December 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Internally developed software | $ | 14,782 | $ | 14,218 | |||
Equipment | 4,241 | 1,546 | |||||
Ground system | 1,350 | 74 | |||||
Total other construction in process | $ | 20,373 | $ | 15,838 |
December 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
United States | $ | 165,337 | $ | 124,483 | |||
Satellites in orbit | 926,090 | 13,405 | |||||
Iridium NEXT systems under construction | 2,088,380 | 2,639,824 | |||||
All others (1) | 30,355 | 35,372 | |||||
Total | $ | 3,210,162 | $ | 2,813,084 |
(1) | No single country in this group represented more than 10% of property and equipment, net. |
First-generation satellites | 15-21 years |
Next-generation satellites | 12.5 years |
Ground system | 5-7 years |
Equipment | 3-5 years |
Internally developed software and purchased software | 3-7 years |
Building | 39 years |
Building improvements | 5-39 years |
Leasehold improvements | shorter of useful life or remaining lease term |
Year Ended December 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Property and equipment, net | $ | 2,458 | $ | 1,906 | |||
Inventory | 280 | 359 | |||||
Cost of subscriber equipment | 30 | 56 | |||||
Cost of services (exclusive of depreciation and amortization) | 4,366 | 1,655 | |||||
Research and development | 349 | 457 | |||||
Selling, general and administrative | 11,211 | 11,540 | |||||
Total stock-based compensation | $ | 18,694 | $ | 15,973 |
Year Ended December 31, | |||||||||
2017 | 2016 | Recurring Fair Value Measurement | |||||||
(In thousands) | |||||||||
Cash and cash equivalents: | |||||||||
Cash | $ | 24,092 | $ | 102,194 | |||||
Money market funds | 251,950 | 266,478 | Level 1 | ||||||
Commercial paper | 9,831 | 2,495 | Level 2 | ||||||
Total cash and cash equivalents | $ | 285,873 | $ | 371,167 |
December 31, 2017 | |||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Recurring Fair Value Measurement | |||||||||||||
(In thousands) | |||||||||||||||||
Fixed-income debt securities | $ | 9,520 | $ | 2 | $ | (15 | ) | $ | 9,507 | Level 2 | |||||||
U.S. Treasury notes | 2,249 | — | (3 | ) | 2,246 | Level 2 | |||||||||||
Total marketable securities | $ | 11,769 | $ | 2 | $ | (18 | ) | $ | 11,753 |
December 31, 2016 | |||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Recurring Fair Value Measurement | |||||||||||||
(In thousands) | |||||||||||||||||
Fixed-income debt securities | $ | 30,037 | $ | 14 | $ | (11 | ) | $ | 30,040 | Level 2 | |||||||
U.S. Treasury notes | 9,283 | 7 | (2 | ) | 9,288 | Level 2 | |||||||||||
Total marketable securities | $ | 39,320 | $ | 21 | $ | (13 | ) | $ | 39,328 |
December 31, 2017 | December 31, 2016 | ||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
(In thousands) | (In thousands) | ||||||||||||||
Mature within one year | $ | 11,519 | $ | 11,504 | $ | 32,776 | $ | 32,788 | |||||||
Mature after one year and within three years | 250 | 249 | 6,544 | 6,540 | |||||||||||
Total | $ | 11,769 | $ | 11,753 | $ | 39,320 | $ | 39,328 |
Year ending December 31, | Operating Leases | |||
(In thousands) | ||||
2018 | $ | 3,741 | ||
2019 | 3,692 | |||
2020 | 3,734 | |||
2021 | 3,827 | |||
2022 | 3,402 | |||
Thereafter | 8,849 | |||
Total | $ | 27,245 |
Year ending December 31, | Amount | |||
(In thousands) | ||||
2018 | $ | 85,500 | ||
2019 | 202,500 | |||
2020 | 288,000 | |||
2021 | 306,000 | |||
2022 | 306,000 | |||
Thereafter | 612,000 | |||
Total debt commitments | $ | 1,800,000 | ||
Original issuance discount | 96,445 | |||
Total short-term debt | 85,500 | |||
Total long-term debt, net | $ | 1,618,055 |
• | an available cash balance of at least $25 million; |
• | a debt-to-equity ratio, which is calculated as the ratio of total net debt to the aggregate of total net debt and total stockholders’ equity, of no more than 0.7 to 1, measured each June 30 and December 31; |
• | specified maximum levels of annual capital expenditures (excluding expenditures on the construction of Iridium NEXT satellites) through the year ending December 31, 2024; |
• | specified minimum levels of consolidated operational earnings before interest, taxes, depreciation and amortization, or operational EBITDA, for the 12-month periods ending each December 31 and June 30 through December 31, 2017; |
• | specified minimum cumulative cash flow requirements from customers who have hosted payloads on the Company’s satellites, measured each December 31 and June 30, from June 30, 2017 through December 31, 2019; |
• | a debt service coverage ratio, measured during the repayment period, of not less than 1 to 1.5; and |
• | specified maximum leverage levels during the repayment period that decline from a ratio of 7.53 to 1 for the twelve months ending June 30, 2018 to a ratio of 2.36 to 1 for the twelve months ending December 31, 2024; and |
• | a requirement that we receive at least $50,000,000 in hosting fees from Aireon by September 30, 2018. |
• | Volatility - The expected volatility of the options granted was estimated based upon historical volatility of our share price through daily observations of our trading history. |
• | Expected life of options - The expected life of options granted to employees was determined from the simplified method. |
• | Risk-free interest rate - The yield on zero-coupon U.S. Treasury strips was used to extrapolate a forward-yield curve. This “term structure” of future interest rates was then input into a numeric model to provide the equivalent risk-free rate to be used in the Black-Scholes-Merton model based on the expected term of the underlying grants. |
• | Dividend yield - The Black-Scholes-Merton valuation model requires an expected dividend yield as an input. The Company does not anticipate paying dividends during the expected term of the grants; therefore, the dividend rate is assumed to be zero. |
Year Ended December 31, | |||||
2017 | 2016 | 2015 | |||
Expected volatility | 40% - 41% | 40% - 42% | 39% - 42% | ||
Expected term (years) | 6.25 | 6.25 | 6.25 | ||
Expected dividends | —% | —% | —% | ||
Risk free interest rate | 1.86% - 2.14% | 1.15% - 2.45% | 1.50% - 2.35% |
Shares | Weighted- Average Exercise Price Per Share | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||
(In thousands, except years and per share data) | ||||||||||||
Options outstanding at January 1, 2015 | 6,671 | $ | 7.68 | |||||||||
Granted | 885 | 9.25 | ||||||||||
Cancelled or expired | (92 | ) | 8.66 | |||||||||
Exercised | (287 | ) | 7.87 | |||||||||
Forfeited | (57 | ) | 7.81 | |||||||||
Options outstanding at December 31, 2015 | 7,120 | 7.86 | 6.33 | $ | 3,937 | |||||||
Granted | 249 | 8.13 | ||||||||||
Cancelled or expired | (39 | ) | 8.92 | |||||||||
Exercised | (73 | ) | 7.33 | |||||||||
Forfeited | (55 | ) | 7.62 | |||||||||
Options outstanding at December 31, 2016 | 7,202 | 7.87 | 5.45 | $ | 12,473 | |||||||
Granted | 209 | 10.50 | ||||||||||
Cancelled or expired | (2 | ) | 7.24 | |||||||||
Exercised | (534 | ) | 7.93 | |||||||||
Forfeited | (19 | ) | 9.13 | |||||||||
Options outstanding at December 31, 2017 | 6,856 | $ | 7.94 | 4.63 | $ | 26,459 | ||||||
Options exercisable at December 31, 2017 | 6,212 | $ | 7.81 | 4.27 | $ | 24,760 | ||||||
Options exercisable and expected to vest at December 31, 2017 | 6,842 | $ | 7.94 | 4.63 | $ | 26,425 |
RSUs | Weighted- Average Grant Date Fair Value Per RSU | |||||
(In thousands) | ||||||
Outstanding at January 1, 2015 | 2,282 | $ | 6.80 | |||
Granted | 834 | 9.42 | ||||
Forfeited | (193 | ) | 7.18 | |||
Released | (979 | ) | 7.06 | |||
Outstanding at December 31, 2015 | 1,944 | 7.76 | ||||
Granted | 2,297 | 7.09 | ||||
Forfeited | (152 | ) | 7.44 | |||
Released | (766 | ) | 7.36 | |||
Outstanding at December 31, 2016 | 3,323 | 7.40 | ||||
Granted | 2,431 | 8.89 | ||||
Forfeited | (203 | ) | 8.42 | |||
Released | (2,003 | ) | 7.16 | |||
Outstanding at December 31, 2017 | 3,548 | 8.50 | ||||
Vested and unreleased at December 31, 2017 (1) | 521 |
(1) | These RSUs were granted to the Company's board of directors as a part of their compensation for board and committee service and had vested but had not yet been issued and released. |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands, except per share data) | |||||||||||
Numerator: | |||||||||||
Net income (loss) attributable to common stockholders (numerator for basic net income per share) | $ | 218,420 | $ | 95,596 | $ | (8,313 | ) | ||||
Net (income) loss allocated to participating securities | (215 | ) | (123 | ) | 3 | ||||||
Numerator for basic net income (loss) per share | 218,205 | 95,473 | (8,310 | ) | |||||||
Dividends on Series A preferred stock, declared and undeclared | 7,000 | 7,000 | — | ||||||||
Dividends on Series B preferred stock, declared and undeclared | 8,436 | 8,436 | — | ||||||||
Numerator for diluted net income (loss) per share | $ | 233,641 | $ | 110,909 | $ | (8,310 | ) | ||||
Denominator: Denominator for basic net income (loss) per share - weighted average outstanding common shares | 97,934 | 95,967 | 95,097 | ||||||||
Dilutive effect of stock options | 1,558 | 250 | — | ||||||||
Dilutive effect of Performance RSUs | 1,308 | 1,328 | — | ||||||||
Dilutive effect of Series A preferred stock | 10,602 | 10,602 | — | ||||||||
Dilutive effect of Series B preferred stock | 16,728 | 16,728 | — | ||||||||
Denominator for diluted net income (loss) per share | 128,130 | 124,875 | 95,097 | ||||||||
Net income (loss) per share attributable to common stockholders - basic | $ | 2.23 | $ | 1.00 | $ | (0.09 | ) | ||||
Net income (loss) per share attributable to common stockholders - diluted | $ | 1.82 | $ | 0.89 | $ | (0.09 | ) |
• | Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; |
• | Level 2, defined as observable inputs other than Level 1 prices 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, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
U.S. income | $ | 120,281 | $ | 176,448 | $ | 75,431 | |||||
Foreign income (loss) | (709 | ) | 1,717 | (2,316 | ) | ||||||
Total income before income taxes | $ | 119,572 | $ | 178,165 | $ | 73,115 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
Current taxes: | |||||||||||
Federal tax expense | $ | 13 | $ | 1,206 | $ | 1,700 | |||||
State tax expense | 422 | 978 | 266 | ||||||||
Foreign tax expense | 863 | 1,141 | 650 | ||||||||
Total current tax expense | 1,298 | 3,325 | 2,616 | ||||||||
Deferred taxes: | |||||||||||
Federal tax expense (benefit) | (110,811 | ) | 60,295 | 54,906 | |||||||
State tax expense (benefit) | (4,851 | ) | 3,454 | 8,803 | |||||||
Foreign tax expense (benefit) | 80 | 59 | (333 | ) | |||||||
Total deferred tax expense (benefit) | (115,582 | ) | 63,808 | 63,376 | |||||||
Total income tax expense (benefit) | $ | (114,284 | ) | $ | 67,133 | $ | 65,992 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
Expected tax expense at U.S. federal statutory tax rate | $ | 41,850 | $ | 62,309 | $ | 25,590 | |||||
State taxes, net of federal benefit | 5,133 | 9,757 | 11,663 | ||||||||
State tax valuation allowance | 582 | (2,710 | ) | (2,763 | ) | ||||||
Deferred impact of Arizona tax law changes and elections | (10,217 | ) | (2,962 | ) | 99 | ||||||
Tax Act - deferred tax effects | (150,903 | ) | — | — | |||||||
Impairment of goodwill | — | — | 30,464 | ||||||||
Other nondeductible expenses | (841 | ) | 596 | 557 | |||||||
Tax credits | (528 | ) | (442 | ) | (97 | ) | |||||
Foreign taxes and other items | 640 | 585 | 479 | ||||||||
Total income tax expense (benefit) | $ | (114,284 | ) | $ | 67,133 | $ | 65,992 |
As of December 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Deferred tax assets | |||||||
Long-term contracts | $ | 61,358 | $ | 74,720 | |||
Federal, state and foreign net operating loss carryforwards and tax credits | 107,566 | 60,667 | |||||
Other | 22,680 | 34,330 | |||||
Total deferred tax assets | 191,604 | 169,717 | |||||
Valuation allowance | (3,815 | ) | (2,825 | ) | |||
Net deferred tax assets | 187,789 | 166,892 | |||||
Deferred tax liabilities | |||||||
Fixed assets, intangibles and research and development expenditures | (403,545 | ) | (513,905 | ) | |||
Investment in joint venture | (27,796 | ) | (14,643 | ) | |||
Other | (2,276 | ) | — | ||||
Total deferred tax liabilities | (433,617 | ) | (528,548 | ) | |||
Net deferred income tax liabilities | $ | (245,828 | ) | $ | (361,656 | ) |
2017 | 2016 | ||||||
(In thousands) | |||||||
Balance at January 1, | $ | 920 | $ | 916 | |||
Change attributable to tax positions taken in a prior period | 146 | 25 | |||||
Change attributable to final assessment | (27 | ) | — | ||||
Change attributable to tax positions taken in the current period | 10 | 8 | |||||
Decrease attributable to lapse of statute of limitations | (3 | ) | (29 | ) | |||
Balance at December 31, | $ | 1,046 | $ | 920 |
December 31, 2017 | |||||||||||||
Useful Life (years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||
(In thousands) | |||||||||||||
Indefinite life intangible assets: | |||||||||||||
Trade names | Indefinite | $ | 21,195 | $ | — | $ | 21,195 | ||||||
Spectrum and licenses | Indefinite | 14,030 | — | 14,030 | |||||||||
Total | 35,225 | — | 35,225 | ||||||||||
Definite life intangible assets: | |||||||||||||
Intellectual property | 20 years | 16,439 | (6,651 | ) | 9,788 | ||||||||
Assembled workforce | 7 years | 5,678 | (812 | ) | 4,866 | ||||||||
Patents | 14 - 20 | 146 | (6 | ) | 140 | ||||||||
Total | 22,263 | (7,469 | ) | 14,794 | |||||||||
Total intangible assets | $ | 57,488 | $ | (7,469 | ) | $ | 50,019 |
December 31, 2016 | |||||||||||||
Useful Life (years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||
(In thousands) | |||||||||||||
Indefinite life intangible assets: | |||||||||||||
Trade names | Indefinite | $ | 21,195 | $ | — | $ | 21,195 | ||||||
Spectrum and licenses | Indefinite | 14,030 | — | 14,030 | |||||||||
Total | 35,225 | — | 35,225 | ||||||||||
Definite life intangible assets: | |||||||||||||
Intellectual property | 20 years | 16,439 | (5,868 | ) | 10,571 | ||||||||
Total | 16,439 | (5,868 | ) | 10,571 | |||||||||
Total intangible assets | $ | 51,664 | $ | (5,868 | ) | $ | 45,796 |
Year ending December 31, | Amount | |||
(In thousands) | ||||
2018 | $ | 1,604 | ||
2019 | 1,604 | |||
2020 | 1,604 | |||
2021 | 1,604 | |||
Thereafter | 8,378 | |||
Total estimated future amortization expense | $ | 14,794 |
December 31, 2017 | December 31, 2016 | ||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
(In thousands) | (In thousands) | ||||||||||||||
Mature within one year | $ | 11,519 | $ | 11,504 | $ | 32,776 | $ | 32,788 | |||||||
Mature after one year and within three years | 250 | 249 | 6,544 | 6,540 | |||||||||||
Total | $ | 11,769 | $ | 11,753 | $ | 39,320 | $ | 39,328 |
December 31, 2017 | |||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Recurring Fair Value Measurement | |||||||||||||
(In thousands) | |||||||||||||||||
Fixed-income debt securities | $ | 9,520 | $ | 2 | $ | (15 | ) | $ | 9,507 | Level 2 | |||||||
U.S. Treasury notes | 2,249 | — | (3 | ) | 2,246 | Level 2 | |||||||||||
Total marketable securities | $ | 11,769 | $ | 2 | $ | (18 | ) | $ | 11,753 |
December 31, 2016 | |||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Recurring Fair Value Measurement | |||||||||||||
(In thousands) | |||||||||||||||||
Fixed-income debt securities | $ | 30,037 | $ | 14 | $ | (11 | ) | $ | 30,040 | Level 2 | |||||||
U.S. Treasury notes | 9,283 | 7 | (2 | ) | 9,288 | Level 2 | |||||||||||
Total marketable securities | $ | 39,320 | $ | 21 | $ | (13 | ) | $ | 39,328 |
• | The Company made an accounting policy election to continue estimating the number of awards that are expected to be forfeited, consistent with the Company’s prior practice. |
• | The Company excluded the excess tax benefits and deficiencies component from the treasury stock method in the diluted earnings per share calculation. The change had an immaterial impact on the Company’s reported diluted earnings per share. |
• | The Company recorded current excess tax benefits and tax deficiencies as income tax benefit (expense) in the consolidated statements of operations and comprehensive income. The change resulted in an excess tax expense of $0.2 million for the three months ended December 31, 2017 and excess tax benefit of $1.1 million recorded in the provision for income taxes for the year ended December 31, 2017. |
• | The Company will present excess tax benefits as an operating activity on the condensed consolidated statement of cash flows rather than as a financing activity. Prior periods have not been adjusted. |
December 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Satellite system | $ | 1,199,794 | $ | 314,228 | |||
Ground system | 67,576 | 63,519 | |||||
Equipment | 35,616 | 34,139 | |||||
Internally developed software and purchased software | 191,089 | 127,498 | |||||
Building and leasehold improvements | 32,130 | 32,099 | |||||
1,526,205 | 571,483 | ||||||
Less: accumulated depreciation | (432,833 | ) | (422,098 | ) | |||
1,093,372 | 149,385 | ||||||
Land | 8,037 | 8,037 | |||||
Construction in process: | |||||||
Iridium NEXT systems under construction | 2,088,380 | 2,639,824 | |||||
Other construction in process | 20,373 | 15,838 | |||||
Total property and equipment, net of accumulated depreciation | $ | 3,210,162 | $ | 2,813,084 |
December 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Internally developed software | $ | 14,782 | $ | 14,218 | |||
Equipment | 4,241 | 1,546 | |||||
Ground system | 1,350 | 74 | |||||
Total other construction in process | $ | 20,373 | $ | 15,838 |
December 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Satellite system | $ | 1,199,794 | $ | 314,228 | |||
Ground system | 67,576 | 63,519 | |||||
Equipment | 35,616 | 34,139 | |||||
Internally developed software and purchased software | 191,089 | 127,498 | |||||
Building and leasehold improvements | 32,130 | 32,099 | |||||
1,526,205 | 571,483 | ||||||
Less: accumulated depreciation | (432,833 | ) | (422,098 | ) | |||
1,093,372 | 149,385 | ||||||
Land | 8,037 | 8,037 | |||||
Construction in process: | |||||||
Iridium NEXT systems under construction | 2,088,380 | 2,639,824 | |||||
Other construction in process | 20,373 | 15,838 | |||||
Total property and equipment, net of accumulated depreciation | $ | 3,210,162 | $ | 2,813,084 |
Quarter Ended | |||||||||||||||
March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Revenue | $ | 104,426 | $ | 111,604 | $ | 116,547 | $ | 115,469 | |||||||
Operating income (loss) (1) | $ | 55,602 | $ | 35,742 | $ | 38,082 | $ | (13,950 | ) | ||||||
Net income (2) | $ | 37,948 | $ | 24,778 | $ | 29,253 | $ | 141,877 | |||||||
Net income per common share - basic | $ | 0.35 | $ | 0.21 | $ | 0.26 | $ | 1.40 | |||||||
Net income per common share -diluted | $ | 0.30 | $ | 0.20 | $ | 0.23 | $ | 1.10 |
(1) | Includes accelerated depreciation of $36.8 million in the fourth quarter of 2017 associated with the write-off of the full amount previously paid to Kosmotras which decreased operating income. Also includes the impact of $14.2 million related to the gain on the transaction with Boeing, effective January 3, 2017. |
(2) | Includes the impact of provisional estimates related to deferred tax assets and liabilities resulting from the Tax Act implemented in December 2017. |
Quarter Ended | |||||||||||||||
March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Revenue | $ | 104,202 | $ | 109,195 | $ | 112,794 | $ | 107,449 | |||||||
Operating income | $ | 43,278 | $ | 41,729 | $ | 49,768 | $ | 41,596 | |||||||
Net income | $ | 28,520 | $ | 26,854 | $ | 31,555 | $ | 24,103 | |||||||
Net income per common share - basic | $ | 0.26 | $ | 0.24 | $ | 0.29 | $ | 0.21 | |||||||
Net income per common share -diluted | $ | 0.23 | $ | 0.22 | $ | 0.26 | $ | 0.19 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
United States | $ | 229,741 | $ | 226,190 | $ | 204,777 | |||||
Canada | 44,107 | 42,373 | 42,063 | ||||||||
United Kingdom | 46,245 | 47,135 | 44,012 | ||||||||
Other countries (1) | 127,953 | 117,942 | 120,526 | ||||||||
Total | $ | 448,046 | $ | 433,640 | $ | 411,378 |
(1) | No single country in this group represented more than 10% of revenue. |
Year Ended December 31, | ||||||||
2017 | 2016 | |||||||
Cash and cash equivalents | $ | 285,873 | $ | 371,167 | ||||
Restricted cash | 102,384 | 113,139 | ||||||
Cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ | 388,257 | $ | 484,306 |
Year Ended December 31, | |||||||||
2017 | 2016 | Recurring Fair Value Measurement | |||||||
(In thousands) | |||||||||
Cash and cash equivalents: | |||||||||
Cash | $ | 24,092 | $ | 102,194 | |||||
Money market funds | 251,950 | 266,478 | Level 1 | ||||||
Commercial paper | 9,831 | 2,495 | Level 2 | ||||||
Total cash and cash equivalents | $ | 285,873 | $ | 371,167 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
Current taxes: | |||||||||||
Federal tax expense | $ | 13 | $ | 1,206 | $ | 1,700 | |||||
State tax expense | 422 | 978 | 266 | ||||||||
Foreign tax expense | 863 | 1,141 | 650 | ||||||||
Total current tax expense | 1,298 | 3,325 | 2,616 | ||||||||
Deferred taxes: | |||||||||||
Federal tax expense (benefit) | (110,811 | ) | 60,295 | 54,906 | |||||||
State tax expense (benefit) | (4,851 | ) | 3,454 | 8,803 | |||||||
Foreign tax expense (benefit) | 80 | 59 | (333 | ) | |||||||
Total deferred tax expense (benefit) | (115,582 | ) | 63,808 | 63,376 | |||||||
Total income tax expense (benefit) | $ | (114,284 | ) | $ | 67,133 | $ | 65,992 |
As of December 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Deferred tax assets | |||||||
Long-term contracts | $ | 61,358 | $ | 74,720 | |||
Federal, state and foreign net operating loss carryforwards and tax credits | 107,566 | 60,667 | |||||
Other | 22,680 | 34,330 | |||||
Total deferred tax assets | 191,604 | 169,717 | |||||
Valuation allowance | (3,815 | ) | (2,825 | ) | |||
Net deferred tax assets | 187,789 | 166,892 | |||||
Deferred tax liabilities | |||||||
Fixed assets, intangibles and research and development expenditures | (403,545 | ) | (513,905 | ) | |||
Investment in joint venture | (27,796 | ) | (14,643 | ) | |||
Other | (2,276 | ) | — | ||||
Total deferred tax liabilities | (433,617 | ) | (528,548 | ) | |||
Net deferred income tax liabilities | $ | (245,828 | ) | $ | (361,656 | ) |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands, except per share data) | |||||||||||
Numerator: | |||||||||||
Net income (loss) attributable to common stockholders (numerator for basic net income per share) | $ | 218,420 | $ | 95,596 | $ | (8,313 | ) | ||||
Net (income) loss allocated to participating securities | (215 | ) | (123 | ) | 3 | ||||||
Numerator for basic net income (loss) per share | 218,205 | 95,473 | (8,310 | ) | |||||||
Dividends on Series A preferred stock, declared and undeclared | 7,000 | 7,000 | — | ||||||||
Dividends on Series B preferred stock, declared and undeclared | 8,436 | 8,436 | — | ||||||||
Numerator for diluted net income (loss) per share | $ | 233,641 | $ | 110,909 | $ | (8,310 | ) | ||||
Denominator: Denominator for basic net income (loss) per share - weighted average outstanding common shares | 97,934 | 95,967 | 95,097 | ||||||||
Dilutive effect of stock options | 1,558 | 250 | — | ||||||||
Dilutive effect of Performance RSUs | 1,308 | 1,328 | — | ||||||||
Dilutive effect of Series A preferred stock | 10,602 | 10,602 | — | ||||||||
Dilutive effect of Series B preferred stock | 16,728 | 16,728 | — | ||||||||
Denominator for diluted net income (loss) per share | 128,130 | 124,875 | 95,097 | ||||||||
Net income (loss) per share attributable to common stockholders - basic | $ | 2.23 | $ | 1.00 | $ | (0.09 | ) | ||||
Net income (loss) per share attributable to common stockholders - diluted | $ | 1.82 | $ | 0.89 | $ | (0.09 | ) |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
Expected tax expense at U.S. federal statutory tax rate | $ | 41,850 | $ | 62,309 | $ | 25,590 | |||||
State taxes, net of federal benefit | 5,133 | 9,757 | 11,663 | ||||||||
State tax valuation allowance | 582 | (2,710 | ) | (2,763 | ) | ||||||
Deferred impact of Arizona tax law changes and elections | (10,217 | ) | (2,962 | ) | 99 | ||||||
Tax Act - deferred tax effects | (150,903 | ) | — | — | |||||||
Impairment of goodwill | — | — | 30,464 | ||||||||
Other nondeductible expenses | (841 | ) | 596 | 557 | |||||||
Tax credits | (528 | ) | (442 | ) | (97 | ) | |||||
Foreign taxes and other items | 640 | 585 | 479 | ||||||||
Total income tax expense (benefit) | $ | (114,284 | ) | $ | 67,133 | $ | 65,992 |
Intellectual property | 20 years |
Assembled workforce | 7 years |
Patents | 14 - 20 years |
Year ending December 31, | Operating Leases | |||
(In thousands) | ||||
2018 | $ | 3,741 | ||
2019 | 3,692 | |||
2020 | 3,734 | |||
2021 | 3,827 | |||
2022 | 3,402 | |||
Thereafter | 8,849 | |||
Total | $ | 27,245 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
U.S. income | $ | 120,281 | $ | 176,448 | $ | 75,431 | |||||
Foreign income (loss) | (709 | ) | 1,717 | (2,316 | ) | ||||||
Total income before income taxes | $ | 119,572 | $ | 178,165 | $ | 73,115 |
December 31, 2017 | |||||||||||||
Useful Life (years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||
(In thousands) | |||||||||||||
Indefinite life intangible assets: | |||||||||||||
Trade names | Indefinite | $ | 21,195 | $ | — | $ | 21,195 | ||||||
Spectrum and licenses | Indefinite | 14,030 | — | 14,030 | |||||||||
Total | 35,225 | — | 35,225 | ||||||||||
Definite life intangible assets: | |||||||||||||
Intellectual property | 20 years | 16,439 | (6,651 | ) | 9,788 | ||||||||
Assembled workforce | 7 years | 5,678 | (812 | ) | 4,866 | ||||||||
Patents | 14 - 20 | 146 | (6 | ) | 140 | ||||||||
Total | 22,263 | (7,469 | ) | 14,794 | |||||||||
Total intangible assets | $ | 57,488 | $ | (7,469 | ) | $ | 50,019 |
December 31, 2016 | |||||||||||||
Useful Life (years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||
(In thousands) | |||||||||||||
Indefinite life intangible assets: | |||||||||||||
Trade names | Indefinite | $ | 21,195 | $ | — | $ | 21,195 | ||||||
Spectrum and licenses | Indefinite | 14,030 | — | 14,030 | |||||||||
Total | 35,225 | — | 35,225 | ||||||||||
Definite life intangible assets: | |||||||||||||
Intellectual property | 20 years | 16,439 | (5,868 | ) | 10,571 | ||||||||
Total | 16,439 | (5,868 | ) | 10,571 | |||||||||
Total intangible assets | $ | 51,664 | $ | (5,868 | ) | $ | 45,796 |
Year ending December 31, | Amount | |||
(In thousands) | ||||
2018 | $ | 85,500 | ||
2019 | 202,500 | |||
2020 | 288,000 | |||
2021 | 306,000 | |||
2022 | 306,000 | |||
Thereafter | 612,000 | |||
Total debt commitments | $ | 1,800,000 | ||
Original issuance discount | 96,445 | |||
Total short-term debt | 85,500 | |||
Total long-term debt, net | $ | 1,618,055 |
Quarter Ended | |||||||||||||||
March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Revenue | $ | 104,426 | $ | 111,604 | $ | 116,547 | $ | 115,469 | |||||||
Operating income (loss) (1) | $ | 55,602 | $ | 35,742 | $ | 38,082 | $ | (13,950 | ) | ||||||
Net income (2) | $ | 37,948 | $ | 24,778 | $ | 29,253 | $ | 141,877 | |||||||
Net income per common share - basic | $ | 0.35 | $ | 0.21 | $ | 0.26 | $ | 1.40 | |||||||
Net income per common share -diluted | $ | 0.30 | $ | 0.20 | $ | 0.23 | $ | 1.10 |
(1) | Includes accelerated depreciation of $36.8 million in the fourth quarter of 2017 associated with the write-off of the full amount previously paid to Kosmotras which decreased operating income. Also includes the impact of $14.2 million related to the gain on the transaction with Boeing, effective January 3, 2017. |
(2) | Includes the impact of provisional estimates related to deferred tax assets and liabilities resulting from the Tax Act implemented in December 2017. |
Quarter Ended | |||||||||||||||
March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Revenue | $ | 104,202 | $ | 109,195 | $ | 112,794 | $ | 107,449 | |||||||
Operating income | $ | 43,278 | $ | 41,729 | $ | 49,768 | $ | 41,596 | |||||||
Net income | $ | 28,520 | $ | 26,854 | $ | 31,555 | $ | 24,103 | |||||||
Net income per common share - basic | $ | 0.26 | $ | 0.24 | $ | 0.29 | $ | 0.21 | |||||||
Net income per common share -diluted | $ | 0.23 | $ | 0.22 | $ | 0.26 | $ | 0.19 |
Year Ended December 31, | ||||||||
2017 | 2016 | |||||||
Cash and cash equivalents | $ | 285,873 | $ | 371,167 | ||||
Restricted cash | 102,384 | 113,139 | ||||||
Cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ | 388,257 | $ | 484,306 |
RSUs | Weighted- Average Grant Date Fair Value Per RSU | |||||
(In thousands) | ||||||
Outstanding at January 1, 2015 | 2,282 | $ | 6.80 | |||
Granted | 834 | 9.42 | ||||
Forfeited | (193 | ) | 7.18 | |||
Released | (979 | ) | 7.06 | |||
Outstanding at December 31, 2015 | 1,944 | 7.76 | ||||
Granted | 2,297 | 7.09 | ||||
Forfeited | (152 | ) | 7.44 | |||
Released | (766 | ) | 7.36 | |||
Outstanding at December 31, 2016 | 3,323 | 7.40 | ||||
Granted | 2,431 | 8.89 | ||||
Forfeited | (203 | ) | 8.42 | |||
Released | (2,003 | ) | 7.16 | |||
Outstanding at December 31, 2017 | 3,548 | 8.50 | ||||
Vested and unreleased at December 31, 2017 (1) | 521 |
Shares | Weighted- Average Exercise Price Per Share | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||
(In thousands, except years and per share data) | ||||||||||||
Options outstanding at January 1, 2015 | 6,671 | $ | 7.68 | |||||||||
Granted | 885 | 9.25 | ||||||||||
Cancelled or expired | (92 | ) | 8.66 | |||||||||
Exercised | (287 | ) | 7.87 | |||||||||
Forfeited | (57 | ) | 7.81 | |||||||||
Options outstanding at December 31, 2015 | 7,120 | 7.86 | 6.33 | $ | 3,937 | |||||||
Granted | 249 | 8.13 | ||||||||||
Cancelled or expired | (39 | ) | 8.92 | |||||||||
Exercised | (73 | ) | 7.33 | |||||||||
Forfeited | (55 | ) | 7.62 | |||||||||
Options outstanding at December 31, 2016 | 7,202 | 7.87 | 5.45 | $ | 12,473 | |||||||
Granted | 209 | 10.50 | ||||||||||
Cancelled or expired | (2 | ) | 7.24 | |||||||||
Exercised | (534 | ) | 7.93 | |||||||||
Forfeited | (19 | ) | 9.13 | |||||||||
Options outstanding at December 31, 2017 | 6,856 | $ | 7.94 | 4.63 | $ | 26,459 | ||||||
Options exercisable at December 31, 2017 | 6,212 | $ | 7.81 | 4.27 | $ | 24,760 | ||||||
Options exercisable and expected to vest at December 31, 2017 | 6,842 | $ | 7.94 | 4.63 | $ | 26,425 |
Year Ended December 31, | |||||
2017 | 2016 | 2015 | |||
Expected volatility | 40% - 41% | 40% - 42% | 39% - 42% | ||
Expected term (years) | 6.25 | 6.25 | 6.25 | ||
Expected dividends | —% | —% | —% | ||
Risk free interest rate | 1.86% - 2.14% | 1.15% - 2.45% | 1.50% - 2.35% |
Year ending December 31, | Amount | |||
(In thousands) | ||||
2018 | $ | 1,604 | ||
2019 | 1,604 | |||
2020 | 1,604 | |||
2021 | 1,604 | |||
Thereafter | 8,378 | |||
Total estimated future amortization expense | $ | 14,794 |
December 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
United States | $ | 165,337 | $ | 124,483 | |||
Satellites in orbit | 926,090 | 13,405 | |||||
Iridium NEXT systems under construction | 2,088,380 | 2,639,824 | |||||
All others (1) | 30,355 | 35,372 | |||||
Total | $ | 3,210,162 | $ | 2,813,084 |
(1) | No single country in this group represented more than 10% of property and equipment, net. |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
United States | $ | 229,741 | $ | 226,190 | $ | 204,777 | |||||
Canada | 44,107 | 42,373 | 42,063 | ||||||||
United Kingdom | 46,245 | 47,135 | 44,012 | ||||||||
Other countries (1) | 127,953 | 117,942 | 120,526 | ||||||||
Total | $ | 448,046 | $ | 433,640 | $ | 411,378 |
(1) | No single country in this group represented more than 10% of revenue. |
• | The Company made an accounting policy election to continue estimating the number of awards that are expected to be forfeited, consistent with the Company’s prior practice. |
• | The Company excluded the excess tax benefits and deficiencies component from the treasury stock method in the diluted earnings per share calculation. The change had an immaterial impact on the Company’s reported diluted earnings per share. |
• | The Company recorded current excess tax benefits and tax deficiencies as income tax benefit (expense) in the consolidated statements of operations and comprehensive income. The change resulted in an excess tax expense of $0.2 million for the three months ended December 31, 2017 and excess tax benefit of $1.1 million recorded in the provision for income taxes for the year ended December 31, 2017. |
• | The Company will present excess tax benefits as an operating activity on the condensed consolidated statement of cash flows rather than as a financing activity. Prior periods have not been adjusted. |
Year Ended December 31, | ||||||||
2017 | 2016 | |||||||
Cash and cash equivalents | $ | 285,873 | $ | 371,167 | ||||
Restricted cash | 102,384 | 113,139 | ||||||
Cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ | 388,257 | $ | 484,306 |
• | Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; |
• | Level 2, defined as observable inputs other than Level 1 prices 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, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
Year Ended December 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Property and equipment, net | $ | 2,458 | $ | 1,906 | |||
Inventory | 280 | 359 | |||||
Cost of subscriber equipment | 30 | 56 | |||||
Cost of services (exclusive of depreciation and amortization) | 4,366 | 1,655 | |||||
Research and development | 349 | 457 | |||||
Selling, general and administrative | 11,211 | 11,540 | |||||
Total stock-based compensation | $ | 18,694 | $ | 15,973 |
First-generation satellites | 15-21 years |
Next-generation satellites | 12.5 years |
Ground system | 5-7 years |
Equipment | 3-5 years |
Internally developed software and purchased software | 3-7 years |
Building | 39 years |
Building improvements | 5-39 years |
Leasehold improvements | shorter of useful life or remaining lease term |
Intellectual property | 20 years |
Assembled workforce | 7 years |
Patents | 14 - 20 years |
2017 | 2016 | ||||||
(In thousands) | |||||||
Balance at January 1, | $ | 920 | $ | 916 | |||
Change attributable to tax positions taken in a prior period | 146 | 25 | |||||
Change attributable to final assessment | (27 | ) | — | ||||
Change attributable to tax positions taken in the current period | 10 | 8 | |||||
Decrease attributable to lapse of statute of limitations | (3 | ) | (29 | ) | |||
Balance at December 31, | $ | 1,046 | $ | 920 |