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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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INTERNAP CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
(State or Other Jurisdiction of
Incorporation of Organization)
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91-2145721
(I.R.S. Employer
Identification No.)
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12120 Sunset Hills Road, Suite 330
Reston, VA
(Address of Principal Executive Offices)
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20190
(Zip Code)
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Title of each class
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Name of exchange on which registered
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Common Stock, $0.001 par value
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The Nasdaq Stock Market LLC
(Nasdaq Global Market)
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Large accelerated filer
¨
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Accelerated filer
x
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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Page
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39
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46
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North America
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Europe
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Asia Pacific
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Atlanta (3)
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Los Angeles (4)
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Oakland
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Amsterdam (4)
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Hong Kong (2)
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Boston (2)
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Miami
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Phoenix (2)
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Frankfurt
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Japan (4)
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Chicago (4)
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Montreal (3)
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Seattle (2)
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London (2)
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Singapore (3)
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Dallas (4)
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New York/New Jersey (5)
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Silicon Valley (6)
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Sydney
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Houston
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Northern Virginia/ DC (1)
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North America
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Europe
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Asia Pacific
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Atlanta (4)
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Los Angeles (9)
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Philadelphia (2)
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Amsterdam (4)
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Hong Kong (2)
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Boston (3)
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Miami (2)
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Phoenix (5)
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Frankfurt (2)
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Japan (4)
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Chicago (6)
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Montreal (3)
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Sacramento
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London (3)
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Singapore (6)
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Dallas (4)
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New York/New Jersey (10)
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Seattle (3)
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Paris
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Sydney
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Denver (2)
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Northern Virginia/DC (7)
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Silicon Valley (10)
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Houston
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Oakland
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Toronto
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•
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Colocation providers, including CyrusOne, Equinix, CoreSite, QTS Realty Trust, ZColo and Cyxtera.
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•
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Managed services and hosting providers, including: Rackspace, IBM Cloud, QTS, and CenturyLink, Inc.
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•
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Cloud providers, including IBM Cloud, OVH.com, Amazon Web Services, Microsoft Azure, and Google Cloud.
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•
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developing or expanding efficient sales channels;
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•
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sourcing, identifying, obtaining and managing qualified research and development and technical staff with the appropriate skill and expertise;
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•
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managing the length and roll out of the development cycle for new products and product enhancements;
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•
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identifying and adapting to emerging and evolving industry standards and to technological developments by our competitors’ and customers’ services and products;
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•
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entering into new or unproven markets where we have limited experience or there is significant competition;
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•
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developing and managing new service and product service strategies and integrating them with our existing services and products;
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•
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incorporating acquired products, technologies and personnel;
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•
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trade compliance issues affecting our ability to ship new products to international markets; and
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•
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obtaining required technology licenses and technical access from operating system software vendors on reasonable terms to enable the development and deployment of interoperable products.
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•
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their level of satisfaction with our services;
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•
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our ability to provide features and functionality demanded by our customers;
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•
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the prices of our services compared to our competitors;
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•
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technological advances that allow customers to meet their needs with fewer infrastructure resources;
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•
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mergers and acquisitions affecting our customer base; which include a significant number of technology customers that are potentially attractive acquisition targets; and
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•
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reduction in our customers’ spending levels or economic decline in our customer’s markets.
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•
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identify and obtain the use of locations meeting our selection criteria on competitive terms, if at all;
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•
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estimate costs and control delays for our services;
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•
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obtain necessary permits on a timely basis, if at all;
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•
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generate sufficient cash flow from operations or through current or additional debt or equity financings to support these expansion plans;
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•
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establish key relationships with IT infrastructure providers and other third party vendors required to deliver our services;
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•
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obtain the necessary power density and supply from local utility companies at competitive rates;
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•
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hire, train, retain and manage sufficient operational and technical employees and supporting personnel;
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•
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avoid labor issues impacting our suppliers, such as a strike; and
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•
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identify and obtain contractors that perform on the agreed upon contract performance.
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•
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develop and expand their IT infrastructure and service offerings more rapidly;
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•
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adapt to new or emerging technologies and changes in customer requirements more quickly;
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•
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take advantage of acquisitions and other opportunities more readily;
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•
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borrow at more competitive rates or otherwise take advantage of capital resources not available to us;
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•
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attract or retain more qualified personnel to develop and market their service offerings; or
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•
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devote greater resources to the marketing and sale of their services and adopt more aggressive pricing policies than we can.
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•
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human error or accidents;
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•
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physical or electronic security breaches;
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•
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network connectivity downtime;
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•
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fire, earthquake, hurricane, flood, tornado and other natural disasters;
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•
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improper maintenance by the landlords of the buildings in which our data centers are located;
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•
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water damage, extreme temperatures and fiber cuts;
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•
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power loss, utility interruptions or equipment failure;
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•
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sabotage, vandalism and terrorism; and
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•
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failure by us or our vendors to provide adequate service or maintenance to our equipment.
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•
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sourcing, evaluating and targeting potential customers and managing existing customers;
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•
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implementing customer orders for services;
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•
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delivering these services;
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•
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timely billing and collection for these services;
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•
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budgeting, forecasting, tracking and reporting our results of operations;
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maintaining the Company’s internal control for financial information; and
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providing technical and operational support to customers and tracking the resolution of customer issues.
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challenges in establishing and maintaining relationships with global customers, ISPs and local vendors, including data center and local network operators;
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•
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challenges in staffing and managing NOCs and POPs across disparate geographic areas;
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•
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potential loss of proprietary information due to misappropriation or laws that may be less protective of our intellectual property rights than the laws in the U.S.;
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•
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challenges in reducing operating expense or other costs required by local laws and longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
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•
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exposure to fluctuations in international currency exchange rates; and
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•
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costs of customizing POPs for foreign countries and customers.
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•
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difficulty integrating the operations, control environments and personnel of acquired companies;
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•
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potential disruption of our ongoing business;
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•
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potential distraction of management and other key personnel;
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•
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diversion of business resources from core operations;
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•
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expenses and potential liabilities related to the transactions, dispositions or acquired business;
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•
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failure to realize synergies or other expected benefits;
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•
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difficulty in maintaining controls, procedures, and policies, and
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•
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increased accounting charges such as impairment of goodwill or intangible assets, amortization of intangible assets acquired and a reduction in the useful lives of intangible assets acquired.
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•
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political conditions and events, including embargo;
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•
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restrictive actions by U.S. and foreign governments;
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•
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the imposition of withholding or other taxes on foreign income, tariffs or restrictions on foreign trade and investment;
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•
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adverse tax consequences;
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•
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limitations on repatriation of earnings and cash;
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•
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currency exchange controls and import/export quotas;
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•
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nationalization, expropriation, asset seizure, blockades and blacklisting;
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•
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limitations in the availability, amount or terms of insurance coverage;
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•
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loss of contract rights and inability to adequately enforce contracts;
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•
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political instability, war and civil disturbances or other risks that may limit or disrupt markets, such as terrorist attacks, piracy and kidnapping;
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•
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outbreaks of pandemic diseases or fear of such outbreaks;
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•
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fluctuations in currency exchange rates, hard currency shortages and controls on currency exchange that affect demand for our services and our profitability;
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•
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potential noncompliance with a wide variety of anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”), and similar non-U.S. laws and regulations, including the U.K. Bribery Act 2010 (the “Bribery Act”);
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•
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labor strikes and shortages;
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•
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changes in general economic and political conditions;
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•
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adverse changes in foreign laws or regulatory requirements; and
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•
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different liability standards and legal systems that may be less developed and less predictable than those in the United States.
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•
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competition and the introduction of new services by our competitors;
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•
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continued pricing pressures;
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•
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fluctuations in the demand and sales cycle for our services;
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•
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fluctuations in the market for qualified sales, technical, customer support and retention and other personnel;
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•
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the cost and availability of adequate public utility services, including access to power;
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•
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our ability to obtain local loop connections to our POPs at favorable prices; and
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•
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any impairment or restructuring charges that we may incur in the future.
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•
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actual or anticipated variations in our quarterly and annual results of operations;
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•
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changes in market valuations of companies in the industries in which we may compete;
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•
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changes in expectations of future financial performance or changes in estimates of securities analysts;
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•
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fluctuations in stock market prices and volumes;
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•
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future issuances of common stock or other securities;
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•
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the addition or departure of key personnel;
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•
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announcements by us or our competitors of acquisitions, investments or strategic alliances; and
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•
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actions of our equity investors, including sales of our common stock by significant stockholders.
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Year Ended December 31, 2017:
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High
(1)
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Low
(1)
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||||
Fourth Quarter
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$
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22.36
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$
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13.76
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Third Quarter
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19.16
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14.04
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Second Quarter
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15.12
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11.92
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|
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First Quarter
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15.44
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6.08
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Year Ended December 31, 2016:
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High
(1)
|
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Low
(1)
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||||
Fourth Quarter
|
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$
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7.72
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$
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3.20
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Third Quarter
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10.76
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6.56
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Second Quarter
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11.76
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7.20
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First Quarter
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25.08
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7.16
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(1)
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Prices have been adjusted to reflect the reverse stock split that occurred on November 16, 2017. See Note 15 in the accompanying consolidated notes to financial statements for more information on the reverse stock split.
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Equity Compensation Plan Information
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||||||||
Plan category
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Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
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Weighted-average exercise price of outstanding options, warrants and rights
(b)
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Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
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Equity compensation plans approved by security holders
(1)
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316
(2)
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$
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25.40
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844
(3)
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(1)
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Our equity compensation plans consist of the 2017 Stock Incentive Plan, 2014 Stock Incentive Plan, 2005 Incentive Stock Plan as amended, 2000 Non-Officer Equity Incentive Plan and 1999 Non-Employee Directors’ Stock Option Plan. Each plan contains customary anti-dilution provisions that are applicable in the event of a stock split or certain other changes in our capitalization.
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(2)
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This number includes the following: 117,842 shares subject to outstanding awards granted under the 2014 Stock Incentive Plan, 174,694 shares subject to outstanding awards granted under the 2005 Incentive Stock Plan as amended, 1,473 shares subject to outstanding awards granted under the 2000 Non-Officer Equity Incentive Plan and 22,268 shares subject to outstanding awards granted under the 1999 Non-Employee Directors’ Stock Option Plan.
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(3)
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This number includes shares remaining available for issuance under the 2017 Stock Incentive Plan. We may not issue additional equity awards under any other plan, including the 2014 Stock Incentive Plan, 2005 Incentive Stock Plan as amended, 2000 Non-Officer Equity Incentive Plan and 1999 Non-Employee Directors’ Stock Option Plan.
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Period
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Total Number of Shares Purchased
(1)
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Average Price Paid per Share
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Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
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Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
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|||||
October 1 to 31, 2017
|
|
632
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|
|
$
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17.40
|
|
|
—
|
|
|
—
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November 1 to 30, 2017
|
|
181
|
|
|
15.90
|
|
|
—
|
|
|
—
|
|
|
December 1 to 31, 2017
|
|
1,168
|
|
|
15.70
|
|
|
—
|
|
|
—
|
|
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Total
|
|
1,981
|
|
|
$
|
16.27
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Employees surrendered these shares to us as payment of statutory minimum payroll taxes due in connection with the vesting of restricted stock.
|
|
|
Year Ended December 31,
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||||||||||||||||||
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2017
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2016
|
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2015
|
|
2014
|
|
2013
(1)
|
||||||||||
(in thousands, except per share data)
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|
|||||
Consolidated Statements of Operations and Comprehensive Loss Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|||||
Revenues
|
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$
|
280,718
|
|
|
$
|
298,297
|
|
|
$
|
318,293
|
|
|
$
|
334,959
|
|
|
$
|
283,342
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Costs of sales and services, exclusive of depreciation and amortization, shown below
|
|
106,217
|
|
|
124,255
|
|
|
131,440
|
|
|
144,946
|
|
|
132,012
|
|
|||||
Costs of customer support
|
|
25,757
|
|
|
32,184
|
|
|
36,475
|
|
|
36,804
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|
|
29,687
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|
|||||
Sales, general and administrative
|
|
62,728
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|
|
70,639
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|
|
81,340
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|
|
81,859
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|
|
74,568
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|
|||||
Depreciation and amortization
|
|
74,993
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|
|
76,948
|
|
|
92,655
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|
|
81,169
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|
|
53,148
|
|
|||||
Goodwill impairment
|
|
—
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|
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80,105
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|
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—
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|
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—
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|
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—
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|
|||||
Exit activities, restructuring and impairments
|
|
6,249
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|
|
7,236
|
|
|
2,278
|
|
|
4,520
|
|
|
1,414
|
|
|||||
Total operating costs and expenses
|
|
275,944
|
|
|
391,367
|
|
|
344,188
|
|
|
349,298
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|
|
290,829
|
|
|||||
Income (loss) from operations
|
|
4,774
|
|
|
(93,070
|
)
|
|
(25,895
|
)
|
|
(14,339
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)
|
|
(7,487
|
)
|
|||||
Non-operating expenses
|
|
51,001
|
|
|
31,312
|
|
|
26,408
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|
|
26,775
|
|
|
12,841
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|
|||||
Loss before income taxes, non-controlling interest and equity in (earnings) of equity-method investment
|
|
(46,227
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)
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|
(124,382
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)
|
|
(52,303
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)
|
|
(41,114
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)
|
|
(20,328
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)
|
|||||
Provision (benefit) for income taxes
|
|
253
|
|
|
530
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(3,660
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)
|
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(1,361
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)
|
|
(285
|
)
|
|||||
Equity in (earnings) of equity-method investment, net of taxes
|
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(1,207
|
)
|
|
(170
|
)
|
|
(200
|
)
|
|
(259
|
)
|
|
(213
|
)
|
|||||
Net loss
|
|
(45,273
|
)
|
|
(124,742
|
)
|
|
(48,443
|
)
|
|
(39,494
|
)
|
|
(19,830
|
)
|
|||||
Less net income attributable to non-controlling interests
|
|
(70
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net loss attributable to INAP stockholders
|
|
$
|
(45,343
|
)
|
|
$
|
(124,742
|
)
|
|
$
|
(48,443
|
)
|
|
$
|
(39,494
|
)
|
|
$
|
(19,830
|
)
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic and diluted
|
|
$
|
(2.39
|
)
|
|
$
|
(9.54
|
)
|
|
$
|
(3.73
|
)
|
|
$
|
(3.08
|
)
|
|
$
|
(1.55
|
)
|
|
|
December 31,
|
||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Consolidated Balance Sheets Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
|
$
|
14,603
|
|
|
$
|
10,389
|
|
|
$
|
17,772
|
|
|
$
|
20,084
|
|
|
$
|
35,018
|
|
Total assets
|
|
586,525
|
|
|
430,615
|
|
|
554,611
|
|
|
590,735
|
|
|
612,979
|
|
|||||
Credit facilities, due after one year, and capital lease obligations, less current portion
|
|
519,249
|
|
|
367,376
|
|
|
370,693
|
|
|
356,686
|
|
|
346,800
|
|
|||||
Total stockholders’ (deficit) equity
|
|
(1,032
|
)
|
|
(3,724
|
)
|
|
114,436
|
|
|
150,336
|
|
|
182,210
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
(1)
|
||||||||||
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Capital expenditures, net of equipment sale-leaseback transactions
|
|
$
|
36,449
|
|
|
$
|
46,192
|
|
|
$
|
57,157
|
|
|
$
|
77,408
|
|
|
$
|
62,798
|
|
Net cash flows provided by operating activities
|
|
39,165
|
|
|
46,449
|
|
|
40,208
|
|
|
53,248
|
|
|
33,683
|
|
|||||
Net cash flows used in investing activities
|
|
(32,209
|
)
|
|
(45,650
|
)
|
|
(57,157
|
)
|
|
(75,727
|
)
|
|
(208,086
|
)
|
|||||
Net cash flows (used in) provided by financing activities
|
|
(2,872
|
)
|
|
(8,118
|
)
|
|
15,290
|
|
|
7,924
|
|
|
180,810
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
(1)
|
On November 26, 2013, we completed our acquisition of iWeb. We allocated the purchase price to iWeb’s net tangible and intangible assets based on their estimated fair values as of November 26, 2013. We recorded the excess purchase price over the value of the net tangible and identifiable intangible assets as goodwill.
|
•
|
Created business unit P&Ls with industry recognized General Managers
|
•
|
Completed the rebuild of the salesforce by year-end
|
•
|
Established a new pay for performance culture aligned with stockholders
|
•
|
By early 2017, leading stockholders invested $43M in common stock
|
•
|
The equity raise was used to reduce debt and refinance $300M in a 5-year bank deal
|
•
|
INAP’s new credit facility included future covenant relief for management flexibility
|
•
|
Improved margins - approaching peer group metrics
|
•
|
Returned the Company to sequential revenue growth by the 4
th
quarter at $70M
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net loss attributable to INAP stockholders
|
|
$
|
(45,343
|
)
|
|
$
|
(124,742
|
)
|
|
$
|
(48,443
|
)
|
Depreciation and amortization
|
|
74,993
|
|
|
76,948
|
|
|
92,655
|
|
|||
Interest expense
|
|
50,476
|
|
|
30,909
|
|
|
27,596
|
|
|||
Provision (benefit) for income taxes
|
|
253
|
|
|
530
|
|
|
(3,660
|
)
|
|||
Other (income) expense
|
|
(682
|
)
|
|
233
|
|
|
(1,388
|
)
|
|||
(Gain) loss on disposal of property and equipment, net
|
|
(353
|
)
|
|
8
|
|
|
674
|
|
|||
Exit activities, restructuring and impairments, including goodwill impairment
|
|
6,249
|
|
|
87,341
|
|
|
2,278
|
|
|||
Stock-based compensation
|
|
3,040
|
|
|
4,997
|
|
|
8,781
|
|
|||
Non-income tax contingency
|
|
1,500
|
|
|
—
|
|
|
—
|
|
|||
Strategic alternatives and related costs
(1)
|
|
70
|
|
|
1,408
|
|
|
1,133
|
|
|||
Organizational realignment costs
(2)
|
|
957
|
|
|
4,412
|
|
|
—
|
|
|||
Claim settlement
|
|
713
|
|
|
—
|
|
|
—
|
|
|||
Pre-acquisition costs
|
|
373
|
|
|
—
|
|
|
—
|
|
|||
Adjusted EBITDA
|
|
$
|
92,246
|
|
|
$
|
82,044
|
|
|
$
|
79,626
|
|
|
|
|
|
|
|
|
(1)
|
Primarily legal and other professional fees incurred in connection with the evaluation by our board of directors of strategic alternatives and related shareholder communications. We include these costs in “Sales, general and administrative” in the accompanying consolidated statements of operations and comprehensive loss for the years ended December 31, 2017 and 2016.
|
(2)
|
Primarily professional fees, employee retention bonus, severance and executive search costs incurred related to our organizational realignment. We include these costs in “Sales, general and administrative” in the accompanying statement of operations and comprehensive loss for the years ended
December 31, 2017
and 2016.
|
|
|
Year Ended December 31,
|
|
Increase (decrease) from 2016 to 2017
|
|
Increase (decrease) from 2015 to 2016
|
||||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
INAP COLO
|
|
$
|
209,580
|
|
|
$
|
221,678
|
|
|
$
|
234,859
|
|
|
$
|
(12,098
|
)
|
|
(5
|
)%
|
|
$
|
(13,181
|
)
|
|
(6
|
)%
|
INAP CLOUD
|
|
71,138
|
|
|
76,619
|
|
|
83,434
|
|
|
(5,481
|
)
|
|
(7
|
)
|
|
(6,815
|
)
|
|
(8
|
)
|
|||||
Total revenues
|
|
280,718
|
|
|
298,297
|
|
|
318,293
|
|
|
(17,579
|
)
|
|
(6
|
)
|
|
(19,996
|
)
|
|
(6
|
)
|
|||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Costs of sales and services, exclusive of depreciation and amortization, shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
INAP COLO
|
|
89,240
|
|
|
105,620
|
|
|
111,765
|
|
|
(16,380
|
)
|
|
(15
|
)
|
|
(6,145
|
)
|
|
(5
|
)
|
|||||
INAP CLOUD
|
|
16,977
|
|
|
18,635
|
|
|
19,675
|
|
|
(1,658
|
)
|
|
(8
|
)
|
|
(1,040
|
)
|
|
(5
|
)
|
|||||
Costs of customer support
|
|
25,757
|
|
|
32,184
|
|
|
36,475
|
|
|
(6,427
|
)
|
|
(18
|
)
|
|
(4,291
|
)
|
|
(12
|
)
|
|||||
Sales, general and administrative
|
|
62,728
|
|
|
70,639
|
|
|
81,340
|
|
|
(7,911
|
)
|
|
(10
|
)
|
|
(10,701
|
)
|
|
(13
|
)
|
|||||
Depreciation and amortization
|
|
74,993
|
|
|
76,948
|
|
|
92,655
|
|
|
(1,955
|
)
|
|
(2
|
)
|
|
(15,707
|
)
|
|
(17
|
)
|
|||||
Goodwill impairment
|
|
—
|
|
|
80,105
|
|
|
—
|
|
|
(80,105
|
)
|
|
(100
|
)
|
|
80,105
|
|
|
100
|
|
|||||
Exit activities, restructuring and impairments
|
|
6,249
|
|
|
7,236
|
|
|
2,278
|
|
|
(987
|
)
|
|
(43
|
)
|
|
4,958
|
|
|
218
|
|
|||||
Total operating costs and expenses
|
|
275,944
|
|
|
391,367
|
|
|
344,188
|
|
|
(115,423
|
)
|
|
(34
|
)
|
|
47,179
|
|
|
14
|
|
|||||
Income (loss) from operations
|
|
$
|
4,774
|
|
|
$
|
(93,070
|
)
|
|
$
|
(25,895
|
)
|
|
$
|
97,844
|
|
|
—
|
|
|
$
|
(67,175
|
)
|
|
(259
|
)
|
Interest expense
|
|
$
|
50,476
|
|
|
$
|
30,909
|
|
|
$
|
27,596
|
|
|
$
|
19,567
|
|
|
63
|
|
|
$
|
3,313
|
|
|
12
|
|
Provision (benefit) for income taxes
|
|
$
|
253
|
|
|
$
|
530
|
|
|
$
|
(3,660
|
)
|
|
$
|
(277
|
)
|
|
(52
|
)%
|
|
$
|
4,190
|
|
|
114
|
%
|
•
|
costs for connecting to and accessing ISPs and competitive local exchange providers;
|
•
|
facility and occupancy costs, including power and utilities, for hosting and operating our equipment and hosting our customers’ equipment;
|
•
|
costs incurred for providing additional third party services to our customers; and
|
•
|
royalties and costs of license fees for operating systems software.
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||
INAP COLO
|
|
$
|
209,580
|
|
|
$
|
221,678
|
|
|
$
|
234,859
|
|
INAP CLOUD
|
|
71,138
|
|
|
76,619
|
|
|
83,434
|
|
|||
Total revenues
|
|
280,718
|
|
|
298,297
|
|
|
318,293
|
|
|||
|
|
|
|
|
|
|
||||||
Costs of sales and services, exclusive of depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|||
INAP COLO
|
|
89,240
|
|
|
105,620
|
|
|
111,765
|
|
|||
INAP CLOUD
|
|
16,977
|
|
|
18,635
|
|
|
19,675
|
|
|||
Total costs of sales and services, exclusive of depreciation and amortization
|
|
106,217
|
|
|
124,255
|
|
|
131,440
|
|
|||
|
|
|
|
|
|
|
||||||
Segment profit:
|
|
|
|
|
|
|
|
|
|
|||
INAP COLO
|
|
120,340
|
|
|
116,058
|
|
|
123,094
|
|
|||
INAP CLOUD
|
|
54,161
|
|
|
57,984
|
|
|
63,759
|
|
|||
Total segment profit
|
|
174,501
|
|
|
174,042
|
|
|
186,853
|
|
|||
|
|
|
|
|
|
|
||||||
Goodwill impairment
|
|
—
|
|
|
80,105
|
|
|
—
|
|
|||
Exit activities, restructuring and impairments
|
|
6,249
|
|
|
7,236
|
|
|
2,278
|
|
|||
Other operating expenses, including direct costs of customer support, depreciation and amortization
|
|
163,478
|
|
|
179,771
|
|
|
210,470
|
|
|||
Income (loss) from operations
|
|
4,774
|
|
|
(93,070
|
)
|
|
(25,895
|
)
|
|||
Non-operating expense
|
|
51,001
|
|
|
31,312
|
|
|
26,408
|
|
|||
Loss before income taxes, non-controlling interest and equity in earnings of equity-method investment
|
|
$
|
(46,227
|
)
|
|
$
|
(124,382
|
)
|
|
$
|
(52,303
|
)
|
|
|
2017
|
|
2016
|
||||
United States
|
|
$
|
220,018
|
|
|
$
|
231,943
|
|
Canada
|
|
38,750
|
|
|
44,206
|
|
||
Other
|
|
21,950
|
|
|
22,148
|
|
||
|
|
$
|
280,718
|
|
|
$
|
298,297
|
|
|
|
2017
|
|
2016
|
||||
Customer support
|
|
$
|
167
|
|
|
$
|
1,159
|
|
Sales, general and administrative
|
|
2,873
|
|
|
3,838
|
|
||
|
|
$
|
3,040
|
|
|
$
|
4,997
|
|
|
|
2016
|
|
2015
|
||||
Costs of customer support
|
|
$
|
1,159
|
|
|
$
|
1,901
|
|
Sales, general and administrative
|
|
3,838
|
|
|
6,880
|
|
||
|
|
$
|
4,997
|
|
|
$
|
8,781
|
|
|
|
Covenants Requirements
|
|
Ratios at December 31, 2017
|
|
Maximum total leverage ratio (the ratio of Consolidated Indebtedness to Consolidated EBITDA as defined in the 2017 Credit Agreement) should be equal to or less than:
|
|
5.9
(1)
|
|
4.69
|
|
Minimum consolidated interest coverage ratio (the ratio of Consolidated EBITDA to Consolidated Interest Expense as defined in the 2017 Credit Agreement) should be equal to or greater than:
|
|
2.0
(2)
|
|
2.71
|
|
|
|
2017 Annual Limit
|
|
Twelve months ended December 31, 2017
|
Limitation on capital expenditures
|
|
No limit
|
|
$36 million
|
(1)
|
The maximum total leverage ratio decreases to 5.9 to 1 as of March 1, 2018, 5.9 to 1 as of June 30, 2018, 5.9 to 1 as of September 30, 2018, 5.9 to 1 as of December 31, 2018, 5.9 to 1 as of March 31, 2019, 5.9 to 1 as of June 30, 2019, 5.5 to 1 as of September 30, 2019, 5.5 to 1 as of December 31, 2019, 5.5 to 1 March 31, 2020, 5.25 to 1 as of June 30, 2020, 5.25 to 1 September 30, 2020, 4.75 to 1 as of December 31, 2020, 4.75 to 1 as of March 31, 2021, 4.75 to 1 as of June 30, 2021 and 4.5 to 1 as of September 30, 2021 and thereafter.
|
(2)
|
The minimum consolidated interest coverage ratio increases to 2.00 to 1 as of March 31, 2018, 2.00 to 1 as of June 30, 2018, 2.00 to 1 as of September 30, 2018, 2.00 to 1 as of December 31, 2018, 2.00 to 1 as of March 31, 2019, 2.00 to 1 as of June 30, 2019, 2.00 to 1 September 30, 2019, 2.00 to 1 as of December 31, 2019, 2.00 to 1 as of March 31, 2020, 2.00 to 1 as of June 30, 2020, 2.00 to 1 as of September 30, 2020, 2.25 to 1 December 31, 2020, 2.25 to 1 as of March 31, 2021, 2.25 to 1 as of June 30, 2021, 2.25 to 1 as of September 30, 2021 and thereafter.
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
Total
|
|
Less than
1 year
|
|
1-3
Years
|
|
3-5
Years
|
|
More
than 5
years
|
||||||||||
Current Credit Agreement:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Term loan, including interest
|
|
$
|
404,814
|
|
|
$
|
28,356
|
|
|
$
|
83,601
|
|
|
$
|
292,857
|
|
|
$
|
—
|
|
Revolving credit facility, including interest
|
|
5,513
|
|
|
5,513
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Capital lease obligations, including interest
|
|
575,929
|
|
|
32,511
|
|
|
57,775
|
|
|
50,696
|
|
|
434,947
|
|
|||||
Exit activities and restructuring
|
|
6,039
|
|
|
4,691
|
|
|
1,348
|
|
|
—
|
|
|
—
|
|
|||||
Asset retirement obligation
|
|
3,634
|
|
|
250
|
|
|
—
|
|
|
—
|
|
|
3,384
|
|
|||||
Operating lease commitments
|
|
29,268
|
|
|
12,138
|
|
|
8,531
|
|
|
5,107
|
|
|
3,492
|
|
|||||
Service and purchase commitments
|
|
3,709
|
|
|
2,357
|
|
|
1,352
|
|
|
—
|
|
|
—
|
|
|||||
|
|
$
|
1,028,906
|
|
|
$
|
85,816
|
|
|
$
|
152,607
|
|
|
$
|
348,660
|
|
|
$
|
441,823
|
|
Item 15(a)(1).
Financial Statements
. The following consolidated financial statements are filed herewith:
|
|
|
|
|
Page
|
Report of Independent Registered Public Accounting Firm
|
F-1
|
Report of Independent Registered Public Accounting Firm 2
|
F-2
|
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2017, 2016 and 2015
|
F-
3
|
Consolidated Balance Sheets as of December 31, 2017 and 2016
|
F-
4
|
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2017, 2016 and 2015
|
F-
5
|
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
|
F-
6
|
Notes to Consolidated Financial Statements
|
F-
7
|
|
|
Item 15(a)(2).
Financial Statement Schedules
.
The following financial statement schedule is filed herewith:
|
|
|
|
|
Page
|
Schedule II - Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2017, 2016 and 2015
|
Item 15(a)(3).
Exhibits
.
The following exhibits are filed as part of this report:
|
||
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
|
Share Purchase Agreement made as of October 30, 2013 between iWeb Group Inc., its stockholders and stockholders’ representative and 8672377 Canada Inc. and Internap Network Services Corporation (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed October 31, 2013).†
|
|
|
|
|
|
Purchase and Sale Agreement, dated as of January 27, 2018, by and among Internap Corporation, SingleHop LLC, the members of SingleHop LLC set forth therein and Shareholder Representative Services LLC (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, filed on January 29, 2018).†
|
|
|
|
|
|
Certificate of Elimination of the Series B Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K, filed March 2, 2010).
|
|
|
|
|
|
Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K, filed March 2, 2010).
|
|
|
|
|
|
Certificate of Amendment of the Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed June 21, 2010).
|
|
|
|
|
|
Certificate of Amendment of the Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed November 25, 2014).
|
|
|
|
|
|
Certificate of Amendment to the Restated Certificate of Incorporation, dated June 22, 2017 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on June 23, 2017).
|
|
|
|
|
|
Certificate of Amendment of the Restated Certificate of Incorporation, as filed on November 16, 2017 (incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 20, 2017).
|
|
|
|
|
|
Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed on August 3, 2017).
|
|
|
|
|
|
Internap Network Services Corporation 1999 Non-Employee Directors’ Stock Option Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K, filed March 13, 2009).+
|
|
|
|
|
|
First Amendment to the Internap Network Services Corporation 1999 Non-Employee Directors’ Stock Option Plan (incorporated herein by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K, filed March 13, 2009).+
|
|
|
|
|
|
Internap Network Services Corporation 2000 Non-Officer Equity Incentive Plan (incorporated herein by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8, File No. 333-37400, filed May 19, 2000).+
|
|
|
|
|
|
Internap Network Services Corporation 2005 Incentive Stock Plan, as amended (incorporated herein by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K, filed February 20, 2014).+
|
|
|
|
|
|
Internap Network Services Corporation 2014 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-8, File No. 333-196775, filed June 16, 2014).+
|
|
|
|
|
Form of Stock Grant Certificate under the Internap Network Services Corporation 2014 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K, filed February 19, 2015).+
|
|
|
|
|
|
Form of Stock Option Certificate under the Internap Network Services Corporation 2014 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K, filed February 19, 2015).+
|
|
|
|
|
|
Form of Stock Grant Certificate (Canada) under the Internap Network Services Corporation 2014 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K, filed February 19, 2015).+
|
|
|
|
|
|
Form of Stock Option Certificate (Canada) under the Internap Network Services Corporation 2014 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K, filed February 19, 2015).+
|
|
|
|
|
|
Form of Indemnity Agreement for directors and officers of the Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed May 29, 2009).+
|
|
|
|
|
|
Commitment Letter, dated as of October 30, 2013 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed October 31, 2013).
|
|
|
|
|
|
Credit Agreement, dated as of November 26, 2013, by and among the Company, as Borrower; the Guarantors party thereto, as Guarantors; the Lenders party thereto; Jefferies Finance, LLC, as Administrative Agent and Collateral Agent; Jefferies Finance LLC and PNC Capital Markets LLC, as Joint Lead Arrangers and Joint Book Managers; PNC Bank National Association, as Syndication Agent; and Jefferies Finance LLC, as Issuing Bank and Swingline Lender (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 26, 2013).
|
|
|
|
|
|
Security Agreement, dated as of November 26, 2013, by and among the Company; the Guarantors party thereto; and Jefferies Finance LLC, as Collateral Agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 26, 2013).
|
|
|
|
|
|
First Amendment to the Credit Agreement, dated as of October 30, 2015, by and among the Company, each of the Lenders party thereto and Jeffries Finance LLC, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 5, 2015).
|
|
|
|
|
|
Second Amendment to the Credit Agreement, dated as of April 12, 2016 among the Company, each of the Lenders party thereto and Jeffries Finance LLC, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 12, 2016 ).
|
|
|
|
|
|
Third Amendment and Waiver to the Credit Agreement, dated as of January 26, 2017, by and among the Company, each of the Lenders party thereto and Jeffries Finance LLC, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 26, 2017).
|
|
|
|
|
|
Securities Purchase Agreement, by and among the Company and the Purchasers identified on Schedule 1 therein, dated as of February 22, 2017 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 28, 2017).
|
|
|
|
|
|
Registration Rights Agreement, by and among the Company and stockholders listed on the signature pages thereto, dated as of February 22, 2017 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on February 28, 2017)
|
|
|
|
|
|
Employment Agreement, by and between the Company and Peter D. Aquino, dated September 12, 2016 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed September 13, 2016).+
|
|
|
|
|
|
Restricted Stock Inducement Award Agreement, by and between the Company and Peter D. Aquino, dated September 12, 2016 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed September 13, 2016).+
|
|
|
|
|
|
Notice of Award pursuant to Restricted Stock Inducement Award Agreement, by and between the Company and Peter D. Aquino, dated September 12, 2016 (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, as filed with the SEC on September 13, 2016).+
|
|
|
|
|
10.22
*
|
|
Offer Letter, by and between the Company and Robert Dennerlein, dated October 28, 2016 +
|
|
|
|
|
Credit Agreement, dated as of April 6, 2017, by and among Internap Corporation, as Borrower; the Guarantors party thereto, as Guarantors; the Lenders party thereto; the Guarantors party thereto, the Lenders party thereto, Jefferies Finance LLC, as Administrative Agent and Collateral Agent, Jefferies Finance LLC and PNC Capital Markets LLC, as Joint Lead Arrangers, PNC Bank, National Association, as Syndication Agent and as Issuing Bank, and Jefferies Finance LLC, as Documentation Agent, Sole Book Manager and as Swingline Lender. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 6, 2017).
|
|
|
|
|
|
Security Agreement, dated as of April 6, 2017, by and among the Company, the Guarantors party thereto and Jefferies Finance LLC, as Collateral Agent. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed April 6, 2017)
|
|
|
|
|
|
Internap Corporation 2017 Stock Incentive Plan (incorporated herein by reference to Annex A to the Company’s Definitive Proxy Statement on Schedule 14A, filed April 25, 2017).+
|
|
|
|
|
|
Lease Agreement, dated as of June 15, 2007, by and between Internap Network Services Corporation and MainRock II Chandler, LLC. (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed August 3, 2017). #
|
|
|
|
|
|
First Amendment to Lease, dated as of January 15, 2008, by and between Internap Network Services Corporation and MainRock II Chandler, LLC. (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed August 3, 2017).#
|
|
|
|
|
|
Second Amendment to Lease, dated as of February 27, 2008, by and between Internap Network Services Corporation and MainRock II Chandler, LLC. (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed August 3, 2017).#
|
|
|
|
|
|
Third Amendment to Lease, dated as of September 22, 2014, by and between Internap Network Services Corporation and Digital 2121 South Price, LLC, as successor-in-interest to MainRock II Chandler, LLC. (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed August 3, 2017).#
|
|
|
|
|
|
Fourth Amendment to Lease, dated as of January 6, 2016, by and between Internap Network Services Corporation and Digital 2121 South Price, LLC, as successor-in-interest to MainRock II Chandler, LLC. (incorporated herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed August 3, 2017).#
|
|
|
|
|
|
Fifth Amendment to Lease, dated as of June 30, 2016, by and between Internap Network Services Corporation and Digital 2121 South Price, LLC, as successor-in-interest to MainRock II Chandler, LLC. (incorporated herein by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, filed August 3, 2017).#
|
|
|
|
|
|
Sixth Amendment to Lease, dated as of March 24, 2017, by and between Internap Network Services Corporation and Digital 2121 South Price, LLC, as successor-in-interest to MainRock II Chandler, LLC. (incorporated herein by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q, filed August 3, 2017).#
|
|
|
|
|
|
Seventh Amendment to Lease, dated as of June 29, 2017, by and between Internap Network Services Corporation and Digital 2121 South Price, LLC, as successor-in-interest to MainRock II Chandler, LLC. (incorporated herein by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q, filed August 3, 2017).#
|
|
|
|
|
|
First Amendment to Credit Agreement, dated as of June 28, 2017, by and among the Company, each of the Lenders parties thereto, and Jefferies Finance LLC, as Administrative Agent. (incorporated herein by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q, filed August 3, 2017).
|
|
|
|
|
|
Offer Letter, by and between the Company and Joanna Lanni, dated November 14, 2017 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November 20, 2017).
|
|
|
|
|
|
Second Amendment to Credit Agreement entered into as of February 6, 2018 among Internap Corporation, each of the Lenders party thereto and Jefferies Finance LLC, as Administrative Agent. ( Incorporated herein by reference to Exhibit 10.36 to the Company's Current Report on Form 8-K, filed February 7, 2018).
|
|
|
|
|
|
Incremental and Third Amendment to Credit Agreement, dated as of February 28, 2018, 2018, among Internap Corporation, each of the Lenders thereto and Jefferies Finance LLC as Administrative Agent ( Incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed March 1, 2018).
|
|
|
|
|
|
Amendment No. 1 to Employment Agreement, dated as of November 14, 2017, by and between Peter D. Aquino and the Company.+
|
|
|
|
|
|
List of Subsidiaries.
|
|
|
|
|
|
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
|
|
|
|
|
|
Consent of BDO LLP, Independent Registered Public Accounting Firm.
|
|
|
|
|
|
Rule 13a-14(a)/15d-14(a) Certification, executed by Peter D. Aquino, President and Chief Executive Officer of the Company.
|
|
|
|
|
|
Rule 13a-14(a)/15d-14(a) Certification, executed by Robert Dennerlein, Chief Financial Officer of the Company.
|
|
|
|
|
|
Section 1350 Certification, executed by Peter D. Aquino, President and Chief Executive Officer of the Company.
|
|
|
|
|
|
Section 1350 Certification, executed by Robert Dennerlein, Chief Financial Officer of the Company.
|
|
|
|
|
101*
|
|
Interactive Data File.
|
|
|
|
*
|
Documents filed herewith.
|
+
|
Management contract and compensatory plan and arrangement.
|
†
|
Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.
|
#
|
Portions of this exhibit have been omitted pursuant to a grant of confidential treatment and have been filed separately with the SEC.
|
|
INTERNAP CORPORATION
|
||
Date: March 15, 2018
|
|
|
|
|
By:
|
/s/ Robert Dennerlein
|
|
|
|
Robert Dennerlein
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Peter D. Aquino
|
|
|
|
|
Peter D. Aquino
|
|
President, CEO and Director
|
|
March 15, 2018
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Robert Dennerlein
|
|
|
|
|
Robert Dennerlein
|
|
Chief Financial Officer
|
|
March 15, 2018
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
/s/ Joanna Lanni
|
|
|
|
|
Joanna Lanni
|
|
VP and Corporate Controller
|
|
March 15, 2018
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Daniel C. Stanzione
|
|
|
|
|
Daniel C. Stanzione
|
|
Non-Executive Chairman and Director
|
|
March 15, 2018
|
|
|
|
|
|
/s/ Charles B. Coe
|
|
|
|
|
Charles B. Coe
|
|
Director
|
|
March 15, 2018
|
|
|
|
|
|
/s/ Patricia L. Higgins
|
|
|
|
|
Patricia L. Higgins
|
|
Director
|
|
March 15, 2018
|
|
|
|
|
|
/s/ Gary M. Pfeiffer
|
|
|
|
|
Gary M. Pfeiffer
|
|
Director
|
|
March 15, 2018
|
|
|
|
|
|
/s/ Peter J. Rogers, Jr.
|
|
|
|
|
Peter J. Rogers, Jr.
|
|
Director
|
|
March 15, 2018
|
|
|
|
|
|
/s/ Debora J. Wilson
|
|
|
|
|
Debora J. Wilson
|
|
Director
|
|
March 15, 2018
|
|
|
|
|
|
/s/ Lance Weaver
|
|
|
|
|
Lance Weaver
|
|
Director
|
|
March 15, 2018
|
|
|
|
|
|
/s/ David B. Potts
|
|
|
|
|
David B. Potts
|
|
Director
|
|
March 15, 2018
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|||
INAP COLO
|
$
|
209,580
|
|
|
$
|
221,678
|
|
|
$
|
234,859
|
|
INAP CLOUD
|
71,138
|
|
|
76,619
|
|
|
83,434
|
|
|||
Total revenues
|
280,718
|
|
|
298,297
|
|
|
318,293
|
|
|||
|
|
|
|
|
|
||||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|||
Costs of sales and services, exclusive of depreciation and amortization, shown below:
|
|
|
|
|
|
|
|
|
|||
INAP COLO
|
89,240
|
|
|
105,620
|
|
|
111,765
|
|
|||
INAP CLOUD
|
16,977
|
|
|
18,635
|
|
|
19,675
|
|
|||
Costs of customer support
|
25,757
|
|
|
32,184
|
|
|
36,475
|
|
|||
Sales, general and administrative
|
62,728
|
|
|
70,639
|
|
|
81,340
|
|
|||
Depreciation and amortization
|
74,993
|
|
|
76,948
|
|
|
92,655
|
|
|||
Goodwill impairment
|
—
|
|
|
80,105
|
|
|
—
|
|
|||
Exit activities, restructuring and impairments
|
6,249
|
|
|
7,236
|
|
|
2,278
|
|
|||
Total operating costs and expenses
|
275,944
|
|
|
391,367
|
|
|
344,188
|
|
|||
Income (loss) from operations
|
4,774
|
|
|
(93,070
|
)
|
|
(25,895
|
)
|
|||
|
|
|
|
|
|
||||||
Non-operating expenses (income):
|
|
|
|
|
|
|
|
|
|||
Interest expense
|
50,476
|
|
|
30,909
|
|
|
27,596
|
|
|||
Loss (gain) on foreign currency, net
|
525
|
|
|
485
|
|
|
(771
|
)
|
|||
Other income, net
|
—
|
|
|
(82
|
)
|
|
(417
|
)
|
|||
Total non-operating expenses (income)
|
51,001
|
|
|
31,312
|
|
|
26,408
|
|
|||
|
|
|
|
|
|
||||||
Loss before income taxes, non-controlling interest and equity in earnings of equity-method investment
|
(46,227
|
)
|
|
(124,382
|
)
|
|
(52,303
|
)
|
|||
Provision (benefit) for income taxes
|
253
|
|
|
530
|
|
|
(3,660
|
)
|
|||
Equity in earnings of equity-method investment, net of taxes
|
(1,207
|
)
|
|
(170
|
)
|
|
(200
|
)
|
|||
|
|
|
|
|
|
||||||
Net loss
|
(45,273
|
)
|
|
(124,742
|
)
|
|
(48,443
|
)
|
|||
Less net income attributable to non-controlling interest
|
(70
|
)
|
|
—
|
|
|
—
|
|
|||
Net loss attributable to INAP stockholders
|
(45,343
|
)
|
|
(124,742
|
)
|
|
(48,443
|
)
|
|||
|
|
|
|
|
|
||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|||
Foreign currency translation adjustment
|
23
|
|
|
(39
|
)
|
|
(197
|
)
|
|||
Unrealized gain (loss) on foreign currency contracts
|
145
|
|
|
600
|
|
|
(745
|
)
|
|||
Unrealized gain on interest rate swap
|
—
|
|
|
728
|
|
|
84
|
|
|||
Total other comprehensive income (loss)
|
168
|
|
|
1,289
|
|
|
(858
|
)
|
|||
|
|
|
|
|
|
||||||
Comprehensive loss
|
$
|
(45,175
|
)
|
|
$
|
(123,453
|
)
|
|
$
|
(49,301
|
)
|
|
|
|
|
|
|
||||||
Basic and diluted net loss per share
|
$
|
(2.39
|
)
|
|
$
|
(9.54
|
)
|
|
$
|
(3.73
|
)
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding used in computing basic and diluted net loss per share
|
18,993
|
|
|
13,083
|
|
|
12,975
|
|
|
December 31,
|
||||||
|
2017
|
|
2016
|
||||
ASSETS
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
14,603
|
|
|
$
|
10,389
|
|
Accounts receivable, net of allowance for doubtful accounts of $1,487 and $1,246, respectively
|
17,794
|
|
|
18,044
|
|
||
Prepaid expenses and other assets
|
8,673
|
|
|
10,055
|
|
||
Total current assets
|
41,070
|
|
|
38,488
|
|
||
|
|
|
|
||||
Property and equipment, net
|
458,565
|
|
|
302,680
|
|
||
Investment in joint venture
|
—
|
|
|
3,002
|
|
||
Intangible assets, net
|
25,666
|
|
|
27,978
|
|
||
Goodwill
|
50,209
|
|
|
50,209
|
|
||
Deposits and other assets
|
11,015
|
|
|
8,258
|
|
||
Total assets
|
$
|
586,525
|
|
|
$
|
430,615
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
20,388
|
|
|
$
|
20,875
|
|
Accrued liabilities
|
15,908
|
|
|
10,603
|
|
||
Deferred revenues
|
4,861
|
|
|
5,746
|
|
||
Capital lease obligations
|
11,711
|
|
|
10,030
|
|
||
Revolving credit facility
|
5,000
|
|
|
—
|
|
||
Term loan, less discount and prepaid costs of $2,133 and $2,243, respectively
|
867
|
|
|
757
|
|
||
Exit activities and restructuring liability
|
4,152
|
|
|
3,177
|
|
||
Other current liabilities
|
1,707
|
|
|
3,171
|
|
||
Total current liabilities
|
64,594
|
|
|
54,359
|
|
||
|
|
|
|
||||
Deferred revenues
|
4,761
|
|
|
5,144
|
|
||
Capital lease obligations
|
223,749
|
|
|
43,876
|
|
||
Revolving credit facility
|
—
|
|
|
35,500
|
|
||
Term loan, less discount and prepaid costs of $7,655 and $4,579, respectively
|
287,845
|
|
|
283,421
|
|
||
Exit activities and restructuring liability
|
664
|
|
|
1,526
|
|
||
Deferred rent
|
1,310
|
|
|
4,642
|
|
||
Deferred tax liability
|
1,651
|
|
|
1,513
|
|
||
Other long-term liabilities
|
2,983
|
|
|
4,358
|
|
||
|
|
|
|
||||
Total liabilities
|
587,557
|
|
|
434,339
|
|
||
Commitments and contingencies (note 10)
|
|
|
|
|
|
||
Stockholders’ deficit:
|
|
|
|
|
|
||
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued or outstanding
|
|
|
|
|
|
||
Common stock, $0.001 par value; 30,000 shares authorized; 20,804 and 14,450 shares outstanding, respectively
|
21
|
|
|
14
|
|
||
Additional paid-in capital
|
1,327,084
|
|
|
1,283,376
|
|
||
Treasury stock, at cost, 293 and 268 shares, respectively
|
(7,159
|
)
|
|
(6,923
|
)
|
||
Accumulated deficit
|
(1,323,723
|
)
|
|
(1,278,699
|
)
|
||
Accumulated items of other comprehensive loss
|
(1,324
|
)
|
|
(1,492
|
)
|
||
Total INAP stockholders’ deficit
|
(5,101
|
)
|
|
(3,724
|
)
|
||
Non-controlling interest
|
4,069
|
|
|
—
|
|
||
Total stockholder's deficit
|
(1,032
|
)
|
|
(3,724
|
)
|
||
Total liabilities and stockholders’ deficit
|
$
|
586,525
|
|
|
$
|
430,615
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Shares
|
|
Par Value
|
|
Additional Paid-In Capital
|
|
Treasury Stock
|
|
Accumulated Deficit
|
|
Accumulated Items of Comprehensive Loss
|
|
Non-Controlling Interest
|
|
Total Stockholders’ Equity (Deficit)
|
|||||||||||||||
Balance, December 31, 2014
|
13,603
|
|
|
$
|
14
|
|
|
$
|
1,262,442
|
|
|
$
|
(4,683
|
)
|
|
$
|
(1,105,514
|
)
|
|
$
|
(1,923
|
)
|
|
$
|
—
|
|
|
$
|
150,336
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(48,443
|
)
|
|
—
|
|
|
—
|
|
|
(48,443
|
)
|
|||||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(197
|
)
|
|
—
|
|
|
(197
|
)
|
|||||||
Interest rate swap
|
|
|
|
|
|
|
|
|
|
|
84
|
|
|
—
|
|
|
84
|
|
||||||||||||
Foreign currency contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(745
|
)
|
|
—
|
|
|
(745
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
9,063
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,063
|
|
|||||||
Proceeds from exercise of stock options, net
|
390
|
|
|
—
|
|
|
6,048
|
|
|
(1,710
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,338
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance, December 31, 2015
|
13,993
|
|
|
14
|
|
|
1,277,553
|
|
|
(6,393
|
)
|
|
(1,153,957
|
)
|
|
(2,781
|
)
|
|
—
|
|
|
114,436
|
|
|||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(124,742
|
)
|
|
—
|
|
|
—
|
|
|
(124,742
|
)
|
|||||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
—
|
|
|
(39
|
)
|
|||||||
Foreign currency contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
600
|
|
|
—
|
|
|
600
|
|
|||||||
Interest rate swap
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
728
|
|
|
—
|
|
|
728
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
5,148
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,148
|
|
|||||||
Proceeds from exercise of stock options, net
|
457
|
|
|
—
|
|
|
675
|
|
|
(530
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
145
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance, December 31, 2016
|
14,450
|
|
|
14
|
|
|
1,283,376
|
|
|
(6,923
|
)
|
|
(1,278,699
|
)
|
|
(1,492
|
)
|
|
—
|
|
|
(3,724
|
)
|
|||||||
Adoption of ASU 2016-16
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
319
|
|
|
—
|
|
|
—
|
|
|
319
|
|
|||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45,273
|
)
|
|
—
|
|
|
—
|
|
|
(45,273
|
)
|
|||||||
Net income attributable to non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
|
—
|
|
|
70
|
|
|
—
|
|
|||||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
23
|
|
|||||||
Foreign currency contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145
|
|
|
—
|
|
|
145
|
|
|||||||
INAP Japan
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,999
|
|
|
3,999
|
|
|||||||
Common stock issuance
|
5,951
|
|
|
7
|
|
|
40,156
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,163
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
3,121
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,121
|
|
|||||||
Proceeds from exercise of stock options, net
|
403
|
|
|
—
|
|
|
431
|
|
|
(236
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
195
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance, December 31, 2017
|
20,804
|
|
|
$
|
21
|
|
|
$
|
1,327,084
|
|
|
$
|
(7,159
|
)
|
|
$
|
(1,323,723
|
)
|
|
$
|
(1,324
|
)
|
|
$
|
4,069
|
|
|
$
|
(1,032
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|||
Net loss
|
|
$
|
(45,273
|
)
|
|
$
|
(124,742
|
)
|
|
$
|
(48,443
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
|
74,993
|
|
|
76,948
|
|
|
92,655
|
|
|||
Loss on disposal of property and equipment, net
|
|
(353
|
)
|
|
8
|
|
|
674
|
|
|||
Impairments
|
|
503
|
|
|
83,377
|
|
|
232
|
|
|||
Amortization of debt discount and issuance costs
|
|
2,519
|
|
|
2,534
|
|
|
2,017
|
|
|||
Stock-based compensation expense, net of capitalized amount
|
|
3,040
|
|
|
4,997
|
|
|
8,781
|
|
|||
Equity in earnings of equity-method investment
|
|
(1,207
|
)
|
|
(170
|
)
|
|
(200
|
)
|
|||
Provision for doubtful accounts
|
|
1,049
|
|
|
1,093
|
|
|
1,354
|
|
|||
Non-cash change in capital lease obligations
|
|
520
|
|
|
223
|
|
|
(1,437
|
)
|
|||
Non-cash change in exit activities and restructuring liability
|
|
6,291
|
|
|
4,409
|
|
|
2,241
|
|
|||
Non-cash change in deferred rent
|
|
(3,554
|
)
|
|
(2,152
|
)
|
|
(1,704
|
)
|
|||
Deferred taxes
|
|
355
|
|
|
325
|
|
|
(3,966
|
)
|
|||
Payment of debt lender fees
|
|
(2,583
|
)
|
|
(1,716
|
)
|
|
—
|
|
|||
Loss on extinguishment and modification of debt
|
|
6,785
|
|
|
—
|
|
|
—
|
|
|||
Other, net
|
|
304
|
|
|
179
|
|
|
261
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|||
Accounts receivable
|
|
(207
|
)
|
|
1,476
|
|
|
(2,211
|
)
|
|||
Prepaid expenses, deposits and other assets
|
|
2,051
|
|
|
2,297
|
|
|
1,099
|
|
|||
Accounts payable
|
|
(1,167
|
)
|
|
1,568
|
|
|
(4,814
|
)
|
|||
Accrued and other liabilities
|
|
3,359
|
|
|
81
|
|
|
(4,206
|
)
|
|||
Deferred revenues
|
|
(1,297
|
)
|
|
(476
|
)
|
|
758
|
|
|||
Exit activities and restructuring liability
|
|
(6,178
|
)
|
|
(3,584
|
)
|
|
(2,873
|
)
|
|||
Asset retirement obligation
|
|
(825
|
)
|
|
(174
|
)
|
|
—
|
|
|||
Other liabilities
|
|
40
|
|
|
(52
|
)
|
|
(10
|
)
|
|||
Net cash flows provided by operating activities
|
|
39,165
|
|
|
46,449
|
|
|
40,208
|
|
|||
|
|
|
|
|
|
|
||||||
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|||
Proceeds from sale of building
|
|
—
|
|
|
542
|
|
|
—
|
|
|||
Purchases of property and equipment
|
|
(35,714
|
)
|
|
(44,364
|
)
|
|
(55,695
|
)
|
|||
Additions to acquired and developed technology
|
|
(735
|
)
|
|
(1,828
|
)
|
|
(1,462
|
)
|
|||
Proceeds from disposal of property and equipment
|
|
402
|
|
|
—
|
|
|
—
|
|
|||
Acquisition, net of cash received
|
|
3,838
|
|
|
—
|
|
|
—
|
|
|||
Net cash flows used in investing activities
|
|
(32,209
|
)
|
|
(45,650
|
)
|
|
(57,157
|
)
|
|||
|
|
|
|
|
|
|
||||||
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|||
Proceeds from credit agreements
|
|
316,900
|
|
|
4,500
|
|
|
21,000
|
|
|||
Proceeds from stock issuance
|
|
40,195
|
|
|
—
|
|
|
—
|
|
|||
Principal payments on credit agreements
|
|
(339,900
|
)
|
|
(3,000
|
)
|
|
(3,000
|
)
|
|||
Payment of debt issuance costs
|
|
(10,194
|
)
|
|
—
|
|
|
—
|
|
|||
Payments on capital lease obligations
|
|
(9,714
|
)
|
|
(9,472
|
)
|
|
(7,879
|
)
|
|||
Proceeds from exercise of stock options
|
|
421
|
|
|
673
|
|
|
6,046
|
|
|||
Acquisition of common stock for income tax withholdings
|
|
(235
|
)
|
|
(530
|
)
|
|
(1,710
|
)
|
|||
Other, net
|
|
(345
|
)
|
|
(289
|
)
|
|
833
|
|
|||
Net cash flows (used in) provided by financing activities
|
|
(2,872
|
)
|
|
(8,118
|
)
|
|
15,290
|
|
|||
Effect of exchange rates on cash and cash equivalents
|
|
130
|
|
|
(64
|
)
|
|
(653
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
4,214
|
|
|
(7,383
|
)
|
|
(2,312
|
)
|
|||
Cash and cash equivalents at beginning of period
|
|
10,389
|
|
|
17,772
|
|
|
20,084
|
|
|||
Cash and cash equivalents at end of period
|
|
$
|
14,603
|
|
|
$
|
10,389
|
|
|
$
|
17,772
|
|
|
|
|
|
|
|
|
||||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|||
Cash paid for interest
|
|
$
|
37,692
|
|
|
$
|
29,561
|
|
|
$
|
26,427
|
|
Non-cash acquisition of property and equipment under capital leases
|
|
189,679
|
|
|
6,042
|
|
|
6,377
|
|
|||
Additions to property and equipment included in accounts payable
|
|
1,932
|
|
|
1,873
|
|
|
5,170
|
|
1.
|
DESCRIPTION OF THE COMPANY AND NATURE OF OPERATIONS
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net loss and net loss available to common stockholders
|
|
$
|
(45,343
|
)
|
|
$
|
(124,742
|
)
|
|
$
|
(48,443
|
)
|
Weighted average shares outstanding, basic and diluted
|
|
18,993
|
|
|
13,083
|
|
|
12,975
|
|
|||
|
|
|
|
|
|
|
||||||
Net loss per share, basic and diluted
|
|
$
|
(2.39
|
)
|
|
$
|
(9.54
|
)
|
|
$
|
(3.73
|
)
|
|
|
|
|
|
|
|
||||||
Anti-dilutive securities excluded from diluted net loss per share calculation for stock-based compensation plans
|
|
1,076
|
|
|
1,350
|
|
|
1,664
|
|
|
|
Year Ended December 31, 2016
|
||||||||||
|
|
As Previously
Reported
|
|
Reclassification
|
|
As Reported
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||
Data center and network services
|
|
$
|
200,660
|
|
|
$
|
(200,660
|
)
|
|
$
|
—
|
|
Cloud and hosting services
|
|
97,637
|
|
|
(97,637
|
)
|
|
—
|
|
|||
INAP COLO
|
|
—
|
|
|
221,678
|
|
|
221,678
|
|
|||
INAP CLOUD
|
|
—
|
|
|
76,619
|
|
|
76,619
|
|
|||
Costs of sales and services, exclusive of depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|||
Data center and network services
|
|
$
|
98,351
|
|
|
$
|
(98,351
|
)
|
|
$
|
—
|
|
Cloud and hosting services
|
|
25,904
|
|
|
(25,904
|
)
|
|
—
|
|
|||
INAP COLO
|
|
—
|
|
|
105,620
|
|
|
105,620
|
|
|||
INAP CLOUD
|
|
—
|
|
|
18,635
|
|
|
18,635
|
|
|
|
Year Ended December 31, 2015
|
||||||||||
|
|
As Previously
Reported
|
|
Reclassification
|
|
As Reported
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||
Data center and network services
|
|
$
|
213,040
|
|
|
$
|
(213,040
|
)
|
|
$
|
—
|
|
Cloud and hosting services
|
|
105,253
|
|
|
(105,253
|
)
|
|
—
|
|
|||
INAP COLO
|
|
—
|
|
|
234,859
|
|
|
234,859
|
|
|||
INAP CLOUD
|
|
—
|
|
|
83,434
|
|
|
83,434
|
|
|||
Costs of sales and services, exclusive of depreciation and amortization:
|
|
|
|
|
|
|
||||||
Data center and network services
|
|
$
|
104,105
|
|
|
$
|
(104,105
|
)
|
|
—
|
|
|
Cloud and hosting services
|
|
27,335
|
|
|
(27,335
|
)
|
|
—
|
|
|||
INAP COLO
|
|
—
|
|
|
111,765
|
|
|
111,765
|
|
|||
INAP CLOUD
|
|
—
|
|
|
19,675
|
|
|
19,675
|
|
3.
|
FAIR VALUE MEASUREMENTS
|
•
|
Level 1: Quoted prices in active markets for identical assets or liabilities;
|
•
|
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
•
|
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
14,603
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Asset retirement obligations
(1)
(note 10)
|
|
—
|
|
|
—
|
|
|
1,936
|
|
|
1,936
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
10,389
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency contracts (note 9)
|
|
—
|
|
|
195
|
|
|
—
|
|
|
195
|
|
||||
Asset retirement obligations
(1)
(note 10)
|
|
—
|
|
|
—
|
|
|
2,810
|
|
|
2,810
|
|
||||
|
|
|
|
|
|
|
|
|
(1)
|
We calculate the fair value of asset retirement obligations by discounting the estimated amount using the current Treasury bill rate adjusted for our credit non-performance.
|
|
|
December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Balance, January 1
|
|
$
|
2,810
|
|
|
$
|
2,803
|
|
|
$
|
2,471
|
|
Accretion
(1)
|
|
197
|
|
|
207
|
|
|
262
|
|
|||
Subsequent revision of estimated obligation
|
|
449
|
|
|
—
|
|
|
70
|
|
|||
Payments
|
|
(1,520
|
)
|
|
(200
|
)
|
|
—
|
|
|||
Balance, December 31
|
|
$
|
1,936
|
|
|
$
|
2,810
|
|
|
$
|
2,803
|
|
|
|
|
|
|
|
|
(1)
|
Included in INAP COLO "Costs of sales and services" in the accompanying consolidated statements of operations and comprehensive loss.
|
|
|
December 31,
|
||||||||||||||
|
|
2017
|
|
2016
|
||||||||||||
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Term loan
|
|
$
|
298,500
|
|
|
$
|
301,485
|
|
|
$
|
291,000
|
|
|
$
|
267,700
|
|
Revolving credit facility
|
|
5,000
|
|
|
5,050
|
|
|
35,500
|
|
|
32,600
|
|
4.
|
PROPERTY AND EQUIPMENT
|
|
|
December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Network equipment
|
|
$
|
247,190
|
|
|
$
|
231,579
|
|
Network equipment under capital lease
|
|
14,206
|
|
|
14,231
|
|
||
Furniture and equipment
|
|
26,246
|
|
|
18,300
|
|
||
Software
|
|
43,930
|
|
|
48,011
|
|
||
Leasehold improvements
|
|
412,631
|
|
|
396,891
|
|
||
Buildings under capital lease
|
|
227,482
|
|
|
63,117
|
|
||
Property and equipment, gross
|
|
971,685
|
|
|
772,129
|
|
||
Less: accumulated depreciation and amortization ($50,253 and $40,218 related to capital leases at December 31, 2016 and 2015, respectively)
|
|
(513,120
|
)
|
|
(469,449
|
)
|
||
|
|
$
|
458,565
|
|
|
$
|
302,680
|
|
|
|
Year ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Costs of sales and services
|
|
$
|
70,368
|
|
|
$
|
71,626
|
|
|
$
|
70,080
|
|
Other depreciation and amortization
|
|
2,478
|
|
|
2,274
|
|
|
19,125
|
|
|||
Subtotal
|
|
72,846
|
|
|
73,900
|
|
|
89,205
|
|
|||
Amortization of acquired and developed technologies
|
|
2,147
|
|
|
3,048
|
|
|
3,450
|
|
|||
Total depreciation and amortization
|
|
$
|
74,993
|
|
|
$
|
76,948
|
|
|
$
|
92,655
|
|
5.
|
INAP JAPAN JOINT VENTURE
|
|
|
Preliminary Purchase Price Allocation
|
Weighted Average
|
||
Cash
|
|
$
|
3,838
|
|
|
Property and equipment
|
|
725
|
|
|
|
Customer relationships
|
|
1,231
|
|
21 years
|
|
License
|
|
634
|
|
|
|
Other assets
|
|
2,322
|
|
|
|
Total assets acquired
|
|
8,750
|
|
|
|
Other liabilities
|
|
446
|
|
|
|
Noncontrolling interest
|
|
3,999
|
|
|
|
Net assets acquired
|
|
$
|
4,305
|
|
|
(in thousands, except per share amounts)
|
Year Ended December 31,
|
|||||||
|
|
2017
|
|
2016
|
||||
Revenue
|
|
$
|
286,570
|
|
|
$
|
305,733
|
|
Net loss attributable to INAP stockholders
|
(45,240
|
)
|
|
(124,722
|
)
|
|||
Basic and diluted net loss per share
|
(2.38
|
)
|
|
(9.53
|
)
|
6.
|
GOODWILL AND OTHER INTANGIBLE ASSETS
|
|
|
January 1, 2016
|
|
Re-allocations
|
|
Impairment
|
|
December 31, 2016
|
|
Re-allocations
|
|
December 31, 2017
|
||||||||||||
Reportable segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Data center services
|
|
$
|
90,849
|
|
|
$
|
(90,849
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
IP services
|
|
39,464
|
|
|
(39,464
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Data center and network services
|
|
—
|
|
|
80,105
|
|
|
(80,105
|
)
|
|
|
|
|
—
|
|
|
—
|
|
||||||
Cloud and hosting services
|
|
—
|
|
|
50,209
|
|
|
—
|
|
|
50,209
|
|
|
(50,209
|
)
|
|
—
|
|
||||||
INAP COLO
|
|
|
|
|
|
|
|
—
|
|
|
6,003
|
|
|
6,003
|
|
|||||||||
INAP CLOUD
|
|
|
|
|
|
|
|
—
|
|
|
44,206
|
|
|
44,206
|
|
|||||||||
Total
|
|
$
|
130,313
|
|
|
$
|
—
|
|
|
$
|
(80,105
|
)
|
|
$
|
50,209
|
|
|
$
|
—
|
|
|
$
|
50,209
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
|||||||||||
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|||||||
Acquired and developed technology
|
|
$
|
52,825
|
|
|
(48,063
|
)
|
|
$
|
52,195
|
|
|
$
|
(45,995
|
)
|
Customer relationships and trade names
|
|
71,116
|
|
|
(50,212
|
)
|
|
69,698
|
|
|
(47,920
|
)
|
|||
|
|
$
|
123,941
|
|
|
(98,275
|
)
|
|
$
|
121,893
|
|
|
$
|
(93,915
|
)
|
|
|
|
|
|
|
|
|
|
2018
|
$
|
4,649
|
|
2019
|
4,146
|
|
|
2020
|
3,236
|
|
|
2021
|
2,753
|
|
|
2022
|
1,794
|
|
|
Thereafter
|
9,088
|
|
|
|
$
|
25,666
|
|
7.
|
ACCRUED LIABILITIES
|
|
|
December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Compensation and benefits payable
|
|
$
|
6,673
|
|
|
$
|
5,396
|
|
Property, sales, and other taxes
|
|
2,636
|
|
|
1,627
|
|
||
Customer credit balances
|
|
1,616
|
|
|
1,256
|
|
||
Accrued interest
|
|
1,690
|
|
|
—
|
|
||
Other
|
|
3,293
|
|
|
2,324
|
|
||
|
|
$
|
15,908
|
|
|
$
|
10,603
|
|
8.
|
EXIT ACTIVITIES AND RESTRUCTURING
|
|
|
Balance December 31, 2016
|
|
Initial
Charges
|
|
Plan
Adjustments
|
|
Cash
Payments
|
|
Balance December 31, 2017
|
||||||||||
Activity for 2017 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate obligations
|
|
$
|
—
|
|
|
$
|
3,359
|
|
|
$
|
1,741
|
|
|
$
|
(1,720
|
)
|
|
$
|
3,380
|
|
Activity for 2016 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Severance
|
|
1,911
|
|
|
—
|
|
|
957
|
|
|
(2,822
|
)
|
|
46
|
|
|||||
Real estate obligations
|
|
933
|
|
|
—
|
|
|
82
|
|
|
(768
|
)
|
|
247
|
|
|||||
Activity for 2015 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate obligation
|
|
111
|
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
|
64
|
|
|||||
Service contracts
|
|
565
|
|
|
—
|
|
|
21
|
|
|
(198
|
)
|
|
388
|
|
|||||
Activity for 2014 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate obligations
|
|
1,183
|
|
|
—
|
|
|
131
|
|
|
(623
|
)
|
|
691
|
|
|||||
|
|
$
|
4,703
|
|
|
$
|
3,359
|
|
|
$
|
2,932
|
|
|
$
|
(6,178
|
)
|
|
$
|
4,816
|
|
|
|
Balance December 31, 2015
|
|
Initial
Charges
|
|
Plan
Adjustments
|
|
Cash
Payments
|
|
Balance December 31, 2016
|
||||||||||
Activity for 2016 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Severance
|
|
$
|
—
|
|
|
$
|
2,444
|
|
|
$
|
—
|
|
|
$
|
(533
|
)
|
|
$
|
1,911
|
|
Real estate obligations
|
|
—
|
|
|
1,082
|
|
|
14
|
|
|
(163
|
)
|
|
933
|
|
|||||
Service contracts
|
|
—
|
|
|
42
|
|
|
(21
|
)
|
|
(21
|
)
|
|
—
|
|
|||||
Activity for 2015 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate obligation
|
|
164
|
|
|
—
|
|
|
(13
|
)
|
|
(40
|
)
|
|
111
|
|
|||||
Service contracts
|
|
843
|
|
|
—
|
|
|
9
|
|
|
(287
|
)
|
|
565
|
|
|||||
Activity for 2014 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Real estate obligations
|
|
1,701
|
|
|
—
|
|
|
104
|
|
|
(622
|
)
|
|
1,183
|
|
|||||
Activity for 2007 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate obligation
|
|
1,170
|
|
|
—
|
|
|
747
|
|
|
(1,917
|
)
|
|
—
|
|
|||||
|
|
$
|
3,878
|
|
|
$
|
3,568
|
|
|
$
|
840
|
|
|
$
|
(3,583
|
)
|
|
$
|
4,703
|
|
|
|
Balance December 31, 2014
|
|
Initial
Charges
|
|
Plan
Adjustments
|
|
Cash
Payments
|
|
Balance December 31, 2015
|
||||||||||
Activity for 2015 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate obligations
|
|
$
|
—
|
|
|
$
|
270
|
|
|
$
|
—
|
|
|
$
|
(106
|
)
|
|
$
|
164
|
|
Service contracts
|
|
—
|
|
|
1,268
|
|
|
—
|
|
|
(425
|
)
|
|
843
|
|
|||||
Activity for 2014 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate obligation
|
|
2,010
|
|
|
—
|
|
|
244
|
|
|
(553
|
)
|
|
1,701
|
|
|||||
Activity for 2007 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Real estate obligation
|
|
2,325
|
|
|
—
|
|
|
660
|
|
|
(1,815
|
)
|
|
1,170
|
|
|||||
Other
|
|
175
|
|
|
—
|
|
|
(6
|
)
|
|
(169
|
)
|
|
—
|
|
|||||
|
|
$
|
4,510
|
|
|
$
|
1,538
|
|
|
$
|
898
|
|
|
$
|
(3,068
|
)
|
|
$
|
3,878
|
|
9.
|
DERIVATIVES
|
|
December 31,
|
||||||
|
2017
|
|
2016
|
||||
Unrealized gain, net of less than $0.1 million and $0.2 million income tax, included in “Accumulated items of other comprehensive loss” in the accompanying consolidated balance sheets
|
$
|
145
|
|
|
$
|
600
|
|
|
|
|
|
|
|||
Realized loss on effective portion, included as compensation expense primarily in “Direct costs of customer support” and “Sales, general and administrative” in the accompanying consolidated statements of operations and comprehensive loss
|
(171
|
)
|
|
328
|
|
Gain recorded as the effective portion of the change in fair value
|
|
|
$
|
728
|
|
Interest payments reclassified as an increase to interest expense
|
|
|
790
|
|
10.
|
COMMITMENTS, CONTINGENCIES AND LITIGATION
|
|
|
December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Outstanding principal balance on the term loan, less unamortized discount and prepaid costs of $9.8 million and $6.8 million, respectively
|
|
$
|
288,712
|
|
|
$
|
284,178
|
|
Outstanding balance on the revolving credit facility
|
|
5,000
|
|
|
35,500
|
|
||
Letters of credit issued with proceeds from revolving credit facility
|
|
5,361
|
|
|
4,209
|
|
||
Borrowing capacity
|
|
14,639
|
|
|
10,291
|
|
||
Interest rate – term loan
|
|
8.4
|
%
|
|
7.0
|
%
|
||
Interest rate – revolving credit facility
|
|
10.3
|
%
|
|
6.1
|
%
|
||
|
|
|
|
|
||||
Maturities of the term loan are as follows:
|
|
|
|
|
|
|
||
|
|
|
|
|
$
|
3,000
|
|
|
2019
|
|
|
|
|
3,000
|
|
||
2020
|
|
|
|
3,000
|
|
|||
2021
|
|
|
|
3,000
|
|
|||
2022
|
|
|
|
286,500
|
|
|||
|
|
|
|
|
$
|
298,500
|
|
|
|
Covenants
Requirements
|
|
|
Maximum total leverage ratio (the ratio of Consolidated Indebtedness to Consolidated EBITDA as defined in the 2017 Credit Agreement) should be equal to or less than:
|
|
5.9
|
|
(1)
|
Minimum consolidated interest coverage ratio (the ratio of Consolidated EBITDA to Consolidated Interest Expense as defined in the 2017 Credit Agreement) should be equal to or greater than:
|
|
2.0
|
|
(2)
|
|
|
2017 Annual Limit
|
|
Twelve Months Ended
December 31, 2017 |
Limitation on capital expenditures
|
|
No limit
|
|
$36 million
|
(1)
|
The maximum total leverage ratio decreases to
5.9
to 1 as of March 1, 2018,
5.9
to 1 as of June 30, 2018,
5.9
to 1 as of September 30, 2018,
5.9
to 1 as of December 31, 2018,
5.9
to 1 as of March 31, 2019,
5.9
to 1 as of June 30, 2019,
5.5
to 1 as of September 30, 2019,
5.5
to 1 as of December 31, 2019,
5.5
to 1 March 31, 2020,
5.25
to 1 as of June 30, 2020,
5.25
to 1 September 30, 2020,
4.75
to 1 as of December 31, 2020,
4.75
to 1 as of March 31, 2021,
4.75
to 1 as of June 30, 2021 and
4.5
to 1 as of September 30, 2021 and thereafter.
|
(2)
|
The minimum consolidated interest coverage ratio increases to
2.00
to 1 as of March 31, 2018,
2.00
to 1 as of June 30, 2018,
2.00
to 1 as of September 30, 2018,
2.00
to 1 as of December 31, 2018,
2.00
to 1 as of March 31, 2019,
2.00
to 1 as of June 30, 2019,
2.00
to 1 September 30, 2019,
2.00
to 1 as of December 31, 2019,
2.00
to 1 as of March 31, 2020,
2.00
to 1 as of June 30, 2020,
2.00
to 1 as of September 30, 2020,
2.25
to 1 December 31, 2020,
2.25
to 1 as of March 31, 2021,
2.25
to 1 as of June 30, 2021,
2.25
to 1 as of September 30, 2021 and thereafter.
|
2018
|
$
|
32,511
|
|
2019
|
31,021
|
|
|
2020
|
26,754
|
|
|
2021
|
26,350
|
|
|
2022
|
24,346
|
|
|
Thereafter
|
434,947
|
|
|
Remaining capital lease payments
|
575,929
|
|
|
Less: amounts representing imputed interest
|
(340,469
|
)
|
|
Present value of minimum lease payments
|
235,460
|
|
|
Less: current portion
|
(11,711
|
)
|
|
|
$
|
223,749
|
|
2018
|
$
|
11,700
|
|
2019
|
5,077
|
|
|
2020
|
2,538
|
|
|
2021
|
2,467
|
|
|
2022
|
2,523
|
|
|
Thereafter
|
3,492
|
|
|
|
$
|
27,797
|
|
2018
|
$
|
2,357
|
|
2019
|
1,221
|
|
|
2020
|
131
|
|
|
2021
|
—
|
|
|
2022
|
—
|
|
|
Thereafter
|
—
|
|
|
|
$
|
3,709
|
|
11.
|
OPERATING SEGMENT AND GEOGRAPHIC INFORMATION
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||
INAP COLO
|
|
$
|
209,580
|
|
|
$
|
221,678
|
|
|
$
|
234,859
|
|
INAP CLOUD
|
|
71,138
|
|
|
76,619
|
|
|
83,434
|
|
|||
Total revenues
|
|
280,718
|
|
|
298,297
|
|
|
318,293
|
|
|||
|
|
|
|
|
|
|
||||||
Costs of sales and services, exclusive of depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|||
INAP COLO
|
|
89,240
|
|
|
105,620
|
|
|
111,765
|
|
|||
INAP CLOUD
|
|
16,977
|
|
|
18,635
|
|
|
19,675
|
|
|||
Total costs of sales and services, exclusive of depreciation and amortization
|
|
106,217
|
|
|
124,255
|
|
|
131,440
|
|
|||
|
|
|
|
|
|
|
||||||
Segment profit:
|
|
|
|
|
|
|
|
|
|
|||
INAP COLO
|
|
120,340
|
|
|
116,058
|
|
|
123,094
|
|
|||
INAP CLOUD
|
|
54,161
|
|
|
57,984
|
|
|
63,759
|
|
|||
Total segment profit
|
|
174,501
|
|
|
174,042
|
|
|
186,853
|
|
|||
|
|
|
|
|
|
|
||||||
Goodwill impairment
|
|
—
|
|
|
80,105
|
|
|
—
|
|
|||
Exit activities, restructuring and impairments
|
|
6,249
|
|
|
7,236
|
|
|
2,278
|
|
|||
Other operating expenses, including direct costs of customer support, depreciation and amortization
|
|
163,478
|
|
|
179,770
|
|
|
210,470
|
|
|||
Income (loss) from operations
|
|
4,774
|
|
|
(93,070
|
)
|
|
(25,895
|
)
|
|||
Non-operating expenses
|
|
51,001
|
|
|
31,312
|
|
|
26,408
|
|
|||
Loss before income taxes, non-controlling interest and equity in earnings of equity-method investment
|
|
$
|
(46,227
|
)
|
|
$
|
(124,382
|
)
|
|
$
|
(52,303
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||
United States
|
|
$
|
220,018
|
|
|
$
|
231,943
|
|
|
$
|
245,853
|
|
Canada
|
|
38,750
|
|
|
44,206
|
|
|
47,021
|
|
|||
Other countries
|
|
21,950
|
|
|
22,148
|
|
|
25,419
|
|
|||
|
|
$
|
280,718
|
|
|
$
|
298,297
|
|
|
$
|
318,293
|
|
12.
|
STOCK-BASED COMPENSATION PLANS
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Costs of customer support
|
|
$
|
167
|
|
|
$
|
1,159
|
|
|
$
|
1,901
|
|
Sales, general and administrative
|
|
2,873
|
|
|
3,838
|
|
|
6,880
|
|
|||
|
|
$
|
3,040
|
|
|
$
|
4,997
|
|
|
$
|
8,781
|
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|||
Balance, December 31, 2016
|
|
795
|
|
|
$
|
27.80
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Exercised
|
|
(49
|
)
|
|
8.80
|
|
|
Forfeitures and post-vesting cancellations
|
|
(430
|
)
|
|
31.72
|
|
|
Balance, December 31, 2017
|
|
316
|
|
|
25.40
|
|
|
Exercisable, December 31, 2017
|
|
277
|
|
|
26.25
|
|
|
|
Fully
Vested and
Exercisable
|
|
Expected
to Vest
|
||||
Total shares
|
|
277
|
|
|
316
|
|
||
Weighted-average exercise price
|
|
$
|
26.25
|
|
|
$
|
25.40
|
|
Aggregate intrinsic value
|
|
$
|
—
|
|
|
$
|
—
|
|
Weighted-average remaining contractual term (in years)
|
|
3.9
|
|
|
4.4
|
|
|
|
Shares
|
|
Weighted-
Average
Grant Date
Fair
Value
|
|||
Unvested balance, December 31, 2016
|
|
555
|
|
|
$
|
4.52
|
|
Granted
|
|
483
|
|
|
$
|
6.20
|
|
Vested
|
|
(172
|
)
|
|
$
|
8.63
|
|
Forfeited
|
|
(106
|
)
|
|
$
|
9.00
|
|
Unvested balance, December 31, 2017
|
|
760
|
|
|
$
|
4.03
|
|
|
|
Stock
Options
|
|
Restricted
Stock
|
|
Total
|
||||||
Unrecognized compensation
|
|
$
|
241
|
|
|
$
|
2,972
|
|
|
$
|
3,213
|
|
Weighted-average remaining recognition period (in years)
|
|
2.51
|
|
|
1.87
|
|
|
1.92
|
|
13.
|
EMPLOYEE RETIREMENT PLAN
|
14.
|
INCOME TAXES
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
United States
|
|
$
|
(46,648
|
)
|
|
$
|
(120,553
|
)
|
|
$
|
(31,572
|
)
|
Foreign
|
|
421
|
|
|
(3,829
|
)
|
|
(20,731
|
)
|
|||
Loss from continuing operations before income taxes, non-controlling interest and equity in (earnings) of equity-method investment
|
|
$
|
(46,227
|
)
|
|
$
|
(124,382
|
)
|
|
$
|
(52,303
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Current:
|
|
|
|
|
|
|
|
|
|
|||
Federal
|
|
$
|
(730
|
)
|
|
$
|
(15
|
)
|
|
$
|
—
|
|
State
|
|
123
|
|
|
155
|
|
|
152
|
|
|||
Foreign
|
|
507
|
|
|
61
|
|
|
158
|
|
|||
|
|
(100
|
)
|
|
201
|
|
|
310
|
|
|||
Deferred:
|
|
|
|
|
|
|
|
|
|
|||
Federal
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
State
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Foreign
|
|
353
|
|
|
329
|
|
|
(3,970
|
)
|
|||
|
|
353
|
|
|
329
|
|
|
(3,970
|
)
|
|||
Provision (benefit) for income taxes
|
|
$
|
253
|
|
|
$
|
530
|
|
|
$
|
(3,660
|
)
|
|
|
Year Ended December 31,
|
|||||||
|
|
2017
|
|
2016
|
|
2015
|
|||
Federal income tax at statutory rates
|
|
(34.0
|
)%
|
|
(34.0
|
)%
|
|
(34.0
|
)%
|
Foreign income tax
|
|
0.5
|
|
|
0.7
|
|
|
4.0
|
|
State income tax
|
|
(5.0
|
)
|
|
(5.0
|
)
|
|
(4.0
|
)
|
Other permanent differences
|
|
0.4
|
|
|
0.2
|
|
|
—
|
|
Statutory tax rate change - Deferred - Tax Reform Act
|
|
(128.4
|
)
|
|
(3.2
|
)
|
|
—
|
|
Statutory tax rate change - Valuation Allowance - Tax Reform Act
|
|
128.4
|
|
|
—
|
|
|
—
|
|
Compensation
|
|
—
|
|
|
3.0
|
|
|
3.0
|
|
Goodwill impairment
|
|
—
|
|
|
25.2
|
|
|
—
|
|
Refundable AMT credit
|
|
(1.5
|
)
|
|
—
|
|
|
|
|
Change in valuation allowance
|
|
40.1
|
|
|
13.5
|
|
|
24.0
|
|
Effective tax rate
|
|
0.5
|
%
|
|
0.4
|
%
|
|
(7.0
|
)%
|
|
|
December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Long-term deferred income tax (liabilities) assets:
|
|
|
|
|
|
|
||
Property and equipment
|
|
$
|
43,554
|
|
|
$
|
57,161
|
|
Goodwill
|
|
1,392
|
|
|
2,525
|
|
||
Intangible assets
|
|
(22,021
|
)
|
|
(22,958
|
)
|
||
Deferred revenue, less current portion
|
|
1,834
|
|
|
2,809
|
|
||
Restructuring liability, less current portion
|
|
1,282
|
|
|
1,839
|
|
||
Refinance
|
|
(374
|
)
|
|
(3,054
|
)
|
||
Deferred rent
|
|
639
|
|
|
2,737
|
|
||
Stock-based compensation
|
|
911
|
|
|
3,079
|
|
||
Provision for doubtful accounts
|
|
1,772
|
|
|
1,449
|
|
||
U.S. net operating loss carryforwards
|
|
89,117
|
|
|
102,408
|
|
||
Foreign net operating loss carryforwards, less current portion
|
|
8,053
|
|
|
9,324
|
|
||
Tax credit carryforwards
|
|
2,812
|
|
|
3,616
|
|
||
Other
|
|
2,090
|
|
|
2,417
|
|
||
Long-term deferred income tax assets
|
|
131,061
|
|
|
163,352
|
|
||
Less: valuation allowance
|
|
(132,712
|
)
|
|
(164,865
|
)
|
||
Net long-term deferred income tax (liabilities) assets
|
|
(1,651
|
)
|
|
(1,513
|
)
|
||
|
|
|
|
|
||||
Net deferred tax liabilities
|
|
$
|
1,651
|
|
|
$
|
1,513
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Balance, January 1,
|
|
$
|
164,865
|
|
|
$
|
148,310
|
|
|
$
|
136,017
|
|
Increase in deferred tax assets
|
|
27,183
|
|
|
16,555
|
|
|
12,293
|
|
|||
Remeasurement in deferred tax assets
|
|
(59,336
|
)
|
|
—
|
|
|
—
|
|
|||
Balance, December 31,
|
|
$
|
132,712
|
|
|
$
|
164,865
|
|
|
$
|
148,310
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Unrecognized tax benefits balance, January 1,
|
|
$
|
187
|
|
|
$
|
—
|
|
|
$
|
408
|
|
Addition for tax positions taken in a prior year
|
|
162
|
|
|
187
|
|
|
—
|
|
|||
Deduction for tax positions taken in a prior year
|
|
(187
|
)
|
|
—
|
|
|
(408
|
)
|
|||
Unrecognized tax benefits balance, December 31,
|
|
$
|
162
|
|
|
$
|
187
|
|
|
$
|
—
|
|
15.
|
EQUITY
|
|
|
2017 Quarter Ended
|
||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Revenues
|
|
$
|
72,133
|
|
|
$
|
69,642
|
|
|
$
|
68,907
|
|
|
$
|
70,035
|
|
Costs of sales and services, exclusive of depreciation and amortization
|
|
29,045
|
|
|
26,429
|
|
|
24,945
|
|
|
25,798
|
|
||||
Costs of customer support
|
|
7,264
|
|
|
6,133
|
|
|
6,237
|
|
|
6,122
|
|
||||
Exit activities, restructuring and impairments
|
|
1,023
|
|
|
4,628
|
|
|
745
|
|
|
(148
|
)
|
||||
Net loss attributable to INAP stockholders
|
|
(8,230
|
)
|
|
(19,283
|
)
|
|
(10,895
|
)
|
|
(6,934
|
)
|
||||
Basic and diluted net loss per share
|
|
$
|
(0.51
|
)
|
|
$
|
(0.97
|
)
|
|
$
|
(0.55
|
)
|
|
$
|
(0.35
|
)
|
|
|
2016 Quarter Ended
|
||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Revenues
|
|
$
|
75,924
|
|
|
$
|
74,315
|
|
|
$
|
73,940
|
|
|
$
|
74,117
|
|
Costs of sales and services, exclusive of depreciation and amortization
|
|
31,077
|
|
|
31,370
|
|
|
31,562
|
|
|
30,246
|
|
||||
Costs of customer support
|
|
8,804
|
|
|
7,919
|
|
|
7,985
|
|
|
7,475
|
|
||||
Goodwill impairment
|
|
—
|
|
|
—
|
|
|
78,169
|
|
|
1,936
|
|
||||
Exit activities, restructuring and impairments
|
|
201
|
|
|
152
|
|
|
1,670
|
|
|
5,213
|
|
||||
Net loss attributable to INAP stockholders
|
|
(9,644
|
)
|
|
(10,693
|
)
|
|
(91,297
|
)
|
|
(13,110
|
)
|
||||
Basic and diluted net loss per share
|
|
$
|
(0.75
|
)
|
|
$
|
(0.82
|
)
|
|
$
|
(7.01
|
)
|
|
$
|
(1.01
|
)
|
|
|
Balance at
Beginning
of Fiscal
Period
|
|
Charges to
Costs and
Expense
|
|
Deductions
|
|
Balance at
End of
Fiscal
Period
|
||||||||
Year ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
|
$
|
2,121
|
|
|
$
|
1,354
|
|
|
$
|
(1,724
|
)
|
(1)
|
$
|
1,751
|
|
|
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
|
1,751
|
|
|
1,093
|
|
|
(1,598
|
)
|
(1)
|
1,246
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
|
1,246
|
|
|
1,049
|
|
|
(808
|
)
|
(1)
|
1,487
|
|
||||
|
|
|
|
|
|
|
|
|
(1)
|
Deductions in the allowance for doubtful accounts represent write-offs of uncollectible accounts net of recoveries.
|
•
|
Role and Responsibilities will include all aspects of the position of a public company CFO, as well as Corporate IT. Section 16 Officer.
|
•
|
Reporting to the President & CEO
|
•
|
Primary location will be our Secaucus datacenter in NJ.
|
•
|
Base Salary of $275K
|
•
|
Target Cash Bonus of 50%
|
•
|
Potential for additional cash bonus up to 100% subject to Compensation Committee discretion
|
•
|
Annual Equity Grant at a value of your base salary, or $275K to start. This value will be converted into Restricted Stock, subject to a 3-year vest. 50% of the grant will be subject to time, and 50% will be subject to performance as part of the Compensation Committee’s approve metrics – TBD.
|
•
|
12 months severance, subject to clearing the first 90 days. The Company will pay COBRA for the period under severance. The severance Amount will be paid over 12 months in the normal payroll cycle.
|
•
|
Participation in Company benefits plans, including medical, dental, 401K, etc.
|
•
|
4 weeks vacation
|
Name of Entity
|
|
Jurisdiction
|
|
|
|
Datagram LLC
|
|
Delaware
|
Internap Connectivity LLC
|
|
Delaware
|
Internap Japan Co., Ltd.*
|
|
Japan
|
Internap Network Services (Australia) Co. Pty. Ltd.
|
|
Australia
|
Internap Network Services B.V.
|
|
Netherlands
|
Internap Network Services Canada Co.
|
|
Canada
|
Internap Network Services (HK) Limited
|
|
Hong Kong
|
Internap Network Services (Singapore) Pte Limited
|
|
Singapore
|
Internap Network Services U.K. Limited
|
|
United Kingdom
|
Internap Technologies (Bermuda) Limited
|
|
Bermuda
|
InterNAP Technologies B.V.
|
|
Netherlands
|
iWeb Intellectual Property Inc.
|
|
Quebec, Canada
|
iWeb Peering Corporation
|
|
Delaware
|
iWeb Technologies Inc.
|
|
Quebec, Canada
|
Server Intellect LLC
|
|
Delaware
|
SingleHop, B.V.
|
|
Netherlands
|
SingleHop LLC
|
|
Delaware
|
Ubersmith, Inc.
|
|
Delaware
|
|
|
/s/ PricewaterhouseCoopers LLP
|
|
Atlanta, Georgia
|
|
March 15, 2018
|
|
|
|
/s/ BDO USA, LLP
|
|
Atlanta, Georgia
|
|
March 15, 2018
|
|
1.
|
I have reviewed this Annual Report on Form 10-K of Internap Corporation (the “registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: March 15, 2018
|
/s/ Peter D. Aquino
|
|
Peter D. Aquino
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K of Internap Corporation (the “registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: March 15, 2018
|
/s/ Robert Dennerlein
|
|
Robert Dennerlein
|
|
Chief Financial Officer
|
Date: March 15, 2018
|
|
|
|
|
/s/ Peter D. Aquino
|
|
Peter D. Aquino
|
|
President and Chief Executive Officer
|
Date: March 15, 2018
|
|
|
|
|
/s/ Robert Dennerlein
|
|
Robert Dennerlein
|
|
Chief Financial Officer
|