Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2015 | Feb. 16, 2016 | Jun. 30, 2015 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | RACKSPACE HOSTING, INC. | ||
Entity Central Index Key | 1,107,694 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Document Fiscal Year Focus | 2,015 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 130,993,039 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 2.5 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 484.7 | $ 213.5 |
Accounts receivable, net of allowance for doubtful accounts and customer credits of $5.3 as of December 31, 2014 and $7.3 as of December 31, 2015 | 174.4 | 156.5 |
Prepaid expenses | 46.6 | 33.6 |
Other current assets | 12.7 | 8.8 |
Total current assets | 718.4 | 412.4 |
Property and equipment, net | 1,148 | 1,057.7 |
Goodwill | 81.1 | 81.1 |
Intangible assets, net | 9.1 | 16.6 |
Other non-current assets | 57.6 | 48.3 |
Total assets | 2,014.2 | 1,616.1 |
Current liabilities: | ||
Accounts payable and accrued expenses | 136.3 | 137.3 |
Accrued compensation and benefits | 57.3 | 66.7 |
Income and other taxes payable | 12 | 11.8 |
Deferred revenue | 29.6 | 20.9 |
Capital lease obligations | 1.7 | 15 |
Debt | 0 | 25.1 |
Total current liabilities | 236.9 | 276.8 |
Non-current liabilities: | ||
Deferred revenue | 1.6 | 1.4 |
Capital lease obligations | 0.2 | 1.5 |
Finance lease obligations for build-to-suit leases | 164.3 | 117.4 |
Debt | 492.4 | 0 |
Deferred income taxes | 60 | 63 |
Deferred rent | 49.5 | 49.9 |
Other liabilities | 32.8 | 32.3 |
Total liabilities | $ 1,037.7 | $ 542.3 |
Commitments and Contingencies | ||
Stockholders' equity: | ||
Common stock, $0.001 par value per share: 300.0 shares authorized; 140.9 shares issued and outstanding as of December 31, 2014; 130.9 shares issued and outstanding as of December 31, 2015 | $ 0.1 | $ 0.1 |
Additional paid-in capital | 834.5 | 696 |
Accumulated other comprehensive loss | (36.2) | (20.7) |
Retained earnings | 178.1 | 398.4 |
Total stockholders’ equity | 976.5 | 1,073.8 |
Total liabilities and stockholders’ equity | $ 2,014.2 | $ 1,616.1 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - USD ($) shares in Millions, $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Current assets: | ||
Allowance for doubtful accounts and customer credits | $ 7.3 | $ 5.3 |
Stockholders' equity: | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 300 | 300 |
Common stock, shares issued | 130.9 | 140.9 |
Common stock, shares outstanding | 130.9 | 140.9 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Net revenue | $ 2,001.3 | $ 1,794.4 | $ 1,534.8 |
Costs and expenses: | |||
Cost of revenue | 675.5 | 582.3 | 492.5 |
Research and development | 124.9 | 117 | 90.2 |
Sales and marketing | 243.5 | 237.6 | 208.4 |
General and administrative | 351.4 | 322.1 | 297.5 |
Depreciation and amortization | 399.9 | 371.9 | 313.1 |
Total costs and expenses | 1,795.2 | 1,630.9 | 1,401.7 |
Income from operations | 206.1 | 163.5 | 133.1 |
Other income (expense): | |||
Interest expense | (11.3) | (1.9) | (3.1) |
Interest and other income (expense) | (1.2) | (2) | 0.7 |
Total other income (expense) | (12.5) | (3.9) | (2.4) |
Income before income taxes | 193.6 | 159.6 | 130.7 |
Income taxes | 67.4 | 49 | 44 |
Net income | 126.2 | 110.6 | 86.7 |
Other comprehensive income, net of tax | |||
Foreign currency translation adjustments | (15.5) | (16.2) | 3.6 |
Other comprehensive income (loss) | (15.5) | (16.2) | 3.6 |
Comprehensive income | $ 110.7 | $ 94.4 | $ 90.3 |
Net income per share | |||
Basic | $ 0.91 | $ 0.78 | $ 0.63 |
Diluted | $ 0.90 | $ 0.77 | $ 0.61 |
Weighted average number of shares outstanding | |||
Basic | 139 | 142 | 138.6 |
Diluted | 141 | 144.5 | 143 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Cash Flows From Operating Activities | |||
Net income | $ 126.2 | $ 110.6 | $ 86.7 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 399.9 | 371.9 | 313.1 |
Deferred income taxes | (4) | 0.4 | (2.1) |
Share-based compensation expense | 78.1 | 70 | 59.6 |
Excess tax benefits from share-based compensation arrangements | (48.6) | (34.5) | (33.5) |
Other operating activities | 9.8 | 8.2 | 5.5 |
Changes in operating assets and liabilities: | |||
Accounts receivable | (28.3) | (41.7) | (34.5) |
Prepaid expenses and other current assets | (17.2) | (1.1) | (12.3) |
Accounts payable, accrued expenses, and other current liabilities | 49.2 | 55.4 | 35.3 |
Deferred revenue | 9.1 | (3.7) | 5.4 |
Deferred rent | 0.1 | 7.4 | 11.6 |
Other non-current assets and liabilities | 9.3 | (0.4) | 9.3 |
Net cash provided by operating activities | 583.6 | 542.5 | 444.1 |
Cash Flows From Investing Activities | |||
Purchases of property and equipment | (474.9) | (430.3) | (452.6) |
Acquisitions, net of cash acquired | 0 | 0 | (9.9) |
All other investing activities | (4.5) | 2.2 | (1.7) |
Net cash used in investing activities | (479.4) | (428.1) | (464.2) |
Cash Flows From Financing Activities | |||
Proceeds from debt | 640 | 25 | 0 |
Repayments of debt | (165.1) | (1.9) | (1.9) |
Payments for debt issuance costs | (8.3) | 0 | 0 |
Proceeds from finance lease obligations for build-to-suit leases | 6.2 | 0 | 0 |
Principal payments of capital and build-to-suit leases | (15) | (39.7) | (65.9) |
Payments for deferred acquisition obligations | (0.2) | (0.2) | (1.4) |
Receipt of Texas Enterprise Fund grant | 0 | 5.5 | 0 |
Repurchase of common stock | (367) | (200) | 0 |
Shares of common stock withheld for employee taxes | 0 | (13.6) | 0 |
Proceeds from employee stock plans | 32.3 | 33.1 | 23.9 |
Excess tax benefits from share-based compensation arrangements | 48.6 | 34.5 | 33.5 |
Net cash provided by (used in) financing activities | 171.5 | (157.3) | (11.8) |
Effect of exchange rate changes on cash and cash equivalents | (4.5) | (3.3) | (0.5) |
Increase (decrease) in cash and cash equivalents | 271.2 | (46.2) | (32.4) |
Cash and cash equivalents, beginning of period | 213.5 | 259.7 | 292.1 |
Cash and cash equivalents, end of period | 484.7 | 213.5 | 259.7 |
Supplemental Cash Flow Information | |||
Cash payments for interest, net of amount capitalized | 4 | 1.8 | 3.2 |
Cash payments for income taxes, net of refunds | 17.8 | 13.5 | 14.9 |
Non-cash Investing and Financing Activities | |||
Non-cash purchases of property and equipment | (8.9) | 4.8 | 19.5 |
Shares issued in business combinations | 0 | 0 | 4.5 |
Additional finance lease obligations for build-to-suit leases and other | 50.4 | 117.6 | 0 |
Acquisition of property and equipment by capital leases | |||
Non-cash Investing and Financing Activities | |||
Non-cash purchases of property and equipment | 0.4 | 0.9 | 7.2 |
Increase (decrease) in property and equipment in accounts payable and accrued expenses | |||
Non-cash Investing and Financing Activities | |||
Non-cash purchases of property and equipment | $ (9.3) | $ 3.9 | $ 12.3 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) shares in Millions, $ in Millions | Total | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings |
Balance (shares) at Dec. 31, 2012 | 137.8 | ||||
Balance ($) at Dec. 31, 2012 | $ 843.6 | $ 0.1 | $ 515.2 | $ (8.1) | $ 336.4 |
Issuance of common stock | |||||
Exercise of stock options and release of stock awards (including excess tax benefit), net of shares withheld for employee taxes ($) | 51.2 | $ 0 | 51.2 | ||
Exercise of stock options and release of stock awards (including excess tax benefit), net of shares withheld for employee taxes (shares) | 3 | ||||
Issuance of shares from Employee Stock Purchase Plans ($) | 6.2 | $ 0 | 6.2 | ||
Issuance of shares from Employee Stock Purchase Plans (shares) | 0.2 | ||||
Issuance of shares in acquisitions ($) | 4.5 | $ 0 | 4.5 | ||
Issuance of shares in acquisitions (shares) | 0.1 | ||||
Total issuance of common stock ($) | 61.9 | $ 0 | 61.9 | ||
Total issuance of common stock (shares) | 3.3 | ||||
Share-based compensation expense | 59.6 | 59.6 | |||
Net income | 86.7 | 86.7 | |||
Foreign currency translation adjustments | 3.6 | 3.6 | |||
Balance (shares) at Dec. 31, 2013 | 141.1 | ||||
Balance ($) at Dec. 31, 2013 | 1,055.4 | $ 0.1 | 636.7 | (4.5) | 423.1 |
Issuance of common stock | |||||
Exercise of stock options and release of stock awards (including excess tax benefit), net of shares withheld for employee taxes ($) | 47.8 | $ 0 | 59.5 | (11.7) | |
Exercise of stock options and release of stock awards (including excess tax benefit), net of shares withheld for employee taxes (shares) | 2.9 | ||||
Issuance of shares from Employee Stock Purchase Plans ($) | 6.2 | $ 0 | 6.2 | ||
Issuance of shares from Employee Stock Purchase Plans (shares) | 0.2 | ||||
Issuance of shares in acquisitions ($) | 0 | ||||
Total issuance of common stock ($) | 54 | $ 0 | 65.7 | (11.7) | |
Total issuance of common stock (shares) | 3.1 | ||||
Repurchase of common stock ($) | (200) | $ 0 | (76.4) | (123.6) | |
Repurchase of common stock (shares) | (3.3) | ||||
Share-based compensation expense | 70 | 70 | |||
Net income | 110.6 | 110.6 | |||
Foreign currency translation adjustments | $ (16.2) | (16.2) | |||
Balance (shares) at Dec. 31, 2014 | 140.9 | 140.9 | |||
Balance ($) at Dec. 31, 2014 | $ 1,073.8 | $ 0.1 | 696 | (20.7) | 398.4 |
Issuance of common stock | |||||
Exercise of stock options and release of stock awards (including excess tax benefit), net of shares withheld for employee taxes ($) | 75.2 | $ 0 | 75.2 | ||
Exercise of stock options and release of stock awards (including excess tax benefit), net of shares withheld for employee taxes (shares) | 2.9 | ||||
Issuance of shares from Employee Stock Purchase Plans ($) | 5.7 | $ 0 | 5.7 | ||
Issuance of shares from Employee Stock Purchase Plans (shares) | 0.2 | ||||
Issuance of shares in acquisitions ($) | 0 | ||||
Total issuance of common stock ($) | 80.9 | $ 0 | 80.9 | ||
Total issuance of common stock (shares) | 3.1 | ||||
Repurchase of common stock ($) | (367) | $ 0 | (20.5) | (346.5) | |
Repurchase of common stock (shares) | (13.1) | ||||
Share-based compensation expense | 78.1 | 78.1 | |||
Net income | 126.2 | 126.2 | |||
Foreign currency translation adjustments | $ (15.5) | (15.5) | |||
Balance (shares) at Dec. 31, 2015 | 130.9 | 130.9 | |||
Balance ($) at Dec. 31, 2015 | $ 976.5 | $ 0.1 | $ 834.5 | $ (36.2) | $ 178.1 |
Consolidated Statements of Sto7
Consolidated Statements of Stockholders' Equity (Parentheticals) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Additional Paid-In Capital | |||
Excess tax benefit on exercise of stock options and release of stock awards | $ 48.6 | $ 34.5 | $ 33.5 |
Company Overview, Basis of Pres
Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies | Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies Nature of Operations As used in this report, the terms “Rackspace,” “Rackspace Hosting,” “we,” “our company,” “the company,” “us,” or “our” refer to Rackspace Hosting, Inc. and its subsidiaries. Rackspace Hosting, Inc., through its operating subsidiaries, is a provider of managed cloud services in the business information technology ("IT") market. We serve our customers from our data centers on four continents. We help customers tap the power of cloud computing by delivering world-class service on the world's leading technology platforms. We are experts in IT, so our customers do not have to be. Our operations began in 1998 as a limited partnership, and Rackspace Hosting, Inc. was incorporated in Delaware in March 2000 . Basis of Consolidation The accompanying consolidated financial statements include the accounts of Rackspace Hosting and our wholly-owned subsidiaries, which include, among others, Rackspace US, Inc., our domestic operating entity, and Rackspace Limited, our United Kingdom operating entity. Intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable and customer credits, property and equipment, fair values of intangible assets and goodwill, useful lives of intangible assets, fair value of share-based compensation, contingencies, and income taxes, among others. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from our estimates. Cash and Cash Equivalents For the purposes of the consolidated financial statements, we consider all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents. Our available cash and cash equivalents are held in bank deposits, overnight sweep accounts, and money market funds. Gains and losses are included in interest and other income in our accompanying consolidated statements of comprehensive income. We actively monitor the third-party depository institutions that hold our deposits. Our emphasis is primarily on safety of principal, secondly on the liquidity of our investments, and finally on maximizing yield on those funds. Our money market mutual funds invest exclusively in high-quality, short-term obligations that include securities issued or guaranteed by the U.S. government or by U.S. government agencies and floating rate and variable rate demand notes of U.S. and foreign corporations. Accounts Receivable, Net Trade accounts receivable are recorded at the invoiced amount and do not bear interest. We generally do not request collateral from our customers; however, some customers choose to prepay for their services. We record an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. When evaluating the adequacy of the allowance, we analyze the overall quality of our accounts receivable portfolio, current economic conditions and trends, historical bad debt write-offs, customer creditworthiness, and specifically identified customer risks. In addition, our hosting arrangements contain service level commitments with our customers. To the extent that such service levels are not achieved or are otherwise disputed due to third-party power or service issues, unfavorable weather, or other service interruptions or conditions, we are required to issue service credits for a portion of the hosting service fees paid by our customers. At each reporting period, we estimate the amount of service level credits to be issued and record a reduction to revenue. To estimate service credits, we utilize historical data and specific knowledge of factors impacting the delivery of services to our customers. Prepaid Expenses and Other Assets Prepaid expenses and other assets consist primarily of prepaid software and equipment maintenance contracts and prepaid operating expenses. Maintenance contracts are amortized over the agreement period, generally one to three years. Prepaid operating expenses are expensed in the period in which services are received. Property and Equipment, Net Property and equipment is stated at cost, net of accumulated depreciation and amortization. Included in property and equipment are capitalized costs related to computer software developed or acquired for internal use. Capitalized computer software costs consist of purchased software licenses, implementation costs, and salaries and related compensation costs of employees and consultants for certain projects that qualify for capitalization. Replacements and major improvements to property and equipment are capitalized, while maintenance and repairs are charged to expense as incurred. We also capitalize interest costs incurred during the acquisition, development and construction of certain assets until the asset is ready for its intended use. For the years ended December 31, 2014 and 2015 , we capitalized interest of $2.1 million and $7.1 million , respectively. There was no interest capitalized during the year ended December 31, 2013 . Property and equipment is depreciated on a straight-line basis over the estimated useful life of the asset. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the remaining lease term. The following table shows estimated useful lives of property and equipment: Classification Estimated Useful Lives Computers and equipment 3 to 5 years Computer software 3 years Furniture and fixtures 7 years Buildings and leasehold improvements 2 to 39 years The cost of assets and related accumulated depreciation and amortization are written off upon retirement or sale, and any resulting gain or loss is credited or charged to income from operations. Goodwill and Intangible Assets Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. Goodwill is evaluated for impairment at a reporting unit level using a fair value approach on an annual basis at the beginning of the fourth quarter or whenever events or circumstances indicate that impairment may have occurred. No goodwill impairment was recognized in any of the years presented, and there were no changes in the carrying amount of goodwill in 2014 or 2015 . Intangible assets, including purchased technology, customer contracts and relationships, certain tradenames, license agreements, and non-compete agreements arising principally from acquisitions, are recorded at cost less accumulated amortization, and the definite-lived intangibles are amortized using a method that reflects the pattern in which the economic benefits of the related intangible asset are consumed or utilized. Impairment of Long-Lived Assets Long-lived assets, including property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured at the asset group level and if the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized. Leases We lease most of our data center facilities and office space under non-cancelable operating lease agreements. Total rent payments, inclusive of rent increases, rent holidays, rent concessions, leasehold incentives or any other unusual provisions or conditions, are expensed on a straight-line basis over the lease period. The difference between the straight-line expense and the cash payment is recorded as deferred rent. We lease certain equipment under capital lease agreements with major vendors. The assets held under capital lease and related obligations are recorded at the lesser of the present value of aggregate future minimum lease payments, including estimated bargain purchase options, or the fair value of the assets held under capital lease. Such assets, included within "property and equipment, net" on our consolidated balance sheets, are depreciated on a straight-line basis over the shorter of the terms of the leases or the estimated useful lives of the assets. For assets for which the lease agreement includes a bargain purchase option or transfer of ownership at the completion of the lease and the lease term is shorter than the estimated useful life of the asset, the asset is depreciated over its estimated useful life. Interest expense is recorded on the outstanding capital lease obligation throughout the lease term. Additionally, we have entered into complex real estate development and build-to-suit lease arrangements with independent real estate developers to design, construct and lease certain real estate projects. While the independent developers legally own the real estate projects and must finance the overall construction, we agreed to fund certain structural improvements and/or retain obligations related to certain potential construction cost overruns. As a result of our involvement during the construction period, we are considered the owner of these construction projects for accounting purposes. During the construction period, we record construction costs for these projects as a work in process asset within "property and equipment, net" and a corresponding long-term liability within "finance lease obligations for build-to-suit leases" on our consolidated balance sheets. The cost of these real estate projects is not depreciated during the construction period. When construction of a project is complete, we evaluate whether the build-to-suit lease arrangement qualifies for sales recognition under sale-leaseback accounting guidance. If the lease meets the criteria to qualify as a sale-leaseback, the asset and liability can be derecognized and the lease is accounted for as an operating lease with rent expense recognized over the lease term. If the sale-leaseback criteria are not met, the asset and liability remain on our consolidated balance sheets. The asset is then depreciated over the term of the lease, and rental payments are recorded as a reduction of the corresponding liability and as interest expense. At the end of the lease term, the remaining lease obligation and residual asset balance are derecognized. The Company has asset retirement obligations associated with commitments to return properties subject to operating and build-to-suit leases to their original condition upon lease termination. The Company's asset retirement obligations were $3.6 million and $4.0 million as of December 31, 2014 and 2015 , respectively, and are recorded in "accounts payable and accrued expenses" and "other liabilities" on our consolidated balance sheets. Debt Issuance Costs Debt issuance costs, such as underwriting, financial advisory, professional fees and other similar fees are capitalized and recognized in interest expense over the estimated life of the related debt instrument using the effective interest method or straight-line method, as applicable. Refer to "Recent Accounting Pronouncements" below for information on our adoption of new accounting guidance on the presentation of debt issuance costs in the balance sheet. Revenue and Deferred Revenue We provide cloud computing to customers, which is broadly defined as the delivery of computing, storage and applications over the Internet. Cloud computing is a service transaction for which revenue is recognized when persuasive evidence of an arrangement exists, usually either a signed, written contract or customer acknowledgment of online terms of service; services have been delivered to the customer; the amounts to be received for the services delivered are fixed or determinable; and collection of such amounts is reasonably assured. Customers primarily consume our principal service offerings in one of two ways: (i) via dedicated computing resources or (ii) via multi-tenant pools of computing resources provided on demand. We also offer customers the flexibility to select the best combination of the two in order to meet the requirements of their unique applications and provide the technology to operate and manage multiple cloud computing environments seamlessly. Each service offering is priced according to the terms of our committed resources and services. Contracts for dedicated computing resources are generally fixed term agreements with a 12 - 36 month term with a monthly recurring fee based on the computing resources reserved and provided to the customer, the complexity of the underlying infrastructure and the level of support we provide. At the end of the initial term, contracts may be renewed or automatically extended on a month-to-month basis. Customers generally have the right to cancel their contracts by providing prior written notice to us of their intent to cancel the remainder of the contract term. In the event that a customer cancels their contract, they are not entitled to a refund for services already rendered. In certain instances we may charge a non-refundable installation fee. Beginning on the date the service is made available to customers, the monthly recurring fee is recognized monthly as services are provided and installation fees are recognized ratably over the estimated average life of a customer relationship. If a customer terminates its relationship with us before the expiration of the estimated average customer life, any unamortized installation fees are recognized as revenue at that time. Setup and other direct implementation activities performed at the inception of a customer contract are expensed as incurred. Contracts for services utilizing pooled resources on demand can be canceled at any time without penalty. Customers are billed according to usage for only the resources consumed, and revenue is recognized in the month in which the customer uses the services. Revenue recognition for multiple-element arrangements requires judgment to determine whether elements can be accounted for as separate units of accounting, and if so, the fair value for each of the elements using a hierarchy for allocating revenue to the elements: (i) vendor-specific objective evidence of fair value, (ii) third-party evidence, and (iii) best estimate of selling price. Revenue arrangements with multiple deliverables are divided into separate units of accounting when the delivered item(s) has value to the customer on a standalone basis, which is normally the situation for our services contracts. In this circumstance, revenue is recognized for each unit of accounting based on its relative estimated selling price. Estimated selling prices are management’s best estimates of the prices that we would charge our customers if we were to sell the standalone elements separately and include considerations of customer demand, prices charged by us and others for similar deliverables, and the cost of providing the service. Revenue is recognized as each element is delivered. Revenue is reported net of customer credits and sales and use tax. Invoiced amounts and accrued unbilled usage is recorded in accounts receivable and either deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Therefore, deferred revenue primarily consists of amounts that have been prepaid or deferred installation fees. As of December 31, 2015 , of the total $31.2 million in deferred revenue recorded on our balance sheet (the majority of which related to prepaid amounts), $29.6 million , $1.4 million and $0.2 million will be amortized to revenue in 2016 , 2017 and 2018 , respectively. Cost of Revenue Cost of revenue consists primarily of expenses related to personnel, licenses, and our data center facilities. Personnel expenses include the salaries, non-equity incentive compensation, share-based compensation and related expenses of our support teams and data center employees, and data center facility costs include rental fees, power costs, maintenance fees, and bandwidth. Advertising Costs We charge advertising costs to sales and marketing expense in the period incurred. Advertising expenses for the years ended December 31, 2013 , 2014 and 2015 were approximately $58.9 million , $59.2 million and $58.4 million , respectively. Share-Based Compensation We grant equity awards, including stock options and restricted stock, to eligible participants. The fair value of stock options is determined using the Black-Scholes valuation model, which requires us to make assumptions and judgments about variables related to our common stock and the related awards. We recognize share-based compensation expense on a straight-line basis over the vesting period. All restricted stock grants include a service requirement for vesting. We have also granted restricted stock that includes either a performance or market condition. The fair value of restricted stock with either solely a service requirement or with the combination of service and performance requirements is based on the closing fair market value of our common stock on the date of grant. The fair value of restricted stock with vesting conditions dependent market performance is determined using a Monte Carlo simulation. Share-based compensation expense is recognized on a straight-line basis over the service period or over our best estimate of the period over which the performance condition will be met, as applicable. Income Taxes Income taxes are accounted for using the asset and liability method. Deferred income taxes are provided for temporary differences in recognizing certain income, expense, and credit items for financial reporting purposes and tax reporting purposes. Such deferred income taxes primarily relate to the difference between the tax bases of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will realize the benefits of these deductible differences. We are currently under income tax audits in the U.K., California, and Pennsylvania. Due to the complexity involved with certain tax matters, there is the possibility that the various taxing authorities may disagree with certain tax positions filed on our income tax returns. We have considered all relevant facts and circumstances and believe that we have made adequate provision for all income tax uncertainties. For a further discussion of the impact of uncertain tax positions, see Note 11 , " Taxes ." We do not provide for a U.S. income tax liability on undistributed earnings of our foreign subsidiaries. The earnings of non-U.S. subsidiaries, which reflect full provision for non-U.S. income taxes, are currently indefinitely reinvested in non-U.S. operations. Refer to "Recent Accounting Pronouncements" below for information on our adoption of new accounting guidance on the presentation of deferred taxes in the balance sheet. Fair Value of Financial Instruments 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. There is a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3 – Unobservable inputs that are supported by little or no market activity, which require management judgment or estimation. Money market funds, classified in cash and cash equivalents, were $11 million and $226 million as of December 31, 2014 and 2015 , respectively, and are Level 1 financial instruments. See Note 6 , " Debt " for discussion on the fair value of our debt instruments. Foreign Currency We have assessed the functional currency of each of our international subsidiaries and have generally designated the local currency to be their respective functional currencies. The consolidated financial statements of these foreign subsidiaries are translated into the U.S. dollar. All assets and liabilities are translated to the U.S. dollar at the end-of-period exchange rates. Capital accounts are determined to be of a permanent nature and are therefore translated using historical exchange rates. Revenue and expenses are translated using average exchange rates. Foreign currency translation adjustments arising from differences in exchange rates from period to period are included in the foreign currency translation adjustment account in accumulated comprehensive income (loss). The income tax expense allocated to foreign currency translation adjustments during the year ended December 31, 2015 was $0.2 million . There was no income taxes allocated in the years ended December 31, 2013 or 2014 . Transaction gains or losses in currencies other than the functional currency are included as a component of other income (expense) in the consolidated statements of comprehensive income. Recent Accounting Pronouncements Revenue Recognition In May 2014, the Financial Accounting Standards Board ("FASB") issued a new standard on revenue recognition. The core principle of the new guidance is that an entity should recognize 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. In addition, the standard requires capitalization of incremental costs to obtain a contract and significantly expanded quantitative and qualitative disclosures. In August 2015, the FASB issued guidance which deferred the effective date by one year. The standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted for annual periods beginning after December 15, 2016. We intend to adopt the standard on January 1, 2018. Upon adoption, the new guidance will be applied retrospectively using one of two methods. One method is to apply the guidance retrospectively to each prior period presented with practical expedients available. The second method is to apply the guidance retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. We are continuing to evaluate our method of adoption and the impact this new accounting standard will have on our consolidated financial statements. Debt Issuance Costs In April 2015, the FASB issued guidance to simplify the presentation of debt issuance costs in the balance sheet. The guidance requires that debt issuance costs be presented as a direct deduction from the carrying value of the related debt liability. The recognition and measurement guidance for debt issuance costs are not affected by this new guidance. In August 2015, the FASB issued additional guidance to clarify the views of the SEC staff on the presentation of debt issuance costs related to line-of-credit arrangements. Under the additional guidance, an entity can defer and present debt issuance costs related to a line-of-credit arrangement as an asset and subsequently amortize the such costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings under the arrangement. We elected to early adopt this guidance in the fourth quarter of 2015. As a result, we have classified debt issuance costs related to the November 25, 2015 issuance of 6.5% Senior Notes due 2024 as a direct deduction from the carrying value of the debt liability on our consolidated balance sheet as of December 31, 2015. Debt issuance costs related to our new Revolving Credit Facility due 2020 entered into on November 25, 2015 are classified as an asset within "Other non-current assets" on our consolidated balance sheet as of December 31, 2015. We are required to apply this new guidance on a retrospective basis; however, there was no retrospective impact on our balance sheet as of December 31, 2014, as all capitalized debt issuance costs were related to our previous Revolving Credit Facility due 2016 and were classified as an asset within "Other non-current assets." Balance Sheet Classification of Deferred Taxes In November 2015, the FASB issued guidance to simplify the presentation of deferred taxes in the balance sheet. The new guidance eliminates the requirement that companies must present all deferred tax assets and liabilities as current and non-current in the balance sheet. Under the new guidance, companies are required to classify all deferred tax assets and liabilities as non-current. We elected to early adopt this new standard in the fourth quarter of 2015 on a retrospective basis. All prior period financial information has been adjusted to reflect the retrospective application of this new guidance. The reclassification of our consolidated balance sheet as of December 31, 2014 resulted in a net decrease of $8.2 million in total assets, including a $9.3 million reduction in current assets and a $1.1 million increase in non-current assets, with an offsetting decrease of $8.2 million in non-current liabilities. |
Net Income Per Share
Net Income Per Share | 12 Months Ended |
Dec. 31, 2015 | |
Earnings Per Share [Abstract] | |
Net Income Per Share | Net Income Per Share The following table sets forth the computation of basic and diluted net income per share: Year Ended December 31, (In millions except per share data) 2013 2014 2015 Basic net income per share: Net income $ 86.7 $ 110.6 $ 126.2 Weighted average shares outstanding: Common stock 138.6 142.0 139.0 Number of shares used in per share computations 138.6 142.0 139.0 Net income per share $ 0.63 $ 0.78 $ 0.91 Diluted net income per share: Net income $ 86.7 $ 110.6 $ 126.2 Weighted average shares outstanding: Common stock 138.6 142.0 139.0 Stock options, awards and employee share purchase plans 4.4 2.5 2.0 Number of shares used in per share computations 143.0 144.5 141.0 Net income per share $ 0.61 $ 0.77 $ 0.90 We excluded 3.5 million , 5.0 million and 3.9 million potential common shares from the computation of dilutive net income per share for the years ended December 31, 2013 , 2014 and 2015 , respectively, because the effect would have been anti-dilutive. |
Property and Equipment, net
Property and Equipment, net | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, net | Property and Equipment, net Property and equipment, net, at December 31, 2014 and 2015 consisted of the following: (In millions) December 31, December 31, Computers and equipment $ 1,495.2 $ 1,787.2 Computer software 318.9 370.6 Furniture and fixtures 56.7 63.5 Buildings and leasehold improvements 253.6 355.7 Land 27.9 28.1 Property and equipment, at cost 2,152.3 2,605.1 Less: Accumulated depreciation and amortization (1,249.5 ) (1,539.7 ) Work in process 154.9 82.6 Property and equipment, net $ 1,057.7 $ 1,148.0 The composition of the work in process balance was as follows: (In millions) December 31, December 31, Office facility build outs $ 51.3 $ 11.5 Data center build outs 80.5 49.0 Capitalized software 23.1 22.1 Work in process $ 154.9 $ 82.6 During 2015 , we placed into service and began depreciating $51.4 million of construction costs related to the completed portion of a data center in the U.K. and $47.7 million of construction costs related to the completion of our new U.K. office. We are deemed the owner of both buildings for accounting purposes. See Note 7 . "Leases" for more information. Depreciation and amortization expense on property and equipment was $303.2 million , $362.2 million and $390.4 million in 2013 , 2014 and 2015 , respectively. Included in these amounts was amortization expense for capitalized computer software costs of $50.6 million , $63.7 million and $61.4 million , respectively. As of December 31, 2014 and 2015 , the unamortized balance of computer software costs on our balance sheets was $103.4 million and $94.1 million , respectively. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
Intangible Assets | Intangible Assets The following tables provide information regarding our intangible assets, other than goodwill: December 31, 2014 (In millions) Gross carrying amount Accumulated amortization Net carrying amount Intangible assets: Licenses $ 32.5 $ (25.4 ) $ 7.1 Purchased technologies 13.2 (10.0 ) 3.2 Non-compete agreements 2.1 (2.0 ) 0.1 Customer relationships 6.1 (5.6 ) 0.5 Other 12.7 (7.0 ) 5.7 Total $ 66.6 $ (50.0 ) $ 16.6 December 31, 2015 (In millions) Gross carrying amount Accumulated amortization Net carrying amount Intangible assets: Licenses $ 33.5 $ (29.8 ) $ 3.7 Purchased technologies 12.4 (11.7 ) 0.7 Non-compete agreements 2.1 (2.1 ) — Customer relationships 5.9 (5.6 ) 0.3 Other 13.8 (9.4 ) 4.4 Total $ 67.7 $ (58.6 ) $ 9.1 Amortization expense on intangibles was $9.8 million , $9.7 million and $9.5 million in 2013 , 2014 and 2015 , respectively. Intangible assets are recorded at cost and are amortized on a straight-line basis over their estimated useful lives, which generally range from two to five years. As of December 31, 2015 , amortization expense on intangible assets for the next five years was expected to be as follows: (In millions) Year ending: Amount 2016 $ 6.7 2017 1.4 2018 0.5 2019 0.2 2020 0.2 Thereafter 0.1 Total $ 9.1 |
Cost-Method Investments
Cost-Method Investments | 12 Months Ended |
Dec. 31, 2015 | |
Investments, All Other Investments [Abstract] | |
Cost-Method Investments | Cost-Method Investments We have several direct investments accounted for under the cost method. The aggregate carrying amount of our cost-method investments, which are recorded as Other non-current assets, as of December 31, 2014 and December 31, 2015 was $1.1 million and $11.6 million , respectively. We have determined that it is not practicable to estimate the fair value of these investments. If we identify events or changes in circumstances that may have a significant adverse effect on the fair value of these investments, we will then estimate their fair values and determine if any decline in the fair value of the investments below carrying value is other-than-temporary. No events or circumstances indicating a potential impairment were identified as of December 31, 2015 . |
Debt
Debt | 12 Months Ended |
Dec. 31, 2015 | |
Debt Disclosure [Abstract] | |
Debt | Debt Debt consisted of: December 31, 2014 (In millions) Revolving Credit Facility Senior Notes due 2024 Note Payable Total Principal balance $ 25.0 $ — $ 0.1 $ 25.1 Unamortized debt issuance costs — — — — Total debt 25.0 — 0.1 25.1 Less: current portion of debt (25.0 ) — (0.1 ) (25.1 ) Debt, excluding current portion $ — $ — $ — $ — December 31, 2015 (In millions) Revolving Credit Facility Senior Notes due 2024 Note Payable Total Principal balance $ — $ 500.0 $ — $ 500.0 Unamortized debt issuance costs — (7.6 ) — (7.6 ) Total debt — 492.4 — 492.4 Less: current portion of debt — — — — Debt, excluding current portion $ — $ 492.4 $ — $ 492.4 Revolving Credit Facility On November 25, 2015 , we entered into a new, five -year $200 million unsecured revolving credit facility (the "Revolving Credit Facility"), with proceeds from loans under the facility available for working capital and general corporate purposes. We have the option to increase the amount of the Revolving Credit Facility by up to an additional $200 million , subject to certain terms and conditions. The Revolving Credit Facility matures on November 25, 2020 and replaced our previous revolving credit facility that was to mature on September 26, 2016 . Outstanding borrowings of $140 million under the previous revolving credit facility were repaid on November 25, 2015 using proceeds from the issuance of the Senior Notes, discussed below. As of December 31, 2015 , we had no outstanding borrowings under the Revolving Credit Facility and $0.4 million of undrawn letters of credit. Borrowings will bear interest, at our option, at either (i) an annual floating rate equal to the base rate plus a margin of between 0.25% and 1.00% or (ii) an annual rate equal to the reserve adjusted Eurodollar rate plus a margin of between 1.25% and 2.00% . Both margins are dependent on our degree of financial leverage. The base rate is defined as the greatest of (A) JPMorgan Chase Bank N.A.'s prime rate, (B) the federal funds rate plus 0.50% or (C) the rate at which deposits in U.S. dollars are offered in the London interbank market for a period of one month plus 1.00% . The Eurodollar rate is determined as the rate at which deposits in U.S. dollars are offered in the London interbank market for the applicable interest period. We also pay a fee on the committed but unused amount of the facility, which ranges from 0.25% to 0.40% , also depending on our degree of financial leverage. Rackspace Hosting, Inc. is the borrower under the Revolving Credit Facility, and all obligations under the facility are currently guaranteed by Rackspace Hosting, Inc. and Rackspace US, Inc., a wholly owned, domestic subsidiary of Rackspace Hosting, Inc. The facility describes certain terms and conditions under which other current or future domestic subsidiaries could also become guarantors of the facility. The facility requires the maintenance of a maximum consolidated total leverage ratio and a minimum consolidated fixed charge ratio in addition to customary affirmative and negative covenants, including covenants that limit or restrict our ability to grant liens, incur indebtedness, sell assets, make investments and make restricted payments subject to customary exceptions for a credit facility of this size and type. As of December 31, 2015 , we were in compliance with all covenants under this facility . Debt issuance costs of $1.0 million related to the Revolving Credit Facility were classified as an asset within "Other non-current assets" on the consolidated balance sheets and are being amortized over the term of the Revolving Credit Facility on a straight-line basis. Senior Notes due 2024 On November 25, 2015 , we completed the issuance of $500 million aggregate principal amount of 6.5% Senior Notes due 2024 (the "Senior Notes") to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act. The Senior Notes will mature on January 15, 2024 and bear interest at a rate of 6.5% per year, payable semi-annually on January 15 and July 15 of each year. The first interest payment date is July 15, 2016 . Rackspace Hosting, Inc. is the issuer of the Senior Notes, and obligations under the Senior Notes are guaranteed on a senior unsecured basis by Rackspace Hosting, Inc. and Rackspace US, Inc., a wholly owned, domestic subsidiary of Rackspace Hosting Inc. The Senior Notes indenture describes certain terms and conditions under which other current and future domestic subsidiaries could also become guarantors of the Senior Notes. The Senior Notes indenture contains covenants that, among other things, limit our ability to incur additional debt, pay dividends or make other restricted payments, purchase, redeem or retire capital stock or subordinated debt, make asset sales, incur liens, enter into sale-leaseback transactions, provide subsidiary guarantees, engage in certain transactions with affiliates, make investments, and engage in mergers or consolidations. Debt issuance costs of $7.7 million related to the Senior Notes were classified as a direct deduction from the carrying value of the long-term debt liability on the consolidated balance sheets and are being amortized over the term of the Senior Notes on a straight-line basis. As of December 31, 2015 , the outstanding principal amount of the Senior Notes was $500 million and we were in compliance with all covenants under the indenture . The fair value of the Senior Notes as of December 31, 2015 was $482.5 million , based on quoted market prices for identical assets that are traded in over-the-counter secondary markets that are not considered active. The fair value of the Senior Notes is classified as Level 2 in the fair value hierarchy. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2015 | |
Leases [Abstract] | |
Leases | Leases Operating Leases We lease most of our data center facilities and office space under non-cancelable operating lease agreements, which expire at various dates through 2033. Facility leases generally include renewal options and may include escalating rental payment provisions. Additionally, they may require us to pay a portion of the related operating expenses. Rent expense was $66.0 million , $74.0 million and $79.4 million for 2013 , 2014 and 2015 , respectively. As of December 31, 2015 , future minimum rental payments under operating leases with an initial non-cancelable lease term in excess of one year were as follows: (In millions) Year ending: Amount 2016 $ 71.4 2017 69.2 2018 63.7 2019 63.7 2020 62.9 Thereafter 515.2 Total minimum operating lease payments $ 846.1 Capital Leases We lease certain equipment under capital lease agreements. Assets recorded as property and equipment under capital leases and the accumulated depreciation thereon as of December 31, 2014 and 2015 were as follows: (In millions) December 31, 2014 December 31, 2015 Computers and equipment $ 74.0 $ 10.4 Less: Accumulated depreciation (57.9 ) (6.7 ) Net book value of property and equipment under capital leases $ 16.1 $ 3.7 Note that amounts as of December 31, 2014 have been revised to exclude assets that had transferred ownership upon the conclusion of the capital lease to conform to current year presentation. As of December 31, 2015 , future minimum lease payments under capital leases were as follows: (In millions) Year ending: Amount 2016 $ 1.7 2017 0.1 2018 0.1 Total minimum capital lease payments 1.9 Less amount representing interest — Present value of net minimum capital lease payments $ 1.9 Build-to-Suit Leases We have entered into build-to-suit lease arrangements under which we are considered the accounting owner of certain real estate projects. Assets recorded as property and equipment under build-to-suit leases and the accumulated depreciation thereon as of December 31, 2014 and 2015 were as follows: (In millions) December 31, 2014 December 31, 2015 Work in process $ 110.0 $ 48.5 Buildings 7.7 103.6 Less: Accumulated depreciation (0.2 ) (2.3 ) Net book value of property and equipment under build-to-suit leases $ 117.5 $ 149.8 During the first quarter of 2015, construction of a data center in the U.K. was partially completed, and we commenced the lease on this portion of the project. However, since the project is considered one unit of accounting, we will not perform a sale-leaseback analysis until the entire project is completed, which is not expected to occur until 2021. As a result, we placed into service and began depreciating $51.4 million of construction costs related to the completed portion of the project. Quarterly payments will be made through January 2041. The lease includes certain fair value renewal options that have not been included in the lease term. During the third quarter of 2015, construction of an office building in the U.K was completed. We performed a sale-leaseback analysis, and, due to our continuing involvement in the project, we were precluded from derecognizing the asset and liability. As a result, we placed into service and began depreciating $47.7 million of construction costs over the 10 -year term of the lease. There are no renewal options within the lease. As of December 31, 2015 , future minimum lease payments under build-to-suit leases were as follows: (In millions) Year ending: Amount 2016 $ 8.7 2017 12.5 2018 15.0 2019 15.5 2020 17.1 Thereafter 276.3 Total minimum build-to-suit lease payments 345.1 Plus amount representing residual asset balance 60.3 Less amount representing executory costs (0.8 ) Less amount representing interest (240.3 ) Finance lease obligations for build-to-suit leases $ 164.3 During 2015, we changed our non-current liability account title for finance lease obligations for assets under construction to finance lease obligations for build-to-suit leases. This non-current liability account now includes all build-to-suit finance lease obligations, including those for assets under construction as well as projects that did not qualify as a sale-leaseback at the completion of construction. As a result, finance lease obligations of $7.4 million as of December 31, 2014 associated with a build-to-suit construction projects that failed sale leaseback have been reclassified from capital lease obligations to finance lease obligations for build-to-suit leases in the consolidated balance sheets to conform to the current period presentation. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Purchase Commitments Non-cancelable purchase commitments primarily consist of commitments for certain software licenses, hardware purchases, and costs associated with our data centers, including bandwidth and electricity. The agreements can generally extend up to five years and provide for either penalties for early termination or may require minimum commitments for the remaining term. The minimum commitments for all of these agreements as of December 31, 2015 approximated $74.5 million , $11.7 million , $1.1 million , $0.3 million , and $0.3 million for the years ended December 31, 2016 , 2017 , 2018 , 2019 and 2020 , respectively. We also have purchase orders and construction contracts primarily related to data center equipment and facility build-outs. We generally have the right to cancel these open purchase orders prior to delivery or terminate the contracts without cause. Legal Proceedings We are party to various legal and administrative proceedings that we consider routine and incidental to our business. Although the outcome of these matters is currently not determinable, management expects that any losses that are incurred as a result of these matters, which are in excess of amounts already accrued in its consolidated balance sheet, would not be material to the consolidated financial statements as a whole. We are also a party to various claims that certain of our services and technologies infringe the intellectual property rights of others. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain features, products, or services, and may also cause us to change our business practices and require development of non-infringing products or technologies, which could result in a loss of revenue for us and otherwise harm our business. We have disputed the allegations of wrongdoing in these proceedings and intend to vigorously defend ourselves in all such matters. We cannot predict the impact, if any, that any of the matters described above may have on our business, results of operations, financial position, or cash flows. Because of the inherent uncertainties of such matters, including the early stage and lack of specific damage claims in many of them, we cannot estimate the range of possible losses from them. We record to cost of revenue state sales taxes related to software licenses acquired to provide hosting services to customers. We also remit state sales taxes collected from our customers for hosting services invoiced to our customers, with such services including the use of the aforementioned software licenses. During the year ended December 31, 2014, we recorded a $7 million benefit to cost of revenue for settlement of a dispute related to sales taxes paid on such software licenses for the period September 2007 through April 2014. Indemnifications As permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have a director and officer insurance policy that limits our exposure and enables us to recover a portion of any future amounts paid. As a result of the insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. We had no significant liabilities recorded for these agreements as of December 31, 2014 or 2015 . Additionally, in the normal course of business, we indemnify certain parties, including customers, vendors and lessors, with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. We had no significant liabilities recorded for these agreements as of December 31, 2014 or 2015 . Incentive Arrangements In August 2007, we entered into a lease for our corporate headquarters. In connection with this lease, we also entered into a Master Economic Incentives Agreement ("MEIA") with the Cities of Windcrest and San Antonio, Texas; Bexar County; and certain other parties, pursuant to which we agreed to locate existing and future employees at the new facility location. The agreement required that we meet certain employment levels each year in exchange for a 14 -year exemption from most of the property taxes associated with the property. If we fail to meet these job creation requirements, we could lose a portion or all of the tax exemption provided during the 14-year period and would then be obligated to repay the exemption amount. We have met the requirements for the employment level for the year ended December 31, 2015 , and we believe that it is probable that we will continue to meet the requirements throughout the exemption period. The exemption period began in 2009. Additionally, we entered into an agreement with the State of Texas, under which we received $5.0 million in 2007, $3.5 million in 2012, and $5.5 million in 2014 for meeting certain new employment levels in the State of Texas. We are responsible for maintaining the jobs until January 2022. If we eliminate jobs for which we have drawn funds, we are subject to a clawback on the amounts we have drawn plus 3.4% interest on such amounts per year. As of December 31, 2015 , the $14.0 million received was deferred and recorded as other non-current liabilities. Amounts will be recognized into income upon the achievement of the performance criteria and the determination that the cash is no longer refundable to the State of Texas. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2015 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Stockholders' Equity Common Stock At December 31, 2014 and 2015 , we had 140.9 million and 130.9 million shares of our common stock legally issued and outstanding, respectively. We have one class of authorized common stock. The rights and privileges provided to our common stockholders are as follows: • Dividend Rights —Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of our common stock are entitled to receive dividends, at the discretion of our board of directors. • Voting Rights —All holders of common stock are entitled to one vote per share on all matters to be voted on by Rackspace Hosting's stockholders. • Right to Receive Liquidation Distributions —Upon liquidation, dissolution or winding-up, the holders of our common stock are entitled to share equally in all of our assets remaining after payment of all liabilities and the liquidation preferences of any outstanding preferred stock. Preferred Stock As of December 31, 2014 and 2015 , there were 50 million authorized shares of preferred stock, of which none was issued or outstanding. Share Repurchase Program On November 6, 2014 , our board of directors authorized a share repurchase program to repurchase up to $500 million of our common stock. On November 12, 2014 , we entered into an accelerated share repurchase ("ASR") agreement with a financial institution and paid $200 million to repurchase our common stock. The payment was accounted for as a reduction to stockholders' equity in our consolidated balance sheet as of December 31, 2014 . We received an initial delivery of 3.3 million shares of common stock in November 2014, and we received an additional 0.9 million shares of common stock in May 2015 as final settlement of the ASR. All shares were subsequently retired. We reflected the ASR agreement as a repurchase of common stock for purposes of calculating earnings per share and as a forward contract indexed to our common stock. The forward contract met all the applicable criteria for equity classification, and therefore, was not accounted for as a derivative instrument. On August 5, 2015, our board of directors increased the authorization under the existing share repurchase program to a total of up to $1 billion , in addition to the $200 million already purchased under the ASR. The program will remain in effect for a period not to exceed 24 months from authorization. Under this program, shares may be repurchased from time to time through both open market and privately negotiated transactions. In addition to the 0.9 million shares of common stock received as final settlement of the ASR, we repurchased $367 million , or 12.2 million shares, of our common stock on the open market during 2015 . These shares were subsequently retired. Therefore, as of December 31, 2015 , approximately $633 million remained available for additional purchases under the current program. |
Share-Based Compensation
Share-Based Compensation | 12 Months Ended |
Dec. 31, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Share-Based Compensation Our 2007 Long-Term Incentive Plan, as amended and restated (the "2007 Stock Plan"), provides for the grant of equity awards, including incentive and non-qualified stock options or rights to purchase common stock, stock appreciation rights, restricted stock awards, restricted stock units, performance awards, cash-based awards, and dividend equivalents, to eligible participants. All awards, excluding incentive stock options, may be granted to employees, officers, directors, or any other non-employee service provider to the company. Incentive stock options may be granted only to employees of the company or a subsidiary. The exercise price of a stock option granted under the 2007 Stock Plan is determined by our Compensation Committee at the time the option is granted and generally may not be less than 100% of the fair market value of a share of common stock as of the date of grant. Under our 2007 Stock Plan, we have granted stock options and restricted stock, including restricted stock units and restricted stock awards. Collectively, all such grants are referred to as "awards." Stock options and restricted stock granted under the 2007 Stock Plan prior to May 2012 deduct one share from the number of shares available for issuance for each share granted. Beginning in May 2012, new grants of restricted stock counted against the numerical limits of the 2007 Stock Plan as 1.76 shares for every one share that was subject to such an award, and, beginning in May 2014, this was increased to 1.93 shares. To the extent awards granted under the 2007 Stock Plan terminate, expire or lapse, shares subject to such awards generally will again be available for future grant. In addition to the 2007 Stock Plan, we maintain the 2005 Stock Plan and plans assumed through acquisitions, collectively referred to as "Other Stock Plans." As of December 31, 2015 , the total number of shares authorized, outstanding and available for future grants under our stock plans was as follows: (In millions) Shares Authorized Shares Outstanding Shares 2007 Stock Plan 40.2 9.8 10.1 Other Stock Plans 11.7 0.1 — Total 51.9 9.9 10.1 The composition of the equity awards outstanding as of December 31, 2014 and 2015 was as follows: (In millions) December 31, December 31, Restricted stock 4.3 5.4 Stock options 6.8 4.5 Total outstanding awards 11.1 9.9 Restricted Stock Restricted stock grants generally vest as the employee continues to be employed with us, in four equal installments, on each of the first, second, third and fourth anniversaries of the grant date. The fair value of these service-vesting awards is measured based on the closing fair market value of our common stock on the date of grant, and share-based compensation expense is recognized ratably over the four -year service period. In addition to our service-vesting restricted stock awards, historically, certain members of our executive team received restricted stock that contained vesting conditions dependent upon predetermined market results measured at the end of three years. The fair values of these market-vesting awards were measured using a Monte Carlo simulation based on the date of grant, with share-based compensation expense recognized ratably over the three-year vesting period. During 2015 , the awards that reached their measurement date did not meet the predetermined market results, and the awards were cancelled with no shares being issued. As of December 31, 2015 , 0.2 million of these awards remain outstanding with measurement dates occurring throughout 2016. Additionally, we have granted awards to members of our executive team with vesting dependent upon the attainment of predetermined financial performance results over the next one to three years. The fair values of these performance-vesting awards is measured based on the closing fair market value of our common stock on the date of grant, and share-based compensation expense is recognized ratably over our best estimate of the period over which the performance condition will be met. In 2015 , we granted 0.3 million of these awards. The following table summarizes our restricted stock activity for the year ended December 31, 2015 : Number of Units or Shares (in millions) Weighted-Average Grant-Date Fair Value Outstanding at December 31, 2014 4.3 $ 34.49 Granted 3.0 $ 35.39 Released (1.2) $ 38.47 Cancelled (0.7) $ 36.15 Outstanding at December 31, 2015 5.4 $ 35.48 Expected to vest after December 31, 2015* 4.5 $ 35.68 *Includes reduction of shares outstanding due to estimated forfeitures The weighted-average grant-date fair value of restricted stock granted during 2013 and 2014 was $39.24 and $34.87 , respectively. The total pre-tax intrinsic value of the restricted stock released during 2013 , 2014 and 2015 was $29.7 million , $52.7 million and $46.8 million , respectively. Stock Options Stock options have generally been granted for terms of either seven or ten years and generally vest ratably over a four -year period or cliff-vest at the third anniversary date of the grant. The following table summarizes the stock option activity for the year ended December 31, 2015 : Number of Shares (in millions) Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Aggregate Intrinsic Value (in millions) Outstanding at December 31, 2014 6.8 $ 32.62 4.21 $ 104.3 Granted 0.0 $ 37.65 Exercised (1.7) $ 15.73 Forfeited (0.4) $ 44.59 Expired (0.2) $ 47.31 Outstanding at December 31, 2015 4.5 $ 37.34 3.58 $ 15.1 Vested and exercisable at December 31, 2015 3.2 $ 34.15 3.20 $ 15.1 Vested and exercisable at December 31, 2015 and expected to vest thereafter* 4.4 $ 37.11 3.54 $ 15.1 *Includes reduction of shares outstanding due to estimated forfeitures The total pre-tax intrinsic value of the stock options exercised during 2013 , 2014 and 2015 was $76.4 million , $44.1 million and $55.5 million , respectively. The following table presents the assumptions used to estimate the fair values of the stock options granted in the periods presented: Years Ended December 31, 2013 2014 2015 Expected stock volatility (1) 46% - 47% 46% - 48% 45% Expected dividend yield (2) —% —% —% Risk-free interest rate (3) 0.57% - 0.93% 1.08% - 1.27% 1.23% - 1.42% Expected life (4) 3.79 years 3.82 years 3.87 years Weighted-average grant-date fair value of options granted during the year (5) $15.86 $15.34 $13.52 (1) Management estimates volatility by evaluating the weighted average of the implied volatility and the mean reversion volatility of the company’s stock. (2) We have not issued dividends to date and do not anticipate issuing dividends. (3) Based on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent expected term. (4) Represents the period that our share-based awards are expected to be outstanding. Management uses historical exercise data in our estimation of the expected life. (5) Based on the end of day market price on the grant date. Employee Stock Purchase Plan An Employee Stock Purchase Plan (the "ESPP") for U.S. employees was approved by the company's board of directors in 2011 and adopted on January 1, 2012. Under the ESPP, eligible employees may purchase a limited number of shares of our common stock at the lesser of 85% of the market value on the enrollment date or 85% of the market value on the purchase date. The ESPP is made up of a series of offering periods. Each offering period has a maximum term of 24 months and is divided into semi-annual purchase intervals. Eligible employees may enroll at the beginning of any semi-annual purchase interval. During 2015 , we issued 0.2 million shares through the ESPP. The fair value on each enrollment date was determined using the Black-Scholes option-pricing model. Share-based compensation expense related to the ESPP was $3.1 million in each of the years 2013 , 2014 and 2015 . Share-Based Compensation Expense Share-based compensation expense was recognized as follows: Year Ended December 31, (In millions) 2013 2014 2015 Cost of revenue $ 12.6 $ 16.4 $ 16.8 Research and development 8.1 12.6 13.7 Sales and marketing 7.3 9.6 9.7 General and administrative 31.6 31.4 37.9 Pre-tax share-based compensation 59.6 70.0 78.1 Less: Income tax benefit (20.1 ) (21.5 ) (27.2 ) Total share-based compensation expense, net of tax $ 39.5 $ 48.5 $ 50.9 As of December 31, 2015 , there was $168.7 million of total unrecognized compensation cost related to restricted stock, stock options and the ESPP, which will be amortized on a straight-line basis over a weighted-average period of 2.6 years . |
Taxes
Taxes | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Taxes | Taxes The provision for income taxes consisted of: Year Ended December 31, (In millions) 2013 2014 2015 Current: Federal $ 35.9 $ 38.3 $ 48.1 Foreign 12.1 11.1 10.5 State 4.1 5.3 7.3 Total current 52.1 54.7 65.9 Deferred: Federal (3.9 ) (2.4 ) 3.0 Foreign (1.6 ) (2.9 ) (2.5 ) State (2.6 ) (0.4 ) 1.0 Total deferred (8.1 ) (5.7 ) 1.5 Total provision for income taxes $ 44.0 $ 49.0 $ 67.4 Income before income taxes from U.S. and foreign operations were as follows: Year Ended December 31, (In millions) 2013 2014 2015 U.S. $ 91.0 $ 95.2 $ 137.4 Foreign 39.7 64.4 56.2 Total income before income taxes $ 130.7 $ 159.6 $ 193.6 A reconciliation of the statutory federal tax rate to the effective tax rate is as follows: Year Ended December 31, 2013 2014 2015 Statutory federal tax rate 35.0 % 35.0 % 35.0 % State taxes, net of federal benefit 0.7 % 1.7 % 2.8 % Tax rate differentials for international jurisdictions (3.8 )% (10.5 )% (6.9 )% Permanent differences 1.6 % 3.5 % 3.0 % Deferred impact of intercompany transfers 3.5 % 3.2 % 2.6 % Research and development credit (current year) (3.1 )% (2.1 )% (1.5 )% Return to provision (1.1 )% (0.7 )% (1.7 )% Transfer pricing reserve 2.8 % (0.2 )% 1.4 % Other, net (1.9 )% 0.8 % 0.1 % Effective tax rate 33.7 % 30.7 % 34.8 % The tax rate differential for international jurisdictions has decreased from 2014 to 2015 as a decreased portion of our profits were earned outside the U.S. The impact of permanent differences has decreased from 2014 to 2015 as the global profit has increased, resulting in the permanent differences having a lesser impact on our global effective tax rate. State income taxes have increased from 2014 to 2015 as a result of legislative changes that were first effective in 2015 and increased profitability in the U.S. In December 2015, the Protecting Americans from Tax Hikes (PATH) Act was signed into law which retroactively reinstated the Federal research credit, bonus depreciation and other provisions that expired on December 31, 2014. The extension of the Federal research credit resulted in a reduction of our effective tax rate in 2015. The Federal research credit has been extended permanently, and we expect the credit to continue to decrease our effective tax rate for years after 2015. Deferred Taxes Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. Significant components of our deferred tax assets and liabilities are as follows: (In millions) December 31, 2014 December 31, 2015 Deferred tax assets: Share-based compensation $ 27.2 $ 31.8 State income taxes 2.2 2.5 Vacation accruals 3.5 0.3 Deferred revenue 5.3 6.1 Deferred rent 16.2 19.1 Accruals not currently deductible 8.4 12.5 Net operating loss carryforwards 4.8 6.0 Foreign tax credit 1.7 1.8 Research and development credits 13.4 16.4 Other 4.3 7.9 Total gross deferred tax assets 87.0 104.4 Deferred tax liabilities: Depreciation 134.6 145.9 Prepaids 4.0 6.2 Other 0.1 0.4 Total gross deferred tax liabilities 138.7 152.5 Net deferred tax liabilities $ 51.7 $ 48.1 Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Immaterial valuation allowances were established in 2014 and 2015 related to foreign tax credits that are expected to expire before they are utilized. For the rest of the deferred tax assets, valuation allowances were not deemed necessary based upon the determination that future profits are anticipated to utilize deferred tax assets in the future. The company has not recognized a deferred tax liability for undistributed earnings of its foreign subsidiaries because such earnings are considered indefinitely invested in a foreign country. As of December 31, 2015 , undistributed earnings of the company’s foreign subsidiaries considered indefinitely invested were $268.4 million . We intend to reinvest these earnings in active non-U.S. business operations and do not currently intend to repatriate these earnings to fund U.S. operations through either a dividend, liquidation or other means. In addition, estimates of future domestic cash generation will be sufficient to meet future domestic cash needs. Further, it is expected that the undistributed earnings of the company's foreign subsidiaries will be used to fund the additional investments made outside of the U.S. The determination of the amount of unrecognized deferred tax liability related to undistributed earnings is not practicable because of the complexities of the hypothetical calculation. We have $98.6 million of federal net operating loss carryforwards and $25.3 million of federal tax credit carryforwards expiring at various dates through 2035 . Of the $98.6 million of federal net operating loss carryforwards, $95.4 million are due to gross excess tax benefits from stock option exercises that have not been recorded as of December 31, 2015 . We have $3.8 million of foreign net operating loss carryforwards, which have an indefinite expiration date. Uncertain Tax Positions We file income tax returns in each jurisdiction in which we operate, both domestically and internationally. Due to the complexity involved with certain tax matters, we have considered all relevant facts and circumstances for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. We believe that there are no other jurisdictions in which the outcome of uncertain tax matters is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties. A reconciliation of our unrecognized tax benefits, excluding accrued interest, for 2014 and 2015 is as follows: (In millions) 2014 2015 Balance, beginning of year $ 23.2 $ 21.0 Additions based on tax positions related to the current year 2.5 1.1 Additions for tax positions of prior years 3.6 9.8 Reduction for statute expiration (0.9 ) — Reductions for tax positions of prior years (7.4 ) (1.1 ) Balance, end of year $ 21.0 $ 30.8 Unrecognized tax benefits of $21.0 million and $30.8 million for 2014 and 2015 , respectively, are included in other non-current liabilities on the balance sheet. At December 31, 2014 and 2015 , respectively, approximately $13.1 million and $16.8 million of these unrecognized tax benefits, if recognized, would favorably impact our effective tax rate in any future period. Also included in the balance of unrecognized tax benefits at December 31, 2015 are liabilities of $14.0 million that, if recognized, would be recorded as an adjustment to other current and non-current assets. We do not expect the amount of unrecognized tax benefits disclosed above to change significantly over the next 12 months. We recognize interest expense and penalties related to income tax matters within income tax expense on our consolidated statements of comprehensive income. Accrued interest and penalties as of December 31, 2014 and 2015 were not material. We are subject to U.S. federal income tax and various state, local, and international income taxes in numerous jurisdictions. Our domestic and international tax liabilities are subject to the allocation of revenue and expenses in different jurisdictions and the timing of recognizing revenue and expenses. As such, our effective tax rate is impacted by the geographical distribution of income and mix of profits in the various jurisdictions. Additionally, the amount of income taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we file. We currently file income tax returns in the U.S. and all foreign jurisdictions in which we have entities, which are periodically under audit by federal, state, and international tax authorities. These audits can involve complex matters that may require an extended period of time for resolution. We remain subject to U.S. federal and state income tax examinations for the tax years 2009 through 2015 and in the international jurisdictions in which we operate for varying periods from 2007 through 2015 . We currently have income tax examinations open in the State of California for 2010 , 2011 and 2012 , the State of Pennsylvania for 2013 and 2014 , and the United Kingdom for 2012 . Although the outcome of open tax audits is uncertain, in management’s opinion, adequate provisions for income taxes have been made. If actual outcomes differ materially from these estimates, they could have a material impact on our financial condition and results of operations. Differences between actual results and assumptions or changes in assumptions in future periods are recorded in the period they become known. To the extent additional information becomes available prior to resolution, such accruals are adjusted to reflect probable outcomes. Other During 2015 we received a federal income tax refund of $0.7 million . We experienced taxable profits in the U.S. and U.K. in 2015 before consideration of excess tax benefits, and therefore we anticipate utilizing benefits of tax deductions related to stock compensation. As a result, we have recognized an excess tax benefit in the U.S. and U.K. During 2011, 2012 and 2013, Rackspace US, Inc. sold certain intangible assets to a wholly-owned offshore subsidiary in taxable transactions. As a result of these transactions, there is an asset on the consolidated balance sheet as of December 31, 2015 of $22.2 million (of which $18.6 million was recorded in other non-current assets) that will be amortized through income tax expense over the lives of the applicable intangible assets. Although the transactions were taxable, the resulting gains were entirely offset against existing net operating losses, including excess stock compensation deductions. Thus, there was no cash tax impact from the sales of the intangible assets. On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of share-based compensation expense in an intercompany cost-sharing arrangement. At this time, the U.S. Department of the Treasury has not withdrawn the requirement to include share-based compensation from its regulations and the Internal Revenue Service may appeal. Until a final decision has been reached, we will continue to monitor developments related to the regulation and the possible impact, if any, of those developments on the consolidated financial statements. |
Segment Information
Segment Information | 12 Months Ended |
Dec. 31, 2015 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information We operate as one reportable segment based upon a number of factors including the basis for our budget and forecasts, the overall organization and management structure, and the consolidated financial information regularly used by our chief executive officer, who is the chief operating decision maker, to make key operating decisions and to assess performance. Since we operate in one reportable segment, all relevant financial information used to allocate resources and assess performance can be found in the consolidated financial statements. We generate revenue from a single type of service offering. Every service we offer is managed cloud, with our managed cloud service offering available across all the leading cloud form factors and technologies. We attribute revenue to geographic location based on the customer's billing address, either the U.S. or International, primarily the U.K. Total net revenue by geographic region was as follows: Year Ended December 31, (In millions) 2013 2014 2015 United States $ 1,076.3 $ 1,232.2 $ 1,366.8 International 458.5 562.2 634.5 Total net revenue $ 1,534.8 $ 1,794.4 $ 2,001.3 Our long-lived assets are primarily located in the U.S. and the U.K., and to a lesser extent Hong Kong and Australia. Property and equipment, net by geographic region was as follows: (In millions) December 31, December 31, United States $ 718.3 $ 736.2 International 339.4 411.8 Total property and equipment, net $ 1,057.7 $ 1,148.0 |
Employee Benefit Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2015 | |
Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans We sponsor defined contribution plans whereby employees may elect to contribute a portion of their annual compensation to the plans, after complying with certain limitations. The plans also include a discretionary employer contribution. During 2013 , 2014 and 2015 , contribution expense recognized for these plans was $10.3 million , $13.2 million and $13.9 million , respectively. |
Subsequent Event
Subsequent Event | 12 Months Ended |
Dec. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event On January 5, 2016, we completed the sale of assets, consisting primarily of intellectual property with an immaterial remaining net book value, of a non-strategic product line for total cash consideration of $24.0 million and other non-cash consideration. We will recognize a pre-tax gain on the disposal of these assets in our consolidated statements of comprehensive income in the first quarter of 2016. |
Supplementary Financial Data (U
Supplementary Financial Data (Unaudited) | 12 Months Ended |
Dec. 31, 2015 | |
Quarterly Financial Information Disclosure [Abstract] | |
Supplementary Financial Data (Unaudited) | SUPPLEMENTARY FINANCIAL DATA (UNAUDITED) Quarters Ended (In millions, except per share amounts) March 31, June 30, September 30, December 31, Net revenue $ 421.0 $ 441.2 $ 459.7 $ 472.5 Cost of revenue $ 140.4 $ 145.1 $ 142.9 $ 153.9 Net income $ 25.4 $ 22.5 $ 25.7 $ 37.0 Net income per share - basic $ 0.18 $ 0.16 $ 0.18 $ 0.26 Net income per share - diluted $ 0.18 $ 0.16 $ 0.18 $ 0.26 Quarters Ended (In millions, except per share amounts) March 31, June 30, September 30, December 31, Net revenue $ 480.2 $ 489.4 $ 508.9 $ 522.8 Cost of revenue $ 161.3 $ 163.9 $ 171.2 $ 179.1 Net income $ 28.4 $ 29.2 $ 36.5 $ 32.1 Net income per share - basic $ 0.20 $ 0.20 $ 0.26 $ 0.24 Net income per share - diluted $ 0.20 $ 0.20 $ 0.26 $ 0.24 |
Schedule of Valuation and Quali
Schedule of Valuation and Qualifying Accounts | 12 Months Ended |
Dec. 31, 2015 | |
Valuation and Qualifying Accounts [Abstract] | |
Schedule II - Valuation and Qualifying Accounts | (In millions) Beginning Balance Additions (1) Write-offs of Accounts Receivable and Credit Memos Paid Ending Balance Allowance for doubtful accounts and customer credits for the years ending December 31: 2013 $ 4.2 $ 16.9 $ (17.2 ) $ 3.9 2014 $ 3.9 $ 16.5 $ (15.1 ) $ 5.3 2015 $ 5.3 $ 20.2 $ (18.2 ) $ 7.3 (1) Additions to the allowance for doubtful accounts are charged to expense. Additions to the allowance for customer credits are charged to revenue. |
Summary of Significant Accounti
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
Basis of Consolidation | The accompanying consolidated financial statements include the accounts of Rackspace Hosting and our wholly-owned subsidiaries, which include, among others, Rackspace US, Inc., our domestic operating entity, and Rackspace Limited, our United Kingdom operating entity. Intercompany transactions and balances have been eliminated in consolidation. |
Basis of Accounting | accounting principles generally accepted in the United States ("GAAP") |
Use of Estimates | The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable and customer credits, property and equipment, fair values of intangible assets and goodwill, useful lives of intangible assets, fair value of share-based compensation, contingencies, and income taxes, among others. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from our estimates. |
Cash and Cash Equivalents | For the purposes of the consolidated financial statements, we consider all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents. Our available cash and cash equivalents are held in bank deposits, overnight sweep accounts, and money market funds. Gains and losses are included in interest and other income in our accompanying consolidated statements of comprehensive income. We actively monitor the third-party depository institutions that hold our deposits. Our emphasis is primarily on safety of principal, secondly on the liquidity of our investments, and finally on maximizing yield on those funds. Our money market mutual funds invest exclusively in high-quality, short-term obligations that include securities issued or guaranteed by the U.S. government or by U.S. government agencies and floating rate and variable rate demand notes of U.S. and foreign corporations. |
Accounts Receivable, Net | Trade accounts receivable are recorded at the invoiced amount and do not bear interest. We generally do not request collateral from our customers; however, some customers choose to prepay for their services. We record an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. When evaluating the adequacy of the allowance, we analyze the overall quality of our accounts receivable portfolio, current economic conditions and trends, historical bad debt write-offs, customer creditworthiness, and specifically identified customer risks. In addition, our hosting arrangements contain service level commitments with our customers. To the extent that such service levels are not achieved or are otherwise disputed due to third-party power or service issues, unfavorable weather, or other service interruptions or conditions, we are required to issue service credits for a portion of the hosting service fees paid by our customers. At each reporting period, we estimate the amount of service level credits to be issued and record a reduction to revenue. To estimate service credits, we utilize historical data and specific knowledge of factors impacting the delivery of services to our customers. |
Prepaid Expense and Other Assets | Prepaid expenses and other assets consist primarily of prepaid software and equipment maintenance contracts and prepaid operating expenses. Maintenance contracts are amortized over the agreement period, generally one to three years. Prepaid operating expenses are expensed in the period in which services are received. |
Property and Equipment, Net | Property and equipment is stated at cost, net of accumulated depreciation and amortization. Included in property and equipment are capitalized costs related to computer software developed or acquired for internal use. Capitalized computer software costs consist of purchased software licenses, implementation costs, and salaries and related compensation costs of employees and consultants for certain projects that qualify for capitalization. Replacements and major improvements to property and equipment are capitalized, while maintenance and repairs are charged to expense as incurred. We also capitalize interest costs incurred during the acquisition, development and construction of certain assets until the asset is ready for its intended use. For the years ended December 31, 2014 and 2015 , we capitalized interest of $2.1 million and $7.1 million , respectively. There was no interest capitalized during the year ended December 31, 2013 . Property and equipment is depreciated on a straight-line basis over the estimated useful life of the asset. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the remaining lease term. The following table shows estimated useful lives of property and equipment: Classification Estimated Useful Lives Computers and equipment 3 to 5 years Computer software 3 years Furniture and fixtures 7 years Buildings and leasehold improvements 2 to 39 years The cost of assets and related accumulated depreciation and amortization are written off upon retirement or sale, and any resulting gain or loss is credited or charged to income from operations. |
Internal Use Software | Included in property and equipment are capitalized costs related to computer software developed or acquired for internal use. Capitalized computer software costs consist of purchased software licenses, implementation costs, and salaries and related compensation costs of employees and consultants for certain projects that qualify for capitalization. |
Goodwill and Intangible Assets | Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. Goodwill is evaluated for impairment at a reporting unit level using a fair value approach on an annual basis at the beginning of the fourth quarter or whenever events or circumstances indicate that impairment may have occurred. No goodwill impairment was recognized in any of the years presented, and there were no changes in the carrying amount of goodwill in 2014 or 2015 . Intangible assets, including purchased technology, customer contracts and relationships, certain tradenames, license agreements, and non-compete agreements arising principally from acquisitions, are recorded at cost less accumulated amortization, and the definite-lived intangibles are amortized using a method that reflects the pattern in which the economic benefits of the related intangible asset are consumed or utilized. |
Intangible Assets | Intangible assets are recorded at cost and are amortized on a straight-line basis over their estimated useful lives, which generally range from two to five years. |
Impairment of Long-Lived Assets | Long-lived assets, including property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured at the asset group level and if the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized. |
Leases | We lease most of our data center facilities and office space under non-cancelable operating lease agreements. Total rent payments, inclusive of rent increases, rent holidays, rent concessions, leasehold incentives or any other unusual provisions or conditions, are expensed on a straight-line basis over the lease period. The difference between the straight-line expense and the cash payment is recorded as deferred rent. We lease certain equipment under capital lease agreements with major vendors. The assets held under capital lease and related obligations are recorded at the lesser of the present value of aggregate future minimum lease payments, including estimated bargain purchase options, or the fair value of the assets held under capital lease. Such assets, included within "property and equipment, net" on our consolidated balance sheets, are depreciated on a straight-line basis over the shorter of the terms of the leases or the estimated useful lives of the assets. For assets for which the lease agreement includes a bargain purchase option or transfer of ownership at the completion of the lease and the lease term is shorter than the estimated useful life of the asset, the asset is depreciated over its estimated useful life. Interest expense is recorded on the outstanding capital lease obligation throughout the lease term. Additionally, we have entered into complex real estate development and build-to-suit lease arrangements with independent real estate developers to design, construct and lease certain real estate projects. While the independent developers legally own the real estate projects and must finance the overall construction, we agreed to fund certain structural improvements and/or retain obligations related to certain potential construction cost overruns. As a result of our involvement during the construction period, we are considered the owner of these construction projects for accounting purposes. During the construction period, we record construction costs for these projects as a work in process asset within "property and equipment, net" and a corresponding long-term liability within "finance lease obligations for build-to-suit leases" on our consolidated balance sheets. The cost of these real estate projects is not depreciated during the construction period. When construction of a project is complete, we evaluate whether the build-to-suit lease arrangement qualifies for sales recognition under sale-leaseback accounting guidance. If the lease meets the criteria to qualify as a sale-leaseback, the asset and liability can be derecognized and the lease is accounted for as an operating lease with rent expense recognized over the lease term. If the sale-leaseback criteria are not met, the asset and liability remain on our consolidated balance sheets. The asset is then depreciated over the term of the lease, and rental payments are recorded as a reduction of the corresponding liability and as interest expense. At the end of the lease term, the remaining lease obligation and residual asset balance are derecognized. |
Real Estate Development and Build-to-Suit Lease Arrangements | Additionally, we have entered into complex real estate development and build-to-suit lease arrangements with independent real estate developers to design, construct and lease certain real estate projects. While the independent developers legally own the real estate projects and must finance the overall construction, we agreed to fund certain structural improvements and/or retain obligations related to certain potential construction cost overruns. As a result of our involvement during the construction period, we are considered the owner of these construction projects for accounting purposes. During the construction period, we record construction costs for these projects as a work in process asset within "property and equipment, net" and a corresponding long-term liability within "finance lease obligations for build-to-suit leases" on our consolidated balance sheets. The cost of these real estate projects is not depreciated during the construction period. |
Debt Issuance Costs | Debt issuance costs, such as underwriting, financial advisory, professional fees and other similar fees are capitalized and recognized in interest expense over the estimated life of the related debt instrument using the effective interest method or straight-line method, as applicable. |
Revenue and Deferred Revenue | We provide cloud computing to customers, which is broadly defined as the delivery of computing, storage and applications over the Internet. Cloud computing is a service transaction for which revenue is recognized when persuasive evidence of an arrangement exists, usually either a signed, written contract or customer acknowledgment of online terms of service; services have been delivered to the customer; the amounts to be received for the services delivered are fixed or determinable; and collection of such amounts is reasonably assured. Customers primarily consume our principal service offerings in one of two ways: (i) via dedicated computing resources or (ii) via multi-tenant pools of computing resources provided on demand. We also offer customers the flexibility to select the best combination of the two in order to meet the requirements of their unique applications and provide the technology to operate and manage multiple cloud computing environments seamlessly. Each service offering is priced according to the terms of our committed resources and services. Contracts for dedicated computing resources are generally fixed term agreements with a 12 - 36 month term with a monthly recurring fee based on the computing resources reserved and provided to the customer, the complexity of the underlying infrastructure and the level of support we provide. At the end of the initial term, contracts may be renewed or automatically extended on a month-to-month basis. Customers generally have the right to cancel their contracts by providing prior written notice to us of their intent to cancel the remainder of the contract term. In the event that a customer cancels their contract, they are not entitled to a refund for services already rendered. In certain instances we may charge a non-refundable installation fee. Beginning on the date the service is made available to customers, the monthly recurring fee is recognized monthly as services are provided and installation fees are recognized ratably over the estimated average life of a customer relationship. If a customer terminates its relationship with us before the expiration of the estimated average customer life, any unamortized installation fees are recognized as revenue at that time. Setup and other direct implementation activities performed at the inception of a customer contract are expensed as incurred. Contracts for services utilizing pooled resources on demand can be canceled at any time without penalty. Customers are billed according to usage for only the resources consumed, and revenue is recognized in the month in which the customer uses the services. Revenue recognition for multiple-element arrangements requires judgment to determine whether elements can be accounted for as separate units of accounting, and if so, the fair value for each of the elements using a hierarchy for allocating revenue to the elements: (i) vendor-specific objective evidence of fair value, (ii) third-party evidence, and (iii) best estimate of selling price. Revenue arrangements with multiple deliverables are divided into separate units of accounting when the delivered item(s) has value to the customer on a standalone basis, which is normally the situation for our services contracts. In this circumstance, revenue is recognized for each unit of accounting based on its relative estimated selling price. Estimated selling prices are management’s best estimates of the prices that we would charge our customers if we were to sell the standalone elements separately and include considerations of customer demand, prices charged by us and others for similar deliverables, and the cost of providing the service. Revenue is recognized as each element is delivered. Revenue is reported net of customer credits and sales and use tax. Invoiced amounts and accrued unbilled usage is recorded in accounts receivable and either deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Therefore, deferred revenue primarily consists of amounts that have been prepaid or deferred installation fees. |
Cost of Revenue | Cost of revenue consists primarily of expenses related to personnel, licenses, and our data center facilities. Personnel expenses include the salaries, non-equity incentive compensation, share-based compensation and related expenses of our support teams and data center employees, and data center facility costs include rental fees, power costs, maintenance fees, and bandwidth. |
Advertising Costs | We charge advertising costs to sales and marketing expense in the period incurred. |
Share-Based Compensation | We grant equity awards, including stock options and restricted stock, to eligible participants. The fair value of stock options is determined using the Black-Scholes valuation model, which requires us to make assumptions and judgments about variables related to our common stock and the related awards. We recognize share-based compensation expense on a straight-line basis over the vesting period. All restricted stock grants include a service requirement for vesting. We have also granted restricted stock that includes either a performance or market condition. The fair value of restricted stock with either solely a service requirement or with the combination of service and performance requirements is based on the closing fair market value of our common stock on the date of grant. The fair value of restricted stock with vesting conditions dependent market performance is determined using a Monte Carlo simulation. Share-based compensation expense is recognized on a straight-line basis over the service period or over our best estimate of the period over which the performance condition will be met, as applicable. |
Income Taxes | Income taxes are accounted for using the asset and liability method. Deferred income taxes are provided for temporary differences in recognizing certain income, expense, and credit items for financial reporting purposes and tax reporting purposes. Such deferred income taxes primarily relate to the difference between the tax bases of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will realize the benefits of these deductible differences. |
Income Tax Uncertainties | We are currently under income tax audits in the U.K., California, and Pennsylvania. Due to the complexity involved with certain tax matters, there is the possibility that the various taxing authorities may disagree with certain tax positions filed on our income tax returns. We have considered all relevant facts and circumstances and believe that we have made adequate provision for all income tax uncertainties. |
Undistributed Earnings of Foreign Subsidiaries | We do not provide for a U.S. income tax liability on undistributed earnings of our foreign subsidiaries. The earnings of non-U.S. subsidiaries, which reflect full provision for non-U.S. income taxes, are currently indefinitely reinvested in non-U.S. operations. |
Fair Value of Financial Instruments | 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. There is a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3 – Unobservable inputs that are supported by little or no market activity, which require management judgment or estimation. Money market funds, classified in cash and cash equivalents, were $11 million and $226 million as of December 31, 2014 and 2015 , respectively, and are Level 1 financial instruments. See Note 6 , " Debt " for discussion on the fair value of our debt instruments. |
Foreign Currency | We have assessed the functional currency of each of our international subsidiaries and have generally designated the local currency to be their respective functional currencies. The consolidated financial statements of these foreign subsidiaries are translated into the U.S. dollar. All assets and liabilities are translated to the U.S. dollar at the end-of-period exchange rates. Capital accounts are determined to be of a permanent nature and are therefore translated using historical exchange rates. Revenue and expenses are translated using average exchange rates. Foreign currency translation adjustments arising from differences in exchange rates from period to period are included in the foreign currency translation adjustment account in accumulated comprehensive income (loss). The income tax expense allocated to foreign currency translation adjustments during the year ended December 31, 2015 was $0.2 million . There was no income taxes allocated in the years ended December 31, 2013 or 2014 . Transaction gains or losses in currencies other than the functional currency are included as a component of other income (expense) in the consolidated statements of comprehensive income. |
Recent Accounting Pronouncements | Revenue Recognition In May 2014, the Financial Accounting Standards Board ("FASB") issued a new standard on revenue recognition. The core principle of the new guidance is that an entity should recognize 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. In addition, the standard requires capitalization of incremental costs to obtain a contract and significantly expanded quantitative and qualitative disclosures. In August 2015, the FASB issued guidance which deferred the effective date by one year. The standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted for annual periods beginning after December 15, 2016. We intend to adopt the standard on January 1, 2018. Upon adoption, the new guidance will be applied retrospectively using one of two methods. One method is to apply the guidance retrospectively to each prior period presented with practical expedients available. The second method is to apply the guidance retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. We are continuing to evaluate our method of adoption and the impact this new accounting standard will have on our consolidated financial statements. Debt Issuance Costs In April 2015, the FASB issued guidance to simplify the presentation of debt issuance costs in the balance sheet. The guidance requires that debt issuance costs be presented as a direct deduction from the carrying value of the related debt liability. The recognition and measurement guidance for debt issuance costs are not affected by this new guidance. In August 2015, the FASB issued additional guidance to clarify the views of the SEC staff on the presentation of debt issuance costs related to line-of-credit arrangements. Under the additional guidance, an entity can defer and present debt issuance costs related to a line-of-credit arrangement as an asset and subsequently amortize the such costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings under the arrangement. We elected to early adopt this guidance in the fourth quarter of 2015. As a result, we have classified debt issuance costs related to the November 25, 2015 issuance of 6.5% Senior Notes due 2024 as a direct deduction from the carrying value of the debt liability on our consolidated balance sheet as of December 31, 2015. Debt issuance costs related to our new Revolving Credit Facility due 2020 entered into on November 25, 2015 are classified as an asset within "Other non-current assets" on our consolidated balance sheet as of December 31, 2015. We are required to apply this new guidance on a retrospective basis; however, there was no retrospective impact on our balance sheet as of December 31, 2014, as all capitalized debt issuance costs were related to our previous Revolving Credit Facility due 2016 and were classified as an asset within "Other non-current assets." Balance Sheet Classification of Deferred Taxes In November 2015, the FASB issued guidance to simplify the presentation of deferred taxes in the balance sheet. The new guidance eliminates the requirement that companies must present all deferred tax assets and liabilities as current and non-current in the balance sheet. Under the new guidance, companies are required to classify all deferred tax assets and liabilities as non-current. We elected to early adopt this new standard in the fourth quarter of 2015 on a retrospective basis. All prior period financial information has been adjusted to reflect the retrospective application of this new guidance. The reclassification of our consolidated balance sheet as of December 31, 2014 resulted in a net decrease of $8.2 million in total assets, including a $9.3 million reduction in current assets and a $1.1 million increase in non-current assets, with an offsetting decrease of $8.2 million in non-current liabilities. |
Cost-Method Investments | If we identify events or changes in circumstances that may have a significant adverse effect on the fair value of these investments, we will then estimate their fair values and determine if any decline in the fair value of the investments below carrying value is other-than-temporary. |
State Sales Taxes | We record to cost of revenue state sales taxes related to software licenses acquired to provide hosting services to customers. We also remit state sales taxes collected from our customers for hosting services invoiced to our customers, with such services including the use of the aforementioned software licenses. |
Segment Reporting | We operate as one reportable segment based upon a number of factors including the basis for our budget and forecasts, the overall organization and management structure, and the consolidated financial information regularly used by our chief executive officer, who is the chief operating decision maker, to make key operating decisions and to assess performance. |
Company Overview, Basis of Pr25
Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Estimated useful lives of property and equipment | The following table shows estimated useful lives of property and equipment: Classification Estimated Useful Lives Computers and equipment 3 to 5 years Computer software 3 years Furniture and fixtures 7 years Buildings and leasehold improvements 2 to 39 years |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Earnings Per Share [Abstract] | |
Computation of Basic and Diluted Net Income Per Share | The following table sets forth the computation of basic and diluted net income per share: Year Ended December 31, (In millions except per share data) 2013 2014 2015 Basic net income per share: Net income $ 86.7 $ 110.6 $ 126.2 Weighted average shares outstanding: Common stock 138.6 142.0 139.0 Number of shares used in per share computations 138.6 142.0 139.0 Net income per share $ 0.63 $ 0.78 $ 0.91 Diluted net income per share: Net income $ 86.7 $ 110.6 $ 126.2 Weighted average shares outstanding: Common stock 138.6 142.0 139.0 Stock options, awards and employee share purchase plans 4.4 2.5 2.0 Number of shares used in per share computations 143.0 144.5 141.0 Net income per share $ 0.61 $ 0.77 $ 0.90 |
Property and Equipment, net (Ta
Property and Equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment, net | Property and equipment, net, at December 31, 2014 and 2015 consisted of the following: (In millions) December 31, December 31, Computers and equipment $ 1,495.2 $ 1,787.2 Computer software 318.9 370.6 Furniture and fixtures 56.7 63.5 Buildings and leasehold improvements 253.6 355.7 Land 27.9 28.1 Property and equipment, at cost 2,152.3 2,605.1 Less: Accumulated depreciation and amortization (1,249.5 ) (1,539.7 ) Work in process 154.9 82.6 Property and equipment, net $ 1,057.7 $ 1,148.0 |
Work in process | The composition of the work in process balance was as follows: (In millions) December 31, December 31, Office facility build outs $ 51.3 $ 11.5 Data center build outs 80.5 49.0 Capitalized software 23.1 22.1 Work in process $ 154.9 $ 82.6 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
Schedule of Intangible Assets, Other Than Goodwill | The following tables provide information regarding our intangible assets, other than goodwill: December 31, 2014 (In millions) Gross carrying amount Accumulated amortization Net carrying amount Intangible assets: Licenses $ 32.5 $ (25.4 ) $ 7.1 Purchased technologies 13.2 (10.0 ) 3.2 Non-compete agreements 2.1 (2.0 ) 0.1 Customer relationships 6.1 (5.6 ) 0.5 Other 12.7 (7.0 ) 5.7 Total $ 66.6 $ (50.0 ) $ 16.6 December 31, 2015 (In millions) Gross carrying amount Accumulated amortization Net carrying amount Intangible assets: Licenses $ 33.5 $ (29.8 ) $ 3.7 Purchased technologies 12.4 (11.7 ) 0.7 Non-compete agreements 2.1 (2.1 ) — Customer relationships 5.9 (5.6 ) 0.3 Other 13.8 (9.4 ) 4.4 Total $ 67.7 $ (58.6 ) $ 9.1 |
Schedule of Future Amortization Expense on Intangible Assets | As of December 31, 2015 , amortization expense on intangible assets for the next five years was expected to be as follows: (In millions) Year ending: Amount 2016 $ 6.7 2017 1.4 2018 0.5 2019 0.2 2020 0.2 Thereafter 0.1 Total $ 9.1 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Debt Disclosure [Abstract] | |
Debt | Debt consisted of: December 31, 2014 (In millions) Revolving Credit Facility Senior Notes due 2024 Note Payable Total Principal balance $ 25.0 $ — $ 0.1 $ 25.1 Unamortized debt issuance costs — — — — Total debt 25.0 — 0.1 25.1 Less: current portion of debt (25.0 ) — (0.1 ) (25.1 ) Debt, excluding current portion $ — $ — $ — $ — December 31, 2015 (In millions) Revolving Credit Facility Senior Notes due 2024 Note Payable Total Principal balance $ — $ 500.0 $ — $ 500.0 Unamortized debt issuance costs — (7.6 ) — (7.6 ) Total debt — 492.4 — 492.4 Less: current portion of debt — — — — Debt, excluding current portion $ — $ 492.4 $ — $ 492.4 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Leases [Abstract] | |
Future minimum rental payments for operating leases | As of December 31, 2015 , future minimum rental payments under operating leases with an initial non-cancelable lease term in excess of one year were as follows: (In millions) Year ending: Amount 2016 $ 71.4 2017 69.2 2018 63.7 2019 63.7 2020 62.9 Thereafter 515.2 Total minimum operating lease payments $ 846.1 |
Assets recorded as property and equipment under capital leases | Assets recorded as property and equipment under capital leases and the accumulated depreciation thereon as of December 31, 2014 and 2015 were as follows: (In millions) December 31, 2014 December 31, 2015 Computers and equipment $ 74.0 $ 10.4 Less: Accumulated depreciation (57.9 ) (6.7 ) Net book value of property and equipment under capital leases $ 16.1 $ 3.7 |
Future minimum lease payments under capital leases | As of December 31, 2015 , future minimum lease payments under capital leases were as follows: (In millions) Year ending: Amount 2016 $ 1.7 2017 0.1 2018 0.1 Total minimum capital lease payments 1.9 Less amount representing interest — Present value of net minimum capital lease payments $ 1.9 |
Assets recorded as property and equipment under build-to-suit leases | Assets recorded as property and equipment under build-to-suit leases and the accumulated depreciation thereon as of December 31, 2014 and 2015 were as follows: (In millions) December 31, 2014 December 31, 2015 Work in process $ 110.0 $ 48.5 Buildings 7.7 103.6 Less: Accumulated depreciation (0.2 ) (2.3 ) Net book value of property and equipment under build-to-suit leases $ 117.5 $ 149.8 |
Future minimum lease payments under build-to-suit leases | As of December 31, 2015 , future minimum lease payments under build-to-suit leases were as follows: (In millions) Year ending: Amount 2016 $ 8.7 2017 12.5 2018 15.0 2019 15.5 2020 17.1 Thereafter 276.3 Total minimum build-to-suit lease payments 345.1 Plus amount representing residual asset balance 60.3 Less amount representing executory costs (0.8 ) Less amount representing interest (240.3 ) Finance lease obligations for build-to-suit leases $ 164.3 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Total number of shares authorized, outstanding and available for future grants under our stock plans | As of December 31, 2015 , the total number of shares authorized, outstanding and available for future grants under our stock plans was as follows: (In millions) Shares Authorized Shares Outstanding Shares 2007 Stock Plan 40.2 9.8 10.1 Other Stock Plans 11.7 0.1 — Total 51.9 9.9 10.1 |
Composition of equity awards outstanding | The composition of the equity awards outstanding as of December 31, 2014 and 2015 was as follows: (In millions) December 31, December 31, Restricted stock 4.3 5.4 Stock options 6.8 4.5 Total outstanding awards 11.1 9.9 |
Restricted stock activity | The following table summarizes our restricted stock activity for the year ended December 31, 2015 : Number of Units or Shares (in millions) Weighted-Average Grant-Date Fair Value Outstanding at December 31, 2014 4.3 $ 34.49 Granted 3.0 $ 35.39 Released (1.2) $ 38.47 Cancelled (0.7) $ 36.15 Outstanding at December 31, 2015 5.4 $ 35.48 Expected to vest after December 31, 2015* 4.5 $ 35.68 *Includes reduction of shares outstanding due to estimated forfeitures |
Stock option activity | The following table summarizes the stock option activity for the year ended December 31, 2015 : Number of Shares (in millions) Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Aggregate Intrinsic Value (in millions) Outstanding at December 31, 2014 6.8 $ 32.62 4.21 $ 104.3 Granted 0.0 $ 37.65 Exercised (1.7) $ 15.73 Forfeited (0.4) $ 44.59 Expired (0.2) $ 47.31 Outstanding at December 31, 2015 4.5 $ 37.34 3.58 $ 15.1 Vested and exercisable at December 31, 2015 3.2 $ 34.15 3.20 $ 15.1 Vested and exercisable at December 31, 2015 and expected to vest thereafter* 4.4 $ 37.11 3.54 $ 15.1 *Includes reduction of shares outstanding due to estimated forfeitures |
Assumptions used to estimate the fair values of the stock options granted | The following table presents the assumptions used to estimate the fair values of the stock options granted in the periods presented: Years Ended December 31, 2013 2014 2015 Expected stock volatility (1) 46% - 47% 46% - 48% 45% Expected dividend yield (2) —% —% —% Risk-free interest rate (3) 0.57% - 0.93% 1.08% - 1.27% 1.23% - 1.42% Expected life (4) 3.79 years 3.82 years 3.87 years Weighted-average grant-date fair value of options granted during the year (5) $15.86 $15.34 $13.52 (1) Management estimates volatility by evaluating the weighted average of the implied volatility and the mean reversion volatility of the company’s stock. (2) We have not issued dividends to date and do not anticipate issuing dividends. (3) Based on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent expected term. (4) Represents the period that our share-based awards are expected to be outstanding. Management uses historical exercise data in our estimation of the expected life. (5) Based on the end of day market price on the grant date. |
Allocation of share-based compensation expense to income statement line items | Share-based compensation expense was recognized as follows: Year Ended December 31, (In millions) 2013 2014 2015 Cost of revenue $ 12.6 $ 16.4 $ 16.8 Research and development 8.1 12.6 13.7 Sales and marketing 7.3 9.6 9.7 General and administrative 31.6 31.4 37.9 Pre-tax share-based compensation 59.6 70.0 78.1 Less: Income tax benefit (20.1 ) (21.5 ) (27.2 ) Total share-based compensation expense, net of tax $ 39.5 $ 48.5 $ 50.9 |
Taxes (Tables)
Taxes (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Provision for Income Taxes | The provision for income taxes consisted of: Year Ended December 31, (In millions) 2013 2014 2015 Current: Federal $ 35.9 $ 38.3 $ 48.1 Foreign 12.1 11.1 10.5 State 4.1 5.3 7.3 Total current 52.1 54.7 65.9 Deferred: Federal (3.9 ) (2.4 ) 3.0 Foreign (1.6 ) (2.9 ) (2.5 ) State (2.6 ) (0.4 ) 1.0 Total deferred (8.1 ) (5.7 ) 1.5 Total provision for income taxes $ 44.0 $ 49.0 $ 67.4 |
Income Before Income Taxes from U.S. and Foreign Operations | Income before income taxes from U.S. and foreign operations were as follows: Year Ended December 31, (In millions) 2013 2014 2015 U.S. $ 91.0 $ 95.2 $ 137.4 Foreign 39.7 64.4 56.2 Total income before income taxes $ 130.7 $ 159.6 $ 193.6 |
Reconciliation of Statutory Federal Tax Rate to Effective Tax Rate | A reconciliation of the statutory federal tax rate to the effective tax rate is as follows: Year Ended December 31, 2013 2014 2015 Statutory federal tax rate 35.0 % 35.0 % 35.0 % State taxes, net of federal benefit 0.7 % 1.7 % 2.8 % Tax rate differentials for international jurisdictions (3.8 )% (10.5 )% (6.9 )% Permanent differences 1.6 % 3.5 % 3.0 % Deferred impact of intercompany transfers 3.5 % 3.2 % 2.6 % Research and development credit (current year) (3.1 )% (2.1 )% (1.5 )% Return to provision (1.1 )% (0.7 )% (1.7 )% Transfer pricing reserve 2.8 % (0.2 )% 1.4 % Other, net (1.9 )% 0.8 % 0.1 % Effective tax rate 33.7 % 30.7 % 34.8 % |
Significant Components of Deferred Tax Assets and Liabilities | Significant components of our deferred tax assets and liabilities are as follows: (In millions) December 31, 2014 December 31, 2015 Deferred tax assets: Share-based compensation $ 27.2 $ 31.8 State income taxes 2.2 2.5 Vacation accruals 3.5 0.3 Deferred revenue 5.3 6.1 Deferred rent 16.2 19.1 Accruals not currently deductible 8.4 12.5 Net operating loss carryforwards 4.8 6.0 Foreign tax credit 1.7 1.8 Research and development credits 13.4 16.4 Other 4.3 7.9 Total gross deferred tax assets 87.0 104.4 Deferred tax liabilities: Depreciation 134.6 145.9 Prepaids 4.0 6.2 Other 0.1 0.4 Total gross deferred tax liabilities 138.7 152.5 Net deferred tax liabilities $ 51.7 $ 48.1 |
Reconciliation of Unrecognized Tax Benefits, Excluding Accrued Interest | A reconciliation of our unrecognized tax benefits, excluding accrued interest, for 2014 and 2015 is as follows: (In millions) 2014 2015 Balance, beginning of year $ 23.2 $ 21.0 Additions based on tax positions related to the current year 2.5 1.1 Additions for tax positions of prior years 3.6 9.8 Reduction for statute expiration (0.9 ) — Reductions for tax positions of prior years (7.4 ) (1.1 ) Balance, end of year $ 21.0 $ 30.8 |
Segment Information (Tables)
Segment Information (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Segment Reporting [Abstract] | |
Total net revenue by geographic region | Total net revenue by geographic region was as follows: Year Ended December 31, (In millions) 2013 2014 2015 United States $ 1,076.3 $ 1,232.2 $ 1,366.8 International 458.5 562.2 634.5 Total net revenue $ 1,534.8 $ 1,794.4 $ 2,001.3 |
Property and equipment, net by geographic region | Property and equipment, net by geographic region was as follows: (In millions) December 31, December 31, United States $ 718.3 $ 736.2 International 339.4 411.8 Total property and equipment, net $ 1,057.7 $ 1,148.0 |
Supplementary Financial Data 34
Supplementary Financial Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Quarterly Financial Information Disclosure [Abstract] | |
Supplementary Financial Data (Unaudited) | Quarters Ended (In millions, except per share amounts) March 31, June 30, September 30, December 31, Net revenue $ 421.0 $ 441.2 $ 459.7 $ 472.5 Cost of revenue $ 140.4 $ 145.1 $ 142.9 $ 153.9 Net income $ 25.4 $ 22.5 $ 25.7 $ 37.0 Net income per share - basic $ 0.18 $ 0.16 $ 0.18 $ 0.26 Net income per share - diluted $ 0.18 $ 0.16 $ 0.18 $ 0.26 Quarters Ended (In millions, except per share amounts) March 31, June 30, September 30, December 31, Net revenue $ 480.2 $ 489.4 $ 508.9 $ 522.8 Cost of revenue $ 161.3 $ 163.9 $ 171.2 $ 179.1 Net income $ 28.4 $ 29.2 $ 36.5 $ 32.1 Net income per share - basic $ 0.20 $ 0.20 $ 0.26 $ 0.24 Net income per share - diluted $ 0.20 $ 0.20 $ 0.26 $ 0.24 |
Company Overview, Basis of Pr35
Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies (Details) | 12 Months Ended | ||
Dec. 31, 2015USD ($)continent | Dec. 31, 2014USD ($) | Dec. 31, 2013USD ($) | |
Number of continents in which we have data centers | continent | 4 | ||
Property and Equipment, Net | |||
Interest capitalized | $ 7,100,000 | $ 2,100,000 | $ 0 |
Goodwill and Intangible Assets | |||
Goodwill impairment recognized | 0 | 0 | 0 |
Changes in carrying amount of goodwill | 0 | 0 | |
Leases | |||
Asset retirement obligations | 4,000,000 | 3,600,000 | |
Revenue and Deferred Revenue | |||
Deferred revenue, total | 31,200,000 | ||
Deferred revenue, current portion | 29,600,000 | 20,900,000 | |
Deferred revenue, non-current portion | 1,600,000 | 1,400,000 | |
Advertising Costs | |||
Advertising expenses | 58,400,000 | 59,200,000 | 58,900,000 |
Foreign Currency | |||
Income tax expense allocated to foreign currency translation adjustments | 200,000 | 0 | $ 0 |
Recent Accounting Pronouncements | |||
Change in total assets | 2,014,200,000 | 1,616,100,000 | |
Change in current assets | 718,400,000 | 412,400,000 | |
Reclassification | Accounting Standards Update 2015-17 | |||
Recent Accounting Pronouncements | |||
Change in total assets | (8,200,000) | ||
Change in current assets | (9,300,000) | ||
Change in non-current assets | 1,100,000 | ||
Change in non-current liabilities | (8,200,000) | ||
Money market funds | Level 1 financial instruments | |||
Fair Value of Financial Instruments | |||
Cash and cash equivalents, fair value | 226,000,000 | $ 11,000,000 | |
Deferred revenue to be amortized to revenue in 2016 | |||
Revenue and Deferred Revenue | |||
Deferred revenue, current portion | 29,600,000 | ||
Deferred revenue to be amortized to revenue in 2017 | |||
Revenue and Deferred Revenue | |||
Deferred revenue, non-current portion | 1,400,000 | ||
Deferred revenue to be amortized to revenue in 2018 | |||
Revenue and Deferred Revenue | |||
Deferred revenue, non-current portion | $ 200,000 | ||
Minimum | |||
Prepaid Expenses and Other Assets | |||
Agreement period of maintenance contracts | 1 year | ||
Revenue and Deferred Revenue | |||
Term of customer contracts for dedicated computing resources | 12 months | ||
Maximum | |||
Prepaid Expenses and Other Assets | |||
Agreement period of maintenance contracts | 3 years | ||
Revenue and Deferred Revenue | |||
Term of customer contracts for dedicated computing resources | 36 months | ||
Computers and equipment | Minimum | |||
Property and Equipment, Net | |||
Estimated useful lives | 3 years | ||
Computers and equipment | Maximum | |||
Property and Equipment, Net | |||
Estimated useful lives | 5 years | ||
Computer software | |||
Property and Equipment, Net | |||
Estimated useful lives | 3 years | ||
Furniture and fixtures | |||
Property and Equipment, Net | |||
Estimated useful lives | 7 years | ||
Buildings and leasehold improvements | Minimum | |||
Property and Equipment, Net | |||
Estimated useful lives | 2 years | ||
Buildings and leasehold improvements | Maximum | |||
Property and Equipment, Net | |||
Estimated useful lives | 39 years |
Net Income Per Share (Details)
Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Basic net income per share: | |||||||||||
Net income | $ 32.1 | $ 36.5 | $ 29.2 | $ 28.4 | $ 37 | $ 25.7 | $ 22.5 | $ 25.4 | $ 126.2 | $ 110.6 | $ 86.7 |
Weighted average shares outstanding: | |||||||||||
Common stock | 139 | 142 | 138.6 | ||||||||
Number of shares used in per share computations | 139 | 142 | 138.6 | ||||||||
Net income per share - basic | $ 0.24 | $ 0.26 | $ 0.20 | $ 0.20 | $ 0.26 | $ 0.18 | $ 0.16 | $ 0.18 | $ 0.91 | $ 0.78 | $ 0.63 |
Diluted net income per share: | |||||||||||
Net income | $ 32.1 | $ 36.5 | $ 29.2 | $ 28.4 | $ 37 | $ 25.7 | $ 22.5 | $ 25.4 | $ 126.2 | $ 110.6 | $ 86.7 |
Weighted average shares outstanding: | |||||||||||
Common stock | 139 | 142 | 138.6 | ||||||||
Stock options, awards and employee share purchase plans | 2 | 2.5 | 4.4 | ||||||||
Number of shares used in per share computations | 141 | 144.5 | 143 | ||||||||
Net income per share - diluted | $ 0.24 | $ 0.26 | $ 0.20 | $ 0.20 | $ 0.26 | $ 0.18 | $ 0.16 | $ 0.18 | $ 0.90 | $ 0.77 | $ 0.61 |
Number of potential common shares excluded from the computation of dilutive net income per share because the effect would have been anti-dilutive | 3.9 | 5 | 3.5 |
Property and Equipment, net (De
Property and Equipment, net (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||
Sep. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Property and equipment | |||||
Property and equipment, at cost | $ 2,605.1 | $ 2,152.3 | |||
Less: Accumulated depreciation and amortization | (1,539.7) | (1,249.5) | |||
Work in process | 82.6 | 154.9 | |||
Property and equipment, net | 1,148 | 1,057.7 | |||
Depreciation and amortization expense | 399.9 | 371.9 | $ 313.1 | ||
Computers and equipment | |||||
Property and equipment | |||||
Property and equipment, at cost | 1,787.2 | 1,495.2 | |||
Computer software | |||||
Property and equipment | |||||
Property and equipment, at cost | 370.6 | 318.9 | |||
Property and equipment, net | 94.1 | 103.4 | |||
Amortization expense | 61.4 | 63.7 | 50.6 | ||
Furniture and fixtures | |||||
Property and equipment | |||||
Property and equipment, at cost | 63.5 | 56.7 | |||
Buildings and leasehold improvements | |||||
Property and equipment | |||||
Property and equipment, at cost | 355.7 | 253.6 | |||
Buildings | Data center in the U.K. | |||||
Property and equipment | |||||
Construction costs placed into service | $ 51.4 | ||||
Buildings | Office building in the U.K. | |||||
Property and equipment | |||||
Construction costs placed into service | $ 47.7 | ||||
Land | |||||
Property and equipment | |||||
Property and equipment, at cost | 28.1 | 27.9 | |||
Office facility build outs | |||||
Property and equipment | |||||
Work in process | 11.5 | 51.3 | |||
Data center build outs | |||||
Property and equipment | |||||
Work in process | 49 | 80.5 | |||
Capitalized software | |||||
Property and equipment | |||||
Work in process | 22.1 | 23.1 | |||
Property and equipment | |||||
Property and equipment | |||||
Depreciation and amortization expense | $ 390.4 | $ 362.2 | $ 303.2 |
Intangible Assets (Details 1) -
Intangible Assets (Details 1) - Information on intangible assets - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Intangible assets, other than goodwill | |||
Gross carrying amount | $ 67.7 | $ 66.6 | |
Accumulated amortization | (58.6) | (50) | |
Net carrying amount | 9.1 | 16.6 | |
Amortization expense on intangibles | $ 9.5 | 9.7 | $ 9.8 |
Minimum | |||
Intangible assets, other than goodwill | |||
Estimated useful lives of intangible assets | 2 years | ||
Maximum | |||
Intangible assets, other than goodwill | |||
Estimated useful lives of intangible assets | 5 years | ||
Licenses | |||
Intangible assets, other than goodwill | |||
Gross carrying amount | $ 33.5 | 32.5 | |
Accumulated amortization | (29.8) | (25.4) | |
Net carrying amount | 3.7 | 7.1 | |
Purchased technologies | |||
Intangible assets, other than goodwill | |||
Gross carrying amount | 12.4 | 13.2 | |
Accumulated amortization | (11.7) | (10) | |
Net carrying amount | 0.7 | 3.2 | |
Non-compete agreements | |||
Intangible assets, other than goodwill | |||
Gross carrying amount | 2.1 | 2.1 | |
Accumulated amortization | (2.1) | (2) | |
Net carrying amount | 0 | 0.1 | |
Customer relationships | |||
Intangible assets, other than goodwill | |||
Gross carrying amount | 5.9 | 6.1 | |
Accumulated amortization | (5.6) | (5.6) | |
Net carrying amount | 0.3 | 0.5 | |
Other | |||
Intangible assets, other than goodwill | |||
Gross carrying amount | 13.8 | 12.7 | |
Accumulated amortization | (9.4) | (7) | |
Net carrying amount | $ 4.4 | $ 5.7 |
Intangible Assets (Details 2) -
Intangible Assets (Details 2) - Future amortization expense on intangible assets - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Amortization expense on intangible assets for the next five years | ||
2,016 | $ 6.7 | |
2,017 | 1.4 | |
2,018 | 0.5 | |
2,019 | 0.2 | |
2,020 | 0.2 | |
Thereafter | 0.1 | |
Net carrying amount | $ 9.1 | $ 16.6 |
Cost-Method Investments (Detail
Cost-Method Investments (Details) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Investments, All Other Investments [Abstract] | ||
Aggregate carrying amount of cost-method investments, not evaluated for impairment | $ 11.6 | $ 1.1 |
Debt (Details)
Debt (Details) - USD ($) | Nov. 25, 2015 | Dec. 31, 2015 | Dec. 31, 2015 | Dec. 31, 2014 |
Debt | ||||
Principal balance | $ 500,000,000 | $ 500,000,000 | $ 25,100,000 | |
Unamortized debt issuance costs | (7,600,000) | (7,600,000) | 0 | |
Total debt | 492,400,000 | 492,400,000 | 25,100,000 | |
Less: current portion of debt | 0 | 0 | (25,100,000) | |
Debt, excluding current portion | 492,400,000 | 492,400,000 | 0 | |
Revolving Credit Facility | ||||
Debt | ||||
Principal balance | 0 | 0 | 25,000,000 | |
Unamortized debt issuance costs | 0 | 0 | 0 | |
Total debt | 0 | 0 | 25,000,000 | |
Less: current portion of debt | 0 | 0 | (25,000,000) | |
Debt, excluding current portion | 0 | 0 | 0 | |
Revolving Credit Facility, Current | ||||
Debt | ||||
Total debt | 0 | $ 0 | ||
Debt issuance costs | 1,000,000 | |||
Revolving Credit Facility | ||||
Initiation date of revolving credit facility | Nov. 25, 2015 | |||
Term of revolving credit facility | 5 years | |||
Borrowing capacity of revolving credit facility | $ 200,000,000 | |||
Additional borrowing capacity of revolving credit facility, subject to certain terms and conditions | 200,000,000 | |||
Maturity date of revolving credit facility | Nov. 25, 2020 | |||
Undrawn letters of credit | 400,000 | $ 400,000 | ||
Covenant compliance | in compliance with all covenants under this facility | |||
Revolving Credit Facility, Current | Minimum | ||||
Revolving Credit Facility | ||||
Fee percentage on committed but unused amount of facility | 0.25% | |||
Revolving Credit Facility, Current | Maximum | ||||
Revolving Credit Facility | ||||
Fee percentage on committed but unused amount of facility | 0.40% | |||
Revolving Credit Facility, Current | Base rate | Minimum | ||||
Revolving Credit Facility | ||||
Basis spread on variable rate | 0.25% | |||
Revolving Credit Facility, Current | Base rate | Maximum | ||||
Revolving Credit Facility | ||||
Basis spread on variable rate | 1.00% | |||
Revolving Credit Facility, Current | Federal funds rate | ||||
Revolving Credit Facility | ||||
Basis spread on variable rate | 0.50% | |||
Revolving Credit Facility, Current | London interbank offered rate | ||||
Revolving Credit Facility | ||||
Basis spread on variable rate | 1.00% | |||
Revolving Credit Facility, Current | Eurodollar rate | Minimum | ||||
Revolving Credit Facility | ||||
Basis spread on variable rate | 1.25% | |||
Revolving Credit Facility, Current | Eurodollar rate | Maximum | ||||
Revolving Credit Facility | ||||
Basis spread on variable rate | 2.00% | |||
Revolving Credit Facility, Previous | ||||
Revolving Credit Facility | ||||
Maturity date of revolving credit facility | Sep. 26, 2016 | |||
Repayments of outstanding borrowings under revolving credit facility | 140,000,000 | |||
Senior Notes due 2024 | ||||
Debt | ||||
Principal balance | 500,000,000 | $ 500,000,000 | 0 | |
Unamortized debt issuance costs | (7,600,000) | (7,600,000) | 0 | |
Total debt | 492,400,000 | 492,400,000 | 0 | |
Less: current portion of debt | 0 | 0 | 0 | |
Debt, excluding current portion | 492,400,000 | $ 492,400,000 | 0 | |
Debt issuance costs | 7,700,000 | |||
Senior Notes due 2024 | ||||
Issuance date | Nov. 25, 2015 | |||
Face amount of debt instrument | $ 500,000,000 | |||
Stated interest rate | 6.50% | |||
Maturity date | Jan. 15, 2024 | |||
Date of first required payment | Jul. 15, 2016 | |||
Covenant compliance | in compliance with all covenants under the indenture | |||
Senior Notes due 2024 | Level 2 in the fair value hierarchy | ||||
Senior Notes due 2024 | ||||
Fair value | 482,500,000 | $ 482,500,000 | ||
Note Payable | ||||
Debt | ||||
Principal balance | 0 | 0 | 100,000 | |
Unamortized debt issuance costs | 0 | 0 | 0 | |
Total debt | 0 | 0 | 100,000 | |
Less: current portion of debt | 0 | 0 | (100,000) | |
Debt, excluding current portion | $ 0 | $ 0 | $ 0 |
Leases (Details 1) - Operating
Leases (Details 1) - Operating Leases - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Operating Leases | |||
Rent expense | $ 79.4 | $ 74 | $ 66 |
Future minimum rental payments under operating leases | |||
2,016 | 71.4 | ||
2,017 | 69.2 | ||
2,018 | 63.7 | ||
2,019 | 63.7 | ||
2,020 | 62.9 | ||
Thereafter | 515.2 | ||
Total minimum operating lease payments | $ 846.1 |
Leases (Details 2) - Capital Le
Leases (Details 2) - Capital Leases - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Assets recorded as property and equipment under capital leases | ||
Less: Accumulated depreciation | $ (6.7) | $ (57.9) |
Net book value of property and equipment under capital leases | 3.7 | 16.1 |
Future minimum lease payments under capital leases | ||
2,016 | 1.7 | |
2,017 | 0.1 | |
2,018 | 0.1 | |
Total minimum capital lease payments | 1.9 | |
Less amount representing interest | 0 | |
Present value of net minimum capital lease payments | 1.9 | |
Computers and equipment | ||
Assets recorded as property and equipment under capital leases | ||
Property and equipment under capital leases | $ 10.4 | $ 74 |
Leases (Details 3) - Build-to-S
Leases (Details 3) - Build-to-Suit Leases - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Assets recorded as property and equipment under build-to-suit leases | ||||
Less: Accumulated depreciation | $ (2.3) | $ (0.2) | ||
Net book value of property and equipment under build-to-suit leases | 149.8 | 117.5 | ||
Finance lease obligations for build-to-suit leases | 164.3 | 117.4 | ||
Future minimum lease payments under build-to-suit leases | ||||
2,016 | 8.7 | |||
2,017 | 12.5 | |||
2,018 | 15 | |||
2,019 | 15.5 | |||
2,020 | 17.1 | |||
Thereafter | 276.3 | |||
Total minimum build-to-suit lease payments | 345.1 | |||
Plus amount representing residual asset balance | 60.3 | |||
Less amount representing executory costs | (0.8) | |||
Less amount representing interest | (240.3) | |||
Finance lease obligations for build-to-suit leases | $ 164.3 | |||
Office building in the U.K. | ||||
Assets recorded as property and equipment under build-to-suit leases | ||||
Term of lease | 10 years | |||
Build-to-suit construction projects that have failed sale leaseback | Previously Reported | ||||
Assets recorded as property and equipment under build-to-suit leases | ||||
Finance lease obligations for build-to-suit leases | 7.4 | |||
Work in process | ||||
Assets recorded as property and equipment under build-to-suit leases | ||||
Property and equipment under build-to-suit leases | $ 48.5 | 110 | ||
Buildings | ||||
Assets recorded as property and equipment under build-to-suit leases | ||||
Property and equipment under build-to-suit leases | $ 103.6 | $ 7.7 | ||
Buildings | Data center in the U.K. | ||||
Assets recorded as property and equipment under build-to-suit leases | ||||
Construction costs placed into service | $ 51.4 | |||
Buildings | Office building in the U.K. | ||||
Assets recorded as property and equipment under build-to-suit leases | ||||
Construction costs placed into service | $ 47.7 |
Commitments and Contingencies (
Commitments and Contingencies (Details 1) - Purchase Commitments $ in Millions | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Purchase Commitments | |
Maximum duration of non-cancelable purchase agreements | 5 years |
Minimum purchase commitments for the year ended December 31, 2016 | $ 74.5 |
Minimum purchase commitments for the year ended December 31, 2017 | 11.7 |
Minimum purchase commitments for the year ended December 31, 2018 | 1.1 |
Minimum purchase commitments for the year ended December 31, 2019 | 0.3 |
Minimum purchase commitments for the year ended December 31, 2020 | $ 0.3 |
Commitments and Contingencies46
Commitments and Contingencies (Details 2) - Legal Proceedings $ in Millions | 12 Months Ended |
Dec. 31, 2014USD ($) | |
Dispute related to sales taxes paid on certain software licenses | Cost of revenue | |
Gain Contingencies | |
Benefit recorded for settlement of dispute | $ 7 |
Commitments and Contingencies47
Commitments and Contingencies (Details 3) - Incentive Arrangements - USD ($) $ in Millions | 12 Months Ended | |||||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2009 | Dec. 31, 2007 | |
Gain Contingencies | ||||||
Duration of exemption from most of the property taxes associated with the corporate headquarters | 14 years | |||||
Funds received from State of Texas for meeting certain new employment levels | $ 0 | $ 5.5 | $ 0 | |||
Funds Received Under Agreement with State of Texas | ||||||
Gain Contingencies | ||||||
Funds received from State of Texas for meeting certain new employment levels | $ 5.5 | $ 3.5 | $ 5 | |||
Interest rate, per year, on amounts subject to a clawback if we eliminate jobs for which we have drawn funds | 3.40% | |||||
Income that will be recognized upon achievement of certain performance criteria | $ 14 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) $ in Millions | Aug. 05, 2015USD ($) | Nov. 12, 2014USD ($) | May. 31, 2015shares | Nov. 30, 2014shares | Dec. 31, 2015USD ($)votesclassesshares | Dec. 31, 2014USD ($)shares | Nov. 06, 2014USD ($) |
Common Stock | |||||||
Shares of common stock legally issued | 130,900,000 | 140,900,000 | |||||
Shares of common stock outstanding | 130,900,000 | 140,900,000 | |||||
Number of classes of authorized common stock | classes | 1 | ||||||
Number of votes per share of common stock owned | votes | 1 | ||||||
Preferred Stock | |||||||
Authorized shares of preferred stock | 50,000,000 | 50,000,000 | |||||
Shares of preferred stock issued | 0 | 0 | |||||
Shares of preferred stock outstanding | 0 | 0 | |||||
Share Repurchase Program | |||||||
Value of shares repurchased and subsequently retired | $ | $ 367 | $ 200 | |||||
Common Stock | |||||||
Share Repurchase Program | |||||||
Authorized value of stock that may be repurchased under the share repurchase program | $ | $ 500 | ||||||
Value of shares repurchased and subsequently retired | $ | $ 367 | ||||||
Number of shares repurchased and subsequently retired | 12,200,000 | ||||||
Authorized repurchase amount remaining under the share repurchase program | $ | $ 1,000 | $ 633 | |||||
Amount of common stock authorized under share repurchase program that has been utilized | $ | $ 200 | ||||||
Common Stock | Maximum | |||||||
Share Repurchase Program | |||||||
Share repurchase period | 24 months | ||||||
Common Stock | ASR agreement entered into on November 12, 2014 | |||||||
Share Repurchase Program | |||||||
Value of shares repurchased and subsequently retired | $ | $ 200 | ||||||
Number of shares repurchased and subsequently retired | 900,000 | 3,300,000 |
Share-Based Compensation (Detai
Share-Based Compensation (Details 1) - General - shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Share-Based Compensation | ||
Shares Authorized | 51,900,000 | |
Shares Outstanding | 9,900,000 | 11,100,000 |
Stock options outstanding | 4,500,000 | 6,800,000 |
Shares Available for Future Grants | 10,100,000 | |
Restricted stock | ||
Share-Based Compensation | ||
Restricted stock outstanding | 5,400,000 | 4,300,000 |
2007 Stock Plan | ||
Share-Based Compensation | ||
Shares Authorized | 40,200,000 | |
Shares Outstanding | 9,800,000 | |
Shares Available for Future Grants | 10,100,000 | |
2007 Stock Plan | Restricted stock | Granted prior to May 2012 | ||
Share-Based Compensation | ||
Number of shares deducted from shares available for issuance under stock plans for each share granted | 1 | |
2007 Stock Plan | Restricted stock | Granted from May 2012 through April 2014 | ||
Share-Based Compensation | ||
Number of shares deducted from shares available for issuance under stock plans for each share granted | 1.76 | |
2007 Stock Plan | Restricted stock | Granted in May 2014 and after | ||
Share-Based Compensation | ||
Number of shares deducted from shares available for issuance under stock plans for each share granted | 1.93 | |
2007 Stock Plan | Stock options | ||
Share-Based Compensation | ||
Number of shares deducted from shares available for issuance under stock plans for each share granted | 1 | |
2007 Stock Plan | Stock options | Minimum | ||
Share-Based Compensation | ||
Exercise price of a stock option granted as a percentage of the fair market value of a share of common stock | 100.00% | |
Other Stock Plans | ||
Share-Based Compensation | ||
Shares Authorized | 11,700,000 | |
Shares Outstanding | 100,000 | |
Shares Available for Future Grants | 0 |
Share-Based Compensation (Det50
Share-Based Compensation (Details 2) - Restricted Stock - Restricted stock $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2015USD ($)installments$ / sharesshares | Dec. 31, 2014USD ($)$ / sharesshares | Dec. 31, 2013USD ($)$ / shares | |
Restricted Stock Roll Forward | |||
Number of units or shares outstanding, beginning of year | 4,300,000 | ||
Number of units or shares granted | 3,000,000 | ||
Number of units or shares released | (1,200,000) | ||
Number of units or shares cancelled | (700,000) | ||
Number of units or shares outstanding, end of year | 5,400,000 | 4,300,000 | |
Restricted Stock, Weighted-Average Grant-Date Fair Value | |||
Weighted-average grant-date fair value of units or shares outstanding, beginning of year | $ / shares | $ 34.49 | ||
Weighted-average grant-date fair value of units or shares granted | $ / shares | 35.39 | $ 34.87 | $ 39.24 |
Weighted-average grant-date fair value of units or shares released | $ / shares | 38.47 | ||
Weighted-average grant-date fair value of units or shares cancelled | $ / shares | 36.15 | ||
Weighted-average grant-date fair value of units or shares outstanding, end of year | $ / shares | $ 35.48 | $ 34.49 | |
Number of units or shares expected to vest after December 31, 2015 | 4,500,000 | ||
Weighted-average grant-date fair value of units or shares expected to vest after December 31, 2015 | $ / shares | $ 35.68 | ||
Pre-tax intrinsic value of restricted stock released | $ | $ 46.8 | $ 52.7 | $ 29.7 |
Vests ratably as the employee continues to be employed with us over a four-year service period | |||
Share-Based Compensation | |||
Number of equal installments in which awards vest | installments | 4 | ||
Vesting period | 4 years | ||
Vesting conditions dependent upon predetermined market results | Certain members of our executive team | |||
Share-Based Compensation | |||
Vesting period | 3 years | ||
Restricted Stock Roll Forward | |||
Number of units or shares released | 0 | ||
Number of units or shares outstanding, end of year | 200,000 | ||
Vesting dependent upon the attainment of predetermined financial performance results | Certain members of our executive team | |||
Restricted Stock Roll Forward | |||
Number of units or shares granted | 300,000 | ||
Vesting dependent upon the attainment of predetermined financial performance results | Certain members of our executive team | Minimum | |||
Share-Based Compensation | |||
Vesting period | 1 year | ||
Vesting dependent upon the attainment of predetermined financial performance results | Certain members of our executive team | Maximum | |||
Share-Based Compensation | |||
Vesting period | 3 years |
Share-Based Compensation (Det51
Share-Based Compensation (Details 3) - Stock Options - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | ||
Stock Options Roll Forward | ||||
Number of shares outstanding, beginning of year | 6.8 | |||
Number of shares granted | 0 | |||
Number of shares exercised | (1.7) | |||
Number of shares forfeited | (0.4) | |||
Number of shares expired | (0.2) | |||
Number of shares outstanding, end of year | 4.5 | 6.8 | ||
Stock Options, Weighted-Average Exercise Price | ||||
Weighted-average exercise price of shares outstanding, beginning of year | $ 32.62 | |||
Weighted-average exercise price of shares granted | 37.65 | |||
Weighted-average exercise price of shares exercised | 15.73 | |||
Weighted-average exercise price of shares forfeited | 44.59 | |||
Weighted-average exercise price of shares expired | 47.31 | |||
Weighted-average exercise price of shares outstanding, end of year | $ 37.34 | $ 32.62 | ||
Stock Options, Additional Disclosures | ||||
Weighted-average remaining contractual life of shares outstanding | 3 years 6 months 29 days | 4 years 2 months 17 days | ||
Aggregate intrinsic value of shares outstanding | $ 15.1 | $ 104.3 | ||
Number of shares vested and exercisable at December 31, 2015 | 3.2 | |||
Weighted-average exercise price of shares vested and exercisable at December 31, 2015 | $ 34.15 | |||
Weighted-average remaining contractual life of shares vested and exercisable at December 31, 2015 | 3 years 2 months 12 days | |||
Aggregate intrinsic value of shares vested and exercisable at December 31, 2015 | $ 15.1 | |||
Total pre-tax intrinsic value of stock options exercised | $ 55.5 | $ 44.1 | $ 76.4 | |
Stock Options, Vested and Expected to Vest | ||||
Number of shares vested and exercisable at December 31, 2015 and expected to vest thereafter | [1] | 4.4 | ||
Weighted-average exercise price of shares vested and exercisable at December 31, 2015 and expected to vest thereafter | [1] | $ 37.11 | ||
Weighted-average remaining contractual life of shares vested and exercisable at December 31, 2015 and expected to vest thereafter | [1] | 3 years 6 months 14 days | ||
Aggregate intrinsic value of shares vested and exercisable at December 31, 2015 and expected to vest thereafter | [1] | $ 15.1 | ||
Stock options | ||||
Stock Options, Fair Value Assumptions | ||||
Expected stock volatility | [2] | 45.00% | ||
Expected stock volatility (minimum) | [2] | 46.00% | 46.00% | |
Expected stock volatility (maximum) | [2] | 48.00% | 47.00% | |
Expected dividend yield | [3] | 0.00% | 0.00% | 0.00% |
Risk-free interest rate (minimum) | [4] | 1.23% | 1.08% | 0.57% |
Risk-free interest rate (maximum) | [4] | 1.42% | 1.27% | 0.93% |
Expected life | [5] | 3 years 10 months 14 days | 3 years 9 months 27 days | 3 years 9 months 14 days |
Weighted-average grant-date fair value of options granted during the year | [6] | $ 13.52 | $ 15.34 | $ 15.86 |
Stock options | Vests ratably as the employee continues to be employed with us over a four-year service period | ||||
Share-Based Compensation | ||||
Vesting period | 4 years | |||
Stock options | Cliff-vests at the third anniversary date of the grant | ||||
Share-Based Compensation | ||||
Vesting period | 3 years | |||
Stock options | Minimum | ||||
Share-Based Compensation | ||||
Terms of awards granted | 7 years | |||
Stock options | Maximum | ||||
Share-Based Compensation | ||||
Terms of awards granted | 10 years | |||
[1] | Includes reduction of shares outstanding due to estimated forfeitures | |||
[2] | Management estimates volatility by evaluating the weighted average of the implied volatility and the mean reversion volatility of the company’s stock. | |||
[3] | We have not issued dividends to date and do not anticipate issuing dividends. | |||
[4] | Based on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent expected term. | |||
[5] | Represents the period that our share-based awards are expected to be outstanding. Management uses historical exercise data in our estimation of the expected life. | |||
[6] | Based on the end of day market price on the grant date. |
Share-Based Compensation (Det52
Share-Based Compensation (Details 4) - Employee Stock Purchase Plan - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Employee Stock Purchase Plan | |||
Share-based compensation expense | $ 78.1 | $ 70 | $ 59.6 |
Employee Stock Purchase Plan | |||
Employee Stock Purchase Plan | |||
Number of shares issued | 0.2 | ||
Share-based compensation expense | $ 3.1 | $ 3.1 | $ 3.1 |
Employee Stock Purchase Plan | Maximum | |||
Employee Stock Purchase Plan | |||
Terms of awards granted | 24 months | ||
Employee Stock Purchase Plan | Enrollment Date | Maximum | |||
Employee Stock Purchase Plan | |||
Purchase price of common stock, as a percentage of market value | 85.00% | ||
Employee Stock Purchase Plan | Purchase Date | Maximum | |||
Employee Stock Purchase Plan | |||
Purchase price of common stock, as a percentage of market value | 85.00% |
Share-Based Compensation (Det53
Share-Based Compensation (Details 5) - Share-Based Compensation Expense - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Allocation of share-based compensation expense to income statement line items | |||
Pre-tax share-based compensation | $ 78.1 | $ 70 | $ 59.6 |
Less: Income tax benefit | (27.2) | (21.5) | (20.1) |
Total share-based compensation expense, net of tax | 50.9 | 48.5 | 39.5 |
Share-Based Compensation, Aggregate Disclosures | |||
Total unrecognized compensation cost related to restricted stock, stock options and the ESPP | $ 168.7 | ||
Remaining weighted-average period over which the unrecognized compensation cost related to restricted stock, stock options and the ESPP will be amortized on a straight-line basis | 2 years 7 months 6 days | ||
Cost of revenue | |||
Allocation of share-based compensation expense to income statement line items | |||
Pre-tax share-based compensation | $ 16.8 | 16.4 | 12.6 |
Research and development | |||
Allocation of share-based compensation expense to income statement line items | |||
Pre-tax share-based compensation | 13.7 | 12.6 | 8.1 |
Sales and marketing | |||
Allocation of share-based compensation expense to income statement line items | |||
Pre-tax share-based compensation | 9.7 | 9.6 | 7.3 |
General and administrative | |||
Allocation of share-based compensation expense to income statement line items | |||
Pre-tax share-based compensation | $ 37.9 | $ 31.4 | $ 31.6 |
Taxes (Details 1) - General
Taxes (Details 1) - General - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Current: | |||
Federal | $ 48.1 | $ 38.3 | $ 35.9 |
Foreign | 10.5 | 11.1 | 12.1 |
State | 7.3 | 5.3 | 4.1 |
Total current | 65.9 | 54.7 | 52.1 |
Deferred: | |||
Federal | 3 | (2.4) | (3.9) |
Foreign | (2.5) | (2.9) | (1.6) |
State | 1 | (0.4) | (2.6) |
Total deferred | 1.5 | (5.7) | (8.1) |
Total provision for income taxes | 67.4 | 49 | 44 |
Income Before Income Taxes | |||
U.S. | 137.4 | 95.2 | 91 |
Foreign | 56.2 | 64.4 | 39.7 |
Income before income taxes | $ 193.6 | $ 159.6 | $ 130.7 |
Reconciliation of Statutory Federal Tax Rate to Effective Tax Rate | |||
Statutory federal tax rate | 35.00% | 35.00% | 35.00% |
State taxes, net of federal benefit | 2.80% | 1.70% | 0.70% |
Tax rate differentials for international jurisdictions | (6.90%) | (10.50%) | (3.80%) |
Permanent differences | 3.00% | 3.50% | 1.60% |
Deferred impact of intercompany transfers | 2.60% | 3.20% | 3.50% |
Research and development credit (current year) | (1.50%) | (2.10%) | (3.10%) |
Return to provision | (1.70%) | (0.70%) | (1.10%) |
Transfer pricing reserve | 1.40% | (0.20%) | 2.80% |
Other, net | 0.10% | 0.80% | (1.90%) |
Effective tax rate | 34.80% | 30.70% | 33.70% |
Taxes (Details 2) - Deferred Ta
Taxes (Details 2) - Deferred Taxes - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Deferred tax assets: | ||
Share-based compensation | $ 31,800,000 | $ 27,200,000 |
State income taxes | 2,500,000 | 2,200,000 |
Vacation accruals | 300,000 | 3,500,000 |
Deferred revenue | 6,100,000 | 5,300,000 |
Deferred rent | 19,100,000 | 16,200,000 |
Accruals not currently deductible | 12,500,000 | 8,400,000 |
Net operating loss carryforwards | 6,000,000 | 4,800,000 |
Foreign tax credit | 1,800,000 | 1,700,000 |
Research and development credits | 16,400,000 | 13,400,000 |
Other | 7,900,000 | 4,300,000 |
Total gross deferred tax assets | 104,400,000 | 87,000,000 |
Deferred tax liabilities: | ||
Depreciation | 145,900,000 | 134,600,000 |
Prepaids | 6,200,000 | 4,000,000 |
Other | 400,000 | 100,000 |
Total gross deferred tax liabilities | 152,500,000 | 138,700,000 |
Net deferred tax liabilities | 48,100,000 | 51,700,000 |
Deferred Tax Liability Not Recognized, Undistributed Earnings of Foreign Subsidiaries | ||
Deferred tax liability recognized for undistributed earnings of foreign subsidiaries | 0 | $ 0 |
Undistributed earnings of the company's foreign subsidiaries considered indefinitely invested | $ 268,400,000 | |
Determination of unrecognized tax liability related to undistributed earnings | The determination of the amount of unrecognized deferred tax liability related to undistributed earnings is not practicable because of the complexities of the hypothetical calculation. | |
Federal | ||
Operating Loss Carryforwards | ||
Net operating loss carryforwards | $ 98,600,000 | |
Tax Credit Carryforward | ||
Tax credit carryforwards | 25,300,000 | |
Federal | Gross excess tax benefits from stock option exercises that have not been recorded | ||
Operating Loss Carryforwards | ||
Net operating loss carryforwards | 95,400,000 | |
Foreign | ||
Operating Loss Carryforwards | ||
Net operating loss carryforwards | $ 3,800,000 |
Taxes (Details 3) - Uncertain T
Taxes (Details 3) - Uncertain Tax Positions - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Reconciliation of Unrecognized Tax Benefits, Excluding Accrued Interest | ||
Balance, beginning of year | $ 21 | $ 23.2 |
Additions based on tax positions related to the current year | 1.1 | 2.5 |
Additions for tax positions of prior years | 9.8 | 3.6 |
Reduction for statute expiration | 0 | (0.9) |
Reductions for tax positions of prior years | (1.1) | (7.4) |
Balance, end of year | 30.8 | 21 |
Uncertain Tax Positions, Additional Disclosures | ||
Unrecognized tax benefits that, if recognized, would favorably impact effective tax rate | 16.8 | $ 13.1 |
Unrecognized tax benefits that, if recognized, would be recorded as an adjustment to other current and non-current assets | $ 14 | |
U.S. federal and state | Minimum | ||
Uncertain Tax Positions, Additional Disclosures | ||
Tax years for which we remain subject to income tax examinations | 2,009 | |
U.S. federal and state | Maximum | ||
Uncertain Tax Positions, Additional Disclosures | ||
Tax years for which we remain subject to income tax examinations | 2,015 | |
State of California | Tax Year 2010 | ||
Uncertain Tax Positions, Additional Disclosures | ||
Tax years for which we currently have income tax examinations open | 2,010 | |
State of California | Tax Year 2011 | ||
Uncertain Tax Positions, Additional Disclosures | ||
Tax years for which we currently have income tax examinations open | 2,011 | |
State of California | Tax Year 2012 | ||
Uncertain Tax Positions, Additional Disclosures | ||
Tax years for which we currently have income tax examinations open | 2,012 | |
State of Pennsylvania | Tax Year 2013 | ||
Uncertain Tax Positions, Additional Disclosures | ||
Tax years for which we currently have income tax examinations open | 2,013 | |
State of Pennsylvania | Tax Year 2014 | ||
Uncertain Tax Positions, Additional Disclosures | ||
Tax years for which we currently have income tax examinations open | 2,014 | |
International jurisdictions | Minimum | ||
Uncertain Tax Positions, Additional Disclosures | ||
Tax years for which we remain subject to income tax examinations | 2,007 | |
International jurisdictions | Maximum | ||
Uncertain Tax Positions, Additional Disclosures | ||
Tax years for which we remain subject to income tax examinations | 2,015 | |
United Kingdom | Tax Year 2012 | ||
Uncertain Tax Positions, Additional Disclosures | ||
Tax years for which we currently have income tax examinations open | 2,012 |
Taxes (Details 4) - Other
Taxes (Details 4) - Other - USD ($) | 12 Months Ended | 36 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2013 | Dec. 31, 2014 | |
Other Tax-Related Disclosures | |||
Portion of asset on consolidated balance sheet as a result of taxable transactions recorded in other non-current assets | $ 57,600,000 | $ 48,300,000 | |
Sale of certain intangible assets to wholly-owned offshore subsidiary | |||
Other Tax-Related Disclosures | |||
Asset on consolidated balance sheet as a result of taxable transactions | 22,200,000 | ||
Portion of asset on consolidated balance sheet as a result of taxable transactions recorded in other non-current assets | 18,600,000 | ||
Cash tax impact | $ 0 | ||
Federal | |||
Other Tax-Related Disclosures | |||
Income tax refunds received | $ 700,000 |
Segment Information (Details)
Segment Information (Details) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2015USD ($) | Sep. 30, 2015USD ($) | Jun. 30, 2015USD ($) | Mar. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Sep. 30, 2014USD ($) | Jun. 30, 2014USD ($) | Mar. 31, 2014USD ($) | Dec. 31, 2015USD ($)segments | Dec. 31, 2014USD ($) | Dec. 31, 2013USD ($) | |
Segment Reporting [Abstract] | |||||||||||
Number of reportable segments | segments | 1 | ||||||||||
Revenue and Long-Lived Assets by Geography | |||||||||||
Total net revenue | $ 522.8 | $ 508.9 | $ 489.4 | $ 480.2 | $ 472.5 | $ 459.7 | $ 441.2 | $ 421 | $ 2,001.3 | $ 1,794.4 | $ 1,534.8 |
Total property and equipment, net | 1,148 | 1,057.7 | 1,148 | 1,057.7 | |||||||
United States | |||||||||||
Revenue and Long-Lived Assets by Geography | |||||||||||
Total net revenue | 1,366.8 | 1,232.2 | 1,076.3 | ||||||||
Total property and equipment, net | 736.2 | 718.3 | 736.2 | 718.3 | |||||||
International | |||||||||||
Revenue and Long-Lived Assets by Geography | |||||||||||
Total net revenue | 634.5 | 562.2 | $ 458.5 | ||||||||
Total property and equipment, net | $ 411.8 | $ 339.4 | $ 411.8 | $ 339.4 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract] | |||
Contribution expense recognized for defined contribution plans | $ 13.9 | $ 13.2 | $ 10.3 |
Subsequent Event (Details)
Subsequent Event (Details) $ in Millions | Jan. 05, 2016USD ($) |
Subsequent Event | Disposal Group, Disposed of by Sale, Not Discontinued Operations | Cash | |
Subsequent Event [Line Items] | |
Amount of consideration received for the sale of assets | $ 24 |
Supplementary Financial Data 61
Supplementary Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Supplementary Financial Data (Unaudited) | |||||||||||
Net revenue | $ 522.8 | $ 508.9 | $ 489.4 | $ 480.2 | $ 472.5 | $ 459.7 | $ 441.2 | $ 421 | $ 2,001.3 | $ 1,794.4 | $ 1,534.8 |
Cost of revenue | 179.1 | 171.2 | 163.9 | 161.3 | 153.9 | 142.9 | 145.1 | 140.4 | 675.5 | 582.3 | 492.5 |
Net income | $ 32.1 | $ 36.5 | $ 29.2 | $ 28.4 | $ 37 | $ 25.7 | $ 22.5 | $ 25.4 | $ 126.2 | $ 110.6 | $ 86.7 |
Net income per share - basic | $ 0.24 | $ 0.26 | $ 0.20 | $ 0.20 | $ 0.26 | $ 0.18 | $ 0.16 | $ 0.18 | $ 0.91 | $ 0.78 | $ 0.63 |
Net income per share - diluted | $ 0.24 | $ 0.26 | $ 0.20 | $ 0.20 | $ 0.26 | $ 0.18 | $ 0.16 | $ 0.18 | $ 0.90 | $ 0.77 | $ 0.61 |
Schedule of Valuation and Qua62
Schedule of Valuation and Qualifying Accounts (Details) - Allowance for Doubtful Accounts and Customer Credits - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | ||
Allowance for doubtful accounts and customer credits | ||||
Beginning Balance | $ 5.3 | $ 3.9 | $ 4.2 | |
Additions | [1] | 20.2 | 16.5 | 16.9 |
Write-offs of Accounts Receivable and Credit Memos Paid | (18.2) | (15.1) | (17.2) | |
Ending Balance | $ 7.3 | $ 5.3 | $ 3.9 | |
[1] | Additions to the allowance for doubtful accounts are charged to expense. Additions to the allowance for customer credits are charged to revenue. |