Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Oct. 01, 2013 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'DIGITAL RIVER INC /DE | ' |
Entity Central Index Key | '0001062530 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 33,432,526 |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
CURRENT ASSETS | ' | ' |
Cash and cash equivalents | $458,062 | $542,851 |
Short-term investments | 122,698 | 162,794 |
Accounts receivable, net of allowance of $2,853 and $4,834 | 50,605 | 55,192 |
Deferred tax assets | 119 | 457 |
Prepaid expenses and other | 28,807 | 31,813 |
Assets of discontinued operations | 6,584 | 7,561 |
Total current assets | 666,875 | 800,668 |
Property and equipment, net | 52,703 | 53,098 |
Goodwill | 140,389 | 108,960 |
Intangible assets, net of accumulated amortization of $85,655 and $78,757 | 32,255 | 11,718 |
Long-term investments | 52,810 | 71,735 |
Deferred income taxes | 1,390 | 1,792 |
Other assets | 2,512 | 4,313 |
TOTAL ASSETS | 948,934 | 1,052,284 |
CURRENT LIABILITIES | ' | ' |
Accounts payable | 135,699 | 201,826 |
Accrued payroll | 15,316 | 11,294 |
Deferred revenue | 10,008 | 13,119 |
Other current liabilities | 70,994 | 50,149 |
Liabilities of discontinued operations | 7,291 | 5,753 |
Total current liabilities | 239,308 | 282,141 |
NON-CURRENT LIABILITIES | ' | ' |
Senior convertible notes | 295,750 | 309,909 |
Other liabilities | 22,217 | 18,236 |
Total non-current liabilities | 317,967 | 328,145 |
TOTAL LIABILITIES | 557,275 | 610,286 |
STOCKHOLDERS' EQUITY | ' | ' |
Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares issued or outstanding | ' | ' |
Common stock, $.01 par value; 120,000,000 shares authorized; 49,928,175 and 48,941,402 shares issued | 499 | 489 |
Treasury stock at cost; 16,495,649 and 13,581,889 shares | -416,999 | -368,721 |
Additional paid-in capital | 756,239 | 737,499 |
Retained earnings | 51,177 | 75,901 |
Accumulated other comprehensive income (loss) | 743 | -3,170 |
Total stockholders' equity | 391,659 | 441,998 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $948,934 | $1,052,284 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, except Share data, unless otherwise specified | ||
CONSOLIDATED BALANCE SHEETS | ' | ' |
Allowance for accounts receivable (in dollars) | $2,853 | $4,834 |
Accumulated amortization of intangible assets (in dollars) | $85,655 | $78,757 |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
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 | 120,000,000 | 120,000,000 |
Common stock, shares issued | 49,928,175 | 48,941,402 |
Treasury stock, shares | 16,495,649 | 13,581,889 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
CONSOLIDATED STATEMENTS OF OPERATIONS | ' | ' | ' | ' |
Revenue | $87,260 | $87,056 | $288,444 | $272,377 |
Costs and expenses (exclusive of depreciation and amortization expense shown separately below): | ' | ' | ' | ' |
Direct cost of services | 16,205 | 15,476 | 55,272 | 47,810 |
Network and infrastructure | 14,648 | 13,184 | 44,049 | 38,322 |
Sales and marketing | 25,013 | 22,756 | 80,415 | 74,593 |
Product research and development | 18,108 | 15,201 | 52,967 | 45,632 |
General and administrative | 12,011 | 13,726 | 44,040 | 37,025 |
Goodwill impairment | ' | ' | 21,249 | ' |
Depreciation and amortization | 5,682 | 4,940 | 15,748 | 15,171 |
Amortization of acquisition-related intangibles | 2,149 | 1,118 | 6,360 | 3,526 |
Total costs and expenses | 93,816 | 86,401 | 320,100 | 262,079 |
Income (loss) from operations | -6,556 | 655 | -31,656 | 10,298 |
Interest income | 553 | 773 | 1,929 | 2,908 |
Interest expense | -1,941 | -2,262 | -5,884 | -6,756 |
Other income (expense), net | -297 | -601 | 16,717 | 124 |
Income (loss) from continuing operations before income taxes | -8,241 | -1,435 | -18,894 | 6,574 |
Income tax expense (benefit) | -645 | -700 | -408 | 1,444 |
Income (loss) from continuing operations | -7,596 | -735 | -18,486 | 5,130 |
Income (loss) from discontinued operations, net of tax | -4,891 | 1 | -6,238 | -927 |
Net income (loss) | ($12,487) | ($734) | ($24,724) | $4,203 |
Income (loss) per share - basic: | ' | ' | ' | ' |
Income (loss) from continuing operations (in dollars per share) | ($0.24) | ($0.02) | ($0.57) | $0.16 |
Income (loss) from discontinued operations (in dollars per share) | ($0.16) | $0 | ($0.19) | ($0.03) |
Net income (loss) per share - basic (in dollars per share) | ($0.40) | ($0.02) | ($0.76) | $0.13 |
Income (loss) per share - diluted: | ' | ' | ' | ' |
Income (loss) from continuing operations (in dollars per share) | ($0.24) | ($0.02) | ($0.57) | $0.16 |
Income (loss) from discontinued operations (in dollars per share) | ($0.16) | $0 | ($0.19) | ($0.03) |
Net income (loss) per share - diluted (in dollars per share) | ($0.40) | ($0.02) | ($0.76) | $0.13 |
Shares used in per-share calculation - basic (in shares) | 31,487 | 32,685 | 32,435 | 33,347 |
Shares used in per-share calculation - diluted (in shares) | 31,487 | 32,685 | 32,435 | 33,579 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ' | ' | ' | ' |
Net income (loss) | ($12,487) | ($734) | ($24,724) | $4,203 |
Other comprehensive income (loss): | ' | ' | ' | ' |
Unrealized foreign currency translation gain (loss) | 8,749 | 9,297 | 524 | 1,601 |
Unrealized gain (loss) on investments | 292 | 1,128 | 3,389 | -5,159 |
Tax benefit (expense) | 1,053 | -647 | ' | 1,981 |
Other comprehensive income (loss) | 10,094 | 9,778 | 3,913 | -1,577 |
Comprehensive income (loss) | ($2,393) | $9,044 | ($20,811) | $2,626 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
OPERATING ACTIVITIES | ' | ' |
Net income (loss) | ($24,724) | $4,203 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ' | ' |
Loss on disposal of discontinued businesses | 2,110 | ' |
Amortization of acquisition-related intangibles | 6,360 | 5,301 |
Provision for doubtful accounts | 1,400 | 1,349 |
Depreciation and amortization | 15,831 | 15,258 |
Impairment of goodwill | 21,249 | ' |
Debt issuance cost amortization | 1,278 | 1,481 |
Amortization of investment premiums | 2,246 | ' |
Loss on sale of equipment | 121 | 39 |
Gain on sale of investment | -17,526 | ' |
Stock-based compensation expense | 16,295 | 18,255 |
Excess tax benefits from stock-based compensation | ' | -129 |
Deferred and other income taxes | 1,715 | -4,325 |
Change in operating assets and liabilities, net of acquisitions: | ' | ' |
Accounts receivable | -2,856 | -11,539 |
Prepaid and other assets | 5,940 | -7,362 |
Accounts payable | -65,721 | -62,586 |
Deferred revenue | -4,321 | 9,094 |
Income tax payable | -2,151 | 5,771 |
Other accrued liabilities | -2,801 | 846 |
Net cash provided by (used in) operating activities | -45,555 | -24,344 |
INVESTING ACTIVITIES | ' | ' |
Purchases of investments | -53,243 | -95,776 |
Sales of investments | 90,891 | 122,391 |
Cash received for cost method investments | 39,636 | ' |
Cash paid for acquisitions, net of cash received | -55,843 | ' |
Cash received from divestitures | 20 | ' |
Purchases of equipment and capitalized software | -15,662 | -14,394 |
Net cash provided by (used in) investing activities | 5,799 | 12,221 |
FINANCING ACTIVITIES | ' | ' |
Repurchase of convertible senior notes | -5,354 | ' |
Exercise of stock options | 1,273 | 1,522 |
Sales of common stock under employee stock purchase plan | 1,183 | 1,300 |
Repurchase of common stock | -43,950 | -20,242 |
Repurchase of restricted stock to satisfy tax withholding obligation | -4,328 | -3,657 |
Excess tax benefits from stock-based compensation | ' | 129 |
Net cash provided by (used in) financing activities | -51,176 | -20,948 |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 6,143 | 1,333 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | -84,789 | -31,738 |
CASH AND CASH EQUIVALENTS, beginning of period | 542,851 | 497,193 |
CASH AND CASH EQUIVALENTS, end of period | 458,062 | 465,455 |
SUPPLEMENTAL DISCLOSURES | ' | ' |
Cash paid for interest on senior convertible notes | 3,123 | 3,560 |
Cash paid for income taxes | $3,373 | $2,314 |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended | ||||||||||
Sep. 30, 2013 | |||||||||||
BASIS OF PRESENTATION | ' | ||||||||||
BASIS OF PRESENTATION | ' | ||||||||||
1. BASIS OF PRESENTATION | |||||||||||
The unaudited consolidated financial statements included herein reflect all adjustments, including normal recurring adjustments, which in our opinion are necessary to fairly state our consolidated financial position, results of operations and cash flows for the periods presented. These consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission. The results of operations for the three and nine months ended September 30, 2013, are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire fiscal year ending December 31, 2013. The December 31, 2012, information was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles (GAAP) in the United States. | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
A detailed description of our significant accounting policies can be found in our most recent Annual Report filed on Form 10-K for the fiscal year ended December 31, 2012. There were no material changes in significant accounting policies during the quarter ended September 30, 2013. | |||||||||||
Revenue | |||||||||||
Revenue Recognition. We recognize revenue from services rendered once all the following criteria for revenue recognition have been met: (1) persuasive evidence of an agreement exists; (2) the services have been rendered; (3) the fee is fixed and determinable; and, (4) collection of the amounts due is reasonably assured. | |||||||||||
We also determine whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as net revenue. We typically are the seller and merchant of record on most of the transactions we process and have contractual relationships with our clients, which obligate us to pay to the client a specified percentage of each sale. We derive our revenue primarily from transaction fees based on a percentage of the product’s sale price and fees from services rendered associated with the e-commerce and other services provided to our clients and end customers. Our revenue is recorded net as generally our clients are subject to inventory risks and control customers’ product choices. We sell both physical and digital products. Revenue is recognized upon fulfillment and based upon when products are shipped and title and significant risk of ownership passes to the customer. | |||||||||||
Our payment processing revenues are derived from one-time set-up fees, monthly gateway fees, and transaction fees paid to us by merchants. Transaction fees are recognized in the period in which the transaction occurs. Gateway fees are monthly subscription fees charged to our merchant customers for the use of our payment processor integrations and are recognized in the period in which the service is provided. Set-up fees represent one-time charges for initiating our processing services. Although these fees are generally paid at the commencement of the agreement, they are recognized ratably over the estimated average life of the merchant relationship. | |||||||||||
The Company also provides customers with various proprietary software backup services. We recognize revenue for these backup services based upon historical usage within the contract period of the digital backup services when this information is available. Digital backup services are recognized straight-line over the life of the backup service when historical usage information is unavailable. Shipping revenues are recorded net of any associated costs. | |||||||||||
We also, to a lesser extent, provide fee-based client services, which include website design, custom development and integration, analytical marketing, affiliate marketing and email marketing services. If we receive payments for fee-based services in advance of delivery, these amounts, if significant, are deferred and recognized over the service period. | |||||||||||
Client service arrangements can have multiple deliverables such as delivery of website design or administrative site set up activities in connection with hosted reseller arrangements. These deliverables do not meet the criteria of separate units of accounting under GAAP. We account for these deliverables as one unit of accounting, as they generally only have value to the client during the time the hosted commerce site launches and commerce transactions occur. Therefore, associated revenue is recorded over the term of the hosting contract. Client services are executed through signed contractual agreements. Accordingly, our fees are fixed and determinable upon the execution of the agreement. | |||||||||||
Provisions for doubtful accounts and transaction losses and authorized credits are made at the time of revenue recognition based upon our historical experience. The provision for doubtful accounts and transaction losses are recorded as charges to operating expense, while the provision for authorized credits is recognized as a reduction of net revenues. | |||||||||||
Taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer may be presented on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues). The Company presents these taxes on a net basis in its financial statements. | |||||||||||
Restricted Cash | |||||||||||
Restricted cash consists of cash and cash equivalents that are held in escrow accounts or restricted by agreements with third parties for a particular purpose. Restricted cash and cash equivalents are included in current assets under “Prepaid expenses and other” on our Consolidated Balance Sheets, and are recorded at fair value. As of September 30, 2013 and December 31, 2012, we had $3.8 million and $0.4 million of restricted cash, respectively. | |||||||||||
Prepaid Expenses and Other | |||||||||||
Prepaid expenses and other are largely comprised of prepaid expenses, restricted cash, inventory, other current assets and value added tax assets. In the second quarter of 2012, $0.6 million was lent through a short-term promissory note to another company and recorded on the “Prepaid expenses and other” line of the Consolidated Balance Sheets. During the third quarter of 2012, collection of the note was deemed unlikely and a $0.6 million reserve was recorded against the note. | |||||||||||
Software Development | |||||||||||
Costs to develop software for internal use are required to be capitalized and amortized over the estimated useful life of the software. For the three months ended September 30, 2013 and 2012, we capitalized $0.5 million and $1.5 million related to software development, respectively. For the nine months ended September 30, 2013 and 2012, we capitalized $1.5 million and $4.3 million related to software development, respectively. This capitalization is primarily related to the development of our new commerce functionality and platform enhancements. | |||||||||||
Goodwill | |||||||||||
We complete our goodwill impairment analysis on an annual basis or more frequently if events or circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying amount. As we only have one operating segment, goodwill is evaluated based on a single reporting unit. During the third quarter of 2013, as part of the sales of CustomCD, Inc. (CustomCD) and Digital River Education Services, Inc. (DRES), we allocated $0.3 million of goodwill from our single reporting unit to these entities, which was written-off and included in the computation of the loss on disposal of discontinued businesses as of September 30, 2013. Due to the sales of these entities, we were required to evaluate if the remaining goodwill in our single reporting unit is impaired. Based on our evaluation, we determined that no impairment exists on the remaining balance of goodwill in our single reporting unit as of September 30, 2013. See Note 11 — Discontinued Operations, for further discussion of the sales of CustomCD and DRES. | |||||||||||
In December 2012, due to the deterioration in our stock price in the second half of 2012, adjustments in our forecasted revenue growth and change in our chief operating decision maker, management completed an interim impairment test and determined that the book value of the Company was in excess of fair value and a goodwill impairment was required. In the fourth quarter 2012, we recorded a non-cash pretax goodwill impairment charge of $175.2 million, or $161.1 million after tax, relating to our single reporting unit. The impairment charge was an estimate pending final valuation of a privately held equity security in calculating the goodwill impairment charge of $175.2 million. | |||||||||||
During the first quarter of 2013, we determined the fair market value of the privately held equity security, which we had estimated at year end, and completed our goodwill impairment analysis. As a result of our analysis we recorded an additional non-cash pretax goodwill impairment charge of $21.2 million relating to our single reporting unit. These goodwill charges are included as a separate operating expense line item, “Goodwill impairment” within Continuing Operations in our Consolidated Statements of Operations. The tax benefit was offset by our current period tax valuation allowance. A blended income and market approach was used to determine the fair value of our sole reporting unit and associated impairment charges. The application of goodwill impairment tests requires management judgment for many of the inputs. Key assumptions included in the impairment test included our revenue growth rate, discount rate assumptions, and estimates of our future cash flows. Changes in these estimates could result in additional impairment of goodwill in a future period. The impairment charge reflects our view of anticipated risks based on our expectations of market and general economic conditions. See Note 5 — Goodwill for further details. | |||||||||||
Comprehensive Income (Loss) | |||||||||||
Comprehensive income (loss) includes revenues, expenses, and gains and losses that are excluded from net earnings under GAAP. Items of comprehensive income (loss) are unrealized gains and losses on investments and foreign currency translation adjustments which are added to net income (loss) to compute comprehensive income (loss). Comprehensive income (loss) is net of income tax benefit or expense, excluding cumulative translation adjustments as these funds are indefinitely invested. | |||||||||||
The following table summarizes the changes in accumulated other comprehensive income (loss), net of tax, by component for the nine months ended September 30, 2013 (in thousands): | |||||||||||
Foreign currency | Unrealized gain | Total | |||||||||
translation | (loss) on | ||||||||||
adjustment | investments | ||||||||||
Balance as of December 31, 2012 | $ | 2,565 | $ | (5,735 | ) | $ | (3,170 | ) | |||
Other comprehensive income before reclassifications | 524 | 3,385 | 3,909 | ||||||||
Amount reclassified from accumulated other comprehensive income (loss) | — | 4 | 4 | ||||||||
Net current period other comprehensive income (loss) | 524 | 3,389 | 3,913 | ||||||||
Balance as of September 30, 2013 | $ | 3,089 | $ | (2,346 | ) | $ | 743 | ||||
Reclassifications out of accumulated other comprehensive income (loss), net of tax, were immaterial for the three months ended September 30, 2013. The following table summarizes the reclassifications out of accumulated other comprehensive income (loss), net of tax, for the nine months ended September 30, 2013 (in thousands): | |||||||||||
Details about accumulated other comprehensive | Amount reclassified | Affected line item in the | |||||||||
income components | from accumulated other | Consolidated Statement of | |||||||||
comprehensive income | Operations | ||||||||||
Realized gains (losses) on investments | |||||||||||
$ | 6 | Other income (expense), net | |||||||||
(2 | ) | Income tax benefit (expense) | |||||||||
$ | 4 | Net income (loss) | |||||||||
Foreign Currency Translation | |||||||||||
Substantially all of our foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets and liabilities are translated at exchange rates prevailing at the balance sheet dates. Revenues, costs and expenses are translated at the average exchange rates for the reported period. Gains and losses resulting from translation are recorded as a component of “Accumulated other comprehensive income (loss)” within stockholders’ equity. Gains and losses resulting from foreign currency transactions are recognized as “Other income (expense), net”. | |||||||||||
We are exposed to market risk from changes in foreign currency exchange rates. Our primary risk is the effect of foreign currency exchange rate fluctuations on the U.S. dollar value of foreign currency denominated operating sales and expenses. We are also exposed to financial risk related to exchange rate translation losses (or gains) associated with economic interests that are denominated in a foreign currency. The risk of translation losses due to foreign exchange volatility is partially mitigated by the use of foreign exchange forward contracts with maturities of less than three months. These derivative transactions are not designated as hedges and are adjusted to fair value each period through “Other income (expense), net” in our Consolidated Statements of Operations. The principal exposures mitigated were euro, Australian dollar, British pound, Canadian dollar, Danish krone and Japanese yen currencies. For the three and nine months ended September 30, 2013 and 2012, the gain/loss on derivative settlements was immaterial. The notional amounts held at period end and the underlying gain/loss were determined to be immaterial when compared to our overall cash and cash equivalents and the net income (loss) reported for the respective periods. | |||||||||||
Our foreign currency contracts contain credit risk to the extent that our bank counterparties may be unable to meet the terms of the agreements. We minimize such risk by limiting our counterparties to major financial institutions of high credit quality. | |||||||||||
Recent Accounting Pronouncements | |||||||||||
ASU 2013-11 - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists: In July 2013, the FASB issued ASU 2013-11, which requires an entity to present unrecognized tax benefits as a reduction of the deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, if net settlement is required or expected. To the extent that net settlement is not required or expected, the unrecognized tax benefit must be presented as a liability. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. ASU No. 2013-11 is effective for reporting periods beginning after December 15, 2013, and should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Because this standard only affects the presentation of unrecognized tax benefits and not the measurement of an unrecognized tax benefit, we do not expect this standard to have a material impact on our Consolidated Financial Statements. | |||||||||||
ASU 2013-02 — Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income: In February 2013, the FASB issued ASU 2013-02, which required entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either in the financial statements or footnotes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. ASU 2013-02 is effective prospectively for fiscal periods beginning after December 15, 2012. We have adopted the new guidance in ASU 2013-02 as of the period ended March 31, 2013, and its adoption did not have a material impact on our Consolidated Financial Statements. | |||||||||||
We have determined that all other recently issued accounting standards will not have a material impact on our Consolidated Financial Statements, or do not apply to our operations. | |||||||||||
Reclassifications | |||||||||||
The results of the operations of CustomCD and DRES have been classified within Discontinued Operations within our Consolidated Statements of Operations for the three and nine month periods ending September 30, 2013. The operations of these entities in the corresponding periods of 2012 have been reclassified into Discontinued Operations for comparative purposes to conform to the current year presentation. In addition, all of the assets and liabilities of DRES, which was sold on October 1, 2013, meet the criteria for assets held for sale as of September 30, 2013, and are separately reported as current assets, at fair value, and current liabilities of discontinued operations within the Consolidated Balance Sheet at September 30, 2013. The assets and liabilities of CustomCD have been removed from our Consolidated Balance Sheet as of September 30, 2013, as the entity was sold on September 30, 2013. The assets and liabilities of both CustomCD and DRES in the December 31, 2012 Consolidated Balance Sheet have been reclassified and separately presented as current assets and current liabilities of discontinued operations for comparative purposes with the current year presentation. | |||||||||||
Certain items in the prior year’s Consolidated Statements of Operations have been reclassified for comparative purposes to conform to the current year presentation. Historically, we have reported payment processing fees, chargebacks, and directly related personnel expenses within the “Sales and marketing” and “General and administrative” line items. We have reclassified these expenses to the “Direct cost of services” line as these costs are associated directly with services rendered. For the three and nine months ended September 30, 2012, excluding amounts related to CustomCD and DRES which have been reclassified to discontinued operations, we have reclassified $12.8 million and $39.3 million, respectively, previously reported as “Sales and marketing” and $0.4 million and $1.4 million, respectively, previously reported as “General and administrative” to “Direct cost of services”. The reclassifications did not have an effect on reported consolidated net income (loss). |
NET_INCOME_LOSS_PER_SHARE
NET INCOME (LOSS) PER SHARE | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
NET INCOME (LOSS) PER SHARE | ' | |||||||||||||
NET INCOME (LOSS) PER SHARE | ' | |||||||||||||
2. NET INCOME (LOSS) PER SHARE | ||||||||||||||
The following table summarizes the computation of basic and diluted income (loss) from continuing operations per share (in thousands, except per share amounts): | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Income (loss) from continuing operations per share - basic | ||||||||||||||
Income (loss) from continuing operations - basic | $ | (7,596 | ) | $ | (735 | ) | $ | (18,486 | ) | $ | 5,130 | |||
Weighted average shares outstanding - basic | 31,487 | 32,685 | 32,435 | 33,347 | ||||||||||
Income (loss) from continuing operations per share - basic | $ | (0.24 | ) | $ | (0.02 | ) | $ | (0.57 | ) | $ | 0.16 | |||
Income (loss) from continuing operations per share - diluted | ||||||||||||||
Income (loss) from continuing operations - basic | $ | (7,596 | ) | $ | (735 | ) | $ | (18,486 | ) | $ | 5,130 | |||
Exclude: Interest expense and amortized financing cost of convertible senior notes, net of tax benefit | — | — | — | — | ||||||||||
Income (loss) from continuing operations - diluted | $ | (7,596 | ) | $ | (735 | ) | $ | (18,486 | ) | $ | 5,130 | |||
Weighted average shares outstanding - basic | 31,487 | 32,685 | 32,435 | 33,347 | ||||||||||
Dilutive impact of non-vested stock and options outstanding | — | — | — | 232 | ||||||||||
Dilutive impact of 2004 senior convertible notes | — | — | — | — | ||||||||||
Weighted average shares outstanding - diluted | 31,487 | 32,685 | 32,435 | 33,579 | ||||||||||
Income (loss) from continuing operations per share - diluted | $ | (0.24 | ) | $ | (0.02 | ) | $ | (0.57 | ) | $ | 0.16 | |||
For the three and nine months ended September 30, 2013, incremental shares related to dilutive securities of 544,629 and 313,695, respectively, were not included in the diluted net income (loss) per share calculation because the Company reported a loss for both periods. For the three months ended September 30, 2012, 264,796 incremental shares, related to dilutive securities were not included in the diluted net income (loss) per share calculation because the Company reported a loss for this period. Incremental shares related to dilutive securities have an anti-dilutive impact on net income (loss) per share when a net loss is reported and therefore are not included in the calculation. | ||||||||||||||
Options to purchase 589,943 and 1,463,689 shares for the three months ended September 30, 2013 and 2012, respectively, and 589,943 and 1,463,689 shares for the nine months ended September 30, 2013 and 2012, respectively, were not included in the computation of diluted net income (loss) per share because their effect on diluted net income (loss) per share would have been anti-dilutive. | ||||||||||||||
The unissued shares underlying our 2004 senior convertible notes, 199,828 weighted average shares for the three and nine months ended September 30, 2013 and 2012, were excluded for the purposes of calculating diluted net income (loss) per share, because their effect on diluted net income (loss) per share would have been anti-dilutive. The unissued shares underlying our 2010 senior convertible notes, 6,019,607 and 7,022,027 weighted average shares for the three months ended September 30, 2013 and 2012, respectively, and 6,070,600 and 7,022,027 weighted average shares for the nine months ended September 30, 2013 and 2012, respectively, were excluded for the purposes of calculating diluted net income (loss) per share, because their effect on diluted net income (loss) per share would have been anti-dilutive. |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||
3. FAIR VALUE MEASUREMENTS | ||||||||||||||
Financial assets and liabilities that are remeasured and reported at fair value at each reporting period are classified and disclosed in one of the following three categories: | ||||||||||||||
Level 1 — Observable inputs such as quoted prices in active markets; | ||||||||||||||
Level 2 — Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including: | ||||||||||||||
· Quoted prices for similar assets or liabilities in active markets; | ||||||||||||||
· Quoted prices for identical or similar assets in less active markets than Level 1 investments; | ||||||||||||||
· Inputs other than quoted prices that are observable for assets or liabilities; and | ||||||||||||||
· Inputs that are derived principally from or corroborated by other observable market data. | ||||||||||||||
Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimate of market participant assumptions. | ||||||||||||||
Assets and Liabilities that are Measured at Fair Value on a Recurring Basis | ||||||||||||||
The fair value hierarchy requires the use of observable market data when available. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The Company’s policy is to recognize transfers between levels at the end of the quarter. | ||||||||||||||
The following table sets forth by level within the fair value hierarchy, our financial assets that were accounted for at fair value on a recurring basis at September 30, 2013 and December 31, 2012, (in thousands), according to the valuation techniques we used to determine their fair values. There have been no transfers of assets between the fair value hierarchies presented below: | ||||||||||||||
Fair Value Measurements | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Balance as of September 30, 2013 | ||||||||||||||
Cash and cash equivalents | $ | 458,062 | $ | 458,062 | $ | — | $ | — | ||||||
Restricted cash | 3,832 | 3,832 | — | — | ||||||||||
U.S. government sponsored entities | 7,994 | — | 7,994 | — | ||||||||||
Corporate bonds | 114,704 | 114,704 | — | — | ||||||||||
Market basis equity investments | 2,146 | 2,146 | — | — | ||||||||||
Auction rate securities | 40,184 | — | — | 40,184 | ||||||||||
Total assets measured at fair value | $ | 626,922 | $ | 578,744 | $ | 7,994 | $ | 40,184 | ||||||
Balance as of December 31, 2012 | ||||||||||||||
Cash and cash equivalents | $ | 542,851 | $ | 542,851 | $ | — | $ | — | ||||||
Restricted cash | 351 | 351 | — | — | ||||||||||
U.S. government sponsored entities | 28,110 | — | 28,110 | — | ||||||||||
Corporate bonds | 128,622 | 128,622 | — | — | ||||||||||
Asset-backed securities | 6,062 | — | 6,062 | — | ||||||||||
Market basis equity investments | 1,694 | 1,694 | — | — | ||||||||||
Auction rate securities | 37,001 | — | — | 37,001 | ||||||||||
Total assets measured at fair value | $ | 744,691 | $ | 673,518 | $ | 34,172 | $ | 37,001 | ||||||
The following table is a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 inputs) (in thousands): | ||||||||||||||
Fair Value Measurements Using | ||||||||||||||
Significant Unobservable Inputs | ||||||||||||||
(Level 3) | ||||||||||||||
Auction rate securities | ||||||||||||||
Balance as of December 31, 2011 | $ | 65,338 | ||||||||||||
Total unrealized gains (losses) included in other comprehensive income | (2,637 | ) | ||||||||||||
Purchases | — | |||||||||||||
Issuances | — | |||||||||||||
Settlements | (25,700 | ) | ||||||||||||
Transfers in and/or out of Level 3 | — | |||||||||||||
Balance as of December 31, 2012 | $ | 37,001 | ||||||||||||
Total unrealized gains (losses) included in other comprehensive income | 3,283 | |||||||||||||
Purchases | — | |||||||||||||
Issuances | — | |||||||||||||
Settlements | (100 | ) | ||||||||||||
Transfers in and/or out of Level 3 | — | |||||||||||||
Balance as of September 30, 2013 | $ | 40,184 | ||||||||||||
The following methods and assumptions were used to estimate the fair value of each class of financial instrument. There have been no changes in the valuation techniques used by the Company to fair value our financial instruments: | ||||||||||||||
Cash and Cash equivalents. Consist of cash on hand in bank deposits, highly liquid investments, primarily high grade commercial paper and money market accounts, all with original maturities of three months or less. The fair value was measured using quoted market prices and is classified as Level 1. The carrying amount approximates fair value. | ||||||||||||||
Restricted Cash. Consists of cash and cash equivalents that are held in escrow accounts or restricted by agreements with third parties for a particular purpose. The carrying amount approximates fair value and is classified as Level 1. | ||||||||||||||
U.S government sponsored entities. Consist of Fannie Mae, Freddie Mac and Federal Home Loan Bank investment grade bonds that are traded in less active markets than Level 1 investments. The fair value of these bonds is classified as Level 2. The contractual maturity of these investments is within three years. | ||||||||||||||
Corporate Bonds. Consist of investment grade corporate bonds that trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis. The fair value of these bonds was measured using quoted market prices and is classified as Level 1. The contractual maturity of these investments is within three years. | ||||||||||||||
Asset Backed Securities. Consist of securities backed by automobile loan receivables that are traded in less active markets than our Level 1 investments. The fair value is classified as Level 2. | ||||||||||||||
Market Basis Equity Investments. Consist of available-for-sale equity securities that trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis. The fair value of these investments was measured using quoted market prices and is classified as Level 1. | ||||||||||||||
Auction Rate Securities. As of September 30, 2013, we held $45.7 million of auction rate securities (ARS) at par value which we have recorded at fair value of $40.2 million. As of December 31, 2012, we held $45.8 million of ARS at par value which was recorded at fair value of $37.0 million. The ARS are 105 — 134% over-collateralized and the underlying student loans are guaranteed by the U.S. government. Almost all of these securities continue to fail at auction due to continued illiquid market conditions. | ||||||||||||||
Due to the illiquid market conditions, we recorded a temporary fair value reduction of our ARS in the amount of $5.5 million (12.1% of par value) as of September 30, 2013, under “Accumulated other comprehensive income (loss)”, compared to a $8.8 million temporary fair value reduction as of December 31, 2012 (19.3% of par value). In evaluating our ARS portfolio, we note sustained performance of our securities, strong parity levels, observed market redemption activity, and continued receipt of interest and penalty payments. As we expect to receive all contractual cash flows, we do not believe the unrealized losses to be credit related. We continue to believe that we will be able to liquidate at par over time. We do not intend to sell the investments prior to recovery of their amortized cost basis nor do we believe it is more likely than not we may be required to sell the investments prior to recovery of their amortized cost basis. Accordingly, we treated the fair value decline as temporary. We anticipate we will have sufficient cash flow from operations to execute our business strategy and fund our operational needs. We believe that capital markets are also available if we need to finance other investment alternatives. | ||||||||||||||
The discounted cash flow model we used to value these securities included the following assumptions: | ||||||||||||||
September 30, | December 31, | |||||||||||||
2013 | 2012 | |||||||||||||
Unobservable inputs | ||||||||||||||
Redemption period (in years) | 7 | 7 | ||||||||||||
Credit ratings | BB+ to AAA | BB+ to AAA | ||||||||||||
Penalty coupon rate | 1.0% to 1.5% | 1.0% to 1.5% | ||||||||||||
Weighted average annualized yield | 1.20% | 1.50% | ||||||||||||
Risk adjusted discount rate | 4.4% to 10.2% | 3.5% to 12.3% | ||||||||||||
Management makes estimates and assumptions about the ARS, which can be sensitive to changes and effect the determination of fair value. An increase in the length of redemption period or an increase in the discount rate assumption would decrease our fair value. Also, a decrease in the securities’ credit ratings would decrease our fair value. | ||||||||||||||
The portfolio had a weighted average maturity of 30.1 years and 30.8 years as of September 30, 2013 and December 31, 2012, respectively. | ||||||||||||||
We classify our ARS as Level 3 long-term investments until we receive a call or partial call on the securities. Upon receipt of a call or partial call, we classify the securities subject to the call or partial call, as Level 1 short term investments. As of September 30, 2013 and December 31, 2012, our entire ARS portfolio was classified as Level 3 long-term investments. In the nine months ended September 30, 2013, we liquidated $0.1 million of ARS due to partial calls at par. During the year ended December 31, 2012, we liquidated $25.7 million of ARS due to full calls, partial calls or sales at par. The amount of Level 3 assets as a percentage of total assets measured at fair value on a recurring basis was 6.4% and 5.0% as of September 30, 2013 and December 31, 2012, respectively. | ||||||||||||||
Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis | ||||||||||||||
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances including evidence of impairment. For the nine months ended September 30, 2013, other than the impairment disclosed in Note 5 — Goodwill, we had no significant fair value adjustments of assets or liabilities on a nonrecurring basis subsequent to their initial recognition. The inputs used in the goodwill impairment fair value calculations fall within Level 3 inputs due to the significant unobservable inputs used to determine the fair value. |
INVESTMENTS
INVESTMENTS | 9 Months Ended | ||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||
INVESTMENTS | ' | ||||||||||||||||||||||
INVESTMENTS | ' | ||||||||||||||||||||||
4. INVESTMENTS | |||||||||||||||||||||||
As of September 30, 2013 and December 31, 2012, our available-for-sale securities consisted of the following (in thousands): | |||||||||||||||||||||||
Gross Unrealized Losses | Maturities/Reset Dates | ||||||||||||||||||||||
Gross Unrealized | Less than 12 | Greater than 12 | Less than 12 | Greater than 12 | |||||||||||||||||||
Cost | Gains | Months | Months | Fair Value | Months | Months | |||||||||||||||||
Balance as of September 30, 2013 | |||||||||||||||||||||||
U.S. government sponsored entities | $ | 8,000 | $ | — | $ | (6 | ) | $ | — | $ | 7,994 | $ | 4,000 | $ | 3,994 | ||||||||
Corporate bonds | 114,402 | 337 | (35 | ) | — | 114,704 | 59,699 | 55,005 | |||||||||||||||
Market basis equity investments | 2,146 | — | — | — | 2,146 | — | 2,146 | ||||||||||||||||
Auction rate securities | 45,725 | — | — | (5,541 | ) | 40,184 | — | 40,184 | |||||||||||||||
Total available-for-sale securities | $ | 170,273 | $ | 337 | $ | (41 | ) | $ | (5,541 | ) | $ | 165,028 | $ | 63,699 | $ | 101,329 | |||||||
Balance as of December 31, 2012 | |||||||||||||||||||||||
U.S. government sponsored entities | $ | 28,103 | $ | 7 | $ | — | $ | — | $ | 28,110 | $ | 28,110 | $ | — | |||||||||
Corporate bonds | 128,035 | 587 | — | — | 128,622 | 51,094 | 77,528 | ||||||||||||||||
Asset-backed securities | 6,058 | 4 | — | — | 6,062 | 6,062 | — | ||||||||||||||||
Market basis equity investments | 1,694 | — | — | — | 1,694 | — | 1,694 | ||||||||||||||||
Auction rate securities | 45,825 | — | — | (8,824 | ) | 37,001 | — | 37,001 | |||||||||||||||
Total available-for-sale securities | $ | 209,715 | $ | 598 | $ | — | $ | (8,824 | ) | $ | 201,489 | $ | 85,266 | $ | 116,223 | ||||||||
We consider the fair value decline of our investments in U.S. government sponsored entities, corporate bonds and auction rate securities to be temporary, as we do not intend to sell the investments and it is not likely that we will be required to sell the investments before recovery of their amortized cost basis. See Note 3 — Fair Value Measurements, regarding the fair value decline in auction rate securities. | |||||||||||||||||||||||
Realized gains or losses on investments are recorded in our Consolidated Statements of Operations within “Other income (expense), net”. As of September 30, 2013 and December 31, 2012, our proceeds on sales of investments equaled par value. Upon the sale of a security classified as available for sale, the amount reclassified out of “Accumulated other comprehensive income (loss)” into earnings is based on the specific identification method. | |||||||||||||||||||||||
As of September 30, 2013 and December 31, 2012, our cost method equity investments were $10.5 million and $33.0 million, respectively, and are included under “Long-term investments” on the Consolidated Balance Sheets. During the first quarter of 2013, we sold a cost method equity investment to a third party and recorded a gain of $11.1 million. During the second quarter of 2013, we received additional funds based on our sales agreement and as a result we recorded a gain of $6.5 million on the line item “Other income (expense), net” in our Consolidated Statements of Operations. Based on future events, we may receive up to $3.1 million of additional sale proceeds. We have concluded that these additional funds represent contingent gains and have not accounted for them in our consolidated financial statements in accordance with U.S. GAAP. We have evaluated our cost method equity investments for impairment as of September 30, 2013 and we are not aware of any facts or circumstances that would indicate a decline in the fair value of these investments below their carrying value. |
GOODWILL
GOODWILL | 9 Months Ended | ||||||||||
Sep. 30, 2013 | |||||||||||
GOODWILL | ' | ||||||||||
GOODWILL | ' | ||||||||||
5. GOODWILL | |||||||||||
Goodwill | |||||||||||
We complete our goodwill impairment analysis on an annual basis or more frequently if events or circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying amount. As we only have one operating segment, goodwill is evaluated based on a single reporting unit. During the third quarter of 2013, as part of the sales of CustomCD and DRES, we allocated $0.3 million of goodwill from our single reporting unit to these entities, which was written-off and included in the computation of the loss on disposal of discontinued businesses as of September 30, 2013. Due to the sales of these entities, we were required to evaluate if the remaining goodwill in our single reporting unit is impaired. Based on our evaluation, we determined that no impairment exists on the remaining balance of goodwill in our single reporting unit as of September 30, 2013. See Note 11 — Discontinued Operations, for further discussion of the sales of CustomCD and DRES. | |||||||||||
In December 2012, due to the deterioration in our stock price in the second half of 2012, adjustments in our forecasted revenue growth and change in our chief operating decision maker, management completed an interim impairment test and determined that the book value of the Company was in excess of fair value and a goodwill impairment was required. In the fourth quarter 2012, we recorded a non-cash pretax goodwill impairment charge of $175.2 million, or $161.1 million after tax, relating to our single reporting unit. The impairment charge was an estimate pending final valuation of a privately held equity security in calculating the goodwill impairment charge of $175.2 million. | |||||||||||
During the first quarter of 2013, we determined the fair market value of the privately held equity security, which we had estimated at year end, and completed our goodwill impairment analysis. As a result of our analysis we recorded an additional non-cash pretax goodwill impairment charge of $21.2 million relating to our single reporting unit. These goodwill charges are included as a separate operating expense line item, “Goodwill impairment” within Continuing Operations in our Consolidated Statements of Operations. The tax benefit was offset by our current period tax valuation allowance. A blended income and market approach was used to determine the fair value of our sole reporting unit and associated impairment charges. The application of goodwill impairment tests requires management judgment for many of the inputs. Key assumptions included in the impairment test included our revenue growth rate, discount rate assumptions, and estimates of our future cash flows. Changes in these estimates could result in additional impairment of goodwill in a future period. The impairment charge reflects our view of anticipated risks based on our expectations of market and general economic conditions. | |||||||||||
The changes in the net carrying amount of goodwill for the periods ended September 30, 2013 and December 31, 2012 are as follows (in thousands): | |||||||||||
Accumulated | |||||||||||
Goodwill | Impairment | Total | |||||||||
Balance as of December 31, 2011 | $ | 281,858 | $ | — | $ | 281,858 | |||||
Disposal of goodwill | (254 | ) | — | (254 | ) | ||||||
Impairment losses | — | (175,241 | ) | (175,241 | ) | ||||||
Adjustments from foreign currency translation | 2,597 | — | 2,597 | ||||||||
Balance as of December 31, 2012 | $ | 284,201 | $ | (175,241 | ) | $ | 108,960 | ||||
Disposal of goodwill | (260 | ) | — | (260 | ) | ||||||
Goodwill from acquisitions | 54,287 | — | 54,287 | ||||||||
Impairment losses | — | (21,249 | ) | (21,249 | ) | ||||||
Adjustments from foreign currency translation | (1,349 | ) | — | (1,349 | ) | ||||||
Balance as of September 30, 2013 | $ | 336,879 | $ | (196,490 | ) | $ | 140,389 | ||||
Goodwill from acquisitions for the nine months ended September 30, 2013 is related to the acquisition of LML Payment Systems, Inc. (LML). Factors that contributed to the recognition of goodwill from the LML acquisition include synergies due to an assembled workforce and existence of complimentary business models which can be leveraged to build an enterprise of greater value than the sum of its parts. In accordance with ASC 350, this goodwill will be tested for impairment annually or more frequently if certain indicators of impairment are present. See Note 10 — Business Combinations for further details regarding the LML acquisition. |
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
STOCK-BASED COMPENSATION | ' | |||||||||||||
STOCK-BASED COMPENSATION | ' | |||||||||||||
6. STOCK-BASED COMPENSATION | ||||||||||||||
The following table summarizes stock-based compensation expense related to employee stock options, restricted stock awards and employee stock purchases recognized (in thousands): | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Costs and expenses | ||||||||||||||
Direct cost of services | $ | 35 | $ | 26 | $ | 124 | $ | 144 | ||||||
Network and infrastructure | 341 | 408 | 1,083 | 1,140 | ||||||||||
Sales and marketing | 1,718 | 1,949 | 5,349 | 6,246 | ||||||||||
Product research and development | 782 | 999 | 2,553 | 2,687 | ||||||||||
General and administrative | 1,465 | 2,681 | 7,186 | 8,038 | ||||||||||
Stock-based compensation included in costs and expenses | $ | 4,341 | $ | 6,063 | $ | 16,295 | $ | 18,255 |
INCOME_TAXES
INCOME TAXES | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
INCOME TAXES | ' | |||||||||||||
INCOME TAXES | ' | |||||||||||||
7. INCOME TAXES | ||||||||||||||
The provision (benefit) for income taxes for both continuing and discontinued operations is composed of the following (in thousands): | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Current tax expense (benefit): | ||||||||||||||
United States | $ | 2,289 | $ | (520 | ) | $ | 3,726 | $ | 829 | |||||
International | (252 | ) | (177 | ) | (1,625 | ) | 76 | |||||||
Total current provision for income taxes | $ | 2,037 | $ | (697 | ) | $ | 2,101 | $ | 905 | |||||
Tax Rate | (19.4 | )% | 48.7 | % | (9.3 | )% | 17.7 | % | ||||||
The total current provision for income taxes for the three months ended September 30, 2013 is expense of $2.0 million, which is comprised of $0.6 million income tax benefit related to continuing operations and $2.6 million tax expense related to discontinued operations. The total current provision for income taxes for the three months ended September 30, 2012 is comprised of $0.7 million tax benefit related to continuing operations, with immaterial tax expense related to discontinued operations. For the nine months ended September 30, 2013, the total current provision for income taxes is $2.1 million, comprised of $0.4 million income tax benefit related to continuing operations and $2.5 million of income tax expense related to discontinued operations. For the nine months ended September 30, 2012, the total current provision for income taxes is $0.9 million, comprised of $1.4 million income tax expense related to continuing operations, offset by $0.5 million of income tax benefit related to discontinued operations. See Note 11 — Discontinued Operations, for further illustration of the tax expense/benefit related to discontinued operations. | ||||||||||||||
As of September 30, 2013, we had U.S. federal tax loss carryforwards of approximately $24.0 million and state tax loss carryforwards of approximately $44.0 million to offset future taxable income. The U.S. federal tax loss carryforwards expire in the years 2025 through 2032, while the state tax loss carryforwards expire in the years 2014 through 2032. As of September 30, 2013, we also had foreign tax loss carryforwards of approximately $9.0 million. The foreign tax loss carryforwards do not expire under current law. | ||||||||||||||
On a quarterly basis, we assess whether a valuation allowance for net operating loss carryforwards and other deferred tax assets is needed. Based on our third quarter 2013 assessment, we concluded that accounting rules require us to maintain a valuation allowance against our net U.S. tax assets. At September 30, 2013, the Company had a valuation allowance on approximately $10.6 million of U.S. deferred tax assets related to operating losses and $46.4 million of deferred tax assets related to other U.S. tax attributes. We also have a valuation allowance on all of our foreign net operating losses of approximately $2.3 million. Any future release of this valuation allowance will reduce expense. | ||||||||||||||
As of September 30, 2013, we had $11.1 million of unrecognized tax benefits, including related interest. Approximately $10.5 million of these unrecognized tax benefits would affect our effective tax rate if recognized. As of September 30, 2013, we had approximately $1.4 million of accrued interest related to uncertain tax positions. During the quarter, $1.2 million of unrecognized tax benefits were released due to the expiration of a statute of limitations. Due to the potential resolution of examinations currently being performed by taxing authorities and the expiration of various statutes of limitation, it is reasonably possible that the balance of our unrecognized tax benefits may change within the next twelve months by a range of zero to $9.0 million. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2013 | |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | ' |
8. COMMITMENTS AND CONTINGENCIES | |
Litigation | |
DDR Holdings, LLC (DDR) brought a claim against us and several other defendants regarding U.S. Patents Nos. 6,629,135 (“the ‘135 patent”), 6,993,572 (“the ‘572 patent”), and 7,818,399 (“the ‘399 Patent”), which are owned by DDR. These patents claim e-commerce outsourcing systems and methods relating to the provision of outsourced e-commerce support pages having a common look and feel with a host’s website. The case was filed in the U.S. District Court for the Eastern District of Texas on January 31, 2006 seeking injunctive relief, declaratory relief, damages and attorneys’ fees. We denied infringement of any valid claim of the patents-in-suit, and asserted counter-claims seeking a judicial declaration that the patents are invalid and not infringed. After a delay due to DDR’s request for re-examination of the ‘135 and ‘572 patents, Digital River and DDR concluded discovery and pre-trial depositions in August 2012. In pre-trial motions, DDR dropped its claims against Digital River with respect to the ‘135 and ‘399 patent. On October 12, 2012, the jury found in favor of the plaintiff on the infringement claim in connection with the ‘572 patent and awarded damages of $0.8 million (versus plaintiff’s demand of $10.2 million). On June 20, 2013, the court denied Digital River’s post-trial motions and entered judgment in the amount of $1.1 million (which amount includes pre-judgment interest), plus costs and post-judgment interest. Digital River has appealed. During the third quarter of 2012, initial full settlement of the awarded damages (exclusive of interest which may be awarded by the court) was accrued for on the “Other accrued liabilities” line of the Consolidated Balance Sheets and the “General and administrative” line of the Consolidated Statements of Operations. The accrued amount was adjusted to $1.1 million during the second quarter of 2013 to reflect the award of pre-judgment interest. In addition, on August 20, 2013, DDR filed a second lawsuit against DR, alleging both additional infringement of the ‘572 patent as well as a newly issued continuation patent, Patent No. 8,515,825 issued on August 20, 2013 (“the ‘825 patent”). While we intend to vigorously defend this matter, we cannot predict the timing or ultimate outcome, nor estimate a range of loss, if any, for this matter. | |
In December 2010, a lawsuit was filed against a number of software companies, including us, by Uniloc USA, Inc. and Uniloc Singapore Private Limited in the United States District Court for the Eastern District of Texas. The complaint seeks monetary damages in unspecified amounts and permanent injunction based upon claims for alleged patent infringement. We are at an early stage of this matter. While we intend to vigorously defend this matter, we cannot predict the timing or ultimate outcome, nor estimate a range of loss, if any, for this matter. | |
We are subject to legal proceedings, claims and litigation arising in the ordinary course of business. While the final outcome of these matters is currently not determinable, we believe there is no ordinary course litigation pending against us that is likely to have, individually or in the aggregate, a material effect on our consolidated financial position, results of operation, stockholders’ equity or cash flows. Because of the uncertainty inherent in litigation, it is possible that unfavorable resolutions of these lawsuits, proceedings and claims could exceed the amount we have currently reserved for these matters. | |
From time to time, we are involved in other disputes or regulatory inquiries that arise in the ordinary course of business. Any claims or regulatory actions against us, whether meritorious or not, could be time consuming, result in costly litigation, damage awards, injunctive relief or increased costs of doing business through adverse judgment or settlement, require us to change our business practices in expensive ways, require significant amounts of management time, result in the diversion of significant operational resources or otherwise harm our business. These matters are subject to inherent uncertainties and management’s view of these matters may change in the future. | |
Third parties have from time-to-time claimed, and others may claim in the future, that we have infringed their intellectual property rights. We have been notified of several potential patent disputes, and expect that we will increasingly be subject to patent infringement claims as our services expand in scope and complexity. We have in the past been forced to litigate such claims. We may also become more vulnerable to third-party claims as laws, such as those related to privacy and online commerce the Digital Millennium Copyright Act, the Lanham Act and the Communications Decency Act are enacted by legislatures and interpreted by the courts, and as we expand geographically into jurisdictions where the underlying laws with respect to the potential liability of online intermediaries like ourselves are either unclear or less favorable. These claims, whether meritorious or not, could be time consuming and costly to resolve, cause service upgrade delays, require expensive changes in our methods of doing business, or could require us to pay damages or enter into costly royalty or licensing agreements. | |
Indemnification Provisions | |
In the ordinary course of business we have included limited indemnification provisions in certain of our agreements with parties with whom we have commercial relations. Under these contracts, we generally indemnify, hold harmless and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with claims by any third party with respect to our domain names, trademarks, logos and other branding elements to the extent that such marks are applicable to our performance under the subject agreement. In certain agreements, including both agreements under which we have developed technology for certain commercial parties and agreements with our clients, we have provided an indemnity for other types of third-party claims. To date, no significant costs have been incurred, either individually or collectively, in connection with our indemnification provisions. | |
In addition, we are required by our credit card processors to comply with credit card association operating rules, and we have agreed to indemnify our processors for any fines they are assessed by credit card associations as a result of processing payments for us. The credit card associations and their member banks set and interpret the credit card rules. Visa, MasterCard, American Express or Discover could adopt new operating rules or re-interpret existing rules that we or our credit card processors might find difficult to follow. We also could be subject to fines or increased fees from MasterCard and Visa. | |
Commitments and Guarantees | |
At certain times, we enter into agreements where a letter of credit is required to ensure payment of future obligations by counterparties, such as our credit card processors and international taxing jurisdictions. Upon withdrawal, we are obligated to fund the executor bank on demand. We have not set aside specific funds to cover this potential obligation as we can generally recover these costs from our clients. If drawn upon, we expect to fund this commitment with cash and cash equivalents. There were $0.5 million and $3.6 million in undrawn letters of credit as of September 30, 2013 and December 31, 2012, respectively. |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2013 | |
DEBT | ' |
DEBT | ' |
9. DEBT | |
2010 Senior Convertible Notes | |
On November 1, 2010, we sold and issued $345.0 million in aggregate principal amount of senior convertible notes (2010 Notes), in a private, unregistered offering. The 2010 Notes are unsecured obligations and rank equally with all of our existing and future senior unsecured debt. The 2010 Notes were sold at their total principal amount. The 2010 Notes bear interest at the rate of 2.00% per annum from the date of issuance, payable semi-annually on May 1 and November 1, commencing on May 1, 2011. The 2010 Notes will mature, unless earlier repurchased, redeemed or converted in accordance with their terms, on November 1, 2030. | |
We began repurchasing our 2010 senior convertible notes in the open market in the fourth quarter of 2012. No repurchases were made in the three months ended September 30, 2013. For the nine months ended September 30, 2013, we repurchased $5.4 million of the 2010 Notes in the open market at an average price of 98.8% of par. For the nine months ended September 30, 2013, the net gain on extinguishment of debt was immaterial, which is the net of the gain on sale offset by the write-off of debt issuance costs. As of December 31, 2012, we repurchased $43.9 million of the 2010 Notes in the open market at an average price of 98.5% of par. Notes repurchased are deemed to be extinguished for accounting purposes. | |
Holders have the right to convert some or all of the 2010 Notes at any time prior to the maturity date into shares of our common stock at the initial conversion rate of 20.3537 shares per $1,000 in principal amount of the 2010 Notes, which is equal to an initial conversion price of approximately $49.13 per share. At the initial conversion rate, assuming the conversion of all $295.8 million in aggregate principal amount, the 2010 Notes may be converted into approximately 6,019,607 shares of our common stock. We will adjust the conversion price if certain events occur, as specified in the related indenture, such as the issuance of our common stock as a dividend or distribution or the occurrence of a stock subdivision or combination. If we undergo certain types of fundamental changes, as defined in the indenture, on or before November 1, 2015, we will be required to pay a fundamental change make-whole premium on 2010 Notes converted in connection with such make-whole fundamental change by increasing the conversion rate. The amount of the fundamental change make-whole premium, if any, will be based on our common stock price and the effective date of the make-whole fundamental change. | |
At any time on or after November 1, 2015, and prior to the maturity date, we may redeem for cash some or all of the 2010 Notes at a redemption price equal to the principal amount of the 2010 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. | |
Holders have the right to require us to repurchase some or all of their 2010 Notes for cash on each of November 1, 2015, November 1, 2020 and November 1, 2025, at a repurchase price equal to the principal amount of the 2010 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date. If we undergo certain types of fundamental changes prior to the maturity date, holders of the 2010 Notes will have the right, at their option, to require us to repurchase some or all of their 2010 Notes at a repurchase price equal to the principal amount of the 2010 Notes being repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date. | |
As of September 30, 2013, the fair value of our $295.8 million 2010 senior convertible notes was valued at $294.3 million based on the quoted fair market value of the debt. As of December 31, 2012, the fair value of our $301.1 million 2010 senior convertible notes was valued at $285.3 million based on the quoted fair market value of the debt. Debt is classified as a level 3 fair value measurement. We determine fair value based on the market approach. | |
2004 Senior Convertible Notes | |
In 2004, we sold and issued $195.0 million in aggregate principal amount of 1.25% senior convertible notes due January 1, 2024 (2004 Notes), in a private, unregistered offering. The 2004 Notes were sold at their principal amount. On January 5, 2009, we announced that the majority of the holders of the 2004 Notes exercised the option to require us to repurchase those Notes on January 2, 2009. Notes with an aggregate principal amount of approximately $8.8 million remain outstanding. Holders of the remaining outstanding 2004 Notes have the right to require us to repurchase their 2004 Notes prior to maturity on January 1, 2014 and 2019. Due to the repurchase right on January 1, 2014, the aggregate principle balance of the 2004 Notes is classified within “Other current liabilities” in the September 30, 2013, balance sheet. The 2004 Notes are classified within “Senior convertible notes” in non-current liabilities at December 31, 2012. | |
We are required to pay interest on the 2004 Notes on January 1 and July 1 of each year so long as the 2004 Notes are outstanding. The 2004 Notes bear interest at a rate of 1.25% and, if specified conditions are met, are convertible into our common stock at a conversion price of $44.063 per share. At the initial conversion rate, assuming the conversion of our $8.8 million in remaining principal debt, the 2004 Notes may be converted into approximately 199,828 shares of our common stock. The 2004 Notes may be surrendered for conversion under certain circumstances, including the satisfaction of a market price condition, such that the price of our common stock reaches a specified threshold; the satisfaction of a trading price condition, such that the trading price of the 2004 Notes falls below a specified level; the redemption of the 2004 Notes by us, the occurrence of specified corporate transactions, as defined in the related indenture; and the occurrence of a fundamental change, as defined in the related indenture. The initial conversion price is equivalent to a conversion rate of approximately 22.6948 shares per $1,000 of principal amount of the 2004 Notes. We will adjust the conversion price if certain events occur, as specified in the related indenture, such as the issuance of our common stock as a dividend or distribution or the occurrence of a stock subdivision or combination. | |
As of September 30, 2013 and December 31, 2012, the fair value of our $8.8 million 1.25% 2004 senior convertible notes was valued at $8.7 million and $8.6 million, respectively, based on the quoted fair market value of the debt. Debt is classified as a level 3 fair value measurement. We determine fair value based on the market approach. |
BUSINESS_COMBINATIONS
BUSINESS COMBINATIONS | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
BUSINESS COMBINATIONS | ' | |||||||||||||
BUSINESS COMBINATIONS | ' | |||||||||||||
10. BUSINESS COMBINATIONS | ||||||||||||||
On January 10, 2013 we acquired 100% of the capital stock of LML Payment Systems, Inc., a publically held payment service provider with operations in Victoria, British Columbia in an all cash transaction valued at $3.45 per share, or an aggregate purchase price of approximately $102.8 million. Acquisition and integration costs of $0.1 million and $4.9 million were expensed as incurred, and were recorded in the line item General and administrative on our Consolidated Statements of Operations for the three and nine months ended September 30, 2013, respectively. LML is a leading provider of payment processing services to the Canadian small and medium sized business market. This acquisition was made to broaden our online payments services to businesses of all sizes. The goodwill arising from the transaction consists primarily of synergies due the existence of an assembled workforce and synergies expected to be gained when combining the complimentary Digital River and LML business models. None of the goodwill recognized is expected to be deductible for income tax purposes. | ||||||||||||||
For the three months ended September 30, 2013, LML revenue was $5.8 million and net loss was $1.3 million. LML revenue for the period starting as of the acquisition date of January 10, 2013, and ending on September 30, 2013, was $18.0 million. LML net loss for the period starting as of the acquisition date of January 10, 2013, and ending on September 30, 2013, was $0.7 million. | ||||||||||||||
The preliminary allocation of the purchase price for the LML acquisition has been assigned to assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair value of assets acquired and liabilities assumed was based upon a preliminary valuation and our estimates and assumptions are subject to change within the measurement period. During the three months ended September 30, 2013, the acquisition date fair value of other liabilities was decreased $0.5 million, due primarily to an adjustment to the opening balance of deferred revenue, which resulted in a corresponding increase in deferred tax liabilities of $0.1 million and a decrease in residual goodwill of $0.4 million. The resolution of various tax matters in the opening balance sheet resulted in an additional increase in deferred tax liabilities of $0.4 million with a corresponding increase in goodwill of $0.4 million. During the three months ended June 30, 2013, the acquisition date fair value of intangible assets was increased $2.6 million, which resulted in a corresponding increase in deferred tax liabilities of $0.6 million and a decrease in residual goodwill of $2.0 million. The remaining areas of the purchase price that are not yet finalized as of September 30, 2013 are related to accounts receivable, other assets, income taxes, deferred tax accounts, other liabilities and residual goodwill. | ||||||||||||||
The preliminary allocation of the purchase price is summarized in the following table (in thousands): | ||||||||||||||
LML Payment | ||||||||||||||
Systems, Inc. | ||||||||||||||
Cash and cash equivalents | $ | 46,957 | ||||||||||||
Accounts receivable | 1,334 | |||||||||||||
Receivable of acquisition expenses incurred on behalf of Digital River | 1,068 | |||||||||||||
Customer and partner relationships | 23,230 | |||||||||||||
Trade names | 3,567 | |||||||||||||
Other intangibles | 1,185 | |||||||||||||
Goodwill | 54,287 | |||||||||||||
Other assets | 4,757 | |||||||||||||
Total assets acquired | 136,385 | |||||||||||||
Other liabilities | 33,585 | |||||||||||||
Total liabilities assumed | 33,585 | |||||||||||||
Total allocation of purchase price consideration | 102,800 | |||||||||||||
Less: cash acquired | (46,957 | ) | ||||||||||||
Total purchase price, net of cash acquired | $ | 55,843 | ||||||||||||
For the LML acquisition, customer and partner relationships have a weighted average useful life of 5.0 years, trade names have a weighted average useful life of 5.0 years and other intangibles have a weighted average useful life of 4.8 years. | ||||||||||||||
Information regarding our intangible assets acquired from the LML acquisition is as follows (in thousands): | ||||||||||||||
As of September 30, 2013 | ||||||||||||||
Carrying Amount | Accumulated | Carrying Amount | ||||||||||||
Gross | Amortization | Net | ||||||||||||
Customer and partner relationships | $ | 23,230 | 3,387 | 19,843 | ||||||||||
Trade names | 3,567 | 520 | 3,047 | |||||||||||
Other intangibles | 1,185 | 205 | 980 | |||||||||||
Total | $ | 27,982 | $ | 4,112 | $ | 23,870 | ||||||||
Amortization expense of LML acquisition-related intangible assets was $1.4 million and $4.1 million for the three and nine months ended September 30, 2013 respectively. | ||||||||||||||
Estimated amortization expense for the remaining life of the LML intangible assets, based on intangible assets as of September 30, 2013, is as follows (in thousands): | ||||||||||||||
Year | ||||||||||||||
Remainder of 2013 | $ | 1,418 | ||||||||||||
2014 | 5,613 | |||||||||||||
2015 | 5,613 | |||||||||||||
2016 | 5,613 | |||||||||||||
2017 | 5,613 | |||||||||||||
Total | $ | 23,870 | ||||||||||||
Pro Forma Operating Results (Unaudited) | ||||||||||||||
The unaudited pro forma financial information in the table below summarizes the combined results of operations for Digital River, Inc. and LML. The consolidated financial statements include the operating results of LML from the date of acquisition. | ||||||||||||||
The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the transaction, are factually supportable and, in the case of the pro forma results of operations, have a nonrecurring impact. For the three and nine months ended September 30, 2012, the pro forma results include adjustments primarily related to amortization of acquired intangible assets of $1.4 million and $4.1 million, respectively, less elimination of LML historical intangible amortization expense of $0.2 million and $0.5 million, respectively, and income taxes benefit of $0.3 million and $0.9 million, respectively. The following unaudited pro forma condensed results of operations for three and nine months ended September 30, 2012 and 2013, have been prepared as if the LML acquisition had occurred on January 1, 2012, (in thousands): | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Revenue | $ | 87,260 | $ | 92,815 | $ | 289,366 | $ | 294,321 | ||||||
Net income (loss) | (12,487 | ) | (1,314 | ) | (24,432 | ) | 4,307 | |||||||
This pro forma financial information does not purport to represent results that would actually have been obtained if the transactions had been in effect on January 1, 2012, as applicable, or any future results that may be realized. | ||||||||||||||
All other business combination activities have been determined to be immaterial when compared to our consolidated financial statements. |
DISCONTINUED_OPERATIONS
DISCONTINUED OPERATIONS | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
DISCONTINUED OPERATIONS | ' | |||||||||||||
DISCONTINUED OPERATIONS | ' | |||||||||||||
11. DISCONTINUED OPERATIONS | ||||||||||||||
On September 30, 2013, we sold substantially all of the net assets of CustomCD, Inc., which was based in Portland, Oregon in a stock sale to a former employee. We have recorded a pre-tax loss on the sale of $0.1 million within “Income (loss) from discontinued operations, net of tax” in our Consolidated Statements of Operations. The results of operations of CustomCD, including the loss on the sale, have been excluded from the results of continuing operations and are reported as discontinued operations. | ||||||||||||||
On October 1, 2013, we sold substantially all of the net assets of Digital River Education Services, Inc., which was based in Plano, Texas in a stock sale to two former employees. We have determined that the criteria for reporting the assets and liabilities of DRES as held for sale, and the results of their operations, including the loss on the sale, as discontinued operations was met as of September 30, 2013. We have recorded a pre-tax loss on the sale of $2.0 million within “Income (loss) from discontinued operations, net of tax” in our Consolidated Statements of Operations. | ||||||||||||||
We do not allocate interest income or interest expense to discontinued operations. The operating results of the discontinued operations included in the our Consolidated Statements of Operations for the three and nine month periods ended September 30, 2013 and 2012 were as follows (in thousands): | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Revenue | $ | 3,064 | $ | 4,614 | $ | 8,044 | $ | 12,510 | ||||||
Income (loss) on discontinued operations before taxes and loss on disposal | (99 | ) | 4 | (1,619 | ) | (1,466 | ) | |||||||
Loss on disposal of discontinued businesses before taxes | (2,110 | ) | — | (2,110 | ) | — | ||||||||
Provision (benefit) for income taxes | 2,682 | 3 | 2,509 | (539 | ) | |||||||||
Income (loss) on discontinued operations, net of tax | $ | (4,891 | ) | $ | 1 | $ | (6,238 | ) | $ | (927 | ) | |||
The assets and liabilities of discontinued operations as of September 30, 2013 and December 31, 2012 were as follows (in thousands): | ||||||||||||||
September 30, | December 31, | |||||||||||||
2013 | 2012 | |||||||||||||
Current assets of discontinued operations | $ | 6,584 | $ | 7,365 | ||||||||||
Long-term assets of discontinued operations | — | 196 | ||||||||||||
Total assets of discontinued operations | $ | 6,584 | $ | 7,561 | ||||||||||
Current liabilities of discontinued operations | $ | 7,291 | $ | 5,753 | ||||||||||
Non-current liabilities of discontinued operations | — | 0 | ||||||||||||
Total liabilities of discontinued operations | $ | 7,291 | $ | 5,753 |
SUBSEQUENT_EVENT
SUBSEQUENT EVENT | 9 Months Ended |
Sep. 30, 2013 | |
SUBSEQUENT EVENT | ' |
SUBSEQUENT EVENT | ' |
12. SUBSEQUENT EVENT | |
Subsequent to the quarter ended September 30, 3013, we reduced our workforce by 7% as part of our strategic transformation. Total severance and outplacement costs are expected to be $1.9 million, which will be recognized starting in the fourth quarter of 2013 when all of the criteria for one-time employee termination benefits under ASC 420 are met. |
BASIS_OF_PRESENTATION_Policies
BASIS OF PRESENTATION (Policies) | 9 Months Ended | ||||||||||
Sep. 30, 2013 | |||||||||||
BASIS OF PRESENTATION | ' | ||||||||||
Revenue | ' | ||||||||||
Revenue | |||||||||||
Revenue Recognition. We recognize revenue from services rendered once all the following criteria for revenue recognition have been met: (1) persuasive evidence of an agreement exists; (2) the services have been rendered; (3) the fee is fixed and determinable; and, (4) collection of the amounts due is reasonably assured. | |||||||||||
We also determine whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as net revenue. We typically are the seller and merchant of record on most of the transactions we process and have contractual relationships with our clients, which obligate us to pay to the client a specified percentage of each sale. We derive our revenue primarily from transaction fees based on a percentage of the product’s sale price and fees from services rendered associated with the e-commerce and other services provided to our clients and end customers. Our revenue is recorded net as generally our clients are subject to inventory risks and control customers’ product choices. We sell both physical and digital products. Revenue is recognized upon fulfillment and based upon when products are shipped and title and significant risk of ownership passes to the customer. | |||||||||||
Our payment processing revenues are derived from one-time set-up fees, monthly gateway fees, and transaction fees paid to us by merchants. Transaction fees are recognized in the period in which the transaction occurs. Gateway fees are monthly subscription fees charged to our merchant customers for the use of our payment processor integrations and are recognized in the period in which the service is provided. Set-up fees represent one-time charges for initiating our processing services. Although these fees are generally paid at the commencement of the agreement, they are recognized ratably over the estimated average life of the merchant relationship. | |||||||||||
The Company also provides customers with various proprietary software backup services. We recognize revenue for these backup services based upon historical usage within the contract period of the digital backup services when this information is available. Digital backup services are recognized straight-line over the life of the backup service when historical usage information is unavailable. Shipping revenues are recorded net of any associated costs. | |||||||||||
We also, to a lesser extent, provide fee-based client services, which include website design, custom development and integration, analytical marketing, affiliate marketing and email marketing services. If we receive payments for fee-based services in advance of delivery, these amounts, if significant, are deferred and recognized over the service period. | |||||||||||
Client service arrangements can have multiple deliverables such as delivery of website design or administrative site set up activities in connection with hosted reseller arrangements. These deliverables do not meet the criteria of separate units of accounting under GAAP. We account for these deliverables as one unit of accounting, as they generally only have value to the client during the time the hosted commerce site launches and commerce transactions occur. Therefore, associated revenue is recorded over the term of the hosting contract. Client services are executed through signed contractual agreements. Accordingly, our fees are fixed and determinable upon the execution of the agreement. | |||||||||||
Provisions for doubtful accounts and transaction losses and authorized credits are made at the time of revenue recognition based upon our historical experience. The provision for doubtful accounts and transaction losses are recorded as charges to operating expense, while the provision for authorized credits is recognized as a reduction of net revenues. | |||||||||||
Taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer may be presented on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues). The Company presents these taxes on a net basis in its financial statements. | |||||||||||
Restricted Cash | ' | ||||||||||
Restricted Cash | |||||||||||
Restricted cash consists of cash and cash equivalents that are held in escrow accounts or restricted by agreements with third parties for a particular purpose. Restricted cash and cash equivalents are included in current assets under “Prepaid expenses and other” on our Consolidated Balance Sheets, and are recorded at fair value. As of September 30, 2013 and December 31, 2012, we had $3.8 million and $0.4 million of restricted cash, respectively. | |||||||||||
Prepaid Expenses and Other | ' | ||||||||||
Prepaid Expenses and Other | |||||||||||
Prepaid expenses and other are largely comprised of prepaid expenses, restricted cash, inventory, other current assets and value added tax assets. In the second quarter of 2012, $0.6 million was lent through a short-term promissory note to another company and recorded on the “Prepaid expenses and other” line of the Consolidated Balance Sheets. During the third quarter of 2012, collection of the note was deemed unlikely and a $0.6 million reserve was recorded against the note. | |||||||||||
Software Development | ' | ||||||||||
Software Development | |||||||||||
Costs to develop software for internal use are required to be capitalized and amortized over the estimated useful life of the software. For the three months ended September 30, 2013 and 2012, we capitalized $0.5 million and $1.5 million related to software development, respectively. For the nine months ended September 30, 2013 and 2012, we capitalized $1.5 million and $4.3 million related to software development, respectively. This capitalization is primarily related to the development of our new commerce functionality and platform enhancements. | |||||||||||
Goodwill | ' | ||||||||||
Goodwill | |||||||||||
We complete our goodwill impairment analysis on an annual basis or more frequently if events or circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying amount. As we only have one operating segment, goodwill is evaluated based on a single reporting unit. During the third quarter of 2013, as part of the sales of CustomCD, Inc. (CustomCD) and Digital River Education Services, Inc. (DRES), we allocated $0.3 million of goodwill from our single reporting unit to these entities, which was written-off and included in the computation of the loss on disposal of discontinued businesses as of September 30, 2013. Due to the sales of these entities, we were required to evaluate if the remaining goodwill in our single reporting unit is impaired. Based on our evaluation, we determined that no impairment exists on the remaining balance of goodwill in our single reporting unit as of September 30, 2013. See Note 11 — Discontinued Operations, for further discussion of the sales of CustomCD and DRES. | |||||||||||
In December 2012, due to the deterioration in our stock price in the second half of 2012, adjustments in our forecasted revenue growth and change in our chief operating decision maker, management completed an interim impairment test and determined that the book value of the Company was in excess of fair value and a goodwill impairment was required. In the fourth quarter 2012, we recorded a non-cash pretax goodwill impairment charge of $175.2 million, or $161.1 million after tax, relating to our single reporting unit. The impairment charge was an estimate pending final valuation of a privately held equity security in calculating the goodwill impairment charge of $175.2 million. | |||||||||||
During the first quarter of 2013, we determined the fair market value of the privately held equity security, which we had estimated at year end, and completed our goodwill impairment analysis. As a result of our analysis we recorded an additional non-cash pretax goodwill impairment charge of $21.2 million relating to our single reporting unit. These goodwill charges are included as a separate operating expense line item, “Goodwill impairment” within Continuing Operations in our Consolidated Statements of Operations. The tax benefit was offset by our current period tax valuation allowance. A blended income and market approach was used to determine the fair value of our sole reporting unit and associated impairment charges. The application of goodwill impairment tests requires management judgment for many of the inputs. Key assumptions included in the impairment test included our revenue growth rate, discount rate assumptions, and estimates of our future cash flows. Changes in these estimates could result in additional impairment of goodwill in a future period. The impairment charge reflects our view of anticipated risks based on our expectations of market and general economic conditions. See Note 5 — Goodwill for further details. | |||||||||||
Comprehensive Income (Loss) | ' | ||||||||||
Comprehensive Income (Loss) | |||||||||||
Comprehensive income (loss) includes revenues, expenses, and gains and losses that are excluded from net earnings under GAAP. Items of comprehensive income (loss) are unrealized gains and losses on investments and foreign currency translation adjustments which are added to net income (loss) to compute comprehensive income (loss). Comprehensive income (loss) is net of income tax benefit or expense, excluding cumulative translation adjustments as these funds are indefinitely invested. | |||||||||||
The following table summarizes the changes in accumulated other comprehensive income (loss), net of tax, by component for the nine months ended September 30, 2013 (in thousands): | |||||||||||
Foreign currency | Unrealized gain | Total | |||||||||
translation | (loss) on | ||||||||||
adjustment | investments | ||||||||||
Balance as of December 31, 2012 | $ | 2,565 | $ | (5,735 | ) | $ | (3,170 | ) | |||
Other comprehensive income before reclassifications | 524 | 3,385 | 3,909 | ||||||||
Amount reclassified from accumulated other comprehensive income (loss) | — | 4 | 4 | ||||||||
Net current period other comprehensive income (loss) | 524 | 3,389 | 3,913 | ||||||||
Balance as of September 30, 2013 | $ | 3,089 | $ | (2,346 | ) | $ | 743 | ||||
Reclassifications out of accumulated other comprehensive income (loss), net of tax, were immaterial for the three months ended September 30, 2013. The following table summarizes the reclassifications out of accumulated other comprehensive income (loss), net of tax, for the nine months ended September 30, 2013 (in thousands): | |||||||||||
Details about accumulated other comprehensive | Amount reclassified | Affected line item in the | |||||||||
income components | from accumulated other | Consolidated Statement of | |||||||||
comprehensive income | Operations | ||||||||||
Realized gains (losses) on investments | |||||||||||
$ | 6 | Other income (expense), net | |||||||||
(2 | ) | Income tax benefit (expense) | |||||||||
$ | 4 | Net income (loss) | |||||||||
Foreign Currency Translation | ' | ||||||||||
Foreign Currency Translation | |||||||||||
Substantially all of our foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets and liabilities are translated at exchange rates prevailing at the balance sheet dates. Revenues, costs and expenses are translated at the average exchange rates for the reported period. Gains and losses resulting from translation are recorded as a component of “Accumulated other comprehensive income (loss)” within stockholders’ equity. Gains and losses resulting from foreign currency transactions are recognized as “Other income (expense), net”. | |||||||||||
We are exposed to market risk from changes in foreign currency exchange rates. Our primary risk is the effect of foreign currency exchange rate fluctuations on the U.S. dollar value of foreign currency denominated operating sales and expenses. We are also exposed to financial risk related to exchange rate translation losses (or gains) associated with economic interests that are denominated in a foreign currency. The risk of translation losses due to foreign exchange volatility is partially mitigated by the use of foreign exchange forward contracts with maturities of less than three months. These derivative transactions are not designated as hedges and are adjusted to fair value each period through “Other income (expense), net” in our Consolidated Statements of Operations. The principal exposures mitigated were euro, Australian dollar, British pound, Canadian dollar, Danish krone and Japanese yen currencies. For the three and nine months ended September 30, 2013 and 2012, the gain/loss on derivative settlements was immaterial. The notional amounts held at period end and the underlying gain/loss were determined to be immaterial when compared to our overall cash and cash equivalents and the net income (loss) reported for the respective periods. | |||||||||||
Our foreign currency contracts contain credit risk to the extent that our bank counterparties may be unable to meet the terms of the agreements. We minimize such risk by limiting our counterparties to major financial institutions of high credit quality. | |||||||||||
Recent Accounting Pronouncements | ' | ||||||||||
Recent Accounting Pronouncements | |||||||||||
ASU 2013-11 - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists: In July 2013, the FASB issued ASU 2013-11, which requires an entity to present unrecognized tax benefits as a reduction of the deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, if net settlement is required or expected. To the extent that net settlement is not required or expected, the unrecognized tax benefit must be presented as a liability. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. ASU No. 2013-11 is effective for reporting periods beginning after December 15, 2013, and should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Because this standard only affects the presentation of unrecognized tax benefits and not the measurement of an unrecognized tax benefit, we do not expect this standard to have a material impact on our Consolidated Financial Statements. | |||||||||||
ASU 2013-02 — Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income: In February 2013, the FASB issued ASU 2013-02, which required entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either in the financial statements or footnotes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. ASU 2013-02 is effective prospectively for fiscal periods beginning after December 15, 2012. We have adopted the new guidance in ASU 2013-02 as of the period ended March 31, 2013, and its adoption did not have a material impact on our Consolidated Financial Statements. | |||||||||||
We have determined that all other recently issued accounting standards will not have a material impact on our Consolidated Financial Statements, or do not apply to our operations. | |||||||||||
Reclassifications | ' | ||||||||||
Reclassifications | |||||||||||
The results of the operations of CustomCD and DRES have been classified within Discontinued Operations within our Consolidated Statements of Operations for the three and nine month periods ending September 30, 2013. The operations of these entities in the corresponding periods of 2012 have been reclassified into Discontinued Operations for comparative purposes to conform to the current year presentation. In addition, all of the assets and liabilities of DRES, which was sold on October 1, 2013, meet the criteria for assets held for sale as of September 30, 2013, and are separately reported as current assets, at fair value, and current liabilities of discontinued operations within the Consolidated Balance Sheet at September 30, 2013. The assets and liabilities of CustomCD have been removed from our Consolidated Balance Sheet as of September 30, 2013, as the entity was sold on September 30, 2013. The assets and liabilities of both CustomCD and DRES in the December 31, 2012 Consolidated Balance Sheet have been reclassified and separately presented as current assets and current liabilities of discontinued operations for comparative purposes with the current year presentation. | |||||||||||
Certain items in the prior year’s Consolidated Statements of Operations have been reclassified for comparative purposes to conform to the current year presentation. Historically, we have reported payment processing fees, chargebacks, and directly related personnel expenses within the “Sales and marketing” and “General and administrative” line items. We have reclassified these expenses to the “Direct cost of services” line as these costs are associated directly with services rendered. For the three and nine months ended September 30, 2012, excluding amounts related to CustomCD and DRES which have been reclassified to discontinued operations, we have reclassified $12.8 million and $39.3 million, respectively, previously reported as “Sales and marketing” and $0.4 million and $1.4 million, respectively, previously reported as “General and administrative” to “Direct cost of services”. The reclassifications did not have an effect on reported consolidated net income (loss). |
BASIS_OF_PRESENTATION_Tables
BASIS OF PRESENTATION (Tables) | 9 Months Ended | ||||||||||
Sep. 30, 2013 | |||||||||||
BASIS OF PRESENTATION | ' | ||||||||||
Summary of changes in accumulated other comprehensive income (loss), net of tax | ' | ||||||||||
The following table summarizes the changes in accumulated other comprehensive income (loss), net of tax, by component for the nine months ended September 30, 2013 (in thousands): | |||||||||||
Foreign currency | Unrealized gain | Total | |||||||||
translation | (loss) on | ||||||||||
adjustment | investments | ||||||||||
Balance as of December 31, 2012 | $ | 2,565 | $ | (5,735 | ) | $ | (3,170 | ) | |||
Other comprehensive income before reclassifications | 524 | 3,385 | 3,909 | ||||||||
Amount reclassified from accumulated other comprehensive income (loss) | — | 4 | 4 | ||||||||
Net current period other comprehensive income (loss) | 524 | 3,389 | 3,913 | ||||||||
Balance as of September 30, 2013 | $ | 3,089 | $ | (2,346 | ) | $ | 743 | ||||
Summary of reclassifications out of accumulated other comprehensive income (loss), net of tax | ' | ||||||||||
The following table summarizes the reclassifications out of accumulated other comprehensive income (loss), net of tax, for the nine months ended September 30, 2013 (in thousands): | |||||||||||
Details about accumulated other comprehensive | Amount reclassified | Affected line item in the | |||||||||
income components | from accumulated other | Consolidated Statement of | |||||||||
comprehensive income | Operations | ||||||||||
Realized gains (losses) on investments | |||||||||||
$ | 6 | Other income (expense), net | |||||||||
(2 | ) | Income tax benefit (expense) | |||||||||
$ | 4 | Net income (loss) |
NET_INCOME_LOSS_PER_SHARE_Tabl
NET INCOME (LOSS) PER SHARE (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
NET INCOME (LOSS) PER SHARE | ' | |||||||||||||
Summary of the computation of basic and diluted income (loss) from continuing operations per share | ' | |||||||||||||
The following table summarizes the computation of basic and diluted income (loss) from continuing operations per share (in thousands, except per share amounts): | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Income (loss) from continuing operations per share - basic | ||||||||||||||
Income (loss) from continuing operations - basic | $ | (7,596 | ) | $ | (735 | ) | $ | (18,486 | ) | $ | 5,130 | |||
Weighted average shares outstanding - basic | 31,487 | 32,685 | 32,435 | 33,347 | ||||||||||
Income (loss) from continuing operations per share - basic | $ | (0.24 | ) | $ | (0.02 | ) | $ | (0.57 | ) | $ | 0.16 | |||
Income (loss) from continuing operations per share - diluted | ||||||||||||||
Income (loss) from continuing operations - basic | $ | (7,596 | ) | $ | (735 | ) | $ | (18,486 | ) | $ | 5,130 | |||
Exclude: Interest expense and amortized financing cost of convertible senior notes, net of tax benefit | — | — | — | — | ||||||||||
Income (loss) from continuing operations - diluted | $ | (7,596 | ) | $ | (735 | ) | $ | (18,486 | ) | $ | 5,130 | |||
Weighted average shares outstanding - basic | 31,487 | 32,685 | 32,435 | 33,347 | ||||||||||
Dilutive impact of non-vested stock and options outstanding | — | — | — | 232 | ||||||||||
Dilutive impact of 2004 senior convertible notes | — | — | — | — | ||||||||||
Weighted average shares outstanding - diluted | 31,487 | 32,685 | 32,435 | 33,579 | ||||||||||
Income (loss) from continuing operations per share - diluted | $ | (0.24 | ) | $ | (0.02 | ) | $ | (0.57 | ) | $ | 0.16 |
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||
Financial Assets Accounted for at Fair Value on Recurring Basis | ' | |||||||||||||
The following table sets forth by level within the fair value hierarchy, our financial assets that were accounted for at fair value on a recurring basis at September 30, 2013 and December 31, 2012, (in thousands), | ||||||||||||||
Fair Value Measurements | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Balance as of September 30, 2013 | ||||||||||||||
Cash and cash equivalents | $ | 458,062 | $ | 458,062 | $ | — | $ | — | ||||||
Restricted cash | 3,832 | 3,832 | — | — | ||||||||||
U.S. government sponsored entities | 7,994 | — | 7,994 | — | ||||||||||
Corporate bonds | 114,704 | 114,704 | — | — | ||||||||||
Market basis equity investments | 2,146 | 2,146 | — | — | ||||||||||
Auction rate securities | 40,184 | — | — | 40,184 | ||||||||||
Total assets measured at fair value | $ | 626,922 | $ | 578,744 | $ | 7,994 | $ | 40,184 | ||||||
Balance as of December 31, 2012 | ||||||||||||||
Cash and cash equivalents | $ | 542,851 | $ | 542,851 | $ | — | $ | — | ||||||
Restricted cash | 351 | 351 | — | — | ||||||||||
U.S. government sponsored entities | 28,110 | — | 28,110 | — | ||||||||||
Corporate bonds | 128,622 | 128,622 | — | — | ||||||||||
Asset-backed securities | 6,062 | — | 6,062 | — | ||||||||||
Market basis equity investments | 1,694 | 1,694 | — | — | ||||||||||
Auction rate securities | 37,001 | — | — | 37,001 | ||||||||||
Total assets measured at fair value | $ | 744,691 | $ | 673,518 | $ | 34,172 | $ | 37,001 | ||||||
Reconciliation of Assets Measured at Fair Value on Recurring Basis using Significant Unobservable Inputs (Level 3 Inputs) | ' | |||||||||||||
The following table is a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 inputs) (in thousands): | ||||||||||||||
Fair Value Measurements Using | ||||||||||||||
Significant Unobservable Inputs | ||||||||||||||
(Level 3) | ||||||||||||||
Auction rate securities | ||||||||||||||
Balance as of December 31, 2011 | $ | 65,338 | ||||||||||||
Total unrealized gains (losses) included in other comprehensive income | (2,637 | ) | ||||||||||||
Purchases | — | |||||||||||||
Issuances | — | |||||||||||||
Settlements | (25,700 | ) | ||||||||||||
Transfers in and/or out of Level 3 | — | |||||||||||||
Balance as of December 31, 2012 | $ | 37,001 | ||||||||||||
Total unrealized gains (losses) included in other comprehensive income | 3,283 | |||||||||||||
Purchases | — | |||||||||||||
Issuances | — | |||||||||||||
Settlements | (100 | ) | ||||||||||||
Transfers in and/or out of Level 3 | — | |||||||||||||
Balance as of September 30, 2013 | $ | 40,184 | ||||||||||||
Discounted Cash Flow Model Assumptions used to Value Securities | ' | |||||||||||||
September 30, | December 31, | |||||||||||||
2013 | 2012 | |||||||||||||
Unobservable inputs | ||||||||||||||
Redemption period (in years) | 7 | 7 | ||||||||||||
Credit ratings | BB+ to AAA | BB+ to AAA | ||||||||||||
Penalty coupon rate | 1.0% to 1.5% | 1.0% to 1.5% | ||||||||||||
Weighted average annualized yield | 1.20% | 1.50% | ||||||||||||
Risk adjusted discount rate | 4.4% to 10.2% | 3.5% to 12.3% |
INVESTMENTS_Tables
INVESTMENTS (Tables) | 9 Months Ended | ||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||
INVESTMENTS | ' | ||||||||||||||||||||||
Schedule of components of available-for-sale securities | ' | ||||||||||||||||||||||
As of September 30, 2013 and December 31, 2012, our available-for-sale securities consisted of the following (in thousands): | |||||||||||||||||||||||
Gross Unrealized Losses | Maturities/Reset Dates | ||||||||||||||||||||||
Gross Unrealized | Less than 12 | Greater than 12 | Less than 12 | Greater than 12 | |||||||||||||||||||
Cost | Gains | Months | Months | Fair Value | Months | Months | |||||||||||||||||
Balance as of September 30, 2013 | |||||||||||||||||||||||
U.S. government sponsored entities | $ | 8,000 | $ | — | $ | (6 | ) | $ | — | $ | 7,994 | $ | 4,000 | $ | 3,994 | ||||||||
Corporate bonds | 114,402 | 337 | (35 | ) | — | 114,704 | 59,699 | 55,005 | |||||||||||||||
Market basis equity investments | 2,146 | — | — | — | 2,146 | — | 2,146 | ||||||||||||||||
Auction rate securities | 45,725 | — | — | (5,541 | ) | 40,184 | — | 40,184 | |||||||||||||||
Total available-for-sale securities | $ | 170,273 | $ | 337 | $ | (41 | ) | $ | (5,541 | ) | $ | 165,028 | $ | 63,699 | $ | 101,329 | |||||||
Balance as of December 31, 2012 | |||||||||||||||||||||||
U.S. government sponsored entities | $ | 28,103 | $ | 7 | $ | — | $ | — | $ | 28,110 | $ | 28,110 | $ | — | |||||||||
Corporate bonds | 128,035 | 587 | — | — | 128,622 | 51,094 | 77,528 | ||||||||||||||||
Asset-backed securities | 6,058 | 4 | — | — | 6,062 | 6,062 | — | ||||||||||||||||
Market basis equity investments | 1,694 | — | — | — | 1,694 | — | 1,694 | ||||||||||||||||
Auction rate securities | 45,825 | — | — | (8,824 | ) | 37,001 | — | 37,001 | |||||||||||||||
Total available-for-sale securities | $ | 209,715 | $ | 598 | $ | — | $ | (8,824 | ) | $ | 201,489 | $ | 85,266 | $ | 116,223 |
GOODWILL_Tables
GOODWILL (Tables) | 9 Months Ended | ||||||||||
Sep. 30, 2013 | |||||||||||
GOODWILL | ' | ||||||||||
Schedule of changes in the net carrying amount of goodwill | ' | ||||||||||
The changes in the net carrying amount of goodwill for the periods ended September 30, 2013 and December 31, 2012 are as follows (in thousands): | |||||||||||
Accumulated | |||||||||||
Goodwill | Impairment | Total | |||||||||
Balance as of December 31, 2011 | $ | 281,858 | $ | — | $ | 281,858 | |||||
Disposal of goodwill | (254 | ) | — | (254 | ) | ||||||
Impairment losses | — | (175,241 | ) | (175,241 | ) | ||||||
Adjustments from foreign currency translation | 2,597 | — | 2,597 | ||||||||
Balance as of December 31, 2012 | $ | 284,201 | $ | (175,241 | ) | $ | 108,960 | ||||
Disposal of goodwill | (260 | ) | — | (260 | ) | ||||||
Goodwill from acquisitions | 54,287 | — | 54,287 | ||||||||
Impairment losses | — | (21,249 | ) | (21,249 | ) | ||||||
Adjustments from foreign currency translation | (1,349 | ) | — | (1,349 | ) | ||||||
Balance as of September 30, 2013 | $ | 336,879 | $ | (196,490 | ) | $ | 140,389 |
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
STOCK-BASED COMPENSATION | ' | |||||||||||||
Summary of stock-based compensation expense | ' | |||||||||||||
The following table summarizes stock-based compensation expense related to employee stock options, restricted stock awards and employee stock purchases recognized (in thousands): | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Costs and expenses | ||||||||||||||
Direct cost of services | $ | 35 | $ | 26 | $ | 124 | $ | 144 | ||||||
Network and infrastructure | 341 | 408 | 1,083 | 1,140 | ||||||||||
Sales and marketing | 1,718 | 1,949 | 5,349 | 6,246 | ||||||||||
Product research and development | 782 | 999 | 2,553 | 2,687 | ||||||||||
General and administrative | 1,465 | 2,681 | 7,186 | 8,038 | ||||||||||
Stock-based compensation included in costs and expenses | $ | 4,341 | $ | 6,063 | $ | 16,295 | $ | 18,255 |
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
INCOME TAXES | ' | |||||||||||||
Schedule of provision (benefit) for income taxes for both continuing and discontinued operations | ' | |||||||||||||
The provision (benefit) for income taxes for both continuing and discontinued operations is composed of the following (in thousands): | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Current tax expense (benefit): | ||||||||||||||
United States | $ | 2,289 | $ | (520 | ) | $ | 3,726 | $ | 829 | |||||
International | (252 | ) | (177 | ) | (1,625 | ) | 76 | |||||||
Total current provision for income taxes | $ | 2,037 | $ | (697 | ) | $ | 2,101 | $ | 905 | |||||
Tax Rate | (19.4 | )% | 48.7 | % | (9.3 | )% | 17.7 | % | ||||||
BUSINESS_COMBINATIONS_Tables
BUSINESS COMBINATIONS (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
BUSINESS COMBINATIONS | ' | |||||||||||||
Summary of preliminary allocation of the purchase price | ' | |||||||||||||
The preliminary allocation of the purchase price is summarized in the following table (in thousands): | ||||||||||||||
LML Payment | ||||||||||||||
Systems, Inc. | ||||||||||||||
Cash and cash equivalents | $ | 46,957 | ||||||||||||
Accounts receivable | 1,334 | |||||||||||||
Receivable of acquisition expenses incurred on behalf of Digital River | 1,068 | |||||||||||||
Customer and partner relationships | 23,230 | |||||||||||||
Trade names | 3,567 | |||||||||||||
Other intangibles | 1,185 | |||||||||||||
Goodwill | 54,287 | |||||||||||||
Other assets | 4,757 | |||||||||||||
Total assets acquired | 136,385 | |||||||||||||
Other liabilities | 33,585 | |||||||||||||
Total liabilities assumed | 33,585 | |||||||||||||
Total allocation of purchase price consideration | 102,800 | |||||||||||||
Less: cash acquired | (46,957 | ) | ||||||||||||
Total purchase price, net of cash acquired | $ | 55,843 | ||||||||||||
Schedule of intangible assets acquired from the LML acquisition | ' | |||||||||||||
Information regarding our intangible assets acquired from the LML acquisition is as follows (in thousands): | ||||||||||||||
As of September 30, 2013 | ||||||||||||||
Carrying Amount | Accumulated | Carrying Amount | ||||||||||||
Gross | Amortization | Net | ||||||||||||
Customer and partner relationships | $ | 23,230 | 3,387 | 19,843 | ||||||||||
Trade names | 3,567 | 520 | 3,047 | |||||||||||
Other intangibles | 1,185 | 205 | 980 | |||||||||||
Total | $ | 27,982 | $ | 4,112 | $ | 23,870 | ||||||||
Schedule of estimated amortization expense for the remaining life of the LML intangible assets | ' | |||||||||||||
Estimated amortization expense for the remaining life of the LML intangible assets, based on intangible assets as of September 30, 2013, is as follows (in thousands): | ||||||||||||||
Year | ||||||||||||||
Remainder of 2013 | $ | 1,418 | ||||||||||||
2014 | 5,613 | |||||||||||||
2015 | 5,613 | |||||||||||||
2016 | 5,613 | |||||||||||||
2017 | 5,613 | |||||||||||||
Total | $ | 23,870 | ||||||||||||
Schedule of unaudited pro forma condensed results of operations | ' | |||||||||||||
The following unaudited pro forma condensed results of operations for three and nine months ended September 30, 2012 and 2013, have been prepared as if the LML acquisition had occurred on January 1, 2012, (in thousands): | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Revenue | $ | 87,260 | $ | 92,815 | $ | 289,366 | $ | 294,321 | ||||||
Net income (loss) | (12,487 | ) | (1,314 | ) | (24,432 | ) | 4,307 | |||||||
DISCONTINUED_OPERATIONS_Tables
DISCONTINUED OPERATIONS (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
DISCONTINUED OPERATIONS | ' | |||||||||||||
Schedule of operating results of the discontinued operations included in the Company's Consolidated Statements of Operations | ' | |||||||||||||
The operating results of the discontinued operations included in the our Consolidated Statements of Operations for the three and nine month periods ended September 30, 2013 and 2012 were as follows (in thousands): | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Revenue | $ | 3,064 | $ | 4,614 | $ | 8,044 | $ | 12,510 | ||||||
Income (loss) on discontinued operations before taxes and loss on disposal | (99 | ) | 4 | (1,619 | ) | (1,466 | ) | |||||||
Loss on disposal of discontinued businesses before taxes | (2,110 | ) | — | (2,110 | ) | — | ||||||||
Provision (benefit) for income taxes | 2,682 | 3 | 2,509 | (539 | ) | |||||||||
Income (loss) on discontinued operations, net of tax | $ | (4,891 | ) | $ | 1 | $ | (6,238 | ) | $ | (927 | ) | |||
Schedule of assets and liabilities of discontinued operations | ' | |||||||||||||
The assets and liabilities of discontinued operations as of September 30, 2013 and December 31, 2012 were as follows (in thousands): | ||||||||||||||
September 30, | December 31, | |||||||||||||
2013 | 2012 | |||||||||||||
Current assets of discontinued operations | $ | 6,584 | $ | 7,365 | ||||||||||
Long-term assets of discontinued operations | — | 196 | ||||||||||||
Total assets of discontinued operations | $ | 6,584 | $ | 7,561 | ||||||||||
Current liabilities of discontinued operations | $ | 7,291 | $ | 5,753 | ||||||||||
Non-current liabilities of discontinued operations | — | 0 | ||||||||||||
Total liabilities of discontinued operations | $ | 7,291 | $ | 5,753 |
BASIS_OF_PRESENTATION_Details
BASIS OF PRESENTATION (Details) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Sep. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Jun. 30, 2012 | |
item | ||||||||
Restricted Cash | ' | ' | ' | ' | ' | ' | ' | ' |
Restricted cash | $3,800,000 | ' | $400,000 | ' | $3,800,000 | ' | $400,000 | ' |
Prepaid Expenses and Other | ' | ' | ' | ' | ' | ' | ' | ' |
Amount lent through short-term promissory note | ' | ' | ' | ' | ' | ' | ' | 600,000 |
Reserve recorded against the note | ' | ' | ' | 600,000 | ' | 600,000 | ' | ' |
Software Development | ' | ' | ' | ' | ' | ' | ' | ' |
Capitalized software development cost | 500,000 | ' | ' | 1,500,000 | 1,500,000 | 4,300,000 | ' | ' |
Goodwill | ' | ' | ' | ' | ' | ' | ' | ' |
Number of operating segments | ' | ' | ' | ' | 1 | ' | ' | ' |
Goodwill allocated from single reporting unit to discontinued entities, which was written-off | ' | ' | ' | ' | 260,000 | ' | 254,000 | ' |
Goodwill impairment | 0 | 21,200,000 | 175,200,000 | ' | 21,249,000 | ' | 175,241,000 | ' |
Impairment losses, after tax | ' | ' | 161,100,000 | ' | ' | ' | ' | ' |
Goodwill charges included as a separate operating expense line item, Goodwill impairment | ' | ' | ' | ' | 21,249,000 | ' | ' | ' |
Foreign Currency Translation | ' | ' | ' | ' | ' | ' | ' | ' |
Foreign exchange forward contracts, maximum maturities | ' | ' | ' | ' | '3 months | ' | ' | ' |
CustomCD and DRES | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill allocated from single reporting unit to discontinued entities, which was written-off | $300,000 | ' | ' | ' | ' | ' | ' | ' |
BASIS_OF_PRESENTATION_Details_
BASIS OF PRESENTATION (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Changes in accumulated other comprehensive income (loss), net of tax, by component | ' | ' | ' | ' |
Beginning balance | ' | ' | ($3,170) | ' |
Other comprehensive income before reclassifications | ' | ' | 3,909 | ' |
Amount reclassified from accumulated other comprehensive income (loss) | ' | ' | 4 | ' |
Other comprehensive income (loss) | 10,094 | 9,778 | 3,913 | -1,577 |
Ending balance | 743 | ' | 743 | ' |
Foreign currency translation adjustment | ' | ' | ' | ' |
Changes in accumulated other comprehensive income (loss), net of tax, by component | ' | ' | ' | ' |
Beginning balance | ' | ' | 2,565 | ' |
Other comprehensive income before reclassifications | ' | ' | 524 | ' |
Other comprehensive income (loss) | ' | ' | 524 | ' |
Ending balance | 3,089 | ' | 3,089 | ' |
Unrealized gain (loss) on investments | ' | ' | ' | ' |
Changes in accumulated other comprehensive income (loss), net of tax, by component | ' | ' | ' | ' |
Beginning balance | ' | ' | -5,735 | ' |
Other comprehensive income before reclassifications | ' | ' | 3,385 | ' |
Amount reclassified from accumulated other comprehensive income (loss) | ' | ' | 4 | ' |
Other comprehensive income (loss) | ' | ' | 3,389 | ' |
Ending balance | ($2,346) | ' | ($2,346) | ' |
BASIS_OF_PRESENTATION_Details_1
BASIS OF PRESENTATION (Details 3) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Amounts Reclassified from AOCI | ' | ' | ' | ' |
Other income (expense), net | ($297) | ($601) | $16,717 | $124 |
Income tax benefit (expense) | 645 | 700 | 408 | -1,444 |
Net income (loss) | -12,487 | -734 | -24,724 | 4,203 |
Realized gains (losses) on investments | Amount reclassified from accumulated other comprehensive income | ' | ' | ' | ' |
Amounts Reclassified from AOCI | ' | ' | ' | ' |
Other income (expense), net | ' | ' | 6 | ' |
Income tax benefit (expense) | ' | ' | -2 | ' |
Net income (loss) | ' | ' | $4 | ' |
BASIS_OF_PRESENTATION_Details_2
BASIS OF PRESENTATION (Details 4) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Sales and marketing | $25,013 | $22,756 | $80,415 | $74,593 |
General and administrative | 12,011 | 13,726 | 44,040 | 37,025 |
Reclassification from | ' | ' | ' | ' |
Sales and marketing | ' | -12,800 | ' | -39,300 |
General and administrative | ' | ($400) | ' | ($1,400) |
NET_INCOME_LOSS_PER_SHARE_Deta
NET INCOME (LOSS) PER SHARE (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Income (loss) from continuing operations per share - basic | ' | ' | ' | ' |
Income (loss) from continuing operations - basic (in dollars) | ($7,596) | ($735) | ($18,486) | $5,130 |
Weighted average shares outstanding - basic (in shares) | 31,487 | 32,685 | 32,435 | 33,347 |
Income (loss) from continuing operations per share - basic (in dollars per share) | ($0.24) | ($0.02) | ($0.57) | $0.16 |
Income (loss) from continuing operations per share - diluted | ' | ' | ' | ' |
Income (loss) from continuing operations - basic (in dollars) | -7,596 | -735 | -18,486 | 5,130 |
Income (loss) from continuing operations - diluted (in dollars) | ($7,596) | ($735) | ($18,486) | $5,130 |
Weighted average shares outstanding - basic (in shares) | 31,487 | 32,685 | 32,435 | 33,347 |
Dilutive impact of non-vested stock and options outstanding (in shares) | ' | ' | ' | 232 |
Weighted average shares outstanding - diluted (in shares) | 31,487 | 32,685 | 32,435 | 33,579 |
Income (loss) from continuing operations per share - diluted (in dollars per share) | ($0.24) | ($0.02) | ($0.57) | $0.16 |
NET_INCOME_LOSS_PER_SHARE_Deta1
NET INCOME (LOSS) PER SHARE (Details 2) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Incremental shares related to dilutive securities | ' | ' | ' | ' |
Antidilutive securities | ' | ' | ' | ' |
Number of anti-dilutive shares excluded from the computation of diluted net income (loss) per share | 544,629 | 264,796 | 313,695 | ' |
Stock Options | ' | ' | ' | ' |
Antidilutive securities | ' | ' | ' | ' |
Number of anti-dilutive shares excluded from the computation of diluted net income (loss) per share | 589,943 | 1,463,689 | 589,943 | 1,463,689 |
2004 Senior Convertible Notes | ' | ' | ' | ' |
Antidilutive securities | ' | ' | ' | ' |
Number of anti-dilutive shares excluded from the computation of diluted net income (loss) per share | 199,828 | 199,828 | 199,828 | 199,828 |
2010 Senior Convertible Notes | ' | ' | ' | ' |
Antidilutive securities | ' | ' | ' | ' |
Number of anti-dilutive shares excluded from the computation of diluted net income (loss) per share | 6,019,607 | 7,022,027 | 6,070,600 | 7,022,027 |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
FAIR VALUE MEASUREMENTS | ' | ' |
Transfers of assets between the fair value hierarchies | $0 | ' |
Transfers of assets between the fair value hierarchies | 0 | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 165,028,000 | 201,489,000 |
U.S. government sponsored entities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 7,994,000 | 28,110,000 |
Corporate bonds | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 114,704,000 | 128,622,000 |
Asset-backed securities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | ' | 6,062,000 |
Market basis equity investments | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 2,146,000 | 1,694,000 |
Auction rate securities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 40,184,000 | 37,001,000 |
Recurring | Total | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Cash and cash equivalents | 458,062,000 | 542,851,000 |
Restricted cash | 3,832,000 | 351,000 |
Assets measured at fair value | 626,922,000 | 744,691,000 |
Recurring | Total | U.S. government sponsored entities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 7,994,000 | 28,110,000 |
Recurring | Total | Corporate bonds | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 114,704,000 | 128,622,000 |
Recurring | Total | Asset-backed securities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | ' | 6,062,000 |
Recurring | Total | Market basis equity investments | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 2,146,000 | 1,694,000 |
Recurring | Total | Auction rate securities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 40,184,000 | 37,001,000 |
Recurring | Level 1 | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Cash and cash equivalents | 458,062,000 | 542,851,000 |
Restricted cash | 3,832,000 | 351,000 |
Assets measured at fair value | 578,744,000 | 673,518,000 |
Recurring | Level 1 | Corporate bonds | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 114,704,000 | 128,622,000 |
Recurring | Level 1 | Market basis equity investments | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 2,146,000 | 1,694,000 |
Recurring | Level 2 | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Assets measured at fair value | 7,994,000 | 34,172,000 |
Recurring | Level 2 | U.S. government sponsored entities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 7,994,000 | 28,110,000 |
Recurring | Level 2 | Asset-backed securities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | ' | 6,062,000 |
Recurring | Level 3 | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Assets measured at fair value | 40,184,000 | 37,001,000 |
Recurring | Level 3 | Auction rate securities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | $40,184,000 | $37,001,000 |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 2) (Auction rate securities, USD $) | 9 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2012 |
Auction rate securities | ' | ' |
Reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 inputs) | ' | ' |
Beginning Balance | $37,001 | $65,338 |
Total unrealized gains (losses) included in other comprehensive income | 3,283 | -2,637 |
Settlements | -100 | -25,700 |
Ending Balance | $40,184 | $37,001 |
FAIR_VALUE_MEASUREMENTS_Detail2
FAIR VALUE MEASUREMENTS (Details 3) (USD $) | 9 Months Ended | 12 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2012 |
U.S. government sponsored entities | Maximum | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' |
Investment, contractual maturity | '3 years | ' |
Corporate bonds | Maximum | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' |
Investment, contractual maturity | '3 years | ' |
Auction rate securities | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' |
Par value | $45.70 | $45.80 |
Fair value | 40.2 | 37 |
Temporary fair value reduction recorded under "Accumulated other comprehensive income (loss)" | 5.5 | 8.8 |
Temporary fair value reduction (as a percent) | 12.10% | 19.30% |
Weighted average maturity | '30 years 1 month 6 days | '30 years 9 months 18 days |
Liquidated due to full calls, partial calls or sales at par | 0.1 | 25.7 |
Auction rate securities | Minimum | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' |
Over-collateralized percentage | 105.00% | ' |
Auction rate securities | Maximum | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' |
Over-collateralized percentage | 134.00% | ' |
Recurring | Auction rate securities | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' |
Level 3 assets to total assets measured at fair value (as a percent) | 6.40% | 5.00% |
Nonrecurring | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' |
Fair value adjustment, assets | 0 | ' |
Fair value adjustment, liabilities | $0 | ' |
FAIR_VALUE_MEASUREMENTS_Detail3
FAIR VALUE MEASUREMENTS (Details 4) (Auction rate securities) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Assumptions used to value securities | ' | ' |
Redemption period | '7 years | '7 years |
Minimum | ' | ' |
Assumptions used to value securities | ' | ' |
Penalty coupon rate (as a percent) | 1.00% | 1.00% |
Risk adjusted discount rate (as a percent) | 4.40% | 3.50% |
Maximum | ' | ' |
Assumptions used to value securities | ' | ' |
Penalty coupon rate (as a percent) | 1.50% | 1.50% |
Risk adjusted discount rate (as a percent) | 10.20% | 12.30% |
Weighted average | ' | ' |
Assumptions used to value securities | ' | ' |
Annualized yield (as a percent) | 1.20% | 1.50% |
INVESTMENTS_Details
INVESTMENTS (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2013 | Mar. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | |
INVESTMENTS | ' | ' | ' | ' |
Cost | ' | ' | $170,273,000 | $209,715,000 |
Gross Unrealized Gains | ' | ' | 337,000 | 598,000 |
Gross Unrealized Losses Less than 12 Months | ' | ' | -41,000 | ' |
Gross Unrealized Losses Greater than 12 Months | ' | ' | -5,541,000 | -8,824,000 |
Fair Value | ' | ' | 165,028,000 | 201,489,000 |
Maturities/Reset Dates Less than 12 Months | ' | ' | 63,699,000 | 85,266,000 |
Maturities/Reset Dates Greater than 12 Months | ' | ' | 101,329,000 | 116,223,000 |
Aggregate carrying value of cost method equity investments | ' | ' | 10,500,000 | 33,000,000 |
Gain recorded under cost method equity investments | 6,500,000 | 11,100,000 | ' | ' |
Contingent gain under cost method equity investments | ' | ' | 3,100,000 | ' |
U.S. government sponsored entities | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' |
Cost | ' | ' | 8,000,000 | 28,103,000 |
Gross Unrealized Gains | ' | ' | ' | 7,000 |
Gross Unrealized Losses Less than 12 Months | ' | ' | -6,000 | ' |
Fair Value | ' | ' | 7,994,000 | 28,110,000 |
Maturities/Reset Dates Less than 12 Months | ' | ' | 4,000,000 | 28,110,000 |
Maturities/Reset Dates Greater than 12 Months | ' | ' | 3,994,000 | ' |
Corporate bonds | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' |
Cost | ' | ' | 114,402,000 | 128,035,000 |
Gross Unrealized Gains | ' | ' | 337,000 | 587,000 |
Gross Unrealized Losses Less than 12 Months | ' | ' | -35,000 | ' |
Fair Value | ' | ' | 114,704,000 | 128,622,000 |
Maturities/Reset Dates Less than 12 Months | ' | ' | 59,699,000 | 51,094,000 |
Maturities/Reset Dates Greater than 12 Months | ' | ' | 55,005,000 | 77,528,000 |
Asset-backed securities | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' |
Cost | ' | ' | ' | 6,058,000 |
Gross Unrealized Gains | ' | ' | ' | 4,000 |
Fair Value | ' | ' | ' | 6,062,000 |
Maturities/Reset Dates Less than 12 Months | ' | ' | ' | 6,062,000 |
Market basis equity investments | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' |
Cost | ' | ' | 2,146,000 | 1,694,000 |
Fair Value | ' | ' | 2,146,000 | 1,694,000 |
Maturities/Reset Dates Greater than 12 Months | ' | ' | 2,146,000 | 1,694,000 |
Auction rate securities | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' |
Cost | ' | ' | 45,725,000 | 45,825,000 |
Gross Unrealized Losses Greater than 12 Months | ' | ' | -5,541,000 | -8,824,000 |
Fair Value | ' | ' | 40,184,000 | 37,001,000 |
Maturities/Reset Dates Greater than 12 Months | ' | ' | $40,184,000 | $37,001,000 |
GOODWILL_Details
GOODWILL (Details) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | |
item | |||||
Goodwill | ' | ' | ' | ' | ' |
Goodwill allocated from single reporting unit to discontinued entities, which was written-off | ' | ' | ' | $260,000 | $254,000 |
Number of operating segments | ' | ' | ' | 1 | ' |
Goodwill impairment | 0 | 21,200,000 | 175,200,000 | 21,249,000 | 175,241,000 |
Impairment losses, after tax | ' | ' | 161,100,000 | ' | ' |
Goodwill charges included as a separate operating expense line item, Goodwill impairment | ' | ' | ' | 21,249,000 | ' |
Changes in the net carrying amount of goodwill | ' | ' | ' | ' | ' |
Goodwill gross, balance at the beginning of the period | ' | 284,201,000 | ' | 284,201,000 | 281,858,000 |
Accumulated impairment total, balance at the beginning of the period | ' | -175,241,000 | ' | -175,241,000 | ' |
Goodwill net, balance at the beginning of the period | ' | 108,960,000 | ' | 108,960,000 | 281,858,000 |
Disposal of goodwill | ' | ' | ' | -260,000 | -254,000 |
Goodwill from acquisitions | ' | ' | ' | 54,287,000 | ' |
Impairment losses | 0 | -21,200,000 | -175,200,000 | -21,249,000 | -175,241,000 |
Adjustments from foreign currency translation | ' | ' | ' | -1,349,000 | 2,597,000 |
Goodwill gross, balance at the end of the period | 336,879,000 | ' | 284,201,000 | 336,879,000 | 284,201,000 |
Accumulated impairment total, balance at the end of the period | -196,490,000 | ' | -175,241,000 | -196,490,000 | -175,241,000 |
Goodwill net, balance at the end of the period | 140,389,000 | ' | 108,960,000 | 140,389,000 | 108,960,000 |
CustomCD and DRES | ' | ' | ' | ' | ' |
Goodwill | ' | ' | ' | ' | ' |
Goodwill allocated from single reporting unit to discontinued entities, which was written-off | 300,000 | ' | ' | ' | ' |
Changes in the net carrying amount of goodwill | ' | ' | ' | ' | ' |
Disposal of goodwill | ($300,000) | ' | ' | ' | ' |
STOCKBASED_COMPENSATION_Detail
STOCK-BASED COMPENSATION (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
STOCK-BASED COMPENSATION | ' | ' | ' | ' |
Stock-based compensation included in costs and expenses | $4,341 | $6,063 | $16,295 | $18,255 |
Direct cost of services | ' | ' | ' | ' |
STOCK-BASED COMPENSATION | ' | ' | ' | ' |
Stock-based compensation included in costs and expenses | 35 | 26 | 124 | 144 |
Network and infrastructure | ' | ' | ' | ' |
STOCK-BASED COMPENSATION | ' | ' | ' | ' |
Stock-based compensation included in costs and expenses | 341 | 408 | 1,083 | 1,140 |
Sales and marketing | ' | ' | ' | ' |
STOCK-BASED COMPENSATION | ' | ' | ' | ' |
Stock-based compensation included in costs and expenses | 1,718 | 1,949 | 5,349 | 6,246 |
Product research and development | ' | ' | ' | ' |
STOCK-BASED COMPENSATION | ' | ' | ' | ' |
Stock-based compensation included in costs and expenses | 782 | 999 | 2,553 | 2,687 |
General and administrative | ' | ' | ' | ' |
STOCK-BASED COMPENSATION | ' | ' | ' | ' |
Stock-based compensation included in costs and expenses | $1,465 | $2,681 | $7,186 | $8,038 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Current tax expense (benefit): | ' | ' | ' | ' |
United States | $2,289 | ($520) | $3,726 | $829 |
International | -252 | -177 | -1,625 | 76 |
Total current provision for income taxes | 2,037 | -697 | 2,101 | 905 |
Tax Rate (as a percent) | -19.40% | 48.70% | -9.30% | 17.70% |
Income tax expense (benefit) for continuing operations | -645 | -700 | -408 | 1,444 |
Income tax expense (benefit) for discontinued operations | $2,682 | $3 | $2,509 | ($539) |
INCOME_TAXES_Details_2
INCOME TAXES (Details 2) (USD $) | 3 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 |
Unrecognized tax benefits | ' |
Unrecognized tax benefits, including related interest | $11.10 |
Unrecognized tax benefits, would affect effective tax rate if recognized | 10.5 |
Accrued interest related to uncertain tax positions | 1.4 |
Unrecognized tax benefits released due to the expiration of a statute of limitations | 1.2 |
Gross unrecognized tax benefits change within the next twelve months, minimum | 0 |
Gross unrecognized tax benefits change within the next twelve months, maximum | 9 |
U.S. federal tax | ' |
Tax loss carryforward | ' |
Tax loss carryforwards | 24 |
U.S. federal tax | Operating losses | ' |
Tax loss carryforward | ' |
Deferred tax assets reserved | 10.6 |
U.S. federal tax | Other tax attributes | ' |
Tax loss carryforward | ' |
Deferred tax assets reserved | 46.4 |
State tax | ' |
Tax loss carryforward | ' |
Tax loss carryforwards | 44 |
Foreign tax | ' |
Tax loss carryforward | ' |
Tax loss carryforwards | 9 |
Foreign tax | Operating losses | ' |
Tax loss carryforward | ' |
Deferred tax assets reserved | $2.30 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 9 Months Ended | 0 Months Ended | |||
Sep. 30, 2013 | Dec. 31, 2012 | Jun. 20, 2013 | Oct. 12, 2012 | Jun. 30, 2013 | |
item | Patent infringement claim | Patent infringement claim | Patent infringement claim | ||
COMMITMENTS AND CONTINGENCIES | ' | ' | ' | ' | ' |
Number of pending litigation | 0 | ' | ' | ' | ' |
Amount of significant costs incurred individually or collectively, in connection with indemnification provisions | $0 | ' | ' | ' | ' |
Undrawn letters of credit | 500,000 | 3,600,000 | ' | ' | ' |
COMMITMENTS AND CONTINGENCIES | ' | ' | ' | ' | ' |
Damages awarded | ' | ' | ' | 800,000 | ' |
Damages sought | ' | ' | ' | 10,200,000 | ' |
Amount of judgment entered by the court | ' | ' | 1,100,000 | ' | ' |
Accrued amount | ' | ' | ' | ' | $1,100,000 |
DEBT_Details
DEBT (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Nov. 01, 2010 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2004 |
2010 Senior Convertible Notes | 2010 Senior Convertible Notes | 2010 Senior Convertible Notes | 2010 Senior Convertible Notes | 2004 Senior Convertible Notes | 2004 Senior Convertible Notes | 2004 Senior Convertible Notes | |||
DEBT | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Principal amount sold and issued (in dollars) | ' | ' | ' | ' | ' | $345,000,000 | ' | ' | $195,000,000 |
Interest rate (as a percent) | ' | ' | ' | ' | ' | 2.00% | 1.25% | 1.25% | 1.25% |
Principal amount of debt repurchased | ' | ' | 0 | 5,400,000 | 43,900,000 | ' | ' | ' | ' |
Average price as a percentage of par amount at which the entity repurchased notes | ' | ' | ' | 98.80% | 98.50% | ' | ' | ' | ' |
Initial conversion rate of debt principal (in shares per dollar) | ' | ' | ' | 0.0203537 | ' | ' | 0.0226948 | ' | ' |
Initial conversion price of shares, assuming conversion (in dollars per share) | ' | ' | $49.13 | $49.13 | ' | ' | $44.06 | ' | ' |
Principal amount, remain outstanding | 295,750,000 | 309,909,000 | 295,800,000 | 295,800,000 | 301,100,000 | ' | 8,800,000 | 8,800,000 | ' |
Number of common shares issuable upon conversion of note (in shares) | ' | ' | ' | 6,019,607 | ' | ' | 199,828 | ' | ' |
Convertible senior notes, fair value | ' | ' | $294,300,000 | $294,300,000 | $285,300,000 | ' | $8,700,000 | $8,600,000 | ' |
BUSINESS_COMBINATIONS_Details
BUSINESS COMBINATIONS (Details) (USD $) | 9 Months Ended | 0 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 9 Months Ended | 9 Months Ended | ||||||||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Jan. 10, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Sep. 30, 2013 | Jan. 10, 2013 | Sep. 30, 2013 | Jan. 10, 2013 | Sep. 30, 2013 | Jan. 10, 2013 | |
LML | LML | LML | LML | LML | LML | LML | LML | LML | LML | LML | LML | |||||
Purchase price allocation adjustment | Purchase price allocation adjustment | Customer relationships | Customer relationships | Trade names | Trade names | Other intangibles | Other intangibles | |||||||||
BUSINESS COMBINATIONS | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Capital stock (as a percent) | ' | ' | ' | ' | 100.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash consideration (in dollars per share) | ' | ' | ' | ' | $3.45 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Aggregate purchase price | ' | ' | ' | ' | $102,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Acquisition and integration costs | ' | ' | ' | ' | ' | 100,000 | ' | 4,900,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill recognized expected to be deductible for income tax purposes | ' | ' | ' | ' | ' | 0 | 0 | 0 | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue | ' | ' | ' | ' | ' | 5,800,000 | 18,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net loss | ' | ' | ' | ' | ' | 1,300,000 | 700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Decrease in other liabilities | ' | ' | ' | ' | ' | ' | ' | ' | 500,000 | ' | ' | ' | ' | ' | ' | ' |
Increase in deferred tax liabilities | ' | ' | ' | ' | ' | ' | ' | ' | 100,000 | 600,000 | ' | ' | ' | ' | ' | ' |
Decrease in residual goodwill | ' | ' | ' | ' | ' | ' | ' | ' | 400,000 | 2,000,000 | ' | ' | ' | ' | ' | ' |
Additional increase in deferred tax liabilities | ' | ' | ' | ' | ' | ' | ' | ' | 400,000 | ' | ' | ' | ' | ' | ' | ' |
Additional increase in goodwill | ' | ' | ' | ' | ' | ' | ' | ' | 400,000 | ' | ' | ' | ' | ' | ' | ' |
Increase in intangible assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,600,000 | ' | ' | ' | ' | ' | ' |
Allocation of the purchase price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash and cash equivalents | ' | ' | ' | ' | 46,957,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Accounts receivable | ' | ' | ' | ' | 1,334,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Receivable of acquisition expenses incurred on behalf of Digital River | ' | ' | ' | ' | 1,068,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amortized intangible assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 23,230,000 | ' | 3,567,000 | ' | 1,185,000 |
Goodwill | 140,389,000 | ' | 108,960,000 | 281,858,000 | 54,287,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Other assets | ' | ' | ' | ' | 4,757,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total assets acquired | ' | ' | ' | ' | 136,385,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total liabilities assumed | ' | ' | ' | ' | 33,585,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total allocation of purchase price consideration | ' | ' | ' | ' | 102,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Less: cash acquired | ' | ' | ' | ' | -46,957,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total purchase price, net of cash acquired | 55,843,000 | ' | ' | ' | 55,843,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average useful life | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '5 years | ' | '5 years | ' | '4 years 9 months 18 days | ' |
Intangible assets acquired | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Carrying Amount Gross | ' | ' | ' | ' | ' | 27,982,000 | 27,982,000 | 27,982,000 | ' | ' | 23,230,000 | ' | 3,567,000 | ' | 1,185,000 | ' |
Accumulated Amortization | 85,655,000 | ' | 78,757,000 | ' | ' | 4,112,000 | 4,112,000 | 4,112,000 | ' | ' | 3,387,000 | ' | 520,000 | ' | 205,000 | ' |
Carrying Amount Net | 32,255,000 | ' | 11,718,000 | ' | ' | 23,870,000 | 23,870,000 | 23,870,000 | ' | ' | 19,843,000 | ' | 3,047,000 | ' | 980,000 | ' |
Amortization expense of acquisition-related intangible assets | 6,360,000 | 5,301,000 | ' | ' | ' | 1,400,000 | ' | 4,100,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Estimated amortization expense for the remaining life of the intangible assets, based on intangible assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Remainder of 2013 | ' | ' | ' | ' | ' | 1,418,000 | 1,418,000 | 1,418,000 | ' | ' | ' | ' | ' | ' | ' | ' |
2014 | ' | ' | ' | ' | ' | 5,613,000 | 5,613,000 | 5,613,000 | ' | ' | ' | ' | ' | ' | ' | ' |
2015 | ' | ' | ' | ' | ' | 5,613,000 | 5,613,000 | 5,613,000 | ' | ' | ' | ' | ' | ' | ' | ' |
2016 | ' | ' | ' | ' | ' | 5,613,000 | 5,613,000 | 5,613,000 | ' | ' | ' | ' | ' | ' | ' | ' |
2017 | ' | ' | ' | ' | ' | 5,613,000 | 5,613,000 | 5,613,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Carrying Amount Net | $32,255,000 | ' | $11,718,000 | ' | ' | $23,870,000 | $23,870,000 | $23,870,000 | ' | ' | $19,843,000 | ' | $3,047,000 | ' | $980,000 | ' |
BUSINESS_COMBINATIONS_Details_
BUSINESS COMBINATIONS (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
BUSINESS COMBINATIONS | ' | ' | ' | ' |
Amortization expense of acquisition-related intangible assets | ' | ' | $6,360 | $5,301 |
Income tax benefit (expense) | 645 | 700 | 408 | -1,444 |
LML | ' | ' | ' | ' |
BUSINESS COMBINATIONS | ' | ' | ' | ' |
Amortization expense of acquisition-related intangible assets | 1,400 | ' | 4,100 | ' |
LML | Acquisition related nonrecurring adjustments | ' | ' | ' | ' |
BUSINESS COMBINATIONS | ' | ' | ' | ' |
Amortization expense of acquisition-related intangible assets | ' | 1,400 | ' | 4,100 |
Elimination of historical intangible asset amortization expense of acquiree | ' | 200 | ' | 500 |
Income tax benefit (expense) | ' | $300 | ' | $900 |
BUSINESS_COMBINATIONS_Details_1
BUSINESS COMBINATIONS (Details 3) (LML, USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
LML | ' | ' | ' | ' |
Pro Forma Operating Results (Unaudited) | ' | ' | ' | ' |
Revenue | $87,260 | $92,815 | $289,366 | $294,321 |
Net income (loss) | ($12,487) | ($1,314) | ($24,432) | $4,307 |
DISCONTINUED_OPERATIONS_Detail
DISCONTINUED OPERATIONS (Details) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Oct. 01, 2013 |
Previously reported | Previously reported | CustomCD, Inc | CustomCD, Inc | Digital River Education Services, Inc. | Digital River Education Services, Inc. | Digital River Education Services, Inc. | ||||||
item | ||||||||||||
Discontinued operations | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of former employees to whom net assets are sold by the entity | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2 |
Operating results of the discontinued operations | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue | $3,064 | $4,614 | $8,044 | $12,510 | ' | ' | ' | ' | ' | ' | ' | ' |
Income (loss) on discontinued operations before taxes and loss on disposal | -99 | 4 | -1,619 | -1,466 | ' | ' | ' | ' | ' | ' | ' | ' |
Loss on disposal of discontinued businesses before taxes | -2,110 | ' | -2,110 | ' | ' | ' | ' | -100 | -100 | -2,000 | -2,000 | ' |
Provision (benefit) for income taxes | 2,682 | 3 | 2,509 | -539 | ' | ' | ' | ' | ' | ' | ' | ' |
Income (loss) on discontinued operations, net of tax | -4,891 | 1 | -6,238 | -927 | ' | ' | ' | ' | ' | ' | ' | ' |
Assets and liabilities of discontinued operations | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Current assets of discontinued operations | 6,584 | ' | 6,584 | ' | 7,561 | 6,584 | 7,365 | ' | ' | ' | ' | ' |
Long-term assets of discontinued operations | ' | ' | ' | ' | ' | ' | 196 | ' | ' | ' | ' | ' |
Total assets of discontinued operations | ' | ' | ' | ' | ' | 6,584 | 7,561 | ' | ' | ' | ' | ' |
Current liabilities of discontinued operations | 7,291 | ' | 7,291 | ' | 5,753 | 7,291 | 5,753 | ' | ' | ' | ' | ' |
Total liabilities of discontinued operations | ' | ' | ' | ' | ' | $7,291 | $5,753 | ' | ' | ' | ' | ' |
SUBSEQUENT_EVENT_Details
SUBSEQUENT EVENT (Details) (Subsequent event, Employee termination, USD $) | 1 Months Ended |
In Millions, unless otherwise specified | Nov. 08, 2013 |
Subsequent event | Employee termination | ' |
Subsequent Event | ' |
Reduction in workforce as a part of strategic transformation (as a percent) | 7.00% |
Total severance and outplacement costs expected | $1.90 |