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☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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46-1304852
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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4931 North 300 West
Provo, UT
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84604
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☒
(Do not check if a smaller reporting company)
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Smaller reporting company
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☐
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Page
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Item 1
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Item 1A
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Item 1B
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Item 2
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Item 3
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Item 4
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Item 5
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Item 6
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Item 7
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Item 7A
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Item 8
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Item 9
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Item 9A
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Item 9B
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Item 10
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Item 11
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Item 12
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Item 13
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Item 14
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Item 15
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Item 16
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•
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accelerate adoption of our smart home solution;
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establish and grow through new customer acquisition channels;
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increase brand awareness;
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meet customer expectations and address key friction points for smart home adoption and use;
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expand our ecosystem with third-party and proprietary devices;
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reduce subscriber attrition;
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lower net subscriber acquisition costs;
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improve unit economics and grow subscription revenues per customer over time;
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increase new customer originations, customer usage, and customer satisfaction;
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develop, design, and sell our own products and services that are differentiated from those of our competitors;
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attract, train and retain an effective sales force and other key personnel;
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upgrade and maintain our information technology systems;
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acquire and protect intellectual property;
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meet future liquidity requirements and comply with restrictive covenants related to our long-term indebtedness;
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enhance our future operating and financial results;
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comply with laws and regulations applicable to our business; and
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successfully defend litigation brought against us.
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risks of the smart home and security industry, including risks of and publicity surrounding the sales, subscriber origination and retention process;
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•
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the highly competitive nature of the smart home and security industry and product introductions and promotional activity by our competitors;
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•
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litigation, complaints or adverse publicity;
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•
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the impact of changes in consumer spending patterns, consumer preferences, local, regional, and national economic conditions, crime, weather, demographic trends and employee availability;
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•
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adverse publicity and product liability claims;
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•
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increases and/or decreases in utility and other energy costs, increased costs related to utility or governmental requirements;
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cost increases or shortages in smart home and security technology products or components;
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•
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privacy and data protection laws, privacy or data breaches, or the loss of data; and
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•
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the impact to our business, results of operations, financial condition, regulatory compliance and customer experience of the Vivint Flex Pay plan (as defined in Note 2 - Basis of Presentation in the consolidated financial statements) and the Best Buy Smart Home powered by Vivint program.
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•
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references to “Vivint,” “we,” “us,” “our” and “the Company” are to APX Group Holdings, Inc. and its consolidated subsidiaries;
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•
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references to “2GIG” are to 2GIG Technologies, Inc., our affiliate;
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•
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references to “Acquisition LLC” are to 313 Acquisition LLC, the Company's indirect parent;
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•
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references to “AMRU” are to average monthly revenue per user, which consists of Total MR (as defined below) divided by Total Subscribers (as defined below) at the end of a given period;
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•
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references to “APX Group” are to APX Group, Inc., an indirect wholly-owned subsidiary of the Company;
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•
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references to the “Consumer Financing Program” or “CFP” are to the program, launched in the first quarter of 2017 under the Vivint Flex Pay plan, pursuant to which we offer to qualified customers in the United States an opportunity to finance the purchase of products and installation fees in connection with the services through a third-party financing provider;
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•
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references to “Holdings” and “Parent Guarantor” are to APX Group Holdings, Inc., a wholly- owned subsidiary of the Company;
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•
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references to “Notes” are to the 6.375% Senior Secured Notes due 2019 (“2019 notes”), 8.75% Senior Notes due 2020 (“2020 notes”), 8.875% Senior Secured Notes due 2022 (“2022 private placement notes”), 7.875% Senior Secured Notes due 2022 (“2022 notes”) and 7.625% Senior Notes due 2023 (“2023 notes”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources”;
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•
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references to “Revolving Credit Facility” are to the senior secured revolving credit facility. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Liquidity and Capital Resources-Revolving Credit Facility”;
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references to “RICs” are to retail installment contracts offered under the Vivint Flex Pay plan with respect to the purchase of products and installation fees to certain of our customers who do not qualify for the CFP but qualify under our historical underwriting criteria;
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•
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references to “Solar” are to Vivint Solar, Inc., our affiliate;
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•
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references to “our Sponsor” are to certain investment funds affiliated with The Blackstone Group L.P.;
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•
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references to “Total MR” are to the aggregate, contracted recurring monthly service billings to our smart home and security subscribers, based on the Total Subscribers number as of the end of a given period, plus deferred product and interest revenue recognized during the last month of the period;
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•
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references to “Total Subscribers” are to the aggregate number of active smart home and security subscribers at the end of a given period, excluding subscribers acquired under pilot programs; and
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•
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references to the “Vivint Flex Pay” plan are to the plan, introduced in January 2017, under which we launched the Consumer Financing Program and began to offer RICs as well as the option to pay in full at the time of purchase.
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ITEM 1.
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BUSINESS
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•
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predict and detect the current state of the home, its systems, and occupants;
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interact with occupants as necessary to preserve awareness and control;
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•
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predict occupants’ preferences based on these interactions; and
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take coordinated action with minimal user effort.
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understand the value proposition and affordability of a smart home;
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•
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customize their smart home system; and
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•
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schedule a professional installation.
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•
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StreetGenie. Our go-to-market software application allows us to target prospective customers efficiently and maintain detailed records of past interactions with each home. It coordinates activities among our sales teams and guides sales representatives through our finely-tuned process.
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TechGenie. Our in-home technician software application enables them to receive schedules, manage inventory and interact with the customer service center remotely to maximize productivity.
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CareGenie. Our customer service software application equips our care representatives with case history, diagnostic capabilities and proactive tools to help them deliver a positive service experience.
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Grow Existing Channels.
We have immediate opportunities for growth in our existing sales channels, and in our emerging retail channels.
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Expand into New Channels.
We intend to expand into new distribution channels, including E-commerce and multi-family units.
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Upsell to Customer Base.
We intend to expand efforts to market our latest smart home solutions to existing customers.
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Accelerate Product Innovation and Integrations.
We will continue to expand the value of our platform and marketing reach by accelerating our product innovation as well as integrations with third-party smart home devices and software applications.
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Capitalize on Our AI Platform Opportunities.
Our artificial intelligence capabilities will enable us to better
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•
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Vivint SkyControl Panel. The system hub has a 7-inch touchscreen to connect and control the whole system-locks, lights, thermostats, cameras, sensors and more. It includes battery backup and cellular radio for reliable and secure communications.
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•
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Vivint Glance Display. The secondary panel gives complete control of the smart home from any room in the home. It is mounted on the wall or placed on a counter.
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Vivint Doorbell Camera. The doorbell camera enables the customer to see and speak with doorstep visitors from anywhere. Integration with locks and garage doors gives them full control of access to their home.
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Vivint Ping Camera. The indoor camera enables customers to connect with loved ones with two-way audio and one-way video. It provides a unique one-touch callout button to instantly connect to family members by mobile devices.
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Vivint Outdoor Camera. Customers can look after their property outside the home even when they are away with the outdoor cameras.
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Vivint Playback. Customers can record 30 days of continuous video from up to four cameras to their Vivint Smart Drive and access it remotely from their mobile device.
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•
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Vivint Element Thermostat. Paired with Vivint Sky, the Element thermostat saves customers money by automatically adjusting the temperature based on when customers are home, away or asleep. Customers can easily control the temperature from their panel, app, thermostat or even with their voice.
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•
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Door/Window Contact Sensor. Customers can ensure doors and windows are secure with a Vivint Door/Window Contact Sensor.
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Motion Detector. Customers can track movement in their house with this passive infrared motion sensor.
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Garage Door Controller. Customers can open or close their garage door remotely from our mobile app with this controller.
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Wireless Smoke Detector. Customers can keep their home safer with this battery-powered wireless smoke detector. When smoke, excessive heat or cold is detected, the sensor sends a signal to the panel, which sounds a loud local alarm, and the Vivint monitoring team immediately dispatches authorities.
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•
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Flood Sensor. Customers are notified when their basement floods or reaches freezing temperatures with this sensor.
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Carbon Monoxide Detector. When excessive carbon monoxide levels are detected, the sensor sends a signal to the panel, which sounds a loud local alarm, and the Vivint monitoring team immediately dispatches authorities.
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•
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Glass-Break Detector. Customers are alerted if a window is broken in the home with this sensor.
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Kwikset Smart Lock. Customers can control their locks with an access code or from anywhere via the mobile app. With one-touch lockup, they can control their security, lights and thermostat when locking up to leave.
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Amazon Echo. Customers can control their smart home with the Amazon Echo voice-controlled speaker. Our software integration lets them control their entire smart home with just their voice.
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•
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Nest Learning Thermostat. The Nest Learning Thermostat integrates with the Vivint smart home system to save money and keep customers comfortable. They can control it with their voice, app, panel, or at the thermostat.
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Google Home. Customers can control their smart home with the Google Home voice-controlled speaker. Our software integration lets them control their entire smart home with just their voice.
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•
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Philips Hue. Customers can use their Philips Hue lighting to create custom lighting schedules for rooms, floors or their entire home, including having the lights on to imitate home occupancy while away. They can control Philips Hue lighting through the panel, app or with their voice using Amazon Echo or Google Home devices.
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Consumer Financing Program.
As of the second quarter of 2017, qualified customers in the United States may finance the purchase of our products through a third-party financing provider, Citizens Bank. Customers electing to
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Paid in Full
. Customers may either pay in full at the time of installation with cash, ACH, credit or debit card.
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Retail Installment Contract.
Customers not eligible for the CFP, but who qualify under our underwriting criteria, may enter into a retail installment contract, or RIC, directly with Vivint.
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•
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In 2015 we introduced our award-winning Vivint Doorbell Camera, which enables homeowners to see, hear and speak to anyone on their doorstep, and customers to decide whether to remotely unlock the door for visitors or open the garage door for a package delivery.
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•
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In 2016, we introduced the Vivint Ping indoor camera, with two-way audio, one-way video and one-touch callout.
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•
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In 2016, we launched the Vivint Element thermostat, an award winning, elegant thermostat at a lower cost than other brand name smart thermostats, and improved performance as a result of the connection to the Vivint platform.
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ITEM 1A.
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RISK FACTORS
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•
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making it more difficult for us to satisfy our obligations with respect to our debt;
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•
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limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;
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•
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requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows and future borrowings available for working capital, capital expenditures (including subscriber acquisition costs), acquisitions and other general corporate purposes;
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•
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increasing our vulnerability to general adverse economic and industry conditions;
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•
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exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;
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•
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limiting our flexibility in planning for and reacting to changes in the industry in which we compete;
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•
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placing us at a disadvantage compared to other, less leveraged competitors; and
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•
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increasing our cost of borrowing.
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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ITEM 2.
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PROPERTIES
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ITEM 3.
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LEGAL PROCEEDINGS
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ITEM 4.
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MINE SAFETY DISCLOSURES
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ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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ITEM 6.
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SELECTED FINANCIAL DATA
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December 31, 2017
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December 31, 2016
|
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December 31, 2015
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December 31, 2014
|
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December 31, 2013
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||||||||||
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(in thousands)
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||||||||||||||||||
Statement of Operations Data:
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|
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|
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||||||||||
Total revenue
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$
|
881,983
|
|
|
$
|
757,907
|
|
|
$
|
653,721
|
|
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$
|
563,677
|
|
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$
|
500,908
|
|
Total costs and expenses
|
1,037,476
|
|
|
829,009
|
|
|
762,396
|
|
|
657,546
|
|
|
555,788
|
|
|||||
Loss from operations
|
(155,493
|
)
|
|
(71,102
|
)
|
|
(108,675
|
)
|
|
(93,869
|
)
|
|
(54,880
|
)
|
|||||
Other expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
(225,772
|
)
|
|
(197,965
|
)
|
|
(161,339
|
)
|
|
(147,511
|
)
|
|
(114,476
|
)
|
|||||
Interest income
|
130
|
|
|
432
|
|
|
90
|
|
|
1,455
|
|
|
1,493
|
|
|||||
Gain on 2GIG Sale
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,866
|
|
|||||
Other (expenses) income
|
(27,986
|
)
|
|
(7,255
|
)
|
|
(8,832
|
)
|
|
1,779
|
|
|
76
|
|
|||||
Loss from continuing operations before income taxes
|
(409,121
|
)
|
|
(275,890
|
)
|
|
(278,756
|
)
|
|
(238,146
|
)
|
|
(120,921
|
)
|
|||||
Income tax expense
|
1,078
|
|
|
67
|
|
|
351
|
|
|
514
|
|
|
3,592
|
|
|||||
Net loss
|
(410,199
|
)
|
|
(275,957
|
)
|
|
(279,107
|
)
|
|
(238,660
|
)
|
|
(124,513
|
)
|
|||||
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash
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$
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3,872
|
|
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$
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43,520
|
|
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$
|
2,559
|
|
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$
|
10,807
|
|
|
$
|
261,905
|
|
Working capital (deficit)
|
(162,406
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)
|
|
(80,170
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)
|
|
(120,952
|
)
|
|
(51,569
|
)
|
|
187,781
|
|
|||||
Adjusted working capital deficit (excluding cash and capital lease obligation)
|
(155,664
|
)
|
|
(113,893
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)
|
|
(115,895
|
)
|
|
(56,827
|
)
|
|
(69,925
|
)
|
|||||
Total assets
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2,868,847
|
|
|
2,547,662
|
|
|
2,303,644
|
|
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2,255,586
|
|
|
2,370,544
|
|
|||||
Total debt
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2,820,297
|
|
|
2,486,700
|
|
|
2,138,112
|
|
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1,835,068
|
|
|
1,708,159
|
|
|||||
Total shareholders’ (deficit) equity
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$
|
(653,526
|
)
|
|
$
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(245,182
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)
|
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$
|
(76,993
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)
|
|
$
|
224,486
|
|
|
$
|
490,243
|
|
Ratio of earnings to fixed charges (1)
|
NM
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|
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NM
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|
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NM
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NM
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NM
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(1)
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The ratio of earnings to fixed charges is calculated by dividing the sum of earnings (loss) from continuing operations before income taxes and fixed charges, by fixed charges. Fixed charges include interest expense on all indebtedness, amortization of debt issuance fees and interest expense on operating leases. Earnings were deficient in all periods presented to cover fixed charges by the following amounts:
|
December 31,
2017 |
|
December 31,
2016 |
|
December 31,
2015 |
|
December 31,
2014 |
|
December 31,
2013 |
||||||||||
(in thousands)
|
||||||||||||||||||
$
|
(409,121
|
)
|
|
$
|
(275,957
|
)
|
|
$
|
(278,756
|
)
|
|
$
|
(238,146
|
)
|
|
$
|
(120,921
|
)
|
ITEM 7.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
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In 2006, we launched our inside sales channel to provide a consultative experience to potential new customers who contact us directly.
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•
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In 2010, we launched a smart thermostat, our first smart home device, which enabled remote energy management through an app and allowed the customer to create advanced energy management rules.
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•
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In 2012, we were acquired by investment funds affiliated with The Blackstone Group L.P., our Sponsor.
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•
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In 2013, we opened our innovation center in Lehi, Utah, which focuses on the research and development of new products within our existing offerings, as well as developing new technology to expand beyond our current products and services. Since its opening, our innovation center has developed a number of industry leading products and software solutions.
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•
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In 2014, we launched our proprietary Vivint Smart Home Cloud software platform, SkyControl panel and Vivint app. Through the Vivint app’s integration with the Vivint Smart Home Cloud, customers can remotely manage their smart home devices, view the cameras in their home and create various alerts and system rules.
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•
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In 2015, we surpassed 1 million active subscribers.
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•
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In 2016, we closed equity investments totaling approximately $100 million, which were co-led by Peter Thiel, a venture capitalist and entrepreneur who co-founded PayPal, and investment firm Solamere Capital. These strategic investments helped further advance our growth and product innovation.
|
•
|
In 2017, we introduced the Vivint Flex Pay plan, which we believe will enhance our unit economics and the capital efficiency of our business, and which became our primary sales model in March 2017. Under Vivint Flex Pay, qualified customers in the United States are eligible for unsecured, zero-interest installment loans through a third-party financing provider to finance their purchase of our products. Under Vivint Flex Pay, customers pay separately for our products and services.
|
•
|
In 2017, we launched our retail sales channel by entering into a strategic relationship with Best Buy to jointly sell our products and services in their retail locations nationwide. Under this strategic relationship, Best Buy offered our products and services in approximately 450 Best Buy retail stores at the end of 2017.
|
•
|
growth in Total Subscribers and Total MR;
|
•
|
the net acquisition costs associated with New Subscribers;
|
•
|
the value of our products and services purchased by New Subscribers;
|
•
|
the cost to monitor and service our subscriber base;
|
•
|
the level of our general and administrative expenses;
|
•
|
subscriber attrition rates; and
|
•
|
the mix of subscribers purchasing our products through the Consumer Financing Program versus through RICs.
|
|
Year ended December 31,
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
Beginning balance of subscribers
|
1,146,746
|
|
|
1,013,917
|
|
|
894,175
|
|
Net new additions
|
279,735
|
|
|
277,241
|
|
|
236,562
|
|
Subscriber contracts sold (1)
|
—
|
|
|
(7,520
|
)
|
|
—
|
|
Attrition
|
(133,783
|
)
|
|
(136,892
|
)
|
|
(116,820
|
)
|
Ending balance of subscribers
|
1,292,698
|
|
|
1,146,746
|
|
|
1,013,917
|
|
Monthly average subscribers
|
1,214,696
|
|
|
1,082,694
|
|
|
953,923
|
|
Attrition rate
|
11.0
|
%
|
|
12.6
|
%
|
|
12.2
|
%
|
|
(1)
|
Represents our New Zealand and Puerto Rico subscriber contracts sold during the year ended December 31, 2016.
|
|
Year ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in thousands)
|
||||||||||
Total revenues
|
$
|
881,983
|
|
|
$
|
757,907
|
|
|
$
|
653,721
|
|
Total costs and expenses
|
1,037,476
|
|
|
829,009
|
|
|
762,396
|
|
|||
Loss from operations
|
(155,493
|
)
|
|
(71,102
|
)
|
|
(108,675
|
)
|
|||
Other expenses
|
253,628
|
|
|
204,788
|
|
|
170,081
|
|
|||
Loss before taxes
|
(409,121
|
)
|
|
(275,890
|
)
|
|
(278,756
|
)
|
|||
Income tax expense
|
1,078
|
|
|
67
|
|
|
351
|
|
|||
Net loss
|
$
|
(410,199
|
)
|
|
$
|
(275,957
|
)
|
|
$
|
(279,107
|
)
|
Key operating metrics (1)
|
|
||||||||||
Total subscribers, as of December 31 (in thousands)
|
1,292.7
|
|
|
1,146.7
|
|
|
1,013.9
|
|
|||
Total MR (in thousands)
|
$
|
75,355
|
|
|
$
|
65,633
|
|
|
$
|
55,689
|
|
AMRU
|
$
|
58.29
|
|
|
$
|
57.23
|
|
|
$
|
54.92
|
|
Net service cost per user
|
$
|
15.69
|
|
|
$
|
14.72
|
|
|
$
|
14.33
|
|
Net service margin
|
72
|
%
|
|
74
|
%
|
|
74
|
%
|
|||
Net subscriber acquisition costs per new subscriber
|
$
|
1,594
|
|
|
$
|
1,996
|
|
|
$
|
1,899
|
|
|
(1)
|
All subscriber data presented excludes wireless internet business and pilot programs.
|
|
Year ended December 31,
|
|
|
|||||||
|
2017
|
|
2016
|
|
% Change
|
|||||
|
(in thousands)
|
|
|
|||||||
Recurring and other revenue
|
$
|
843,420
|
|
|
$
|
724,478
|
|
|
16
|
%
|
Service and other sales revenue
|
26,988
|
|
|
22,855
|
|
|
18
|
%
|
||
Activation fees
|
11,575
|
|
|
10,574
|
|
|
9
|
%
|
||
Total revenues
|
$
|
881,983
|
|
|
$
|
757,907
|
|
|
16
|
%
|
|
Year ended December 31,
|
|
|
|||||||
|
2017
|
|
2016
|
|
% Change
|
|||||
|
(in thousands)
|
|
|
|||||||
Operating expenses
|
$
|
321,476
|
|
|
$
|
264,865
|
|
|
21
|
%
|
Selling expenses
|
198,348
|
|
|
131,421
|
|
|
51
|
%
|
||
General and administrative
|
188,397
|
|
|
143,168
|
|
|
32
|
%
|
||
Depreciation and amortization
|
329,255
|
|
|
288,542
|
|
|
14
|
%
|
||
Restructuring and asset impairment charges
|
—
|
|
|
1,013
|
|
|
NM
|
|
||
Total costs and expenses
|
$
|
1,037,476
|
|
|
$
|
829,009
|
|
|
25
|
%
|
|
Year ended December 31,
|
|
|
|||||||
|
2017
|
|
2016
|
|
% Change
|
|||||
|
(in thousands)
|
|
|
|||||||
Interest expense
|
$
|
225,772
|
|
|
$
|
197,965
|
|
|
14
|
%
|
Interest income
|
(130
|
)
|
|
(432
|
)
|
|
NM
|
|
||
Other loss, net
|
27,986
|
|
|
7,255
|
|
|
NM
|
|
||
Total other expenses, net
|
$
|
253,628
|
|
|
$
|
204,788
|
|
|
24
|
%
|
|
Year ended December 31,
|
|
|
||||||
|
2017
|
|
2016
|
|
% Change
|
||||
|
(in thousands)
|
|
|
||||||
Income tax expense
|
$
|
1,078
|
|
|
$
|
67
|
|
|
NM
|
|
Year ended December 31,
|
|
|
|||||||
|
2016
|
|
2015
|
|
% Change
|
|||||
|
(in thousands)
|
|
|
|||||||
Recurring and other revenue
|
$
|
724,478
|
|
|
$
|
624,989
|
|
|
16
|
%
|
Service and other sales revenue
|
22,855
|
|
|
22,700
|
|
|
1
|
%
|
||
Activation fees
|
10,574
|
|
|
6,032
|
|
|
75
|
%
|
||
Total revenues
|
$
|
757,907
|
|
|
$
|
653,721
|
|
|
16
|
%
|
|
Year ended December 31,
|
|
|
|||||||
|
2016
|
|
2015
|
|
% Change
|
|||||
|
(in thousands)
|
|
|
|||||||
Operating expenses
|
$
|
264,865
|
|
|
$
|
228,315
|
|
|
16
|
%
|
Selling expenses
|
131,421
|
|
|
122,948
|
|
|
7
|
%
|
||
General and administrative
|
143,168
|
|
|
107,212
|
|
|
34
|
%
|
||
Depreciation and amortization
|
288,542
|
|
|
244,724
|
|
|
18
|
%
|
||
Restructuring and asset impairment charges
|
1,013
|
|
|
59,197
|
|
|
NM
|
|
||
Total costs and expenses
|
$
|
829,009
|
|
|
$
|
762,396
|
|
|
9
|
%
|
|
Year ended December 31,
|
|
|
|||||||
|
2016
|
|
2015
|
|
% Change
|
|||||
|
(in thousands)
|
|
|
|||||||
Interest expense
|
$
|
197,965
|
|
|
$
|
161,339
|
|
|
23
|
%
|
Interest income
|
(432
|
)
|
|
(90
|
)
|
|
NM
|
|
||
Other loss (income), net
|
7,255
|
|
|
8,832
|
|
|
(18
|
)%
|
||
Total other expenses, net
|
$
|
204,788
|
|
|
$
|
170,081
|
|
|
20
|
%
|
|
Year ended December 31,
|
|
|
||||||
|
2016
|
|
2015
|
|
% Change
|
||||
|
(in thousands)
|
|
|
||||||
Income tax expense
|
$
|
67
|
|
|
$
|
351
|
|
|
NM
|
|
Three Months Ended
|
||||||||||||||
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Statement of operations data
|
|
|
|
|
|
|
|
||||||||
Revenue
|
$
|
235,846
|
|
|
$
|
228,658
|
|
|
$
|
212,126
|
|
|
$
|
205,353
|
|
Loss from operations
|
(68,356
|
)
|
|
(40,147
|
)
|
|
(30,463
|
)
|
|
(16,527
|
)
|
||||
Net loss
|
(135,406
|
)
|
|
(107,920
|
)
|
|
(84,237
|
)
|
|
(82,636
|
)
|
|
Three Months Ended
|
||||||||||||||
|
December 31, 2016
|
|
September 30, 2016
|
|
June 30, 2016
|
|
March 31, 2015 (1)
|
||||||||
|
(in thousands)
|
||||||||||||||
Statement of operations data
|
|
|
|
||||||||||||
Revenue
|
$
|
204,512
|
|
|
$
|
198,335
|
|
|
$
|
180,807
|
|
|
$
|
174,253
|
|
Loss from operations
|
(16,818
|
)
|
|
(17,736
|
)
|
|
(32,873
|
)
|
|
(3,675
|
)
|
||||
Net loss
|
(71,168
|
)
|
|
(69,974
|
)
|
|
(89,722
|
)
|
|
(45,093
|
)
|
|
|
Year ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net cash used in operating activities
|
|
$
|
(309,332
|
)
|
|
$
|
(365,706
|
)
|
|
$
|
(255,307
|
)
|
Net cash used in investing activities
|
|
(21,661
|
)
|
|
(15,147
|
)
|
|
(35,615
|
)
|
|||
Net cash provided by financing activities
|
|
291,213
|
|
|
422,280
|
|
|
284,400
|
|
•
|
$337.4 million
in non-cash amortization, depreciation, and stock-based compensation,
|
•
|
a
$23.1 million
loss on early extinguishment of debt, and
|
•
|
a
$22.5 million
provision for doubtful accounts.
|
•
|
a
$457.7 million
increase
in subscriber acquisition costs,
|
•
|
a
$75.6 million
increase
in inventories to support our Best Buy relationship and the anticipated sales generated by our inside sales channel,
|
•
|
a
$74.8 million
increase
in other assets primarily due to increases in notes receivables associated with RICs,
|
•
|
a
$49.6 million
increase
in accounts receivable driven primarily by the recognition of billed RICs under Vivint Flex Pay, and
|
•
|
a
$6.0 million
increase
in prepaid expenses and other current assets.
|
•
|
a
$247.5 million
increase
in deferred revenue due to the increased subscriber base and the generation of deferred revenues associated with product sales under the Vivint Flex Pay plan,
|
•
|
a
$70.5 million
increase
in accounts payable due primarily to increases in inventory purchases, and
|
•
|
a
$62.2 million
increase
in accrued expenses and other liabilities due primarily from increases in accrued interest on our long term debt.
|
•
|
$302.9 million in non-cash amortization, depreciation, and stock-based compensation,
|
•
|
a $19.6 million provision for doubtful accounts,
|
•
|
a $10.1 million loss on early extinguishment of debt, and
|
•
|
$7.1 million in non-cash restructuring and asset impairment charges
|
•
|
a $419.5 million increase in subscriber acquisition costs,
|
•
|
a $24.3 million increase in accounts receivable,
|
•
|
a $11.8 million increase in inventories,
|
•
|
a $3.0 million decrease in accounts payable due primarily to the timing of inventory purchases, and
|
•
|
a $5.2 million increase in prepaid expenses and other current assets, and
|
•
|
a $2.8 million decrease in the restructuring liability.
|
•
|
a $24.6 million increase in deferred revenue due to the increased subscriber base, and
|
•
|
a $12.7 million increase in accrued expenses and other liabilities due primarily from increases in accrued interest on our long term debt.
|
•
|
$245.5 million in non-cash amortization, depreciation, stock-based compensation, a non-cash gain on settlement of the Merger-related escrow,
|
•
|
$59.2 million restructuring and asset impairment charge related to our Wireless Internet business transition, and
|
•
|
a $14.9 million provision for doubtful accounts
|
•
|
a $354.9 million increase in subscriber acquisition costs, and
|
•
|
a $14.4 million increase in accounts receivable, and
|
•
|
a $1.5 million decrease in the restructuring liability.
|
•
|
a $21.8 million increase in accounts payable, primarily related to purchases of inventory and wireless internet equipment,
|
•
|
a $18.6 million decrease in inventories,
|
•
|
a $18.0 million increase in accrued expenses and other liabilities, and
|
•
|
a $15.0 million increase in fees paid by our subscribers in advance of when the associated revenue is recognized, and
|
•
|
a $1.5 million decrease in prepaid expenses and other current assets.
|
•
|
incur or guarantee additional debt or issue disqualified stock or preferred stock;
|
•
|
pay dividends and make other distributions on, or redeem or repurchase, capital stock;
|
•
|
make certain investments;
|
•
|
incur certain liens;
|
•
|
enter into transactions with affiliates;
|
•
|
merge or consolidate;
|
•
|
enter into agreements that restrict the ability of restricted subsidiaries to make dividends or other payments to APX Group, Inc.;
|
•
|
designate restricted subsidiaries as unrestricted subsidiaries
|
•
|
amend, prepay, redeem or purchase certain subordinated debt; and
|
•
|
transfer or sell certain assets.
|
|
|
Year ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net loss
|
|
$
|
(410,199
|
)
|
|
$
|
(275,957
|
)
|
|
$
|
(279,107
|
)
|
Interest expense, net
|
|
225,642
|
|
|
197,533
|
|
|
161,248
|
|
|||
Non-capitalized subscriber acquisition costs (1)
|
|
255,456
|
|
|
175,948
|
|
|
164,013
|
|
|||
Amortization of capitalized subscriber acquisition costs
|
|
206,153
|
|
|
154,877
|
|
|
92,993
|
|
|||
Depreciation and amortization (2)
|
|
123,102
|
|
|
133,666
|
|
|
151,731
|
|
|||
Other expense (income)
|
|
27,986
|
|
|
7,255
|
|
|
8,832
|
|
|||
Non-cash compensation (3)
|
|
1,377
|
|
|
3,999
|
|
|
2,544
|
|
|||
Restructuring and asset impairment charge (4)
|
|
—
|
|
|
1,013
|
|
|
59,197
|
|
|||
Income tax expense (benefit)
|
|
1,078
|
|
|
67
|
|
|
351
|
|
|||
Other adjustments (5)
|
|
59,733
|
|
|
45,697
|
|
|
25,344
|
|
|||
Adjusted EBITDA
|
|
$
|
490,328
|
|
|
$
|
444,098
|
|
|
$
|
387,146
|
|
|
(1)
|
Reflects subscriber acquisition costs that are expensed as incurred because they are not directly related to the acquisition of specific subscribers. Certain other industry participants purchase subscribers through subscriber contract purchases, and as a result, may capitalize the full cost to purchase these subscriber contracts, as compared to our organic generation of new subscribers, which requires us to expense a portion of our subscriber acquisition costs under GAAP.
|
(2)
|
Excludes loan amortization costs that are included in interest expense.
|
(3)
|
Reflects non-cash compensation costs related to employee and director stock and stock option plans. Excludes non-cash compensation costs included in non-capitalized subscriber acquisition costs.
|
(4)
|
Reflects costs associated with the restructuring and asset impairment charges related to the transition of our Wireless Internet business and the 2016 Contract Sales (See Note 3 to the accompanying consolidated financial statements).
|
(5)
|
Other adjustments represent primarily the following items (in thousands):
|
|
|
Year ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Product development (a)
|
|
$
|
26,767
|
|
|
$
|
24,189
|
|
|
$
|
16,423
|
|
Litigation settlement (b)
|
|
10,012
|
|
|
—
|
|
|
—
|
|
|||
Certain legal and professional fees (c)
|
|
4,986
|
|
|
6,399
|
|
|
3,369
|
|
|||
Monitoring fee (d)
|
|
3,506
|
|
|
3,746
|
|
|
3,580
|
|
|||
Start-up of new strategic initiatives (e)
|
|
3,486
|
|
|
—
|
|
|
392
|
|
|||
Purchase accounting deferred revenue fair value adjustment (f)
|
|
3,280
|
|
|
4,410
|
|
|
4,710
|
|
|||
Information technology implementation (g)
|
|
3,188
|
|
|
3,745
|
|
|
1,876
|
|
|||
Hiring and termination payments (h)
|
|
386
|
|
|
1,017
|
|
|
1,132
|
|
|||
Projected run-rate restructuring cost savings (i)
|
|
—
|
|
|
—
|
|
|
5,485
|
|
|||
Non-cash gain on settlement of Merger-related escrow (j)
|
|
—
|
|
|
—
|
|
|
(12,200
|
)
|
|||
One-time deferred revenue adjustment (k)
|
|
—
|
|
|
—
|
|
|
(2,023
|
)
|
|||
Excess Inventory (l)
|
|
—
|
|
|
—
|
|
|
733
|
|
|||
All other adjustments (m)
|
|
4,122
|
|
|
2,191
|
|
|
1,867
|
|
|||
Total other adjustments
|
|
$
|
59,733
|
|
|
$
|
45,697
|
|
|
$
|
25,344
|
|
|
(a)
|
Costs related to the development of control panels, including associated software, peripheral devices and Wireless Internet Technology.
|
(b)
|
ADT litigation settlement.
|
(c)
|
Legal and related professional fees associated with strategic initiatives and financing transactions.
|
(d)
|
Blackstone Management Partners L.L.C. monitoring fee (See Note 14 to the accompanying consolidated financial statements).
|
(e)
|
Costs related to the start-up of potential new service offerings and sales channels.
|
(f)
|
Add back revenue reduction directly related to purchase accounting deferred revenue adjustments.
|
(g)
|
Costs related to the implementation of new information technologies.
|
(h)
|
Signing bonuses and relocation costs related to executive hiring and severance payments primarily related to restructuring plans.
|
(i)
|
Run-rate savings related to December 2014 reduction-in-force (“RIF”) and the Wireless Restructuring
RIF. |
(j)
|
Gain related to settlement of escrow balance related to the Merger (See Note 14 to the accompanying consolidated financial statements).
|
(k)
|
Represents a one-time adjustment to exclude $2.0 million of recurring revenue recognized during the year ended December 31, 2015, related to prior periods in connection with deferred revenue. (See Note 2 to the accompanying consolidated financial statements.)
|
(l)
|
Represents reserve for excess inventory associated with discontinued product offerings.
|
(m)
|
Other adjustments primarily reflect costs associated with payments to third parties related to various strategic and financing activities, including the monthly financing fee paid under the Consumer Financing Plan, and costs to implement Sarbanes-Oxley Section 404.
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
Total
|
|
Less than
1 Year
|
|
1 - 3 Years
|
|
3 - 5 Years
|
|
More than
5 Years
|
||||||||||
|
|
(dollars in thousands)
|
||||||||||||||||||
Long-term debt obligations (1)
|
|
$
|
2,829,465
|
|
|
$
|
—
|
|
|
$
|
1,202,465
|
|
|
$
|
1,227,000
|
|
|
$
|
400,000
|
|
Interest on long-term debt (2)
|
|
1,197,010
|
|
|
303,802
|
|
|
591,200
|
|
|
271,508
|
|
|
30,500
|
|
|||||
Capital lease obligations
|
|
23,287
|
|
|
11,635
|
|
|
11,601
|
|
|
51
|
|
|
—
|
|
|||||
Operating lease obligations
|
|
131,461
|
|
|
20,276
|
|
|
36,530
|
|
|
31,733
|
|
|
42,922
|
|
|||||
Purchase obligations (3)
|
|
69,799
|
|
|
23,571
|
|
|
13,677
|
|
|
12,970
|
|
|
19,581
|
|
|||||
Other long-term obligations
|
|
38,849
|
|
|
5,550
|
|
|
9,013
|
|
|
7,030
|
|
|
17,256
|
|
|||||
Total contractual obligations
|
|
$
|
4,289,871
|
|
|
$
|
364,834
|
|
|
$
|
1,864,486
|
|
|
$
|
1,550,292
|
|
|
$
|
510,259
|
|
|
(1)
|
As of
December 31, 2017
, we had
$60.0 million
of borrowings under our revolving credit facility. At
December 31, 2017
, our revolving credit facility provided for availability of
$303.6 million
. The principal amount outstanding under the revolving credit facility will be due and payable in full on (1) with respect to the non-extended commitments under the Series D Revolving Credit Facility, March 31, 2019 and (2) with respect to the extended commitments under the Series A Revolving Credit Facility and Series B Revolving Credit Facility, March 31, 2021. As of
December 31, 2017
,
|
(2)
|
Represents aggregate interest payments on aggregate principal amounts of
$269.5 million
of the outstanding 2019 notes,
$930.0 million
of outstanding 2020 notes,
$270.0 million
of the outstanding 2022 private placement notes,
$900.0 million
of the outstanding 2022 notes, and
$400.0 million
of the outstanding 2023 notes as well as letter of credit and commitment fees for the unused portion of our revolving credit facility. Does not reflect interest payments on future borrowings under our revolving credit facility.
|
(3)
|
Purchase obligations consist of commitments for purchases of goods and services that are not already included in our consolidated balance sheet as of
December 31, 2017
. We have contingent liabilities related to legal proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible we may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made at this time. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying consolidated financial statements.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
|
|
|
Page
|
Consolidated Financial Statements APX Group Holdings, Inc. and Subsidiaries:
|
|
|
December 31,
|
||||||
|
2017
|
|
2016
|
||||
ASSETS
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
3,872
|
|
|
$
|
43,520
|
|
Accounts and notes receivable, net
|
40,721
|
|
|
12,891
|
|
||
Inventories
|
115,222
|
|
|
38,452
|
|
||
Prepaid expenses and other current assets
|
16,150
|
|
|
10,158
|
|
||
Total current assets
|
175,965
|
|
|
105,021
|
|
||
Property, plant and equipment, net
|
78,081
|
|
|
63,626
|
|
||
Subscriber acquisition costs, net
|
1,308,558
|
|
|
1,052,434
|
|
||
Deferred financing costs, net
|
3,099
|
|
|
4,420
|
|
||
Intangible assets, net
|
377,451
|
|
|
475,392
|
|
||
Goodwill
|
836,970
|
|
|
835,233
|
|
||
Long-term investments and other assets, net
|
88,723
|
|
|
11,536
|
|
||
Total assets
|
$
|
2,868,847
|
|
|
$
|
2,547,662
|
|
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
|
||||
Current Liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
107,347
|
|
|
$
|
49,119
|
|
Accrued payroll and commissions
|
57,752
|
|
|
46,288
|
|
||
Accrued expenses and other current liabilities
|
74,321
|
|
|
34,265
|
|
||
Deferred revenue
|
88,337
|
|
|
45,722
|
|
||
Current portion of capital lease obligations
|
10,614
|
|
|
9,797
|
|
||
Total current liabilities
|
338,371
|
|
|
185,191
|
|
||
Notes payable, net
|
2,760,297
|
|
|
2,486,700
|
|
||
Revolving line of credit
|
60,000
|
|
|
—
|
|
||
Capital lease obligations, net of current portion
|
11,089
|
|
|
7,935
|
|
||
Deferred revenue, net of current portion
|
264,555
|
|
|
58,734
|
|
||
Other long-term obligations
|
79,020
|
|
|
47,080
|
|
||
Deferred income tax liabilities
|
9,041
|
|
|
7,204
|
|
||
Total liabilities
|
3,522,373
|
|
|
2,792,844
|
|
||
Commitments and contingencies (See Note 12)
|
|
|
|
||||
Stockholders’ deficit:
|
|
|
|
||||
Common stock, $0.01 par value, 100 shares authorized; 100 shares issued and outstanding
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
732,346
|
|
|
731,920
|
|
||
Accumulated deficit
|
(1,358,571
|
)
|
|
(948,339
|
)
|
||
Accumulated other comprehensive loss
|
(27,301
|
)
|
|
(28,763
|
)
|
||
Total stockholders’ deficit
|
(653,526
|
)
|
|
(245,182
|
)
|
||
Total liabilities and stockholders’ deficit
|
$
|
2,868,847
|
|
|
$
|
2,547,662
|
|
|
Year ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Recurring and other revenue
|
$
|
843,420
|
|
|
$
|
724,478
|
|
|
$
|
624,989
|
|
Service and other sales revenue
|
26,988
|
|
|
22,855
|
|
|
22,700
|
|
|||
Activation fees
|
11,575
|
|
|
10,574
|
|
|
6,032
|
|
|||
Total revenues
|
881,983
|
|
|
757,907
|
|
|
653,721
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Operating expenses (exclusive of depreciation and amortization shown separately below)
|
321,476
|
|
|
264,865
|
|
|
228,315
|
|
|||
Selling expenses (exclusive of amortization of deferred commissions of $84,152, $64,007 and $38,441, respectively, which are included in depreciation and amortization shown separately below)
|
198,348
|
|
|
131,421
|
|
|
122,948
|
|
|||
General and administrative expenses
|
188,397
|
|
|
143,168
|
|
|
107,212
|
|
|||
Depreciation and amortization
|
329,255
|
|
|
288,542
|
|
|
244,724
|
|
|||
Restructuring and asset impairment charges
|
—
|
|
|
1,013
|
|
|
59,197
|
|
|||
Total costs and expenses
|
1,037,476
|
|
|
829,009
|
|
|
762,396
|
|
|||
Loss from operations
|
(155,493
|
)
|
|
(71,102
|
)
|
|
(108,675
|
)
|
|||
Other expenses (income):
|
|
|
|
|
|
||||||
Interest expense
|
225,772
|
|
|
197,965
|
|
|
161,339
|
|
|||
Interest income
|
(130
|
)
|
|
(432
|
)
|
|
(90
|
)
|
|||
Other loss, net
|
27,986
|
|
|
7,255
|
|
|
8,832
|
|
|||
Loss before income taxes
|
(409,121
|
)
|
|
(275,890
|
)
|
|
(278,756
|
)
|
|||
Income tax expense
|
1,078
|
|
|
67
|
|
|
351
|
|
|||
Net loss
|
$
|
(410,199
|
)
|
|
$
|
(275,957
|
)
|
|
$
|
(279,107
|
)
|
|
Year ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Net loss
|
$
|
(410,199
|
)
|
|
$
|
(275,957
|
)
|
|
$
|
(279,107
|
)
|
Other comprehensive income (loss), net of tax effects:
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
3,155
|
|
|
2,482
|
|
|
(13,293
|
)
|
|||
Unrealized (loss) gain on marketable securities
|
(1,693
|
)
|
|
1,011
|
|
|
—
|
|
|||
Total other comprehensive income (loss)
|
1,462
|
|
|
3,493
|
|
|
(13,293
|
)
|
|||
Comprehensive loss
|
$
|
(408,737
|
)
|
|
$
|
(272,464
|
)
|
|
$
|
(292,400
|
)
|
|
Common Stock
|
|
Additional
paid-in
capital
|
|
Accumulated
deficit
|
|
Accumulated
other
comprehensive
income (loss)
|
|
Total
|
||||||||||
Balance, December 31, 2014
|
—
|
|
|
636,724
|
|
|
(393,275
|
)
|
|
(18,963
|
)
|
|
224,486
|
|
|||||
Net Loss
|
—
|
|
|
—
|
|
|
(279,107
|
)
|
|
—
|
|
|
(279,107
|
)
|
|||||
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,293
|
)
|
|
(13,293
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
3,121
|
|
|
—
|
|
|
—
|
|
|
3,121
|
|
|||||
Escrow adjustment
|
—
|
|
|
(12,200
|
)
|
|
—
|
|
|
—
|
|
|
(12,200
|
)
|
|||||
Balance, December 31, 2015
|
—
|
|
|
627,645
|
|
|
(672,382
|
)
|
|
(32,256
|
)
|
|
(76,993
|
)
|
|||||
Net Loss
|
—
|
|
|
—
|
|
|
(275,957
|
)
|
|
—
|
|
|
(275,957
|
)
|
|||||
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
2,482
|
|
|
2,482
|
|
|||||
Unrealized gain on marketable securities
|
—
|
|
|
—
|
|
|
—
|
|
|
1,011
|
|
|
1,011
|
|
|||||
Stock-based compensation
|
—
|
|
|
3,868
|
|
|
—
|
|
|
—
|
|
|
3,868
|
|
|||||
Capital contribution
|
—
|
|
|
100,407
|
|
|
—
|
|
|
—
|
|
|
100,407
|
|
|||||
Balance, December 31, 2016
|
—
|
|
|
731,920
|
|
|
(948,339
|
)
|
|
(28,763
|
)
|
|
(245,182
|
)
|
|||||
Net Loss
|
—
|
|
|
—
|
|
|
(410,199
|
)
|
|
—
|
|
|
(410,199
|
)
|
|||||
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
3,155
|
|
|
3,155
|
|
|||||
Unrealized loss on marketable securities
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,693
|
)
|
|
(1,693
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
1,577
|
|
|
(33
|
)
|
|
—
|
|
|
1,544
|
|
|||||
Return of capital to Vivint Smart Home, Inc.
|
—
|
|
|
(1,151
|
)
|
|
—
|
|
|
—
|
|
|
(1,151
|
)
|
|||||
Balance, December 31, 2017
|
$
|
—
|
|
|
$
|
732,346
|
|
|
$
|
(1,358,571
|
)
|
|
$
|
(27,301
|
)
|
|
$
|
(653,526
|
)
|
|
Year ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities:
|
|
|
|
||||||||
Net loss from operations
|
$
|
(410,199
|
)
|
|
$
|
(275,957
|
)
|
|
$
|
(279,107
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities of operations:
|
|
|
|
|
|
||||||
Amortization of subscriber acquisition costs
|
206,153
|
|
|
154,877
|
|
|
92,994
|
|
|||
Amortization of customer relationships
|
94,863
|
|
|
108,178
|
|
|
125,451
|
|
|||
Depreciation and amortization of property, plant and equipment and other intangible assets
|
28,239
|
|
|
25,488
|
|
|
26,279
|
|
|||
Amortization of deferred financing costs and bond premiums and discounts
|
6,586
|
|
|
10,447
|
|
|
9,844
|
|
|||
Non-cash gain on settlement of Merger-related escrow
|
—
|
|
|
—
|
|
|
(12,200
|
)
|
|||
Loss (gain) on sale or disposal of assets
|
458
|
|
|
(33
|
)
|
|
(54
|
)
|
|||
Loss on early extinguishment of debt
|
23,062
|
|
|
10,085
|
|
|
—
|
|
|||
Stock-based compensation
|
1,595
|
|
|
3,868
|
|
|
3,121
|
|
|||
Provision for doubtful accounts
|
22,465
|
|
|
19,624
|
|
|
14,924
|
|
|||
Deferred income taxes
|
929
|
|
|
(478
|
)
|
|
(41
|
)
|
|||
Restructuring and asset impairment charges
|
—
|
|
|
7,126
|
|
|
59,197
|
|
|||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
||||||
Accounts and notes receivable
|
(49,590
|
)
|
|
(24,338
|
)
|
|
(14,421
|
)
|
|||
Inventories
|
(75,580
|
)
|
|
(11,827
|
)
|
|
18,591
|
|
|||
Prepaid expenses and other current assets
|
(5,975
|
)
|
|
(5,165
|
)
|
|
1,450
|
|
|||
Subscriber acquisition costs – deferred contract costs
|
(457,679
|
)
|
|
(419,509
|
)
|
|
(354,867
|
)
|
|||
Other assets
|
(74,801
|
)
|
|
368
|
|
|
160
|
|
|||
Accounts payable
|
70,525
|
|
|
(2,978
|
)
|
|
21,842
|
|
|||
Accrued expenses and other current liabilities
|
62,208
|
|
|
12,702
|
|
|
18,019
|
|
|||
Restructuring liability
|
(91
|
)
|
|
(2,797
|
)
|
|
(1,515
|
)
|
|||
Deferred revenue
|
247,500
|
|
|
24,613
|
|
|
15,026
|
|
|||
Net cash used in operating activities
|
(309,332
|
)
|
|
(365,706
|
)
|
|
(255,307
|
)
|
|||
Cash flows from investing activities:
|
|
|
|
||||||||
Subscriber acquisition costs – company owned equipment
|
—
|
|
|
(5,243
|
)
|
|
(24,740
|
)
|
|||
Capital expenditures
|
(20,391
|
)
|
|
(11,642
|
)
|
|
(26,982
|
)
|
|||
Proceeds from the sale of capital assets
|
776
|
|
|
3,123
|
|
|
480
|
|
|||
Acquisition of intangible assets
|
(1,745
|
)
|
|
(1,385
|
)
|
|
(1,363
|
)
|
|||
Proceeds from insurance claims
|
—
|
|
|
—
|
|
|
2,984
|
|
|||
Change in restricted cash
|
—
|
|
|
—
|
|
|
14,214
|
|
|||
Acquisition of other assets
|
(301
|
)
|
|
—
|
|
|
(208
|
)
|
|||
Net cash used in investing activities
|
(21,661
|
)
|
|
(15,147
|
)
|
|
(35,615
|
)
|
|
Year ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from financing activities:
|
|
|
|
||||||||
Proceeds from notes payable
|
724,750
|
|
|
604,000
|
|
|
296,250
|
|
|||
Repayments of notes payable
|
(450,000
|
)
|
|
(235,535
|
)
|
|
—
|
|
|||
Borrowings from revolving line of credit
|
196,895
|
|
|
57,000
|
|
|
271,000
|
|
|||
Repayments on revolving line of credit
|
(136,895
|
)
|
|
(77,000
|
)
|
|
(271,000
|
)
|
|||
Repayments of capital lease obligations
|
(10,007
|
)
|
|
(8,315
|
)
|
|
(6,414
|
)
|
|||
Payments of other long-term obligations
|
(2,983
|
)
|
|
—
|
|
|
—
|
|
|||
Financing costs
|
(18,277
|
)
|
|
(9,036
|
)
|
|
—
|
|
|||
Deferred financing costs
|
(11,119
|
)
|
|
(9,241
|
)
|
|
(5,436
|
)
|
|||
Payments of dividends
|
(1,151
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from capital contributions
|
—
|
|
|
100,407
|
|
|
—
|
|
|||
Net cash provided by financing activities
|
291,213
|
|
|
422,280
|
|
|
284,400
|
|
|||
Effect of exchange rate changes on cash
|
132
|
|
|
(466
|
)
|
|
(1,726
|
)
|
|||
Net (decrease) increase in cash and cash equivalents
|
(39,648
|
)
|
|
40,961
|
|
|
(8,248
|
)
|
|||
Cash and cash equivalents:
|
|
|
|
||||||||
Beginning of period
|
43,520
|
|
|
2,559
|
|
|
10,807
|
|
|||
End of period
|
$
|
3,872
|
|
|
$
|
43,520
|
|
|
$
|
2,559
|
|
Supplemental cash flow disclosures:
|
|
|
|
||||||||
Income tax paid
|
$
|
219
|
|
|
$
|
435
|
|
|
$
|
290
|
|
Interest paid
|
$
|
207,433
|
|
|
$
|
189,170
|
|
|
$
|
145,647
|
|
Supplemental non-cash investing and financing activities:
|
|
|
|
||||||||
Capital lease additions
|
$
|
14,633
|
|
|
$
|
8,411
|
|
|
$
|
11,002
|
|
Intangible assets acquisitions included within accounts payable, accrued expenses and other current liabilities and other long-term obligations
|
$
|
557
|
|
|
$
|
31,283
|
|
|
$
|
314
|
|
Capital expenditures included within accounts payable, accrued expenses and other current liabilities
|
$
|
2,531
|
|
|
$
|
2,345
|
|
|
$
|
161
|
|
Change in fair value of marketable securities
|
$
|
1,314
|
|
|
$
|
1,011
|
|
|
$
|
—
|
|
Property acquired under build-to-suit agreements included within other long-term obligations
|
$
|
2,300
|
|
|
$
|
4,619
|
|
|
$
|
—
|
|
|
Year ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Beginning balance
|
$
|
4,138
|
|
|
$
|
3,541
|
|
|
$
|
3,373
|
|
Provision for doubtful accounts
|
22,465
|
|
|
19,624
|
|
|
14,924
|
|
|||
Write-offs and adjustments
|
(21,247
|
)
|
|
(19,027
|
)
|
|
(14,756
|
)
|
|||
Balance at end of period
|
$
|
5,356
|
|
|
$
|
4,138
|
|
|
$
|
3,541
|
|
|
Year ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Amortization of subscriber acquisition costs
|
$
|
206,153
|
|
|
$
|
154,877
|
|
|
$
|
92,994
|
|
Amortization of definite-lived intangibles
|
101,827
|
|
|
116,865
|
|
|
134,803
|
|
|||
Depreciation of property, plant and equipment
|
21,275
|
|
|
16,800
|
|
|
16,927
|
|
|||
Total depreciation and amortization
|
$
|
329,255
|
|
|
$
|
288,542
|
|
|
$
|
244,724
|
|
|
December 31, 2017
|
||
RIC receivables, gross
|
$
|
131,024
|
|
Deferred interest
|
(36,048
|
)
|
|
RIC receivables, net of deferred interest
|
94,976
|
|
|
|
|
||
Classified on the consolidated balance sheets as:
|
|
||
Accounts and notes receivable, net
|
$
|
16,469
|
|
Long-term investments and other assets, net
|
78,507
|
|
|
RIC receivables, net
|
$
|
94,976
|
|
|
December 31, 2017
|
||
Deferred interest, beginning of period
|
$
|
—
|
|
Write-offs, net of recoveries
|
(6,055
|
)
|
|
Change in deferred interest on short-term and long-term RIC receivables
|
42,103
|
|
|
Deferred interest, end of period
|
$
|
36,048
|
|
|
Other expense and loss on extinguishment
|
|
Deferred financing costs
|
||||||||||||||||||||||||
Issuance
|
Original discount extinguished
|
|
Original deferred financing costs extinguished
|
|
New financing costs
|
|
Total other expense and loss on extinguishment
|
|
Original deferred financing rolled over
|
|
New deferred financing costs
|
|
Total deferred financing costs
|
||||||||||||||
For the year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
August 2017 issuance
|
$
|
—
|
|
|
$
|
1,408
|
|
|
$
|
8,881
|
|
|
$
|
10,289
|
|
|
$
|
473
|
|
|
$
|
4,569
|
|
|
$
|
5,042
|
|
February 2017 issuance
|
—
|
|
|
3,259
|
|
|
9,491
|
|
|
12,750
|
|
|
1,476
|
|
|
6,076
|
|
|
7,552
|
|
|||||||
Total
|
$
|
—
|
|
|
$
|
4,667
|
|
|
$
|
18,372
|
|
|
$
|
23,039
|
|
|
$
|
1,949
|
|
|
$
|
10,645
|
|
|
$
|
12,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
For the year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
May 2016 issuance
|
$
|
355
|
|
|
$
|
695
|
|
|
$
|
9,036
|
|
|
$
|
10,086
|
|
|
$
|
3,423
|
|
|
$
|
6,628
|
|
|
$
|
10,051
|
|
|
Unamortized Deferred Financing Costs
|
||||||||||||||||||||||
|
Balance 12/31/2016
|
|
Additions
|
|
Refinances
|
|
Early Extinguishment
|
|
Amortized
|
|
Balance 12/31/2017
|
||||||||||||
Revolving Credit Facility
|
$
|
4,420
|
|
|
$
|
399
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,720
|
)
|
|
$
|
3,099
|
|
2019 Notes
|
11,693
|
|
|
—
|
|
|
(1,949
|
)
|
|
(4,667
|
)
|
|
(2,200
|
)
|
|
2,877
|
|
||||||
2020 Notes
|
15,053
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,844
|
)
|
|
11,209
|
|
||||||
2022 Private Placement Notes
|
903
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(151
|
)
|
|
752
|
|
||||||
2022 Notes
|
11,714
|
|
|
6,076
|
|
|
1,476
|
|
|
—
|
|
|
(3,199
|
)
|
|
16,067
|
|
||||||
2023 Notes
|
—
|
|
|
4,569
|
|
|
473
|
|
|
—
|
|
|
(280
|
)
|
|
4,762
|
|
||||||
Total Deferred Financing Costs
|
$
|
43,783
|
|
|
$
|
11,044
|
|
|
$
|
—
|
|
|
$
|
(4,667
|
)
|
|
$
|
(11,394
|
)
|
|
$
|
38,766
|
|
|
Unamortized Deferred Financing Costs
|
||||||||||||||||||||||
|
Balance 12/31/2015
|
|
Additions
|
|
Refinances
|
|
Early Extinguishment
|
|
Amortized
|
|
Balance 12/31/2016
|
||||||||||||
Revolving Credit Facility
|
$
|
6,456
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2,036
|
)
|
|
$
|
4,420
|
|
2019 Notes
|
20,182
|
|
|
—
|
|
|
(3,423
|
)
|
|
(585
|
)
|
|
(4,481
|
)
|
|
11,693
|
|
||||||
2020 Notes
|
18,892
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,839
|
)
|
|
15,053
|
|
||||||
2022 Private Placement Notes
|
1,170
|
|
|
—
|
|
|
—
|
|
|
(110
|
)
|
|
(157
|
)
|
|
903
|
|
||||||
2022 Notes
|
—
|
|
|
9,337
|
|
|
3,423
|
|
|
—
|
|
|
(1,046
|
)
|
|
11,714
|
|
||||||
Total Deferred Financing Costs
|
$
|
46,700
|
|
|
$
|
9,337
|
|
|
$
|
—
|
|
|
$
|
(695
|
)
|
|
$
|
(11,559
|
)
|
|
$
|
43,783
|
|
|
December 31, 2017
|
||||||||||||||
|
Outstanding
Principal
|
|
Unamortized
Premium
(Discount)
|
|
Unamortized Deferred Financing Costs (1)
|
|
Net Carrying
Amount
|
||||||||
Series D Revolving Credit Facility due 2019
|
$
|
3,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,000
|
|
Series A, B Revolving Credit Facilities due 2021
|
57,000
|
|
|
—
|
|
|
—
|
|
|
57,000
|
|
||||
6.375% Senior Secured Notes due 2019
|
269,465
|
|
|
—
|
|
|
(2,877
|
)
|
|
266,588
|
|
||||
8.75% Senior Notes due 2020
|
930,000
|
|
|
4,465
|
|
|
(11,209
|
)
|
|
923,256
|
|
||||
8.875% Senior Secured Notes Due 2022
|
270,000
|
|
|
(2,559
|
)
|
|
(752
|
)
|
|
266,689
|
|
||||
7.875% Senior Secured Notes Due 2022
|
900,000
|
|
|
24,593
|
|
|
(16,067
|
)
|
|
908,526
|
|
||||
7.625% Senior Unsecured Notes Due 2023
|
400,000
|
|
|
—
|
|
|
(4,762
|
)
|
|
395,238
|
|
||||
Total Notes payable
|
$
|
2,829,465
|
|
|
$
|
26,499
|
|
|
$
|
(35,667
|
)
|
|
$
|
2,820,297
|
|
|
December 31, 2016
|
||||||||||||||
|
Outstanding
Principal
|
|
Unamortized
Premium
|
|
Unamortized Deferred Financing Costs (1)
|
|
Net Carrying
Amount
|
||||||||
6.375% Senior Secured Notes due 2019
|
719,465
|
|
|
—
|
|
|
(11,693
|
)
|
|
707,772
|
|
||||
8.75% Senior Notes due 2020
|
930,000
|
|
|
5,848
|
|
|
(15,053
|
)
|
|
920,795
|
|
||||
8.875% Senior Secured Notes due 2022 - Private Placement
|
270,000
|
|
|
(2,960
|
)
|
|
(903
|
)
|
|
266,137
|
|
||||
7.875% Senior Secured Notes due 2022
|
600,000
|
|
|
3,710
|
|
|
(11,714
|
)
|
|
591,996
|
|
||||
Total Notes payable
|
$
|
2,519,465
|
|
|
$
|
6,598
|
|
|
$
|
(39,363
|
)
|
|
$
|
2,486,700
|
|
|
|
December 31,
|
||||||
|
2017
|
|
2016
|
||||
Prepaid expenses and other current assets
|
|
|
|
||||
Prepaid expenses
|
$
|
8,000
|
|
|
$
|
7,983
|
|
Deposits
|
1,596
|
|
|
1,046
|
|
||
Other
|
6,554
|
|
|
1,129
|
|
||
Total prepaid expenses and other current assets
|
$
|
16,150
|
|
|
$
|
10,158
|
|
Subscriber acquisition costs
|
|
||||||
Subscriber acquisition costs
|
$
|
1,837,388
|
|
|
$
|
1,373,080
|
|
Accumulated amortization
|
(528,830
|
)
|
|
(320,646
|
)
|
||
Subscriber acquisition costs, net
|
$
|
1,308,558
|
|
|
$
|
1,052,434
|
|
Long-term investments and other assets
|
|
||||||
RIC receivables, gross
|
$
|
114,556
|
|
|
$
|
—
|
|
RIC deferred interest
|
(36,049
|
)
|
|
—
|
|
||
Security deposits
|
6,427
|
|
|
6,612
|
|
||
Investments
|
3,429
|
|
|
4,442
|
|
||
Other
|
360
|
|
|
482
|
|
||
Total long-term investments and other assets, net
|
$
|
88,723
|
|
|
$
|
11,536
|
|
Accrued payroll and commissions
|
|
||||||
Accrued payroll
|
$
|
30,267
|
|
|
$
|
24,101
|
|
Accrued commissions
|
27,485
|
|
|
22,187
|
|
||
Total accrued payroll and commissions
|
$
|
57,752
|
|
|
$
|
46,288
|
|
Accrued expenses and other current liabilities
|
|
||||||
Accrued interest payable
|
$
|
28,737
|
|
|
$
|
16,944
|
|
Current portion of derivative liability
|
25,473
|
|
|
—
|
|
||
Accrued taxes
|
4,585
|
|
|
3,376
|
|
||
Spectrum license obligation
|
3,861
|
|
|
2,983
|
|
||
Accrued payroll taxes and withholdings
|
3,185
|
|
|
4,793
|
|
||
Loss contingencies
|
2,156
|
|
|
2,571
|
|
||
Other
|
6,324
|
|
|
3,598
|
|
||
Total accrued expenses and other current liabilities
|
$
|
74,321
|
|
|
$
|
34,265
|
|
Current deferred revenue
|
|
|
|
||||
Subscriber deferred revenues
|
$
|
38,170
|
|
|
$
|
34,682
|
|
Deferred product revenues
|
40,397
|
|
|
—
|
|
||
Deferred activation fees
|
9,770
|
|
|
11,040
|
|
||
Total current deferred revenue
|
$
|
88,337
|
|
|
$
|
45,722
|
|
Deferred revenue, net of current portion
|
|
|
|
||||
Deferred product revenues
|
$
|
213,542
|
|
|
$
|
975
|
|
Deferred activation fees
|
51,013
|
|
|
57,759
|
|
||
Total deferred revenue, net of current portion
|
$
|
264,555
|
|
|
$
|
58,734
|
|
|
December 31,
|
|
Estimated
Useful Lives
|
||||||
|
2017
|
|
2016
|
|
|||||
Vehicles
|
$
|
42,008
|
|
|
$
|
31,416
|
|
|
3-5 years
|
Computer equipment and software
|
46,651
|
|
|
27,006
|
|
|
3-5 years
|
||
Leasehold improvements
|
20,783
|
|
|
17,717
|
|
|
2-15 years
|
||
Office furniture, fixtures and equipment
|
17,202
|
|
|
13,508
|
|
|
7 years
|
||
Buildings
|
—
|
|
|
702
|
|
|
39 years
|
||
Build-to-suit lease building
|
8,268
|
|
|
5,004
|
|
|
10.5 years
|
||
Construction in process
|
4,299
|
|
|
9,908
|
|
|
|
||
Property, plant and equipment, gross
|
139,211
|
|
|
105,261
|
|
|
|
||
Accumulated depreciation and amortization
|
(61,130
|
)
|
|
(41,635
|
)
|
|
|
||
Property, plant and equipment, net
|
$
|
78,081
|
|
|
$
|
63,626
|
|
|
|
|
|
||
Balance as of January 1, 2016
|
$
|
834,416
|
|
Effect of Foreign Currency Translation
|
817
|
|
|
Balance as of December 31, 2016
|
835,233
|
|
|
Effect of Foreign Currency Translation
|
1,737
|
|
|
Balance as of December 31, 2017
|
$
|
836,970
|
|
|
December 31, 2017
|
|
December 31, 2016
|
|
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Estimated
Useful Lives |
||||||||||||
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer contracts
|
$
|
970,147
|
|
|
$
|
(637,780
|
)
|
|
$
|
332,367
|
|
|
$
|
965,179
|
|
|
$
|
(539,910
|
)
|
|
$
|
425,269
|
|
|
10 years
|
2GIG 2.0 technology
|
17,000
|
|
|
(13,274
|
)
|
|
3,726
|
|
|
17,000
|
|
|
(10,479
|
)
|
|
6,521
|
|
|
8 years
|
||||||
Other technology
|
2,917
|
|
|
(1,250
|
)
|
|
1,667
|
|
|
7,067
|
|
|
(4,984
|
)
|
|
2,083
|
|
|
5 - 7 years
|
||||||
Space Monkey technology
|
7,100
|
|
|
(4,066
|
)
|
|
3,034
|
|
|
7,100
|
|
|
(2,268
|
)
|
|
4,832
|
|
|
6 years
|
||||||
Patents
|
10,616
|
|
|
(5,835
|
)
|
|
4,781
|
|
|
8,724
|
|
|
(3,913
|
)
|
|
4,811
|
|
|
5 years
|
||||||
Total definite-lived intangible assets:
|
1,007,780
|
|
|
(662,205
|
)
|
|
345,575
|
|
|
1,005,070
|
|
|
(561,554
|
)
|
|
443,516
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Spectrum licenses
|
31,253
|
|
|
—
|
|
|
31,253
|
|
|
31,253
|
|
|
—
|
|
|
31,253
|
|
|
|
||||||
IP addresses
|
564
|
|
|
—
|
|
|
564
|
|
|
564
|
|
|
—
|
|
|
564
|
|
|
|
||||||
Domain names
|
59
|
|
|
—
|
|
|
59
|
|
|
59
|
|
|
—
|
|
|
59
|
|
|
|
||||||
Total Indefinite-lived intangible assets
|
31,876
|
|
|
—
|
|
|
31,876
|
|
|
31,876
|
|
|
—
|
|
|
31,876
|
|
|
|
||||||
Total intangible assets, net
|
$
|
1,039,656
|
|
|
$
|
(662,205
|
)
|
|
$
|
377,451
|
|
|
$
|
1,036,946
|
|
|
$
|
(561,554
|
)
|
|
$
|
475,392
|
|
|
|
|
|
||
2018
|
$
|
89,513
|
|
2019
|
79,267
|
|
|
2020
|
68,349
|
|
|
2021
|
59,023
|
|
|
2022
|
49,038
|
|
|
Thereafter
|
118
|
|
|
Total estimated amortization expense
|
$
|
345,308
|
|
|
December 31, 2017
|
||||||||||||||||||||||
|
Adjusted Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
|
Cash and Cash Equivalents
|
|
Long-Term Investments and Other Assets, net
|
||||||||||||
Cash
|
$
|
3,866
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,866
|
|
|
$
|
3,866
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
|
—
|
|
||||||
Corporate securities
|
4,018
|
|
|
—
|
|
|
(1,315
|
)
|
|
2,703
|
|
|
—
|
|
|
2,703
|
|
||||||
Subtotal
|
4,024
|
|
|
—
|
|
|
(1,315
|
)
|
|
2,709
|
|
|
6
|
|
|
2,703
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
$
|
7,890
|
|
|
$
|
—
|
|
|
$
|
(1,315
|
)
|
|
$
|
6,575
|
|
|
$
|
3,872
|
|
|
$
|
2,703
|
|
|
December 31, 2016
|
||||||||||||||||||||||
|
Adjusted Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
|
Cash and Cash Equivalents
|
|
Long-Term Investments and Other Assets, net
|
||||||||||||
Cash
|
$
|
1,191
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,191
|
|
|
$
|
1,191
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
42,329
|
|
|
—
|
|
|
—
|
|
|
42,329
|
|
|
42,329
|
|
|
—
|
|
||||||
Corporate securities
|
3,007
|
|
|
1,011
|
|
|
—
|
|
|
4,018
|
|
|
—
|
|
|
4,018
|
|
||||||
Subtotal
|
45,336
|
|
|
1,011
|
|
|
—
|
|
|
46,347
|
|
|
42,329
|
|
|
4,018
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
$
|
46,527
|
|
|
$
|
1,011
|
|
|
$
|
—
|
|
|
$
|
47,538
|
|
|
$
|
43,520
|
|
|
$
|
4,018
|
|
Issuance
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Stated Interest
Rate
|
|||||||||||||
|
Face Value
|
|
Estimated Fair Value
|
|
Face Value
|
|
Estimated Fair Value
|
|
|||||||||||
2019 Notes
|
|
$
|
269,465
|
|
|
$
|
273,507
|
|
|
$
|
719,465
|
|
|
$
|
743,783
|
|
|
6.375
|
%
|
2020 Notes
|
|
930,000
|
|
|
952,134
|
|
|
930,000
|
|
|
946,275
|
|
|
8.75
|
%
|
||||
2022 Notes Private Placement Notes
|
|
270,000
|
|
|
276,486
|
|
|
270,000
|
|
|
280,372
|
|
|
8.875
|
%
|
||||
2022 Notes
|
|
900,000
|
|
|
966,420
|
|
|
600,000
|
|
|
655,140
|
|
|
7.875
|
%
|
||||
2023 Notes
|
|
400,000
|
|
|
425,000
|
|
|
—
|
|
|
—
|
|
|
7.625
|
%
|
||||
Total
|
|
$
|
2,769,465
|
|
|
$
|
2,893,547
|
|
|
$
|
2,519,465
|
|
|
$
|
2,625,570
|
|
|
|
|
|
Fair Value
|
|
Notional Amount
|
||||
Consumer Financing Program Contractual Obligations
|
$
|
46,496
|
|
|
$
|
163,032
|
|
|
|
|
|
||||
Classified on the consolidated balance sheets as:
|
|
|
|
||||
Accrued expenses and other current liabilities
|
25,473
|
|
|
|
|||
Other long-term obligations
|
21,023
|
|
|
|
|||
Total Consumer Financing Program Contractual Obligation
|
$
|
46,496
|
|
|
|
Balance, January 1, 2017
|
$
|
—
|
|
Additions
|
44,913
|
|
|
Settlements
|
(7,972
|
)
|
|
Losses included in earnings
|
9,555
|
|
|
Balance, December 31, 2017
|
$
|
46,496
|
|
|
Year ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Wireless restructuring and asset (recoveries) impairment charges:
|
|
|
|
|
|
||||||
Asset (recoveries) impairments
|
$
|
—
|
|
|
$
|
(710
|
)
|
|
$
|
53,228
|
|
Contract termination (recoveries) costs
|
—
|
|
|
(751
|
)
|
|
4,767
|
|
|||
Employee severance and termination benefits (recoveries) charges
|
—
|
|
|
(77
|
)
|
|
1,202
|
|
|||
Total wireless restructuring and asset (recoveries) impairment charges
|
—
|
|
|
(1,538
|
)
|
|
59,197
|
|
|||
Loss on subscriber contract sales
|
—
|
|
|
2,551
|
|
|
—
|
|
|||
Total restructuring and asset impairment charges
|
$
|
—
|
|
|
$
|
1,013
|
|
|
$
|
59,197
|
|
|
Asset impairments
|
|
Contract
termination costs
|
|
Employee severance and
termination benefits
|
|
Total
|
||||||||
Accrued restructuring balance as of December 31, 2015
|
$
|
—
|
|
|
$
|
3,954
|
|
|
$
|
321
|
|
|
$
|
4,275
|
|
Restructuring and impairment recoveries
|
(710
|
)
|
|
(751
|
)
|
|
(77
|
)
|
|
(1,538
|
)
|
||||
Cash payments
|
—
|
|
|
(2,554
|
)
|
|
(244
|
)
|
|
(2,798
|
)
|
||||
Non-cash settlements
|
710
|
|
|
—
|
|
|
—
|
|
|
710
|
|
||||
Accrued restructuring balance as of December 31, 2016
|
—
|
|
|
649
|
|
|
—
|
|
|
649
|
|
||||
Cash payments
|
—
|
|
|
(91
|
)
|
|
—
|
|
|
(91
|
)
|
||||
Accrued restructuring balance as of December 31, 2017
|
$
|
—
|
|
|
$
|
558
|
|
|
$
|
—
|
|
|
$
|
558
|
|
|
Year ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Current income tax:
|
|
|
|
||||||||
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
151
|
|
|
545
|
|
|
392
|
|
|||
Foreign
|
(24
|
)
|
|
95
|
|
|
(1
|
)
|
|||
Total
|
127
|
|
|
640
|
|
|
391
|
|
|||
Deferred income tax:
|
|
|
|
||||||||
Federal
|
(326
|
)
|
|
—
|
|
|
—
|
|
|||
State
|
(53
|
)
|
|
—
|
|
|
—
|
|
|||
Foreign
|
1,330
|
|
|
(573
|
)
|
|
(40
|
)
|
|||
Total
|
951
|
|
|
(573
|
)
|
|
(40
|
)
|
|||
Provision for income taxes
|
$
|
1,078
|
|
|
$
|
67
|
|
|
$
|
351
|
|
|
Year ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Computed expected tax expense
|
$
|
(139,100
|
)
|
|
$
|
(93,770
|
)
|
|
$
|
(94,737
|
)
|
State income taxes, net of federal tax effect
|
65
|
|
|
360
|
|
|
259
|
|
|||
Foreign income taxes
|
(299
|
)
|
|
(949
|
)
|
|
202
|
|
|||
Other reconciling items
|
(344
|
)
|
|
666
|
|
|
—
|
|
|||
Permanent differences
|
2,008
|
|
|
1,688
|
|
|
1,980
|
|
|||
Effect of Federal law change
|
166,876
|
|
|
—
|
|
|
—
|
|
|||
Change in valuation allowance
|
(28,128
|
)
|
|
92,072
|
|
|
92,647
|
|
|||
Provision for income taxes
|
$
|
1,078
|
|
|
$
|
67
|
|
|
$
|
351
|
|
|
December 31,
|
||||||
|
2017
|
|
2016
|
||||
Gross deferred tax assets:
|
|
||||||
Net operating loss carryforwards
|
$
|
591,619
|
|
|
$
|
799,302
|
|
Deferred subscriber income
|
72,389
|
|
|
19,866
|
|
||
Accrued expenses and allowances
|
17,633
|
|
|
15,452
|
|
||
Purchased intangibles and deferred financing costs
|
15,191
|
|
|
14,776
|
|
||
Inventory reserves
|
6,662
|
|
|
6,999
|
|
||
Property and equipment
|
1,176
|
|
|
3,482
|
|
||
Research and development credits
|
41
|
|
|
41
|
|
||
Valuation allowance
|
(304,509
|
)
|
|
(328,991
|
)
|
||
Total
|
400,202
|
|
|
530,927
|
|
||
Gross deferred tax liabilities:
|
|
||||||
Deferred subscriber acquisition costs
|
(408,610
|
)
|
|
(537,387
|
)
|
||
Prepaid expenses
|
(633
|
)
|
|
(744
|
)
|
||
Total
|
(409,243
|
)
|
|
(538,131
|
)
|
||
Net deferred tax liabilities
|
$
|
(9,041
|
)
|
|
$
|
(7,204
|
)
|
|
December 31,
|
||||||
|
2017
|
|
2016
|
||||
Net operating loss carryforwards:
|
|
|
|
||||
Federal
|
$
|
2,355,153
|
|
|
$
|
2,084,897
|
|
States
|
1,715,004
|
|
|
1,553,812
|
|
||
Canada
|
27,326
|
|
|
33,526
|
|
||
Total
|
$
|
4,097,485
|
|
|
$
|
3,672,237
|
|
•
|
Remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. The Company continues to analyze certain aspects of the Tax Reform which could potentially affect the measurement of these balances or give rise to revised deferred tax amounts. The consolidated financial statements include provisional amounts for the impacts of deferred tax remeasurement.
|
•
|
Performed initial evaluations of the state conformity to Tax Reform. The Company continues to assess the conformity to Tax Reform of each state in which it operates, along with the changes in deductibility of certain expenses at the federal level, in order to finalize the impacts on the realizability of its state deferred tax assets and liabilities. The consolidated financial statements include provisional amounts for the impacts of state conformity.
|
•
|
Tax Reform creates a new requirement that certain income (i.e., GILTI) earned by foreign subsidiaries must be included currently in the gross income of the U.S. shareholder. Due to the complexity of the new GILTI tax rules, the Company is continuing to evaluate this provision of the Tax Reform and the application of ASC 740. Under U.S. GAAP, a company is permitted to make an accounting policy election to either treat taxes due on future inclusions in U.S. taxable income related to GILTI as a current-period expense when incurred or to factor such amounts into its measurement of deferred taxes. The Company has not yet completed the analysis of the GILTI tax rules primarily due to a lack of guidance from the U.S. Treasury Department and is not yet able to reasonably estimate the effect of this provision of the Tax Reform or make an accounting policy election for ASC 740 treatment of the GILTI tax. Therefore, the Company has not recorded any amounts related to potential GILTI tax, if any, in its financial statements and has not yet made a policy decision regarding whether to record deferred taxes on GILTI, if any.
|
|
Incentive Units
|
|
Weighted Average
Exercise Price
Per Share
|
|
Weighted Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic Value
|
|||||
Outstanding, December 31, 2015
|
73,962,836
|
|
|
$
|
1.06
|
|
|
7.31
|
|
$
|
104,562,869
|
|
Granted
|
12,825,000
|
|
|
1.93
|
|
|
|
|
|
|||
Forfeited
|
(905,000
|
)
|
|
1.09
|
|
|
|
|
|
|||
Outstanding, December 31, 2016
|
85,882,836
|
|
|
1.19
|
|
|
6.81
|
|
—
|
|
||
Forfeited
|
(70,000
|
)
|
|
1.30
|
|
|
|
|
|
|||
Outstanding, December 31, 2017
|
85,812,836
|
|
|
1.19
|
|
|
6.81
|
|
—
|
|
||
Unvested shares expected to vest after December 31, 2017
|
61,686,998
|
|
|
1.23
|
|
|
6.99
|
|
—
|
|
||
Exercisable at December 31, 2017
|
24,125,838
|
|
|
$
|
1.07
|
|
|
6.36
|
|
$
|
—
|
|
|
Stock Appreciation
Rights
|
|
Weighted Average
Exercise Price
Per Share
|
|
Weighted Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic Value
|
|||||
Outstanding, December 31, 2015
|
18,664,137
|
|
|
$
|
0.87
|
|
|
8.66
|
|
$
|
3,628,498
|
|
Granted
|
5,649,573
|
|
|
1.22
|
|
|
|
|
|
|||
Forfeited
|
(2,320,552
|
)
|
|
0.92
|
|
|
|
|
|
|||
Outstanding, December 31, 2016
|
21,993,158
|
|
|
0.96
|
|
|
8.23
|
|
—
|
|
||
Granted
|
13,250,640
|
|
|
1.74
|
|
|
|
|
|
|||
Forfeited
|
(2,374,864
|
)
|
|
1.12
|
|
|
|
|
|
|||
Exercised
|
(114,644
|
)
|
|
0.72
|
|
|
|
|
|
|||
Outstanding, December 31, 2017
|
32,754,290
|
|
|
1.26
|
|
|
9.21
|
|
—
|
|
||
Unvested shares expected to vest after December 31, 2017
|
28,805,779
|
|
|
1.32
|
|
|
9.43
|
|
—
|
|
||
Exercisable at December 31, 2017
|
3,948,511
|
|
|
$
|
0.86
|
|
|
7.64
|
|
$
|
—
|
|
|
Stock Appreciation
Rights
|
|
Weighted Average
Exercise Price
Per Share
|
|
Weighted Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic Value
|
||||
Outstanding, December 31, 2015
|
81,000
|
|
|
$
|
13.26
|
|
|
7.66
|
|
—
|
|
Forfeited
|
(63,500
|
)
|
|
15.54
|
|
|
|
|
|
||
Outstanding, December 31, 2016
|
17,500
|
|
|
5.00
|
|
|
6.41
|
|
—
|
|
|
Forfeited
|
(7,500
|
)
|
|
5.00
|
|
|
|
|
|
||
Outstanding, December 31, 2017
|
10,000
|
|
|
5.00
|
|
|
6.41
|
|
—
|
|
|
Unvested shares expected to vest after December 31, 2017
|
2,000
|
|
|
5.00
|
|
|
6.41
|
|
—
|
|
|
Exercisable, December 31, 2017
|
8,000
|
|
|
$
|
5.00
|
|
|
6.41
|
|
—
|
|
|
Year ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Operating expenses
|
$
|
65
|
|
|
$
|
68
|
|
|
$
|
71
|
|
Selling expenses
|
217
|
|
|
(127
|
)
|
|
578
|
|
|||
General and administrative expenses
|
1,313
|
|
|
3,927
|
|
|
2,472
|
|
|||
Total stock-based compensation
|
$
|
1,595
|
|
|
$
|
3,868
|
|
|
$
|
3,121
|
|
|
Rent Expense
|
|
|
||||||
|
Years ended December 31,
|
|
|
||||||
|
2017
|
|
2016
|
|
Lease Term
|
||||
Warehouse, office space and other
|
$
|
12,550
|
|
|
$
|
11,222
|
|
|
1 - 15 years
|
Wireless towers, spectrum and other
|
4,461
|
|
|
4,732
|
|
|
1 - 10 years
|
||
Total Rent Expense
|
$
|
17,011
|
|
|
$
|
15,954
|
|
|
|
|
Operating
|
|
Capital
|
|
Total
|
||||||
2018
|
$
|
20,276
|
|
|
$
|
11,635
|
|
|
$
|
31,911
|
|
2019
|
19,424
|
|
|
7,234
|
|
|
26,658
|
|
|||
2020
|
17,106
|
|
|
4,368
|
|
|
21,474
|
|
|||
2021
|
16,433
|
|
|
51
|
|
|
16,484
|
|
|||
2022
|
15,300
|
|
|
—
|
|
|
15,300
|
|
|||
Thereafter
|
42,922
|
|
|
—
|
|
|
42,922
|
|
|||
Amounts representing interest
|
—
|
|
|
(1,583
|
)
|
|
(1,583
|
)
|
|||
Total lease payments
|
$
|
131,461
|
|
|
$
|
21,705
|
|
|
$
|
153,166
|
|
•
|
A Master Intercompany Framework Agreement which establishes a framework for the ongoing relationship between the Company and Solar and contains master terms regarding the protection of each other’s confidential information, and master procedural terms, such as notice procedures, restrictions on assignment, interpretive provisions, governing law and dispute resolution;
|
•
|
A Non-Competition Agreement in which the Company and Solar each define their current areas of business and their competitors, and agree not to directly or indirectly engage in the other’s business for
three
years;
|
•
|
A Transition Services Agreement pursuant to which the Company will provide to Solar various enterprise services, including services relating to information technology and infrastructure, human resources and employee benefits, administration services and facilities-related services;
|
•
|
A Product Development and Supply Agreement pursuant to which one of Solar’s wholly owned subsidiaries will, for an initial term of
three
years, subject to automatic renewal for successive
one
-year periods unless either party elects otherwise, collaborate with the Company to develop certain monitoring and communications equipment that will be compatible with other equipment used in Solar’s energy systems and will replace equipment Solar currently procures from third parties;
|
•
|
A Marketing and Customer Relations Agreement which governs various cross-marketing initiatives between the Company and Solar, in particularly the provision of sales leads from each company to the other; and
|
•
|
A Trademark License Agreement pursuant to which the licensor, a special purpose subsidiary majority-owned by the Company and minority-owned by Solar, will grant Solar a royalty-free exclusive license to the trademark “VIVINT SOLAR” in the field of selling renewable energy or energy storage products and services.
|
|
United States
|
|
Canada
|
|
Total
|
||||||
As of and for the
|
|
|
|
|
|
||||||
Year ended December 31, 2017
|
|
|
|
|
|
||||||
Revenue from external customers
|
$
|
816,026
|
|
|
$
|
65,957
|
|
|
$
|
881,983
|
|
Property and equipment, net
|
77,345
|
|
|
736
|
|
|
78,081
|
|
|||
Year ended December 31, 2016
|
|
|
|
|
|
||||||
Revenue from external customers
|
$
|
700,471
|
|
|
$
|
57,436
|
|
|
$
|
757,907
|
|
Property and equipment, net
|
62,781
|
|
|
845
|
|
|
63,626
|
|
|||
Year ended December 31, 2015
|
|
|
|
|
|
||||||
Revenue from external customers
|
$
|
602,418
|
|
|
$
|
51,303
|
|
|
$
|
653,721
|
|
Property and equipment, net
|
55,103
|
|
|
171
|
|
|
55,274
|
|
|
Parent
|
|
APX
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current assets
|
$
|
—
|
|
|
$
|
4,150
|
|
|
$
|
284,293
|
|
|
$
|
49,935
|
|
|
$
|
(162,413
|
)
|
|
$
|
175,965
|
|
Property and equipment, net
|
—
|
|
|
—
|
|
|
77,345
|
|
|
736
|
|
|
—
|
|
|
78,081
|
|
||||||
Subscriber acquisition costs, net
|
—
|
|
|
—
|
|
|
1,214,678
|
|
|
93,880
|
|
|
—
|
|
|
1,308,558
|
|
||||||
Deferred financing costs, net
|
—
|
|
|
3,099
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,099
|
|
||||||
Investment in subsidiaries
|
—
|
|
|
2,188,221
|
|
|
—
|
|
|
—
|
|
|
(2,188,221
|
)
|
|
—
|
|
||||||
Intercompany receivable
|
—
|
|
|
—
|
|
|
6,303
|
|
|
—
|
|
|
(6,303
|
)
|
|
—
|
|
||||||
Intangible assets, net
|
—
|
|
|
—
|
|
|
350,710
|
|
|
26,741
|
|
|
—
|
|
|
377,451
|
|
||||||
Goodwill
|
—
|
|
|
—
|
|
|
809,678
|
|
|
27,292
|
|
|
—
|
|
|
836,970
|
|
||||||
Long-term investments and other assets
|
—
|
|
|
106
|
|
|
78,173
|
|
|
10,550
|
|
|
(106
|
)
|
|
88,723
|
|
||||||
Total Assets
|
$
|
—
|
|
|
$
|
2,195,576
|
|
|
$
|
2,821,180
|
|
|
$
|
209,134
|
|
|
$
|
(2,357,043
|
)
|
|
$
|
2,868,847
|
|
Liabilities and Stockholders’ (Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current liabilities
|
$
|
—
|
|
|
$
|
28,805
|
|
|
$
|
343,398
|
|
|
$
|
128,581
|
|
|
$
|
(162,413
|
)
|
|
$
|
338,371
|
|
Intercompany payable
|
—
|
|
|
—
|
|
|
—
|
|
|
6,303
|
|
|
(6,303
|
)
|
|
—
|
|
||||||
Notes payable and revolving line of credit, net of current portion
|
—
|
|
|
2,820,297
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,820,297
|
|
||||||
Capital lease obligations, net of current portion
|
—
|
|
|
—
|
|
|
10,791
|
|
|
298
|
|
|
—
|
|
|
11,089
|
|
||||||
Deferred revenue, net of current portion
|
—
|
|
|
—
|
|
|
248,643
|
|
|
15,912
|
|
|
—
|
|
|
264,555
|
|
||||||
Accumulated losses of investee
|
653,526
|
|
|
|
|
|
|
|
|
|
|
|
(653,526
|
)
|
|
—
|
|
||||||
Other long-term obligations
|
—
|
|
|
—
|
|
|
79,020
|
|
|
—
|
|
|
—
|
|
|
79,020
|
|
||||||
Deferred income tax liability
|
—
|
|
|
—
|
|
|
106
|
|
|
9,041
|
|
|
(106
|
)
|
|
9,041
|
|
||||||
Total (deficit) equity
|
(653,526
|
)
|
|
(653,526
|
)
|
|
2,139,222
|
|
|
48,999
|
|
|
(1,534,695
|
)
|
|
(653,526
|
)
|
||||||
Total liabilities and stockholders’ (deficit) equity
|
$
|
—
|
|
|
$
|
2,195,576
|
|
|
$
|
2,821,180
|
|
|
$
|
209,134
|
|
|
$
|
(2,357,043
|
)
|
|
$
|
2,868,847
|
|
|
Parent
|
|
APX
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current assets
|
$
|
—
|
|
|
$
|
25,136
|
|
|
$
|
143,954
|
|
|
$
|
3,730
|
|
|
$
|
(67,799
|
)
|
|
$
|
105,021
|
|
Property and equipment, net
|
—
|
|
|
—
|
|
|
62,781
|
|
|
845
|
|
|
—
|
|
|
63,626
|
|
||||||
Subscriber acquisition costs, net
|
—
|
|
|
—
|
|
|
974,975
|
|
|
77,459
|
|
|
—
|
|
|
1,052,434
|
|
||||||
Deferred financing costs, net
|
—
|
|
|
4,420
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,420
|
|
||||||
Investment in subsidiaries
|
—
|
|
|
2,228,903
|
|
|
—
|
|
|
—
|
|
|
(2,228,903
|
)
|
|
—
|
|
||||||
Intercompany receivable
|
—
|
|
|
—
|
|
|
9,492
|
|
|
—
|
|
|
(9,492
|
)
|
|
—
|
|
||||||
Intangible assets, net
|
—
|
|
|
—
|
|
|
443,189
|
|
|
32,203
|
|
|
—
|
|
|
475,392
|
|
||||||
Goodwill
|
—
|
|
|
—
|
|
|
809,678
|
|
|
25,555
|
|
|
—
|
|
|
835,233
|
|
||||||
Long-term investments and other assets
|
—
|
|
|
106
|
|
|
11,523
|
|
|
13
|
|
|
(106
|
)
|
|
11,536
|
|
||||||
Total Assets
|
$
|
—
|
|
|
$
|
2,258,565
|
|
|
$
|
2,455,592
|
|
|
$
|
139,805
|
|
|
$
|
(2,306,300
|
)
|
|
$
|
2,547,662
|
|
Liabilities and Stockholders’ (Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current liabilities
|
$
|
—
|
|
|
$
|
17,047
|
|
|
$
|
160,956
|
|
|
$
|
74,987
|
|
|
$
|
(67,799
|
)
|
|
$
|
185,191
|
|
Intercompany payable
|
—
|
|
|
—
|
|
|
—
|
|
|
9,492
|
|
|
(9,492
|
)
|
|
—
|
|
||||||
Notes payable and revolving line of credit, net of current portion
|
—
|
|
|
2,486,700
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,486,700
|
|
||||||
Capital lease obligations, net of current portion
|
—
|
|
|
—
|
|
|
7,368
|
|
|
567
|
|
|
—
|
|
|
7,935
|
|
||||||
Deferred revenue, net of current portion
|
—
|
|
|
—
|
|
|
53,991
|
|
|
4,743
|
|
|
—
|
|
|
58,734
|
|
||||||
Accumulated losses of investee
|
245,182
|
|
|
|
|
|
|
|
|
|
|
|
(245,182
|
)
|
|
—
|
|
||||||
Other long-term obligations
|
—
|
|
|
—
|
|
|
47,080
|
|
|
—
|
|
|
—
|
|
|
47,080
|
|
||||||
Deferred income tax liability
|
—
|
|
|
—
|
|
|
106
|
|
|
7,204
|
|
|
(106
|
)
|
|
7,204
|
|
||||||
Total (deficit) equity
|
(245,182
|
)
|
|
(245,182
|
)
|
|
2,186,091
|
|
|
42,812
|
|
|
(1,983,721
|
)
|
|
(245,182
|
)
|
||||||
Total liabilities and stockholders’ (deficit) equity
|
$
|
—
|
|
|
$
|
2,258,565
|
|
|
$
|
2,455,592
|
|
|
$
|
139,805
|
|
|
$
|
(2,306,300
|
)
|
|
$
|
2,547,662
|
|
|
Parent
|
|
APX
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
841,658
|
|
|
$
|
43,015
|
|
|
$
|
(2,690
|
)
|
|
$
|
881,983
|
|
Costs and expenses
|
—
|
|
|
—
|
|
|
997,247
|
|
|
42,919
|
|
|
(2,690
|
)
|
|
1,037,476
|
|
||||||
(Loss) income from operations
|
—
|
|
|
—
|
|
|
(155,589
|
)
|
|
96
|
|
|
—
|
|
|
(155,493
|
)
|
||||||
Loss from subsidiaries
|
(410,199
|
)
|
|
(165,497
|
)
|
|
—
|
|
|
—
|
|
|
575,696
|
|
|
—
|
|
||||||
Other expense (income), net
|
—
|
|
|
244,702
|
|
|
13,545
|
|
|
(4,619
|
)
|
|
—
|
|
|
253,628
|
|
||||||
(Loss) income before income tax expenses
|
(410,199
|
)
|
|
(410,199
|
)
|
|
(169,134
|
)
|
|
4,715
|
|
|
575,696
|
|
|
(409,121
|
)
|
||||||
Income tax (benefit) expense
|
—
|
|
|
—
|
|
|
(228
|
)
|
|
1,306
|
|
|
—
|
|
|
1,078
|
|
||||||
Net (loss) income
|
$
|
(410,199
|
)
|
|
$
|
(410,199
|
)
|
|
$
|
(168,906
|
)
|
|
$
|
3,409
|
|
|
$
|
575,696
|
|
|
$
|
(410,199
|
)
|
Other comprehensive income (loss), net of tax effects:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency translation adjustment
|
3,155
|
|
|
3,155
|
|
|
—
|
|
|
3,155
|
|
|
(6,310
|
)
|
|
3,155
|
|
||||||
Unrealized loss on marketable securities
|
(1,693
|
)
|
|
(1,693
|
)
|
|
(1,693
|
)
|
|
—
|
|
|
3,386
|
|
|
(1,693
|
)
|
||||||
Total other comprehensive income (loss), net of tax effects
|
1,462
|
|
|
1,462
|
|
|
(1,693
|
)
|
|
3,155
|
|
|
(2,924
|
)
|
|
1,462
|
|
||||||
Comprehensive (loss) income
|
$
|
(408,737
|
)
|
|
$
|
(408,737
|
)
|
|
$
|
(170,599
|
)
|
|
$
|
6,564
|
|
|
$
|
572,772
|
|
|
$
|
(408,737
|
)
|
|
Parent
|
|
APX
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
715,072
|
|
|
$
|
45,539
|
|
|
$
|
(2,704
|
)
|
|
$
|
757,907
|
|
Costs and expenses
|
—
|
|
|
—
|
|
|
787,138
|
|
|
44,575
|
|
|
(2,704
|
)
|
|
829,009
|
|
||||||
(Loss) income from operations
|
—
|
|
|
—
|
|
|
(72,066
|
)
|
|
964
|
|
|
—
|
|
|
(71,102
|
)
|
||||||
Loss from subsidiaries
|
(275,957
|
)
|
|
(69,637
|
)
|
|
—
|
|
|
—
|
|
|
345,594
|
|
|
—
|
|
||||||
Other expense (income), net
|
—
|
|
|
206,320
|
|
|
(1,207
|
)
|
|
(325
|
)
|
|
—
|
|
|
204,788
|
|
||||||
(Loss) income before income tax expenses
|
(275,957
|
)
|
|
(275,957
|
)
|
|
(70,859
|
)
|
|
1,289
|
|
|
345,594
|
|
|
(275,890
|
)
|
||||||
Income tax expense (benefit)
|
—
|
|
|
—
|
|
|
545
|
|
|
(478
|
)
|
|
—
|
|
|
67
|
|
||||||
Net (loss) income
|
$
|
(275,957
|
)
|
|
$
|
(275,957
|
)
|
|
$
|
(71,404
|
)
|
|
$
|
1,767
|
|
|
$
|
345,594
|
|
|
$
|
(275,957
|
)
|
Other comprehensive income (loss), net of tax effects:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency translation adjustment
|
2,482
|
|
|
2,482
|
|
|
—
|
|
|
2,482
|
|
|
(4,964
|
)
|
|
2,482
|
|
||||||
Unrealized gain on marketable securities
|
1,011
|
|
|
1,011
|
|
|
1,011
|
|
|
—
|
|
|
(2,022
|
)
|
|
1,011
|
|
||||||
Total other comprehensive income (loss), net of tax effects
|
3,493
|
|
|
3,493
|
|
|
1,011
|
|
|
2,482
|
|
|
(6,986
|
)
|
|
3,493
|
|
||||||
Comprehensive (loss) income
|
$
|
(272,464
|
)
|
|
$
|
(272,464
|
)
|
|
$
|
(70,393
|
)
|
|
$
|
4,249
|
|
|
$
|
338,608
|
|
|
$
|
(272,464
|
)
|
|
Parent
|
|
APX
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
622,507
|
|
|
$
|
34,022
|
|
|
$
|
(2,808
|
)
|
|
$
|
653,721
|
|
Costs and expenses
|
—
|
|
|
—
|
|
|
730,322
|
|
|
34,882
|
|
|
(2,808
|
)
|
|
762,396
|
|
||||||
Loss from operations
|
—
|
|
|
—
|
|
|
(107,815
|
)
|
|
(860
|
)
|
|
—
|
|
|
(108,675
|
)
|
||||||
Loss from subsidiaries
|
(279,107
|
)
|
|
(118,885
|
)
|
|
—
|
|
|
—
|
|
|
397,992
|
|
|
—
|
|
||||||
Other expense, net
|
—
|
|
|
160,222
|
|
|
9,763
|
|
|
96
|
|
|
—
|
|
|
170,081
|
|
||||||
Loss before income tax expenses
|
(279,107
|
)
|
|
(279,107
|
)
|
|
(117,578
|
)
|
|
(956
|
)
|
|
397,992
|
|
|
(278,756
|
)
|
||||||
Income tax expense (benefit)
|
—
|
|
|
—
|
|
|
392
|
|
|
(41
|
)
|
|
—
|
|
|
351
|
|
||||||
Net loss
|
$
|
(279,107
|
)
|
|
$
|
(279,107
|
)
|
|
$
|
(117,970
|
)
|
|
$
|
(915
|
)
|
|
$
|
397,992
|
|
|
$
|
(279,107
|
)
|
Other comprehensive (loss) income, net of tax effects:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency translation adjustment
|
(13,293
|
)
|
|
(13,293
|
)
|
|
2
|
|
|
(13,294
|
)
|
|
26,585
|
|
|
(13,293
|
)
|
||||||
Total other comprehensive (loss) income, net of tax effects
|
(13,293
|
)
|
|
(13,293
|
)
|
|
2
|
|
|
(13,294
|
)
|
|
26,585
|
|
|
(13,293
|
)
|
||||||
Comprehensive loss
|
$
|
(292,400
|
)
|
|
$
|
(292,400
|
)
|
|
$
|
(117,968
|
)
|
|
$
|
(14,209
|
)
|
|
$
|
424,577
|
|
|
$
|
(292,400
|
)
|
|
Parent
|
|
APX
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net cash (used in) provided by operating activities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(313,290
|
)
|
|
$
|
3,958
|
|
|
$
|
—
|
|
|
$
|
(309,332
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Capital expenditures
|
—
|
|
|
—
|
|
|
(20,391
|
)
|
|
—
|
|
|
—
|
|
|
(20,391
|
)
|
||||||
Proceeds from sale of capital assets
|
—
|
|
|
—
|
|
|
776
|
|
|
—
|
|
|
—
|
|
|
776
|
|
||||||
Investment in subsidiary
|
1,151
|
|
|
(325,222
|
)
|
|
—
|
|
|
—
|
|
|
324,071
|
|
|
—
|
|
||||||
Acquisition of intangible assets
|
—
|
|
|
—
|
|
|
(1,745
|
)
|
|
—
|
|
|
—
|
|
|
(1,745
|
)
|
||||||
Other assets
|
—
|
|
|
—
|
|
|
(301
|
)
|
|
—
|
|
|
—
|
|
|
(301
|
)
|
||||||
Net cash provided by (used in) investing activities
|
1,151
|
|
|
(325,222
|
)
|
|
(21,661
|
)
|
|
—
|
|
|
324,071
|
|
|
(21,661
|
)
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Proceeds from notes payable
|
—
|
|
|
724,750
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
724,750
|
|
||||||
Repayment on notes payable
|
—
|
|
|
(450,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(450,000
|
)
|
||||||
Borrowings from revolving line of credit
|
—
|
|
|
196,895
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
196,895
|
|
||||||
Repayment of revolving line of credit
|
—
|
|
|
(136,895
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(136,895
|
)
|
||||||
Proceeds from capital contribution
|
—
|
|
|
—
|
|
|
326,373
|
|
|
—
|
|
|
(326,373
|
)
|
|
—
|
|
||||||
Payment of intercompany settlement
|
—
|
|
|
—
|
|
|
(2,983
|
)
|
|
—
|
|
|
—
|
|
|
(2,983
|
)
|
||||||
Intercompany receivable
|
—
|
|
|
—
|
|
|
3,621
|
|
|
—
|
|
|
(3,621
|
)
|
|
—
|
|
||||||
Intercompany payable
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,621
|
)
|
|
3,621
|
|
|
—
|
|
||||||
Repayments of capital lease obligations
|
—
|
|
|
—
|
|
|
(9,667
|
)
|
|
(340
|
)
|
|
—
|
|
|
(10,007
|
)
|
||||||
Financing costs
|
—
|
|
|
(18,277
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,277
|
)
|
||||||
Deferred financing costs
|
—
|
|
|
(11,119
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,119
|
)
|
||||||
Return of capital
|
(1,151
|
)
|
|
(1,151
|
)
|
|
(1,151
|
)
|
|
—
|
|
|
2,302
|
|
|
(1,151
|
)
|
||||||
Net cash (used in) provided by financing activities
|
(1,151
|
)
|
|
304,203
|
|
|
316,193
|
|
|
(3,961
|
)
|
|
(324,071
|
)
|
|
291,213
|
|
||||||
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
132
|
|
|
—
|
|
|
132
|
|
||||||
Net (decrease) increase in cash
|
—
|
|
|
(21,019
|
)
|
|
(18,758
|
)
|
|
129
|
|
|
—
|
|
|
(39,648
|
)
|
||||||
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning of period
|
—
|
|
|
24,680
|
|
|
18,186
|
|
|
654
|
|
|
—
|
|
|
43,520
|
|
||||||
End of period
|
$
|
—
|
|
|
$
|
3,661
|
|
|
$
|
(572
|
)
|
|
$
|
783
|
|
|
$
|
—
|
|
|
$
|
3,872
|
|
|
Parent
|
|
APX
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net cash (used in) provided by operating activities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(380,508
|
)
|
|
$
|
14,802
|
|
|
$
|
—
|
|
|
$
|
(365,706
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Subscriber acquisition costs – company owned equipment
|
—
|
|
|
—
|
|
|
(5,243
|
)
|
|
—
|
|
|
—
|
|
|
(5,243
|
)
|
||||||
Capital expenditures
|
—
|
|
|
—
|
|
|
(11,642
|
)
|
|
—
|
|
|
—
|
|
|
(11,642
|
)
|
||||||
Proceeds from sale of capital assets
|
—
|
|
|
—
|
|
|
3,080
|
|
|
43
|
|
|
—
|
|
|
3,123
|
|
||||||
Investment in subsidiary
|
(100,407
|
)
|
|
(408,214
|
)
|
|
—
|
|
|
—
|
|
|
508,621
|
|
|
—
|
|
||||||
Acquisition of intangible assets
|
—
|
|
|
—
|
|
|
(1,385
|
)
|
|
—
|
|
|
—
|
|
|
(1,385
|
)
|
||||||
Net cash used in investing activities
|
(100,407
|
)
|
|
(408,214
|
)
|
|
(15,190
|
)
|
|
43
|
|
|
508,621
|
|
|
(15,147
|
)
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Proceeds from notes payable
|
—
|
|
|
604,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
604,000
|
|
||||||
Repayment on notes payable
|
—
|
|
|
(235,535
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(235,535
|
)
|
||||||
Borrowings from revolving line of credit
|
—
|
|
|
57,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,000
|
|
||||||
Repayment of revolving line of credit
|
—
|
|
|
(77,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
(77,000
|
)
|
|||||
Proceeds from capital contribution
|
100,407
|
|
|
100,407
|
|
|
—
|
|
|
—
|
|
|
(100,407
|
)
|
|
100,407
|
|
||||||
Payment of intercompany settlement
|
—
|
|
|
—
|
|
|
3,000
|
|
|
(3,000
|
)
|
|
—
|
|
|
—
|
|
||||||
Intercompany receivable
|
—
|
|
|
|
|
12,906
|
|
|
—
|
|
|
(12,906
|
)
|
|
—
|
|
|||||||
Intercompany payable
|
—
|
|
|
—
|
|
|
408,214
|
|
|
(12,906
|
)
|
|
(395,308
|
)
|
|
—
|
|
||||||
Repayments of capital lease obligations
|
—
|
|
|
—
|
|
|
(8,295
|
)
|
|
(20
|
)
|
|
—
|
|
|
(8,315
|
)
|
||||||
Financing costs
|
—
|
|
|
(9,036
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,036
|
)
|
||||||
Deferred financing costs
|
—
|
|
|
(9,241
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,241
|
)
|
||||||
Net cash provided by (used in) provided by financing activities
|
100,407
|
|
|
430,595
|
|
|
415,825
|
|
|
(15,926
|
)
|
|
(508,621
|
)
|
|
422,280
|
|
||||||
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
(466
|
)
|
|
—
|
|
|
(466
|
)
|
||||||
Net increase (decrease) in cash
|
—
|
|
|
22,381
|
|
|
20,127
|
|
|
(1,547
|
)
|
|
—
|
|
|
40,961
|
|
||||||
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning of period
|
—
|
|
|
2,299
|
|
|
(1,941
|
)
|
|
2,201
|
|
|
—
|
|
|
2,559
|
|
||||||
End of period
|
$
|
—
|
|
|
$
|
24,680
|
|
|
$
|
18,186
|
|
|
$
|
654
|
|
|
$
|
—
|
|
|
$
|
43,520
|
|
|
Parent
|
|
APX
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net cash provided by (used in) operating activities
|
$
|
—
|
|
|
$
|
(1,052
|
)
|
|
$
|
(267,327
|
)
|
|
$
|
13,072
|
|
|
$
|
—
|
|
|
$
|
(255,307
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Subscriber acquisition costs – company owned equipment
|
—
|
|
|
—
|
|
|
(23,641
|
)
|
|
(1,099
|
)
|
|
—
|
|
|
(24,740
|
)
|
||||||
Capital expenditures
|
—
|
|
|
—
|
|
|
(26,941
|
)
|
|
(41
|
)
|
|
—
|
|
|
(26,982
|
)
|
||||||
Proceeds from sale of capital assets
|
—
|
|
|
—
|
|
|
480
|
|
|
—
|
|
|
—
|
|
|
480
|
|
||||||
Investment in subsidiary
|
—
|
|
|
(296,895
|
)
|
|
—
|
|
|
—
|
|
|
296,895
|
|
|
—
|
|
||||||
Acquisition of intangible assets
|
—
|
|
|
—
|
|
|
(1,363
|
)
|
|
—
|
|
|
—
|
|
|
(1,363
|
)
|
||||||
Proceeds from insurance claims
|
—
|
|
|
—
|
|
|
2,984
|
|
|
—
|
|
|
—
|
|
|
2,984
|
|
||||||
Change in restricted cash
|
—
|
|
|
—
|
|
|
14,214
|
|
|
—
|
|
|
—
|
|
|
14,214
|
|
||||||
Other assets
|
—
|
|
|
—
|
|
|
(208
|
)
|
|
—
|
|
|
—
|
|
|
(208
|
)
|
||||||
Net cash used in investing activities
|
—
|
|
|
(296,895
|
)
|
|
(34,475
|
)
|
|
(1,140
|
)
|
|
296,895
|
|
|
(35,615
|
)
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Proceeds from notes payable
|
—
|
|
|
296,250
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
296,250
|
|
||||||
Borrowings from revolving line of credit
|
—
|
|
|
271,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
271,000
|
|
||||||
Repayment of revolving line of credit
|
—
|
|
|
(271,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
(271,000
|
)
|
|||||
Intercompany receivable
|
—
|
|
|
|
|
11,601
|
|
|
—
|
|
|
(11,601
|
)
|
|
—
|
|
|||||||
Intercompany payable
|
—
|
|
|
—
|
|
|
296,895
|
|
|
(11,601
|
)
|
|
(285,294
|
)
|
|
—
|
|
||||||
Repayments of capital lease obligations
|
—
|
|
|
—
|
|
|
(6,402
|
)
|
|
(12
|
)
|
|
—
|
|
|
(6,414
|
)
|
||||||
Deferred financing costs
|
—
|
|
|
(5,436
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,436
|
)
|
||||||
Net cash (used in) provided by financing activities
|
—
|
|
|
290,814
|
|
|
302,094
|
|
|
(11,613
|
)
|
|
(296,895
|
)
|
|
284,400
|
|
||||||
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,726
|
)
|
|
—
|
|
|
(1,726
|
)
|
||||||
Net increase (decrease) in cash
|
—
|
|
|
(7,133
|
)
|
|
292
|
|
|
(1,407
|
)
|
|
—
|
|
|
(8,248
|
)
|
||||||
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning of period
|
—
|
|
|
9,432
|
|
|
(2,233
|
)
|
|
3,608
|
|
|
—
|
|
|
10,807
|
|
||||||
End of period
|
$
|
—
|
|
|
$
|
2,299
|
|
|
$
|
(1,941
|
)
|
|
$
|
2,201
|
|
|
$
|
—
|
|
|
$
|
2,559
|
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
•
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Name
|
|
Age
|
|
Position
|
Executive officers:
|
|
|
|
|
Todd R. Pedersen
|
|
49
|
|
Chief Executive Officer and Director
|
Alex J. Dunn
|
|
46
|
|
President and Director
|
Mark J. Davies
|
|
57
|
|
Chief Financial Officer
|
Matthew J. Eyring
|
|
48
|
|
Chief Strategy and Innovation Officer
|
Scott R. Hardy
|
|
40
|
|
Chief Operating Officer
|
Patrick E. Kelliher
|
|
54
|
|
Chief Accounting Officer
|
Shawn J. Lindquist
|
|
48
|
|
Chief Legal Officer
|
Todd M. Santiago
|
|
45
|
|
Chief Revenue Officer
|
Jeremy B. Warren
|
|
43
|
|
Chief Technology Officer
|
Non-employee directors:
|
|
|
|
|
David F. D’Alessandro
|
|
67
|
|
Director
|
Paul S. Galant
|
|
50
|
|
Director
|
Bruce McEvoy
|
|
40
|
|
Director
|
Jay D. Pauley
|
|
40
|
|
Director
|
Joseph S. Tibbetts, Jr.
|
|
65
|
|
Director
|
Peter F. Wallace
|
|
42
|
|
Director
|
•
|
Mr. Pedersen’s extensive knowledge of our industry and significant experience, as well as his insights as the original founder of our firm. Mr. Pedersen has played a critical role in our firm’s successful growth since its founding and has developed a unique and unparalleled understanding of our business.
|
•
|
Mr. Dunn’s extensive knowledge of our industry and significant leadership experience.
|
•
|
Mr. D’Alessandro’s extensive business and leadership experience, including as Chairman, President and Chief Executive Officer of John Hancock Financial Services, as well as his familiarity with board responsibilities, oversight and control resulting from serving on the boards of directors of public companies.
|
•
|
Mr. McEvoy’s significant financial and investment experience, including as a Senior Managing Director in the Private Equity Group at Blackstone, as well as his familiarity with board responsibilities, oversight and control resulting from serving on the boards of directors of public companies.
|
•
|
Mr. Wallace’s significant financial expertise and business experience, including as a Senior Managing Director in the Private Equity Group at Blackstone, as well as his familiarity with board responsibilities, oversight and control resulting from serving on the boards of directors of public companies.
|
•
|
Mr. Galant’s significant business and leadership experience, including as the Chief Executive Officer of Citigroup’s Enterprise Payments business, as well as his familiarity with board responsibilities, oversight and control resulting from serving on the board of directors of VeriFone Systems.
|
•
|
Mr. Pauley’s significant financial expertise and business experience, including as a managing director at Summit Partners, as well as his familiarity with board responsibilities, oversight and control resulting from serving on the boards of directors of public companies.
|
•
|
Mr. Tibbetts’ significant financial expertise and business experience, including as Senior Vice President and Chief Financial Officer of Sapient Corporation and 20 years at Price Waterhouse LLP (now PricewaterhouseCoopers LLP) including his experience as an Audit Partner and National Director of the firm’s Software Services Group, as well as his familiarity with board responsibilities, oversight and control resulting from serving on the boards of directors of public companies.
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
•
|
Todd R. Pedersen, our Chief Executive Officer;
|
•
|
Mark J. Davies, our Chief Financial Officer;
|
•
|
Alex J. Dunn, our President;
|
•
|
Matthew J. Eyring, our Chief Strategy and Innovation Officer; and
|
•
|
Todd M. Santiago, our Chief Revenue Officer.
|
•
|
attract, retain and motivate senior management leaders who are capable of advancing our mission and strategy and ultimately, creating and maintaining our long-term equity value. Such leaders must engage in a collaborative approach and possess the ability to execute our business strategy in an industry characterized by competitiveness and growth;
|
•
|
reward senior management in a manner aligned with our financial performance; and
|
•
|
align senior management’s interests with our equity owners’ long-term interests through equity participation and ownership.
|
•
|
Base salary;
|
•
|
Cash bonus opportunities;
|
•
|
Long-term incentive compensation;
|
•
|
Broad-based employee benefits;
|
•
|
Supplemental executive perquisites; and
|
•
|
Severance benefits.
|
Name
|
|
Base Salary prior to April 1, 2017
($)
|
|
Base Salary Effective as of April 1, 2017
($)
|
||
Todd R. Pedersen
|
|
660,000
|
|
|
679,800
|
|
Mark J. Davies
|
|
600,000
|
|
|
618,000
|
|
Alex J. Dunn
|
|
660,000
|
|
|
679,800
|
|
Matthew J. Eyring
|
|
600,000
|
|
|
618,000
|
|
Todd M. Santiago
|
|
600,000
|
|
|
618,000
|
|
% Attainment of Performance Target
|
Achievement
Factor
|
|
Less than 90%
|
0
|
|
90%
|
50
|
%
|
100%
|
100
|
%
|
110%
|
200
|
%
|
130% or greater
|
250
|
%
|
Name
|
Salary
(1)
($)
|
|
Target
Bonus
%
|
|
Target
Bonus
Amount
($)
|
|
Achievement
Factor
|
|
Bonus
Earned
($)
|
|||||
Todd R. Pedersen
|
679,800
|
|
|
100
|
%
|
|
679,800
|
|
|
121
|
%
|
|
822,558
|
|
Alex J. Dunn
|
679,800
|
|
|
100
|
%
|
|
679,800
|
|
|
121
|
%
|
|
822,558
|
|
|
(1)
|
The annual base salaries of Messrs. Pedersen and Dunn were increased from $660,000 to $679,800, effective as of April 1, 2017.
|
Named Executive Officer
|
Salary
(1)
($)
|
|
Target
Bonus % |
|
Target Bonus
Amount
($)
|
|
Bonus
Amount Payable
($)
|
||||
Mark J. Davies
|
618,000
|
|
|
60
|
%
|
|
370,800
|
|
|
370,800
|
|
Matthew J. Eyring
|
618,000
|
|
|
60
|
%
|
|
370,800
|
|
|
370,800
|
|
Todd M. Santiago
|
618,000
|
|
|
60
|
%
|
|
370,800
|
|
|
370,800
|
|
|
(1)
|
Effective April 1, 2017, the base salaries of Messrs. Davies, Eyring and Santiago were increased from $600,000 to $618,000.
|
•
|
a 401(k) savings plan;
|
•
|
paid vacation, sick leave and holidays;
|
•
|
medical, dental, vision and life insurance coverage; and
|
•
|
employee assistance program benefits.
|
Name and Principal
Position
|
Year
|
|
Salary
($) (1)
|
|
Bonus
($) (2)
|
|
Stock
Awards
($)
|
|
Non-Equity
Incentive Plan
Compensation
($) (3)
|
|
Declined
Non-Equity
Incentive Plan
Compensation
($)
|
|
All Other
Compensation
($) (4)
|
|
Total
($)
|
|||||||
Todd R. Pedersen,
|
2017
|
|
674,469
|
|
|
—
|
|
|
—
|
|
|
822,558
|
|
|
—
|
|
|
948,737
|
|
|
2,445,764
|
|
Chief Executive Officer and Director
|
2016
|
|
582,115
|
|
|
—
|
|
|
—
|
|
|
660,000
|
|
|
—
|
|
|
869,823
|
|
|
2,111,938
|
|
|
2015
|
|
525,000
|
|
|
—
|
|
|
—
|
|
|
525,000
|
|
|
—
|
|
|
687,561
|
|
|
1,737,561
|
|
Mark J. Davies,
|
2017
|
|
613,154
|
|
|
370,800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
143,949
|
|
|
1,127,903
|
|
Chief Financial Officer
|
2016
|
|
550,962
|
|
|
360,000
|
|
|
6,667
|
|
|
—
|
|
|
—
|
|
|
89,992
|
|
|
1,007,621
|
|
|
2015
|
|
511,250
|
|
|
755,625
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
311,534
|
|
|
1,578,409
|
|
Alex J. Dunn,
|
2017
|
|
674,469
|
|
|
—
|
|
|
—
|
|
|
822,558
|
|
|
—
|
|
|
875,137
|
|
|
2,372,164
|
|
President and Director
|
2016
|
|
582,115
|
|
|
—
|
|
|
—
|
|
|
660,000
|
|
|
—
|
|
|
2,926,862
|
|
|
4,168,977
|
|
|
2015
|
|
518,750
|
|
|
511,784
|
|
|
—
|
|
|
518,750
|
|
|
—
|
|
|
680,060
|
|
|
2,229,344
|
|
Matthew J. Eyring,
|
2017
|
|
613,154
|
|
|
370,800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
114,616
|
|
|
1,098,570
|
|
Chief Strategy and Innovation Officer
|
2016
|
|
550,962
|
|
|
360,000
|
|
|
14,167
|
|
|
—
|
|
|
—
|
|
|
63,736
|
|
|
988,865
|
|
|
2015
|
|
534,808
|
|
|
257,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
86,836
|
|
|
879,144
|
|
Todd M. Santiago,
|
2017
|
|
613,154
|
|
|
370,800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
148,460
|
|
|
1,132,414
|
|
Chief Revenue Officer
|
2016
|
|
559,875
|
|
|
360,000
|
|
|
14,167
|
|
|
—
|
|
|
—
|
|
|
142,412
|
|
|
1,076,454
|
|
|
2015
|
|
526,588
|
|
|
263,294
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
127,432
|
|
|
917,314
|
|
|
(1)
|
Effective April 1, 2017, the base salaries of Messrs. Pedersen, Davies, Dunn, Eyring and Santiago were increased as follows: for Messrs. Pedersen and Dunn, from $660,000 to $679,800; for Messrs. Davies, Eyring and Santiago, from $600,000 to $618,000.
|
(2)
|
The amounts reported in this column for Messrs. Davies, Eyring and Santiago represent their annual discretionary bonuses earned for each respective fiscal year.
|
(3)
|
Amounts reported in this column for Messrs. Pedersen and Dunn reflect amounts earned under the annual cash incentive plan. See “Compensation Discussion and Analysis-Compensation Elements-Bonuses.”
|
(4)
|
Amounts reported under All Other Compensation for fiscal 2016 reflect the following:
|
(a)
|
as to Mr. Pedersen, $300,000 additional cash compensation paid to Mr. Pedersen pursuant to his employment agreement (see “Narrative Disclosure to Summary Compensation Table and Grants of Plan Based Awards-Employment Agreements”), reimbursement for health insurance premiums, excess liability insurance premiums, country club membership fees, actual Company expenditures for use, including business use, of a Company car, alarm system fees, the value of event tickets, fuel expenses, and Company paid personal travel, $162,836 in actual Company expenditures for financial advisory services provided to Mr. Pedersen, other miscellaneous personal benefits and $267,595 reimbursed for taxes with respect to perquisites. In addition, Mr. Pedersen reimburses the Company for the aggregate variable costs associated with his personal use of the Company leased aircraft in accordance with the time-sharing agreement described under “Compensation Discussion and Analysis-Compensation Elements-Benefits and Perquisites.” While maintenance costs are not included in the
|
(b)
|
as to Mr. Davies, $44,340 in actual Company expenditures for use, including business use, of a Company car, reimbursement for health insurance premiums, country club membership fees, the value of event tickets, excess liability insurance premiums, fuel expenses and $66,950 reimbursed for taxes owed with respect to perquisites. In addition, family members of Mr. Davies have, in limited circumstances, accompanied him on business travel on the Company leased aircraft for which we incurred de minimis incremental costs;
|
(c)
|
as to Mr. Dunn, $300,000 additional cash compensation paid to Mr. Dunn pursuant to his employment agreement (see “Narrative Disclosure to Summary Compensation Table and Grants of Plan Based Awards-Employment Agreements”), reimbursement for health insurance premiums, excess liability insurance premiums, the value of meals in the Company cafeteria, country club membership fees, actual Company expenditures for use, including business use, of a Company car, alarm system fees, the value of event tickets and Company paid personal travel, $162,836 in actual Company expenditures for financial advisory services provided to Mr. Dunn, other miscellaneous personal benefits and $248,929 reimbursed for taxes with respect to perquisites. In addition, Mr. Dunn reimburses the Company for the aggregate variable costs associated with his personal use of the Company leased aircraft in accordance with the time-sharing agreement described under “Compensation Discussion and Analysis-Compensation Elements-Benefits and Perquisites.” As discussed in footnote 6(a) above, amounts reported reflect a similar allocation of $39,043 in maintenance costs associated with Mr. Dunn’s personal use of the Company leased aircraft. In addition, family members of Mr. Dunn have, in limited circumstances, accompanied him on business travel on the Company leased aircraft for which we incurred
de minimis
incremental costs;
|
(d)
|
as to Mr. Eyring, $31,169 in actual Company expenditures for use, including business use, of a Company car, reimbursement for health insurance premiums, country club membership fees, the value of event tickets, the value of meals in the Company cafeteria, excess liability insurance premiums, fuel expenses, alarm system fees and $17,730 reimbursed for taxes owed with respect to perquisites. In addition, family members of Mr. Eyring have, in limited circumstances, accompanied him on business travel on the Company leased aircraft for which we incurred
de minimis
incremental costs; and
|
(e)
|
as to Mr. Santiago, $29,823 in actual Company expenditures for use, including business use, of a Company car, reimbursement for health insurance premiums, country club membership fees, the value of event tickets, Company paid personal travel, the value of meals in the Company cafeteria, excess liability insurance premiums, fuel expenses, gift cards and other prizes and $61,536 reimbursed for taxes owed with respect to perquisites. In addition, family members of Mr. Santiago have, in limited circumstances, accompanied him on business travel on the Company leased aircraft for which we incurred
de minimis
incremental costs.
|
|
Grant
Date
|
|
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards(1)
|
||||||||
Name
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
||||||
Todd R. Pedersen
|
—
|
|
|
339,900
|
|
|
679,800
|
|
|
1,699,500
|
|
Mark J. Davies
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Alex Dunn
|
—
|
|
|
339,900
|
|
|
679,800
|
|
|
1,699,500
|
|
Matthew J. Eyring
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Todd M. Santiago
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
Reflects the possible payouts of cash incentive compensation to Messrs. Pedersen and Dunn under the fiscal
2017
management bonus. The actual amounts paid are reflected in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” and described in “Compensation Discussion and Analysis—Compensation Elements—Bonuses—Fiscal
2017
Management Bonus – Messrs. Pedersen and Dunn” above.
|
•
|
Reasonable personal use of the company airplane, subject to reimbursement by the executive of an amount determined on a basis consistent with IRS guidelines;
|
•
|
An annual payment equal to $300,000 per year, subject to all applicable taxes and withholdings, intended to be used to reimburse the Company for the costs of the executive’s personal use of the company airplane; and
|
•
|
Access to a financial advisor to provide the executive with customary financial advice, subject to a combined aggregate cap of $250,000 on such professional fees for Messrs. Pedersen and Dunn.
|
•
|
a pro rata portion of his target annual bonus based upon the portion of the fiscal year during which the executive was employed (the “pro rata bonus”);
|
•
|
a lump-sum cash payment equal to 150% of the executive’s then-current base salary plus 150% of the actual bonus the executive received in respect of the immediately preceding fiscal year (or, if a termination of employment occurs prior to any annual bonus becoming payable under his employment agreement, the target bonus for the immediately preceding fiscal year); and
|
•
|
a lump-sum cash payment equal to the cost of the health and welfare benefits for the executive and his dependents, at the levels at which the executive received benefits on the date of termination, for 18 months (the “COBRA payment”).
|
•
|
Time-Vesting Units: Twelve months after the initial “vesting reference date,” as defined in the applicable subscription agreement, 20% of the named executive officer’s time-vesting Employee Units will vest, subject to continued employment through such date. The “vesting reference date” for Messrs. Pedersen and Dunn is November 16, 2012, the date of the grant of their Class B Units. The “vesting reference” date for the Class B Units granted to Messrs. Eyring and Santiago on August 12, 2013 is also November 16, 2012 and the “vesting reference date” for the Class B Units granted to Mr. Davies is November 4, 2013, which is the date he commenced employment with us. Thereafter, an additional 20% of the named executive officer’s time-vesting Class B Units will vest every year until he is fully vested, subject to his continued employment through each vesting date. Notwithstanding the foregoing, the time-vesting Class B Units will become fully vested upon a change of control (as defined in the securityholders agreement) that occurs while the named executive officer is still employed by us. In addition, as to Messrs. Pedersen and Dunn, the time-vesting Class B Units will also continue to vest for one year following a termination by Parent without “cause” (excluding by reason of death or disability) or resignation by the executive for “good reason,” each as defined in the executive’s employment agreement (any such termination, a “qualifying termination”).
|
•
|
2.0x Exit-Vesting Units: The 2.0x exit-vesting Class B Units vest if the named executive officer is employed by us when and if Blackstone receives cash proceeds in respect of its Class A units in the Company equal to (x) a return equal to 2.0x Blackstone’s cumulative invested capital in respect of the Class A Units and (y) an annual internal rate of return of at least 20% on Blackstone’s cumulative invested capital in respect of its Class A Units. In addition, as to Messrs. Pedersen and Dunn, the 2.0x exit-vesting Class B Units will remain eligible to vest for one year following a qualifying termination if a change of control occurs during such one-year period and, as a result of such change of control, the 2.0x exit-vesting conditions are met. As to Messrs. Davies, Eyring and Santiago, the 2.0x exit-vesting Class B Units will remain eligible to vest for six months following a termination by us without “cause” (as defined for the purposes of the employment agreement) and other than by reason of death or while he is disabled if the applicable vesting criteria are satisfied during the six-month period. If the exit-vesting units do not become vested following the end of the six-month period, they will be forfeited without consideration.
|
•
|
3.0 Exit-Vesting Units: The 3.0x exit-vesting Class B Units vest if the named executive officer is employed by us when and if Blackstone receives cash proceeds in respect of its Class A units in the Company equal to (x) a return equal to 3.0x Blackstone’s cumulative invested capital in respect of the Class A Units and (y) an annual internal rate of return of at least 25% on Blackstone’s cumulative invested capital in respect of its Class A Units. In addition, as to Messrs. Pedersen and Dunn, the 3.0x exit-vesting Class B Units will remain eligible to vest for one year following a qualifying termination if a change of control occurs during such one-year period and, as a result of such change of control, the 3.0x
|
Triggering Event
|
|
Call Price
|
|
Put Price
|
Death or Disability
|
|
fair market value
|
|
fair market value
|
Termination With Cause or Voluntary Resignation When Grounds Exist for Cause
|
|
lesser of (a) fair market value and (b) cost
|
|
N/A
|
Termination Without Cause or Resignation For Good Reason
|
|
fair market value
|
|
N/A
|
Voluntary Resignation Without Good Reason Prior to November 16, 2014
|
|
lesser of (a) fair market value and (b) cost
|
|
N/A
|
Voluntary Resignation on or After November 16, 2014
|
|
fair market value
|
|
N/A
|
Restrictive Covenant Violation
|
|
lesser of (a) fair market value and (b) cost
|
|
N/A
|
Triggering Event
|
|
Call Price
|
|
Put Price
|
Death or Disability
|
|
fair market value
|
|
fair market value
|
Termination With Cause or Voluntary Resignation When Grounds Exist for Cause
|
|
lesser of (a) fair market value and (b) cost
|
|
N/A
|
Termination Without Cause
|
|
fair market value
|
|
N/A
|
Voluntary Resignation Prior to November 16, 2014, or, if Later, the Second Anniversary of Date of Hire
|
|
lesser of (a) fair market value and (b) cost
|
|
N/A
|
Voluntary Resignation on or After November 16, 2014, or, if Later, the Second Anniversary of Date of Hire
|
|
fair market value
|
|
N/A
|
Restrictive Covenant Violation
|
|
lesser of (a) fair market value and (b) cost
|
|
N/A
|
Competitive Activity Not Constituting a Restrictive Covenant Violation
|
|
fair market value
|
|
N/A
|
|
Stock Awards
|
||||||||||
Name
|
Grant Date
|
|
Number of
Shares
or Units of Stock That
Have Not
Vested
(#) (1)
|
|
Market
Value of
Shares
or Units of Stock
That
Have
Not
Vested
($)
|
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or Other
Rights That
Have Not
Vested
(#) (3)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
($)
|
||
Todd R. Pedersen
|
11/16/2012
|
|
—
|
|
|
(2)
|
|
15,494,699
|
|
|
(2)
|
Mark J. Davies
|
9/20/2016
|
|
106,667
|
|
|
(2)
|
|
266,667
|
|
|
(2)
|
|
3/3/2014
|
|
288,333
|
|
|
(2)
|
|
2,883,333
|
|
|
(2)
|
Alex J. Dunn
|
11/16/2012
|
|
—
|
|
|
(2)
|
|
15,494,699
|
|
|
(2)
|
Matthew J. Eyring
|
9/20/2016
|
|
226,667
|
|
|
(2)
|
|
566,667
|
|
|
(2)
|
|
7/12/2013
|
|
—
|
|
|
(2)
|
|
2,883,333
|
|
|
(2)
|
Todd M. Santiago
|
9/20/2016
|
|
226,667
|
|
|
(2)
|
|
566,667
|
|
|
(2)
|
|
7/12/2013
|
|
—
|
|
|
(2)
|
|
2,883,333
|
|
|
(2)
|
|
(1)
|
Reflects the number of time-vesting Class B Units of Parent, which vest 20% over a five-year period on each anniversary of November 16, 2012 or the applicable vesting reference date, subject to the executive’s continued employment on such date. Additional terms of these time-vesting units are summarized under “Compensation Discussion and Analysis—Compensation Elements—Long-Term Equity Compensation,” “Narrative Disclosure to Summary Compensation Table and Grants of Plan Based Awards Table—Equity Awards” and “Potential Payments Upon Termination or Change in Control.” Vesting of the time-vesting Class B Units will be accelerated upon a change of control that occurs while the executive is still employed by us and, as to Messrs. Pedersen and Dunn, will also continue to vest for one year following a qualifying termination, each as described under “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards—Equity Awards.”
|
(2)
|
Because there was no public market for the Class B Units of Parent as of
December 31, 2017
, the market value of such units was not determinable as of such date.
|
(3)
|
Reflects exit-vesting Class B Units (of which one-half are 2.0x exit-vesting and one-half are 3.0x exit-vesting). Unvested exit-vesting Class B units vest as described under the “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards—Equity Awards” section above. As to (i) Messrs. Pedersen and Dunn, the 2.0x and 3.0x exit-vesting Class B Units will remain eligible to vest for one year following a qualifying termination if a change of control occurs during such one-year period and, as a result of such change of control, the respective exit-vesting conditions are met, and (ii) as to Messrs. Davies, Eyring and Santiago, 2.0x and 3.0x exit-vesting Class B Units will remain outstanding and eligible to vest for a six-month period following a termination by us without “cause” (as defined for the purposes of his employment agreement) and other than by reason of death or while he is disabled if the applicable vesting criteria are satisfied during the six-month period, each as described under “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards—Equity Awards.”
|
|
(1)
|
Because there was no public market for the Class B Units of Parent as of
December 31, 2017
, the market value of such units on the vesting date was not determinable.
|
•
|
a pro rata portion of his target annual bonus based upon the portion of the fiscal year during which the executive was employed (the “pro rata bonus”);
|
•
|
a lump-sum cash payment equal to 200% of the executive’s then-current base salary plus 200% of the actual bonus the executive received in respect of the immediately preceding fiscal year (or, if a termination of employment occurs prior
|
•
|
a lump-sum cash payment equal to the cost of the health and welfare benefits for the executive and his dependents, at the levels at which the executive received benefits on the date of termination, for two years (the “COBRA payment”).
|
•
|
a pro rata portion of his target annual bonus based upon the portion of the fiscal year during which the executive was employed (the “pro rata bonus”);
|
•
|
a lump-sum cash payment equal to 150% of the executive’s then-current base salary plus 150% of the actual bonus the executive received in respect of the immediately preceding fiscal year (or, if a termination of employment occurs prior to any annual bonus becoming payable under his employment agreement, the target bonus for the immediately preceding fiscal year); and
|
•
|
a lump-sum cash payment equal to the cost of the health and welfare benefits for the executive and his dependents, at the levels at which the executive received benefits on the date of termination, for 18 months (the “COBRA payment”).
|
Name
|
Cash
Severance
($)(1)
|
|
Prorated
Bonus
($)(2)
|
|
Continuation
of Health
Benefits
($)(3)
|
|
Accrued
But
Unused
Vacation
($)
|
|
Value of
Accelerated
Equity
($)(4)
|
|
Total
($)
|
||||||
Todd R. Pedersen
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Termination Without Cause or for Good Reason
|
2,679,600
|
|
|
674,469
|
|
|
27,785
|
|
|
—
|
|
|
—
|
|
|
3,381,854
|
|
Change of Control
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Death or Disability
|
—
|
|
|
674,469
|
|
|
27,785
|
|
|
—
|
|
|
—
|
|
|
702,254
|
|
Mark J. Davies
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Termination Without Cause or for Good Reason
|
1,467,000
|
|
|
370,800
|
|
|
20,839
|
|
|
—
|
|
|
—
|
|
|
1,858,639
|
|
Change of Control
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Death or Disability
|
—
|
|
|
370,800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
370,800
|
|
Alex J. Dunn
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Termination Without Cause or for Good Reason
|
2,679,600
|
|
|
674,469
|
|
|
27,785
|
|
|
—
|
|
|
—
|
|
|
3,381,854
|
|
Change of Control
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Death or Disability
|
—
|
|
|
674,469
|
|
|
27,785
|
|
|
—
|
|
|
—
|
|
|
702,254
|
|
Matthew J. Eyring
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Termination Without Cause or for Good Reason
|
1,467,000
|
|
|
370,800
|
|
|
20,839
|
|
|
—
|
|
|
—
|
|
|
1,858,639
|
|
Change of Control
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Death or Disability
|
—
|
|
|
370,800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
370,800
|
|
Todd M. Santiago
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Termination Without Cause or for Good Reason
|
1,467,000
|
|
|
370,800
|
|
|
20,839
|
|
|
—
|
|
|
—
|
|
|
1,858,639
|
|
Change of Control
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Death or Disability
|
—
|
|
|
370,800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
370,800
|
|
|
(1)
|
Messrs. Pedersen and Dunn's cash severance reflects a lump sum cash payment equal to the sum of (x) 200% of the executive’s base salary of $679,800 and (y) 200% of the executive’s respective actual annual bonus paid for the preceding fiscal year. For fiscal 2016, Messrs. Pedersen and Dunn each received an annual bonus of $660,000. Messrs. Davies, Eyring and Santiago's cash severance reflects a lump sum cash payment equal to the sum of (x) 150% of the executive’s base salary of $618,000 and (y) 150% of the executive’s respective actual annual bonus paid for the preceding fiscal year. For fiscal 2016, Messrs. Davies, Eyring and Santiago each received an annual bonus of $360,000.
|
(2)
|
Reflects the executive’s target bonus for the 12 completed months of employment for the
2017
fiscal year.
|
(3)
|
For Messrs. Pedersen and Dunn reflects the cost of providing the executive officer with continued health and welfare benefits for the executive and his dependents under COBRA for two years and assuming
2017
rates. For Messrs. Davies, Eyring and Santiago reflects the cost of providing the executive officer with continued health and welfare benefits for the executive and his dependents under COBRA for 18 months and assuming
2017
rates.
|
(4)
|
Upon a change of control each of Messrs. Pedersen’s, Davies’, Dunn’s, Eyring’s and Santiago’s unvested time-vesting Class B Units would become immediately vested. However, because there was no public market for the Class B Units as of December 30,
2017
, the market value of such Class B Units was not determinable. In addition, the unvested 2.0x and 3.0x exit-vesting Class B Units would vest upon a change of control if the applicable exit-vesting hurdles were met. Amounts reported assume that the exit-vesting Class B Units do not vest upon a change of control.
|
Name
|
Fees Earned
or Paid in
Cash
($)
|
|
Stock
Awards
($) (1)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|||||||
David F. D’Alessandro
|
150,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
150,000
|
|
Paul S. Galant
|
150,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
150,000
|
|
Bruce McEvoy (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Jay D. Pauley (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Joseph S. Tibbetts, Jr.
|
150,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
150,000
|
|
Peter F. Wallace (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
As of
December 31, 2017
, Mr. D’Alessandro held
33,333
unvested time-vesting Class B Units and
333,350
unvested Class B Units subject to exit-vesting criteria and each of Messrs. Galant and Tibbetts held
84,034
stock appreciation rights covering shares of common stock of Vivint Group, Inc., which became vested and exercisable on July 1, 2017.
|
(2)
|
Employees of Blackstone and Summit Partners do not receive any compensation from us for their services on our Board of Directors.
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
|
Class A Units
|
||||
Name and Address of Beneficial Owner
|
Amount and
Nature of
Beneficial
Ownership
|
|
Percent of Class
|
||
Principal Unitholders:
|
|
|
|
||
Blackstone Funds(1)(2)
|
579,077,203
|
|
|
74
|
%
|
Summit Funds(1)(3)
|
50,000,000
|
|
|
6
|
%
|
Directors and Named Executive Officers(4):
|
|
|
|
||
Todd R. Pedersen
|
96,479,649
|
|
|
12
|
%
|
Alex J. Dunn
|
5,282,259
|
|
|
1
|
%
|
David F. D’Alessandro
|
—
|
|
|
—
|
|
Bruce McEvoy(5)
|
—
|
|
|
—
|
|
Jay D. Pauley
|
—
|
|
|
—
|
|
Joseph S. Tibbetts, Jr.
|
—
|
|
|
—
|
|
Paul S. Galant
|
—
|
|
|
—
|
|
Peter F. Wallace(5)
|
—
|
|
|
—
|
|
Mark J. Davies
|
—
|
|
|
—
|
|
Matthew J. Eyring
|
—
|
|
|
—
|
|
Todd M. Santiago
|
1,500,000
|
|
|
*
|
|
All Directors and Executive Officers as a Group (9 persons)
|
103,836,908
|
|
|
13
|
%
|
|
*
|
Indicates less than 1%
|
(1)
|
The limited liability company agreement of Acquisition LLC (the “LLC Agreement”) provides that the business and affairs of Acquisition LLC will be managed by the Board of Directors, initially comprised of five members, three of whom will be appointed by Blackstone, one of whom will be appointed by Mr. Pedersen, and one of whom will be appointed by the Summit Funds, and Blackstone Capital Partners VI L.P. (“BCP VI”) acting as managing member (in such capacity, the “Managing Member”). The Managing Member is an affiliate of Blackstone and will have the ability to appoint its own successor if it resigns its position as Managing Member. Effective July 30, 2013, the Managing
|
(2)
|
Represents (i) 436,112,143.59 Class A Units directly held by BCP VI, (ii) 2,644,957.26 Class A Units directly held by Blackstone Family Investment Partnership VI—ESC L.P. (“BFIP VI—ESC”), (iii) 220,012.15 Class A Units directly held by Blackstone Family Investment Partnership VI L.P. (“BFIP VI”) and (iv) 140,100,090 Class A Units directly held by Blackstone VNT Co-Invest, L.P. (“VNT”) (BCP VI, BFIP VI-ESC, BFIP VI and VNT are collectively referred to as the “Blackstone Funds”). BCP VI Side-by-Side GP L.L.C. is the general partner of each of BFIP VI-ESC and BFIP VI. Blackstone Management Associates VI L.L.C. is the general partner of each of BCP VI and VNT. BMA VI L.L.C. is the sole member of Blackstone Management Associates VI L.L.C. Blackstone Holdings III L.P. is the managing member of BMA VI L.L.C. and the sole member of BCP VI Side-by-Side GP L.L.C. The general partner of Blackstone Holdings III L.P. is Blackstone Holdings III GP L.P. The general partner of Blackstone Holdings III GP L.P. is Blackstone Holdings III GP Management L.L.C. The sole member of Blackstone Holdings III GP Management L.L.C. is The Blackstone Group L.P. The general partner of The Blackstone Group L.P. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly owned by Blackstone’s senior managing directors and controlled by its founder, Stephen A. Schwarzman. Each of such Blackstone entities and Mr. Schwarzman may be deemed to beneficially own the limited liability company interests in Acquisition LLC beneficially owned by the Blackstone Funds directly or indirectly controlled by it or him, but each disclaims beneficial ownership of such limited liability company interests in Acquisition LLC (other than the Blackstone Funds to the extent of their direct holdings). The address of each of Mr. Schwarzman and each of the other entities listed in this footnote is c/o The Blackstone Group L.P., 345 Park Avenue, New York, New York 10154.
|
(3)
|
Class A Units shown as beneficially owned by the Summit Funds (as hereinafter defined) are held by the following entities: (i) Summit Partners Growth Equity Fund VIII-A, L.P. (“SPGE VIII-A”) owns 36,490,138.53 Class A Units, (ii) Summit Partners Growth Equity Fund VIII-B, L.P. (“SPGE VIII-B”) owns 13,330,631.47 Class A Units, (iii) Summit Investors I, LLC (“SI”) owns 164,980 Class A Units and (iv) Summit Investors I (UK), LP (“SI(UK)” and together with SPGE VIII-A, SPGE VIII-B and SI, the “Summit Funds”) owns 14,250 Class A Units. Summit Partners, L.P. is (i) the managing member of Summit Partners GE VIII, LLC, which is the general partner of Summit Partners GE VIII, L.P., which is the general partner of each of Summit Partners Growth Equity Fund VIII-A, L.P. and Summit Partners Growth Equity Fund VIII-B, L.P., and (ii) the manager of Summit Investors Management, LLC, which is the managing member of Summit Investors I, LLC and the general partner of Summit Investors I (UK), L.P. Summit Partners, L.P., through a three-person investment committee currently composed of Peter Y. Chung, Bruce R. Evans and Martin J. Mannion, has voting and dispositive authority over the Units held by the Summit Funds. Each of such Summit entities and therefore Summit Partners, L.P. may be deemed to beneficially own limited liability company interests in Acquisition LLC beneficially owned by the Summit Funds directly or indirectly controlled by it, but each disclaims beneficial ownership of such limited liability company interests in Acquisition LLC (other than Summit Partners, L.P. and other than the Summit Funds to the extent of their direct holdings). The address of each of these entities and Messrs. Chung, Evans and Mannion is 222 Berkeley Street, 18th Floor, Boston, Massachusetts 02116.
|
(4)
|
Certain directors and executive officers also own profits interests in Acquisition LLC, having economic characteristics similar to stock appreciation rights, in the form of Class B Units of Acquisition LLC, as described under “Management—Executive Compensation—Compensation Discussion and Analysis—Long-term Incentive Compensation”. Directors and executive officers as a group hold an aggregate of 65,094,456 Class B Units.
|
(5)
|
Messrs. McEvoy and Wallace are each employees of affiliates of the Blackstone Funds, but each disclaims beneficial ownership of the limited liability company interests in Acquisition LLC beneficially owned by the Blackstone Funds. The address for Messrs., McEvoy and Wallace is c/o The Blackstone Group L.P., 345 Park Avenue, New York, New York 10154.
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
•
|
Master Intercompany Framework Agreement
. This agreement establishes a framework for the ongoing relationship between us and Solar. This agreement contains master terms regarding the protection of each other’s confidential
|
•
|
Non-Competition Agreement
. In this agreement, we and Solar each define our current areas of business and our competitors, and agree not to directly or indirectly engage in the other’s business for three years. Our area of business is defined as residential and commercial automation and security products and services, energy management (i.e., wireless or remote management and control of energy controlling or consuming devices in a residence, including thermostats, HVAC, lighting, other appliances and in-house consumption monitoring), products and services for accessing and using the Internet, products and services for the storage, access, retrieval, and sharing of data, fixed and mobile data services, audio/video entertainment services, healthcare and wellness services, content distribution network services, wholesale cloud computing services, demand response services and information security. Solar’s area of business is defined as selling renewable energy and energy storage products and services. We and Solar may each engage in the business of energy inverters, aggregate consumption monitoring and micro-grid technology. We may not sell products and services to Solar’s competitors. Solar may purchase products and services from specified Vivint competitors. Although Solar may not engage in our business for three years, we may engage in Solar’s business in markets where Solar is not yet operating, including by selling customer leads to Solar’s competitors (other than SolarCity Corporation). Once Solar begins operating in a market, we will provide those leads exclusively to Solar. This agreement permits us and Solar to make investments of up to 2.5% in any publicly traded company without violating the commitments in this agreement. This agreement also permits Solar to obtain financing from a Vivint competitor. Finally, in this agreement we also each agree that for five years, unless we or Solar obtain prior written permission from the other party, neither of us will solicit for employment any member of the other’s executive or senior management team, or any of the other’s employees who primarily manage sales, installation or servicing of the other’s products and services. The commitment not to solicit those employees lasts for 180 days after the employee finishes employment with us or Solar. General purpose employment advertisements and contact initiated by an employee are not, however, considered solicitation.
|
•
|
Transition Services Agreement
. Pursuant to this agreement we will provide to Solar various enterprise services, including services relating to information technology and infrastructure, human resources and employee benefits, administration services and facilities-related services. We agreed to perform the services with the same degree of care and diligence that we take in performing services for our own operations. We also agreed to provide Solar with reasonable assistance with Solar’s eventual transition to providing those services in-house or through the use of third-party service providers. Solar will pay us a sum of $313,000 per month for the services, which represents our good faith estimate of our full cost of providing the services to Solar, without markup or surcharge. As Solar transitions any service from us to an alternate provider or in-house, the fees paid to us will be reduced accordingly, except for any third party license fees related to services we obtains for Solar that cannot be terminated or assigned to Solar. The agreement will also account for the possibility that new services will be required from us that were not initially addressed in the agreement. The initial term of this agreement is six months; however, we and Solar will seek to complete the transition of the services contemplated by this agreement as soon as commercially practicable.
|
•
|
Product Development and Supply Agreement
. Pursuant to this agreement, one of Solar’s wholly owned subsidiaries will collaborate with us to develop certain monitoring and communications equipment that will be compatible with other equipment used in Solar’s solar energy systems and will replace equipment Solar currently procures from third parties. The initial term of the agreement is three years, and it will automatically renew for successive one-year periods unless either party elects otherwise.
|
•
|
Marketing and Customer Relations Agreement
. This agreement governs various cross-marketing initiatives between us and Solar, in particular the provision of sales leads from each company to the other. In November 2016, the parties amended this agreement to update certain terms and conditions governing existing cross-marketing initiatives and to introduce new cross-marketing initiatives, including a pilot program with the purpose of exploring potential opportunities for each company to offer, sell and integrate the other company’s respective products and services with its standard product offering. The term of this agreement, as amended, including the terms of the schedules defining the various cross-marketing initiatives, is up to three years.
|
•
|
Bill of Sale
. This agreement governs the transfer of certain assets such as office equipment from us to Solar.
|
•
|
Trademark License Agreement
. Pursuant to this agreement, the licensor, a special purpose subsidiary majority-owned by us and minority-owned by Solar, will grant Solar a royalty-free exclusive license to the trademark “VIVINT SOLAR” in the field of selling renewable energy or energy storage products and services. The agreement enables
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
|
Year ended December 31,
|
||||||
Fee Category
|
2017
|
|
2016
|
||||
Audit Fees (a)
|
$
|
1,793,930
|
|
|
$
|
1,656,000
|
|
Audit-Related Fees
|
—
|
|
|
—
|
|
||
Total Audit and Audit-Related Fees
|
1,793,930
|
|
|
1,656,000
|
|
||
Tax Fees (b)
|
—
|
|
|
51,000
|
|
||
All Other Fees
|
—
|
|
|
—
|
|
||
Total
|
$
|
1,793,930
|
|
|
$
|
1,707,000
|
|
|
(a)
|
Audit Fees primarily consisted of audit work performed for the preparation of the Company’s annual consolidated financial statements and reviews of interim consolidated financial information and in connection with regulatory filings.
|
(b)
|
Tax Fees included tax compliance, planning and support services.
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
1.
|
Financial Statements:
|
2.
|
Financial Statement Schedules:
|
4.6
|
|
|
|
|
|
4.7
|
|
|
|
|
|
4.8
|
|
|
|
|
|
4.9
|
|
|
|
|
|
4.10
|
|
|
|
|
|
4.11
|
|
|
|
|
|
4.12
|
|
|
|
|
|
4.13
|
|
|
|
|
|
4.14
|
|
|
|
|
|
4.15
|
|
|
|
|
|
4.16
|
|
|
|
|
|
4.17
|
|
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
|
10.5
|
|
|
|
|
|
10.6
|
|
|
|
|
|
10.7
|
|
|
|
|
|
10.8†
|
|
|
|
|
10.9†
|
|
|
|
|
|
10.10†
|
|
|
|
|
|
10.11†
|
|
|
|
|
|
10.12†
|
|
|
|
|
|
10.13†
|
|
|
|
|
|
10.14†
|
|
|
|
|
|
10.15†
|
|
|
|
|
|
10.16†
|
|
|
|
|
|
10.17†
|
|
|
|
|
|
10.18†
|
|
|
|
|
|
10.19†
|
|
|
|
|
|
10.20†
|
|
|
|
|
|
10.21†
|
|
|
|
|
10.22
|
|
|
|
|
|
10.23
|
|
|
|
|
|
10.24*
|
|
|
|
|
|
12.1*
|
|
|
|
|
|
21.1*
|
|
|
|
|
|
24.1*
|
|
|
|
|
|
31.1*
|
|
|
|
|
|
31.2*
|
|
|
|
|
|
32.1*
|
|
|
|
|
|
32.2*
|
|
|
|
|
|
99.2
|
|
|
|
|
|
99.3
|
|
|
|
|
|
101.1*
|
|
The following materials are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Loss, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements, and (vii) document and entity information. (A)
|
|
*
|
Filed herewith.
|
†
|
Identifies exhibits that consist of a management contract or compensatory plan or arrangement.
|
(A)
|
Pursuant to Rule 406T of Regulation S-T, the Interactive Data files on Exhibit 101.1 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
|
ITEM 16.
|
FORM 10-K SUMMARY
|
|
|
|
|
|
APX GROUP HOLDINGS, INC.
|
|
|
|
By:
|
|
/s/ MARK J. DAVIES
|
|
|
Mark J. Davies
|
|
|
Chief Financial Officer
|
|
|
|
|
|
Date: March 6, 2018
|
Name
|
|
Title
|
|
|
|
/s/ Todd R. Pedersen
|
|
Chief Executive Officer and Director
|
TODD R. PEDERSEN
|
|
(Principal Executive Officer)
|
|
|
|
/s/ Mark J. Davies
|
|
Chief Financial Officer
|
MARK J. DAVIES
|
|
(Principal Financial Officer)
|
|
|
|
/s/ Patrick E. Kelliher
|
|
Chief Accounting Officer
|
PATRICK E. KELLIHER
|
|
(Principal Accounting Officer)
|
|
|
|
/s/ Alex J. Dunn
|
|
President and Director
|
ALEX J. DUNN
|
|
|
|
|
|
/s/ David F. D’Alessandro
|
|
Director
|
DAVID F. D’ALESSANDRO
|
|
|
|
|
|
/s/ Paul S. Galant
|
|
Director
|
PAUL S. GALANT
|
|
|
|
|
|
/s/ Bruce McEvoy
|
|
Director
|
BRUCE MCEVOY
|
|
|
|
|
|
/s/ Jay D. Pauley
|
|
Director
|
JAY D. PAULEY
|
|
|
|
|
|
/s/ Joseph S. Tibbetts, Jr.
|
|
Director
|
JOSEPH S. TIBBETTS, JR.
|
|
|
|
|
|
/s/ Peter F. Wallace
|
|
Director
|
PETER F. WALLACE
|
|
|
1
|
Definitions
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
(a)
|
an application is made to a court for an order that a body corporate be wound up;
|
(b)
|
an application is made to a court for an order appointing a liquidator or provisional liquidator in respect of a body corporate, or one of them is appointed, whether or not under an order;
|
(c)
|
a receiver, manager or receiver and manager is appointed in respect of a body corporate for the whole or any part of its undertaking, property or assets;
|
(d)
|
except to reconstruct or amalgamate while solvent, a body corporate enters into, or resolves to enter into, a scheme of arrangement, deed of company arrangement or composition with, or assignment for the benefit of, all or any class of its creditors or it enters into or takes steps to enter into a reorganization, moratorium or other administration involving any of them;
|
(e)
|
a body corporate resolves to wind itself up, or otherwise dissolve itself or gives notice of its intention to do so, except to reconstruct or amalgamate while solvent or is otherwise wound up or dissolved;
|
(f)
|
a body corporate is, or states that it is insolvent;
|
(g)
|
a body corporate takes any step to obtain protection or is granted protection from its creditors, under any applicable legislation or an administrator is appointed to a body corporate; or
|
(h)
|
anything analogous or having a substantially similar effect to any of the events specified above happens under the law of any applicable jurisdiction.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
2
|
The Program
|
2.1
|
Product Offering; Program Elements
|
2.1.1
|
The product offering constitutes Credit Services, as prepared and administered by Supplier, to facilitate purchases by Consumers of Company Products
.
|
2.1.2
|
The Program elements shall include the following:
|
2.1.2.1
|
The Credit Services will be offered to Consumers in connection with Consumers’ purchase of Company Products.
|
2.1.2.2
|
The Credit Services will be an installment loan (as further described herein, a “Loan”) with an APR of zero percent (0%).
|
2.1.2.3
|
The maximum aggregate Loan Amount of [*] will be as set forth in the Supplier Credit Policy and the Program B Loans Credit Policy and the Loan term lengths will be forty-two (42) or sixty (60) months.
|
2.1.2.4
|
The Credit Services will be available through the Company Channels.
|
2.1.2.5
|
The Credit Services will be available on orders for Company Products that result in a Loan Amount of not less than [*].
|
2.1.2.6
|
The Borrower for a Program A Loan must have an existing, U.S.-based personal, commercial or small business credit card (which, for the avoidance of doubt, will not include a debit or prepaid card) in good standing. Such credit card may be the Borrower’s credit card on file with Company. The Borrower for a Program B Loan must have an existing credit card as described above or an existing U.S.-based “signature-required” debit card (which, for the avoidance of doubt, will not include “PIN” or “PIN-less” debit cards or prepaid cards). Such debit card may be the Borrower’s debit card on file with Company.
|
2.1.2.7
|
Split tender will be allowed in connection with Credit Services for Borrower purchases of Company Products through a Company Channel.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
2.1.2.8
|
Except as approved in advance by Company in writing, at Company’s sole discretion, [*] to Borrower for originating the Program Loan or otherwise in connection with a Program Loan.
|
2.1.2.9
|
Regarding situations where shipment of a Product will be delayed, the Parties agree to follow the normal billing practices of Company in effect as of the Effective Date to ensure Borrowers are charged correctly; provided, however, that Company shall not change its billing practices without the prior written consent of Supplier, which consent shall not be unreasonably withheld or delayed.
|
2.2
|
Credit Application; Disclosures; Returns
|
2.2.1.
|
The Credit Application shall include the following entry fields relating to Borrower and the credit (or debit) card, as applicable: [*]. All other entry fields shall be mutually agreed by the Parties unless the inclusion of such fields are required by Legal Requirements and included by Supplier consistently to the credit applications for all consumer credit programs to which such Legal Requirements are applicable.
|
2.2.2.
|
The description of the Credit Services in the Program Materials shall include all disclosures required under applicable Legal Requirements. The drafting and adequacy of such disclosures shall be solely the responsibility of Citizens, provided that Company will be provided with a reasonable opportunity to review such disclosures in advance, though Company’s review shall in no way limit or offset Supplier’s sole responsibility for providing Credit Services disclosures that comply with applicable Legal Requirements. Citizens will be provided with a reasonable opportunity to review Company’s disclosures for Company Products that are financed by the Credit Services.
|
2.2.3.
|
As it relates to returns of Company Products that were purchased with a Loan under the Program, the Parties agree as follows:
|
2.2.3.1
|
Company shall perform all usual and customary actions relating to processing such a return, provided, however, Company shall only return funds to the Consumer to the extent the funds relate to forms of tender unrelated to the Credit Services;
|
2.2.3.2
|
Company shall post to the applicable Loan account record for the Borrower the amount that Citizens delivered to Company under
Article
9 below. Such posting shall occur automatically and as soon as reasonably practicable in connection with a return;
|
2.2.3.3
|
Citizens shall perform all actions relating to cancelling the Loan and providing a credit (if any) to the Borrower; and
|
2.2.3.4
|
To allow Company to identify a return as relating to a Loan, the name of the Program, to be determined by Company, will be included on the proof of purchase that Company provides to Borrower. Such proof of purchase may also include disclosure language.
|
2.3
|
Reserved.
|
2.4
|
Transaction Fee; Credit Loss Sharing and Assignment of Program B Loans; Fraud Losses
|
2.4.1
|
Transaction Fee; Interchange Expenses
. Company shall pay to Citizens a monthly fee (the “
Transaction Fee
”) calculated with respect to each month of the Program in the applicable amount set forth in the table below.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
LOAN CATEGORY
|
TRANSACTION FEE
|
Program A
|
[*]
|
Program B
|
[*]
|
2.4.2
|
Credit Losses; Assignment of Program B Loans
. As it relates to the Loans originated during the Term (collectively, the “
Program Loans
”), the Parties shall be responsible for the Credit Losses associated with the Program Loans as set forth in the table immediately below.
|
|
[*]
|
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
[*]
|
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
[*]
|
|
[*]
|
[*]
|
|
[*]
|
[*]
|
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
2.4.3
|
Fraud Losses.
|
2.4.3.1.
|
Subject to the terms hereof, [*].
|
2.4.3.2.
|
Company and Supplier will collaborate on fraud prevention and management as follows:
|
3
|
Supplier Obligations
|
3.1
|
For the duration of the Agreement, Supplier agrees as follows:
|
3.1.1
|
Supplier shall, in cooperation with Company and in a manner consistent with the terms hereof, supply and operate financing systems, which enable the Supplier to offer Credit Services to Borrowers in the U.S.A. Subject to Section 3.1.14, Section 3.1.15 and Section 3.1.17, all decisions concerning the Credit Services and creditworthiness of any Consumer, including provision of the Credit Services in compliance with applicable Legal Requirements, shall be made at the good faith discretion of Supplier;
|
3.1.2
|
Supplier shall administer the Credit Services in accordance with the Services Level Agreement in
Exhibit 2
;
|
3.1.3
|
Supplier shall, at its own expense, be responsible for all activities associated with the servicing of all Loans under the Program, including billing account maintenance, transaction and payment posting, authorizations, customer service, including maintaining toll-free numbers, collections, and handling billing disputes, Company inquiries
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
3.1.4
|
If Supplier receives a Borrower complaint regarding the quality or delivery of any Company Products, Supplier shall refer such complaint to Company via a “warm transfer” to Company’s customer service unit pursuant to a mutually agreed warm transfer process;
|
3.1.5
|
Supplier shall produce Credit Application and disclosure forms for Credit Services in an electronic web-based and point-of-sale format accessible by Consumers and ensure that these forms evidence a bona fide installment loan transaction that is a valid, legal, and binding obligation that complies with all applicable Legal Requirements. Supplier will also produce online forms for Company telesales agents to access as well as check the status of a Credit Application and provide disclosures as required by applicable Legal Requirements;
|
3.1.6
|
Supplier shall provide support and assistance to Company for the integration of the Credit Services into Company operational processes;
|
3.1.7
|
Supplier will be provided with advance copies of Company Program Advertising and will have twenty-four (24) hours to review such materials and respond to Company to ensure the materials are in accordance with any Legal Requirements; provided, that if Supplier does not respond within such period, such Company Program Advertising shall be deemed approved;
|
3.1.8
|
[*];
|
3.1.9
|
To the extent, and in the manner, requested by Company, Supplier shall use its best efforts to promote and market the Credit Services in a manner that is not illegal, unfair, deceptive or abusive; Supplier shall provide Company with advance copies of all Program Materials, provided that Company’s review, acceptance or approval of same shall not relieve Supplier of its obligations or responsibilities with respect thereto. Any use of Company’s Marks by Supplier must be in accordance with
Section 13.1
;
|
3.1.10
|
Supplier shall be responsible for managing any Supplier Personnel which assists in developing, managing, processing, or marketing any aspect of the Program in any way. Supplier shall, upon written request, provide Company with the identity of any and all such Personnel along with a description of the work being performed. Further, Supplier shall: (i) develop metrics to monitor and maintain normal business operation, and be responsible for managing issues and ensure resolution within the metrics set out as defined in
Exhibit 2
; and (ii) ensure that Company’s Confidential Information and Program Information are handled in accordance with
Article 11
;
|
3.1.11
|
Supplier shall not pay any fees or costs associated with a Consumer’s transactions with Company;
|
3.1.12
|
Supplier shall provide Company with monthly reporting based on the agreed to metrics as set out in
Exhibit 2
;
|
3.1.13
|
Supplier shall provide the Online Service Center for Consumers as set forth in
Exhibit 2
;
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
3.1.14
|
With respect to each Credit Application submitted for approval under the Program, such Credit Application shall be approved for a Program A Loan unless the Applicant with respect to such Credit Application fails to satisfy one or more criteria of the Supplier Credit Policy. [*];
|
3.1.15
|
With respect to each Credit Application submitted for approval under the Program that fails to satisfy one or more criteria of the Supplier Credit Policy, such Credit Application shall be approved for a Program B Loan unless the Applicant with respect to such Credit Application fails to satisfy one or more criteria of the Program B Loans Credit Policy. Upon reasonable request of Company from time to time, Supplier shall make such modifications to the Program B Loans Credit Policy as Company may request and as are permitted by applicable Legal Requirements, such that the Program B Loans Credit Policy will at all times ensure that Program B Loans shall be approved for all Consumers not eligible for Program A Loans, to the extent such approval is acceptable to Company and permitted by applicable Legal Requirements;
|
3.1.16
|
Except as expressly provided otherwise pursuant to this Agreement, [*];
|
3.1.17
|
[*];
|
3.1.18
|
[*]; and
|
3.1.19
|
Supplier shall use commercially reasonable efforts to cooperate with and assist Company, at Company’s request, to improve the administration of chargebacks in an effort to reduce Chargeback Costs incurred by Company, including by transitioning its chargeback services provider from [*] to a different provider mutually agreeable to Supplier and Company.
|
4
|
Company Obligations
|
4.1
|
For the duration of the Agreement, Company agrees as follows:
|
4.1.1
|
Company shall, in cooperation with Supplier and in a manner consistent with the terms hereof, create a process to enable Borrowers to apply for Credit Services using Supplier’s Credit Application form via the Company Channels;
|
4.1.2
|
Company shall include Credit Services in Company Program Advertising and consumer sales activities, where Company deems such inclusion appropriate in Company’s sole discretion;
|
4.1.3
|
Company shall not be responsible for any inaccuracy or truthfulness of the content of any documents and information required for Supplier’s analysis of credit requests by Borrowers, provided, however, that in the event Company collects those documents and information, Company shall be responsible for the transfer of those documents and information to Supplier without modification;
|
4.1.4
|
Company shall pay any Interchange Expenses relating to Borrower repayment of Loan Amounts with a credit (or debit) card product;
|
4.1.5
|
Company shall abide by applicable requirements in Regulation E, 12 C.F.R. Part 1005, for accepting preauthorized, recurring payments using a debit card, including but not limited to, requiring that preauthorized, recurring debit transactions from a consumer account be authorized in writing (not over the phone), and providing a copy of that written authorization to the customer in the required timeframe(s). [*].
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
4.1.6
|
To the extent permitted by Legal Requirements, and in Company’s sole discretion, Company may provide reasonable cooperation to Supplier in connection with any collection or charge-off efforts of Supplier, including responding to information requests from Supplier;
|
4.1.7
|
Company shall comply with its obligations as set forth in the Services Level Agreement attached hereto as
Exhibit 2
; and
|
4.1.8
|
In connection with any changes and improvements relating to the selling of Company Products under the Program to be made following the date hereof, each such change or improvement shall be made following discussions and agreement between the Account Managers.
|
4.1.9
|
Changes to Supplier’s System or Credit Services
. Subject to the last sentence of this
Section 4.1.9
, if Company desires to implement a Change, the Parties will adhere to the following Change procedures: Company will send a project change request (a “
PCR
”) to Citizens in writing that it desires to implement a Change. Within five (5) Business Days following Citizens’ receipt of a PCR, or such longer period of time as may be reasonably necessary, Citizens shall prepare and provide Company with a written response to such PCR (a “
PCR Response
”), reasonably detailing whether the PCR is feasible and any material issues involved in the implementation of such PCR (including, without limitation, the estimated time and expense of Citizens and its Personnel required to implement the PCR). If the PCR Response is acceptable to Company and Company wishes to proceed with such Change proposal, then Company shall indicate such by approving the PCR Response and promptly providing written confirmation to Citizens. An approved PCR Response shall constitute an amendment to this Agreement. Supplier acknowledges that it has and shall be responsible for providing sufficient Supplier Systems and Personnel to launch the Program in accordance with the requirements of this Agreement, and Company shall not be responsible for any of Supplier’s costs in connection with such launch; however, if Company insists on a Change in connection with the Program launch that is a customization not required in order to achieve the Program launch, then the provisions of this
Section 4.1.9
shall apply.
|
5
|
Exclusivity
|
5.1
|
Supplier understands and acknowledges that: (i) it is not the sole provider of credit products to Company and (ii) Company has and may enter into agreements with other suppliers for credit products. However, during the Term, Supplier shall be the sole provider of Loans under the Loan Program, other than the Secondary Program. For the avoidance of doubt, nothing in this Agreement shall preclude Company (itself or pursuant to agreements with third parties) from financing sales of Company Products made through third party sales channels (whether physical locations or other channels, and whether such sales are effected by Company Personnel or by third party sellers).
|
5.2
|
Notwithstanding the foregoing, Company has the right to establish, substantially concurrently with the Program, a program for extending lines of credit, either directly by Company or through an Affiliate or pursuant to an agreement with a third party, to Applicants whose Credit Applications have been declined by Supplier as either a Program A Loan or a Program B Loan (a “
Secondary Program
”). At Company’s reasonable discretion, to the extent permitted by applicable Legal Requirements, a Secondary Program may be similar or identical to the Program in its features, positioning and appearance, provided a Secondary Program shall not (i) have similar credit criteria terms as a Program A Loan or a Program B Loan or (ii) use any Supplier’s Marks or other proprietary Supplier intellectual property. To the extent permitted by applicable Legal Requirements, Supplier shall, at Company’s expense, take the following actions in relation to a Secondary Program:
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
5.3
|
[*].
|
5.4
|
Company understands and acknowledges that Supplier provides consumer credit services to other sellers of products. [*].
|
5.5
|
Notwithstanding anything to the contrary in this Agreement, the exclusivity provisions of this
Article 5
shall not apply to any credit products issued (either directly or pursuant to an agreement or arrangement with a third party issuer) by any business that is acquired by or becomes affiliated with Company or any of its Affiliates by virtue of any acquisition or business combination transaction to which Company or any of its Affiliates becomes party, so long as Supplier remains the sole provider of Loans for the Company Products in existence and sold by Company and issued by Supplier as of immediately prior to such acquisition or other business combination transaction through the particular Company Channels and geographic regions in which Loans were issued by Supplier immediately prior to such acquisition or other business combination transaction.
|
6
|
Branding; Marks
|
7
|
Marketing and Promotion
|
7.1
|
Except as provided in this Agreement, neither Party may use the other’s Marks without the other Party’s prior written consent in the sole discretion of such other Party.
|
7.2
|
The Parties agree to contribute to marketing and promotional activities relating to the Program as agreed from time to time. All Company Program Advertising and Program Materials are subject to the prior written approval of each of the Parties; provided that Supplier will be solely responsible for the inclusion of any disclosures required under Legal Requirements and Company shall have final approval rights as to the “look and feel” of the Program Materials and the conformity of the content of the Program Materials with Company’s branding; provided further, that Supplier’s consent will not be required for any Company Program Advertising that do not include or reference Supplier’s Marks.
|
7.3
|
Supplier and Company may jointly offer Borrower promotions. These may include, but not be limited to [*]. At the time of the implementation of a promotion, Supplier and Company will agree to the definition and structure of the specific promotion for a Program, costs (if any), metrics, and reporting
|
7.4
|
Supplier and Company will develop a communication strategy which will outline how and when Consumer and Borrower communications will be effected. This will include communications about the Credit Application and Company Product order process with respect to the Program. Company shall pre-approve in writing all communication materials relating to the Program.
|
7.5
|
The Parties agree to jointly conduct an annual review and/or refresh of Consumer-facing communications, including, but not limited to, the Online Service Center maintained by Supplier.
|
7.6
|
Each Party shall pay its own costs associated with any and all marketing and promotional activities. For the avoidance of doubt, all costs and expense of preparation, production and delivery of all Program Materials shall be borne solely by Supplier, and all costs and expenses relating to Company Program Advertising shall be borne solely by Company.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
8
|
Appointment of Account Managers
|
9
|
Payments and Reconciliation
|
9.1
|
Supplier shall pay to Company the Loan Amount pursuant to the transmittal procedures set forth on
Exhibit 2
.
|
9.2
|
On or by the tenth (10
th
) Business Day of each month (provided that late delivery shall not affect Company’s obligation to pay), Citizens shall deliver to Company with respect to such month: (a) an invoice for the Transaction Fee, (b) the Interchange Invoice, and (c) the Credit Loss Invoice (collectively, the “
Monthly Invoices
”). The Monthly Invoices delivered to Company shall be in the respective forms set forth as
Exhibit 7
to this Agreement, and shall be accompanied by reasonable supporting documentation.
|
9.3
|
In addition, Citizens shall make available to Company upon request all work papers, schedules and other supporting documentation used by Citizens in preparing the Monthly Invoices. Company shall pay the undisputed portion of the amount set forth in any said Monthly Invoice to Citizens on or by the forty-fifth (45th) day following Company’s receipt of said Monthly Invoice. If Company does not agree with Citizens’ calculation of the Transaction Fees, Interchange Expenses or Credit Losses as set forth in a Monthly Invoice, then the Parties shall use best efforts to arrive at a mutually agreeable resolution of any disputes relating to the amount of such charges. Citizens may only send a demand notice for payment obligations under a Monthly Invoice following forty-five (45) days from the Company’s receipt of such Monthly Invoice.
|
10
|
Reporting and Audit
|
10.1
|
Each Party will provide the other Party with information as set forth in
Exhibit 2
.
|
10.2
|
Each Party will maintain accounts and records necessary to confirm the basis for any amounts paid to the other Party pursuant to this Agreement and to verify the Party’s compliance with the terms of this Agreement. The records will be maintained according to recognized accounting practices and in such a manner as may be readily audited by an independent accounting firm at the other Party’s reasonable request and cost. A non-requesting Party shall permit independent auditors nominated by a requesting Party (and as it relates to either Party, Government Agencies with jurisdiction over such Party) and/or representatives of such requesting Party to audit records of such non-requesting Party no more than twice per calendar year with at least six (6) months separation between requests, on reasonable notice by such requesting Party and without unreasonable disruption to
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
10.3
|
Notwithstanding the foregoing, Company shall have the right, at any reasonable time during the Term [*].
|
10.4
|
Any reporting must comply with the confidentiality obligations under this Agreement and be subject to applicable data protection laws, and as per
Exhibit 2
.
|
11
|
Confidential Information
|
11.1
|
Each Party acknowledges that in the course of performing its obligations hereunder it may receive information that is confidential and proprietary to the other Party.
|
11.2
|
Supplier expressly agrees that information disclosed by Company and/or any Company entity or member of the Company group of companies, Company Personnel to Supplier or Personnel under Supplier’s direction and/or control as the case may be, regarding sales and/or marketing operations, relationship(s) with business partner(s), relationship(s) with channel partner(s), transaction histories, contests, promotions, trade shows and other like events, products, product announcements, product launches and any other information, including but not limited to information learned by Supplier from Company Personnel or through inspection of Company’s property, that relates to Company’s Products, designs, business plans, business opportunities, finance, research, development, know-how, Personnel, third-party confidential information, Company’s Customer Information, the Company System, the terms and conditions of this Agreement, and the existence of the discussions between Supplier and Company will be considered and will be referred to collectively as “
Company’s Confidential Information
”.
|
11.3
|
Company expressly agrees that information disclosed by Supplier and/or any Supplier entity or member of the Supplier’s group of companies, Supplier or Personnel to Company, or Personnel under Company’s direction and/or control as the case may be, regarding sales and/or marketing operations, relationship(s) with business partner(s), relationship(s) with channel partner(s), products, product announcements, product launches and any other information, including but not limited to information learned by Company from Supplier Personnel or through inspection of Supplier’s property, that relates to the Credit Services, Supplier’s products, designs (including, for the avoidance of doubt, Supplier Program Specifications), business plans, business opportunities, finance, research, development, know-how, Personnel, Program Information, the Supplier System, the terms and conditions of this Agreement, and the existence of the discussions between Company and Supplier will be considered and will be referred to collectively as “Supplier’s Confidential Information” (Company’s Confidential Information and Supplier’s Confidential Information, collectively, shall mean the “Confidential Information”).
|
11.4
|
Confidential Information however shall not include information that: (i) is now or subsequently becomes generally available to the public through no fault or breach on the part of either Party; (ii) is independently developed by either Party without the use of any Confidential Information of the other Party; (iii) either Party rightfully obtains from a third party who has the right to transfer or disclose it; (iv) was in a Party’s possession on
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
11.5
|
Neither Party shall disclose, publish or disseminate the other Party’s Confidential Information to anyone other than those of its Personnel under its direction and/or control with a need to know, provided that such Party shall be liable for any breach of the terms of this Article 11 or Article 12 by any of the foregoing parties. Each Party agrees to take all reasonable precautions to prevent any unauthorized use, disclosure, publication, or dissemination of the other Party’s Confidential Information and to use the same measures in doing so as it uses with regard to its own Confidential Information, but in no event using less than a reasonable standard of care. Each Party agrees to use the other Party’s Confidential Information for the sole purpose of carrying out its obligations and exercising its rights under this Agreement, including pursuant to Article 12. Each Party agrees not to use the other Party’s Confidential Information for its own or any third party’s benefit without the prior written approval of an authorized representative of the other Party in each instance.
|
11.6
|
Supplier represents and warrants to Company that it has used and will continue to use reasonable best efforts to implement all requisite processes and systems for the protection and security of the privacy and confidentiality of Company’s Confidential Information in compliance with applicable Legal Requirements.
|
11.7
|
Company represents and warrants to Supplier that it has used and will continue to use reasonable best efforts to implement all requisite processes and systems for the protection and security of the confidentiality of Supplier’s Confidential Information.
|
11.8
|
Each Party explicitly acknowledges and agrees that, as between the Parties, all Confidential Information of a Party remains the exclusive property of such Party and no license or other rights to Confidential Information is granted or implied hereby to the other Party unless explicitly set forth herein.
|
11.9
|
Within thirty (30) days of termination or expiration of this Agreement for any reason, each Party will either return to the other Party all tangible embodiments of the other Party’s Confidential Information, including but not limited to any and all electronic files, computer programs, documentation, notes, plans, drawings, and copies thereof, or, at such other Party’s option, will provide the other Party with written certification that all such tangible embodiments of Confidential Information have been destroyed in accordance with the other Party’s instructions pertaining thereto. Each Party may retain the other Party’s Confidential Information if required by applicable Legal Requirements, and shall continue protect such Confidential Information in accordance with Section 11.5.
|
12
|
Data Privacy and Security
|
12.1
|
Personal Data
|
12.2
|
Protection of Personal Data
|
12.2.1
|
For purposes of this
Section 12.2
, (i) Company’s obligations with respect to Personal Data shall be with respect to the Program Information to the extent received from
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
12.2.2
|
Each Party shall, and shall ensure that any Personnel, collect, access, maintain, use, process, transmit, store, destroy and transfer Personal Data in accordance with the applicable Legal Requirements, all internal and posted policies related to privacy, personal information and data or system security and requirements set forth in this in this Article 12.
|
12.2.3
|
In addition to its obligations in
Article 11
, each Party shall take all appropriate legal, organizational, and technical measures to protect Personal Data and Confidential Information against accidental or unlawful destruction or accidental loss, alteration, unauthorized disclosure or access, and against all other unlawful forms of processing, keeping in mind the nature of such data, including in compliance with applicable Legal Requirements.
|
12.2.4
|
Each Party shall take all reasonable steps to ensure that Personal Data is reliable for its intended use, and is accurate, complete and current.
|
12.2.5
|
Each Party shall provide other reasonable assistance and support, and assist and support to the other Party in the event of an investigation by a data protection regulator or similar authority, if and to the extent that such investigation relates to the collection, access of, maintenance, use, processing, transmission, storage, destruction or transfer of Personal Data under this Agreement.
|
12.2.6
|
Each Party shall immediately notify the other Party in the event that the notifying Party learns or has reason to believe that any person or entity has breached or attempted to breach such Party’s systems that collect, access, process, store, transfer, transmit, destroy or maintain Personal Data covered by this Agreement, or gained unauthorized access to Personal Data covered by this Agreement (“Information Security Breach”). Upon any such discovery, the notifying Party will investigate, remediate, and mitigate the effects of the Information Security Breach pursuant to a mutually agreed to remediation plan and the Parties shall cooperate fully in all such remedial actions. The notifying Party shall provide the other Party with reasonable assurances and evidence that such Information Security Breach will not recur. Unless otherwise required by applicable Legal Requirements (in which case, the notifying Party will promptly notify the other Party as to the required notifications to be made), the notifying Party shall not make any notifications to customers or the general public of any such Information Security Breach without the other Party’s prior written consent.
|
13
|
Proprietary Rights
|
13.1
|
Company Marks
|
13.1.1
|
Any Supplier violation of this
Section 13.1
shall constitute a material breach of this Agreement and shall be grounds for termination of this Agreement by Company.
|
13.1.2
|
All Program Materials that include or refer to the Company’s Marks shall be pre-approved, in advance and in writing, by Company. Company reserves the right to approve or reject any use of any of Company’s Marks in its sole discretion. Further, Company may terminate the right to any previously approved reference to the Company’s Marks upon thirty (30) days’ written notice, provided, however, that Supplier shall be allowed to run down any existing inventory of such materials. Supplier will not remove, obfuscate or add any legal notification or mark to any materials
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
13.1.3
|
General Usage Guidelines
. In addition to any specific guidelines provided in writing by Company to Supplier, Supplier agrees:
|
13.1.3.1
|
Not to incorporate or integrate any Company Mark into any Supplier Mark or Mark of a third party in any manner that creates a composite or combination mark;
|
13.1.3.2
|
Not to obfuscate or remove any Company Mark or third party Mark from any materials provided by Company or any packaging for the Company Products, and not to add any Mark of Supplier or a third party to any materials provided by Company or any packaging for the Company Products;
|
13.1.3.3
|
Not to use or register, in whole or in part, any Mark that is confusingly similar to or that dilutes any Company Mark, as or as part of a company name, company logo, trade name, product name, service name, or domain name. If Supplier has filed or obtained in any country any trademark application, trademark registration, or domain name registration that relates to any name or Mark that, in the sole opinion of Company, is similar, deceptive, or misleading with respect to any Company Mark, Supplier shall immediately abandon any such application, registration or domain name or, at Company’s sole discretion, assign it to Company;
|
13.1.3.4
|
Not to imitate the trade dress, design, layout, or “look and feel” of Company Products or services, including, but not limited to, Company sales programs, websites, logos, typefaces, or product packaging;
|
13.1.3.5
|
Not to use the Company’s Marks in any unauthorized manner that would imply Company’s affiliation with or endorsement, sponsorship, or support of Supplier; and
|
13.1.3.6
|
Not to bid on or obtain the rights to (or authorize others to bid on or obtain the rights to) any key word utilized by any search engine (including, but not limited to, Google, Yahoo and MSN) to return or prompt search results if such key word is, includes, or is confusingly similar to any Company Mark without the prior written consent of the Company.
|
13.1.4
|
Compliance
. Upon request of Company, Supplier shall send to Company representative samples of the Program Materials. If, upon review of such materials or otherwise, Company determines in its sole discretion that such materials are in violation of the Agreement or Company’s trademark guidelines, then Supplier shall promptly correct or abandon such non-conforming materials. Without limiting the foregoing, at Company’s request, Supplier shall promptly cease using such materials and/or recall any copies of such materials and destroy them.
|
13.1.5
|
Termination
. Upon expiration or termination of the Agreement, Supplier will immediately cease all use of the Company’s Marks.
|
13.1.6
|
Reservation and Protection of Rights.
This Agreement gives Supplier no rights to any of Company’s Marks or other intellectual property of Company except as expressly stated herein. Supplier agrees that, as between the Parties, Company owns all rights in the Company’s Marks and its intellectual property. Supplier shall not at any time, whether during or after the Term, take any action to challenge, contest, impair, disparage, invalidate, or that would tend to impair or invalidate any of Company’s rights in the Company’s Marks or any applications or registrations therefor or any other Company intellectual property.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
13.1.7
|
Enforcement.
Supplier agrees to notify Company if Supplier becomes aware of:
|
13.1.7.1
|
Any uses of, or any application or registration for a Mark that conflicts with, dilutes, or is confusingly similar to any Company Mark;
|
13.1.7.2
|
Any acts of infringement, dilution, or unfair competition involving any Company Mark; or
|
13.1.7.3
|
Any allegations or claims whether or not made in a lawsuit, that the use of any Company Mark by Supplier infringes or otherwise violates the trademark or service mark or other rights of any other entity.
|
13.1.8
|
Company may, but shall not be required to, take whatever action it, in its sole discretion, deems necessary or desirable to protect the validity and strength of the Company’s Marks.
|
13.2
|
Supplier Marks
|
13.2.1
|
Any Company violation of this
Section 13.2
shall constitute a material breach of this Agreement and shall be grounds for termination of this Agreement by Supplier.
|
13.2.2
|
All Company Program Advertising that includes or refers to the Supplier’s Marks shall be
|
13.2.3
|
General Usage Guidelines
. In addition to any specific guidelines provided in writing by Supplier to Company, Company agrees:
|
13.2.3.1
|
Not to incorporate or integrate any Supplier Mark into any Company Mark or Mark of a third party in any manner that creates a composite or combination mark;
|
13.2.3.2
|
Not to obfuscate or remove any Supplier Mark or third party Mark from any Program Materials, and not to add any Company Mark or a third party to any Program Materials;
|
13.2.3.3
|
Not to use or register, in whole or in part, any Mark that is confusingly similar to or that dilutes any Supplier Mark, as or as part of a company name, company logo, trade name, product name, service name, or domain name. If Company has filed or obtained in any country any trademark application, trademark registration, or domain name registration that relates to any name or Mark that, in the sole opinion of Supplier, is similar, deceptive, or misleading with respect to any Supplier Mark, Company shall immediately abandon any such application, registration or domain name or, at Supplier’s sole discretion, assign it to Supplier;
|
13.2.3.4
|
Not to imitate the trade dress, design, layout, or “look and feel” of Supplier’s products or services, including, but not limited to, Supplier’s websites, logos, typefaces, or product packaging;
|
13.2.3.5
|
Not to use the Supplier’s Marks in any unauthorized manner that would imply Supplier’s affiliation with or endorsement, sponsorship, or support of Company; and
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
13.2.3.6
|
Not to bid on or obtain the rights to (or authorize others to bid on or obtain the rights to) any key word utilized by any search engine (including, but not limited to, Google, Yahoo and MSN) to return or prompt search results if such key word is, includes, or is confusingly similar to any Supplier Mark without the prior written consent of Supplier.
|
13.2.4
|
Compliance.
Upon request of Supplier, Company shall send to Supplier representative samples of the Company Program Advertising. If, upon review of such materials or otherwise, Supplier determines in its sole discretion that such materials are in violation of the Agreement or Supplier’s trademark guidelines, then Company shall promptly correct or abandon such non-conforming materials. Without limiting the foregoing, at Supplier’s request, Company shall promptly cease using such materials and/or recall any copies of such materials and destroy them.
|
13.2.5
|
Termination
. Upon expiration or termination of the Agreement, Company will immediately cease all use of the Supplier’s Marks.
|
13.2.6
|
Reservation and Protection of Rights
. This Agreement gives Company no rights to any of Supplier’s Marks or other intellectual property of Supplier except as expressly stated herein. Company agrees that, as between the Parties, Supplier owns all rights in the Supplier’s Marks and its intellectual property, provided that Supplier shall not use the same or substantially similar forms of any Program Materials in connection with providing services similar to the Credit Services to any third party (it being understood that Supplier’s use of standardized system templates, legal disclosures and other standardized disclosures generally used by Supplier for both the Company and its other third party program partners shall not be deemed a violation of this provision). Company shall not at any time, whether during or after the Term, take any action to challenge, contest, impair, disparage, invalidate, or that would tend to impair or invalidate any of Supplier’s rights in the Supplier’s Marks or any applications or registrations therefor or any other Supplier intellectual property.
|
13.2.7
|
Enforcement.
Company agrees to notify Supplier if Company becomes aware of:
|
13.2.7.1
|
Any uses of, or any application or registration for a Mark that conflicts with, dilutes, or is confusingly similar to any Supplier Mark;
|
13.2.7.2
|
Any acts of infringement, dilution, or unfair competition involving any Supplier Mark; or
|
13.2.7.3
|
Any allegations or claims whether or not made in a lawsuit, that the use of any Supplier Mark by Company infringes or otherwise violates the trademark or service mark or other rights of any other entity.
|
13.2.8
|
Supplier may, but shall not be required to, take whatever action it, in its sole discretion, deems necessary or desirable to protect the validity and strength of the Supplier’s Marks.
|
13.3
|
Systems and Processes
|
13.4
|
Company and Supplier Proprietary Customer Information
|
13.4.1
|
Supplier acknowledges that: (i) Company maintains Company’s Customer Information independently derived from numerous sources other than Supplier; (ii) the same or similar information may be contained in Company’s Customer Information and Program Information; and
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
13.4.2
|
Supplier shall cooperate with Company to provide Company the maximum ability permissible under applicable Legal Requirements to use and disclose Program Information, including, as necessary or appropriate, through the program privacy notices and/or the use of disclosures, consents, opt-in provisions or opt-out provisions.
|
13.4.3
|
Company acknowledges that: (i) Supplier maintains Program Information independently derived from numerous sources other than Company; (ii) the same or similar information may be contained in Company’s Customer Information and Program Information; and (iii) Supplier has a proprietary interest in Program Information and any other information about Borrowers gathered by or on behalf of Supplier, whether or not Company has derived or maintains identical information or has or asserts any rights therein, and that each such pool of data will be considered separate information subject to the specific provisions applicable to that data hereunder. For clarity, with respect to any data that constitutes both Company’s Customer Data and Information, Supplier shall be free to exercise all rights with respect thereto as Program Information without regard to any restrictions on the use or disclosure of Company’s Customer Data. Company hereby disclaims any right or interest whatsoever in the Program Information and agrees not to contest Supplier’s rights therein.
|
13.4.4
|
Supplier shall not use, or permit to be used, Program Information, except as specifically provided in this Agreement. Supplier may use the Program Information and any other information derived from the Program Information in compliance with applicable Legal Requirements and the program privacy notices, solely: (i) as necessary to exercise its rights or carry out its obligations hereunder; (ii) for purposes of promoting the Program; (iii) for purposes of performing analysis and modeling, provided, however, that Program Information used for analysis and modeling other than with respect to the Program shall be non-personally identifiable information, shall be aggregated with data from other portfolios; (iv) as necessary or appropriate for purposes of compliance with applicable Legal Requirements, regulatory examination or internal auditing functions, risk assessment or management functions. Supplier shall not use Program Information to market any of its products or services (i) in greater frequency than is usual and customary for Supplier, which shall be consistent with the marketing levels shared with Company prior to the date hereof, (ii) through marketing which makes reference to Company or uses Company’s Marks or (iii) through Program inserts or billing statement messages, unless Supplier shall have provided reasonable advance notice of such proposed insert or billing statement, Company shall have approved of such inclusion and Company shall have been given a reasonable opportunity to review and approve the content thereof (such approval not to be unreasonably withheld). Notwithstanding the foregoing, Company acknowledges that Supplier may independently gather information from individuals independent of the Program, including from Persons who may or may not also be Borrowers or Applicants and that marketing by use of such information, without reference to or use of Program Information shall not be governed or restricted by this
Section 13.4.4
.
|
13.4.5
|
Supplier shall not, directly or indirectly, sell, or otherwise transfer any right in or to
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
13.4.6
|
Subject to applicable Legal Requirements, Supplier shall provide the information below to Company on a daily basis for each Borrower: [*].
|
14
|
Representations and Warranties
|
15
|
Force Majeure
|
16
|
Limitation of Liability
|
|
16.1
|
Except as provided in this Agreement, the total liability of either Party to the other on all claims of any kind under or related to this Agreement, whether in contract, warranty, condition, tort, strict liability, statute, or otherwise, shall be limited to the total amount of: [*].
|
|
16.2
|
IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, CONDITION, TORT, STRICT LIABILITY, STATUTE OR OTHERWISE, SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY: [*].
|
|
16.3
|
The limitations in this
Article 16
(including, for the avoidance of doubt,
Section 16.2
) shall not apply to: [*]. The remedies set forth in this Agreement will be Supplier and Company’s sole and exclusive remedies for any claim against the Supplier and Company respectively in connection with this Agreement.
|
|
16.4
|
THE PARTIES AGREE THAT THE TERMS OF THIS AGREEMENT, INCLUDING THOSE CONCERNING WARRANTIES, INDEMNITY AND LIMITATIONS OF LIABILITY, REPRESENT A FAIR ALLOCATION OF RISK BETWEEN THE PARTIES WITHOUT WHICH THEY WOULD NOT HAVE ENTERED INTO THIS AGREEMENT. LIABILITY FOR DAMAGES WILL BE LIMITED AND EXCLUDED, EVEN IF ANY EXCLUSIVE REMEDY PROVIDED FOR IN THE AGREEMENT FAILS OF ITS ESSENTIAL PURPOSE.
|
|
16.5
|
NOTHING IN THIS AGREEMENT SHALL IN ANY WAY EXCLUDE OR LIMIT EITHER PARTY’S LIABILITY FOR DEATH OR PERSONAL INJURY CAUSED BY SUCH PARTY, OR OTHER DAMAGES RELATING TO SUCH PARTY’S GROSS NEGLIGENCE OR LIABILITY FOR FRAUD HEREUNDER.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
17
|
Performance of Company Products and Credit Services
|
18
|
Term and termination
|
18.1
|
Term of Program
|
18.2
|
Termination by the Parties
|
18.2.1
|
Company may terminate this Agreement by giving at least thirty (30) days’ written notice to the Supplier if at any time [*].
|
18.2.2
|
Company may terminate this Agreement by giving at least thirty (30) days’ written notice to Supplier if at any time [*].
|
18.2.3
|
Company may terminate this Agreement pursuant to its rights to terminate as provided in the Services Level Agreement attached hereto as
Exhibit 2
, which termination shall be effectuated by Company by giving at least thirty (30) days’ written notice to Supplier.
|
18.2.4
|
Supplier may terminate this Agreement by giving at least thirty (30) days’ written notice to Company if at any time Company varies the terms of the sales of any Company Product included in the Program and such variation, in the reasonable opinion of Supplier, makes the performance of such obligations contrary to Legal Requirements.
|
18.2.5
|
Company may terminate this Agreement in accordance with
Section 3.1.14
.
|
18.2.6
|
[*].
|
18.2.7
|
Company may terminate this Agreement upon thirty (30) days’ prior written notice if [*].
|
18.2.8
|
Company may terminate this Agreement by giving at least thirty (30) days’ written notice to Supplier if at any time [*].
|
18.3
|
Termination by either Party
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
18.3.1
|
immediately by giving at least 30 days’ written notice to the other party if a representation or warranty given by the other Party under this Agreement was untrue in a material respect when it was made;
|
18.3.2
|
[*];
|
18.3.3
|
if the other Party breaches any other obligation under this Agreement and such breach continues unremedied for thirty (30) days after the date of a notice to remedy the breach, provided, if any such breach is caused by any Personnel of a party, such cure period shall be forty-five (45) days after the date of a notice to remedy the breach; provided, further that if such failure cannot be cured in a commercially reasonable manner within such thirty (30) or forty-five (45) day time period, no termination right exists if the defaulting Party shall have initiated a cure within such time and such cure is completed within ninety (90) days from the date of written notice regarding such breach;
|
18.3.4
|
upon written notice to the other Party, if the performance by the other Party of its obligations under this Agreement is prevented or materially impeded for a period of not less than sixty (60) consecutive days by a force majeure event as set forth in
Article 15
;
|
18.3.5
|
if an Insolvency Event occurs in respect of the other Party; or
|
18.3.6
|
if a Party is directed by a Government Agency having jurisdiction over it to terminate this Agreement, and the matter has not been resolved within thirty (30) days after delivery by such Party of a notice to the other Party.
|
18.4
|
Effects of Termination
|
18.4.1
|
In the event of a notice of termination or non-renewal of this Agreement, all obligations of the Parties shall continue in accordance with and subject to the terms of this Agreement until the Termination Date; provided, that the obligations of the Company and its Affiliates in
Article 5
shall cease to be of any further force and effect if at any time following notice of termination or non-renewal of this Agreement by either Party, Supplier ceases to accept Credit Applications or extend credit under the Loans or comply with
Section 2.1
in connection with the Loans. Supplier shall (at its expense) cooperate with Company to effect an orderly and efficient wind-down or transition to Company or to a successor supplier.
|
18.4.2
|
Supplier shall use commercially reasonable efforts to cooperate with and assist Company, at Company’s request, in Company’s efforts to transition the Program to a new supplier, including, beginning the earlier of eighteen
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
18.4.3
|
Following the Termination Date, in no event shall Supplier or any of its Personnel solicit any Applicant or Borrower for any loan, product or service on the basis of such Person’s status as an Applicant or Borrower by use of any Borrower list, Applicant list (or portion thereof) or any other information that is distinguishable from Supplier’s other customer information based on its origination from or association with the Program Information.
|
18.4.4
|
Without limiting Company’s unilateral rights with respect to communications regarding any successor financing program, the parties shall jointly agree to any communications with Borrowers and prospective Borrowers about the termination of the Program.
|
19
|
Survivorship
|
20
|
Notices
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
21
|
General Terms
|
21.1
|
Entire Agreement
|
21.2
|
Governing Law, Venue, Waiver of Jury Trial
|
21.3
|
Relationship of Parties
|
21.4
|
Severability
|
21.5
|
Waivers
|
21.6
|
Assignment and Other Material Business Changes
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
21.7
|
Variation
|
21.8
|
Counterparts
|
21.9
|
Due Execution
|
21.10
|
Insurance
|
21.10.1
|
Supplier shall obtain and maintain in full force and effect, at its own cost and expense, during the term of the Agreement, and after termination of the Agreement as may be specified below, the following minimum types and limits of insurance and any other insurance required by Legal Requirements in any state where Supplier performs Credit Services under this Agreement. Such insurance shall be maintained with reputable and solvent insurance companies having, where available, an A.M. Best’s insurance rating of A-VII or better or a comparable financial rating from a reputable rating bureau, and lawfully authorized to do business where the Credit Services are to be performed, and will comply with all those requirements as stated herein. In no way do these minimum insurance requirements limit the liability assumed elsewhere in this Agreement, including but not limited to Supplier’s defense and indemnity obligations.
|
21.10.1.1
|
Workers’ compensation insurance with statutory limits, as required by any state, territory, province or nation having jurisdiction over Supplier’s employees, and Employer’s Liability insurance with limits not less than [*]. Such coverage must include a waiver of subrogation in favor of Company, its subsidiaries and Affiliates, and their respective officers, directors, shareholders, employees, and agents (“
Company Parties
”) and their insurers, but only to the extent of liabilities falling within Supplier’s indemnity obligations pursuant to the terms of this Agreement.
|
21.10.1.2
|
Commercial general liability insurance, including coverage for bodily injury, property damage, personal and advertising injury, and contractual liability and including severability of interests provisions with limits of not less than [*] per occurrence and in the annual aggregate, provided, however, that such insurance may be provided in any combination of primary and follow-form excess insurance. Such insurance must include Company, its subsidiaries and affiliates, and their respective officers, directors, shareholders, and Personnel (“
Company Parties
”) as additional insureds for liabilities based on the Credit Services of the Supplier and its Personnel. Such coverage shall be primary to and non-contributory with any and all other insurance maintained by Company Parties and include a waiver of subrogation against Company Parties and their
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
21.10.1.3
|
Automobile liability insurance covering any owned, non-owned or hired vehicles used by Supplier in the performance of the Credit Services, in compliance with all statutory requirements and with limits of not less than [*] for bodily injury and property damage. Such insurance must include coverage for passenger liability. Such coverage must include a waiver of subrogation against Company Parties and their insurers.
|
21.10.1.4
|
Banker’s professional liability insurance, covering negligent acts, errors and omissions in the provision of Credit Services, and including extensions of coverage for internet security risks applying to all services provided under this Agreement, including coverage for (a) theft, dissemination and/or use of Confidential Information stored or transmitted in electronic form and (b) introduction of a computer virus into a Borrower’s or third Person’s computer, data, software or programs, all with a minimum limits of [*] per claim and in the annual aggregate. The retroactive date applicable to such coverage shall precede the date Supplier first began any Credit Services in connection with this Agreement. Supplier shall continue to maintain such insurance for a period of not less than three (3) years following termination of this Agreement.
|
21.10.1.5
|
Banker’s blanket bond, including coverage for on and off premises loss, computer loss, and loss resulting from the fraudulent or dishonest acts committed by Supplier’s Personnel, acting alone or in collusion with others. Limits of coverage must be at least [*] per coverage grant described herein.
|
21.10.1.6
|
Cyber and network security liability insurance including privacy liability, the limits of which shall not be less than [*] per occurrence and in the annual aggregate.
|
21.10.2
|
Supplier shall use best efforts to cause each of its third party Personnel, at no cost to Company, to maintain the same types and limits of insurance, and to extend rights and benefits to the Company Parties under such insurance, as set forth in this
Section 21.10
.
|
21.10.3
|
At the time this Agreement is executed, or within a reasonable time thereafter, and within a reasonable time after coverage is renewed or replaced, Supplier will deliver to Company evidence that the foregoing coverages required from Supplier are in place, at the notice address provided in
Article 20
. Supplier shall similarly provide proof of the maintenance of insurance by its third party Personnel to Company upon request. Company’s receipt or acceptance of evidence of coverage that does not comply with these requirements, or Supplier’s failure to provide evidence of coverage, shall not constitute a waiver or modification of the insurance requirements as set forth herein. In the event of cancellation of coverage, Supplier shall promptly replace coverage so that no lapse in insurance occurs. All deductibles and self-insured retentions are to be paid by Supplier.
|
22
|
Indemnification
|
22.1
|
General Indemnity
.
|
22.1.1
|
From and after the Program Commencement Date, Supplier shall indemnify, hold harmless and defend Company and its subsidiaries and Affiliates, and their respective directors, officers, employees and agents, from and against all claims, liabilities, actions, demands, settlements, damages, costs, fees and losses of any type, including reasonable attorneys’ and professionals’ fees and costs, in connection with, in whole or in part: [*].
|
22.1.2
|
Company shall indemnify, hold harmless and defend Citizens and its subsidiaries and Affiliates, and their respective directors, officers, employees and agents, from and against all claims, liabilities, actions, demands, settlements, damages, costs, fees and losses of any type, including reasonable attorneys’ and professionals’ fees and costs, in connection with, in whole or in part: [*].
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
22.2
|
IP Infringement Indemnification
.
|
22.2.1
|
Supplier shall indemnify, hold harmless and, upon Company’s request, defend Company and its subsidiaries and affiliates, and their respective directors, officers, employees and agents from and against all third party claims, liabilities, actions, demands, settlements, damages, costs, fees and losses of any type, including reasonable attorneys’ and professionals’ fees and costs, arising from [*].
|
22.2.2
|
Company shall indemnify, hold harmless and, upon Citizens’ request, defend Citizens and its subsidiaries and affiliates, and their respective directors, officers, employees and agents from and against all third party claims, liabilities, actions, demands, settlements, damages, costs, fees and losses of any type, including reasonable attorneys’ and professionals’ fees and costs, arising from [*].
|
23
|
Additional Obligations
.
|
23.1
|
In case any claim is made, or any suit or action is commenced, against a Party (the “
Indemnified Party
”) in respect of which indemnification may be sought by it under
Article 22
and this
Article 23
, the Indemnified Party shall promptly give the other Party (the “
Indemnifying Party
”) notice thereof and the Indemnifying Party shall be entitled to participate in the defense thereof and, with prior written notice to the Indemnified Party given not later than twenty (20) days after the delivery of the applicable notice from the Indemnified Party, to assume, at the Indemnifying Party’s expense, the defense thereof, with counsel reasonably satisfactory to such Indemnified Party. After notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof, the Indemnifying Party shall not be liable to such Indemnified Party under this
Article 23
for any attorneys’ fees or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof, other than reasonable costs of investigation and other than as set forth in
Section 23.2
.
|
23.2
|
The Indemnified Party shall have the right to employ its own counsel if the Indemnifying Party elects to assume such defense, but the fees and expenses of such counsel shall be at the Indemnified Party’s expense, unless (i) the employment of such counsel at the Indemnifying Party’s expense has been authorized in writing by the Indemnifying Party, (ii) the Indemnifying Party has not employed counsel to take charge of the defense within twenty (20) days after delivery of the applicable notice or, having elected to assume such defense, thereafter ceases its defense of such action, or (iii) the Indemnified Party has reasonably concluded that there may be defenses available to it which are different from or additional to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), in any of which events the attorneys’ fees and expenses of counsel to the Indemnified Party shall be borne by the Indemnifying Party.
|
23.3
|
The Indemnified Party or Indemnifying Party may at any time notify the other of its intention to settle or compromise any claim, suit or action against the Indemnified Party in respect of which payments may be sought by the Indemnified Party hereunder, and (i) the Indemnifying Party may settle or compromise any such claim, suit or action solely for the payment of money damages for which the Indemnified Party will be released and fully indemnified hereunder, but shall not agree to any other settlement or compromise without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld (it being agreed that any failure of an Indemnified Party to consent to any settlement or compromise involving relief other than monetary damages shall not be deemed to be unreasonably withheld), and (ii) the Indemnified Party may not settle or compromise any such claim, suit or action without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld.
|
23.4
|
The Indemnifying Party shall promptly notify the Indemnified Party if the Indemnifying Party desires not to assume, or participate in the defense of, any third party claim, suit or action.
|
23.5
|
If an Indemnified Party fails to give prompt notice of any claim being made or any suit or action being commenced in respect of which indemnification under
Article 22
and this
Article 23
may be sought, such failure shall not limit the liability of the Indemnifying
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
23.6
|
Notwithstanding anything to the contrary in this Agreement, no Party shall be liable to the other for consequential, punitive or exemplary damages relating to or arising out of
Article 22
and this
Article 23
, unless the Indemnified Party shall have become liable to a third party for such consequential, punitive or exemplary damages, in which case the Indemnifying Party shall be liable, subject to and in accordance with the terms of
Article 22
and this
Article 23
for reimbursement of the amounts so paid to such third party.
|
24
|
Sales Taxes.
Citizens shall notify Company of any amounts charged-off on Loans by Citizens, identified by Loan, and shall sign such forms and provide any such other information as reasonably requested by Company to enable Company to recover any sales tax paid in connection with any Loan that has been charged off by Citizen.
|
25
|
Company Employee Procedures Guide.
|
25.1
|
Company shall comply with the processes, procedures, practices, scripts, content, and other written instructions set forth in the “Company Employee Procedures Guide” attached hereto as
Exhibit 3
(the “
Procedures Guide
”).
|
25.2
|
[*].
|
25.3
|
With respect to activities of Company that require or permit Company to interact with a potential or existing Borrower where the interaction relates to the Credit Services, Citizens is solely responsible for (A) determining whether the Procedures Guide addresses such activities and satisfies Legal Requirements, the terms and conditions of Citizens’ Program Loans and amending the Procedures Guide to cure any non-compliance in accordance with Section 25.5, and (C) obtaining all consents or authorizations from its Borrowers sufficient to legally permit the contact or interaction.
|
25.4
|
Company will use commercially reasonable efforts to notify Supplier of any suspected or known breach of the Procedures Guide.
|
25.5
|
Supplier agrees that if Supplier desires to make any changes to the Procedures Guide during the Term, Supplier shall provide Company with written notice of any such proposed changes. As soon as is commercially practicable after receipt of such notice from Supplier, Company shall notify Supplier in writing if Company has any potential operational feasibility issues related to such Supplier’s proposed changes. In the event Company provides the notice described above, as soon as is commercially practicable thereafter, the Parties shall mutually agree in writing on any changes to the Procedures Guide to address the issues raised in the notice from Company prior to the changes to the Procedures Guide being implemented.
|
26
|
Publicity.
All media releases, public announcements and public disclosures by any Party, their respective affiliates, or their employees or agents, relating to this Agreement, the Program or the transactions contemplated hereby, but not including any announcement intended solely for internal distribution by the releasing party or any disclosure required by a Legal Requirement, shall be coordinated with and approved by the other Party in writing prior to the release thereof.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
Exhibit 1
|
Fraud Detection Information
|
Exhibit 2
|
Services Level Agreement
|
Exhibit 3
|
Company Employee Procedures Guide
|
Exhibit 4
|
Supplier Credit Policy and Program B Loans Credit Policy
|
Exhibit 5
|
[*]
|
Exhibit 6
|
Schedule of Interchange Expenses
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
|
EXHIBIT 1
|
|
|
|
FRAUD DETECTION INFORMATION
|
|
|
Data Point
|
|
Example
|
Available
|
Transaction
[*]
|
|
|
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
Credit Card/Debit Card Data
|
|
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
Customer Data
|
|
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
Shipping
|
|
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
Order Item Data
|
|
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
Installment Auth Response
|
|
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
[*]
|
|
[*]
|
Y
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
1.
|
TECHNOLOGY AND SERVICE STANDARDS 1
|
2.
|
SYSTEMS AVAILABILITY 1
|
3.
|
SECURITY PROCEDURES 1
|
4.
|
UNDERWRITING AND CREDIT SLA; PROBLEM RESOLUTION; TERMINATION; FORECASTING 1
|
5.
|
ACCOUNT MANAGER AND OTHER SUPPORT BY CITIZENS 1
|
6.
|
QUARTERLY BUSINESS REVIEWS 1
|
7.
|
SETTLEMENT AND PAYMENTS 1
|
8.
|
TRAINING 1
|
9.
|
CONSUMER EXPERIENCE AND SATISFACTION 1
|
10.
|
ONLINE SERVICE CENTER 1
|
11.
|
REPORTING 1
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
1.
|
TECHNOLOGY AND SERVICE STANDARDS
|
2.
|
[*]
|
3.
|
SECURITY PROCEDURES
|
4.
|
UNDERWRITING AND CREDIT SLA; PROBLEM RESOLUTION; TERMINATION; FORECASTING
|
4.2
|
Problem Resolution (Service Levels)
|
4.3
|
Monitoring and Other Metrics
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
4.4
|
Escalations
|
4.5
|
Incident Analysis
|
i.
|
Description of what happened;
|
ii.
|
Explanation of how the event differed from what was supposed to happen;
|
iii.
|
Determination of root cause(s) that contributed to the event through an analysis of the sequence of events leading up to the occurrence;
|
iv.
|
Implications to Consumers, Program or Company; and
|
v.
|
Steps being taken to prevent a recurrence.
|
5.
|
ACCOUNT MANAGER AND OTHER SUPPORT BY CITIZENS
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
i.
|
Major strategy decisions on the portfolio;
|
ii.
|
Executive issue escalations (as documented in
Section 4.5
above);
|
iii.
|
Delivery of the Quarterly Business Review;
|
iv.
|
Action plan to deliver against dashboard performance metrics or other set goals; and
|
v.
|
Development of quarterly and yearly goals/priorities associated with the Program.
|
5.2
|
Account Manager
|
i.
|
Day-to-day administration of the Program;
|
ii.
|
Preparation of Quarterly Business Review materials as directed by Company;
|
iii.
|
Reporting and administrative support;
|
iv.
|
Training;
|
v.
|
Customer escalations from in-home sales and call center, including monitoring and developing action plans associated with metrics; and
|
vi.
|
General systems escalations resolution.
|
5.3
|
IS&T Account Manager
|
i.
|
Coordination of technical escalations among several parties servicing Citizens calls;
|
ii.
|
Direct contact for Company information systems and technology team;
|
iii.
|
Coordinating maintenance and schedule down times with Company; and
|
iv.
|
Coordinating required technical enhancements and timelines.
|
5.4
|
Account Manager Response Time
|
5.5
|
Other Management Support
|
i.
|
Marketing and Merchandising: Focused on marketing the program via email or online. They will also develop promotions and offers;
|
ii.
|
Credit Manager: Focused on developing credit strategy to best meet the needs of the customer base. Continuously monitors and provides suggestions to best increase approval rates.
|
6.
|
QUARTERLY BUSINESS REVIEWS
|
i.
|
Review key program metrics (i.e. volume, applications, approvals, declines, cancelations, fraud cancelations, etc.);
|
ii.
|
Review marketing and merchandising plan;
|
iii.
|
Consumer experience review: Review survey results, improvements to Consumer experience, as well as Consumer escalations and feedback;
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
iv.
|
Consumer communication and marketing;
|
v.
|
Competitive analysis: Market analysis including trends;
|
vi.
|
Consumer credit review and demographics;
|
vii.
|
Legal Requirements and legislations changes which may impact the Program;
|
viii.
|
Project reviews: Results of previous launched projects and upcoming plans;
|
ix.
|
Reporting improvements;
|
x.
|
Lender dashboard;
|
xi.
|
Organization chart review: Review support structure;
|
xii.
|
Areas for improvement with action plans and metrics for the above;
|
xiii.
|
Yearly priorities review; and
|
xiv.
|
Jointly review fraud rate and procedures to be revisited if needed.
|
7.
|
SETTLEMENT AND PAYMENTS
|
8.
|
TRAINING
|
8.1
|
Company Training by Citizens
|
8.2
|
Citizens Training by Company
|
i.
|
Company in-home sales and call center Consumer experience;
|
ii.
|
Current promotions or offers made available by Company to its Consumers;
|
iii.
|
Current Company Products; and
|
iv.
|
How to address Company escalations.
|
9.
|
CONSUMER EXPERIENCE AND SATISFACTION
|
9.1
|
Surveys
|
9.2
|
Complaints Monitoring
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
9.3
|
Complaint Remedies
|
9.4
|
Escalated Complaint Notification
|
10.
|
ONLINE SERVICE CENTER
|
i.
|
Monthly statements - Showing transaction history; and
|
ii.
|
Payment notifications - Indicating when payments are due/overdue.
|
11.
|
REPORTING
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
|
Credit Underwriting Criteria
|
|
Program A
|
|
Program B
|
|
Citizens Cannot Underwrite
|
1
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
2
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
|
|
|
and meet all requirements
|
|
and meet all requirements
|
|
or meet any of the details
|
|
|
|
below
|
|
below
|
|
below
|
3
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
4
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
5
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
6
|
Maximum Loan *
|
|
up to $4,000
|
|
up to $4,000
|
|
[*]
|
7
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
8
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
9
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
10
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
11
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
12
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
13
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
14
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
15
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
16
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
17
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
18
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
19
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
20
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
21
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
22
|
[*]
|
|
[*]
|
|
[*]
|
|
[*]
|
*
|
Loan range of [*] - $4,000 is at a program level regardless of the loan being Program A or Program B. A consumer may finance any amount within that range.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
1.
|
CARD TRANSACTION FEES (per transaction)
:
|
a.
|
The fee of $[*] per [*] Authorization transaction
|
b.
|
The fee of $[*] per [*] settlement transaction
|
c.
|
The fees charged by the Card Organizations, including [*].
|
d.
|
Each [*] transaction submitted by CUSTOMER will be subject to a [*]. The fees set forth in this
Section 1 (Card Transaction Fees)
may be adjusted without notice to reflect increases or decreases in applicable sales or telecommunication taxes as levied by federal, state or local authorities.
|
2.
|
ADDITIONAL SERVICES FEES (per item):
|
Confidential treatment has been requested with respect to information contained within the [*] marking. Such portions have been omitted from this filing and have been separately filed with the Securities and Exchange Commission.
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
$
|
225,772
|
|
|
$
|
197,965
|
|
|
$
|
161,339
|
|
|
$
|
147,511
|
|
|
$
|
114,476
|
|
Capitalized interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Portion of rental expense which represents interest factor (1)
|
5,614
|
|
|
5,318
|
|
|
5,047
|
|
|
3,624
|
|
|
2,028
|
|
|||||
Total Fixed Charges
|
231,386
|
|
|
203,283
|
|
|
166,386
|
|
|
151,135
|
|
|
116,504
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings Available for Fixed Charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Pretax loss from continuing operations
|
(409,121
|
)
|
|
(275,957
|
)
|
|
(278,756
|
)
|
|
(238,146
|
)
|
|
(120,921
|
)
|
|||||
Distributed equity income of affiliated companies
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Add: Fixed Charges
|
231,386
|
|
|
203,283
|
|
|
166,386
|
|
|
151,135
|
|
|
116,504
|
|
|||||
Total earnings available for fixed charges
|
$
|
(177,735
|
)
|
|
$
|
(72,674
|
)
|
|
$
|
(112,370
|
)
|
|
$
|
(87,011
|
)
|
|
$
|
(4,417
|
)
|
Earnings for the period were insufficient to cover fixed charges by the following amounts:
|
(409,121
|
)
|
|
(275,957
|
)
|
|
(278,756
|
)
|
|
(238,146
|
)
|
|
(120,921
|
)
|
|||||
Ratio of earnings to fixed charges (2)
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
(1)
|
Represents the portion of rental expense deemed to be attributable to interest
|
(2)
|
NM - Not meaningful
|
Name
|
|
Jurisdiction of Incorporation / Organization
|
313 Aviation, LLC
|
|
Utah
|
Smart Home Pros, Inc.
|
|
Utah
|
Vivint, Inc.
|
|
Utah
|
Vivint Purchasing, LLC
|
|
Utah
|
AP AL LLC
|
|
Delaware
|
APX Group, Inc.
|
|
Delaware
|
IPR LLC
|
|
Delaware
|
Farmington IP LLC
|
|
Delaware
|
Smartrove Inc.
|
|
Delaware
|
Space Monkey, LLC
|
|
Delaware
|
Vivint Firewild, LLC
|
|
Delaware
|
Vivint Funding US LLC
|
|
Delaware
|
Vivint Funding Holdings LLC
|
|
Delaware
|
Vivint Group, Inc.
|
|
Delaware
|
Vivint Servicing, LLC
|
|
Delaware
|
Vivint Solar Licensing, LLC
|
|
Delaware
|
Vivint Wireless, Inc.
|
|
Delaware
|
Vivint Louisiana LLC
|
|
Louisiana
|
Vivint Australia Pty Ltd.
|
|
Australia
|
Vivint Canada, Inc.
|
|
Canada
|
Vivint New Zealand Limited
|
|
New Zealand
|
Vivint Canada Servicing, LP
|
|
Ontario
|
Vivint Funding Canada LP
|
|
Ontario
|
Vivint Puerto Rico, LLC
|
|
Puerto Rico
|
|
/s/ Todd Pedersen
|
Todd Pedersen
|
Chief Executive Officer and Director
|
(Principal Executive Officer)
|
|
/s/ Mark Davies
|
Mark Davies
|
Chief Financial Officer
|
(Principal Financial Officer)
|
•
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
•
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.
|
/s/ Todd Pedersen
|
Todd Pedersen
|
Chief Executive Officer and Director
|
(Principal Executive Officer)
|
•
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
•
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.
|
/s/ Mark Davies
|
Mark Davies
|
Chief Financial Officer
|
(Principal Financial Officer)
|