Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 31, 2010 | Apr. 23, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-31 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | VRSN | |
Entity Registrant Name | VERISIGN INC/CA | |
Entity Central Index Key | 0001014473 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 182,497,307 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Thousands | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Current assets: | ||
Cash and cash equivalents | $1,090,030 | $1,477,166 |
Marketable securities | 460,401 | 185 |
Accounts receivable, net | 58,528 | 63,133 |
Prepaid expenses and other current assets | 134,481 | 168,574 |
Total current assets | 1,743,440 | 1,709,058 |
Property and equipment, net | 398,563 | 403,821 |
Goodwill | 288,399 | 289,980 |
Other intangible assets, net | 19,671 | 22,420 |
Other assets | 42,115 | 44,865 |
Total long-term assets | 748,748 | 761,086 |
Total assets | 2,492,188 | 2,470,144 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 180,259 | 243,967 |
Deferred revenues | 668,582 | 642,507 |
Total current liabilities | 848,841 | 886,474 |
Long-term deferred revenues | 255,374 | 245,734 |
Convertible debentures, including contingent interest derivative | 575,545 | 574,378 |
Other long-term liabilities | 179,982 | 164,894 |
Total long-term liabilities | 1,010,901 | 985,006 |
Total liabilities | 1,859,742 | 1,871,480 |
Commitments and contingencies | ||
VeriSign, Inc. stockholders' equity: | ||
Preferred stock-par value $.001 per share; Authorized shares: 5,000,000; Issued and outstanding shares: none | ||
Common stock-par value $.001 per share; Authorized shares: 1,000,000,000; Issued and outstanding shares: 182,410,456, excluding 126,679,737 held in treasury, at March 31, 2010; and 183,299,463, excluding 124,434,684 held in treasury, at December 31, 2009 | 309 | 308 |
Additional paid-in capital | 21,719,214 | 21,736,209 |
Accumulated deficit | (21,143,079) | (21,194,435) |
Accumulated other comprehensive income | 7,038 | 7,659 |
Total VeriSign, Inc. stockholders' equity | 583,482 | 549,741 |
Noncontrolling interest in subsidiary | 48,964 | 48,923 |
Total stockholders' equity | 632,446 | 598,664 |
Total liabilities and stockholders' equity | $2,492,188 | $2,470,144 |
1_CONDENSED CONSOLIDATED BALANC
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
Mar. 31, 2010
| Dec. 31, 2009
| |
Preferred stock, par value | 0.001 | 0.001 |
Preferred stock, Authorized shares | 5,000,000 | 5,000,000 |
Preferred stock, Issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value | 0.001 | 0.001 |
Common stock, Authorized shares | 1,000,000,000 | 1,000,000,000 |
Common stock, Issued and outstanding shares | 182,410,456 | 183,299,463 |
Common stock, held in treasury | 126,679,737 | 124,434,684 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | ||
In Thousands, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Revenues | $264,402 | $253,557 |
Costs and expenses | ||
Cost of revenues | 59,729 | 62,879 |
Sales and marketing | 48,699 | 38,189 |
Research and development | 20,382 | 21,783 |
General and administrative | 43,755 | 48,630 |
Restructuring and other charges, net | 363 | 3,998 |
Amortization of other intangible assets | 2,749 | 3,221 |
Total costs and expenses | 175,677 | 178,700 |
Operating income | 88,725 | 74,857 |
Other loss, net | (6,933) | (4,340) |
Income from continuing operations before income taxes | 81,792 | 70,517 |
Income tax expense | (27,798) | (23,200) |
Income from continuing operations, net of tax | 53,994 | 47,317 |
(Loss) income from discontinued operations, net of tax | (1,554) | 18,198 |
Net income | 52,440 | 65,515 |
Less: Net income attributable to noncontrolling interest in subsidiary | (1,084) | (495) |
Net income attributable to VeriSign, Inc. stockholders | 51,356 | 65,020 |
Basic income per share attributable to VeriSign, Inc. stockholders from: | ||
Continuing operations | 0.29 | 0.24 |
Discontinued operations | -0.01 | 0.1 |
Net income | 0.28 | 0.34 |
Diluted income per share attributable to VeriSign, Inc. stockholders from: | ||
Continuing operations | 0.29 | 0.24 |
Discontinued operations | -0.01 | 0.1 |
Net income | 0.28 | 0.34 |
Shares used to compute net income per share attributable to VeriSign, Inc. stockholders: | ||
Basic | 183,174 | 192,311 |
Diluted | 184,259 | 192,804 |
Amounts attributable to VeriSign, Inc. stockholders: | ||
Income from continuing operations, net of tax | 52,910 | 46,822 |
(Loss) Income from discontinued operations, net of tax | (1,554) | 18,198 |
Net income attributable to VeriSign, Inc. stockholders | $51,356 | $65,020 |
2_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Cash flows from operating activities: | ||
Net income | $52,440 | $65,515 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation of property and equipment and amortization of other intangible assets | 21,905 | 20,530 |
Stock-based compensation | 12,085 | 13,928 |
Excess tax benefit associated with stock-based compensation | (8,097) | (27,293) |
Other, net | 6,270 | (6,943) |
Changes in operating assets and liabilities, excluding the effects of acquisitions and divestitures: | ||
Accounts receivable | 4,579 | 8,464 |
Prepaid expenses and other assets | 9,689 | (29,380) |
Accounts payable and accrued liabilities | (33,734) | (32,175) |
Deferred revenues | 35,983 | 25,792 |
Net cash provided by operating activities | 101,120 | 38,438 |
Cash flows from investing activities: | ||
Proceeds from maturities and sales of marketable securities and investments | 95,909 | 94,016 |
Purchases of marketable securities and investments | (549,087) | (750) |
Purchases of property and equipment | (19,898) | (20,994) |
Proceeds received from divestiture of businesses, net of cash contributed | 15,583 | 2,372 |
Other investing activities | 3,485 | |
Net cash (used in) provided by investing activities | (457,493) | 78,129 |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock from option exercises and employee stock purchase plans | 17,393 | 17,133 |
Repurchases of common stock | (53,753) | (1,361) |
Excess tax benefit associated with stock-based compensation | 8,097 | 27,293 |
Other financing activities | (346) | |
Net cash (used in) provided by financing activities | (28,609) | 43,065 |
Effect of exchange rate changes on cash and cash equivalents | (2,154) | (6,314) |
Net (decrease) increase in cash and cash equivalents | (387,136) | 153,318 |
Cash and cash equivalents at beginning of period | 1,477,166 | 789,068 |
Cash and cash equivalents at end of period | 1,090,030 | 942,386 |
Supplemental cash flow disclosures: | ||
Cash paid for interest, net of capitalized interest | $19,811 | $19,521 |
Basis of Presentation
Basis of Presentation | |
3 Months Ended
Mar. 31, 2010 | |
Basis of Presentation | Note1. Basis of Presentation Interim Financial Statements The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by VeriSign, Inc. and its subsidiaries (collectively, VeriSign or the Company) in accordance with the instructions to Form10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and, therefore, do not include all information and notes normally provided in audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of, nor comparable to, the results of operations for any other interim period or for a full fiscal year. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes contained in VeriSigns fiscal 2009 Annual Report on Form10-K (the 2009 Form 10-K) filed with the SEC on February26, 2010. Reclassifications Certain reclassifications have been made to prior period amounts to conform to current period presentation. Such reclassifications have no effect on net income as previously reported. Recent Accounting Pronouncements In October 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.2009-13Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangementsa consensus of the FASB Emerging Issues Task Force (ASU 2009-13). ASU 2009-13 addresses how to measure and allocate arrangement consideration to one or more units of accounting within certain multiple-deliverable arrangements. ASU 2009-13 modifies the requirements for determining whether a deliverable can be treated as a separate unit of accounting by removing the criterion that objective evidence of fair value must exist for the undelivered elements. ASU 2009-13 is effective for the Company prospectively for revenue arrangements entered into or materially modified beginning January1, 2011. Early adoption is permitted. Currently, the Company is evaluating the impact adoption will have on its financial condition and results of operations. In October 2009, the FASB issued ASU No.2009-14Software (Topic 985): Certain Revenue Arrangements That Include Software Elementsa consensus of the FASB Emerging Issues Task Force (ASU 2009-14). ASU 2009-14 modifies the scope of the software revenue recognition guidance to exclude arrangements that contain tangible products for which the software element is essential to the functionality of the tangible products. ASU 2009-14 is effective for the Company prospectively for revenue arrangements entered into or materially modified beginning January1, 2011. Early adoption is permitted. Currently, the Company is evaluating the impact adoption will have on its financial condition and results of operations. |
Cash, Cash Equivalents, and Mar
Cash, Cash Equivalents, and Marketable Securities | |
3 Months Ended
Mar. 31, 2010 | |
Cash, Cash Equivalents, and Marketable Securities | Note 2.Cash, Cash Equivalents, and Marketable Securities The following table summarizes the Companys cash, cash equivalents, and marketable securities: March31, 2010 December31, 2009 (In thousands) Cash $ 248,028 $ 227,547 Money market funds 300,333 736,459 Time deposits 506,549 514,938 Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies 258,927 Corporate debt securities 238,020 Equity securities of a public company 352 185 Total $ 1,552,209 $ 1,479,129 Included in Cash and cash equivalents $ 1,090,030 $ 1,477,166 Included in Marketable securities $ 460,401 $ 185 Included in Other assets (1) $ 1,778 $ 1,778 (1) Represents restricted cash related to employee payroll withholdings, net of claims paid, for the short-term disability program under the State of California Employment Development Departments Voluntary Plan Fund guidelines. The following table summarizes the Companys unrealized gains and losses, and fair value of debt and equity securities designated as available-for-sale investments. There were no investments classified as either held-to-maturity or trading. Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (In thousands) As of March31, 2010 Fixed income securities: Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies $ 259,196 $ 70 $ (339 ) $ 258,927 Corporate debt securities 238,138 98 (216 ) 238,020 Total fixed income securities 497,334 168 (555 ) 496,947 Equity securities of a public company 255 97 352 Total available-for-sale investments $ 497,589 $ 265 $ (555 ) $ 497,299 Included in Cash and cash equivalents $ 36,898 Included in Marketable securities $ 460,401 As of December31, 2009 Equity securities of a public company (1) $ 290 $ $ (105 ) $ 185 (1) Included in Marketable securities The following table presents the contractual maturities of the fixed income securities as of March31, 2010: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (In thousands) Due within one year $ 90,029 $ 7 $ (35 ) $ 90,001 Due after one year through five years 407,305 161 (520 ) 406,946 Total $ 497,334 $ 168 $ (555 ) $ 496,947 The following table presents the fair value and unrealized losses of the Companys available-for-sale investments that have been in a continuous unrealized loss position for less than twelve months as of March31, 2010, for which an other-than-temporary impairment has not been recognized. There are no av |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | |
3 Months Ended
Mar. 31, 2010 | |
Fair Value of Financial Instruments | Note3. Fair Value of Financial Instruments Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table summarizes the Companys financial assets and liabilities measured at fair value on a recurring basis as of March31, 2010 and December31, 2009: Total Fair Valueasof March31, 2010 Fair Value Measurement Using QuotedPricesin ActiveMarketsfor Identical Assets (Level 1) SignificantOther ObservableInputs (Level 2) Significant Unobservable Inputs (Level 3) (Inthousands) Assets: Investments in money market funds $ 300,333 $ 300,333 $ $ Investments in fixed income securities: Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies 258,927 258,927 Corporate debt securities 238,020 238,020 Equity securities of a public company 352 352 Foreign currency forward contracts 1,145 1,145 Total $ 798,777 $ 300,685 $ 498,092 $ Liabilities: Contingent interest derivative on convertible debentures $ 9,531 $ $ $ 9,531 Total $ 9,531 $ $ $ 9,531 Total Fair Value as of December31, 2009 Fair Value Measurement Using QuotedPricesin ActiveMarketsfor Identical Assets (Level 1) SignificantOther ObservableInputs (Level 2) Significant Unobservable Inputs (Level 3) (Inthousands) Assets: Investments in money market funds $ 736,459 $ 736,459 $ $ Equity securities of a public company 185 185 Foreign currency forward contracts 932 932 Total $ 737,576 $ 736,644 $ 932 $ Liabilities: Contingent interest derivative on convertible debentures $ 10,000 $ $ $ 10,000 Total $ 10,000 $ $ $ 10,000 The fair value of the Companys investments in certain money market funds approximates their face value. Such instruments are classified as Level 1 and are included in Cash and cash equivalents. The fair value of the Companys investments in fixed income securities are obtained using the weighted average price of available market prices for the underlying securities from various industry standard data providers, large financial institutions and other third-party sources. Such instruments are included in either Cash and cash equivalents or Marketable securities. The fair value of the Companys foreign currency forward contracts is based on foreign currency rates quoted by banks or foreign currency dealers and other public data sources. Such instruments are included in Prepaid expenses and other current assets. The fair value of the equity securities of a public company is based on the quoted market price of the underlying shares. This investment is included in Marketable securitie |
Other Balance Sheet Items
Other Balance Sheet Items | |
3 Months Ended
Mar. 31, 2010 | |
Other Balance Sheet Items | Note4. Other Balance Sheet Items Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: March31, 2010 December31, 2009 (In thousands) Prepaid expenses $ 20,042 $ 18,868 Deferred tax assets 66,062 65,984 Non-trade receivables 29,090 25,467 Receivables from buyers 4,678 34,365 Funds held by the Reserve 12,506 20,867 Other 2,103 3,023 Total prepaid expenses and other current assets $ 134,481 $ 168,574 During the three months ended, March31, 2010, the Company received $2.5 million held in escrow for a divested business, $13.3 million for services performed on behalf of buyers under transition service agreements and $13.1 million of working capital receivables from the buyers of certain divested businesses, all of which were included in receivables from buyers as of December 31, 2009. During the three months ended March31, 2010, the Company received distributions of $8.4 million from the funds held by the Reserve. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consist of the following: March31, 2010 December31, 2009 (In thousands) Accounts payable $ 14,862 $ 16,228 Accrued employee compensation 53,109 81,782 Customer deposits, net 19,658 23,213 Payables to buyers 10,171 21,122 Taxes payable, deferred and other tax liabilities 23,616 27,206 Other accrued liabilities 58,843 74,416 Total accounts payable and accrued liabilities $ 180,259 $ 243,967 Accrued employee compensation primarily consists of employee accrued vacation, accrued payroll and taxes, accruals for employee contribution to the employee stock purchase plan, and bonus payable. During the three months ended March31, 2010, the Company paid annual bonuses to its employees. Payables to buyers consist of payables for collections received on behalf of buyers of certain divested businesses under transition services agreements. Other accrued liabilities consist primarily of interest on convertible debentures, accrued restructuring costs, accrued litigation, and accruals for products and services. Interest on convertible debentures is paid semiannually in arrears on August15 and February15. During the three months ended March31, 2010, the Company paid interest on convertible debentures of $20.3 million. Other Long-term Liabilities March31, 2010 December31, 2009 (In thousands) Deferred tax liabilities $ 158,611 $ 144,777 Long-term tax liabilities 14,791 12,949 Other 6,580 7,168 Total other long-term liabilities $ 179,982 $ 164,894 |
Stockholders' Equity
Stockholders' Equity | |
3 Months Ended
Mar. 31, 2010 | |
Stockholders' Equity | Note5. Stockholders Equity Comprehensive Income Comprehensive income consists of Net income adjusted for unrealized gains and losses on marketable securities classified as available-for-sale and foreign currency translation adjustments. The following table presents the components of comprehensive income: Three months ended March31, 2010 2009 (In thousands) Net income $ 52,440 $ 65,515 Foreign currency translation adjustments (526 ) (9,954 ) Change in unrealized loss on investments, net of tax (286 ) 158 Comprehensive income 51,628 55,719 Less: Comprehensive income (loss) attributable to noncontrolling interest in subsidiary 893 (4,114 ) Comprehensive income attributable to VeriSign, Inc. stockholders $ 50,735 $ 59,833 Repurchase of Common Stock On August5, 2008, the Board of Directors authorized the repurchase of up to $680.0 million of VeriSigns common stock, in addition to the $320.0 million of its common stock remaining available for repurchase under the previous 2006 stock repurchase program, for a total repurchase of up to $1 billion of its common stock (collectively, the 2008 Share Buyback Program). The 2008 Share Buyback Program has no expiration date. During the three months ended March31, 2010, the Company repurchased 2.1million shares of its common stock at an average stock price of $23.93 for an aggregate of $50.5 million under the 2008 ShareBuyback Program. As of March31, 2010, $646.7 million is available under the 2008 Share Buyback Program. |
Calculation of Net Income Per S
Calculation of Net Income Per Share Attributable to VeriSign, Inc. Stockholders | |
3 Months Ended
Mar. 31, 2010 | |
Calculation of Net Income Per Share Attributable to VeriSign, Inc. Stockholders | Note6. Calculation of Net Income Per Share Attributable to VeriSign, Inc. Stockholders The Company computes basic net income per share attributable to VeriSign, Inc. stockholders by dividing net income attributable to VeriSign, Inc. stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share attributable to VeriSign, Inc. stockholders gives effect to dilutive potential common shares, including outstanding stock options, unvested restricted stock units, and employee stock purchases using the treasury stock method. The following table presents the computation of weighted average shares used in the calculation of basic and diluted net income per share attributable to VeriSign, Inc. stockholders: Three Months Ended March31, 2010 2009 (In thousands) Weighted-average shares of common stock outstanding 183,174 192,311 Weighted-average potential shares of common stock outstanding: Stock options 336 236 Unvested restricted stock units 749 257 Shares used to compute diluted net income per share attributable to VeriSign,Inc. stockholders 184,259 192,804 The following table presents the weighted-average potential shares of common stock that were excluded from the above calculation because their effect was anti-dilutive, and the weighted-average exercise price of the weighted-average stock options outstanding: ThreeMonthsEnded March31, 2010 2009 (Inthousands,except per share data) Weighted-average stock options outstanding 4,436 8,289 Weighted-average exercise price $ 30.63 $ 28.13 Weighted-average restricted stock units outstanding 56 2,355 Employee stock purchase plans 1,387 3,098 There was no positive conversion spread relating to the convertible debentures during the three months ended March31, 2010 and 2009 and therefore is not included in the calculation of diluted net income per share attributable to VeriSign, Inc. stockholders. |
Segment Information
Segment Information | |
3 Months Ended
Mar. 31, 2010 | |
Segment Information | Note7. Segment Information The Company operates in two reportable segments: (1)Internet Infrastructure and Identity Services (3IS) and (2)Other Services. The following tables present the results of the Companys reportable segments: 3IS Other Services Total (In thousands) Three months ended March31, 2010 Revenues: Naming Services $ 161,583 $ $ 161,583 Authentication Services 101,908 101,908 Other Services 911 911 Total revenues 263,491 911 264,402 Cost of revenues 50,141 1,560 51,701 $ 213,350 $ (649 ) $ 212,701 Three months ended March31, 2009 Revenues: Naming Services $ 148,308 $ $ 148,308 Authentication Services 103,904 103,904 Other Services 1,345 1,345 Total revenues 252,212 1,345 253,557 Cost of revenues 49,747 1,302 51,049 $ 202,465 $ 43 $ 202,508 A reconciliation of the totals reported for the reportable segments to the applicable line items in the Condensed Consolidated Statements of Operations is as follows: Three MonthsEnded March31, 2010 2009 (In thousands) Total revenues from reportable segments $ 264,402 $ 253,557 Total cost of revenues from reportable segments 51,701 51,049 Unallocated operating expenses (1) 123,976 127,651 Operating income 88,725 74,857 Other loss, net (6,933 ) (4,340 ) Income from continuing operations before income taxes $ 81,792 $ 70,517 (1) Unallocated operating expenses include unallocated cost of revenues, sales and marketing, research and development, general and administrative, restructuring and other charges, net, and amortization of other intangible assets. Geographic Information The Company operates in the United States (U.S.); Australia, Japan and other Asia Pacific countries (APAC); Europe, the Middle East and Africa (EMEA); and certain other countries, including Canada and Latin American countries. The following table represents a comparison of the Companys geographic revenues: Three Months Ended March31, 2010 2009 (In thousands) U.S. $ 150,047 $ 147,132 APAC 50,755 48,167 EMEA 44,211 40,524 Other 19,389 17,734 Total revenues $ 264,402 $ 253,557 Revenues are generally attributed to the country of domicile and the respective regions in which the Companys customers are located. The following table presents a comparison of property and equipment, net of accumulated depreciation, by geographic region: March31, 2010 December31, 2009 (In thousands) U.S. $ 376,812 $ 380,732 APAC 12,258 13,154 EMEA 9,464 9,898 O |
Stock-Based Compensation
Stock-Based Compensation | |
3 Months Ended
Mar. 31, 2010 | |
Stock-Based Compensation | Note8. Stock-Based Compensation Stock-based compensation is classified in the Condensed Consolidated Statements of Operations in the same expense line items as cash compensation. The following table presents the classification of stock-based compensation: Three Months Ended March31, 2010 2009 (In thousands) Stock-based compensation: Cost of revenues $ 1,793 $ 1,658 Sales and marketing 2,811 2,427 Research and development 1,873 1,481 General and administrative 5,527 5,277 Restructuring and other charges, net 202 723 Stock-based compensation for continuing operations 12,206 11,566 Discontinued operations (121 ) 2,362 Total stock-based compensation $ 12,085 $ 13,928 The following table presents the nature of the Companys total stock-based compensation, inclusive of amounts for discontinued operations: Three Months Ended March31, 2010 2009 (In thousands) Stock-based compensation: Stock options $ 2,316 $ 3,511 Employee stock purchase plan 2,729 2,721 Restricted stock units 6,949 7,481 Stock options/awards acceleration 570 932 Capitalization (1) (479 ) (717 ) Total stock-based compensation $ 12,085 $ 13,928 (1) Included in Property and equipment, net. |
Other Loss, Net
Other Loss, Net | |
3 Months Ended
Mar. 31, 2010 | |
Other Loss, Net | Note9. Other Loss, Net The following table presents the components of Other loss, net: Three Months Ended March31, 2010 2009 (In thousands) Interest and dividend income $ 1,294 $ 1,649 Interest expense (11,998 ) (11,805 ) Unrealized gain on contingent interest derivative on convertible debentures 469 1,174 Income from transition services agreements 3,020 782 Other, net 282 3,860 Total other loss, net $ (6,933 ) $ (4,340 ) Interest and dividend income is earned principally from the investment of VeriSigns surplus cash balances and marketable securities. Interest expense is principally incurred on convertible debentures. Income from transition services agreements includes fees generated from services provided to the purchasers of the divested businesses for a certain period of time to ensure and facilitate the transfer of business operations for those businesses. During the three months ended March31, 2009, Other, net, primarily includes $3.3 million received from Certicom Corporation (Certicom) due to the termination of the acquisition agreement entered into with Certicom. |
Discontinued Operations
Discontinued Operations | |
3 Months Ended
Mar. 31, 2010 | |
Discontinued Operations | Note 10. Discontinued Operations The Company has completed the divestitures of its non-core businesses. For a period of time, the Company will continue to generate cash flows and will report income statement activity in continuing operations that are associated with the completed divestitures. The activities that will give rise to these impacts are transitional in nature and generally result from agreements that ensure and facilitate the orderly transfer of business operations. The nature, magnitude and duration of the agreements will vary depending on the specific circumstances of the service, location and/or business need. The agreements can include the following: logistics, customer service, support of financial processes, procurement, human resources, facilities management, data collection and information services. Existing agreements generally extend for periods less than 12 months. Income from discontinued operations for the three months ended March31, 2010, represents adjustments to gains or losses on sale of discontinued operations reported in 2009, as a result of certain one-time employment termination benefits and settlement of certain retained litigation of the divested businesses. |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes | Note11. Income Taxes During the three months ended March31, 2010 and 2009, the Company recorded income tax expense for continuing operations of $27.8 million and $23.2 million, respectively. The effective tax rates for the three months ended March31, 2010 and 2009 were 34% and 33%, respectively. The effective tax rate for the three months ended March31, 2010 differs from the statutory federal rate of 35% due to state taxes, the effect of non-U.S. operations and non-deductible stock-based compensation expense. The effective tax rate for the three months ended March31, 2009 differs from the statutory federal rate of 35% due to state taxes, non-deductible stock-based compensation and a one-time discrete income tax benefit related to a California tax law change. The Company applies a valuation allowance to certain deferred tax assets when management does not believe that it is more likely than not that they will be realized. Deferred tax assets offset by a valuation allowance relate primarily to investments with differing book and tax bases and net operating losses in certain foreign jurisdictions. As of March31, 2010 and December31, 2009, the Company had gross unrecognized tax benefits for income taxes associated with uncertain tax positions of $32.0 million and $30.0 million, respectively. During the three months ended March31, 2010, the Company recorded an increase in unrecognized tax benefits of $2.0 million. As of March31, 2010 and December31, 2009, $30.9 million and $29.0 million, respectively, of unrecognized tax benefits, including penalties and interest, would affect the Companys effective tax rate if realized. The balance of the gross unrecognized tax benefits is not expected to materially change in the next 12 months. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of Income tax expense. During the three months ended March31, 2010 and 2009, the Company expensed $0.1 million and $0.3 million, respectively, for interest and penalties related to income tax liabilities through income tax expense. The Companys major taxing jurisdictions are U.S. Federal, Japan and the states of California and Virginia. The Companys income tax returns are not currently under tax examination by the Internal Revenue Service or the Virginia Department of Revenue. The Companys income tax return for the year ended December31, 2005 is currently under examination by the California Franchise Tax Board. Because the Company uses historic net operating loss carryforwards and other tax attributes to offset its taxable income in current and future years income tax returns for U.S. Federal, California and Virginia, such attributes can be adjusted by these taxing authorities until the statute closes on the year in which such attributes were utilized. The Companys income tax returns are not currently under income tax examination by the Japan National Tax Agency. The years remaining subject to examination by the Japan National Tax Agency are those ended on December31, 2007 and forward. |
Contingencies
Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Contingencies | Note 12. Contingencies Legal Proceedings On July6, 2006, a stockholder derivative complaint(Parnes v. Bidzos, et al., and VeriSign) was filed against VeriSign in the U.S. District Court for the Northern District of California, as a nominal defendant,and certain of its current and former directors and executive officersrelated tocertain historical stock option grants.The complaint seeks unspecified damages on behalf of VeriSign, constructive trust and other equitable relief. Two other derivative actions were filed, one in the U.S. District Court for the Northern District of California (Port Authority v. Bidzos, et al., and VeriSign), and one in the Superior Court of the State of California, Santa Clara County (Port Authority v. Bidzos, et al., and VeriSign) on August14, 2006. The state court derivative action is stayed pending resolution of the federal actions. The current directors and officers named in this state action are D. James Bidzos, William L. Chenevich, Roger H. Moore and Louis A. Simpson. The Company is named as a nominal defendant in these actions.The federal actions have been consolidated and plaintiffs filed a consolidated complaint on November20, 2006 (Federal Action). The current directors and officers named in this consolidated Federal Action are D. James Bidzos, William L. Chenevich, Roger H. Moore, Louis A. Simpson and Timothy Tomlinson. Motions to dismiss the consolidated federal court complaint were heard on May23, 2007. Those motions were granted on September14, 2007. On November16, 2007, a second amended stockholder derivative complaint was filed in the Federal Action wherein the Company was again named as a nominal defendant.By stipulation and Court order, defendants obligation to respond to the second amended stockholder derivative complaint has been continued pendinginformal efforts by the parties to resolve the Federal Action. The parties have reached an agreement to resolve the option grant related matters. The Federal Action is subject to approval of the U.S. District Court for the Northern District of California. On March5, 2010, the United States District Court for the Northern District of California issued an order granting preliminary approval of the settlement of the Federal Action. A hearing for final approval is scheduled for June2, 2010. The parties have agreed that upon final approval of the settlement and dismissal of the Federal Action the parallel state court proceedings will be dismissed. The settlement amount is not significant. On May15, 2007, a putative class action (Mykityshyn v. Bidzos, et al., and VeriSign) was filed in Superior Court for the State of California, Santa Clara County, naming VeriSign and certain current and former officers and directors, alleging false representations and disclosure failures regarding certain historical stock option grants. The plaintiff purports to represent all individuals who owned VeriSigns common stock between April3, 2002, and August9, 2006. The complaint seeks rescission of amendments to the 1998 and 2006 Option Plans and the cancellation of shares added to the 1998 Option Plan. The complaint also seeks to enjoin the Company from granting any st |