Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2016 | Jul. 29, 2016 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | EARTHLINK HOLDINGS CORP. | |
Entity Central Index Key | 1,102,541 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 105,494,702 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 76,833 | $ 91,296 |
Accounts receivable, net of allowance of $3,537 and $2,957 as of December 31, 2015 and June 30, 2016, respectively | 72,750 | 74,724 |
Prepaid expenses | 16,609 | 14,187 |
Other current assets | 10,014 | 9,724 |
Total current assets | 176,206 | 189,931 |
Property and equipment, net | 338,009 | 372,504 |
Goodwill | 134,464 | 137,751 |
Other intangible assets, net | 3,969 | 25,325 |
Other long-term assets | 9,867 | 9,141 |
Total assets | 662,515 | 734,652 |
Current liabilities: | ||
Accounts payable | 12,158 | 18,442 |
Accrued payroll and related expenses | 19,897 | 50,532 |
Other accrued liabilities | 63,804 | 64,305 |
Deferred revenue | 37,033 | 40,229 |
Current portion of long-term debt and capital lease obligations | 33,585 | 6,787 |
Total current liabilities | 166,477 | 180,295 |
Long-term debt and capital lease obligations | 437,492 | 505,613 |
Long-term deferred income taxes, net | 4,446 | 3,876 |
Other long-term liabilities | 26,107 | 22,022 |
Total liabilities | 634,522 | 711,806 |
Stockholders' equity: | ||
Preferred stock, $0.01 par value, 100,000 shares authorized, 0 shares issued and outstanding as of December 31, 2015 and June 30, 2016 | 0 | 0 |
Common stock, $0.01 par value, 300,000 shares authorized, 200,207 and 201,805 shares issued as of December 31, 2015 and June 30, 2016, respectively, and 103,880 and 105,478 shares outstanding as of December 31, 2015 and June 30, 2016, respectively | 2,018 | 2,002 |
Additional paid-in capital | 2,019,786 | 2,026,638 |
Accumulated deficit | (1,248,954) | (1,260,937) |
Treasury stock, at cost, 96,327 shares as of December 31, 2015 and June 30, 2016 | (744,857) | (744,857) |
Total stockholders' equity | 27,993 | 22,846 |
Total liabilities and stockholders' equity | $ 662,515 | $ 734,652 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Allowance for Doubtful Accounts Receivable | $ 2,957 | $ 3,537 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 201,805,000 | 200,207,000 |
Common stock, shares outstanding | 105,478,000 | 103,880,000 |
Treasury stock, shares | 96,327,000 | 96,327,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Income Statement [Abstract] | ||||
Revenues | $ 240,357 | $ 283,664 | $ 494,619 | $ 566,111 |
Operating costs and expenses: | ||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 110,934 | 127,048 | 226,140 | 256,510 |
Selling, general and administrative (exclusive of depreciation and amortization shown separately below) | 76,925 | 94,349 | 158,337 | 189,607 |
Depreciation and amortization | 33,571 | 47,723 | 73,770 | 94,987 |
Restructuring, acquisition and integration-related costs | 3,279 | 3,978 | 6,292 | 9,350 |
Total operating costs and expenses | 224,709 | 273,098 | 464,539 | 550,454 |
Income from operations | 15,648 | 10,566 | 30,080 | 15,657 |
Gain on sale of business | 0 | 0 | 5,727 | 0 |
Interest expense and other, net | (10,824) | (14,112) | (21,933) | (28,049) |
Loss on extinguishment of debt | (226) | (5,966) | (458) | (7,252) |
Income (loss) before income taxes | 4,598 | (9,512) | 13,416 | (19,644) |
Income tax provision | (483) | (410) | (1,434) | (761) |
Net income (loss) and comprehensive income (loss) | $ 4,115 | $ (9,922) | $ 11,982 | $ (20,405) |
Net Income (Loss) Per Share | ||||
Basic net income (loss) per share | $ 0.04 | $ (0.10) | $ 0.11 | $ (0.20) |
Diluted net income (loss) per share | $ 0.04 | $ (0.10) | $ 0.11 | $ (0.20) |
Weighted average common shares outstanding | ||||
Basic weighted average common shares outstanding | 105,322 | 103,323 | 104,879 | 102,969 |
Diluted weighted average common shares outstanding | 108,328 | 103,323 | 108,015 | 102,969 |
Dividends declared per share | $ 0.05 | $ 0.05 | $ 0.10 | $ 0.10 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 11,982 | $ (20,405) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 73,770 | 94,987 |
Gain on sale of business | (5,727) | 0 |
Non-cash income taxes | 522 | 381 |
Stock-based compensation | 8,161 | 7,229 |
Amortization of debt discount and debt issuance costs | 1,720 | 2,023 |
Loss on extinguishment of debt | 458 | 7,252 |
Other operating activities | (682) | 656 |
Decrease (increase) in accounts receivable, net | (2,130) | 7,092 |
Increase in prepaid expenses and other assets | (4,901) | (2,465) |
Decrease in accounts payable and accrued and other liabilities | (37,783) | (44,843) |
Increase in deferred revenue | 5,548 | 220 |
Net cash provided by operating activities | 50,938 | 52,127 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (35,208) | (38,402) |
Proceeds from sale of business | 26,000 | 0 |
Net cash used in investing activities | (9,208) | (38,402) |
Cash flows from financing activities: | ||
Proceeds (payments) from issuance of debt, net of issuance costs | (2,230) | 54,761 |
Repayment of debt and capital lease obligations | (42,812) | (100,624) |
Payment of dividends | (11,402) | (15,882) |
Proceeds from exercises of stock options | 251 | 1,249 |
Net cash used in financing activities | (56,193) | (60,496) |
Net decrease in cash and cash equivalents | (14,463) | (46,771) |
Cash and cash equivalents, beginning of period | 91,296 | 134,133 |
Cash and cash equivalents, end of period | $ 76,833 | $ 87,362 |
Organization
Organization | 6 Months Ended |
Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization EarthLink Holdings Corp. (“EarthLink” or the “Company”), together with its consolidated subsidiaries, is a leading managed network, security and cloud services provider to business and residential customers in the United States. The Company provides a broad range of data, voice and managed network services to retail and wholesale business customers. The Company also provides nationwide Internet access and related value-added services to residential customers. The Company operates an extensive network including more than 29,000 route fiber miles and 90 metro fiber rings. Through its owned and leased facilities, the Company provides data and voice IP service coverage across more than 90 percent of the United States. The Company operates four reportable segments aligned around distinct customer categories: Enterprise/Mid-Market, Small Business, Carrier/Transport and Consumer. For further information concerning the Company’s reportable segments, see Note 13, “Segment Information.” |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The condensed consolidated financial statements of EarthLink for the three and six months ended June 30, 2015 and 2016 and the related footnote information are unaudited and have been prepared on a basis consistent with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission (the “SEC”) (the “Annual Report”). These financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto contained in the Annual Report. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring adjustments) which management considers necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results anticipated for the entire year ending December 31, 2016 . Basis of Consolidation The accompanying condensed consolidated financial statements of EarthLink include the accounts of its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates. Recently Issued Accounting Pronouncements Revenue Recognition . In May 2014, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance on revenue from contracts with customers. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires significantly expanded disclosures about revenue contract assets and liabilities. The new standard also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs. In August 2015, the FASB issued guidance that deferred the effective date by one year. The standard is now required to be adopted by public business entities in annual periods beginning on or after December 15, 2017, and interim periods within those annual periods, and may be applied on a full retrospective or modified retrospective approach. Early adoption at the original effective date is permitted. The Company has elected to adopt the standard in the first quarter of the fiscal year ending December 31, 2018. The Company is in the process of determining the method of adoption and assessing the impact the new standard will have on its consolidated financial statements. Going Concern . In August 2014, the FASB issued authoritative guidance related to the disclosure of uncertainties about an entity's ability to continue as a going concern. The new guidance requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements and to provide related footnote disclosures if so. The new standard is effective for fiscal years, and interim periods within those fiscal years, ending after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company's financial statements. Leases . In February 2016, the FASB issued authoritative guidance on accounting for leases. The new guidance requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. As of the lease commencement date, a lessee is required to recognize a liability for its lease obligation (initially measured at the present value of the future lease payments not yet paid over the lease term) and an asset for its right to use the underlying asset equal to the lease liability, adjusted for lease payments made at or before lease commencement, lease incentives, and any initial direct costs. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the implementation of this standard on its financial statements. Share-Based Payments . In March 2016, the FASB issued authoritative guidance, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the impact of the implementation of this standard on its financial statements. |
Earnings per Share
Earnings per Share | 6 Months Ended |
Jun. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Earnings per Share Basic earnings per share represents net income (loss) divided by the weighted average number of common shares outstanding during the reported period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, including stock options and restricted stock units (collectively "Common Stock Equivalents"), were exercised or converted into common stock. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. In applying the treasury stock method for stock-based compensation arrangements, the assumed proceeds are computed as the sum of the amount the employee must pay upon exercise, the amount of compensation cost attributed to future services and not yet recognized and the amount of excess tax benefits, if any, that would be credited to additional paid-in capital assuming exercise of the awards. The following table presents the computation for basic and diluted net income (loss) per share for the three and six months ended June 30, 2015 and 2016 : Three Months Ended June 30, Six Months Ended June 30, 2015 2016 2015 2016 (in thousands, except per share data) Numerator Net income (loss) $ (9,922 ) $ 4,115 $ (20,405 ) $ 11,982 Denominator Basic weighted average common shares outstanding 103,323 105,322 102,969 104,879 Dilutive effect of Common Stock Equivalents — 3,006 — 3,136 Diluted weighted average common shares outstanding 103,323 108,328 102,969 108,015 Basic net income (loss) per share $ (0.10 ) $ 0.04 $ (0.20 ) $ 0.11 Diluted net income (loss) per share $ (0.10 ) $ 0.04 $ (0.20 ) $ 0.11 The Company has not included the effect of Common Stock Equivalents in the calculation of diluted earnings per share for the three and six months ended June 30, 2015 because such inclusion would have an anti-dilutive effect due to the Company's net loss. As of June 30, 2015 , the Company had 10.0 million stock options and restricted stock units outstanding which were excluded from the determination of dilutive earnings per share. During the three and six months ended June 30, 2016 , approximately 0.6 million stock options and restricted stock units were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive. Anti-dilutive securities could be dilutive in future periods. |
Sale of Business (Notes)
Sale of Business (Notes) | 6 Months Ended |
Jun. 30, 2016 | |
Sale of Business [Abstract] | |
Disposal Groups, Including Discontinued Operations, Disclosure | Sale of Business On February 1, 2016, the Company sold certain assets related to its IT services product offerings. The primary purpose of the sale was to simplify operations and provide more flexibility to invest in new capabilities and services to drive growth in the Company's core business. The purchase price in the transaction was $29.0 million , subject to post-closing contingencies that could increase or decrease the purchase price by up to $5.0 million . The Company received $26.0 million of cash upon completion of the sale. The other $3.0 million of consideration was deposited into an escrow account to fund potential indemnification obligations. The Company recognized a pretax gain of $5.7 million and recorded a $2.0 million deferred gain for contingent consideration. The gain is included in gain on sale of business in the Condensed Consolidated Statement of Comprehensive Income (Loss). The carrying amount of the IT services assets was $17.5 million , which included $11.4 million of property and equipment, $2.3 million of goodwill, $3.5 million of other intangible assets and $0.3 million of other assets and liabilities. Total revenue of the Company's IT services business was approximately $23.5 million and $3.4 million , respectively, during the six months ended June 30, 2015 and 2016 . The sale of the IT services business did not represent a strategic shift in the Company's business nor did it have a major effect on the Company's consolidated results of operations, financial position or cash flows, and accordingly, did not qualify for reporting as a discontinued operation. The IT services business was previously included in the Company's Enterprise/Mid-Market and Small Business segments. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 6 Months Ended |
Jun. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill The following table presents changes in the carrying amount of goodwill by operating segment during the six months ended June 30, 2016 : Enterprise/ Small Carrier/ Mid-Market Business Transport Consumer Total (in thousands) Balance as of December 31, 2015 Goodwill $ 237,982 $ 57,137 $ 98,290 $ 88,920 $ 482,329 Accumulated impairment loss (208,443 ) (50,045 ) (86,090 ) — (344,578 ) 29,539 7,092 12,200 88,920 137,751 Goodwill disposed (1,516 ) (746 ) — (1,025 ) (3,287 ) Balance as of June 30, 2016 Goodwill 236,466 56,391 98,290 87,895 479,042 Accumulated impairment loss (208,443 ) (50,045 ) (86,090 ) — (344,578 ) $ 28,023 $ 6,346 $ 12,200 $ 87,895 $ 134,464 Goodwill disposed includes the portion of goodwill allocated to the disposed IT services business and the portion of goodwill allocated to certain assets held for sale. Other Intangible Assets The following table presents the components of the Company’s acquired identifiable intangible assets included in the accompanying Condensed Consolidated Balance Sheets as of December 31, 2015 and June 30, 2016 : As of December 31, 2015 As of June 30, 2016 Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value (in thousands) Customer relationships $ 346,825 $ (323,365 ) $ 23,460 $ 337,397 $ (334,143 ) $ 3,254 Developed technology and software 26,261 (24,396 ) 1,865 25,311 (24,596 ) 715 Trade name 1,521 (1,521 ) — 1,521 (1,521 ) — Other intangible assets, net $ 374,607 $ (349,282 ) $ 25,325 $ 364,229 $ (360,260 ) $ 3,969 Definite-lived intangible assets are amortized over their estimated useful lives. The Company amortizes its customer relationships using the straight-line method to match the estimated cash flow generated by such assets, and amortizes its developed technology and software using the straight-line method because a pattern to which the expected benefits will be consumed or otherwise used up could not be reliably determined. As of June 30, 2016 , the weighted average amortization periods were 5.3 years for customer relationships and 3.8 years for developed technology and software. The Company sold intangible assets that had a gross carrying value of $10.4 million and a net carrying value of $3.5 million in connection with the sale of its IT services business. Amortization of intangible assets, which is included in depreciation and amortization in the Condensed Consolidated Statements of Comprehensive Income (Loss) , for the three and six months ended June 30, 2015 and 2016 was as follows: Three Months Ended June 30, Six Months Ended June 30, 2015 2016 2015 2016 (in thousands) Amortization expense $ 16,596 $ 5,898 $ 33,276 $ 17,845 Based on the current amount of definite-lived intangible assets, the Company expects to record amortization expense of approximately $4.0 million during the remaining six months in the year ending December 31, 2016 . Actual amortization expense to be reported in future periods could differ materially from these estimates as a result of acquisitions, changes in useful lives and other relevant factors. |
Other Accrued Liabilities
Other Accrued Liabilities | 6 Months Ended |
Jun. 30, 2016 | |
Other Accrued Liabilities [Abstract] | |
Other Accrued Liabilities | Other Accrued Liabilities The Company's other accrued liabilities consisted of the following as of December 31, 2015 and June 30, 2016 : December 31, 2015 June 30, 2016 (in thousands) Accrued taxes and surcharges $ 14,663 $ 14,308 Accrued communications costs 23,201 23,153 Customer-related liabilities 7,854 7,052 Accrued interest 3,822 3,716 Other 14,765 15,575 Total other accrued liabilities $ 64,305 $ 63,804 |
Long-Term Debt and Capital Leas
Long-Term Debt and Capital Lease Obligations | 6 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Long-Term Debt and Capital Lease Obligations | Long-Term Debt and Capital Lease Obligations The Company’s long-term debt and capital lease obligations consisted of the following as of December 31, 2015 and June 30, 2016 : December 31, 2015 June 30, 2016 (in thousands) Senior secured notes due June 2020 $ 300,000 $ 300,000 Unamortized debt issue costs on senior secured notes due June 2020 (4,723 ) (4,188 ) Senior notes due May 2019 173,925 166,945 Unamortized discount and debt issue costs on senior notes due May 2019 (5,393 ) (4,464 ) Senior secured revolving credit facility 35,000 — Capital lease obligations 13,591 12,784 Carrying value of debt and capital lease obligations 512,400 471,077 Less current portion of debt and capital lease obligations (6,787 ) (33,585 ) Long-term debt and capital lease obligations $ 505,613 $ 437,492 2016 Transactions During the six months ended June 30, 2016 , the Company repurchased $7.0 million outstanding principal of its 8.875% Senior Notes due 2019 (the “Senior Notes”) in the open market for $7.0 million , plus accrued and unpaid interest. The Company recognized a $0.2 million loss on extinguishment of debt, consisting of the write-off of unamortized discount on debt, the write-off of debt issuance costs and payment of premium on the repurchase. The loss is included in loss on extinguishment of debt in the Condensed Consolidated Statement of Comprehensive Income (Loss). The payment of premium is included in repayment of debt and capital lease obligations in the Condensed Consolidated Statement of Cash Flows. During the six months ended June 30, 2016 , the Company repaid $35.0 million of its senior secured revolving credit facility. As of June 30, 2016 , the Company had no amounts outstanding under its senior secured revolving credit facility. On June 30, 2016, the Company refinanced its senior secured revolving credit facility. See "2016 Credit Facility" below for more information. On June 30, 2016, the Company exercised its right under the related indenture to call a portion of its outstanding Senior Notes. On August 4, 2016, the Company redeemed $90.0 million aggregate principal amount of its Senior Notes at a redemption price equal to 102.219% of the principal amount thereof, plus accrued and unpaid interest. The Company used approximately $34.0 million of existing cash, a $50.0 million term loan and $10.0 million under its senior secured revolving credit facility to fund the redemption, call premium and accrued interest. As of June 30, 2016, $31.7 million net carrying amount of the Senior Notes was classified within current portion of debt and capital lease obligations in the Condensed Consolidated Balance Sheet and $130.8 million net carrying amount was classified within long-term debt and capital lease obligations. Debt Covenants The indenture governing the Company's 7.375% Senior Secured Notes due 2020 (the “Senior Secured Notes”) includes covenants which, subject to certain exceptions, limit the ability of the Company and its Restricted Subsidiaries (as defined in the indenture) to, among other things, incur additional indebtedness, make certain types of restricted payments, create liens, transfer and sell assets, enter into certain transactions with affiliates, issue or sell stock of subsidiaries, engage in sale-leaseback transactions and create restrictions on dividends or other payments by restricted subsidiaries. Upon a change of control (as defined in the indenture), the Company may be required to make an offer to repurchase the Senior Secured Notes at 101% of their principal amount, plus accrued and unpaid interest. The indenture governing the Senior Secured Notes also contains customary events of default. As of June 30, 2016 , the Company was in compliance with these covenants. The indenture governing the Senior Notes includes covenants which, subject to certain exceptions, limit the ability of the Company and its Restricted Subsidiaries (as defined in the indenture) to, among other things, incur additional indebtedness, make certain types of restricted payments, incur liens on assets of the Company or the Restricted Subsidiaries, engage in asset sales and enter into transactions with affiliates. Upon a change of control (as defined in the indenture), the Company may be required to make an offer to repurchase the Notes at 101% of their principal amount, plus accrued and unpaid interest. The indenture governing the Senior Notes also contains customary events of default. As of June 30, 2016 , the Company was in compliance with these covenants. The indentures governing the Senior Secured Notes and Senior Notes contain covenants regarding the Company's ability to make Restricted Payments (as defined in the indentures), including certain dividends, stock purchases, debt repayments and investments. As of June 30, 2016 , the indentures governing the Company's Senior Secured Notes and Senior Notes permitted approximately $185.1 million and $313.6 million , respectively, in Restricted Payments. The Company's ability to make Restricted Payments varies over time, and is determined, in part, by the extent that the Company's cumulative EBITDA exceeds 300% of its cumulative interest expense. 2016 Credit Facility General. In June 2016, the Company entered into a second amended and restated credit agreement (the “Credit Agreement”) providing for a new senior secured revolving credit facility with aggregate revolving commitments of up to $125.0 million and an up to $50.0 million delayed draw senior secured term loan (together, the "Credit Facility"). The senior secured revolving credit facility replaces the Company’s previous $135.0 million senior secured credit facility. The Company paid $2.2 million of transaction fees and expenses related to the new Credit Facility, which are being amortized to interest expense over the life of the Credit Facility using the straight-line method. The payment of transaction fees is included in proceeds (payments) from issuance of debt, net of issuance costs, in the Condensed Consolidated Statement of Cash Flows. The Company wrote-off $0.2 million of unamortized debt issuance costs related to the previous $135.0 million senior secured revolving credit facility. The loss is included in loss on extinguishment of debt in the Condensed Consolidated Statements of Comprehensive Income (Loss). Commitment fees and borrowing costs under this facility vary and are based on the Company’s most recent Consolidated Leverage Ratio (as defined in the Credit Agreement). As of June 30, 2016 , the Company’s commitment fee was 0.5% and the Company’s borrowing cost is LIBOR plus 3.25% for LIBOR Rate Loans and the Base Rate plus 2.25% for Base Rate Loans. As of June 30, 2016 , no amounts were outstanding under the Credit Agreement. As of June 30, 2016 , $1.7 million of letters of credit were outstanding under the Credit Agreement’s Letter of Credit Sublimit. The amended and restated credit facility matures on June 30, 2021 and all amounts outstanding thereunder shall be due and payable in full, except that if the Company's Senior Secured Notes have not been repaid in full by February 29, 2020, the maturity date will be February 29, 2020. The term loan is subject to quarterly amortization of principal, commencing with the first fiscal quarter ending after the term loan is funded, as set forth as follows with the remaining outstanding principal amount (and any accrued and unpaid interest) due on February 29, 2020: Year 1, 5.0%; Year 2, 5.0%; Year 3, 7.5%, Year 4, 7.5%; and Year 5, 10.0%. The Credit Facility may in the future be increased by up to $50.0 million (so long as the aggregate amount of the Credit Facility does not exceed $175.0 million ) with additional commitments from the current lenders or other financial institutions reasonably acceptable to the administrative agent and the satisfaction of conditions contained in the Credit Agreement. The Company is the borrower under the Credit Facility. All obligations of the borrower under the Credit Agreement are guaranteed by each of the Company’s existing direct and indirect domestic subsidiaries and will be guaranteed by certain of the Company’s future direct and indirect domestic subsidiaries (other than immaterial subsidiaries). The obligations of the Company and the subsidiary guarantors under the Credit Facility, as well as obligations under any treasury management, interest protection or other hedging arrangements entered into with a lender (or affiliate thereof), are secured by (subject to certain liens permitted by the Credit Agreement) liens, which rank equally with the Company’s other senior secured indebtedness, on and security interests in, (i) substantially all of the Company’s and the subsidiary guarantors’ present and future personal property assets (subject to certain exclusions set forth in the Credit Agreement), (ii) certain of the Company’s and the subsidiary guarantors’ present and future real estate owned in fee simple that is required by the Credit Agreement to be mortgaged, (iii) all present and future shares of the capital stock of the Company’s and the subsidiary guarantors’ present and future subsidiaries (excluding any stock in excess of 66% of the voting stock of non-U.S. subsidiaries), and (iv) all proceeds and products of the foregoing property and assets. Prepayment . The Company may prepay the Credit Facility in whole or in part at any time without premium or penalty, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of LIBOR borrowings. The Company may irrevocably reduce or terminate the unutilized portion of the revolving credit facility at any time without penalty. Covenants . The Credit Agreement contains representations and warranties, covenants and events of default with respect to the Company and its subsidiaries that are customarily applicable to senior secured credit facilities. The negative covenants contained in the Credit Agreement include restrictions on the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make capital expenditures, incur liens on assets, engage in certain mergers, acquisitions or divestitures, pay dividends or make other distributions, voluntarily prepay certain other indebtedness (including certain prepayments of the Company’s senior secured notes and senior notes), enter into transactions with affiliates, make investments, and change the nature of their businesses, and amend the terms of certain other indebtedness (including the Company’s existing notes), in each case subject to certain exceptions set forth in the Credit Agreement. Additionally, the Credit Agreement requires the Company to maintain a consolidated net leverage ratio of not greater than 3.5 to 1.0 (with restrictions on cash netting) and a consolidated interest coverage ratio of not less than 2.5 to 1.0. The Company was in compliance with all covenants as of June 30, 2016 . Financial Information Under Rule 3-10 of Regulation S-X The Company’s Senior Secured Notes and Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of the Company’s existing and future domestic subsidiaries, other than certain subsidiaries that are minor (the “Guarantor Subsidiaries”). All of the Guarantor Subsidiaries are 100% owned by the Company and have, jointly and severally, fully and unconditionally guaranteed, to each holder of the Notes, the full and prompt performance of the Company’s obligations under the Notes and the indenture governing the Notes, including the payment of principal (or premium, if any) and interest on the Notes, on an equal and ratable basis. Further, the Company has no independent assets or operations, and there are no significant restrictions on the ability of its consolidated subsidiaries to transfer funds to the Company in the form of cash dividends, loans or advances. The Company’s assets consist solely of investments it has made in its consolidated subsidiaries, and its operations consist solely of changes in its investment in subsidiaries and interest associated with the Senior Secured Notes and Senior Notes. Based on these facts, and in accordance with SEC Regulation S-X Rule 3-10, “Financial statements of guarantors and issuers of guaranteed securities registered or being registered,” the Company is not required to provide condensed consolidating financial information for the Guarantor Subsidiaries. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2016 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Stockholders’ Equity Share Repurchases Since the inception of the Company’s share repurchase program, the Board of Directors has authorized a total of $750.0 million for the repurchase of EarthLink’s common stock. As of June 30, 2016 , the Company had $65.7 million available under the current authorizations. The Company may repurchase its common stock from time to time in compliance with the SEC’s regulations and other legal requirements, including through the use of derivative transactions, and subject to market conditions and other factors. The share repurchase program does not require the Company to acquire any specific number of shares and may be terminated by the Board of Directors at any time. In addition, the agreements governing the Company’s Senior Secured Notes and Senior Notes and the Company's Credit Agreement contain restrictions on the ability of the Company to repurchase common stock. Dividends During the six months ended June 30, 2015 and 2016 , cash dividends declared were $0.10 and $0.10 per common share, respectively. The Company also pays cash dividend amounts on each outstanding restricted stock unit to be paid at the time the restricted stock unit vests. Cash dividend amounts are forfeited if the restricted stock units do not vest. Total dividend payments were $15.9 million and $11.4 million during the six months ended June 30, 2015 and 2016 , respectively. The decision to declare future dividends is made at the discretion of the Board of Directors and will depend on, among other things, the Company’s results of operations, financial condition, cash requirements, investment opportunities and other factors the Board of Directors may deem relevant. In addition, the agreements governing the Company’s Senior Secured Notes and Senior Notes and the Company's Credit Agreement contain restrictions on the amount of dividends the Company can pay. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation Stock-based compensation expense was $3.8 million and $4.1 million during the three months ended June 30, 2015 and 2016 , respectively, and $7.2 million and $8.2 million during the six months ended June 30, 2015 and 2016 , respectively. The Company has classified stock-based compensation expense within selling, general and administrative expense, the same operating expense line item as cash compensation paid to employees. Options Outstanding The following table presents stock option activity as of and for the six months ended June 30, 2016 : Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (shares and dollars in thousands) Outstanding as of December 31, 2015 908 $ 6.52 Granted — — Exercised (41 ) 6.08 Forfeited and expired (163 ) 8.58 Outstanding as of June 30, 2016 704 6.08 6.3 $ 486 Vested and expected to vest as of June 30, 2016 668 6.11 6.2 $ 450 Exercisable as of June 30, 2016 465 6.43 5.8 $ 243 The aggregate intrinsic value amounts in the table above represent the closing price of the Company’s common stock on June 30, 2016 in excess of the exercise price, multiplied by the number of stock options outstanding, exercisable or vested and expected to vest, when the closing price is greater than the exercise price. This represents the amount that would have been received by the stock option holders if they had all exercised their stock options on June 30, 2016 . The total intrinsic value of stock options exercised during the six months ended June 30, 2015 and 2016 was not material. The intrinsic value of stock options exercised represents the difference between the market value of Company’s common stock at the time of exercise and the exercise price, multiplied by the number of stock options exercised. As of June 30, 2016 , there was $0.2 million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized over a weighted-average period of 1.4 years . The following table presents the status of the Company’s stock options as of June 30, 2016 : Stock Options Outstanding Stock Options Exercisable Weighted Average Weighted Weighted Remaining Average Average Range of Number Contractual Exercise Number Exercise Exercise Prices Outstanding Life Price Exercisable Price (in thousands) (in thousands) $ 4.97 to $ 4.97 300 7.5 $ 4.97 150 $ 4.97 6.08 to 6.08 179 6.6 6.08 90 6.08 6.90 to 9.23 225 4.3 7.55 225 7.55 4.97 to 9.23 704 6.3 6.08 465 6.43 Restricted Stock Units The following table presents restricted stock unit activity as of and for the six months ended June 30, 2016 : Restricted Stock Units Weighted Average Grant Date Fair Value (in thousands) Outstanding as of December 31, 2015 7,751 $ 4.58 Granted 3,234 5.07 Vested (2,306 ) 4.86 Forfeited (622 ) 4.53 Outstanding as of June 30, 2016 8,057 $ 4.70 The fair value of restricted stock units is determined based on the closing price of EarthLink’s common stock on the grant date. The weighted-average grant date fair value of restricted stock units granted during the six months ended June 30, 2015 and 2016 was $4.49 and $5.07 , respectively. As of June 30, 2016 , there was $24.8 million of total unrecognized compensation cost related to nonvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 2.0 years . The total fair value of shares vested during the six months ended June 30, 2015 and 2016 was $8.0 million and $12.7 million , respectively, which represents the closing price of the Company’s common stock on the vesting date multiplied by the number of restricted stock units that vested. |
Restructuring, Acquisition and
Restructuring, Acquisition and Integration-Related Costs | 6 Months Ended |
Jun. 30, 2016 | |
Restructuring and Related Activities [Abstract] | |
Restructuring, Acquisition and Integration-Related Costs | Restructuring, Acquisition and Integration-Related Costs Restructuring, acquisition and integration-related costs consisted of the following during the three and six months ended June 30, 2015 and 2016 : Three Months Ended June 30, Six Months Ended June 30, 2015 2016 2015 2016 (in thousands) Integration-related costs $ 1,658 $ 1,897 $ 2,975 $ 3,676 Severance, retention and other employee costs 1,048 667 3,949 1,558 Facility-related costs 1,272 715 2,426 1,058 Restructuring, acquisition and integration-related costs $ 3,978 $ 3,279 $ 9,350 $ 6,292 Restructuring, acquisition and integration-related costs consist of costs related to the Company's restructuring, acquisition and integration-related activities. The Company recognizes a liability for costs associated with an exit or disposal activity when the liability is incurred. The Company recognizes severance costs when they are both probable and reasonably estimable. Restructuring, acquisition and integration-related costs include the following: • Integration-related costs, such as system conversion and integration-related consulting and employee costs. The Company is also undertaking a long-term network optimization project designed to consolidate traffic onto network facilities operated by the Company and reduce the usage of other carriers’ networks. Integration-related costs associated with this initiative include costs to migrate traffic to lower cost circuits and to terminate existing contracts prior to their expiration; • Severance, retention and other employee termination costs associated with acquisition and integration activities and as a result of evaluations of our operating structure; and • Facility-related costs, such as lease termination and asset impairments. During the six months ended June 30, 2016 , the Company recorded $2.6 million of restructuring costs in connection with changes in its business strategy. The restructuring costs consisted of $1.6 million of severance due to reductions in workforce and $1.1 million of facilities-related costs primarily due to the closing of certain sales offices and other facilities. Restructuring costs for the six months ended June 30, 2016 are included in restructuring, acquisition and integration-related costs in the Condensed Consolidated Statement of Comprehensive Income (Loss). The following table summarizes activity for liability balances associated with facility exit and restructuring liabilities for the six months ended June 30, 2016 : Severance and Benefits Facilities Total (in thousands) Balance as of December 31, 2015 $ 3,539 $ 5,542 $ 9,081 Accruals 1,558 1,058 2,616 Payments (4,587 ) (1,479 ) (6,066 ) Balance as of June 30, 2016 $ 510 $ 5,121 $ 5,631 As of December 31, 2015 , $5.4 million of facility exit and restructuring liabilities were classified within current liabilities and $3.7 million were classified as other long-term liabilities. As of June 30, 2016 , $2.3 million of facility exit and restructuring liabilities were classified within current liabilities and $3.3 million were classified as other long-term liabilities. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes During the six months ended June 30, 2016 , the Company recorded an income tax provision of $1.4 million , resulting in an effective tax rate for the six months ended June 30, 2016 of approximately 10.7% . During the six months ended June 30, 2015 , the Company recorded an income tax provision of $0.8 million , resulting in an effective tax rate for the six months ended June 30, 2015 of approximately (3.9)% . The difference between the effective tax rate and the federal statutory rate during the six months ended June 30, 2016 primarily relates to changes in the valuation allowance on net deferred tax assets. The income tax provision for the six months ended June 30, 2016 includes federal alternative minimum tax expense, tax expense for foreign and state taxes, amortization of intangibles with indefinite useful lives and a discrete expense of $0.1 million , primarily for state taxes. The difference between the effective tax rate and the federal statutory rate during the six months ended June 30, 2015 primarily relates to changes in the valuation allowance on net deferred tax assets. The income tax benefit for the six months ended June 30, 2015 includes tax expense for foreign and state taxes, amortization of intangible assets with indefinite useful lives and a discrete expense of $0.2 million primarily for state taxes. As of June 30, 2016 , the Company had a valuation allowance of $343.5 million against its net deferred tax assets, exclusive of its deferred tax liabilities with indefinite useful lives. The Company continually reviews the adequacy of the valuation allowance and recognizes the benefits of deferred tax assets only as the reassessment indicates that it is more likely than not that the deferred tax assets will be realized. As of June 30, 2016 , the Company does not believe it is more likely than not that the remaining net deferred tax assets will be realized. Should the Company’s assessment change in a future period it may release all or a portion of the valuation allowance at such time, which would result in a deferred tax benefit in the period of adjustment. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). A three-tier fair value hierarchy is used to prioritize the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as observable inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The estimated fair value of the Company’s Senior Secured Notes and Senior Notes was determined based on Level 2 input using observable market prices in less active markets. The carrying amount of the Company’s senior secured revolving credit facility approximated its fair value as of December 31, 2015 . The following table presents the fair value of the Company’s debt, excluding capital leases, as of December 31, 2015 and June 30, 2016 : As of December 31, 2015 As of June 30, 2016 Carrying Carrying Amount Fair Value Amount Fair Value (in thousands) Senior Secured Notes $ 295,277 $ 305,439 $ 295,812 $ 309,033 Senior Notes 168,532 177,404 162,481 169,917 Senior secured revolving credit facility 35,000 35,000 — — Total debt, excluding capital leases $ 498,809 $ 517,843 $ 458,293 $ 478,950 |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2016 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information General The Company reports segment information along the same lines that its Chief Operating Decision Maker reviews its operating results in assessing performance and allocating resources. The Company's Chief Operating Decision Maker is its Chief Executive Officer. The Company's reportable segments are strategic business units that are aligned around distinct customer categories to optimize operations. The Company operates the following four reportable segments: • Enterprise/Mid-Market . The Company’s Enterprise/Mid-Market segment provides a broad range of data, voice and managed network services to distributed multi-site business customers. • Small Business . The Company’s Small Business segment provides a broad range of data, voice and managed network services to small, often single-site business customers. • Carrier/Transport . The Company’s Carrier/Transport segment provides transmission capacity and other data, voice and managed network services to telecommunications carriers and large enterprises. • Consumer . The Company’s Consumer segment provides nationwide Internet access and related value-added services to residential customers. Segment Results The following table presents segment results for the three and six months ended June 30, 2015 and 2016 : Three Months Ended Six Months Ended June 30, June 30, 2015 2016 2015 2016 (in thousands) Enterprise/Mid-Market Revenues $ 114,368 $ 97,586 $ 228,759 $ 202,275 Cost of revenues (excluding depreciation and amortization) 56,216 50,499 112,488 102,070 Gross margin 58,152 47,087 116,271 100,205 Small Business Revenues 79,041 57,270 $ 158,095 $ 119,403 Cost of revenues (excluding depreciation and amortization) 35,263 27,205 72,860 56,939 Gross margin 43,778 30,065 85,235 62,464 Carrier/Transport Revenues 34,149 35,123 $ 67,021 $ 71,192 Cost of revenues (excluding depreciation and amortization) 15,350 15,289 30,943 30,753 Gross margin 18,799 19,834 36,078 40,439 Consumer Revenues 56,106 50,378 $ 112,236 $ 101,749 Cost of revenues (excluding depreciation and amortization) 20,219 17,941 40,219 36,378 Gross margin 35,887 32,437 72,017 65,371 Total Segments Revenues 283,664 240,357 566,111 494,619 Cost of revenues (excluding depreciation and amortization) 127,048 110,934 256,510 226,140 Gross margin $ 156,616 $ 129,423 $ 309,601 $ 268,479 The following table presents a reconciliation of segment gross margin to consolidated income (loss) before income taxes for the three and six months ended June 30, 2015 and 2016 : Three Months Ended Six Months Ended June 30, June 30, 2015 2016 2015 2016 (in thousands) Segment gross margin $ 156,616 $ 129,423 $ 309,601 $ 268,479 Operating costs and expenses: Selling, general and administrative expenses 94,349 76,925 189,607 158,337 Depreciation and amortization 47,723 33,571 94,987 73,770 Restructuring, acquisition and integration-related costs 3,978 3,279 9,350 6,292 Total operating costs and expenses 146,050 113,775 293,944 238,399 Income from operations 10,566 15,648 15,657 30,080 Gain on sale of business — — — 5,727 Interest expense and other, net (14,112 ) (10,824 ) (28,049 ) (21,933 ) Loss on extinguishment of debt (5,966 ) (226 ) (7,252 ) (458 ) Income (loss) before income taxes $ (9,512 ) $ 4,598 $ (19,644 ) $ 13,416 The Company evaluates performance of its segments based on segment gross margin. Segment gross margin includes revenues from external customers and related cost of revenues. Costs excluded from segment gross margin include selling, general and administrative expenses, depreciation and amortization, restructuring, acquisition and integration-related costs, gain on sale of business, interest expense and other, net, and loss on extinguishment of debt, as they are not considered in the measurement of segment performance. Management periodically evaluates the segmentation of customers within the distinct customer categories, which may result in changes to segment information in the future. The Company manages its working capital on a consolidated basis and does not allocate long-lived assets to segments. In addition, segment assets are not reported to, or used by, the Chief Operating Decision Maker and therefore, total segment assets and expenditures for additions of long-lived assets have not been disclosed. The Company has not provided information about geographic segments because substantially all of the Company’s revenues, results of operations and identifiable assets are in the United States. Revenues by Type The Company generates revenues by providing a broad range of data, voice and managed network services to business and residential customers. The Company’s revenues primarily consist of the following: • Monthly recurring charges for providing data, voice and managed network services; transmission capacity; and Internet access and related value-added services; • Usage revenues; • Equipment revenues; and • Non-recurring and other revenues, such as installation fees, termination fees and administrative fees. The following table presents revenue detail for the three and six months ended June 30, 2015 and 2016 : Three Months Ended Six Months Ended June 30, June 30, 2015 2016 2015 2016 (in thousands) Monthly recurring revenues $ 251,145 $ 212,693 $ 499,120 $ 436,095 Usage revenues 25,120 21,271 52,798 43,729 Equipment revenues 3,935 3,947 7,659 8,054 Non-recurring and other revenues 3,464 2,446 6,534 6,741 Total revenues $ 283,664 $ 240,357 $ 566,111 $ 494,619 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal proceedings and other disputes General . The Company is party to various legal proceedings and other disputes arising in the normal course of business, including, but not limited to, regulatory audits, E911 payments, trademark and patent infringement, billing disputes, rights of access, tax, consumer protection, employment and tort. The Company accrues for such matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the range is more likely than any other amount, the Company accrues at the low end of the range. The Company reviews its accruals each reporting period. The Company's management believes that there are no disputes, litigation or other legal proceedings, audits or disputes asserted or pending against the Company that could have, individually or in the aggregate, a material adverse effect on its financial position, results of operations or cash flows, and believes that adequate provision for any probable and estimable losses has been made in the Company's consolidated financial statements. However, the ultimate result of any current or future litigation or other legal proceedings, audits or disputes is inherently unpredictable and could result in liabilities that are higher than currently predicted. Regulatory audits . The Company is subject to regulatory audits in the ordinary course of business with respect to various matters, including audits by local municipalities for E911 charges and audits by the Universal Service Administrative Company on universal service fund assessments and payments. These audits can cover periods for several years prior to the date the audit is undertaken and could result in the imposition of liabilities, interest and penalties if the Company's positions are not accepted by the auditing entity. The Company's financial statements contain reserves for certain of such potential liabilities. Billing disputes . The Company is periodically involved in disputes related to its billings to other carriers for access to its network. The Company does not recognize revenue related to such matters until the period that revenues are determinable and it is reasonably assured of the collection of the amounts billed. In the event that a claim is made related to revenues previously recognized, the Company assesses the validity of the claim and adjusts the amount of revenue being recognized to the extent that the claim adjustment is considered probable and estimable. The Company recognized $1.0 million and $0.7 million of net favorable disputes related to its billings to other carriers during the three months ended June 30, 2015 and June 30, 2016 , respectively, and $3.1 million and $1.6 million of net favorable disputes related to its billings to other carriers during the six months ended June 30, 2015 and June 30, 2016 , respectively, which are included in revenues in the Condensed Consolidated Statements of Comprehensive Income (Loss). The Company periodically disputes network access charges that it is assessed by other companies with which the Company interconnects. The Company maintains adequate reserves for anticipated exposure associated with these billing disputes. The reserves are subject to changes in estimates and management judgment as new information becomes available. In view of the length of time historically required to resolve these disputes, they may be resolved or require adjustment in future periods and relate to costs invoiced, accrued or paid in prior periods. While the Company believes its reserves for billing disputes are adequate, it is reasonably possible that the Company could record additional expense of up to $10.4 million for unrecorded disputed amounts. The Company recognized $3.1 million and $3.7 million for favorable disputes with telecommunication vendors during the three months ended June 30, 2015 and 2016 , respectively, $6.6 million and $7.5 million for favorable disputes with telecommunication vendors during the six months ended June 30, 2015 and 2016 , respectively, which are included in cost of revenues in the Condensed Consolidated Statements of Comprehensive Income (Loss). Regulation The Company's services are subject to varying degrees of federal, state and local regulation. These regulations are subject to ongoing proceedings at federal and state administrative agencies or within state and federal judicial systems. Results of these proceedings could change, in varying degrees, the manner in which the Company operates. The Company cannot predict the outcome of these proceedings or their effect on the Company's industry generally or upon the Company specifically. |
Subsequent Event (Notes)
Subsequent Event (Notes) | 6 Months Ended |
Jun. 30, 2016 | |
Subsequent Event [Abstract] | |
Subsequent Event | Subsequent Event On July 13, 2016, the Company acquired Boston Retail Partners, LLC (“BRP”), a privately-held management consulting firm focused on the retail industry, for initial consideration of approximately $11.2 million , plus possible earn-out payments. The primary purpose of the transaction was to provide additional professional services capabilities in connection with the Company's strategy to be a leading managed network, security and cloud services provider for multi-location retail and service businesses. The assets acquired and liabilities assumed of BRP will be recognized at their acquisition date fair values. The allocation of the consideration transferred to the assets acquired and liabilities assumed (and the related estimated lives of depreciable tangible and identifiable intangible assets) will require a significant amount of judgment and is subject to finalization. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The condensed consolidated financial statements of EarthLink for the three and six months ended June 30, 2015 and 2016 and the related footnote information are unaudited and have been prepared on a basis consistent with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission (the “SEC”) (the “Annual Report”). These financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto contained in the Annual Report. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring adjustments) which management considers necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results anticipated for the entire year ending December 31, 2016 . |
Basis of Consolidation | Basis of Consolidation The accompanying condensed consolidated financial statements of EarthLink include the accounts of its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements Revenue Recognition . In May 2014, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance on revenue from contracts with customers. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires significantly expanded disclosures about revenue contract assets and liabilities. The new standard also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs. In August 2015, the FASB issued guidance that deferred the effective date by one year. The standard is now required to be adopted by public business entities in annual periods beginning on or after December 15, 2017, and interim periods within those annual periods, and may be applied on a full retrospective or modified retrospective approach. Early adoption at the original effective date is permitted. The Company has elected to adopt the standard in the first quarter of the fiscal year ending December 31, 2018. The Company is in the process of determining the method of adoption and assessing the impact the new standard will have on its consolidated financial statements. Going Concern . In August 2014, the FASB issued authoritative guidance related to the disclosure of uncertainties about an entity's ability to continue as a going concern. The new guidance requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements and to provide related footnote disclosures if so. The new standard is effective for fiscal years, and interim periods within those fiscal years, ending after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company's financial statements. Leases . In February 2016, the FASB issued authoritative guidance on accounting for leases. The new guidance requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. As of the lease commencement date, a lessee is required to recognize a liability for its lease obligation (initially measured at the present value of the future lease payments not yet paid over the lease term) and an asset for its right to use the underlying asset equal to the lease liability, adjusted for lease payments made at or before lease commencement, lease incentives, and any initial direct costs. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the implementation of this standard on its financial statements. Share-Based Payments . In March 2016, the FASB issued authoritative guidance, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the impact of the implementation of this standard on its financial statements. |
Earnings per Share Earnings Per
Earnings per Share Earnings Per Share (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following table presents the computation for basic and diluted net income (loss) per share for the three and six months ended June 30, 2015 and 2016 : Three Months Ended June 30, Six Months Ended June 30, 2015 2016 2015 2016 (in thousands, except per share data) Numerator Net income (loss) $ (9,922 ) $ 4,115 $ (20,405 ) $ 11,982 Denominator Basic weighted average common shares outstanding 103,323 105,322 102,969 104,879 Dilutive effect of Common Stock Equivalents — 3,006 — 3,136 Diluted weighted average common shares outstanding 103,323 108,328 102,969 108,015 Basic net income (loss) per share $ (0.10 ) $ 0.04 $ (0.20 ) $ 0.11 Diluted net income (loss) per share $ (0.10 ) $ 0.04 $ (0.20 ) $ 0.11 |
Goodwill and Other Intangible23
Goodwill and Other Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The following table presents changes in the carrying amount of goodwill by operating segment during the six months ended June 30, 2016 : Enterprise/ Small Carrier/ Mid-Market Business Transport Consumer Total (in thousands) Balance as of December 31, 2015 Goodwill $ 237,982 $ 57,137 $ 98,290 $ 88,920 $ 482,329 Accumulated impairment loss (208,443 ) (50,045 ) (86,090 ) — (344,578 ) 29,539 7,092 12,200 88,920 137,751 Goodwill disposed (1,516 ) (746 ) — (1,025 ) (3,287 ) Balance as of June 30, 2016 Goodwill 236,466 56,391 98,290 87,895 479,042 Accumulated impairment loss (208,443 ) (50,045 ) (86,090 ) — (344,578 ) $ 28,023 $ 6,346 $ 12,200 $ 87,895 $ 134,464 |
Schedule of gross carrying value and accumulated amortization by major intangible asset | The following table presents the components of the Company’s acquired identifiable intangible assets included in the accompanying Condensed Consolidated Balance Sheets as of December 31, 2015 and June 30, 2016 : As of December 31, 2015 As of June 30, 2016 Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value (in thousands) Customer relationships $ 346,825 $ (323,365 ) $ 23,460 $ 337,397 $ (334,143 ) $ 3,254 Developed technology and software 26,261 (24,396 ) 1,865 25,311 (24,596 ) 715 Trade name 1,521 (1,521 ) — 1,521 (1,521 ) — Other intangible assets, net $ 374,607 $ (349,282 ) $ 25,325 $ 364,229 $ (360,260 ) $ 3,969 |
Schedule of amortization expense | Amortization of intangible assets, which is included in depreciation and amortization in the Condensed Consolidated Statements of Comprehensive Income (Loss) , for the three and six months ended June 30, 2015 and 2016 was as follows: Three Months Ended June 30, Six Months Ended June 30, 2015 2016 2015 2016 (in thousands) Amortization expense $ 16,596 $ 5,898 $ 33,276 $ 17,845 |
Other Accrued Liabilities (Tabl
Other Accrued Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Other Accrued Liabilities [Abstract] | |
Schedule of Other Accrued Liabilities | December 31, 2015 and June 30, 2016 : December 31, 2015 June 30, 2016 (in thousands) Accrued taxes and surcharges $ 14,663 $ 14,308 Accrued communications costs 23,201 23,153 Customer-related liabilities 7,854 7,052 Accrued interest 3,822 3,716 Other 14,765 15,575 Total other accrued liabilities $ 64,305 $ 63,804 |
Long-Term Debt and Capital Le25
Long-Term Debt and Capital Lease Obligations (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | The Company’s long-term debt and capital lease obligations consisted of the following as of December 31, 2015 and June 30, 2016 : December 31, 2015 June 30, 2016 (in thousands) Senior secured notes due June 2020 $ 300,000 $ 300,000 Unamortized debt issue costs on senior secured notes due June 2020 (4,723 ) (4,188 ) Senior notes due May 2019 173,925 166,945 Unamortized discount and debt issue costs on senior notes due May 2019 (5,393 ) (4,464 ) Senior secured revolving credit facility 35,000 — Capital lease obligations 13,591 12,784 Carrying value of debt and capital lease obligations 512,400 471,077 Less current portion of debt and capital lease obligations (6,787 ) (33,585 ) Long-term debt and capital lease obligations $ 505,613 $ 437,492 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Option Activity | The following table presents stock option activity as of and for the six months ended June 30, 2016 : Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (shares and dollars in thousands) Outstanding as of December 31, 2015 908 $ 6.52 Granted — — Exercised (41 ) 6.08 Forfeited and expired (163 ) 8.58 Outstanding as of June 30, 2016 704 6.08 6.3 $ 486 Vested and expected to vest as of June 30, 2016 668 6.11 6.2 $ 450 Exercisable as of June 30, 2016 465 6.43 5.8 $ 243 |
Summary of the status of stock options by exercise price range | The following table presents the status of the Company’s stock options as of June 30, 2016 : Stock Options Outstanding Stock Options Exercisable Weighted Average Weighted Weighted Remaining Average Average Range of Number Contractual Exercise Number Exercise Exercise Prices Outstanding Life Price Exercisable Price (in thousands) (in thousands) $ 4.97 to $ 4.97 300 7.5 $ 4.97 150 $ 4.97 6.08 to 6.08 179 6.6 6.08 90 6.08 6.90 to 9.23 225 4.3 7.55 225 7.55 4.97 to 9.23 704 6.3 6.08 465 6.43 |
Restricted stock unit activity | The following table presents restricted stock unit activity as of and for the six months ended June 30, 2016 : Restricted Stock Units Weighted Average Grant Date Fair Value (in thousands) Outstanding as of December 31, 2015 7,751 $ 4.58 Granted 3,234 5.07 Vested (2,306 ) 4.86 Forfeited (622 ) 4.53 Outstanding as of June 30, 2016 8,057 $ 4.70 |
Restructuring, Acquisition an27
Restructuring, Acquisition and Integration-Related Costs (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Restructuring and Related Activities [Abstract] | |
Schedule of Restructuring, Acquisition and Integration-Related Costs | Restructuring, acquisition and integration-related costs consisted of the following during the three and six months ended June 30, 2015 and 2016 : Three Months Ended June 30, Six Months Ended June 30, 2015 2016 2015 2016 (in thousands) Integration-related costs $ 1,658 $ 1,897 $ 2,975 $ 3,676 Severance, retention and other employee costs 1,048 667 3,949 1,558 Facility-related costs 1,272 715 2,426 1,058 Restructuring, acquisition and integration-related costs $ 3,978 $ 3,279 $ 9,350 $ 6,292 |
Rollforward of Restructuring and Related Costs | The following table summarizes activity for liability balances associated with facility exit and restructuring liabilities for the six months ended June 30, 2016 : Severance and Benefits Facilities Total (in thousands) Balance as of December 31, 2015 $ 3,539 $ 5,542 $ 9,081 Accruals 1,558 1,058 2,616 Payments (4,587 ) (1,479 ) (6,066 ) Balance as of June 30, 2016 $ 510 $ 5,121 $ 5,631 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value of debt, excluding capital leases | The following table presents the fair value of the Company’s debt, excluding capital leases, as of December 31, 2015 and June 30, 2016 : As of December 31, 2015 As of June 30, 2016 Carrying Carrying Amount Fair Value Amount Fair Value (in thousands) Senior Secured Notes $ 295,277 $ 305,439 $ 295,812 $ 309,033 Senior Notes 168,532 177,404 162,481 169,917 Senior secured revolving credit facility 35,000 35,000 — — Total debt, excluding capital leases $ 498,809 $ 517,843 $ 458,293 $ 478,950 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Segment Reporting [Abstract] | |
Schedule Of Segment Reporting Information | The following table presents segment results for the three and six months ended June 30, 2015 and 2016 : Three Months Ended Six Months Ended June 30, June 30, 2015 2016 2015 2016 (in thousands) Enterprise/Mid-Market Revenues $ 114,368 $ 97,586 $ 228,759 $ 202,275 Cost of revenues (excluding depreciation and amortization) 56,216 50,499 112,488 102,070 Gross margin 58,152 47,087 116,271 100,205 Small Business Revenues 79,041 57,270 $ 158,095 $ 119,403 Cost of revenues (excluding depreciation and amortization) 35,263 27,205 72,860 56,939 Gross margin 43,778 30,065 85,235 62,464 Carrier/Transport Revenues 34,149 35,123 $ 67,021 $ 71,192 Cost of revenues (excluding depreciation and amortization) 15,350 15,289 30,943 30,753 Gross margin 18,799 19,834 36,078 40,439 Consumer Revenues 56,106 50,378 $ 112,236 $ 101,749 Cost of revenues (excluding depreciation and amortization) 20,219 17,941 40,219 36,378 Gross margin 35,887 32,437 72,017 65,371 Total Segments Revenues 283,664 240,357 566,111 494,619 Cost of revenues (excluding depreciation and amortization) 127,048 110,934 256,510 226,140 Gross margin $ 156,616 $ 129,423 $ 309,601 $ 268,479 |
Reconciliation of Segment Gross Margin to Consolidated | The following table presents a reconciliation of segment gross margin to consolidated income (loss) before income taxes for the three and six months ended June 30, 2015 and 2016 : Three Months Ended Six Months Ended June 30, June 30, 2015 2016 2015 2016 (in thousands) Segment gross margin $ 156,616 $ 129,423 $ 309,601 $ 268,479 Operating costs and expenses: Selling, general and administrative expenses 94,349 76,925 189,607 158,337 Depreciation and amortization 47,723 33,571 94,987 73,770 Restructuring, acquisition and integration-related costs 3,978 3,279 9,350 6,292 Total operating costs and expenses 146,050 113,775 293,944 238,399 Income from operations 10,566 15,648 15,657 30,080 Gain on sale of business — — — 5,727 Interest expense and other, net (14,112 ) (10,824 ) (28,049 ) (21,933 ) Loss on extinguishment of debt (5,966 ) (226 ) (7,252 ) (458 ) Income (loss) before income taxes $ (9,512 ) $ 4,598 $ (19,644 ) $ 13,416 |
Schedule Revenues by Type of Services | The following table presents revenue detail for the three and six months ended June 30, 2015 and 2016 : Three Months Ended Six Months Ended June 30, June 30, 2015 2016 2015 2016 (in thousands) Monthly recurring revenues $ 251,145 $ 212,693 $ 499,120 $ 436,095 Usage revenues 25,120 21,271 52,798 43,729 Equipment revenues 3,935 3,947 7,659 8,054 Non-recurring and other revenues 3,464 2,446 6,534 6,741 Total revenues $ 283,664 $ 240,357 $ 566,111 $ 494,619 |
Organization (Details)
Organization (Details) | 6 Months Ended |
Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of reportable segments | 4 |
Number of route fiber miles | 29,000 |
Number of metro fiber rings | 90 |
Minimum percentage of IP coverage in United States | 90.00% |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Earnings Per Share [Abstract] | ||||
Net income (loss) | $ 4,115 | $ (9,922) | $ 11,982 | $ (20,405) |
Basic weighted average common shares outstanding | 105,322 | 103,323 | 104,879 | 102,969 |
Dilutive effect of Common Stock Equivalents | 3,006 | 3,136 | 0 | |
Diluted weighted average common shares outstanding | 108,328 | 103,323 | 108,015 | 102,969 |
Basic net income (loss) per share | $ 0.04 | $ (0.10) | $ 0.11 | $ (0.20) |
Diluted net income (loss) per share | $ 0.04 | $ (0.10) | $ 0.11 | $ (0.20) |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 600 | 10,000 |
Sale of Business (Details)
Sale of Business (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Sale of Business [Abstract] | ||||
Purchase Price Of Disposal Group | $ 29,000 | $ 29,000 | ||
Contingent Purchase Price Of Disposal Group | 5,000 | 5,000 | ||
Proceeds from sale of business | 26,000 | $ 0 | ||
Escrow Portion Of Purchase Price Of Disposal Group | 3,000 | 3,000 | ||
Gain on sale of business | 0 | $ 0 | 5,727 | 0 |
Disposal Group, Deferred Gain on Disposal | 2,000 | 2,000 | ||
Disposal Group, Including Discontinued Operation, Assets | 17,500 | 17,500 | ||
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment | 11,400 | 11,400 | ||
Disposal Group, Including Discontinued Operation, Goodwill | 2,300 | 2,300 | ||
Disposal Group, Including Discontinued Operation, Intangible Assets | 3,500 | 3,500 | ||
Disposal Group, Including Discontinued Operation, Other Assets | $ 300 | 300 | ||
Disposal Group, Including Discontinued Operation, Revenue | $ 3,400 | $ 23,500 |
Goodwill and Other Intangible33
Goodwill and Other Intangible Assets Goodwill (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2015 | |
Goodwill [Line Items] | ||
Goodwill, Gross as of December 31, 2015 | $ 479,042 | $ 482,329 |
Accumulated Impairment Loss as of December 31, 2015 | (344,578) | |
Goodwill as of December 31, 2015 | 137,751 | |
Goodwill Disposed | (3,287) | |
Goodwill, Gross as of June 30, 2016 | 479,042 | |
Accumulated Impairment Loss as of June 30, 2016 | (344,578) | |
Goodwill as of June 30, 2016 | 134,464 | |
Enterprise/Mid-Market | ||
Goodwill [Line Items] | ||
Goodwill, Gross as of December 31, 2015 | 236,466 | 237,982 |
Accumulated Impairment Loss as of December 31, 2015 | (208,443) | |
Goodwill as of December 31, 2015 | 29,539 | |
Goodwill Disposed | (1,516) | |
Goodwill, Gross as of June 30, 2016 | 236,466 | |
Accumulated Impairment Loss as of June 30, 2016 | (208,443) | |
Goodwill as of June 30, 2016 | 28,023 | |
Small Business | ||
Goodwill [Line Items] | ||
Goodwill, Gross as of December 31, 2015 | 56,391 | 57,137 |
Accumulated Impairment Loss as of December 31, 2015 | (50,045) | |
Goodwill as of December 31, 2015 | 7,092 | |
Goodwill Disposed | (746) | |
Goodwill, Gross as of June 30, 2016 | 56,391 | |
Accumulated Impairment Loss as of June 30, 2016 | (50,045) | |
Goodwill as of June 30, 2016 | 6,346 | |
Carrier/Transport | ||
Goodwill [Line Items] | ||
Goodwill, Gross as of December 31, 2015 | 98,290 | 98,290 |
Accumulated Impairment Loss as of December 31, 2015 | (86,090) | |
Goodwill as of December 31, 2015 | 12,200 | |
Goodwill Disposed | 0 | |
Goodwill, Gross as of June 30, 2016 | 98,290 | |
Accumulated Impairment Loss as of June 30, 2016 | (86,090) | |
Goodwill as of June 30, 2016 | 12,200 | |
Consumer | ||
Goodwill [Line Items] | ||
Goodwill, Gross as of December 31, 2015 | 87,895 | $ 88,920 |
Accumulated Impairment Loss as of December 31, 2015 | 0 | |
Goodwill as of December 31, 2015 | 88,920 | |
Goodwill Disposed | (1,025) | |
Goodwill, Gross as of June 30, 2016 | 87,895 | |
Accumulated Impairment Loss as of June 30, 2016 | 0 | |
Goodwill as of June 30, 2016 | $ 87,895 |
Goodwill and Other Intangible34
Goodwill and Other Intangible Assets Other Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Finite-Lived Intangible Assets [Line Items] | |||||
Finite-Lived Intangible Assets, Gross | $ 364,229 | $ 364,229 | $ 374,607 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 360,260 | 360,260 | 349,282 | ||
Other intangible assets, net | 3,969 | 3,969 | 25,325 | ||
Disposal Group Including Discontinued Operation Intangible Assets, Gross | 10,400 | 10,400 | |||
Disposal Group, Including Discontinued Operation, Intangible Assets | 3,500 | 3,500 | |||
Amortization of Intangible Assets | 5,898 | $ 16,596 | 17,845 | $ 33,276 | |
Finite-Lived Intangible Assets, Amortization Expense, Remainder of Fiscal Year | 4,000 | 4,000 | |||
Customer Relationships | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Finite-Lived Intangible Assets, Gross | 337,397 | 337,397 | 346,825 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 334,143 | 334,143 | 323,365 | ||
Other intangible assets, net | 3,254 | $ 3,254 | 23,460 | ||
Finite-Lived Intangible Asset, Useful Life | 5 years 3 months | ||||
Developed Technology | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Finite-Lived Intangible Assets, Gross | 25,311 | $ 25,311 | 26,261 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 24,596 | 24,596 | 24,396 | ||
Other intangible assets, net | 715 | $ 715 | 1,865 | ||
Finite-Lived Intangible Asset, Useful Life | 3 years 9 months | ||||
Trade Names | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Finite-Lived Intangible Assets, Gross | 1,521 | $ 1,521 | 1,521 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 1,521 | 1,521 | 1,521 | ||
Other intangible assets, net | $ 0 | $ 0 | $ 0 |
Other Accrued Liabilities (Deta
Other Accrued Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2016 | Dec. 31, 2015 |
Other Accrued Liabilities [Abstract] | ||
Accrued taxes and surcharges | $ 14,308 | $ 14,663 |
Accrued communications costs | 23,153 | 23,201 |
Customer-related liabilities | 7,052 | 7,854 |
Accrued interest | 3,716 | 3,822 |
Other | 15,575 | 14,765 |
Total other accrued liabilities | $ 63,804 | $ 64,305 |
Long-Term Debt and Capital Le36
Long-Term Debt and Capital Lease Obligations (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Sep. 30, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Debt Instrument [Line Items] | ||||||
Long-term debt | $ 471,077 | $ 471,077 | $ 512,400 | |||
Current portion of long-term debt and capital lease obligations | (33,585) | (33,585) | (6,787) | |||
Long-term debt and capital lease obligations | 437,492 | 437,492 | 505,613 | |||
Long Term Debt Redemption Price As Percentage Of Principal Amount From May 2016 To May 2017 | 102.219% | |||||
Repayments of Debt | $ 34,000 | |||||
Proceeds from Lines of Credit | 10,000 | |||||
Proceeds from Issuance of Debt | 50,000 | |||||
Loss on extinguishment of debt | (226) | $ (5,966) | (458) | $ (7,252) | ||
Repayments of Lines of Credit | 35,000 | |||||
Term Loan Borrowing Capacity | 50,000 | 50,000 | ||||
Credit Facility, Amount That May be Increased | 50,000 | 50,000 | ||||
Credit Facility, Maximum Borrowing Amount | $ 175,000 | $ 175,000 | ||||
Dividends declared per share | $ 0.05 | $ 0.05 | $ 0.10 | $ 0.10 | ||
Equity Method Investment, Ownership Percentage | 100.00% | 100.00% | ||||
Senior Secured Notes Due 2020 | ||||||
Debt Instrument [Line Items] | ||||||
Long-term debt | $ 300,000 | $ 300,000 | 300,000 | |||
Unamortized Debt Issuance Expense | $ (4,188) | $ (4,188) | (4,723) | |||
Debt Instrument, Interest Rate, Stated Percentage | 7.375% | 7.375% | ||||
Long-term Debt Redemption Price Due to Change of Control as Percentage of Principal Amount | 101.00% | |||||
Amount permitted in debt covenants for Restricted Payments | $ 185,100 | $ 185,100 | ||||
Percent used in determining ability to make Restricted Payments | 300.00% | |||||
Senior Notes Due 2019 | ||||||
Debt Instrument [Line Items] | ||||||
Long-term debt | 166,945 | $ 166,945 | 173,925 | |||
Debt Instrument, Unamortized Discount | 4,464 | 4,464 | 5,393 | |||
Current portion of long-term debt and capital lease obligations | (31,700) | (31,700) | ||||
Long-term debt and capital lease obligations | 130,800 | 130,800 | ||||
Debt Instrument, Repurchased Face Amount | $ 90,000 | $ 7,000 | $ 7,000 | |||
Debt Instrument, Interest Rate, Stated Percentage | 8.875% | 8.875% | ||||
Debt Instrument, Repurchase Amount | $ 7,000 | $ 7,000 | ||||
Loss on extinguishment of debt | $ 200 | |||||
Long-term Debt Redemption Price Due to Change of Control as Percentage of Principal Amount | 101.00% | |||||
Amount permitted in debt covenants for Restricted Payments | 313,600 | $ 313,600 | ||||
Capital Lease Obligations | ||||||
Debt Instrument [Line Items] | ||||||
Long-term debt | 12,784 | 12,784 | 13,591 | |||
Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Long-term debt | 35,000 | |||||
Payments of Debt Issuance Costs | 2,200 | |||||
Write off of Deferred Debt Issuance Cost | 200 | |||||
Line of Credit Facility, Maximum Borrowing Capacity | 125,000 | $ 125,000 | $ 135,000 | |||
Line of Credit Facility, Commitment Fee Percentage | 0.50% | |||||
Letters of Credit Outstanding, Amount | $ 1,700 | $ 1,700 | ||||
Debt Instrument Variable Rate Base LIBOR | Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Debt Instrument, Interest Rate, Stated Percentage | 3.25% | 3.25% | ||||
Debt Instrument Variable Rate Base | Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Debt Instrument, Interest Rate, Stated Percentage | 2.25% | 2.25% |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Share Repurchases | ||||
Repurchase of common stock, authorized amount | $ 750,000 | $ 750,000 | ||
Repurchase of common stock, remaining authorization | $ 65,700 | $ 65,700 | ||
Dividends | ||||
Dividends declared per share | $ 0.05 | $ 0.05 | $ 0.10 | $ 0.10 |
Payment of dividends | $ 11,402 | $ 15,882 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | ||||
Stock-based compensation | $ 4,100 | $ 3,800 | $ 8,161 | $ 7,229 |
Stock Options | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | ||||
Unrecognized compensation costs | $ 200 | $ 200 | ||
Weighted-average period for recognition of unrecognized compensation cost (in years) | 1 year 5 months | |||
Stock option activity | ||||
Outstanding at the beginning of the period (in shares) | 908 | |||
Granted (in shares) | 0 | |||
Exercised (in shares) | 41 | |||
Forfeited and expired (in shares) | (163) | |||
Outstanding at the end of the period (in shares) | 704 | 704 | ||
Vested and expected to vest at the end of the period (in shares) | 668 | 668 | ||
Exercisable at the end of the period (in shares) | 465 | 465 | ||
Weighted Average Exercise Price | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 6.52 | |||
Granted (in dollars per share) | 0 | |||
Exercised (in dollars per share) | 6.08 | |||
Forfeited and expired (in dollars per share) | 8.58 | |||
Outstanding at the end of the period (in dollars per share) | $ 6.08 | 6.08 | ||
Vested and expected to vest at the end of the period (in dollars per share) | 6.11 | 6.11 | ||
Exercisable at the end of the period (in dollars per share) | $ 6.43 | $ 6.43 | ||
Weighted Average Remaining Contractual Term | ||||
Options outstanding at the end of the period (in years) | 6 years 3 months | |||
Vested and expected to vest at the end of the period (in years) | 6 years 2 months | |||
Exercisable at the end of the period (in years) | 5 years 9 months | |||
Aggregate Intrinsic Value | ||||
Outstanding at the end of the period | $ 486 | $ 486 | ||
Vested and expected to vest at the end of the period | 450 | 450 | ||
Exercisable at the end of the period | $ 243 | $ 243 |
Stock-Based Compensation (Det39
Stock-Based Compensation (Details 2) - Stock Options shares in Thousands | 6 Months Ended |
Jun. 30, 2016$ / sharesshares | |
Range of Exercise Prices from $4.97 to $4.97 | |
Stock options outstanding and exercisable by exercise price range | |
Exercise price, low end of the range | $ 4.97 |
Exercise price, high end of the range | $ 4.97 |
Stock Options Outstanding - Number Outstanding (in shares) | shares | 300 |
Stock Options Outstanding - Weighted Average Remaining Contractual Life (in years) | 7 years 6 months |
Stock Options Outstanding - Weighted Average Exercise Price (in dollars per share) | $ 4.97 |
Stock Options Exercisable - Number Exercisable (in shares) | shares | 150 |
Stock Options Exercisable - Weighted Average Exercise Price (in dollars per share) | $ 4.97 |
Range of Exercise Prices from $6.08 to $6.08 | |
Stock options outstanding and exercisable by exercise price range | |
Exercise price, low end of the range | 6.08 |
Exercise price, high end of the range | $ 6.08 |
Stock Options Outstanding - Number Outstanding (in shares) | shares | 179 |
Stock Options Outstanding - Weighted Average Remaining Contractual Life (in years) | 6 years 7 months |
Stock Options Outstanding - Weighted Average Exercise Price (in dollars per share) | $ 6.08 |
Stock Options Exercisable - Number Exercisable (in shares) | shares | 90 |
Stock Options Exercisable - Weighted Average Exercise Price (in dollars per share) | $ 0 |
Range of Exercise Prices from $6.90 to $9.23 | |
Stock options outstanding and exercisable by exercise price range | |
Exercise price, low end of the range | 6.90 |
Exercise price, high end of the range | $ 9.23 |
Stock Options Outstanding - Number Outstanding (in shares) | shares | 225 |
Stock Options Outstanding - Weighted Average Remaining Contractual Life (in years) | 4 years 3 months |
Stock Options Outstanding - Weighted Average Exercise Price (in dollars per share) | $ 7.55 |
Stock Options Exercisable - Number Exercisable (in shares) | shares | 225 |
Stock Options Exercisable - Weighted Average Exercise Price (in dollars per share) | $ 7.55 |
Range of Exercise Prices from $4.97 to $9.23 | |
Stock options outstanding and exercisable by exercise price range | |
Exercise price, low end of the range | 4.97 |
Exercise price, high end of the range | $ 9.23 |
Stock Options Outstanding - Number Outstanding (in shares) | shares | 704 |
Stock Options Outstanding - Weighted Average Remaining Contractual Life (in years) | 6 years 3 months |
Stock Options Outstanding - Weighted Average Exercise Price (in dollars per share) | $ 6.08 |
Stock Options Exercisable - Number Exercisable (in shares) | shares | 465 |
Stock Options Exercisable - Weighted Average Exercise Price (in dollars per share) | $ 6.43 |
Stock-Based Compensation (Det40
Stock-Based Compensation (Details 3) - Restricted Stock Units - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Restricted Stock Unit Activity | ||
Nonvested, at the beginning of the period (in shares) | 7,751 | |
Granted (in shares) | 3,234 | |
Vested (in shares) | (2,306) | |
Forfeited (in shares) | (622) | |
Nonvested, at the end of the period (in shares) | 8,057 | |
Weighted Average Grant Date Fair Value | ||
Nonvested, at the beginning of the period (in dollars per share) | $ 4.58 | |
Granted (in dollars per share) | 5.07 | $ 4.49 |
Vested (in dollars per share) | 4.86 | |
Forfeited (in dollars per share) | 4.53 | |
Nonvested, at the end of the period (in dollars per share) | $ 4.70 | |
Restricted Stock Units, Other Information | ||
Unrecognized compensation costs | $ 24.8 | |
Weighted-average period for recognition of unrecognized compensation cost (in years) | 2 years | |
Aggregate fair value of shares, vested | $ 12.7 | $ 8 |
Restructuring, Acquisition an41
Restructuring, Acquisition and Integration-Related Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Restructuring Cost and Reserve [Line Items] | |||||
Integration Related Costs | $ 1,897 | $ 1,658 | $ 3,676 | $ 2,975 | |
Business Combination Severance and Retention Costs | 667 | 1,048 | 1,558 | 3,949 | |
Facility-related costs | 715 | 1,272 | 1,058 | 2,426 | |
Restructuring, acquisition and integration-related costs | 3,279 | $ 3,978 | 6,292 | $ 9,350 | |
Balance as of December 31, 2015 | 9,081 | ||||
Restructuring Costs | 2,616 | ||||
Payments | (6,066) | ||||
Balance as of June 30, 2016 | 5,631 | 5,631 | |||
Restructuring Reserve, Current | 2,300 | 2,300 | $ 5,400 | ||
Restructuring Reserve, Noncurrent | 3,300 | 3,300 | $ 3,700 | ||
Employee Severance | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Balance as of December 31, 2015 | 3,539 | ||||
Restructuring Costs | 1,558 | ||||
Payments | (4,587) | ||||
Balance as of June 30, 2016 | 510 | 510 | |||
Facility Closing | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Balance as of December 31, 2015 | 5,542 | ||||
Restructuring Costs | 1,058 | ||||
Payments | (1,479) | ||||
Balance as of June 30, 2016 | $ 5,121 | $ 5,121 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Income Tax Contingency [Line Items] | ||||
Income tax provision | $ (483) | $ (410) | $ (1,434) | $ (761) |
Effective Income Tax Rate, Continuing Operations | 10.70% | (3.90%) | ||
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Amount | $ 100 | $ 200 | ||
Valuation Allowance, Amount | $ 343,500 | $ 343,500 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Jun. 30, 2016 | Dec. 31, 2015 |
Carrying (Reported) Amount, Fair Value Disclosure | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt | $ 458,293 | $ 498,809 |
Carrying (Reported) Amount, Fair Value Disclosure | Senior Secured Notes Due 2020 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt | 295,812 | 295,277 |
Carrying (Reported) Amount, Fair Value Disclosure | Senior Notes Due 2019 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt | 162,481 | 168,532 |
Carrying (Reported) Amount, Fair Value Disclosure | Revolving Credit Facility | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt | 0 | 35,000 |
Estimate of Fair Value, Fair Value Disclosure | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt | 478,950 | 517,843 |
Estimate of Fair Value, Fair Value Disclosure | Senior Secured Notes Due 2020 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt | 309,033 | 305,439 |
Estimate of Fair Value, Fair Value Disclosure | Senior Notes Due 2019 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt | 169,917 | 177,404 |
Estimate of Fair Value, Fair Value Disclosure | Revolving Credit Facility | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt | $ 0 | $ 35,000 |
Segment Information (Details)
Segment Information (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2015USD ($) | |
Schedule Of Segment Reporting Information | ||||
Number of reportable segments | 4 | |||
Revenues | $ 240,357 | $ 283,664 | $ 494,619 | $ 566,111 |
Cost of Revenue | 110,934 | 127,048 | 226,140 | 256,510 |
Gross margin | 129,423 | 156,616 | 268,479 | 309,601 |
Enterprise/Mid-Market | ||||
Schedule Of Segment Reporting Information | ||||
Revenues | 97,586 | 114,368 | 202,275 | 228,759 |
Cost of Revenue | 50,499 | 56,216 | 102,070 | 112,488 |
Gross margin | 47,087 | 58,152 | 100,205 | 116,271 |
Small Business | ||||
Schedule Of Segment Reporting Information | ||||
Revenues | 57,270 | 79,041 | 119,403 | 158,095 |
Cost of Revenue | 27,205 | 35,263 | 56,939 | 72,860 |
Gross margin | 30,065 | 43,778 | 62,464 | 85,235 |
Carrier/Transport | ||||
Schedule Of Segment Reporting Information | ||||
Revenues | 35,123 | 34,149 | 71,192 | 67,021 |
Cost of Revenue | 15,289 | 15,350 | 30,753 | 30,943 |
Gross margin | 19,834 | 18,799 | 40,439 | 36,078 |
Consumer | ||||
Schedule Of Segment Reporting Information | ||||
Revenues | 50,378 | 56,106 | 101,749 | 112,236 |
Cost of Revenue | 17,941 | 20,219 | 36,378 | 40,219 |
Gross margin | $ 32,437 | $ 35,887 | $ 65,371 | $ 72,017 |
Segment Information (Details 2)
Segment Information (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract] | ||||
Gross Profit | $ 129,423 | $ 156,616 | $ 268,479 | $ 309,601 |
Selling, general and administrative expenses | 76,925 | 94,349 | 158,337 | 189,607 |
Depreciation and amortization | 33,571 | 47,723 | 73,770 | 94,987 |
Restructuring, acquisition and integration-related costs | 3,279 | 3,978 | 6,292 | 9,350 |
Other cost and expense, operating | 113,775 | 146,050 | 238,399 | 293,944 |
Income from operations | 15,648 | 10,566 | 30,080 | 15,657 |
Gain on sale of business | 0 | 0 | 5,727 | 0 |
Interest expense and other, net | (10,824) | (14,112) | (21,933) | (28,049) |
Loss on extinguishment of debt | (226) | (5,966) | (458) | (7,252) |
Income (loss) before income taxes | $ 4,598 | $ (9,512) | $ 13,416 | $ (19,644) |
Segment Information (Details 3)
Segment Information (Details 3) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Schedule of Revenues by Type of Service | ||||
Revenue, Net | $ 240,357 | $ 283,664 | $ 494,619 | $ 566,111 |
Monthly Recurring Revenues | ||||
Schedule of Revenues by Type of Service | ||||
Revenue, Net | 212,693 | 251,145 | 436,095 | 499,120 |
Usage Revenues | ||||
Schedule of Revenues by Type of Service | ||||
Revenue, Net | 21,271 | 25,120 | 43,729 | 52,798 |
Equipment Revenues | ||||
Schedule of Revenues by Type of Service | ||||
Revenue, Net | 3,947 | 3,935 | 8,054 | 7,659 |
Non-Recurring and Other Revenues | ||||
Schedule of Revenues by Type of Service | ||||
Revenue, Net | $ 2,446 | $ 3,464 | $ 6,741 | $ 6,534 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Billing Disputes, Revenue | $ 0.7 | $ 1 | $ 1.6 | $ 3.1 |
Loss Contingency, Range of Possible Loss, Portion Not Accrued | 10.4 | 10.4 | ||
Billing Disputes, Cost of Revenues | $ 3.7 | $ 3.1 | $ 7.5 | $ 6.6 |
Subsequent Event (Details)
Subsequent Event (Details) $ in Millions | 3 Months Ended |
Sep. 30, 2016USD ($) | |
Subsequent Event [Abstract] | |
Payments to Acquire Businesses, Gross | $ 11.2 |