Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | Apr. 01, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'DIGITAL RIVER INC /DE | ' |
Entity Central Index Key | '0001062530 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
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 | ' | 32,653,574 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
CURRENT ASSETS | ' | ' |
Cash and cash equivalents | $309,717 | $483,868 |
Short-term investments | 82,156 | 115,652 |
Accounts receivable, net of allowance of $3,417 and $3,206 | 66,746 | 70,865 |
Deferred tax assets | 1,518 | 1,479 |
Prepaid expenses and other | 23,199 | 27,878 |
Total current assets | 483,336 | 699,742 |
Property and equipment, net | 51,480 | 53,770 |
Goodwill | 137,766 | 139,318 |
Intangible assets, net | 26,441 | 29,217 |
Long-term investments | 57,580 | 56,023 |
Deferred income taxes | 1,169 | 1,037 |
Other assets | 1,212 | 2,067 |
TOTAL ASSETS | 758,984 | 981,174 |
CURRENT LIABILITIES | ' | ' |
Accounts payable | 167,857 | 187,635 |
Accrued payroll | 12,714 | 20,058 |
Deferred revenue | 4,945 | 6,904 |
Other current liabilities | 44,968 | 55,899 |
Total current liabilities | 230,484 | 270,496 |
NON-CURRENT LIABILITIES | ' | ' |
Senior convertible notes | 135,225 | 295,795 |
Other liabilities | 21,532 | 21,452 |
Total non-current liabilities | 156,757 | 317,247 |
TOTAL LIABILITIES | 387,241 | 587,743 |
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; 50,603,707 and 50,074,977 shares issued | 506 | 501 |
Treasury stock at cost; 17,950,133 and 16,910,883 shares | -442,400 | -424,416 |
Additional paid-in capital | 765,543 | 761,560 |
Retained earnings | 45,670 | 51,254 |
Accumulated other comprehensive income (loss) | 2,424 | 4,532 |
Total stockholders' equity | 371,743 | 393,431 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $758,984 | $981,174 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
CONSOLIDATED BALANCE SHEETS | ' | ' |
Allowance for accounts receivable (in dollars) | $3,417 | $3,206 |
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 | 50,603,707 | 50,074,977 |
Treasury stock, shares | 17,950,133 | 16,910,883 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
CONSOLIDATED STATEMENTS OF OPERATIONS | ' | ' |
Revenue | $97,807 | $111,021 |
Costs and expenses (exclusive of depreciation and amortization expense shown separately below): | ' | ' |
Direct cost of services | 18,152 | 22,006 |
Network and infrastructure | 14,079 | 15,075 |
Sales and marketing | 24,302 | 29,456 |
Product research and development | 18,273 | 17,248 |
General and administrative | 12,319 | 18,347 |
Goodwill impairment | ' | 21,249 |
Depreciation and amortization | 6,358 | 5,000 |
Amortization of acquisition-related intangibles | 2,171 | 1,928 |
Total costs and expenses | 95,654 | 130,309 |
Income (loss) from operations | 2,153 | -19,288 |
Interest income | 619 | 596 |
Interest expense | -1,607 | -1,979 |
Other income (expense), net | -323 | 10,905 |
Loss on extinguishment of debt | -5,605 | ' |
Income (loss) from continuing operations before income taxes | -4,763 | -9,766 |
Income tax expense (benefit) | 954 | 921 |
Income (loss) from continuing operations | -5,717 | -10,687 |
Income (loss) from discontinued operations, net of tax | 133 | -678 |
Net income (loss) | ($5,584) | ($11,365) |
Income (loss) per share - basic: | ' | ' |
Income (loss) from continuing operations (in dollars per share) | ($0.19) | ($0.33) |
Income (loss) from discontinued operations (in dollars per share) | $0.01 | ($0.02) |
Net income (loss) per share - basic (in dollars per share) | ($0.18) | ($0.35) |
Income (loss) per share - diluted: | ' | ' |
Income (loss) from continuing operations (in dollars per share) | ($0.19) | ($0.33) |
Income (loss) from discontinued operations (in dollars per share) | $0.01 | ($0.02) |
Net income (loss) per share - diluted (in dollars per share) | ($0.18) | ($0.35) |
Shares used in per-share calculation - basic (in shares) | 30,734 | 32,877 |
Shares used in per-share calculation - diluted (in shares) | 30,734 | 32,877 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ' | ' |
Net income (loss) | ($5,584) | ($11,365) |
Other comprehensive income (loss): | ' | ' |
Unrealized foreign exchange gain (loss) on the revaluation of investments in foreign subsidiaries | -2,444 | -8,205 |
Unrealized gain (loss) on investments | 549 | 3,503 |
Tax benefit (expense) | -213 | ' |
Other comprehensive income (loss) | -2,108 | -4,702 |
Comprehensive income (loss) | ($7,692) | ($16,067) |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
OPERATING ACTIVITIES | ' | ' |
Net income (loss) | ($5,584) | ($11,365) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ' | ' |
Loss (gain) on disposal of discontinued operations | -212 | ' |
Amortization of acquisition-related intangibles | 2,171 | 1,928 |
Provision for doubtful accounts | 179 | 327 |
Depreciation and amortization | 6,358 | 5,030 |
Impairment of goodwill | ' | 21,249 |
Debt issuance cost amortization | 346 | 430 |
Amortization of investment premiums | 473 | 697 |
Loss (gain) on disposal of equipment | -472 | 73 |
Gain on sale of investment | ' | -11,067 |
Loss on extinguishment of debt | 5,605 | ' |
Stock-based compensation expense | 3,988 | 5,575 |
Deferred and other income taxes | -228 | -633 |
Change in operating assets and liabilities, net of acquisitions: | ' | ' |
Accounts receivable | 4,151 | -13,774 |
Prepaid and other assets | 2,245 | 2,172 |
Accounts payable | -19,060 | -1,197 |
Deferred revenue | -2,174 | -1,646 |
Income tax payable | 850 | 716 |
Other current liabilities | -9,060 | -8,764 |
Net cash provided by (used in) operating activities | -10,424 | -10,249 |
INVESTING ACTIVITIES | ' | ' |
Purchases of investments | -11,102 | -20,285 |
Sales of investments | 44,060 | 37,783 |
Cash received (paid) for cost method investments | -658 | 33,177 |
Cash paid for acquisitions, net of cash received | ' | -55,847 |
Proceeds from sale of equipment | 472 | ' |
Purchases of equipment and capitalized software | -4,135 | -6,983 |
Net cash provided by (used in) investing activities | 28,637 | -12,155 |
FINANCING ACTIVITIES | ' | ' |
Repurchase of senior convertible notes | -173,253 | -1,335 |
Exercise of stock options | ' | 1,273 |
Repurchase of common stock | -14,024 | -11,181 |
Repurchase of restricted stock to satisfy tax withholding obligation | -3,960 | -3,961 |
Net cash provided by (used in) financing activities | -191,237 | -15,204 |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | -1,127 | -4,501 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | -174,151 | -42,109 |
CASH AND CASH EQUIVALENTS, beginning of period | 483,868 | 542,851 |
CASH AND CASH EQUIVALENTS, end of period | 309,717 | 500,742 |
SUPPLEMENTAL DISCLOSURES | ' | ' |
Cash paid for interest on senior convertible notes | 1,157 | 55 |
Cash paid for income taxes | $1,657 | $974 |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2014 | |
BASIS OF PRESENTATION | ' |
BASIS OF PRESENTATION | ' |
1. BASIS OF PRESENTATION | |
The unaudited consolidated financial statements of Digital River, Inc. and our wholly owned subsidiaries (we, our Digital River, or the Company) included herein have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information, and, accordingly, do not include all financial information and footnotes normally required for a complete set of financial statements. 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, 2013, as filed with the Securities and Exchange Commission. | |
The unaudited consolidated statements 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. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire fiscal year ending December 31, 2014 due to seasonality and other factors. The December 31, 2013 information was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. | |
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, 2013. There were no material changes in significant accounting policies during the quarter ended March 31, 2014. | |
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. We adopted the new guidance in ASU 2013-11 as of the period ended March 31, 2014, 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, Inc. (CustomCD) and Digital River Education Services, Inc. (DRES), which were sold on September 30, 2013 and October 1, 2013, respectively, have been classified within Discontinued Operations in our Consolidated Statements of Operations for the three months ended March 31, 2014. The operations of these entities in the corresponding three months ended March 31, 2013 have been reclassified into Discontinued Operations to conform with the current period presentation. |
NET_INCOME_LOSS_PER_SHARE
NET INCOME (LOSS) PER SHARE | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
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 net income (loss) per share from continuing operations (in thousands, except per share amounts): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Income (loss) from continuing operations per share - basic | ||||||||
Income (loss) from continuing operations - basic | $ | (5,717 | ) | $ | (10,687 | ) | ||
Weighted average shares outstanding - basic | 30,734 | 32,877 | ||||||
Income (loss) from continuing operations per share - basic | $ | (0.19 | ) | $ | (0.33 | ) | ||
Income (loss) from continuing operations per share - diluted | ||||||||
Income (loss) from continuing operations - basic | $ | (5,717 | ) | $ | (10,687 | ) | ||
Exclude: Interest expense and amortized financing cost of convertible senior notes, net of tax benefit | — | — | ||||||
Income (loss) from continuing operations - diluted | $ | (5,717 | ) | $ | (10,687 | ) | ||
Weighted average shares outstanding - basic | 30,734 | 32,877 | ||||||
Dilutive impact of non-vested stock and options outstanding | — | — | ||||||
Dilutive impact of 2004 senior convertible notes | — | — | ||||||
Weighted average shares outstanding - diluted | 30,734 | 32,877 | ||||||
Income (loss) from continuing operations per share - diluted | $ | (0.19 | ) | $ | (0.33 | ) | ||
For the three months ended March 31, 2014 and 2013, 682,387 and 573,291 incremental shares, respectively, 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 455,422 and 1,429,109 shares for the three months ended March 31, 2014 and 2013, 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, 1,021 and 199,828 weighted average shares for the three months ended March 31, 2014 and 2013, respectively, and the unissued shares underlying our 2010 senior convertible notes, 5,021,960 and 6,116,842 weighted average shares for the three months ended March 31, 2014 and 2013, respectively, were excluded for the purposes of calculating GAAP diluted net income (loss) per share, because their effect on diluted net income (loss) per share would have been anti-dilutive. |
ACCUMULATED_OTHER_COMPREHENSIV
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ' | ||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ' | ||||||||||
3. ACCUMULATED OTHER 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) related to cumulative translation adjustments has no tax expense or benefit 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 period ended March 31, 2014 and 2013, (in thousands): | |||||||||||
Foreign currency | Unrealized gain | Total | |||||||||
translation | (loss) on | ||||||||||
adjustment | investments | ||||||||||
Balance as of December 31, 2013 | $ | 3,720 | $ | 812 | $ | 4,532 | |||||
Other comprehensive income (loss) before reclassifications | (2,444 | ) | 332 | (2,112 | ) | ||||||
Reclassified adjustment for net loss included in net income (loss) | — | 4 | 4 | ||||||||
Net current period other comprehensive income (loss) | (2,444 | ) | 336 | (2,108 | ) | ||||||
Balance as of March 31, 2014 | $ | 1,276 | $ | 1,148 | $ | 2,424 | |||||
Balance as of December 31, 2012 | $ | 2,565 | $ | (5,735 | ) | $ | (3,170 | ) | |||
Other comprehensive income (loss) before reclassifications | (8,205 | ) | 3,505 | (4,700 | ) | ||||||
Reclassified adjustment for net gain included in net income (loss) | — | (2 | ) | (2 | ) | ||||||
Net current period other comprehensive income (loss) | (8,205 | ) | 3,503 | (4,702 | ) | ||||||
Balance as of March 31, 2013 | $ | (5,640 | ) | $ | (2,232 | ) | $ | (7,872 | ) | ||
The following table summarizes the reclassifications out of accumulated other comprehensive income (loss) for the period ended March 31, 2014 (in thousands): | |||||||||||
Reclassification out of accumulated other | Amount reclassified | Affected line item in the | |||||||||
comprehensive income | from accumulated other | Consolidated Statement of | |||||||||
comprehensive income | Operations | ||||||||||
Realized gains (losses) on investments | |||||||||||
$ | (7 | ) | Other income (expense), net | ||||||||
3 | Income tax benefit (expense) | ||||||||||
$ | (4 | ) | Net income (loss) | ||||||||
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||
4. 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 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 March 31, 2014 and December 31, 2013, (in thousands): | ||||||||||||||
Fair Value Measurements | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Balance as of March 31, 2014 | ||||||||||||||
Cash and cash equivalents | $ | 309,717 | $ | 309,717 | $ | — | $ | — | ||||||
Restricted cash | 3,606 | 3,606 | — | — | ||||||||||
U.S. government sponsored entities | 1,993 | — | 1,993 | — | ||||||||||
Corporate bonds | 80,163 | 80,163 | — | — | ||||||||||
Market basis equity investments | 3,207 | 3,207 | — | — | ||||||||||
Auction rate securities | 42,943 | — | — | 42,943 | ||||||||||
Total assets measured at fair value | $ | 441,629 | $ | 396,693 | $ | 1,993 | $ | 42,943 | ||||||
Balance as of December 31, 2013 | ||||||||||||||
Cash and cash equivalents | $ | 483,868 | $ | 483,868 | $ | — | $ | — | ||||||
Restricted cash | 3,560 | 3,560 | — | — | ||||||||||
Commerical paper | 9,992 | 9,992 | — | — | ||||||||||
U.S. government sponsored entities | 4,000 | — | 4,000 | — | ||||||||||
Corporate bonds | 101,660 | 101,660 | — | — | ||||||||||
Market basis equity investments | 3,549 | 3,549 | — | — | ||||||||||
Auction rate securities | 41,993 | — | — | 41,993 | ||||||||||
Total assets measured at fair value | $ | 648,622 | $ | 602,629 | $ | 4,000 | $ | 41,993 | ||||||
There were no transfers of assets between levels of the hierarchy during the periods ended March 31, 2014 and December 31, 2013. | ||||||||||||||
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, 2012 | $ | 37,001 | ||||||||||||
Total unrealized gains (losses) included in other comprehensive income | 5,092 | |||||||||||||
Settlements | (100 | ) | ||||||||||||
Balance as of December 31, 2013 | $ | 41,993 | ||||||||||||
Total unrealized gains (losses) included in other comprehensive income | 950 | |||||||||||||
Settlements | — | |||||||||||||
Balance as of March 31, 2014 | $ | 42,943 | ||||||||||||
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 and money market accounts. The fair value was measured using quoted market prices and is classified as Level 1. The carrying amount approximates fair value. | ||||||||||||||
Restricted Cash. Consist of cash and cash equivalents that are held in escrow accounts and restricted by agreements with third parties for a particular purpose. The carrying amount approximates fair value and is classified as Level 1. | ||||||||||||||
Commercial Paper. Consist of primarily high grade commercial paper. The fair value of these investments was measured using quoted market prices and is classified as Level 1. As of December 31, 2013, the contractual maturities of these investments were within one year. | ||||||||||||||
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 maturities of these investments are within four 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 maturities of these investments are within three years. | ||||||||||||||
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 March 31, 2014, we held $45.7 million of auction rate securities (ARS) at par value which we have recorded at $42.9 million fair value. As of December 31, 2013, we held $45.7 million of ARS at par value which was recorded at $42.0 million fair value. As of March 31, 2014 the ARS are 107— 140% over-collateralized and the underlying student loans are guaranteed by the U.S. government. | ||||||||||||||
Due to the illiquid market conditions, the fair value of our ARS is $2.8 million, 6.1%, less than par value as of March 31, 2014. This reduction from par value is considered temporary and is recorded in “Accumulated other comprehensive income (loss)”. The temporary reduction from par value recorded in “Accumulated other comprehensive income (loss)” was $3.7 million, 8.2%, as of December 31, 2013. For the periods ended March 31, 2014 and 2013, unrealized gains on our ARS of $0.9 million and $3.1 million, respectively, are recorded in “Unrealized gain (loss) on investments” in our Consolidated Statements of Comprehensive Income (Loss). | ||||||||||||||
In evaluating our ARS portfolio, we note sustained performance of our securities, strong parity levels, observed market redemption activity, continued receipt of interest and penalty payments, and an increase in fair value at March 31, 2014 compared to December 31, 2013. 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 also anticipate we will have sufficient cash flow from operations to execute our business strategy and fund our operational needs. We do not intend to sell, or believe we will be required to sell, these investments prior to recovery of their amortized cost basis. Accordingly, we treated the fair value decline as temporary. | ||||||||||||||
The discounted cash flow model we used to value these securities included the following assumptions: | ||||||||||||||
March 31, | December 31, | |||||||||||||
2014 | 2013 | |||||||||||||
Unobservable inputs | ||||||||||||||
Redemption period (in years) | 6 | 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 | 1.50% | 1.60% | ||||||||||||
Risk adjusted discount rate | 4.3% to 6.0% | 4.7% to 7.8% | ||||||||||||
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. In the first quarter of 2014 we decreased the redemption period from 7 years to 6 years to align the valuation model with our internal expectations regarding holding period and prevailing pricing in secondary markets for our ARS. This change resulted in a $0.7 million increase in the fair value of our ARS. | ||||||||||||||
The portfolio had a weighted average maturity of 29.6 years and 29.8 years as of March 31, 2014 and December 31, 2013, respectively. | ||||||||||||||
We classify our ARS as Level 3 long-term investments until we receive a call or partial call on the securities. As of March 31, 2014 and December 31, 2013, our entire ARS portfolio was classified as Level 3 long-term investments. In the three months ended March 31, 2014, no ARS were liquidated. During the year ended December 31, 2013, we liquidated $0.1 million of ARS due to a partial call at par. The amount of Level 3 assets as a percentage of total assets measured at fair value on a recurring basis was 9.7% and 6.5% as of March 31, 2014 and December 31, 2013, 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 only in certain circumstances like evidence of impairment. For the quarters ended March 31, 2014 and 2013, other than the goodwill impairment recorded during the quarter ended March 31, 2013, as further discussed in Note 6 — 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 goodwill impairment fair value calculations fall within Level 3 inputs due to the significant unobservable inputs used to determine fair value. |
INVESTMENTS
INVESTMENTS | 3 Months Ended | ||||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||||
INVESTMENTS | ' | ||||||||||||||||||||||
INVESTMENTS | ' | ||||||||||||||||||||||
5. INVESTMENTS | |||||||||||||||||||||||
As of March 31, 2014 and December 31, 2013, 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 March 31, 2014 | |||||||||||||||||||||||
U.S. government sponsored entities | $ | 2,000 | $ | — | $ | (7 | ) | $ | — | $ | 1,993 | $ | 997 | $ | 996 | ||||||||
Corporate bonds | 79,950 | 224 | (11 | ) | — | 80,163 | 66,423 | 13,740 | |||||||||||||||
Market basis equity investments | 3,207 | — | — | — | 3,207 | — | 3,207 | ||||||||||||||||
Auction rate securities | 45,725 | — | — | (2,782 | ) | 42,943 | — | 42,943 | |||||||||||||||
Total available-for-sale securities | $ | 130,882 | $ | 224 | $ | (18 | ) | $ | (2,782 | ) | $ | 128,306 | $ | 67,420 | $ | 60,886 | |||||||
Balance as of December 31, 2013 | |||||||||||||||||||||||
Commercial paper | $ | 9,992 | $ | — | $ | — | $ | — | $ | 9,992 | $ | 9,992 | $ | — | |||||||||
U.S. government sponsored entities | 4,000 | — | — | — | 4,000 | — | 4,000 | ||||||||||||||||
Corporate bonds | 101,400 | 281 | (21 | ) | — | 101,660 | 58,280 | 43,380 | |||||||||||||||
Market basis equity investments | 1,668 | 1,881 | — | — | 3,549 | — | 3,549 | ||||||||||||||||
Auction rate securities | 45,725 | — | — | (3,732 | ) | 41,993 | — | 41,993 | |||||||||||||||
Total available-for-sale securities | $ | 162,785 | $ | 2,162 | $ | (21 | ) | $ | (3,732 | ) | $ | 161,194 | $ | 68,272 | $ | 92,922 | |||||||
We consider the fair value decline of our investments in U.S. government sponsored entities, corporate bonds and ARS 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 4 — Fair Value Measurements, for further discussion regarding the fair value of ARS. Temporary, unrealized, gains and losses on available for sale securities are recorded in “Accumulated other comprehensive income (loss)”. | |||||||||||||||||||||||
Realized gains or losses on investments are recorded in our Consolidated Statements of Operations within “Other income (expense), net”. 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 March 31, 2014 and December 31, 2013, the balance of our cost method equity investment was $11.4 million and $10.5 million, respectively, which is included under “Long-term investments” in our Consolidated Balance Sheets. During the first quarter of 2014, we invested an additional $0.6 million and converted a note receivable of $0.3 million into shares in our cost method equity investment. 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. All gains related to this cost basis investment were recorded in “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 not estimated the fair value of our cost method equity investment as of March 31, 2014 as we are not aware of any facts or circumstances that would indicate a decline in the fair value of this investment below its carrying value. |
GOODWILL
GOODWILL | 3 Months Ended |
Mar. 31, 2014 | |
GOODWILL | ' |
GOODWILL | ' |
6. GOODWILL | |
In the fourth quarter 2012, we determined our goodwill was impaired and recorded a preliminary non-cash pretax goodwill impairment charge. During the first quarter of 2013, we completed our goodwill impairment analysis and recorded an additional non-cash pretax goodwill impairment charge of $21.2 million relating to our single reporting unit. The tax benefit associated with the first quarter impairment was offset by our current period tax valuation allowance. As previously disclosed, a blended income and market approach was used to determine the applicable impairment changes. The application of goodwill impairment tests is a level 3 fair value measurement and requires management judgment for many of the inputs. Goodwill impairment charges are included as a separate operating expense line item, “Goodwill impairment” within Continuing Operations in our Consolidated Statements of Operations. |
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
STOCK-BASED COMPENSATION | ' | |||||||
STOCK-BASED COMPENSATION | ' | |||||||
7. STOCK-BASED COMPENSATION | ||||||||
The following table summarizes stock-based compensation expense related to employee stock options, restricted and performance stock awards and employee stock purchases recognized (in thousands): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Costs and expenses | ||||||||
Direct cost of services | $ | 44 | $ | 42 | ||||
Network and infrastructure | 382 | 415 | ||||||
Sales and marketing | 1,002 | 1,832 | ||||||
Product research and development | 912 | 925 | ||||||
General and administrative | 1,648 | 2,361 | ||||||
Stock-based compensation included in costs and expenses | $ | 3,988 | $ | 5,575 | ||||
INCOME_TAXES
INCOME TAXES | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
INCOME TAXES | ' | |||||||
INCOME TAXES | ' | |||||||
8. INCOME TAXES | ||||||||
The provision (benefit) for income taxes from continuing operations is composed of the following (in thousands): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Current tax expense (benefit): | ||||||||
United States | $ | 260 | $ | 1,538 | ||||
International | 694 | (617 | ) | |||||
Total current provision for income taxes | $ | 954 | $ | 921 | ||||
Tax Rate | (20.1 | )% | (9.4 | )% | ||||
As of March 31, 2014, and before consideration of current losses, we had U.S. federal tax loss carryforwards of approximately $13.1 million and state tax loss carryforwards of $50.4 million to offset future taxable income before considering 2014 activity. The tax losses consist of U.S. federal net operating losses of $10.9 million and acquired U.S. federal net operating losses of $2.2 million as well as state net operating losses of $23.8 million and acquired state net operating losses of $26.6 million. 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 2033. As of March 31, 2014, we also had foreign tax loss carryforwards of approximately $10.8 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. We concluded during the first quarter of 2014 evaluation that we are required to maintain a valuation allowance against our net U.S. tax assets. As of March 31, 2014, the Company had a valuation allowance on approximately $8.1 million of U.S. deferred tax assets related to operating losses before considering 2014 activity and $21.8 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 $2.2 million. Any future release of this valuation allowance will reduce expense. | ||||||||
As of March 31, 2014, we had $10.4 million of unrecognized tax benefits, excluding related interest. $9.7 million of these unrecognized tax benefits would affect our effective tax rate if recognized. As of March 31, 2014, we had approximately $1.7 million of accrued interest related to uncertain tax positions. 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 gross unrecognized tax benefits may change within the next twelve months by a range of zero to $8.9 million. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2014 | |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | ' |
9. COMMITMENTS AND CONTINGENCIES | |
Litigation | |
We are subject to legal proceedings, claims and litigation, and other disputes or regulatory inquires arising in the ordinary course of business. In addition, 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. While the final outcome of these matters is currently not determinable, we believe there is no ordinary course litigation or other matters that are currently pending against us that is likely to have, individually or in the aggregate, a material effect on our consolidated financial position, results of operations, stockholders’ equity or cash flows. Because of the uncertainty inherent in litigation, disputes, and intellectual property matters, it is possible that unfavorable resolutions of these lawsuits, proceedings and claims could exceed the amount we have currently reserved for these matters. | |
On April 4, 2014, we settled two intellectual property lawsuits with DDR Holdings, LLC, each of which was dismissed with prejudice. As of the period ended March 31, 2014, we have accrued for the full settlement amount within the “Other accrued liabilities” line of the Consolidated Balance Sheets. | |
On March 31, 2014, the U.S. District Court for the District of Minnesota certified a class action against the Company of all persons in the United States who purchased Extended Download Service for Norton Products between January 24, 2005, and October 26, 2009. The plaintiffs have sued Symantec Corporation and the Company. The claims against the Company are for alleged violation of the Minnesota Consumer Fraud and False Statement in Advertising Acts and unjust enrichment, based on the Company’s sale of Extended Download Service to purchasers of Norton products. We intend to continue to vigorously defend this matter, but cannot predict the timing or ultimate outcome, nor estimate a range of loss, if any, for this matter. | |
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. | |
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. | |
To date, no significant costs have been incurred, either individually or collectively, in connection with our indemnification provisions | |
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 $0.6 million in undrawn letters of credit as of March 31, 2014 and December 31, 2013. |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2014 | |
DEBT | ' |
DEBT | ' |
10. DEBT | |
2010 Senior Convertible Notes | |
For the three months ended March 31, 2014, we repurchased $160.6 million of our 2.00% senior convertible notes (2010 Notes) in the open market for $164.5 million, excluding accrued interest. For the three months ended March 31, 2014, the loss on extinguishment of debt, including the premium on repurchase and acceleration of the recognition of deferred financing fees was $5.5 million. For the three months ended March 31, 2013, we repurchased $1.4 million of the 2010 Notes in the open market for $1.3 million, excluding accrued interest. For the three months ended March 31, 2013, the net gain on extinguishment of debt, which is the net of the gain on sale and the loss on acceleration of the recognition of deferred financing fees, was immaterial. Notes repurchased are deemed to be extinguished for accounting purposes. | |
As of March 31, 2014, the carrying value of our 2010 Notes was $135.2 million and the fair value was $135.5 million. As of December 31, 2013, the carrying value of our 2010 Notes was $295.8 million and the fair value was $298.3 million. Fair values are based on the quoted fair market values 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 | |
On January 1, 2014, holders of $8.7 million of our 1.25% senior convertible notes (2004 Notes) exercised the option to require us to repurchase those Notes at par. The acceleration of the recognition of deferred financing fees related to the repurchased 2004 Notes resulted in a $0.1 million charge to the quarter ended March 31, 2014. The repurchased 2004 Notes have been classified as current in “Other current liabilities” in our December 31, 2013, Consolidated Balance Sheet due to the subsequent repurchase on January 1, 2014. | |
As of March 31, 2014, the carrying value and fair value of our remaining 2004 notes was $0.1 million. As of December 31, 2013, the carrying value of our 2004 Notes was $8.8 million and the fair value was $8.9 million. Fair values are based on the quoted fair market values of the debt. Debt is classified as a level 3 fair value measurement. We determine fair value based on the market approach. |
DISCONTINUED_OPERATIONS_AND_DI
DISCONTINUED OPERATIONS AND DISPOSALS | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
DISCONTINUED OPERATIONS AND DISPOSALS | ' | |||||||
DISCONTINUED OPERATIONS AND DISPOSALS | ' | |||||||
11. DISCONTINUED OPERATIONS AND DISPOSALS | ||||||||
On September 30, 2013, we sold CustomCD, Inc., which was based in Portland, Oregon in a stock sale to a former employee. On October 1, 2013, we sold Digital River Education Services, Inc., which was based in Plano, Texas in a stock sale to two former employees. The results of operations of these entities, including the income (losses) on their respective sales, have been excluded from the results of continuing operations and are reported as discontinued operations. We do not allocate interest income or interest expense to discontinued operations. The operating results of the discontinued operations included in our Consolidated Statements of Operations, including adjustments to loss on the respective sales, for the three months ended March 31, 2014 and 2013, were as follows (in thousands): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Revenue | $ | — | $ | 2,672 | ||||
Income (loss) on discontinued operations before taxes and loss on sales | — | (678 | ) | |||||
Income (loss) on disposal of discontinued businesses before taxes | 212 | — | ||||||
Provision (benefit) for income taxes | 79 | — | ||||||
Income (loss) on discontinued operations, net of tax | $ | 133 | $ | (678 | ) | |||
BASIS_OF_PRESENTATION_Policies
BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
BASIS OF PRESENTATION | ' |
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. We adopted the new guidance in ASU 2013-11 as of the period ended March 31, 2014, 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, Inc. (CustomCD) and Digital River Education Services, Inc. (DRES), which were sold on September 30, 2013 and October 1, 2013, respectively, have been classified within Discontinued Operations in our Consolidated Statements of Operations for the three months ended March 31, 2014. The operations of these entities in the corresponding three months ended March 31, 2013 have been reclassified into Discontinued Operations to conform with the current period presentation. |
NET_INCOME_LOSS_PER_SHARE_Tabl
NET INCOME (LOSS) PER SHARE (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
NET INCOME (LOSS) PER SHARE | ' | |||||||
Computation of basic and diluted net income (loss) per share from continuing operations | ' | |||||||
The following table summarizes the computation of basic and diluted net income (loss) per share from continuing operations (in thousands, except per share amounts): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Income (loss) from continuing operations per share - basic | ||||||||
Income (loss) from continuing operations - basic | $ | (5,717 | ) | $ | (10,687 | ) | ||
Weighted average shares outstanding - basic | 30,734 | 32,877 | ||||||
Income (loss) from continuing operations per share - basic | $ | (0.19 | ) | $ | (0.33 | ) | ||
Income (loss) from continuing operations per share - diluted | ||||||||
Income (loss) from continuing operations - basic | $ | (5,717 | ) | $ | (10,687 | ) | ||
Exclude: Interest expense and amortized financing cost of convertible senior notes, net of tax benefit | — | — | ||||||
Income (loss) from continuing operations - diluted | $ | (5,717 | ) | $ | (10,687 | ) | ||
Weighted average shares outstanding - basic | 30,734 | 32,877 | ||||||
Dilutive impact of non-vested stock and options outstanding | — | — | ||||||
Dilutive impact of 2004 senior convertible notes | — | — | ||||||
Weighted average shares outstanding - diluted | 30,734 | 32,877 | ||||||
Income (loss) from continuing operations per share - diluted | $ | (0.19 | ) | $ | (0.33 | ) |
ACCUMULATED_OTHER_COMPREHENSIV1
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ' | ||||||||||
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 period ended March 31, 2014 and 2013, (in thousands): | |||||||||||
Foreign currency | Unrealized gain | Total | |||||||||
translation | (loss) on | ||||||||||
adjustment | investments | ||||||||||
Balance as of December 31, 2013 | $ | 3,720 | $ | 812 | $ | 4,532 | |||||
Other comprehensive income (loss) before reclassifications | (2,444 | ) | 332 | (2,112 | ) | ||||||
Reclassified adjustment for net loss included in net income (loss) | — | 4 | 4 | ||||||||
Net current period other comprehensive income (loss) | (2,444 | ) | 336 | (2,108 | ) | ||||||
Balance as of March 31, 2014 | $ | 1,276 | $ | 1,148 | $ | 2,424 | |||||
Balance as of December 31, 2012 | $ | 2,565 | $ | (5,735 | ) | $ | (3,170 | ) | |||
Other comprehensive income (loss) before reclassifications | (8,205 | ) | 3,505 | (4,700 | ) | ||||||
Reclassified adjustment for net gain included in net income (loss) | — | (2 | ) | (2 | ) | ||||||
Net current period other comprehensive income (loss) | (8,205 | ) | 3,503 | (4,702 | ) | ||||||
Balance as of March 31, 2013 | $ | (5,640 | ) | $ | (2,232 | ) | $ | (7,872 | ) | ||
Summary of reclassifications out of accumulated other comprehensive income (loss) | ' | ||||||||||
The following table summarizes the reclassifications out of accumulated other comprehensive income (loss) for the period ended March 31, 2014 (in thousands): | |||||||||||
Reclassification out of accumulated other | Amount reclassified | Affected line item in the | |||||||||
comprehensive income | from accumulated other | Consolidated Statement of | |||||||||
comprehensive income | Operations | ||||||||||
Realized gains (losses) on investments | |||||||||||
$ | (7 | ) | Other income (expense), net | ||||||||
3 | Income tax benefit (expense) | ||||||||||
$ | (4 | ) | Net income (loss) |
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
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 March 31, 2014 and December 31, 2013, (in thousands): | ||||||||||||||
Fair Value Measurements | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Balance as of March 31, 2014 | ||||||||||||||
Cash and cash equivalents | $ | 309,717 | $ | 309,717 | $ | — | $ | — | ||||||
Restricted cash | 3,606 | 3,606 | — | — | ||||||||||
U.S. government sponsored entities | 1,993 | — | 1,993 | — | ||||||||||
Corporate bonds | 80,163 | 80,163 | — | — | ||||||||||
Market basis equity investments | 3,207 | 3,207 | — | — | ||||||||||
Auction rate securities | 42,943 | — | — | 42,943 | ||||||||||
Total assets measured at fair value | $ | 441,629 | $ | 396,693 | $ | 1,993 | $ | 42,943 | ||||||
Balance as of December 31, 2013 | ||||||||||||||
Cash and cash equivalents | $ | 483,868 | $ | 483,868 | $ | — | $ | — | ||||||
Restricted cash | 3,560 | 3,560 | — | — | ||||||||||
Commerical paper | 9,992 | 9,992 | — | — | ||||||||||
U.S. government sponsored entities | 4,000 | — | 4,000 | — | ||||||||||
Corporate bonds | 101,660 | 101,660 | — | — | ||||||||||
Market basis equity investments | 3,549 | 3,549 | — | — | ||||||||||
Auction rate securities | 41,993 | — | — | 41,993 | ||||||||||
Total assets measured at fair value | $ | 648,622 | $ | 602,629 | $ | 4,000 | $ | 41,993 | ||||||
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, 2012 | $ | 37,001 | ||||||||||||
Total unrealized gains (losses) included in other comprehensive income | 5,092 | |||||||||||||
Settlements | (100 | ) | ||||||||||||
Balance as of December 31, 2013 | $ | 41,993 | ||||||||||||
Total unrealized gains (losses) included in other comprehensive income | 950 | |||||||||||||
Settlements | — | |||||||||||||
Balance as of March 31, 2014 | $ | 42,943 | ||||||||||||
Discounted cash flow model assumptions used to value securities | ' | |||||||||||||
The discounted cash flow model we used to value these securities included the following assumptions: | ||||||||||||||
March 31, | December 31, | |||||||||||||
2014 | 2013 | |||||||||||||
Unobservable inputs | ||||||||||||||
Redemption period (in years) | 6 | 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 | 1.50% | 1.60% | ||||||||||||
Risk adjusted discount rate | 4.3% to 6.0% | 4.7% to 7.8% |
INVESTMENTS_Tables
INVESTMENTS (Tables) | 3 Months Ended | ||||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||||
INVESTMENTS | ' | ||||||||||||||||||||||
Schedule of components of available-for-sale securities | ' | ||||||||||||||||||||||
As of March 31, 2014 and December 31, 2013, 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 March 31, 2014 | |||||||||||||||||||||||
U.S. government sponsored entities | $ | 2,000 | $ | — | $ | (7 | ) | $ | — | $ | 1,993 | $ | 997 | $ | 996 | ||||||||
Corporate bonds | 79,950 | 224 | (11 | ) | — | 80,163 | 66,423 | 13,740 | |||||||||||||||
Market basis equity investments | 3,207 | — | — | — | 3,207 | — | 3,207 | ||||||||||||||||
Auction rate securities | 45,725 | — | — | (2,782 | ) | 42,943 | — | 42,943 | |||||||||||||||
Total available-for-sale securities | $ | 130,882 | $ | 224 | $ | (18 | ) | $ | (2,782 | ) | $ | 128,306 | $ | 67,420 | $ | 60,886 | |||||||
Balance as of December 31, 2013 | |||||||||||||||||||||||
Commercial paper | $ | 9,992 | $ | — | $ | — | $ | — | $ | 9,992 | $ | 9,992 | $ | — | |||||||||
U.S. government sponsored entities | 4,000 | — | — | — | 4,000 | — | 4,000 | ||||||||||||||||
Corporate bonds | 101,400 | 281 | (21 | ) | — | 101,660 | 58,280 | 43,380 | |||||||||||||||
Market basis equity investments | 1,668 | 1,881 | — | — | 3,549 | — | 3,549 | ||||||||||||||||
Auction rate securities | 45,725 | — | — | (3,732 | ) | 41,993 | — | 41,993 | |||||||||||||||
Total available-for-sale securities | $ | 162,785 | $ | 2,162 | $ | (21 | ) | $ | (3,732 | ) | $ | 161,194 | $ | 68,272 | $ | 92,922 |
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
STOCK-BASED COMPENSATION | ' | |||||||
Summary of stock-based compensation expense | ' | |||||||
The following table summarizes stock-based compensation expense related to employee stock options, restricted and performance stock awards and employee stock purchases recognized (in thousands): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Costs and expenses | ||||||||
Direct cost of services | $ | 44 | $ | 42 | ||||
Network and infrastructure | 382 | 415 | ||||||
Sales and marketing | 1,002 | 1,832 | ||||||
Product research and development | 912 | 925 | ||||||
General and administrative | 1,648 | 2,361 | ||||||
Stock-based compensation included in costs and expenses | $ | 3,988 | $ | 5,575 |
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
INCOME TAXES | ' | |||||||
Schedule of components of provision (benefit) for income taxes from continuing operations | ' | |||||||
The provision (benefit) for income taxes from continuing operations is composed of the following (in thousands): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Current tax expense (benefit): | ||||||||
United States | $ | 260 | $ | 1,538 | ||||
International | 694 | (617 | ) | |||||
Total current provision for income taxes | $ | 954 | $ | 921 | ||||
Tax Rate | (20.1 | )% | (9.4 | )% | ||||
DISCONTINUED_OPERATIONS_AND_DI1
DISCONTINUED OPERATIONS AND DISPOSALS (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
DISCONTINUED OPERATIONS AND DISPOSALS | ' | |||||||
Schedule of operating results of the discontinued operations included in the Company's Consolidated Statements of Operations, including adjustments to loss on the respective disposals | ' | |||||||
The operating results of the discontinued operations included in our Consolidated Statements of Operations, including adjustments to loss on the respective sales, for the three months ended March 31, 2014 and 2013, were as follows (in thousands): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Revenue | $ | — | $ | 2,672 | ||||
Income (loss) on discontinued operations before taxes and loss on sales | — | (678 | ) | |||||
Income (loss) on disposal of discontinued businesses before taxes | 212 | — | ||||||
Provision (benefit) for income taxes | 79 | — | ||||||
Income (loss) on discontinued operations, net of tax | $ | 133 | $ | (678 | ) |
NET_INCOME_LOSS_PER_SHARE_Deta
NET INCOME (LOSS) PER SHARE (Details) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Income (loss) from continuing operations per share - basic | ' | ' |
Income (loss) from continuing operations - basic (in dollars) | ($5,717) | ($10,687) |
Weighted average shares outstanding - basic (in shares) | 30,734 | 32,877 |
Income (loss) from continuing operations per share - basic (in dollars per share) | ($0.19) | ($0.33) |
Income (loss) from continuing operations per share - diluted | ' | ' |
Income (loss) from continuing operations - basic (in dollars) | -5,717 | -10,687 |
Income (loss) from continuing operations - diluted (in dollars) | ($5,717) | ($10,687) |
Weighted average shares outstanding - basic (in shares) | 30,734 | 32,877 |
Weighted average shares outstanding - diluted (in shares) | 30,734 | 32,877 |
Income (loss) from continuing operations per share - diluted (in dollars per share) | ($0.19) | ($0.33) |
NET_INCOME_LOSS_PER_SHARE_Deta1
NET INCOME (LOSS) PER SHARE (Details 2) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Incremental shares related to dilutive securities | ' | ' |
Antidilutive securities | ' | ' |
Number of anti-dilutive shares excluded from the computation of diluted net income (loss) per share | 682,387 | 573,291 |
Stock Options | ' | ' |
Antidilutive securities | ' | ' |
Number of anti-dilutive shares excluded from the computation of diluted net income (loss) per share | 455,422 | 1,429,109 |
Convertible debt securities | Convertible debt | 2004 Senior Convertible Notes | ' | ' |
Antidilutive securities | ' | ' |
Number of anti-dilutive shares excluded from the computation of diluted net income (loss) per share | 1,021 | 199,828 |
Convertible debt securities | Convertible debt | 2010 Senior Convertible Notes | ' | ' |
Antidilutive securities | ' | ' |
Number of anti-dilutive shares excluded from the computation of diluted net income (loss) per share | 5,021,960 | 6,116,842 |
ACCUMULATED_OTHER_COMPREHENSIV2
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Changes in accumulated other comprehensive income (loss), net of tax, by component | ' | ' |
Beginning balance | $4,532 | ($3,170) |
Other comprehensive income (loss) before reclassifications | -2,112 | -4,700 |
Reclassified adjustment for net loss (gain) included in net income (loss) | 4 | -2 |
Other comprehensive income (loss) | -2,108 | -4,702 |
Ending balance | 2,424 | -7,872 |
Foreign currency translation adjustment | ' | ' |
Changes in accumulated other comprehensive income (loss), net of tax, by component | ' | ' |
Beginning balance | 3,720 | 2,565 |
Other comprehensive income (loss) before reclassifications | -2,444 | -8,205 |
Other comprehensive income (loss) | -2,444 | -8,205 |
Ending balance | 1,276 | -5,640 |
Unrealized gain (loss) on investments | ' | ' |
Changes in accumulated other comprehensive income (loss), net of tax, by component | ' | ' |
Beginning balance | 812 | -5,735 |
Other comprehensive income (loss) before reclassifications | 332 | 3,505 |
Reclassified adjustment for net loss (gain) included in net income (loss) | 4 | -2 |
Other comprehensive income (loss) | 336 | 3,503 |
Ending balance | $1,148 | ($2,232) |
ACCUMULATED_OTHER_COMPREHENSIV3
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details 2) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Amounts Reclassified from AOCI | ' | ' |
Other income (expense), net | ($323) | $10,905 |
Income tax benefit (expense) | -954 | -921 |
Net income (loss) | -5,584 | -11,365 |
Realized gains (losses) on investments | Reclassification out of accumulated other comprehensive income | ' | ' |
Amounts Reclassified from AOCI | ' | ' |
Other income (expense), net | -7 | ' |
Income tax benefit (expense) | 3 | ' |
Net income (loss) | ($4) | ' |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
FAIR VALUE MEASUREMENTS | ' | ' |
Transfers of assets between levels of the hierarchy | $0 | $0 |
Transfers of assets between levels of the hierarchy | 0 | 0 |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 128,306 | 161,194 |
Commercial paper | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | ' | 9,992 |
U.S. government sponsored entities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 1,993 | 4,000 |
Corporate bonds | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 80,163 | 101,660 |
Market basis equity investments | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 3,207 | 3,549 |
Auction rate securities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 42,943 | 41,993 |
Recurring | Total | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Cash and cash equivalents | 309,717 | 483,868 |
Restricted cash | 3,606 | 3,560 |
Assets measured at fair value | 441,629 | 648,622 |
Recurring | Total | Commercial paper | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | ' | 9,992 |
Recurring | Total | U.S. government sponsored entities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 1,993 | 4,000 |
Recurring | Total | Corporate bonds | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 80,163 | 101,660 |
Recurring | Total | Market basis equity investments | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 3,207 | 3,549 |
Recurring | Total | Auction rate securities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 42,943 | 41,993 |
Recurring | Level 1 | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Cash and cash equivalents | 309,717 | 483,868 |
Restricted cash | 3,606 | 3,560 |
Assets measured at fair value | 396,693 | 602,629 |
Recurring | Level 1 | Commercial paper | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | ' | 9,992 |
Recurring | Level 1 | Corporate bonds | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 80,163 | 101,660 |
Recurring | Level 1 | Market basis equity investments | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | 3,207 | 3,549 |
Recurring | Level 2 | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Assets measured at fair value | 1,993 | 4,000 |
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 | 1,993 | 4,000 |
Recurring | Level 3 | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Assets measured at fair value | 42,943 | 41,993 |
Recurring | Level 3 | Auction rate securities | ' | ' |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ' |
Available-for-sale securities, fair value | $42,943 | $41,993 |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 2) (Auction rate securities, USD $) | 3 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 |
Auction rate securities | ' | ' |
Reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 inputs) | ' | ' |
Beginning Balance | $41,993 | $37,001 |
Total unrealized gains (losses) included in other comprehensive income | 950 | 5,092 |
Settlements | ' | -100 |
Ending Balance | $42,943 | $41,993 |
FAIR_VALUE_MEASUREMENTS_Detail2
FAIR VALUE MEASUREMENTS (Details 3) (USD $) | 3 Months Ended | 12 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' | ' |
Fair value adjustment, assets | $0.70 | ' | ' |
Commercial paper | Maximum | ' | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' | ' |
Investment, contractual maturity | '1 year | ' | ' |
U.S. government sponsored entities | Maximum | ' | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' | ' |
Investment, contractual maturity | '4 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 | 45.7 | ' | 45.7 |
Fair value | 42.9 | ' | 42 |
Temporary fair value reduction recorded under "Accumulated other comprehensive income (loss)" | 2.8 | ' | 3.7 |
Temporary fair value reduction (as a percent) | 6.10% | ' | 8.20% |
Unrealized gains (losses) on ARS | 0.9 | 3.1 | ' |
Weighted average maturity | '29 years 7 months 6 days | ' | '29 years 9 months 18 days |
Liquidated due to partial calls at par | 0 | ' | 0.1 |
Auction rate securities | Minimum | ' | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' | ' |
Over-collateralized percentage | 107.00% | ' | ' |
Auction rate securities | Maximum | ' | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' | ' |
Over-collateralized percentage | 140.00% | ' | ' |
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) | 9.70% | ' | 6.50% |
Nonrecurring | ' | ' | ' |
Methods and assumptions used to estimate the fair value of each class of financial instrument | ' | ' | ' |
Fair value adjustment, assets | 0 | ' | 0 |
Fair value adjustment, liabilities | $0 | ' | $0 |
FAIR_VALUE_MEASUREMENTS_Detail3
FAIR VALUE MEASUREMENTS (Details 4) (USD $) | 3 Months Ended | 12 Months Ended |
In Millions, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 |
Assumptions used to value securities | ' | ' |
Increase in fair value | 0.7 | ' |
Auction rate securities | ' | ' |
Assumptions used to value securities | ' | ' |
Redemption period | '6 years | '7 years |
Auction rate securities | Minimum | ' | ' |
Assumptions used to value securities | ' | ' |
Penalty coupon rate (as a percent) | 1.00% | 1.00% |
Risk adjusted discount rate (as a percent) | 4.30% | 4.70% |
Auction rate securities | Maximum | ' | ' |
Assumptions used to value securities | ' | ' |
Penalty coupon rate (as a percent) | 1.50% | 1.50% |
Risk adjusted discount rate (as a percent) | 6.00% | 7.80% |
Auction rate securities | Weighted average | ' | ' |
Assumptions used to value securities | ' | ' |
Weighted average annualized yield (as a percent) | 1.50% | 1.60% |
INVESTMENTS_Details
INVESTMENTS (Details) (USD $) | 3 Months Ended | |||
Mar. 31, 2014 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2013 | |
INVESTMENTS | ' | ' | ' | ' |
Cost | $130,882,000 | ' | ' | $162,785,000 |
Gross Unrealized Gains | 224,000 | ' | ' | 2,162,000 |
Gross Unrealized Losses Less than 12 Months | -18,000 | ' | ' | -21,000 |
Gross Unrealized Losses Greater than 12 Months | -2,782,000 | ' | ' | -3,732,000 |
Fair Value | 128,306,000 | ' | ' | 161,194,000 |
Maturities/Reset Dates Less than 12 Months | 67,420,000 | ' | ' | 68,272,000 |
Maturities/Reset Dates Greater than 12 Months | 60,886,000 | ' | ' | 92,922,000 |
Aggregate carrying value of cost method equity investments | 11,400,000 | ' | ' | 10,500,000 |
Additional amount invested under cost method investment | 600,000 | ' | ' | ' |
Amount of note receivable converted into shares | 300,000 | ' | ' | ' |
Gain recorded under cost method equity investments | ' | 6,500,000 | 11,100,000 | ' |
Contingent gain under cost method equity investments | 3,100,000 | ' | ' | ' |
Commercial paper | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' |
Cost | ' | ' | ' | 9,992,000 |
Fair Value | ' | ' | ' | 9,992,000 |
Maturities/Reset Dates Less than 12 Months | ' | ' | ' | 9,992,000 |
U.S. government sponsored entities | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' |
Cost | 2,000,000 | ' | ' | 4,000,000 |
Gross Unrealized Losses Less than 12 Months | -7,000 | ' | ' | ' |
Fair Value | 1,993,000 | ' | ' | 4,000,000 |
Maturities/Reset Dates Less than 12 Months | 997,000 | ' | ' | ' |
Maturities/Reset Dates Greater than 12 Months | 996,000 | ' | ' | 4,000,000 |
Corporate bonds | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' |
Cost | 79,950,000 | ' | ' | 101,400,000 |
Gross Unrealized Gains | 224,000 | ' | ' | 281,000 |
Gross Unrealized Losses Less than 12 Months | -11,000 | ' | ' | -21,000 |
Fair Value | 80,163,000 | ' | ' | 101,660,000 |
Maturities/Reset Dates Less than 12 Months | 66,423,000 | ' | ' | 58,280,000 |
Maturities/Reset Dates Greater than 12 Months | 13,740,000 | ' | ' | 43,380,000 |
Market basis equity investments | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' |
Cost | 3,207,000 | ' | ' | 1,668,000 |
Gross Unrealized Gains | ' | ' | ' | 1,881,000 |
Fair Value | 3,207,000 | ' | ' | 3,549,000 |
Maturities/Reset Dates Greater than 12 Months | 3,207,000 | ' | ' | 3,549,000 |
Auction Rate Securities | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' |
Cost | 45,725,000 | ' | ' | 45,725,000 |
Gross Unrealized Losses Greater than 12 Months | -2,782,000 | ' | ' | -3,732,000 |
Fair Value | 42,943,000 | ' | ' | 41,993,000 |
Maturities/Reset Dates Greater than 12 Months | $42,943,000 | ' | ' | $41,993,000 |
GOODWILL_Details
GOODWILL (Details) (USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2013 |
GOODWILL | ' |
Goodwill impairment | $21,249 |
STOCKBASED_COMPENSATION_Detail
STOCK-BASED COMPENSATION (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
STOCK-BASED COMPENSATION | ' | ' |
Stock-based compensation included in costs and expenses | $3,988 | $5,575 |
Direct cost of services | ' | ' |
STOCK-BASED COMPENSATION | ' | ' |
Stock-based compensation included in costs and expenses | 44 | 42 |
Network and infrastructure | ' | ' |
STOCK-BASED COMPENSATION | ' | ' |
Stock-based compensation included in costs and expenses | 382 | 415 |
Sales and marketing | ' | ' |
STOCK-BASED COMPENSATION | ' | ' |
Stock-based compensation included in costs and expenses | 1,002 | 1,832 |
Product research and development | ' | ' |
STOCK-BASED COMPENSATION | ' | ' |
Stock-based compensation included in costs and expenses | 912 | 925 |
General and administrative | ' | ' |
STOCK-BASED COMPENSATION | ' | ' |
Stock-based compensation included in costs and expenses | $1,648 | $2,361 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Current tax expense (benefit): | ' | ' |
United States | $260 | $1,538 |
International | 694 | -617 |
Total current provision for income taxes | $954 | $921 |
Tax Rate (as a percent) | -20.10% | -9.40% |
INCOME_TAXES_Details_2
INCOME TAXES (Details 2) (USD $) | Mar. 31, 2014 |
In Millions, unless otherwise specified | |
Unrecognized tax benefits | ' |
Unrecognized tax benefits, excluding related interest | $10.40 |
Unrecognized tax benefits that would affect effective tax rate if recognized | 9.7 |
Accrued interest related to uncertain tax positions | 1.7 |
Gross unrecognized tax benefits change within the next twelve months, minimum | 0 |
Gross unrecognized tax benefits change within the next twelve months, maximum | 8.9 |
U.S. federal tax | ' |
Tax loss carryforward | ' |
Tax loss carryforwards | 13.1 |
Net operating losses | 10.9 |
Acquired net operating losses | 2.2 |
U.S. federal tax | Operating losses | ' |
Tax loss carryforward | ' |
Deferred tax assets reserved | 8.1 |
U.S. federal tax | Other tax attributes | ' |
Tax loss carryforward | ' |
Deferred tax assets reserved | 21.8 |
State tax | ' |
Tax loss carryforward | ' |
Tax loss carryforwards | 50.4 |
Net operating losses | 23.8 |
Acquired net operating losses | 26.6 |
Foreign tax | ' |
Tax loss carryforward | ' |
Tax loss carryforwards | 10.8 |
Foreign tax | Operating losses | ' |
Tax loss carryforward | ' |
Deferred tax assets reserved | $2.20 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 3 Months Ended | 0 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | Apr. 04, 2014 | |
item | Subsequent event | ||
item | |||
COMMITMENTS AND CONTINGENCIES | ' | ' | ' |
Number of pending litigation | 0 | ' | ' |
COMMITMENTS AND CONTINGENCIES | ' | ' | ' |
Number of settled and dismissed litigations | ' | ' | 2 |
Amount of significant costs incurred individually or collectively, in connection with indemnification provisions | $0 | ' | ' |
Undrawn letters of credit | $600,000 | $600,000 | ' |
DEBT_Details
DEBT (Details) (USD $) | 3 Months Ended | 0 Months Ended | 3 Months Ended | ||||
Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Jan. 02, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | |
Convertible debt | Convertible debt | Convertible debt | Convertible debt | Convertible debt | Convertible debt | ||
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 | ' | ' | ' | ' | ' | ' | ' |
Interest rate (as a percent) | ' | 2.00% | ' | ' | ' | 1.25% | ' |
Principal amount of debt repurchased | ' | $160,600,000 | $1,400,000 | ' | $8,700,000 | ' | ' |
Debt repurchased amount | ' | 164,500,000 | 1,300,000 | ' | ' | ' | ' |
Loss on extinguishment of debt | 5,605,000 | 5,500,000 | ' | ' | ' | 100,000 | ' |
Carrying value of debt | ' | 135,200,000 | ' | 295,800,000 | ' | 100,000 | 8,800,000 |
Fair value of debt | ' | $135,500,000 | ' | $298,300,000 | ' | $100,000 | $8,900,000 |
DISCONTINUED_OPERATIONS_AND_DI2
DISCONTINUED OPERATIONS AND DISPOSALS (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Oct. 01, 2013 |
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 | ' | $2,672 | ' |
Income (loss) on discontinued operations before taxes and loss on sales | ' | -678 | ' |
Income (loss) on disposal of discontinued businesses before taxes | -212 | ' | ' |
Provision (benefit) for income taxes | 79 | ' | ' |
Income (loss) on discontinued operations, net of tax | $133 | ($678) | ' |