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Level 1 | Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to directly access. |
Level 2 | Valuations based on quoted prices for similar assets or liabilities; valuations for interest-bearing securities based on non-daily quoted prices in active markets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. |
Level 3 | Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Standard | Description | Expected date of adoption | Effect on the financial statements or other significant matters | |||
Standards that are not yet adopted | ||||||
Revenue from Contracts with Customers Accounting Standards Update (ASU) No. 2014-09, 2016-08, 2016-10 and 2016-12 (Topic 606) | The updated revenue standard establishes principles for recognizing revenue and develops a common revenue standard for all industries. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires that entities disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Early adoption is permitted, but not earlier than the first quarter of 2017. The retrospective or cumulative effect transition method is permitted. | January 1, 2018 | The Company completed an initial analysis of the impact of the standard on its sales contract portfolio by reviewing its current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to its sales contracts. The Company does not anticipate a material impact on its consolidated financial statements because the analysis of its contracts under the new standard supports the recognition of most of its revenue at the time product is shipped, consistent with its current revenue policy. Although the Company is continuing to review certain aspects of its policies and practices, it expects that, as a result of the adoption of the new guidance, the timing of recognizing certain sales incentives as a reduction of revenue will generally be earlier than under the existing guidance. The Company expects to utilize the modified retrospective transition method. | |||
Leases ASU No. 2016-02(Topic 842) | This standard requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Lessees would recognize a right-to-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The new standard should be applied on a modified retrospective basis. | January 1, 2019 | Although the Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures, the Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption. | |||
Stock Compensation ASU No. 2016-09 (Topic 718) | This standard simplifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification on the statement of cash flows. The new guidance also allows an entity to make a policy election to account for forfeitures as they occur. Early adoption is permitted for an entity in any interim or annual period. | January 1, 2017 | The adoption of the standard resulted in a net cumulative-effect adjustment of $16.2 million to decrease accumulated deficit as of January 1, 2017, mostly related to the recognition of previously unrecognized excess tax benefits using the modified retrospective method. The previously unrecognized excess tax effects were recorded as a reduction to tax liabilities or an increase to deferred tax assets, which was fully offset by a valuation allowance. Without the valuation allowance, the Company’s deferred tax assets would have increased by $162.8 million. The Company elected to apply the change in presentation to the statements of cash flows prospectively and elected to account for forfeitures as they occur. | |||
Income Taxes ASU No. 2016-16 (Topic 740) | This standard requires entities to recognize at the transaction date the income tax consequences of intra-entity asset transfers. Previous guidance requires the tax effects from intra-entity asset transfers to be deferred until that asset is sold to a third party or recovered through use. The updated standard is effective in annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted during the first interim period of a fiscal year, and requires a modified retrospective transition method. | January 1, 2018 | The Company is evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures. |
Intangible - Goodwill and Other ASU No. 2017-04 (Topic 350) | This standard simplifies the accounting for goodwill and removes Step 2 of the annual goodwill impairment test. Upon adoption, goodwill impairment will be determined based on the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017, and requires a prospective transition method. | January 1, 2020 | The Company is evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures. |
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December 31, 2016 | December 31, 2015 | ||||||||||||||||||||||
(in thousands) | Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | |||||||||||||||||
Cash equivalents (1): | |||||||||||||||||||||||
Money market funds | $ | 18,024 | $ | — | $ | 18,024 | $ | 51,059 | $ | — | $ | 51,059 | |||||||||||
Total cash equivalents | $ | 18,024 | $ | — | $ | 18,024 | $ | 51,059 | $ | — | $ | 51,059 | |||||||||||
Marketable securities: | |||||||||||||||||||||||
U.S. agency securities | $ | — | $ | 8,283 | $ | 8,283 | $ | — | $ | 14,451 | $ | 14,451 | |||||||||||
Commercial paper | — | — | — | — | 2,197 | 2,197 | |||||||||||||||||
Corporate debt securities | — | 15,226 | 15,226 | — | 165,825 | 165,825 | |||||||||||||||||
Municipal securities | — | 2,330 | 2,330 | — | 11,913 | 11,913 | |||||||||||||||||
Total marketable securities | $ | — | $ | 25,839 | $ | 25,839 | $ | — | $ | 194,386 | $ | 194,386 |
December 31, | |||||||
(in thousands) | 2016 | 2015 | |||||
Less than one year | $ | 25,839 | $ | 122,199 | |||
Greater than one year but less than two years | — | 72,187 | |||||
Total | $ | 25,839 | $ | 194,386 |
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December 31, | |||||||
(in thousands) | 2016 | 2015 | |||||
Components | $ | 25,236 | $ | 9,476 | |||
Finished goods | 141,956 | 178,756 | |||||
Total inventory | $ | 167,192 | $ | 188,232 |
December 31, | |||||||||
(in thousands) | Useful life (in years) | 2016 | 2015 | ||||||
Leasehold improvements | 3–12 | $ | 48,103 | $ | 40,841 | ||||
Production, engineering and other equipment | 4 | 46,328 | 25,174 | ||||||
Tooling | 1–2 | 23,742 | 19,537 | ||||||
Computers and software | 2 | 18,750 | 14,581 | ||||||
Furniture and office equipment | 3 | 12,530 | 11,389 | ||||||
Tradeshow equipment and other | 2-5 | 7,578 | 4,136 | ||||||
Construction in progress | 1,870 | 4,632 | |||||||
Gross property and equipment | 158,901 | 120,290 | |||||||
Less: Accumulated depreciation and amortization | (82,392 | ) | (50,240 | ) | |||||
Property and equipment, net | $ | 76,509 | $ | 70,050 |
December 31, 2016 | |||||||||||
(in thousands) | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||
Purchased technology | $ | 47,001 | $ | (17,086 | ) | $ | 29,915 | ||||
In-process research and development (IPR&D) | 3,615 | — | 3,615 | ||||||||
Total intangible assets | $ | 50,616 | $ | (17,086 | ) | $ | 33,530 |
December 31, 2015 | |||||||||||
(in thousands) | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||
Purchased technology | $ | 32,952 | $ | (8,540 | ) | $ | 24,412 | ||||
IPR&D | 6,615 | — | 6,615 | ||||||||
Total intangible assets | $ | 39,567 | $ | (8,540 | ) | $ | 31,027 |
(in thousands) | Total | ||
Balance at December 31, 2015 | $ | 6,615 | |
IPR&D assets acquired | 4,460 | ||
Technological feasibility achieved | (1,150 | ) | |
Asset impairment | (6,310 | ) | |
Balance at December 31, 2016 | $ | 3,615 |
(in thousands) | Total | ||
Year ending December 31, | |||
2017 | $ | 8,689 | |
2018 | 8,297 | ||
2019 | 7,786 | ||
2020 | 4,273 | ||
2021 | 870 | ||
$ | 29,915 |
December 31, | |||||||
(in thousands) | 2016 | 2015 | |||||
POP displays | $ | 27,592 | $ | 27,989 | |||
Long-term deferred tax assets | 106 | 41,936 | |||||
Income tax receivable | 33,425 | 33,206 | |||||
Deposits and other | 17,206 | 8,430 | |||||
Other long-term assets | $ | 78,329 | $ | 111,561 |
December 31, | |||||||
(in thousands) | 2016 | 2015 | |||||
Accrued payables | $ | 91,655 | $ | 60,738 | |||
Employee related liabilities(1) | 42,577 | 27,535 | |||||
Accrued sales incentives | 40,070 | 29,298 | |||||
Warranty liability | 11,456 | 10,400 | |||||
Customer deposits | 4,381 | 8,877 | |||||
Income taxes payable | 2,756 | 7,536 | |||||
Purchase order commitments | 4,730 | 38,477 | |||||
Other | 13,698 | 9,585 | |||||
Accrued liabilities | $ | 211,323 | $ | 192,446 |
(1) | See Note 13 for amounts associated with restructuring liabilities. |
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(in thousands) | December 31, 2016 | |
Stock options outstanding | 12,379 | |
Restricted stock units outstanding | 7,970 | |
Common stock available for future grants | 20,685 | |
Total common stock shares reserved for issuance | 41,034 |
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Options outstanding | ||||||||||||
Shares (in thousands) | Weighted- average exercise price | Weighted- average remaining contractual term (in years) | Aggregate intrinsic value (in thousands) | |||||||||
Outstanding at December 31, 2015: | 13,081 | $ | 11.82 | 6.70 | $ | 108,846 | ||||||
Granted | 2,573 | 11.27 | ||||||||||
Exercised | (1,733 | ) | 2.05 | |||||||||
Forfeited/Cancelled | (1,542 | ) | 19.07 | |||||||||
Outstanding at December 31, 2016: | 12,379 | $ | 12.17 | 5.97 | $ | 32,772 | ||||||
Vested and expected to vest at December 31, 2016 | 12,245 | $ | 12.12 | 5.95 | $ | 32,772 | ||||||
Exercisable at December 31, 2016 | 8,952 | $ | 10.37 | 5.36 | $ | 32,771 |
Shares (in thousands) | Weighted- average grant date fair value | |||||
Non-vested shares at December 31, 2014 | 4,307 | $ | 21.98 | |||
Granted | 2,170 | 44.00 | ||||
Vested | (1,735 | ) | 19.84 | |||
Forfeited | (104 | ) | 63.47 | |||
Non-vested shares at December 31, 2015 | 4,638 | 32.15 | ||||
Granted | 7,354 | 12.10 | ||||
Vested | (2,075 | ) | 23.87 | |||
Forfeited | (1,947 | ) | 22.85 | |||
Non-vested shares at December 31, 2016 | 7,970 | $ | 18.08 |
Year ended December 31, | |||||
2016 | 2015 | 2014 | |||
Volatility | 44%–45% | 43%–54% | 54%–56% | ||
Expected term (years) | 5.2–6.1 | 5.5–7.0 | 5.3–6.3 | ||
Risk-free interest rate | 1.2%–2.0% | 1.6%–2.0% | 1.7%–2.0% | ||
Dividend yield | —% | —% | —% |
Year ended December 31, | |||||
2016 | 2015 | 2014 | |||
Volatility | 43%–54% | 39%–45% | 45.5% | ||
Expected term (years) | 0.5 | 0.5 | 0.6 | ||
Risk-free interest rate | 0.4%–0.5% | 0.1%–0.2% | 0.1% | ||
Dividend yield | —% | —% | —% |
Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Cost of revenue | $ | 1,616 | $ | 1,492 | $ | 835 | |||||
Research and development | 31,365 | 18,024 | 11,640 | ||||||||
Sales and marketing | 13,883 | 13,762 | 10,428 | ||||||||
General and administrative | 22,663 | 47,402 | 48,496 | ||||||||
Total stock-based compensation expense | $ | 69,527 | $ | 80,680 | $ | 71,399 |
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Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Domestic | $ | (200,595 | ) | $ | 13,562 | $ | 114,937 | ||||
Foreign | (174,579 | ) | 39,023 | 66,038 | |||||||
$ | (375,174 | ) | $ | 52,585 | $ | 180,975 |
Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Current: | |||||||||||
Federal | $ | (2,925 | ) | $ | 18,548 | $ | 55,846 | ||||
State | (356 | ) | 3,007 | 6,075 | |||||||
Foreign | 8,542 | 6,539 | 8,219 | ||||||||
Total current | 5,261 | 28,094 | 70,140 | ||||||||
Deferred: | |||||||||||
Federal | 37,573 | (11,211 | ) | (13,551 | ) | ||||||
State | 4,436 | (204 | ) | (3,369 | ) | ||||||
Foreign | (3,441 | ) | (225 | ) | (333 | ) | |||||
Total deferred | 38,568 | (11,640 | ) | (17,253 | ) | ||||||
Income tax expense | $ | 43,829 | $ | 16,454 | $ | 52,887 |
Year ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||||||
(in thousands, except percentage) | $ | % | $ | % | $ | % | ||||||||||||||
Reconciliation to statutory rate: | ||||||||||||||||||||
Tax at federal statutory rate | $ | (131,311 | ) | (35.0 | )% | $ | 18,405 | 35.0 | % | $ | 63,341 | 35.0 | % | |||||||
Change in valuation allowance | 101,878 | 27.2 | 8,555 | 16.3 | — | — | ||||||||||||||
Impact of foreign operations | 84,491 | 22.5 | 6,434 | 12.2 | (13,305 | ) | (7.4 | ) | ||||||||||||
Stock-based compensation | 15,718 | 4.2 | 2,390 | 4.5 | 8,050 | 4.4 | ||||||||||||||
State taxes, net of federal benefit | (14,195 | ) | (3.8 | ) | 1,454 | 2.8 | 4,911 | 2.7 | ||||||||||||
Tax credits | (12,992 | ) | (3.5 | ) | (21,891 | ) | (41.6 | ) | (10,616 | ) | (5.9 | ) | ||||||||
Other | 240 | 0.1 | 1,107 | 2.1 | 506 | 0.4 | ||||||||||||||
Income tax provision at effective tax rate | $ | 43,829 | 11.7 | % | $ | 16,454 | 31.3 | % | $ | 52,887 | 29.2 | % |
December 31, | |||||||
(in thousands) | 2016 | 2015 | |||||
Deferred tax assets: | |||||||
Net operating loss carryforwards | $ | 30,193 | $ | 339 | |||
Tax credit carryforwards | 22,341 | 9,372 | |||||
Stock-based compensation | 26,656 | 19,096 | |||||
Allowance for returns | 6,336 | 8,812 | |||||
Accruals and reserves | 26,587 | 20,398 | |||||
Total deferred tax assets | 112,113 | 58,017 | |||||
Valuation allowance | (110,433 | ) | (8,555 | ) | |||
Total deferred tax assets, net of valuation allowance | 1,680 | 49,462 | |||||
Deferred tax liabilities: | |||||||
Depreciation and amortization | (1,714 | ) | (6,937 | ) | |||
Intangible assets | (2,540 | ) | (2,904 | ) | |||
Total deferred tax liabilities | (4,254 | ) | (9,841 | ) | |||
Net deferred tax assets (liabilities) | $ | (2,574 | ) | $ | 39,621 |
December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Gross balance at January 1 | $ | 36,273 | $ | 16,558 | $ | 9,898 | |||||
Gross increase related to current year tax positions | 20,594 | 19,948 | 6,401 | ||||||||
Gross increase related to prior year tax positions | 130 | 108 | 259 | ||||||||
Gross decrease related to prior year tax positions | (88 | ) | (341 | ) | — | ||||||
$ | 56,909 | $ | 36,273 | $ | 16,558 |
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(in thousands) | Total | 2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | ||||||||||||||||||||
Operating leases(1) | $ | 139,511 | $ | 16,972 | $ | 20,345 | $ | 13,896 | $ | 17,157 | $ | 16,770 | $ | 54,371 | |||||||||||||
Sponsorship commitments(2) | 14,500 | 7,449 | 4,134 | 2,917 | — | — | — | ||||||||||||||||||||
Other contractual commitments(3) | 39,189 | 11,744 | 14,723 | 12,722 | — | — | — | ||||||||||||||||||||
Total contractual cash obligations | $ | 193,200 | $ | 36,165 | $ | 39,202 | $ | 29,535 | $ | 17,157 | $ | 16,770 | $ | 54,371 |
(1) | The Company leases its facilities under long-term operating leases, which expire at various dates through 2027. |
(2) | The Company enters into multi-year sponsorship agreements with event organizers, resorts and athletes as part of its marketing efforts. |
(3) | The Company enters into other contractual commitments, including the multi-year agreement with Red Bull, as well as software licenses related to the Company's financial and IT systems which require payments over several years. |
Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Beginning balances | $ | 10,856 | $ | 6,405 | $ | 3,870 | |||||
Charged to cost of revenue | 19,272 | 25,377 | 10,268 | ||||||||
Settlements of warranty claims | (18,183 | ) | (20,926 | ) | (7,733 | ) | |||||
Ending balances | $ | 11,945 | $ | 10,856 | $ | 6,405 |
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December 31, | |||
(in thousands) | 2016 | 2015 | |
Customer A | 15% | * | |
Customer B | 27% | 40% | |
Customer C | * | 18% |
Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Accounts receivable sold | $ | 167,769 | $ | 194,223 | $ | 250,437 | |||||
Factoring fees | 1,266 | 1,566 | 2,148 |
Year ended December 31, | |||||
2016 | 2015 | 2014 | |||
Customer A | 17% | 14% | 20% | ||
Customer B | 11% | 12% | * |
Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Americas | $ | 619,784 | $ | 868,772 | $ | 890,352 | |||||
EMEA | 366,352 | 535,260 | 371,197 | ||||||||
APAC | 199,345 | 215,939 | 132,656 | ||||||||
Total revenue | $ | 1,185,481 | $ | 1,619,971 | $ | 1,394,205 |
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(in thousands) | Amount | ||
Employee severance pay and related costs(1) | $ | 18,893 | |
Non-cash acceleration of stock-based compensation expense(1) | 15,566 | ||
Non-cancelable leases, accelerated depreciation and other charges | 2,122 | ||
Total restructuring charges | $ | 36,581 |
(1) | Includes total charges of $11.4 million (including $8.8 million for accelerated equity awards) associated with the departure of the Company's former President. |
(in thousands) | Severance | Other | Total | ||||||||
Restructuring liability as of October 1, 2016 | $ | — | $ | — | $ | — | |||||
Restructuring charges | 18,893 | 879 | 19,772 | ||||||||
Cash paid | (8,440 | ) | — | (8,440 | ) | ||||||
Non-cash settlements | (793 | ) | — | (793 | ) | ||||||
Restructuring liability as of December 31, 2016 | $ | 9,660 | $ | 879 | $ | 10,539 |
(in thousands) | Amount | ||
Cost of revenue | $ | 497 | |
Research and development | 17,197 | ||
Sales and marketing | 12,064 | ||
General and administrative | 13,331 | ||
Total restructuring charges | $ | 43,089 |
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(in thousands) | Balance at Beginning of Year | Charges to Revenue | Charges to Expense | Deductions/Write-offs | Balance at End of Year | ||||||||||||||
Allowance for doubtful accounts receivable: | |||||||||||||||||||
Year ended December 31, 2016 | $ | 1,400 | $ | — | $ | 40 | $ | (159 | ) | $ | 1,281 | ||||||||
Year ended December 31, 2015 | 1,250 | — | 682 | (532 | ) | 1,400 | |||||||||||||
Year ended December 31, 2014 | 520 | — | 970 | (240 | ) | 1,250 | |||||||||||||
Allowance for sales returns: | |||||||||||||||||||
Year ended December 31, 2016 | $ | 26,280 | $ | 35,136 | $ | (41,378 | ) | $ | — | $ | 20,038 | ||||||||
Year ended December 31, 2015 | 25,747 | 48,182 | (47,649 | ) | — | 26,280 | |||||||||||||
Year ended December 31, 2014 | 14,352 | 39,011 | (27,616 | ) | — | 25,747 | |||||||||||||
Valuation allowance for deferred tax assets: | |||||||||||||||||||
Year ended December 31, 2016 | $ | 8,555 | $ | — | $ | 101,878 | $ | — | $ | 110,433 | |||||||||
Year ended December 31, 2015 | — | — | 8,555 | — | 8,555 |
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Level 1 | Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to directly access. |
Level 2 | Valuations based on quoted prices for similar assets or liabilities; valuations for interest-bearing securities based on non-daily quoted prices in active markets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. |
Level 3 | Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Standard | Description | Expected date of adoption | Effect on the financial statements or other significant matters | |||
Standards that are not yet adopted | ||||||
Revenue from Contracts with Customers Accounting Standards Update (ASU) No. 2014-09, 2016-08, 2016-10 and 2016-12 (Topic 606) | The updated revenue standard establishes principles for recognizing revenue and develops a common revenue standard for all industries. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires that entities disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Early adoption is permitted, but not earlier than the first quarter of 2017. The retrospective or cumulative effect transition method is permitted. | January 1, 2018 | The Company completed an initial analysis of the impact of the standard on its sales contract portfolio by reviewing its current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to its sales contracts. The Company does not anticipate a material impact on its consolidated financial statements because the analysis of its contracts under the new standard supports the recognition of most of its revenue at the time product is shipped, consistent with its current revenue policy. Although the Company is continuing to review certain aspects of its policies and practices, it expects that, as a result of the adoption of the new guidance, the timing of recognizing certain sales incentives as a reduction of revenue will generally be earlier than under the existing guidance. The Company expects to utilize the modified retrospective transition method. | |||
Leases ASU No. 2016-02(Topic 842) | This standard requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Lessees would recognize a right-to-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The new standard should be applied on a modified retrospective basis. | January 1, 2019 | Although the Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures, the Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption. | |||
Stock Compensation ASU No. 2016-09 (Topic 718) | This standard simplifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification on the statement of cash flows. The new guidance also allows an entity to make a policy election to account for forfeitures as they occur. Early adoption is permitted for an entity in any interim or annual period. | January 1, 2017 | The adoption of the standard resulted in a net cumulative-effect adjustment of $16.2 million to decrease accumulated deficit as of January 1, 2017, mostly related to the recognition of previously unrecognized excess tax benefits using the modified retrospective method. The previously unrecognized excess tax effects were recorded as a reduction to tax liabilities or an increase to deferred tax assets, which was fully offset by a valuation allowance. Without the valuation allowance, the Company’s deferred tax assets would have increased by $162.8 million. The Company elected to apply the change in presentation to the statements of cash flows prospectively and elected to account for forfeitures as they occur. | |||
Income Taxes ASU No. 2016-16 (Topic 740) | This standard requires entities to recognize at the transaction date the income tax consequences of intra-entity asset transfers. Previous guidance requires the tax effects from intra-entity asset transfers to be deferred until that asset is sold to a third party or recovered through use. The updated standard is effective in annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted during the first interim period of a fiscal year, and requires a modified retrospective transition method. | January 1, 2018 | The Company is evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures. |
Intangible - Goodwill and Other ASU No. 2017-04 (Topic 350) | This standard simplifies the accounting for goodwill and removes Step 2 of the annual goodwill impairment test. Upon adoption, goodwill impairment will be determined based on the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017, and requires a prospective transition method. | January 1, 2020 | The Company is evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures. |
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Standard | Description | Expected date of adoption | Effect on the financial statements or other significant matters | |||
Standards that are not yet adopted | ||||||
Revenue from Contracts with Customers Accounting Standards Update (ASU) No. 2014-09, 2016-08, 2016-10 and 2016-12 (Topic 606) | The updated revenue standard establishes principles for recognizing revenue and develops a common revenue standard for all industries. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires that entities disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Early adoption is permitted, but not earlier than the first quarter of 2017. The retrospective or cumulative effect transition method is permitted. | January 1, 2018 | The Company completed an initial analysis of the impact of the standard on its sales contract portfolio by reviewing its current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to its sales contracts. The Company does not anticipate a material impact on its consolidated financial statements because the analysis of its contracts under the new standard supports the recognition of most of its revenue at the time product is shipped, consistent with its current revenue policy. Although the Company is continuing to review certain aspects of its policies and practices, it expects that, as a result of the adoption of the new guidance, the timing of recognizing certain sales incentives as a reduction of revenue will generally be earlier than under the existing guidance. The Company expects to utilize the modified retrospective transition method. | |||
Leases ASU No. 2016-02(Topic 842) | This standard requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Lessees would recognize a right-to-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The new standard should be applied on a modified retrospective basis. | January 1, 2019 | Although the Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures, the Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption. | |||
Stock Compensation ASU No. 2016-09 (Topic 718) | This standard simplifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification on the statement of cash flows. The new guidance also allows an entity to make a policy election to account for forfeitures as they occur. Early adoption is permitted for an entity in any interim or annual period. | January 1, 2017 | The adoption of the standard resulted in a net cumulative-effect adjustment of $16.2 million to decrease accumulated deficit as of January 1, 2017, mostly related to the recognition of previously unrecognized excess tax benefits using the modified retrospective method. The previously unrecognized excess tax effects were recorded as a reduction to tax liabilities or an increase to deferred tax assets, which was fully offset by a valuation allowance. Without the valuation allowance, the Company’s deferred tax assets would have increased by $162.8 million. The Company elected to apply the change in presentation to the statements of cash flows prospectively and elected to account for forfeitures as they occur. | |||
Income Taxes ASU No. 2016-16 (Topic 740) | This standard requires entities to recognize at the transaction date the income tax consequences of intra-entity asset transfers. Previous guidance requires the tax effects from intra-entity asset transfers to be deferred until that asset is sold to a third party or recovered through use. The updated standard is effective in annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted during the first interim period of a fiscal year, and requires a modified retrospective transition method. | January 1, 2018 | The Company is evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures. |
Intangible - Goodwill and Other ASU No. 2017-04 (Topic 350) | This standard simplifies the accounting for goodwill and removes Step 2 of the annual goodwill impairment test. Upon adoption, goodwill impairment will be determined based on the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017, and requires a prospective transition method. | January 1, 2020 | The Company is evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures. |
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December 31, 2016 | December 31, 2015 | ||||||||||||||||||||||
(in thousands) | Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | |||||||||||||||||
Cash equivalents (1): | |||||||||||||||||||||||
Money market funds | $ | 18,024 | $ | — | $ | 18,024 | $ | 51,059 | $ | — | $ | 51,059 | |||||||||||
Total cash equivalents | $ | 18,024 | $ | — | $ | 18,024 | $ | 51,059 | $ | — | $ | 51,059 | |||||||||||
Marketable securities: | |||||||||||||||||||||||
U.S. agency securities | $ | — | $ | 8,283 | $ | 8,283 | $ | — | $ | 14,451 | $ | 14,451 | |||||||||||
Commercial paper | — | — | — | — | 2,197 | 2,197 | |||||||||||||||||
Corporate debt securities | — | 15,226 | 15,226 | — | 165,825 | 165,825 | |||||||||||||||||
Municipal securities | — | 2,330 | 2,330 | — | 11,913 | 11,913 | |||||||||||||||||
Total marketable securities | $ | — | $ | 25,839 | $ | 25,839 | $ | — | $ | 194,386 | $ | 194,386 |
December 31, | |||||||
(in thousands) | 2016 | 2015 | |||||
Less than one year | $ | 25,839 | $ | 122,199 | |||
Greater than one year but less than two years | — | 72,187 | |||||
Total | $ | 25,839 | $ | 194,386 |
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December 31, | |||||||
(in thousands) | 2016 | 2015 | |||||
Components | $ | 25,236 | $ | 9,476 | |||
Finished goods | 141,956 | 178,756 | |||||
Total inventory | $ | 167,192 | $ | 188,232 |
December 31, | |||||||||
(in thousands) | Useful life (in years) | 2016 | 2015 | ||||||
Leasehold improvements | 3–12 | $ | 48,103 | $ | 40,841 | ||||
Production, engineering and other equipment | 4 | 46,328 | 25,174 | ||||||
Tooling | 1–2 | 23,742 | 19,537 | ||||||
Computers and software | 2 | 18,750 | 14,581 | ||||||
Furniture and office equipment | 3 | 12,530 | 11,389 | ||||||
Tradeshow equipment and other | 2-5 | 7,578 | 4,136 | ||||||
Construction in progress | 1,870 | 4,632 | |||||||
Gross property and equipment | 158,901 | 120,290 | |||||||
Less: Accumulated depreciation and amortization | (82,392 | ) | (50,240 | ) | |||||
Property and equipment, net | $ | 76,509 | $ | 70,050 |
December 31, 2016 | |||||||||||
(in thousands) | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||
Purchased technology | $ | 47,001 | $ | (17,086 | ) | $ | 29,915 | ||||
In-process research and development (IPR&D) | 3,615 | — | 3,615 | ||||||||
Total intangible assets | $ | 50,616 | $ | (17,086 | ) | $ | 33,530 |
December 31, 2015 | |||||||||||
(in thousands) | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||
Purchased technology | $ | 32,952 | $ | (8,540 | ) | $ | 24,412 | ||||
IPR&D | 6,615 | — | 6,615 | ||||||||
Total intangible assets | $ | 39,567 | $ | (8,540 | ) | $ | 31,027 |
(in thousands) | Total | ||
Balance at December 31, 2015 | $ | 6,615 | |
IPR&D assets acquired | 4,460 | ||
Technological feasibility achieved | (1,150 | ) | |
Asset impairment | (6,310 | ) | |
Balance at December 31, 2016 | $ | 3,615 |
(in thousands) | Total | ||
Year ending December 31, | |||
2017 | $ | 8,689 | |
2018 | 8,297 | ||
2019 | 7,786 | ||
2020 | 4,273 | ||
2021 | 870 | ||
$ | 29,915 |
December 31, | |||||||
(in thousands) | 2016 | 2015 | |||||
POP displays | $ | 27,592 | $ | 27,989 | |||
Long-term deferred tax assets | 106 | 41,936 | |||||
Income tax receivable | 33,425 | 33,206 | |||||
Deposits and other | 17,206 | 8,430 | |||||
Other long-term assets | $ | 78,329 | $ | 111,561 |
December 31, | |||||||
(in thousands) | 2016 | 2015 | |||||
Accrued payables | $ | 91,655 | $ | 60,738 | |||
Employee related liabilities(1) | 42,577 | 27,535 | |||||
Accrued sales incentives | 40,070 | 29,298 | |||||
Warranty liability | 11,456 | 10,400 | |||||
Customer deposits | 4,381 | 8,877 | |||||
Income taxes payable | 2,756 | 7,536 | |||||
Purchase order commitments | 4,730 | 38,477 | |||||
Other | 13,698 | 9,585 | |||||
Accrued liabilities | $ | 211,323 | $ | 192,446 |
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(in thousands) | December 31, 2016 | |
Stock options outstanding | 12,379 | |
Restricted stock units outstanding | 7,970 | |
Common stock available for future grants | 20,685 | |
Total common stock shares reserved for issuance | 41,034 |
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Options outstanding | ||||||||||||
Shares (in thousands) | Weighted- average exercise price | Weighted- average remaining contractual term (in years) | Aggregate intrinsic value (in thousands) | |||||||||
Outstanding at December 31, 2015: | 13,081 | $ | 11.82 | 6.70 | $ | 108,846 | ||||||
Granted | 2,573 | 11.27 | ||||||||||
Exercised | (1,733 | ) | 2.05 | |||||||||
Forfeited/Cancelled | (1,542 | ) | 19.07 | |||||||||
Outstanding at December 31, 2016: | 12,379 | $ | 12.17 | 5.97 | $ | 32,772 | ||||||
Vested and expected to vest at December 31, 2016 | 12,245 | $ | 12.12 | 5.95 | $ | 32,772 | ||||||
Exercisable at December 31, 2016 | 8,952 | $ | 10.37 | 5.36 | $ | 32,771 |
Shares (in thousands) | Weighted- average grant date fair value | |||||
Non-vested shares at December 31, 2014 | 4,307 | $ | 21.98 | |||
Granted | 2,170 | 44.00 | ||||
Vested | (1,735 | ) | 19.84 | |||
Forfeited | (104 | ) | 63.47 | |||
Non-vested shares at December 31, 2015 | 4,638 | 32.15 | ||||
Granted | 7,354 | 12.10 | ||||
Vested | (2,075 | ) | 23.87 | |||
Forfeited | (1,947 | ) | 22.85 | |||
Non-vested shares at December 31, 2016 | 7,970 | $ | 18.08 |
Year ended December 31, | |||||
2016 | 2015 | 2014 | |||
Volatility | 44%–45% | 43%–54% | 54%–56% | ||
Expected term (years) | 5.2–6.1 | 5.5–7.0 | 5.3–6.3 | ||
Risk-free interest rate | 1.2%–2.0% | 1.6%–2.0% | 1.7%–2.0% | ||
Dividend yield | —% | —% | —% |
Year ended December 31, | |||||
2016 | 2015 | 2014 | |||
Volatility | 43%–54% | 39%–45% | 45.5% | ||
Expected term (years) | 0.5 | 0.5 | 0.6 | ||
Risk-free interest rate | 0.4%–0.5% | 0.1%–0.2% | 0.1% | ||
Dividend yield | —% | —% | —% |
Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Cost of revenue | $ | 1,616 | $ | 1,492 | $ | 835 | |||||
Research and development | 31,365 | 18,024 | 11,640 | ||||||||
Sales and marketing | 13,883 | 13,762 | 10,428 | ||||||||
General and administrative | 22,663 | 47,402 | 48,496 | ||||||||
Total stock-based compensation expense | $ | 69,527 | $ | 80,680 | $ | 71,399 |
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Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Domestic | $ | (200,595 | ) | $ | 13,562 | $ | 114,937 | ||||
Foreign | (174,579 | ) | 39,023 | 66,038 | |||||||
$ | (375,174 | ) | $ | 52,585 | $ | 180,975 |
Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Current: | |||||||||||
Federal | $ | (2,925 | ) | $ | 18,548 | $ | 55,846 | ||||
State | (356 | ) | 3,007 | 6,075 | |||||||
Foreign | 8,542 | 6,539 | 8,219 | ||||||||
Total current | 5,261 | 28,094 | 70,140 | ||||||||
Deferred: | |||||||||||
Federal | 37,573 | (11,211 | ) | (13,551 | ) | ||||||
State | 4,436 | (204 | ) | (3,369 | ) | ||||||
Foreign | (3,441 | ) | (225 | ) | (333 | ) | |||||
Total deferred | 38,568 | (11,640 | ) | (17,253 | ) | ||||||
Income tax expense | $ | 43,829 | $ | 16,454 | $ | 52,887 |
Year ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||||||
(in thousands, except percentage) | $ | % | $ | % | $ | % | ||||||||||||||
Reconciliation to statutory rate: | ||||||||||||||||||||
Tax at federal statutory rate | $ | (131,311 | ) | (35.0 | )% | $ | 18,405 | 35.0 | % | $ | 63,341 | 35.0 | % | |||||||
Change in valuation allowance | 101,878 | 27.2 | 8,555 | 16.3 | — | — | ||||||||||||||
Impact of foreign operations | 84,491 | 22.5 | 6,434 | 12.2 | (13,305 | ) | (7.4 | ) | ||||||||||||
Stock-based compensation | 15,718 | 4.2 | 2,390 | 4.5 | 8,050 | 4.4 | ||||||||||||||
State taxes, net of federal benefit | (14,195 | ) | (3.8 | ) | 1,454 | 2.8 | 4,911 | 2.7 | ||||||||||||
Tax credits | (12,992 | ) | (3.5 | ) | (21,891 | ) | (41.6 | ) | (10,616 | ) | (5.9 | ) | ||||||||
Other | 240 | 0.1 | 1,107 | 2.1 | 506 | 0.4 | ||||||||||||||
Income tax provision at effective tax rate | $ | 43,829 | 11.7 | % | $ | 16,454 | 31.3 | % | $ | 52,887 | 29.2 | % |
December 31, | |||||||
(in thousands) | 2016 | 2015 | |||||
Deferred tax assets: | |||||||
Net operating loss carryforwards | $ | 30,193 | $ | 339 | |||
Tax credit carryforwards | 22,341 | 9,372 | |||||
Stock-based compensation | 26,656 | 19,096 | |||||
Allowance for returns | 6,336 | 8,812 | |||||
Accruals and reserves | 26,587 | 20,398 | |||||
Total deferred tax assets | 112,113 | 58,017 | |||||
Valuation allowance | (110,433 | ) | (8,555 | ) | |||
Total deferred tax assets, net of valuation allowance | 1,680 | 49,462 | |||||
Deferred tax liabilities: | |||||||
Depreciation and amortization | (1,714 | ) | (6,937 | ) | |||
Intangible assets | (2,540 | ) | (2,904 | ) | |||
Total deferred tax liabilities | (4,254 | ) | (9,841 | ) | |||
Net deferred tax assets (liabilities) | $ | (2,574 | ) | $ | 39,621 |
December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Gross balance at January 1 | $ | 36,273 | $ | 16,558 | $ | 9,898 | |||||
Gross increase related to current year tax positions | 20,594 | 19,948 | 6,401 | ||||||||
Gross increase related to prior year tax positions | 130 | 108 | 259 | ||||||||
Gross decrease related to prior year tax positions | (88 | ) | (341 | ) | — | ||||||
$ | 56,909 | $ | 36,273 | $ | 16,558 |
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(in thousands) | Total | 2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | ||||||||||||||||||||
Operating leases(1) | $ | 139,511 | $ | 16,972 | $ | 20,345 | $ | 13,896 | $ | 17,157 | $ | 16,770 | $ | 54,371 | |||||||||||||
Sponsorship commitments(2) | 14,500 | 7,449 | 4,134 | 2,917 | — | — | — | ||||||||||||||||||||
Other contractual commitments(3) | 39,189 | 11,744 | 14,723 | 12,722 | — | — | — | ||||||||||||||||||||
Total contractual cash obligations | $ | 193,200 | $ | 36,165 | $ | 39,202 | $ | 29,535 | $ | 17,157 | $ | 16,770 | $ | 54,371 |
(1) | The Company leases its facilities under long-term operating leases, which expire at various dates through 2027. |
(2) | The Company enters into multi-year sponsorship agreements with event organizers, resorts and athletes as part of its marketing efforts. |
(3) | The Company enters into other contractual commitments, including the multi-year agreement with Red Bull, as well as software licenses related to the Company's financial and IT systems which require payments over several years. |
Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Beginning balances | $ | 10,856 | $ | 6,405 | $ | 3,870 | |||||
Charged to cost of revenue | 19,272 | 25,377 | 10,268 | ||||||||
Settlements of warranty claims | (18,183 | ) | (20,926 | ) | (7,733 | ) | |||||
Ending balances | $ | 11,945 | $ | 10,856 | $ | 6,405 |
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Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Accounts receivable sold | $ | 167,769 | $ | 194,223 | $ | 250,437 | |||||
Factoring fees | 1,266 | 1,566 | 2,148 |
Year ended December 31, | |||||||||||
(in thousands) | 2016 | 2015 | 2014 | ||||||||
Americas | $ | 619,784 | $ | 868,772 | $ | 890,352 | |||||
EMEA | 366,352 | 535,260 | 371,197 | ||||||||
APAC | 199,345 | 215,939 | 132,656 | ||||||||
Total revenue | $ | 1,185,481 | $ | 1,619,971 | $ | 1,394,205 |
December 31, | |||
(in thousands) | 2016 | 2015 | |
Customer A | 15% | * | |
Customer B | 27% | 40% | |
Customer C | * | 18% |
Year ended December 31, | |||||
2016 | 2015 | 2014 | |||
Customer A | 17% | 14% | 20% | ||
Customer B | 11% | 12% | * |
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(in thousands) | Amount | ||
Employee severance pay and related costs(1) | $ | 18,893 | |
Non-cash acceleration of stock-based compensation expense(1) | 15,566 | ||
Non-cancelable leases, accelerated depreciation and other charges | 2,122 | ||
Total restructuring charges | $ | 36,581 |
(1) | Includes total charges of $11.4 million (including $8.8 million for accelerated equity awards) associated with the departure of the Company's former President. |
(in thousands) | Amount | ||
Cost of revenue | $ | 497 | |
Research and development | 17,197 | ||
Sales and marketing | 12,064 | ||
General and administrative | 13,331 | ||
Total restructuring charges | $ | 43,089 |
(in thousands) | Severance | Other | Total | ||||||||
Restructuring liability as of October 1, 2016 | $ | — | $ | — | $ | — | |||||
Restructuring charges | 18,893 | 879 | 19,772 | ||||||||
Cash paid | (8,440 | ) | — | (8,440 | ) | ||||||
Non-cash settlements | (793 | ) | — | (793 | ) | ||||||
Restructuring liability as of December 31, 2016 | $ | 9,660 | $ | 879 | $ | 10,539 |
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