Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Mar. 08, 2016 | Jun. 30, 2015 | |
Document and Entity Information | |||
Entity Registrant Name | ROSETTA STONE INC | ||
Entity Central Index Key | 1,351,285 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 136.5 | ||
Entity Common Stock, Shares Outstanding | 21,882,727 | ||
Document Fiscal Year Focus | 2,015 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 | [1] |
Current assets: | |||
Cash and cash equivalents | $ 47,782 | $ 64,657 | |
Restricted cash | 80 | 123 | |
Accounts receivable (net of allowance for doubtful accounts of $1,196 and $1,434, at December 31, 2015 and December 31, 2014, respectively) | 47,327 | 76,757 | |
Inventory | 7,333 | 6,500 | |
Deferred sales commissions | 13,526 | 10,740 | |
Prepaid expenses and other current assets | 3,612 | 4,842 | |
Income tax receivable | 0 | 464 | |
Total current assets | 119,660 | 164,083 | |
Deferred sales commissions | 5,614 | 4,362 | |
Property and equipment, net | 22,532 | 25,277 | |
Goodwill | 50,280 | 58,584 | |
Intangible assets, net | 28,244 | 34,377 | |
Other assets | 2,213 | 1,490 | |
Total assets | 228,543 | 288,173 | |
Current liabilities: | |||
Accounts payable | 10,778 | 19,548 | |
Accrued compensation | 8,201 | 14,470 | |
Income tax payable | 121 | 0 | |
Obligations under capital lease | 521 | 594 | |
Other current liabilities | 35,318 | 53,258 | |
Deferred revenue | 106,868 | 95,240 | |
Total current liabilities | 161,807 | 183,110 | |
Deferred revenue | 35,880 | 32,929 | |
Deferred income taxes | 4,998 | 4,222 | |
Obligations under capital lease | 2,622 | 3,154 | |
Other long-term liabilities | 826 | 1,313 | |
Total liabilities | $ 206,133 | $ 224,728 | |
Commitments and contingencies (Note 16) | |||
Stockholders' equity: | |||
Preferred stock, $0.001 par value; 10,000 and 10,000 shares authorized, zero and zero shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively | $ 0 | $ 0 | |
Non-designated common stock, $0.00005 par value, 190,000 and 190,000 shares authorized, 23,150 and 22,936 shares issued and 22,150 and 21,936 shares outstanding at December 31, 2015 and December 31, 2014, respectively | 2 | 2 | |
Additional paid-in capital | 185,863 | 178,554 | |
Treasury stock | (11,435) | (11,435) | |
Accumulated loss | (149,794) | (102,998) | |
Accumulated other comprehensive loss | (2,226) | (678) | |
Total stockholders' equity | 22,410 | 63,445 | |
Total liabilities and stockholders' equity | $ 228,543 | $ 288,173 | |
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $ 1,196 | $ 1,434 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Non-designated common stock, par value (in dollars per share) | $ 0.00005 | $ 0.00005 |
Non-designated common stock, shares authorized | 190,000,000 | 190,000,000 |
Non-designated common stock, shares issued | 23,149,634 | 22,935,620 |
Non-designated common stock, shares outstanding | 22,149,634 | 21,935,620 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Revenue: | |||
Product | $ 65,969 | $ 136,251 | $ 156,792 |
Subscription and service | 151,701 | 125,602 | 107,853 |
Total revenue | 217,670 | 261,853 | 264,645 |
Cost of revenue: | |||
Cost of product revenue | 16,898 | 34,192 | 32,191 |
Cost of subscription and service revenue | 21,629 | 18,862 | 13,523 |
Total cost of revenue | 38,527 | 53,054 | 45,714 |
Gross profit | 179,143 | 208,799 | 218,931 |
Operating expenses | |||
Sales and marketing | 136,084 | 173,208 | 146,104 |
Research and development | 29,939 | 33,176 | 33,995 |
General and administrative | 50,124 | 57,120 | 56,432 |
Impairment | 6,754 | 20,333 | 0 |
Lease abandonment and termination | 55 | 3,812 | 842 |
Total operating expenses | 222,956 | 287,649 | 237,373 |
Loss from operations | (43,813) | (78,850) | (18,442) |
Other income and (expense): | |||
Interest income | 23 | 17 | 117 |
Interest expense | (378) | (233) | (61) |
Other (expense) income | (1,469) | (1,129) | 368 |
Total other income and (expense) | (1,824) | (1,345) | 424 |
Loss before income taxes | (45,637) | (80,195) | (18,018) |
Income tax expense (benefit) | 1,159 | (6,489) | (1,884) |
Net loss | $ (46,796) | $ (73,706) | $ (16,134) |
Loss per share: | |||
Basic (in dollars per share) | $ (2.17) | $ (3.47) | $ (0.75) |
Diluted (in dollars per share) | $ (2.17) | $ (3.47) | $ (0.75) |
Common shares and equivalents outstanding: | |||
Basic weighted average shares (in shares) | 21,571 | 21,253 | 21,528 |
Diluted weighted average shares (in shares) | 21,571 | 21,253 | 21,528 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Statement of Comprehensive Income [Abstract] | |||
Net loss | $ (46,796) | $ (73,706) | $ (16,134) |
Other comprehensive loss, net of tax: | |||
Foreign currency translation (loss) gain | (1,548) | (1,523) | 188 |
Other comprehensive (loss) income | (1,548) | (1,523) | 188 |
Comprehensive loss | $ (48,344) | $ (75,229) | $ (15,946) |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Non-Designated Common Stock | Additional Paid-in Capital | Treasury Stock | Accumulated Income (Loss) | Accumulated Other Comprehensive Income (Loss) | |
Balance at Dec. 31, 2012 | $ 148,194 | $ 2 | $ 160,693 | $ (13,158) | $ 657 | ||
Balance (in shares) at Dec. 31, 2012 | 21,188,000 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Stock Issued Upon the Exercise of Stock Options | 2,457 | 2,457 | |||||
Stock Issued Upon the Exercise of Stock Options (in shares) | 550,000 | ||||||
Restricted Stock Award Vesting (in shares) | 301,000 | ||||||
Stock-based Compensation Expense | 9,241 | 9,241 | |||||
Repurchase of Stock Option Exercised | (1,040) | (1,040) | |||||
Repurchase of Stock Option Exercised (in shares) | (123,000) | ||||||
Sale of Shares in Secondary Offering | 160 | 160 | |||||
Sale of Shares in Secondary Offering (in shares) | 10,000 | ||||||
Secondary Offering Costs | (388) | (388) | |||||
Purchase of Treasury Stock | $ (11,435) | $ (11,435) | |||||
Purchase of Treasury Stock (in shares) | (1,000,000) | (1,000,000) | |||||
Net loss | $ (16,134) | (16,134) | |||||
Other comprehensive income (loss) | 188 | 188 | |||||
Balance at Dec. 31, 2013 | 131,243 | $ 2 | 171,123 | (11,435) | (29,292) | 845 | |
Balance (in shares) at Dec. 31, 2013 | 20,926,000 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Stock Issued Upon the Exercise of Stock Options | 669 | 669 | |||||
Stock Issued Upon the Exercise of Stock Options (in shares) | 116,000 | ||||||
Restricted Stock Award Vesting (in shares) | 287,000 | ||||||
Stock-based Compensation Expense | 6,762 | 6,762 | |||||
Net loss | (73,706) | (73,706) | |||||
Other comprehensive income (loss) | (1,523) | (1,523) | |||||
Balance at Dec. 31, 2014 | 63,445 | [1] | $ 2 | 178,554 | (11,435) | (102,998) | (678) |
Balance (in shares) at Dec. 31, 2014 | 21,329,000 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Stock Issued Upon the Exercise of Stock Options | 114 | 114 | |||||
Stock Issued Upon the Exercise of Stock Options (in shares) | 25,000 | ||||||
Restricted Stock Award Vesting (in shares) | 452,000 | ||||||
Stock-based Compensation Expense | $ 7,195 | 7,195 | |||||
Purchase of Treasury Stock (in shares) | 0 | ||||||
Net loss | $ (46,796) | (46,796) | |||||
Other comprehensive income (loss) | (1,548) | (1,548) | |||||
Balance at Dec. 31, 2015 | $ 22,410 | $ 2 | $ 185,863 | $ (11,435) | $ (149,794) | $ (2,226) | |
Balance (in shares) at Dec. 31, 2015 | 21,806,000 | ||||||
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||
Net loss | $ (46,796) | $ (73,706) | $ (16,134) | ||
Adjustments to reconcile net loss to cash (used in) provided by operating activities: | |||||
Stock-based compensation expense | 7,195 | 6,762 | 9,241 | ||
Loss (gain) on foreign currency transactions | 1,471 | 1,171 | 0 | ||
Bad debt expense | 1,657 | 2,405 | 1,420 | ||
Depreciation and amortization | 13,660 | 13,904 | 9,635 | ||
Deferred income tax expense (benefit) | 849 | (7,667) | (3,869) | ||
(Gain) loss on disposal of equipment | (15) | 184 | 278 | ||
Amortization of deferred financing costs | 160 | 21 | 0 | ||
Loss on impairment | 6,754 | 20,333 | 0 | ||
Loss from equity method investments | 23 | 0 | 0 | ||
Gain on divestiture of subsidiary | (660) | 0 | 0 | ||
Net change in: | |||||
Restricted cash | 43 | (13) | (37) | ||
Accounts receivable | 26,376 | (16,478) | (9,477) | ||
Inventory | (1,253) | 341 | (108) | ||
Deferred sales commissions | (4,121) | (7,268) | (4,245) | ||
Prepaid expenses and other current assets | 1,080 | 1,844 | (878) | ||
Income tax receivable | 568 | (147) | 827 | ||
Other assets | (684) | 446 | (68) | ||
Accounts payable | (8,636) | 8,394 | 3,702 | ||
Accrued compensation | (5,485) | (4,494) | (897) | ||
Other current liabilities | (14,223) | 11,318 | 4,250 | ||
Other long-term liabilities | (486) | 459 | 481 | ||
Deferred revenue | 16,878 | 48,864 | 13,947 | ||
Net cash (used in) provided by operating activities | (5,645) | 6,673 | 8,068 | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||
Purchases of property and equipment | (8,856) | (9,736) | (8,941) | ||
Proceeds from sale of fixed assets | 1,642 | 0 | 0 | ||
Decrease (increase) in restricted cash for Vivity acquisition | 0 | 12,314 | (12,314) | ||
Acquisitions, net of cash acquired | (1,688) | (41,687) | (25,675) | ||
Net cash outflow from divestiture of subsidiary | (186) | 0 | 0 | ||
Other investing activities | (286) | 0 | 0 | ||
Net cash used in investing activities | (9,374) | (39,109) | (46,930) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||
Proceeds from the exercise of stock options | 114 | 669 | 2,457 | ||
Repurchase of shares from exercised stock options | 0 | 0 | (1,040) | ||
Purchase of treasury stock | 0 | 0 | (11,435) | ||
Proceeds from equity offering, net of issuance costs | 0 | 0 | (228) | ||
Deferred financing costs | (130) | (381) | 0 | ||
Payments under capital lease obligations | (711) | (593) | (241) | ||
Net cash used in financing activities | (727) | (305) | (10,487) | ||
Increase (decrease) in cash and cash equivalents | (15,746) | (32,741) | (49,349) | ||
Effect of exchange rate changes in cash and cash equivalents | (1,129) | (1,427) | (16) | ||
Net increase (decrease) in cash and cash equivalents | (16,875) | (34,168) | (49,365) | ||
Cash and cash equivalents—beginning of year | 64,657 | [1] | 98,825 | 148,190 | |
Cash and cash equivalents—end of year | 47,782 | 64,657 | [1] | 98,825 | |
Cash paid during the periods for: | |||||
Interest | 218 | 211 | 18 | ||
Income taxes, net of refund | 601 | 1,722 | 3,290 | ||
Noncash financing and investing activities: | |||||
Accrued purchase price of business acquisition | 0 | 0 | 3,375 | ||
Accrued liability for purchase of property and equipment | 258 | 561 | 192 | ||
Equipment acquired under capital lease | $ 462 | $ 0 | $ 702 | ||
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 12 Months Ended |
Dec. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | NATURE OF OPERATIONS Rosetta Stone Inc. and its subsidiaries ("Rosetta Stone," or the "Company") develop, market and support a suite of language-learning, literacy, and brain fitness solutions consisting of perpetual software products, web-based software subscriptions, online and professional services, audio practice tools and mobile applications. The Company's offerings are sold on a direct basis and through select third party retailers and distributors. The Company provides its solutions to customers through the sale of packaged software and web-based software subscriptions, domestically and in certain international markets. In early 2015, the Company announced a plan (the "2015 Restructuring Plan") to accelerate growth in and prioritize its focus on the Enterprise & Education segment, emphasizing Corporate and K-12 learners who need to speak and read English. In addition, the Company’s Consumer segment would focus on serving the needs of more passionate language learners rather than addressing the entire mass marketplace. In the first quarter of 2015, the Company began reductions to areas including Consumer sales and marketing, Consumer product investment, and general and administrative costs. See Note 2 "Summary of Significant Accounting Policies," Note 13 "Restructuring," Note 17 "Segment Information" and Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" within Part II for additional information about these strategic undertakings and the associated impact to the Company's financial statements and financial results. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of Rosetta Stone Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. For comparative purposes, certain amounts in the 2014 consolidated balance sheet have been reclassified to conform to the 2015 presentation. See “Recently Issued Accounting Standards” below regarding the impact of our adoption of Accounting Standards Update No. 2015-17 on the classification of deferred tax amounts in our consolidated balance sheets. The equity method is used to account for investments in entities if the investment provides the Company with the ability to exercise significant influence over operating and financial policies of the investee. The Company determines its level of influence over an equity method investment by considering key factors such as ownership interest, representation on a governance body, participation in policy-making decisions, and technological dependencies. The Company's proportionate share of the net income or loss of any equity method investments is reported in "Other income and (expense)" and included in the net loss on the consolidated statements of operations. The carrying value of any equity method investment is reported in "Other assets" on the consolidated balance sheets. Use of Estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make certain estimates and assumptions. The amounts reported in the consolidated financial statements include significant estimates and assumptions that have been made, including, but not limited to, those related to revenue recognition, allowance for doubtful accounts, estimated sales returns and reserves, stock-based compensation, restructuring costs, fair value of intangibles and goodwill, disclosure of contingent assets and liabilities, disclosure of contingent litigation, and allowance for valuation of deferred tax assets. The Company bases its estimates and assumptions on historical experience and on various other judgments that are believed to be reasonable under the circumstances. The Company continuously evaluates its estimates and assumptions. Actual results may differ from these estimates and assumptions. Revenue Recognition The Company's primary sources of revenue are web-based software subscriptions, online services, perpetual product software, and bundles of perpetual product software and online services. The Company also generates revenue from the sale of audio practice products, mobile applications, and professional services. Revenue is recognized when all of the following criteria are met: there is persuasive evidence of an arrangement; the product has been delivered or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. Revenue is recorded net of discounts. The Company identifies the units of accounting contained within sales arrangements in accordance with Accounting Standards Codification ("ASC") subtopic 605-25 Revenue Recognition - Multiple Element Arrangements (“ASC 605-25”). In doing so, the Company evaluates a variety of factors including whether the undelivered element(s) have value to the customer on a stand-alone basis or if the undelivered element(s) could be sold by another vendor on a stand-alone basis. For multiple element arrangements that contain perpetual software products and related online services, the Company allocates the total arrangement consideration to its deliverables based on the existence of vendor-specific objective evidence of fair value, or vendor-specific objective evidence ("VSOE"), in accordance with ASC subtopic 985-605-25 Software: Revenue Recognition-Multiple-Element Arrangements ("ASC 985-605-25"). The Company generates a substantial portion of its Consumer revenue from the CD and digital download formats of the Rosetta Stone language-learning product which is typically a multiple-element arrangement that includes two deliverables: the perpetual software, delivered at the time of sale, and the online service, which is considered an undelivered software-related element. The online service includes access to conversational coaching services. Because the Company only sells the perpetual language-learning software on a stand-alone basis in its homeschool version, the Company does not have a sufficient concentration of stand-alone sales to establish VSOE for the perpetual product. Where VSOE of the undelivered online services can be established, arrangement consideration is allocated using the residual method. The Company determines VSOE by reference to the range of comparable stand-alone renewal sales of the online service. The Company reviews these stand-alone sales on a quarterly basis. VSOE is established if at least 80% of the stand-alone sales are within a range of plus or minus 15% of a midpoint of the range of prices, consistent with generally accepted industry practice. Where VSOE of the undelivered online services cannot be established, revenue is deferred and recognized commensurate with the delivery of the online services. For non-software multiple element arrangements the Company allocates revenue to all deliverables based on their relative selling prices. The Company's non-software multiple element arrangements primarily occur as sales to its Enterprise & Education customers. These arrangements can include web-based subscription services, audio practice materials and professional services or any combination thereof. The Company does not have a sufficient concentration of stand-alone sales of the various deliverables noted above to its Enterprise & Education customers, and therefore cannot establish VSOE for each deliverable. Third party evidence of fair value does not exist for the web-based subscription, audio practice and professional services due to the lack of interchangeable language-learning products and services within the market. Accordingly, the Company determines the relative selling price of the web-based subscription, audio practice tools and professional services deliverables included in its non-software multiple element arrangements using the best estimated selling price. The Company determines the best estimated selling price based on its internally published price list which includes suggested sales prices for each deliverable based on the type of client and volume purchased. This price list is derived from past experience and from the expectation of obtaining a reasonable margin based on what each deliverable costs the Company. In the U.S. and Canada, the Company offers consumers who purchase packaged software and audio practice products directly from the Company a 30 -day, unconditional, full money-back refund. The Company also permits some of our retailers and distributors to return unsold packaged products, subject to certain limitations. In accordance with ASC subtopic 985-605, Software: Revenue Recognition ("ASC 985-605"), the Company estimates and establishes revenue reserves for packaged product returns at the time of sale based on historical return rates, estimated channel inventory levels, the timing of new product introductions and other factors. The Company distributes its products and services both directly to the end customer and indirectly through resellers. Resellers earn commissions generally calculated as a fixed percentage of the gross sale to the end customer. The Company evaluates each of its reseller relationships in accordance with ASC subtopic 605-45, Revenue Recognition - Principal Agent Considerations (“ASC 605-45”) to determine whether the revenue recognized from indirect sales should be the gross amount of the contract with the end customer or reduced for the reseller commission. In making this determination the Company evaluates a variety of factors including whether it is the primary obligor to the end customer. Revenue is recorded net of taxes. Revenue for online services and web-based subscriptions is recognized ratably over the term of the service or subscription period, assuming all revenue recognition criteria have been met. The CD and digital download formats of Rosetta Stone language-learning products are bundled with a short-term online service where customers are allowed to begin their short-term online services at any point during a registration window, which is up to six months from the date of purchase from us or an authorized reseller. The short-term online services that are not activated during this registration window are forfeited and revenue is recognized upon expiry. Revenue from non-refundable upfront fees that are not related to products already delivered or services already performed is deferred and recognized over the term of the related arrangement because the period over which a customer is expected to benefit from the service that is included within our subscription arrangements does not extend beyond the contractual period. Accounts receivable and deferred revenue are recorded at the time a customer enters into a binding subscription agreement. Software products include sales to end user customers and resellers. In many cases, revenue from sales to resellers is not contingent upon resale of the software to the end user and is recorded in the same manner as all other product sales. Revenue from sales of packaged software products and audio practice products is recognized as the products are shipped and title passes and risks of loss have been transferred. For many product sales, these criteria are met at the time the product is shipped. For some sales to resellers and certain other sales, the Company defers revenue until the customer receives the product because the Company legally retains a portion of the risk of loss on these sales during transit. In other cases where packaged software products are sold to resellers on a consignment basis, revenue is recognized for these consignment transactions once the end user sale has occurred, assuming the remaining revenue recognition criteria have been met. In accordance with ASC subtopic 605-50, Revenue Recognition: Customer Payments and Incentives (“ASC 605-50”), cash sales incentives to resellers are accounted for as a reduction of revenue, unless a specific identified benefit is identified and the fair value is reasonably determinable. Price protection for changes in the manufacturer suggested retail value granted to resellers for the inventory that they have on hand at the date the price protection is offered is recorded as a reduction to revenue at the time of sale. The Company offers customers the ability to make payments for packaged software purchases in installments over a period of time, which typically ranges between three and five months. Given that these installment payment plans are for periods less than 12 months , a successful collection history has been established and these fees are fixed and determinable, revenue is recognized at the time of sale, assuming the remaining revenue recognition criteria have been met. In connection with packaged software product sales and web-based software subscriptions, technical support is provided to customers, including customers of resellers, via telephone support at no additional cost for up to six months from the time of purchase. As the fee for technical support is included in the initial licensing fee, the technical support and services are generally provided within one year, the estimated cost of providing such support is deemed insignificant and no unspecified upgrades/enhancements are offered, technical support revenue is recognized together with the software product and web-based software subscription revenue. Costs associated with the technical support are accrued at the time of sale. Sales commissions from non-cancellable web-based software subscription contracts are deferred and amortized in proportion to the revenue recognized from the related contract. Divestitures The Company deconsolidates divested subsidiaries when there is a loss of control or when appropriate when evaluated under the variable interest entity model. The Company recognizes a gain or loss at divestiture equal to the difference between the fair value of any consideration received and the carrying amount of the former subsidiary’s assets and liabilities. Any resulting gain or loss is reported in "Other income and (expense)" on the consolidated statement of operations. Business Combinations The Company recognizes all of the assets acquired, liabilities assumed and contractual contingencies from an acquired company as well as contingent consideration at fair value on the acquisition date. The excess of the total purchase price over the fair value of the assets and liabilities acquired is recognized as goodwill. Acquisition-related costs are recognized separately from the acquisition and expensed as incurred. Generally, restructuring costs incurred in periods subsequent to the acquisition date are expensed when incurred. Subsequent changes to the purchase price (i.e., working capital adjustments) or other fair value adjustments determined during the measurement period are recorded as adjustments to goodwill. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less and demand deposits with financial institutions. Restricted Cash Restricted cash is generally used to reimburse funds to employees under the Company's flexible benefit plan. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable consist of amounts due to the Company from its normal business activities. The Company provides an allowance for doubtful accounts to reflect the expected non-collection of accounts receivable based on past collection history and specific risks identified. Inventories Inventories are stated at the lower of cost, determined on a first-in first-out basis, or market. The Company reviews inventory for excess quantities and obsolescence based on its best estimates of future demand, product lifecycle status and product development plans. The Company uses historical information along with these future estimates to establish a new cost basis for obsolete and potential obsolete inventory. Concentrations of Credit Risk Accounts receivable and cash and cash equivalents subject the Company to its highest potential concentrations of credit risk. The Company reserves for credit losses and does not require collateral on its trade accounts receivable. In addition, the Company maintains cash and investment balances in accounts at various banks and brokerage firms. The Company has not experienced any losses on cash and cash equivalent accounts to date. The Company sells its offerings to retailers, resellers, government agencies, and individual consumers and extends credit based on an evaluation of the customer's financial condition, and may require collateral, such as letters of credit, in certain circumstances. Exposure to losses on receivables is principally dependent on each customer's financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. No customer accounted for more than 10% of the Company's revenue during the years ended December 31, 2015 , 2014 or 2013 . The four largest distributor and reseller receivable balances collectively represented 30% and 33% of accounts receivable as of December 31, 2015 and 2014 , respectively, with one customer that accounted for 17% and 18% of accounts receivable as of December 31, 2015 and 2014 , respectively. The Company maintains trade credit insurance for certain customers to provide coverage, up to a certain limit, in the event of insolvency of some customers. Fair Value of Financial Instruments The Company values its assets and liabilities using the methods of fair value as described in ASC topic 820, Fair Value Measurements and Disclosures, ("ASC 820"). ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels of the fair value hierarchy are described below: Level 1: Quoted prices for identical instruments in active markets. Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3: Significant inputs to the valuation model are unobservable. The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation on property, leasehold improvements, equipment, and software is computed on a straight-line basis over the estimated useful lives of the assets, as follows: Software 3 years Computer equipment 3-5 years Automobiles 5 years Furniture and equipment 5-7 years Building 39 years Building improvements 15 years Leasehold improvements lesser of lease term or economic life Assets under capital leases lesser of lease term or economic life Expenses for repairs and maintenance that do not extend the life of equipment are charged to expense as incurred. Expenses for major renewals and betterments, which significantly extend the useful lives of existing property and equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized. Valuation of Long-Lived Assets In accordance with ASC topic 360, Property, Plant and Equipment ("ASC 360"), the Company evaluates the recoverability of its long-lived assets. ASC 360 requires recognition of impairment of long-lived assets in the event that the net book value of such assets exceeds the future undiscounted net cash flows attributable to such assets. Impairment, if any, is recognized in the period of identification to the extent the carrying amount of an asset exceeds the fair value of such asset. During the years ended December 31, 2015 and 2014 , the Company recorded impairment expense of $1.1 million and $0.2 million , respectively, related to the abandonment of a previously capitalized internal-use software projects. There were no impairments of its long-lived assets during the year ended December 31, 2013 . Intangible Assets Intangible assets consist of acquired technology, including developed and core technology, customer related assets, trade name and trademark, and other intangible assets. Those intangible assets with finite lives are recorded at cost and amortized on a straight line basis over their expected lives in accordance with ASC topic 350, Intangibles—Goodwill and Other ("ASC 350"). Annually, as of December 31, and more frequently if a triggering event occurs, the Company reviews its indefinite-lived intangible asset for impairment in accordance with ASC 350. This guidance provides the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative test. If necessary, the quantitative test is performed by comparing the fair value of indefinite lived intangible assets to the carrying value. In the event the carrying value exceeds the fair value of the assets, the assets are written down to their fair value. The Rosetta Stone trade name is the Company's only indefinite-lived intangible asset. During the fourth quarter of 2015, the Company elected to bypass the qualitative assessment and performed the quantitative assessment. In the quantitative assessment, the fair value of the Rosetta Stone trade name has declined due to the reduction in forecasted revenue and bookings from both the Enterprise & Education Language and the Consumer Language reporting units, however, the fair value exceeded the carrying value. There has been no impairment of intangible assets during any of the periods presented. Goodwill Goodwill represents purchase consideration paid in a business combination that exceeds the values assigned to the net assets of acquired businesses. The Company tests goodwill for impairment annually on June 30 of each year or more frequently if impairment indicators arise. Goodwill is tested for impairment at the reporting unit level using a fair value approach, in accordance with the provisions of ASC 350. This guidance provides the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, a "Step 0" analysis. If, based on a review of qualitative factors, it is more likely than not that the fair value of a reporting unit is less than its carrying value the Company performs "Step 1" of the traditional two-step goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. If the carrying value exceeds the fair value, the Company measures the amount of impairment loss, if any, by comparing the implied fair value of the reporting unit goodwill with its carrying amount, the "Step 2" analysis. During the fourth quarter of 2015, the Company determined that sufficient indication existed to require performance of an interim goodwill impairment analysis for the Consumer Fit Brains reporting unit. As a result, the Company recorded an impairment loss of $5.6 million associated with the interim impairment assessment of the Consumer Fit Brains reporting unit as of December 31, 2015. During the fourth quarter of 2015, the Company also determined that sufficient indication existed to require performance of an interim goodwill impairment analysis for the Enterprise & Education Language reporting unit beginning with a Step1 analysis. While this analysis did indicate that the fair value of the Enterprise & Education Language reporting unit declined, the fair value is still greater than the carrying value of this reporting unit. Since the Enterprise & Education Language reporting unit passed the Step 1 test, no further analysis or testing under Step 2 was necessary and no impairment charges were recorded in connection with this interim impairment assessment of this reporting unit. In the first quarter of 2014, the Company determined sufficient indication existed to require performance of an interim goodwill impairment analysis for the then extant Rest of World Consumer reporting unit. As a result, the Company recorded a goodwill impairment loss of $2.2 million , which represented a full impairment of Rest of World Consumer’s goodwill. In the fourth quarter of 2014, the Company determined sufficient indication existed to require performance of an interim goodwill impairment analysis for the then extant North America Consumer Language reporting unit. As a result of this test, the Company recorded a goodwill impairment loss of $18.0 million , which represented a full impairment of North America Consumer Language’s goodwill. For income tax purposes, the goodwill balances with tax basis are amortized over a period of 15 years. Guarantees Indemnifications are provided of varying scope and size to certain Enterprise & Education customers against claims of intellectual property infringement made by third parties arising from the use of its products. The Company has not incurred any costs or accrued any liabilities as a result of such obligations. Cost of Product and Subscription and Service Revenue Cost of product revenue consists of the direct and indirect materials and labor costs to produce and distribute the Company's products. Such costs include packaging materials, computer headsets, freight, inventory receiving, personnel costs associated with product assembly, third-party royalty fees and inventory storage, obsolescence and shrinkage. The Company believes cost of subscription and service revenue primarily represents costs associated with supporting the web-based subscription services, which includes online language conversation coaching, hosting costs and depreciation. Also included are the costs of credit card processing and customer technical support in both cost of product revenue and cost of subscription and service revenue. Research and Development Research and development expenses include employee compensation costs, consulting fees and overhead costs associated with the development of our solutions. The Company develops the majority of its language-learning software products for perpetual sale to external customers. The Company considers technological feasibility to be established when all planning, designing, coding, and testing has been completed according to design specifications. The Company has determined that technological feasibility for such software products is reached shortly before the products are released to manufacturing. Costs incurred after technological feasibility is established have not been material, and accordingly, the Company has expensed all research and development costs when incurred. Software Developed for Internal Use The Company capitalizes software development costs related to certain of its software platforms developed exclusively to provide its web-based subscription services and other general and administrative use software in accordance with ASC subtopic 350-40: Internal-Use Software . Development costs for internal-use software are expensed as incurred until the project reaches the application development stage. Internal-use software is defined to have the following characteristics: (a) the software is internally developed, or modified solely to meet the entity's internal needs, and (b) during the software's development or modification, no substantive plan exists or is being developed to market the software externally. Internally developed software is amortized over a three-year useful life. For the years ended December 31, 2015 , 2014 and 2013 , the Company capitalized $7.1 million , $8.8 million , and $4.8 million in internal-use software, respectively. For the years ended December 31, 2015 , 2014 and 2013 , the Company recorded amortization expense relating to internal-use software of $4.8 million , $3.4 million , and $1.8 million , respectively. Income Taxes The Company accounts for income taxes in accordance with ASC topic 740, Income Taxes ("ASC 740"), which provides for an asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted. Significant judgment is required to determine whether a valuation allowance is necessary and the amount of such valuation allowance, if appropriate. The valuation allowance is reviewed at each reporting period and is maintained until sufficient positive evidence exists to support a reversal. When assessing the realization of the Company's deferred tax assets, the Company considers all available evidence, including: • the nature, frequency, and severity of cumulative financial reporting losses in recent years; • the carryforward periods for the net operating loss, capital loss, and foreign tax credit carryforwards; • predictability of future operating profitability of the character necessary to realize the asset; • prudent and feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax assets; and • the effect of reversing taxable temporary differences. The evaluation of the recoverability of the deferred tax assets requires that the Company weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed. The establishment of a valuation allowance has no effect on the ability to use the deferred tax assets in the future to reduce cash tax payments. The Company will continue to assess the likelihood that the deferred tax assets will be realizable at each reporting period and the valuation allowance will be adjusted accordingly, which could materially affect the Company's financial position and results of operations. Stock-Based Compensation The Company accounts for its stock-based compensation in accordance ASC topic 718, Compensation—Stock Compensation ("ASC 718"). Under ASC 718, all stock-based awards, including employee stock option grants, are recorded at fair value as of the grant date and recognized as expense in the statement of operations on a straight-line basis over the requisite service period, which is the vesting period. Restructuring Costs In the first quarter of 2015, as part of the 2015 Restructuring Plan, the Company announced and initiated actions to reduce headcount and other costs in order to support its strategic shift in business focus and address periods of loss. In connection with this plan, the Company incurred restructuring related costs, including employee severance and related benefit costs, contract termination costs, and other related costs. These costs are included within the Sales and marketing, Research and development, and General and administrative operating expense categories on the Company's consolidated statements of operations. Employee severance and related benefit costs primarily include cash payments, outplacement services, continuing health insurance coverage, and other benefits. Where no substantive involuntary termination plan previously exists, these severance costs are generally considered “one-time” benefits and recognized at fair value in the period in which a detailed plan has been approved by management and communicated to the terminated employees. Severance costs pursuant to ongoing benefit arrangements, including termination benefits provided for in existing employment contracts, are recognized when probable and reasonably estimable. Contract termination costs include penalties to cancel certain service and license contracts. Contract termination costs are recognized at fair value in the period in which the contract is terminated in accordance with the contract terms. Other related costs generally include external consulting and legal costs associated with the strategic shift in business focus of the Company’s Consumer business. Such costs are recognized at fair value in the period in which the costs are incurred. Net Loss Per Share Net loss per share is computed under the provisions of ASC topic 260, Earnings Per Share . Basic loss per share is computed using net loss and the weighted average number of shares of common stock outstanding. Diluted loss per share reflect the weighted average number of shares of common stock outstanding plus any potentially dilutive shares outstanding during the period. Potentially dilutive shares consist of shares issuable upon the exercise of stock options, restricted stock awards, restricted stock units and conversion of shares of preferred stock. Common stock equivalent shares are excluded from the diluted computation if their effect is anti-dilutive. When there is a net loss, there is a presumption that there are no dilutive shares as these would be anti-dilutive. The following table sets forth the computation of basic and diluted net loss per common share: Years Ended December 31, 2015 2014 2013 (dollars in thousands, except per share amounts) Numerator: Net loss $ |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2015 | |
Inventory Disclosure [Abstract] | |
INVENTORY | INVENTORY Inventory consisted of the following (in thousands): As of 2015 2014 Raw materials $ 3,375 $ 3,163 Finished goods 3,958 3,337 Total inventory $ 7,333 $ 6,500 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | operty and equipment consisted of the following (in thousands): As of December 31, 2015 2014 Land $ 893 $ 950 Buildings and improvements 9,573 12,477 Leasehold improvements 1,477 1,408 Computer equipment 16,508 16,400 Software 34,478 31,240 Furniture and equipment 3,115 3,457 66,044 65,932 Less: accumulated depreciation (43,512 ) (40,655 ) Property and equipment, net $ 22,532 $ 25,277 In December 2015, the Company completed the sale of one of its two office buildings and associated building improvements located in Harrisonburg, Virginia. The office building and associated building improvements had a cost and net book value of $2.5 million and $1.6 million , respectively. The Company recognized a gain on sale of $0.1 million based on a sales price of $1.8 million and sales expenses of $0.1 million . The gain on sale was included in "General and administrative" operating expense line item on the consolidated statements of operations for the year ended December 31, 2015. The Company leases certain computer equipment, software, buildings, and machinery under capital lease agreements. As of December 31, 2015 and 2014 , assets under capital lease included in property and equipment above was $5.5 million and $5.6 million , respectively. As of December 31, 2015 and 2014 , accumulated depreciation and amortization relating to property and equipment under capital lease arrangements totaled $1.5 million and $1.0 million , respectively. The Company recorded total depreciation and amortization expense for its property and equipment for the years ended December 31, 2015 , 2014 and 2013 in the amount of $8.5 million , $7.6 million and $7.8 million , respectively. Depreciation and amortization expense related to property and equipment includes depreciation related to its physical assets and amortization expense related to amounts capitalized in the development of internal-use software. During the years ending December 31, 2015 and 2014 , the Company recorded $1.1 million and $0.2 million , respectively, in impairment expense related to the abandonment of a previously capitalized internal-use software project. There were no impairment charges for the year ended December 31, 2013 . |
DIVESTITURES AND ACQUISITIONS
DIVESTITURES AND ACQUISITIONS | 12 Months Ended |
Dec. 31, 2015 | |
Business Combinations [Abstract] | |
DIVESTITURES AND ACQUISITIONS | DIVESTITURES AND ACQUISITIONS 2015 Divestitures: As part of the shift in strategy initiated in early 2015, the Company determined that its ownership of the consumer-oriented Rosetta Stone Korea Ltd. ("RSK") entity no longer agreed with the Company’s overall strategy to focus on the Enterprise & Education business. In September 2015, the Company completed the divestiture of 100% of the Company's capital stock of RSK to the current President of RSK for consideration equal to the assumption of RSK's net liabilities at the date of sale. This divestiture resulted in a pre-tax gain of $0.7 million reported in “ Other (expense) income ” line of the consolidated statements of operations. This gain was comprised of a gain of $0.2 million equal to the value of the net liabilities transferred and a $0.5 million gain on the transfer of the foreign subsidiary's cumulative translation adjustment on the date of sale. As part of the transaction, the Company has agreed to continue to provide to RSK certain of its online product offerings for resale and distribution and RSK is committed to purchase those products, for an initial term ending December 31, 2025. In addition, the Company has loaned RSK $0.5 million as of October 2, 2015, which will be repaid in five equal installments due every six months beginning December 31, 2016 . As a result of this loan receivable and the level of financial support it represents, the Company concluded that it holds a variable interest in RSK whereby the Company is not the primary beneficiary. The maximum exposure to loss as a result of this involvement in the variable interest entity is limited to the $0.5 million amount of the loan. 2014 Acquisitions: In January 2014, the Company acquired Vivity Labs, Inc. and Tell Me More S.A. Under the acquisition method of accounting, the total purchase price was allocated to the tangible and intangible assets acquired on the basis of their respective estimated fair values at the date of acquisition. The valuation of the identifiable intangible assets and their useful lives acquired reflects management's estimates. Vivity Labs Inc. On January 2, 2014, the Company completed its acquisition of Vivity Labs Inc. (the "Vivity Merger" and "Vivity"). Vivity’s principal business activity is the development of brain fitness games aimed at improving the user’s cognitive function through activity, awareness and motivation through its flagship product, Fit Brains. The applications are designed for use on mobile, web and social platforms. Vivity’s emphasis on mobile solutions is especially compatible with Rosetta Stone’s focus on cloud-based technology to enable on-the-go learning. The aggregate amount of consideration paid by the Company was $12.2 million in cash. The acquisition of Vivity resulted in goodwill of approximately $9.3 million , none of which is deductible for tax purposes. This amount represents the residual amount of the total purchase price after allocation to the assets acquired and liabilities assumed. All expenditures incurred in connection with the Vivity Merger were expensed and are included in general and administrative expenses. Transaction costs incurred in connection with the Vivity Merger were $57 thousand and $51 thousand during the years ended December 31, 2014 and 2013, respectively. The results of operations for Vivity have been included in the consolidated results of operations since January 2, 2014. The Company has allocated the purchase price based on current estimates of the fair values of assets acquired and liabilities assumed in connection with the Vivity Merger. The table below summarizes the estimates of fair value of the Vivity assets acquired, liabilities assumed and related deferred income taxes as of the acquisition date. The Company finalized its allocation of the purchase price for Vivity as of December 31, 2014. The purchase price was allocated as follows (in thousands): Cash $ 14 Accounts receivable 452 Other current assets (3 ) Accounts payable and accrued expenses (307 ) Net deferred tax liability (919 ) Net tangible assets acquired (763 ) Goodwill 9,336 Amortizable intangible assets 3,577 Purchase price $ 12,150 The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): Estimated Useful Lives Estimated Value January 2, 2014 Tradename 3 years $ 188 Technology platform 5 years 2,448 Customer relationships 3 years 941 Total assets $ 3,577 Tell Me More S.A. On January 9, 2014, the Company completed its acquisition of Tell Me More S.A., (the "Tell Me More Merger" and "Tell Me More") a company organized under the laws of France. Tell Me More provides online language-learning subscriptions and learning services primarily to corporate and educational organizations. Tell Me More offers a robust suite of SaaS-based language-learning products and services that provide intermediate, advanced and business language solutions in nine languages. The Tell Me More Merger strengthens the Company's growing Enterprise & Education business and expands its global footprint. The aggregate amount of consideration paid by the Company was €22.1 million ( $30.2 million ), including assumed net debt. The Tell Me More Merger resulted in goodwill of approximately $21.7 million , none of which is deductible for tax purposes. This amount represents the residual amount of the total purchase price after allocation to the assets acquired and liabilities assumed. All expenditures incurred in connection with the Tell Me More Merger were expensed and are included in general and administrative expenses. Transaction costs incurred in connection with the Merger were $1.0 million and $0.5 million during the years ended December 31, 2014 and 2013, respectively. The results of operations for Tell Me More have been included in the consolidated results of operations since January 9, 2014. The Company has allocated the purchase price based on current estimates of the fair values of assets acquired and liabilities assumed in connection with the Tell Me More Merger. The table below summarizes the estimates of fair value of the Tell Me More assets acquired, liabilities assumed and related deferred income taxes as of the acquisition date. The Company finalized its allocation of the purchase price for Tell Me More as of December 31, 2014. The purchase price was allocated as follows (in thousands): Cash $ 2,323 Accounts receivable 2,979 Inventory 246 Prepaid expenses 243 Fixed assets 5,595 Other non-current assets 330 Accounts payable (732 ) Accrued compensation (2,855 ) Deferred revenue (2,190 ) Other current liabilities (1,211 ) Obligation under capital lease (3,958 ) Net deferred tax liability (1,392 ) Net tangible assets acquired (622 ) Goodwill 21,703 Amortizable intangible assets 9,105 Purchase price $ 30,186 The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): Estimated Useful Lives Estimated Value January 9, 2014 Customer relationships 5 years 4,348 Technology platform 5 years 4,144 Tradename 1 year 613 Total assets $ 9,105 2013 Acquisitions: The Company acquired Livemocha Inc. and Lexia Learning Systems Inc. in April and August of 2013, respectively. Under the acquisition method of accounting, the total purchase price was allocated to the tangible and intangible assets acquired on the basis of their respective estimated fair values at the date of acquisition. The valuation of the identifiable intangible assets and their useful lives acquired reflects management's estimates. Livemocha, Inc. On April 1, 2013, the Company completed its acquisition of Livemocha, Inc. (the “Livemocha Merger” and "Livemocha"). Livemocha is one of the world’s largest online language-learning communities with over 16 million registered members. The acquisition of Livemocha's technology platform has accelerated the Company’s transition to cloud-based learning solutions and reinforced its leadership position in the competitive language-learning industry. The aggregate amount of consideration paid by the Company was $8.4 million in cash. The acquisition of Livemocha resulted in goodwill of approximately $5.2 million , none of which is deductible for tax purposes. This amount represents the residual amount of the total purchase price after allocation to the assets acquired and liabilities assumed. All expenditures incurred in connection with the Livemocha Merger were expensed and are included in general and administrative expenses. Transaction costs incurred in connection with the Livemocha Merger were $0.4 million during the year ended December 31, 2013. The results of operations for Livemocha have been included in the consolidated results of operations since April 1, 2013. The Company allocated the purchase price based on current estimates of the fair values of assets acquired and liabilities assumed in connection with the Livemocha Merger. The table below summarizes the estimates of fair value of the Livemocha assets acquired, liabilities assumed and related deferred income taxes as of the acquisition date. The Company finalized its allocation of the purchase price for Livemocha as of March 31, 2014. The purchase price was allocated as follows (in thousands): Cash $ 191 Accounts receivable 227 Other current assets 93 Fixed assets 35 Accounts payable and accrued expenses (956 ) Deferred revenue (743 ) Net deferred tax liability (1,161 ) Net tangible assets acquired (2,314 ) Goodwill 5,185 Amortizable intangible assets 5,500 Purchase Price $ 8,371 The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): Estimated Useful Lives Estimated Value April 1, 2013 Online community 3 years $ 1,800 Enterprise relationships 5 years 100 Technology platform 5 years 3,400 Tradename 2 years 200 Total assets $ 5,500 In connection with the Livemocha Merger, the Company recorded deferred tax liabilities related to definite-lived intangible assets that were acquired. As a result of this deferred tax liability balance, the Company reduced its deferred tax asset valuation allowance by $1.2 million . Such reduction was recognized as an income tax benefit in the consolidated statement of operations for the year ended December 31, 2013. Lexia Learning Systems, Inc. On August 1, 2013, the Company completed its acquisition of Lexia Learning Systems, Inc. (the “Lexia Merger” and "Lexia"). Lexia is one of the most trusted and established companies in the literacy technology market. The transaction marked the Company’s first extension beyond language learning and took the Company deeper into the Education Technology industry. The aggregate amount of consideration paid by the Company was $21.1 million in cash, net of working capital and deferred revenue adjustments, including a holdback of $3.4 million with 50% of such holdback paid within 30 days of the Company filing its Form 10-K for the year ended December 31, 2013 and 50% of such holdback to be paid on the 18 month anniversary of the acquisition. The Company paid $1.7 million of the holdback in April of 2014 and paid the remaining $1.7 million in February 2015. The acquisition of Lexia resulted in goodwill of approximately $9.9 million , none of which is deductible for tax purposes. This amount represents the residual amount of the total purchase price after allocation to the assets acquired and liabilities assumed. All expenditures incurred in connection with the Lexia Merger were expensed and are included in general and administrative expenses. Transaction costs incurred in connection with the Lexia Merger were $0.1 million during the year ended December 31, 2013. The results of operations for Lexia have been included in the consolidated results of operations for the period since August 1, 2013. The Company allocated the purchase price based on current estimates of the fair values of assets acquired and liabilities assumed in connection with the Lexia Merger. The table below summarizes the estimates of fair value of the Lexia assets acquired, liabilities assumed and related deferred income taxes as of the acquisition date. The Company finalized its allocation of the purchase price for Lexia as of June 30, 2014. The purchase price was allocated as follows (in thousands): Cash $ 263 Accounts receivable 2,404 Other current assets 105 Fixed assets 255 Accounts payable and accrued expenses (899 ) Deferred revenue (1,223 ) Net deferred tax liability (4,210 ) Net tangible assets acquired (3,305 ) Goodwill 9,938 Amortizable intangible assets 14,500 Purchase price $ 21,133 The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): Estimated Useful Lives Estimated Value August 1, 2013 Enterprise relationships 10 years $ 9,400 Technology platform 7 years 4,100 Tradename 5 years 1,000 Total assets $ 14,500 In connection with the Lexia Merger, the Company recorded deferred tax liabilities related to definite-lived intangible assets that were acquired. As a result of this deferred tax liability balance, the Company reduced its deferred tax asset valuation allowance by $4.2 million . Such reduction was recognized as an income tax benefit in the consolidated statement of operations for the year ended December 31, 2013. |
GOODWILL
GOODWILL | 12 Months Ended |
Dec. 31, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL | GOODWILL The value of goodwill is primarily derived from the acquisition of Rosetta Stone Ltd. (formerly known as Fairfield & Sons, Ltd.) in January 2006, the acquisition of certain assets of SGLC International Co. Ltd ("SGLC") in November 2009, the acquisitions of Livemocha and Lexia in 2013, and the acquisitions of Vivity and Tell Me More in January 2014. The Company tests goodwill for impairment annually on June 30 of each year at the reporting unit level using a fair value approach, in accordance with the provisions of ASC 350, or more frequently, if impairment indicators arise. The Company also routinely reviews goodwill at the reporting unit level for potential impairment. Throughout 2015, the Company's reporting units were: Enterprise & Education Language, Enterprise & Education Literacy, Consumer Language, and Consumer Fit Brains. The combined Enterprise & Education Language and Enterprise & Education Literacy reporting units make up the Enterprise & Education operating and reportable segment. The combined Consumer Language and Consumer Fit Brains reporting units make up the Consumer operating and reportable segment. During 2014, the Company's reporting units were: Enterprise & Education Language, Enterprise & Education Literacy, North America Consumer Language, Rest of World Consumer, and Consumer Fit Brains. Due to a shift in strategy in the first quarter of 2015, the Company reevaluated and restructured its reporting units, operating, and reportable segments as described above. The following table shows the balance and changes in goodwill for the Company's reporting units for the years ended December 31, 2015 and 2014 (in thousands): Enterprise & Education Consumer Enterprise & Education Language Enterprise & Education Literacy Consumer Language Consumer Fit Brains Total Balance as of January 1, 2014 $ 19,926 $ 9,962 $ 20,171 $ — $ 50,059 Acquisition of Vivity — — — 9,336 9,336 Acquisition of Tell Me More 21,703 — — — 21,703 Impairment of Rest of World Consumer — — (2,199 ) — (2,199 ) Impairment of North America Consumer Language — — (17,971 ) — (17,971 ) Effect of change in foreign currency rate (1,545 ) — (1 ) (798 ) (2,344 ) Balance as of December 31, 2014 $ 40,084 $ 9,962 $ — $ 8,538 $ 58,584 Impairment of Consumer Fit Brains — — — (5,604 ) (5,604 ) Effect of change in foreign currency rate (1,384 ) — — (1,316 ) (2,700 ) Balance as of December 31, 2015 $ 38,700 $ 9,962 $ — $ 1,618 $ 50,280 2015 Activity Annual Impairment Testing of Goodwill In connection with the annual goodwill impairment analysis performed as of June 30, 2015 , the Company exercised its option to bypass Step 0 and began the annual test with Step 1. The Company determined that the fair values of the Enterprise & Education Literacy, Enterprise & Education Language, and Consumer Fit Brains reporting units exceeded their carrying values. As a result of the 2015 annual impairment test, no goodwill impairment charges were recorded as of June 30, 2015 . Interim Impairment Review During the fourth quarter of 2015, the Company determined that sufficient indication existed to require performance of an interim goodwill impairment analysis for the Consumer Fit Brains reporting unit. This indicator was due to a decline in the operations of the Consumer Fit Brains reporting unit, with decreases in revenue and bookings within this reporting unit driving lower than expected operating results for the quarter and impacting the forecast going forward. In this interim goodwill impairment test, the Consumer Fit Brains reporting unit failed Step 1. The combination of lower reporting unit fair value calculated in Step 1 and the identification of unrecognized fair value adjustments to the carrying values of other assets and liabilities (primarily developed technology and deferred revenue) in Step 2 of the interim goodwill impairment test, resulted in an implied fair value of goodwill below its carrying value. As a result, the Company recorded an impairment loss of $5.6 million associated with the interim impairment assessment of the Consumer Fit Brains reporting unit as of December 31, 2015. During the fourth quarter of 2015, the Company determined that sufficient indication existed to require performance of an interim goodwill impairment analysis for the Enterprise & Education Language reporting unit. This indicator was due to declines in the operations of the Enterprise & Education Language reporting unit, with decreases in revenue and bookings within this reporting unit driving lower than expected operating results for the quarter and impacting the forecast going forward. As a result of the operating results in the fourth quarter of 2015, the Company has further refined its strategy of focusing on the Enterprise & Education segment and, as discussed in Note 21, in March 2016, the Company announced a plan to exit the direct distribution of Enterprise & Education language offerings in a number of non-US markets and right-size the overall business. In particular, the Company initiated a process to exit direct presence and close offices in China, Brazil and France. This plan is expected to result in significantly lower projected revenues, bookings, and short-term profitability of the Enterprise & Education Language reporting unit. As a result, the Company determined that sufficient indication existed to require the performance of an interim goodwill impairment analysis for this reporting unit. While this analysis did indicate that the fair value of the Enterprise & Education Language reporting unit declined, the fair value is still greater than the carrying value of this reporting unit. Since the Enterprise & Education Language reporting unit passed the Step 1 test, no further analysis or testing under Step 2 was necessary and no impairment charges were recorded in connection with this interim impairment assessment of this reporting unit. The Company also routinely reviews goodwill at the reporting unit level for potential impairment as part of the Company’s internal control framework. In the fourth quarter of 2015 , the Company evaluated any reporting unit with remaining goodwill that was not tested for impairment to determine if a triggering event has occurred. As of December 31, 2015 , the Company concluded that there were no indicators of impairment that would cause it to believe that it is more likely than not that the fair value of these reporting units is less than the carrying value. Accordingly, a detailed impairment test has not been performed and no impairment charges were recorded in connection with the interim impairment reviews of any such reporting units. 2014 Activity Rest of World Consumer Goodwill Impairment During the first quarter of 2014, the Company determined sufficient indication existed to require performance of an interim goodwill impairment analysis as of March 31, 2014 for the then extant Rest of World Consumer reporting unit (“ROW Consumer”). This indicator was due to unexpected declines in the operations of the ROW Consumer reporting unit, with further decreases in revenue and bookings within the reporting unit driving lower than expected operating results and impacting the forecast going forward. In this interim goodwill impairment test, the ROW Consumer reporting unit failed Step 1 of the goodwill impairment test. The combination of the lower reporting unit fair value calculated in Step 1 and the identification of unrecognized fair value changes to the carrying values of other assets and liabilities (primarily tradename and deferred revenue) in Step 2 of the interim goodwill impairment test, resulted in an implied fair value of goodwill below the carrying value of goodwill for ROW Consumer. As a result, the Company recorded a goodwill impairment loss of $2.2 million , which represents a full impairment of ROW Consumer’s goodwill. North America Consumer Language Goodwill Impairment In the fourth quarter of 2014, the then extant North America Consumer Language reporting unit experienced a decline in the demand for its products and services at its current pricing levels. In an attempt to increase demand, the Company lowered prices in its direct-to-consumer and retail sales channels. This strategy increased the number of units sold, however, revenue recognized decreased significantly due to the lower prices in 2014. Additionally, these results were significantly lower than the forecasted bookings, meaning that while the Company was able to increase the number of units sold, the per unit price was lower than expected. As a result of the reduced demand and the need to offer lower prices in the fourth quarter of 2014 to generate sales, the Company began to evaluate whether the decline in demand at prior price levels has resulted in the need for a permanent price decline. As a result of the above events, the Company considered it appropriate to perform an interim goodwill impairment test for the North America Consumer Language reporting unit. The combination of the lower reporting unit fair value of the North America Consumer Language reporting unit, and the identification of unrecognized fair value changes to the carrying values of other assets and liabilities (primarily tradename, developed technology and deferred revenue) in Step 2 of the interim goodwill impairment test, resulted in a negative implied fair value of goodwill for the North America Consumer Language reporting unit. As a result, the Company recorded a goodwill impairment loss of $18.0 million , which represented a full impairment of the North America Consumer Language goodwill. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
INTANGIBLE ASSETS | INTANGIBLE ASSETS Intangible assets consisted of the following items as of the dates indicated (in thousands): December 31, 2015 December 31, 2014 Gross Accumulated Net Gross Accumulated Net Trade name/ trademark $ 12,442 $ (1,271 ) $ 11,171 $ 12,526 $ (1,062 ) $ 11,464 Core technology 15,149 (7,817 ) 7,332 15,890 (5,661 ) 10,229 Customer relationships 26,245 (16,603 ) 9,642 26,889 (14,344 ) 12,545 Website 12 (12 ) — 12 (12 ) — Patents 300 (201 ) 99 300 (161 ) 139 Total $ 54,148 $ (25,904 ) $ 28,244 $ 55,617 $ (21,240 ) $ 34,377 The Company recorded intangible assets of $23.8 million , associated with the acquisition of Rosetta Stone Ltd. in January 2006, including its indefinite-lived Rosetta Stone trade name. The Company recorded intangible assets of $5.5 million with the acquisition of Livemocha in April 2013, consisting of an online community, enterprise relationships, technology platform and the Livemocha trade name. The estimated useful lives of these intangible assets range from two to five years . The Company recorded intangible assets of $14.5 million with the acquisition of Lexia in August 2013, consisting of enterprise relationships, technology platform and the Lexia trade name. The estimated useful lives of these intangible assets range from five to ten years . The Company recorded intangible assets of $3.6 million with the acquisition of Vivity in January 2014, consisting of customer relationships, technology platform and the Vivity trade name. The estimated useful lives of these intangible assets range from three to five years . The Company recorded intangible assets of $9.1 million with the acquisition of Tell Me More in January 2014, consisting of customer relationships, technology platform and the Tell Me More trade name. The estimated useful lives of these intangible assets range from one to five years . Included within the Trade name/ trademark intangible asset category is the Rosetta Stone trade name with a carrying amount of $10.6 million . This intangible asset is considered to have an indefinite useful life and is therefore not amortized, but rather tested for impairment on at least an annual basis. The Company computes amortization of intangible assets on a straight-line basis over the estimated useful life. Below are the weighted average remaining useful lives of the Company's amortizing intangible assets: Weighted Average Life Trade name / trademark 29 months Core technology 36 months Customer relationships 76 months Patents 33 months Amortization expense consisted of the following (in thousands): Years Ended December 31, 2015 2014 2013 Included in cost of revenue: Cost of product revenue $ 264 $ 377 $ — Cost of subscription and service revenue 322 209 244 Total included in cost of revenue 586 586 244 Included in operating expenses: Sales and marketing 2,804 3,677 1,028 Research and development 1,802 2,000 550 General and administrative — — — Total included in operating expenses 4,606 5,677 1,578 Total $ 5,192 $ 6,263 $ 1,822 The following table summarizes the estimated future amortization expense related to intangible assets as of December 31, 2015 (in thousands): As of 2016 $ 4,630 2017 4,189 2018 3,576 2019 1,532 2020 1,282 Thereafter 2,428 Total $ 17,637 The Company also routinely reviews indefinite-lived intangible assets and long-lived intangible assets for potential impairment as part of the Company’s internal control framework. As an indefinite-lived intangible asset, the Rosetta Stone tradename was evaluated as of December 31, 2015 to determine if indicators of impairment exist. The Company elected to bypass the option to first assess qualitative factors to determine whether it is more likely than not that the Rosetta Stone trade name was impaired and performed the quantitative assessment. In the quantitative assessment, the Company noted that the fair value of the Rosetta Stone trade name has declined from prior estimates of fair value due to the reduction in forecasted revenue and bookings from both the Enterprise & Education Language and the Consumer Language reporting units, however, the fair value exceeds the carrying value. Additionally, all long-lived intangible assets were evaluated to determine if indicators of impairment exist and the Company concluded that there are no potential indicators of impairment. There were no impairment charges related to intangible assets for the years ended December 31, 2015 , 2014 and 2013 . |
OTHER CURRENT LIABILITIES
OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2015 | |
Other Liabilities Disclosure [Abstract] | |
OTHER CURRENT LIABILITIES | e following table summarizes other current liabilities (in thousands): As of 2015 2014 Accrued marketing expenses $ 20,022 $ 31,985 Accrued professional and consulting fees 1,746 2,804 Sales return reserve 3,728 3,570 Sales, withholding, and property taxes payable 3,879 5,875 Accrued purchase price of business acquisition — 1,688 Other 5,943 7,336 Total Other current liabilities $ 35,318 $ 53,258 |
FINANCING ARRANGEMENTS
FINANCING ARRANGEMENTS | 12 Months Ended |
Dec. 31, 2015 | |
Debt Disclosure [Abstract] | |
FINANCING ARRANGEMENTS | FINANCING ARRANGEMENTS Revolving Line of Credit On October 28, 2014 , Rosetta Stone Ltd (“RSL”), a wholly owned subsidiary of parent company Rosetta Stone Inc., executed a Loan and Security Agreement with Silicon Valley Bank (“Bank”) to obtain a $25.0 million revolving credit facility (the “credit facility”). The Company executed the First Amendment to the credit facility with the Bank effective March 31, 2015 , the Second Amendment effective May 1, 2015 , the Third Amendment effective June 29, 2015 , and the Fourth Amendment effective December 29, 2015 . The Company is subject to certain covenants under the Loan and Security Agreement including financial covenants and limitations on indebtedness, encumbrances, investments and distributions and dispositions of assets, certain of which covenants were amended in the First, Second, Third, and Fourth Amendments, which were primarily amended to reflect updates to the Company's financial outlook. The Third Amendment also changed the definition of "change of control" to eliminate the clause referring to a change in a portion of the Board of Directors within a twelve-month period. On March 14, 2016, the Company executed the Fifth Amendment to the credit facility. Under the amended agreement, the Company may borrow up to $25.0 million including a sub-facility, which reduces available borrowings, for letters of credit in the aggregate availability amount of $4.0 million (the "credit facility"). Borrowings by RSL under the credit facility are guaranteed by the Company as the ultimate parent. The credit facility has a term that expires on January 1, 2018, during which time RSL may borrow and re-pay loan amounts and re-borrow the loan amounts subject to customary borrowing conditions. The total obligations under the credit facility cannot exceed the lesser of (i) the total revolving commitment of $25.0 million or (ii) the borrowing base, which is calculated as 80% of eligible accounts receivable. As a result, the borrowing base will fluctuate and the Company expects it will follow the general seasonality of cash and accounts receivable (lower in the first half of the year and higher in the second half of the year). If the borrowing base less any outstanding amounts, plus the cash held at SVB ("Availability") is greater than $25.0 million , then the Company may borrow up to an additional $5.0 million , but in no case can borrowings exceed $25.0 million . Interest on borrowings accrue at the Prime Rate provided that the Company maintains a minimum cash and Availability balance of $17.5 million . If cash and Availability is below $17.5 million , interest will accrue at the Prime Rate plus 1% . Proceeds of loans made under the credit facility may be used as working capital or to fund general business requirements. All obligations under the credit facility, including letters of credit, are secured by a security interest on substantially all of the Company’s assets including intellectual property rights and by a stock pledge by the Company of 100% of its ownership interests in U.S. subsidiaries and 66% of its ownership interests in certain foreign subsidiaries. The Company is subject to certain financial and restrictive covenants under the credit facility. The credit facility contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, incur additional indebtedness, dispose of assets, execute a material change in business, acquire or dispose of an entity, grant liens, make share repurchases, and make distributions, including payment of dividends. The Company is required to maintain compliance with a minimum liquidity amount and minimum financial performance requirements, as defined in the credit facility. As of December 31, 2015 , the Company was in compliance with all covenants. The credit facility contains customary events of default, including among others, non-payment defaults, covenant defaults, bankruptcy and insolvency defaults, and a change of control default, in each case, subject to customary exceptions. The occurrence of a default event could result in the Bank’s acceleration of repayment obligations of any loan amounts then outstanding. As of December 31, 2015 , there were no borrowings outstanding and the Company was eligible to borrow the entire $25.0 million of available credit and $4.0 million in letters of credit have been issued by the Bank on the Company's behalf. A quarterly commitment fee accrues on any unused portion of the credit facility at a nominal annual rate. Capital Leases The Company enters into capital leases under non-committed arrangements for equipment and software. In addition, as a result of the Tell Me More Merger, the Company assumed a capital lease for a building near Versailles, France, where Tell Me More’s headquarters are located. The fair value of the lease liability at the date of acquisition was $4.0 million . During the years ended December 31, 2015 , 2014 , 2013 , the Company acquired equipment or software through the issuance of capital leases totaling $0.5 million , zero , $0.7 million , respectively. This non-cash investing activity has been excluded from the consolidated statement of cash flows. As of December 31, 2015 , the future minimum payments under capital leases with initial terms of one year or more are as follows (in thousands): Periods Ending December 31, 2016 $ 644 2017 645 2018 493 2019 492 2020 492 Thereafter 855 Total minimum lease payments $ 3,621 Less amount representing interest 478 Present value of net minimum lease payments $ 3,143 Less current portion 521 Obligations under capital lease, long-term $ 2,622 |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION 2006 Stock Incentive Plan On January 4, 2006 , the Company established the Rosetta Stone Inc. 2006 Stock Incentive Plan (the "2006 Plan") under which the Company's Board of Directors, at its discretion, could grant stock options to employees and certain directors of the Company and affiliated entities. The 2006 Plan initially authorized the grant of stock options for up to 1,942,200 shares of common stock. On May 28, 2008 , the Board of Directors authorized the grant of additional stock options for up to 195,000 shares of common stock under the plan, resulting in total stock options available for grant under the 2006 Plan of 2,137,200 as of December 31, 2008 . The stock options granted under the 2006 Plan generally expire at the earlier of a specified period after termination of service or the date specified by the Board or its designated committee at the date of grant, but not more than ten years from such grant date. Stock issued as a result of exercises of stock options will be issued from the Company's authorized available stock. 2009 Omnibus Incentive Plan On February 27, 2009 , the Company's Board of Directors approved the 2009 Omnibus Incentive Plan (the "2009 Plan") that provides for the ability of the Company to grant up to 2,437,744 new stock incentive awards or options including Incentive and Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, Performance based Restricted Stock, Share Awards, Phantom Stock and Cash Incentive Awards. The stock incentive awards and options granted under the 2009 Plan generally expire at the earlier of a specified period after termination of service or the date specified by the Board or its designated committee at the date of grant, but not more than ten years from such grant date. Concurrent with the approval of the 2009 Plan, the 2006 Plan was terminated for purposes of future grants. On May 26, 2011 the Board of Directors authorized and the Company's shareholders' approved the allocation of an additional 1,000,000 shares of common stock to the 2009 Plan. On May 23, 2012 , the Board of Directors authorized and the Company's shareholders approved the allocation of 1,122,930 additional shares of common stock to the 2009 Plan. On May 23, 2013 , the Board of Directors authorized and the Company's shareholders approved the allocation of 2,317,000 additional shares of common stock to the 2009 Plan. On May 20, 2014 , the Board of Directors authorized and the Company's shareholders approved the allocation of 500,000 additional shares of common stock to the 2009 Plan. On June 12, 2015 , the Board of Directors authorized and the Company's shareholders approved the allocation of 1,200,000 additional shares of common stock to the 2009 Plan. At December 31, 2015 there were 3,349,235 shares available for future grant under the 2009 Plan. In accordance with ASC 718, the fair value of stock-based awards to employees is calculated as of the date of grant. Compensation expense is then recognized on a straight-line basis over the requisite service period of the award. The Company uses the Black-Scholes pricing model to value its stock options, which requires the use of estimates, including future stock price volatility, expected term and forfeitures. Stock-based compensation expense recognized is based on the estimated portion of the awards that are expected to vest. Estimated forfeiture rates were applied in the expense calculation. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model as follows: Years Ended December 31, 2015 2014 2013 Expected stock price volatility 49%-63% 63%-65% 64%-67% Expected term of options 6 years 6 years 6 years Expected dividend yield — — — Risk-free interest rate 1.19%-1.75% 1.46%-1.80% 0.75%-1.65% Prior to the completion of the Company's initial public offering in April 2009, the Company's stock was not publicly quoted and the Company had a limited history of stock option activity, so the Company reviewed a group of comparable industry-related companies to estimate its expected volatility over the most recent period commensurate with the estimated expected term of the awards. In addition to analyzing data from the peer group, the Company also considered the contractual option term and vesting period when determining the expected option life and forfeiture rate. Subsequent to the initial public offering and through April 2015, the Company continued to review a group of comparable industry-related companies to estimate volatility, but also reviewed the volatility of its own stock since the initial public offering. During this period, the Company considered the volatility of the comparable companies to be the best estimate of future volatility. After April 2015, the Company had a sufficient period of stock price data to estimate volatility based upon the historical volatility experienced in its own stock price. For the risk-free interest rate, the Company uses a U.S. Treasury Bond rate consistent with the estimated expected term of the option award. The expected term of options granted represents the period of time that they are expected to be outstanding and is derived using a combination of peer company information and the simplified method as described in ASC 718-10-S99. Prior to the completion of the Company's initial public offering in April 2009, the stock was not publicly quoted and there was a limited history of stock option activity. The Company believes the limited historical exercise data related to our stock options does not provide a reasonable basis on which to estimate the expected term. Stock Options The following table summarizes the Company's stock option activity from January 1, 2015 to December 31, 2015 : Options Weighted Weighted Aggregate Options Outstanding, January 1, 2015 2,017,642 $ 13.24 7.32 $ 760,925 Options granted 1,203,031 8.92 Options exercised (25,009 ) 4.55 Options cancelled (1,358,499 ) 13.16 Options Outstanding, December 31, 2015 1,837,165 10.58 7.70 130,262 Vested and expected to vest at December 31, 2015 1,740,152 10.60 7.63 130,262 Exercisable at December 31, 2015 1,033,366 $ 10.77 6.98 $ 130,262 As of December 31, 2015 and 2014 , there was approximately $5.2 million and $6.1 million of unrecognized stock-based compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted average period of 1.84 and 2.38 years, respectively. Stock options are granted at the discretion of the Board of Directors or the Compensation Committee (or its authorized member(s)) and expire 10 years from the date of the grant. Options generally vest over a four -year period based upon required service conditions. No options have performance or market conditions. The Company calculates the pool of additional paid-in capital associated with excess tax benefits using the "simplified method" in accordance with ASC 718. The weighted average remaining contractual term and the aggregate intrinsic value for options outstanding at December 31, 2015 was 7.70 years and $0.1 million , respectively. The weighted average remaining contractual term and the aggregate intrinsic value for options exercisable at December 31, 2014 was 7.32 years and $0.8 million , respectively. As of December 31, 2015 , options that were vested and exercisable totaled 1,033,366 shares of common stock with a weighted average exercise price per share of $10.77 . The weighted average grant-date fair value per share of stock options granted was $4.77 and $6.73 for the years ended December 31, 2015 and 2014 , respectively. The aggregate intrinsic value disclosed above represents the total intrinsic value (the difference between the fair market value of the Company's common stock as of December 31, 2015 , and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2015 . This amount is subject to change based on changes to the fair market value of the Company's common stock. Restricted Stock Awards The following table summarizes the Company's restricted stock activity for the years ended December 31, 2015 and 2014 , respectively: Nonvested Outstanding Weighted Average Grant Date Fair Value Aggregate Intrinsic Value Nonvested Awards, January 1, 2014 634,031 $ 12.28 $ 7,785,901 Awards granted 236,338 11.69 Awards vested (253,526 ) 10.72 Awards canceled (134,198 ) 13.23 Nonvested Awards, December 31, 2014 482,645 12.59 6,074,136 Awards granted 481,992 9.05 Awards vested (452,341 ) 10.56 Awards canceled (170,717 ) 11.88 Nonvested Awards, December 31, 2015 341,579 10.61 3,624,153 During 2015 and 2014 , 481,992 and 236,338 shares of restricted stock were granted, respectively. The aggregate grant date fair value of the awards in 2015 and 2014 was $4.4 million and $2.8 million , respectively, which will be recognized as expense on a straight-line basis over the requisite service period of the awards, which is also the vesting period. The Company's restricted stock grants are accounted for as equity awards. The grant date fair value is based on the market price of the Company's common stock at the date of grant. The Company did not grant any restricted stock prior to April 2009. During 2015 , 170,717 shares of restricted stock were forfeited. As of December 31, 2015 , future compensation cost related to the nonvested portion of the restricted stock awards not yet recognized in the statement of operations was $3.6 million and is expected to be recognized over a period of 1.93 years. Restricted stock awards are considered outstanding at the time of grant as the stockholders are entitled to voting rights and to receive any dividends declared subject to the loss of the right to receive accumulated dividends if the award is forfeited prior to vesting. Unvested restricted stock awards are not considered outstanding in the computation of basic earnings per share. Restricted Stock Units The following table summarizes the Company's restricted stock unit activity from January 1, 2015 to December 31, 2015 : Units Outstanding Weighted Aggregate Units Outstanding, January 1, 2015 124,506 $ 12.52 $ 1,215,179 Units granted 63,436 8.49 Units released — — Units cancelled — — Units Outstanding, December 31, 2015 187,942 11.16 1,257,332 Vested and expected to vest at December 31, 2015 153,786 8.50 203,244 Vested and deferred at December 31, 2015 123,406 $ 12.58 $ 825,586 During 2015 and 2014 , 63,436 and 43,842 restricted stock units were granted, respectively, to members of the Board of Directors as part of their compensation package. Restricted stock units convert to common stock following the separation of service with the Company. The aggregate grant date fair value of the awards in 2015 and 2014 was $0.5 million and $0.4 million , respectively. Beginning June 2015, all restricted stock unit awards vest quarterly over a one year period from the date of grant, with expense recognized straight-line over the vesting period. Prior to June 2015, all restricted stock unit awards were immediately vested with expense recognized in full on the grant date. The Company's restricted stock units are accounted for as equity awards. The grant date fair value is based on the market price of the Company's common stock at the date of grant. The Company did not grant any restricted stock units prior to April 2009. Long Term Incentive Program On February 21, 2013, the Company’s Board of Directors approved the 2013 Rosetta Stone Inc. Long Term Incentive Program (“2013 LTIP”). The 2013 LTIP was administered under the Rosetta Stone Inc. 2009 Omnibus Incentive Plan (the “2009 Plan”) and the shares awarded under the 2013 LTIP will be taken from the shares reserved under the 2009 Plan. The purpose of the 2013 LTIP was to: motivate senior management and other executives to achieve key financial and strategic business objectives of the Company; offer eligible executives of the Company a competitive total compensation package; reward executives in the success of the Company; provide ownership in the Company; and retain key talent. The 2013 LTIP was effective from January 1, 2013 until December 31, 2014. Certain executives were designated for eligibility by the Board of Directors to receive performance stock awards and cash upon the Company’s achievement of specified performance goals between January 1, 2013 and December 31, 2014. In order for any performance stock award grants or any cash payments to be made under the 2013 LTIP, the Company must have met the minimum threshold requirements for a performance goal for the 2014 fiscal year in addition to the cumulative threshold performance goals for the two year period ended December 31, 2014. Each performance goal was mutually exclusive. Each performance goal had a range of payout levels depending on the achievement of the goal ranging from zero to 200% of the incentive target. The performance stock awards granted were 100% vested as of the date of grant with no subsequent holding period requirement. The Company’s stockholders approved the material terms of the performance goals on May 23, 2013, the grant date for the performance stock awards. The amount of share-based compensation expense recognized related to the 2013 LTIP was $1.3 million and $1.4 million for the years ended December 31, 2014 and 2013, respectively. Expense of $0.3 million and $0.6 million was recognized related to the cash-based portion of the 2013 LTIP for the years ended December 31, 2014 and 2013, respectively. In the first quarter of 2015, the Company issued 160,860 performance share awards related to the conclusion of the 2013 LTIP. Stock-Based Compensation Expense The following table presents the stock-based compensation expense for stock options and restricted stock included in the related financial statement line items (in thousands): Years Ended December 31, 2015 2014 2013 Included in cost of revenue: Cost of product revenue $ 57 $ 95 $ 109 Cost of subscription and service revenue 44 13 66 Total included in cost of revenue 101 108 175 Included in operating expenses: Sales and marketing 1,327 1,975 1,840 Research & development 841 958 1,460 General and administrative 4,926 3,721 5,766 Total included in operating expenses 7,094 6,654 9,066 Total $ 7,195 $ 6,762 $ 9,241 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2015 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS' EQUITY At December 31, 2015 , the Company's Board of Directors had the authority to issue 200,000,000 shares of stock, of which 190,000,000 were designated as Common Stock, with a par value of $0.00005 per share, and 10,000,000 were designated as Preferred Stock, with a par value of $0.001 per share. At December 31, 2015 and 2014 , the Company had shares of Common Stock issued of 23,149,634 and 22,935,620 , respectively, and shares of Common Stock outstanding of 22,149,634 and 21,935,620 , respectively. On May 8, 2013 , the Company filed a universal shelf registration statement which became effective on May 30, 2013 . The registration statement permitted certain holders of the Company’s stock to offer the shares of common stock held by them. On June 11, 2013 the selling shareholders, ABS Capital Partners IV Trust and Norwest Equity Partners VIII, LP, sold a combined total of 3,490,000 shares at an offering price of $16.00 per share. During November and December 2013, ABS Capital Partners IV Trust sold the remainder of its common stock holdings in the Company. The shelf also provides the Company with the flexibility to offer an amount of equity or issue debt in the amount of $150.0 million . The Company issued and sold an additional 10,000 shares at a per share price of $16.00 in the offering. On August 22, 2013 , the Company’s Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $25.0 million of its outstanding common stock from time to time in the open market or in privately negotiated transactions depending on market conditions, other corporate considerations, and applicable legal requirements. The Company expects to fund the repurchases through existing cash balances and cash generated from operations. For the year ended December 31, 2013 , the Company paid $11.4 million to repurchase 1,000,000 shares at a weighted average price of $11.44 per share as part of this program. No shares were repurchased during the year ended December 31, 2015 . Shares repurchased under the program were recorded as treasury stock on the Company’s consolidated balance sheet. The shares repurchased under this program during the year ended December 31, 2013 were not the result of an accelerated share repurchase agreement. Management has not made a decision on whether shares purchased under this program will be retired or reissued. Holders of the Company's common stock are entitled to receive dividends when and if declared by the Board of Directors out of assets or funds legally available for that purpose. Future dividends are dependent on the Company's financial condition and results of operations, the capital requirements of its business, covenants associated with financing arrangements, other contractual restrictions, legal requirements, regulatory constraints, industry practice and other factors deemed relevant by its Board of Directors. |
EMPLOYEE BENEFIT PLAN
EMPLOYEE BENEFIT PLAN | 12 Months Ended |
Dec. 31, 2015 | |
Compensation and Retirement Disclosure [Abstract] | |
EMPLOYEE BENEFIT PLAN | EMPLOYEE BENEFIT PLAN The Company maintains a defined contribution 401(k) Plan (the "Plan"). The Company matches employee contributions to the Plan up to 4% of their compensation. The Company recorded Company contribution matching expenses for the Plan totaling $2.0 million , $2.2 million , and $1.9 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. |
RESTRUCTURING AND OTHER EMPLOYE
RESTRUCTURING AND OTHER EMPLOYEE SEVERANCE | 12 Months Ended |
Dec. 31, 2015 | |
Restructuring and Related Activities [Abstract] | |
RESTRUCTURING AND OTHER EMPLOYEE SEVERANCE | RESTRUCTURING AND OTHER EMPLOYEE SEVERANCE 2015 Restructuring Actions In the first quarter of 2015, the Company announced and initiated actions to reduce headcount and other costs in order to support its strategic shift in business focus. Restructuring charges included in the Company’s consolidated statement of operations related to the 2015 Restructuring Plan include the following: • Employee severance and related benefits costs incurred in connection with headcount reductions involving employees primarily in the U.S. and the U.K.; • Contract termination costs; and • Other related costs. The following table summarizes activity with respect to the restructuring charges for the 2015 Restructuring Plan during the year ended December 31, 2015 (in thousands): Balance at January 1, 2015 Cost Incurred Cash Payments Other Adjustments (1) Balance at December 31, 2015 Severance costs $ — $ 7,240 $ (5,940 ) $ (1,048 ) $ 252 Contract termination costs — 1,134 (1,134 ) — — Other costs — 417 (417 ) — — Total $ — $ 8,791 $ (7,491 ) $ (1,048 ) $ 252 (1) Other Adjustments includes non-cash period changes in the liability balance, which may include non-cash stock compensation expense and foreign currency translation adjustments. As of December 31, 2015 , the entire restructuring liability of $0.3 million was classified as a current liability within accrued compensation and other current liabilities on the consolidated balance sheets. The following table presents restructuring costs included in the related line items of our Statement of Operations (in thousands): Years Ended December 31, 2015 2014 Cost of revenue $ 113 $ — Sales and marketing 4,492 — Research and development 602 — General and administrative 3,584 — Total $ 8,791 $ — These restructuring expenses are not allocated to any reportable segment under our definition of segment contribution as defined in Note 17 "Segment Information." The Company does not expect to incur any additional restructuring costs in connection with the 2015 Restructuring Plan. At each reporting date, the Company will evaluate its accrued restructuring costs to ensure the liabilities reported are still appropriate. Any changes to the estimated costs of executing approved restructuring plans will be reflected in the Company’s consolidated statements of operations. 2014 Employee Severance Actions On January 9, 2014, the Company completed its acquisition of Tell Me More, a company organized under the laws of France. At acquisition, the plan was to fully integrate Tell Me More into the operations of the Company. Following the acquisition, the Company undertook financial performance review of the French entity and of the Company as a whole. As a result, the Company identified the need to reduce expenses. In the second quarter of 2014, the Company began to create a plan to address the economic issues of the business through the reduction of expense. The result of this economic planning was to reduce headcount within certain business units of the French entity. Under the requirements of French Labour Law, there is an expectation on the part of both the employer and employee that if an employee is terminated, the employer is required to pay a minimum amount of severance. Accordingly, the Company concluded that the termination benefits for certain employees as the result of the reduction in force in France were payable based upon an ongoing benefit arrangement. A severance liability became probable and estimable when the Company received approval from the French Labour Administration and when the specific employees impacted were determined. These criteria were met in the third quarter of 2014 and the Company recorded an accrual and related expense of $1.0 million . Severance payments totaling $0.5 million related to this reduction in force were paid during the fourth quarter of 2014, $0.4 million was paid in 2015, and the remaining amount is expected to be paid in 2016. During 2014, the Company initiated other actions across its business to reduce headcount in order to align resources to support business needs. The Company recorded $3.2 million in severance costs associated with these actions. As a result, $2.3 million was paid during 2014, $0.8 million was paid during 2015, and the remaining $0.1 million liability will be paid in 2016. |
LEASE ABANDONMENT AND TERMINATI
LEASE ABANDONMENT AND TERMINATION | 12 Months Ended |
Dec. 31, 2015 | |
Restructuring and Related Activities [Abstract] | |
LEASE ABANDONMENT AND TERMINATION | LEASE ABANDONMENT AND TERMINATION As part of the Company’s effort to reduce general and administrative expenses through a planned space consolidation at its Arlington, Virginia headquarters location, the Company incurred a lease abandonment charge of $3.2 million for the year ended December 31, 2014. Prior to January 31, 2014, the Company occupied the 6th and 7th floors at its Arlington, Virginia headquarters. The Company estimated the liability under the operating lease agreements and accrued lease abandonment costs in accordance with ASC 420, Exit or Disposal Cost Obligations ("ASC 420"), as the Company has no future economic benefit from the abandoned space and the lease does not terminate until December 31, 2018. All leased space related to the 6th floor was abandoned and ceased to be used by the Company on January 31, 2014. In March 2013 Rosetta Stone Japan Inc. partially abandoned its Japan office as a result of excess office space due to reduction in staff along with overall local operations business performance. The Company estimated the liability under the operating lease agreement reduced for anticipated sublease income in accordance with ASC 420 as the Company had no future economic benefit from the abandoned space and the lease did not terminate until February 28, 2015. As of March 31, 2014, the Company ceased to use the remaining office space in this facility and simultaneously negotiated and paid a lease termination fee of $0.4 million . The Company has been released from all obligations under the lease arrangement as of December 31, 2014. A summary of the Company’s lease abandonment activity for the years ended December 31, 2015 and 2014 is as follows (in thousands): As of December 31, 2015 2014 Accrued lease abandonment costs, beginning of period $ 1,679 $ 413 Costs incurred and charged to expense 55 3,812 Principal reductions (452 ) (2,546 ) Accrued lease abandonment costs, end of period $ 1,282 $ 1,679 Accrued lease abandonment costs liability: Short-term $ 455 $ 496 Long-term 827 1,183 Total $ 1,282 $ 1,679 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The following table summarizes the significant components of the Company's deferred tax assets and liabilities as of December 31, 2015 and 2014 (in thousands): As of December 31, 2015 2014 Deferred tax assets: Inventory $ 564 $ 535 Net operating and capital loss carryforwards 48,334 27,637 Deferred revenue 13,908 12,447 Accrued liabilities 9,780 12,890 Stock-based compensation 4,656 5,760 Amortization and depreciation 31 — Bad debt reserve 398 501 Foreign and other tax credits 1,517 1,283 Gross deferred tax assets 79,188 61,053 Valuation allowance (70,464 ) (53,809 ) Net deferred tax assets 8,724 7,244 Deferred tax liabilities: Goodwill and indefinite lived intangibles (4,782 ) (3,465 ) Deferred sales commissions (7,337 ) (5,714 ) Prepaid expenses (625 ) (555 ) Amortization and depreciation — (1,337 ) Foreign currency translation (973 ) (391 ) Other (5 ) (5 ) Gross deferred tax liabilities (13,722 ) (11,467 ) Net deferred tax liabilities $ (4,998 ) $ (4,223 ) For the year ended December 31, 2015 , the Company recorded income tax expense of $1.2 million primarily related to current year operations in Germany and the UK and the tax impact of the amortization of indefinite lived intangibles, and the inability to recognize tax benefits associated with current year losses of operations in all other foreign jurisdictions and in the U.S. due to the valuation allowance recorded against the deferred tax asset balances of these entities. These tax expenses were partially offset by tax benefits related to current year losses (excluding the Consumer Fit Brains goodwill impairment) in Canada. The goodwill that was impaired is no t deductible for tax. Additionally, tax benefits were recorded related to the reversal of accrued withholding taxes as a result of an intercompany transaction. For the year ending December 31, 2014 , the Company recorded an income tax benefit of $6.5 million primarily resulting from the tax benefits related to the goodwill impairment taken during the first quarter of 2014 related to the ROW Consumer reporting unit, the goodwill impairment taken during the fourth quarter of 2014 related to the North America Consumer Language reporting unit, and current year losses in Canada and France. The goodwill that was impaired related to acquisitions from prior years, a portion of which resulted in a tax benefit as a result of writing off a deferred tax liability previously recorded (i.e., goodwill had tax basis and was amortized for tax). These tax benefit amounts were partially offset by income tax expense related to profits from certain foreign operations and foreign withholding taxes. The tax benefits were also partially offset by the tax expense related to the tax impact of amortization of indefinite lived intangibles, and the inability to recognize tax benefits associated with current year losses of operation in all other foreign jurisdictions and in the U.S. due to the valuation allowance recorded against the deferred tax asset balances of these entities. During the third quarter of 2012, the Company established a full valuation allowance to reduce the deferred tax assets of its operations in Brazil, Japan, and the U.S., resulting in a non-cash charge of $0.4 million , $2.1 million , and $23.1 million , respectively. Additionally, no tax benefits were provided on 2012 losses incurred in foreign jurisdictions where the Company has determined a valuation allowance is required. As of December 31, 2015 , a full valuation allowance was provided for domestic and certain foreign deferred tax assets in those jurisdictions where the Company has determined the deferred tax assets will more likely than not be realized. If future events change the outcome of the Company's projected return to profitability, a valuation allowance may not be required to reduce the deferred tax assets. The Company will continue to assess the need for a valuation allowance. As of December 31, 2015 , the Company had federal, state and foreign tax NOL carryforward amounts and expiration periods as follows (in thousands): Year of Expiration U.S. Federal State Brazil France Japan Other Foreign Total 2016-2020 $ — $ 498 $ — $ — $ — $ — $ 498 2021-2025 — 1,180 — — 11,872 607 13,659 2026-2030 — 6,288 — — — 152 6,440 2031-2035 39,437 34,008 — — — 251 73,696 2036-2040 48,904 38,532 — — — 932 88,368 Indefinite — — 5,511 13,158 — — 18,669 Totals $ 88,341 $ 80,506 $ 5,511 $ 13,158 $ 11,872 $ 1,942 $ 201,330 As of December 31, 2015 , the Company had federal and state capital loss carryforward amounts and expiration periods as follows (in thousands): Year of Tax Credit Expiration U.S. Federal State 2016-2020 $ — $ — 2021-2025 6,837 6,055 2026-2030 — — 2031-2035 — 360 2036-2040 — — Indefinite — — Totals $ 6,837 $ 6,415 As of December 31, 2015 , the Company had federal tax credit carryforward amounts and expiration periods as follows (in thousands): Year of Tax Credit Expiration U.S. Federal 2016-2020 $ — 2021-2025 1,516 2026-2030 1 2031-2035 — 2036-2040 — Indefinite — Totals $ 1,517 The components of loss before income taxes and the provision for taxes on income consist of the following (in thousands): Years Ended December 31, 2015 2014 2013 United States $ (41,458 ) $ (60,434 ) $ (14,360 ) Foreign (4,179 ) (19,761 ) (3,658 ) Loss before income taxes $ (45,637 ) $ (80,195 ) $ (18,018 ) The provision for taxes on income consists of the following (in thousands): Federal $ (157 ) $ 29 $ 155 State 96 23 123 Foreign 444 1,258 1,709 Total current $ 383 $ 1,310 $ 1,987 Deferred: Federal $ 1,148 $ (5,425 ) $ (3,972 ) State 169 (797 ) (112 ) Foreign (541 ) (1,577 ) 213 Total deferred 776 (7,799 ) (3,871 ) Provision (benefit) for income taxes $ 1,159 $ (6,489 ) $ (1,884 ) Reconciliation of income tax provision (benefit) computed at the U.S. federal statutory rate to income tax expense (benefit) is as follows (in thousands): Years Ended December 31, 2015 2014 2013 Income tax benefit at statutory federal rate $ (15,973 ) $ (28,068 ) $ (6,306 ) State income tax expense, net of federal income tax effect 231 (782 ) 7 Acquired intangibles — — (859 ) Nondeductible goodwill impairment 1,961 — — Other nondeductible expenses 88 482 1,105 Tax rate differential on foreign operations (1,019 ) 276 (264 ) Increase in valuation allowance 15,713 21,772 4,263 Tax audit settlements (96 ) — — Change in prior year estimates 225 (69 ) (17 ) Other tax credits 29 (102 ) — Other — 2 187 Income tax expense (benefit) $ 1,159 $ (6,489 ) $ (1,884 ) The Company accounts for uncertainty in income taxes under ASC topic 740-10-25, Income Taxes: Overall: Recognition, ("ASC 740-10-25"). ASC 740-10-25 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10-25 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense (benefit). As of December 31, 2015 and 2014 , the Company had zero and $26,000 accrued for interest and penalties, respectively, in "Other Long Term Liabilities". During the years ended December 31, 2015 and 2014 , the Company accrued zero and $10,000 in interest expense, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands): Years Ended December 31, 2015 2014 Balance at January 1, $ 446 $ 143 Increases for tax positions taken during prior years — 322 Settlements with tax authorities (446 ) — Reductions for tax positions taken during prior years — (2 ) Lapse of statute of limitations — (17 ) Balance at December 31, $ — $ 446 The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. The Company's tax years 2010 and forward are subject to examination by the tax authorities. The Company was under audit by the Internal Revenue Service for tax years 2009 to 2012. During 2015, the U.S. audit for tax years 2009 through 2012 concluded and resulted in the Company recording a $0.1 million tax benefit. The previously recorded $0.4 million of unrecognized tax benefits were settled as a result of the concluded IRS audit. During the year ended December 31, 2015 , the Company recorded a net decrease of $0.4 million of additional unrecognized tax benefits related to tax credits claimed in a prior period. As of December 31, 2015 and 2014 , the Company had zero and $0.4 million of unrecognized tax benefits, respectively. Any liabilities for unrecognized tax benefits were netted against "Income Tax Receivable." The Company does not expect that the amounts of unrecognized tax benefits will change significantly within the next twelve months. The Company had an accumulated consolidated deficit related to its foreign subsidiaries of $34.4 million at December 31, 2015 and aggregate 2015 losses before income tax related to its foreign subsidiaries of approximately $4.2 million . The Company has certain foreign subsidiaries with aggregate undistributed earnings of $11.6 million at December 31, 2015 . The foreign subsidiaries with aggregate undistributed earnings are considered indefinitely reinvested as of December 31, 2015 . As a result of the multitude of scenarios in which the earnings could be repatriated, if desired, and the complexity of associated calculations, it is not practicable to estimate the amount of additional tax that might be payable on the undistributed foreign earnings. The Company made income tax payments of $1.4 million , $1.7 million , and $3.3 million , in 2015 , 2014 and 2013 , respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Operating Leases The Company leases copiers, parking spaces, buildings, a warehouse, and office space under operating lease and site license arrangements, some of which contain renewal options. Building, warehouse and office space leases range from 7 months to 74 months . Certain leases also include lease renewal options. The following table summarizes future minimum operating lease payments as of December 31, 2015 and the years thereafter (in thousands): As of Periods Ending December 31, 2016 $ 5,591 2017 4,367 2018 3,829 2019 1,253 2020 962 Thereafter 590 Total future minimum operating lease payments $ 16,592 Total expenses under operating leases were $5.1 million , $5.6 million and $7.1 million during the years ended December 31, 2015 , 2014 and 2013 , respectively. The Company accounts for its leases under the provisions of ASC topic 840, Accounting for Leases ("ASC 840"), which require that leases be evaluated and classified as operating leases or capital leases for financial reporting purposes. Certain operating leases contain rent escalation clauses, which are recorded on a straight-line basis over the initial term of the lease with the difference between the rent paid and the straight-line rent recorded as either a deferred rent asset or liability depending on the calculation. Lease incentives received from landlords are recorded as deferred rent liabilities and are amortized on a straight-line basis over the lease term as a reduction to rent expense. Royalty Agreements The Company has entered into agreements to license software from vendors for incorporation in the Company's products. Pursuant to some of these agreements, the Company is required to pay minimum royalties or license fees over the term of the agreement regardless of actual license sales. In addition, such agreements typically specify that, in the event the software is incorporated into specified Company products, royalties will be due at a contractual rate based on actual sales volumes. These agreements are subject to various royalty rates typically calculated based on the level of sales for those products. The Company expenses these amounts to cost of sales or research and development expense, as appropriate. Royalty expense was $0.2 million , $31,000 , and $0 for the years ended December 31 2015 , 2014 and 2013 , respectively. Employment Agreements The Company has agreements with certain of its executives and key employees which provide guaranteed severance payments upon termination of their employment without cause. Litigation In June 2011, Rosetta Stone GmbH, a subsidiary of the Company, was served with a writ filed by Langenscheidt KG (“Langenscheidt”) in the District Court of Cologne, Germany alleging trademark infringement due to Rosetta Stone GmbH’s use of the color yellow on its packaging of its language-learning software and the advertising thereof in Germany. Langenscheidt sought relief in the form of monetary damages and injunctive relief; however there has not been a demand for a specific amount of monetary damages and there has been no specific damage amount awarded to Langenscheidt. In January 2012, the District Court of Cologne ordered an injunction against specific uses of the color yellow made by Rosetta Stone GmbH in packaging, on its website and in television commercials and declared Rosetta Stone GmbH liable for damages, attorneys’ fees and costs to Langenscheidt. In its decision, the District Court of Cologne also ordered the destruction of Rosetta Stone GmbH’s product and packaging which utilized the color yellow and which was deemed to have infringed Langenscheidt’s trademark. The Court of Appeals in Cologne and the German Federal Supreme Court have affirmed the District Court's decision. The Company has filed special complaints with the German Federal Supreme Court and the German Constitutional Court directed to constitutional issues in the German Federal Supreme Court’s decision. In August 2011, Rosetta Stone GmbH commenced a separate proceeding for the cancellation of Langenscheidt’s German trademark registration of yellow as an abstract color mark. In June 2012, the German Patent and Trademark Office rendered a decision in the cancellation proceeding denying our request to cancel Langenscheidt’s German trademark registration. The German Federal Supreme Court has denied Rosetta Stone GmbH's further appeal but has not yet issued its written decision denying further appeal. A constitutional complaint was filed with the German Federal Supreme Court in May 2015, which is still pending. In October 2015, the parties engaged in further settlement discussions and executed a settlement agreement pursuant to which Rosetta Stone GmbH will pay a lump sum of $0.4 million in full settlement of all financial claims resulting from the proceedings, including damages and cost reimbursement to Langenscheidt. Both parties have withdrawn the pending motions. As of December 31, 2015, the Company recorded a liability equal to the full settlement amount of $0.4 million , which was paid in January 2016. From time to time, the Company has been subject to various claims and legal actions in the ordinary course of its business. The Company is not currently involved in any legal proceeding the ultimate outcome of which, in its judgment based on information currently available, would have a material impact on its business, financial condition or results of operations. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 12 Months Ended |
Dec. 31, 2015 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATION The Company is managed in two operating segments - Enterprise & Education and Consumer. These segments also represent the Company's reportable segments. Segment contribution includes segment revenue and expenses incurred directly by the segment, including material costs, service costs, customer care and coaching costs, sales and marketing expenses, and bad debt expense. The Company does not allocate expenses beneficial to all segments, which include certain general and administrative expenses, facilities and communication expenses, purchasing expenses and manufacturing support and logistic expenses. These expenses are included in the unallocated expenses section of the table presented below. Revenue from transactions between the Company's operating segments is not material. With the exception of goodwill, the Company does not identify or allocate its assets by operating segment. Consequently, the Company does not present assets or liabilities by operating segment. Operating results by segment for the years ended December 31, 2015 , 2014 , and 2013 were as follows (in thousands): Years Ended December 31, 2015 2014 2013 Revenue: Enterprise & Education $ 98,057 $ 84,700 $ 60,209 Consumer 119,613 177,153 204,436 Total revenue $ 217,670 $ 261,853 $ 264,645 Segment contribution: Enterprise & Education $ 30,431 $ 22,864 $ 20,965 Consumer 34,547 35,298 70,884 Total segment contribution 64,978 58,162 91,849 Unallocated expenses, net: Unallocated cost of sales 8,291 8,947 4,586 Unallocated sales and marketing 15,282 16,168 16,447 Unallocated research and development 29,939 33,176 33,993 Unallocated general and administrative 48,470 54,576 54,423 Unallocated non-operating expense/(income) 1,824 1,345 (424 ) Unallocated impairment 6,754 20,333 — Unallocated lease abandonment 55 3,812 842 Total unallocated expenses, net 110,615 138,357 109,867 Income (loss) before income taxes $ (45,637 ) $ (80,195 ) $ (18,018 ) Geographic Information Revenue by major geographic region is based primarily upon the geographic location of the customers who purchase the Company's products. The geographic locations of distributors and resellers who purchase and resell the Company's products may be different from the geographic locations of end customers. The information below summarizes revenue from customers by geographic area as of December 31, 2015 , 2014 and 2013 , respectively (in thousands): Years Ended December 31, 2015 2014 2013 United States $ 177,966 $ 212,070 $ 223,404 International 39,704 49,783 41,241 Total Revenue $ 217,670 $ 261,853 $ 264,645 The information below summarizes long-lived assets by geographic area for the years ended December 31, 2015 and 2014 , respectively (in thousands): As of December 31, 2015 2014 United States $ 18,704 $ 20,451 International 3,828 4,826 Total $ 22,532 $ 25,277 Revenue by Product and Service The Company earns revenue from the sale of language-learning, literacy and brain fitness products and services. The information below summarizes revenue by type for the years ended December 31, 2015 , 2014 and 2013 , respectively (in thousands): As of December 31, 2015 2014 2013 Language learning $ 191,568 $ 249,340 $ 263,426 Literacy 21,928 9,912 1,219 Brain Fitness 4,174 2,601 — Total $ 217,670 $ 261,853 $ 264,645 |
RELATED PARTIES
RELATED PARTIES | 12 Months Ended |
Dec. 31, 2015 | |
Related Party Transactions [Abstract] | |
RELATED PARTIES | RELATED PARTIES As of December 31, 2015 and 2014 , the Company had outstanding receivables from employees in the amount of $18,000 and $67,000 , respectively. |
VALUATION AND QUALIFYING ACCOUN
VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended |
Dec. 31, 2015 | |
Valuation and Qualifying Accounts [Abstract] | |
VALUATION AND QUALIFYING ACCOUNTS | VALUATION AND QUALIFYING ACCOUNTS The following table includes the Company's valuation and qualifying accounts for the respective periods (in thousands): Years Ended December 31, 2015 2014 2013 Allowance for doubtful accounts: Beginning balance $ 1,434 $ 1,000 $ 1,297 Charged to costs and expenses 1,657 2,405 1,420 Deductions—accounts written off (1,895 ) (1,971 ) (1,717 ) Ending balance $ 1,196 $ 1,434 $ 1,000 Promotional rebate and coop advertising reserves: Beginning balance $ 23,437 $ 13,025 $ 9,127 Charged to costs and expenses 40,563 39,249 22,881 Deductions - reserves utilized (47,090 ) (28,837 ) (18,983 ) Ending balance $ 16,910 $ 23,437 $ 13,025 Sales return reserve: Beginning balance $ 3,570 $ 4,834 $ 5,883 Charged against revenue 11,474 12,011 14,258 Deductions—reserves utilized (11,316 ) (13,275 ) (15,307 ) Ending balance $ 3,728 $ 3,570 4,834 Deferred income tax asset valuation allowance: Beginning balance $ 53,809 33,866 29,671 Charged to costs and expenses 16,655 19,943 9,566 Deductions — — (5,371 ) Ending balance $ 70,464 $ 53,809 $ 33,866 |
SUPPLEMENTAL QUARTERLY FINANCIA
SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (Unaudited) | 12 Months Ended |
Dec. 31, 2015 | |
Quarterly Financial Information Disclosure [Abstract] | |
SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (Unaudited) | SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (Unaudited) Summarized quarterly supplemental consolidated financial information for 2015 and 2014 are as follows (in thousands, except per share amounts): Three Months Ended March 31, June 30, September 30, December 31, 2015 Revenue $ 58,442 $ 51,411 $ 49,802 $ 58,015 Gross profit $ 47,140 $ 42,391 $ 41,136 $ 48,476 Net loss $ (19,884 ) $ (8,175 ) $ (7,301 ) $ (11,436 ) Basic loss per share $ (0.95 ) $ (0.38 ) $ (0.34 ) $ (0.52 ) Shares used in basic per share computation 21,018 21,689 21,771 21,801 Diluted loss per share $ (0.95 ) $ (0.38 ) $ (0.34 ) $ (0.52 ) Shares used in diluted per share computation 21,018 21,689 21,771 21,801 2014 Revenue $ 60,765 $ 57,315 $ 64,515 $ 79,258 Gross profit $ 48,594 $ 45,355 $ 51,528 $ 63,322 Net loss $ (20,241 ) $ (15,750 ) $ (16,178 ) $ (21,537 ) Basic loss per share $ (0.96 ) $ (0.74 ) $ (0.76 ) $ (1.01 ) Shares used in basic per share computation 21,125 21,252 21,305 21,327 Diluted loss per share $ (0.96 ) $ (0.74 ) $ (0.76 ) $ (1.01 ) Shares used in diluted per share computation 21,125 21,252 21,305 21,327 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS On March 14, 2016 , the Company announced that it intends to exit the direct sales presence in almost all of its non-U.S. and non-northern European geographies related to the distribution of Enterprise & Education language offerings. Where appropriate, the Company will seek to operate through partners in those geographies being exited. The Company will also look to initiate processes to close its software development operations in France and China. In total, if the Company's intentions are realized, these actions will reduce headcount by approximately 17% of our full-time workforce and is expected to result in annual expense reductions of approximately $19.0 million . If fully realized, these actions will result in an estimated restructuring charge ranging between $5.0 million and $6.0 million , with approximately 50% accrued in the first quarter 2016, largely reflecting cash separation payments. These actions are additive to the plans discussed in Note 13 and further support a strategic shift in business focus to help address periods of losses. On March 14, 2016, the Company executed the Fifth Amendment to its Loan and Security Agreement with Silicon Valley Bank. See Note 9 for more details. In March 2016 the Board of Director's concluded the search for a chief executive officer and has appointed A. John Hass III as President, Chief Executive Officer, and Chairman of the Board effective April 1, 2016. |
SUMMARY OF SIGNIFICANT ACCOUN29
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of Rosetta Stone Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. For comparative purposes, certain amounts in the 2014 consolidated balance sheet have been reclassified to conform to the 2015 presentation. See “Recently Issued Accounting Standards” below regarding the impact of our adoption of Accounting Standards Update No. 2015-17 on the classification of deferred tax amounts in our consolidated balance sheets. The equity method is used to account for investments in entities if the investment provides the Company with the ability to exercise significant influence over operating and financial policies of the investee. The Company determines its level of influence over an equity method investment by considering key factors such as ownership interest, representation on a governance body, participation in policy-making decisions, and technological dependencies. The Company's proportionate share of the net income or loss of any equity method investments is reported in "Other income and (expense)" and included in the net loss on the consolidated statements of operations. The carrying value of any equity method investment is reported in "Other assets" on the consolidated balance sheets. |
Use of Estimates | Use of Estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make certain estimates and assumptions. The amounts reported in the consolidated financial statements include significant estimates and assumptions that have been made, including, but not limited to, those related to revenue recognition, allowance for doubtful accounts, estimated sales returns and reserves, stock-based compensation, restructuring costs, fair value of intangibles and goodwill, disclosure of contingent assets and liabilities, disclosure of contingent litigation, and allowance for valuation of deferred tax assets. The Company bases its estimates and assumptions on historical experience and on various other judgments that are believed to be reasonable under the circumstances. The Company continuously evaluates its estimates and assumptions. Actual results may differ from these estimates and assumptions. |
Revenue Recognition | Revenue Recognition The Company's primary sources of revenue are web-based software subscriptions, online services, perpetual product software, and bundles of perpetual product software and online services. The Company also generates revenue from the sale of audio practice products, mobile applications, and professional services. Revenue is recognized when all of the following criteria are met: there is persuasive evidence of an arrangement; the product has been delivered or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. Revenue is recorded net of discounts. The Company identifies the units of accounting contained within sales arrangements in accordance with Accounting Standards Codification ("ASC") subtopic 605-25 Revenue Recognition - Multiple Element Arrangements (“ASC 605-25”). In doing so, the Company evaluates a variety of factors including whether the undelivered element(s) have value to the customer on a stand-alone basis or if the undelivered element(s) could be sold by another vendor on a stand-alone basis. For multiple element arrangements that contain perpetual software products and related online services, the Company allocates the total arrangement consideration to its deliverables based on the existence of vendor-specific objective evidence of fair value, or vendor-specific objective evidence ("VSOE"), in accordance with ASC subtopic 985-605-25 Software: Revenue Recognition-Multiple-Element Arrangements ("ASC 985-605-25"). The Company generates a substantial portion of its Consumer revenue from the CD and digital download formats of the Rosetta Stone language-learning product which is typically a multiple-element arrangement that includes two deliverables: the perpetual software, delivered at the time of sale, and the online service, which is considered an undelivered software-related element. The online service includes access to conversational coaching services. Because the Company only sells the perpetual language-learning software on a stand-alone basis in its homeschool version, the Company does not have a sufficient concentration of stand-alone sales to establish VSOE for the perpetual product. Where VSOE of the undelivered online services can be established, arrangement consideration is allocated using the residual method. The Company determines VSOE by reference to the range of comparable stand-alone renewal sales of the online service. The Company reviews these stand-alone sales on a quarterly basis. VSOE is established if at least 80% of the stand-alone sales are within a range of plus or minus 15% of a midpoint of the range of prices, consistent with generally accepted industry practice. Where VSOE of the undelivered online services cannot be established, revenue is deferred and recognized commensurate with the delivery of the online services. For non-software multiple element arrangements the Company allocates revenue to all deliverables based on their relative selling prices. The Company's non-software multiple element arrangements primarily occur as sales to its Enterprise & Education customers. These arrangements can include web-based subscription services, audio practice materials and professional services or any combination thereof. The Company does not have a sufficient concentration of stand-alone sales of the various deliverables noted above to its Enterprise & Education customers, and therefore cannot establish VSOE for each deliverable. Third party evidence of fair value does not exist for the web-based subscription, audio practice and professional services due to the lack of interchangeable language-learning products and services within the market. Accordingly, the Company determines the relative selling price of the web-based subscription, audio practice tools and professional services deliverables included in its non-software multiple element arrangements using the best estimated selling price. The Company determines the best estimated selling price based on its internally published price list which includes suggested sales prices for each deliverable based on the type of client and volume purchased. This price list is derived from past experience and from the expectation of obtaining a reasonable margin based on what each deliverable costs the Company. In the U.S. and Canada, the Company offers consumers who purchase packaged software and audio practice products directly from the Company a 30 -day, unconditional, full money-back refund. The Company also permits some of our retailers and distributors to return unsold packaged products, subject to certain limitations. In accordance with ASC subtopic 985-605, Software: Revenue Recognition ("ASC 985-605"), the Company estimates and establishes revenue reserves for packaged product returns at the time of sale based on historical return rates, estimated channel inventory levels, the timing of new product introductions and other factors. The Company distributes its products and services both directly to the end customer and indirectly through resellers. Resellers earn commissions generally calculated as a fixed percentage of the gross sale to the end customer. The Company evaluates each of its reseller relationships in accordance with ASC subtopic 605-45, Revenue Recognition - Principal Agent Considerations (“ASC 605-45”) to determine whether the revenue recognized from indirect sales should be the gross amount of the contract with the end customer or reduced for the reseller commission. In making this determination the Company evaluates a variety of factors including whether it is the primary obligor to the end customer. Revenue is recorded net of taxes. Revenue for online services and web-based subscriptions is recognized ratably over the term of the service or subscription period, assuming all revenue recognition criteria have been met. The CD and digital download formats of Rosetta Stone language-learning products are bundled with a short-term online service where customers are allowed to begin their short-term online services at any point during a registration window, which is up to six months from the date of purchase from us or an authorized reseller. The short-term online services that are not activated during this registration window are forfeited and revenue is recognized upon expiry. Revenue from non-refundable upfront fees that are not related to products already delivered or services already performed is deferred and recognized over the term of the related arrangement because the period over which a customer is expected to benefit from the service that is included within our subscription arrangements does not extend beyond the contractual period. Accounts receivable and deferred revenue are recorded at the time a customer enters into a binding subscription agreement. Software products include sales to end user customers and resellers. In many cases, revenue from sales to resellers is not contingent upon resale of the software to the end user and is recorded in the same manner as all other product sales. Revenue from sales of packaged software products and audio practice products is recognized as the products are shipped and title passes and risks of loss have been transferred. For many product sales, these criteria are met at the time the product is shipped. For some sales to resellers and certain other sales, the Company defers revenue until the customer receives the product because the Company legally retains a portion of the risk of loss on these sales during transit. In other cases where packaged software products are sold to resellers on a consignment basis, revenue is recognized for these consignment transactions once the end user sale has occurred, assuming the remaining revenue recognition criteria have been met. In accordance with ASC subtopic 605-50, Revenue Recognition: Customer Payments and Incentives (“ASC 605-50”), cash sales incentives to resellers are accounted for as a reduction of revenue, unless a specific identified benefit is identified and the fair value is reasonably determinable. Price protection for changes in the manufacturer suggested retail value granted to resellers for the inventory that they have on hand at the date the price protection is offered is recorded as a reduction to revenue at the time of sale. The Company offers customers the ability to make payments for packaged software purchases in installments over a period of time, which typically ranges between three and five months. Given that these installment payment plans are for periods less than 12 months , a successful collection history has been established and these fees are fixed and determinable, revenue is recognized at the time of sale, assuming the remaining revenue recognition criteria have been met. In connection with packaged software product sales and web-based software subscriptions, technical support is provided to customers, including customers of resellers, via telephone support at no additional cost for up to six months from the time of purchase. As the fee for technical support is included in the initial licensing fee, the technical support and services are generally provided within one year, the estimated cost of providing such support is deemed insignificant and no unspecified upgrades/enhancements are offered, technical support revenue is recognized together with the software product and web-based software subscription revenue. Costs associated with the technical support are accrued at the time of sale. Sales commissions from non-cancellable web-based software subscription contracts are deferred and amortized in proportion to the revenue recognized from the related contract. |
Divestitures | Divestitures The Company deconsolidates divested subsidiaries when there is a loss of control or when appropriate when evaluated under the variable interest entity model. The Company recognizes a gain or loss at divestiture equal to the difference between the fair value of any consideration received and the carrying amount of the former subsidiary’s assets and liabilities. Any resulting gain or loss is reported in "Other income and (expense)" on the consolidated statement of operations. |
Business Combinations | Business Combinations The Company recognizes all of the assets acquired, liabilities assumed and contractual contingencies from an acquired company as well as contingent consideration at fair value on the acquisition date. The excess of the total purchase price over the fair value of the assets and liabilities acquired is recognized as goodwill. Acquisition-related costs are recognized separately from the acquisition and expensed as incurred. Generally, restructuring costs incurred in periods subsequent to the acquisition date are expensed when incurred. Subsequent changes to the purchase price (i.e., working capital adjustments) or other fair value adjustments determined during the measurement period are recorded as adjustments to goodwill. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less and demand deposits with financial institutions. |
Restricted Cash | Restricted Cash Restricted cash is generally used to reimburse funds to employees under the Company's flexible benefit plan. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable consist of amounts due to the Company from its normal business activities. The Company provides an allowance for doubtful accounts to reflect the expected non-collection of accounts receivable based on past collection history and specific risks identified. |
Inventories | Inventories Inventories are stated at the lower of cost, determined on a first-in first-out basis, or market. The Company reviews inventory for excess quantities and obsolescence based on its best estimates of future demand, product lifecycle status and product development plans. The Company uses historical information along with these future estimates to establish a new cost basis for obsolete and potential obsolete inventory. |
Concentrations of Credit Risk | Concentrations of Credit Risk Accounts receivable and cash and cash equivalents subject the Company to its highest potential concentrations of credit risk. The Company reserves for credit losses and does not require collateral on its trade accounts receivable. In addition, the Company maintains cash and investment balances in accounts at various banks and brokerage firms. The Company has not experienced any losses on cash and cash equivalent accounts to date. The Company sells its offerings to retailers, resellers, government agencies, and individual consumers and extends credit based on an evaluation of the customer's financial condition, and may require collateral, such as letters of credit, in certain circumstances. Exposure to losses on receivables is principally dependent on each customer's financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. No customer accounted for more than 10% of the Company's revenue during the years ended December 31, 2015 , 2014 or 2013 . The four largest distributor and reseller receivable balances collectively represented 30% and 33% of accounts receivable as of December 31, 2015 and 2014 , respectively, with one customer that accounted for 17% and 18% of accounts receivable as of December 31, 2015 and 2014 , respectively. The Company maintains trade credit insurance for certain customers to provide coverage, up to a certain limit, in the event of insolvency of some customers. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company values its assets and liabilities using the methods of fair value as described in ASC topic 820, Fair Value Measurements and Disclosures, ("ASC 820"). ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels of the fair value hierarchy are described below: Level 1: Quoted prices for identical instruments in active markets. Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3: Significant inputs to the valuation model are unobservable. The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation on property, leasehold improvements, equipment, and software is computed on a straight-line basis over the estimated useful lives of the assets, as follows: Software 3 years Computer equipment 3-5 years Automobiles 5 years Furniture and equipment 5-7 years Building 39 years Building improvements 15 years Leasehold improvements lesser of lease term or economic life Assets under capital leases lesser of lease term or economic life Expenses for repairs and maintenance that do not extend the life of equipment are charged to expense as incurred. Expenses for major renewals and betterments, which significantly extend the useful lives of existing property and equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized. |
Valuation of Long-Lived Assets | Valuation of Long-Lived Assets In accordance with ASC topic 360, Property, Plant and Equipment ("ASC 360"), the Company evaluates the recoverability of its long-lived assets. ASC 360 requires recognition of impairment of long-lived assets in the event that the net book value of such assets exceeds the future undiscounted net cash flows attributable to such assets. Impairment, if any, is recognized in the period of identification to the extent the carrying amount of an asset exceeds the fair value of such asset. |
Intangible Assets | Intangible Assets Intangible assets consist of acquired technology, including developed and core technology, customer related assets, trade name and trademark, and other intangible assets. Those intangible assets with finite lives are recorded at cost and amortized on a straight line basis over their expected lives in accordance with ASC topic 350, Intangibles—Goodwill and Other ("ASC 350"). Annually, as of December 31, and more frequently if a triggering event occurs, the Company reviews its indefinite-lived intangible asset for impairment in accordance with ASC 350. This guidance provides the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative test. If necessary, the quantitative test is performed by comparing the fair value of indefinite lived intangible assets to the carrying value. In the event the carrying value exceeds the fair value of the assets, the assets are written down to their fair value. The Rosetta Stone trade name is the Company's only indefinite-lived intangible asset. |
Goodwill | Goodwill Goodwill represents purchase consideration paid in a business combination that exceeds the values assigned to the net assets of acquired businesses. The Company tests goodwill for impairment annually on June 30 of each year or more frequently if impairment indicators arise. Goodwill is tested for impairment at the reporting unit level using a fair value approach, in accordance with the provisions of ASC 350. This guidance provides the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, a "Step 0" analysis. If, based on a review of qualitative factors, it is more likely than not that the fair value of a reporting unit is less than its carrying value the Company performs "Step 1" of the traditional two-step goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. If the carrying value exceeds the fair value, the Company measures the amount of impairment loss, if any, by comparing the implied fair value of the reporting unit goodwill with its carrying amount, the "Step 2" analysis. During the fourth quarter of 2015, the Company determined that sufficient indication existed to require performance of an interim goodwill impairment analysis for the Consumer Fit Brains reporting unit. As a result, the Company recorded an impairment loss of $5.6 million associated with the interim impairment assessment of the Consumer Fit Brains reporting unit as of December 31, 2015. During the fourth quarter of 2015, the Company also determined that sufficient indication existed to require performance of an interim goodwill impairment analysis for the Enterprise & Education Language reporting unit beginning with a Step1 analysis. While this analysis did indicate that the fair value of the Enterprise & Education Language reporting unit declined, the fair value is still greater than the carrying value of this reporting unit. Since the Enterprise & Education Language reporting unit passed the Step 1 test, no further analysis or testing under Step 2 was necessary and no impairment charges were recorded in connection with this interim impairment assessment of this reporting unit. In the first quarter of 2014, the Company determined sufficient indication existed to require performance of an interim goodwill impairment analysis for the then extant Rest of World Consumer reporting unit. As a result, the Company recorded a goodwill impairment loss of $2.2 million , which represented a full impairment of Rest of World Consumer’s goodwill. In the fourth quarter of 2014, the Company determined sufficient indication existed to require performance of an interim goodwill impairment analysis for the then extant North America Consumer Language reporting unit. As a result of this test, the Company recorded a goodwill impairment loss of $18.0 million , which represented a full impairment of North America Consumer Language’s goodwill. For income tax purposes, the goodwill balances with tax basis are amortized over a period of 15 years. |
Guarantees | Guarantees Indemnifications are provided of varying scope and size to certain Enterprise & Education customers against claims of intellectual property infringement made by third parties arising from the use of its products. The Company has not incurred any costs or accrued any liabilities as a result of such obligations. |
Cost of Product and Subscription and Service Revenue | Cost of Product and Subscription and Service Revenue Cost of product revenue consists of the direct and indirect materials and labor costs to produce and distribute the Company's products. Such costs include packaging materials, computer headsets, freight, inventory receiving, personnel costs associated with product assembly, third-party royalty fees and inventory storage, obsolescence and shrinkage. The Company believes cost of subscription and service revenue primarily represents costs associated with supporting the web-based subscription services, which includes online language conversation coaching, hosting costs and depreciation. Also included are the costs of credit card processing and customer technical support in both cost of product revenue and cost of subscription and service revenue. |
Research and Development | Research and Development Research and development expenses include employee compensation costs, consulting fees and overhead costs associated with the development of our solutions. The Company develops the majority of its language-learning software products for perpetual sale to external customers. The Company considers technological feasibility to be established when all planning, designing, coding, and testing has been completed according to design specifications. The Company has determined that technological feasibility for such software products is reached shortly before the products are released to manufacturing. Costs incurred after technological feasibility is established have not been material, and accordingly, the Company has expensed all research and development costs when incurred. |
Software Developed for Internal Use | Software Developed for Internal Use The Company capitalizes software development costs related to certain of its software platforms developed exclusively to provide its web-based subscription services and other general and administrative use software in accordance with ASC subtopic 350-40: Internal-Use Software . Development costs for internal-use software are expensed as incurred until the project reaches the application development stage. Internal-use software is defined to have the following characteristics: (a) the software is internally developed, or modified solely to meet the entity's internal needs, and (b) during the software's development or modification, no substantive plan exists or is being developed to market the software externally. Internally developed software is amortized over a three-year useful life. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC topic 740, Income Taxes ("ASC 740"), which provides for an asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted. Significant judgment is required to determine whether a valuation allowance is necessary and the amount of such valuation allowance, if appropriate. The valuation allowance is reviewed at each reporting period and is maintained until sufficient positive evidence exists to support a reversal. When assessing the realization of the Company's deferred tax assets, the Company considers all available evidence, including: • the nature, frequency, and severity of cumulative financial reporting losses in recent years; • the carryforward periods for the net operating loss, capital loss, and foreign tax credit carryforwards; • predictability of future operating profitability of the character necessary to realize the asset; • prudent and feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax assets; and • the effect of reversing taxable temporary differences. The evaluation of the recoverability of the deferred tax assets requires that the Company weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed. The establishment of a valuation allowance has no effect on the ability to use the deferred tax assets in the future to reduce cash tax payments. The Company will continue to assess the likelihood that the deferred tax assets will be realizable at each reporting period and the valuation allowance will be adjusted accordingly, which could materially affect the Company's financial position and results of operations. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for its stock-based compensation in accordance ASC topic 718, Compensation—Stock Compensation ("ASC 718"). Under ASC 718, all stock-based awards, including employee stock option grants, are recorded at fair value as of the grant date and recognized as expense in the statement of operations on a straight-line basis over the requisite service period, which is the vesting period. |
Restructuring Costs | Restructuring Costs In the first quarter of 2015, as part of the 2015 Restructuring Plan, the Company announced and initiated actions to reduce headcount and other costs in order to support its strategic shift in business focus and address periods of loss. In connection with this plan, the Company incurred restructuring related costs, including employee severance and related benefit costs, contract termination costs, and other related costs. These costs are included within the Sales and marketing, Research and development, and General and administrative operating expense categories on the Company's consolidated statements of operations. Employee severance and related benefit costs primarily include cash payments, outplacement services, continuing health insurance coverage, and other benefits. Where no substantive involuntary termination plan previously exists, these severance costs are generally considered “one-time” benefits and recognized at fair value in the period in which a detailed plan has been approved by management and communicated to the terminated employees. Severance costs pursuant to ongoing benefit arrangements, including termination benefits provided for in existing employment contracts, are recognized when probable and reasonably estimable. Contract termination costs include penalties to cancel certain service and license contracts. Contract termination costs are recognized at fair value in the period in which the contract is terminated in accordance with the contract terms. Other related costs generally include external consulting and legal costs associated with the strategic shift in business focus of the Company’s Consumer business. Such costs are recognized at fair value in the period in which the costs are incurred. |
Net Loss Per Share | Net Loss Per Share Net loss per share is computed under the provisions of ASC topic 260, Earnings Per Share . Basic loss per share is computed using net loss and the weighted average number of shares of common stock outstanding. Diluted loss per share reflect the weighted average number of shares of common stock outstanding plus any potentially dilutive shares outstanding during the period. Potentially dilutive shares consist of shares issuable upon the exercise of stock options, restricted stock awards, restricted stock units and conversion of shares of preferred stock. Common stock equivalent shares are excluded from the diluted computation if their effect is anti-dilutive. When there is a net loss, there is a presumption that there are no dilutive shares as these would be anti-dilutive. |
Comprehensive (Loss) Income | Comprehensive (Loss) Income Comprehensive (loss) income consists of net loss and other comprehensive (loss) income. Other comprehensive (loss) income refers to revenues, expenses, gains, and losses that are not included in net loss, but rather are recorded directly in stockholders' equity. For the years ended December 31, 2015 , 2014 and 2013 , the Company's comprehensive (loss) income consisted of net loss and foreign currency translation gains (losses). The other comprehensive (loss) income presented in the consolidated financial statements and the notes are presented net of tax. |
Foreign Currency Translation and Transactions | Foreign Currency Translation and Transactions The functional currency of the Company's foreign subsidiaries is their local currency. Accordingly, assets and liabilities of the foreign subsidiaries are translated into U.S. dollars at exchange rates in effect on the balance sheet date. Income and expense items are translated at average rates for the period. Translation adjustments are recorded as a component of other comprehensive loss in stockholders' equity. Cash flows of consolidated foreign subsidiaries, whose functional currency is the local currency, are translated to U.S. dollars using average exchange rates for the period. The Company reports the effect of exchange rate changes on cash balances held in foreign currencies as a separate item in the reconciliation of the changes in cash and cash equivalents during the period. |
Advertising Costs | Advertising Costs Costs for advertising are expensed as incurred. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards During 2015, the Company adopted the following recently issued Accounting Standard Updates ("ASU"): In November 2015, the Financial Accounting Standards Board ("FASB") issued ASU No. 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes ("ASU 2015-17"). ASU 2015-17 simplifies the presentation of deferred income taxes and requires non-current classification of all deferred tax assets and liabilities in a classified statement of financial position. Deferred income taxes were previously required to be classified as current or non-current on the consolidated balance sheets. The standard is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted for any interim and annual financial statements that have not yet been issued. The amendments may be applied prospectively or retrospectively. The Company early adopted ASU 2015-17 effective January 1, 2015, retrospectively. Other than the following reclassifications and related disclosures, the adoption of ASU 2015-17 had no other impacts on the Company's consolidated financial statements and disclosures which resulted in the following adjustments to the December 31, 2014 consolidated balance sheet (amounts in thousands): As of December 31, 2014 As Previously Reported Impact of Adopting ASU 2015-17 As Adjusted Prepaid expenses and other current assets $ 5,038 $ (196 ) $ 4,842 Total current assets $ 164,279 $ (196 ) $ 164,083 Other assets $ 1,525 $ (35 ) $ 1,490 Total assets $ 288,404 $ (231 ) $ 288,173 Other current liabilities $ 56,157 $ (2,899 ) $ 53,258 Total current liabilities $ 186,009 $ (2,899 ) $ 183,110 Deferred income taxes $ 1,554 $ 2,668 $ 4,222 Total liabilities $ 224,959 $ (231 ) $ 224,728 Total liabilities and stockholders' equity $ 288,404 $ (231 ) $ 288,173 In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of Equity ("ASU 2014-08"), which amends the definition of a discontinued operation and requires entities to provide additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued operations criteria. The new guidance changes the definition of a discontinued operation and requires discontinued operations treatment for disposals of a component or group of components that represents a strategic shift that has or will have a major impact on an entity’s operations or financial results. ASU 2014-08 is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014; earlier adoption is permitted. The Company adopted ASU 2014-08 effective January 1, 2015 and adoption did not have a material impact on the Company's consolidated financial condition, results of operations or cash flows. The following ASUs were recently issued but have not yet been adopted by the Company: In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). Under ASU 2016-02, entities will be required to recognize a lease liability and a right-of-use asset for all leases. Lessor accounting is largely unchanged. ASU 2016-02 is effective for public entities in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact of the new guidance on the Company's consolidated financial statements and disclosures. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. Under the new guidance, entities will be required to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. The accounting for other financial instruments, such as loans and investments in debt securities is largely unchanged. ASU 2016-01 is effective for public entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not believe that the adoption of this guidance will have a material impact on the Company's consolidated financial statements and disclosures. In April 2015, the Financial Accounting Standards Board ("FASB") issued ASU No. 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement ("ASU 2015-05"). ASU 2015-05 provides guidance regarding whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the entity should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the entity should account for the arrangement as a service contract. ASU 2015-05 does not change the accounting for service contracts. ASU 2015-05 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company does not expect to early adopt the guidance and does not believe that the adoption of this guidance will have a material impact on the Company's consolidated financial statements and disclosures. In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. ASU 2015-03 will be effective for interim and annual financial statements issued for fiscal years beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. The Company does not believe that the adoption of this guidance will have a material impact on the Company's consolidated financial statements and disclosures. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40) ("ASU 2014-15"). ASU 2014-15 addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. ASU 2014-15 will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect to early adopt this guidance and does not believe that the adoption of this guidance will have a material impact on the Company's financial statements and disclosures. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which replaces the current revenue accounting guidance. ASU 2014-09 is effective for annual periods beginning after December 15, 2016. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date ("ASU 2015-14") which defers the effective date of the updated guidance on revenue recognition by one year to make ASU 2014-09 effective for annual periods beginning after December 31, 2017. The core principle of ASU 2014-09 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. To achieve that core principle, an entity should apply a five step model to 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract and 5) recognize revenue when (or as) the entity satisfies a performance obligation. Entities may choose from two adoption methods, with certain practical expedients. The Company expects that it will adopt this new guidance beginning in the first quarter of 2018 and is currently evaluating the appropriate transition method and any impact of the new guidance on the Company's consolidated financial statements and disclosures. |
SUMMARY OF SIGNIFICANT ACCOUN30
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
Schedule of estimated useful lives of property, equipment and software | Depreciation on property, leasehold improvements, equipment, and software is computed on a straight-line basis over the estimated useful lives of the assets, as follows: Software 3 years Computer equipment 3-5 years Automobiles 5 years Furniture and equipment 5-7 years Building 39 years Building improvements 15 years Leasehold improvements lesser of lease term or economic life Assets under capital leases lesser of lease term or economic life |
Computation of basic and diluted net income (loss) per common share | The following table sets forth the computation of basic and diluted net loss per common share: Years Ended December 31, 2015 2014 2013 (dollars in thousands, except per share amounts) Numerator: Net loss $ (46,796 ) $ (73,706 ) $ (16,134 ) Denominator: Common shares and equivalents outstanding: Basic weighted average shares 21,571 21,253 21,528 Diluted weighted average shares 21,571 21,253 21,528 Loss per share: Basic $ (2.17 ) $ (3.47 ) $ (0.75 ) Diluted $ (2.17 ) $ (3.47 ) $ (0.75 ) |
Schedule of antidilutive securities excluded from computation of earnings per share | The following is a summary of common stock equivalents for the securities outstanding during the respective periods that have been excluded from the earnings per share calculations as their impact was anti-dilutive. Years Ended December 31, 2015 2014 2013 (in thousands) Stock options 35 67 279 Restricted stock units 39 103 90 Restricted stocks 82 89 248 Total common stock equivalent shares 156 259 617 |
Schedule of accumulated other comprehensive income (loss) | Components of accumulated other comprehensive loss as of December 31, 2015 are as follows (in thousands): Foreign Currency Total Balance at beginning of period $ (678 ) $ (678 ) Other comprehensive loss before reclassifications (2,003 ) (2,003 ) Amounts reclassified from accumulated other comprehensive loss related to divestiture of foreign subsidiary 455 455 Net current period other comprehensive loss (1,548 ) (1,548 ) Accumulated other comprehensive loss $ (2,226 ) $ (2,226 ) |
Schedule of new accounting pronouncements and changes in accounting principles | Other than the following reclassifications and related disclosures, the adoption of ASU 2015-17 had no other impacts on the Company's consolidated financial statements and disclosures which resulted in the following adjustments to the December 31, 2014 consolidated balance sheet (amounts in thousands): As of December 31, 2014 As Previously Reported Impact of Adopting ASU 2015-17 As Adjusted Prepaid expenses and other current assets $ 5,038 $ (196 ) $ 4,842 Total current assets $ 164,279 $ (196 ) $ 164,083 Other assets $ 1,525 $ (35 ) $ 1,490 Total assets $ 288,404 $ (231 ) $ 288,173 Other current liabilities $ 56,157 $ (2,899 ) $ 53,258 Total current liabilities $ 186,009 $ (2,899 ) $ 183,110 Deferred income taxes $ 1,554 $ 2,668 $ 4,222 Total liabilities $ 224,959 $ (231 ) $ 224,728 Total liabilities and stockholders' equity $ 288,404 $ (231 ) $ 288,173 |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | Inventory consisted of the following (in thousands): As of 2015 2014 Raw materials $ 3,375 $ 3,163 Finished goods 3,958 3,337 Total inventory $ 7,333 $ 6,500 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consisted of the following (in thousands): As of December 31, 2015 2014 Land $ 893 $ 950 Buildings and improvements 9,573 12,477 Leasehold improvements 1,477 1,408 Computer equipment 16,508 16,400 Software 34,478 31,240 Furniture and equipment 3,115 3,457 66,044 65,932 Less: accumulated depreciation (43,512 ) (40,655 ) Property and equipment, net $ 22,532 $ 25,277 |
DIVESTITURES AND ACQUISITIONS (
DIVESTITURES AND ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Livemocha Merger | |
Business Acquisition [Line Items] | |
Summary of fair value of assets acquired in the asset acquisition | The Company finalized its allocation of the purchase price for Livemocha as of March 31, 2014. The purchase price was allocated as follows (in thousands): Cash $ 191 Accounts receivable 227 Other current assets 93 Fixed assets 35 Accounts payable and accrued expenses (956 ) Deferred revenue (743 ) Net deferred tax liability (1,161 ) Net tangible assets acquired (2,314 ) Goodwill 5,185 Amortizable intangible assets 5,500 Purchase Price $ 8,371 |
Schedule of amortizable intangible assets and the related estimated useful lives | The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): Estimated Useful Lives Estimated Value April 1, 2013 Online community 3 years $ 1,800 Enterprise relationships 5 years 100 Technology platform 5 years 3,400 Tradename 2 years 200 Total assets $ 5,500 |
Lexia Merger | |
Business Acquisition [Line Items] | |
Summary of fair value of assets acquired in the asset acquisition | The Company finalized its allocation of the purchase price for Lexia as of June 30, 2014. The purchase price was allocated as follows (in thousands): Cash $ 263 Accounts receivable 2,404 Other current assets 105 Fixed assets 255 Accounts payable and accrued expenses (899 ) Deferred revenue (1,223 ) Net deferred tax liability (4,210 ) Net tangible assets acquired (3,305 ) Goodwill 9,938 Amortizable intangible assets 14,500 Purchase price $ 21,133 |
Schedule of amortizable intangible assets and the related estimated useful lives | The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): Estimated Useful Lives Estimated Value August 1, 2013 Enterprise relationships 10 years $ 9,400 Technology platform 7 years 4,100 Tradename 5 years 1,000 Total assets $ 14,500 |
Vivity Labs Inc | |
Business Acquisition [Line Items] | |
Summary of fair value of assets acquired in the asset acquisition | The Company finalized its allocation of the purchase price for Vivity as of December 31, 2014. The purchase price was allocated as follows (in thousands): Cash $ 14 Accounts receivable 452 Other current assets (3 ) Accounts payable and accrued expenses (307 ) Net deferred tax liability (919 ) Net tangible assets acquired (763 ) Goodwill 9,336 Amortizable intangible assets 3,577 Purchase price $ 12,150 |
Schedule of amortizable intangible assets and the related estimated useful lives | The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): Estimated Useful Lives Estimated Value January 2, 2014 Tradename 3 years $ 188 Technology platform 5 years 2,448 Customer relationships 3 years 941 Total assets $ 3,577 |
Tell Me More SA | |
Business Acquisition [Line Items] | |
Summary of fair value of assets acquired in the asset acquisition | The Company finalized its allocation of the purchase price for Tell Me More as of December 31, 2014. The purchase price was allocated as follows (in thousands): Cash $ 2,323 Accounts receivable 2,979 Inventory 246 Prepaid expenses 243 Fixed assets 5,595 Other non-current assets 330 Accounts payable (732 ) Accrued compensation (2,855 ) Deferred revenue (2,190 ) Other current liabilities (1,211 ) Obligation under capital lease (3,958 ) Net deferred tax liability (1,392 ) Net tangible assets acquired (622 ) Goodwill 21,703 Amortizable intangible assets 9,105 Purchase price $ 30,186 |
Schedule of amortizable intangible assets and the related estimated useful lives | The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands): Estimated Useful Lives Estimated Value January 9, 2014 Customer relationships 5 years 4,348 Technology platform 5 years 4,144 Tradename 1 year 613 Total assets $ 9,105 |
GOODWILL (Tables)
GOODWILL (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of the balance and changes in goodwill, by reporting unit | The following table shows the balance and changes in goodwill for the Company's reporting units for the years ended December 31, 2015 and 2014 (in thousands): Enterprise & Education Consumer Enterprise & Education Language Enterprise & Education Literacy Consumer Language Consumer Fit Brains Total Balance as of January 1, 2014 $ 19,926 $ 9,962 $ 20,171 $ — $ 50,059 Acquisition of Vivity — — — 9,336 9,336 Acquisition of Tell Me More 21,703 — — — 21,703 Impairment of Rest of World Consumer — — (2,199 ) — (2,199 ) Impairment of North America Consumer Language — — (17,971 ) — (17,971 ) Effect of change in foreign currency rate (1,545 ) — (1 ) (798 ) (2,344 ) Balance as of December 31, 2014 $ 40,084 $ 9,962 $ — $ 8,538 $ 58,584 Impairment of Consumer Fit Brains — — — (5,604 ) (5,604 ) Effect of change in foreign currency rate (1,384 ) — — (1,316 ) (2,700 ) Balance as of December 31, 2015 $ 38,700 $ 9,962 $ — $ 1,618 $ 50,280 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
Schedule of intangible assets | Intangible assets consisted of the following items as of the dates indicated (in thousands): December 31, 2015 December 31, 2014 Gross Accumulated Net Gross Accumulated Net Trade name/ trademark $ 12,442 $ (1,271 ) $ 11,171 $ 12,526 $ (1,062 ) $ 11,464 Core technology 15,149 (7,817 ) 7,332 15,890 (5,661 ) 10,229 Customer relationships 26,245 (16,603 ) 9,642 26,889 (14,344 ) 12,545 Website 12 (12 ) — 12 (12 ) — Patents 300 (201 ) 99 300 (161 ) 139 Total $ 54,148 $ (25,904 ) $ 28,244 $ 55,617 $ (21,240 ) $ 34,377 |
Schedule of estimated useful lives of acquired intangible assets | Below are the weighted average remaining useful lives of the Company's amortizing intangible assets: Weighted Average Life Trade name / trademark 29 months Core technology 36 months Customer relationships 76 months Patents 33 months |
Schedule of amortization expense | Amortization expense consisted of the following (in thousands): Years Ended December 31, 2015 2014 2013 Included in cost of revenue: Cost of product revenue $ 264 $ 377 $ — Cost of subscription and service revenue 322 209 244 Total included in cost of revenue 586 586 244 Included in operating expenses: Sales and marketing 2,804 3,677 1,028 Research and development 1,802 2,000 550 General and administrative — — — Total included in operating expenses 4,606 5,677 1,578 Total $ 5,192 $ 6,263 $ 1,822 |
Summary of the estimated future amortization expense related to intangible assets | The following table summarizes the estimated future amortization expense related to intangible assets as of December 31, 2015 (in thousands): As of 2016 $ 4,630 2017 4,189 2018 3,576 2019 1,532 2020 1,282 Thereafter 2,428 Total $ 17,637 |
OTHER CURRENT LIABILITIES (Tabl
OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Other Liabilities Disclosure [Abstract] | |
Summary of other current liabilities | The following table summarizes other current liabilities (in thousands): As of 2015 2014 Accrued marketing expenses $ 20,022 $ 31,985 Accrued professional and consulting fees 1,746 2,804 Sales return reserve 3,728 3,570 Sales, withholding, and property taxes payable 3,879 5,875 Accrued purchase price of business acquisition — 1,688 Other 5,943 7,336 Total Other current liabilities $ 35,318 $ 53,258 |
FINANCING ARRANGEMENTS Debt (Ta
FINANCING ARRANGEMENTS Debt (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of Future Minimum Lease Payments for Capital Leases | As of December 31, 2015 , the future minimum payments under capital leases with initial terms of one year or more are as follows (in thousands): Periods Ending December 31, 2016 $ 644 2017 645 2018 493 2019 492 2020 492 Thereafter 855 Total minimum lease payments $ 3,621 Less amount representing interest 478 Present value of net minimum lease payments $ 3,143 Less current portion 521 Obligations under capital lease, long-term $ 2,622 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of estimated fair value of each option grant on the date of grant using Black-Scholes option pricing model | The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model as follows: Years Ended December 31, 2015 2014 2013 Expected stock price volatility 49%-63% 63%-65% 64%-67% Expected term of options 6 years 6 years 6 years Expected dividend yield — — — Risk-free interest rate 1.19%-1.75% 1.46%-1.80% 0.75%-1.65% |
Schedule of stock option activity | The following table summarizes the Company's stock option activity from January 1, 2015 to December 31, 2015 : Options Weighted Weighted Aggregate Options Outstanding, January 1, 2015 2,017,642 $ 13.24 7.32 $ 760,925 Options granted 1,203,031 8.92 Options exercised (25,009 ) 4.55 Options cancelled (1,358,499 ) 13.16 Options Outstanding, December 31, 2015 1,837,165 10.58 7.70 130,262 Vested and expected to vest at December 31, 2015 1,740,152 10.60 7.63 130,262 Exercisable at December 31, 2015 1,033,366 $ 10.77 6.98 $ 130,262 |
Schedule of restricted stock activity | The following table summarizes the Company's restricted stock activity for the years ended December 31, 2015 and 2014 , respectively: Nonvested Outstanding Weighted Average Grant Date Fair Value Aggregate Intrinsic Value Nonvested Awards, January 1, 2014 634,031 $ 12.28 $ 7,785,901 Awards granted 236,338 11.69 Awards vested (253,526 ) 10.72 Awards canceled (134,198 ) 13.23 Nonvested Awards, December 31, 2014 482,645 12.59 6,074,136 Awards granted 481,992 9.05 Awards vested (452,341 ) 10.56 Awards canceled (170,717 ) 11.88 Nonvested Awards, December 31, 2015 341,579 10.61 3,624,153 |
Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block] | The following table summarizes the Company's restricted stock unit activity from January 1, 2015 to December 31, 2015 : Units Outstanding Weighted Aggregate Units Outstanding, January 1, 2015 124,506 $ 12.52 $ 1,215,179 Units granted 63,436 8.49 Units released — — Units cancelled — — Units Outstanding, December 31, 2015 187,942 11.16 1,257,332 Vested and expected to vest at December 31, 2015 153,786 8.50 203,244 Vested and deferred at December 31, 2015 123,406 $ 12.58 $ 825,586 |
Schedule of stock-based compensation expense for stock options and restricted stock included in the related financial statement line items | The following table presents the stock-based compensation expense for stock options and restricted stock included in the related financial statement line items (in thousands): Years Ended December 31, 2015 2014 2013 Included in cost of revenue: Cost of product revenue $ 57 $ 95 $ 109 Cost of subscription and service revenue 44 13 66 Total included in cost of revenue 101 108 175 Included in operating expenses: Sales and marketing 1,327 1,975 1,840 Research & development 841 958 1,460 General and administrative 4,926 3,721 5,766 Total included in operating expenses 7,094 6,654 9,066 Total $ 7,195 $ 6,762 $ 9,241 |
RESTRUCTURING AND OTHER EMPLO39
RESTRUCTURING AND OTHER EMPLOYEE SEVERANCE (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Restructuring and Related Activities [Abstract] | |
Schedule of Restructuring Reserve by Type of Cost | The following table summarizes activity with respect to the restructuring charges for the 2015 Restructuring Plan during the year ended December 31, 2015 (in thousands): Balance at January 1, 2015 Cost Incurred Cash Payments Other Adjustments (1) Balance at December 31, 2015 Severance costs $ — $ 7,240 $ (5,940 ) $ (1,048 ) $ 252 Contract termination costs — 1,134 (1,134 ) — — Other costs — 417 (417 ) — — Total $ — $ 8,791 $ (7,491 ) $ (1,048 ) $ 252 (1) Other Adjustments includes non-cash period changes in the liability balance, which may include non-cash stock compensation expense and foreign currency translation adjustments. |
Schedule of Restructuring and related Costs by Income Statement Location | The following table presents restructuring costs included in the related line items of our Statement of Operations (in thousands): Years Ended December 31, 2015 2014 Cost of revenue $ 113 $ — Sales and marketing 4,492 — Research and development 602 — General and administrative 3,584 — Total $ 8,791 $ — |
LEASE ABANDONMENT AND TERMINA40
LEASE ABANDONMENT AND TERMINATION (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Restructuring and Related Activities [Abstract] | |
Lease abandonment costs | A summary of the Company’s lease abandonment activity for the years ended December 31, 2015 and 2014 is as follows (in thousands): As of December 31, 2015 2014 Accrued lease abandonment costs, beginning of period $ 1,679 $ 413 Costs incurred and charged to expense 55 3,812 Principal reductions (452 ) (2,546 ) Accrued lease abandonment costs, end of period $ 1,282 $ 1,679 Accrued lease abandonment costs liability: Short-term $ 455 $ 496 Long-term 827 1,183 Total $ 1,282 $ 1,679 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Summary of significant components of deferred tax assets and liabilities | The following table summarizes the significant components of the Company's deferred tax assets and liabilities as of December 31, 2015 and 2014 (in thousands): As of December 31, 2015 2014 Deferred tax assets: Inventory $ 564 $ 535 Net operating and capital loss carryforwards 48,334 27,637 Deferred revenue 13,908 12,447 Accrued liabilities 9,780 12,890 Stock-based compensation 4,656 5,760 Amortization and depreciation 31 — Bad debt reserve 398 501 Foreign and other tax credits 1,517 1,283 Gross deferred tax assets 79,188 61,053 Valuation allowance (70,464 ) (53,809 ) Net deferred tax assets 8,724 7,244 Deferred tax liabilities: Goodwill and indefinite lived intangibles (4,782 ) (3,465 ) Deferred sales commissions (7,337 ) (5,714 ) Prepaid expenses (625 ) (555 ) Amortization and depreciation — (1,337 ) Foreign currency translation (973 ) (391 ) Other (5 ) (5 ) Gross deferred tax liabilities (13,722 ) (11,467 ) Net deferred tax liabilities $ (4,998 ) $ (4,223 ) |
Summary of operating loss carryforwards | As of December 31, 2015 , the Company had federal, state and foreign tax NOL carryforward amounts and expiration periods as follows (in thousands): Year of Expiration U.S. Federal State Brazil France Japan Other Foreign Total 2016-2020 $ — $ 498 $ — $ — $ — $ — $ 498 2021-2025 — 1,180 — — 11,872 607 13,659 2026-2030 — 6,288 — — — 152 6,440 2031-2035 39,437 34,008 — — — 251 73,696 2036-2040 48,904 38,532 — — — 932 88,368 Indefinite — — 5,511 13,158 — — 18,669 Totals $ 88,341 $ 80,506 $ 5,511 $ 13,158 $ 11,872 $ 1,942 $ 201,330 |
Summary of capital loss carryforwards | As of December 31, 2015 , the Company had federal and state capital loss carryforward amounts and expiration periods as follows (in thousands): Year of Tax Credit Expiration U.S. Federal State 2016-2020 $ — $ — 2021-2025 6,837 6,055 2026-2030 — — 2031-2035 — 360 2036-2040 — — Indefinite — — Totals $ 6,837 $ 6,415 |
Summary of tax credit carryforwards | As of December 31, 2015 , the Company had federal tax credit carryforward amounts and expiration periods as follows (in thousands): Year of Tax Credit Expiration U.S. Federal 2016-2020 $ — 2021-2025 1,516 2026-2030 1 2031-2035 — 2036-2040 — Indefinite — Totals $ 1,517 |
Schedule of components of income (loss) before income taxes | The components of loss before income taxes and the provision for taxes on income consist of the following (in thousands): Years Ended December 31, 2015 2014 2013 United States $ (41,458 ) $ (60,434 ) $ (14,360 ) Foreign (4,179 ) (19,761 ) (3,658 ) Loss before income taxes $ (45,637 ) $ (80,195 ) $ (18,018 ) The provision for taxes on income consists of the following (in thousands): Federal $ (157 ) $ 29 $ 155 State 96 23 123 Foreign 444 1,258 1,709 Total current $ 383 $ 1,310 $ 1,987 Deferred: Federal $ 1,148 $ (5,425 ) $ (3,972 ) State 169 (797 ) (112 ) Foreign (541 ) (1,577 ) 213 Total deferred 776 (7,799 ) (3,871 ) Provision (benefit) for income taxes $ 1,159 $ (6,489 ) $ (1,884 ) |
Schedule of reconciliation of income tax provision (benefit) computed at the U.S. federal statutory rate to income tax expense | Reconciliation of income tax provision (benefit) computed at the U.S. federal statutory rate to income tax expense (benefit) is as follows (in thousands): Years Ended December 31, 2015 2014 2013 Income tax benefit at statutory federal rate $ (15,973 ) $ (28,068 ) $ (6,306 ) State income tax expense, net of federal income tax effect 231 (782 ) 7 Acquired intangibles — — (859 ) Nondeductible goodwill impairment 1,961 — — Other nondeductible expenses 88 482 1,105 Tax rate differential on foreign operations (1,019 ) 276 (264 ) Increase in valuation allowance 15,713 21,772 4,263 Tax audit settlements (96 ) — — Change in prior year estimates 225 (69 ) (17 ) Other tax credits 29 (102 ) — Other — 2 187 Income tax expense (benefit) $ 1,159 $ (6,489 ) $ (1,884 ) |
Schedule of reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties | A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands): Years Ended December 31, 2015 2014 Balance at January 1, $ 446 $ 143 Increases for tax positions taken during prior years — 322 Settlements with tax authorities (446 ) — Reductions for tax positions taken during prior years — (2 ) Lapse of statute of limitations — (17 ) Balance at December 31, $ — $ 446 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Summary of future minimum operating lease payments | The following table summarizes future minimum operating lease payments as of December 31, 2015 and the years thereafter (in thousands): As of Periods Ending December 31, 2016 $ 5,591 2017 4,367 2018 3,829 2019 1,253 2020 962 Thereafter 590 Total future minimum operating lease payments $ 16,592 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Segment Reporting [Abstract] | |
Schedule of operating results by segment | Operating results by segment for the years ended December 31, 2015 , 2014 , and 2013 were as follows (in thousands): Years Ended December 31, 2015 2014 2013 Revenue: Enterprise & Education $ 98,057 $ 84,700 $ 60,209 Consumer 119,613 177,153 204,436 Total revenue $ 217,670 $ 261,853 $ 264,645 Segment contribution: Enterprise & Education $ 30,431 $ 22,864 $ 20,965 Consumer 34,547 35,298 70,884 Total segment contribution 64,978 58,162 91,849 Unallocated expenses, net: Unallocated cost of sales 8,291 8,947 4,586 Unallocated sales and marketing 15,282 16,168 16,447 Unallocated research and development 29,939 33,176 33,993 Unallocated general and administrative 48,470 54,576 54,423 Unallocated non-operating expense/(income) 1,824 1,345 (424 ) Unallocated impairment 6,754 20,333 — Unallocated lease abandonment 55 3,812 842 Total unallocated expenses, net 110,615 138,357 109,867 Income (loss) before income taxes $ (45,637 ) $ (80,195 ) $ (18,018 ) |
Summary of revenue from customers by geographic area and products | The information below summarizes revenue from customers by geographic area as of December 31, 2015 , 2014 and 2013 , respectively (in thousands): Years Ended December 31, 2015 2014 2013 United States $ 177,966 $ 212,070 $ 223,404 International 39,704 49,783 41,241 Total Revenue $ 217,670 $ 261,853 $ 264,645 |
Summary of long-lived assets by geographic area | The information below summarizes long-lived assets by geographic area for the years ended December 31, 2015 and 2014 , respectively (in thousands): As of December 31, 2015 2014 United States $ 18,704 $ 20,451 International 3,828 4,826 Total $ 22,532 $ 25,277 |
Summary of revenue from customers by type | The information below summarizes revenue by type for the years ended December 31, 2015 , 2014 and 2013 , respectively (in thousands): As of December 31, 2015 2014 2013 Language learning $ 191,568 $ 249,340 $ 263,426 Literacy 21,928 9,912 1,219 Brain Fitness 4,174 2,601 — Total $ 217,670 $ 261,853 $ 264,645 |
VALUATION AND QUALIFYING ACCO44
VALUATION AND QUALIFYING ACCOUNTS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Valuation and Qualifying Accounts [Abstract] | |
Schedule of valuation and qualifying accounts | The following table includes the Company's valuation and qualifying accounts for the respective periods (in thousands): Years Ended December 31, 2015 2014 2013 Allowance for doubtful accounts: Beginning balance $ 1,434 $ 1,000 $ 1,297 Charged to costs and expenses 1,657 2,405 1,420 Deductions—accounts written off (1,895 ) (1,971 ) (1,717 ) Ending balance $ 1,196 $ 1,434 $ 1,000 Promotional rebate and coop advertising reserves: Beginning balance $ 23,437 $ 13,025 $ 9,127 Charged to costs and expenses 40,563 39,249 22,881 Deductions - reserves utilized (47,090 ) (28,837 ) (18,983 ) Ending balance $ 16,910 $ 23,437 $ 13,025 Sales return reserve: Beginning balance $ 3,570 $ 4,834 $ 5,883 Charged against revenue 11,474 12,011 14,258 Deductions—reserves utilized (11,316 ) (13,275 ) (15,307 ) Ending balance $ 3,728 $ 3,570 4,834 Deferred income tax asset valuation allowance: Beginning balance $ 53,809 33,866 29,671 Charged to costs and expenses 16,655 19,943 9,566 Deductions — — (5,371 ) Ending balance $ 70,464 $ 53,809 $ 33,866 |
SUPPLEMENTAL QUARTERLY FINANC45
SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Quarterly Financial Information Disclosure [Abstract] | |
Summary of quarterly supplemental consolidated financial information | Summarized quarterly supplemental consolidated financial information for 2015 and 2014 are as follows (in thousands, except per share amounts): Three Months Ended March 31, June 30, September 30, December 31, 2015 Revenue $ 58,442 $ 51,411 $ 49,802 $ 58,015 Gross profit $ 47,140 $ 42,391 $ 41,136 $ 48,476 Net loss $ (19,884 ) $ (8,175 ) $ (7,301 ) $ (11,436 ) Basic loss per share $ (0.95 ) $ (0.38 ) $ (0.34 ) $ (0.52 ) Shares used in basic per share computation 21,018 21,689 21,771 21,801 Diluted loss per share $ (0.95 ) $ (0.38 ) $ (0.34 ) $ (0.52 ) Shares used in diluted per share computation 21,018 21,689 21,771 21,801 2014 Revenue $ 60,765 $ 57,315 $ 64,515 $ 79,258 Gross profit $ 48,594 $ 45,355 $ 51,528 $ 63,322 Net loss $ (20,241 ) $ (15,750 ) $ (16,178 ) $ (21,537 ) Basic loss per share $ (0.96 ) $ (0.74 ) $ (0.76 ) $ (1.01 ) Shares used in basic per share computation 21,125 21,252 21,305 21,327 Diluted loss per share $ (0.96 ) $ (0.74 ) $ (0.76 ) $ (1.01 ) Shares used in diluted per share computation 21,125 21,252 21,305 21,327 |
SUMMARY OF SIGNIFICANT ACCOUN46
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 3 Months Ended | 12 Months Ended |
Dec. 31, 2015USD ($) | Dec. 31, 2015deliverable | |
Revenue Recognition | ||
Refund, unconditional, full money-back, daily criteria | 30 days | |
Rosetta Stone Version 4 TOTALe bundles | ||
Revenue Recognition | ||
Number of deliverables identified | deliverable | 2 | |
Rosetta Stone Version 4 TOTALe bundles | Maximum | ||
Revenue Recognition | ||
Period of registration window to begin services from the date of purchase from the entity | 6 months | |
Packaged software and online software subscriptions | Maximum | ||
Revenue Recognition | ||
Period of providing technical support in connection with packaged software product sales and online software subscriptions | 6 months | |
Packaged software | Minimum | ||
Revenue Recognition | ||
Period offered to customers for payment of purchases in installments | 3 months | |
Packaged software | Maximum | ||
Revenue Recognition | ||
Period offered to customers for payment of purchases in installments | 5 months | |
Period of installment payment plans | 12 months | |
Enterprise & Education | Language learning | ||
Revenue Recognition | ||
Goodwill, impairment loss | $ | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN47
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - Accounts receivables - Customer concentration - customer | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Concentrations of Credit Risk | ||
Number of customers | 4 | |
Percentage of concentration risk | 30.00% | 33.00% |
Customer Number One | ||
Concentrations of Credit Risk | ||
Number of customers | 1 | |
Percentage of concentration risk | 17.00% | 18.00% |
SUMMARY OF SIGNIFICANT ACCOUN48
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) - USD ($) | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Property and equipment | |||||
Impairment charges | $ 1,100,000 | $ 200,000 | $ 0 | ||
Impairment of intangible assets (excluding goodwill) | $ 0 | 0 | 0 | ||
Goodwill | |||||
Amortization period of goodwill for tax purposes | 15 years | ||||
Software Developed for Internal Use | |||||
Cost of capitalization | $ 7,100,000 | 8,800,000 | 4,800,000 | ||
Amortization expense | $ 4,800,000 | 3,400,000 | $ 1,800,000 | ||
Software | |||||
Property and equipment | |||||
Estimated useful lives | 3 years | ||||
Computer equipment | Minimum | |||||
Property and equipment | |||||
Estimated useful lives | 3 years | ||||
Computer equipment | Maximum | |||||
Property and equipment | |||||
Estimated useful lives | 5 years | ||||
Automobiles | |||||
Property and equipment | |||||
Estimated useful lives | 5 years | ||||
Furniture and equipment | Minimum | |||||
Property and equipment | |||||
Estimated useful lives | 5 years | ||||
Furniture and equipment | Maximum | |||||
Property and equipment | |||||
Estimated useful lives | 7 years | ||||
Building | |||||
Property and equipment | |||||
Estimated useful lives | 39 years | ||||
Building improvements | |||||
Property and equipment | |||||
Estimated useful lives | 15 years | ||||
Rest of World Consumer | |||||
Goodwill | |||||
Goodwill impairment | $ (2,200,000) | ||||
North America Consumer | |||||
Goodwill | |||||
Goodwill impairment | $ (18,000,000) | ||||
Consumer Fit Brains | |||||
Goodwill | |||||
Goodwill impairment | $ (5,604,000) | ||||
Brain Fitness | Consumer Fit Brains | |||||
Goodwill | |||||
Goodwill impairment | $ (5,600,000) |
SUMMARY OF SIGNIFICANT ACCOUN49
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) - USD ($) | 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 | ||||
Numerator: | ||||||||||||||
Net loss | $ (11,436,000) | $ (7,301,000) | $ (8,175,000) | $ (19,884,000) | $ (21,537,000) | $ (16,178,000) | $ (15,750,000) | $ (20,241,000) | $ (46,796,000) | $ (73,706,000) | $ (16,134,000) | |||
Common shares and equivalents outstanding: | ||||||||||||||
Basic weighted average shares (in shares) | 21,801,000 | 21,771,000 | 21,689,000 | 21,018,000 | 21,327,000 | 21,305,000 | 21,252,000 | 21,125,000 | 21,571,000 | 21,253,000 | 21,528,000 | |||
Diluted weighted average shares (in shares) | 21,801,000 | 21,771,000 | 21,689,000 | 21,018,000 | 21,327,000 | 21,305,000 | 21,252,000 | 21,125,000 | 21,571,000 | 21,253,000 | 21,528,000 | |||
Loss per share: | ||||||||||||||
Basic (in dollars per share) | $ (0.52) | $ (0.34) | $ (0.38) | $ (0.95) | $ (1.01) | $ (0.76) | $ (0.74) | $ (0.96) | $ (2.17) | $ (3.47) | $ (0.75) | |||
Diluted (in dollars per share) | $ (0.52) | $ (0.34) | $ (0.38) | $ (0.95) | $ (1.01) | $ (0.76) | $ (0.74) | $ (0.96) | $ (2.17) | $ (3.47) | $ (0.75) | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||||||||
Dilutive securities, common stock, equivalent shares | 0 | 0 | 0 | 0 | 0 | |||||||||
Antidilutive shares of common stock excluded from the calculation of diluted earnings per share | 156,000 | 259,000 | 617,000 | |||||||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||||||||||||||
Beginning balance | [1] | $ (678,000) | $ (678,000) | |||||||||||
Other comprehensive loss before reclassifications | (2,003,000) | |||||||||||||
Amounts reclassified from accumulated other comprehensive loss related to divestiture of foreign subsidiary | 455,000 | |||||||||||||
Net current period other comprehensive loss | (1,548,000) | |||||||||||||
Ending balance | $ (2,226,000) | $ (678,000) | [1] | (2,226,000) | $ (678,000) | [1] | ||||||||
Other comprehensive income (loss), tax | 0 | 0 | $ 0 | |||||||||||
Prepaid expenses and other current assets | 3,612,000 | 4,842,000 | [1] | 3,612,000 | 4,842,000 | [1] | ||||||||
Total current assets | 119,660,000 | 164,083,000 | [1] | 119,660,000 | 164,083,000 | [1] | ||||||||
Other assets | 2,213,000 | 1,490,000 | [1] | 2,213,000 | 1,490,000 | [1] | ||||||||
Total assets | 228,543,000 | 288,173,000 | [1] | 228,543,000 | 288,173,000 | [1] | ||||||||
Other current liabilities | 35,318,000 | 53,258,000 | [1] | 35,318,000 | 53,258,000 | [1] | ||||||||
Total current liabilities | 161,807,000 | 183,110,000 | [1] | 161,807,000 | 183,110,000 | [1] | ||||||||
Deferred income taxes | 4,998,000 | 4,222,000 | [1] | 4,998,000 | 4,222,000 | [1] | ||||||||
Total liabilities | 206,133,000 | 224,728,000 | [1] | 206,133,000 | 224,728,000 | [1] | ||||||||
Total liabilities and stockholders' equity | 228,543,000 | 288,173,000 | [1] | 228,543,000 | 288,173,000 | [1] | ||||||||
Advertising Costs | ||||||||||||||
Advertising expense | 46,900,000 | 79,600,000 | 63,600,000 | |||||||||||
Foreign Currency Translation and Transactions | ||||||||||||||
Net loss | (11,436,000) | $ (7,301,000) | $ (8,175,000) | $ (19,884,000) | (21,537,000) | $ (16,178,000) | $ (15,750,000) | $ (20,241,000) | (46,796,000) | (73,706,000) | $ (16,134,000) | |||
New Accounting Pronouncement, Early Adoption, Effect | Scenario, Previously Reported | ||||||||||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||||||||||||||
Prepaid expenses and other current assets | 5,038,000 | 5,038,000 | ||||||||||||
Total current assets | 164,279,000 | 164,279,000 | ||||||||||||
Other assets | 1,525,000 | 1,525,000 | ||||||||||||
Total assets | 288,404,000 | 288,404,000 | ||||||||||||
Other current liabilities | 56,157,000 | 56,157,000 | ||||||||||||
Total current liabilities | 186,009,000 | 186,009,000 | ||||||||||||
Deferred income taxes | 1,554,000 | 1,554,000 | ||||||||||||
Total liabilities | 224,959,000 | 224,959,000 | ||||||||||||
Total liabilities and stockholders' equity | 288,404,000 | 288,404,000 | ||||||||||||
New Accounting Pronouncement, Early Adoption, Effect | Scenario, Adjustment | ||||||||||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||||||||||||||
Prepaid expenses and other current assets | (196,000) | (196,000) | ||||||||||||
Total current assets | (196,000) | (196,000) | ||||||||||||
Other assets | (35,000) | (35,000) | ||||||||||||
Total assets | (231,000) | (231,000) | ||||||||||||
Other current liabilities | (2,899,000) | (2,899,000) | ||||||||||||
Total current liabilities | (2,899,000) | (2,899,000) | ||||||||||||
Deferred income taxes | 2,668,000 | 2,668,000 | ||||||||||||
Total liabilities | (231,000) | (231,000) | ||||||||||||
Total liabilities and stockholders' equity | $ (231,000) | $ (231,000) | ||||||||||||
Foreign Currency | ||||||||||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||||||||||||||
Other comprehensive loss before reclassifications | (2,003,000) | |||||||||||||
Amounts reclassified from accumulated other comprehensive loss related to divestiture of foreign subsidiary | 455,000 | |||||||||||||
Net current period other comprehensive loss | (1,548,000) | |||||||||||||
Ending balance | $ (2,226,000) | $ (2,226,000) | ||||||||||||
Stock options | ||||||||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||||||||
Antidilutive shares of common stock excluded from the calculation of diluted earnings per share | 35,000 | 67,000 | 279,000 | |||||||||||
Restricted stock units | ||||||||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||||||||
Antidilutive shares of common stock excluded from the calculation of diluted earnings per share | 39,000 | 103,000 | 90,000 | |||||||||||
Restricted stocks | ||||||||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||||||||
Antidilutive shares of common stock excluded from the calculation of diluted earnings per share | 82,000 | 89,000 | 248,000 | |||||||||||
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
INVENTORY (Details)
INVENTORY (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 | |
Inventory Disclosure [Abstract] | |||
Raw materials | $ 3,375 | $ 3,163 | |
Finished goods | 3,958 | 3,337 | |
Total inventory | $ 7,333 | $ 6,500 | [1] |
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) | 1 Months Ended | 12 Months Ended | |||
Dec. 31, 2015USD ($)building | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Dec. 31, 2013USD ($) | ||
PROPERTY AND EQUIPMENT | |||||
Property, plant and equipment, gross | $ 66,044,000 | $ 66,044,000 | $ 65,932,000 | ||
Less: accumulated depreciation | (43,512,000) | (43,512,000) | (40,655,000) | ||
Property and equipment, net | 22,532,000 | 22,532,000 | 25,277,000 | [1] | |
Gain (loss) on disposition of property plant equipment | 15,000 | (184,000) | $ (278,000) | ||
Impairment charges | 1,100,000 | 200,000 | 0 | ||
Land | |||||
PROPERTY AND EQUIPMENT | |||||
Property, plant and equipment, gross | 893,000 | 893,000 | 950,000 | ||
Buildings and improvements | |||||
PROPERTY AND EQUIPMENT | |||||
Property, plant and equipment, gross | 9,573,000 | 9,573,000 | 12,477,000 | ||
Leasehold improvements | |||||
PROPERTY AND EQUIPMENT | |||||
Property, plant and equipment, gross | 1,477,000 | 1,477,000 | 1,408,000 | ||
Computer equipment | |||||
PROPERTY AND EQUIPMENT | |||||
Property, plant and equipment, gross | 16,508,000 | 16,508,000 | 16,400,000 | ||
Software | |||||
PROPERTY AND EQUIPMENT | |||||
Property, plant and equipment, gross | 34,478,000 | 34,478,000 | 31,240,000 | ||
Furniture and equipment | |||||
PROPERTY AND EQUIPMENT | |||||
Property, plant and equipment, gross | 3,115,000 | 3,115,000 | 3,457,000 | ||
Computer equipment and software | |||||
PROPERTY AND EQUIPMENT | |||||
Less: accumulated depreciation | (1,500,000) | (1,500,000) | (1,000,000) | ||
Assets under capital lease | $ 5,500,000 | 5,500,000 | 5,600,000 | ||
Depreciation | 8,500,000 | $ 7,600,000 | $ 7,800,000 | ||
VIRGINIA | Building | |||||
PROPERTY AND EQUIPMENT | |||||
Number of Office Buildings Sold | building | 1 | ||||
Number of Office Buildings Owned | building | 2 | ||||
VIRGINIA | Buildings and improvements | |||||
PROPERTY AND EQUIPMENT | |||||
Property, plant and equipment, gross | $ 2,500,000 | 2,500,000 | |||
Property and equipment, net | $ 1,600,000 | 1,600,000 | |||
Gross proceeds from sale of productive assets | 1,800,000 | ||||
Sale of productive assets, sales expense | 100,000 | ||||
General and administrative | VIRGINIA | Buildings and improvements | |||||
PROPERTY AND EQUIPMENT | |||||
Gain (loss) on disposition of property plant equipment | $ 100,000 | ||||
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
DIVESTITURES AND ACQUISITIONS52
DIVESTITURES AND ACQUISITIONS (Details) € in Millions, member in Millions | Oct. 02, 2015USD ($)installment | Jan. 09, 2014EUR (€) | Jan. 02, 2014USD ($) | Aug. 01, 2013USD ($) | Apr. 01, 2013USD ($)member | Sep. 30, 2015USD ($) | Feb. 28, 2015USD ($) | Apr. 30, 2014USD ($) | Sep. 30, 2014USD ($) | Dec. 31, 2014USD ($) | Dec. 31, 2013USD ($) | Dec. 31, 2015USD ($) | Jun. 30, 2014USD ($) | Mar. 31, 2014USD ($) | Jan. 31, 2014USD ($) | Jan. 09, 2014USD ($) | Aug. 31, 2013USD ($) | Apr. 30, 2013USD ($) | |
Business Acquisition [Line Items] | |||||||||||||||||||
Goodwill | $ 58,584,000 | [1] | $ 50,059,000 | $ 50,280,000 | |||||||||||||||
Business acquisition, goodwill, expected tax deductible amount | 0 | $ 0 | |||||||||||||||||
Livemocha Merger | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Cash | $ 191,000 | ||||||||||||||||||
Accounts receivable | 227,000 | ||||||||||||||||||
Prepaid expenses | 93,000 | ||||||||||||||||||
Fixed assets | 35,000 | ||||||||||||||||||
Deferred revenue | (743,000) | ||||||||||||||||||
Net deferred tax liability | (1,161,000) | ||||||||||||||||||
Net tangible assets acquired | (2,314,000) | ||||||||||||||||||
Goodwill | 5,185,000 | ||||||||||||||||||
Amortizable intangible assets | $ 5,500,000 | 5,500,000 | $ 5,500,000 | ||||||||||||||||
Purchase Price | $ 8,371,000 | ||||||||||||||||||
Transaction costs | 400,000 | ||||||||||||||||||
Number of registered members in community of online language learning, over (greater than) | member | 16 | ||||||||||||||||||
Consideration paid | $ 8,400,000 | ||||||||||||||||||
Lexia Merger | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Cash | $ 263,000 | ||||||||||||||||||
Accounts receivable | 2,404,000 | ||||||||||||||||||
Prepaid expenses | 105,000 | ||||||||||||||||||
Fixed assets | 255,000 | ||||||||||||||||||
Deferred revenue | (1,223,000) | ||||||||||||||||||
Net deferred tax liability | (4,210,000) | ||||||||||||||||||
Net tangible assets acquired | (3,305,000) | ||||||||||||||||||
Goodwill | 9,938,000 | ||||||||||||||||||
Amortizable intangible assets | $ 14,500,000 | 14,500,000 | $ 14,500,000 | ||||||||||||||||
Purchase Price | $ 21,133,000 | ||||||||||||||||||
Transaction costs | 100,000 | ||||||||||||||||||
Consideration paid | 21,100,000 | $ 1,700,000 | $ 1,700,000 | ||||||||||||||||
Amount of holdback consideration to be transferred within specified period from date of filing of form 10K | $ 3,400,000 | ||||||||||||||||||
Percentage of holdback consideration to be transferred within specified period from date of filing of form 10K | 50.00% | ||||||||||||||||||
Period from date of filing of form 10K specified percentage of holdback consideration to be transferred | 30 days | ||||||||||||||||||
Percentage of remaining holdback consideration to be transferred within specified period | 50.00% | ||||||||||||||||||
Vivity Labs Inc | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Cash | 14,000 | ||||||||||||||||||
Accounts receivable | 452,000 | ||||||||||||||||||
Prepaid expenses | (3,000) | ||||||||||||||||||
Accounts payable | (307,000) | ||||||||||||||||||
Net deferred tax liability | (919,000) | ||||||||||||||||||
Net tangible assets acquired | (763,000) | ||||||||||||||||||
Goodwill | 9,336,000 | ||||||||||||||||||
Amortizable intangible assets | $ 3,577,000 | 3,577,000 | $ 3,600,000 | ||||||||||||||||
Purchase Price | 12,150,000 | ||||||||||||||||||
Transaction costs | 57,000 | 51,000 | |||||||||||||||||
Tell Me More SA | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Cash | 2,323,000 | ||||||||||||||||||
Accounts receivable | 2,979,000 | ||||||||||||||||||
Inventory | 246,000 | ||||||||||||||||||
Prepaid expenses | 243,000 | ||||||||||||||||||
Fixed assets | 5,595,000 | ||||||||||||||||||
Other non-current assets | 330,000 | ||||||||||||||||||
Accounts payable | (732,000) | ||||||||||||||||||
Accrued compensation | (2,855,000) | ||||||||||||||||||
Deferred revenue | (2,190,000) | ||||||||||||||||||
Other current liabilities | (1,211,000) | ||||||||||||||||||
Obligation under capital lease | (3,958,000) | $ (4,000,000) | |||||||||||||||||
Net deferred tax liability | (1,392,000) | ||||||||||||||||||
Net tangible assets acquired | (622,000) | ||||||||||||||||||
Goodwill | 21,703,000 | ||||||||||||||||||
Amortizable intangible assets | 9,105,000 | $ 9,100,000 | 9,105,000 | ||||||||||||||||
Purchase Price | € 22.1 | 30,186,000 | |||||||||||||||||
Transaction costs | $ 1,000,000 | $ 500,000 | |||||||||||||||||
Investment Income (Expense) | Lexia Merger | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Net deferred tax liability | $ 4,200,000 | ||||||||||||||||||
Trade Names | Livemocha Merger | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Amortizable intangible assets | $ 200,000 | ||||||||||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 2 years | ||||||||||||||||||
Trade Names | Lexia Merger | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Amortizable intangible assets | $ 1,000,000 | ||||||||||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 5 years | ||||||||||||||||||
Trade Names | Vivity Labs Inc | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Amortizable intangible assets | $ 188,000 | ||||||||||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 3 years | ||||||||||||||||||
Trade Names | Tell Me More SA | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Amortizable intangible assets | 613,000 | ||||||||||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 1 year | ||||||||||||||||||
Technology Platform | Livemocha Merger | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Amortizable intangible assets | $ 3,400,000 | ||||||||||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 5 years | ||||||||||||||||||
Technology Platform | Lexia Merger | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Amortizable intangible assets | $ 4,100,000 | ||||||||||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 7 years | ||||||||||||||||||
Technology Platform | Vivity Labs Inc | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Amortizable intangible assets | $ 2,448,000 | ||||||||||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 5 years | ||||||||||||||||||
Technology Platform | Tell Me More SA | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Amortizable intangible assets | 4,144,000 | ||||||||||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 5 years | ||||||||||||||||||
Customer relationships | Vivity Labs Inc | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Amortizable intangible assets | $ 941,000 | ||||||||||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 3 years | ||||||||||||||||||
Customer relationships | Tell Me More SA | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Amortizable intangible assets | $ 4,348,000 | ||||||||||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 5 years | ||||||||||||||||||
Rosetta Stone Korea | Discontinued Operations, Held-for-sale or Disposed of by Sale | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Acquisition by Management, Percent | 100.00% | ||||||||||||||||||
Disposal Group, Including Discontinued Operation, Net Liabilities | $ 200,000 | ||||||||||||||||||
Disposal Group, Including Discontinued Operation, Foreign Currency Translation Gains (Losses) | 500,000 | ||||||||||||||||||
Management Acquisition, Continuing Relationship Agreement, Amount Company to Loan Acquired Entity | $ 500,000 | ||||||||||||||||||
Management Acquisition, Continuing Relationship Agreement, Amount Company to Loan Acquired Entity, Repayment Period, Number of Installments | installment | 5 | ||||||||||||||||||
Management Acquisition, Continuing Relationship Agreement, Amount Company to Loan Acquired Entity, Repayment Period, Frequency of Installment | 6 months | ||||||||||||||||||
Rosetta Stone Korea | Discontinued Operations, Held-for-sale or Disposed of by Sale | Other Nonoperating Income (Expense) | |||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||
Gain (Loss) on Disposition of Business | $ 700,000 | ||||||||||||||||||
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
DIVESTITURES AND ACQUISITIONS53
DIVESTITURES AND ACQUISITIONS (Purchase price of allocation) (Details) $ in Thousands, € in Millions | Jan. 09, 2014EUR (€) | Jan. 02, 2014USD ($) | Aug. 01, 2013USD ($) | Apr. 01, 2013USD ($) | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Jun. 30, 2014USD ($) | Mar. 31, 2014USD ($) | Jan. 31, 2014USD ($) | Jan. 09, 2014USD ($) | Dec. 31, 2013USD ($) | Aug. 31, 2013USD ($) | Apr. 30, 2013USD ($) | |
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Goodwill | $ 50,280 | $ 58,584 | [1] | $ 50,059 | ||||||||||
Vivity Labs Inc | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Cash | 14 | |||||||||||||
Accounts receivable | 452 | |||||||||||||
Other current assets | (3) | |||||||||||||
Accounts payable | (307) | |||||||||||||
Net deferred tax liability | (919) | |||||||||||||
Net tangible assets acquired | (763) | |||||||||||||
Goodwill | 9,336 | |||||||||||||
Amortizable intangible assets | $ 3,577 | 3,577 | $ 3,600 | |||||||||||
Purchase price | 12,150 | |||||||||||||
Vivity Labs Inc | Technology platform | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | $ 2,448 | |||||||||||||
Acquired intangible asset, estimated useful lives | 5 years | |||||||||||||
Vivity Labs Inc | Tradename | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | $ 188 | |||||||||||||
Acquired intangible asset, estimated useful lives | 3 years | |||||||||||||
Vivity Labs Inc | Customer relationships | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | $ 941 | |||||||||||||
Acquired intangible asset, estimated useful lives | 3 years | |||||||||||||
Tell Me More SA | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Cash | 2,323 | |||||||||||||
Accounts receivable | 2,979 | |||||||||||||
Inventory | 246 | |||||||||||||
Other current assets | 243 | |||||||||||||
Accounts payable | (732) | |||||||||||||
Accrued compensation | 2,855 | |||||||||||||
Fixed assets | 5,595 | |||||||||||||
Other non-current assets | 330 | |||||||||||||
Deferred revenue | (2,190) | |||||||||||||
Other current liabilities | (1,211) | |||||||||||||
Obligation under capital lease | (3,958) | $ (4,000) | ||||||||||||
Net deferred tax liability | (1,392) | |||||||||||||
Net tangible assets acquired | (622) | |||||||||||||
Goodwill | 21,703 | |||||||||||||
Amortizable intangible assets | 9,105 | $ 9,100 | 9,105 | |||||||||||
Purchase price | € 22.1 | $ 30,186 | ||||||||||||
Tell Me More SA | Technology platform | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | 4,144 | |||||||||||||
Acquired intangible asset, estimated useful lives | 5 years | |||||||||||||
Tell Me More SA | Tradename | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | 613 | |||||||||||||
Acquired intangible asset, estimated useful lives | 1 year | |||||||||||||
Tell Me More SA | Customer relationships | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | $ 4,348 | |||||||||||||
Acquired intangible asset, estimated useful lives | 5 years | |||||||||||||
Livemocha Merger | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Cash | $ 191 | |||||||||||||
Accounts receivable | 227 | |||||||||||||
Other current assets | 93 | |||||||||||||
Fixed assets | 35 | |||||||||||||
Accounts payable and accrued expenses | (956) | |||||||||||||
Deferred revenue | (743) | |||||||||||||
Net deferred tax liability | (1,161) | |||||||||||||
Net tangible assets acquired | (2,314) | |||||||||||||
Goodwill | 5,185 | |||||||||||||
Amortizable intangible assets | $ 5,500 | 5,500 | $ 5,500 | |||||||||||
Purchase price | $ 8,371 | |||||||||||||
Livemocha Merger | Online community | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | $ 1,800 | |||||||||||||
Acquired intangible asset, estimated useful lives | 3 years | |||||||||||||
Livemocha Merger | Enterprise relationships | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | $ 100 | |||||||||||||
Acquired intangible asset, estimated useful lives | 5 years | |||||||||||||
Livemocha Merger | Technology platform | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | $ 3,400 | |||||||||||||
Acquired intangible asset, estimated useful lives | 5 years | |||||||||||||
Livemocha Merger | Tradename | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | $ 200 | |||||||||||||
Acquired intangible asset, estimated useful lives | 2 years | |||||||||||||
Lexia Merger | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Cash | $ 263 | |||||||||||||
Accounts receivable | 2,404 | |||||||||||||
Other current assets | 105 | |||||||||||||
Fixed assets | 255 | |||||||||||||
Accounts payable and accrued expenses | (899) | |||||||||||||
Deferred revenue | (1,223) | |||||||||||||
Net deferred tax liability | (4,210) | |||||||||||||
Net tangible assets acquired | (3,305) | |||||||||||||
Goodwill | 9,938 | |||||||||||||
Amortizable intangible assets | $ 14,500 | 14,500 | $ 14,500 | |||||||||||
Purchase price | $ 21,133 | |||||||||||||
Lexia Merger | Enterprise relationships | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | $ 9,400 | |||||||||||||
Acquired intangible asset, estimated useful lives | 10 years | |||||||||||||
Lexia Merger | Technology platform | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | $ 4,100 | |||||||||||||
Acquired intangible asset, estimated useful lives | 7 years | |||||||||||||
Lexia Merger | Tradename | ||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||||||
Amortizable intangible assets | $ 1,000 | |||||||||||||
Acquired intangible asset, estimated useful lives | 5 years | |||||||||||||
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
GOODWILL (Details)
GOODWILL (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | ||||
Goodwill | |||||||
Business acquisition, goodwill, expected tax deductible amount | $ 0 | $ 0 | $ 0 | $ 0 | |||
Changes in goodwill | |||||||
Balance at the beginning of the period | 58,584,000 | [1] | 50,059,000 | ||||
Effect of change in foreign currency rate | (2,700,000) | (2,344,000) | |||||
Balance at the end of the period | 50,280,000 | 58,584,000 | [1] | 50,280,000 | 58,584,000 | [1] | |
Rest of World Consumer | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | (2,200,000) | ||||||
Consumer | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | (18,000,000) | ||||||
Vivity Labs Inc | |||||||
Changes in goodwill | |||||||
Balance at the beginning of the period | 9,336,000 | ||||||
Acquisition during the period | 9,336,000 | ||||||
Balance at the end of the period | 9,336,000 | 9,336,000 | |||||
Tell Me More SA | |||||||
Changes in goodwill | |||||||
Balance at the beginning of the period | 21,703,000 | ||||||
Acquisition during the period | 21,703,000 | ||||||
Balance at the end of the period | 21,703,000 | 21,703,000 | |||||
Rest of World Consumer | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | (2,199,000) | ||||||
North America Consumer Language | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | (17,971,000) | ||||||
Consumer Fit Brains | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | (5,604,000) | ||||||
Language learning | Consumer | |||||||
Changes in goodwill | |||||||
Balance at the beginning of the period | 0 | 20,171,000 | |||||
Effect of change in foreign currency rate | 0 | (1,000) | |||||
Balance at the end of the period | 0 | 0 | 0 | 0 | |||
Language learning | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Balance at the beginning of the period | 40,084,000 | 19,926,000 | |||||
Goodwill, Impairment Loss | 0 | ||||||
Effect of change in foreign currency rate | (1,384,000) | (1,545,000) | |||||
Balance at the end of the period | 38,700,000 | 40,084,000 | 38,700,000 | 40,084,000 | |||
Language learning | Vivity Labs Inc | Consumer | |||||||
Changes in goodwill | |||||||
Acquisition during the period | 0 | ||||||
Language learning | Vivity Labs Inc | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Acquisition during the period | 0 | ||||||
Language learning | Tell Me More SA | Consumer | |||||||
Changes in goodwill | |||||||
Acquisition during the period | 0 | ||||||
Language learning | Tell Me More SA | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Acquisition during the period | 21,703,000 | ||||||
Language learning | Rest of World Consumer | Consumer | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | (2,199,000) | ||||||
Language learning | Rest of World Consumer | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | 0 | ||||||
Language learning | North America Consumer Language | Consumer | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | (17,971,000) | ||||||
Language learning | North America Consumer Language | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | 0 | ||||||
Language learning | Consumer Fit Brains | Consumer | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | 0 | ||||||
Language learning | Consumer Fit Brains | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | 0 | ||||||
Literacy | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Balance at the beginning of the period | 9,962,000 | 9,962,000 | |||||
Goodwill, Impairment Loss | 0 | ||||||
Effect of change in foreign currency rate | 0 | 0 | |||||
Balance at the end of the period | 9,962,000 | 9,962,000 | 9,962,000 | 9,962,000 | |||
Literacy | Vivity Labs Inc | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Acquisition during the period | 0 | ||||||
Literacy | Tell Me More SA | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Acquisition during the period | 0 | ||||||
Literacy | Rest of World Consumer | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | 0 | ||||||
Literacy | North America Consumer Language | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | 0 | ||||||
Literacy | Consumer Fit Brains | Enterprise & Education | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | 0 | ||||||
Brain Fitness | Consumer | |||||||
Changes in goodwill | |||||||
Balance at the beginning of the period | 8,538,000 | 0 | |||||
Effect of change in foreign currency rate | (1,316,000) | (798,000) | |||||
Balance at the end of the period | 1,618,000 | $ 8,538,000 | $ 1,618,000 | 8,538,000 | |||
Brain Fitness | Vivity Labs Inc | Consumer | |||||||
Changes in goodwill | |||||||
Acquisition during the period | 9,336,000 | ||||||
Brain Fitness | Tell Me More SA | Consumer | |||||||
Changes in goodwill | |||||||
Acquisition during the period | 0 | ||||||
Brain Fitness | Rest of World Consumer | Consumer | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | 0 | ||||||
Brain Fitness | North America Consumer Language | Consumer | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | $ 0 | ||||||
Brain Fitness | Consumer Fit Brains | |||||||
Changes in goodwill | |||||||
Goodwill, Impairment Loss | $ (5,600,000) | ||||||
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||||||||||||
Jan. 31, 2014 | Aug. 31, 2013 | Apr. 30, 2013 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Mar. 31, 2014 | Jan. 09, 2014 | Jan. 02, 2014 | Aug. 01, 2013 | Apr. 01, 2013 | Jan. 31, 2006 | ||
Intangible assets | ||||||||||||||
Finite and indefinite lived intangible assets excluding goodwill gross | $ 54,148,000 | $ 55,617,000 | ||||||||||||
Accumulated Amortization | (25,904,000) | (21,240,000) | ||||||||||||
Net carrying amount of finite and indefinite lived intangible assets | 28,244,000 | 34,377,000 | [1] | |||||||||||
Total | 17,637,000 | |||||||||||||
Amortization of intangible assets | 5,192,000 | 6,263,000 | $ 1,822,000 | |||||||||||
Impairment of long-lived assets to be disposed of | 0 | |||||||||||||
Impairment of intangible assets (excluding goodwill) | 0 | 0 | 0 | |||||||||||
Cost of product revenue | ||||||||||||||
Intangible assets | ||||||||||||||
Amortization of intangible assets | 264,000 | 377,000 | 0 | |||||||||||
Cost of subscription and service revenue | ||||||||||||||
Intangible assets | ||||||||||||||
Amortization of intangible assets | 322,000 | 209,000 | 244,000 | |||||||||||
Total included in cost of revenue | ||||||||||||||
Intangible assets | ||||||||||||||
Amortization of intangible assets | 586,000 | 586,000 | 244,000 | |||||||||||
Sales and marketing | ||||||||||||||
Intangible assets | ||||||||||||||
Amortization of intangible assets | 2,804,000 | 3,677,000 | 1,028,000 | |||||||||||
Research and development | ||||||||||||||
Intangible assets | ||||||||||||||
Amortization of intangible assets | 1,802,000 | 2,000,000 | 550,000 | |||||||||||
General and administrative | ||||||||||||||
Intangible assets | ||||||||||||||
Amortization of intangible assets | 0 | 0 | 0 | |||||||||||
Total included in operating expenses | ||||||||||||||
Intangible assets | ||||||||||||||
Amortization of intangible assets | 4,606,000 | 5,677,000 | $ 1,578,000 | |||||||||||
Rosetta Stone Ltd. | ||||||||||||||
Intangible assets | ||||||||||||||
Finite and indefinite lived intangibles associated with acquisitions | $ 23,800,000 | |||||||||||||
Livemocha Merger | ||||||||||||||
Intangible assets | ||||||||||||||
Business combinations, intangible assets | $ 5,500,000 | $ 5,500,000 | $ 5,500,000 | |||||||||||
Livemocha Merger | Minimum | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 2 years | |||||||||||||
Livemocha Merger | Maximum | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 5 years | |||||||||||||
Lexia Merger | ||||||||||||||
Intangible assets | ||||||||||||||
Business combinations, intangible assets | $ 14,500,000 | $ 14,500,000 | $ 14,500,000 | |||||||||||
Lexia Merger | Minimum | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 5 years | |||||||||||||
Lexia Merger | Maximum | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 10 years | |||||||||||||
Vivity Labs Inc | ||||||||||||||
Intangible assets | ||||||||||||||
Business combinations, intangible assets | $ 3,600,000 | 3,577,000 | $ 3,577,000 | |||||||||||
Vivity Labs Inc | Minimum | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 3 years | |||||||||||||
Vivity Labs Inc | Maximum | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 5 years | |||||||||||||
Tell Me More SA | ||||||||||||||
Intangible assets | ||||||||||||||
Business combinations, intangible assets | $ 9,100,000 | 9,105,000 | $ 9,105,000 | |||||||||||
Tell Me More SA | Minimum | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 1 year | |||||||||||||
Tell Me More SA | Maximum | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 5 years | |||||||||||||
Tradename | Rosetta Stone Ltd. | ||||||||||||||
Intangible assets | ||||||||||||||
Indefinite lived intangibles associated with acquisitions | 10,600,000 | |||||||||||||
Trade name/ trademark | ||||||||||||||
Intangible assets | ||||||||||||||
Finite and indefinite lived intangible assets excluding goodwill gross | 12,442,000 | 12,526,000 | ||||||||||||
Accumulated Amortization | (1,271,000) | (1,062,000) | ||||||||||||
Net carrying amount of finite and indefinite lived intangible assets | $ 11,171,000 | 11,464,000 | ||||||||||||
Trade name/ trademark | Weighted Average | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 29 months | |||||||||||||
Core technology | ||||||||||||||
Intangible assets | ||||||||||||||
Gross carrying amount of finite-lived intangible assets | $ 15,149,000 | 15,890,000 | ||||||||||||
Accumulated Amortization | (7,817,000) | (5,661,000) | ||||||||||||
Total | $ 7,332,000 | 10,229,000 | ||||||||||||
Core technology | Weighted Average | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 36 months | |||||||||||||
Customer relationships | ||||||||||||||
Intangible assets | ||||||||||||||
Gross carrying amount of finite-lived intangible assets | $ 26,245,000 | 26,889,000 | ||||||||||||
Accumulated Amortization | (16,603,000) | (14,344,000) | ||||||||||||
Total | $ 9,642,000 | 12,545,000 | ||||||||||||
Customer relationships | Weighted Average | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 76 months | |||||||||||||
Customer relationships | Vivity Labs Inc | ||||||||||||||
Intangible assets | ||||||||||||||
Business combinations, intangible assets | $ 941,000 | |||||||||||||
Customer relationships | Tell Me More SA | ||||||||||||||
Intangible assets | ||||||||||||||
Business combinations, intangible assets | $ 4,348,000 | |||||||||||||
Website | ||||||||||||||
Intangible assets | ||||||||||||||
Gross carrying amount of finite-lived intangible assets | $ 12,000 | 12,000 | ||||||||||||
Accumulated Amortization | (12,000) | (12,000) | ||||||||||||
Total | 0 | 0 | ||||||||||||
Patents | ||||||||||||||
Intangible assets | ||||||||||||||
Gross carrying amount of finite-lived intangible assets | 300,000 | 300,000 | ||||||||||||
Accumulated Amortization | (201,000) | (161,000) | ||||||||||||
Total | $ 99,000 | $ 139,000 | ||||||||||||
Patents | Weighted Average | ||||||||||||||
Intangible assets | ||||||||||||||
Finite lived intangible assets, useful life | 33 months | |||||||||||||
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
INTANGIBLE ASSETS (Estimated Fu
INTANGIBLE ASSETS (Estimated Future Amortization Expense) (Details) $ in Thousands | Dec. 31, 2015USD ($) |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | |
2,016 | $ 4,630 |
2,017 | 4,189 |
2,018 | 3,576 |
2,019 | 1,532 |
2,020 | 1,282 |
Thereafter | 2,428 |
Total | $ 17,637 |
OTHER CURRENT LIABILITIES (Deta
OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 | |
Other Liabilities Disclosure [Abstract] | |||
Accrued marketing expenses | $ 20,022 | $ 31,985 | |
Accrued professional and consulting fees | 1,746 | 2,804 | |
Sales return reserve | 3,728 | 3,570 | |
Sales, withholding, and property taxes payable | 3,879 | 5,875 | |
Accrued purchase price of business acquisition | 0 | 1,688 | |
Other | 5,943 | 7,336 | |
Total Other current liabilities | $ 35,318 | $ 53,258 | [1] |
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
FINANCING ARRANGEMENTS (Details
FINANCING ARRANGEMENTS (Details) - USD ($) | Mar. 10, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Jan. 09, 2014 |
Borrowing agreement | |||||
Equipment acquired under capital lease | $ 462,000 | $ 0 | $ 702,000 | ||
Tell Me More SA | |||||
Borrowing agreement | |||||
Fair value of the lease liability at the date of acquisition | $ 3,958,000 | $ 4,000,000 | |||
Line of Credit | Revolving Credit Facility | |||||
Borrowing agreement | |||||
Borrowing capacity provided under credit facility | 25,000,000 | ||||
Long-term line of credit | 0 | ||||
Line of Credit | Letter of Credit | |||||
Borrowing agreement | |||||
Borrowing capacity provided under credit facility | $ 4,000,000 | ||||
Subsequent Event | Line of Credit | Revolving Credit Facility | |||||
Borrowing agreement | |||||
Borrowing capacity provided under credit facility | $ 25,000,000 | ||||
Line of credit facility, maximum borrowing capacity, accounts receivable collateral basis | 80.00% | ||||
Line of credit facility, maximum conditional borrowing capacity | $ 5,000,000 | ||||
Line of credit, ownership stock pledged as collateral U.S. subsidiaries, percentage | 100.00% | ||||
Line of credit, ownership stock pledged as collateral foreign subsidiaries, percentage | 66.00% | ||||
Subsequent Event | Line of Credit | Revolving Credit Facility | Prime Rate | |||||
Borrowing agreement | |||||
Line of credit facility, minimum cash and availability balance | $ 17,500,000 | ||||
Applicable interest rate added to the reference rate | 1.00% | ||||
Subsequent Event | Line of Credit | Sub-Facility | |||||
Borrowing agreement | |||||
Borrowing capacity provided under credit facility | $ 4,000,000 |
FINANCING ARRANGEMENTS (Capital
FINANCING ARRANGEMENTS (Capital Lease) (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 | [1] |
Debt Disclosure [Abstract] | |||
2,016 | $ 644 | ||
2,017 | 645 | ||
2,018 | 493 | ||
2,019 | 492 | ||
2,020 | 492 | ||
Thereafter | 855 | ||
Total minimum lease payments | 3,621 | ||
Less amount representing interest | 478 | ||
Present value of net minimum lease payments | 3,143 | ||
Less current portion | 521 | $ 594 | |
Obligations under capital lease, long-term | $ 2,622 | $ 3,154 | |
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
STOCK-BASED COMPENSATION (Stock
STOCK-BASED COMPENSATION (Stock Option Activity) (Details) - USD ($) | May. 23, 2012 | May. 26, 2011 | May. 28, 2008 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Jun. 12, 2015 | May. 20, 2014 | May. 23, 2013 | Feb. 27, 2009 | Dec. 31, 2008 | Jan. 04, 2006 |
Additional information | ||||||||||||
Expiration period | 10 years | |||||||||||
Share-based compensation arrangement by share-based payment award, options, with performance or market conditions, number | 0 | |||||||||||
Restricted stock units | ||||||||||||
Additional information | ||||||||||||
Vesting period | 1 year | |||||||||||
Stock options | ||||||||||||
Estimated fair value of each option grant on the date of grant using Black-Scholes option pricing model | ||||||||||||
Expected term of options | 6 years | 6 years | 6 years | |||||||||
Expected dividend yield | 0.00% | 0.00% | 0.00% | |||||||||
Share-based compensation arrangement by share-based payment award, fair value assumptions, expected volatility rate, minimum | 49.00% | 63.00% | 64.00% | |||||||||
Expected stock price volatility, maximum | 63.00% | 65.00% | 67.00% | |||||||||
Risk-free interest rate, minimum | 1.19% | 1.46% | 0.75% | |||||||||
Risk-free interest rate, maximum | 1.75% | 1.80% | 1.65% | |||||||||
Options Outstanding | ||||||||||||
Options Outstanding at the beginning of the period (in shares) | 2,017,642 | |||||||||||
Options granted (in shares) | 1,203,031 | |||||||||||
Options exercised (in shares) | (25,009) | |||||||||||
Options cancelled (in shares) | (1,358,499) | |||||||||||
Options Outstanding at the end of the period (in shares) | 1,837,165 | 2,017,642 | ||||||||||
Vested and expected to vest at the end of the period (in shares) | 1,740,152 | |||||||||||
Exercisable at the end of the period (in shares) | 1,033,366 | |||||||||||
Weighted Average Exercise Price | ||||||||||||
Options Outstanding at the beginning of the period (in dollars per share) | $ 13.24 | |||||||||||
Options granted (in dollars per share) | 8.92 | |||||||||||
Options exercised (in dollars per share) | 4.55 | |||||||||||
Options cancelled (in dollars per share) | 13.16 | |||||||||||
Options Outstanding at the end of the period (in dollars per share) | 10.58 | $ 13.24 | ||||||||||
Vested and expected to vest at the end of the period (in dollars per share) | 10.60 | |||||||||||
Exercisable at the end of the period (in dollars per share) | $ 10.77 | |||||||||||
Weighted Average Contractual Life | ||||||||||||
Options Outstanding at balance sheet date | 7 years 8 months 12 days | 7 years 3 months 26 days | ||||||||||
Vested and expected to vest at the end of the period | 7 years 7 months 17 days | |||||||||||
Exercisable at the end of the period | 6 years 11 months 23 days | |||||||||||
Aggregate Intrinsic Value | ||||||||||||
Options outstanding at balance sheet date | $ 130,262 | $ 760,925 | ||||||||||
Vested and expected to vest at the end of the period | 130,262 | |||||||||||
Exercisable at the end of the period | $ 130,262 | |||||||||||
Additional information | ||||||||||||
Options exercised (in shares) | (25,009) | |||||||||||
Unrecognized stock-based compensation expense related to non-vested stock option awards | $ 5,200,000 | $ 6,100,000 | ||||||||||
Weighted-average period over which unrecognized stock-based compensation cost expected to be recognized | 1 year 10 months 2 days | 2 years 4 months 17 days | ||||||||||
Vesting period | 4 years | |||||||||||
Weighted average grant-date fair value (in dollars per share) | $ 4.77 | $ 6.73 | ||||||||||
2006 Plan | Stock options | ||||||||||||
Stock-based compensation | ||||||||||||
Number of shares authorized for grant | 2,137,200 | 1,942,200 | ||||||||||
Number of additional shares authorized for grant | 195,000 | |||||||||||
2006 Plan | Stock options | Maximum | ||||||||||||
Additional information | ||||||||||||
Expiration period | 10 years | |||||||||||
2009 Plan | ||||||||||||
Stock-based compensation | ||||||||||||
Number of shares authorized for grant | 1,200,000 | 500,000 | 2,317,000 | 2,437,744 | ||||||||
Number of additional shares authorized for grant | 1,122,930 | 1,000,000 | ||||||||||
Shares available for future grant under plan | 3,349,235 | |||||||||||
2009 Plan | Maximum | ||||||||||||
Additional information | ||||||||||||
Expiration period | 10 years |
STOCK-BASED COMPENSATION (Restr
STOCK-BASED COMPENSATION (Restricted stock and Performance share) (Details 2) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Restricted stock awards | ||||
Nonvested Outstanding | ||||
Nonvested Awards at the beginning of the period (in shares) | 482,645 | 482,645 | 634,031 | |
Awards granted (in shares) | 481,992 | 236,338 | ||
Awards vested (in shares) | (452,341) | (253,526) | ||
Awards cancelled (in shares) | (170,717) | (134,198) | ||
Nonvested Awards at the end of the period (in shares) | 341,579 | 482,645 | ||
Weighted Average Grant Date Fair Value | ||||
Nonvested Awards at the beginning of the period (in dollars per share) | $ 12.59 | $ 12.59 | $ 12.28 | |
Awards granted (in dollars per share) | 9.05 | 11.69 | ||
Awards vested (in dollars per share) | 10.56 | 10.72 | ||
Awards cancelled (in dollars per share) | 11.88 | 13.23 | ||
Nonvested Awards at the end of the period (in dollars per share) | $ 10.61 | $ 12.59 | ||
Aggregate Intrinsic Value | ||||
Nonvested Awards at the end of the period | $ 3,624,153 | $ 6,074,136 | $ 7,785,901 | |
Additional information | ||||
Aggregate grant date fair value of awards | 4,400,000 | $ 2,800,000 | ||
Future compensation cost related to the nonvested portion of the restricted stock awards not yet recognized | $ 3,600,000 | |||
Period over which future compensation cost expected to be recognized | 1 year 11 months 5 days | |||
Restricted stock units | ||||
Nonvested Outstanding | ||||
Nonvested Awards at the beginning of the period (in shares) | 124,506 | 124,506 | ||
Awards granted (in shares) | 63,436 | 43,842 | ||
Awards vested (in shares) | 0 | |||
Awards cancelled (in shares) | 0 | |||
Nonvested Awards at the end of the period (in shares) | 187,942 | 124,506 | ||
Weighted Average Grant Date Fair Value | ||||
Nonvested Awards at the beginning of the period (in dollars per share) | $ 12.52 | $ 12.52 | ||
Awards granted (in dollars per share) | 8.49 | |||
Awards vested (in dollars per share) | 0 | |||
Awards cancelled (in dollars per share) | 0 | |||
Nonvested Awards at the end of the period (in dollars per share) | $ 11.16 | $ 12.52 | ||
Additional information | ||||
Aggregate grant date fair value of awards | $ 500,000 | $ 400,000 | ||
Vesting period | 1 year | |||
Performance shares | ||||
Nonvested Outstanding | ||||
Awards granted (in shares) | 160,860 | |||
Additional information | ||||
Performance period | 2 years | |||
Performance shares | LTIP | ||||
Additional information | ||||
Vesting percentage | 100.00% | |||
Performance shares | LTIP | Minimum | ||||
Additional information | ||||
Payout level based on incentive target | 0.00% | |||
Performance shares | LTIP | Maximum | ||||
Additional information | ||||
Payout level based on incentive target | 200.00% |
STOCK-BASED COMPENSATION (Res62
STOCK-BASED COMPENSATION (Restricted Stock Unit Activity) (Details 3) - Restricted stock units - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Units Outstanding | ||
Nonvested Awards at the beginning of the period (in shares) | 124,506 | |
Awards granted (in shares) | 63,436 | 43,842 |
Awards released (in shares) | 0 | |
Awards cancelled (in shares) | 0 | |
Nonvested Awards at the end of the period (in shares) | 187,942 | 124,506 |
Weighted Average Grant Date Fair Value | ||
Nonvested Awards at the beginning of the period (in dollars per share) | $ 12.52 | |
Awards granted, weighted average grant date fair value (in dollars per share) | 8.49 | |
Awards released, weighted average grant date fair value (in dollars per share) | 0 | |
Awards cancelled, weighted average grant date fair value (in dollars per share) | 0 | |
Nonvested Awards at the end of the period (in dollars per share) | $ 11.16 | $ 12.52 |
Aggregate intrinsic value, outstanding, beginning of the period | $ 1,215,179 | |
Aggregate intrinsic value, outstanding, end of the period | $ 1,257,332 | $ 1,215,179 |
Awards, vested and expected to vest at December 31, 2015 | 153,786 | |
Awards, vested and deferred at December 31, 2015 | 123,406 | |
Awards, vested and expected to vest, weighted average grant date fair value (in dollars per share) | $ 8.50 | |
Awards, vested and deferred, weighted average grant date fair value (in dollars per share) | $ 12.58 | |
Aggregate intrinsic value, vested and expected to vest | $ 203,244 | |
Aggregate Intrinsic Value, Vested and Deferred | $ 825,586 |
STOCK-BASED COMPENSATION (Share
STOCK-BASED COMPENSATION (Share-based compensation expense) (Details 4) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Stock-based compensation expense for stock options and restricted stock | |||
Stock-based compensation expense | $ 7,195 | $ 6,762 | $ 9,241 |
Cost of revenue | |||
Stock-based compensation expense for stock options and restricted stock | |||
Stock-based compensation expense | 101 | 108 | 175 |
Cost of product revenue | |||
Stock-based compensation expense for stock options and restricted stock | |||
Stock-based compensation expense | 57 | 95 | 109 |
Cost of subscription and service revenue | |||
Stock-based compensation expense for stock options and restricted stock | |||
Stock-based compensation expense | 44 | 13 | 66 |
Total included in operating expenses | |||
Stock-based compensation expense for stock options and restricted stock | |||
Stock-based compensation expense | 7,094 | 6,654 | 9,066 |
Sales and marketing | |||
Stock-based compensation expense for stock options and restricted stock | |||
Stock-based compensation expense | 1,327 | 1,975 | 1,840 |
Research and development | |||
Stock-based compensation expense for stock options and restricted stock | |||
Stock-based compensation expense | 841 | 958 | 1,460 |
General and administrative | |||
Stock-based compensation expense for stock options and restricted stock | |||
Stock-based compensation expense | $ 4,926 | 3,721 | 5,766 |
Performance shares | LTIP | |||
Stock-based compensation expense for stock options and restricted stock | |||
Stock-based compensation expense | 1,300 | 1,400 | |
Performance shares | Cash-based portion of LTIP | |||
Stock-based compensation expense for stock options and restricted stock | |||
Stock-based compensation expense | $ 300 | $ 600 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - USD ($) | 12 Months Ended | |||||
Dec. 31, 2015 | Dec. 31, 2013 | Dec. 31, 2014 | Aug. 22, 2013 | Jun. 11, 2013 | May. 08, 2013 | |
Stockholders' Equity Note [Abstract] | ||||||
Capital units, authorized | 200,000,000 | |||||
Common stock | ||||||
Common stock, shares authorized | 190,000,000 | 190,000,000 | ||||
Common stock, par value (in dollars per share) | $ 0.00005 | $ 0.00005 | ||||
Common stock, shares issued | 23,149,634 | 22,935,620 | ||||
Common stock, shares outstanding | 22,149,634 | 21,935,620 | ||||
Preferred stock | ||||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | ||||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | ||||
Shelf Registration Statement, number of shares sold | 3,490,000 | |||||
Shelf Registration Statement, offering price | $ 16 | |||||
Shelf Registration Statement, additional number of shares issued and sold | 10,000 | |||||
Shelf Registration Statement, amount | $ 150,000,000 | |||||
Share repurchase program | ||||||
Share repurchase program, number of shares authorized to repurchase | $ 25,000,000 | |||||
Stock repurchased during the year, value | $ 11,435,000 | |||||
Shares repurchased under the share repurchase program | 0 | 1,000,000 | ||||
Stock repurchased during the year, cost per share | $ 11.44 |
EMPLOYEE BENEFIT PLAN (Details)
EMPLOYEE BENEFIT PLAN (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
EMPLOYEE BENEFIT PLAN | |||
Expenses for the plan | $ 2 | $ 2.2 | $ 1.9 |
Maximum | |||
EMPLOYEE BENEFIT PLAN | |||
Percentage of contributions vested | 4.00% |
RESTRUCTURING AND OTHER EMPLO66
RESTRUCTURING AND OTHER EMPLOYEE SEVERANCE Restructuring Reserve (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2014 | Sep. 30, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | |
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring reserve | $ 0 | $ 0 | ||
Cost Incurred | $ 8,791 | 0 | ||
Cash Payments | (7,491) | |||
Other adjustments | (1,048) | |||
Severance costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring reserve | 0 | 252 | 0 | |
Cost Incurred | 7,240 | |||
Cash Payments | (5,940) | |||
Other adjustments | (1,048) | |||
Contract termination costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring reserve | 0 | 0 | 0 | |
Cost Incurred | 1,134 | |||
Cash Payments | (1,134) | |||
Other adjustments | 0 | |||
Other costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring reserve | 0 | 0 | 0 | |
Cost Incurred | 417 | |||
Cash Payments | (417) | |||
Other adjustments | 0 | |||
Accrued Compensation and Other Current Liabilities | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring reserve | 252 | |||
Cost of revenue | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Cost Incurred | 113 | 0 | ||
Sales and marketing | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Cost Incurred | 4,492 | 0 | ||
Research and development | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Cost Incurred | 602 | 0 | ||
General and administrative | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Cost Incurred | 3,584 | 0 | ||
France Related Restructuring | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Severance Costs | $ 1,000 | |||
France Related Restructuring | Severance costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Cash Payments | (500) | |||
Restructuring and related cost, expected cost remaining | 400 | |||
Other Restructuring Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Severance Costs | 3,200 | |||
Other Restructuring Plan | Severance costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Cash Payments | (800) | |||
Restructuring and related cost, expected cost remaining | $ 2,300 | $ 2,300 | ||
Restructuring reserve, current | $ 100 |
LEASE ABANDONMENT AND TERMINA67
LEASE ABANDONMENT AND TERMINATION (Details) - USD ($) $ in Thousands | Mar. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 |
Restructuring Reserve [Roll Forward] | |||
Restructuring Reserve | $ 0 | ||
Costs incurred and charged to expense | 8,791 | $ 0 | |
Principal reductions | (7,491) | ||
Restructuring Reserve | 0 | ||
Facility Closing | |||
Restructuring Reserve [Roll Forward] | |||
Restructuring Reserve | 1,679 | 413 | |
Costs incurred and charged to expense | 55 | 3,812 | |
Principal reductions | (452) | (2,546) | |
Restructuring Reserve | 1,282 | 1,679 | |
Short-term | 455 | 496 | |
Long-term | $ 827 | 1,183 | |
VIRGINIA | Facility Closing | |||
Restructuring Reserve [Roll Forward] | |||
Costs incurred and charged to expense | $ 3,200 | ||
Japan | Facility Closing | |||
Restructuring Reserve [Roll Forward] | |||
Principal reductions | $ (400) |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Deferred tax assets: | ||
Inventory | $ 564 | $ 535 |
Net operating and capital loss carryforwards | 48,334 | 27,637 |
Deferred revenue | 13,908 | 12,447 |
Accrued liabilities | 9,780 | 12,890 |
Stock-based compensation | 4,656 | 5,760 |
Amortization and depreciation | 31 | 0 |
Bad debt reserve | 398 | 501 |
Foreign and other tax credits | 1,517 | 1,283 |
Gross deferred tax assets | 79,188 | 61,053 |
Valuation allowance | (70,464) | (53,809) |
Net deferred tax assets | 8,724 | 7,244 |
Deferred tax liabilities: | ||
Goodwill and indefinite lived intangibles | (4,782) | (3,465) |
Deferred sales commissions | (7,337) | (5,714) |
Prepaid expenses | (625) | (555) |
Amortization and depreciation | 0 | (1,337) |
Foreign currency translation | (973) | (391) |
Other | (5) | (5) |
Gross deferred tax liabilities | (13,722) | (11,467) |
Net deferred tax liabilities | $ (4,998) | $ (4,223) |
INCOME TAXES (Details 3)
INCOME TAXES (Details 3) - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Components of income (loss) before income tax expense | |||
United States | $ (41,458,000) | $ (60,434,000) | $ (14,360,000) |
Foreign | (4,179,000) | (19,761,000) | (3,658,000) |
Loss before income taxes | (45,637,000) | (80,195,000) | (18,018,000) |
The provision for taxes on income consists of the following (in thousands): | |||
Federal | (157,000) | 29,000 | 155,000 |
State | 96,000 | 23,000 | 123,000 |
Foreign | 444,000 | 1,258,000 | 1,709,000 |
Total current | 383,000 | 1,310,000 | 1,987,000 |
Deferred: | |||
Federal | 1,148,000 | (5,425,000) | (3,972,000) |
State | 169,000 | (797,000) | (112,000) |
Foreign | (541,000) | (1,577,000) | 213,000 |
Total deferred | 776,000 | (7,799,000) | (3,871,000) |
Provision (benefit) for income taxes | 1,159,000 | (6,489,000) | (1,884,000) |
Reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties | |||
Balance at the beginning of the period | 446,000 | 143,000 | |
Increases for tax positions taken during prior years | 0 | 322,000 | |
Settlements with tax authorities | (446,000) | 0 | |
Reductions for tax positions taken during prior years | 0 | (2,000) | |
Balance at the end of the period | 0 | 446,000 | $ 143,000 |
Unrecognized Tax Benefits, Reduction Resulting from Lapse of Applicable Statute of Limitations | $ 0 | $ (17,000) |
INCOME TAXES (Reconciliation) (
INCOME TAXES (Reconciliation) (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Reconciliation of income tax provision (benefit) computed at the U.S. federal statutory rate to income tax expense | |||
Income tax benefit at statutory federal rate | $ (15,973) | $ (28,068) | $ (6,306) |
State income tax expense, net of federal income tax effect | 231 | (782) | 7 |
Acquired intangibles | 0 | 0 | (859) |
Nondeductible goodwill impairment | 1,961 | 0 | 0 |
Other nondeductible expenses | 88 | 482 | 1,105 |
Tax rate differential on foreign operations | (1,019) | 276 | (264) |
Increase in valuation allowance | 15,713 | 21,772 | 4,263 |
Tax audit settlements | (96) | 0 | 0 |
Change in prior year estimates | 225 | (69) | (17) |
Other tax credits | 29 | (102) | 0 |
Other | 0 | 2 | 187 |
Provision (benefit) for income taxes | $ 1,159 | $ (6,489) | $ (1,884) |
INCOME TAXES (Net Operating Los
INCOME TAXES (Net Operating Losses Carryforward and Tax Credit Carryforward) (Details) $ in Thousands | Dec. 31, 2015USD ($) |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | $ 201,330 |
U.S. Federal | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 88,341 |
Capital loss carryforward, amount | 6,837 |
Tax credit carryforward, amount | 1,517 |
State | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 80,506 |
Capital loss carryforward, amount | 6,415 |
Brazil | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 5,511 |
France | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 13,158 |
Japan | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 11,872 |
Other Foreign | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 1,942 |
2016-2020 | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 498 |
2016-2020 | U.S. Federal | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
Capital loss carryforward, amount | 0 |
Tax credit carryforward, amount | 0 |
2016-2020 | State | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 498 |
Capital loss carryforward, amount | 0 |
2016-2020 | Brazil | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2016-2020 | France | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2016-2020 | Japan | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2016-2020 | Other Foreign | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2021-2025 | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 13,659 |
2021-2025 | U.S. Federal | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
Capital loss carryforward, amount | 6,837 |
Tax credit carryforward, amount | 1,516 |
2021-2025 | State | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 1,180 |
Capital loss carryforward, amount | 6,055 |
2021-2025 | Brazil | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2021-2025 | France | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2021-2025 | Japan | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 11,872 |
2021-2025 | Other Foreign | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 607 |
2026-2030 | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 6,440 |
2026-2030 | U.S. Federal | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
Capital loss carryforward, amount | 0 |
Tax credit carryforward, amount | 1 |
2026-2030 | State | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 6,288 |
Capital loss carryforward, amount | 0 |
2026-2030 | Brazil | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2026-2030 | France | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2026-2030 | Japan | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2026-2030 | Other Foreign | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 152 |
2031-2035 | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 73,696 |
2031-2035 | U.S. Federal | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 39,437 |
Capital loss carryforward, amount | 0 |
Tax credit carryforward, amount | 0 |
2031-2035 | State | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 34,008 |
Capital loss carryforward, amount | 360 |
2031-2035 | Brazil | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2031-2035 | France | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2031-2035 | Japan | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2031-2035 | Other Foreign | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 251 |
2036-2040 | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 88,368 |
2036-2040 | U.S. Federal | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 48,904 |
Capital loss carryforward, amount | 0 |
Tax credit carryforward, amount | 0 |
2036-2040 | State | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 38,532 |
Capital loss carryforward, amount | 0 |
2036-2040 | Brazil | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2036-2040 | France | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2036-2040 | Japan | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
2036-2040 | Other Foreign | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 932 |
Indefinite | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 18,669 |
Indefinite | U.S. Federal | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
Capital loss carryforward, amount | 0 |
Tax credit carryforward, amount | 0 |
Indefinite | State | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
Capital loss carryforward, amount | 0 |
Indefinite | Brazil | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 5,511 |
Indefinite | France | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 13,158 |
Indefinite | Japan | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | 0 |
Indefinite | Other Foreign | Foreign | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforward, amount | $ 0 |
INCOME TAXES (Narrative) (Detai
INCOME TAXES (Narrative) (Details) - USD ($) | 12 Months Ended | ||||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2012 | ||
Income Tax Examination [Line Items] | |||||
Income tax expense (benefit) | $ 1,159,000 | $ (6,489,000) | $ (1,884,000) | ||
Business acquisition, goodwill, expected tax deductible amount | 0 | 0 | |||
Valuation allowance | (70,464,000) | (53,809,000) | |||
Interest expense accrued | 0 | 10,000 | |||
Effective Income Tax Rate Reconciliation, Tax Settlement, Amount | (96,000) | 0 | 0 | ||
Unrecognized tax benefits, decrease resulting from settlements with taxing authorities | 446,000 | 0 | |||
Increase in unrecognized tax benefits | (400,000) | ||||
Unrecognized tax benefits | 0 | 446,000 | 143,000 | ||
Accumulated loss | 149,794,000 | 102,998,000 | [1] | ||
Foreign | (4,179,000) | (19,761,000) | (3,658,000) | ||
Undistributed earnings of foreign subsidiaries | 11,600,000 | ||||
Income tax payments | 1,400,000 | 1,700,000 | $ 3,300,000 | ||
Foreign | |||||
Income Tax Examination [Line Items] | |||||
Accumulated loss | 34,400,000 | ||||
Other Long Term Liabilities | |||||
Income Tax Examination [Line Items] | |||||
Accrued interest and penalties | $ 0 | $ 26,000 | |||
Brazil | |||||
Income Tax Examination [Line Items] | |||||
Valuation allowance | $ (400,000) | ||||
Japan | |||||
Income Tax Examination [Line Items] | |||||
Valuation allowance | (2,100,000) | ||||
UNITED STATES | |||||
Income Tax Examination [Line Items] | |||||
Valuation allowance | $ (23,100,000) | ||||
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
COMMITMENTS AND CONTINGENCIES73
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Commitments and contingencies | |||
Royalty expense | $ 200,000 | $ 31,000 | $ 0 |
Future minimum operating lease payments | |||
2,016 | 5,591,000 | ||
2,017 | 4,367,000 | ||
2,018 | 3,829,000 | ||
2,019 | 1,253,000 | ||
2,020 | 962,000 | ||
Thereafter | 590,000 | ||
Total future minimum operating lease payments | 16,592,000 | ||
Rent | |||
Rent expense | $ 5,100,000 | $ 5,600,000 | $ 7,100,000 |
Building, warehouse and office space | Minimum | |||
Commitments and contingencies | |||
Lease period | 7 months | ||
Building, warehouse and office space | Maximum | |||
Commitments and contingencies | |||
Lease period | 74 months |
COMMITMENTS AND CONTINGENCIES74
COMMITMENTS AND CONTINGENCIES (Details 3) - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Royalty expense | $ 200,000 | $ 31,000 | $ 0 |
Reserve for proposed settlement amount | $ 400,000 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) | 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 ($)segment | Dec. 31, 2014USD ($) | Dec. 31, 2013USD ($) | |
Segment Reporting [Abstract] | |||||||||||
Number of operating segments | segment | 2 | ||||||||||
Revenue: | |||||||||||
Revenue | $ 58,015,000 | $ 49,802,000 | $ 51,411,000 | $ 58,442,000 | $ 79,258,000 | $ 64,515,000 | $ 57,315,000 | $ 60,765,000 | $ 217,670,000 | $ 261,853,000 | $ 264,645,000 |
Segment contribution: | |||||||||||
Operating income (loss) | (43,813,000) | (78,850,000) | (18,442,000) | ||||||||
Unallocated expenses, net: | |||||||||||
Unallocated cost of sales | 38,527,000 | 53,054,000 | 45,714,000 | ||||||||
Unallocated sales and marketing | 136,084,000 | 173,208,000 | 146,104,000 | ||||||||
Unallocated research and development | 29,939,000 | 33,176,000 | 33,995,000 | ||||||||
Unallocated general and administrative | 50,124,000 | 57,120,000 | 56,432,000 | ||||||||
Unallocated non-operating expense/(income) | 1,824,000 | 1,345,000 | (424,000) | ||||||||
Unallocated impairment | 1,100,000 | 200,000 | 0 | ||||||||
Unallocated lease abandonment | 55,000 | 3,812,000 | 842,000 | ||||||||
Income (loss) before income taxes | (45,637,000) | (80,195,000) | (18,018,000) | ||||||||
Operating segments | |||||||||||
Revenue: | |||||||||||
Revenue | 217,670,000 | 261,853,000 | 264,645,000 | ||||||||
Segment contribution: | |||||||||||
Operating income (loss) | 64,978,000 | 58,162,000 | 91,849,000 | ||||||||
Operating segments | Enterprise & Education | |||||||||||
Revenue: | |||||||||||
Revenue | 98,057,000 | 84,700,000 | 60,209,000 | ||||||||
Segment contribution: | |||||||||||
Operating income (loss) | 30,431,000 | 22,864,000 | 20,965,000 | ||||||||
Operating segments | Consumer | |||||||||||
Revenue: | |||||||||||
Revenue | 119,613,000 | 177,153,000 | 204,436,000 | ||||||||
Segment contribution: | |||||||||||
Operating income (loss) | 34,547,000 | 35,298,000 | 70,884,000 | ||||||||
Segment Reconciling Items | |||||||||||
Segment contribution: | |||||||||||
Operating income (loss) | 110,615,000 | 138,357,000 | 109,867,000 | ||||||||
Unallocated expenses, net: | |||||||||||
Unallocated cost of sales | 8,291,000 | 8,947,000 | 4,586,000 | ||||||||
Unallocated sales and marketing | 15,282,000 | 16,168,000 | 16,447,000 | ||||||||
Unallocated research and development | 33,176,000 | 33,993,000 | |||||||||
Unallocated general and administrative | 48,470,000 | 54,576,000 | 54,423,000 | ||||||||
Unallocated non-operating expense/(income) | 1,824,000 | 1,345,000 | (424,000) | ||||||||
Unallocated impairment | $ 6,754,000 | 20,333,000 | 0 | ||||||||
Unallocated lease abandonment | $ 3,812,000 | $ 842,000 |
SEGMENT INFORMATION (Details 2)
SEGMENT INFORMATION (Details 2) - USD ($) $ in Thousands | 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 | |||
Geographic Information | |||||||||||||
Revenue | $ 58,015 | $ 49,802 | $ 51,411 | $ 58,442 | $ 79,258 | $ 64,515 | $ 57,315 | $ 60,765 | $ 217,670 | $ 261,853 | $ 264,645 | ||
Long-lived assets | 22,532 | 25,277 | [1] | 22,532 | 25,277 | [1] | |||||||
Language learning | |||||||||||||
Geographic Information | |||||||||||||
Revenue | 191,568 | 249,340 | 263,426 | ||||||||||
Literacy | |||||||||||||
Geographic Information | |||||||||||||
Revenue | 21,928 | 9,912 | 1,219 | ||||||||||
Brain Fitness | |||||||||||||
Geographic Information | |||||||||||||
Revenue | 4,174 | 2,601 | 0 | ||||||||||
United States | |||||||||||||
Geographic Information | |||||||||||||
Revenue | 177,966 | 212,070 | 223,404 | ||||||||||
Long-lived assets | 18,704 | 20,451 | 18,704 | 20,451 | |||||||||
International | |||||||||||||
Geographic Information | |||||||||||||
Revenue | 39,704 | 49,783 | $ 41,241 | ||||||||||
Long-lived assets | $ 3,828 | $ 4,826 | $ 3,828 | $ 4,826 | |||||||||
[1] | * Certain amounts have been adjusted for the retrospective adoption of Accounting Standard Update No. 2015-17 (See Note 2) |
RELATED PARTIES (Details)
RELATED PARTIES (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Related Party Transactions [Abstract] | ||
Outstanding receivables from employees | $ 18 | $ 67 |
VALUATION AND QUALIFYING ACCO78
VALUATION AND QUALIFYING ACCOUNTS (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Allowance for doubtful accounts: | |||
Changes in the valuation and qualifying accounts | |||
Beginning balance | $ 1,434 | $ 1,000 | $ 1,297 |
Charged to costs and expenses | 1,657 | 2,405 | 1,420 |
Deductions | (1,895) | (1,971) | (1,717) |
Ending balance | 1,196 | 1,434 | 1,000 |
Promotional rebate and coop advertising reserves: | |||
Changes in the valuation and qualifying accounts | |||
Beginning balance | 23,437 | 13,025 | 9,127 |
Charged to costs and expenses | 40,563 | 39,249 | 22,881 |
Deductions | (47,090) | (28,837) | (18,983) |
Ending balance | 16,910 | 23,437 | 13,025 |
Sales return reserve: | |||
Changes in the valuation and qualifying accounts | |||
Beginning balance | 3,570 | 4,834 | 5,883 |
Deductions | (11,316) | (13,275) | (15,307) |
Charged against revenue | 11,474 | 12,011 | 14,258 |
Ending balance | 3,728 | 3,570 | 4,834 |
Deferred income tax asset valuation allowance: | |||
Changes in the valuation and qualifying accounts | |||
Beginning balance | 53,809 | 33,866 | 29,671 |
Charged to costs and expenses | 16,655 | 19,943 | 9,566 |
Deductions | 0 | 0 | (5,371) |
Ending balance | $ 70,464 | $ 53,809 | $ 33,866 |
SUPPLEMENTAL QUARTERLY FINANC79
SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (Unaudited) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 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 | |
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Revenue | $ 58,015 | $ 49,802 | $ 51,411 | $ 58,442 | $ 79,258 | $ 64,515 | $ 57,315 | $ 60,765 | $ 217,670 | $ 261,853 | $ 264,645 |
Gross profit | 48,476 | 41,136 | 42,391 | 47,140 | 63,322 | 51,528 | 45,355 | 48,594 | 179,143 | 208,799 | 218,931 |
Net loss | $ (11,436) | $ (7,301) | $ (8,175) | $ (19,884) | $ (21,537) | $ (16,178) | $ (15,750) | $ (20,241) | $ (46,796) | $ (73,706) | $ (16,134) |
Basic income (loss) per share (in dollars per share) | $ (0.52) | $ (0.34) | $ (0.38) | $ (0.95) | $ (1.01) | $ (0.76) | $ (0.74) | $ (0.96) | $ (2.17) | $ (3.47) | $ (0.75) |
Shares used in basic per share computation | 21,801 | 21,771 | 21,689 | 21,018 | 21,327 | 21,305 | 21,252 | 21,125 | 21,571 | 21,253 | 21,528 |
Diluted income (loss) per share (in dollars per share) | $ (0.52) | $ (0.34) | $ (0.38) | $ (0.95) | $ (1.01) | $ (0.76) | $ (0.74) | $ (0.96) | $ (2.17) | $ (3.47) | $ (0.75) |
Shares used in diluted per share computation | 21,801 | 21,771 | 21,689 | 21,018 | 21,327 | 21,305 | 21,252 | 21,125 | 21,571 | 21,253 | 21,528 |
Subsequent Events (Details)
Subsequent Events (Details) - Enterprise & Education $ in Millions | Mar. 14, 2016USD ($) | Mar. 31, 2016 |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Restructuring and related cost, percentage of positions eliminated | 0.17 | |
Effect on future earnings, amount | $ 19 | |
One-time Termination Benefits | Minimum | Subsequent Event | ||
Subsequent Event [Line Items] | ||
Restructuring and related cost, expected cost | 5 | |
One-time Termination Benefits | Maximum | Subsequent Event | ||
Subsequent Event [Line Items] | ||
Restructuring and related cost, expected cost | $ 6 | |
Scenario, Forecast | One-time Termination Benefits | ||
Subsequent Event [Line Items] | ||
Restructuring and related cost, expected cost accrued, percentage | 50.00% |