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ý
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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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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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•
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establish and grow through new subscriber acquisition channels;
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•
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increase brand awareness;
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•
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meet customer expectations and address key friction points for smart home adoption and use;
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•
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expand our ecosystem with third-party and proprietary devices;
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•
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reduce subscriber attrition;
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•
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lower net subscriber acquisition costs;
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•
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improve unit economics and grow subscription revenues per subscriber over time;
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•
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increase new subscriber originations, customer usage, and customer satisfaction;
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•
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develop, design, and sell our own Smart Home Services that are differentiated from those of our competitors;
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•
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attract, train and retain an effective sales force and other key personnel;
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•
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upgrade and maintain our information technology systems;
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•
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acquire and protect intellectual property;
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•
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meet future liquidity requirements and comply with restrictive covenants related to our long-term indebtedness;
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•
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enhance our future operating and financial results;
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•
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comply with laws and regulations applicable to our business; and
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•
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successfully defend litigation brought against us.
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•
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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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•
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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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the introduction of unsuccessful new Smart Home Services;
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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 our ability to successfully compete in retail sales channels.
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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 average monthly Total Subscribers (as defined below) during 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 (as defined below) and installation fees in connection with the services through a third-party financing provider;
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•
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references to “Average Subscriber Lifetime” are to 100% divided by our expected long-term annualized attrition rate multiplied by 12 months;
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•
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references to “DTH” are to our direct to home sales channels;
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•
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references to “Existing Notes” are to the 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 “Lifetime Service Revenue per New Subscriber” are to the total monthly Service revenue for New Subscribers divided by the number of New Subscribers, multiplied by Average Subscriber Lifetime;
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•
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references to “ Lifetime Service Revenue Multiple” are to Lifetime Service Revenue per New Subscriber divided by Net Subscriber Acquisition Costs per New Subscriber;
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•
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references to “NIS” are to our national inside sales channels;
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•
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references to “Products” are to our offering of smart home equipment including a proprietary control panel, door and window sensors, door locks, security cameras and smoke alarms;
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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-
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•
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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 “Services” are to our offering of smart home and security services;
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•
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references to “Smart Home as a Services,” or “SHaaS” are to our business model which generates subscription-based, high margin recurring revenue from customers who sign up for our Smart Home Services;
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•
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references to “Smart Home Operating System” are to the combination of the software inside our Products and our cloud-based software and mobile apps;
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•
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references to “Smart Home Pros” or “SHPs” are to our full-time smart home professionals who service our customers;
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•
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references to “Smart Home Services” are to our offering of smart home services combining Products and related installation, Services and our proprietary back-end cloud platform software;
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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 “Sponsor” are to certain investment funds affiliated with The Blackstone Group L.P.;
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•
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references to “Net Subscriber Acquisition Costs per New Subscriber” are to the net cash cost to create new smart home and security subscribers during a given 12 month period divided by New Subscribers for that period. These costs include commissions, Products, installation, marketing, sales support and other allocations (general and administrative and overhead); less upfront payment received from the sale of Products associated with the initial installation, and installation fees. These costs exclude capitalized contract costs and upfront proceeds associated with contract modifications;
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•
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references to “2024 Term Loan B Agreement” refer to the credit agreement (the “Term Loan Agreement”), dated as of September 6, 2018, among us, certain of our subsidiaries, certain lenders party thereto and Bank of America, N.A., as administrative agent;
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•
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references to “Total Bookings” are to the total monthly Service revenue for New Subscribers multiplied by Average Subscriber Lifetime, plus total Product revenue to be recognized over the contract term from New Subscribers.
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•
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references to “Total MR” are to the average monthly total revenue recognized during 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;
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•
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references to “Total Subscriber Lifetime Backlog” are to total unrecognized Product revenue plus total Service revenue expected to be recognized over the remaining Subscriber Lifetime for Total Subscribers;
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•
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references to “Vivint Assist” are to our AI-driven smart home automation and assistance software that uses the data from our devices and partner devices;
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•
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references to the “Vivint Flex Pay” or “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; and
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•
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references to “Vivint Smart Home App” or “Smart Home App” are to our application available on both Android and iOS which allows users to automate, control and monitor their smart home experience.
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ITEM 1.
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BUSINESS
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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, 2018 (1)
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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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||||||||||
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(in thousands)
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||||||||||||||||||
Statement of Operations Data:
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|
|
|
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||||||||||
Total revenue
|
$
|
1,050,441
|
|
|
$
|
881,983
|
|
|
$
|
757,907
|
|
|
$
|
653,721
|
|
|
$
|
563,677
|
|
Total costs and expenses
|
1,292,500
|
|
|
1,037,476
|
|
|
829,009
|
|
|
762,396
|
|
|
657,546
|
|
|||||
Loss from operations
|
(242,059
|
)
|
|
(155,493
|
)
|
|
(71,102
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)
|
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(108,675
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)
|
|
(93,869
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)
|
|||||
Other expenses:
|
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|
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||||||||||
Interest expense
|
(245,214
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)
|
|
(225,772
|
)
|
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(197,965
|
)
|
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(161,339
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)
|
|
(147,511
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)
|
|||||
Interest income
|
425
|
|
|
130
|
|
|
432
|
|
|
90
|
|
|
1,455
|
|
|||||
Other income (expenses)
|
17,323
|
|
|
(27,986
|
)
|
|
(7,255
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)
|
|
(8,832
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)
|
|
1,779
|
|
|||||
Loss from operations before income taxes
|
(469,525
|
)
|
|
(409,121
|
)
|
|
(275,890
|
)
|
|
(278,756
|
)
|
|
(238,146
|
)
|
|||||
Income tax (benefit) expense
|
(1,611
|
)
|
|
1,078
|
|
|
67
|
|
|
351
|
|
|
514
|
|
|||||
Net loss
|
$
|
(467,914
|
)
|
|
$
|
(410,199
|
)
|
|
$
|
(275,957
|
)
|
|
$
|
(279,107
|
)
|
|
$
|
(238,660
|
)
|
Balance Sheet Data (for the year ended):
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash
|
$
|
12,773
|
|
|
$
|
3,872
|
|
|
$
|
43,520
|
|
|
$
|
2,559
|
|
|
$
|
10,807
|
|
Working capital
|
(340,038
|
)
|
|
(162,406
|
)
|
|
(80,170
|
)
|
|
(120,952
|
)
|
|
(51,569
|
)
|
|||||
Adjusted working capital deficit (excluding cash and capital lease obligation)
|
(345,068
|
)
|
|
(155,664
|
)
|
|
(113,893
|
)
|
|
(115,895
|
)
|
|
(56,827
|
)
|
|||||
Total assets
|
2,524,491
|
|
|
2,868,847
|
|
|
2,547,662
|
|
|
2,303,644
|
|
|
2,255,586
|
|
|||||
Total debt
|
3,045,195
|
|
|
2,820,297
|
|
|
2,486,700
|
|
|
2,138,112
|
|
|
1,835,068
|
|
|||||
Total shareholders’ (deficit) equity
|
$
|
(1,396,601
|
)
|
|
$
|
(653,526
|
)
|
|
$
|
(245,182
|
)
|
|
$
|
(76,993
|
)
|
|
$
|
224,486
|
|
|
(1)
|
Includes the impact of adopting Topic 606. See Note
3
"Revenue and Capitalized Contract Costs" in the accompanying notes to consolidated financial statements for additional information related to the impact of adopting this standard and a discussion of our updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract.
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Beginning balance of subscribers
|
1,292,698
|
|
|
1,146,746
|
|
|
1,013,917
|
|
Net new additions
|
322,574
|
|
|
279,735
|
|
|
277,241
|
|
Subscriber contracts sold (1)
|
—
|
|
|
—
|
|
|
(7,520
|
)
|
Attrition
|
(170,450
|
)
|
|
(133,783
|
)
|
|
(136,892
|
)
|
Ending balance of subscribers
|
1,444,822
|
|
|
1,292,698
|
|
|
1,146,746
|
|
Monthly average subscribers
|
1,380,741
|
|
|
1,214,696
|
|
|
1,082,694
|
|
Attrition rate
|
12.3
|
%
|
|
11.0
|
%
|
|
12.6
|
%
|
|
(1)
|
Represents our New Zealand and Puerto Rico subscriber contracts sold during the year ended December 31, 2016.
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Total revenues
|
$
|
1,050,441
|
|
|
$
|
881,983
|
|
|
$
|
757,907
|
|
Total costs and expenses
|
1,292,500
|
|
|
1,037,476
|
|
|
829,009
|
|
|||
Loss from operations
|
(242,059
|
)
|
|
(155,493
|
)
|
|
(71,102
|
)
|
|||
Other expenses
|
227,466
|
|
|
253,628
|
|
|
204,788
|
|
|||
Loss before taxes
|
(469,525
|
)
|
|
(409,121
|
)
|
|
(275,890
|
)
|
|||
Income tax (benefit) expense
|
(1,611
|
)
|
|
1,078
|
|
|
67
|
|
|||
Net loss
|
$
|
(467,914
|
)
|
|
$
|
(410,199
|
)
|
|
$
|
(275,957
|
)
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Total Subscribers (in thousands)
|
1,444.8
|
|
|
1,292.7
|
|
|
1,146.7
|
|
|||
Total MSR (in thousands)
|
$
|
76,103
|
|
|
$
|
70,992
|
|
|
$
|
65,633
|
|
AMSRU
|
$
|
52.67
|
|
|
$
|
54.92
|
|
|
$
|
57.23
|
|
Net subscriber acquisition costs per new subscriber
|
$
|
1,189
|
|
|
$
|
1,594
|
|
|
$
|
1,996
|
|
Net service cost per subscriber
|
$
|
16.27
|
|
|
$
|
15.69
|
|
|
$
|
14.72
|
|
Net service margin
|
69
|
%
|
|
72
|
%
|
|
74
|
%
|
|||
Average subscriber lifetime (months)
|
91
|
|
|
90
|
|
|
87
|
|
|||
Total bookings (in millions) (1)
|
$
|
1,676
|
|
|
$
|
1,524
|
|
|
$
|
1,642
|
|
Lifetime service revenue per new subscriber
|
$
|
4,233
|
|
|
$
|
4,366
|
|
|
$
|
5,809
|
|
Lifetime service revenue multiple
|
3.56x
|
|
|
2.74x
|
|
|
2.91x
|
|
|||
Total subscriber lifetime backlog (in millions)
|
$
|
5,163
|
|
|
$
|
4,758
|
|
|
$
|
4,296
|
|
|
Year ended December 31,
|
||||||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||||||
|
As Reported
|
|
As Adjusted (2)
|
|
|
|
|
||||||||
Total MR (in thousands)
|
$
|
87,537
|
|
|
$
|
83,879
|
|
|
$
|
73,499
|
|
|
$
|
63,159
|
|
AMRU
|
$
|
63.11
|
|
|
$
|
60.47
|
|
|
$
|
60.21
|
|
|
$
|
58.04
|
|
|
(1)
|
The decrease in total bookings from 2016 to 2017 is due to the reduction in Average Monthly Service Revenue per New Subscriber resulting from the transition to Vivint Flex Pay in 2017.
|
(2)
|
As adjusted excludes the impact of adopting Topic 606 associated with total revenues recognized. See Note
3
"Revenue and Capitalized Contract Costs" in the accompanying notes to consolidated financial statements for additional information related to the impact of adopting this standard and a discussion of our updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract.
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||||||||
|
As Reported
|
|
Topic 606 Adjustments
|
|
As Adjusted (1)
|
|
|
As Reported
|
|
As Adjusted
|
|||||||||||
|
(in thousands)
|
|
|
|
|
||||||||||||||||
Recurring and other revenue
|
$
|
1,050,441
|
|
|
$
|
(99,780
|
)
|
|
$
|
950,661
|
|
|
$
|
843,420
|
|
|
25
|
%
|
|
13
|
%
|
Service and other sales revenue
|
—
|
|
|
46,177
|
|
|
46,177
|
|
|
26,988
|
|
|
NM (2)
|
|
|
71
|
%
|
||||
Activation fees
|
—
|
|
|
9,705
|
|
|
9,705
|
|
|
11,575
|
|
|
NM
|
|
|
(16
|
)%
|
||||
Total revenues
|
$
|
1,050,441
|
|
|
$
|
(43,898
|
)
|
|
$
|
1,006,543
|
|
|
$
|
881,983
|
|
|
19
|
%
|
|
14
|
%
|
|
(1)
|
As adjusted excludes the impact of adopting Topic 606. See Note
3
"Revenue and Capitalized Contract Costs" in the accompanying notes to the consolidated financial statements for additional information related to the impact of adopting this standard and a discussion of our updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract.
|
(2)
|
Not Meaningful (“NM”)
|
|
2018
|
|
|
|
% Change
|
||||||||||||||||
|
As Reported
|
|
Topic 606 Adjustments
|
|
As Adjusted (1)
|
|
2017
|
|
As Reported
|
|
As Adjusted
|
||||||||||
|
(in thousands)
|
|
|
|
|
||||||||||||||||
Operating expenses
|
$
|
355,813
|
|
|
$
|
29,859
|
|
|
$
|
385,672
|
|
|
$
|
321,476
|
|
|
11
|
%
|
|
20
|
%
|
Selling expenses
|
213,386
|
|
|
—
|
|
|
213,386
|
|
|
198,348
|
|
|
8
|
%
|
|
8
|
%
|
||||
General and administrative
|
204,536
|
|
|
—
|
|
|
204,536
|
|
|
188,397
|
|
|
9
|
%
|
|
9
|
%
|
||||
Depreciation and amortization
|
514,082
|
|
|
(146,203
|
)
|
|
367,879
|
|
|
329,255
|
|
|
56
|
%
|
|
12
|
%
|
||||
Restructuring and asset impairment charges
|
4,683
|
|
|
—
|
|
|
4,683
|
|
|
—
|
|
|
NM
|
|
|
NM
|
|
||||
Total costs and expenses
|
$
|
1,292,500
|
|
|
$
|
(116,344
|
)
|
|
$
|
1,176,156
|
|
|
$
|
1,037,476
|
|
|
25
|
%
|
|
13
|
%
|
|
(1)
|
As adjusted excludes the impact of adopting Topic 606. See Note
3
"Revenue and Capitalized Contract Costs" in the accompanying notes to the consolidated financial statements for additional information related to the impact of adopting this standard and a discussion of our updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract.
|
|
Year ended December 31,
|
|
|
|||||||
|
2018
|
|
2017
|
|
% Change
|
|||||
|
(in thousands)
|
|
|
|||||||
Interest expense
|
$
|
245,214
|
|
|
$
|
225,772
|
|
|
9
|
%
|
Interest income
|
(425
|
)
|
|
(130
|
)
|
|
NM
|
|
||
Other (income) loss, net
|
(17,323
|
)
|
|
27,986
|
|
|
NM
|
|
||
Total other expenses, net
|
$
|
227,466
|
|
|
$
|
253,628
|
|
|
(10
|
)%
|
|
Year ended December 31,
|
|
|
||||||
|
2018
|
|
2017
|
|
% Change
|
||||
|
(in thousands)
|
|
|
||||||
Income tax (benefit) expense
|
$
|
(1,611
|
)
|
|
$
|
1,078
|
|
|
NM
|
|
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 (income), net
|
27,986
|
|
|
7,255
|
|
|
286
|
%
|
||
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
|
|
Three Months Ended
|
||||||||||||||
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Statement of operations data
|
|
|
|
|
|
|
|
||||||||
Revenue
|
$
|
276,542
|
|
|
$
|
272,335
|
|
|
$
|
254,967
|
|
|
$
|
246,597
|
|
Loss from operations
|
(46,137
|
)
|
|
(44,058
|
)
|
|
(80,233
|
)
|
|
(71,631
|
)
|
||||
Net loss
|
(118,586
|
)
|
|
(120,226
|
)
|
|
(144,385
|
)
|
|
(84,717
|
)
|
|
Three Months Ended
|
||||||||||||||
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2015 (1)
|
||||||||
|
(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
|
)
|
•
|
In February 2017 we issued an additional
$300.0 million
aggregate principal amount of the 2022 notes at a price of
108.250%
, which we used the net proceeds from to redeem $300.0 million aggregate principal amount of the existing 2019 notes and pay the related redemption premium, and to pay all fees and expenses related thereto and used any remaining proceeds for general corporate purposes;
|
•
|
In August 2017, we issued $400 million aggregate principal amount of the 2023 notes, which we used the net proceeds from to redeem $150 million aggregate principal amount of the existing 2019 notes and pay the related redemption premium and accrued and unpaid interest thereon, and to pay all fees and expenses related thereto and used any remaining proceeds for general corporate purposes; and
|
•
|
In September 2018, we borrowed $810 million under the 2024 Term Loan B (the “2024 Term Loan B”). We used a portion of the net proceeds from the borrowings under the 2024 Term Loan B to redeem in full the entire $269.5 million outstanding aggregate principal amount of the existing 2019 notes and pay the related accrued interest and redemption premium, to repurchase approximately $250.7 million aggregate principal amount of the 2020 notes, and to pay fees and expenses related to the Term Loan Agreement.
|
|
|
Year ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net cash used in operating activities
|
|
$
|
(220,499
|
)
|
|
$
|
(309,332
|
)
|
|
$
|
(365,706
|
)
|
Net cash provided by (used in) investing activities
|
|
32,922
|
|
|
(21,661
|
)
|
|
(15,147
|
)
|
|||
Net cash provided by financing activities
|
|
196,407
|
|
|
291,213
|
|
|
422,280
|
|
•
|
$521.7 million
in non-cash amortization, depreciation, and stock-based compensation,
|
•
|
a
$49.8 million
net gain on sale of disposal of assets primarily associated with the sale of our spectrum intangible assets,
|
•
|
a
$14.6 million
loss on early extinguishment of debt,
|
•
|
a
$19.4 million
provision for doubtful accounts, and
|
•
|
a
$0.5 million
unrealized
gain
on equity securities.
|
•
|
a
$499.3 million
increase
in capitalized contract costs,
|
•
|
$34.0 million
increase
in accounts receivable driven primarily by the increase in billed RIC receivables,
|
•
|
a
$29.1 million
increase
in other assets primarily due to increases in notes receivables associated with RICs, and
|
•
|
a
$27.0 million
decrease
in accounts payable due primarily to decreases in inventory purchases.
|
•
|
a
$172.9 million
increase
in deferred revenue due to the increased subscriber base and the increase of deferred revenues associated with Product sales under Vivint Flex Pay,
|
•
|
a
$91.5 million
increase
in accrued expenses and other liabilities due primarily from increases in accrued interest on our long term debt,
|
•
|
a
$64.4 million
decrease
in inventories primarily associated with the decrease in inventory on hand associated with our retail sales channel, and
|
•
|
a
$4.7 million
decrease
in prepaid expenses and other current assets.
|
•
|
$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 RIC receivables, 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 Vivint Flex Pay,
|
•
|
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.
|
•
|
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;
|
•
|
materially change the nature of their business;
|
•
|
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,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net loss
|
|
$
|
(467,914
|
)
|
|
$
|
(410,199
|
)
|
|
$
|
(275,957
|
)
|
Interest expense, net
|
|
244,789
|
|
|
225,642
|
|
|
197,533
|
|
|||
Non-capitalized subscriber acquisition costs (1)
|
|
276,437
|
|
|
255,456
|
|
|
175,948
|
|
|||
Amortization of capitalized subscriber acquisition costs
|
|
398,174
|
|
|
206,153
|
|
|
154,877
|
|
|||
Depreciation and amortization (2)
|
|
115,908
|
|
|
123,102
|
|
|
133,666
|
|
|||
Gain on sale of spectrum (3)
|
|
(50,389
|
)
|
|
—
|
|
|
—
|
|
|||
Other expense
|
|
33,066
|
|
|
27,986
|
|
|
7,255
|
|
|||
Non-cash compensation (4)
|
|
2,217
|
|
|
1,377
|
|
|
3,999
|
|
|||
Restructuring and asset impairment charge (5)
|
|
4,683
|
|
|
—
|
|
|
1,013
|
|
|||
Income tax (benefit) expense
|
|
(1,611
|
)
|
|
1,078
|
|
|
67
|
|
|||
Other adjustments (6)
|
|
59,519
|
|
|
59,733
|
|
|
45,697
|
|
|||
Adjustment for a change in accounting principle (Topic 606) (7)
|
|
(73,757
|
)
|
|
—
|
|
|
—
|
|
|||
Adjusted EBITDA
|
|
$
|
541,122
|
|
|
$
|
490,328
|
|
|
$
|
444,098
|
|
|
(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)
|
Gain on sale of spectrum intangible assets in 2018. (See Note
8
to the accompanying consolidated financial statements).
|
(4)
|
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.
|
(5)
|
Restructuring employee severance and termination benefits expenses. (See Note
10
to the accompanying consolidated financial statements).
|
(6)
|
Other adjustments represent primarily the following items (in thousands):
|
|
|
Year ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Product development (a)
|
|
$
|
22,253
|
|
|
$
|
26,767
|
|
|
$
|
24,189
|
|
Litigation settlement (b)
|
|
—
|
|
|
10,012
|
|
|
—
|
|
|||
Certain legal and professional fees (c)
|
|
8,965
|
|
|
4,986
|
|
|
6,399
|
|
|||
Monitoring fee (d)
|
|
4,068
|
|
|
3,506
|
|
|
3,746
|
|
|||
Start-up of new strategic initiatives (e)
|
|
—
|
|
|
3,486
|
|
|
—
|
|
|||
Purchase accounting deferred revenue fair value adjustment (f)
|
|
1,336
|
|
|
3,280
|
|
|
4,410
|
|
|||
Information technology implementation (g)
|
|
—
|
|
|
3,188
|
|
|
3,745
|
|
|||
Hiring and termination payments (h)
|
|
9,373
|
|
|
386
|
|
|
1,017
|
|
|||
Projected run-rate restructuring cost savings (i)
|
|
5,756
|
|
|
—
|
|
|
—
|
|
|||
All other adjustments (j)
|
|
7,768
|
|
|
4,122
|
|
|
2,191
|
|
|||
Total other adjustments
|
|
$
|
59,519
|
|
|
$
|
59,733
|
|
|
$
|
45,697
|
|
|
(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)
|
Expenses associated with retention bonus, relocation and severance payments to management.
|
(i)
|
Projected run-rate savings related to June 2018 reduction-in-force.
|
(j)
|
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 Program, and costs to implement Sarbanes-Oxley Section 404.
|
(7)
|
The adjustments to eliminate the impact of the Company's adoption of Topic 606, are as follows (in thousands):
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net loss
|
$
|
70,029
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Amortization of capitalized contract costs
|
(398,174
|
)
|
|
—
|
|
|
—
|
|
|||
Amortization of subscriber acquisition costs
|
251,971
|
|
|
—
|
|
|
—
|
|
|||
Income tax (benefit) expense
|
2,417
|
|
|
—
|
|
|
—
|
|
|||
Topic 606 adjustments
|
$
|
(73,757
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
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)
|
|
$
|
3,057,274
|
|
|
$
|
8,100
|
|
|
$
|
695,499
|
|
|
$
|
1,586,200
|
|
|
$
|
767,475
|
|
Interest on long-term debt (2)
|
|
1,146,390
|
|
|
324,520
|
|
|
530,128
|
|
|
276,799
|
|
|
14,943
|
|
|||||
Capital lease obligations
|
|
13,772
|
|
|
8,193
|
|
|
5,572
|
|
|
7
|
|
|
—
|
|
|||||
Operating lease obligations
|
|
103,293
|
|
|
16,709
|
|
|
30,404
|
|
|
27,356
|
|
|
28,824
|
|
|||||
Purchase obligations (3)
|
|
59,459
|
|
|
17,996
|
|
|
15,192
|
|
|
13,541
|
|
|
12,730
|
|
|||||
Other long-term obligations
|
|
42,846
|
|
|
9,077
|
|
|
11,982
|
|
|
7,618
|
|
|
14,169
|
|
|||||
Total contractual obligations
|
|
$
|
4,423,034
|
|
|
$
|
384,595
|
|
|
$
|
1,288,777
|
|
|
$
|
1,911,521
|
|
|
$
|
838,141
|
|
|
(1)
|
As of
December 31, 2018
, we had
no
borrowings under our revolving credit facility. The principal amount outstanding under the revolving credit facility will be due and payable in full on March 31, 2021. As of
December 31, 2018
, there was approximately
$289.8 million
of availability under our revolving credit facility (after giving effect to
$13.8 million
of outstanding letters of credit and
no
borrowings).
|
(2)
|
Represents aggregate interest payments on aggregate principal amounts of
$679.3 million
of outstanding 2020 notes,
$270.0 million
of the outstanding 2022 private placement notes,
$900.0 million
of the outstanding 2022 notes,
$400.0 million
of the outstanding 2023 notes, and
$808.0 million
of the 2024 Term Loan B 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, 2018
. 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,
|
||||||
|
2018
|
|
2017
|
||||
ASSETS
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
12,773
|
|
|
$
|
3,872
|
|
Accounts and notes receivable, net
|
48,724
|
|
|
40,721
|
|
||
Inventories
|
50,552
|
|
|
115,222
|
|
||
Prepaid expenses and other current assets
|
11,449
|
|
|
16,150
|
|
||
Total current assets
|
123,498
|
|
|
175,965
|
|
||
Property, plant and equipment, net
|
73,401
|
|
|
78,081
|
|
||
Capitalized contract costs, net
|
1,115,775
|
|
|
—
|
|
||
Subscriber acquisition costs, net
|
—
|
|
|
1,308,558
|
|
||
Deferred financing costs, net
|
2,058
|
|
|
3,099
|
|
||
Intangible assets, net
|
255,085
|
|
|
377,451
|
|
||
Goodwill
|
834,855
|
|
|
836,970
|
|
||
Long-term notes receivables and other assets, net
|
119,819
|
|
|
88,723
|
|
||
Total assets
|
$
|
2,524,491
|
|
|
$
|
2,868,847
|
|
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
|
||||
Current Liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
66,646
|
|
|
$
|
107,347
|
|
Accrued payroll and commissions
|
65,479
|
|
|
57,752
|
|
||
Accrued expenses and other current liabilities
|
136,715
|
|
|
74,321
|
|
||
Deferred revenue
|
186,953
|
|
|
88,337
|
|
||
Current portion of capital lease obligations
|
7,743
|
|
|
10,614
|
|
||
Total current liabilities
|
463,536
|
|
|
338,371
|
|
||
Notes payable, net
|
2,961,947
|
|
|
2,760,297
|
|
||
Notes payable, net - related party
|
75,148
|
|
|
—
|
|
||
Revolving line of credit
|
—
|
|
|
60,000
|
|
||
Capital lease obligations, net of current portion
|
5,571
|
|
|
11,089
|
|
||
Deferred revenue, net of current portion
|
323,585
|
|
|
264,555
|
|
||
Other long-term obligations
|
90,209
|
|
|
79,020
|
|
||
Deferred income tax liabilities
|
1,096
|
|
|
9,041
|
|
||
Total liabilities
|
3,921,092
|
|
|
3,522,373
|
|
||
Commitments and contingencies (See Note 13)
|
|
|
|
||||
Stockholders’ deficit:
|
|
|
|
||||
Common stock, $0.01 par value, 100 shares authorized; 100 shares issued and outstanding
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
736,333
|
|
|
732,346
|
|
||
Accumulated deficit
|
(2,104,097
|
)
|
|
(1,358,571
|
)
|
||
Accumulated other comprehensive loss
|
(28,837
|
)
|
|
(27,301
|
)
|
||
Total stockholders’ deficit
|
(1,396,601
|
)
|
|
(653,526
|
)
|
||
Total liabilities and stockholders’ deficit
|
$
|
2,524,491
|
|
|
$
|
2,868,847
|
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Recurring and other revenue
|
$
|
1,050,441
|
|
|
$
|
843,420
|
|
|
$
|
724,478
|
|
Service and other sales revenue
|
—
|
|
|
26,988
|
|
|
22,855
|
|
|||
Activation fees
|
—
|
|
|
11,575
|
|
|
10,574
|
|
|||
Total revenues
|
1,050,441
|
|
|
881,983
|
|
|
757,907
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Operating expenses (exclusive of depreciation and amortization shown separately below)
|
355,813
|
|
|
321,476
|
|
|
264,865
|
|
|||
Selling expenses (exclusive of amortization of deferred commissions of $165,797, $84,152 and $64,007, respectively, which are included in depreciation and amortization shown separately below)
|
213,386
|
|
|
198,348
|
|
|
131,421
|
|
|||
General and administrative expenses
|
204,536
|
|
|
188,397
|
|
|
143,168
|
|
|||
Depreciation and amortization
|
514,082
|
|
|
329,255
|
|
|
288,542
|
|
|||
Restructuring and asset impairment charges
|
4,683
|
|
|
—
|
|
|
1,013
|
|
|||
Total costs and expenses
|
1,292,500
|
|
|
1,037,476
|
|
|
829,009
|
|
|||
Loss from operations
|
(242,059
|
)
|
|
(155,493
|
)
|
|
(71,102
|
)
|
|||
Other expenses (income):
|
|
|
|
|
|
||||||
Interest expense
|
245,214
|
|
|
225,772
|
|
|
197,965
|
|
|||
Interest income
|
(425
|
)
|
|
(130
|
)
|
|
(432
|
)
|
|||
Other (income) loss, net
|
(17,323
|
)
|
|
27,986
|
|
|
7,255
|
|
|||
Loss before income taxes
|
(469,525
|
)
|
|
(409,121
|
)
|
|
(275,890
|
)
|
|||
Income tax (benefit) expense
|
(1,611
|
)
|
|
1,078
|
|
|
67
|
|
|||
Net loss
|
$
|
(467,914
|
)
|
|
$
|
(410,199
|
)
|
|
$
|
(275,957
|
)
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net loss
|
$
|
(467,914
|
)
|
|
$
|
(410,199
|
)
|
|
$
|
(275,957
|
)
|
Other comprehensive (loss) income, net of tax effects:
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
(2,218
|
)
|
|
3,155
|
|
|
2,482
|
|
|||
Unrealized (loss) gain on marketable securities
|
—
|
|
|
(1,693
|
)
|
|
1,011
|
|
|||
Total other comprehensive (loss) income
|
(2,218
|
)
|
|
1,462
|
|
|
3,493
|
|
|||
Comprehensive loss
|
$
|
(470,132
|
)
|
|
$
|
(408,737
|
)
|
|
$
|
(272,464
|
)
|
|
Common Stock
|
|
Additional
paid-in
capital
|
|
Accumulated
deficit
|
|
Accumulated
other
comprehensive
loss
|
|
Total
|
||||||||||
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
|
)
|
|||||
Net Loss
|
—
|
|
|
—
|
|
|
(467,914
|
)
|
|
—
|
|
|
(467,914
|
)
|
|||||
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,218
|
)
|
|
(2,218
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
2,416
|
|
|
—
|
|
|
—
|
|
|
2,416
|
|
|||||
Return of capital to Vivint Smart Home, Inc.
|
—
|
|
|
(3,129
|
)
|
|
—
|
|
|
—
|
|
|
(3,129
|
)
|
|||||
ASU 2014-09 adoption
|
—
|
|
|
—
|
|
|
(276,930
|
)
|
|
—
|
|
|
(276,930
|
)
|
|||||
ASU 2016-01 adoption
|
—
|
|
|
—
|
|
|
(680
|
)
|
|
680
|
|
|
—
|
|
|||||
Capital contribution
|
—
|
|
|
4,700
|
|
|
—
|
|
|
—
|
|
|
4,700
|
|
|||||
Balance, December 31, 2018
|
$
|
—
|
|
|
$
|
736,333
|
|
|
$
|
(2,104,095
|
)
|
|
$
|
(28,839
|
)
|
|
$
|
(1,396,601
|
)
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities:
|
|
|
|
||||||||
Net loss from operations
|
$
|
(467,914
|
)
|
|
$
|
(410,199
|
)
|
|
$
|
(275,957
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities of operations:
|
|
|
|
|
|
||||||
Amortization of capitalized contract costs
|
398,174
|
|
|
—
|
|
|
—
|
|
|||
Amortization of subscriber acquisition costs
|
—
|
|
|
206,153
|
|
|
154,877
|
|
|||
Amortization of customer relationships
|
84,174
|
|
|
94,863
|
|
|
108,178
|
|
|||
Gain on fair value changes of equity securities
|
(477
|
)
|
|
—
|
|
|
—
|
|
|||
Depreciation and amortization of property, plant and equipment and other intangible assets
|
31,734
|
|
|
28,239
|
|
|
25,488
|
|
|||
Amortization of deferred financing costs and bond premiums and discounts
|
5,152
|
|
|
6,586
|
|
|
10,447
|
|
|||
(Gain) loss on sale or disposal of assets
|
(49,762
|
)
|
|
458
|
|
|
(33
|
)
|
|||
Loss on early extinguishment of debt
|
14,571
|
|
|
23,062
|
|
|
10,085
|
|
|||
Stock-based compensation
|
2,505
|
|
|
1,595
|
|
|
3,868
|
|
|||
Provision for doubtful accounts
|
19,405
|
|
|
22,465
|
|
|
19,624
|
|
|||
Deferred income taxes
|
(2,149
|
)
|
|
929
|
|
|
(478
|
)
|
|||
Restructuring and asset impairment charges
|
—
|
|
|
—
|
|
|
7,126
|
|
|||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
||||||
Accounts and notes receivable, net
|
(34,008
|
)
|
|
(49,590
|
)
|
|
(24,338
|
)
|
|||
Inventories
|
64,442
|
|
|
(75,580
|
)
|
|
(11,827
|
)
|
|||
Prepaid expenses and other current assets
|
4,695
|
|
|
(5,975
|
)
|
|
(5,165
|
)
|
|||
Capitalized contract costs, net
|
(499,252
|
)
|
|
—
|
|
|
—
|
|
|||
Subscriber acquisition costs, net
|
—
|
|
|
(457,679
|
)
|
|
(419,509
|
)
|
|||
Long-term notes receivables and other assets, net
|
(29,118
|
)
|
|
(74,801
|
)
|
|
368
|
|
|||
Accounts payable
|
(27,045
|
)
|
|
70,525
|
|
|
(2,978
|
)
|
|||
Accrued payroll and commissions, expenses and other current and long-term liabilities
|
91,469
|
|
|
62,208
|
|
|
12,702
|
|
|||
Restructuring liability
|
—
|
|
|
(91
|
)
|
|
(2,797
|
)
|
|||
Deferred revenue
|
172,905
|
|
|
247,500
|
|
|
24,613
|
|
|||
Net cash used in operating activities
|
(220,499
|
)
|
|
(309,332
|
)
|
|
(365,706
|
)
|
|||
Cash flows from investing activities:
|
|
|
|
||||||||
Subscriber acquisition costs – company owned equipment
|
—
|
|
|
—
|
|
|
(5,243
|
)
|
|||
Capital expenditures
|
(19,412
|
)
|
|
(20,391
|
)
|
|
(11,642
|
)
|
|||
Proceeds from the sale of intangible assets
|
53,693
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from the sale of capital assets
|
127
|
|
|
776
|
|
|
3,123
|
|
|||
Acquisition of intangible assets
|
(1,486
|
)
|
|
(1,745
|
)
|
|
(1,385
|
)
|
|||
Acquisition of other assets
|
—
|
|
|
(301
|
)
|
|
—
|
|
|||
Net cash provided by (used in) investing activities
|
32,922
|
|
|
(21,661
|
)
|
|
(15,147
|
)
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from financing activities:
|
|
|
|
||||||||
Proceeds from notes payable
|
759,000
|
|
|
724,750
|
|
|
604,000
|
|
|||
Proceeds from notes payable - related party
|
51,000
|
|
|
—
|
|
|
—
|
|
|||
Repayments of notes payable
|
(522,191
|
)
|
|
(450,000
|
)
|
|
(235,535
|
)
|
|||
Borrowings from revolving line of credit
|
201,000
|
|
|
196,895
|
|
|
57,000
|
|
|||
Repayments on revolving line of credit
|
(261,000
|
)
|
|
(136,895
|
)
|
|
(77,000
|
)
|
|||
Repayments of capital lease obligations
|
(12,354
|
)
|
|
(10,007
|
)
|
|
(8,315
|
)
|
|||
Payments of other long-term obligations
|
—
|
|
|
(2,983
|
)
|
|
—
|
|
|||
Financing costs
|
(11,317
|
)
|
|
(18,277
|
)
|
|
(9,036
|
)
|
|||
Deferred financing costs
|
(9,302
|
)
|
|
(11,119
|
)
|
|
(9,241
|
)
|
|||
Return of capital
|
(3,129
|
)
|
|
(1,151
|
)
|
|
—
|
|
|||
Proceeds from capital contributions
|
4,700
|
|
|
—
|
|
|
100,407
|
|
|||
Net cash provided by financing activities
|
196,407
|
|
|
291,213
|
|
|
422,280
|
|
|||
Effect of exchange rate changes on cash
|
71
|
|
|
132
|
|
|
(466
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
8,901
|
|
|
(39,648
|
)
|
|
40,961
|
|
|||
Cash and cash equivalents:
|
|
|
|
||||||||
Beginning of period
|
3,872
|
|
|
43,520
|
|
|
2,559
|
|
|||
End of period
|
$
|
12,773
|
|
|
$
|
3,872
|
|
|
$
|
43,520
|
|
Supplemental cash flow disclosures:
|
|
|
|
||||||||
Income tax paid
|
$
|
330
|
|
|
$
|
219
|
|
|
$
|
435
|
|
Interest paid
|
$
|
239,441
|
|
|
$
|
207,433
|
|
|
$
|
189,170
|
|
Supplemental non-cash investing and financing activities:
|
|
|
|
||||||||
Capital lease additions
|
$
|
4,569
|
|
|
$
|
14,633
|
|
|
$
|
8,411
|
|
Intangible asset acquisitions included within accounts payable, accrued expenses and other current liabilities and other long-term obligations
|
$
|
974
|
|
|
$
|
557
|
|
|
$
|
31,283
|
|
Capital expenditures included within accounts payable, accrued expenses and other current liabilities
|
$
|
128
|
|
|
$
|
2,531
|
|
|
$
|
2,345
|
|
Change in fair value of equity 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,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Beginning balance
|
$
|
5,356
|
|
|
$
|
4,138
|
|
|
$
|
3,541
|
|
Provision for doubtful accounts
|
19,405
|
|
|
22,465
|
|
|
19,624
|
|
|||
Write-offs and adjustments
|
(19,167
|
)
|
|
(21,247
|
)
|
|
(19,027
|
)
|
|||
Balance at end of period
|
$
|
5,594
|
|
|
$
|
5,356
|
|
|
$
|
4,138
|
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Amortization of capitalized contract costs
|
$
|
398,174
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Amortization of subscriber acquisition costs
|
—
|
|
|
206,153
|
|
|
154,877
|
|
|||
Amortization of definite-lived intangibles
|
90,945
|
|
|
101,827
|
|
|
116,865
|
|
|||
Depreciation of property, plant and equipment
|
24,963
|
|
|
21,275
|
|
|
16,800
|
|
|||
Total depreciation and amortization
|
$
|
514,082
|
|
|
$
|
329,255
|
|
|
$
|
288,542
|
|
Consolidated Balance Sheets
|
|||||||||||
|
|
|
|
|
|
||||||
|
As Reported
|
|
Adjustments
|
|
Adjusted
|
||||||
|
December 31, 2017
|
|
|
January 1, 2018
|
|||||||
Assets
|
|
|
|
|
|
||||||
Capitalized contract costs, net
|
$
|
—
|
|
|
$
|
1,020,408
|
|
|
$
|
1,020,408
|
|
Subscriber acquisition costs, net
|
1,308,558
|
|
|
(1,308,558
|
)
|
|
—
|
|
|||
Long-term notes receivables and other assets, net
|
88,723
|
|
|
2,713
|
|
|
91,436
|
|
|||
|
|
|
|
|
|
||||||
Liabilities and Stockholders' Deficit
|
|
|
|
|
|
||||||
Accrued expenses and other current liabilities
|
74,321
|
|
|
10,329
|
|
|
84,650
|
|
|||
Deferred revenue
|
88,337
|
|
|
39,868
|
|
|
128,205
|
|
|||
Deferred revenue, net of current portion
|
264,555
|
|
|
(53,062
|
)
|
|
211,493
|
|
|||
Deferred income tax liabilities
|
9,041
|
|
|
(5,641
|
)
|
|
3,400
|
|
|||
Accumulated deficit
|
(1,358,571
|
)
|
|
(276,931
|
)
|
|
(1,635,502
|
)
|
Consolidated Balance Sheets
|
|||||||||||
|
|
||||||||||
|
December 31, 2018
|
||||||||||
|
As Reported
|
|
Balances Without Adoption of Topic 606
|
|
Effect of Change
Higher/(Lower)
|
||||||
Assets
|
|
|
|
|
|
||||||
Capitalized contract costs, net
|
$
|
1,115,775
|
|
|
$
|
—
|
|
|
$
|
1,115,775
|
|
Subscriber acquisition costs, net
|
—
|
|
|
1,518,188
|
|
|
(1,518,188
|
)
|
|||
Liabilities and Stockholders' Deficit
|
|
|
|
|
|
||||||
Accrued expenses and other current liabilities
|
136,715
|
|
|
126,900
|
|
|
9,815
|
|
|||
Deferred revenue
|
186,953
|
|
|
126,582
|
|
|
60,371
|
|
|||
Deferred revenue, net of current portion
|
323,585
|
|
|
440,474
|
|
|
(116,889
|
)
|
|||
Deferred income tax liabilities
|
1,096
|
|
|
8,682
|
|
|
(7,586
|
)
|
|||
Accumulated deficit
|
(2,104,097
|
)
|
|
(1,754,426
|
)
|
|
(349,671
|
)
|
|||
Accumulated other comprehensive loss
|
(28,837
|
)
|
|
(30,384
|
)
|
|
1,547
|
|
Consolidated Statements of Operations and Comprehensive Loss
|
|||||||||||
|
|
||||||||||
|
Year ended December 31, 2018
|
||||||||||
|
As Reported
|
|
Balances Without Adoption of Topic 606
|
|
Effect of Change
Higher/(Lower)
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Recurring and other revenue
|
$
|
1,050,441
|
|
|
$
|
950,661
|
|
|
$
|
99,780
|
|
Service and other sales revenue
|
—
|
|
|
46,177
|
|
|
(46,177
|
)
|
|||
Activation fees
|
—
|
|
|
9,705
|
|
|
(9,705
|
)
|
|||
Total revenues
|
1,050,441
|
|
|
1,006,543
|
|
|
43,898
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Operating expenses
|
355,813
|
|
|
385,672
|
|
|
(29,859
|
)
|
|||
Depreciation and amortization
|
514,082
|
|
|
367,879
|
|
|
146,203
|
|
|||
Loss from operations
|
(242,059
|
)
|
|
(169,613
|
)
|
|
(72,446
|
)
|
|||
Income tax (benefit) expense
|
(1,611
|
)
|
|
806
|
|
|
(2,417
|
)
|
|||
Net loss
|
(467,914
|
)
|
|
(397,885
|
)
|
|
(70,029
|
)
|
|||
Other comprehensive loss, net of tax effects:
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
(2,218
|
)
|
|
(3,765
|
)
|
|
1,547
|
|
|||
Total other comprehensive (loss) income
|
(2,218
|
)
|
|
(3,765
|
)
|
|
1,547
|
|
|||
Comprehensive loss
|
(470,132
|
)
|
|
(401,650
|
)
|
|
(68,482
|
)
|
Consolidated Statements of Cashflows
|
|||||||||||
|
|
||||||||||
|
Year ended December 31, 2018
|
||||||||||
|
As Reported
|
|
Balances Without Adoption of Topic 606
|
|
Effect of Change
Higher/(Lower) |
||||||
|
|
|
|
|
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net loss
|
$
|
(467,914
|
)
|
|
$
|
(397,885
|
)
|
|
$
|
(70,029
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
||||||
Amortization of capitalized contract costs
|
398,174
|
|
|
—
|
|
|
398,174
|
|
|||
Amortization of subscriber acquisition costs
|
—
|
|
|
251,971
|
|
|
(251,971
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Capitalized contract costs – deferred contract costs
|
(499,252
|
)
|
|
—
|
|
|
(499,252
|
)
|
|||
Subscriber acquisition costs – deferred contract costs
|
—
|
|
|
(469,393
|
)
|
|
469,393
|
|
|||
Accrued expenses and other current liabilities
|
91,469
|
|
|
93,886
|
|
|
(2,417
|
)
|
|||
Deferred revenue
|
172,905
|
|
|
216,803
|
|
|
(43,898
|
)
|
|||
Net cash used in operating activities
|
(220,499
|
)
|
|
(220,499
|
)
|
|
—
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
RIC receivables, gross
|
$
|
175,250
|
|
|
$
|
131,024
|
|
Deferred interest
|
(34,163
|
)
|
|
(36,048
|
)
|
||
RIC receivables, net of deferred interest
|
$
|
141,087
|
|
|
$
|
94,976
|
|
|
|
|
|
||||
Classified on the consolidated balance sheets as:
|
|
|
|
||||
Accounts and notes receivable, net
|
$
|
32,185
|
|
|
$
|
16,469
|
|
Long-term notes receivables and other assets, net
|
108,902
|
|
|
78,507
|
|
||
RIC receivables, net
|
$
|
141,087
|
|
|
$
|
94,976
|
|
|
For the Years Ended
|
||||||
|
December 31, 2018
|
|
December 31, 2017
|
||||
Deferred interest, beginning of period
|
$
|
36,048
|
|
|
$
|
—
|
|
Write-offs, net of recoveries
|
(26,360
|
)
|
|
(6,055
|
)
|
||
Change in deferred interest on short-term and long-term RIC receivables
|
24,475
|
|
|
42,103
|
|
||
Deferred interest, end of period
|
$
|
34,163
|
|
|
$
|
36,048
|
|
|
Other expense and loss on extinguishment
|
|
Deferred financing costs
|
||||||||||||||||||||||||
Issuance
|
Original premium extinguished
|
|
Previously deferred financing costs extinguished
|
|
New financing costs
|
|
Total other expense and loss on extinguishment
|
|
Previously deferred financing rolled over
|
|
New deferred financing costs
|
|
Total deferred financing costs
|
||||||||||||||
For the year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
September 2018 issuance
|
$
|
(953
|
)
|
|
$
|
4,207
|
|
|
$
|
11,317
|
|
|
$
|
14,571
|
|
|
$
|
—
|
|
|
$
|
10,275
|
|
|
$
|
10,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
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 12/31/2017
|
|
Additions
|
|
Refinances
|
|
Early Extinguishment
|
|
Amortized
|
|
Balance 12/31/2018
|
||||||||||||
Revolving Credit Facility
|
$
|
3,099
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,041
|
)
|
|
$
|
2,058
|
|
2019 Notes
|
2,877
|
|
|
—
|
|
|
—
|
|
|
(1,877
|
)
|
|
(1,000
|
)
|
|
—
|
|
||||||
2020 Notes
|
11,209
|
|
|
—
|
|
|
—
|
|
|
(2,330
|
)
|
|
(3,499
|
)
|
|
5,380
|
|
||||||
2022 Private Placement Notes
|
752
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(150
|
)
|
|
602
|
|
||||||
2022 Notes
|
16,067
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,268
|
)
|
|
12,799
|
|
||||||
2023 Notes
|
4,762
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(840
|
)
|
|
3,922
|
|
||||||
Term Loan
|
—
|
|
|
10,275
|
|
|
—
|
|
|
—
|
|
|
(613
|
)
|
|
9,662
|
|
||||||
Total Deferred Financing Costs
|
$
|
38,766
|
|
|
$
|
10,275
|
|
|
$
|
—
|
|
|
$
|
(4,207
|
)
|
|
$
|
(10,411
|
)
|
|
$
|
34,423
|
|
|
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
|
|
|
December 31, 2018
|
||||||||||||||
|
Outstanding
Principal
|
|
Unamortized
Premium
(Discount)
|
|
Unamortized Deferred Financing Costs (1)
|
|
Net Carrying
Amount
|
||||||||
8.75% Senior Notes due 2020
|
$
|
679,299
|
|
|
$
|
2,230
|
|
|
$
|
(5,380
|
)
|
|
$
|
676,149
|
|
8.875% Senior Secured Notes Due 2022
|
270,000
|
|
|
(2,122
|
)
|
|
(602
|
)
|
|
267,276
|
|
||||
7.875% Senior Secured Notes Due 2022
|
900,000
|
|
|
20,178
|
|
|
(12,799
|
)
|
|
907,379
|
|
||||
7.625% Senior Notes Due 2023
|
400,000
|
|
|
—
|
|
|
(3,922
|
)
|
|
396,078
|
|
||||
Term Loan - noncurrent
|
799,875
|
|
|
—
|
|
|
(9,662
|
)
|
|
790,213
|
|
||||
Total Long-Term Debt
|
3,049,174
|
|
|
20,286
|
|
|
(32,365
|
)
|
|
3,037,095
|
|
||||
Term Loan - current
|
8,100
|
|
|
—
|
|
|
—
|
|
|
8,100
|
|
||||
Total Debt
|
$
|
3,057,274
|
|
|
$
|
20,286
|
|
|
$
|
(32,365
|
)
|
|
$
|
3,045,195
|
|
|
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 Notes Due 2023
|
400,000
|
|
|
—
|
|
|
(4,762
|
)
|
|
395,238
|
|
||||
Total Debt
|
$
|
2,829,465
|
|
|
$
|
26,499
|
|
|
$
|
(35,667
|
)
|
|
$
|
2,820,297
|
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Prepaid expenses and other current assets
|
|
|
|
||||
Prepaid expenses
|
$
|
7,183
|
|
|
$
|
8,000
|
|
Deposits
|
904
|
|
|
1,596
|
|
||
Other
|
3,362
|
|
|
6,554
|
|
||
Total prepaid expenses and other current assets
|
$
|
11,449
|
|
|
$
|
16,150
|
|
Capitalized contract costs
|
|
||||||
Capitalized contract costs
|
$
|
2,361,795
|
|
|
$
|
—
|
|
Accumulated amortization
|
(1,246,020
|
)
|
|
—
|
|
||
Capitalized contract costs, net
|
$
|
1,115,775
|
|
|
$
|
—
|
|
Subscriber acquisition costs
|
|
||||||
Subscriber acquisition costs
|
$
|
—
|
|
|
$
|
1,837,388
|
|
Accumulated amortization
|
—
|
|
|
(528,830
|
)
|
||
Subscriber acquisition costs, net
|
$
|
—
|
|
|
$
|
1,308,558
|
|
Long-term notes receivables and other assets
|
|
||||||
RIC receivables, gross
|
$
|
143,065
|
|
|
$
|
114,556
|
|
RIC deferred interest
|
(34,164
|
)
|
|
(36,049
|
)
|
||
Security deposits
|
6,586
|
|
|
6,427
|
|
||
Investments
|
3,865
|
|
|
3,429
|
|
||
Other
|
467
|
|
|
360
|
|
||
Total long-term notes receivables and other assets, net
|
$
|
119,819
|
|
|
$
|
88,723
|
|
Accrued payroll and commissions
|
|
||||||
Accrued payroll
|
$
|
36,753
|
|
|
$
|
30,267
|
|
Accrued commissions
|
28,726
|
|
|
27,485
|
|
||
Total accrued payroll and commissions
|
$
|
65,479
|
|
|
$
|
57,752
|
|
Accrued expenses and other current liabilities
|
|
||||||
Accrued interest payable
|
$
|
28,885
|
|
|
$
|
28,737
|
|
Current portion of derivative liability
|
67,710
|
|
|
25,473
|
|
||
Service warranty accrual
|
8,813
|
|
|
—
|
|
||
Current portion of notes payable
|
8,100
|
|
|
—
|
|
||
Blackstone monitoring fee, a related party
|
4,793
|
|
|
933
|
|
||
Accrued taxes
|
5,351
|
|
|
4,585
|
|
||
Spectrum license obligation
|
—
|
|
|
3,861
|
|
||
Accrued payroll taxes and withholdings
|
5,097
|
|
|
3,185
|
|
||
Loss contingencies
|
3,131
|
|
|
2,156
|
|
||
Other
|
4,835
|
|
|
5,391
|
|
||
Total accrued expenses and other current liabilities
|
$
|
136,715
|
|
|
$
|
74,321
|
|
|
December 31,
|
|
Estimated
Useful Lives
|
||||||
|
2018
|
|
2017
|
|
|||||
Vehicles
|
$
|
45,050
|
|
|
$
|
42,008
|
|
|
3-5 years
|
Computer equipment and software
|
53,891
|
|
|
46,651
|
|
|
3-5 years
|
||
Leasehold improvements
|
26,401
|
|
|
20,783
|
|
|
2-15 years
|
||
Office furniture, fixtures and equipment
|
19,532
|
|
|
17,202
|
|
|
7 years
|
||
Build-to-suit lease building
|
8,247
|
|
|
8,268
|
|
|
10.5 years
|
||
Construction in process
|
2,975
|
|
|
4,299
|
|
|
|
||
Property, plant and equipment, gross
|
156,096
|
|
|
139,211
|
|
|
|
||
Accumulated depreciation and amortization
|
(82,695
|
)
|
|
(61,130
|
)
|
|
|
||
Property, plant and equipment, net
|
$
|
73,401
|
|
|
$
|
78,081
|
|
|
|
|
|
||
Balance as of January 1, 2017
|
$
|
835,233
|
|
Effect of Foreign Currency Translation
|
1,737
|
|
|
Balance as of December 31, 2017
|
836,970
|
|
|
Effect of Foreign Currency Translation
|
(2,115
|
)
|
|
Balance as of December 31, 2018
|
$
|
834,855
|
|
|
December 31, 2018
|
|
December 31, 2017
|
|
|
||||||||||||||||||||
|
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
|
$
|
964,100
|
|
|
$
|
(717,648
|
)
|
|
$
|
246,452
|
|
|
$
|
970,147
|
|
|
$
|
(637,780
|
)
|
|
$
|
332,367
|
|
|
10 years
|
2GIG 2.0 technology
|
17,000
|
|
|
(15,292
|
)
|
|
1,708
|
|
|
17,000
|
|
|
(13,274
|
)
|
|
3,726
|
|
|
8 years
|
||||||
Other technology
|
2,917
|
|
|
(1,667
|
)
|
|
1,250
|
|
|
2,917
|
|
|
(1,250
|
)
|
|
1,667
|
|
|
5 - 7 years
|
||||||
Space Monkey technology
|
7,100
|
|
|
(5,756
|
)
|
|
1,344
|
|
|
7,100
|
|
|
(4,066
|
)
|
|
3,034
|
|
|
6 years
|
||||||
Patents
|
12,123
|
|
|
(8,415
|
)
|
|
3,708
|
|
|
10,616
|
|
|
(5,835
|
)
|
|
4,781
|
|
|
5 years
|
||||||
Total definite-lived intangible assets:
|
1,003,240
|
|
|
(748,778
|
)
|
|
254,462
|
|
|
1,007,780
|
|
|
(662,205
|
)
|
|
345,575
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Spectrum licenses
|
—
|
|
|
—
|
|
|
—
|
|
|
31,253
|
|
|
—
|
|
|
31,253
|
|
|
|
||||||
IP addresses
|
564
|
|
|
—
|
|
|
564
|
|
|
564
|
|
|
—
|
|
|
564
|
|
|
|
||||||
Domain names
|
59
|
|
|
—
|
|
|
59
|
|
|
59
|
|
|
—
|
|
|
59
|
|
|
|
||||||
Total Indefinite-lived intangible assets
|
623
|
|
|
—
|
|
|
623
|
|
|
31,876
|
|
|
—
|
|
|
31,876
|
|
|
|
||||||
Total intangible assets, net
|
$
|
1,003,863
|
|
|
$
|
(748,778
|
)
|
|
$
|
255,085
|
|
|
$
|
1,039,656
|
|
|
$
|
(662,205
|
)
|
|
$
|
377,451
|
|
|
|
|
|
||
2019
|
$
|
79,062
|
|
2020
|
67,807
|
|
|
2021
|
58,578
|
|
|
2022
|
48,674
|
|
|
2023
|
47
|
|
|
Thereafter
|
11
|
|
|
Total estimated amortization expense
|
$
|
254,179
|
|
|
December 31, 2018
|
||||||||||||||||||||||
|
Adjusted Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
|
Cash and Cash Equivalents
|
|
Long-Term Notes Receivables and Other Assets, net
|
||||||||||||
Cash
|
$
|
6,681
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,681
|
|
|
$
|
6,681
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
6,092
|
|
|
—
|
|
|
—
|
|
|
6,092
|
|
|
6,092
|
|
|
—
|
|
||||||
Corporate securities
|
3,485
|
|
|
—
|
|
|
(304
|
)
|
|
3,181
|
|
|
—
|
|
|
3,181
|
|
||||||
Subtotal
|
9,577
|
|
|
—
|
|
|
(304
|
)
|
|
9,273
|
|
|
6,092
|
|
|
3,181
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
$
|
16,258
|
|
|
$
|
—
|
|
|
$
|
(304
|
)
|
|
$
|
15,954
|
|
|
$
|
12,773
|
|
|
$
|
3,181
|
|
|
December 31, 2017
|
||||||||||||||||||||||
|
Adjusted Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
|
Cash and Cash Equivalents
|
|
Long-Term Notes Receivables 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
|
|
Issuance
|
|
December 31, 2018
|
|
December 31, 2017
|
|
Stated Interest
Rate
|
|||||||||||||
|
Face Value
|
|
Estimated Fair Value
|
|
Face Value
|
|
Estimated Fair Value
|
|
|||||||||||
2019 Notes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
269,465
|
|
|
$
|
273,507
|
|
|
6.375
|
%
|
2020 Notes
|
|
679,299
|
|
|
643,568
|
|
|
930,000
|
|
|
952,134
|
|
|
8.75
|
%
|
||||
2022 Notes Private Placement Notes
|
|
270,000
|
|
|
257,073
|
|
|
270,000
|
|
|
276,486
|
|
|
8.875
|
%
|
||||
2022 Notes
|
|
900,000
|
|
|
855,000
|
|
|
900,000
|
|
|
966,420
|
|
|
7.875
|
%
|
||||
2023 Notes
|
|
400,000
|
|
|
326,000
|
|
|
400,000
|
|
|
425,000
|
|
|
7.625
|
%
|
||||
Term Loan
|
|
807,975
|
|
|
807,975
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
||||
Total
|
|
$
|
3,057,274
|
|
|
$
|
2,889,616
|
|
|
$
|
2,769,465
|
|
|
$
|
2,893,547
|
|
|
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Consumer Financing Program Contractual Obligations:
|
|
|
|
||||
Fair value
|
$
|
117,620
|
|
|
$
|
46,496
|
|
Notional amount
|
368,708
|
|
|
163,032
|
|
||
Classified on the consolidated balance sheets as:
|
|
|
|
||||
Accrued expenses and other current liabilities
|
67,710
|
|
|
25,473
|
|
||
Other long-term obligations
|
49,910
|
|
|
21,023
|
|
||
Total Consumer Financing Program Contractual Obligation
|
$
|
117,620
|
|
|
$
|
46,496
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Balance, beginning of period
|
$
|
46,496
|
|
|
$
|
—
|
|
Additions
|
93,095
|
|
|
44,913
|
|
||
Settlements
|
(34,587
|
)
|
|
(7,972
|
)
|
||
Losses included in earnings
|
12,616
|
|
|
9,555
|
|
||
Balance, end of period
|
$
|
117,620
|
|
|
$
|
46,496
|
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Wireless restructuring recoveries:
|
|
|
|
|
|
||||||
Asset recoveries
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(710
|
)
|
Contract termination recoveries
|
—
|
|
|
—
|
|
|
(751
|
)
|
|||
Employee severance and termination benefits recoveries
|
—
|
|
|
—
|
|
|
(77
|
)
|
|||
Total wireless restructuring recoveries
|
—
|
|
|
—
|
|
|
(1,538
|
)
|
|||
Loss on subscriber contract sales
|
—
|
|
|
—
|
|
|
2,551
|
|
|||
Employee severance and termination benefits charges
|
4,683
|
|
|
—
|
|
|
—
|
|
|||
Total restructuring and asset impairment charges
|
$
|
4,683
|
|
|
$
|
—
|
|
|
$
|
1,013
|
|
|
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
|
|
||||
Restructuring expenses
|
—
|
|
|
—
|
|
|
4,683
|
|
|
4,683
|
|
||||
Cash payments
|
—
|
|
|
(91
|
)
|
|
(4,341
|
)
|
|
(4,432
|
)
|
||||
Accrued restructuring balance as of December 31, 2018
|
$
|
—
|
|
|
$
|
467
|
|
|
$
|
342
|
|
|
$
|
809
|
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Current income tax:
|
|
|
|
||||||||
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
512
|
|
|
151
|
|
|
545
|
|
|||
Foreign
|
(52
|
)
|
|
(24
|
)
|
|
95
|
|
|||
Total
|
460
|
|
|
127
|
|
|
640
|
|
|||
Deferred income tax:
|
|
|
|
||||||||
Federal
|
—
|
|
|
(326
|
)
|
|
—
|
|
|||
State
|
—
|
|
|
(53
|
)
|
|
—
|
|
|||
Foreign
|
(2,071
|
)
|
|
1,330
|
|
|
(573
|
)
|
|||
Total
|
(2,071
|
)
|
|
951
|
|
|
(573
|
)
|
|||
Income tax (benefit) expense
|
$
|
(1,611
|
)
|
|
$
|
1,078
|
|
|
$
|
67
|
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Computed expected tax expense
|
$
|
(98,598
|
)
|
|
$
|
(139,100
|
)
|
|
$
|
(93,770
|
)
|
State income taxes, net of federal tax effect
|
404
|
|
|
65
|
|
|
360
|
|
|||
Foreign income taxes
|
(690
|
)
|
|
(299
|
)
|
|
(949
|
)
|
|||
Other reconciling items
|
—
|
|
|
(344
|
)
|
|
666
|
|
|||
Permanent differences
|
4,406
|
|
|
2,008
|
|
|
1,688
|
|
|||
Effect of Federal law change
|
—
|
|
|
166,876
|
|
|
—
|
|
|||
Change in valuation allowance
|
92,867
|
|
|
(28,128
|
)
|
|
92,072
|
|
|||
Income tax (benefit) expense
|
$
|
(1,611
|
)
|
|
$
|
1,078
|
|
|
$
|
67
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Gross deferred tax assets:
|
|
||||||
Net operating loss carryforwards
|
$
|
591,244
|
|
|
$
|
591,619
|
|
Deferred subscriber income
|
113,103
|
|
|
72,389
|
|
||
Interest expense limitation
|
56,381
|
|
|
—
|
|
||
Accrued expenses and allowances
|
18,766
|
|
|
17,633
|
|
||
Purchased intangibles and deferred financing costs
|
17,788
|
|
|
15,191
|
|
||
Inventory reserves
|
4,688
|
|
|
6,662
|
|
||
Property and equipment
|
—
|
|
|
1,176
|
|
||
Research and development credits
|
41
|
|
|
41
|
|
||
Valuation allowance
|
(467,705
|
)
|
|
(304,509
|
)
|
||
Total
|
334,306
|
|
|
400,202
|
|
||
Gross deferred tax liabilities:
|
|
||||||
Deferred capitalized contract costs
|
(332,547
|
)
|
|
(408,610
|
)
|
||
Property and equipment
|
(2,242
|
)
|
|
—
|
|
||
Prepaid expenses
|
(613
|
)
|
|
(633
|
)
|
||
Total
|
(335,402
|
)
|
|
(409,243
|
)
|
||
Net deferred tax liabilities
|
$
|
(1,096
|
)
|
|
$
|
(9,041
|
)
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Net operating loss carryforwards:
|
|
|
|
||||
Federal
|
$
|
2,405,380
|
|
|
$
|
2,355,153
|
|
States
|
1,656,333
|
|
|
1,715,004
|
|
||
Canada
|
19,753
|
|
|
27,326
|
|
||
Total
|
$
|
4,081,466
|
|
|
$
|
4,097,483
|
|
|
Incentive Units
|
|
Weighted Average
Exercise Price
Per Share
|
|
Weighted Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic Value
|
|||||
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
|
|
|
5.81
|
|
—
|
|
||
Forfeited
|
(450,000
|
)
|
|
1.93
|
|
|
|
|
|
|||
Outstanding, December 31, 2018
|
85,362,836
|
|
|
1.18
|
|
|
4.81
|
|
—
|
|
||
Unvested shares expected to vest after December 31, 2018
|
59,663,659
|
|
|
1.22
|
|
|
4.93
|
|
—
|
|
||
Exercisable at December 31, 2018
|
25,699,177
|
|
|
$
|
1.11
|
|
|
4.50
|
|
$
|
—
|
|
|
Stock Appreciation
Rights
|
|
Weighted Average
Exercise Price
Per Share
|
|
Weighted Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic Value
|
|||||
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
|
|
—
|
|
||
Granted
|
14,630,000
|
|
|
1.79
|
|
|
|
|
|
|||
Forfeited
|
(9,255,137
|
)
|
|
1.31
|
|
|
|
|
|
|||
Exercised
|
(117,274
|
)
|
|
0.89
|
|
|
|
|
|
|||
Outstanding, December 31, 2018
|
38,011,879
|
|
|
1.46
|
|
|
8.07
|
|
—
|
|
||
Unvested shares expected to vest after December 31, 2018
|
33,813,668
|
|
|
1.51
|
|
|
8.28
|
|
—
|
|
||
Exercisable at December 31, 2018
|
4,198,211
|
|
|
$
|
1.02
|
|
|
6.30
|
|
$
|
—
|
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Operating expenses
|
$
|
129
|
|
|
$
|
65
|
|
|
$
|
68
|
|
Selling expenses
|
285
|
|
|
217
|
|
|
(127
|
)
|
|||
General and administrative expenses
|
2,091
|
|
|
1,313
|
|
|
3,927
|
|
|||
Total stock-based compensation
|
$
|
2,505
|
|
|
$
|
1,595
|
|
|
$
|
3,868
|
|
|
Operating
|
|
Capital
|
|
Total
|
||||||
2019
|
$
|
16,709
|
|
|
$
|
8,193
|
|
|
$
|
24,902
|
|
2020
|
15,478
|
|
|
5,209
|
|
|
20,687
|
|
|||
2021
|
14,926
|
|
|
363
|
|
|
15,289
|
|
|||
2022
|
13,655
|
|
|
7
|
|
|
13,662
|
|
|||
2023
|
13,701
|
|
|
—
|
|
|
13,701
|
|
|||
Thereafter
|
28,824
|
|
|
—
|
|
|
28,824
|
|
|||
Amounts representing interest
|
—
|
|
|
(459
|
)
|
|
(459
|
)
|
|||
Total lease payments
|
$
|
103,293
|
|
|
$
|
13,313
|
|
|
$
|
116,606
|
|
•
|
A Master Intercompany Framework Agreement which established 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 defined their current areas of business and their competitors, and agreed not to directly or indirectly engage in the other’s business for
three
years;
|
•
|
A Transition Services Agreement pursuant to which the Company agreed to 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 would, 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
|
||||||
Revenue from external customers
|
|
|
|
|
|
||||||
Year ended December 31, 2018
|
$
|
977,877
|
|
|
$
|
72,564
|
|
|
$
|
1,050,441
|
|
Year ended December 31, 2017
|
$
|
816,026
|
|
|
$
|
65,957
|
|
|
$
|
881,983
|
|
Year ended December 31, 2016
|
$
|
700,471
|
|
|
$
|
57,436
|
|
|
$
|
757,907
|
|
|
Parent
|
|
APX
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current assets
|
$
|
—
|
|
|
$
|
12,951
|
|
|
$
|
269,770
|
|
|
$
|
103,451
|
|
|
$
|
(262,674
|
)
|
|
$
|
123,498
|
|
Property and equipment, net
|
—
|
|
|
—
|
|
|
72,937
|
|
|
464
|
|
|
—
|
|
|
73,401
|
|
||||||
Capitalized contract costs, net
|
—
|
|
|
—
|
|
|
1,047,532
|
|
|
68,243
|
|
|
—
|
|
|
1,115,775
|
|
||||||
Deferred financing costs, net
|
—
|
|
|
2,058
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,058
|
|
||||||
Investment in subsidiaries
|
—
|
|
|
1,662,367
|
|
|
—
|
|
|
—
|
|
|
(1,662,367
|
)
|
|
—
|
|
||||||
Intercompany receivable
|
—
|
|
|
—
|
|
|
6,303
|
|
|
—
|
|
|
(6,303
|
)
|
|
—
|
|
||||||
Intangible assets, net
|
—
|
|
|
—
|
|
|
236,677
|
|
|
18,408
|
|
|
—
|
|
|
255,085
|
|
||||||
Goodwill
|
—
|
|
|
—
|
|
|
809,678
|
|
|
25,177
|
|
|
—
|
|
|
834,855
|
|
||||||
Long-term notes receivables and other assets, net
|
—
|
|
|
106
|
|
|
102,695
|
|
|
17,124
|
|
|
(106
|
)
|
|
119,819
|
|
||||||
Total Assets
|
$
|
—
|
|
|
$
|
1,677,482
|
|
|
$
|
2,545,592
|
|
|
$
|
232,867
|
|
|
$
|
(1,931,450
|
)
|
|
$
|
2,524,491
|
|
Liabilities and Stockholders’ (Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current liabilities
|
$
|
—
|
|
|
$
|
36,988
|
|
|
$
|
507,063
|
|
|
$
|
182,159
|
|
|
$
|
(262,674
|
)
|
|
$
|
463,536
|
|
Intercompany payable
|
—
|
|
|
—
|
|
|
—
|
|
|
6,303
|
|
|
(6,303
|
)
|
|
—
|
|
||||||
Notes payable and revolving line of credit, net of current portion
|
—
|
|
|
3,037,095
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,037,095
|
|
||||||
Capital lease obligations, net of current portion
|
—
|
|
|
—
|
|
|
5,570
|
|
|
1
|
|
|
—
|
|
|
5,571
|
|
||||||
Deferred revenue, net of current portion
|
—
|
|
|
—
|
|
|
306,653
|
|
|
16,932
|
|
|
—
|
|
|
323,585
|
|
||||||
Accumulated losses of investee
|
1,396,601
|
|
|
|
|
|
|
|
|
|
|
|
(1,396,601
|
)
|
|
—
|
|
||||||
Other long-term obligations
|
—
|
|
|
—
|
|
|
90,209
|
|
|
—
|
|
|
—
|
|
|
90,209
|
|
||||||
Deferred income tax liability
|
—
|
|
|
—
|
|
|
106
|
|
|
1,096
|
|
|
(106
|
)
|
|
1,096
|
|
||||||
Total (deficit) equity
|
(1,396,601
|
)
|
|
(1,396,601
|
)
|
|
1,635,991
|
|
|
26,376
|
|
|
(265,766
|
)
|
|
(1,396,601
|
)
|
||||||
Total liabilities and stockholders’ (deficit) equity
|
$
|
—
|
|
|
$
|
1,677,482
|
|
|
$
|
2,545,592
|
|
|
$
|
232,867
|
|
|
$
|
(1,931,450
|
)
|
|
$
|
2,524,491
|
|
|
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 notes receivables and other assets, net
|
—
|
|
|
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
|
||||||||||||
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
998,190
|
|
|
$
|
54,818
|
|
|
$
|
(2,567
|
)
|
|
$
|
1,050,441
|
|
Costs and expenses
|
—
|
|
|
—
|
|
|
1,240,570
|
|
|
54,497
|
|
|
(2,567
|
)
|
|
1,292,500
|
|
||||||
(Loss) income from operations
|
—
|
|
|
—
|
|
|
(242,380
|
)
|
|
321
|
|
|
—
|
|
|
(242,059
|
)
|
||||||
Loss from subsidiaries
|
(467,914
|
)
|
|
(211,665
|
)
|
|
—
|
|
|
—
|
|
|
679,579
|
|
|
—
|
|
||||||
Other expense (income), net
|
—
|
|
|
256,249
|
|
|
(35,936
|
)
|
|
7,153
|
|
|
—
|
|
|
227,466
|
|
||||||
Loss before income taxes
|
(467,914
|
)
|
|
(467,914
|
)
|
|
(206,444
|
)
|
|
(6,832
|
)
|
|
679,579
|
|
|
(469,525
|
)
|
||||||
Income tax expense (benefit)
|
—
|
|
|
—
|
|
|
512
|
|
|
(2,123
|
)
|
|
—
|
|
|
(1,611
|
)
|
||||||
Net loss
|
$
|
(467,914
|
)
|
|
$
|
(467,914
|
)
|
|
$
|
(206,956
|
)
|
|
$
|
(4,709
|
)
|
|
$
|
679,579
|
|
|
$
|
(467,914
|
)
|
Other comprehensive loss, net of tax effects:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency translation adjustment
|
(2,218
|
)
|
|
(2,218
|
)
|
|
—
|
|
|
(2,218
|
)
|
|
4,436
|
|
|
(2,218
|
)
|
||||||
Total other comprehensive loss, net of tax effects
|
(2,218
|
)
|
|
(2,218
|
)
|
|
—
|
|
|
(2,218
|
)
|
|
4,436
|
|
|
(2,218
|
)
|
||||||
Comprehensive loss
|
$
|
(470,132
|
)
|
|
$
|
(470,132
|
)
|
|
$
|
(206,956
|
)
|
|
$
|
(6,927
|
)
|
|
$
|
684,015
|
|
|
$
|
(470,132
|
)
|
|
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 taxes
|
(410,199
|
)
|
|
(410,199
|
)
|
|
(169,134
|
)
|
|
4,715
|
|
|
575,696
|
|
|
(409,121
|
)
|
||||||
Income tax expense (benefit)
|
—
|
|
|
—
|
|
|
(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 gain 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 before income taxes
|
(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, 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, net of tax effects
|
3,493
|
|
|
3,493
|
|
|
1,011
|
|
|
2,482
|
|
|
(6,986
|
)
|
|
3,493
|
|
||||||
Comprehensive loss
|
$
|
(272,464
|
)
|
|
$
|
(272,464
|
)
|
|
$
|
(70,393
|
)
|
|
$
|
4,249
|
|
|
$
|
338,608
|
|
|
$
|
(272,464
|
)
|
|
Parent
|
|
APX
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net cash (used in) provided by operating activities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(220,952
|
)
|
|
$
|
453
|
|
|
$
|
—
|
|
|
$
|
(220,499
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Capital expenditures
|
—
|
|
|
—
|
|
|
(19,409
|
)
|
|
(3
|
)
|
|
—
|
|
|
(19,412
|
)
|
||||||
Proceeds from sale of intangibles
|
—
|
|
|
—
|
|
|
53,693
|
|
|
—
|
|
|
—
|
|
|
53,693
|
|
||||||
Proceeds from sale of capital assets
|
—
|
|
|
—
|
|
|
127
|
|
|
—
|
|
|
—
|
|
|
127
|
|
||||||
Investment in subsidiary
|
(1,571
|
)
|
|
(201,292
|
)
|
|
—
|
|
|
—
|
|
|
202,863
|
|
|
—
|
|
||||||
Acquisition of intangible assets
|
—
|
|
|
—
|
|
|
(1,486
|
)
|
|
—
|
|
|
—
|
|
|
(1,486
|
)
|
||||||
Net cash (used in) provided by investing activities
|
(1,571
|
)
|
|
(201,292
|
)
|
|
32,925
|
|
|
(3
|
)
|
|
202,863
|
|
|
32,922
|
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Proceeds from notes payable
|
—
|
|
|
810,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
810,000
|
|
||||||
Repayment on notes payable
|
—
|
|
|
(522,191
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(522,191
|
)
|
||||||
Borrowings from revolving line of credit
|
—
|
|
|
201,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
201,000
|
|
||||||
Repayment of revolving line of credit
|
—
|
|
|
(261,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(261,000
|
)
|
||||||
Proceeds from capital contribution
|
4,700
|
|
|
4,700
|
|
|
204,421
|
|
|
—
|
|
|
(209,121
|
)
|
|
4,700
|
|
||||||
Repayments of capital lease obligations
|
—
|
|
|
—
|
|
|
(12,011
|
)
|
|
(343
|
)
|
|
—
|
|
|
(12,354
|
)
|
||||||
Financing costs
|
—
|
|
|
(11,317
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,317
|
)
|
||||||
Deferred financing costs
|
—
|
|
|
(9,302
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,302
|
)
|
||||||
Return of capital
|
(3,129
|
)
|
|
(3,129
|
)
|
|
(3,129
|
)
|
|
—
|
|
|
6,258
|
|
|
(3,129
|
)
|
||||||
Net cash provided by (used in) financing activities
|
1,571
|
|
|
208,761
|
|
|
189,281
|
|
|
(343
|
)
|
|
(202,863
|
)
|
|
196,407
|
|
||||||
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
71
|
|
||||||
Net increase in cash
|
—
|
|
|
7,469
|
|
|
1,254
|
|
|
178
|
|
|
—
|
|
|
8,901
|
|
||||||
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning of period
|
—
|
|
|
3,661
|
|
|
(572
|
)
|
|
783
|
|
|
—
|
|
|
3,872
|
|
||||||
End of period
|
$
|
—
|
|
|
$
|
11,130
|
|
|
$
|
682
|
|
|
$
|
961
|
|
|
$
|
—
|
|
|
$
|
12,773
|
|
|
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 increase (decrease) 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) 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
|
|
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
|
•
|
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; and
|
•
|
a lump-sum cash payment equal to the monthly 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, times twenty four (the “COBRA payment”).
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Name
|
|
Age
|
|
Position
|
Executive officers:
|
|
|
|
|
Todd R. Pedersen
|
|
50
|
|
Chief Executive Officer and Director
|
Alex J. Dunn
|
|
47
|
|
President and Director
|
Mark J. Davies
|
|
58
|
|
Chief Financial Officer
|
Matthew J. Eyring
|
|
49
|
|
Executive Vice President, General Manager of Inside Sales
|
Scott R. Hardy
|
|
41
|
|
Chief Operating Officer
|
Patrick E. Kelliher
|
|
55
|
|
Chief Accounting Officer
|
Shawn J. Lindquist
|
|
49
|
|
Chief Legal Officer
|
Todd M. Santiago
|
|
46
|
|
Executive Vice President, General Manager of Retail
|
Jeremy B. Warren
|
|
44
|
|
Chief Technology Officer
|
Non-employee directors:
|
|
|
|
|
David F. D’Alessandro
|
|
68
|
|
Director
|
Paul S. Galant
|
|
51
|
|
Director
|
Bruce McEvoy
|
|
41
|
|
Director
|
Jay D. Pauley
|
|
41
|
|
Director
|
Joseph S. Tibbetts, Jr.
|
|
66
|
|
Director
|
Peter F. Wallace
|
|
43
|
|
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 Executive Vice President, General Manager of Inside Sales; and
|
•
|
Todd M. Santiago, our Executive Vice President, General Manager of Retail.
|
•
|
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, 2018 ($)
|
|
Base Salary Effective as of April 1, 2018 ($)
|
||
Todd R. Pedersen
|
|
679,800
|
|
|
700,194
|
|
Mark J. Davies
|
|
618,000
|
|
|
636,540
|
|
Alex J. Dunn
|
|
679,800
|
|
|
700,194
|
|
Matthew J. Eyring
|
|
618,000
|
|
|
636,540
|
|
Todd M. Santiago
|
|
618,000
|
|
|
636,540
|
|
% 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
Paid (2)
($)
|
|||||
Todd R. Pedersen
|
700,194
|
|
|
100
|
%
|
|
700,194
|
|
|
116
|
%
|
|
875,243
|
|
Alex J. Dunn
|
700,194
|
|
|
100
|
%
|
|
700,194
|
|
|
116
|
%
|
|
875,243
|
|
|
(1)
|
The annual base salaries of Messrs. Pedersen and Dunn were increased from
$679,800
to
$700,194
, effective as of
April 1, 2018
.
|
(2)
|
As discussed above, the bonus amounts paid to Messrs. Pedersen and Dunn represented
125%
of their annual base salaries.
|
Named Executive Officer
|
Salary
(1)
($)
|
|
Target
Bonus % |
|
Target Bonus
Amount
($)
|
|
Bonus
Amount Payable
($)
|
||||
Mark J. Davies
|
636,540
|
|
|
60
|
%
|
|
381,924
|
|
|
477,405
|
|
Matthew J. Eyring
|
636,540
|
|
|
60
|
%
|
|
381,924
|
|
|
477,405
|
|
Todd M. Santiago
|
636,540
|
|
|
60
|
%
|
|
381,924
|
|
|
477,405
|
|
|
(1)
|
The annual base salaries of Messrs. Davies, Eyring and Santiago were increased from
$618,000
to
$636,540
, effective as of
April 1, 2018
.
|
•
|
a 401(k) savings plan;
|
•
|
paid vacation, sick leave and holidays;
|
•
|
medical, dental, vision and life insurance coverage; and
|
•
|
employee assistance program benefits.
|
Name and Principal
Position
|
Year
|
|
Salary
($) (1)
|
|
Bonus
($) (2)
|
|
Stock
Awards
($) (3)
|
|
Non-Equity
Incentive Plan
Compensation
($) (4)
|
|
Declined
Non-Equity
Incentive Plan
Compensation
($)
|
|
All Other
Compensation
($) (5)
|
|
Total
($)
|
|||||||
Todd R. Pedersen,
|
2018
|
|
695,096
|
|
|
63,018
|
|
|
2,670,732
|
|
|
812,225
|
|
|
—
|
|
|
1,272,564
|
|
|
5,513,635
|
|
Chief Executive Officer and Director
|
2017
|
|
674,469
|
|
|
—
|
|
|
—
|
|
|
822,558
|
|
|
—
|
|
|
1,066,105
|
|
|
2,563,132
|
|
|
2016
|
|
582,115
|
|
|
—
|
|
|
—
|
|
|
660,000
|
|
|
—
|
|
|
869,823
|
|
|
2,111,938
|
|
Mark J. Davies,
|
2018
|
|
631,905
|
|
|
1,310,738
|
|
|
455,167
|
|
|
—
|
|
|
—
|
|
|
170,520
|
|
|
2,568,330
|
|
Chief Financial Officer
|
2017
|
|
613,154
|
|
|
370,800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
143,949
|
|
|
1,127,903
|
|
|
2016
|
|
550,962
|
|
|
360,000
|
|
|
6,667
|
|
|
—
|
|
|
—
|
|
|
89,992
|
|
|
1,007,621
|
|
Alex J. Dunn,
|
2018
|
|
695,096
|
|
|
63,018
|
|
|
2,670,732
|
|
|
812,225
|
|
|
—
|
|
|
939,177
|
|
|
5,180,248
|
|
President and Director
|
2017
|
|
674,469
|
|
|
—
|
|
|
—
|
|
|
822,558
|
|
|
—
|
|
|
937,079
|
|
|
2,434,106
|
|
|
2016
|
|
582,115
|
|
|
—
|
|
|
—
|
|
|
660,000
|
|
|
—
|
|
|
2,926,862
|
|
|
4,168,977
|
|
Matthew J. Eyring,
|
2018
|
|
631,905
|
|
|
1,310,738
|
|
|
596,000
|
|
|
—
|
|
|
—
|
|
|
116,376
|
|
|
2,655,019
|
|
Executive Vice President, General Manager of Inside Sales
|
2017
|
|
613,154
|
|
|
370,800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
114,616
|
|
|
1,098,570
|
|
|
2016
|
|
550,962
|
|
|
360,000
|
|
|
14,167
|
|
|
—
|
|
|
—
|
|
|
63,736
|
|
|
988,865
|
|
Todd M. Santiago,
|
2018
|
|
631,905
|
|
|
1,310,738
|
|
|
596,000
|
|
|
—
|
|
|
—
|
|
|
174,459
|
|
|
2,713,102
|
|
Executive Vice President, General Manager of Retail
|
2017
|
|
613,154
|
|
|
370,800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
148,460
|
|
|
1,132,414
|
|
|
2016
|
|
559,875
|
|
|
360,000
|
|
|
14,167
|
|
|
—
|
|
|
—
|
|
|
142,412
|
|
|
1,076,454
|
|
|
(1)
|
Effective
April 1, 2018
, the base salaries of Messrs. Pedersen, Davies, Dunn, Eyring and Santiago were increased as follows: for Messrs. Pedersen and Dunn, from
$679,800
to
$700,194
; for Messrs. Davies, Eyring and Santiago, from
$618,000
to
$636,540
.
|
(2)
|
The amounts reported in this column for Messrs. Pedersen and Dunn for fiscal 2018 reflect the discretionary portion of their respective annual cash incentive awards. The amounts reported in this column for Messrs. Davies, Eyring and Santiago represent their annual discretionary bonuses earned for each respective fiscal year. Additionally, amounts reported in this column for Messrs. Davies, Eyring and Santiago for fiscal
2018
each include
$833,333
of retention bonuses paid.
|
(3)
|
We did not grant any new stock awards to the named executive officers in fiscal 2018. The amounts reported in this column for fiscal 2018 reflect the incremental fair value, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718-Stock Compensation (“Topic 718”) and using the assumptions contained in Note 12 - Stock Based Compensation and Equity in the Consolidated Financial Statements included elsewhere in this report, in connection with the June 2018 modification of their previously granted long-term equity incentive awards of Class B Units. See “Compensation Discussion and Analysis-Long-Term Incentive Compensation-
|
(4)
|
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.”
|
(5)
|
Amounts reported under All Other Compensation for fiscal
2018
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,
$21,951
in country club membership fees,
$42,431
in actual Company expenditures for use, including business use, of a Company car, alarm system fees,
$237,112
in the value of event tickets, fuel expenses,
$125,000
in actual Company expenditures for financial advisory services provided to Mr. Pedersen, other miscellaneous personal benefits and
$358,020
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 reimbursement amount under the time-sharing agreement, the Company has determined it is appropriate to allocate a portion of the maintenance costs when calculating the aggregate incremental cost associated with personal use of the Company aircraft for purposes of SEC disclosure. Therefore, amounts reported also reflect
$159,786
in maintenance costs allocated on the basis of the proportion of personal use. In addition, family members of Mr. Pedersen have, in limited circumstances, accompanied him on business travel on the Company leased aircraft for which we incurred
de minimis
incremental costs;
|
(b)
|
as to Mr. Davies,
$42,365
in actual Company expenditures for use, including business use, of a Company car, reimbursement for health insurance premiums, country club membership fees,
$32,016
in the value of event tickets, excess liability insurance premiums, fuel expenses and
$74,685
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,
$35,639
in actual Company expenditures for use, including business use, of a Company car, alarm system fees,
$49,872
in the value of event tickets and Company paid personal travel,
$125,000
in actual Company expenditures for financial advisory services provided to Mr. Dunn, other miscellaneous personal benefits and
$216,136
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
$146,674
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
$34,690
of incremental costs;
|
(d)
|
as to Mr. Eyring,
$32,482
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
$50,009
reimbursed for taxes owed with respect to perquisites; and
|
(e)
|
as to Mr. Santiago,
$24,436
in actual Company expenditures for use, including business use, of a Company car, alarm system fees, reimbursement for health insurance premiums, country club membership fees,
$29,872
in the value of event tickets, Company paid personal travel, the value of meals in the Company cafeteria, excess liability insurance premiums, fuel expenses, and
$75,212
reimbursed for taxes owed with respect to perquisites. In addition, family members of Mr. Santiago have, in limited circumstances, accompanied him on business travel on the Company leased aircraft for which we incurred
de minimis
incremental costs.
|
|
Grant
Date
|
|
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards(1)
|
|
Estimated Future Payouts
Under Equity
Incentive Plan Awards (2)
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
|
|
Grant
Date
Fair
Value of
Stock
and
Option
|
|||||||||||||||||
Name
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
Units
(#) (2)
|
|
Awards
($) (3)
|
|||||||||||
Todd R. Pedersen
|
—
|
|
|
350,097
|
|
|
700,194
|
|
|
1,750,485
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,028,243
|
|
|
2,670,732
|
|
Mark J. Davies
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,575,000
|
|
|
455,167
|
|
Alex Dunn
|
—
|
|
|
350,097
|
|
|
700,194
|
|
|
1,750,485
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,028,243
|
|
|
2,670,732
|
|
Matthew J. Eyring
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,725,000
|
|
|
596,000
|
|
Todd M. Santiago
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,725,000
|
|
|
596,000
|
|
|
(1)
|
Reflects the possible payouts of cash incentive compensation to Messrs. Pedersen and Dunn under the fiscal
2018
management bonus. The actual amounts paid are reflected in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” and described in “Compensation Discussion and Analysis—Compensation Elements—Bonuses—Fiscal
2018
Management Bonus – Messrs. Pedersen and Dunn” above.
|
(2)
|
Represents Class B Units, the vesting terms of which were modified in 2018, and does not reflect new awards.
|
(3)
|
The amounts reported in this column reflect the incremental fair value, calculated in accordance with Topic 718, in connection with the modification of the Class B Units. See “Compensation Discussion and Analysis-Long-Term Incentive Compensation-Equity Awards” and “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards-Equity Awards-Vesting Terms.”
|
Prior to January 1, 2015 ($)
|
|
Effective as of January 1, 2015 ($)
|
|
Effective as of July 25, 2016 ($)
|
|
Effective as of April 1, 2017 ($)
|
|
Effective as of April 1, 2018 ($)
|
|||||
500,000
|
|
|
525,000
|
|
|
660,000
|
|
|
679,800
|
|
|
700,194
|
|
•
|
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 (the “IRR Hurdle”). 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-
|
•
|
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 exit-vesting conditions are met. As to Messrs. Davies, Eyring and Santiago, the 3.0x 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.
|
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
|
|
7,028,243
|
|
|
(2)
|
|
7,028,243
|
|
|
(2)
|
Mark J. Davies
|
9/20/2016
|
|
213,333
|
|
|
(2)
|
|
133,333
|
|
|
(2)
|
|
3/3/2014
|
|
1,441,667
|
|
|
(2)
|
|
1,441,667
|
|
|
(2)
|
Alex J. Dunn
|
11/16/2012
|
|
7,028,243
|
|
|
(2)
|
|
7,028,243
|
|
|
(2)
|
Matthew J. Eyring
|
9/20/2016
|
|
453,333
|
|
|
(2)
|
|
283,333
|
|
|
(2)
|
|
7/12/2013
|
|
1,441,667
|
|
|
(2)
|
|
1,441,667
|
|
|
(2)
|
Todd M. Santiago
|
9/20/2016
|
|
453,333
|
|
|
(2)
|
|
283,333
|
|
|
(2)
|
|
7/12/2013
|
|
1,441,667
|
|
|
(2)
|
|
1,441,667
|
|
|
(2)
|
|
(1)
|
Consists of time-vesting Class B Units of Parent. The following provides information with respect to the vesting schedules of the time-vesting Class B Units of Parent held by our NEOs:
|
•
|
Mr. Pedersen
- of these outstanding time-vesting Class B Units of Parent, all vest 20% over a five-year period on each anniversary of June 12, 2018.
|
•
|
Mr. Davies
- of these outstanding time-vesting Class B Units of Parent, 80,000 of the Class B Units granted on September 20, 2016 vest 20% over a five-year period on each anniversary of September 20, 2016, 133,333 of the Class B Units granted on September 20, 2016 vest 20% over a five-year period on each anniversary of June 12, 2018, and all of the Class B Units granted on March 3, 2014 vest 20% over a five-year period on each anniversary of June 12, 2018.
|
•
|
Mr. Dunn
- of these outstanding time-vesting Class B Units of Parent, all vest 20% over a five-year period on each anniversary of June 12, 2018.
|
•
|
Mr. Eyring
- of these outstanding time-vesting Class B Units of Parent, 170,000 of the Class B Units granted on September 20, 2016 vest 20% over a five-year period on each anniversary of September 20, 2016, 283,333 of the Class B Units granted on September 20, 2016 vest 20% over a five-year period on each anniversary of June 12, 2018, and all of the Class B Units granted on July 12, 2013 vest 20% over a five-year period on each anniversary of June 12, 2018.
|
•
|
Mr. Santiago
- of these outstanding time-vesting Class B Units of Parent, 170,000 of the Class B Units granted on September 20, 2016 vest 20% over a five-year period on each anniversary of September 20, 2016, 283,333 of the Class B Units granted on September 20, 2016 vest 20% over a five-year period on each anniversary of June 12, 2018, and all of the Class B Units granted on July 12, 2013 vest 20% over a five-year period on each anniversary of June 12, 2018.
|
(2)
|
Because there was no public market for the Class B Units of Parent as of
December 31, 2018
, the market value of such units was not determinable as of such date.
|
(3)
|
Reflects exit-vesting Class B Units. 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 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 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 the applicable vesting date, 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
|
3,045,504
|
|
|
700,194
|
|
|
27,785
|
|
|
—
|
|
|
—
|
|
|
3,773,483
|
|
Change of Control
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Death or Disability
|
—
|
|
|
700,194
|
|
|
27,785
|
|
|
—
|
|
|
—
|
|
|
727,979
|
|
Mark J. Davies
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Termination Without Cause or for Good Reason
|
1,511,010
|
|
|
381,924
|
|
|
20,839
|
|
|
—
|
|
|
—
|
|
|
1,913,773
|
|
Change of Control
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Death or Disability
|
—
|
|
|
381,924
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
381,924
|
|
Alex J. Dunn
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Termination Without Cause or for Good Reason
|
3,045,504
|
|
|
700,194
|
|
|
27,785
|
|
|
—
|
|
|
—
|
|
|
3,773,483
|
|
Change of Control
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Death or Disability
|
—
|
|
|
700,194
|
|
|
27,785
|
|
|
—
|
|
|
—
|
|
|
727,979
|
|
Matthew J. Eyring
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Termination Without Cause or for Good Reason
|
1,511,010
|
|
|
381,924
|
|
|
20,839
|
|
|
—
|
|
|
—
|
|
|
1,913,773
|
|
Change of Control
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Death or Disability
|
—
|
|
|
381,924
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
381,924
|
|
Todd M. Santiago
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Termination Without Cause or for Good Reason
|
1,511,010
|
|
|
381,924
|
|
|
20,839
|
|
|
—
|
|
|
—
|
|
|
1,913,773
|
|
Change of Control
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Death or Disability
|
—
|
|
|
381,924
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
381,924
|
|
|
(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 $360,000.
|
(2)
|
Reflects the executive’s target bonus for the 12 completed months of employment for the
2018
fiscal year.
|
(3)
|
For Messrs. Pedersen and Dunn reflects the cost of providing the executive officer with continued health and welfare benefits for the executive and his dependents under COBRA for two years and assuming
2018
rates. For Messrs. Davies, Eyring and Santiago reflects the cost of providing the executive officer with continued health and welfare benefits for the executive and his dependents under COBRA for 18 months and assuming
2018
rates.
|
(4)
|
Upon a change of control each of Messrs. Pedersen’s, Davies’, Dunn’s, Eyring’s and Santiago’s unvested time-vesting Class B Units would become immediately vested. However, because there was no public market for the Class B Units as of December 31,
2018
, the market value of such Class B Units was not determinable. In addition, the unvested 2.0x and 3.0x exit-vesting Class B Units would vest upon a change of control if the applicable exit-vesting hurdles were met. Amounts reported assume that the exit-vesting Class B Units do not vest upon a change of control.
|
Name
|
Fees Earned
or Paid in
Cash
($)
|
|
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
|
|
|
63,333
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
213,333
|
|
Paul S. Galant
|
150,000
|
|
|
86,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
236,400
|
|
Bruce McEvoy (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Jay D. Pauley (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Joseph S. Tibbetts, Jr.
|
150,000
|
|
|
86,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
236,400
|
|
Peter F. Wallace (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
The amounts reported in this column for Messrs. Galant and Tibbetts reflect the grant date fair value of the restricted stock unit awards of Vivint Group, Inc., calculated in accordance with Topic 718 utilizing the assumptions discussed in Note 12 - “Stock-Based Compensation and Equity” in the audited financial statements included elsewhere in this Annual Report on Form 10-K. The amounts reported in this column for Mr. D’Alessandro reflect the incremental fair value, calculated in accordance with Topic 718, in connection with the modification of the Class B Units. See “Compensation Discussion and Analysis-Long-Term Incentive Compensation-Equity Awards” and “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards-Equity Awards-Vesting Terms.” As of
December 31, 2018
, Mr. D’Alessandro held Class B Units as follows:
166,667
unvested units subject to time-vesting criteria that vest on each of the first five anniversaries of June 12, 2018,
166,667
unvested units subject to exit-vesting criteria and
166,667
vested units. 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 and 180,000 restricted stock units of Vivint Group, Inc. which become vested on each of the first three anniversaries of June 8, 2018.
|
(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
|
|
*
|
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. The members of the board of managers of
|
(2)
|
Represents (i)
436,112,144
Class A Units directly held by BCP VI, (ii)
2,644,957
Class A Units directly held by Blackstone Family Investment Partnership VI—ESC L.P. (“BFIP VI—ESC”), (iii)
220,012
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
36,490,139
Class A Units, (ii) Summit Partners Growth Equity Fund VIII-B, L.P. (“SPGE VIII-B”) owns
13,330,631
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
69,909,562
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 information, and master procedural terms, such as notice procedures, restrictions on assignment, interpretive provisions, governing law and dispute resolution. We and Solar each make customary representations and warranties that will apply across all of the agreements between us, and we each agree not to damage the value of the goodwill associated with the “VIVINT” or “VIVINT SOLAR” marks. We agree to provide Solar notice if we plans to stop using or to abandon rights in the “VIVINT” mark in any country or jurisdiction, and Solar is permitted to take steps to prevent abandonment of the “VIVINT” mark. We each also agree not to make public statements about each other without the consent of the other or disparage one another.
|
•
|
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 subscriber 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 Subscriber 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
|
•
|
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 Solar to sublicense the Vivint Solar trademark to its subsidiaries and to certain third parties, such as suppliers and distributors, to the extent necessary for Solar to operate its business. The agreement governs how Solar may use and display the Vivint Solar trademark and provides that Solar may create new marks that incorporate “VIVINT SOLAR” with licensor’s reasonable approval. The agreement also provides that the licensor will apply to register Vivint Solar trademarks as reasonably requested by Solar, and that Solar will work together with the licensor in enforcing and protecting the Vivint Solar trademarks. The agreement is perpetual but may be terminated voluntarily by Solar or by the licensor if (1) a court finds that Solar have materially breached the agreement and not cured such breach within 30 days after notice, (2) Solar becomes insolvent, makes an assignment for the benefit of creditors, or becomes subject to bankruptcy proceedings, (3) one of the parties (or us, with respect to the licensor) is acquired by a competitor of the other party, or (4) Solar ceases using the “VIVINT SOLAR” mark worldwide. We retain ownership of the Vivint trademark and Solar has no right to use “Vivint” except as part of “VIVINT SOLAR”.
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
|
Year ended December 31,
|
||||||
Fee Category
|
2018
|
|
2017
|
||||
Audit Fees (a)
|
$
|
1,398,921
|
|
|
$
|
1,793,930
|
|
Audit-Related Fees
|
—
|
|
|
—
|
|
||
Total Audit and Audit-Related Fees
|
1,398,921
|
|
|
1,793,930
|
|
||
Tax Fees (b)
|
63,000
|
|
|
—
|
|
||
All Other Fees
|
—
|
|
|
—
|
|
||
Total
|
$
|
1,461,921
|
|
|
$
|
1,793,930
|
|
|
(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:
|
|
|
|
4.7
|
|
|
|
|
|
4.8
|
|
|
|
|
|
4.9
|
|
|
|
|
|
4.10
|
|
|
|
|
|
4.11
|
|
|
|
|
|
4.12
|
|
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
10.5
|
|
|
|
|
|
10.6
|
|
|
|
|
|
10.7
|
|
|
|
|
|
10.8
|
|
|
|
|
|
10.9
|
|
|
|
|
|
10.10
|
|
|
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10.11†
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10.12†
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10.13†
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10.14†
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10.15†
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10.16†
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10.17†
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10.18†*
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10.19†*
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10.20†*
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10.21†
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10.22†
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10.23†
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10.24†
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10.25†
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10.26†
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10.27†
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10.28†
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10.29
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10.30
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10.31†*
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21.1*
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24.1*
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31.1*
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31.2*
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32.1*
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32.2*
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99.2
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101.1*
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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)
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*
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Filed herewith.
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†
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Identifies exhibits that consist of a management contract or compensatory plan or arrangement.
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(A)
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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.
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ITEM 16.
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FORM 10-K SUMMARY
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APX GROUP HOLDINGS, INC.
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By:
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/s/ MARK J. DAVIES
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Mark J. Davies
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Chief Financial Officer
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Date: March 5, 2019
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Name
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Title
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/s/ Todd R. Pedersen
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Chief Executive Officer and Director
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TODD R. PEDERSEN
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(Principal Executive Officer)
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|
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/s/ Mark J. Davies
|
|
Chief Financial Officer
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MARK J. DAVIES
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(Principal Financial Officer)
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/s/ Patrick E. Kelliher
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Chief Accounting Officer
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PATRICK E. KELLIHER
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(Principal Accounting Officer)
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/s/ Alex J. Dunn
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President and Director
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ALEX J. DUNN
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/s/ David F. D’Alessandro
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Director
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DAVID F. D’ALESSANDRO
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/s/ Paul S. Galant
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Director
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PAUL S. GALANT
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/s/ Bruce McEvoy
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Director
|
BRUCE MCEVOY
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/s/ Jay D. Pauley
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Director
|
JAY D. PAULEY
|
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/s/ Joseph S. Tibbetts, Jr.
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Director
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JOSEPH S. TIBBETTS, JR.
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/s/ Peter F. Wallace
|
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Director
|
PETER F. WALLACE
|
|
|
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)
|