FORM 10-K
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _____ to _____.
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INTERNAP NETWORK SERVICES CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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91-2145721
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(State or Other Jurisdiction of
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(I.R.S. Employer
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Incorporation or Organization)
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Identification No.)
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One Ravinia Drive, Suite 1300
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Atlanta, Georgia
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30346
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(Address of Principal Executive Offices)
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(Zip Code)
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(404) 302-9700
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(Registrant’s telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of exchange on which registered
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Common Stock, $0.001 par value
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The NASDAQ Stock Market LLC
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(NASDAQ Global Market)
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
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- i - |
- 1 - |
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hybrid infrastructure services: customers can mix and match cloud, hosting and colocation for the optimal combination of services to meet specific application and business requirements;
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delivered across a global network of data centers;
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supported by network optimization services that leverage our proprietary technologies to maximize uptime and minimize latency for customers’ applications; and
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managed with a “single-pane-of-glass” customer portal, backed by service level agreements (“SLAs”) and our team of dedicated support professionals.
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- 2 - |
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Internap operated
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Domestic sites operated
under third party agreements
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International sites operated
under third party agreements
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Atlanta
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Atlanta
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Orange County
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Amsterdam
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Paris
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Boston
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Boston
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San Diego
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Frankfurt
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Singapore
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Dallas
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Chicago
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Philadelphia
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Hong Kong
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Sydney
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Houston
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Dallas
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Phoenix
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London
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Tokyo
(1)
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Los Angeles
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Denver
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San Francisco
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Osaka
(1)
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Toronto
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Montreal
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Los Angeles
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San Jose
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New York Metro
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Miami
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Santa Clara
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Santa Clara
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New York metro
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Seattle
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Seattle
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Oakland
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Washington DC
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(1)
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Through our joint venture in Internap Japan Co., Ltd. with NTT-ME Corporation and Nippon Telegraph and Telephone Corporation.
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colocation, hosting and cloud providers, including Equinix, Inc.; Rackspace, Inc.; Amazon Web Services; Telx Group, Inc.; CyrusOne; CenturyLink, Inc.; Softlayer (IBM); SunGard Availability Services and QTS Realty Trust, Inc.; and |
- 3 - |
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ISPs that provide connectivity services and storage solutions, including AT&T Inc.; Sprint Nextel Corporation; Verizon Communications Inc.; Level 3 Communications, Inc.; Akamai Technologies, Inc. and Limelight Networks, Inc. |
- 4 - |
- 5 - |
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sourcing, identifying, obtaining and maintaining qualified research and development staff with the appropriate skill and expertise;
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managing the length of the development cycle for new products and product enhancements, which historically has been longer than expected;
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identifying and adapting to emerging and evolving industry standards and to technological developments by our competitors’ and customers’ services and products;
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developing or expanding efficient sales channels;
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entering into new or unproven markets where we have limited experience;
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managing new service and product service strategies and integrating them with our existing services and products;
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incorporating acquired products and technologies;
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trade compliance issues affecting our ability to ship new products to international markets; and
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obtaining required technology licenses and technical access from operating system software vendors on reasonable terms to enable the development and deployment of interoperable products.
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- 6 - |
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identify and obtain the use of locations meeting our selection criteria on competitive terms;
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estimate costs and control delays;
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obtain necessary permits on a timely basis, if at all;
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generate sufficient cash flow from operations or through current or additional debt or equity financings to support these expansion plans;
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establish key relationships with IT infrastructure providers;
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hire, train, retain and manage sufficient operational and technical employees and supporting personnel;
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obtain the necessary power density and supply from local utility companies;
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avoid labor issues impacting our suppliers, such as a strike; and
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identify and obtain contractors that will not default on the agreed upon contract performance.
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develop and expand their IT infrastructure and service offerings more rapidly;
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adapt to new or emerging technologies and changes in customer requirements more quickly;
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take advantage of acquisitions and other opportunities more readily; or
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devote greater resources to the marketing and sale of their services and adopt more aggressive pricing policies than we can.
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- 7 - |
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their level of satisfaction with our services;
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our ability to provide features and functionality demanded by our customers;
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the prices of our services compared to our competitors;
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technological advances that allow customers to meet their needs with fewer infrastructure resources;
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mergers and acquisitions affecting our customer base; and
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reduction in our customers’ spending levels.
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- 8 - |
- 9 - |
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human error;
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physical or electronic security breaches;
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fire, earthquake, hurricane, flood, tornado and other natural disasters;
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improper maintenance of the buildings in which our data centers are located;
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water damage, extreme temperatures, fiber cuts;
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power loss or equipment failure;
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sabotage and vandalism; and
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failures experienced by underlying service providers upon which our business relies.
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- 10 - |
- 11 - |
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sourcing, evaluating and targeting potential customers and managing existing customers;
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implementing customer orders for services;
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delivering these services;
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timely billing for these services;
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budgeting, forecasting, tracking and reporting our results of operations; and
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providing technical and operational support to customers and tracking the resolution of customer issues.
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- 12 - |
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challenges in establishing and maintaining relationships with global customers, ISPs and local vendors, including data center and local network operators;
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challenges in staffing and managing NOCs and P-NAPs across disparate geographic areas;
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potential loss of proprietary information due to misappropriation or laws that may be less protective of our intellectual property rights than the laws in the U.S.;
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challenges in reducing operating expense or other costs required by local laws, and longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
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exposure to fluctuations in international currency exchange rates;
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costs of customizing P-NAPs for foreign countries and customers; and
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compliance with requirements of foreign laws, regulations and other governmental controls, including trade and labor restrictions and related laws that may reduce the flexibility of our business operations or favor local competition.
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failure to sustain sales of our services;
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pricing pressures;
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- 13 - |
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significant increases in cost of goods sold or other operating expenses;
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failure of our services to operate as expected;
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loss of customers or inability to attract new customers or loss of existing customers at a rate greater than our increase in new customers;
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customers’ failure to pay on a timely basis or at all or failure to continue to purchase our IT infrastructure services in accordance with their contractual commitments; or
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network failures and any breach or unauthorized access to our network.
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competition and the introduction of new services by our competitors;
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continued pricing pressures;
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fluctuations in the demand and sales cycle for our services;
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fluctuations in the market for qualified sales and other personnel;
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the cost and availability of adequate public utilities, including power;
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our ability to obtain local loop connections to our P-NAPs at favorable prices;
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general economic conditions; and
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any impairments or restructurings charges that we may incur in the future.
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- 14 - |
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actual or anticipated variations in our quarterly and annual results of operations;
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changes in market valuations of companies in the industries in which we may compete;
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changes in expectations of future financial performance or changes in estimates of securities analysts;
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fluctuations in stock market prices and volumes;
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future issuances of common stock or other securities;
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the addition or departure of key personnel; and
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announcements by us or our competitors of acquisitions, investments or strategic alliances.
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- 15 - |
- 16 - |
Year Ended December 31, 2013:
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High
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Low
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||||||||||
Fourth Quarter
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$
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7.75
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$
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6.51
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Third Quarter
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9.10
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6.66
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Second Quarter
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9.47
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7.82
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First Quarter
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9.60
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6.80
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Year Ended December 31, 2012:
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High
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Low
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Fourth Quarter
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$
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7.68
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$
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5.52
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Third Quarter
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7.52
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6.15
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Second Quarter
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7.90
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6.25
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First Quarter
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7.96
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5.55
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- 17 - |
Equity Compensation Plan Information
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Plan category
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Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
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Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
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Number of securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities reflected
in column (a))
(c)
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Equity compensation plans approved by security holders
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5,802
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$
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7.05
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1,901
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Equity compensation plans not approved by security holders
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—
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—
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—
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Total
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5,802
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$
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7.05
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1,901
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Period
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Total Number of Shares
Purchased
(1)
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Average Price Paid
per Share
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Total Number of
Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
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Maximum Number
(or Approximate
Dollar Value) of
Shares that
May Yet Be
Purchased Under the
Plans or Programs
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October 1 to 31, 2013
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1,668
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$
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7.10
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—
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—
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November 1 to 30, 2013
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2,657
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7.37
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—
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—
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December 1 to 31, 2013
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20,975
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7.34
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—
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—
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Total
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25,300
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$
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7.33
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—
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—
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(1)
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Employees surrendered these shares to us as payment of statutory minimum payroll taxes due in connection with the vesting of restricted stock.
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- 18 - |
Year Ended December 31,
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2013
(1)
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2012
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2011
(2)
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2010
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2009
(3)
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(in thousands, except per share data)
Consolidated Statements of Operations and Comprehensive Loss Data:
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Revenues
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$ | 283,342 | $ | 273,592 | $ | 244,628 | $ | 244,164 | $ | 256,259 | ||||||||||
Operating costs and expenses:
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Direct costs of network, sales and services, exclusive of depreciation and amortization, shown below
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132,012 | 130,954 | 120,310 | 127,423 | 143,016 | |||||||||||||||
Direct costs of customer support
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29,687 | 26,664 | 21,278 | 19,861 | 18,034 | |||||||||||||||
Direct costs of amortization of acquired technologies
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4,967 | 4,718 | 3,500 | 3,811 | 8,349 | |||||||||||||||
Sales and marketing
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31,800 | 31,343 | 29,715 | 29,232 | 28,131 | |||||||||||||||
General and administrative
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42,759 | 38,635 | 33,952 | 33,048 | 44,645 | |||||||||||||||
Depreciation and amortization
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48,181 | 36,147 | 36,926 | 30,158 | 28,282 | |||||||||||||||
Loss (gain) on disposals of property and equipment, net
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9 | (55 | ) | 37 | 116 | 26 | ||||||||||||||
Exit activities, restructuring and impairments
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1,414 | 1,422 | 2,833 | 1,411 | 54,698 | |||||||||||||||
Total operating costs and expenses
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290,829 | 269,828 | 248,551 | 245,060 | 325,181 | |||||||||||||||
(Loss) income from operations
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(7,487 | ) | 3,764 | (3,923 | ) | (896 | ) | (68,922 | ) | |||||||||||
Non-operating expenses
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12,841 | 7,849 | 3,866 | 2,170 | 461 | |||||||||||||||
Loss before income taxes and equity in (earnings) of equity-method investment
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(20,328 | ) | (4,085 | ) | (7,789 | ) | (3,066 | ) | (69,383 | ) | ||||||||||
(Benefit) provision for income taxes
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(285 | ) | 453 | (5,612 | ) | 952 | 357 | |||||||||||||
Equity in (earnings) of equity-method investment, net of taxes
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(213 | ) | (220 | ) | (475 | ) | (396 | ) | (15 | ) | ||||||||||
Net loss
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(19,830 | ) | $ | (4,318 | ) | $ | (1,702 | ) | $ | (3,622 | ) | $ | (69,725 | ) | ||||||
Net loss per share:
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Basic and diluted
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$ | (0.39 | ) | $ | (0.09 | ) | $ | (0.03 | ) | $ | (0.07 | ) | $ | (1.41 | ) |
December 31, | ||||||||||||||||||||
2013
(1)
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2012
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2011
(2)
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2010
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2009
(3)
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Consolidated Balance Sheets Data:
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Cash and cash equivalents, investments in marketable securities and other related assets
(4)
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$ | 35,018 | $ | 28,553 | $ | 29,772 | $ | 59,582 | $ | 80,926 | ||||||||||
Total assets
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614,241 | 400,712 | 356,710 | 293,142 | 267,502 | |||||||||||||||
Credit facilities, due after one year, and capital lease obligations, less current portion
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346,800 | 136,555 | 94,673 | 37,889 | 23,217 | |||||||||||||||
Total stockholders’ equity
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182,210 | 195,605 | 192,170 | 188,611 | 184,402 |
Year Ended December 31, | ||||||||||||||||||||
2013
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2012
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2011
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2010
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2009
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Other Financial Data:
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Purchases of property and equipment
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$ | 62,798 | $ | 74,947 | $ | 68,542 | $ | 62,184 | $ | 17,278 | ||||||||||
Net cash flows provided by operating activities
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33,683 | 43,742 | 28,630 | 39,602 | 37,520 | |||||||||||||||
Net cash flows used in investing activities
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(208,086 | ) | (79,697 | ) | (96,265 | ) | (55,184 | ) | (9,900 | ) | ||||||||||
Net cash flows provided by (used in) financing activities
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180,810 | 34,571 | 37,901 | 1,224 | (598 | ) |
(1)
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On November 26, 2013, we completed our acquisition of iWeb. We allocated the purchase price to iWeb’s net tangible and intangible assets based on their estimated fair values as of November 26, 2013. We recorded the excess purchase price over the value of the net tangible and identifiable intangible assets as goodwill.
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(2)
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On December 30, 2011, we completed our acquisition of Voxel Holdings, Inc. (“Voxel”). We allocated the purchase price to Voxel’s net tangible and intangible assets based on their estimated fair values as of December 30, 2011. We recorded the excess purchase price over the value of the net tangible and identifiable intangible assets as goodwill. In addition, as a result of our purchase price accounting, our net loss was reduced by a $6.1 million deferred tax benefit that offset our existing income tax expense of $0.5 million.
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- 19 - |
(3)
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We completed an assessment of goodwill and other intangible assets for impairment as of June 1, 2009, in connection with our decision to consolidate our business segments, which resulted in aggregate impairment charges of $51.5 million for goodwill and $4.1 million for other acquired intangible assets.
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(4)
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The following table provides a reconciliation of total cash and cash equivalents, investments in marketable securities and other related assets and restricted cash to the amounts reported in our audited consolidated balance sheets (in thousands):
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December 31, | ||||||||||||||||||||
2013
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2012
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2011
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2010
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2009
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Cash and cash equivalents
(a)
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$ | 35,018 | $ | 28,553 | $ | 29,772 | $ | 59,582 | $ | 73,926 | ||||||||||
Investments in marketable securities and other related assets:
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Short-term
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— | — | — | — | 7,000 | |||||||||||||||
$ | 35,018 | $ | 28,553 | $ | 29,772 | $ | 59,582 | $ | 80,926 |
- 20 - |
Year Ended December 31,
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2013
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2012
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2011
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(Loss) income from operations
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$ | (7,487 | ) | $ | 3,764 | $ | (3,923 | ) | ||||
Depreciation and amortization, including amortization of acquired technologies
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53,148 | 40,865 | 40,426 | |||||||||
Loss (gain) on disposals of property and equipment, net
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9 | (55 | ) | 37 | ||||||||
Exit activities, restructuring and impairments
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1,414 | 1,422 | 2,833 | |||||||||
Stock-based compensation
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6,743 | 5,858 | 3,983 | |||||||||
Acquisition costs for iWeb and Voxel, respectively
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4,210 | — | 647 | (1) | ||||||||
Adjusted EBITDA
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$ | 58,037 | $ | 51,854 | $ | 44,003 |
We generate revenues primarily from the sale of data center services and IP services. Our revenues typically consist of monthly recurring revenues from contracts with terms of one year or more and we typically recognize the monthly minimum as revenue each month. We record installation fees as deferred revenue and recognize the revenue ratably over the estimated customer life, which was approximately six years for 2013, five years for 2012 and four years for 2011.
For multiple-deliverable revenue arrangements we allocate arrangement consideration at the inception of an arrangement to all deliverables using the relative selling price method. The hierarchy for determining the selling price of a deliverable includes (a) vendor-specific objective evidence, if available, (b) third-party evidence, if vendor-specific objective evidence is not available and (c) best estimated selling price, if neither vendor-specific nor third-party evidence is available.
We determine third-party evidence based on the prices charged by our competitors for a similar deliverable when sold separately. Our determination of best estimated selling price involves a weighting of several factors including, but not limited to, pricing practices and market conditions. We analyze the selling prices used in our allocation of arrangement consideration on an annual basis at a minimum.
We account for each deliverable within a multiple-deliverable revenue arrangement as a separate unit of accounting if both of the following criteria are met: (a) the delivered item or items have value to the customer on a standalone basis and (b) for an arrangement that includes a general right of return relative to the delivered item(s), we consider delivery or performance of the undelivered item(s) probable and substantially in our control. We consider a deliverable to have standalone value if we sell this item separately or if the item is sold by another vendor or could be resold by the customer. Further, our revenue arrangements generally do not include a right of return for to delivered services. We combine deliverables not meeting the criteria for being a separate unit of accounting with a deliverable that does meet that criterion. We then determine the appropriate allocation of arrangement consideration and recognition of revenue for the combined unit of accounting.
We routinely review the collectability of our accounts receivable and payment status of our customers. If we determine that collection of revenue is uncertain, we do not recognize revenue until collection is reasonably assured. Additionally, we maintain an allowance for doubtful accounts resulting from the inability of our customers to make required payments on accounts receivable. We base the allowance for doubtful accounts upon general customer information, which primarily includes our historical cash collection experience and the aging of our accounts receivable. We assess the payment status of customers by reference to the terms under which we provide services or goods, with any payments not made on or before their due date considered past-due. Once we have exhausted all collection efforts, we write the uncollectible balance off against the allowance for doubtful accounts. In addition, we record a reserve amount for SLAs and other sales adjustments.
- 21 - |
- 22 - |
- 23 - |
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●
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costs for connecting to and accessing ISPs and competitive local exchange providers;
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●
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facility and occupancy costs, including power and utilities, for hosting and operating our equipment and hosting our customers’ equipment;
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●
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costs incurred for providing additional third party services to our customers; and
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●
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royalties and costs of license fees for operating systems software.
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- 24 - |
Year Ended December 31,
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Increase
(decrease)
from 2012 to
2013
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Increase
(decrease)
from 2011 to
2012
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2013
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2012
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2011
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Amount
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Percent
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Amount
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Percent
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|||||||||||||||||||||||
Revenues:
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Data center services
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$ | 185,147 | $ | 167,286 | $ | 133,453 | $ | 17,861 | 11 | % | $ | 33,833 | 25 |
%
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IP services
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98,195 | 106,306 | 111,175 | (8,111 | ) | (8 | ) | (4,869 | ) | (4 | ) | ||||||||||||||||||
Total revenues
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283,342 | 273,592 | 244,628 | 9,750 | 4 | 28,964 | 12 | ||||||||||||||||||||||
Operating costs and expenses:
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|||||||||||||||||||||||||||||
Direct costs of network, sales and services, exclusive of depreciation and amortization, shown below:
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Data center services
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92,564 | 90,604 | 78,907 | 1,960 | 2 | (11,697 | ) | (15 | ) | ||||||||||||||||||||
IP services
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39,448 | 40,350 | 41,403 | (902 | ) | (2 | ) | (1,053 | ) | (3 | ) | ||||||||||||||||||
Direct costs of customer support
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29,687 | 26,664 | 21,278 | 3,023 | 11 | 5,386 | 25 | ||||||||||||||||||||||
Direct costs of amortization of acquired technologies
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4,967 | 4,718 | 3,500 | 249 | 5 | 1,218 | (35 | ) | |||||||||||||||||||||
Sales and marketing
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31,800 | 31,343 | 29,715 | 457 | 1 | 1,628 | 5 | ||||||||||||||||||||||
General and administrative
|
42,759 | 38,635 | 33,952 | 4,124 | 11 | 4,683 | 14 | ||||||||||||||||||||||
Depreciation and amortization
|
48,181 | 36,147 | 36,926 | 12,034 | 33 | (779 | ) | (2 | ) | ||||||||||||||||||||
Loss (gain) on disposal of property and equipment, net
|
9 | (55 | ) | 37 | 64 | 116 | (92 | ) | (249 | ) | |||||||||||||||||||
Exit activities, restructuring and impairments
|
1,414 | 1,422 | 2,833 | (8 | ) | (1 | ) | (1,411 | ) | (50 | ) | ||||||||||||||||||
Total operating costs and expenses
|
290,829 | 269,828 | 248,551 | 21,001 | 8 | 21,277 | 9 | ||||||||||||||||||||||
(Loss) income from operations
|
$ | (7,487 | ) | $ | 3,764 | $ | (3,923 | ) | $ | (11,251 | ) | (299 | ) | $ | 7,687 | 196 | |||||||||||||
Interest expense
|
$ | 11,346 | $ | 7,566 | $ | 3,701 | $ | 3,780 | 50 | $ | 3,865 | 104 | |||||||||||||||||
(Benefit) provision for income taxes
|
$ | (285 | ) | $ | 453 | $ | (5,612 | ) | $ | (738 | ) | (163 | )% | $ | 6,065 | 108 |
%
|
- 25 - |
Year Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Revenues:
|
||||||||||||
Data center services
|
$ | 185,147 | $ | 167,286 | $ | 133,453 | ||||||
IP services
|
98,195 | 106,306 | 111,175 | |||||||||
Total revenues
|
283,342 | 273,592 | 244,628 | |||||||||
Direct costs of network, sales and services, exclusive of depreciation and amortization:
|
||||||||||||
Data center services
|
92,564 | 90,604 | 78,907 | |||||||||
IP services
|
39,448 | 40,350 | 41,403 | |||||||||
Total direct costs of network, sales and services, exclusive of depreciation and amortization
|
132,012 | 130,954 | 120,310 | |||||||||
Segment profit:
|
||||||||||||
Data center services
|
92,583 | 76,682 | 54,546 | |||||||||
IP services
|
58,747 | 65,956 | 69,772 | |||||||||
Total segment profit
|
151,330 | 142,638 | 124,318 | |||||||||
Exit activities, restructuring and impairments
|
1,414 | 1,422 | 2,833 | |||||||||
Other operating expenses, including direct costs of customer support, depreciation and amortization
|
157,403 | 137,452 | 125,408 | |||||||||
(Loss) income from operations
|
(7,487 | ) | 3,764 | (3,923 | ) | |||||||
Non-operating expense
|
12,841 | 7,849 | 3,866 | |||||||||
Loss before income taxes and equity in (earnings) of equity-method investment
|
$ | (20,328 | ) | $ | (4,085 | ) | $ | (7,789 | ) |
- 26 - |
2013
|
2012
|
|||||||
Direct costs of customer support
|
$ | 1,108 | $ | 936 | ||||
Sales and marketing
|
1,110 | 929 | ||||||
General and administrative
|
4,525 | 3,993 | ||||||
$ | 6,743 | $ | 5,858 |
- 27 - |
2012
|
2011
|
|||||||
Direct costs of customer support
|
$ | 936 | $ | 659 | ||||
Sales and marketing
|
929 | 835 | ||||||
General and administrative
|
3,993 | 2,489 | ||||||
$ | 5,858 | $ | 3,983 |
- 28 - |
- 29 - |
Payments Due by Period
|
||||||||||||||||||||
Total
|
Less than
1 year
|
1-3
Years
|
3-5
Years
|
More
than 5
years
|
||||||||||||||||
Term loan
(1)
|
404,700 | 21,181 | 41,815 | 41,085 | 300,619 | |||||||||||||||
Capital lease obligations, including interest
|
80,070 | 10,336 | 22,376 | 18,161 | 29,197 | |||||||||||||||
Exit activities and restructuring
|
5,599 | 2,882 | 2,717 | — | — | |||||||||||||||
Asset retirement obligation
|
4,784 | 1,400 | — | — | 3,384 | |||||||||||||||
Operating lease commitments
|
130,384 | 29,161 | 42,810 | 31,599 | 26,814 | |||||||||||||||
Service and purchase commitments
|
38,667 | 18,049 | 19,799 | 588 | 231 | |||||||||||||||
$ | 664,204 | $ | 83,009 | $ | 129,517 | $ | 91,433 | $ | 360,245 |
(1)
|
At December 31, 2013, the interest rate was 6% and the projected interest included in the debt payments above incorporates this rate.
|
- 30 - |
- 31 - |
- 32 - |
The scope of management’s assessment of the effectiveness of our internal control over financial reporting excludes iWeb, which we acquired on November 26, 2013. iWeb’s operations represented 17% of our consolidated total assets and 1% of our consolidated net revenues as of and for the year ended December 31, 2013.
- 33 - |
Page
|
||
Report of Independent Registered Public Accounting Firm
|
F-1
|
|
Consolidated Statements of Operations and Comprehensive Loss
|
F-2
|
|
Consolidated Balance Sheets
|
F-3
|
|
Consolidated Statements of Stockholders’ Equity
|
F-4
|
|
Consolidated Statements of Cash Flows
|
F-5
|
|
Notes to Consolidated Financial Statements
|
F-6
|
|
Item 15(a)(2).
Financial Statement Schedules
.
The following financial statement schedule is filed herewith:
|
||
Page
|
||
Schedule II - Valuation and Qualifying Accounts and Reserves
|
S-1
|
- 34 - |
Exhibit
Number
|
Description
|
||
2.1
3.1
|
Share Purchase Agreement made as of October 30, 2013 between iWeb Group Inc., its stockholders and stockholders’ representative and 8672377 Canada Inc. and Internap Network Services Corporation (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed October 31, 2013).†
Certificate of Elimination of the Series B Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K, filed March 2, 2010).
|
||
3.2
|
Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K, filed March 2, 2010).
|
||
3.3
|
Certificate of Amendment of Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed June 21, 2010).
|
||
3.4
|
Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed March 29, 2011).
|
||
10.1
|
Amended and Restated Internap Network Services Corporation 1998 Stock Option/Stock Issuance Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K, filed March 13, 2009).+
|
||
10.2
|
Internap Network Services Corporation 1999 Non-Employee Directors’ Stock Option Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K, filed March 13, 2009).+
|
||
10.3
|
First Amendment to the Internap Network Services Corporation 1999 Non-Employee Directors’ Stock Option Plan (incorporated herein by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K, filed March 13, 2009).+
|
||
10.4
|
Amended Internap Network Services Corporation 1999 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1, File No. 333-95503 dated January 27, 2000).+
|
||
10.5
|
Form of 1999 Equity Incentive Plan Stock Option Agreement (incorporated herein by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1, File No. 333-84035 dated July 29, 1999).+
|
||
10.6
|
Internap Network Services Corporation 2000 Non-Officer Equity Incentive Plan (incorporated herein by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8, File No. 333-37400 dated May 19, 2000).+
|
||
10.7
|
Internap Network Services Corporation 2002 Stock Compensation Plan (incorporated herein by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K, filed March 13, 2009).+
|
||
10.8
|
Form of Nonstatutory Stock Option Agreement under the Internap Network Services Corporation 2002 Stock Compensation Plan (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K, filed March 13, 2009).+
|
||
10.9*
|
2005 Incentive Stock Plan, as amended.+
|
||
10.10
|
Form of Stock Grant Certificate under the Amended and Restated Internap Network Services Corporation 2005 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K, filed March 2, 2010).+
|
||
10.11
|
Form of Stock Option Certificate under the Amended and Restated Internap Network Services Corporation 2005 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K, filed March 2, 2010).+
|
||
10.12
|
Employment Security Plan dated November 14, 2007 (incorporated herein by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K, filed February 21, 2013).+
|
||
10.13
|
Form of Indemnity Agreement for directors and officers of the Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed May 29, 2009).+
|
||
10.14
|
Credit Agreement, dated as of November 2, 2010, by and among the Company, Wells Fargo Capital Finance, LLC, as Agent for the lenders and the other lenders identified on the signature pages thereto (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November 4, 2010)†
|
||
10.15
|
Security Agreement, dated as of November 2, 2010, among the Company, and certain of its subsidiaries party thereto from time to time, as Grantors, and Wells Fargo Capital Finance, LLC, as Agent (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed November 4, 2010).†
|
- 35 - |
10.16
|
General Continuing Guaranty, dated as of November 2, 2010, executed by CO Space, Inc.; CO Space Services, LLC; CO Space Services Texas, LP; CO Space Properties, LLC and CO Space Properties Texas, LP in favor of Wells Fargo Capital Finance, LLC, as Agent (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed November 4, 2010).†
|
|
10.17
|
Joinder, Consent and First Amendment to Credit Agreement by and among the Company, Wells Fargo Capital Finance, LLC, Royal Bank of Canada, Fifth Third Bank, Sun Trust Bank and Silicon Valley Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed January 3, 2012).†
|
|
10.18
|
10.18 Fourth Amendment to Credit Agreement dated August 30, 2012 by and among the Company and Wells Fargo Capital Finance, LLC as agent for the Lenders (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed September 4, 2012).†
|
|
10.19
|
Commitment Letter dated October 30, 2013 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed October 31, 2013).
|
|
10.20
|
Credit Agreement dated as of November 26, 2013 among Internap Network Services Corporation, as Borrower; the Guarantors party thereto, as Guarantors; the Lenders party thereto; Jefferies Finance, LLC, as Administrative Agent and Collateral Agent; Jefferies Finance LLC and PNC Capital Markets LLC, as Joint Lead Arrangers and Joint Book Managers; PNC Bank National Association, as Syndication Agent; and Jefferies Finance LLC, as Issuing Bank and Swingline Lender (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November 26, 2013).†
|
|
10.21
|
Security Agreement dated as of November 26, 2013 among Internap Network Services Corporation; the Guarantors party thereto; and Jefferies Finance LLC, as Collateral Agent ((incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November 26, 2013).†
|
|
10.22
|
Lease Agreement by and between Cousins Properties Incorporated and CO Space Services, LLC, originally dated January 10, 2000 and as amended through February 26, 2007 (incorporated herein by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K, filed February 24, 2011).†§
|
|
10.23
|
Joinder Agreement to the Employment Security Plan executed by Steven A. Orchard (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed May 6, 2010). +
|
|
10.24
|
Offer Letter between the Company and Eric Cooney, dated January 16, 2009 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 2, 2009).+
|
|
10.25
|
Joinder Agreement to the Employment Security Plan executed by Eric Cooney (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed February 2, 2009).+
|
|
10.26
|
Employment Security Agreement executed by Kevin M. Dotts (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed July 26, 2012).+
|
|
10.27
10.28
|
Employment Security Agreement executed by Stephen D. Callahan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed October 30, 2013).+
General Release and Separation Agreement between Richard A. Shank and the Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November 18, 2013).+
|
|
10.29
|
2013 Short Term Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 25, 2013).+
|
|
21.1*
|
List of Subsidiaries.
|
|
23.1*
|
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
|
|
31.1*
|
Rule
13a-14(a)/15d-14(a) Certification, executed by J. Eric Cooney, President and Chief Executive Officer the
Company.
|
- 36 - |
31.2*
|
Rule 13a-14(a)/15d-14(a) Certification, executed by Kevin M. Dotts, Chief Financial Officer of the Company.
|
|
32.1*
|
Section
1350 Certification, executed by J. Eric Cooney, President and Chief Executive Officer the Company.
|
|
32.2*
99.1
|
Section 1350 Certification, executed by Kevin M. Dotts, Chief Financial Officer of the Company.
Notice of Derivative Settlement (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed July 5, 2013).
|
*
|
Documents filed herewith.
|
+
|
Management contract and compensatory plan and arrangement.
|
†
|
Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.
|
§
|
Confidential treatment has been requested for this exhibit. The copy filed as an exhibit omits the information subject to the request for confidential treatment.
|
- 37 - |
INTERNAP NETWORK SERVICES CORPORATION
|
|||
Date: February 20, 2014
|
|||
By:
|
/s/ Kevin M. Dotts
|
||
Kevin M. Dotts
|
|||
Chief Financial Officer
|
|||
(Principal Accounting Officer)
|
Signature
|
Title
|
Date
|
||
/s/ J. Eric Cooney
|
||||
J. Eric Cooney
|
President, Chief Executive Officer and Director
|
February 20, 2014
|
||
(Principal Executive Officer)
|
||||
/s/ Kevin M. Dotts
|
||||
Kevin M. Dotts
|
Chief Financial Officer
|
February 20, 2014
|
||
(Principal Accounting Officer)
|
||||
/s/ Daniel C. Stanzione
|
||||
Daniel C. Stanzione
|
Non-Executive Chairman and Director
|
February 20, 2014
|
||
/s/ Charles B. Coe
|
||||
Charles B. Coe
|
Director
|
February 20, 2014
|
||
/s/ Patricia L. Higgins
|
||||
Patricia L. Higgins
|
Director
|
February 20, 2014
|
||
/s/ Gary M. Pfeiffer
|
||||
Gary M. Pfeiffer
|
Director
|
February 20, 2014
|
||
/s/ Michael A. Ruffolo
|
||||
Michael A. Ruffolo
|
Director
|
February 20, 2014
|
||
/s/ Debora J. Wilson
|
||||
Debora J. Wilson
|
Director
|
February 20, 2014
|
- 38 - |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Internap Network Services Corporation:
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Internap Network Services Corporation and its subsidiaries at December 31, 2013 and December 31, 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework issued in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As described in the Report of Management on Internal Control Over Financial Reporting appearing under Item 9A, management has excluded iWeb Group Inc. from its assessment of internal control over financial reporting as of December 31, 2013 because it was acquired by the Company in a purchase business combination in November 2013. We have also excluded iWeb Group Inc. from our audit of internal control over financial reporting. iWeb Group Inc. is a wholly-owned subsidiary whose total assets and total revenues represent 17% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2013.
/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
February 20, 2014
F-1 |
Year Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Revenues:
|
||||||||||||
Data center services
|
$ | 185,147 | $ | 167,286 | $ | 133,453 | ||||||
Internet protocol (IP) services
|
98,195 | 106,306 | 111,175 | |||||||||
Total revenues
|
283,342 | 273,592 | 244,628 | |||||||||
Operating costs and expenses:
|
||||||||||||
Direct costs of network, sales and services, exclusive of depreciation and amortization, shown below:
|
||||||||||||
Data center services
|
92,564 | 90,604 | 78,907 | |||||||||
IP services
|
39,448 | 40,350 | 41,403 | |||||||||
Direct costs of customer support
|
29,687 | 26,664 | 21,278 | |||||||||
Direct costs of amortization of acquired technologies
|
4,967 | 4,718 | 3,500 | |||||||||
Sales and marketing
|
31,800 | 31,343 | 29,715 | |||||||||
General and administrative
|
42,759 | 38,635 | 33,952 | |||||||||
Depreciation and amortization
|
48,181 | 36,147 | 36,926 | |||||||||
Loss (gain) on disposal of property and equipment, net
|
9 | (55 | ) | 37 | ||||||||
Exit activities, restructuring and impairments
|
1,414 | 1,422 | 2,833 | |||||||||
Total operating costs and expenses
|
290,829 | 269,828 | 248,551 | |||||||||
(Loss) income from operations
|
(7,487 | ) | 3,764 | (3,923 | ) | |||||||
Non-operating expenses:
|
||||||||||||
Interest expense
|
11,346 | 7,566 | 3,701 | |||||||||
Loss on extinguishment of debt
|
881 | — | — | |||||||||
Other, net
|
614 | 283 | 165 | |||||||||
Total non-operating expenses
|
12,841 | 7,849 | 3,866 | |||||||||
Loss before income taxes and equity in (earnings) of equity-method investment
|
(20,328 | ) | (4,085 | ) | (7,789 | ) | ||||||
(Benefit) provision for income taxes
|
(285 | ) | 453 | (5,612 | ) | |||||||
Equity in (earnings) of equity-method investment, net of taxes
|
(213 | ) | (220 | ) | (475 | ) | ||||||
Net loss
|
(19,830 | ) | (4,318 | ) | (1,702 | ) | ||||||
Other comprehensive (loss) income:
|
||||||||||||
Foreign currency translation adjustment
|
(464 | ) | 84 | 136 | ||||||||
Unrealized loss on interest rate swap | (777 | ) | — | — | ||||||||
Total other comprehensive (loss) income | (1,241 | ) | 84 | 136 | ||||||||
Comprehensive loss
|
$ | (21,071 | ) | $ | (4,234 | ) | $ | (1,566 | ) | |||
Basic and diluted net loss per share
|
$ | (0.39 | ) | $ | (0.09 | ) | $ | (0.03 | ) | |||
Weighted average shares outstanding used in computing basic and diluted net loss per share
|
51,135 | 50,761 | 50,422 |
F-2 |
December 31,
|
||||||||
2013
|
2012
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 35,018 | $ | 28,553 | ||||
Accounts receivable, net of allowance for doubtful accounts of $1,995 and $1,809, respectively
|
23,927 | 19,035 | ||||||
Deferred tax asset
|
371 | — | ||||||
Prepaid expenses and other assets
|
22,533 | 13,438 | ||||||
Total current assets
|
81,849 | 61,026 | ||||||
Property and equipment, net
|
331,963 | 248,095 | ||||||
Investment in joint venture
|
2,602 | 3,000 | ||||||
Intangible assets, net
|
57,699 | 21,342 | ||||||
Goodwill
|
130,387 | 59,605 | ||||||
Deposits and other assets
|
7,999 | 5,735 | ||||||
Deferred tax asset
|
1,742 | 1,909 | ||||||
Total assets
|
$ | 614,241 | $ | 400,712 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 29,774 | $ | 22,158 | ||||
Accrued liabilities
|
13,549 | 11,386 | ||||||
Deferred revenues
|
6,729 | 2,991 | ||||||
Capital lease obligations
|
5,489 | 4,504 | ||||||
Term loan, less discount of $1,387 and $239, respectively
|
1,613 | 3,261 | ||||||
Exit activities and restructuring liability
|
2,286 | 2,508 | ||||||
Other current liabilities
|
2,493 | 169 | ||||||
Total current liabilities
|
61,933 | 46,977 | ||||||
Deferred revenues
|
3,804 | 2,669 | ||||||
Capital lease obligations
|
49,800 | 44,054 | ||||||
Revolving credit facility
|
— | 30,501 | ||||||
Term loan, less discount of $8,006 and $388, respectively
|
288,994 | 61,612 | ||||||
Exit activities and restructuring liability
|
1,877 | 3,365 | ||||||
Deferred rent
|
14,617 | 15,026 | ||||||
Deferred tax liability
|
8,591 | — | ||||||
Other long-term liabilities
|
2,415 | 903 | ||||||
Total liabilities
|
432,031 | 205,107 | ||||||
Commitments and contingencies (note 11)
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock, $0.001 par value, 20,000 shares authorized; no shares issued or outstanding
|
— | — | ||||||
Common stock, $0.001 par value; 120,000 shares authorized; 54,023 and 53,459 shares outstanding, respectively
|
54 | 54 | ||||||
Additional paid-in capital
|
1,253,106 | 1,243,801 | ||||||
Treasury stock, at cost, 461 and 267 shares, respectively
|
(3,474 | ) | (1,845 | ) | ||||
Accumulated deficit
|
(1,066,020 | ) | (1,046,190 | ) | ||||
Accumulated items of other comprehensive loss
|
(1,456 | ) | (215 | ) | ||||
Total stockholders’ equity
|
182,210 | 195,605 | ||||||
Total liabilities and stockholders’ equity
|
$ | 614,241 | $ | 400,712 |
F-3 |
Common
Stock
|
||||||||||||||||||||||||||||
Shares
|
Par
Value
|
Additional
Paid-In
Capital
|
Treasury
Stock
|
Accumulated
Deficit
|
Accumulated
Items of
Comprehensive
Loss
|
Total
Stockholders’
Equity
|
||||||||||||||||||||||
Balance, December 31, 2010
|
52,017 | $ | 52 | $ | 1,229,684 | $ | (520 | ) | $ | (1,040,170 | ) | $ | (435 | ) | $ | 188,611 | ||||||||||||
Net loss
|
— | — | — | — | (1,702 | ) | — | (1,702 | ) | |||||||||||||||||||
Foreign currency translation
|
— | — | — | — | — | 136 | 136 | |||||||||||||||||||||
Stock-based compensation
|
— | — | 4,499 | — | — | — | 4,499 | |||||||||||||||||||||
Other activity of stock
compensation plans
|
511 | 1 | 1,371 | (746 | ) | — | — | 626 | ||||||||||||||||||||
Balance, December 31, 2011
|
52,528 | 53 | 1,235,554 | (1,266 | ) | (1,041,872 | ) | (299 | ) | 192,170 | ||||||||||||||||||
Net loss
|
— | — | — | — | (4,318 | ) | — | (4,318 | ) | |||||||||||||||||||
Foreign currency translation
|
— | — | — | — | — | 84 | 84 | |||||||||||||||||||||
Stock-based compensation
|
— | — | 6,285 | — | — | — | 6,285 | |||||||||||||||||||||
Other activity of stock
compensation plans
|
931 | 1 | 1,962 | (579 | ) | — | — | 1,384 | ||||||||||||||||||||
Balance, December 31, 2012
|
53,459 | 54 | 1,243,801 | (1,845 | ) | (1,046,190 | ) | (215 | ) | 195,605 | ||||||||||||||||||
Net loss
|
— | — | — | — | (19,830 | ) | — | (19,830 | ) | |||||||||||||||||||
Foreign currency translation
|
— | — | — | — | — | (464 | ) | (464 | ) | |||||||||||||||||||
Interest rate swap | — | — | — | — | — | (777 | ) | (777 | ) | |||||||||||||||||||
Stock-based compensation
|
— | — | 7,167 | — | — | — | 7,167 | |||||||||||||||||||||
Other activity of stock
compensation plans
|
564 | — | 2,138 | (1,629 | ) | — | — | 509 | ||||||||||||||||||||
Balance, December 31, 2013
|
54,023 | $ | 54 | $ | 1,253,106 | $ | (3,474 | ) | $ | (1,066,020 | ) | $ | (1,456 | ) | $ | 182,210 |
F-4 |
Year Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Cash Flows from Operating Activities:
|
||||||||||||
Net loss
|
$ | (19,830 | ) | $ | (4,318 | ) | $ | (1,702 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
53,148 | 40,865 | 40,426 | |||||||||
Loss (gain) on disposal of property and equipment, net
|
9 | (55 | ) | 37 | ||||||||
Impairment of capitalized software
|
520 | 438 | 526 | |||||||||
Stock-based compensation expense, net of capitalized amount
|
6,743 | 5,858 | 3,983 | |||||||||
Equity in (earnings) of equity-method investment
|
(213 | ) | (220 | ) | (475 | ) | ||||||
Provision for doubtful accounts
|
1,861 | 932 | 1,082 | |||||||||
Non-cash portion of loss on extinguishment of debt
|
841 | — | — | |||||||||
Non-cash change in capital lease obligations
|
99 | 705 | 1,044 | |||||||||
Non-cash change in accrued contingent consideration
|
— | 124 | — | |||||||||
Non-cash change in exit activities and restructuring liability
|
1,185 | 1,171 | 2,288 | |||||||||
Non-cash change in deferred rent
|
(1,907 | ) | (1,073 | ) | (555 | ) | ||||||
Deferred taxes
|
(67 | ) | 204 | (5,734 | ) | |||||||
Other, net
|
706 | (199 | ) | 263 | ||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Accounts receivable
|
(5,777 | ) | (1,428 | ) | (1,186 | ) | ||||||
Prepaid expenses, deposits and other assets
|
(218 | ) | (671 | ) | (2,282 | ) | ||||||
Accounts payable
|
3,992 | 413 | (5,209 | ) | ||||||||
Accrued and other liabilities
|
(5,062 | ) | 2,304 | (247 | ) | |||||||
Deferred revenues
|
1,149 | 862 | (970 | ) | ||||||||
Exit activities and restructuring liability
|
(2,895 | ) | (2,890 | ) | (2,659 | ) | ||||||
Other liabilities
|
(601 | ) | 720 | — | ||||||||
Net cash flows provided by operating activities
|
33,683 | 43,742 | 28,630 | |||||||||
Cash Flows from Investing Activities:
|
||||||||||||
Purchases of property and equipment
|
(62,798 | ) | (74,947 | ) | (68,542 | ) | ||||||
Additions to acquired technology
|
(801 | ) | — | — | ||||||||
Payment of accrued contingent consideration
|
— | (4,750 | ) | — | ||||||||
Acquisitions, net of cash received
|
(144,487 | ) | — | (27,723 | ) | |||||||
Net cash flows used in investing activities
|
(208,086 | ) | (79,697 | ) | (96,265 | ) | ||||||
Cash Flows from Financing Activities:
|
||||||||||||
Proceeds from credit agreements
|
320,000 | 40,401 | 39,853 | |||||||||
Principal payments on credit agreements
|
(116,000 | ) | (3,250 | ) | (1,000 | ) | ||||||
Payment of debt issuance costs
|
(12,415 | ) | (543 | ) | (253 | ) | ||||||
Deposit collateral on credit agreement
|
(6,461 | ) | — | — | ||||||||
Payments on capital lease obligations
|
(4,655 | ) | (3,303 | ) | (1,190 | ) | ||||||
Proceeds from exercise of stock options
|
2,138 | 2,469 | 1,372 | |||||||||
Tax withholdings related to net share settlements of restricted stock awards
|
(1,630 | ) | (1,085 | ) | (746 | ) | ||||||
Other, net
|
(167 | ) | (118 | ) | (135 | ) | ||||||
Net cash flows provided by financing activities
|
180,810 | 34,571 | 37,901 | |||||||||
Effect of exchange rates on cash and cash equivalents
|
58 | 165 | (76 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents
|
6,465 | (1,219 | ) | (29,810 | ) | |||||||
Cash and cash equivalents at beginning of period
|
28,553 | 29,772 | 59,582 | |||||||||
Cash and cash equivalents at end of period
|
$ | 35,018 | $ | 28,553 | $ | 29,772 | ||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid for interest
|
$ | 11,678 | $ | 7,646 | $ | 3,293 | ||||||
Cash paid for income taxes
|
344 | 189 | 267 | |||||||||
Non-cash acquisition of property and equipment under capital leases
|
9,815 | 10,079 | 19,565 | |||||||||
Additions to property and equipment included in accounts payable
|
7,884 | 2,869 | 6,345 | |||||||||
Capitalized stock-based compensation
|
424 | 427 | 516 |
F-5 |
1.
|
DESCRIPTION OF THE COMPANY AND NATURE OF OPERATIONS
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
F-6 |
F-7 |
F-8 |
F-9 |
F-10 |
Year Ended December 31, | ||||||||||||
2013
|
2012
|
2011
|
||||||||||
Net loss and net loss available to common stockholders
|
$ | (19,830 | ) | $ | (4,318 | ) | $ | (1,702 | ) | |||
Weighted average shares outstanding, basic and diluted
|
51,135 | 50,761 | 50,422 | |||||||||
Net loss per share, basic and diluted
|
$ | (0.39 | ) | $ | (0.09 | ) | $ | (0.03 | ) | |||
Anti-dilutive securities excluded from diluted net loss per share calculation for stock-based compensation plans
|
6,795 | 5,909 | 5,816 |
F-11 |
3.
|
ACQUISITIONS
|
Current assets, including cash acquired of $1.3 million
|
$
|
4,284
|
||
Property and equipment
|
52,497
|
|||
Goodwill
|
70,782
|
|||
Intangible assets
|
40,925
|
|||
Other long-term assets
|
689
|
|||
Current liabilities
|
(7,119
|
)
|
||
Deferred revenue
|
(3,740
|
)
|
||
Capital lease obligations
|
(1,301
|
)
|
||
Other long-term liabilities
|
(2,981
|
)
|
||
Net
deferred income tax liability, long-term
|
(8,249
|
)
|
||
$
|
145,787
|
Fair Value
|
Weighted Average
Useful Life
|
||||
Customer relationships
|
$
|
22,200
|
15 years
|
||
Trade name
|
15,100
|
30 years
|
|||
Beneficial leasehold interest
|
858
|
14 years
|
|||
Internally developed software
|
2,767
|
5 years
|
|||
Total intangible assets
|
$
|
40,925
|
F-12 |
|
Year Ended December 31, | |||||||
(in thousands) |
2013
|
2012
|
||||||
Unaudited pro forma revenue
|
$ | 323,000 | $ | 315,000 | ||||
Unaudited pro forma net loss
|
(32,000 | ) | (19,000 | ) |
Cash and cash equivalents
|
$
|
930
|
||
Account receivable and other current assets
|
1,081
|
|||
Property and equipment
|
4,795
|
|||
Goodwill
|
20,007
|
|||
Intangible assets
|
15,700
|
|||
Other assets
|
336
|
|||
Accounts payable and accrued expenses
|
(1,636
|
)
|
||
Deferred revenue
|
(368
|
)
|
||
Capital lease obligations
|
(1,288
|
)
|
||
Other long-term liabilities
|
(137
|
)
|
||
Deferred income tax liability
|
(6,140
|
)
|
||
$
|
33,280
|
Fair Value
|
Weighted Average
Useful Life
|
||||
Customer relationships
|
$
|
7,800
|
10 years
|
||
Internally used software
|
3,400
|
5 years
|
|||
Acquired technology
|
4,300
|
8 years
|
|||
Trade names
|
200
|
10 years
|
|||
Total intangible assets
|
$
|
15,700
|
|
Year Ended
December 31, |
|||
(in thousands)
|
2011
|
|||
Unaudited pro forma revenue
|
$ | 257,999 | ||
Unaudited pro forma net loss
|
(12,241 | ) |
F-13 |
4.
|
FAIR VALUE MEASUREMENTS
|
|
●
|
Level 1: Quoted prices in active markets for identical assets or liabilities;
|
|
●
|
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
|
●
|
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
December 31, 2013:
|
||||||||||||||||
Money market funds
(1)
|
$ | 5,006 | $ | — | $ | — | $ | 5,006 | ||||||||
Interest rate swap (note 10) | — | 777 | — | 777 | ||||||||||||
Asset retirement obligations (note 11)
|
— | — | 2,357 | 2,357 | ||||||||||||
December 31, 2012:
|
||||||||||||||||
Money market funds
(1)
|
$ | 5,003 | $ | — | $ | — | $ | 5,003 |
|
(1)
|
Included in “Cash and cash equivalents” in the consolidated balance sheets as of December 31, 2013 and 2012. Unrealized gains and losses on money market funds were nominal due to the short-term nature of the investments.
|
|
(2)
|
We calculate the fair value of the asset retirement obligations by discounting the estimated amount using the current Treasury bill rate adjusted for our credit non-performance.
|
Balance, January 1, 2013
|
$
|
—
|
||
Accrued estimated obligations, less fair value adjustment
|
3,820
|
|||
Subsequent revision of estimated obligation
|
(1,519
|
)
|
||
Accretion
|
56
|
|||
Balance, December 31, 2013
|
$
|
2,357
|
December 31,
|
||||||||||||||||
2013
|
2012 | |||||||||||||||
Carrying Amount |
Fair
Value |
Carrying
Amount
|
Fair
Value
|
|||||||||||||
Term loan
|
$ | 300,000 | 293,125 | $ | 65,500 | $ | 65,180 | |||||||||
Revolving credit facility
|
— | — | 30,501 | 30,342 |
5.
|
PROPERTY AND EQUIPMENT
|
Property and equipment consisted of the following (in thousands):
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Network equipment
|
$ | 189,763 | $ | 129,168 | ||||
Network equipment under capital lease
|
6,346 | 6,386 | ||||||
Furniture and equipment
|
19,194 | 17,955 | ||||||
Software
|
51,763 | 45,011 | ||||||
Leasehold improvements
|
319,119 | 279,219 | ||||||
Land
|
630 | — | ||||||
Buildings
|
1,395 | — | ||||||
Buildings under capital lease
|
56,440 | 43,325 | ||||||
Property and equipment, gross
|
644,650 | 521,064 | ||||||
Less: accumulated depreciation and amortization ($17,786 and $11,351 related to capital leases at December 31, 2013 and 2012, respectively)
|
(312,687 | ) | (272,969 | ) | ||||
$ | 331,963 | $ | 248,095 |
F-14 |
Year ended December 31, | ||||||||||||
2013
|
2012
|
2011
|
||||||||||
Direct costs of network, sales and services
|
$ | 44,799 | $ | 33,019 | $ | 36,040 | ||||||
Other depreciation and amortization
|
3,382 | 3,128 | 886 | |||||||||
Subtotal
|
48,181 | 36,147 | 36,926 | |||||||||
Amortization of acquired technologies
|
4,967 | 4,718 | 3,500 | |||||||||
Total depreciation and amortization
|
$ | 53,148 | $ | 40,865 | $ | 40,426 |
6.
|
INVESTMENT IN JOINT VENTURE
|
Year Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
Investment balance, January 1
|
$ | 3,000 | $ | 2,936 | ||||
Proportional share of net income
|
213 | 220 | ||||||
Unrealized foreign currency translation loss, net
|
(611 | ) | (156 | ) | ||||
Investment balance, December 31
|
$ | 2,602 | $ | 3,000 |
7.
|
GOODWILL AND OTHER INTANGIBLE ASSETS
|
Data Center
Services
|
IP
Services
|
Total
|
||||||||||
Balance, December 31, 2012:
|
||||||||||||
Goodwill
|
$ | 20,141 | $ | 152,087 | $ | 172,228 | ||||||
Accumulated impairment losses
|
— | (112,623 | ) | (112,623 | ) | |||||||
Net
|
$ | 20,141 | $ | 39,464 | $ | 59,605 | ||||||
iWeb acquisition (note 3)
|
70,782 | — | 70,782 | |||||||||
Balance, December 31, 2013:
|
||||||||||||
Goodwill
|
90,923 | 152,087 | 243,010 | |||||||||
Accumulated impairment losses
|
— | (112,623 | ) | (112,623 | ) | |||||||
Net
|
$ | 90,923 | 39,464 | 130,387 |
F-15 |
December 31, 2013
|
December 31, 2012
|
|||||||||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
|||||||||||||
Acquired technology
|
$ | 47,723 | $ | (34,474 | ) | $ | 43,627 | $ | (29,561 | ) | ||||||
Customer relationships and trade names
|
69,548 | (25,950 | ) | 32,247 | (24,971 | ) | ||||||||||
Beneficial lease interest
|
858 | (6 | ) | — | — | |||||||||||
$ | 118,129 | $ | (60,430 | ) | $ | 75,874 | $ | (54,532 | ) |
2014
|
$
|
8,093
|
||
2015
|
5,068
|
|||
2016
|
4,444
|
|||
2017
|
3,699
|
|||
2018
|
3,554
|
|||
Thereafter
|
32,841
|
|||
$
|
57,699
|
8.
|
ACCRUED LIABILITIES
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Compensation and benefits payable
|
$ | 8,100 | $ | 6,366 | ||||
Telecommunications, sales, use and other taxes
|
1,619 | 1,737 | ||||||
Customer credit balances
|
1,147 | 1,584 | ||||||
Other
|
2,683 | 1,699 | ||||||
$ | 13,549 | $ | 11,386 |
9.
|
EXIT ACTIVITIES AND RESTRUCTURING
|
December 31,
2012
Exit and
Restructuring
Liability
|
Initial
Restructuring
Charges
|
Subsequent
Plan
Adjustments
|
Cash
Payments
|
December 31,
2013
Exit and
Restructuring
Liability
|
||||||||||||||||
Real estate obligations:
|
||||||||||||||||||||
2013 -2011 exit activities
|
$ | 146 | $ | 81 | $ | 2 | $ | (162 | ) | $ | 67 | |||||||||
2007 restructuring
|
4,245 | — | 1,043 | (1,992 | ) | 3,296 | ||||||||||||||
2001 restructuring
|
1,482 | — | 59 | (741 | ) | 800 | ||||||||||||||
$ | 5,873 | $ | 81 | $ | 1,104 | $ | (2,895 | ) | $ | 4,163 |
F-16 |
December 31,
2011
Exit and
Restructuring
Liability
|
Initial
Restructuring
Charges
|
Subsequent
Plan
Adjustments
|
Cash
Payments
|
December 31,
2012
Exit and
Restructuring
Liability
|
||||||||||||||||
Real estate obligations:
|
||||||||||||||||||||
2012-2011 exit activities
|
$ | 361 | $ | 61 | $ | (96 | ) | $ | (180 | ) | $ | 146 | ||||||||
2007 restructuring
|
5,162 | — | 1,018 | (1,935 | ) | 4,245 | ||||||||||||||
2001 restructuring
|
2,070 | — | 187 | (775 | ) | 1,482 | ||||||||||||||
$ | 7,593 | $ | 61 | $ | 1,109 | $ | (2,890 | ) | $ | 5,873 |
10.
|
INTEREST RATE SWAPS
|
F-17 |
December 31,
|
||||||||
2013
|
2012
|
|||||||
Credit limit:
|
||||||||
Revolving credit facility
|
$ | 50,000 | $ | 70,000 | ||||
Term loan
|
300,000 | 67,300 | ||||||
Outstanding balance on revolving credit facility
|
— | 30,501 | ||||||
Outstanding principal balance on the term loan, less unamortized discount of $9.4 million and $0.6 million, respectively
|
290,608 | 64,873 | ||||||
Letters of credit issued with proceeds from revolving credit facility
|
— | 13,578 | ||||||
Letters of credit issued with cash
|
6,400 | — | ||||||
Borrowing capacity
|
50,000 | 25,921 | ||||||
Interest rate – term loan
|
6.0 | % | 3.7 | % | ||||
Interest rate – revolving credit facility
|
5.0 | % | 3.7 | % | ||||
Maturities of the term loan are as follows:
|
||||||||
2014
|
$ | 3,000 | ||||||
2015
|
3,000 | |||||||
2016
|
3,000 | |||||||
2017
|
3,000 | |||||||
2018
|
3,000 | |||||||
2019
|
285,000 | |||||||
$ | 300,000 |
F-18 |
2014
|
$
|
10,336
|
||
2015
|
12,912
|
|||
2016
|
9,464
|
|||
2017
|
8,978
|
|||
2018
|
9,183
|
|||
Thereafter
|
29,197
|
|||
Remaining capital lease payments
|
80,070
|
|||
Less: amounts representing imputed interest
|
(24,781
|
)
|
||
Present value of minimum lease payments
|
55,289
|
|||
Less: current portion
|
(5,489
|
)
|
||
$
|
49,800
|
2014
|
$
|
29,161
|
||
2015
|
21,384
|
|||
2016
|
21,426
|
|||
2017
|
15,957
|
|||
2018
|
15,642
|
|||
Thereafter
|
26,814
|
|||
$
|
130,384
|
2014
|
$
|
18,049
|
||
2015
|
15,987
|
|||
2016
|
3,812
|
|||
2017
|
390
|
|||
2018
|
198
|
|||
Thereafter
|
231
|
|||
$
|
38,667
|
F-19 |
12.
|
OPERATING SEGMENTS
|
Year Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Revenues:
|
||||||||||||
Data center services
|
$ | 185,147 | $ | 167,286 | $ | 133,453 | ||||||
IP services
|
98,195 | 106,306 | 111,175 | |||||||||
Total revenues
|
283,342 | 273,592 | 244,628 | |||||||||
Direct costs of network, sales and services, exclusive of depreciation and amortization:
|
||||||||||||
Data center services
|
92,564 | 90,604 | 78,907 | |||||||||
IP services
|
39,448 | 40,350 | 41,403 | |||||||||
Total direct costs of network, sales and services, exclusive of depreciation and amortization
|
132,012 | 130,954 | 120,310 | |||||||||
Segment profit:
|
||||||||||||
Data center services
|
92,583 | 76,682 | 54,546 | |||||||||
IP services
|
58,747 | 65,956 | 69,772 | |||||||||
Total segment profit
|
151,330 | 142,638 | 124,318 | |||||||||
Exit activities, restructuring and impairments
|
1,414 | 1,422 | 2,833 | |||||||||
Other operating expenses, including direct costs of customer support, depreciation and amortization
|
157,403 | 137,452 | 125,408 | |||||||||
(Loss) income from operations
|
(7,487 | ) | 3,764 | (3,923 | ) | |||||||
Non-operating expenses
|
12,841 | 7,849 | 3,866 | |||||||||
Loss before income taxes and equity in (earnings) of equity-method investment
|
$ | (20,328 | ) | $ | (4,085 | ) | $ | (7,789 | ) |
F-20 |
December 31,
|
||||||||
2013
|
2012
|
|||||||
Data center services
|
$ | 470,736 | $ | 233,727 | ||||
IP services
|
143,505 | 166,985 | ||||||
$ | 614,241 | $ | 400,712 |
13.
|
STOCK-BASED COMPENSATION PLANS
|
Year Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Direct costs of customer support
|
$ | 1,108 | $ | 936 | $ | 659 | ||||||
Sales and marketing
|
1,110 | 929 | 835 | |||||||||
General and administrative
|
4,525 | 3,993 | 2,489 | |||||||||
$ | 6,743 | $ | 5,858 | $ | 3,983 |
F-21 |
Shares
|
Weighted
Average
Exercise
Price
|
|||||||
Balance, December 31, 2012
|
4,701 | $ | 6.57 | |||||
Granted
|
2,077 | 8.60 | ||||||
Exercised
|
(399 | ) | 5.36 | |||||
Forfeitures and post-vesting cancellations
|
(577 | ) | 9.91 | |||||
Balance, December 31, 2013
|
5,802 | 7.05 | ||||||
Exercisable, December 31, 2013
|
3,035 | 6.08 |
Fully
Vested and
Exercisable
|
Expected
to Vest
|
|||||||
Total shares
|
3,035 | 5,361 | ||||||
Weighted-average exercise price
|
$ | 6.08 | 6.94 | |||||
Aggregate intrinsic value
|
$ | 6,275 | 6,722 | |||||
Weighted-average remaining contractual term (in years)
|
5.8 | 7.0 |
Shares
|
Weighted-
Average
Grant Date
Fair
Value
|
|||||||
Unvested balance, December 31, 2012
|
1,207 | $ | 4.96 | |||||
Granted
|
466 | 7.30 | ||||||
Vested
|
(572 | ) | 4.59 | |||||
Forfeited
|
(109 | ) | 6.61 | |||||
Unvested balance, December 31, 2013
|
992 | 6.08 |
F-22 |
Stock
Options
|
Restricted
Stock
|
Total
|
||||||||||
Unrecognized compensation
|
$ | 8,177 | $ | 4,231 | $ | 12,408 | ||||||
Weighted-average remaining recognition period (in years)
|
2.7 | 1.7 | 2.4 |
14.
|
EMPLOYEE RETIREMENT PLAN
|
Year Ended December 31,
|
||||||||||||
|
2013
|
|
|
2012
|
|
|
2011
|
|
||||
|
|
|
|
|
|
|
||||||
United States
|
|
$
|
(17,066
|
)
|
|
$
|
(3,838
|
)
|
|
$
|
(7,316
|
)
|
Foreign
|
|
(3,262
|
)
|
|
(247
|
)
|
|
(473
|
)
|
|||
Loss from continuing operations before income taxes and equity in (earnings) of equity-method investment
|
|
$
|
(20,328
|
)
|
|
$
|
(4,085
|
)
|
|
$
|
(7,789
|
)
|
Year Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Current:
|
||||||||||||
Federal
|
$ | (420 | ) | $ | — | $ | 12 | |||||
State
|
122 | 165 | 140 | |||||||||
Foreign
|
12 | — | — | |||||||||
(286 | ) | 165 | 152 | |||||||||
Deferred:
|
||||||||||||
Federal
|
— | — | (6,002 | ) | ||||||||
State
|
25 | — | — | |||||||||
Foreign
|
(24 | ) | 288 | 238 | ||||||||
1 | 288 | (5,764 | ) | |||||||||
Net income tax (benefit) provision
|
$ | (285 | ) | $ | 453 | $ | (5,612 | ) |
Year Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Federal income tax at statutory rates
|
(34 | )% | (34 | )% | (34 | )% | ||||||
Foreign income tax
|
— | — | 6 | |||||||||
State income tax
|
(4 | ) | (2 | ) | (3 | ) | ||||||
Other permanent differences
|
3 | 3 | 4 | |||||||||
Statutory tax rate change
|
1 | 4 | 2 | |||||||||
Compensation
|
5 | 9 | 2 | |||||||||
Capital loss expiration
|
11 | — | — | |||||||||
Acquisition costs
|
6 | — | — | |||||||||
Change in valuation allowance
|
11 | 31 | (49 | ) | ||||||||
Effective tax rate
|
(1 | )% | 11 | % | (72 | )% |
F-23 |
December 31,
|
||||||||
2013
|
2012
|
|||||||
Current deferred income tax assets (liabilities):
|
||||||||
Provision for doubtful accounts
|
$ | 2,937 | $ | 2,457 | ||||
Accrued compensation
|
1,812 | 1,745 | ||||||
Other accrued expenses
|
6 | 5 | ||||||
Deferred revenue
|
967 | 1,097 | ||||||
Restructuring liability
|
869 | 953 | ||||||
Other
|
195 | 165 | ||||||
Current deferred income tax assets
|
6,786 | 6,422 | ||||||
Less: valuation allowance
|
(6,415 | ) | (6,422 | ) | ||||
Net current deferred income tax assets (liabilities)
|
371 | — | ||||||
Long-term deferred income tax assets (liabilities):
|
||||||||
Property and equipment
|
40,255 | 38,340 | ||||||
Goodwill
|
3,856 | 4,323 | ||||||
Intangible assets
|
(17,329 | ) | (4,495 | ) | ||||
Deferred revenue, less current portion
|
927 | 909 | ||||||
Restructuring liability, less current portion
|
713 | 1,279 | ||||||
Deferred rent
|
5,533 | 5,777 | ||||||
Stock-based compensation
|
3,398 | 2,387 | ||||||
U.S. net operating loss carryforwards
|
63,730 | 62,313 | ||||||
Foreign net operating loss carryforwards, less current portion
|
8,220 | 3,755 | ||||||
Capital loss carryforwards
|
— | 2,271 | ||||||
Tax credit carryforwards
|
2,782 | 980 | ||||||
Other
|
1,219 | 2,081 | ||||||
Long-term deferred income tax assets
|
113,304 | 119,920 | ||||||
Less: valuation allowance
|
(120,153 | ) | (118,011 | ) | ||||
Net long-term deferred income tax (liabilities) assets
|
(6,849 | ) | 1,909 | |||||
Net deferred tax (liabilities) assets
|
$ | (6,478 | ) | $ | 1,909 |
F-24 |
Year Ended December 31, | ||||||||||||
2013
|
2012
|
2011
|
||||||||||
Balance, January 1,
|
$ | 124,433 | $ | 123,414 | $ | 138,693 | ||||||
Increase (decrease) in deferred tax assets
|
2,135 | 1,019 | (15,279 | ) | ||||||||
Balance, December 31,
|
$ | 126,568 | $ | 124,433 | $ | 123,414 |
Year Ended December 31, | ||||||||||||
2013
|
2012
|
2011
|
||||||||||
Unrecognized tax benefits balance, January 1,
|
$ | 341 | $ | 283 | $ | — | ||||||
Addition for tax positions taken in current year
|
— | 58 | 283 | |||||||||
Addition for tax positions taken in a prior year
|
408 | — | — | |||||||||
Deduction for tax positions taken in a prior year
|
(341 | ) | — | — | ||||||||
Unrecognized tax benefits balance, December 31,
|
$ | 408 | $ | 341 | $ | 283 |
16.
|
RELATED PARTY TRANSACTIONS
|
Year Ended December 31, | ||||||||||||
2013
|
2012
|
2011
|
||||||||||
Revenues
|
$ | 123 | $ | 109 | $ | 192 | ||||||
Direct costs of network sales and services
|
129 | 87 | 116 |
F-25 |
17.
|
UNAUDITED QUARTERLY RESULTS
|
2013 Quarter Ended
|
||||||||||||||||
March 31
|
June 30
|
September 30
|
December 31
|
|||||||||||||
Revenues
|
$ | 69,699 | $ | 69,983 | $ | 69,572 | $ | 74,087 | ||||||||
Direct costs of network, sales and services, exclusive of depreciation and amortization
|
32,870 | 32,653 | 32,795 | 33,693 | ||||||||||||
Direct costs of customer support
|
7,151 | 7,372 | 7,528 | 7,635 | ||||||||||||
Direct costs of amortization of acquired technologies
|
1,179 | 1,190 | 1,273 | 1,324 | ||||||||||||
Exit activities, restructuring and impairments
|
248 | 683 | 274 | 209 | ||||||||||||
Net loss
|
(1,643 | ) | (3,702 | ) | (4,035 | ) | (10,450 | ) | ||||||||
Basic and diluted net loss per share
|
(0.03 | ) | (0.07 | ) | (0.08 | ) | (0.21 | ) |
2012 Quarter Ended
|
||||||||||||||||
March 31
|
June 30
|
September 30
|
December 31
|
|||||||||||||
Revenues
|
$ | 67,028 | $ | 68,687 | $ | 68,129 | $ | 69,748 | ||||||||
Direct costs of network, sales and services, exclusive of depreciation and amortization
|
31,154 | 32,641 | 33,573 | 33,585 | ||||||||||||
Direct costs of customer support
|
6,728 | 6,481 | 6,898 | 6,556 | ||||||||||||
Direct costs of amortization of acquired technologies
|
1,179 | 1,179 | 1,179 | 1,179 | ||||||||||||
Exit activities, restructuring and impairments
|
43 | 645 | 124 | 610 | ||||||||||||
Net income (loss)
|
107 | (1,997 | ) | (2,450 | ) | 21 | ||||||||||
Basic and diluted net income (loss) per share
|
0.00 | (0.04 | ) | (0.05 | ) | 0.00 |
F-26 |
Balance at
Beginning
of Fiscal
Period
|
Charges to
Costs and
Expense
|
Deductions
|
Balance at
End of
Fiscal
Period
|
||||||||||
Year ended December 31, 2011:
|
|||||||||||||
Allowance for doubtful accounts
|
$
|
1,883
|
1,082
|
(1,297
|
)
(1)
|
1,668
|
|||||||
Year ended December 31, 2012:
|
|||||||||||||
Allowance for doubtful accounts
|
1,668
|
932
|
(791
|
)
(1)
|
1,809
|
||||||||
Year ended December 31, 2013:
|
|||||||||||||
Allowance for doubtful accounts
|
1,809
|
1,861
|
(1,675
|
)
(1)
|
1,995
|
|
(1)
|
Deductions in the allowance for doubtful accounts represent write-offs of uncollectible accounts net of recoveries.
|
S-1 |
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16
|
-ii- |
|
(a)
|
An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (an “Entity”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 30% or more of either (i) the then outstanding shares of Stock (the “Outstanding Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); excluding, however, the following: (A) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section;
|
|
(b)
|
A change in the composition of the Board such that the individuals who, as of the Change Effective Date, constitute the Board (such Board shall be hereinafter referred to as the “Incumbent Board”), cease for any reason to constitute at least a majority of the Board; provided, however, that for purposes of this definition, any individual who becomes a member of the Board subsequent to the Change Effective Date, whose election, or nomination for election, by the Company’s stockholders was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso), shall be considered as though such individual were a member of the Incumbent Board; and provided, further however, that any such individual whose initial assumption of office occurs as a result of or in connection with either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an Entity other than the Board shall not be so considered as a member of the Incumbent Board;
|
|
(c)
|
The approval by the stockholders of the Company of a merger, reorganization or consolidation or sale or other disposition of all or substantially all of the assets of the Company (each, a “Corporate Transaction”) and, if consummation of such Corporate Transaction is subject, at the time of such approval by stockholders, to the consent of any government or governmental agency, the obtaining of such consent either explicitly or implicitly by consummation); excluding however, such a Corporate Transaction pursuant to which (i) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Stock and Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a Parent) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Stock and Outstanding Voting Securities, as the case may be, (ii) no Entity (other than the Company, any employee benefit plan (or related trust) of the Company, such corporation resulting from such Corporate Transaction or, if reference was made to equity ownership of any Parent for purposes of determining whether clause (i) above is satisfied in connection with the applicable Corporate Transaction, such Parent) will beneficially own, directly or indirectly, 50% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors unless such ownership resulted solely from ownership of securities of the Company prior to the Corporate Transaction, and (iii) individuals who were members of the Incumbent Board will immediately after the consummation of the Corporate Transaction constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction (or, if reference was made to equity ownership of any Parent for purposes of determining whether clause (i) above is satisfied in connection with the applicable Corporate Transaction, of the Parent); or
|
|
(d)
|
The approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
|
-2- |
-3- |
-4- |
-5- |
-6- |
|
(a)
|
Exercise Period
. Each Option granted under this Plan shall be exercisable in whole or in part at such time or times as set forth in the related Option Certificate, but no Option Certificate shall make an Option exercisable on or after the earlier of
|
|
(1)
|
the date which is the fifth anniversary of the date the Option is granted, if the Option is an ISO and the Eligible Employee is a Ten Percent Shareholder on the date the Option is granted, or
|
|
(2)
|
the date which is the tenth anniversary of the date the Option is granted, if the Option is (a) a Non-ISO or (b) an ISO which is granted to an Eligible Employee who is not a Ten Percent Shareholder on the date the Option is granted.
|
|
(b)
|
Termination of Status as Eligible Employee or Director
. Subject to § 7.5(a), an Option Certificate may provide for the exercise of an Option after an Eligible Employee’s or a Director’s status as such has terminated for any reason whatsoever, including death or disability.
|
-7- |
|
(a)
|
Stock Appreciation Right Certificate
. If a Stock Appreciation Right is granted independent of an Option, such Stock Appreciation Right shall be evidenced by a Stock Appreciation Right Certificate, and such certificate shall set forth the number of shares of Stock on which the Eligible Employee’s or Director’s right to appreciation shall be based and the SAR Value of each share of Stock. Such SAR Value shall be no less than the Fair Market Value of a share of Stock on the date that the Stock Appreciation Right is granted. The Stock Appreciation Right Certificate shall set forth such other terms and conditions for the exercise of the Stock Appreciation Right as the Committee deems appropriate under the circumstances, but no Stock Appreciation Right Certificate shall make a Stock Appreciation Right exercisable on or after the date which is the tenth anniversary of the date such Stock Appreciation Right is granted.
|
|
(b)
|
Option Certificate
. If a Stock Appreciation Right is granted together with an Option, such Stock Appreciation Right shall be evidenced by an Option Certificate, the number of shares of Stock on which the Eligible Employee’s or Director’s right to appreciation shall be based shall be the same as the number of shares of Stock subject to the related Option, and the SAR Value for each such share of Stock shall be no less than the Option Price under the related Option. Each such Option Certificate shall provide that the exercise of the Stock Appreciation Right with respect to any share of Stock shall cancel the Eligible Employee’s or Director’s right to exercise his or her Option with respect to such share and, conversely, that the exercise of the Option with respect to any share of Stock shall cancel the Eligible Employee’s or Director’s right to exercise his or her Stock Appreciation Right with respect to such share. A Stock Appreciation Right which is granted as part of an Option shall be exercisable only while the related Option is exercisable. The Option Certificate shall set forth such other terms and conditions for the exercise of the Stock Appreciation Right as the Committee deems appropriate under the circumstances.
|
|
(c)
|
Minimum Vesting Period
. The minimum period of time over which a Stock Appreciation Right shall vest (whether subject to vesting over a period of time only or achievement of performance objectives) shall be no less than the one (1) year period which starts on the date as of which the Stock Appreciation Right is granted unless the Committee determines that a shorter period of time (or no period of time) better serves the Company’s interest.
|
-8- |
|
(a)
|
Conditions to Issuance of Stock
. The Committee acting in its absolute discretion may make the issuance of Stock under a Stock Grant subject to the satisfaction of one, or more than one, condition which the Committee deems appropriate under the circumstances for Eligible Employees or Directors generally or for an Eligible Employee or a Director in particular, and the related Stock Grant Certificate shall set forth each such condition and the deadline for satisfying each such condition. Stock subject to a Stock Grant shall be issued in the name of an Eligible Employee or Director only after each such condition, if any, has been timely satisfied, and any Stock which is so issued shall be held by the Company pending the satisfaction of the forfeiture conditions, if any, under § 9.2(b) for the related Stock Grant.
|
|
(b)
|
Conditions on Forfeiture of Stock or Cash Payment
. The Committee acting in its absolute discretion may make any cash payment due, or Stock to be issued, under a Stock Unit Grant or Stock issued in the name of an Eligible Employee or Director under a Stock Grant non-forfeitable subject to the satisfaction of one, or more than one, objective employment, performance or other condition that the Committee acting in its absolute discretion deems appropriate under the circumstances for Eligible Employees or Directors generally or for an Eligible Employee or a Director in particular, and the related Stock Grant Certificate shall set forth each such condition, if any, and the deadline, if any, for satisfying each such condition. An Eligible Employee’s or a Director’s non-forfeitable interest in the shares of Stock underlying a Stock Grant or the cash payable, or the Stock issuable, under a Stock Unit Grant shall depend on the extent to which he or she timely satisfies each such condition. If a share of Stock is issued under this § 9.2(b) before an Eligible Employee’s or Director’s interest in such share of Stock is non-forfeitable, (1) such share of Stock shall not be available for re-issuance under § 3 until such time, if any, as such share of Stock thereafter is forfeited as a result of a failure to timely satisfy a forfeiture condition and (2) the Company shall have the right to condition any such issuance on the Eligible Employee or Director first signing an irrevocable stock power in favor of the Company with respect to the forfeitable shares of Stock issued to such Eligible Employee or Director in order for the Company to effect any forfeiture called for under the related Stock Grant Certificate.
|
-9- |
|
(c)
|
Minimum Vesting Period
. The minimum vesting period over which a Stock Grant or a Stock Unit Grant shall vest is as follows: (i) if subject to vesting over a period of time, such period shall be no less than the three (3) year period which starts on the date as of which the Stock Grant or Stock Unit Grant is made or (ii) if subject to achievement of performance objectives, such period shall be no less than the one (1) year period which starts on the date as of which the Stock Grant or Stock Unit Grant is made, unless in each case the Committee determines that a shorter period of time (or no period of time) better serves the Company’s interest.
|
|
(a)
|
Cash Dividends
. Except as otherwise set forth in a Stock Grant Certificate, if a dividend is paid in cash on a share of Stock after such Stock has been issued under a Stock Grant but before the first date that an Eligible Employee’s or a Director’s interest in such Stock (1) is forfeited completely or (2) becomes completely non-forfeitable, the Company shall pay such cash dividend directly to such Eligible Employee or Director.
|
|
(b)
|
Stock Dividends
. If a dividend is paid on a share of Stock in Stock after such Stock has been issued under a Stock Grant but before the first date that an Eligible Employee’s or a Director’s interest in such Stock (1) is forfeited completely or (2) becomes completely non-forfeitable, the Company shall hold such dividend Stock subject to the same conditions under § 9.2(b) as the related Stock Grant.
|
|
(c)
|
Other
. If a dividend (other than a dividend described in § 9.3(a) or § 9.3(b)) is paid with respect to a share of Stock after such Stock has been issued under a Stock Grant but before the first date that an Eligible Employee’s or a Director’s interest in such Stock (1) is forfeited completely or (2) becomes completely non-forfeitable, the Company shall distribute or hold such dividend in accordance with such rules as the Committee shall adopt with respect to each such dividend.
|
|
(d)
|
Dividend Equivalents
. If an award is subject to achievement of performance objectives, the Committee may, at the date of the grant of such award, provide for the payment of dividend equivalents to an Eligible Employee or Director either in cash or in shares of Stock, subject in all cases to deferral and payment on a contingent basis based on the Eligible Employee’s or Director’s achievement of the performance objectives with respect to which such dividend equivalents are paid.
|
|
(e)
|
Voting
. Except as otherwise set forth in a Stock Grant Certificate, an Eligible Employee or a Director shall have the right to vote the Stock issued under his or her Stock Grant during the period which comes after such Stock has been issued under a Stock Grant but before the first date that an Eligible Employee’s or Director’s interest in such Stock (1) is forfeited completely or (2) becomes completely non-forfeitable.
|
-10- |
|
(f)
|
General Creditor Status
. Each Eligible Employee and each Director to whom a Stock Unit grant is made shall be no more than a general and unsecured creditor of the Company with respect to any cash payable, or Stock issuable, under such Stock Unit Grant.
|
|
(a)
|
General
. The Committee shall (where the Committee under the circumstances deems in the Company’s best interest) either (1) make Stock Grants and Stock Unit Grants to Eligible Employees subject to at least one condition related to one, or more than one, performance goal based on the performance goals described in § 9.5(b) which seems likely to result in the Stock Grant or Stock Unit Grant qualifying as “performance-based compensation” under § 162(m) of the Code or (2) make Stock Grants and Stock Unit Grants to Eligible Employees under such other circumstances as the Committee deems likely to result in an income tax deduction for the Company with respect such Stock Grant or Stock Unit Grant. A performance goal may be set in any manner determined by the Committee, including looking to achievement on an absolute or relative basis in relation to peer groups or indexes, and no change may be made to a performance goal after the goal has been set.
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(b)
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Performance Goals
. A performance goal is described in this § 9.5(b) if such goal relates to (1) the Company’s return over capital costs or increases in return over capital costs, (2) the Company’s total earnings or the growth in such earnings, (3) the Company’s consolidated earnings or the growth in such earnings, (4) the Company’s earnings per share or the growth in such earnings, (5) the Company’s net earnings or the growth in such earnings, (6) the Company’s earnings before interest expense, taxes, depreciation, amortization and one-time charges or the growth in such earnings, (7) the Company’s earnings before interest and taxes or the growth in such earnings, (8) the Company’s consolidated net income or the growth in such income, (9) the value of the Company’s stock or the growth in such value, (10) the Company’s stock price or the growth in such price, (11) the Company’s return on assets or the growth on such return, (12) the Company’s cash flow or the growth in such cash flow, (13) the Company’s total shareholder return or the growth in such return, (14) the Company’s expenses or the reduction of such expenses, (15) the Company’s revenue growth, (16) the Company’s overhead ratios or changes in such ratios, (17) the Company’s expense-to-sales ratios or the changes in such ratios, or (18) the Company’s economic value added or changes in such value added.
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-11- |
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(c)
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Adjustments
. When the Committee determines whether a performance goal has been satisfied for any period, the Committee where the Committee deems appropriate may make such determination using calculations which alternatively include and exclude one, or more than one, “extraordinary items” as determined under U.S. generally accepted accounting principles, and the Committee may determine whether a performance goal has been satisfied for any period taking into account the alternative which the Committee deems appropriate under the circumstances. The Committee also may take into account any other unusual or non-recurring items, including, without limitation, the charges or costs associated with restructurings of the Company, discontinued operations, and the cumulative effects of accounting changes and, further, may take into account any unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles or such other factors as the Committee may determine reasonable and appropriate under the circumstances (including, without limitation, any factors that could result in the Company’s paying non-deductible compensation to an Eligible Employee).
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-12- |
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(a)
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the tenth anniversary of the effective date of this Plan (as determined under § 4), in which event this Plan otherwise thereafter shall continue in effect until all outstanding Options and Stock Appreciation Rights have been exercised in full or no longer are exercisable and all Stock issued under any Stock Grants under this Plan have been forfeited or have become non-forfeitable, or
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(b)
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the date on which all of the Stock reserved under § 3 has (as a result of the exercise of Options or Stock Appreciation Rights granted under this Plan or the satisfaction of the forfeiture conditions, if any, on Stock Grants) been issued or no longer is available for use under this Plan, in which event this Plan also shall terminate on such date.
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(a)
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any equity restructuring or change in the capitalization of the Company, including, but not limited to, spin offs, stock dividends, large non-reoccurring dividends, rights offerings or stock splits, or
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(b)
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any other transaction described in § 424(a) of the Code which does not constitute a Change in Control of the Company
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-13- |
-14- |
-15- |
-16- |
Name of Entity | Jurisdiction | |||
Voxel Holdings, Inc. | Delaware | |||
Voxel Dot Net, Inc. | Delaware | |||
Ubersmith, Inc. | Delaware | |||
Internap Connectivity LLC | Delaware | |||
Internap Network Services U.K. Limited | United Kingdom | |||
Internap Network Services B.V.
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Netherlands
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Internap Technologies (Bermuda) Limited
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Bermuda
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Internap Technologies B.V.
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Netherlands
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Internap Network Services (HK) Limited
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Hong Kong
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Internap Network Services (Singapore) Pte Limited
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Singapore
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Internap Network Services (Australia) Co. Pty. Ltd.
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Australia
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Internap Network Services Canada
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Canada
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iWeb Technologies Inc. | Quebec, Canada | |||
iWeb Hosting UK Ltd. | United Kingdom | |||
iWeb Intellectual Property Inc. | Quebec, Canada | |||
iWeb Peering Corporation | Delaware | |||
iWeb U.S., LLC | Delaware | |||
Internap Japan Co., Ltd.* | Japan |
2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: February 20, 2014
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/s/ J. Eric Cooney
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J. Eric Cooney
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President and Chief Executive Officer
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1.
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I have reviewed this Annual Report on Form 10-K of Internap Network Services Corporation (the “registrant”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: February 20, 2014
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/s/ Kevin M. Dotts
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Kevin M. Dotts
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Chief Financial Officer
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●
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the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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●
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information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: February 20, 2014
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/s/ J. Eric Cooney
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J. Eric Cooney
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President and Chief
Executive Officer
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●
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the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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●
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information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: February 20, 2014
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/s/ Kevin M. Dotts
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Kevin M. Dotts
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Chief Financial Officer
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