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Note 1. Basis of Presentation
Interim Financial Statements
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by VeriSign, Inc. ("Verisign" or the "Company") in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, therefore, do not include all information and notes normally provided in audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of, nor comparable to, the results of operations for any other interim period or for a full fiscal year. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes contained in Verisign's fiscal 2010 Annual Report on Form 10-K (the "2010 Form 10-K") filed with the SEC on February 24, 2011.
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to current period presentation. Such reclassifications have no effect on net income as previously reported.
|
|||
Note 2. Cash, Cash Equivalents, and Marketable Securities
The following table summarizes the Company's cash, cash equivalents, and marketable securities:
| June 30, 2011 |
December 31, 2010 |
|||||||
| (In thousands) | ||||||||
|
Cash |
$ | 81,166 | $ | 106,270 | ||||
|
Money market funds |
241,084 | 648,054 | ||||||
|
Time deposits |
901,889 | 803,797 | ||||||
|
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies |
81,808 | 359,160 | ||||||
|
Corporate debt securities |
92,777 | 141,338 | ||||||
|
Debt securities issued by foreign governments |
— | 5,040 | ||||||
|
|
|
|
|
|||||
|
Total |
$ | 1,398,724 | $ | 2,063,659 | ||||
|
|
|
|
|
|||||
|
Included in Cash and cash equivalents |
$ | 1,220,165 | $ | 1,559,628 | ||||
|
Included in Marketable securities |
$ | 174,585 | $ | 501,238 | ||||
|
Included in Other assets (Restricted cash) |
$ | 3,974 | $ | 2,793 | ||||
The following tables summarize the Company's unrealized gains and losses, and fair value of fixed income securities designated as available-for-sale investments. There were no investments classified as either held-to-maturity or trading.
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | |||||||||||||
| (In thousands) | ||||||||||||||||
|
As of June 30, 2011: |
||||||||||||||||
|
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies |
$ | 80,809 | $ | 1,003 | $ | (4 | ) | $ | 81,808 | |||||||
|
Corporate debt securities |
91,761 | 1,016 | — | 92,777 | ||||||||||||
|
Total fixed income securities |
$ | 172,570 | $ | 2,019 | $ | (4 | ) | $ | 174,585 | |||||||
|
Included in Marketable securities |
$ | 174,585 | ||||||||||||||
|
As of December 31, 2010: |
||||||||||||||||
|
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies |
$ | 357,135 | $ | 2,524 | $ | (499 | ) | $ | 359,160 | |||||||
|
Corporate debt securities |
140,009 | 1,329 | — | 141,338 | ||||||||||||
|
Debt securities issued by foreign governments |
5,038 | 2 | — | 5,040 | ||||||||||||
|
Total fixed income securities |
$ | 502,182 | $ | 3,855 | $ | (499 | ) | $ | 505,538 | |||||||
|
Included in Cash and cash equivalents |
$ | 4,300 | ||||||||||||||
|
Included in Marketable securities |
$ | 501,238 | ||||||||||||||
The following table presents the contractual maturities of the fixed income securities as of June 30, 2011:
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Due within one year |
$ | 42,132 | $ | 247 | $ | — | $ | 42,379 | ||||||||
|
Due after one year through three years |
130,438 | 1,772 | (4 | ) | 132,206 | |||||||||||
|
Total |
$ | 172,570 | $ | 2,019 | $ | (4 | ) | $ | 174,585 | |||||||
The Company recognized pre-tax net gains of $2.3 million during the three and six months ended June 30, 2011 related to the sale of $369.6 million of marketable securities, primarily to fund a special dividend paid in May 2011 (the "May 2011 Dividend") discussed further in Note 6. Net gains or losses recognized during the three and six months ended June 30, 2010 related to sales of marketable securities were not material.
|
|||
Note 3. Fair Value of Financial Instruments
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2011 and December 31, 2010:
| Fair Value Measurement Using | ||||||||||||||||
| Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
| (In thousands) | ||||||||||||||||
|
As of June 30, 2011: |
||||||||||||||||
|
Assets: |
||||||||||||||||
|
Investments in money market funds |
$ | 241,084 | $ | 241,084 | $ | — | $ | — | ||||||||
|
Investments in fixed income securities: |
||||||||||||||||
|
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies |
81,808 | — | 81,808 | — | ||||||||||||
|
Corporate debt securities |
92,777 | — | 92,777 | — | ||||||||||||
|
Foreign currency forward contracts (1) |
394 | — | 394 | — | ||||||||||||
|
Total |
$ | 416,063 | $ | 241,084 | $ | 174,979 | $ | — | ||||||||
|
Liabilities: |
||||||||||||||||
|
Contingent interest derivative on Convertible Debentures |
$ | 10,250 | $ | — | $ | — | $ | 10,250 | ||||||||
|
Foreign currency forward contracts (2) |
74 | — | 74 | — | ||||||||||||
|
Total |
$ | 10,324 | $ | — | $ | 74 | $ | 10,250 | ||||||||
|
As of December 31, 2010: |
||||||||||||||||
|
Assets: |
||||||||||||||||
|
Investments in money market funds |
$ | 648,054 | $ | 648,054 | $ | — | $ | — | ||||||||
|
Investments in fixed income securities: |
||||||||||||||||
|
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies |
359,160 | 2,700 | 356,460 | — | ||||||||||||
|
Corporate debt securities |
141,338 | — | 141,338 | — | ||||||||||||
|
Debt securities issued by foreign governments |
5,040 | — | 5,040 | — | ||||||||||||
|
Total |
$ | 1,153,592 | $ | 650,754 | $ | 502,838 | $ | — | ||||||||
|
Liabilities: |
||||||||||||||||
|
Contingent interest derivative on Convertible Debentures |
$ | 10,500 | $ | — | $ | — | $ | 10,500 | ||||||||
|
Foreign currency forward contracts (2) |
282 | — | 282 | — | ||||||||||||
|
Total |
$ | 10,782 | $ | — | $ | 282 | $ | 10,500 | ||||||||
| (1) | Included in Prepaid expenses and other current assets |
| (2) | Included in Accounts payable and accrued liabilities |
The fair value of the Company's investments in certain money market funds approximates their face value. Such instruments are classified as Level 1 and are included in Cash and cash equivalents.
The fair value of the Company's investments in fixed income securities are obtained using the weighted-average price of available market prices for the underlying securities from various industry standard data providers, large financial institutions and other third-party sources. Such instruments are included in either Cash and cash equivalents or Marketable securities. The $2.7 million fair value of U.S. Treasury bills held by the Company at December 31, 2010 was based on their quoted market prices and included in Cash and cash equivalents.
The fair value of the Company's foreign currency forward contracts is based on foreign currency rates quoted by banks or foreign currency dealers and other public data sources.
The Company utilizes a valuation model to estimate the value of the contingent interest derivative on the Convertible Debentures. The inputs to the model include stock price, bond price, risk adjusted interest rates, volatility, and credit spread observations. As several significant inputs are not observable, the overall fair value measurement of the derivative is classified as Level 3.
The following table summarizes the change in the fair value of the Company's Level 3 contingent interest derivative on Convertible Debentures during the three and six months ended June 30, 2011 and 2010:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Beginning balance |
$ | 10,950 | $ | 9,531 | $ | 10,500 | $ | 10,000 | ||||||||
|
Unrealized gain on contingent interest derivative on Convertible Debentures |
(700 | ) | (1,281 | ) | (250 | ) | (1,750 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Ending balance |
$ | 10,250 | $ | 8,250 | $ | 10,250 | $ | 8,250 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Other
The Company's other financial instruments include accounts receivable, restricted cash, and accounts payable. As of June 30, 2011, the carrying value of these financial instruments approximated their fair value. The fair value of the Company's Convertible Debentures as of June 30, 2011, is $1.4 billion, and is based on quoted market prices.
|
|||
Note 4. Other Balance Sheet Items
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
| June 30, 2011 |
December 31, 2010 |
|||||||
| (In thousands) | ||||||||
|
Prepaid expenses |
$ | 16,452 | $ | 9,939 | ||||
|
Deferred tax assets |
82,344 | 69,807 | ||||||
|
Non-trade receivables |
12,810 | 14,158 | ||||||
|
Receivables from buyers |
818 | 8,198 | ||||||
|
Other |
3,450 | 115 | ||||||
|
|
|
|
|
|||||
|
Total prepaid expenses and other current assets |
$ | 115,874 | $ | 102,217 | ||||
|
|
|
|
|
|||||
The Company recognized additional deferred tax assets, due to net operating losses, during the six months ended June 30, 2011. Non-trade receivables primarily consist of income tax receivables and value added tax receivables. As of December 31, 2010, Receivables from buyers primarily represents amounts due from Symantec for services performed on its behalf under transition services agreements. During the six months ended June 30, 2011, the Company received substantially the entire amount included in Receivables from buyers as of December 31, 2010.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
| June 30, 2011 |
December 31, 2010 |
|||||||
| (In thousands) | ||||||||
|
Accounts payable |
$ | 13,076 | $ | 16,727 | ||||
|
Accrued employee compensation |
36,784 | 52,628 | ||||||
|
Customer deposits, net |
19,964 | 18,681 | ||||||
|
Payables to buyers |
1,308 | 11,337 | ||||||
|
Taxes payable, deferred and other tax liabilities |
33,873 | 38,168 | ||||||
|
Accrued restructuring costs |
11,376 | 17,460 | ||||||
|
Other accrued liabilities |
40,614 | 40,234 | ||||||
|
|
|
|
|
|||||
|
Total accounts payable and accrued liabilities |
$ | 156,995 | $ | 195,235 | ||||
|
|
|
|
|
|||||
Accrued employee compensation primarily consists of liabilities for employee leave, salaries, payroll taxes, employee contributions to the employee stock purchase plan, and incentive compensation. As of December 31, 2010, Payables to buyers primarily consists of amounts due to Symantec for certain post-closing purchase price adjustments related to the sale of the Authentication Services business and accrued bonus for employees associated with the Authentication Services business, substantially the entire amount of which was paid during the six months ended June 30, 2011. Accrued bonus as of December 31, 2010, included in Accrued employee compensation was paid during the six months ended June 30, 2011. As of June 30, 2011, Accrued restructuring costs primarily represents restructuring costs related to the sale of the Authentication Services business. Other accrued liabilities include miscellaneous vendor payables and interest on the Convertible Debentures which is paid semi-annually in arrears on August 15 and February 15.
|
|||
Note 5. Restructuring Charges
2010 Restructuring Plan
In connection with the sale of the Authentication Services business and the migration of its corporate functions from California to Virginia, the Company initiated a restructuring plan in 2010, including workforce reductions, abandonment of excess facilities and other exit costs (the "2010 Restructuring Plan").
Under the 2010 Restructuring Plan, the Company expects to incur total estimated pre-tax cash charges for severance costs and other related employee termination costs of $22.9 million, and excess facility exit costs of $10.6 million, of which the Company has recorded a total of $22.7 million, and $1.5 million, respectively, through June 30, 2011. Additionally, the Company recognized stock-based compensation expenses of $15.4 million, inclusive of amounts reported in discontinued operations, through June 30, 2011, upon acceleration of stock-based awards for employees notified of termination.
The following table presents the nature of the restructuring charges:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Workforce reduction |
$ | 3,147 | $ | 11,840 | $ | 7,870 | $ | 13,551 | ||||||||
|
Excess facilities |
512 | (9 | ) | 1,319 | 108 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total consolidated restructuring charges |
$ | 3,659 | $ | 11,831 | $ | 9,189 | $ | 13,659 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Amounts classified as continuing operations |
$ | 3,659 | $ | 7,539 | $ | 9,189 | $ | 7,773 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Amounts classified as discontinued operations |
$ | — | $ | 4,292 | $ | — | $ | 5,886 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The following table presents a rollforward of the accrued restructuring costs:
| Accrued Restructuring Costs at December 31, 2010 |
Costs Incurred |
Costs Paid or Settled |
Stock-Based Compensation |
Accrued Restructuring Costs at June 30, 2011 |
||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Workforce reduction |
$ | 15,120 | $ | 7,870 | $ | (7,895 | ) | $ | (4,978 | ) | $ | 10,117 | ||||||||
|
Excess facilities |
3,098 | 1,319 | (2,639 | ) | — | 1,778 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total accrued restructuring costs |
$ | 18,218 | $ | 9,189 | $ | (10,534 | ) | $ | (4,978 | ) | $ | 11,895 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Current portion of accrued restructuring costs |
$ | 11,376 | ||||||||||||||||||
|
|
|
|||||||||||||||||||
|
Long-term portion of accrued restructuring costs |
$ | 519 | ||||||||||||||||||
|
|
|
|||||||||||||||||||
Amounts included in the tables above relate primarily to the 2010 Restructuring Plan.
|
|||
Note 6. Stockholders' (Deficit) Equity
Comprehensive (Loss) Income
Comprehensive (loss) income consists of Net (loss) income adjusted for realized and unrealized gains on marketable securities classified as available-for-sale and foreign currency translation adjustments. The following table presents the components of comprehensive (loss) income:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Net (loss) income |
$ | (10,610 | ) | $ | 36,374 | $ | 30,161 | $ | 88,814 | |||||||
|
Foreign currency translation adjustments |
48 | 4,617 | 76 | 4,091 | ||||||||||||
|
Change in unrealized gain on investments, net of tax |
1,077 | 2,982 | 609 | 2,742 | ||||||||||||
|
Realized gain on investments, net of tax, included in net (loss) income |
(1,398 | ) | (106 | ) | (1,415 | ) | (152 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Comprehensive (loss) income |
(10,883 | ) | 43,867 | 29,431 | 95,495 | |||||||||||
|
Less: Comprehensive income attributable to noncontrolling interest in subsidiary |
— | 3,288 | — | 4,181 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Comprehensive (loss) income attributable to Verisign stockholders |
$ | (10,883 | ) | $ | 40,579 | $ | 29,431 | $ | 91,314 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
Repurchase of Common Stock
On July 27, 2010, the Company's Board of Directors ("Board") authorized the repurchase of up to approximately $1.1 billion of common stock, in addition to the $393.6 million of its common stock remaining available for repurchase under the previous 2008 Share Buyback Program, for a total repurchase authorization of up to $1.5 billion of its common stock (collectively, the "2010 Share Buyback Program"). The 2010 Share Buyback Program has no expiration date. During the three and six months ended June 30, 2011, the Company repurchased 2.8 million and 8.4 million shares of its common stock, respectively, at an average stock price of $35.90 and $35.66, respectively. The aggregate cost of the repurchases under the 2010 Share Buyback Program in the three and six months ended June 30, 2011 was $100.0 million and $299.6 million, respectively. As of June 30, 2011, $1.1 billion remained available for further repurchases under the 2010 Share Buyback Program.
During the three and six months ended June 30, 2011, the Company placed 0.1 million and 0.3 million shares, respectively, at an average stock price of $36.36 and $35.00, respectively, for an aggregate cost of $3.2 million and $11.1 million, respectively, into treasury stock to cover tax withholdings upon vesting of Restricted Stock Units ("RSUs").
Since inception the Company has repurchased 149.3 million shares of its common stock for an aggregate cost of $4.4 billion, which is recorded as a reduction of Additional paid-in capital.
Special Dividend
On April 27, 2011, the Board declared a special dividend of $2.75 per share of the Company's common stock, totaling approximately $463.5 million, which was paid on May 18, 2011. The special dividend was accounted for as a reduction of Additional paid-in capital.
|
|||
Note 8. Stock-based Compensation
Stock-based compensation is classified in the Condensed Consolidated Statements of Operations in the same expense line items as cash compensation. The following table presents the classification of stock-based compensation:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Stock-based compensation: |
||||||||||||||||
|
Cost of revenues |
$ | 1,846 | $ | 1,348 | $ | 3,836 | $ | 2,269 | ||||||||
|
Sales and marketing |
1,697 | 1,484 | 3,551 | 2,604 | ||||||||||||
|
Research and development |
1,353 | 1,234 | 2,871 | 2,304 | ||||||||||||
|
General and administrative |
7,179 | 5,256 | 13,778 | 10,485 | ||||||||||||
|
Restructuring charges |
1,989 | — | 4,978 | 112 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Stock-based compensation for continuing operations |
14,064 | 9,322 | 29,014 | 17,774 | ||||||||||||
|
Discontinued operations |
— | 3,903 | — | 7,536 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total stock-based compensation expense |
$ | 14,064 | $ | 13,225 | $ | 29,014 | $ | 25,310 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The following table presents the nature of the Company's total stock-based compensation, inclusive of amounts for discontinued operations:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Stock-based compensation: |
||||||||||||||||
|
Stock options |
$ | 1,031 | $ | 2,329 | $ | 2,494 | $ | 4,645 | ||||||||
|
Employee stock purchase plan |
798 | 2,998 | 1,978 | 5,727 | ||||||||||||
|
Restricted stock units |
11,141 | 8,483 | 21,356 | 15,432 | ||||||||||||
|
RSUs/Stock options acceleration |
1,989 | — | 4,978 | 570 | ||||||||||||
|
Capitalization (Included in Property and equipment, net) |
(895 | ) | (585 | ) | (1,792 | ) | (1,064 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total stock-based compensation expense |
$ | 14,064 | $ | 13,225 | $ | 29,014 | $ | 25,310 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
|||
Note 9. Interest Expense
The following table presents the components of interest expense:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Contractual interest |
$ | 10,156 | $ | 10,156 | $ | 20,313 | $ | 20,313 | ||||||||
|
Amortization of debt discount on the Convertible Debentures |
1,819 | 1,676 | 3,602 | 3,318 | ||||||||||||
|
Contingent interest to holders of Convertible Debentures |
100,020 | — | 100,020 | — | ||||||||||||
|
Interest capitalized to Property and equipment, net |
(166 | ) | (280 | ) | (310 | ) | (467 | ) | ||||||||
|
Other interest expense |
27 | 414 | 51 | 800 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total interest expense |
$ | 111,856 | $ | 11,966 | $ | 123,676 | $ | 23,964 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Interest expense in the three and six months ended June 30, 2011 includes $100.0 million of interest paid to holders of the Convertible Debentures as a result of the May 2011 Dividend. The Indenture governing the Convertible Debentures requires the payment of contingent interest to the holders of the Convertible Debentures if the Board declares a dividend to its stockholders that is designated by the Board as an extraordinary dividend. The contingent interest is calculated as the amount derived by multiplying the per share declared dividend with the if-converted number of shares applicable to the Convertible Debentures.
|
|||
Note 10. Non-operating Income, Net
The following table presents the components of Non-operating income, net:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Interest and dividend income |
$ | 1,579 | $ | 2,046 | $ | 3,670 | $ | 3,139 | ||||||||
|
Unrealized gain on contingent interest derivative on Convertible Debentures |
700 | 1,281 | 250 | 1,750 | ||||||||||||
|
Income from transition services agreements |
2,271 | 858 | 5,733 | 3,878 | ||||||||||||
|
Other, net |
1,599 | (335 | ) | 1,974 | (89 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total non-operating income, net |
$ | 6,149 | $ | 3,850 | $ | 11,627 | $ | 8,678 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Interest and dividend income is earned principally from Verisign's surplus cash balances and marketable securities. Income from transition services agreements includes fees generated from services provided to the purchasers of divested businesses for a certain period of time to ensure and facilitate the transfer of business operations.
|
|||
Note 11. Discontinued Operations
The Company will continue to generate cash flows and will report income statement activity in continuing operations associated with providing transition related services to Symantec for the divested Authentication Services business for a remaining term of 25 months.
The following table presents the revenues and the components of discontinued operations, net of tax, attributable to Verisign stockholders:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Revenues |
$ | — | $ | 102,584 | $ | 44 | $ | 205,405 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
(Loss) income from discontinued operations before income taxes |
$ | (4,799 | ) | $ | 24,924 | $ | (1,594 | ) | $ | 57,584 | ||||||
|
Income tax benefit (expense) |
1,870 | (15,135 | ) | (2,857 | ) | (25,364 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
(Loss) income from discontinued operations |
(2,929 | ) | 9,789 | (4,451 | ) | 32,220 | ||||||||||
|
Less: Income from discontinued operations, net of tax, attributable to noncontrolling interest in subsidiary |
— | (1,161 | ) | — | (2,245 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total (loss) income from discontinued operations, net of tax, attributable to Verisign stockholders |
$ | (2,929 | ) | $ | 8,628 | $ | (4,451 | ) | $ | 29,975 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
Losses from discontinued operations before income taxes for the three and six months ended June 30, 2011 primarily represent the effects of certain retained litigation of the divested businesses. Income tax expense for discontinued operations for the six months ended June 30, 2011 includes a $2.9 million discrete charge attributable to a change in the purchase price allocation prepared for income tax purposes related to the divestiture of the Authentication Services business. Income from discontinued operations before income taxes for the three and six months ended June 30, 2010 represents the results of operations of the Authentication Services business, and adjustments to gains and losses on divestitures completed in 2009, as a result of certain one-time employee termination costs and settlement of certain retained litigation of the divested businesses.
|
|||
Note 12. Income Taxes
The following table presents the income tax benefit (expense) from continuing operations and the effective tax rate:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
|
Income tax benefit (expense) from continuing operations |
$ | 15,967 | $ | (16,121 | ) | $ | (908 | ) | $ | (33,045 | ) | |||||
|
Effective tax rate |
68 | % | 38 | % | 3 | % | 37 | % | ||||||||
The effective tax rate for the three and six months ended June 30, 2011 differs from the statutory federal rate of 35% due to state taxes, non-deductible stock-based compensation, the effect of non-US operations, and tax benefits from foreign income taxed at lower rates. In the three months ended June 30, 2011, the Company also recognized a discrete income tax benefit of $39.7 million relating to the contingent interest paid to the holders of the Company's Convertible Debentures (see Note 9). Had the income tax benefit relating to the contingent interest payment not been recorded on a discrete basis, the effective tax rates for the three and six months ended June 30, 2011 would have been 34% and 25%, respectively. The effective tax rate for the three and six months ended June 30, 2010 differs from the statutory federal rate of 35% due to state taxes, non-deductible stock-based compensation, the effect of non-US operations, and tax benefits from foreign income taxed at lower rates.
The Company applies a valuation allowance to certain deferred tax assets when management does not believe that it is more likely than not that they will be realized. Deferred tax assets offset by a valuation allowance relate primarily to investments with differing book and tax bases and net operating losses in certain foreign jurisdictions.
As of June 30, 2011 and December 31, 2010, the Company had gross unrecognized tax benefits for income taxes associated with uncertain tax positions of $43.5 million and $28.8 million, respectively. During the three and six months ended June 30, 2011, the Company recorded an increase in unrecognized tax benefits of $7.3 million and $14.7 million, respectively, related to current period activities. As of June 30, 2011 and December 31, 2010, $36.4 million and $24.9 million, respectively, of unrecognized tax benefits, including penalties and interest, would affect the Company's effective tax rate if realized. The balance of the gross unrecognized tax benefits is expected to increase in the next 12 months.
In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. Interest and penalties related to income tax liabilities, recognized through income tax benefit (expense) during the three and six months ended June 30, 2011 and 2010, were not material.
The Company's major taxing jurisdictions are the U.S., the states of California and Virginia, and Switzerland. The Company's tax returns are not currently under examination by these taxing jurisdictions. Because the Company uses historic net operating loss carryforwards and other tax attributes to offset its taxable income in current and future years' income tax returns for the U.S., California and Virginia, such attributes can be adjusted by these taxing authorities until the statute closes on the year in which such attributes were utilized. The open years in Switzerland are the 2006 tax year and forward.
|
|||
Note 13. Contingencies
Legal Proceedings
On May 31, 2007, plaintiffs Karen Herbert, et al., on behalf of themselves and a nationwide class of consumers, filed a complaint against Verisign, m-Qube, Inc., and other defendants alleging that defendants collectively operated an illegal lottery under the laws of multiple states by allowing viewers of the NBC television show "Deal or No Deal" to incur premium text message charges in order to participate in an interactive television promotion called "Lucky Case Game." The lawsuit is pending in the U.S. District Court for the Central District of California, Western Division. The defendants' motion to dismiss the Herbert matter was denied by the district court on December 3, 2007 and that ruling was appealed. On July 8, 2010, the Court of Appeals for the Ninth Circuit dismissed the appeal for lack of jurisdiction and remanded the case to the district court. A hearing is scheduled for consideration of the motion for class certification on August 8, 2011. Certain defendants have asserted indemnity claims against Verisign in connection with these matters.
On July 13, 2011, the parties reached an agreement in principle to settle this matter and the defendants, including Verisign, previously reached an agreement in principle to resolve the indemnity claims noted above. The parties anticipate entering into fully documented settlement agreements promptly. Under the agreement in principle to resolve the Herbert case, class members will be able to claim a full refund for premium text message charges incurred entering the Lucky Case Game. Verisign will pay sixty percent of the settlement costs. The Company has accrued for the expected settlement costs. See Note 11, "Discontinued Operations," of Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. This estimate of the expected settlement costs, by its nature, is based on judgment and currently available information and involves a variety of factors, including, but not limited to, the type and nature of the lawsuit, the progress of the lawsuit, and the Company's experience in similar matters. Given the inherent uncertainties involved in litigation, the Company cannot assure you that the ultimate resolution of this matter will not exceed the amount accrued for the settlement costs. The final settlement agreement in Herbert will be terminable upon certain contingencies, including the number of class members who opt out of the settlement and the cost of notice to the class.
The Herbert settlement is subject to the approval of the Court and from the Boards of Directors of Verisign and the other defendants. Verisign's Board of Directors has approved the settlement. The agreement in principle in the Herbert case anticipates that there will be two notice periods — the first notice period to allow class members and the court to consider fairness of the settlement, and the second notice period to allow class members to make claims. The parties expect to promptly seek preliminary approval from the court for the Herbert settlement and to thereafter seek final approval later this year. Although the parties do not anticipate that the court would reject or would require material changes to the settlement terms, these outcomes are possible.
On June 5, 2007, plaintiffs Cheryl Bentley, et al., on behalf of themselves and a nationwide class of consumers, filed a complaint against Verisign, m-Qube, Inc., and other defendants alleging that defendants collectively operated an illegal lottery under the laws of multiple states by allowing viewers of the NBC television show "The Apprentice" to incur premium text message charges in order to participate in an interactive television promotion called "Get Rich With Trump." The lawsuit was filed in the U.S. District Court for the Central District of California, Western Division. On May 17, 2011, the plaintiffs voluntarily dismissed this case without prejudice.
Verisign was as a defendant in litigation in the United States District Court for the Northern District of California (San Jose Division) in a case entitled Coalition for ICANN Transparency, Inc. ("CFIT") v. VeriSign, Inc. On May 11, 2011, Verisign entered into a Settlement Agreement and Mutual Release (the "Agreement") with CFIT, CFIT's members, iRegistry Corp., Name Administration, Inc., Linkz Internet Services Corp., World Association for Domain Name Developers, Inc., Targeted Traffic Domains, Inc., Bret Fausett, Howard Neu and Frank Schilling (collectively "the CFIT Parties"), that fully resolves the litigation initiated by CFIT against Verisign. Under the terms of the Agreement, Verisign did not make any payment. On May 12, 2011, the CFIT Parties filed a dismissal with prejudice of all claims in the litigation, which was entered on May 31, 2011. The Agreement includes mutual releases pursuant to which the CFIT Parties have released Verisign from any and all claims that were or could have been asserted in the litigation, or that the CFIT Parties may hereafter have or assert, that are related to the facts giving rise to the litigation, the .com or .net Registry Agreements or any renewal of those agreements, or conduct pursuant to those agreements, including any past or future price increases by Verisign or any services or potential services thereunder. Under the release provisions, Verisign has conditionally released the CFIT Parties from claims related to the facts giving rise to the litigation or conduct by the CFIT Parties or their representatives in connection with the litigation, including for malicious prosecution or abuse of process relating to the commencement or prosecution of the litigation against Verisign. Further, the CFIT Parties have agreed to mutual covenants not to sue and mutual non-disparagement provisions. Under the Agreement, CFIT issued a press release on May 11, 2011 stating that CFIT dismissed its claims in their entirety with prejudice in view of the Amended Opinion of the United States Court of Appeals for the Ninth Circuit in Coal. for ICANN Transparency, Inc. v. Verisign, Inc. 611 F.3d 495 (9th Cir., 2010), the subsequent orders of the United States District Court for the Northern District of California, San Jose Division dismissing CFIT's claims with respect to the 2005 .net Registry Agreement and for disgorgement, and Verisign's motion for summary judgment. For a description of these proceedings prior to the settlement, see Verisign's Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on April 29, 2011.
Indemnifications
In connection with the sale of the Authentication Services business to Symantec, the Company has agreed to indemnify Symantec for certain potential legal claims arising from the operation of the Authentication Services business for a period of sixty months after the closing of the sale transaction. The Company's indemnification obligations in this regard are triggered only when indemnifiable claims exceed in the aggregate $4 million. Thereafter, the Company is obligated to indemnify Symantec for 50% of all indemnifiable claims. The Company's maximum indemnification obligation with respect to these claims is capped at $125 million.
While certain legal proceedings and related indemnification obligations to which the Company is a party specify the amounts claimed, such claims may not represent reasonably possible losses. Given the inherent uncertainties of the litigation, the ultimate outcome of these matters cannot be predicted at this time, nor can the amount of possible loss or range of loss, if any, be reasonably estimated, except in circumstances where an aggregate litigation accrual has been recorded for probable and reasonably estimable loss contingencies. A determination of the amount of accrual required, if any, for these contingencies is made after careful analysis of each matter. The required accrual may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters. The Company does not believe that any such matter currently being reviewed will have a material adverse effect on its financial condition or results of operations.
Verisign is involved in various other investigations, claims and lawsuits arising in the normal conduct of its business, none of which, in its opinion, will have a material adverse effect on its financial condition or results of operations. The Company cannot assure you that it will prevail in any litigation. Regardless of the outcome, any litigation may require the Company to incur significant litigation expense and may result in significant diversion of management attention.
|
|||
| June 30, 2011 |
December 31, 2010 |
|||||||
| (In thousands) | ||||||||
|
Cash |
$ | 81,166 | $ | 106,270 | ||||
|
Money market funds |
241,084 | 648,054 | ||||||
|
Time deposits |
901,889 | 803,797 | ||||||
|
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies |
81,808 | 359,160 | ||||||
|
Corporate debt securities |
92,777 | 141,338 | ||||||
|
Debt securities issued by foreign governments |
— | 5,040 | ||||||
|
|
|
|
|
|||||
|
Total |
$ | 1,398,724 | $ | 2,063,659 | ||||
|
|
|
|
|
|||||
|
Included in Cash and cash equivalents |
$ | 1,220,165 | $ | 1,559,628 | ||||
|
Included in Marketable securities |
$ | 174,585 | $ | 501,238 | ||||
|
Included in Other assets (Restricted cash) |
$ | 3,974 | $ | 2,793 | ||||
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | |||||||||||||
| (In thousands) | ||||||||||||||||
|
As of June 30, 2011: |
||||||||||||||||
|
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies |
$ | 80,809 | $ | 1,003 | $ | (4 | ) | $ | 81,808 | |||||||
|
Corporate debt securities |
91,761 | 1,016 | — | 92,777 | ||||||||||||
|
Total fixed income securities |
$ | 172,570 | $ | 2,019 | $ | (4 | ) | $ | 174,585 | |||||||
|
Included in Marketable securities |
$ | 174,585 | ||||||||||||||
|
As of December 31, 2010: |
||||||||||||||||
|
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies |
$ | 357,135 | $ | 2,524 | $ | (499 | ) | $ | 359,160 | |||||||
|
Corporate debt securities |
140,009 | 1,329 | — | 141,338 | ||||||||||||
|
Debt securities issued by foreign governments |
5,038 | 2 | — | 5,040 | ||||||||||||
|
Total fixed income securities |
$ | 502,182 | $ | 3,855 | $ | (499 | ) | $ | 505,538 | |||||||
|
Included in Cash and cash equivalents |
$ | 4,300 | ||||||||||||||
|
Included in Marketable securities |
$ | 501,238 | ||||||||||||||
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Due within one year |
$ | 42,132 | $ | 247 | $ | — | $ | 42,379 | ||||||||
|
Due after one year through three years |
130,438 | 1,772 | (4 | ) | 132,206 | |||||||||||
|
Total |
$ | 172,570 | $ | 2,019 | $ | (4 | ) | $ | 174,585 | |||||||
|
|||
| Fair Value Measurement Using | ||||||||||||||||
| Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
| (In thousands) | ||||||||||||||||
|
As of June 30, 2011: |
||||||||||||||||
|
Assets: |
||||||||||||||||
|
Investments in money market funds |
$ | 241,084 | $ | 241,084 | $ | — | $ | — | ||||||||
|
Investments in fixed income securities: |
||||||||||||||||
|
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies |
81,808 | — | 81,808 | — | ||||||||||||
|
Corporate debt securities |
92,777 | — | 92,777 | — | ||||||||||||
|
Foreign currency forward contracts (1) |
394 | — | 394 | — | ||||||||||||
|
Total |
$ | 416,063 | $ | 241,084 | $ | 174,979 | $ | — | ||||||||
|
Liabilities: |
||||||||||||||||
|
Contingent interest derivative on Convertible Debentures |
$ | 10,250 | $ | — | $ | — | $ | 10,250 | ||||||||
|
Foreign currency forward contracts (2) |
74 | — | 74 | — | ||||||||||||
|
Total |
$ | 10,324 | $ | — | $ | 74 | $ | 10,250 | ||||||||
|
As of December 31, 2010: |
||||||||||||||||
|
Assets: |
||||||||||||||||
|
Investments in money market funds |
$ | 648,054 | $ | 648,054 | $ | — | $ | — | ||||||||
|
Investments in fixed income securities: |
||||||||||||||||
|
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies |
359,160 | 2,700 | 356,460 | — | ||||||||||||
|
Corporate debt securities |
141,338 | — | 141,338 | — | ||||||||||||
|
Debt securities issued by foreign governments |
5,040 | — | 5,040 | — | ||||||||||||
|
Total |
$ | 1,153,592 | $ | 650,754 | $ | 502,838 | $ | — | ||||||||
|
Liabilities: |
||||||||||||||||
|
Contingent interest derivative on Convertible Debentures |
$ | 10,500 | $ | — | $ | — | $ | 10,500 | ||||||||
|
Foreign currency forward contracts (2) |
282 | — | 282 | — | ||||||||||||
|
Total |
$ | 10,782 | $ | — | $ | 282 | $ | 10,500 | ||||||||
| (1) | Included in Prepaid expenses and other current assets |
| (2) | Included in Accounts payable and accrued liabilities |
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Beginning balance |
$ | 10,950 | $ | 9,531 | $ | 10,500 | $ | 10,000 | ||||||||
|
Unrealized gain on contingent interest derivative on Convertible Debentures |
(700 | ) | (1,281 | ) | (250 | ) | (1,750 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Ending balance |
$ | 10,250 | $ | 8,250 | $ | 10,250 | $ | 8,250 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
|||
| June 30, 2011 |
December 31, 2010 |
|||||||
| (In thousands) | ||||||||
|
Prepaid expenses |
$ | 16,452 | $ | 9,939 | ||||
|
Deferred tax assets |
82,344 | 69,807 | ||||||
|
Non-trade receivables |
12,810 | 14,158 | ||||||
|
Receivables from buyers |
818 | 8,198 | ||||||
|
Other |
3,450 | 115 | ||||||
|
|
|
|
|
|||||
|
Total prepaid expenses and other current assets |
$ | 115,874 | $ | 102,217 | ||||
|
|
|
|
|
|||||
| June 30, 2011 |
December 31, 2010 |
|||||||
| (In thousands) | ||||||||
|
Accounts payable |
$ | 13,076 | $ | 16,727 | ||||
|
Accrued employee compensation |
36,784 | 52,628 | ||||||
|
Customer deposits, net |
19,964 | 18,681 | ||||||
|
Payables to buyers |
1,308 | 11,337 | ||||||
|
Taxes payable, deferred and other tax liabilities |
33,873 | 38,168 | ||||||
|
Accrued restructuring costs |
11,376 | 17,460 | ||||||
|
Other accrued liabilities |
40,614 | 40,234 | ||||||
|
|
|
|
|
|||||
|
Total accounts payable and accrued liabilities |
$ | 156,995 | $ | 195,235 | ||||
|
|
|
|
|
|||||
|
|||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Workforce reduction |
$ | 3,147 | $ | 11,840 | $ | 7,870 | $ | 13,551 | ||||||||
|
Excess facilities |
512 | (9 | ) | 1,319 | 108 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total consolidated restructuring charges |
$ | 3,659 | $ | 11,831 | $ | 9,189 | $ | 13,659 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Amounts classified as continuing operations |
$ | 3,659 | $ | 7,539 | $ | 9,189 | $ | 7,773 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Amounts classified as discontinued operations |
$ | — | $ | 4,292 | $ | — | $ | 5,886 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Accrued Restructuring Costs at December 31, 2010 |
Costs Incurred |
Costs Paid or Settled |
Stock-Based Compensation |
Accrued Restructuring Costs at June 30, 2011 |
||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Workforce reduction |
$ | 15,120 | $ | 7,870 | $ | (7,895 | ) | $ | (4,978 | ) | $ | 10,117 | ||||||||
|
Excess facilities |
3,098 | 1,319 | (2,639 | ) | — | 1,778 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total accrued restructuring costs |
$ | 18,218 | $ | 9,189 | $ | (10,534 | ) | $ | (4,978 | ) | $ | 11,895 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Current portion of accrued restructuring costs |
$ | 11,376 | ||||||||||||||||||
|
|
|
|||||||||||||||||||
|
Long-term portion of accrued restructuring costs |
$ | 519 | ||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|||
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Net (loss) income |
$ | (10,610 | ) | $ | 36,374 | $ | 30,161 | $ | 88,814 | |||||||
|
Foreign currency translation adjustments |
48 | 4,617 | 76 | 4,091 | ||||||||||||
|
Change in unrealized gain on investments, net of tax |
1,077 | 2,982 | 609 | 2,742 | ||||||||||||
|
Realized gain on investments, net of tax, included in net (loss) income |
(1,398 | ) | (106 | ) | (1,415 | ) | (152 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Comprehensive (loss) income |
(10,883 | ) | 43,867 | 29,431 | 95,495 | |||||||||||
|
Less: Comprehensive income attributable to noncontrolling interest in subsidiary |
— | 3,288 | — | 4,181 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Comprehensive (loss) income attributable to Verisign stockholders |
$ | (10,883 | ) | $ | 40,579 | $ | 29,431 | $ | 91,314 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
|||
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Stock-based compensation: |
||||||||||||||||
|
Cost of revenues |
$ | 1,846 | $ | 1,348 | $ | 3,836 | $ | 2,269 | ||||||||
|
Sales and marketing |
1,697 | 1,484 | 3,551 | 2,604 | ||||||||||||
|
Research and development |
1,353 | 1,234 | 2,871 | 2,304 | ||||||||||||
|
General and administrative |
7,179 | 5,256 | 13,778 | 10,485 | ||||||||||||
|
Restructuring charges |
1,989 | — | 4,978 | 112 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Stock-based compensation for continuing operations |
14,064 | 9,322 | 29,014 | 17,774 | ||||||||||||
|
Discontinued operations |
— | 3,903 | — | 7,536 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total stock-based compensation expense |
$ | 14,064 | $ | 13,225 | $ | 29,014 | $ | 25,310 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Stock-based compensation: |
||||||||||||||||
|
Stock options |
$ | 1,031 | $ | 2,329 | $ | 2,494 | $ | 4,645 | ||||||||
|
Employee stock purchase plan |
798 | 2,998 | 1,978 | 5,727 | ||||||||||||
|
Restricted stock units |
11,141 | 8,483 | 21,356 | 15,432 | ||||||||||||
|
RSUs/Stock options acceleration |
1,989 | — | 4,978 | 570 | ||||||||||||
|
Capitalization (Included in Property and equipment, net) |
(895 | ) | (585 | ) | (1,792 | ) | (1,064 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total stock-based compensation expense |
$ | 14,064 | $ | 13,225 | $ | 29,014 | $ | 25,310 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
|||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Contractual interest |
$ | 10,156 | $ | 10,156 | $ | 20,313 | $ | 20,313 | ||||||||
|
Amortization of debt discount on the Convertible Debentures |
1,819 | 1,676 | 3,602 | 3,318 | ||||||||||||
|
Contingent interest to holders of Convertible Debentures |
100,020 | — | 100,020 | — | ||||||||||||
|
Interest capitalized to Property and equipment, net |
(166 | ) | (280 | ) | (310 | ) | (467 | ) | ||||||||
|
Other interest expense |
27 | 414 | 51 | 800 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total interest expense |
$ | 111,856 | $ | 11,966 | $ | 123,676 | $ | 23,964 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
|||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
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Interest and dividend income |
$ | 1,579 | $ | 2,046 | $ | 3,670 | $ | 3,139 | ||||||||
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Unrealized gain on contingent interest derivative on Convertible Debentures |
700 | 1,281 | 250 | 1,750 | ||||||||||||
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Income from transition services agreements |
2,271 | 858 | 5,733 | 3,878 | ||||||||||||
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Other, net |
1,599 | (335 | ) | 1,974 | (89 | ) | ||||||||||
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Total non-operating income, net |
$ | 6,149 | $ | 3,850 | $ | 11,627 | $ | 8,678 | ||||||||
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| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (In thousands) | ||||||||||||||||
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Revenues |
$ | — | $ | 102,584 | $ | 44 | $ | 205,405 | ||||||||
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(Loss) income from discontinued operations before income taxes |
$ | (4,799 | ) | $ | 24,924 | $ | (1,594 | ) | $ | 57,584 | ||||||
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Income tax benefit (expense) |
1,870 | (15,135 | ) | (2,857 | ) | (25,364 | ) | |||||||||
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(Loss) income from discontinued operations |
(2,929 | ) | 9,789 | (4,451 | ) | 32,220 | ||||||||||
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Less: Income from discontinued operations, net of tax, attributable to noncontrolling interest in subsidiary |
— | (1,161 | ) | — | (2,245 | ) | ||||||||||
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Total (loss) income from discontinued operations, net of tax, attributable to Verisign stockholders |
$ | (2,929 | ) | $ | 8,628 | $ | (4,451 | ) | $ | 29,975 | ||||||
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| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
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Income tax benefit (expense) from continuing operations |
$ | 15,967 | $ | (16,121 | ) | $ | (908 | ) | $ | (33,045 | ) | |||||
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Effective tax rate |
68 | % | 38 | % | 3 | % | 37 | % | ||||||||
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