| Schedule of Contract Balances and Financial Statement Impact |
The following tables summarize the impacts of adopting Topic 606 on the Company’s condensed consolidated financial statements as of and for the three and six months ended June 30, 2018 (in thousands):
i. Condensed consolidated balance sheets
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Impact of changes in accounting policies |
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As reported
June 30, 2018
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Adjustments |
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Balances without adoption of Topic 606 |
Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
2,103 |
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— |
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|
2,103 |
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Restricted cash |
104 |
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— |
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|
104 |
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Trade receivables, net of allowance for doubtful accounts |
12,456 |
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— |
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|
12,456 |
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Prepaid and other current assets |
22,959 |
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(13,528 |
) |
|
9,431 |
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Total current assets |
37,622 |
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(13,528 |
) |
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24,094 |
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Property and equipment, net of accumulated depreciation |
36,582 |
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— |
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36,582 |
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Subscriber accounts and deferred contract acquisition costs, net of accumulated amortization |
1,222,485 |
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47,452 |
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1,269,937 |
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Dealer network and other intangible assets, net of accumulated amortization |
1,213 |
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— |
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1,213 |
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Goodwill |
349,149 |
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— |
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349,149 |
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Other assets, net |
31,699 |
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(12,908 |
) |
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18,791 |
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Total assets |
$ |
1,678,750 |
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21,016 |
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1,699,766 |
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Liabilities and Stockholder’s (Deficit) Equity |
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Current liabilities: |
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Accounts payable |
$ |
12,730 |
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— |
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12,730 |
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Accrued payroll and related liabilities |
4,934 |
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— |
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4,934 |
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Other accrued liabilities |
51,911 |
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— |
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51,911 |
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Deferred revenue |
12,965 |
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|
1,302 |
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|
14,267 |
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Holdback liability |
9,740 |
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— |
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9,740 |
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Current portion of long-term debt |
11,000 |
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— |
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11,000 |
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Total current liabilities |
103,280 |
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1,302 |
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104,582 |
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Non-current liabilities: |
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Long-term debt |
1,720,235 |
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— |
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1,720,235 |
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Long-term holdback liability |
2,031 |
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— |
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2,031 |
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Derivative financial instruments |
3,313 |
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— |
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3,313 |
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Deferred income tax liability, net |
14,628 |
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— |
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14,628 |
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Other liabilities |
2,958 |
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— |
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2,958 |
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Total liabilities |
1,846,445 |
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1,302 |
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1,847,747 |
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Commitments and contingencies |
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Stockholder’s (deficit) equity: |
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Common stock |
— |
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— |
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— |
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Additional paid-in capital |
444,691 |
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— |
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444,691 |
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Accumulated deficit |
(625,543 |
) |
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19,714 |
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(605,829 |
) |
Accumulated other comprehensive income, net |
13,157 |
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— |
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13,157 |
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Total stockholder’s (deficit) equity |
(167,695 |
) |
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19,714 |
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(147,981 |
) |
Total liabilities and stockholder’s (deficit) equity |
$ |
1,678,750 |
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21,016 |
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1,699,766 |
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ii. Condensed consolidated statements of operations and comprehensive income (loss)
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Impact of changes in accounting policies |
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As reported
three months ended
June 30, 2018
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Adjustments |
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Balances without adoption of Topic 606 |
Net revenue |
$ |
135,013 |
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(2,445 |
) |
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132,568 |
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Operating expenses: |
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Cost of services |
33,047 |
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(1,596 |
) |
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31,451 |
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Selling, general and administrative, including stock-based and long-term incentive compensation |
32,655 |
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(30 |
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32,625 |
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Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets |
53,891 |
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1,880 |
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55,771 |
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Depreciation |
2,865 |
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— |
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2,865 |
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Loss on goodwill impairment |
214,400 |
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— |
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214,400 |
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336,858 |
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|
254 |
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337,112 |
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Operating loss |
(201,845 |
) |
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(2,699 |
) |
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(204,544 |
) |
Other expense: |
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Interest expense |
38,600 |
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— |
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38,600 |
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38,600 |
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— |
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38,600 |
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Loss before income taxes |
(240,445 |
) |
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(2,699 |
) |
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(243,144 |
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Income tax expense |
1,347 |
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— |
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1,347 |
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Net loss |
(241,792 |
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(2,699 |
) |
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(244,491 |
) |
Other comprehensive income (loss): |
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Unrealized gain on derivative contracts, net |
5,521 |
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— |
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5,521 |
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Total other comprehensive income, net of tax |
5,521 |
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— |
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5,521 |
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Comprehensive loss |
$ |
(236,271 |
) |
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(2,699 |
) |
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(238,970 |
) |
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Impact of changes in accounting policies |
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As reported
six months ended
June 30, 2018
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Adjustments |
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Balances without adoption of Topic 606 |
Net revenue |
$ |
268,766 |
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(2,770 |
) |
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265,996 |
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Operating expenses: |
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Cost of services |
65,748 |
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(3,518 |
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62,230 |
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Selling, general and administrative, including stock-based and long-term incentive compensation |
64,669 |
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(9 |
) |
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64,660 |
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Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets |
108,302 |
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3,763 |
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112,065 |
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Depreciation |
5,480 |
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— |
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|
5,480 |
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Loss on goodwill impairment |
214,400 |
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— |
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214,400 |
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|
458,599 |
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|
236 |
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|
458,835 |
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Operating loss |
(189,833 |
) |
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(3,006 |
) |
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(192,839 |
) |
Other expense: |
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Interest expense |
75,473 |
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— |
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75,473 |
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75,473 |
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— |
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75,473 |
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Loss before income taxes |
(265,306 |
) |
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(3,006 |
) |
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(268,312 |
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Income tax expense |
2,693 |
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— |
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2,693 |
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Net loss |
(267,999 |
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(3,006 |
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(271,005 |
) |
Other comprehensive income (loss): |
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Unrealized gain on derivative contracts, net |
19,927 |
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— |
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19,927 |
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Total other comprehensive income, net of tax |
19,927 |
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— |
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19,927 |
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Comprehensive loss |
$ |
(248,072 |
) |
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(3,006 |
) |
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(251,078 |
) |
iii. Condensed consolidated statements of cash flows
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Impact of changes in accounting policies |
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As reported
six months ended
June 30, 2018
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Adjustments |
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Balances without adoption of Topic 606 |
Cash flows from operating activities: |
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Net loss |
$ |
(267,999 |
) |
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(3,006 |
) |
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(271,005 |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets |
108,302 |
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|
3,763 |
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112,065 |
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Depreciation |
5,480 |
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— |
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|
5,480 |
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Stock-based and long-term incentive compensation |
406 |
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— |
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|
406 |
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Deferred income tax expense |
1,324 |
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— |
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1,324 |
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Amortization of debt discount and deferred debt costs |
3,613 |
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— |
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3,613 |
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Bad debt expense |
5,623 |
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— |
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5,623 |
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Goodwill impairment |
214,400 |
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— |
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214,400 |
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Other non-cash activity, net |
1,463 |
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— |
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1,463 |
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Changes in assets and liabilities: |
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Trade receivables |
(5,434 |
) |
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— |
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(5,434 |
) |
Prepaid expenses and other assets |
(2,276 |
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|
3,164 |
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|
888 |
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Subscriber accounts - deferred contract acquisition costs |
(2,586 |
) |
|
89 |
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(2,497 |
) |
Payables and other liabilities |
5,181 |
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(783 |
) |
|
4,398 |
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Net cash provided by operating activities |
67,497 |
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|
3,227 |
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|
70,724 |
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Cash flows from investing activities: |
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Capital expenditures |
(8,928 |
) |
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— |
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(8,928 |
) |
Cost of subscriber accounts acquired |
(69,695 |
) |
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(3,227 |
) |
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(72,922 |
) |
Net cash used in investing activities |
(78,623 |
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(3,227 |
) |
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(81,850 |
) |
Cash flows from financing activities: |
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Proceeds from long-term debt |
105,300 |
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— |
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|
105,300 |
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Payments on long-term debt |
(95,200 |
) |
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— |
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(95,200 |
) |
Value of shares withheld for share-based compensation |
(69 |
) |
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— |
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(69 |
) |
Net cash provided by financing activities |
10,031 |
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— |
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|
10,031 |
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Net decrease in cash, cash equivalents and restricted cash |
(1,095 |
) |
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— |
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(1,095 |
) |
Cash, cash equivalents and restricted cash at beginning of period |
3,302 |
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— |
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|
3,302 |
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Cash, cash equivalents and restricted cash at end of period |
$ |
2,207 |
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— |
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|
2,207 |
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The following table provides information about receivables, contract assets and contract liabilities from contracts with customers (in thousands):
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June 30, 2018 |
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At adoption |
Trade receivables, net |
$ |
12,456 |
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|
12,645 |
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Contract assets, net - current portion (a) |
13,528 |
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|
14,197 |
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Contract assets, net - long-term portion (b) |
12,908 |
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|
10,377 |
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Deferred revenue |
12,965 |
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|
12,892 |
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(a) Amount is included in Prepaid and other current assets in the unaudited condensed consolidated balance sheets.
(b) Amount is included in Other assets in the unaudited condensed consolidated balance sheets.
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