-Market. The Company’s Enterprise/Mid-Market segment provides a broad range of data, voice and managed network services to distributed multi-site business customers. |
• | Small Business. The Company’s Small Business segment provides a broad range of data, voice and managed network services to small, often single-site business customers. |
• | Carrier/Transport. The Company’s Carrier/Transport segment provides transmission capacity and other data, voice and managed network services to telecommunications carriers and large enterprises. |
• | Consumer. The Company’s Consumer segment provides nationwide Internet access and related value-added services to residential customers. |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
(in thousands) | |||||||
Enterprise/Mid-Market | |||||||
Revenues | $ | 114,391 | $ | 104,689 | |||
Cost of revenues (excluding depreciation and amortization) | 56,272 | 51,571 | |||||
Gross margin | 58,119 | 53,118 | |||||
Small Business | |||||||
Revenues | 79,054 | 62,133 | |||||
Cost of revenues (excluding depreciation and amortization) | 37,597 | 29,734 | |||||
Gross margin | 41,457 | 32,399 | |||||
Carrier/Transport | |||||||
Revenues | 32,872 | 36,069 | |||||
Cost of revenues (excluding depreciation and amortization) | 15,593 | 15,464 | |||||
Gross margin | 17,279 | 20,605 | |||||
Consumer | |||||||
Revenues | 56,130 | 51,371 | |||||
Cost of revenues (excluding depreciation and amortization) | 20,000 | 18,437 | |||||
Gross margin | 36,130 | 32,934 | |||||
Total Segments | |||||||
Revenues | 282,447 | 254,262 | |||||
Cost of revenues | 129,462 | 115,206 | |||||
Gross margin | $ | 152,985 | $ | 139,056 |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
(in thousands) | |||||||
Segment gross margin | $ | 152,985 | $ | 139,056 | |||
Operating costs and expenses: | |||||||
Selling, general and administrative expenses | 95,258 | 81,412 | |||||
Depreciation and amortization | 47,264 | 40,199 | |||||
Restructuring, acquisition and integration-related costs | 5,372 | 3,013 | |||||
Total operating costs and expenses | 147,894 | 124,624 | |||||
Income from operations | 5,091 | 14,432 | |||||
Gain on sale of business | — | 5,727 | |||||
Interest expense and other, net | (13,937 | ) | (11,109 | ) | |||
Loss on extinguishment of debt | (1,286 | ) | (232 | ) | |||
Income (loss) before income taxes | $ | (10,132 | ) | $ | 8,818 |
• | Monthly recurring charges for providing data, voice and managed network services; transmission capacity; and Internet access and related value-added services; |
• | Usage revenues; |
• | Equipment revenues; and |
• | Non-recurring and other revenues, such as installation fees, termination fees and administrative fees. |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
(in thousands) | |||||||
Monthly recurring revenues | 247,975 | 223,402 | |||||
Usage revenues | 27,678 | 22,458 | |||||
Equipment revenues | 3,724 | 4,107 | |||||
Non-recurring and other revenues | 3,070 | 4,295 | |||||
Total revenues | $ | 282,447 | $ | 254,262 |
• | Generated revenues of $254.3 million, a 10% decrease compared to the three months ended March 31, 2015, primarily driven by declines in traditional voice and data products for business and consumer services and the sale of our IT services business, as further discussed below. These declines were partially offset by increased sales of our growth products, targeted price increases and successful efforts to re-term customers coming out of contract. |
• | Reduced cost of revenues 11% during the three months ended March 31, 2016 compared to the prior year period, primarily related to the decline in revenues noted above as well as successful efforts to manage cost of revenues through network grooming, auditing telecommunications vendor invoices and other cost saving initiatives. |
• | Generated net income of $7.9 million, compared to a net loss of $10.5 million during the three months ended March 31, 2015, primarily due to a $5.7 million pretax gain recognized on our sale of IT services business, a decrease in depreciation and amortization expense and a decrease in interest expense due to lower outstanding debt. Also contributing was an increase in Adjusted EBITDA as described below. |
• | Generated Adjusted EBITDA (a non-GAAP measure, see “Non-GAAP Financial Measures” in this Item 2) of $61.7 million, an increase from $61.1 million in the prior year period, primarily due to improvements in our cost of revenues and operating expenses, offset by the decrease in revenues from traditional voice and data products. The decrease in cost of revenues and operating expenses was driven by cost savings initiatives, including reductions in workforce implemented over the past year. |
• | Made capital expenditures of $18.6 million during the three months ended March 31, 2016. |
• | Repurchased $7.0 million of outstanding principal amount of debt and repaid $35.0 million under our senior secured revolving credit facility during the three months ended March 31, 2016. |
• | Made $6.0 million of dividend payments to shareholders during the three months ended March 31, 2016. |
• | Operate each of our business units with focused, value-optimizing strategies. Our organization is aligned around four distinct business units, which are Enterprise/Mid-Market, Small Business, Carrier/Transport and Consumer. We believe this concentrates our resources and investments into areas that will drive growth and deliver improved performance, enable each business to compete more successfully in the market and provide strategic optionality. We are focused on operating each business unit with value-optimizing strategies, which are managing the decline in our Small Business and Consumer business units and investing the cash flow to grow our Enterprise/Mid-Market and Carrier/Transport business units. |
• | Optimize our cost structure and cash flows. We are focused on optimizing our cost structure and maximizing our cash flows. This includes managing our cost of revenues and operating expenses, streamlining our internal processes and aligning our workforce to current revenue trends. It also includes the repayment and/or refinancing of debt in order to reduce our interest expense. We plan to use the cash flow generated from our improvement efforts to continue to optimize our balance sheet and invest in growth. |
• | Invest in growth business products, marketing and sales. Our growth business products include MultiProtocol Label Switching ("MPLS"), hosted voice and other UCaaS products, hybrid WAN and managed network, security and cloud services for multi-location businesses and transport services for other communications carriers and enterprises. We are focused on investing in product and service capabilities and sales and marketing initiatives to support our growth products. |
• | Evaluate potential strategic transactions. We continue to evaluate potential strategic transactions in order to accelerate our transformation. We believe that targeted acquisitions, when available at the right economics, can be an effective means for growth and targeted capability building. In addition, we continue to evaluate our business, which could lead us to discontinue or divest non-strategic products, assets or customers based on management's assessment of their strategic value to our business. |
• | Targeting larger multi-location retail and service businesses which have lower churn profiles, as well as a need for our product and services |
• | Investing in new products and service capabilities to create value for our customers, in particular our cloud-based offerings |
• | Focusing on customer contract re-term efforts, retention offers, targeted price increases and opportunities to upsell products and services |
• | Improving the customer experience to increase customer satisfaction and further enhance customer retention |
• | Continuing to refine and narrow our product portfolio |
• | Implementing cost efficiencies, such as network grooming and workforce alignment, and seeking to make costs more variable |
• | Repaying and/or refinancing outstanding indebtedness in order to reduce interest expense |
• | Considering further divestitures of non-strategic products, assets or customers in order to continue to simplify our operations and generate cash to reduce debt or to use for other strategic needs |
• | Evaluating potential strategic transactions to add products and services |
• | Industry factors. The communications industry is characterized by intense competition, changing technology and changes in customer needs, an evolving regulatory environment and industry consolidation resulting in larger competitors and fewer suppliers. We expect these trends to continue. More recently, trends in the industry have included increased demand for data, evolving security threats, the adoption of cloud computing and the increased use of outsourcing. We are trying to capitalize on these changes by focusing on our managed network, security and cloud services and transport services. |
• | Traditional business voice and data products. Our traditional business voice and data revenues have been declining due to competition, migration to more advanced integrated voice and data services and mandated rate reductions. We expect this trend to continue. We have also experienced an increase in churn for these products. However, we are focused on decelerating these declines through customer retention efforts, contract renewals, upselling products and services and offering new services. |
• | Consumer access declines. Our consumer access subscriber base and revenues have been declining and are expected to continue to decline due to the continued maturation of the market for Internet access, competition from cable, DSL and wireless providers and limited sales and marketing activities. In addition, we have implemented, and expect to continue to implement, targeted price increases, which could negatively impact our churn rates. However, we are focused on customer retention and, as a result, we expect the rate of churn to continue to generally decline as our customer base becomes longer tenured. |
• | Operating costs and expenses. We have experienced declines in cost of revenues and operating expense due to various cost saving initiatives, lower sales of traditional voice and data products and customer churn. We are focused on continuing to optimize our cost structure to offset pressures on revenue. However, we may not be able to continue to achieve the level of cost savings we have been experiencing and there will be decreasing opportunities for cost savings in the future. |
• | Dispute settlements. Due to the nature of our industry, we are regularly involved in disputes related to our billings to other carriers for access to our network and network access charges that we are assessed by other companies. The disputes often take significant time to resolve, and they may be resolved or require adjustment in future periods although they relate to costs and revenues in prior periods. We have experienced an increase in dispute settlements impacting revenues and cost of revenues over the past few years. However, this trend may not continue at the rate it has historically. |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
(in thousands) | |||||||
Revenues | $ | 282,447 | $ | 254,262 | |||
Operating costs and expenses: | |||||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 129,462 | 115,206 | |||||
Selling, general and administrative (exclusive of of depreciation and amortization shown separately below) | 95,258 | 81,412 | |||||
Depreciation and amortization | 47,264 | 40,199 | |||||
Restructuring, acquisition and integration-related costs | 5,372 | 3,013 | |||||
Total operating costs and expenses | 277,356 | 239,830 | |||||
Income from operations | 5,091 | 14,432 | |||||
Gain on sale of business | — | 5,727 | |||||
Interest expense and other, net | (13,937 | ) | (11,109 | ) | |||
Loss on extinguishment of debt | (1,286 | ) | (232 | ) | |||
Income (loss) before income taxes | (10,132 | ) | 8,818 | ||||
Income tax provision | (351 | ) | (951 | ) | |||
Net income (loss) | $ | (10,483 | ) | $ | 7,867 |
• | Monthly recurring charges for providing data, voice and managed network services; transmission capacity; and Internet access and related value-added services; |
• | Usage revenues; |
• | Equipment revenues; and |
• | Non-recurring and other revenues, such as installation fees, termination fees and administrative fees. |
Three Months Ended March 31, | Change | |||||||||||||
2015 | 2016 | Dollar | Percent | |||||||||||
(dollars in thousands) | ||||||||||||||
Monthly recurring revenues | $ | 247,975 | $ | 223,402 | $ | (24,573 | ) | (10 | )% | |||||
Usage revenues | 27,678 | 22,458 | (5,220 | ) | (19 | )% | ||||||||
Equipment revenues | 3,724 | 4,107 | 383 | 10 | % | |||||||||
Non-recurring and other revenues | 3,070 | 4,295 | 1,225 | 40 | % | |||||||||
Total revenues | $ | 282,447 | $ | 254,262 | $ | (28,185 | ) | (10 | )% |
Three Months Ended | |||
2016 vs 2015 | |||
(in millions) | |||
Due to decrease in Small Business revenues (a) | $ | (14.2 | ) |
Due to decrease in IT services revenues (b) | (8.3 | ) | |
Due to decrease in Consumer revenues (c) | (4.8 | ) | |
Due to decrease in Enterprise/Mid-Market revenues (d) | (4.1 | ) | |
Due to increase in Carrier/Transport (e) | 3.2 | ||
Total change in revenues | $ | (28.2 | ) |
(a) | Decrease primarily due to decline in traditional voice and data products, including traditional voice, lower-end, single site broadband services and web hosting. Revenues for these voice and data products have been decreasing due to an increase in customer churn, competition and a deemphasis on certain traditional products. Partially offsetting the decline in revenues for our traditional voice and data products were efforts to protect our revenue base, such as targeted price increases implemented during the three months ended March 31, 2016 and re-terms of customers coming out of contract. |
(b) | Decrease in IT services revenues primarily due to the sale of certain assets related to our IT services product offerings on February 1, 2016. Also contributing to the decrease was the discontinuance of certain products that were low margin revenue streams or that were not consistent with our more focused business strategy. |
(c) | Decrease primarily due to the continued maturation of the market for Internet access, competitive pressures in the industry and limited sales and marketing activities. |
(d) | Decrease primarily due to decline in traditional voice and data products due to an increase in customer churn, competition and a deemphasis on certain traditional products. Over the past year we deemphasized and discontinued certain products that were low margin revenue streams or that were not consistent with our more focused business strategy. Partially offsetting the decline in revenues for our traditional voice and data products were price increases implemented during the three months ended March 31, 2016 and an increase in sales of growth products, including MPLS, hosted voice, managed network services and transport revenues due to an increased emphasis on selling these products and services. |
(e) | Increase primarily due to an increase in transport revenues as we capitalize on unique fiber routes. Also contributing to the increase was a change in settlements and disputes related to billings to other carriers, as we recognized net unfavorable settlements during the three months ended March 31, 2015 and favorable settlements during the three months ended March 31, 2016. |
Three Months Ended | |||||||||||
March 31, | Change | ||||||||||
2015 | 2016 | Dollar | Percent | ||||||||
(dollars in thousands) | |||||||||||
Cost of revenues | 129,462 | 115,206 | $ | (14,256 | ) | (11)% |
Three Months Ended | |||
2016 vs 2015 | |||
(in millions) | |||
Due to decrease in interconnection expenses (a) | $ | (7.6 | ) |
Due to decrease in network expenses (b) | (2.2 | ) | |
Due to decrease in usage (c) | (2.5 | ) | |
Due to sale of IT services business (d) | (4.3 | ) | |
Due to change in non-recurring charges and other expenses (e) | 2.3 | ||
Total change in cost of revenues | $ | (14.3 | ) |
(a) | Decrease due to decline in revenues and a concentrated effort to manage cost of revenues through auditing telecommunications vendor invoices and other cost saving initiatives and declines in traditional voice and data products. Partially offsetting these declines were increased sales of growth products. |
(b) | Decrease due to a concentrated effort to manage cost of revenues through network grooming and other cost saving initiatives and declines in traditional voice and data products. Partially offsetting these declines were increased sales of growth products. |
(c) | Decrease due to declines in traditional voice and data products and a decreased emphasis on selling certain lower margin products and services. |
(d) | Decrease in IT services cost of revenues primarily due to the sale of certain assets related to our IT services product offerings on February 1, 2016. Also contributing to the decrease was the discontinuance of certain products that had low margins or that were not consistent with our more focused business strategy. |
(e) | Increase primarily due to fewer favorable adjustments and settlements during the three months ended March 31, 2016 compared to the three months ended March 31, 2015. |
Three Months Ended | |||||||||||||
March 31, | Change | ||||||||||||
2015 | 2016 | Dollar | Percent | ||||||||||
(dollars in thousands) | |||||||||||||
Selling, general and administrative expenses | $ | 95,258 | $ | 81,412 | $ | (13,846 | ) | (15)% |
Three Months Ended | |||
2016 vs 2015 | |||
(in millions) | |||
Due to decrease in people costs (a) | $ | (10.7 | ) |
Due to decrease in rent and occupancy costs (b) | (1.1 | ) | |
Due to decrease in professional fees (c) | (1.1 | ) | |
Due to decrease in bad debt expense (d) | (0.6 | ) | |
Due to decrease in other selling, general and administrative costs (e) | (0.3 | ) | |
Total change in selling, general and administrative expenses | $ | (13.8 | ) |
(a) | Decrease in people costs as employee headcount decreased from 2,402 full-time equivalents as of March 31, 2015 to 1,895 full-time equivalents as of March 31, 2016. The decrease was primarily due to reductions in workforce over the past year driven by changes in our business strategy and the transfer of employees in connection with the sale of IT services business on February 1, 2016. |
(b) | Decrease in rent and occupancy costs primarily due to cost savings from the closing of several sales offices and other properties over the past year in connection with changes to our business strategy. |
(c) | Decrease in professional fees due to consulting fees incurred during the three months ended March 31, 2015 associated with strategic reviews of our business. |
(d) | Decrease in bad debt expense due to more effective collection efforts and the overall decrease in revenues. |
(e) | Decrease in other selling, general and administrative costs such as commissions, outsourced labor, payment processing, travel and insurance due to increased focus on optimizing our cost structure. |
Three Months Ended | |||||||||||||
March 31, | Change | ||||||||||||
2015 | 2016 | Dollars | Percent | ||||||||||
(dollars in thousands) | |||||||||||||
Depreciation expense | $ | 30,584 | $ | 28,252 | $ | (2,332 | ) | (8)% | |||||
Amortization expense | 16,680 | 11,947 | (4,733 | ) | (28)% | ||||||||
Depreciation and amortization expense | $ | 47,264 | $ | 40,199 | $ | (7,065 | ) | (15)% |
• | Integration-related costs, such as system conversion, rebranding costs and integration-related consulting and employee costs; |
• | Severance, retention and other employee termination costs associated with acquisition and integration activities and with certain voluntary employee separations; and |
• | Facility-related costs, such as lease termination and asset impairments. |
Three Months Ended | |||||||||||||
March 31, | Change | ||||||||||||
2015 | 2016 | Dollars | Percent | ||||||||||
(dollars in thousands) | |||||||||||||
Integration-related costs | $ | 1,317 | $ | 1,779 | $ | 462 | 35% | ||||||
Severance, retention and other employee costs | 2,901 | 891 | (2,010 | ) | (69)% | ||||||||
Facility-related costs | 1,154 | 343 | (811 | ) | 70% | ||||||||
Restructuring, acquisition and integration-related costs | $ | 5,372 | $ | 3,013 | $ | (2,359 | ) | (44)% |
• | Enterprise/Mid-Market. Our Enterprise/Mid-Market segment provides a broad range of data, voice and managed network services to distributed multi-site business customers. |
• | Small Business. Our Small Business segment provides a broad range of data, voice and managed network services to small, often single-site business customers. |
• | Carrier/Transport. Our Carrier/Transport segment provides transmission capacity and other data, voice and managed network services to telecommunications carriers and large enterprises. |
• | Consumer. Our Consumer segment provides nationwide Internet access and related value-added services to residential customers. |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
(in thousands) | |||||||
Enterprise/Mid-Market | |||||||
Revenues | $ | 114,391 | $ | 104,689 | |||
Cost of revenues (excluding depreciation and amortization) | 56,272 | 51,571 | |||||
Gross margin | 58,119 | 53,118 | |||||
Small Business | |||||||
Revenues | 79,054 | 62,133 | |||||
Cost of revenues (excluding depreciation and amortization) | 37,597 | 29,734 | |||||
Gross margin | 41,457 | 32,399 | |||||
Carrier/Transport | |||||||
Revenues | 32,872 | 36,069 | |||||
Cost of revenues (excluding depreciation and amortization) | 15,593 | 15,464 | |||||
Gross margin | 17,279 | 20,605 | |||||
Consumer | |||||||
Revenues | 56,130 | 51,371 | |||||
Cost of revenues (excluding depreciation and amortization) | 20,000 | 18,437 | |||||
Gross margin | 36,130 | 32,934 | |||||
Total Segments | |||||||
Revenues | 282,447 | 254,262 | |||||
Cost of revenues (excluding depreciation and amortization) | 129,462 | 115,206 | |||||
Gross margin | $ | 152,985 | $ | 139,056 |
Three Months Ended | |||||||||||||
March 31, | Change | ||||||||||||
2015 | 2016 | Dollars | Percent | ||||||||||
(dollars in thousands) | |||||||||||||
Segment revenues | $ | 114,391 | $ | 104,689 | $ | (9,702 | ) | (8)% | |||||
Segment cost of revenues | 56,272 | 51,571 | (4,701 | ) | (8)% | ||||||||
Segment gross margin | $ | 58,119 | $ | 53,118 | $ | (5,001 | ) | (9)% |
• | Decrease of $5.6 million in IT services revenues, primarily due to the sale of certain assets related to our IT services product offerings on February 1, 2016, as well as the discontinuance of certain products that had low margins or that were not consistent with our more focused business strategy. |
• | Decrease in traditional voice and data products. Revenues for traditional voice and data products have been decreasing due to an increase in customer churn, competition and a deemphasis on certain traditional products. |
• | Partially offset by targeted price increases implemented during the three months ended March 31, 2016 and increased sales of our growth products, including MPLS, hosted voice and managed network services. |
Three Months Ended | |||||||||||||
March 31, | Change | ||||||||||||
2015 | 2016 | Dollars | Percent | ||||||||||
(dollars in thousands) | |||||||||||||
Segment revenues | $ | 79,054 | $ | 62,133 | $ | (16,921 | ) | (21)% | |||||
Segment cost of revenues | 37,597 | 29,734 | (7,863 | ) | (21)% | ||||||||
Segment gross margin | $ | 41,457 | $ | 32,399 | $ | (9,058 | ) | (22)% |
• | Decrease in traditional voice and data products. Revenues for traditional voice and data products have been decreasing due to an increase in customer churn, competition and a deemphasis on certain traditional products. |
• | Decrease of $2.7 million in IT services revenues primarily due to the sale of certain assets related to our IT services product offerings on February 1, 2016, as well as the discontinuance of certain products that had low margins or that were not consistent with our more focused business strategy. |
• | Partially offset by efforts to protect our revenue base, such as targeted price increases and re-terms of customers coming out of contract. |
Three Months Ended | |||||||||||||
March 31, | Change | ||||||||||||
2015 | 2016 | Dollars | Percent | ||||||||||
(dollars in thousands) | |||||||||||||
Segment revenues | $ | 32,872 | $ | 36,069 | $ | 3,197 | 10% | ||||||
Segment cost of revenues | 15,593 | 15,464 | (129 | ) | (1)% | ||||||||
Segment gross margin | $ | 17,279 | $ | 20,605 | $ | 3,326 | 19% |
Three Months Ended | |||||||||||||
March 31, | Change | ||||||||||||
2015 | 2016 | Dollars | Percent | ||||||||||
(dollars in thousands) | |||||||||||||
Segment revenues | |||||||||||||
Access services | $ | 45,046 | $ | 40,056 | $ | (4,990 | ) | (11)% | |||||
Value-added services | 11,084 | 11,315 | 231 | 2% | |||||||||
Total segment revenues | 56,130 | 51,371 | (4,759 | ) | (8)% | ||||||||
Segment cost of revenues | 20,000 | 18,437 | (1,563 | ) | (8)% | ||||||||
Segment gross margin | $ | 36,130 | $ | 32,934 | $ | (3,196 | ) | (9)% |
• | Decrease in average consumer subscribers, which were 0.8 million during the three months ended March 31, 2015 and 0.7 million during the three months ended March 31, 2016. The decrease resulted from limited sales and marketing activities, the continued maturation of the market for Internet access and competitive pressures in the industry. However, as we continue to focus on the retention of customers, our monthly consumer subscriber churn rates improved from 2.1% during the three months ended March 31, 2015 to 1.8% during the three months ended March 31, 2016, which moderated the decline in average consumer subscribers. |
• | Partially offsetting the decrease was an increase in our average revenue per subscriber, which was $23.20 during the three months ended March 31, 2015 and $23.91 during the three months ended March 31, 2016. The increase was due to targeted price increases and a change in mix of subscribers. |
• | The decrease in average consumer subscribers noted above. |
• | Partially offset by an increase in our average cost per subscriber. This was due to a shift in the mix to customers with higher costs associated with delivering services and higher unit costs as our agreements with certain service providers generally have volume based tiered pricing which is leading to higher unit costs as our subscriber base decreases. |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
Consumer Subscriber Activity | |||||||
Subscribers at beginning of period | 821,000 | 729,000 | |||||
Gross organic subscriber additions | 19,000 | 14,000 | |||||
Churn | (51,000) | (39,000) | |||||
Subscribers at end of period (a) | 789,000 | 704,000 | |||||
Consumer Metrics | |||||||
Average narrowband subscribers (b) | 475,000 | 441,000 | |||||
Average broadband subscribers (b) | 331,000 | 275,000 | |||||
Average consumer subscribers (b) | 806,000 | 716,000 | |||||
ARPU (c) | $ | 23.20 | $ | 23.91 | |||
Churn rate (d) | 2.1 | % | 1.8 | % |
Three Months Ended | ||||||||||||||
March 31, | Change | |||||||||||||
2015 | 2016 | Dollars | Percent | |||||||||||
(dollars in thousands) | ||||||||||||||
Net cash provided by operating activities | $ | 18,865 | $ | 10,630 | $ | (8,235 | ) | (44 | )% | |||||
Net cash (used in) provided by investing activities | (17,529 | ) | 7,427 | (24,956 | ) | (142 | )% | |||||||
Net cash used in financing activities | (27,416 | ) | (48,640 | ) | 21,224 | 77 | % | |||||||
Net decrease in cash and cash equivalents | $ | (26,080 | ) | $ | (30,583 | ) | $ | (4,503 | ) | (17 | )% |
• | Debt and interest. We expect to use cash to service our outstanding indebtedness, including $300.0 million aggregate principal amount of our Senior Secured Notes due in June 2020, $166.9 million aggregate principal amount of our Senior Notes due in May 2019 and any future borrowings under our $135.0 million revolving credit facility. We may also use cash to repay outstanding indebtedness. During the three months ended March 31, 2016, we repurchased $7.0 million outstanding principal of our Senior Notes. We may repurchase or redeem additional debt. |
• | Capital expenditures. We expect to incur capital expenditures of approximately $85.0 million to $105.0 million during 2016. The capital expenditures primarily relate to the acquisition of new customers and to maintain and upgrade our network and technology infrastructure. The actual amount of capital expenditures may fluctuate due to a number of factors which are difficult to predict and could change significantly over time. Additionally, technological advances may require us to make capital expenditures to develop or acquire new equipment or technology in order to replace aging or obsolete equipment. |
• | Investments in our growth products and services. We expect to invest cash in sales and marketing efforts and other resources required to support our strategy related to our growth products and services. |
• | Dividends. We have historically used cash for dividends. The decision to declare future dividends is made at the discretion of the Board of Directors and will depend on, among other things, our results of operations, financial condition, cash requirements, investment opportunities, restrictions on dividends under the agreements governing our indebtedness and other factors the Board of Directors may deem relevant. |
• | Other. We may also use cash to acquire or invest in other companies or to repurchase common stock. We also expect to use cash for current restructuring liabilities. Payments for restructuring liabilities incurred to date will be funded through operating cash flows. We continue to evaluate our business, including evaluating ways to reduce the cost structure of our business, and may use cash for additional restructuring activities. |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
(in thousands) | |||||||
Net income (loss) | $ | (10,483 | ) | $ | 7,867 | ||
Interest expense and other, net | 13,937 | 11,109 | |||||
Income tax provision | 351 | 951 | |||||
Depreciation and amortization | 47,264 | 40,199 | |||||
Stock-based compensation expense | 3,415 | 4,086 | |||||
Restructuring, acquisition and integration-related costs | 5,372 | 3,013 | |||||
Gain on sale of business | — | (5,727 | ) | ||||
Loss on extinguishment of debt | 1,286 | 232 | |||||
Adjusted EBITDA | $ | 61,142 | $ | 61,730 |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
(in thousands) | |||||||
Net income (loss) | $ | (10,483 | ) | $ | 7,867 | ||
Interest expense and other, net | 13,937 | 11,109 | |||||
Income tax provision | 351 | 951 | |||||
Depreciation and amortization | 47,264 | 40,199 | |||||
Stock-based compensation expense | 3,415 | 4,086 | |||||
Restructuring, acquisition and integration-related costs | 5,372 | 3,013 | |||||
Gain on sale of business | — | (5,727 | ) | ||||
Loss on extinguishment of debt | 1,286 | 232 | |||||
Purchases of property and equipment | (17,529 | ) | (18,573 | ) | |||
Unlevered Free Cash Flow | $ | 43,613 | $ | 43,157 |
Three Months Ended | |||||||
March 31, | |||||||
2015 | 2016 | ||||||
(in thousands) | |||||||
Net cash provided by operating activities | $ | 18,865 | $ | 10,630 | |||
Income tax provision | 351 | 951 | |||||
Non-cash income taxes | (185 | ) | (298 | ) | |||
Interest expense and other, net | 13,937 | 11,109 | |||||
Amortization of debt discount and debt issuance costs | (1,029 | ) | (859 | ) | |||
Restructuring, acquisition and integration-related costs | 5,372 | 3,013 | |||||
Changes in operating assets and liabilities | 23,741 | 36,589 | |||||
Purchases of property and equipment | (17,529 | ) | (18,573 | ) | |||
Other, net | 90 | 595 | |||||
Unlevered Free Cash Flow | $ | 43,613 | $ | 43,157 | |||
Net cash (used in) provided by investing activities | $ | (17,529 | ) | $ | 7,427 | ||
Net cash used in financing activities | $ | (27,416 | ) | $ | (48,640 | ) |
10.1 | 2016 EarthLink Shared Services, LLC Short-Term Incentive Bonus Plan. | |
10.2 | Form of Service-Based Restricted Stock Unit Agreement under the EarthLink Holding Corp. 2016 Equity and Cash Incentive Plan | |
10.3 | Form of Performance-Based Restricted Stock Unit Agreement under the EarthLink Holding Corp. 2016 Equity and Cash Incentive Plan | |
31.1 | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document* | |
101.SCH | XBRL Taxonomy Extension Schema Document* | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document* | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document* | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document* | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document* |
* | Pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for the purposes of section 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities and Exchanges Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
EARTHLINK HOLDINGS CORP. | |||
Date: | May 3, 2016 | /s/ JOSEPH F. EAZOR | |
Joseph F. Eazor, Chief Executive Officer and President (principal executive officer) | |||
Date: | May 3, 2016 | /s/ LOUIS M. ALTERMAN | |
Louis M. Alterman, Chief Financial Officer | |||
(principal financial officer) | |||
Date: | May 3, 2016 | /s/ R. MICHAEL THURSTON | |
R. Michael Thurston, Vice President and Controller | |||
(principal accounting officer) |
If to the Company: | EarthLink Holdings Corp. 1170 Peachtree Street Suite 900 Atlanta, Georgia 30309 Attention: General Counsel |
COMPANY: | |
EARTHLINK HOLDINGS CORP. | |
By: _______________________________________________ Name: ____________________________________________ Title: _____________________________________________ | |
PARTICIPANT: __________________________________________________ [Participant's Name] | |
If to the Company: | EarthLink Holdings Corp. 1170 Peachtree Street Suite 900 Atlanta, Georgia 30309 Attention: General Counsel | |||
If to the Participant: |
COMPANY: | |
EARTHLINK HOLDINGS CORP. | |
By: _______________________________________________ Name: ____________________________________________ Title: _____________________________________________ | |
PARTICIPANT: __________________________________________________ [Participant's Name] | |
Date: | May 3, 2016 | By: | /s/ JOSEPH F. EAZOR |
Joseph F. Eazor | |||
Chief Executive Officer |
Date: | May 3, 2016 | By: | /s/ LOUIS M. ALTERMAN |
Louis M. Alterman | |||
Chief Financial Officer |
/s/ JOSEPH F. EAZOR | |
Joseph F. Eazor | |
Chief Executive Officer | |
May 3, 2016 |
/s/ LOUIS M. ALTERMAN | |
Louis M. Alterman | |
Chief Financial Officer | |
May 3, 2016 |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Apr. 29, 2016 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | EARTHLINK HOLDINGS CORP. | |
Entity Central Index Key | 0001102541 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 105,101,501 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for Doubtful Accounts Receivable | $ 2,984 | $ 3,537 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 201,397,000 | 200,207,000 |
Common stock, shares outstanding | 105,070,000 | 103,880,000 |
Treasury stock, shares | 96,327,000 | 96,327,000 |
Organization |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization EarthLink Holdings Corp. (“EarthLink” or the “Company”), together with its consolidated subsidiaries, is a leading managed network, security and cloud services provider to business and residential customers in the United States. The Company provides a broad range of data, voice and managed network services to retail and wholesale business customers. The Company also provides nationwide Internet access and related value-added services to residential customers. The Company operates an extensive network including more than 29,000 route fiber miles and 90 metro fiber rings. Through its owned and leased facilities, the Company provides data and voice IP service coverage across more than 90 percent of the United States. The Company operates four reportable segments aligned around distinct customer categories: Enterprise/Mid-Market, Small Business, Carrier/Transport and Consumer. For further information concerning the Company’s reportable segments, see Note 13, “Segment Information.” |
Summary of Significant Accounting Policies |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The condensed consolidated financial statements of EarthLink for the three months ended March 31, 2015 and 2016 and the related footnote information are unaudited and have been prepared on a basis consistent with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission (the “SEC”) (the “Annual Report”). These financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto contained in the Annual Report. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring adjustments) which management considers necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results anticipated for the entire year ending December 31, 2016. Basis of Consolidation The accompanying condensed consolidated financial statements of EarthLink include the accounts of its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. 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. Actual results may differ from those estimates. Reclassifications Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. Specifically, the Company reclassified $1.3 million of loss on extinguishment of debt from interest expense and other, net, to loss on extinguishment of debt in the Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 2015. Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance on revenue from contracts with customers. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires significantly expanded disclosures about revenue contract assets and liabilities. In August 2015, the FASB issued guidance that deferred the effective date by one year. The standard is now required to be adopted by public business entities in annual periods beginning on or after December 15, 2017, and interim periods within those annual periods, and may be applied on a full retrospective or modified retrospective approach. Early adoption at the original effective date is permitted. The Company is in the process of determining the method of adoption and assessing the impact the new standard will have on its consolidated financial statements. In August 2014, the FASB issued authoritative guidance related to the disclosure of uncertainties about an entity's ability to continue as a going concern. The new guidance requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements and to provide related footnote disclosures if so. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company's financial statements. In February 2016, the FASB issued authoritative guidance on accounting for leases. The new guidance requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. As of the lease commencement date, a lessee is required to recognize a liability for its lease obligation (initially measured at the present value of the future lease payments not yet paid over the lease term) and an asset for its right to use the underlying asset equal to the lease liability, adjusted for lease payments made at or before lease commencement, lease incentives, and any initial direct costs. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the implementation of this standard on its financial statements. In March 2016, the FASB issued authoritative guidance, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the impact of the implementation of this standard on its financial statements. |
Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share Basic earnings per share represents net income (loss) divided by the weighted average number of common shares outstanding during the reported period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, including stock options and restricted stock units (collectively "Common Stock Equivalents"), were exercised or converted into common stock. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. In applying the treasury stock method for stock-based compensation arrangements, the assumed proceeds are computed as the sum of the amount the employee must pay upon exercise, the amount of compensation cost attributed to future services and not yet recognized and the amount of excess tax benefits, if any, that would be credited to additional paid-in capital assuming exercise of the awards. The following table presents the computation for basic and diluted net income (loss) per share for the three months ended March 31, 2015 and 2016:
The Company has not included the effect of Common Stock Equivalents in the calculation of diluted earnings per share for the three months ended March 31, 2015 because such inclusion would have an anti-dilutive effect due to the Company's net loss. As of March 31, 2015, the Company had 11.2 million stock options and restricted stock units outstanding which were excluded from the determination of dilutive earnings per share. During the three months ended March 31, 2016, approximately 0.7 million stock options and restricted stock units were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive. Anti-dilutive securities could be dilutive in future periods. |
Sale of Business (Notes) |
3 Months Ended |
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Mar. 31, 2016 | |
Sale of Business [Abstract] | |
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] | Sale of Business On February 1, 2016, the Company sold certain assets related to its IT services product offerings. The primary purpose of the sale was to simplify operations and provide more flexibility to invest in new capabilities and services to drive growth in the Company's core business. The purchase price in the transaction was $29.0 million, subject to post-closing contingencies that could increase or decrease the purchase price by $5.0 million. The Company received $26.0 million of cash upon completion of the sale. The other $3.0 million of consideration was deposited into an escrow account to fund potential indemnification obligations. The Company recognized a pretax gain of $5.7 million and recorded a $2.0 million deferred gain for contingent consideration. The gain is included in gain on sale of business in the Condensed Consolidated Statement of Comprehensive Income (Loss). The carrying amount of the IT services assets was $17.5 million, which included $11.4 million of property and equipment, $2.3 million of goodwill, $3.5 million of other intangible assets and $0.3 million of other assets and liabilities. Total revenue of the Company's IT services business was approximately $11.8 million and $3.4 million, respectively, during the three months ended March 31, 2015 and 2016. The sale of the IT services business did not represent a strategic shift in the Company's business nor did it have a major effect on the Company's consolidated results of operations, financial position or cash flows, and accordingly, did not qualify for reporting as a discontinued operation. The IT services business was previously included in the Company's Enterprise/Mid-Market and Small Business segments. |
Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill The following table presents changes in the carrying amount of goodwill by operating segment during the three months ended March 31, 2016:
Goodwill disposed represents the portion of goodwill allocated to the disposed IT services business. Other Intangible Assets The following table presents the components of the Company’s acquired identifiable intangible assets included in the accompanying Condensed Consolidated Balance Sheets as of December 31, 2015 and March 31, 2016:
Definite-lived intangible assets are amortized over their estimated useful lives. The Company amortizes its customer relationships using the straight-line method to match the estimated cash flow generated by such assets, and amortizes its developed technology and trade names using the straight-line method because a pattern to which the expected benefits will be consumed or otherwise used up could not be reliably determined. As of March 31, 2016, the weighted average amortization periods were 5.3 years for customer relationships and 3.8 years for developed technology and software. The Company sold intangible assets that had a gross carrying value of $10.4 million and a net carrying value of $3.5 million in connection with the sale of its IT services business. Amortization of intangible assets, which is included in depreciation and amortization in the Condensed Consolidated Statements of Comprehensive Income (Loss), for the three months ended March 31, 2015 and 2016 was as follows:
Based on the current amount of definite-lived intangible assets, the Company expects to record amortization expense of approximately $9.9 million during the remaining nine months in the year ending December 31, 2016. Actual amortization expense to be reported in future periods could differ materially from these estimates as a result of acquisitions, changes in useful lives and other relevant factors. |
Other Accrued Liabilities |
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Accrued Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Accrued Liabilities | Other Accrued Liabilities The Company's other accrued liabilities consisted of the following as of December 31, 2015 and March 31, 2016:
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Long-Term Debt and Capital Lease Obligations |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt and Capital Lease Obligations | Long-Term Debt and Capital Lease Obligations The Company’s long-term debt and capital lease obligations consisted of the following as of December 31, 2015 and March 31, 2016:
2016 Transactions During the three months ended March 31, 2016, the Company repurchased $7.0 million outstanding principal of its 8.875% Senior Notes due 2019 (the “Senior Notes”) in the open market for $7.0 million, plus accrued and unpaid interest. The Company recognized a $0.2 million loss on extinguishment of debt, consisting of the write-off of unamortized discount on debt, the write-off of debt issuance costs and payment of premium on the repurchase. The loss is included in loss on extinguishment of debt in the Condensed Consolidated Statement of Comprehensive Income (Loss). The payment of premium is included in repayment of debt and capital lease obligations in the Condensed Consolidated Statement of Cash Flows. During the three months ended March 31, 2016, the Company repaid $35.0 million of its senior secured revolving credit facility. As of March 31, 2016, the Company had no amounts outstanding under its senior secured revolving credit facility. Debt Covenants The indenture governing the Company's 7.375% Senior Secured Notes due 2020 (the “Senior Secured Notes”) includes covenants which, subject to certain exceptions, limit the ability of the Company and its Restricted Subsidiaries (as defined in the indenture) to, among other things, incur additional indebtedness, make certain types of restricted payments, create liens, transfer and sell assets, enter into certain transactions with affiliates, issue or sell stock of subsidiaries, engage in sale-leaseback transactions and create restrictions on dividends or other payments by restricted subsidiaries. Upon a change of control (as defined in the indenture), the Company may be required to make an offer to repurchase the Senior Secured Notes at 101% of their principal amount, plus accrued and unpaid interest. The indenture governing the Senior Secured Notes also contains customary events of default. As of March 31, 2016, the Company was in compliance with these covenants. The indenture governing the Senior Notes includes covenants which, subject to certain exceptions, limit the ability of the Company and its Restricted Subsidiaries (as defined in the indenture) to, among other things, incur additional indebtedness, make certain types of restricted payments, incur liens on assets of the Company or the Restricted Subsidiaries, engage in asset sales and enter into transactions with affiliates. Upon a change of control (as defined in the indenture), the Company may be required to make an offer to repurchase the Notes at 101% of their principal amount, plus accrued and unpaid interest. The indenture governing the Senior Notes also contains customary events of default. As of March 31, 2016, the Company was in compliance with these covenants. The indentures governing the Senior Secured Notes and Senior Notes contain covenants regarding the Company's ability to make Restricted Payments (as defined in the indentures), including certain dividends, stock purchases, debt repayments and investments. As of March 31, 2016, the indentures governing the Company's Senior Secured Notes and Senior Notes permitted approximately $164.5 million and $293.1 million, respectively, in Restricted Payments. The Company's ability to make Restricted Payments varies over time, and is determined, in part, by the extent that the Company's cumulative EBITDA exceeds 300% of its cumulative interest expense. Revolving Credit Facility General. The Company has a credit agreement (the “Credit Agreement”) providing for a senior secured revolving credit facility with aggregate revolving commitments of $135.0 million. The senior secured revolving credit facility terminates on May 29, 2017, and all amounts outstanding thereunder shall be due and payable in full. Commitment fees and borrowing costs under this facility vary and are based on the Company’s most recent Consolidated Leverage Ratio (as defined in the Credit Agreement). As of March 31, 2016, the Company’s Commitment Fee was 0.5% and the Company’s borrowing cost is LIBOR plus 3.25% for LIBOR Rate Loans and the Base Rate plus 2.25% for Base Rate Loans. As of March 31, 2016, no amounts were outstanding under the Credit Agreement. As of March 31, 2016, $1.8 million of letters of credit were outstanding under the Credit Agreement’s Letter of Credit Sublimit. Covenants. The Credit Agreement contains representations and warranties, covenants, and events of default with respect to the Company and its subsidiaries that are customarily applicable to senior secured credit facilities. The negative covenants in the Credit Agreement include restrictions on the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make capital expenditures, incur liens on assets, engage in certain mergers, acquisitions or divestitures, pay dividends, repurchase stock or make other distributions, voluntarily prepay certain other indebtedness (including certain prepayments of the Company’s existing notes), enter into transactions with affiliates, make investments, and change the nature of their businesses, and amend the terms of certain other indebtedness (including the Company’s existing notes), in each case subject to certain exceptions set forth in the Credit Agreement. The Credit Agreement requires the Company to maintain a consolidated net leverage ratio of not greater than 3.5 to 1.0 (with restrictions on cash netting) and a consolidated interest coverage ratio of not less than 3.0 to 1.0 in order to borrow under the Credit Agreement. Additionally, the Credit Agreement requires the Company to maintain a consolidated net leverage ratio of not greater than 3.25 to 1.0 in order to repurchase common stock and to make dividend payments in excess of the $0.05 per share regular quarterly dividend. The Company was in compliance with all covenants as of March 31, 2016. Financial Information Under Rule 3-10 of Regulation S-X The Company’s Senior Secured Notes and Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of the Company’s existing and future domestic subsidiaries, other than certain subsidiaries that are minor (the “Guarantor Subsidiaries”). All of the Guarantor Subsidiaries are 100% owned by the Company and have, jointly and severally, fully and unconditionally guaranteed, to each holder of the Notes, the full and prompt performance of the Company’s obligations under the Notes and the indenture governing the Notes, including the payment of principal (or premium, if any) and interest on the Notes, on an equal and ratable basis. Further, the Company has no independent assets or operations, and there are no significant restrictions on the ability of its consolidated subsidiaries to transfer funds to the Company in the form of cash dividends, loans or advances. The Company’s assets consist solely of investments it has made in its consolidated subsidiaries, and its operations consist solely of changes in its investment in subsidiaries and interest associated with the Senior Secured Notes and Senior Notes. Based on these facts, and in accordance with SEC Regulation S-X Rule 3-10, “Financial statements of guarantors and issuers of guaranteed securities registered or being registered,” the Company is not required to provide condensed consolidating financial information for the Guarantor Subsidiaries. |
Stockholders' Equity |
3 Months Ended |
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Mar. 31, 2016 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Stockholders’ Equity Share Repurchases Since the inception of the Company’s share repurchase program, the Board of Directors has authorized a total of $750.0 million for the repurchase of EarthLink’s common stock. As of March 31, 2016, the Company had $65.7 million available under the current authorizations. The Company may repurchase its common stock from time to time in compliance with the SEC’s regulations and other legal requirements, including through the use of derivative transactions, and subject to market conditions and other factors. The share repurchase program does not require the Company to acquire any specific number of shares and may be terminated by the Board of Directors at any time. In addition, the agreements governing the Company’s Senior Secured Notes and Senior Notes and the Company's Credit Agreement contain restrictions on the ability of the Company to repurchase common stock. Dividends During the three months ended March 31, 2015 and 2016, cash dividends declared were $0.05 and $0.05 per common share, respectively. The Company also pays cash dividend amounts on each outstanding restricted stock unit to be paid at the time the restricted stock unit vests. Cash dividend amounts are forfeited if the restricted stock units do not vest. Total dividend payments were $5.5 million and $6.0 million during the three months ended March 31, 2015 and 2016, respectively. The decision to declare future dividends is made at the discretion of the Board of Directors and will depend on, among other things, the Company’s results of operations, financial condition, cash requirements, investment opportunities and other factors the Board of Directors may deem relevant. In addition, the agreements governing the Company’s Senior Secured Notes and Senior Notes and the Company's Credit Agreement contain restrictions on the amount of dividends the Company can pay. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation Stock-based compensation expense was $3.4 million and $4.1 million during the three months ended March 31, 2015 and 2016, respectively. The Company has classified stock-based compensation expense within selling, general and administrative expense, the same operating expense line item as cash compensation paid to employees. Options Outstanding The following table presents stock option activity as of and for the three months ended March 31, 2016:
The aggregate intrinsic value amounts in the table above represent the closing price of the Company’s common stock on March 31, 2016 in excess of the exercise price, multiplied by the number of stock options outstanding, exercisable or vested and expected to vest, when the closing price is greater than the exercise price. This represents the amount that would have been received by the stock option holders if they had all exercised their stock options on March 31, 2016. As of March 31, 2016, there was $0.3 million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized over a weighted-average period of 1.5 years. The following table presents the status of the Company’s stock options as of March 31, 2016:
Restricted Stock Units The following table presents restricted stock unit activity as of and for the three months ended March 31, 2016:
The fair value of restricted stock units is determined based on the closing price of EarthLink’s common stock on the grant date. The weighted-average grant date fair value of restricted stock units granted during the three months ended March 31, 2015 and 2016 was $4.45 and $5.01, respectively. As of March 31, 2016, there was $28.8 million of total unrecognized compensation cost related to nonvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 2.2 years. The total fair value of shares vested during the three months ended March 31, 2015 and 2016 was $5.0 million and $10.1 million, respectively, which represents the closing price of the Company’s common stock on the vesting date multiplied by the number of restricted stock units that vested. |
Restructuring, Acquisition and Integration-Related Costs |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring, Acquisition and Integration-Related Costs | Restructuring, Acquisition and Integration-Related Costs Restructuring, acquisition and integration-related costs consisted of the following during the three months ended March 31, 2015 and 2016:
Restructuring, acquisition and integration-related costs consist of costs related to the Company's restructuring, acquisition and integration-related activities. The Company recognizes a liability for costs associated with an exit or disposal activity when the liability is incurred. The Company recognizes severance costs when they are both probable and reasonably estimable. Restructuring, acquisition and integration-related costs include the following:
During the three months ended March 31, 2016, the Company recorded $1.2 million of restructuring costs in connection with changes in its business strategy. The restructuring costs consisted of $0.9 million of severance due to reductions in workforce and $0.3 million of facilities-related costs primarily due to the closing of certain sales offices and other facilities. Restructuring costs for the three months ended March 31, 2016 are included in restructuring, acquisition and integration-related costs in the Condensed Consolidated Statement of Comprehensive Income (Loss). The following table summarizes activity for liability balances associated with facility exit and restructuring liabilities for the three months ended March 31, 2016:
As of December 31, 2015, $5.4 million of facility exit and restructuring liabilities were classified within current liabilities and $3.7 million were classified as other long-term liabilities. As of March 31, 2016, $3.7 million of facility exit and restructuring liabilities were classified within current liabilities and $3.2 million were classified as other long-term liabilities. |
Income Taxes |
3 Months Ended |
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Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes During the three months ended March 31, 2016, the Company recorded an income tax provision of $1.0 million, resulting in an effective tax rate for the three months ended March 31, 2016 of approximately 10.8%. During the three months ended March 31, 2015, the Company recorded an income tax provision of $0.4 million, resulting in an effective tax rate for the three months ended March 31, 2015 of approximately (3.5)%. The difference between the effective tax rate and the federal statutory rate during the three months ended March 31, 2016 primarily relates to changes in the valuation allowance on net deferred tax assets. The income tax provision for the three months ended March 31, 2016 includes federal alternative minimum tax expense, tax expense for foreign and state taxes, amortization of intangibles with indefinite useful lives and a discrete expense of $0.2 million, primarily for state taxes. The difference between the effective tax rate and the federal statutory rate during the three months ended March 31, 2015 primarily relates to changes in the valuation allowance on net deferred tax assets. The income tax benefit for the three months ended March 31, 2015 includes tax expense for foreign and state taxes, amortization of intangible assets with indefinite useful lives and a discrete expense of $0.1 million primarily for state taxes. As of March 31, 2016, the Company had a valuation allowance of $345.5 million against its net deferred tax assets, exclusive of its deferred tax liabilities with indefinite useful lives. The Company continually reviews the adequacy of the valuation allowance and recognizes the benefits of deferred tax assets only as the reassessment indicates that it is more likely than not that the deferred tax assets will be realized. As of March 31, 2016, the Company does not believe it is more likely than not that the remaining net deferred tax assets will be realized. Should the Company’s assessment change in a future period it may release all or a portion of the valuation allowance at such time, which would result in a deferred tax benefit in the period of adjustment. |
Fair Value Measurements |
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Fair Value Measurements | Fair Value Measurements Fair value is defined as 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 (an exit price). A three-tier fair value hierarchy is used to prioritize the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as observable inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The estimated fair value of the Company’s Senior Secured Notes and Senior Notes was determined based on Level 2 input using observable market prices in less active markets. The carrying amount of the Company’s senior secured revolving credit facility approximated its fair value as of December 31, 2015. The following table presents the fair value of the Company’s debt, excluding capital leases, as of December 31, 2015 and March 31, 2016:
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information General The Company reports segment information along the same lines that its Chief Operating Decision Maker reviews its operating results in assessing performance and allocating resources. The Company's Chief Operating Decision Maker is its Chief Executive Officer. The Company's reportable segments are strategic business units that are aligned around distinct customer categories to optimize operations. The Company operates the following four reportable segments:
Segment Results The following table presents segment results for the three months ended March 31, 2015 and 2016:
The following table presents a reconciliation of segment gross margin to consolidated income (loss) before income taxes for the three months ended March 31, 2015 and 2016:
The Company evaluates performance of its segments based on segment gross margin. Segment gross margin includes revenues from external customers and related cost of revenues. Costs excluded from segment gross margin include selling, general and administrative expenses, depreciation and amortization, restructuring, acquisition and integration-related costs, gain on sale of business, interest expense and other, net, and loss on extinguishment of debt, as they are not considered in the measurement of segment performance. Management periodically evaluates the segmentation of customers within the distinct customer categories, which may result in changes to segment information in the future. The Company manages its working capital on a consolidated basis and does not allocate long-lived assets to segments. In addition, segment assets are not reported to, or used by, the Chief Operating Decision Maker and therefore, total segment assets and expenditures for additions of long-lived assets have not been disclosed. The Company has not provided information about geographic segments because substantially all of the Company’s revenues, results of operations and identifiable assets are in the United States. Revenues by Type The Company generates revenues by providing a broad range of data, voice and managed network services to business and residential customers. The Company’s revenues primarily consist of the following:
The following table presents revenue detail for the three months ended March 31, 2015 and 2016:
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal proceedings and other disputes General. The Company is party to various legal proceedings and other disputes arising in the normal course of business, including, but not limited to, regulatory audits, E911 payments, trademark and patent infringement, billing disputes, rights of access, tax, consumer protection, employment and tort. The Company accrues for such matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the range is more likely than any other amount, the Company accrues at the low end of the range. The Company reviews its accruals each reporting period. The Company's management believes that there are no disputes, litigation or other legal proceedings, audits or disputes asserted or pending against the Company that could have, individually or in the aggregate, a material adverse effect on its financial position, results of operations or cash flows, and believes that adequate provision for any probable and estimable losses has been made in the Company's consolidated financial statements. However, the ultimate result of any current or future litigation or other legal proceedings, audits or disputes is inherently unpredictable and could result in liabilities that are higher than currently predicted. Regulatory audits. The Company is subject to regulatory audits in the ordinary course of business with respect to various matters, including audits by local municipalities for E911 charges and audits by the Universal Service Administrative Company on universal service fund assessments and payments. These audits can cover periods for several years prior to the date the audit is undertaken and could result in the imposition of liabilities, interest and penalties if the Company's positions are not accepted by the auditing entity. The Company's financial statements contain reserves for certain of such potential liabilities. Billing disputes. The Company is periodically involved in disputes related to its billings to other carriers for access to its network. The Company does not recognize revenue related to such matters until the period that revenues are determinable and it is reasonably assured of the collection of the amounts billed. In the event that a claim is made related to revenues previously recognized, the Company assesses the validity of the claim and adjusts the amount of revenue being recognized to the extent that the claim adjustment is considered probable and estimable. The Company recognized $2.1 million and $0.9 million of net favorable disputes related to its billings to other carriers during the three months ended March 31, 2015 and March 31, 2016, respectively, which are included in revenues in the Condensed Consolidated Statements of Comprehensive Income (Loss). The Company periodically disputes network access charges that it is assessed by other companies with which the Company interconnects. The Company maintains adequate reserves for anticipated exposure associated with these billing disputes. The reserves are subject to changes in estimates and management judgment as new information becomes available. In view of the length of time historically required to resolve these disputes, they may be resolved or require adjustment in future periods and relate to costs invoiced, accrued or paid in prior periods. While the Company believes its reserves for billing disputes are adequate, it is reasonably possible that the Company could record additional expense of up to $15.2 million for unrecorded disputed amounts. The Company recognized $3.6 million and $3.8 million for favorable disputes with telecommunication vendors during the three months ended March 31, 2015 and 2016, respectively, which are included in cost of revenues in the Condensed Consolidated Statements of Comprehensive Income (Loss). Regulation The Company's services are subject to varying degrees of federal, state and local regulation. These regulations are subject to ongoing proceedings at federal and state administrative agencies or within state and federal judicial systems. Results of these proceedings could change, in varying degrees, the manner in which the Company operates. The Company cannot predict the outcome of these proceedings or their effect on the Company's industry generally or upon the Company specifically. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The condensed consolidated financial statements of EarthLink for the three months ended March 31, 2015 and 2016 and the related footnote information are unaudited and have been prepared on a basis consistent with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission (the “SEC”) (the “Annual Report”). These financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto contained in the Annual Report. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring adjustments) which management considers necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results anticipated for the entire year ending December 31, 2016. |
Basis of Consolidation | Basis of Consolidation The accompanying condensed consolidated financial statements of EarthLink include the accounts of its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. |
Use of Estimates | 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. Actual results may differ from those estimates. |
Reclassifications | Reclassifications Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. Specifically, the Company reclassified $1.3 million of loss on extinguishment of debt from interest expense and other, net, to loss on extinguishment of debt in the Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 2015. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance on revenue from contracts with customers. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires significantly expanded disclosures about revenue contract assets and liabilities. In August 2015, the FASB issued guidance that deferred the effective date by one year. The standard is now required to be adopted by public business entities in annual periods beginning on or after December 15, 2017, and interim periods within those annual periods, and may be applied on a full retrospective or modified retrospective approach. Early adoption at the original effective date is permitted. The Company is in the process of determining the method of adoption and assessing the impact the new standard will have on its consolidated financial statements. In August 2014, the FASB issued authoritative guidance related to the disclosure of uncertainties about an entity's ability to continue as a going concern. The new guidance requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements and to provide related footnote disclosures if so. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company's financial statements. In February 2016, the FASB issued authoritative guidance on accounting for leases. The new guidance requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. As of the lease commencement date, a lessee is required to recognize a liability for its lease obligation (initially measured at the present value of the future lease payments not yet paid over the lease term) and an asset for its right to use the underlying asset equal to the lease liability, adjusted for lease payments made at or before lease commencement, lease incentives, and any initial direct costs. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the implementation of this standard on its financial statements. In March 2016, the FASB issued authoritative guidance, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the impact of the implementation of this standard on its financial statements. |
Earnings per Share Earnings Per Share (Tables) |
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Schedule of Earnings Per Share, Basic and Diluted | The following table presents the computation for basic and diluted net income (loss) per share for the three months ended March 31, 2015 and 2016:
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Goodwill and Other Intangible Assets (Tables) |
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Schedule of Goodwill | The following table presents changes in the carrying amount of goodwill by operating segment during the three months ended March 31, 2016:
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Schedule of gross carrying value and accumulated amortization by major intangible asset | The following table presents the components of the Company’s acquired identifiable intangible assets included in the accompanying Condensed Consolidated Balance Sheets as of December 31, 2015 and March 31, 2016:
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Schedule of amortization expense | Amortization of intangible assets, which is included in depreciation and amortization in the Condensed Consolidated Statements of Comprehensive Income (Loss), for the three months ended March 31, 2015 and 2016 was as follows:
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Other Accrued Liabilities (Tables) |
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Schedule of Other Accrued Liabilities | December 31, 2015 and March 31, 2016:
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Long-Term Debt and Capital Lease Obligations (Tables) |
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Schedule of Debt | The Company’s long-term debt and capital lease obligations consisted of the following as of December 31, 2015 and March 31, 2016:
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Stock-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Option Activity | The following table presents stock option activity as of and for the three months ended March 31, 2016:
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Summary of the status of stock options by exercise price range | The following table presents the status of the Company’s stock options as of March 31, 2016:
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Restricted stock unit activity | The following table presents restricted stock unit activity as of and for the three months ended March 31, 2016:
|
Restructuring, Acquisition and Integration-Related Costs (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring, Acquisition and Integration-Related Costs | Restructuring, acquisition and integration-related costs consisted of the following during the three months ended March 31, 2015 and 2016:
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Rollforward of Restructuring and Related Costs | The following table summarizes activity for liability balances associated with facility exit and restructuring liabilities for the three months ended March 31, 2016:
|
Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of debt, excluding capital leases | The following table presents the fair value of the Company’s debt, excluding capital leases, as of December 31, 2015 and March 31, 2016:
|
Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Segment Reporting Information | The following table presents segment results for the three months ended March 31, 2015 and 2016:
|
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Reconciliation of Segment Gross Margin to Consolidated | The following table presents a reconciliation of segment gross margin to consolidated income (loss) before income taxes for the three months ended March 31, 2015 and 2016:
|
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Schedule Revenues by Type of Services | The following table presents revenue detail for the three months ended March 31, 2015 and 2016:
|
Organization (Details) |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of reportable segments | 4 |
Number of route fiber miles | 29,000 |
Number of metro fiber rings | 90 |
Minimum percentage of IP coverage in United States | 90.00% |
Summary of Significant Accounting Policies Summary of Significant Policies (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Summary of Significant Accounting Policies [Abstract] | ||
Loss on extinguishment of debt | $ (232) | $ (1,286) |
Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Earnings Per Share [Abstract] | ||
Net income (loss) | $ 7,867 | $ (10,483) |
Basic weighted average common shares outstanding | 104,433 | 102,611 |
Dilutive effect of Common Stock Equivalents | 3,267 | 0 |
Diluted weighted average common shares outstanding | 107,700 | 102,611 |
Basic net income (loss) per share | $ 0.08 | $ (0.10) |
Diluted net income (loss) per share | $ 0.07 | $ (0.10) |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 700 | 11,200 |
Sale of Business (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Sale of Business [Abstract] | ||
Purchase Price Of Disposal Group | $ 29,000 | |
Contingent Purchase Price Of Disposal Group | 5,000 | |
Proceeds from sale of business | 26,000 | $ 0 |
Escrow Portion Of Purchase Price Of Disposal Group | 3,000 | |
Gain on sale of business | 5,727 | 0 |
Disposal Group, Deferred Gain on Disposal | 2,000 | |
Disposal Group, Including Discontinued Operation, Assets | 17,500 | |
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment | 11,400 | |
Disposal Group, Including Discontinued Operation, Goodwill | 2,300 | |
Disposal Group, Including Discontinued Operation, Intangible Assets | 3,500 | |
Disposal Group, Including Discontinued Operation, Other Assets | 300 | |
Disposal Group, Including Discontinued Operation, Revenue | $ 3,400 | $ 11,800 |
Other Accrued Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Other Accrued Liabilities [Abstract] | ||
Accrued taxes and surcharges | $ 14,249 | $ 14,663 |
Accrued communications costs | 19,940 | 23,201 |
Customer-related liabilities | 7,356 | 7,854 |
Accrued interest | 12,932 | 3,822 |
Other | 16,916 | 14,765 |
Total other accrued liabilities | $ 71,393 | $ 64,305 |
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Share Repurchases | ||
Repurchase of common stock, authorized amount | $ 750,000 | |
Repurchase of common stock, remaining authorization | $ 65,700 | |
Dividends | ||
Dividends declared per share | $ 0.05 | $ 0.05 |
Payment of dividends | $ 6,016 | $ 5,478 |
Stock-Based Compensation (Details 3) - Restricted Stock Units - USD ($) $ / shares in Units, shares in Thousands, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Restricted Stock Unit Activity | ||
Nonvested, at the beginning of the period (in shares) | 7,751 | |
Granted (in shares) | 2,989 | |
Vested (in shares) | (1,852) | |
Forfeited (in shares) | (245) | |
Nonvested, at the end of the period (in shares) | 8,643 | |
Weighted Average Grant Date Fair Value | ||
Nonvested, at the beginning of the period (in dollars per share) | $ 4.58 | |
Granted (in dollars per share) | 5.01 | $ 4.45 |
Vested (in dollars per share) | 4.94 | |
Forfeited (in dollars per share) | 4.53 | |
Nonvested, at the end of the period (in dollars per share) | $ 4.65 | |
Restricted Stock Units, Other Information | ||
Unrecognized compensation costs | $ 28.8 | |
Weighted-average period for recognition of unrecognized compensation cost (in years) | 2 years 2 months | |
Aggregate fair value of shares, vested | $ 10.1 | $ 5.0 |
Restructuring, Acquisition and Integration-Related Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
|
Restructuring Cost and Reserve [Line Items] | |||
Integration Related Costs | $ 1,779 | $ 1,317 | |
Business Combination Severance and Retention Costs | 891 | 2,901 | |
Facility-related costs | 343 | 1,154 | |
Restructuring, acquisition and integration-related costs | 3,013 | $ 5,372 | |
Balance as of December 31, 2015 | 9,081 | ||
Restructuring Costs | 1,234 | ||
Payments | (3,456) | ||
Balance as of March 31, 2016 | 6,859 | ||
Restructuring Reserve, Current | 3,700 | $ 5,400 | |
Restructuring Reserve, Noncurrent | 3,200 | $ 3,700 | |
Employee Severance | |||
Restructuring Cost and Reserve [Line Items] | |||
Balance as of December 31, 2015 | 3,539 | ||
Restructuring Costs | 891 | ||
Payments | (2,420) | ||
Balance as of March 31, 2016 | 2,010 | ||
Facility Closing | |||
Restructuring Cost and Reserve [Line Items] | |||
Balance as of December 31, 2015 | 5,542 | ||
Restructuring Costs | 343 | ||
Payments | (1,036) | ||
Balance as of March 31, 2016 | $ 4,849 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Income Tax Contingency [Line Items] | ||
Income tax provision | $ (951) | $ (351) |
Effective Income Tax Rate, Continuing Operations | 10.80% | (3.50%) |
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Amount | $ 200 | $ 100 |
Valuation Allowance, Amount | $ 345,500 |
Segment Information (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016
USD ($)
|
Mar. 31, 2015
USD ($)
|
|
Schedule Of Segment Reporting Information | ||
Number of reportable segments | 4 | |
Revenues | $ 254,262 | $ 282,447 |
Cost of Revenue | 115,206 | 129,462 |
Gross margin | 139,056 | 152,985 |
Enterprise/Mid-Market | ||
Schedule Of Segment Reporting Information | ||
Revenues | 104,689 | 114,391 |
Cost of Revenue | 51,571 | 56,272 |
Gross margin | 53,118 | 58,119 |
Small Business | ||
Schedule Of Segment Reporting Information | ||
Revenues | 62,133 | 79,054 |
Cost of Revenue | 29,734 | 37,597 |
Gross margin | 32,399 | 41,457 |
Carrier/Transport | ||
Schedule Of Segment Reporting Information | ||
Revenues | 36,069 | 32,872 |
Cost of Revenue | 15,464 | 15,593 |
Gross margin | 20,605 | 17,279 |
Consumer | ||
Schedule Of Segment Reporting Information | ||
Revenues | 51,371 | 56,130 |
Cost of Revenue | 18,437 | 20,000 |
Gross margin | $ 32,934 | $ 36,130 |
Segment Information (Details 2) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Segment Reporting Information | ||
Gross margin | $ 139,056 | $ 152,985 |
Selling, general and administrative (exclusive of depreciation and amortization shown separately below) | 81,412 | 95,258 |
Depreciation and amortization | 40,199 | 47,264 |
Restructuring, acquisition and integration-related costs | 3,013 | 5,372 |
Operating costs and expenses | 124,624 | 147,894 |
Income from operations | 14,432 | 5,091 |
Gain on sale of business | 5,727 | 0 |
Interest expense and other, net | (11,109) | (13,937) |
Loss on extinguishment of debt | (232) | (1,286) |
Income (loss) from continuing operations before income taxes | $ 8,818 | $ (10,132) |
Segment Information (Details 3) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Segment Reporting Information | ||
Revenue, Net | $ 254,262 | $ 282,447 |
Monthly Recurring Revenues | ||
Segment Reporting Information | ||
Revenue, Net | 223,402 | 247,975 |
Usage Revenues | ||
Segment Reporting Information | ||
Revenue, Net | 22,458 | 27,678 |
Equipment Revenues | ||
Segment Reporting Information | ||
Revenue, Net | 4,107 | 3,724 |
Non-Recurring and Other Revenues | ||
Segment Reporting Information | ||
Revenue, Net | $ 4,295 | $ 3,070 |
Commitments and Contingencies (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Billing Disputes, Revenue | $ 0.9 | $ 2.1 |
Loss Contingency, Range of Possible Loss, Portion Not Accrued | 15.2 | |
Billing Disputes, Cost of Revenues | $ 3.8 | $ 3.6 |
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