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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
x
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Emerging growth 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 (4)
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Los Angeles (8)
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Phoenix (6)
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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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Sacramento
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Frankfurt (2)
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Japan (4)
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Chicago (6)
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Montreal (6)
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Seattle (3)
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London (4)
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Singapore (6)
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Connecticut
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New York/New Jersey (9)
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Silicon Valley (10)
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Paris
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Sydney
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Dallas (4)
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Northern Virginia/DC (8)
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Toronto
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|
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Denver (2)
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Oakland
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|
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Houston
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Philadelphia (2)
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•
|
Colocation providers, including CyrusOne, Equinix, CoreSite, QTS Realty Trust, ZColo and Cyxtera
|
•
|
Managed services and hosting providers, including: Rackspace, IBM Cloud, Hosting, and CenturyLink
|
•
|
Cloud providers, including IBM Cloud, OVH.com, Amazon Web Services, Microsoft Azure, and Google Cloud
|
•
|
Network Service providers including Cogent, XO, CenturyLink, Zayo, Telia and NTT Communications
|
•
|
developing or expanding efficient sales channels;
|
•
|
sourcing, identifying, obtaining and managing qualified research and development and technical staff with the appropriate skill and expertise;
|
•
|
managing the length and roll out of the development cycle for new products and product enhancements;
|
•
|
identifying and adapting to emerging and evolving industry standards and to technological developments by our competitors' and customers' services and products;
|
•
|
entering into new or unproven markets where we have limited experience or there is significant competition;
|
•
|
developing and managing new service and product service strategies and integrating them with our existing services and products;
|
•
|
incorporating acquired products, technologies and personnel;
|
•
|
trade compliance issues affecting our ability to ship new products to international markets; and
|
•
|
obtaining required technology licenses and technical access from operating system software vendors on reasonable terms to enable the development and deployment of interoperable products.
|
•
|
their level of satisfaction with our services;
|
•
|
our ability to provide features and functionality demanded by our customers;
|
•
|
the prices of our services compared to our competitors;
|
•
|
technological advances that allow customers to meet their needs with fewer infrastructure resources;
|
•
|
mergers and acquisitions affecting our customer base; which include a significant number of technology customers that are potentially attractive acquisition targets; and
|
•
|
reduction in our customers' spending levels or economic decline in our customer’s markets.
|
•
|
identify and obtain the use of locations meeting our selection criteria on competitive terms, if at all;
|
•
|
estimate costs and control delays for our services;
|
•
|
obtain necessary permits on a timely basis, if at all;
|
•
|
generate sufficient cash flow from operations or through current or additional debt or equity financings to support these expansion plans;
|
•
|
establish key relationships with IT infrastructure providers and other third party vendors required to deliver our services;
|
•
|
obtain the necessary power density, upgrades and supply from local utility companies at competitive rates;
|
•
|
hire, train, retain and manage sufficient operational and technical employees and supporting personnel;
|
•
|
avoid labor issues impacting our suppliers, such as a strike; and
|
•
|
identify and obtain contractors that perform on the agreed upon contract performance.
|
•
|
develop and expand their IT infrastructure and service offerings more rapidly;
|
•
|
adapt to new or emerging technologies and changes in customer requirements more quickly;
|
•
|
take advantage of acquisitions and other opportunities more readily;
|
•
|
borrow at more competitive rates or otherwise take advantage of capital resources not available to us;
|
•
|
attract or retain more qualified personnel to develop and market their service offerings; or
|
•
|
devote greater resources to the marketing and sale of their services and adopt more aggressive pricing policies than we can.
|
•
|
human error or accidents;
|
•
|
physical or electronic security breaches;
|
•
|
network connectivity downtime;
|
•
|
fire, earthquake, hurricane, flood, tornado and other natural disasters;
|
•
|
improper maintenance by the landlords of the buildings in which our data centers are located;
|
•
|
water damage, extreme temperatures and fiber cuts;
|
•
|
power loss, utility interruptions or equipment failure;
|
•
|
sabotage, vandalism and terrorism; and
|
•
|
failure by us or our vendors to provide adequate service or maintenance to our equipment.
|
•
|
sourcing, evaluating and targeting potential customers and managing existing customers;
|
•
|
implementing customer orders for services;
|
•
|
delivering these services;
|
•
|
timely billing and collection for these services;
|
•
|
budgeting, forecasting, tracking and reporting our results of operations;
|
•
|
maintaining the Company’s internal control over financial information; and
|
•
|
providing technical and operational support to customers and tracking the resolution of customer issues.
|
•
|
challenges in establishing and maintaining relationships with global customers, ISPs and local vendors, including data center and local network operators;
|
•
|
challenges in staffing and managing NOCs and POPs across disparate geographic areas;
|
•
|
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.;
|
•
|
challenges in reducing operating expense or other costs required by local laws and longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
|
•
|
exposure to fluctuations in international currency exchange rates; and
|
•
|
costs of customizing POPs for foreign countries and customers.
|
•
|
difficulty integrating the operations, control environments and personnel of acquired companies;
|
•
|
potential disruption of our ongoing business;
|
•
|
potential distraction of management and other key personnel;
|
•
|
diversion of business resources from core operations;
|
•
|
expenses and potential liabilities related to the transactions, dispositions or acquired business;
|
•
|
failure to realize synergies or other expected benefits;
|
•
|
difficulty in maintaining controls, procedures, and policies,
|
•
|
obtaining funding or other sources of liquidity on competitive terms, if at all; and
|
•
|
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.
|
•
|
political conditions and events, including embargo;
|
•
|
restrictive actions by U.S. and foreign governments;
|
•
|
the imposition of withholding or other taxes on foreign income, tariffs or restrictions on foreign trade and investment;
|
•
|
adverse tax consequences;
|
•
|
limitations on repatriation of earnings and cash;
|
•
|
currency exchange controls and import/export quotas;
|
•
|
nationalization, expropriation, asset seizure, blockades and blacklisting;
|
•
|
limitations in the availability, amount or terms of insurance coverage;
|
•
|
loss of contract rights and inability to adequately enforce contracts;
|
•
|
political instability, war and civil disturbances or other risks that may limit or disrupt markets, such as terrorist attacks, piracy and kidnapping;
|
•
|
outbreaks of pandemic diseases or fear of such outbreaks;
|
•
|
fluctuations in currency exchange rates associated with non-U.S. operations (including as a result of Brexit), hard currency shortages and controls on currency exchange that affect demand for our services and our profitability;
|
•
|
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 other non-U.S. laws and regulations, including the U.K. Bribery Act 2010 (the "Bribery Act"), and Modern Slavery Act 2015;
|
•
|
labor strikes and shortages;
|
•
|
changes in general economic and political conditions;
|
•
|
adverse changes in foreign laws or regulatory requirements; and
|
•
|
different liability standards and legal systems that may be less developed and less predictable than those in the United States.
|
•
|
competition and the introduction of new services by our competitors;
|
•
|
continued pricing pressures;
|
•
|
fluctuations in the demand and sales cycle for our services;
|
•
|
fluctuations in the market for qualified sales, technical, customer support and retention and other personnel;
|
•
|
the cost and availability of adequate public utility services, including access to power;
|
•
|
our ability to obtain local loop connections to our POPs at favorable prices; and
|
•
|
any impairment or restructuring charges that we may incur in the future.
|
•
|
actual or anticipated variations in our quarterly and annual results of operations;
|
•
|
changes in market valuations or results of companies in the industries in which we may compete;
|
•
|
changes in expectations of future financial performance or changes in estimates of securities analysts;
|
•
|
fluctuations in stock market prices and volumes;
|
•
|
future issuances of common stock or other securities;
|
•
|
the addition or departure of key personnel;
|
•
|
announcements by us or our competitors of acquisitions, investments or strategic alliances; and
|
•
|
actions of our equity investors, including sales of our common stock by significant stockholders.
|
Equity Compensation Plan Information
|
||||||||
Plan category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
|
|
Weighted-average exercise price of outstanding options, warrants and rights
(b)
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
|
||
Equity compensation plans approved by security holders
(1)
|
|
223
(2)
|
|
$
|
25.95
|
|
|
1,337
(3)
|
|
|
|
|
|
|
|
(1)
|
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.
|
(2)
|
This number includes the following: 85,376 shares subject to outstanding awards granted under the 2014 Stock Incentive Plan, 132,581 shares subject to outstanding awards granted under the 2005 Incentive Stock Plan as amended, 1,153 shares subject to outstanding awards granted under the 2000 Non-Officer Equity Incentive Plan and 4,317 shares subject to outstanding awards granted under the 1999 Non-Employee Directors' Stock Option Plan.
|
(3)
|
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.
|
Period
|
|
Total Number of Shares Purchased
(1)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
|
||||||
October 1 to 31, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
November 1 to 30, 2018
|
|
167
|
|
|
$
|
6.81
|
|
|
—
|
|
|
—
|
|
|
December 1 to 31, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
5,000,000
|
|
|
Total
|
|
167
|
|
|
$
|
6.81
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated Statements of Operations and Comprehensive Loss Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net revenues
|
|
$
|
317,373
|
|
|
$
|
280,718
|
|
|
$
|
298,297
|
|
|
$
|
318,293
|
|
|
$
|
334,959
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Costs of sales and services, exclusive of depreciation and amortization, shown below
|
|
107,262
|
|
|
106,217
|
|
|
124,255
|
|
|
131,440
|
|
|
144,946
|
|
|||||
Costs of customer support
|
|
32,517
|
|
|
25,757
|
|
|
32,184
|
|
|
36,475
|
|
|
36,804
|
|
|||||
Sales, general and administrative
|
|
75,356
|
|
|
62,728
|
|
|
70,639
|
|
|
81,340
|
|
|
81,859
|
|
|||||
Depreciation and amortization
|
|
90,676
|
|
|
74,993
|
|
|
76,948
|
|
|
92,655
|
|
|
81,169
|
|
|||||
Goodwill impairment
|
|
—
|
|
|
—
|
|
|
80,105
|
|
|
—
|
|
|
—
|
|
|||||
Exit activities, restructuring and impairments
|
|
5,406
|
|
|
6,249
|
|
|
7,236
|
|
|
2,278
|
|
|
4,520
|
|
|||||
Total operating costs and expenses
|
|
311,217
|
|
|
275,944
|
|
|
391,367
|
|
|
344,188
|
|
|
349,298
|
|
|||||
Income (loss) from operations
|
|
6,156
|
|
|
4,774
|
|
|
(93,070
|
)
|
|
(25,895
|
)
|
|
(14,339
|
)
|
|||||
Non-operating expenses
|
|
67,874
|
|
|
51,001
|
|
|
31,312
|
|
|
26,408
|
|
|
26,775
|
|
|||||
Loss before income taxes and equity in earnings of equity-method investment
|
|
(61,718
|
)
|
|
(46,227
|
)
|
|
(124,382
|
)
|
|
(52,303
|
)
|
|
(41,114
|
)
|
|||||
Provision (benefit) for income taxes
|
|
657
|
|
|
253
|
|
|
530
|
|
|
(3,660
|
)
|
|
(1,361
|
)
|
|||||
Equity in earnings of equity-method investment, net of taxes
|
|
—
|
|
|
(1,207
|
)
|
|
(170
|
)
|
|
(200
|
)
|
|
(259
|
)
|
|||||
Net loss
|
|
(62,375
|
)
|
|
(45,273
|
)
|
|
(124,742
|
)
|
|
(48,443
|
)
|
|
(39,494
|
)
|
|||||
Less net income attributable to non-controlling interest
|
|
125
|
|
|
70
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net loss attributable to INAP shareholders
|
|
$
|
(62,500
|
)
|
|
$
|
(45,343
|
)
|
|
$
|
(124,742
|
)
|
|
$
|
(48,443
|
)
|
|
$
|
(39,494
|
)
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic and diluted
|
|
$
|
(3.01
|
)
|
|
$
|
(2.39
|
)
|
|
$
|
(9.54
|
)
|
|
$
|
(3.73
|
)
|
|
$
|
(3.08
|
)
|
|
|
December 31,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Consolidated Balance Sheets Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
|
$
|
17,823
|
|
|
$
|
14,603
|
|
|
$
|
10,389
|
|
|
$
|
17,772
|
|
|
$
|
20,084
|
|
Total assets
|
|
744,931
|
|
|
586,525
|
|
|
430,615
|
|
|
554,611
|
|
|
590,735
|
|
|||||
Credit facilities, due after one year, and capital lease obligations, less current portion
|
|
687,168
|
|
|
519,249
|
|
|
367,376
|
|
|
370,693
|
|
|
356,686
|
|
|||||
Total stockholders' equity (deficit)
|
|
$
|
57
|
|
|
$
|
(1,032
|
)
|
|
$
|
(3,724
|
)
|
|
$
|
114,436
|
|
|
$
|
150,336
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Capital expenditures, net of equipment sale-leaseback transactions
|
|
$
|
41,821
|
|
|
$
|
36,449
|
|
|
$
|
46,192
|
|
|
$
|
57,157
|
|
|
$
|
77,408
|
|
Net cash flows provided by operating activities
|
|
34,572
|
|
|
41,748
|
|
|
48,165
|
|
|
40,208
|
|
|
53,248
|
|
|||||
Net cash flows used in investing activities
|
|
(174,037
|
)
|
|
(32,209
|
)
|
|
(45,650
|
)
|
|
(57,157
|
)
|
|
(75,727
|
)
|
|||||
Net cash flows provided by (used in) financing activities
|
|
142,680
|
|
|
(5,455
|
)
|
|
(9,834
|
)
|
|
15,290
|
|
|
7,924
|
|
•
|
2018 Reported Revenue increase is a combination of organic and acquisition growth, offset by portfolio improvement initiatives and accelerated DC closures;
|
•
|
The INAP Sales team is totally rebuilt and active selling larger deals, with overall improved productivity;
|
•
|
Completed two tuck-in deals in 2018: SingleHop to upgrade Managed Services, and our BofA Data Center in Phoenix to add a new INAP Flagship;
|
•
|
Margin Expansion continued through best practices / cost rationalization / real estate portfolio management; and
|
•
|
Projects related to the two-year turnaround are completed, with incremental opportunity to always improve cost structure with targeted investments.
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|||
Net revenues
|
|
$
|
317,373
|
|
|
100.0
|
%
|
|
$
|
280,718
|
|
|
100.0
|
%
|
|
$
|
298,297
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to INAP shareholders
|
|
$
|
(62,500
|
)
|
|
(19.7
|
)%
|
|
$
|
(45,343
|
)
|
|
(16.2
|
)%
|
|
$
|
(124,742
|
)
|
|
(41.8
|
)%
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Depreciation and amortization
|
|
90,676
|
|
|
28.6
|
%
|
|
74,993
|
|
|
26.7
|
%
|
|
76,948
|
|
|
25.8
|
%
|
|||
Interest expense
|
|
68,132
|
|
|
21.5
|
%
|
|
50,476
|
|
|
18.0
|
%
|
|
30,909
|
|
|
10.4
|
%
|
|||
Provision for income taxes
|
|
657
|
|
|
0.2
|
%
|
|
253
|
|
|
0.1
|
%
|
|
530
|
|
|
0.2
|
%
|
|||
Other (income) expense
|
|
(252
|
)
|
|
(0.1
|
)%
|
|
(682
|
)
|
|
(0.2
|
)%
|
|
233
|
|
|
0.1
|
%
|
|||
(Gain) loss on disposal of property and equipment, net
|
|
(109
|
)
|
|
—
|
%
|
|
(353
|
)
|
|
(0.1
|
)%
|
|
8
|
|
|
—
|
%
|
|||
Exit activities, restructuring and impairments, including goodwill impairment
|
|
5,406
|
|
|
1.7
|
%
|
|
6,249
|
|
|
2.2
|
%
|
|
87,341
|
|
|
29.3
|
%
|
|||
Stock-based compensation
|
|
4,678
|
|
|
1.5
|
%
|
|
3,040
|
|
|
1.1
|
%
|
|
4,997
|
|
|
1.7
|
%
|
|||
Non-income tax contingency
|
|
842
|
|
|
0.3
|
%
|
|
1,500
|
|
|
0.5
|
%
|
|
—
|
|
|
—
|
%
|
|||
Strategic alternatives and related costs
(1)
|
|
125
|
|
|
—
|
%
|
|
70
|
|
|
—
|
%
|
|
1,408
|
|
|
0.5
|
%
|
|||
Organizational realignment costs
(2)
|
|
791
|
|
|
0.2
|
%
|
|
957
|
|
|
0.3
|
%
|
|
4,412
|
|
|
1.5
|
%
|
|||
Claim settlement
|
|
—
|
|
|
—
|
%
|
|
713
|
|
|
0.3
|
%
|
|
—
|
|
|
—
|
%
|
|||
Acquisition costs
(3)
|
|
2,869
|
|
|
0.9
|
%
|
|
373
|
|
|
0.1
|
%
|
|
—
|
|
|
—
|
%
|
|||
Adjusted EBITDA
|
|
$
|
111,315
|
|
|
35.1
|
%
|
|
$
|
92,246
|
|
|
32.9
|
%
|
|
$
|
82,044
|
|
|
27.5
|
%
|
(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, 2018, 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 consolidated statements of operations and comprehensive loss for the years ended
December 31, 2018
, 2017 and 2016.
|
(3)
|
On February 28, 2018, we acquired SingleHop LLC, which resulted in higher acquisition costs.
|
|
|
Year Ended December 31,
|
|
Increase (decrease) from 2017 to 2018
|
|
Increase (decrease) from 2016 to 2017
|
||||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
INAP US
|
|
$
|
248,184
|
|
|
$
|
215,770
|
|
|
$
|
229,902
|
|
|
$
|
32,414
|
|
|
15.0
|
%
|
|
$
|
(14,132
|
)
|
|
(6.1
|
)%
|
INAP INTL
|
|
69,189
|
|
|
64,948
|
|
|
68,395
|
|
|
4,241
|
|
|
6.5
|
|
|
(3,447
|
)
|
|
(5.0
|
)
|
|||||
Net revenues
|
|
317,373
|
|
|
280,718
|
|
|
298,297
|
|
|
36,655
|
|
|
13.1
|
|
|
(17,579
|
)
|
|
(5.9
|
)
|
|||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Costs of sales and services, exclusive of depreciation and amortization, shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
INAP US
|
|
80,550
|
|
|
82,997
|
|
|
98,512
|
|
|
(2,447
|
)
|
|
(2.9
|
)
|
|
(15,515
|
)
|
|
(15.7
|
)
|
|||||
INAP INTL
|
|
26,712
|
|
|
23,220
|
|
|
25,743
|
|
|
3,492
|
|
|
15.0
|
|
|
(2,523
|
)
|
|
(9.8
|
)
|
|||||
Costs of customer support
|
|
32,517
|
|
|
25,757
|
|
|
32,184
|
|
|
6,760
|
|
|
26.2
|
|
|
(6,427
|
)
|
|
(20.0
|
)
|
|||||
Sales, general and administrative
|
|
75,356
|
|
|
62,728
|
|
|
70,639
|
|
|
12,628
|
|
|
20.1
|
|
|
(7,911
|
)
|
|
(11.2
|
)
|
|||||
Depreciation and amortization
|
|
90,676
|
|
|
74,993
|
|
|
76,948
|
|
|
15,683
|
|
|
20.9
|
|
|
(1,955
|
)
|
|
(2.5
|
)
|
|||||
Goodwill impairment
|
|
—
|
|
|
—
|
|
|
80,105
|
|
|
—
|
|
|
—
|
|
|
(80,105
|
)
|
|
—
|
|
|||||
Exit activities, restructuring and impairments
|
|
5,406
|
|
|
6,249
|
|
|
7,236
|
|
|
(843
|
)
|
|
(13.5
|
)
|
|
(987
|
)
|
|
(13.6
|
)
|
|||||
Total operating costs and expenses
|
|
311,217
|
|
|
275,944
|
|
|
391,367
|
|
|
35,273
|
|
|
12.8
|
|
|
(115,423
|
)
|
|
(29.5
|
)
|
|||||
Income (loss) from operations
|
|
$
|
6,156
|
|
|
$
|
4,774
|
|
|
$
|
(93,070
|
)
|
|
$
|
1,382
|
|
|
28.9
|
|
|
$
|
97,844
|
|
|
105.1
|
|
Interest expense
|
|
$
|
68,132
|
|
|
$
|
50,476
|
|
|
$
|
30,909
|
|
|
$
|
17,656
|
|
|
35.0
|
|
|
$
|
19,567
|
|
|
63.3
|
|
Provision for income taxes
|
|
$
|
657
|
|
|
$
|
253
|
|
|
$
|
530
|
|
|
$
|
404
|
|
|
159.7
|
%
|
|
$
|
(277
|
)
|
|
(52.3
|
)%
|
•
|
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,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||
INAP US
|
|
$
|
248,184
|
|
|
$
|
215,770
|
|
|
$
|
229,902
|
|
INAP INTL
|
|
69,189
|
|
|
64,948
|
|
|
68,395
|
|
|||
Net revenues
|
|
317,373
|
|
|
280,718
|
|
|
298,297
|
|
|||
|
|
|
|
|
|
|
||||||
Costs of sales and services, customer support and sales and marketing:
|
|
|
|
|
|
|
|
|
|
|||
INAP US
|
|
134,792
|
|
|
128,062
|
|
|
148,706
|
|
|||
INAP INTL
|
|
45,124
|
|
|
37,829
|
|
|
41,900
|
|
|||
Total costs of sales and services, customer support and sales and marketing
|
|
179,916
|
|
|
165,891
|
|
|
190,606
|
|
|||
|
|
|
|
|
|
|
||||||
Segment profit:
|
|
|
|
|
|
|
|
|
|
|||
INAP US
|
|
113,392
|
|
|
87,708
|
|
|
81,196
|
|
|||
INAP INTL
|
|
24,065
|
|
|
27,119
|
|
|
26,495
|
|
|||
Total segment profit
|
|
137,457
|
|
|
114,827
|
|
|
107,691
|
|
|||
|
|
|
|
|
|
|
||||||
Goodwill impairment
|
|
—
|
|
|
—
|
|
|
80,105
|
|
|||
Exit activities, restructuring and impairments
|
|
5,406
|
|
|
6,249
|
|
|
7,236
|
|
|||
Other operating expenses, including sales, general and administrative and depreciation and amortization expenses
|
|
125,895
|
|
|
103,804
|
|
|
113,420
|
|
|||
Income (loss) from operations
|
|
6,156
|
|
|
4,774
|
|
|
(93,070
|
)
|
|||
Non-operating expenses
|
|
67,874
|
|
|
51,001
|
|
|
31,312
|
|
|||
Loss before income taxes and equity in earnings of equity-method investment
|
|
$
|
(61,718
|
)
|
|
$
|
(46,227
|
)
|
|
$
|
(124,382
|
)
|
|
|
2018
|
|
2017
|
||||
United States
|
|
$
|
252,482
|
|
|
$
|
220,018
|
|
Canada
|
|
38,133
|
|
|
38,750
|
|
||
Other
|
|
26,758
|
|
|
21,950
|
|
||
|
|
$
|
317,373
|
|
|
$
|
280,718
|
|
|
|
2018
|
|
2017
|
||||
Customer support
|
|
$
|
165
|
|
|
$
|
167
|
|
Sales, general and administrative
|
|
4,513
|
|
|
2,873
|
|
||
|
|
$
|
4,678
|
|
|
$
|
3,040
|
|
|
|
2017
|
|
2016
|
||||
Costs of customer support
|
|
$
|
167
|
|
|
$
|
1,159
|
|
Sales, general and administrative
|
|
2,873
|
|
|
3,838
|
|
||
|
|
$
|
3,040
|
|
|
$
|
4,997
|
|
|
|
Covenants Requirements
|
|
Ratios at December 31, 2018
|
|
Maximum Total Net Leverage Ratio (the ratio of Consolidated Indebtedness to Consolidated EBITDA as defined in the Second Amendment to the 2017 Credit Agreement) should be equal to or less than:
|
|
5.9
(1)
|
|
5.4
|
|
Maximum Consolidated Interest Coverage Ratio (the ratio of Consolidated EBITDA to Consolidated Interest Expense as defined in the Second Amendment to the 2017 Credit Agreement) should be equal to or greater than:
|
|
2.0
(2)
|
|
2.1
|
|
(1)
|
The maximum total leverage ratio decreases to 5.9 to 1 as of March 31, 2019 - June 30, 2019, 5.5 to 1 as of September 30, 2019 - March 31, 2020, 5.25 to 1 as of June 30, 2020 - September 30, 2020, 4.75 to 1 as of December 31, 2020 - 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, 2019 - September 30, 2020, and 2.25 to 1 December 31, 2020 - September 30, 2021 and thereafter.
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
Total
|
|
2019
|
|
2020-2021
|
|
2022-2023
|
|
Thereafter
|
||||||||||
Current Credit Agreement:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Term loan, including interest
|
|
$
|
543,937
|
|
|
$
|
39,946
|
|
|
$
|
78,903
|
|
|
$
|
425,088
|
|
|
$
|
—
|
|
Capital lease obligations, including interest
|
|
800,602
|
|
|
34,719
|
|
|
68,795
|
|
|
66,515
|
|
|
630,573
|
|
|||||
Exit activities and restructuring
|
|
2,601
|
|
|
2,526
|
|
|
75
|
|
|
—
|
|
|
—
|
|
|||||
Asset retirement obligation
|
|
3,384
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,384
|
|
|||||
Operating lease commitments
|
|
39,484
|
|
|
7,980
|
|
|
15,232
|
|
|
12,515
|
|
|
3,757
|
|
|||||
Service and purchase commitments
|
|
6,447
|
|
|
3,981
|
|
|
2,362
|
|
|
104
|
|
|
—
|
|
|||||
|
|
$
|
1,396,455
|
|
|
$
|
89,152
|
|
|
$
|
165,367
|
|
|
$
|
504,222
|
|
|
$
|
637,714
|
|
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, 2018, 2017 and 2016
|
F-
3
|
Consolidated Balance Sheets as of December 31, 2018 and 2017
|
F-
4
|
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2018, 2017 and 2016
|
F-
5
|
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016
|
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, 2018, 2017 and 2016
|
Item 15(a)(3).
Exhibits
.
The following exhibits are filed as part of this report:
|
||
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
2.1
|
|
|
|
|
|
2.2
|
|
|
|
|
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
3.3
|
|
|
|
|
|
3.4
|
|
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
|
10.5
|
|
|
|
|
|
10.6
|
|
|
|
|
|
10.7
|
|
|
|
|
|
10.8
|
|
|
|
|
|
10.9
|
|
|
|
|
|
10.10
|
|
|
|
|
|
10.11
|
|
|
|
|
|
10.12
|
|
|
|
|
|
10.13
|
|
|
|
|
|
10.14
|
|
|
|
|
|
10.15
|
|
|
|
|
|
10.16
|
|
|
|
|
|
10.17
|
|
|
|
|
|
10.18
|
|
|
|
|
|
10.19
|
|
|
|
|
|
10.20
|
|
|
|
|
|
10.21
|
|
|
|
|
10.22
|
|
|
|
|
|
10.23
|
|
|
|
|
|
10.24
|
|
|
|
|
|
10.25
|
|
|
|
|
|
10.26
|
|
|
|
|
|
10.27
|
|
|
|
|
|
10.28
|
|
|
|
|
|
10.29
|
|
|
|
|
|
10.30
|
|
|
|
|
|
10.31
|
|
|
|
|
|
10.32
|
|
|
|
|
|
10.33
|
|
|
|
|
|
10.34
|
|
|
|
|
|
10.35
|
|
|
|
|
|
10.36
|
|
|
|
|
|
10.37
|
|
|
|
|
|
10.38
|
|
|
|
|
|
10.39
|
|
|
|
|
|
10.40
|
|
|
|
|
|
10.41
|
|
|
|
|
|
10.42
|
|
|
|
|
|
10.43
|
|
|
|
|
|
10.44
|
|
|
|
|
|
10.45
|
|
|
|
|
|
10.46
|
|
|
|
|
|
10.47
|
|
|
|
|
10.48
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
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 18, 2019
|
|
|
|
|
By:
|
/s/ James C. Keeley
|
|
|
|
James C. Keeley
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Peter D. Aquino
|
|
|
|
|
Peter D. Aquino
|
|
President, CEO and Director
|
|
March 18, 2019
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ James C. Keeley
|
|
|
|
|
James C. Keeley
|
|
Chief Financial Officer
|
|
March 18, 2019
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
/s/ Joanna Lanni
|
|
|
|
|
Joanna Lanni
|
|
VP and Corporate Controller
|
|
March 18, 2019
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Gary M. Pfeiffer
|
|
|
|
|
Gary M. Pfeiffer
|
|
Director
|
|
March 18, 2019
|
|
|
|
|
|
/s/ Peter J. Rogers, Jr.
|
|
|
|
|
Peter J. Rogers, Jr.
|
|
Director
|
|
March 18, 2019
|
|
|
|
|
|
/s/ Debora J. Wilson
|
|
|
|
|
Debora J. Wilson
|
|
Director
|
|
March 18, 2019
|
|
|
|
|
|
/s/ Lance Weaver
|
|
|
|
|
Lance Weaver
|
|
Director
|
|
March 18, 2019
|
|
|
|
|
|
/s/ David B. Potts
|
|
|
|
|
David B. Potts
|
|
Director
|
|
March 18, 2019
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net revenues
|
$
|
317,373
|
|
|
$
|
280,718
|
|
|
$
|
298,297
|
|
|
|
|
|
|
|
||||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|||
Costs of sales and services, exclusive of depreciation and amortization
|
107,262
|
|
|
106,217
|
|
|
124,255
|
|
|||
Costs of customer support
|
32,517
|
|
|
25,757
|
|
|
32,184
|
|
|||
Sales, general and administrative
|
75,356
|
|
|
62,728
|
|
|
70,639
|
|
|||
Depreciation and amortization
|
90,676
|
|
|
74,993
|
|
|
76,948
|
|
|||
Goodwill impairment
|
—
|
|
|
—
|
|
|
80,105
|
|
|||
Exit activities, restructuring and impairments
|
5,406
|
|
|
6,249
|
|
|
7,236
|
|
|||
Total operating costs and expenses
|
311,217
|
|
|
275,944
|
|
|
391,367
|
|
|||
Income (loss) from operations
|
6,156
|
|
|
4,774
|
|
|
(93,070
|
)
|
|||
|
|
|
|
|
|
||||||
Interest expense
|
68,132
|
|
|
50,476
|
|
|
30,909
|
|
|||
(Gain) loss on foreign currency, net
|
(258
|
)
|
|
525
|
|
|
485
|
|
|||
Other income, net
|
—
|
|
|
—
|
|
|
(82
|
)
|
|||
Total non-operating expenses
|
67,874
|
|
|
51,001
|
|
|
31,312
|
|
|||
|
|
|
|
|
|
||||||
Loss before income taxes and equity in earnings of equity-method investment
|
(61,718
|
)
|
|
(46,227
|
)
|
|
(124,382
|
)
|
|||
Provision for income taxes
|
657
|
|
|
253
|
|
|
530
|
|
|||
Equity in earnings of equity-method investment, net of taxes
|
—
|
|
|
(1,207
|
)
|
|
(170
|
)
|
|||
|
|
|
|
|
|
||||||
Net loss
|
(62,375
|
)
|
|
(45,273
|
)
|
|
(124,742
|
)
|
|||
Less net income attributable to non-controlling interest
|
125
|
|
|
70
|
|
|
—
|
|
|||
Net loss attributable to INAP shareholders
|
(62,500
|
)
|
|
(45,343
|
)
|
|
(124,742
|
)
|
|||
|
|
|
|
|
|
||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|||
Foreign currency translation adjustment
|
259
|
|
|
23
|
|
|
(39
|
)
|
|||
Unrealized gain on foreign currency contracts
|
—
|
|
|
145
|
|
|
600
|
|
|||
Unrealized gain on interest rate swap
|
—
|
|
|
—
|
|
|
728
|
|
|||
Total other comprehensive income
|
259
|
|
|
168
|
|
|
1,289
|
|
|||
|
|
|
|
|
|
||||||
Comprehensive loss
|
$
|
(62,241
|
)
|
|
$
|
(45,175
|
)
|
|
$
|
(123,453
|
)
|
|
|
|
|
|
|
||||||
Basic and diluted net loss per share
|
$
|
(3.01
|
)
|
|
$
|
(2.39
|
)
|
|
$
|
(9.54
|
)
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding used in computing basic and diluted net loss per share
|
20,732
|
|
|
18,993
|
|
|
13,083
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
ASSETS
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
17,823
|
|
|
$
|
14,603
|
|
Accounts receivable, net of allowance for doubtful accounts of $1,547 and $1,487, respectively
|
20,054
|
|
|
17,794
|
|
||
Contract assets
|
8,844
|
|
|
—
|
|
||
Prepaid expenses and other assets
|
7,377
|
|
|
8,673
|
|
||
Total current assets
|
54,098
|
|
|
41,070
|
|
||
|
|
|
|
||||
Property and equipment, net
|
478,061
|
|
|
458,565
|
|
||
Intangible assets, net
|
73,042
|
|
|
25,666
|
|
||
Goodwill
|
116,217
|
|
|
50,209
|
|
||
Contract assets
|
16,104
|
|
|
—
|
|
||
Deposits and other assets
|
7,409
|
|
|
11,015
|
|
||
Total assets
|
$
|
744,931
|
|
|
$
|
586,525
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
23,435
|
|
|
$
|
20,388
|
|
Accrued liabilities
|
15,540
|
|
|
15,908
|
|
||
Deferred revenues
|
8,022
|
|
|
4,861
|
|
||
Capital lease obligations
|
9,080
|
|
|
11,711
|
|
||
Revolving credit facility
|
—
|
|
|
5,000
|
|
||
Term loan, less discount and prepaid costs of $4,036 and $2,133, respectively
|
321
|
|
|
867
|
|
||
Exit activities and restructuring liability
|
2,526
|
|
|
4,152
|
|
||
Other current liabilities
|
1,063
|
|
|
1,707
|
|
||
Total current liabilities
|
59,987
|
|
|
64,594
|
|
||
|
|
|
|
||||
Deferred revenues
|
511
|
|
|
4,761
|
|
||
Capital lease obligations
|
262,382
|
|
|
223,749
|
|
||
Term loan, less discount and prepaid costs of $9,508 and $7,655, respectively
|
415,278
|
|
|
287,845
|
|
||
Exit activities and restructuring liability
|
75
|
|
|
664
|
|
||
Deferred rent
|
957
|
|
|
1,310
|
|
||
Deferred tax liability
|
2,211
|
|
|
1,651
|
|
||
Other long-term liabilities
|
3,473
|
|
|
2,983
|
|
||
|
|
|
|
||||
Total liabilities
|
744,874
|
|
|
587,557
|
|
||
Commitments and contingencies (Note 10)
|
|
|
|
|
|
||
Stockholders' equity (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; 25,455 and 20,804 shares outstanding, respectively
|
25
|
|
|
21
|
|
||
Additional paid-in capital
|
1,368,968
|
|
|
1,327,084
|
|
||
Treasury stock, at cost, 330 and 293 shares, respectively
|
(7,646
|
)
|
|
(7,159
|
)
|
||
Accumulated deficit
|
(1,363,019
|
)
|
|
(1,323,723
|
)
|
||
Accumulated items of other comprehensive loss
|
(1,065
|
)
|
|
(1,324
|
)
|
||
Total INAP stockholders' deficit
|
(2,737
|
)
|
|
(5,101
|
)
|
||
Non-controlling interest
|
2,794
|
|
|
4,069
|
|
||
Total stockholders' equity (deficit)
|
57
|
|
|
(1,032
|
)
|
||
Total liabilities and stockholders' equity (deficit)
|
$
|
744,931
|
|
|
$
|
586,525
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Shares
|
|
Par Value
|
|
Additional Paid-In Capital
|
|
Treasury Stock
|
|
Accumulated Deficit
|
|
Accumulated Items of Other Comprehensive Loss
|
|
Non-Controlling Interest
|
|
Total Stockholders' Equity (Deficit)
|
|||||||||||||||
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
|
)
|
|||||||
Interest rate swap
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
728
|
|
|
—
|
|
|
728
|
|
|||||||
Foreign currency contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
600
|
|
|
—
|
|
|
600
|
|
|||||||
Common stock issuance
|
444
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Employee taxes paid on withholding shares
|
(62
|
)
|
|
—
|
|
|
—
|
|
|
(530
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(530
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
5,148
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,148
|
|
|||||||
Proceeds from exercise of stock options, net
|
75
|
|
|
—
|
|
|
675
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
675
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
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
|
379
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Employee taxes paid on withholding shares
|
(25
|
)
|
|
|
|
|
|
(236
|
)
|
|
|
|
|
|
|
|
(236
|
)
|
||||||||||||
2017 Securities Purchase Agreement
|
5,951
|
|
|
7
|
|
|
40,156
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,163
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
3,121
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,121
|
|
|||||||
Proceeds from exercise of stock options, net
|
49
|
|
|
—
|
|
|
431
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
431
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance, December 31, 2017
|
20,804
|
|
|
21
|
|
|
1,327,084
|
|
|
(7,159
|
)
|
|
(1,323,723
|
)
|
|
(1,324
|
)
|
|
4,069
|
|
|
(1,032
|
)
|
|||||||
Adoption of ASC 606
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,204
|
|
|
—
|
|
|
—
|
|
|
23,204
|
|
|||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(62,375
|
)
|
|
—
|
|
|
—
|
|
|
(62,375
|
)
|
|||||||
Net income attributable to non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(125
|
)
|
|
—
|
|
|
125
|
|
|
—
|
|
|||||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
259
|
|
|
—
|
|
|
259
|
|
|||||||
INAP Japan
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,400
|
)
|
|
(1,400
|
)
|
|||||||
Common stock issuance
|
471
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Employee taxes paid on withholding shares
|
(36
|
)
|
|
—
|
|
|
—
|
|
|
(487
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(487
|
)
|
|||||||
2018 public offering, net
|
4,210
|
|
|
4
|
|
|
37,099
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37,103
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
4,737
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,737
|
|
|||||||
Proceeds from exercise of stock options, net
|
6
|
|
|
—
|
|
|
48
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
48
|
|
|||||||
Balance, December 31, 2018
|
25,455
|
|
|
25
|
|
|
1,368,968
|
|
|
(7,646
|
)
|
|
(1,363,019
|
)
|
|
(1,065
|
)
|
|
2,794
|
|
|
57
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|||
Net loss
|
|
$
|
(62,375
|
)
|
|
$
|
(45,273
|
)
|
|
$
|
(124,742
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
|
90,676
|
|
|
74,993
|
|
|
76,948
|
|
|||
(Gain) loss on disposal of property and equipment, net
|
|
(115
|
)
|
|
(353
|
)
|
|
8
|
|
|||
Impairments
|
|
—
|
|
|
503
|
|
|
83,377
|
|
|||
Amortization of debt discount and issuance costs
|
|
3,874
|
|
|
2,519
|
|
|
2,534
|
|
|||
Stock-based compensation expense, net of capitalized amount
|
|
4,678
|
|
|
3,040
|
|
|
4,997
|
|
|||
Equity in earnings of equity-method investment
|
|
—
|
|
|
(1,207
|
)
|
|
(170
|
)
|
|||
Provision for doubtful accounts
|
|
882
|
|
|
1,049
|
|
|
1,093
|
|
|||
Non-cash change in capital lease obligations
|
|
2,640
|
|
|
520
|
|
|
223
|
|
|||
Non-cash change in exit activities and restructuring liability
|
|
4,751
|
|
|
6,291
|
|
|
4,409
|
|
|||
Non-cash change in deferred rent
|
|
(979
|
)
|
|
(3,554
|
)
|
|
(2,152
|
)
|
|||
Deferred taxes
|
|
262
|
|
|
355
|
|
|
325
|
|
|||
Loss on extinguishment and modification of debt
|
|
—
|
|
|
6,785
|
|
|
—
|
|
|||
Other, net
|
|
(10
|
)
|
|
304
|
|
|
179
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|||
Accounts receivable
|
|
(1,352
|
)
|
|
(207
|
)
|
|
1,476
|
|
|||
Prepaid expenses, deposits and other assets
|
|
(1,232
|
)
|
|
2,051
|
|
|
2,297
|
|
|||
Accounts payable
|
|
1,339
|
|
|
(1,167
|
)
|
|
1,568
|
|
|||
Accrued and current other liabilities
|
|
(1,583
|
)
|
|
3,359
|
|
|
81
|
|
|||
Deferred revenues
|
|
435
|
|
|
(1,297
|
)
|
|
(476
|
)
|
|||
Exit activities and restructuring liability
|
|
(6,966
|
)
|
|
(6,178
|
)
|
|
(3,584
|
)
|
|||
Asset retirement obligation
|
|
(96
|
)
|
|
(825
|
)
|
|
(174
|
)
|
|||
Other liabilities
|
|
(257
|
)
|
|
40
|
|
|
(52
|
)
|
|||
Net cash provided by operating activities
|
|
34,572
|
|
|
41,748
|
|
|
48,165
|
|
|||
|
|
|
|
|
|
|
||||||
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|||
Proceeds from sale of building
|
|
—
|
|
|
—
|
|
|
542
|
|
|||
Purchases of property and equipment
|
|
(38,298
|
)
|
|
(35,714
|
)
|
|
(44,364
|
)
|
|||
Proceeds from disposal of property and equipment
|
|
662
|
|
|
402
|
|
|
—
|
|
|||
Business acquisition, net of cash acquired
|
|
(131,748
|
)
|
|
3,838
|
|
|
—
|
|
|||
Acquisition of non-controlling interests
|
|
(1,130
|
)
|
|
—
|
|
|
—
|
|
|||
Additions to acquired and developed technology
|
|
(3,523
|
)
|
|
(735
|
)
|
|
(1,828
|
)
|
|||
Net cash used in investing activities
|
|
(174,037
|
)
|
|
(32,209
|
)
|
|
(45,650
|
)
|
|||
|
|
|
|
|
|
|
||||||
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|||
Proceeds from credit agreements
|
|
148,500
|
|
|
316,900
|
|
|
4,500
|
|
|||
Proceeds from stock issuance, net
|
|
37,151
|
|
|
40,195
|
|
|
—
|
|
|||
Principal payments on credit agreements
|
|
(23,251
|
)
|
|
(339,900
|
)
|
|
(3,000
|
)
|
|||
Debt issuance costs
|
|
(7,302
|
)
|
|
(12,777
|
)
|
|
(1,716
|
)
|
|||
Payments on capital lease obligations
|
|
(12,040
|
)
|
|
(9,714
|
)
|
|
(9,472
|
)
|
|||
Proceeds from exercise of stock options
|
|
—
|
|
|
421
|
|
|
673
|
|
|||
Acquisition of common stock for income tax withholdings
|
|
(488
|
)
|
|
(235
|
)
|
|
(530
|
)
|
|||
Other, net
|
|
110
|
|
|
(345
|
)
|
|
(289
|
)
|
|||
Net cash provided by (used in) financing activities
|
|
142,680
|
|
|
(5,455
|
)
|
|
(9,834
|
)
|
|||
Effect of exchange rates on cash and cash equivalents
|
|
5
|
|
|
130
|
|
|
(64
|
)
|
|||
Net increase in cash and cash equivalents
|
|
3,220
|
|
|
4,214
|
|
|
(7,383
|
)
|
|||
Cash and cash equivalents at beginning of period
|
|
14,603
|
|
|
10,389
|
|
|
17,772
|
|
|||
Cash and cash equivalents at end of period
|
|
$
|
17,823
|
|
|
$
|
14,603
|
|
|
$
|
10,389
|
|
|
|
|
|
|
|
|
||||||
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|||
Cash paid for interest
|
|
$
|
60,329
|
|
|
$
|
37,692
|
|
|
$
|
29,561
|
|
Non-cash acquisition of property and equipment under capital leases
|
|
43,909
|
|
|
189,679
|
|
|
6,042
|
|
|||
Additions to property and equipment included in accounts payable
|
|
2,459
|
|
|
1,932
|
|
|
1,873
|
|
1.
|
DESCRIPTION OF THE COMPANY AND NATURE OF OPERATIONS
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
For the quarter ended March 31, 2018
|
||||||||
|
As reported
|
Adjustments
|
As adjusted
|
||||||
|
|
|
|
||||||
Costs of sales and services, exclusive of depreciation and amortization - QTD
|
$
|
25,037
|
|
$
|
430
|
|
$
|
25,467
|
|
Costs of sales and services, exclusive of depreciation and amortization - YTD
|
25,037
|
|
430
|
|
25,467
|
|
|||
Depreciation and amortization - QTD
|
21,077
|
|
(81
|
)
|
20,996
|
|
|||
Depreciation and amortization - YTD
|
21,077
|
|
(81
|
)
|
20,996
|
|
|||
Interest expense - QTD
|
15,027
|
|
(577
|
)
|
14,450
|
|
|||
Interest expense - YTD
|
15,027
|
|
(577
|
)
|
14,450
|
|
|||
Net loss attributable to INAP shareholders - QTD
|
(14,060
|
)
|
(228
|
)
|
(14,288
|
)
|
|||
Net loss attributable to INAP shareholders - YTD
|
(14,060
|
)
|
(228
|
)
|
(14,288
|
)
|
|||
Property and equipment, net
|
461,314
|
|
10,438
|
|
471,752
|
|
|||
Total assets
|
731,920
|
|
10,438
|
|
742,358
|
|
|||
Capital lease obligations - non-current
|
223,549
|
|
10,470
|
|
234,019
|
|
|||
Total liabilities
|
723,098
|
|
10,470
|
|
733,568
|
|
|||
Accumulated deficit
|
(1,313,598
|
)
|
(228
|
)
|
(1,313,826
|
)
|
|||
Total stockholders' equity (deficit)
|
$
|
8,822
|
|
$
|
(228
|
)
|
$
|
8,594
|
|
|
For the quarter ended June 30, 2018
|
||||||||
|
As reported
|
Adjustments
|
As adjusted
|
||||||
|
|
|
|
||||||
Costs of sales and services, exclusive of depreciation and amortization - QTD
|
$
|
27,976
|
|
$
|
645
|
|
$
|
28,621
|
|
Costs of sales and services, exclusive of depreciation and amortization - YTD
|
53,013
|
|
1,075
|
|
54,088
|
|
|||
Depreciation and amortization - QTD
|
22,590
|
|
(122
|
)
|
22,468
|
|
|||
Depreciation and amortization - YTD
|
43,667
|
|
(203
|
)
|
43,464
|
|
|||
Interest expense - QTD
|
15,860
|
|
(879
|
)
|
14,981
|
|
|||
Interest expense - YTD
|
30,887
|
|
(1,456
|
)
|
29,431
|
|
|||
Net loss attributable to INAP shareholders - QTD
|
(13,923
|
)
|
(356
|
)
|
(14,279
|
)
|
|||
Net loss attributable to INAP shareholders - YTD
|
(27,983
|
)
|
(584
|
)
|
(28,567
|
)
|
|||
Property and equipment, net
|
452,958
|
|
10,315
|
|
463,273
|
|
|||
Total assets
|
724,707
|
|
10,315
|
|
735,022
|
|
|||
Capital lease obligations - non-current
|
220,721
|
|
10,694
|
|
231,415
|
|
|||
Total liabilities
|
729,728
|
|
10,694
|
|
740,422
|
|
|||
Accumulated deficit
|
(1,328,502
|
)
|
(584
|
)
|
(1,329,086
|
)
|
|||
Total stockholders' equity (deficit)
|
$
|
(5,021
|
)
|
$
|
(584
|
)
|
$
|
(5,605
|
)
|
|
For the quarter ended September 30, 2018
|
||||||||
|
As reported
|
Adjustments
|
As adjusted
|
||||||
|
|
|
|
||||||
Costs of sales and services, exclusive of depreciation and amortization - QTD
|
$
|
28,866
|
|
$
|
645
|
|
$
|
29,511
|
|
Costs of sales and services, exclusive of depreciation and amortization - YTD
|
81,880
|
|
1,721
|
|
83,601
|
|
|||
Depreciation and amortization - QTD
|
23,431
|
|
(122
|
)
|
23,309
|
|
|||
Depreciation and amortization - YTD
|
67,097
|
|
(326
|
)
|
66,771
|
|
|||
Interest expense - QTD
|
16,898
|
|
(895
|
)
|
16,003
|
|
|||
Interest expense - YTD
|
47,786
|
|
(2,351
|
)
|
45,435
|
|
|||
Net loss attributable to INAP Shareholders - QTD
|
(15,106
|
)
|
(373
|
)
|
(15,479
|
)
|
|||
Net loss attributable to INAP Shareholders - YTD
|
(43,089
|
)
|
(957
|
)
|
(44,046
|
)
|
|||
Property and equipment, net
|
477,423
|
|
10,193
|
|
487,616
|
|
|||
Total assets
|
746,038
|
|
10,193
|
|
756,231
|
|
|||
Capital lease obligations - non-current
|
252,599
|
|
10,945
|
|
263,544
|
|
|||
Total liabilities
|
765,004
|
|
10,945
|
|
775,949
|
|
|||
Accumulated deficit
|
(1,343,609
|
)
|
(957
|
)
|
(1,344,566
|
)
|
|||
Total stockholders' equity (deficit)
|
$
|
(18,966
|
)
|
$
|
(957
|
)
|
$
|
(19,923
|
)
|
a.
|
the parties to the contract have approved the contract (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations.
|
b.
|
the Company can identify each party’s rights regarding the goods or services to be transferred.
|
c.
|
the Company can identify the payment terms for the goods or services to be transferred.
|
d.
|
the contract has commercial substance (that is, the risk, timing, or amount of the entity’s future cash flows is expected to change as a result of the contract).
|
e.
|
it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer
|
|
|
Current
|
|
Non-current
|
||||
Balance at December 31, 2017
|
|
$
|
—
|
|
|
$
|
—
|
|
Adjustments resulting from adoption of ASC 606
|
|
9,035
|
|
|
16,313
|
|
||
Deferred customer acquisition costs incurred in the period
|
|
1,877
|
|
|
7,361
|
|
||
Amounts recognized as expense in the period
|
|
(9,638
|
)
|
|
—
|
|
||
Reclassification between short-term and long-term
|
|
7,570
|
|
|
(7,570
|
)
|
||
Balance at December 31, 2018
|
|
$
|
8,844
|
|
|
$
|
16,104
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net loss and net loss available to common stockholders
|
|
$
|
(62,500
|
)
|
|
$
|
(45,343
|
)
|
|
$
|
(124,742
|
)
|
Weighted average shares outstanding, basic and diluted
|
|
20,732
|
|
|
18,993
|
|
|
13,083
|
|
|||
|
|
|
|
|
|
|
||||||
Net loss per share, basic and diluted
|
|
$
|
(3.01
|
)
|
|
$
|
(2.39
|
)
|
|
$
|
(9.54
|
)
|
|
|
|
|
|
|
|
||||||
Anti-dilutive securities excluded from diluted net loss per share calculation for stock-based compensation plans
|
|
1,509
|
|
|
1,076
|
|
|
1,350
|
|
|
|
Year Ended December 31, 2017
|
||||||||||
|
|
As Previously
Reported
|
|
Reclassification
|
|
As Reported
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||
INAP COLO
|
|
$
|
209,580
|
|
|
$
|
(209,580
|
)
|
|
$
|
—
|
|
INAP CLOUD
|
|
71,138
|
|
|
(71,138
|
)
|
|
—
|
|
|||
INAP US
|
|
—
|
|
|
215,770
|
|
|
215,770
|
|
|||
INAP INTL
|
|
—
|
|
|
64,948
|
|
|
64,948
|
|
|||
Costs of sales and services, exclusive of depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|||
INAP COLO
|
|
$
|
89,240
|
|
|
$
|
(89,240
|
)
|
|
$
|
—
|
|
INAP CLOUD
|
|
16,977
|
|
|
(16,977
|
)
|
|
—
|
|
|||
INAP US
|
|
—
|
|
|
82,997
|
|
|
82,977
|
|
|||
INAP INTL
|
|
—
|
|
|
23,220
|
|
|
23,220
|
|
|
|
Year Ended December 31, 2016
|
||||||||||
|
|
As Previously
Reported
|
|
Reclassification
|
|
As Reported
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||
INAP COLO
|
|
$
|
221,678
|
|
|
$
|
(221,678
|
)
|
|
$
|
—
|
|
INAP CLOUD
|
|
76,619
|
|
|
(76,619
|
)
|
|
—
|
|
|||
INAP US
|
|
—
|
|
|
229,902
|
|
|
229,902
|
|
|||
INAP INTL
|
|
—
|
|
|
68,395
|
|
|
68,395
|
|
|||
Costs of sales and services, exclusive of depreciation and amortization:
|
|
|
|
|
|
|
||||||
INAP COLO
|
|
$
|
105,620
|
|
|
$
|
(105,620
|
)
|
|
—
|
|
|
INAP CLOUD
|
|
18,635
|
|
|
(18,635
|
)
|
|
—
|
|
|||
INAP US
|
|
—
|
|
|
98,512
|
|
|
98,512
|
|
|||
INAP INTL
|
|
—
|
|
|
25,743
|
|
|
25,743
|
|
|
December 31, 2017, as reported
|
|
Adjustments
|
|
January 1, 2018, as adjusted
|
||||||
ASSETS
|
|
|
|
|
|
|
|
||||
Contract assets - current
|
$
|
—
|
|
|
$
|
8,609
|
|
|
$
|
8,609
|
|
Contract assets - non-current
|
—
|
|
|
15,759
|
|
|
15,759
|
|
|||
|
|
|
|
|
|
||||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
||||
Deferred revenues - current
|
4,861
|
|
|
(749
|
)
|
|
4,112
|
|
|||
Deferred tax liability
|
1,651
|
|
|
209
|
|
|
1,860
|
|
|||
Deferred revenues - non-current
|
4,761
|
|
|
(4,616
|
)
|
|
145
|
|
|||
Accumulated deficit
|
$
|
(1,323,723
|
)
|
|
$
|
23,204
|
|
|
$
|
(1,300,519
|
)
|
|
Year Ended
December 31, 2018
|
||||||||||
|
As Reported
|
|
Balances without Adoption of ASC 606
|
|
Effect of Change Higher/ (Lower)
|
||||||
Net revenues
|
$
|
317,373
|
|
|
$
|
316,606
|
|
|
$
|
767
|
|
|
|
|
|
|
|
||||||
Sales, general and administrative
|
75,356
|
|
|
75,120
|
|
|
236
|
|
|||
Total operating costs and expenses
|
311,217
|
|
|
310,981
|
|
|
236
|
|
|||
Income from operations
|
6,156
|
|
|
5,625
|
|
|
531
|
|
|||
|
|
|
|
|
|
||||||
Loss before income taxes and equity in earnings of equity-method investment
|
(61,718
|
)
|
|
(62,249
|
)
|
|
531
|
|
|||
|
|
|
|
|
|
||||||
Net loss
|
(62,375
|
)
|
|
(62,906
|
)
|
|
531
|
|
|||
Less net income attributable to non-controlling interest
|
125
|
|
|
125
|
|
|
—
|
|
|||
Net loss attributable to INAP shareholders
|
(62,500
|
)
|
|
(63,031
|
)
|
|
531
|
|
|||
|
|
|
|
|
|
||||||
Comprehensive loss
|
$
|
(62,241
|
)
|
|
$
|
(62,772
|
)
|
|
$
|
531
|
|
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, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available-for-sale securities
|
|
$
|
—
|
|
|
$
|
2,309
|
|
|
$
|
—
|
|
|
$
|
2,309
|
|
Asset retirement obligations
(1)
|
|
—
|
|
|
—
|
|
|
2,090
|
|
|
2,090
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available-for-sale securities
|
|
—
|
|
|
2,271
|
|
|
—
|
|
|
—
|
|
||||
Asset retirement obligations
(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,936
|
|
|
$
|
1,936
|
|
|
|
|
|
|
|
|
|
|
(1)
|
We calculate the fair value of asset retirement obligations ("ARO") by discounting the estimated amount using the current Treasury bill rate adjusted for our credit non-performance. At December 31, 2018, the balance is included in "Other long-term liabilities," in the accompanying consolidated balance sheets. At December 31, 2017,
$0.2 million
and
$1.7 million
were included in "Other current liabilities" and "Other long-term liabilities," respectively, in the accompanying consolidated balance sheets.
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance, January 1
|
|
$
|
1,936
|
|
|
$
|
2,810
|
|
|
$
|
2,803
|
|
Accretion
|
|
154
|
|
|
197
|
|
|
207
|
|
|||
Subsequent revision of estimated obligation
|
|
—
|
|
|
449
|
|
|
—
|
|
|||
Payments
|
|
—
|
|
|
(1,520
|
)
|
|
(200
|
)
|
|||
Balance, December 31
|
|
$
|
2,090
|
|
|
$
|
1,936
|
|
|
$
|
2,810
|
|
|
December 31, 2018
|
||||||||||||||
|
Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Fair Value
|
||||||||
Japanese Corporate Bonds
|
$
|
2,184
|
|
|
$
|
144
|
|
|
$
|
(107
|
)
|
|
$
|
2,221
|
|
Japanese Government Bonds
|
87
|
|
|
5
|
|
|
(4
|
)
|
|
88
|
|
||||
Total Bonds
|
$
|
2,271
|
|
|
$
|
149
|
|
|
$
|
(111
|
)
|
|
$
|
2,309
|
|
|
|
|
|
|
|
|
|
||||||||
|
December 31, 2017
|
||||||||||||||
|
Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Fair Value
|
||||||||
Japanese Corporate Bonds
|
$
|
2,267
|
|
|
$
|
17
|
|
|
$
|
(100
|
)
|
|
$
|
2,184
|
|
Japanese Government Bonds
|
87
|
|
|
1
|
|
|
(1
|
)
|
|
87
|
|
||||
Total Bonds
|
$
|
2,354
|
|
|
$
|
18
|
|
|
$
|
(101
|
)
|
|
$
|
2,271
|
|
|
|
December 31,
|
||||||||||||||
|
|
2018
|
|
2017
|
||||||||||||
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Term loan
|
|
$
|
429,143
|
|
|
$
|
428,071
|
|
|
$
|
298,500
|
|
|
$
|
301,485
|
|
Revolving credit facility
|
|
—
|
|
|
—
|
|
|
5,000
|
|
|
5,050
|
|
4.
|
PROPERTY AND EQUIPMENT
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Network equipment
|
|
$
|
274,322
|
|
|
$
|
247,190
|
|
Network equipment under capital lease
|
|
14,206
|
|
|
14,206
|
|
||
Furniture and equipment
|
|
28,583
|
|
|
26,246
|
|
||
Software
|
|
66,924
|
|
|
43,930
|
|
||
Leasehold improvements
|
|
414,212
|
|
|
412,631
|
|
||
Buildings under capital lease
|
|
269,455
|
|
|
227,482
|
|
||
Property and equipment, gross
|
|
1,067,701
|
|
|
971,685
|
|
||
Less: accumulated depreciation and amortization ($55,198 and $50,253 related to capital leases at December 31, 2018 and 2017, respectively)
|
|
(589,640
|
)
|
|
(513,120
|
)
|
||
|
|
$
|
478,061
|
|
|
$
|
458,565
|
|
|
|
Year ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Costs of sales and services
|
|
$
|
75,998
|
|
|
$
|
70,368
|
|
|
$
|
71,626
|
|
Other depreciation and amortization
|
|
10,644
|
|
|
2,478
|
|
|
2,274
|
|
|||
Subtotal
|
|
86,642
|
|
|
72,846
|
|
|
73,900
|
|
|||
Amortization of acquired and developed technologies
|
|
4,034
|
|
|
2,147
|
|
|
3,048
|
|
|||
Total depreciation and amortization
|
|
$
|
90,676
|
|
|
$
|
74,993
|
|
|
$
|
76,948
|
|
5.
|
ACQUISITION
|
|
Preliminary Valuation as of March 31, 2018
|
|
Measurement Period Adjustments
|
|
Final Valuation as of December 31, 2018
|
||||||
Cash
|
$
|
2,857
|
|
|
$
|
(34
|
)
|
|
$
|
2,823
|
|
Prepaid expenses and other assets
|
1,683
|
|
|
544
|
|
|
2,227
|
|
|||
Property, plant and equipment
|
14,885
|
|
|
(632
|
)
|
|
14,253
|
|
|||
Other long term assets
|
39
|
|
|
537
|
|
|
576
|
|
|||
Intangible assets:
|
|
|
|
|
|
||||||
Noncompete agreements
|
4,000
|
|
|
—
|
|
|
4,000
|
|
|||
Trade names
|
1,700
|
|
|
—
|
|
|
1,700
|
|
|||
Technology
|
15,100
|
|
|
—
|
|
|
15,100
|
|
|||
Customer relationships
|
34,100
|
|
|
—
|
|
|
34,100
|
|
|||
Goodwill
|
67,868
|
|
|
(1,860
|
)
|
|
66,008
|
|
|||
Total assets acquired
|
142,232
|
|
|
(1,445
|
)
|
|
140,787
|
|
|||
Accounts payable and accrued liabilities
|
5,098
|
|
|
(2,279
|
)
|
|
2,819
|
|
|||
Deferred revenue
|
1,600
|
|
|
834
|
|
|
2,434
|
|
|||
Long term liabilities
|
534
|
|
|
—
|
|
|
534
|
|
|||
Net assets acquired
|
$
|
135,000
|
|
|
$
|
—
|
|
|
$
|
135,000
|
|
|
|
Year Ended
December 31, |
||||||
|
|
2018
|
|
2017
|
||||
Revenues
|
|
$
|
325,498
|
|
|
$
|
328,572
|
|
Net loss
|
|
(63,577
|
)
|
|
(47,391
|
)
|
||
Basic and diluted net loss per share
|
|
$
|
(3.07
|
)
|
|
$
|
(2.50
|
)
|
Weighted average shares outstanding used in computing basic and diluted net loss per share
|
|
20,732
|
|
|
18,993
|
|
6.
|
GOODWILL AND OTHER INTANGIBLE ASSETS
|
|
January 1, 2017
|
Re-allocations
|
December 31, 2017
|
Re-allocations
|
SingleHop Acquisition
|
December 31, 2018
|
||||||||||||
Reportable segments:
|
|
|
|
|
|
|
||||||||||||
Data center and network services
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Cloud and hosting services
|
50,209
|
|
(50,209
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||
INAP COLO
|
—
|
|
6,003
|
|
6,003
|
|
(6,003
|
)
|
—
|
|
—
|
|
||||||
INAP CLOUD
|
—
|
|
44,206
|
|
44,206
|
|
(44,206
|
)
|
—
|
|
—
|
|
||||||
INAP US
|
—
|
|
—
|
|
—
|
|
28,118
|
|
66,008
|
|
94,126
|
|
||||||
INAP INTL
|
—
|
|
—
|
|
—
|
|
22,091
|
|
—
|
|
22,091
|
|
||||||
Total
|
$
|
50,209
|
|
$
|
—
|
|
$
|
50,209
|
|
$
|
—
|
|
$
|
66,008
|
|
$
|
116,217
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
||||||||
Acquired and developed technology
|
|
$
|
71,586
|
|
|
$
|
(52,097
|
)
|
|
$
|
52,825
|
|
|
$
|
(48,063
|
)
|
Customer relationships and trade names
|
|
110,785
|
|
|
(57,232
|
)
|
|
71,116
|
|
|
(50,212
|
)
|
||||
|
|
$
|
182,371
|
|
|
$
|
(109,329
|
)
|
|
$
|
123,941
|
|
|
$
|
(98,275
|
)
|
2019
|
$
|
13,080
|
|
2020
|
12,375
|
|
|
2021
|
11,234
|
|
|
2022
|
8,317
|
|
|
2023
|
7,995
|
|
|
Thereafter
|
20,041
|
|
|
|
$
|
73,042
|
|
7.
|
ACCRUED LIABILITIES
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Compensation and benefits payable
|
|
$
|
7,523
|
|
|
$
|
6,673
|
|
Property, sales, and other taxes
|
|
785
|
|
|
2,636
|
|
||
Customer credit balances
|
|
2,204
|
|
|
1,616
|
|
||
Accrued interest
|
|
1,762
|
|
|
1,690
|
|
||
Other
|
|
3,266
|
|
|
3,293
|
|
||
|
|
$
|
15,540
|
|
|
$
|
15,908
|
|
8.
|
EXIT ACTIVITIES AND RESTRUCTURING
|
|
|
Balance December 31, 2017
|
|
Initial
Charges
|
|
Plan
Adjustments
|
|
Cash
Payments
|
|
Balance December 31, 2018
|
||||||||||
Activity for 2018 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate obligations
|
|
$
|
—
|
|
|
$
|
3,484
|
|
|
$
|
1,023
|
|
|
$
|
(2,585
|
)
|
|
$
|
1,922
|
|
Activity for 2017 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate obligations
|
|
3,380
|
|
|
—
|
|
|
316
|
|
|
(3,596
|
)
|
|
100
|
|
|||||
Activity for 2016 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Severance
|
|
46
|
|
|
—
|
|
|
34
|
|
|
(80
|
)
|
|
—
|
|
|||||
Real estate obligations
|
|
247
|
|
|
—
|
|
|
39
|
|
|
(161
|
)
|
|
125
|
|
|||||
Activity for 2015 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate obligation
|
|
64
|
|
|
—
|
|
|
4
|
|
|
(41
|
)
|
|
27
|
|
|||||
Service contracts
|
|
388
|
|
|
—
|
|
|
31
|
|
|
(198
|
)
|
|
221
|
|
|||||
Activity for 2014 restructuring charge:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Real estate obligation
|
|
691
|
|
|
—
|
|
|
240
|
|
|
(725
|
)
|
|
206
|
|
|||||
|
|
$
|
4,816
|
|
|
$
|
3,484
|
|
|
$
|
1,687
|
|
|
$
|
(7,386
|
)
|
|
$
|
2,601
|
|
|
|
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
|
|
|
|
Covenants Requirements
|
|
Ratios at December 31, 2018
|
|
Maximum Total Net Leverage Ratio (the ratio of Consolidated Indebtedness to Consolidated EBITDA as defined in the Second Amendment to the 2017 Credit Agreement) should be equal to or less than:
|
|
5.9
(1)
|
|
5.4
|
|
Maximum Consolidated Interest Coverage Ratio (the ratio of Consolidated EBITDA to Consolidated Interest Expense as defined in the Second Amendment to the 2017 Credit Agreement) should be equal to or greater than:
|
|
2.0
(2)
|
|
2.1
|
|
(1)
|
The maximum total leverage ratio decreases to 5.9 to 1 as of March 31, 2019 - June 30, 2019, 5.5 to 1 as of September 30, 2019 - March 31, 2020, 5.25 to 1 as of June 30, 2020 - September 30, 2020, 4.75 to 1 as of December 31, 2020 - 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, 2019 - September 30, 2020, and 2.25 to 1 December 31, 2020 - September 30, 2021 and thereafter.
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Outstanding principal balance on the term loan, less unamortized discount and prepaid costs of $13.5 million and $9.8 million, respectively
|
|
$
|
415,599
|
|
|
$
|
288,712
|
|
Outstanding balance on the revolving credit facility
|
|
—
|
|
|
5,000
|
|
||
Letters of credit issued with proceeds from revolving credit facility
|
|
4,187
|
|
|
5,361
|
|
||
Surety bonds issued with proceeds from revolving credit facility
|
|
131
|
|
|
—
|
|
||
Borrowing capacity
|
|
30,682
|
|
|
14,639
|
|
||
Interest rate – term loan
|
|
8.2
|
%
|
|
8.4
|
%
|
||
Interest rate – revolving credit facility
|
|
—
|
%
|
|
10.3
|
%
|
||
|
|
|
|
|
||||
|
|
|
|
|
||||
Maturities of the term loan are as follows:
|
|
|
|
|
|
|
||
2019
|
|
$
|
4,357
|
|
|
|
||
2020
|
|
4,357
|
|
|
|
|||
2021
|
|
4,357
|
|
|
|
|||
2022
|
|
416,072
|
|
|
|
|||
2023
|
|
—
|
|
|
|
|||
|
|
$
|
429,143
|
|
|
|
2019
|
$
|
34,719
|
|
2020
|
33,901
|
|
|
2021
|
34,894
|
|
|
2022
|
33,637
|
|
|
2023
|
32,878
|
|
|
Thereafter
|
630,573
|
|
|
Remaining capital lease payments
|
800,602
|
|
|
Less: amounts representing imputed interest
|
(529,140
|
)
|
|
Present value of minimum lease payments
|
271,462
|
|
|
Less: current portion
|
(9,080
|
)
|
|
|
$
|
262,382
|
|
2019
|
$
|
7,980
|
|
2020
|
7,616
|
|
|
2021
|
7,616
|
|
|
2022
|
7,108
|
|
|
2023
|
5,407
|
|
|
Thereafter
|
3,757
|
|
|
|
$
|
39,484
|
|
2019
|
$
|
3,981
|
|
2020
|
1,707
|
|
|
2021
|
655
|
|
|
2022
|
85
|
|
|
2023
|
19
|
|
|
Thereafter
|
—
|
|
|
|
$
|
6,447
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||
INAP US
|
|
$
|
248,184
|
|
|
$
|
215,770
|
|
|
$
|
229,902
|
|
INAP INTL
|
|
69,189
|
|
|
64,948
|
|
|
68,395
|
|
|||
Total revenues
|
|
317,373
|
|
|
280,718
|
|
|
298,297
|
|
|||
|
|
|
|
|
|
|
||||||
Costs of sales and services, customer support and sales and marketing:
|
|
|
|
|
|
|
|
|
|
|||
INAP US
|
|
134,792
|
|
|
128,062
|
|
|
148,706
|
|
|||
INAP INTL
|
|
45,124
|
|
|
37,829
|
|
|
41,900
|
|
|||
Total costs of sales and services, customer support and sales and marketing
|
|
179,916
|
|
|
165,891
|
|
|
190,606
|
|
|||
|
|
|
|
|
|
|
||||||
Segment profit:
|
|
|
|
|
|
|
|
|
|
|||
INAP US
|
|
113,392
|
|
|
87,708
|
|
|
81,196
|
|
|||
INAP INTL
|
|
24,065
|
|
|
27,119
|
|
|
26,495
|
|
|||
Total segment profit
|
|
137,457
|
|
|
114,827
|
|
|
107,691
|
|
|||
|
|
|
|
|
|
|
||||||
Goodwill impairment
|
|
—
|
|
|
—
|
|
|
80,105
|
|
|||
Exit activities, restructuring and impairments
|
|
5,406
|
|
|
6,249
|
|
|
7,236
|
|
|||
Other operating expenses, including sales, general and administrative and depreciation and amortization expenses
|
|
125,895
|
|
|
103,804
|
|
|
113,420
|
|
|||
Income (loss) from operations
|
|
6,156
|
|
|
4,774
|
|
|
(93,070
|
)
|
|||
Non-operating expenses
|
|
67,874
|
|
|
51,001
|
|
|
31,312
|
|
|||
Loss before income taxes and equity in earnings of equity-method investment
|
|
$
|
(61,718
|
)
|
|
$
|
(46,227
|
)
|
|
$
|
(124,382
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
|
|
|
|
|
|||
Colocation
|
|
$
|
131,124
|
|
|
$
|
124,083
|
|
|
$
|
129,881
|
|
Network Services
|
|
64,111
|
|
|
67,435
|
|
|
70,779
|
|
|||
Cloud
|
|
122,138
|
|
|
89,200
|
|
|
97,637
|
|
|||
|
|
$
|
317,373
|
|
|
$
|
280,718
|
|
|
$
|
298,297
|
|
|
Year Ended December 31, 2018
|
||||||
|
|
|
|
||||
|
INAP US
|
|
INAP INTL
|
||||
|
|
|
|
||||
Colocation
|
$
|
125,282
|
|
|
$
|
5,842
|
|
Network Services
|
52,748
|
|
|
11,363
|
|
||
Cloud
|
70,154
|
|
|
51,984
|
|
||
|
$
|
248,184
|
|
|
$
|
69,189
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||
United States
|
|
$
|
252,482
|
|
|
$
|
220,018
|
|
|
$
|
231,943
|
|
Canada
|
|
38,133
|
|
|
38,750
|
|
|
44,206
|
|
|||
Other countries
|
|
26,758
|
|
|
21,950
|
|
|
22,148
|
|
|||
|
|
$
|
317,373
|
|
|
$
|
280,718
|
|
|
$
|
298,297
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Costs of customer support
|
|
$
|
165
|
|
|
$
|
167
|
|
|
$
|
1,159
|
|
Sales, general and administrative
|
|
4,513
|
|
|
2,873
|
|
|
3,838
|
|
|||
|
|
$
|
4,678
|
|
|
$
|
3,040
|
|
|
$
|
4,997
|
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|||
Balance, December 31, 2017
|
|
379
|
|
|
$
|
21.17
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Exercised
|
|
(6
|
)
|
|
8.49
|
|
|
Forfeitures and post-vesting cancellations
|
|
(150
|
)
|
|
14.55
|
|
|
Balance, December 31, 2018
|
|
223
|
|
|
25.95
|
|
|
Exercisable, December 31, 2018
|
|
211
|
|
|
26.74
|
|
|
|
Fully
Vested and
Exercisable
|
|
Expected
to Vest
|
||||
Total shares
|
|
211
|
|
|
223
|
|
||
Weighted-average exercise price
|
|
$
|
26.74
|
|
|
$
|
25.95
|
|
Aggregate intrinsic value
|
|
$
|
—
|
|
|
$
|
—
|
|
Weighted-average remaining contractual term (in years)
|
|
3.8
|
|
|
4.0
|
|
|
|
Shares
|
|
Weighted-
Average
Grant Date
Fair
Value
|
|||
Unvested balance, December 31, 2017
|
|
760
|
|
|
$
|
4.03
|
|
Granted
|
|
608
|
|
|
$
|
7.73
|
|
Vested
|
|
(277
|
)
|
|
$
|
6.95
|
|
Forfeited
|
|
(133
|
)
|
|
$
|
6.61
|
|
Unvested balance, December 31, 2018
|
|
958
|
|
|
$
|
5.17
|
|
|
|
Stock
Options
|
|
Restricted
Stock
|
|
Total
|
||||||
Unrecognized compensation
|
|
$
|
53
|
|
|
$
|
3,330
|
|
|
$
|
3,383
|
|
Weighted-average remaining recognition period (in years)
|
|
1.03
|
|
|
2.90
|
|
|
2.90
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
United States
|
|
$
|
(64,237
|
)
|
|
$
|
(46,648
|
)
|
|
$
|
(120,553
|
)
|
Foreign
|
|
2,519
|
|
|
421
|
|
|
(3,829
|
)
|
|||
Loss from continuing operations before income taxes, non-controlling interest and equity in (earnings) of equity-method investment
|
|
$
|
(61,718
|
)
|
|
$
|
(46,227
|
)
|
|
$
|
(124,382
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Current:
|
|
|
|
|
|
|
|
|
|
|||
Federal
|
|
$
|
—
|
|
|
$
|
(730
|
)
|
|
$
|
(15
|
)
|
State
|
|
118
|
|
|
123
|
|
|
155
|
|
|||
Foreign
|
|
277
|
|
|
507
|
|
|
61
|
|
|||
|
|
395
|
|
|
(100
|
)
|
|
201
|
|
|||
Deferred:
|
|
|
|
|
|
|
|
|
|
|||
Federal
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
State
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Foreign
|
|
262
|
|
|
353
|
|
|
329
|
|
|||
|
|
262
|
|
|
353
|
|
|
329
|
|
|||
Provision for income taxes
|
|
$
|
657
|
|
|
$
|
253
|
|
|
$
|
530
|
|
|
|
Year Ended December 31,
|
|||||||
|
|
2018
|
|
2017
|
|
2016
|
|||
Federal income tax at statutory rates
|
|
(21.0
|
)%
|
|
(34.0
|
)%
|
|
(34.0
|
)%
|
Foreign income tax
|
|
(0.1
|
)
|
|
0.5
|
|
|
0.7
|
|
State income tax
|
|
(5.5
|
)
|
|
(5.0
|
)
|
|
(5.0
|
)
|
Other permanent differences
|
|
1.3
|
|
|
0.4
|
|
|
0.2
|
|
Statutory tax rate change
|
|
1.2
|
|
|
—
|
|
|
(3.2
|
)
|
Statutory tax rate change - Deferred - Tax Reform Act
|
|
—
|
|
|
(128.4
|
)
|
|
—
|
|
Statutory tax rate change - Valuation Allowance - Tax Reform Act
|
|
—
|
|
|
128.4
|
|
|
—
|
|
Compensation
|
|
—
|
|
|
—
|
|
|
3.0
|
|
Goodwill impairment
|
|
—
|
|
|
—
|
|
|
25.2
|
|
Refundable AMT credit
|
|
—
|
|
|
(1.5
|
)
|
|
—
|
|
Change in valuation allowance
|
|
25.2
|
|
|
40.1
|
|
|
13.5
|
|
Effective tax rate
|
|
1.1
|
%
|
|
0.5
|
%
|
|
0.4
|
%
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Long-term deferred income tax (liabilities) assets:
|
|
|
|
|
|
|
||
Property and equipment
|
|
$
|
50,405
|
|
|
$
|
43,554
|
|
Goodwill
|
|
1,071
|
|
|
1,392
|
|
||
Intangible assets
|
|
(26,534
|
)
|
|
(22,021
|
)
|
||
Deferred revenue, less current portion
|
|
1,358
|
|
|
1,834
|
|
||
Restructuring liability, less current portion
|
|
696
|
|
|
1,282
|
|
||
Refinance
|
|
(4,130
|
)
|
|
(374
|
)
|
||
Deferred rent
|
|
285
|
|
|
639
|
|
||
Stock-based compensation
|
|
1,450
|
|
|
911
|
|
||
Provision for doubtful accounts
|
|
1,360
|
|
|
1,772
|
|
||
U.S. net operating loss carryforwards
|
|
99,026
|
|
|
89,117
|
|
||
Foreign net operating loss carryforwards, less current portion
|
|
7,631
|
|
|
8,053
|
|
||
Tax credit carryforwards
|
|
2,775
|
|
|
2,812
|
|
||
Interest limitation
|
|
9,403
|
|
|
—
|
|
||
Impact of adoption of ASC 606
|
|
(6,666
|
)
|
|
—
|
|
||
Other
|
|
2,408
|
|
|
2,090
|
|
||
Long-term deferred income tax assets
|
|
140,538
|
|
|
131,061
|
|
||
Less: valuation allowance
|
|
(142,749
|
)
|
|
(132,712
|
)
|
||
Net long-term deferred income tax (liabilities) assets
|
|
(2,211
|
)
|
|
(1,651
|
)
|
||
|
|
|
|
|
||||
Net deferred tax liabilities
|
|
$
|
2,211
|
|
|
$
|
1,651
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance, January 1,
|
|
$
|
132,712
|
|
|
$
|
164,865
|
|
|
$
|
148,310
|
|
Increase in deferred tax assets
|
|
10,037
|
|
|
27,183
|
|
|
16,555
|
|
|||
Remeasurement in deferred tax assets
|
|
—
|
|
|
(59,336
|
)
|
|
—
|
|
|||
Balance, December 31,
|
|
$
|
142,749
|
|
|
$
|
132,712
|
|
|
$
|
164,865
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Unrecognized tax benefits balance, January 1,
|
|
$
|
162
|
|
|
$
|
187
|
|
|
$
|
—
|
|
Addition for tax positions taken in a prior year
|
|
300
|
|
|
162
|
|
|
187
|
|
|||
Deduction for tax positions taken in a prior year
|
|
—
|
|
|
(187
|
)
|
|
—
|
|
|||
Unrecognized tax benefits balance, December 31,
|
|
$
|
462
|
|
|
$
|
162
|
|
|
$
|
187
|
|
|
|
2018 Quarter Ended
|
||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Net revenues
|
|
$
|
74,201
|
|
|
$
|
81,962
|
|
|
$
|
82,972
|
|
|
$
|
78,238
|
|
Costs of sales and services, exclusive of depreciation and amortization
|
|
25,467
|
|
|
28,621
|
|
|
29,511
|
|
|
23,662
|
|
||||
Costs of customer support
|
|
7,387
|
|
|
8,841
|
|
|
7,984
|
|
|
8,305
|
|
||||
Exit activities, restructuring and impairments
|
|
(33
|
)
|
|
826
|
|
|
2,347
|
|
|
2,266
|
|
||||
Net loss attributable to INAP shareholders
|
|
(14,288
|
)
|
|
(14,279
|
)
|
|
(15,479
|
)
|
|
(18,454
|
)
|
||||
Basic and diluted net loss per share
|
|
$
|
(0.70
|
)
|
|
$
|
(0.69
|
)
|
|
$
|
(0.75
|
)
|
|
$
|
(0.82
|
)
|
|
|
2017 Quarter Ended
|
||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Net 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 shareholders
|
|
(8,230
|
)
|
|
(19,283
|
)
|
|
(10,895
|
)
|
|
(6,934
|
)
|
||||
Basic and diluted net loss per share
|
|
$
|
(0.51
|
)
|
|
$
|
(0.97
|
)
|
|
$
|
(0.55
|
)
|
|
$
|
(0.35
|
)
|
|
|
Balance at
Beginning
of Fiscal
Period
|
|
Charges to
Costs and
Expense
|
|
Deductions
|
|
Balance at
End of
Fiscal
Period
|
||||||||
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
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
|
$
|
1,487
|
|
|
$
|
882
|
|
|
$
|
(822
|
)
|
(1)
|
$
|
1,547
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Deductions in the allowance for doubtful accounts represent write-offs of uncollectible accounts net of recoveries.
|
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 18, 2019
|
|
|
|
/s/ BDO USA, LLP
|
|
Atlanta, Georgia
|
|
March 18, 2019
|
|
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 18, 2019
|
/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 18, 2019
|
/s/ James C. Keeley
|
|
James C. Keeley
|
|
Chief Financial Officer
|
Date: March 18, 2019
|
|
|
|
|
/s/ Peter D. Aquino
|
|
Peter D. Aquino
|
|
President and Chief Executive Officer
|
Date: March 18, 2019
|
|
|
|
|
/s/ James C. Keeley
|
|
James C. Keeley
|
|
Chief Financial Officer
|