Condensed Consolidating Financial Information | 9 Months Ended |
Sep. 30, 2013 |
Condensed Consolidating Financial Information Disclosure [Abstract] | ' |
Condensed Consolidating Financial Information | ' |
Condensed Consolidating Financial Information |
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The Company’s Senior Notes due 2019 and Senior Secured Notes due 2020 are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of the Company’s existing and future domestic subsidiaries, other than certain subsidiaries that are minor (the “Guarantor Subsidiaries”). All of the Guarantor Subsidiaries are 100% owned by the Company. As a result of these guarantees, the Company is required to provide the financial information set forth under Rule 3-10 of Regulation S-X, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered” (“Rule 3-10”). |
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The accompanying condensed consolidating financial information has been prepared and presented pursuant to Rule 3-10. The Parent column represents EarthLink's stand-alone results and its investment in all of its subsidiaries presented using the equity method of accounting. The Guarantor Subsidiaries are presented in a separate column and represent all the Guarantor Subsidiaries on a combined basis. Intercompany eliminations and consolidations, including adjustments required to present the Guarantor Subsidiaries' deferred tax balances on a stand-alone basis, as well as goodwill impairment charges that are not pushed-down to the Guarantor Subsidiaries, are shown in a separate column. Included in this column are: 1) amounts for impairment of goodwill recognized at a consolidated level that are not required or permitted in the separate stand-alone financial statements of the subsidiaries; 2) amounts for income taxes recognized at a consolidated level that are not required or permitted in the separate stand-alone financial statements of the subsidiaries, including the determination of the need for a valuation allowance; and 3) intercompany revenue and cost of revenue eliminations. Certain amounts in the prior period condensed consolidating financial information have been revised to conform with the current period presentation. The condensed consolidating financial information is presented in the following tables (in thousands): |
Condensed Consolidating Balance Sheet |
As of September 30, 2013 |
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| | | | | | | | | | | | | | | |
| Parent | | Guarantor | | Consolidations & Eliminations | | Consolidated |
Subsidiaries |
ASSETS | | | | | | | | | | | |
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Current assets: | | | | | | | | | | | |
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Cash and cash equivalents | $ | 64,754 | | | $ | 51,149 | | | $ | — | | | $ | 115,903 | |
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Accounts receivable, net | 8,325 | | | 99,108 | | | — | | | 107,433 | |
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Prepaid expenses | 8,147 | | | 12,422 | | | — | | | 20,569 | |
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Deferred income taxes, net | — | | | 4,516 | | | 5,966 | | | 10,482 | |
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Due from affiliates | 129,379 | | | 17,977 | | | (147,356 | ) | | — | |
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Other current assets | 3,516 | | | 6,754 | | | — | | | 10,270 | |
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Total current assets | 214,121 | | | 191,926 | | | (141,390 | ) | | 264,657 | |
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Property and equipment, net | 25,246 | | | 413,228 | | | — | | | 438,474 | |
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Long-term deferred income taxes, net | 33,861 | | | 91,573 | | | 121,523 | | | 246,957 | |
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Goodwill | 88,920 | | | 211,031 | | | (160,895 | ) | | 139,056 | |
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Purchased intangible assets, net | — | | | 172,111 | | | — | | | 172,111 | |
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Investment in subsidiaries | 829,603 | | | — | | | (829,603 | ) | | — | |
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Other long-term assets | 16,466 | | | 10,927 | | | — | | | 27,393 | |
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Total assets | $ | 1,208,217 | | | $ | 1,090,796 | | | $ | (1,010,365 | ) | | $ | 1,288,648 | |
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LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | |
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Current liabilities: | | | | | | | | | | | |
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Accounts payable | $ | 4,017 | | | $ | 6,269 | | | $ | — | | | $ | 10,286 | |
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Accrued payroll and related expenses | 3,402 | | | 25,633 | | | | | | 29,035 | |
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Other accrued liabilities | 48,244 | | | 68,456 | | | (655 | ) | | 116,045 | |
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Deferred revenue | 12,485 | | | 37,939 | | | — | | | 50,424 | |
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Due to affiliates | — | | | 147,356 | | | (147,356 | ) | | — | |
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Current portion of debt and capital lease obligations | 80 | | | 1,312 | | | — | | | 1,392 | |
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Total current liabilities | 68,228 | | | 286,965 | | | (148,011 | ) | | 207,182 | |
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Long-term debt and capital lease obligations | 592,249 | | | 14,352 | | | — | | | 606,601 | |
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Other long-term liabilities | 1,644 | | | 29,665 | | | (518 | ) | | 30,791 | |
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Total liabilities | 662,121 | | | 330,982 | | | (148,529 | ) | | 844,574 | |
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Stockholders’ equity: | | | | | | | | | | | |
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Common stock | 1,975 | | | — | | | — | | | 1,975 | |
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Additional paid-in capital | 2,072,250 | | | 1,235,800 | | | (1,258,918 | ) | | 2,049,132 | |
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Accumulated deficit | (786,202 | ) | | (475,982 | ) | | 397,082 | | | (865,102 | ) |
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Treasury stock, at cost | (741,927 | ) | | — | | | — | | | (741,927 | ) |
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Accumulated other comprehensive loss | — | | | (4 | ) | | — | | | (4 | ) |
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Total stockholders’ equity | 546,096 | | | 759,814 | | | (861,836 | ) | | 444,074 | |
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Total liabilities and stockholders’ equity | $ | 1,208,217 | | | $ | 1,090,796 | | | $ | (1,010,365 | ) | | $ | 1,288,648 | |
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Condensed Consolidating Balance Sheet |
As of December 31, 2012 |
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| | | | | | | | | | | | | | | |
| Parent | | Guarantor | | Consolidations & Eliminations | | Consolidated |
Subsidiaries |
ASSETS | | | | | | | | | | | |
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Current assets: | | | | | | | | | | | |
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Cash and cash equivalents | $ | 70,312 | | | $ | 87,309 | | | $ | — | | | $ | 157,621 | |
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Marketable securities | 42,073 | | | — | | | — | | | 42,073 | |
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Restricted cash | — | | | 1,013 | | | — | | | 1,013 | |
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Accounts receivable, net | 9,490 | | | 103,275 | | | — | | | 112,765 | |
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Prepaid expenses | 6,352 | | | 10,819 | | | — | | | 17,171 | |
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Deferred income taxes, net | 1,234 | | | 5,948 | | | 8,772 | | | 15,954 | |
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Due from affiliates | 90,778 | | | 30,429 | | | (121,207 | ) | | — | |
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Other current assets | 7,862 | | | 12,441 | | | — | | | 20,303 | |
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Total current assets | 228,101 | | | 251,234 | | | (112,435 | ) | | 366,900 | |
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Long-term marketable securities | 4,778 | | | — | | | — | | | 4,778 | |
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Property and equipment, net | 24,427 | | | 394,539 | | | — | | | 418,966 | |
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Long-term deferred income taxes, net | 12,421 | | | 74,013 | | | 108,578 | | | 195,012 | |
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Goodwill | 88,920 | | | 290,495 | | | — | | | 379,415 | |
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Purchased intangible assets, net | — | | | 214,685 | | | — | | | 214,685 | |
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Investment in subsidiaries | 650,405 | | | — | | | (650,405 | ) | | — | |
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Other long-term assets | 8,842 | | | 10,812 | | | — | | | 19,654 | |
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Total assets | $ | 1,017,894 | | | $ | 1,235,778 | | | $ | (654,262 | ) | | $ | 1,599,410 | |
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LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | |
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Current liabilities: | | | | | | | | | | | |
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Accounts payable | $ | 2,654 | | | $ | 16,138 | | | $ | — | | | $ | 18,792 | |
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Accrued payroll and related expenses | 9,493 | | | 21,510 | | | — | | | 31,003 | |
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Other accrued liabilities | 23,064 | | | 106,524 | | | (16 | ) | | 129,572 | |
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Deferred revenue | 13,883 | | | 37,807 | | | — | | | 51,690 | |
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Due to affiliates | — | | | 121,207 | | | (121,207 | ) | | — | |
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Current portion of debt and capital lease obligations | 93 | | | 1,282 | | | — | | | 1,375 | |
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Total current liabilities | 49,187 | | | 304,468 | | | (121,223 | ) | | 232,432 | |
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Long-term debt and capital lease obligations | 291,534 | | | 323,356 | | | — | | | 614,890 | |
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Other long-term liabilities | 3,139 | | | 32,502 | | | (2,357 | ) | | 33,284 | |
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Total liabilities | 343,860 | | | 660,326 | | | (123,580 | ) | | 880,606 | |
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Stockholders’ equity: | | | | | | | | | | | |
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Common stock | 1,969 | | | — | | | — | | | 1,969 | |
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Additional paid-in capital | 2,057,974 | | | 894,223 | | | (894,223 | ) | | 2,057,974 | |
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Accumulated deficit | (650,918 | ) | | (318,771 | ) | | 363,541 | | | (606,148 | ) |
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Treasury stock, at cost | (735,003 | ) | | — | | | — | | | (735,003 | ) |
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Accumulated other comprehensive income | 12 | | | — | | | — | | | 12 | |
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Total stockholders’ equity | 674,034 | | | 575,452 | | | (530,682 | ) | | 718,804 | |
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Total liabilities and stockholders’ equity | $ | 1,017,894 | | | $ | 1,235,778 | | | $ | (654,262 | ) | | $ | 1,599,410 | |
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Condensed Consolidating Statement of Comprehensive Loss |
Three Months Ended September 30, 2013 |
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| | | | | | | | | | | | | | | |
| Parent | | Guarantor | | Consolidations & Eliminations | | Consolidated |
Subsidiaries |
Revenues | $ | 72,443 | | | $ | 238,371 | | | $ | (2,236 | ) | | $ | 308,578 | |
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Operating costs and expenses: | | | | | | | | | | | |
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Cost of revenues (exclusive of depreciation and amortization shown separately below) | 24,373 | | | 122,623 | | | (2,236 | ) | | 144,760 | |
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Selling, general and administrative (exclusive of depreciation and amortization shown separately below) | 22,055 | | | 86,856 | | | — | | | 108,911 | |
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Depreciation and amortization | 2,308 | | | 44,381 | | | — | | | 46,689 | |
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Restructuring, acquisition and integration-related costs | 4,414 | | | 5,514 | | | — | | | 9,928 | |
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Total operating costs and expenses | 53,150 | | | 259,374 | | | (2,236 | ) | | 310,288 | |
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Income (loss) from operations | 19,293 | | | (21,003 | ) | | — | | | (1,710 | ) |
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Interest expense and other, net | (12,999 | ) | | (986 | ) | | — | | | (13,985 | ) |
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Equity in losses of subsidiaries | (13,828 | ) | | — | | | 13,828 | | | — | |
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Loss before income taxes | (7,534 | ) | | (21,989 | ) | | 13,828 | | | (15,695 | ) |
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Income tax (provision) benefit | (178 | ) | | 8,423 | | | (3,663 | ) | | 4,582 | |
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Loss from continuing operations | (7,712 | ) | | (13,566 | ) | | 10,165 | | | (11,113 | ) |
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Loss from discontinued operations, net of tax | — | | | (262 | ) | | 37 | | | (225 | ) |
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Net loss | $ | (7,712 | ) | | $ | (13,828 | ) | | $ | 10,202 | | | $ | (11,338 | ) |
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| | | | | | | |
Comprehensive loss | $ | (7,713 | ) | | $ | (13,832 | ) | | $ | 10,202 | | | $ | (11,343 | ) |
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Condensed Consolidating Statement of Comprehensive Income (Loss) |
Three Months Ended September 30, 2012 |
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| | | | | | | | | | | | | | | |
| Parent | | Guarantor | | Consolidations & Eliminations | | Consolidated |
Subsidiaries |
Revenues | $ | 83,022 | | | $ | 249,669 | | | $ | (1,852 | ) | | $ | 330,839 | |
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Operating costs and expenses: | | | | | | | | | | | |
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Cost of revenues (exclusive of depreciation and amortization shown separately below) | 27,187 | | | 130,007 | | | (1,852 | ) | | 155,342 | |
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Selling, general and administrative (exclusive of depreciation and amortization shown separately below) | 24,468 | | | 83,158 | | | — | | | 107,626 | |
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Depreciation and amortization | 2,272 | | | 43,358 | | | — | | | 45,630 | |
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Restructuring, acquisition and integration-related costs | 3,683 | | | 2,696 | | | — | | | 6,379 | |
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Total operating costs and expenses | 57,610 | | | 259,219 | | | (1,852 | ) | | 314,977 | |
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Income (loss) from operations | 25,412 | | | (9,550 | ) | | — | | | 15,862 | |
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Interest expense and other, net | (7,385 | ) | | (9,407 | ) | | — | | | (16,792 | ) |
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Equity in losses of subsidiaries | (17,248 | ) | | — | | | 17,248 | | | — | |
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Income (loss) before income taxes | 779 | | | (18,957 | ) | | 17,248 | | | (930 | ) |
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Income tax (provision) benefit | (4,672 | ) | | 2,777 | | | 4,688 | | | 2,793 | |
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Income (loss) from continuing operations | (3,893 | ) | | (16,180 | ) | | 21,936 | | | 1,863 | |
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Loss from discontinued operations, net of tax | — | | | (1,068 | ) | | 577 | | | (491 | ) |
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Net income (loss) | $ | (3,893 | ) | | $ | (17,248 | ) | | $ | 22,513 | | | $ | 1,372 | |
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| | | | | | | |
Comprehensive income (loss) | $ | (3,874 | ) | | $ | (17,248 | ) | | $ | 22,513 | | | $ | 1,391 | |
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Condensed Consolidating Statement of Comprehensive Loss |
Nine Months Ended September 30, 2013 |
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| | | | | | | | | | | | | | | |
| Parent | | Guarantor | | Consolidations & Eliminations | | Consolidated |
Subsidiaries |
Revenues | $ | 224,313 | | | $ | 721,100 | | | $ | (6,646 | ) | | $ | 938,767 | |
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Operating costs and expenses: | | | | | | | | |
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Cost of revenues (exclusive of depreciation and amortization shown separately below) | 75,156 | | | 382,054 | | | (6,646 | ) | | 450,564 | |
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Selling, general and administrative (exclusive of depreciation and amortization shown separately below) | 65,819 | | | 254,650 | | | — | | | 320,469 | |
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Depreciation and amortization | 6,380 | | | 127,934 | | | — | | | 134,314 | |
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Impairment of goodwill | — | | | 95,805 | | | 159,794 | | | 255,599 | |
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Restructuring, acquisition and integration-related costs | 10,752 | | | 17,716 | | | — | | | 28,468 | |
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Total operating costs and expenses | 158,107 | | | 878,159 | | | 153,148 | | | 1,189,414 | |
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Income (loss) from operations | 66,206 | | | (157,059 | ) | | (159,794 | ) | | (250,647 | ) |
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Interest expense and other, net | (28,992 | ) | | (17,722 | ) | | — | | | (46,714 | ) |
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Equity in losses of subsidiaries | (157,211 | ) | | — | | | 157,211 | | | — | |
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Loss before income taxes | (119,997 | ) | | (174,781 | ) | | (2,583 | ) | | (297,361 | ) |
Income tax (provision) benefit | (15,287 | ) | | 18,324 | | | 36,992 | | | 40,029 | |
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Loss from continuing operations | (135,284 | ) | | (156,457 | ) | | 34,409 | | | (257,332 | ) |
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Loss from discontinued operations, net of tax | — | | | (754 | ) | | (868 | ) | | (1,622 | ) |
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Net loss | $ | (135,284 | ) | | $ | (157,211 | ) | | $ | 33,541 | | | $ | (258,954 | ) |
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| | | | | | | |
Comprehensive loss | $ | (135,296 | ) | | $ | (157,215 | ) | | $ | 33,541 | | | $ | (258,970 | ) |
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Condensed Consolidating Statement of Comprehensive Income (Loss) |
Nine Months Ended September 30, 2012 |
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| | | | | | | | | | | | | | | |
| Parent | | Guarantor | | Consolidations & Eliminations | | Consolidated |
Subsidiaries |
Revenues | $ | 259,113 | | | $ | 752,650 | | | $ | (5,354 | ) | | $ | 1,006,409 | |
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Operating costs and expenses: | | | | | | | | | | | |
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Cost of revenues (exclusive of depreciation and amortization shown separately below) | 84,233 | | | 399,065 | | | (5,354 | ) | | 477,944 | |
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Selling, general and administrative (exclusive of depreciation and amortization shown separately below) | 72,032 | | | 247,929 | | | — | | | 319,961 | |
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Depreciation and amortization | 6,293 | | | 130,510 | | | — | | | 136,803 | |
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Restructuring, acquisition and integration-related costs | 7,344 | | | 6,392 | | | — | | | 13,736 | |
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Total operating costs and expenses | 169,902 | | | 783,896 | | | (5,354 | ) | | 948,444 | |
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Income (loss) from operations | 89,211 | | | (31,246 | ) | | — | | | 57,965 | |
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Interest expense and other, net | (20,308 | ) | | (27,951 | ) | | — | | | (48,259 | ) |
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Equity in losses of subsidiaries | (52,108 | ) | | — | | | 52,108 | | | — | |
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Income (loss) before income taxes | 16,795 | | | (59,197 | ) | | 52,108 | | | 9,706 | |
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Income tax (provision) benefit | (23,746 | ) | | 10,355 | | | 12,913 | | | (478 | ) |
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Income (loss) from continuing operations | (6,951 | ) | | (48,842 | ) | | 65,021 | | | 9,228 | |
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Loss from discontinued operations, net of tax | — | | | (3,266 | ) | | 1,567 | | | (1,699 | ) |
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Net income (loss) | $ | (6,951 | ) | | $ | (52,108 | ) | | $ | 66,588 | | | $ | 7,529 | |
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| | | | | | | |
Comprehensive income (loss) | $ | (6,922 | ) | | $ | (52,108 | ) | | $ | 66,588 | | | $ | 7,558 | |
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Condensed Consolidating Statement of Cash Flows |
Nine Months Ended September 30, 2013 |
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| | | | | | | | | | | | | | | |
| Parent | | Guarantor | | Consolidations & Eliminations | | Consolidated |
Subsidiaries |
Cash flows from operating activities | $ | (9,117 | ) | | $ | 92,547 | | | $ | — | | | $ | 83,430 | |
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Cash flows from investing activities: | | | | | | | | | | | |
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Purchases of property and equipment | (4,840 | ) | | (104,807 | ) | | — | | | (109,647 | ) |
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Purchases of marketable securities | (41,209 | ) | | — | | | — | | | (41,209 | ) |
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Sales and maturities of marketable securities | 88,060 | | | — | | | — | | | 88,060 | |
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Purchase of business | — | | | (16,806 | ) | | — | | | (16,806 | ) |
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Purchase of customer relationships | — | | | (1,195 | ) | | — | | | (1,195 | ) |
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Payment for investment in subsidiary stock | (308,460 | ) | | — | | | 308,460 | | | — | |
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Change in restricted cash | — | | | 1,013 | | | — | | | 1,013 | |
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Other investing activities | 690 | | | 561 | | | — | | | 1,251 | |
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Net cash used in investing activities | (265,759 | ) | | (121,234 | ) | | 308,460 | | | (78,533 | ) |
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Cash flows from financing activities: | | | | | | | | | | | |
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Proceeds from issuance of debt, net of issuance costs | 290,692 | | | — | | | — | | | 290,692 | |
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Principal payments under capital lease obligations | (81 | ) | | (315,965 | ) | | — | | | (316,046 | ) |
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Repurchases of common stock | (5,604 | ) | | — | | | — | | | (5,604 | ) |
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Payment of dividends | (15,693 | ) | | — | | | — | | | (15,693 | ) |
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Proceeds from parent | — | | | 308,460 | | | (308,460 | ) | | — | |
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Other financing activities | 4 | | | 32 | | | — | | | 36 | |
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Net cash provided by (used in) financing activities | 269,318 | | | (7,473 | ) | | (308,460 | ) | | (46,615 | ) |
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Net decrease in cash and cash equivalents | (5,558 | ) | | (36,160 | ) | | — | | | (41,718 | ) |
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Cash and cash equivalents, beginning of period | 70,312 | | | 87,309 | | | — | | | 157,621 | |
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Cash and cash equivalents, end of period | $ | 64,754 | | | $ | 51,149 | | | $ | — | | | $ | 115,903 | |
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Condensed Consolidating Statement of Cash Flows |
Nine Months Ended September 30, 2012 |
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| | | | | | | | | | | | | | | |
| Parent | | Guarantor | | Consolidations & Eliminations | | Consolidated |
Subsidiaries |
Cash flows from operating activities | $ | 91,098 | | | $ | 87,430 | | | $ | — | | | $ | 178,528 | |
|
Cash flows from investing activities: | | | | | | | | | | | |
|
Purchases of property and equipment | (15,962 | ) | | (64,767 | ) | | — | | | (80,729 | ) |
|
Purchases of marketable securities | (57,528 | ) | | — | | | — | | | (57,528 | ) |
|
Sales and maturities of marketable securities | 38,763 | | | — | | | — | | | 38,763 | |
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Change in restricted cash | — | | | 768 | | | — | | | 768 | |
|
Net cash used in investing activities | (34,727 | ) | | (63,999 | ) | | — | | | (98,726 | ) |
|
Cash flows from financing activities: | | | | | | | | | | | |
|
Repayment of debt and capital lease obligations | 7 | | | (1,250 | ) | | — | | | (1,243 | ) |
|
Repurchases of common stock | (12,967 | ) | | — | | | — | | | (12,967 | ) |
|
Payment of dividends | (15,917 | ) | | — | | | — | | | (15,917 | ) |
|
Proceeds from exercises of stock options | 236 | | | — | | | — | | | 236 | |
|
Change in due to/from affiliates, net | — | | | | | | — | | | — | |
|
Other | 30 | | | 69 | | | — | | | 99 | |
|
Net cash used in financing activities | (28,611 | ) | | (1,181 | ) | | — | | | (29,792 | ) |
|
Net increase in cash and cash equivalents | 27,760 | | | 22,250 | | | — | | | 50,010 | |
|
Cash and cash equivalents, beginning of period | 148,363 | | | 63,420 | | | — | | | 211,783 | |
|
Cash and cash equivalents, end of period | $ | 176,123 | | | $ | 85,670 | | | $ | — | | | $ | 261,793 | |
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