Datasets:

todenthal
/

merged_financial_dataset

Dataset card Viewer Files Files and versions Community

Split (1)

train · 4.64M rows

text stringlengths 1.03k 343k
Awards with combined market and service conditions were granted as follows: · 250,000 stock options to the former interim Chief Executive Officer for which (i) the exercisability of the options is subject to the volume weighted average price of the Company’s stock attaining at least $12 per share for at least 30 days during any consecutive 90 day period through December 31, 2014, and (ii) the continued employment/directorship of the interim Chief Executive Officer over a period of time that permits vesting at the rate of 62,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015, subject to a time based service condition only; and o 100,000 options subject to the delivery of a business plan acceptable to the board of directors of the Company by no later than June 30, 2013; o 70,000 options subject to the closing of a financing transaction as set forth in the business plan; o 70,000 options for two successful patent monetization; o 70,000 options upon the completion of an additional purchase of a patent portfolio; o 70,000 options upon the initiation of litigation upon at least four defendants in infringement cases; o 70,000 options upon the presentation of at least two additional monetization opportunities acceptable to the board of directors; and o 50,000 options for attending at least 20 investor relations meetings.
Awards with service conditions only were granted as follows: · 750,000 stock options to the Company’s former interim Chief Executive Officer which vest in four equal installments of 187,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015, subject to a time based service condition only; · 250,000 stock options to the former Chief Executive Officer of North South, who became the Company’s Chief Executive Officer upon the completion of the acquisition of North South on September 10, 2013, which vest in four equal installments of 62,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015, subject to a time based service condition only; · An aggregate of 225,000 options to three directors that fully vested on October 4, 2013, subject to each of these directors’ continued service to the Company through that date; and · An aggregate of 30,000 options to two consultants and one employee that fully vested on August 16, 2013 upon shareholder approval of the plan.
Awards with combined market and service conditions were granted as follows: · 250,000 stock options to the former interim Chief Executive Officer for which (i) the exercisability of the options is subject to the volume weighted average price of the Company’s stock attaining at least $12 per share for at least 30 days during any consecutive 90 day period through December 31, 2014, and (ii) the continued employment/directorship of the interim Chief Executive Officer over a period of time that permits vesting at the rate of 62,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015, subject to a time based service condition only; and · 500,000 stock options to the former Chief Executive Officer of North South, who became the Company’s Chief Executive Officer upon the completion of the acquisition of North South on September 10, 2013 for which (i) (i) the exercisability of the options is subject to the volume weighted average price of the Company’s stock attaining at least $12 per share for at least 30 days during any consecutive 90 day period through December 31, 2014, and (ii) achieving performance conditions as follows: o 100,000 options subject to the delivery of a business plan acceptable to the board of directors of the Company by no later than June 30, 2013; o 70,000 options subject to the closing of a financing transaction as set forth in the business plan; o 70,000 options for two successful patent monetization’s; o 70,000 options upon the completion of an additional purchase of a patent portfolio; o 70,000 options upon the initiation of litigation upon at least four defendants in infringement cases; o 70,000 options upon the presentation of at least two additional monetization opportunities acceptable to the board of directors; and o 50,000 options for attending at least 20 investor relations meetings.
Also on January 28, 2014, in consideration for services provided to the Company in 2013, and pursuant to and subject to the available number of shares reserved under Plan, the Company issued non-qualified options with a term of five (5) years and an exercise price of $5.83 (the “Performance Options”) to the individuals below for the number of shares of Common Stock set forth opposite their respective names: ● Anthony Hayes, Chief Executive Officer and Director - 300,000 shares, vesting pursuant to specific performance targets to be determined at the discretion of the Compensation Committee; ● Edward Karr - 200,000 shares, vesting in two equal annual installments with 50% vesting immediately on the date of issue and the remaining 50% on the one year anniversary of the date of issue so long as the recipient has not been removed as a director for cause; ● Harvey Kesner - 600,000 shares, vesting in two equal annual installments with 50% vesting immediately on the date of issue and the remaining 50% on the one year anniversary of the date of issue so long as the recipient has not been removed as a director for cause; and ● Robert Knie - 25,000, vesting immediately.
Our general business strategy may be adversely affected by unpredictable and unstable market conditions, including: · one or more of our current service providers, manufacturers and other partners may encounter difficulties during challenging economic times, which would directly affect our ability to attain our goals on schedule and on budget; · our ability to collect on trade receivables may be negatively impacted by slow payments or bad debt; · our efforts to raise additional capital may be negatively impacted; · additional funding may not be available or, if it is available, may not be on terms and conditions we deem acceptable; · any additional funding derived from the sale of equity securities is likely to result in significant dilution to our existing stockholders; and · failure to secure the necessary financing in a timely manner and on favorable terms could have a material adverse effect on our business strategy, financial performance, and stock price and could require us to delay or abandon the clinical development plans.
The warrants at issue (collectively, the “Warrants”) include: (i) warrants to purchase an aggregate of 5,522 and 414 shares of the Company’s common stock, issued in November 2009 at an exercise price of $650.00 and $575.00 per share, respectively; (ii) warrants to purchase an aggregate of 10,500 and 630 shares of the Company’s common stock, issued in October 2010 at an exercise price of $300.00 and $312.50 per share, respectively; (iii) warrants to purchase an aggregate of 10,673 and 640 shares of the Company’s common stock, issued in January 2011 at an exercise price of $160.00 and $162.50 per share, respectively; (iv) warrants to purchase an aggregate of 26,628 and 799 shares of the Company’s common stock, issued in October 2011 at an exercise price of $44.80 and $59.13 per share, respectively; (v) warrants to purchase an aggregate of 10,648 and 1,597 shares of the Company’s common stock, issued in February 2012 at an exercise price of $28.00 and $27.00 per share, respectively; and (vi) warrants to purchase an aggregate of 483,657 shares of the Company’s common stock, issued in November 2012 at an exercise price of $6.53 per share; The above warrant shares and exercise prices have been retroactively adjusted to reflect the 2011 and 2012 reverse stock splits.
The warrants at issue (collectively, the “Warrants”) include: (i) warrants to purchase an aggregate of 5,522 and 414 shares of the Company’s common stock, issued in November 2009 at an exercise price of $650.00 and $575.00 per share, respectively; (ii) warrants to purchase an aggregate of 10,500 and 630 shares of the Company’s common stock, issued in October 2010 at an exercise price of $300.00 and $312.50 per share, respectively; (iii) warrants to purchase an aggregate of 10,673 and 640 shares of the Company’s common stock, issued in January 2011 at an exercise price of $160.00 and $162.50 per share, respectively; (iv) warrants to purchase an aggregate of 26,628 and 799 shares of the Company’s common stock, issued in October 2011 at an exercise price of $44.80 and $59.13 per share, respectively; (v) warrants to purchase an aggregate of 10,648 and 1,597 shares of the Company’s common stock, issued in February 2012 at an exercise price of $28.00 and $27.00 per share, respectively; and (vi) warrants to purchase an aggregate of 483,657 shares of the Company’s common stock, issued in November 2012 at an exercise price of $6.53 per share; The above warrant shares and exercise prices have been retroactively adjusted to reflect the 2011 and 2012 reverse stock splits.
The warrants at issue (collectively, the “Warrants”) include: (i) warrants to purchase an aggregate of 5,522 and 414 shares of the Company’s common stock, issued in November 2009 at an exercise price of $650.00 and $575.00 per share, respectively; (ii) warrants to purchase an aggregate of 10,500 and 630 shares of the Company’s common stock, issued in October 2010 at an exercise price of $300.00 and $312.50 per share, respectively; (iii) warrants to purchase an aggregate of 10,673 and 640 shares of the Company’s common stock, issued in January 2011 at an exercise price of $160.00 and $162.50 per share, respectively; (iv) warrants to purchase an aggregate of 26,628 and 799 shares of the Company’s common stock, issued in October 2011 at an exercise price of $44.80 and $59.13 per share, respectively; (v) warrants to purchase an aggregate of 10,648 and 1,597 shares of the Company’s common stock, issued in February 2012 at an exercise price of $28.00 and $27.00 per share, respectively; and (vi) warrants to purchase an aggregate of 483,657 shares of the Company’s common stock, issued in November 2012 at an exercise price of $6.53 per share; The above warrant shares and exercise prices have been retroactively adjusted to reflect the 2011 and 2012 reverse stock splits.
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES (a) Exhibits 3.2 Certificates of Amendment of the Company (incorporated by reference to the Company’s Proxy Statement for its May 1996, May 2000, May 2001, November 2011, and August 2012 annual meetings, as filed with the Commission) 3.4 Certificate of Amendment filed November 28, 2011 (incorporated by reference to Form 8-K filed December 15, 2011) 3.6 Certificate of Amendment filed December 17, 2012 (incorporated by reference to Form 8-K filed December 17, 2012) 4.1 Rights Agreement dated as of February 16, 2001, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference to Form 8-K filed March 6, 2001) 4.3 Rights Agreement dated as of December 31, 2012, between Spherix Incorporated and Equity Stock Transfer, LLC (incorporated by reference to Form 8-K filed January30, 2013) 4.5 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (incorporated by reference to Form 8-K filed October 8, 2010) 4.7 Form of Warrants Agreement (incorporated by reference to Form 8-K filed November 18, 2009) 4.9 Form of Warrants Agreement (incorporated by reference to Form 8-K filed January 20, 2011) 4.11 Form of Warrants Agreement (incorporated by reference to Form 8-K filed February 3, 2012) 4.13 Placement Agent Agreement, dated as of November 6, 2009, by and between the Company and Rodman & Renshaw, LLC.
(incorporated by reference to Form 8-K filed October 27, 2011) 4.19 Investment Banking Agreement dated as of September 27, 2012, by and between the Company and Ladenburg Thalmann & Co. Inc. (incorporated by reference to Form 8-K filed November 8, 2012) 10.2 Employment Agreement dated as of August 15, 2007, by and between Claire L. Kruger and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) 10.4 Termination of Employment and General Release Agreement dated as of December 3, 2012, by and between Claire L. Kruger and the Company (incorporated by reference to Form 8-K filed December 17, 2012) 10.6 Employment Agreement dated as of August 16, 2007, by and between Robert A. Lodder and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) 10.8 Retention Agreement with Robert A. Lodder and the Company (incorporated by reference to Form 8-K filed February 7, 2013) 10.10 Retention Agreement dated as of December 12, 2012, by and between Robert L. Clayton and the Company (incorporated by reference to Form 8-K filed December 17, 2012) 10.12 Termination of Employment and General Release Agreement dated as of December 3, 2012, by and between Katherine M. Brailer and the Company (filed herewith) 10.14 Letter Agreement dated as of January 13, 2011, by and between Gilbert V. Levin, M. Karen Levin and the Company (incorporated by reference to Form 10-K dated March 30, 2011) 10.16 2012 Equity Incentive Plan (incorporated by reference from the Company’s Information Statement on Form DEF 14c filed November 26, 2012) 10.18 Amendment to Office Building Lease, between Elizabethean Court Associates III Limited Partnership and the Company (incorporated by reference to Form 8-K filed March 23, 2012) 10.20 Securities Purchase Agreement dated November 16, 2009, between the Company and certain investors (incorporated by reference to Form 8-K filed November 18, 2009) 10.22 Securities Purchase Agreement dated January 19, 2011, between the Company and certain investors (incorporated by reference to Form 8-K filed January 20, 2011) 10.24 Securities Purchase Agreement dated February 2, 2012, between the Company and certain investors (incorporated by reference to Form 8-K filed February 3, 2012) 10.26 License Agreement dated June 22, 2010 between the University of Kentucky Research Foundation and Biospherics Incorporated (incorporated by reference to Form 10-K filed March 29, 2012) 10.28 Consulting Agreement dated December 28, 2012, between the Company and Paradox Capital Partners, LLC.
Our general business strategy may be adversely affected by unpredictable and unstable market conditions, including: · one or more of our current service providers, manufacturers and other partners may encounter difficulties during challenging economic times, which would directly affect our ability to attain our goals on schedule and on budget; · demand for our consulting services may decrease, resulting in a decrease in revenue; · our ability to collect on trade receivables may be negatively impacted by slow payments or bad debt; · our efforts to raise additional capital may be negatively impacted; · additional funding may not be available or, if it is available, may not be on terms and conditions we deem acceptable; · any additional funding derived from the sale of equity securities is likely to result in significant dilution to our existing stockholders; and · failure to secure the necessary financing in a timely manner and on favorable terms could have a material adverse effect on our business strategy, financial performance, and stock price and could require us to delay or abandon the clinical development plans.
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES (a) Exhibits 3.1 Certificate of Incorporation and Bylaws of the Company (incorporated by reference to the Company’s Annual Proxy Statement for meeting held on May 15, 1992, as filed with the Commission) 3.2 Certificates of Amendment of the Company (incorporated by reference to the Company’s Proxy Statement for its May 1996, May 2000, May 2001, and November 2011 annual meetings, as filed with the Commission) 3.3 Amended and Restated By-Laws of Spherix Incorporated (incorporated by reference to Form 8-K filed November 23, 2009) 4.1 Rights Agreement dated as of February 16, 2001, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference to Form 8-K filed March 6, 2001) 4.2 First Amendment to Rights Agreement dated as of December 20, 2010, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference to Form 8-K filed December 20, 2010) 4.3 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (incorporated by reference to Form 8-K filed October 8, 2010) 4.4 Form of Warrants Agreement (incorporated by reference to Form 8-K filed November 18, 2009) 4.5 Form of Warrants Agreement (incorporated by reference to Form 8-K filed October 8, 2010) 4.6 Form of Warrants Agreement (incorporated by reference to Form 8-K filed January 20, 2011) 4.7 Form of Warrants Agreement (incorporated by reference to Form 8-K filed October 27, 2011) 4.8 Form of Warrants Agreement (incorporated by reference to Form 8-K filed February 3, 2012) 4.9 Placement Agent Agreement, dated as of November 6, 2009, by and between the Company and Rodman & Renshaw, LLC.
(incorporated by reference to Form 8-K filed February 3, 2012) 10.1 Summary of Annual Compensation of Members of the Board of Directors of Spherix Incorporated (incorporated by reference to Form 8-K filed May 28, 2010) 10.2 Employment Agreement dated as of August 15, 2007, by and between Claire L. Kruger and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) 10.3 Amendment To Employment Agreement dated as of May 25, 2010, by and between Claire L. Kruger and the Company (incorporated by reference to Form 8-K filed May 28, 2010) 10.4 Employment Agreement dated as of August 16, 2007, by and between Robert A. Lodder and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) 10.5 Amendment To Employment Agreement dated as of May 25, 2010, by and between Robert A. Lodder and the Company (incorporated by reference to Form 8-K filed May 28, 2010) 10.6 Employment Agreement dated as of May 25, 2010, by and between Robert L. Clayton and the Company (incorporated by reference to Form 8-K filed May 28, 2010) 10.7 Employment Agreement dated as of May 25, 2010, by and between Katherine M. Brailer and the Company (incorporated by reference to Form 8-K filed May 28, 2010) 10.8 Letter Agreement dated as of January 13, 2011, by and between Gilbert V. Levin, M. Karen Levin and the Company (incorporated by reference to Form 10-K dated March 30, 2011) 10.9 1997 Stock Option Plan (incorporated by reference from the Company’s Proxy Statements for its May 1998, May 2001, May 2005 and November 2011 annual meetings, as filed with the Commission) 10.10 Lease agreement dated October 4, 2007, between Elizabethean Court Associates III Limited Partnership and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) 10.11 Amendment to Office Building Lease, between Elizabethean Court Associates III Limited Partnership and the Company (incorporated by reference to Form 8-K filed March 23, 2012) 10.12 Settlement Agreement dated March 16, 2011, between the Biospherics Incorporated (a wholly-owned subsidiary of the Company) and Inalco S.p.A (incorporated by reference to Form 8-K filed on March 21, 2011) 10.13 Securities Purchase Agreement dated November 16, 2009, between the Company and certain investors (incorporated by reference to Form 8-K filed November 18, 2009) 10.14 Securities Purchase Agreement dated October 7, 2010, between the Company and certain investors (incorporated by reference to Form 8-K filed October 8, 2010) 10.15 Securities Purchase Agreement dated January 19, 2011, between the Company and certain investors (incorporated by reference to Form 8-K filed January 20, 2011) 10.16 Securities Purchase Agreement dated October 25, 2011, between the Company and certain investors (incorporated by reference to Form 8-K filed October 27, 2011) 10.17 Securities Purchase Agreement dated February 2, 2012, between the Company and certain investors (incorporated by reference to Form 8-K filed February 3, 2012) 10.18 License Agreement dated June 22, 2010 between the University of Kentucky Research Foundation and Biospherics Incorporated List of Subsidiaries (incorporated by reference to Form S-1 Amendment #1 filed on September 3, 2010) Consent of Grant Thornton LLP, Independent Auditors(1) 31.1 Certification of Chief Executive Officer of Spherix Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer of Spherix Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer of Spherix Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer of Spherix Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.1 XBRL Instance Document 101.2 XBRL Taxonomy Extension Schema Document 101.3 XBRL Taxonomy Extension Calculation Linkbase Document 101.4 XBRL Taxonomy Extension Definition Linkbase Document 101.5 XBRL Taxonomy Extension Label Linkbase Document 101.6 XBRL Taxonomy Extension Presentation Linkbase Document SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Our general business strategy may be adversely affected by unpredictable and unstable market conditions, including: · one or more of our current service providers, manufacturers and other partners may encounter difficulties during challenging economic times, which would directly affect our ability to attain our goals on schedule and on budget; · demand for our consulting services may decrease resulting in a decrease in revenue; · our ability to collect on trade receivables may be negatively impacted by slow payments or bad debt; · our efforts to raise additional capital may be negatively impacted; · additional funding may not be available or, if it is available, may not be on terms and conditions we deem acceptable; · any additional funding derived from the sale of equity securities is likely to result in significant dilution to our existing stockholders; and · failure to secure the necessary financing in a timely manner and on favorable terms could have a material adverse effect on our business strategy, financial performance, and stock price and could require us to delay or abandon the clinical development plans.
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES (a) Exhibits 3.1 Certificate of Incorporation and Bylaws of the Company (incorporated by reference to the Company’s Annual Proxy Statement for meeting held on May 15, 1992, as filed with the Commission) 3.2 Articles of Amendment of the Company (incorporated by reference to the Company’s Proxy Statement for its May 1996, May 2000, and May 2001 annual meetings, as filed with the Commission) 3.3 Amended and Restated By-Laws of Spherix Incorporated (incorporated by reference to Form 8-K dated November 23, 2009) 4.1 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (incorporated by reference to Form 8-K filed October 8, 2010) 10.1 Summary of Annual Compensation of Members of the Board of Directors of Spherix Incorporated (incorporated by reference to Form 8-K dated May 28, 2010) 10.2 Employment Agreement dated as of August 15, 2007, by and between Claire L. Kruger and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) 10.3 Amendment To Employment Agreement dated as of May 25, 2010, by and between Claire L. Kruger and the Company (incorporated by reference to Form 8-K filed May 28, 2010) 10.4 Employment Agreement dated as of August 16, 2007, by and between Robert A. Lodder and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) 10.5 Amendment To Employment Agreement dated as of May 25, 2010, by and between Robert A. Lodder and the Company (incorporated by reference to Form 8-K filed May 28, 2010) 10.6 Employment Agreement dated as of May 25, 2010, by and between Robert L. Clayton and the Company (incorporated by reference to Form 8-K filed May 28, 2010) 10.7 Employment Agreement dated as of May 25, 2010, by and between Katherine M. Brailer and the Company (incorporated by reference to Form 8-K filed May 28, 2010) 10.8 Employment Agreement effective as of August 31, 2009, by and between Ram Nimmagudda and the Company (incorporated by reference to Form 8-K filed September 3, 2009) 10.9 Letter Agreement dated as of July 2, 2008, by and between Gilbert V. Levin, M. Karen Levin and the Company (incorporated by reference to Form 8-K filed July 8, 2008) 10.10 Restated Consulting Agreement dated as of November 29, 2005, by and between M. Karen Levin and the Company (incorporated by reference to Form 8-K filed December 1, 2005) 10.11 Restated Consulting Agreement dated as of March 23, 2004, by and between Gilbert V. Levin and the Company (incorporated by reference to Form 10-K filed March 30, 2004) 10.12 Letter Agreement dated as of January 13, 2011, by and between Gilbert V. Levin, M. Karen Levin and the Company 10.13 1997 Stock Option Plan (incorporated by reference from the Company’s Proxy Statements for its May 1998, May 2001 and May 2005 annual meetings, as filed with the Commission) 10.14 Rights Agreement dated as of February 16, 2001, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference to Form 8-K filed March 6, 2001) 10.15 First Amendment to Rights Agreement dated as of December 20, 2010, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference to Form 8-K filed December 20, 2010) 10.16 Lease agreement dated October 4, 2007, between Elizabethean Court Associates III Limited Partnership and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) 10.17 Securities Purchase Agreement dated November 16, 2009, between the Company and certain investors (incorporated by reference to Form 8-K dated November 18, 2009) 10.18 Warrant (incorporated by reference to Form 8-K dated November 18, 2009) 10.19 Manufacturing Support And Supply Agreement dated December 15, 2009, between Biospherics Incorporated (a wholly-owned subsidiary of the Company) and Inalco S.p.A (incorporated by reference to Form 8-K filed December 18, 2009) 10.20 Settlement Agreement dated March 16, 2011, between the Biospherics Incorporated (a wholly-owned subsidiary of the Company) and Inalco S.p.A (incorporated by reference to Form 8-K filed on March 21, 2011) 10.21 Securities Purchase Agreement dated October 7, 2010, between the Company and certain investors (incorporated by reference to Form 8-K dated October 8, 2010) 10.22 Warrant (incorporated by reference to Form 8-K filed on October 8, 2010) 10.23 Securities Purchase Agreement dated January 19, 2011, between the Company and certain investors (incorporated by reference to Form 8-K dated January 20, 2011) 10.24 Warrant (incorporated by reference to Form 8-K filed on January 20, 2011) 21.1 List of Subsidiaries (incorporated by reference to Form S-1 Amendment #1 filed on September 3, 2010) Consent of Grant Thornton LLP, Independent Auditors(1) 31.1 Certification of Chief Executive Officer of Spherix Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer of Spherix Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer of Spherix Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer of Spherix Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Our general business strategy may be adversely affected by unpredictable and unstable market conditions, including: · one or more of our current service providers, manufacturers and other partners may encounter difficulties during challenging economic times, which would directly affect our ability to attain our goals on schedule and on budget; · demand for our consulting services may decrease resulting in a decrease in revenue; · our ability to collect on trade receivables may be negatively impacted by slow payments or bad debt; · our efforts to raise additional capital may be negatively impacted; · additional funding may not be available or, if it is available, may not be on terms and conditions we deem acceptable; · any additional funding derived from the sale of equity securities is likely to result in significant dilution to our existing stockholders; and · failure to secure the necessary financing in a timely manner and on favorable terms could have a material adverse effect on our business strategy, financial performance, and stock price and could require us to delay or abandon the clinical development plans.
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES (a) Exhibits (3) Certificate of Incorporation and Bylaws of the Company (incorporated by reference to the Company’s Annual Proxy Statement for meeting held on May 15, 1992, as filed with the Commission) (3.1) Articles of Amendment of the Company (incorporated by reference to the Company’s Proxy Statement for its May 1996, May 2000, and May 2001 annual meetings, as filed with the Commission) (3.2) Amended and Restated By-Laws of Spherix Incorporated (incorporated by reference to Form 8-K dated November 23, 2009) (10.1) Summary of Annual Compensation of Members of the Board of Directors of Spherix Incorporated (incorporated by reference to Form 8-K dated February 29, 2008) (10.2) Employment Agreement dated as of August 15, 2007, by and between Claire L. Kruger and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) (10.3) Employment Agreement dated as of August 16, 2007, by and between Robert A. Lodder and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) (10.4) Employment Agreement dated as of August 16, 2007, by and between Robert L. Clayton and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) (10.5) Employment Agreement dated as of August 31, 2009, by and between Ram Nimmagudda and the Company (incorporated by reference to Form 8-K filed September 3, 2009) (10.6) Letter Agreement dated as of July 2, 2008, by and between Gilbert V. Levin, M. Karen Levin and the Company (incorporated by reference to Form 8-K filed July 8, 2008) (10.7) Restated Consulting Agreement dated as of November 29, 2005, by and between M. Karen Levin and the Company (incorporated by reference to Form 8-K filed December 1, 2005) (10.8) Restated Consulting Agreement dated as of March 23, 2004, by and between Gilbert V. Levin and the Company (incorporated by reference to Form 10-K filed March 30, 2004) (10.9) 1997 Stock Option Plan (incorporated by reference from the Company’s Proxy Statements for its May 1998, May 2001 and May 2005 annual meetings, as filed with the Commission) (10.10) Rights Agreement dated as of February 16, 2001, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference to Form 8-K filed March 6, 2001) (10.11) Stock Purchase Agreement by and among the Company, InfoSpherix and Active dated as of June 25, 2007 (incorporated by reference from the Company’s Schedule 14A as filed with the Securities and Exchange Commission on July 16, 2007) (10.12) Lease termination agreement dated August 1, 2007, between Indian Creek Investors, LLC and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) (10.13) Lease agreement dated October 4, 2007, between Elizabethean Court Associates III Limited Partnership and the Company (incorporated by reference to Form 10-Q dated September 30, 2007) (10.14) Securities Purchase Agreement dated November 16, 2009, between the Company and certain investors (incorporated by reference to Form 8-K dated November 18, 2009) (10.15) Manufacturing Support And Supply Agreement dated December 15, 2009, between the Company and Inalco S.p.A (incorporated by reference to Form 8-K filed December 18, 2009) (23) Consent of Independent Registered Public Accounting Firm (31.1) Certification of Chief Executive Officer of Spherix Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (31.2) Certification of Chief Financial Officer of Spherix Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (32.1) Certification of Chief Executive Officer of Spherix Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (32.2) Certification of Chief Financial Officer of Spherix Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Our general business strategy may be adversely affected by unpredictable and unstable market conditions, including: · one or more of our current service providers, manufacturers and other partners may encounter difficulties during challenging economic times, which would directly affect our ability to attain our goals on schedule and on budget; · demand for our consulting services may decrease resulting in a decrease in revenue; · our ability to collect on trade receivables may be negatively impacted by slow payments or bad debt; · our efforts to raise additional capital may be negatively impacted; · additional funding may not be available or, if it is available, may not be on terms and conditions we deem acceptable; · any additional funding derived from the sale of equity securities is likely to result in significant dilution to our existing stockholders; and · failure to secure the necessary financing in a timely manner and on favorable terms could have a material adverse effect on our business strategy, financial performance, and stock price and could require us to delay or abandon the clinical development plans.
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES (a) Exhibits (3) Certificate of Incorporation and Bylaws of the Company (incorporated by reference to the Company’s Annual Proxy Statement for meeting held on May 15, 1992, as filed with the Commission) (3.1) Articles of Amendment of the Company (incorporated by reference to the Company’s Proxy Statement for its May 1996, May 2000, and May 2001 annual meetings, as filed with the Commission) (10.1) Summary of Annual Compensation of Members of the Board of Directors of Spherix Incorporated (incorporated by reference to Form 8-K dated February 29, 2008) (10.2) Restated Consulting Agreement dated as of March 23, 2004, by and between Gilbert V. Levin and the Company (incorporated by reference to Form 10-K filed March 30, 2004) (10.3) Restated Consulting Agreement dated as of November 29, 2005, by and between M. Karen Levin and the Company (incorporated by reference to Form 8-K filed December 1, 2005) (10.4) Amended and Restated Employment Agreement dated as of March 23, 2004, by and between Gilbert V. Levin and the Company (incorporated by reference to Form 10-K filed March 30, 2004) (10.5) Stock Purchase Warrant dated as of February 24, 2000 (incorporated by reference to Form 8-K filed March 3, 2000) (10.6) Agreement and License between the Company and MD Foods Ingredients Amba (incorporated by reference to Form 8-K filed October 22, 1996 and Form 10-KSB filed March 31, 1997) (10.7) Securities Purchase Agreement dated as of February 24, 2000, by and between the Company and RGC International Investors, LDC, c/o Rose Glen Capital Management, L.P. (incorporated by reference to Form 8-K filed March 3, 2000) (10.8) Standby Equity Distribution Agreement dated July 22, 2005, by and between the Company and Cornell Capital Partners, L.P. (incorporated by reference to Form 8-K filed July 25, 2005) (10.9) 1997 Stock Option Plan (incorporated by reference from the Company’s Proxy Statements for its May 1998, May 2001 and May 2005 annual meetings, as filed with the Commission) (10.10) Rights Agreement dated as of February 16, 2001, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference to Form 8-K filed in March 2001) (10.11) Amendment to the September 27, 1996 Agreement and License between the Company and Arla Foods Ingredients amba (formerly MD Foods Ingredients amba (incorporated by reference to Form 8-K filed November 17, 2003) (10.12) G.V.
Levin Exit Agreement Resolution approved by the Board of Directors on March 23, 2004 (incorporated by reference to Form 10-K filed March 30, 2004) (10.13) Exit Agreement dated November 29, 2005, by and between M. Karen Levin and the Company (incorporated by reference to Form 8-K filed December 1, 2005) (10.14) Employment Agreement dated as of August 15, 2007, by and between Claire L. Kruger and the Company (incorporated by reference to Form 10-Q dated September 30, 2008) (10.15) Employment Agreement dated as of August 16, 2007, by and between Robert A. Lodder and the Company (incorporated by reference to Form 10-Q dated September 30, 2008) (10.16) Employment Agreement dated as of August 16, 2007, by and between Robert L. Clayton and the Company (incorporated by reference to Form 10-Q dated September 30, 2008) (10.17) Lease termination agreement dated August 1, 2007, between Indian Creek Investors, LLC and the Company (incorporated by reference to Form 10-Q dated September 30, 2008) (10.18) Lease agreement dated October 4, 2007, between Elizabethean Court Associates III Limited Partnership and the Company (incorporated by reference to Form 10-Q dated September 30, 2008) (10.19) Stock Purchase Agreement by and among the Company, InfoSpherix and Active dated as of June 25, 2007 (incorporated by reference from the Company’s Schedule 14A as filed with the Securities and Exchange Commission on July 16, 2007) (10.20) Amended And Restated By-Laws of Spherix Incorporated (incorporated by reference to Form 8-K dated November 15, 2007) (23) Consent of Independent Registered Public Accounting Firm (31.1) Certification of Chief Executive Officer of Spherix Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (31.2) Certification of Chief Financial Officer of Spherix Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (32.1) Certification of Chief Executive Officer of Spherix Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (32.2) Certification of Chief Financial Officer of Spherix Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES (a) Exhibits (3) Certificate of Incorporation and Bylaws of the Company (incorporated by reference to the Company’s Annual Proxy Statement for meeting held on May 15, 1992, as filed with the Commission) (3.1) Articles of Amendment of the Company (incorporated by reference to the Company’s Proxy Statement for its May 1996, May 2000, and May 2001 annual meetings, as filed with the Commission) (10.1) Summary of Annual Compensation of Members of the Board of Directors of Spherix Incorporated (10.2) Restated Consulting Agreement dated as of March 23, 2004, by and between Gilbert V. Levin and the Company (incorporated by reference to Form 10-K filed March 30, 2004) (10.3) Restated Consulting Agreement dated as of November 29, 2005, by and between M. Karen Levin and the Company (incorporated by reference to Form 8-K filed December 1, 2005) (10.4) Amended and Restated Employment Agreement dated as of March 23, 2004, by and between Gilbert V. Levin and the Company (incorporated by reference to Form 10-K filed March 30, 2004) (10.5) Stock Purchase Warrant dated as of February 24, 2000 (incorporated by reference to Form 8-K filed March 3, 2000) (10.6) Agreement and License between the Company and MD Foods Ingredients Amba (incorporated by reference to Form 8-K filed October 22, 1996 and Form 10-KSB filed March 31, 1997) (10.7) Securities Purchase Agreement dated as of February 24, 2000, by and between the Company and RGC International Investors, LDC, c/o Rose Glen Capital Management, L.P. (incorporated by reference to Form 8-K filed March 3, 2000) (10.8) Standby Equity Distribution Agreement dated July 22, 2005, by and between the Company and Cornell Capital Partners, L.P. (incorporated by reference to Form 8-K filed July 25, 2005) (10.9) 1997 Stock Option Plan (incorporated by reference from the Company’s Proxy Statements for its May 1998, May 2001 and May 2005 annual meetings, as filed with the Commission) (10.10) Rights Agreement dated as of February 16, 2001, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference to Form 8-K filed in March 2001) (10.11) Amendment to the September 27, 1996 Agreement and License between the Company and Arla Foods Ingredients amba (formerly MD Foods Ingredients amba (incorporated by reference to Form 8-K filed November 17, 2003) (10.12) G.V.
Levin Exit Agreement Resolution approved by the Board of Directors on March 23, 2004 (incorporated by reference to Form 10-K filed March 30, 2004) (10.13) Exit Agreement dated November 29, 2005, by and between M. Karen Levin and the Company (incorporated by reference to Form 8-K filed December 1, 2005) (10.14) Lease Agreement dated February 6, 2007, between the Company and Allegany Research Properties, LLC (incorporated by reference to Form 8-K filed April 2, 2007) (23) Consent of Independent Registered Public Accounting Firm (31) Certification of Chief Executive Officer/Chief Financial Officer of Spherix Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (32) Certification of Chief Executive Officer/Chief Financial Officer of Spherix Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) Exhibits (3) Certificate of Incorporation and Bylaws of the Company (incorporated by reference to the Company’s Annual Proxy Statement for meeting held on May 15, 1992, as filed with the Commission) (3.1) Articles of Amendment of the Company (incorporated by reference to the Company’s Proxy Statement for its May 1996, May 2000, and May 2001 annual meetings, as filed with the Commission) (10.1) Summary of Annual Compensation of Members of the Board of Directors of Spherix Incorporated (10.2) Amended and Restated Supplemental Executive Retirement Plan Agreement dated as of May 15, 2002, by and between M. Karen Levin and the Company (incorporated by reference to Form 10-K filed March 26, 2003) (10.3) Restated Consulting Agreement dated as of March 23, 2004, by and between Gilbert V. Levin and the Company (incorporated by reference to Form 10-K filed March 30, 2004) (10.4) Consulting Agreement dated as of February 17, 1993, by and between M. Karen Levin and the Company (incorporated by reference to Form 10-KSB filed March 31, 1993) (10.5) Amended and Restated Employment Agreement dated as of March 23, 2004, by and between Gilbert V. Levin and the Company (incorporated by reference March 30, 2004) (10.6) Stock Purchase Warrant dated as of February 24, 2000 (incorporated by reference to Form 8-K filed March 3, 2000) (10.7) Agreement and License between the Company and MD Foods Ingredients Amba (incorporated by reference to Form 8-K filed October 22, 1996 and Form 10-KSB filed March 31, 1997) (10.8) Securities Purchase Agreement dated as of February 24, 2000, by and between the Company and RGC International Investors, LDC, c/o Rose Glen Capital Management, L.P. (incorporated by reference from Form 8-K filed March 3, 2000) (10.9) 1997 Stock Option Plan (incorporated by reference from the Company’s Proxy Statements for its May 1998 and May 2001 annual meetings, as filed with the Commission) (10.10) Rights Agreement dated as of February 16, 2001, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference from Form 8-K filed in March 2001) (10.11) Amendment to the September 27, 1996 Agreement and License between the Company and Arla Foods Ingredients amba (formerly MD Foods Ingredients amba (incorporated by reference to Form 8-K filed November 17, 2003) (10.12) G.V.
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) Exhibits (3) Certificate of Incorporation and Bylaws of the Company (incorporated by reference to the Company’s Annual Proxy Statement for meeting held on May 15, 1992, as filed with the Commission) (3.1) Articles of Amendment of the Company (incorporated by reference to the Company’s Proxy Statement for its May 1996, May 2000, and May 2001 annual meetings, as filed with the Commission) (10.1) Supplemental Executive Retirement Plan Agreement dated as of February 17, 1993, by and between Gilbert V. Levin and the Company (incorporated by reference to Form 10-KSB filed March 31, 1993) (10.2) Amended and Restated Supplemental Executive Retirement Plan Agreement dated as of May 15, 2002, by and between M. Karen Levin and the Company (incorporated by reference to Form 10-K filed March 26, 2003) (10.3) Restated Consulting Agreement dated as of March 23, 2004, by and between Gilbert V. Levin and the Company (10.4) Consulting Agreement dated as of February 17, 1993, by and between M. Karen Levin and the Company (incorporated by reference to Form 10-KSB filed March 31, 1993) (10.5) Amended and Restated Employment Agreement dated as of March 23, 2004, by and between Gilbert V. Levin and the Company (10.6) Stock Purchase Warrant dated as of February 24, 2000 (incorporated by reference to Form 8-K filed March 3, 2000) (10.7) Agreement and License between the Company and MD Foods Ingredients Amba (incorporated by reference to Form 8-K filed October 22, 1996 and Form 10-KSB filed March 31, 1997) (10.8) Securities Purchase Agreement dated as of February 24, 2000, by and between the Company and RGC International Investors, LDC, c/o Rose Glen Capital Management, L.P. (incorporated by reference from Form 8-K filed March 3, 2000) (10.9) 1997 Stock Option Plan (incorporated by reference from the Company’s Proxy Statements for its May 1998 and May 2001 annual meetings, as filed with the Commission) (10.10) Rights Agreement dated as of February 16, 2001, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference from Form 8-K filed in March 2001) (10.11) Amendment to the September 27, 1996 Agreement and License between the Company and Arla Foods Ingredients amba (formerly MD Foods Ingredients amba (incorporated by reference to Form 8-K filed November 17, 2003) (10.12) G.V.
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) Exhibits (3) Certificate of Incorporation and Bylaws of the Company (incorporated by reference to the Company’s Annual Proxy Statement for meeting held on May 15, 1992, as filed with the Commission) (3.1) Articles of Amendment of the Company (incorporated by reference to the Company’s Proxy Statement for its May 1996, May 2000, and May 2001 annual meetings, as filed with the Commission) (10.1) Supplemental Executive Retirement Plan Agreement dated as of February 17, 1993, by and between Gilbert V. Levin and the Company (incorporated by reference to Form 10-KSB filed March 31, 1993) (10.2) Amended and Restated Supplemental Executive Retirement Plan Agreement dated as of May 15, 2002, by and between M. Karen Levin and the Company (10.3) Consulting Agreement dated as of February 17, 1993, by and between Gilbert V. Levin and the Company (incorporated by reference to Form 10-KSB filed March 31, 1993) (10.4) Consulting Agreement dated as of February 17, 1993, by and between M. Karen Levin and the Company (incorporated by reference to Form 10-KSB filed March 31, 1993) (10.5) Amended and Restated Employment Agreement dated as of May 15, 2002, by and between Gilbert V. Levin and the Company (10.6) Stock Purchase Warrant dated as of February 24, 2000 (incorporated by reference to Form 8-K filed March 3, 2000) (10.7) Agreement and License between the Company and MD Foods Ingredients Amba (incorporated by reference to Form 8-K filed October 22, 1996 and Form 10-KSB filed March 31, 1997) (10.8) Securities Purchase Agreement dated as of February 24, 2000, by and between the Company and RGC International Investors, LDC, c/o Rose Glen Capital Management, L.P. (incorporated by reference from Form 8-K filed March 3, 2000) (10.9) 1997 Stock Option Plan (incorporated by reference from the Company’s Proxy Statements for its May 1998 and May 2001 annual meetings, as filed with the Commission) (10.10) Rights Agreement dated as of February 16, 2001, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference from Form 8-K filed in March 2001) (23) Consent of Grant Thornton LLP (99.1) Certification of Chief Executive Officer of Spherix Incorporated pursuant to 18 U.S.C.
Holders may convert their notes at a conversion rate of 18.2989 shares of CACI common stock for each $1,000 of note principal (an initial conversion price of $54.65 per share) under the following circumstances: 1) if the last reported sale price of CACI stock is greater than or equal to 130 percent of the applicable conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; 2) during the five consecutive business day period immediately after any ten consecutive trading day period (the note measurement period) in which the average of the trading price per $1,000 principal amount of convertible note was equal to or less than 97 percent of the average product of the closing price of a share of the Company’s common stock and the conversion rate of each date during the note measurement period; 3) upon the occurrence of certain corporate events constituting a fundamental change, as defined in the indenture governing the Notes; or 4) during the last three-month period prior to maturity.
ACQUISITIONS Year Ended June 30, 2012 During the year ended June 30, 2012, the Company completed acquisitions of five businesses that have added to the Company’s portfolio of cyber security and information technology modernization solutions, three in the United States and two in Europe, as follows: • On July 1, 2011, the acquisition of 100 percent of Pangia Technologies, LLC (Pangia), a United States-based company that provides technical solutions in the areas of computer network operations, information assurance, mission systems, software and systems engineering, and IT infrastructure support to the US government; CACI INTERNATIONAL INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) • On September 1, 2011, the acquisition of 100 percent of Paradigm Holdings, Inc., the parent of Paradigm Solutions Corporation (Paradigm), a United States-based company that provides cybersecurity and enterprise IT solutions to clients in federal civilian agencies, the Department of Defense, and the Intelligence Community; • On October 3, 2011, the acquisition of 100 percent of Advanced Programs Group, LLC (APG), a United States-based company that provides Oracle e-Business Services in the Federal market; • On February 1, 2012, the acquisition of 100 percent of Tomorrow Communications Ltd (TCL), a United Kingdom company specializing in the design, implementation and on-going management and support of data networks operated by large commercial companies; and • On May 25, 2012, the acquisition of 100 percent of PSB Informatiesystemen BV (PSB), a Dutch company that sells and maintains its proprietary ‘OSIRIS’ student administration system used throughout the Dutch higher education sector.
Holders may convert their notes at a conversion rate of 18.2989 shares of CACI common stock for each $1,000 of note principal (an initial conversion price of $54.65 per share) under the following circumstances: 1) if the last reported sale price of CACI stock is greater than or equal to 130 percent of the applicable conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; 2) during the five consecutive business day period immediately after any ten consecutive trading day period (the note measurement period) in which the average of the trading price per $1,000 principal amount of convertible note was equal to or less than 97 percent of the average product of the closing price of a share of the Company’s common stock and the conversion rate of each date during the note measurement period; 3) upon the occurrence of certain corporate events constituting a fundamental change, as defined in the indenture governing the Notes; or 4) during the last three-month period prior to maturity.
CACI INTERNATIONAL INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Activity for all outstanding SSARs and stock options, and the corresponding exercise price and fair value information, for the years ended June 30, 2012, 2011, and 2010, is as follows: CACI INTERNATIONAL INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Changes in the number of unvested SSARs and stock options and in unvested restricted stock and RSUs during each of the years in the three-year period ended June 30, 2012, together with the corresponding weighted-average fair values, are as follows: Information regarding the cash proceeds received, and the intrinsic value and total tax benefits realized resulting from stock option exercises is as follows (in thousands): The total intrinsic value of RSUs that vested during the years ended June 30, 2012, 2011, and 2010 was $13.4 million, $15.4 million and $4.5 million, respectively, and the tax benefit realized for these vestings was $5.3 million, $6.1 million and $1.7 million, respectively.
Among the factors that could seriously affect our federal government contracting business are: • the demand for and priority of funding for combat operations in Afghanistan, decreases to which may reduce the demand for our services on contracts supporting some operations and maintenance activities in the DoD; • the funding of some or all civilian agencies through a continuing resolution instead of a budget appropriation, which may cause our customers within those agencies to defer or reduce work under our current contracts; • a federal government shutdown resulting from the failure to pass budget appropriations or continuing resolutions, as well as other budgetary priorities limiting or delaying federal government spending generally, or specific departments or agencies in particular, and changes in fiscal policies or available funding; • an increase in set-asides for small businesses, which could result in our inability to compete directly for prime contracts; and • reduction of the federal government’s use of information technology or professional services.
Holders may convert their notes at a conversion rate of 18.2989 shares of CACI common stock for each $1,000 of note principal (an initial conversion price of $54.65 per share) under the following circumstances: 1) if the last reported sale price of CACI stock is greater than or equal to 130 percent of the applicable conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; 2) during the five consecutive business day period immediately after any ten consecutive trading day period (the note measurement period) in which the average of the trading price per $1,000 principal amount of convertible note was equal to or less than 97 percent of the average product of the closing price of a share of the Company’s common stock and the conversion rate of each date during the note measurement period; 3) upon the occurrence of certain corporate events constituting a fundamental change, as defined in the indenture governing the Notes; or 4) during the last three-month period prior to maturity.
Holders may convert their notes at a conversion rate of 18.2989 shares of CACI common stock for each $1,000 of note principal (an initial conversion price of $54.65 per share) under the following circumstances: 1) if the last reported sale price of CACI stock is greater than or equal to 130 percent of the applicable conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; 2) during the five consecutive business day period immediately after any ten consecutive trading day period (the note measurement period) in which the average of the trading price per $1,000 principal amount of convertible note was equal to or less than 97 percent of the average product of the closing price of a share of the Company’s common stock and the conversion rate of each date during the note measurement period; 3) upon the occurrence of certain corporate events constituting a fundamental change, as defined in the indenture governing the Notes; or 4) during the last three-month period prior to maturity.
CACI INTERNATIONAL INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Activity for all outstanding SSARs and stock options, and the corresponding exercise price and fair value information, for the years ended June 30, 2010, 2009, and 2008, is as follows: CACI INTERNATIONAL INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Changes in the number of unvested SSARs and stock options and in unvested restricted stock and RSUs during each of the years in the three-year period ended June 30, 2010, together with the corresponding weighted-average fair values, are as follows: Information regarding the cash proceeds received, and the intrinsic value and total tax benefits realized resulting from stock option exercises is as follows (in thousands): The total intrinsic value of RSUs that vested during the years ended June 30, 2010, 2009, and 2008 was $4.5 million, $5.3 million and $1.0 million, respectively, and the tax benefit realized for these vestings was $1.7 million, $2.1 million and $0.4 million, respectively.
Holders may convert their notes at a conversion rate of 18.2989 shares of CACI common stock for each $1,000 of note principal (an initial conversion price of $54.65 per share) under the following circumstances: 1) if the last reported sale price of CACI stock is greater than or equal to 130 percent of the applicable conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; 2) during the five consecutive business day period immediately after any ten consecutive trading day period (the note measurement period) in which the average of the trading price per $1,000 principal amount of convertible note was equal to or less than 97 percent of the average product of the closing price of a share of the Company’s common stock and the conversion rate of each date during the note measurement period; 3) upon the occurrence of certain corporate events constituting a fundamental change, as defined in the indenture governing the Notes; or 4) during the last three-month period prior to maturity.
Among the factors that could seriously affect our federal government contracting business are: • the increasing demand and priority of funding for combat operations in Iraq and Afghanistan, which may reduce the demand for our services on contracts supporting some operations and maintenance activities in the DoD; • the funding of all civilian agencies through a continuing resolution instead of a budget appropriation, which may cause our customers to defer or reduce work under our current contracts; • budgetary priorities limiting or delaying federal government spending generally, or specific departments or agencies in particular, and changes in fiscal policies or available funding, including potential government shutdowns (such as that which occurred during the federal government’s 1996 fiscal year); • an increase in set-asides for small businesses, which could result in our inability to compete directly for prime contracts; and • curtailment of the federal government’s use of information technology or professional services.
(21) The significant subsidiaries of the Registrant, as defined in Section 1-02(w) of regulation S-X, are: CACI, INC.- FEDERAL, a Delaware Corporation (also does business as “CACI eBusiness Solutions”) CACI, INC.- COMMERCIAL, a Delaware Corporation CACI Limited, a United Kingdom Corporation Automated Sciences Group, Inc., a Delaware Corporation CACI Technologies, Inc., a Virginia Corporation (also does business as “CACI Productions Group”) CACI Dynamic Systems, Inc., a Virginia Corporation CACI Premier Technology, Inc., a Delaware Corporation CACI SYSTEMS AND TECHNOLOGY LTD, a Canadian Corporation (23.1) Consent of Ernst & Young LLP (23.2) Consent of Deloitte & Touche, LLP (99) Certifications SECTION II REPORTS OF INDEPENDENT AUDITORS AND CONSOLIDATED FINANCIAL STATEMENTS REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders CACI International Inc We have audited the accompanying consolidated balance sheet of CACI International Inc and subsidiaries (the Company) as of June 30, 2003, and the related consolidated statements of operations, shareholders’ equity, cash flows, and comprehensive income for the year then ended.
(21) The significant subsidiaries of the Registrant, as defined in Section 1-02(w) of regulation S-X, are: CACI, INC.-FEDERAL, a Delaware Corporation (also does business as “CACI eBusiness Solutions”) CACI, INC.-COMMERCIAL, a Delaware Corporation CACI Products Company California, a California Corporation CACI N.V., a Netherlands Corporation CACI Limited, a United Kingdom Corporation Automated Sciences Group, Inc., a Delaware Corporation CACI Technologies, Inc., a Virginia Corporation (also does business as “CACI Productions Group”) CACI Dynamic Systems, Inc., a Virginia Corporation CACI Products Company, a Delaware Corporation SECTION II INDEPENDENT AUDITORS’ REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000 INDEPENDENT AUDITORS’ REPORT To The Board of Directors and Shareholders CACI International Inc Arlington, Virginia We have audited the accompanying consolidated balance sheets of CACI International Inc and subsidiaries (the Company) as of June 30, 2002 and 2001, and the related consolidated statements of operations, shareholders’ equity, cash flows, and comprehensive income for each of the three years in the period ended June 30, 2002.
/s/ - - ----------------------------- Deloitte & Touche Washington, D.C. August 11, 1994 CACI INTERNATIONAL INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ASSETS June 30 ------------------------- 1994 1993 ----------- ---------- CURRENT ASSETS Cash and equivalents $ 941,000 $ 2,725,000 Accounts receivable: Billed 35,668,000 30,209,000 Unbilled 14,420,000 9,434,000 Prepaid expenses and other 5,067,000 4,591,000 ---------- ---------- TOTAL CURRENT ASSETS 56,096,000 46,959,000 ---------- ---------- PROPERTY AND EQUIPMENT, NET Equipment and furniture 18,476,000 16,036,000 Leasehold improvements 1,648,000 1,276,000 ---------- ---------- Property and equipment, at cost 20,124,000 17,312,000 Less accumulated depreciation and amortization (12,369,000) ( 9,625,000) ---------- ---------- TOTAL PROPERTY AND EQUIPMENT, NET 7,755,000 7,687,000 ---------- ---------- OTHER ASSETS 1,001,000 1,084,000 GOODWILL 5,921,000 2,687,000 INCOME TAXES 226,000 0 ---------- ---------- TOTAL ASSETS $70,999,000 $58,417,000 ========== ========== See notes to Consolidated Financial Statements CACI INTERNATIONAL INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (cont'd) LIABILITIES AND SHAREHOLDERS' EQUITY June 30 ----------------------- 1994 1993 ----------- ---------- CURRENT LIABILITIES Note payable $ 2,745,000 $ 7,223,000 Accounts payable & accrued expenses 14,848,000 8,878,000 Accrued compensation & benefits 10,712,000 7,139,000 Deferred rent expense 454,000 324,000 Income taxes payable 1,829,000 1,135,000 Deferred income taxes 181,000 323,000 ---------- ---------- TOTAL CURRENT LIABILITIES 30,769,000 25,022,000 ---------- ---------- DEFERRED RENT EXPENSES 2,353,000 2,509,000 DEFERRED INCOME TAXES 139,000 389,000 SHAREHOLDERS' EQUITY Common Stock 1,349,000 0 $.10 par value, 13,490,000 shares issued Common Stock - Class A $.10 par value, 13,130,000 shares issued 0 1,313,000 Common Stock - Class B $.10 par value, 115,000 shares issued 0 12,000 Capital in excess of par 4,591,000 3,454,000 Retained earnings 44,621,000 38,585,000 Cumulative currency translation adjustments (1,315,000) (1,516,000) Treasury stock, at cost (3,251,000 shares and 3,233,000 shares) (11,508,000) (11,351,000) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 37,738,000 30,497,000 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $70,999,000 $58,417,000 ========== ========== See notes to Consolidated Financial Statements.
INCOME TAXES The provision (benefit) for income taxes consists of: State Year End and June 30 Federal Local Foreign Total - - ------- ---------- -------- ---------- ---------- Current $1,894,000 $696,000 $1,151,000 $3,741,000 Deferred 97,000 21,000 34,000 152,000 --------- ------- --------- --------- $1,991,000 $717,000 $1,185,000 $3,893,000 ========= ======= ========= ========= Current $2,311,000 $260,000 $ 610,000 $3,181,000 Deferred (1,042,000) (85,000) (147,000) (1,274,000) ---------- ------- --------- --------- $1,269,000 $175,000 $ 463,000 $1,907,000 ========= ======= ========= ========= Current $2,434,000 $501,000 $ 199,000 $3,134,000 Deferred (296,000) (67,000) 157,000 (206,000) --------- ------- --------- --------- $2,138,000 $434,000 $ 356,000 $2,928,000 ========= ======= ========= ========= A reconciliation of the income tax provision (benefit) and the amount computed by applying the statutory U.S. income tax rate of 34% is as follows: Year Ended June 30, -------------------------------------- 1994 1993 1992 ---------- ---------- ---------- Amount at statutory U.S. rate $3,478,000 $1,662,000 $2,427,000 Other taxes, net of U.S. income tax benefit 450,000 116,000 287,000 Other expenses not deductible for tax purposes 80,000 76,000 6,000 Taxes on foreign earnings at different effective rates 209,000 48,000 191,000 Extraordinary item (194,000) 0 0 Other (130,000) 5,000 17,000 --------- --------- --------- Income taxes (benefit) $3,893,000 $1,907,000 $2,928,000 ========= ========= ========= The net current and non-current components of the deferred income tax accounts as shown on the consolidated balance sheet at June 30, 1994 are: Total -------- Current deferred tax liability $181,000 Net non-current deferred tax asset (87,000) ------- Net deferred tax liability $ 94,000 ======= The deferred tax assets and tax liabilities at June 30, 1994 are: Assets: 1994 ---------- Accrued vacation & other expenses $ 2,314,000 Deferred rent 1,084,000 Foreign currency conversion 182,000 Pension 168,000 --------- Total deferred assets $ 3,748,000 --------- Liabilities: Unbilled revenue $(2,745,000) Foreign transactions (613,000) Depreciation (435,000) Other (49,000) ---------- Total deferred liabilities $(3,842,000) ---------- Net deferred tax liability: $ (94,000) ========== Commencing July 1, 1987, the Company adopted the accrual net of unbillable revenue method of accounting for tax purposes.
Information about operations in the United States and foreign countries (primarily in Western Europe), after the elimination of intercompany transactions, consists of: Earnings Before Identifiable Income Net Assets at Revenue Taxes * Earnings** Year End ------------ ---------- ---------- ------------ - - ---- United States $156,775,000 $6,651,000 $4,137,000 $56,568,000 Foreign 26,925,000 3,084,000 1,899,000 14,431,000 ----------- --------- --------- ---------- Combined $183,700,000 $9,735,000 $6,036,000 $70,999,000 =========== ========= ========= ========== - - ---- United States $127,413,000 $3,639,000 $2,195,000 $48,826,000 Foreign 17,735,000 1,248,000 785,000 9,591,000 ----------- --------- --------- ---------- Combined $145,148,000 $4,887,000 $2,980,000 $58,417,000 =========== ========= ========= ========== - - ---- United States $124,070,000 $6,505,000 $3,933,000 $45,757,000 Foreign 15,808,000 633,000 277,000 10,078,000 ----------- --------- --------- ---------- Combined $139,878,000 $7,138,000 $4,210,000 $55,835,000 =========== ========= ========= ========== * 1994 includes extraordinary loss of $494,000.
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) Financial Statements (Refer to Item 8 above) Independent Auditors' Report Consolidated Balance Sheet as of June 30, 1994 and 1993 Consolidated Statement of Operations for the Years Ended June 30, 1994, 1993 and 1992 Consolidated Statement of Cash Flows for the Years Ended June 30, 1994, 1993 and 1992 Consolidated Statement of Shareholders' Equity for the Years Ended June 30, 1994, 1993 and 1992 Notes to Consolidated Financial Statements (a)(2) Financial Statement Schedules (Refer to Item 8 above) Schedule V: Property, Plant, and Equipment for the Years Ended June 30, 1994,1993 and 1992 Schedule VI: Accumulated Depreciation and Amortization of Property, Plant, and Equipment for the Years Ended June 30, 1994, 1993 and 1992 Schedule VIII: Valuation and Qualifying Accounts for the Years Ended June 30, 1994, 1993 and 1992 Schedule IX: Short-Term Borrowings for the Years Ended June 30, 1994, 1993 and 1992 (a)(3) Exhibits and Exhibit Index (listed by numbers corresponding to the exhibit table of Item 601 regulation S-K) (3) Articles of Incorporation and By-laws: 3.1 Certificate of Incorporation of the Registrant, as amended December 17, 1993.
Signature Title Date --------- ----- ---- /s/ September 23, 1994 - - ------------------------ ------------------ J.P. London Chairman of the Board, President, and Director (Principal Executive Officer) /s/ September 23, 1994 - - ------------------------ Executive Vice President, Chief ------------------ Samuel R. Strickland Financial Officer, and Treasurer (Chief Financial and Accounting Officer) /s/ September 23, 1994 - - ------------------------ Director ------------------ Paul J. Coleman, Jr. /s/ Director September 23, 1994 - - ------------------------ ------------------ Alan S. Parsow /s/ Director September 23, 1994 - - ------------------------ ------------------ Larry L. Pfirman /s/ Director September 23, 1994 - - ------------------------ ------------------ Warren R. Phillips /s/ Director September 23, 1994 - - ------------------------ ------------------ Charles P. Revoile /s/ Director September 23, 1994 - - ------------------------ ------------------ William K. Sacks /s/ Director September 23, 1994 - - ------------------------ ------------------ John M. Toups
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) Financial Statements (Refer to Item 8 above) Independent Auditors' Report Consolidated Balance Sheet as of June 30, 1994 and 1993 Consolidated Statement of Operations for the Years Ended June 30, 1994, 1993 and 1992 Consolidated Statement of Cash Flows for the Years Ended June 30, 1994, 1993 and 1992 Consolidated Statement of Shareholders' Equity for the Years Ended June 30, 1994, 1993 and 1992 Notes to Consolidated Financial Statements (a)(2) Financial Statement Schedules (Refer to Item 8 above) Schedule V: Property, Plant, and Equipment for the Years Ended June 30, 1994,1993 and 1992 Schedule VI: Accumulated Depreciation and Amortization of Property, Plant, and Equipment for the Years Ended June 30, 1994, 1993 and 1992 Schedule VIII: Valuation and Qualifying Accounts for the Years Ended June 30, 1994, 1993 and 1992 Schedule IX: Short-Term Borrowings for the Years Ended June 30, 1994, 1993 and 1992 (a)(3) Exhibits and Exhibit Index (listed by numbers corresponding to the exhibit table of Item 601 regulation S-K) (3) Articles of Incorporation and By-laws: 3.1 Certificate of Incorporation of the Registrant, as amended December 17, 1993.
Signature Title Date --------- ----- ---- /s/ September 23, 1994 - - ------------------------ ------------------ J.P. London Chairman of the Board, President, and Director (Principal Executive Officer) /s/ September 23, 1994 - - ------------------------ Executive Vice President, Chief ------------------ Samuel R. Strickland Financial Officer, and Treasurer (Chief Financial and Accounting Officer) /s/ September 23, 1994 - - ------------------------ Director ------------------ Paul J. Coleman, Jr. /s/ Director September 23, 1994 - - ------------------------ ------------------ Alan S. Parsow /s/ Director September 23, 1994 - - ------------------------ ------------------ Larry L. Pfirman /s/ Director September 23, 1994 - - ------------------------ ------------------ Warren R. Phillips /s/ Director September 23, 1994 - - ------------------------ ------------------ Charles P. Revoile /s/ Director September 23, 1994 - - ------------------------ ------------------ William K. Sacks /s/ Director September 23, 1994 - - ------------------------ ------------------ John M. Toups
Our significant levels of debt and related debt service obligations could adversely affect us in several respects, including: •requiring us to dedicate a substantial portion of our cash flow from operations to the payment of interest and principal on our debt, thereby reducing the funds available to us for other purposes, including acquisitions, capital expenditures, strategic initiatives and dividends; •hindering our ability to capitalize on business opportunities and to plan for or react to changing market, industry, competitive or economic conditions; •making us more vulnerable to economic or industry downturns, including interest rate increases; •placing us at a competitive disadvantage compared to less leveraged companies; •making it more difficult or expensive for us to obtain any necessary future financings or refinancings, including the risk that this could force us to sell assets or take other less desirable actions to raise capital; and •increasing the risk that we may not meet the financial or non-financial covenants contained in our debt agreements or timely make all required debt payments, either of which could result in the acceleration of some or all of our outstanding indebtedness.
Small and Medium Business Segment Year Ended December 31, 2020 Compared to the same periods Ended December 31, 2019 and December 31, 2018 Segment revenue decreased $170 million for the year ended December 31, 2020 compared to December 31, 2019 and decreased $191 million for the year ended December 31, 2019 compared to December 31, 2018, primarily due to the following factors: •For both periods, voice and collaboration revenue decreased due to continued declines in demand for traditional voice TDM services; •for the year ended 2020 compared to 2019, transport and infrastructure revenue decreased primarily due to continued reductions in demand for our low-speed broadband, and for the year ended 2019 compared to 2018, transport and infrastructure declined primarily due to lower equipment sales and lower demand for broadband services; and •for the year ended 2020 compared to 2019, IP and data services decreased due to lower VPN revenue and customers transitioning from Ethernet solutions to lower-rate IP services, and for the year ended 2019 compared to 2018, IP and data services increased due to strength in VPN revenue.
Some of our current and potential competitors (i) offer products or services that are substitutes for our traditional wireline voice services, including wireless voice and non-voice communication services, (ii) offer a more comprehensive range of communications products and services, (iii) offer products or services with features that we cannot readily match in some or all of our markets, (iv) install their services more quickly than we do, (v) have greater marketing, engineering, research, development, technical, provisioning, customer relations, financial or other resources, (vi) have larger or more diverse networks with greater transmission capacity, (vii) conduct operations or raise capital at a lower cost than us, (viii) are subject to less regulation, which we believe enables such competitors to operate more flexibly than us with respect to certain offerings, (ix) offer services nationally or internationally to a larger geographic area or larger base of customers, (x) have substantially stronger brand names, which may provide them with greater pricing power than ours, (xi) have deeper or more long-standing relationships with key customers, or (xii) have larger operations than ours, which may enable them to compete more successfully in recruiting top talent, entering into operational or strategic partnerships or acquiring companies.
Disruptions, security breaches and other significant failures of the above-described networks and systems could: • disrupt the proper functioning of these networks and systems, which could in turn disrupt (i) our operational, billing or other administrative functions or (ii) the operations of certain of our customers who rely upon us to provide services critical to their operations; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, classified or otherwise valuable information of ours, our customers or our customers’ end users, including trade secrets, which others could use for competitive, disruptive, destructive or otherwise harmful purposes and outcomes; • require us to notify customers, regulatory agencies or the public of data breaches; • require us to provide credits for future service under certain service level commitments we have provided contractually to our customers or to offer expensive incentives to retain customers; • subject us to claims for damages, fines, penalties, termination or other remedies under our customer contracts or service standards set by regulators, which in certain cases could exceed our insurance coverage; • result in a loss of business, damage our reputation among our customers and the public generally, subject us to additional regulatory scrutiny or expose us to prolonged litigation; or • require significant management attention or financial resources to remedy the resulting damages or to change our systems, including expenses to repair systems, add new personnel or develop additional protective systems.
Bribery Act of 2010, the Brazilian Anti-corruption Law and other applicable anti-corruption laws (collectively with the FCPA, the "Anti-Corruption Laws"); • economic, social and political instability, with the attendant risks of terrorism, kidnapping, extortion, civic unrest and potential seizure or nationalization of assets; • currency and exchange controls, repatriation restrictions and fluctuations in currency exchange rates; • challenges in securing and maintaining the necessary physical and telecommunications infrastructure; • the inability in certain jurisdictions to enforce contract rights either due to underdeveloped legal systems or government actions that result in a deprivation of contract rights; • increased risk of cyber-attacks or similar events to our network as we expand our network or interconnect our network with other networks internationally; • the inability in certain jurisdictions to adequately protect intellectual property rights or prevent its misappropriation; • laws, policies or practices that restrict with whom we can contract or otherwise limit the scope of operations that can legally or practicably be conducted within any particular country; • potential submission of disputes to the jurisdiction of a non-U.S. court or arbitration panel; • reliance on third parties, including those with which we have limited experience; • limitations in the availability, amount or terms of insurance coverage; • the imposition of unanticipated or increased taxes, increased communications or privacy regulations or other forms of public or governmental regulation that increase our operating expenses; and • challenges in staffing and managing overseas operations.
Our significant levels of debt can adversely affect us in several respects, including: • limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, refinancings or other general corporate purposes, particularly if, as discussed further in the risk factor disclosure below, (i) the ratings assigned to our debt securities by nationally recognized credit rating organizations are revised downward or (ii) we seek capital during periods of turbulent or unsettled market conditions; • requiring us to dedicate a substantial portion of our cash flow from operations to the payment of interest and principal on our debt, thereby reducing the funds available to us for other purposes, including acquisitions, capital expenditures, strategic initiatives, dividends, stock repurchases, marketing and other potential growth initiatives; • hindering our ability to capitalize on business opportunities and to plan for or react to changing market, industry, competitive or economic conditions; • increasing our future borrowing costs; • limiting or precluding us from entering into commercial, hedging or other financial arrangements with vendors, customers or other business partners; • making us more vulnerable to economic or industry downturns, including interest rate increases; • placing us at a competitive disadvantage compared to less leveraged competitors; • increasing the risk that we will need to sell securities or assets, possibly on unfavorable terms, or take other unfavorable actions to meet payment obligations; or • increasing the risk that we may not meet the financial covenants contained in our debt agreements or timely make all required debt payments, either of which could result in the acceleration of some or all of our outstanding indebtedness.
Decisions on whether, when and in which amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of our Board of Directors, which reserves the right to change or terminate our dividend practices at any time and for any reason without prior notice, including without limitation any of the following: • our supply of cash or other liquid assets is anticipated to remain under pressure for the various reasons described in this report; • our cash requirements or plans might change for a wide variety of reasons, including changes in our financial position, capital allocation plans (including a desire to retain or accumulate cash), capital spending plans, stock purchase plans, acquisition strategies, strategic initiatives, debt payment plans (including a desire to maintain or improve credit ratings on our debt securities), pension funding or other benefits payments; • our ability to service and refinance our current and future indebtedness and our ability to borrow or raise additional capital to satisfy our capital needs; • the amount of dividends that we may distribute to our shareholders is subject to restrictions under Louisiana law and restrictions imposed by our existing or future credit facilities, debt securities, outstanding preferred stock securities, leases and other agreements, including restricted payment and leverage covenants; and • the amount of cash that our subsidiaries may make available to us, whether by dividends, loans or other payments, may be subject to the legal, regulatory and contractual restrictions described in the immediately preceding risk factor.
Our costs of maintaining our pension and healthcare plans, and the future funding requirements for these plans, are affected by several factors, most of which are outside our control, including: • decreases in investment returns on funds held by our pension and other benefit plan trusts; • changes in prevailing interest rates and discount rates or other factors used to calculate the funding status of our pension and other post-retirement plans; • increases in healthcare costs generally or claims submitted under our healthcare plans specifically; • increasing longevity of our employees and retirees; • the impact of the continuing implementation, modification or potential repeal of current federal healthcare legislation and regulations promulgated thereunder; • increases in the number of retirees who elect to receive lump sum benefit payments; • increases in insurance premiums we are required to pay to the Pension Benefit Guaranty Corporation due to its systemic underfunded status; • changes in plan benefits; and • changes in funding laws or regulations.
Enterprise Segment Year Ended December 31, 2019 Compared to the same periods Ended December 31, 2018 and December 31, 2017 Segment revenue remained unchanged for the year ended December 31, 2019 compared to December 31, 2018 and increased $1.9 billion or 47% for the year ended December 31, 2018 compared to December 31, 2017, due to the following factors: • For the year ended 2019 compared to 2018, IP and data services revenue increased, primarily driven by an increase in rates, and for the period ended 2018 compared to 2017, the increase was driven mainly by the acquisition of Level 3; • for both periods, IT and managed services revenue declined mainly due to churn in legacy managed services contracts; • for the year ended 2019 compared to 2018, voice and collaboration revenue decreased as customers continue to disconnect traditional voice TDM service and transition to newer (low cost) products such as VoIP, and for the year ended 2018 compared to 2017, voice and collaboration revenue increased due to the Level 3 acquisition partially offset by migration from traditional TDM services to VoIP; and • for the year ended 2019 compared to 2018, transport and infrastructure revenue decreased due to our deemphasis of low-margin equipment and lower professional services, and for the year ended 2018 compared to 2017, transport and infrastructure increased due to the Level 3 acquisition partially offset by lower equipment sales.
Small and Medium Business Segment Year Ended December 31, 2019 Compared to the same periods Ended December 31, 2018 and December 31, 2017 Segment revenue decreased $188 million or 6% for the year ended December 31, 2019 compared to December 31, 2018 and increased $726 million, or 30% for the year ended December 31, 2018 compared to December 31, 2017, primarily due to the following factors: • For the year ended 2019 compared to 2018, voice and collaboration revenue decreased due to continued decline in demand for legacy voice services, and for the year ended 2018 compared to 2017, voice and collaboration increased due to the Level 3 acquisition, partially offset by continued legacy voice declines; • for the year ended 2019 compared to 2018, transport and infrastructure revenue decreased primarily due to lower equipment sales as we continue to focus on driving profitable growth, and for the year ended 2018 compared to 2017, transport and infrastructure increased due to the Level 3 acquisition, partially offset by de-emphasis of Customer Premises Equipment ("CPE") sales; and • for the year ended 2018 compared to 2017, IP and data services increased due to the Level 3 acquisition and VPN revenue growth as we continue to experience good momentum in this product within our small and medium business segment.
Wholesale Segment Year Ended December 31, 2019 Compared to the same periods Ended December 31, 2018 and December 31, 2017 Segment revenue decreased $323 million or 7% for the year ended December 31, 2019 compared to December 31, 2018 and increased $1.4 billion or 45% for the year ended December 31, 2018 compared to December 31, 2017, primarily due to the following factors: • For the year ended 2019 compared to 2018, transport and infrastructure revenue decreased due to continued declines in legacy private line and customer network consolidation and grooming efforts, and for the year ended 2018 compared to 2017 transport and infrastructure increased due to the Level 3 acquisition; • for the year ended 2019 compared to 2018, voice and collaboration revenue decreased due to a combination of market rate compression, customer volume losses resulting from insourcing and industry consolidation, and for the year ended 2018 compared to 2017 voice and collaboration increased due to the Level 3 acquisition; and • for the year ended 2018 compared to 2017 IP and data services revenue increased due to the Level 3 acquisition.
Some of our current and potential competitors (i) offer products or services that are substitutes for our traditional wireline voice services, including wireless voice and non-voice communication services, (ii) offer a more comprehensive range of communications products and services, (iii) offer products or services with features that we cannot readily match in some or all of our markets, (iv) install their services more quickly than we do, (v) have greater marketing, engineering, research, development, technical, provisioning, customer relations, financial or other resources, (vi) have larger or more diverse networks with greater transmission capacity, (vii) conduct operations or raise capital at a lower cost than us, (viii) are subject to less regulation, which we believe enables such competitors to operate more flexibly than us with respect to certain offerings, (ix) offer services nationally or internationally to a larger geographic area or larger base of customers, (x) have substantially stronger brand names, which may provide them with greater pricing power than ours, or (xi) have larger operations than ours, which may enable them to compete more successfully in recruiting top talent, entering into operational or strategic partnerships or acquiring companies.
Disruptions, security breaches and other significant failures of the above-described networks and systems could: • disrupt the proper functioning of these networks and systems, which could in turn disrupt (i) our operational, billing or other administrative functions or (ii) the operations of certain of our customers who rely upon us to provide services critical to their operations; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, classified or otherwise valuable information of ours, our customers or our customers’ end users, including trade secrets, which others could use for competitive, disruptive, destructive or otherwise harmful purposes and outcomes; • require us to notify customers, regulatory agencies or the public of data breaches; • require us to provide credits for future service under certain service level commitments we have provided contractually to our customers or to offer expensive incentives to retain customers; • subject us to claims for damages, fines, penalties, termination or other remedies under our customer contracts or service standards set by regulators, which in certain cases could exceed our insurance coverage; • result in a loss of business, damage our reputation among our customers and the public generally, subject us to additional regulatory scrutiny or expose us to prolonged litigation; or • require significant management attention or financial resources to remedy the resulting damages or to change our systems, including expenses to repair systems, add new personnel or develop additional protective systems.
Bribery Act of 2010 and the Brazilian Anti-corruption Law, (collectively with the FCPA, the "Anti-Corruption Laws"); • economic, social and political instability, with the attendant risks of terrorism, kidnapping, extortion, civic unrest and potential seizure or nationalization of assets; • currency and exchange controls, repatriation restrictions and fluctuations in currency exchange rates; • challenges in securing and maintaining the necessary physical and telecommunications infrastructure; • the inability in certain jurisdictions to enforce contract rights either due to underdeveloped legal systems or government actions that result in a deprivation of contract rights; • increased risk of cyber-attacks or similar events to our network as we expand our network or interconnect our network with other networks internationally; • the inability in certain jurisdictions to adequately protect intellectual property rights; • laws, policies or practices that restrict with whom we can contract or otherwise limit the scope of operations that can legally or practicably be conducted within any particular country; • potential submission of disputes to the jurisdiction of a non-U.S. court or arbitration panel; • reliance on third parties, including those with which we have limited experience; • limitations in the availability, amount or terms of insurance coverage; • the imposition of unanticipated or increased taxes, increased communications or privacy regulations or other forms of public or governmental regulation that increase our operating expenses; and • challenges in staffing and managing overseas operations.
Potential difficulties we may encounter in the remainder of the integration process include the following: • the inability to successfully combine our incumbent business and Level 3’s business in a manner that permits us to fully and timely attain the cost savings and operating synergies anticipated to result from the acquisition; • the additional complexities of combining two companies with different histories, cultures, regulatory restrictions, operating structures and markets; • the complexities associated with managing the combined businesses out of several different locations and integrating personnel from the two companies, while at the same time attempting to provide consistent, high quality products and services under a unified culture; • lost sales and customers as a result of certain customers of either of the two companies deciding to terminate or reduce their business with the combined company; • the failure to retain key employees of either of the two companies; • unanticipated impediments in integrating departments, systems, technologies, procedures and policies, and in maintaining uniform standards and controls; • potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the acquisition; and • performance shortfalls as a result of the diversion of management’s attention caused by completing the acquisition and integrating the companies’ operations.
Our significant levels of debt can adversely affect us in several other respects, including: • limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, refinancings or other general corporate purposes, particularly if, as discussed further in the risk factor disclosure below, (i) the ratings assigned to our debt securities by nationally recognized credit rating organizations are revised downward or (ii) we seek capital during periods of turbulent or unsettled market conditions; • requiring us to dedicate a substantial portion of our cash flow from operations to the payment of interest and principal on our debt, thereby reducing the funds available to us for other purposes, including acquisitions, capital expenditures, strategic initiatives, dividends, stock repurchases, marketing and other potential growth initiatives; • hindering our ability to capitalize on business opportunities and to plan for or react to changing market, industry, competitive or economic conditions; • increasing our future borrowing costs; • limiting or precluding us from entering into commercial, hedging or other financial arrangements with vendors, customers or other business partners; • making us more vulnerable to economic or industry downturns, including interest rate increases; • placing us at a competitive disadvantage compared to less leveraged competitors; • increasing the risk that we will need to sell securities or assets, possibly on unfavorable terms, or take other unfavorable actions to meet payment obligations; or • increasing the risk that we may not meet the financial covenants contained in our debt agreements or timely make all required debt payments, either of which could result in the acceleration of some or all of our outstanding indebtedness.
Decisions on whether, when and in which amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of our Board of Directors, which reserves the right to change or terminate our dividend practices at any time and for any reason without prior notice, including without limitation any of the following: • our supply of cash or other liquid assets is anticipated to remain under pressure for the various reasons described in this report; • our cash requirements or plans might change for a wide variety of reasons, including changes in our financial position, capital allocation plans (including a desire to retain or accumulate cash), capital spending plans, stock purchase plans, acquisition strategies, strategic initiatives, debt payment plans (including a desire to maintain or improve credit ratings on our debt securities), pension funding or other benefits payments; • our ability to service and refinance our current and future indebtedness and our ability to borrow or raise additional capital to satisfy our capital needs; • the amount of dividends that we may distribute to our shareholders is subject to restrictions under Louisiana law and restrictions imposed by our existing or future credit facilities, debt securities, outstanding preferred stock securities, leases and other agreements, including restricted payment and leverage covenants; and • the amount of cash that our subsidiaries may make available to us, whether by dividends, loans or other payments, may be subject to the legal, regulatory and contractual restrictions described in the immediately preceding risk factor.
Our costs of maintaining our pension and healthcare plans, and the future funding requirements for these plans, are affected by several factors, most of which are outside our control, including: • decreases in investment returns on funds held by our pension and other benefit plan trusts; • changes in prevailing interest rates and discount rates or other factors used to calculate the funding status of our pension and other post-retirement plans; • increases in healthcare costs generally or claims submitted under our healthcare plans specifically; • increasing longevity of our employees and retirees; • the impact of the continuing implementation, modification or potential repeal of current federal healthcare legislation and regulations promulgated thereunder; • increases in the number of retirees who elect to receive lump sum benefit payments; • increases in insurance premiums we are required to pay to the Pension Benefit Guaranty Corporation, an independent agency of the United States government that must cover its own underfunded status by collecting premiums from a declining population of pension plans that are qualified under the U.S. tax code; • changes in plan benefits; and • changes in funding laws or regulations.
Operating Revenue We categorize our products, services and revenue among the following five categories: • IP and Data Services, which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services and Vyvx broadcast services) and other ancillary services; • Transport and Infrastructure, which include broadband, private line (including business data services), data center facilities and services, including cloud, hosting and application management solutions, wavelength, equipment sales and professional services, network security services and other ancillary services; • Voice and Collaboration, which includes primarily local and long distance voice, including wholesale voice, and other ancillary services; • IT and Managed Services, which include information technology services and managed services, which may be purchased in conjunction with our other network services; and • Regulatory Revenue, which consist of (i) Universal Service Fund ("USF"), Connect America Fund ("CAF") and other support payments designed to reimburse us for various costs related to certain telecommunications services and (ii) other operating revenue from the leasing and subleasing of space, none of which is included in our segment revenue.
Material weaknesses have been identified related to (i) ineffective design and operation of process level controls over the fair value measurement of certain assets acquired and liabilities assumed in a business combination, which arose because the Company did not conduct an effective risk assessment to identify and assess changes needed to process level controls resulting from the business combination, did not clearly assign responsibility for controls over the fair value measurements, and did not maintain effective information and communication processes to ensure the necessary information was available to personnel on a timely basis so they could fulfill their control responsibilities related to the fair value measurements; and (ii) ineffective design and operation of process level controls over the existence and accuracy of revenue transactions, which arose because the Company did not conduct an effective risk assessment to identify risks of material misstatement related to revenue transactions, and included in management's assessment.
Product and Service Categories We categorize our products, services and revenue among the following five categories: • IP and Data Services, which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services, CDN services and Vyvx broadcast services) and other ancillary services; • Transport and Infrastructure, which include broadband, private line (including business data services), data center facilities and services, including cloud, hosting and application management solutions, wavelength, equipment sales and professional services, network security services, dark fiber services and other ancillary services; • Voice and Collaboration, which includes primarily local and long-distance voice, including wholesale voice, and other ancillary services; • IT and Managed Services, which include information technology services and managed services, which may be purchased in conjunction with our other network services; and • Regulatory Revenue, which consist of (i) Universal Service Fund ("USF"), Connect America Fund ("CAF") and other support payments designed to reimburse us for various costs related to certain telecommunications services and (ii) other operating revenue from the leasing and subleasing of space, none of which is included in our segment revenue.
Some of our current and potential competitors (i) offer products or services that are substitutes for our traditional wireline voice services, including wireless voice and non-voice communication services, (ii) offer a more comprehensive range of communications products and services, (iii) offer products or services with features that we cannot readily match in some or all of our markets, (iv) install their services more quickly than we do, (v) have greater marketing, engineering, research, development, technical, provisioning, customer relations, financial and other resources, (vi) have larger or more diverse networks with greater transmission capacity, (vii) conduct operations or raise capital at a lower cost than us, (viii) are subject to less regulation, which we believe enables such competitors to operate more flexibly than us with respect to certain offerings, (ix) offer services nationally or internationally to a larger geographic area or larger base of customers, (x) have substantially stronger brand names, which may provide them with greater pricing power than ours, or (xi) have larger operations than ours, which may enable them to compete more successfully in recruiting top talent, entering into operational or strategic partnerships or acquiring companies.
Disruptions, security breaches and other significant failures of the above-described networks and systems could: • disrupt the proper functioning of these networks and systems, which could in turn disrupt (i) our operational, billing or other administrative functions or (ii) the operations of certain of our customers who rely upon us to provide services critical to their operations; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, classified or otherwise valuable information of ours, our customers or our customers’ end users, including trade secrets, which others could use for competitive, disruptive, destructive or otherwise harmful purposes and outcomes; • require us to notify customers, regulatory agencies or the public of data breaches; • require us to provide credits for future service under certain service level commitments we have provided contractually to our customers or to offer expensive incentives to retain customers; • subject us to claims for damages, fines, penalties, termination or other remedies under our customer contracts or service standards set by state regulatory commissions, which in certain cases could exceed our insurance coverage; • result in a loss of business, damage our reputation among our customers and the public generally, subject us to additional regulatory scrutiny or expose us to prolonged litigation; or • require significant management attention or financial resources to remedy the resulting damages or to change our systems, including expenses to repair systems, add new personnel or develop additional protective systems.
Bribery Act of 2010 and the Brazilian Anti-corruption Law, (collectively with the FCPA, the "Anti-Corruption Laws"); • economic, social and political instability, with the attendant risks of terrorism, kidnapping, extortion, civic unrest and potential seizure or nationalization of assets; • currency and exchange controls, repatriation restrictions and fluctuations in currency exchange rates; • challenges in securing and maintaining the necessary physical and telecommunications infrastructure; • the inability in certain jurisdictions to enforce contract rights either due to underdeveloped legal systems or government actions that result in a deprivation of contract rights; • increased risk of cyber-attacks or similar events to our network as we expand our network or interconnect our network with other networks internationally; • the inability in certain jurisdictions to adequately protect intellectual property rights; • laws, policies or practices that restrict with whom we can contract or otherwise limit the scope of operations that can legally or practicably be conducted within any particular country; • potential submission of disputes to the jurisdiction of a non-U.S. court or arbitration panel; • reliance on third parties, including those with which we have limited experience; • limitations in the availability, amount or terms of insurance coverage; • the imposition of unanticipated or increased taxes, increased communications or privacy regulations or other forms of public or governmental regulation that increase our operating expenses; and • challenges in staffing and managing overseas operations.
Potential difficulties we may encounter in the integration process include the following: • the inability to successfully combine our incumbent business and Level 3’s business in a manner that permits us to achieve the cost savings and operating synergies anticipated to result from the acquisition, which would result in the anticipated benefits of the acquisition not being realized in the time frame currently anticipated or at all; • lost sales and customers as a result of certain customers of either of the two companies deciding to terminate or reduce their business with the combined company; • the complexities associated with managing the combined businesses out of several different locations and integrating personnel from the two companies, while at the same time attempting to provide consistent, high quality products and services under a unified culture; • the additional complexities of combining two companies with different histories, regulatory restrictions, operating structures and markets; • the failure to retain key employees of either of the two companies; • unanticipated impediments in integrating departments, systems (including accounting systems), technologies, books and records, procedures and policies, and in maintaining uniform standards and controls, including internal control over financial reporting; • potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the acquisition; and • performance shortfalls as a result of the diversion of management’s attention caused by completing the acquisition and integrating the companies’ operations.
Our significant levels of debt can adversely affect us in several other respects, including: • limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, refinancings or other general corporate purposes, particularly if, as discussed further in the risk factor disclosure below, (i) the ratings assigned to our debt securities by nationally recognized credit rating organizations are revised downward or (ii) we seek capital during periods of turbulent or unsettled market conditions; • requiring us to dedicate a substantial portion of our cash flow from operations to the payment of interest and principal on our debt, thereby reducing the funds available to us for other purposes, including acquisitions, capital expenditures, strategic initiatives, dividends, stock repurchases, marketing and other potential growth initiatives; • hindering our ability to capitalize on business opportunities and to plan for or react to changing market, industry, competitive or economic conditions; • increasing our future borrowing costs; • increasing the risk that third parties will be unwilling or unable to engage in hedging or other financial or commercial arrangements with us; • making us more vulnerable to economic or industry downturns, including interest rate increases; • placing us at a competitive disadvantage compared to less leveraged competitors; • increasing the risk that we will need to sell securities or assets, possibly on unfavorable terms, or take other unfavorable actions to meet payment obligations; or • increasing the risk that we may not meet the financial covenants contained in our debt agreements or timely make all required debt payments, either of which could result in the acceleration of some or all of our outstanding indebtedness.
We have a significant amount of indebtedness that we intend to refinance over the next several years, principally through the issuance of debt by CenturyLink, Inc., Qwest Corporation or Level 3 Financing, Inc. We may also need to obtain additional financing under a variety of other circumstances, including if: • revenues and cash provided by operations decline; • economic conditions weaken, competitive pressures increase or regulatory requirements change; • we engage in additional acquisitions or undertake substantial capital projects or other initiatives that increase our cash requirements; • we are required to make pension or other benefits payments earlier or in greater amounts than currently anticipated; • our payments of federal income taxes increase faster or in greater amounts than currently anticipated; or • we become subject to significant judgments or settlements, including in connection with one or more of the matters discussed in Note 16-Commitments and Contingencies to our consolidated financial statements included elsewhere in this report.
Decisions on whether, when and in which amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of our Board of Directors, which reserves the right to change or terminate our dividend practices at any time and for any reason without prior notice, including without limitation any of the following: • our supply of cash or other liquid assets is anticipated to remain under pressure for the various reasons described in this report; • our cash requirements or plans might change for a wide variety of reasons, including changes in our financial position, capital allocation plans (including a desire to retain or accumulate cash), capital spending plans, stock purchase plans, acquisition strategies, strategic initiatives, debt payment plans (including a desire to maintain or improve credit ratings on our debt securities), pension funding or other benefits payments; • our ability to service and refinance our current and future indebtedness and our ability to borrow or raise additional capital to satisfy our capital needs; • the amount of dividends that we may distribute to our shareholders is subject to restrictions under Louisiana law and restrictions imposed by our existing or future credit facilities, debt securities, outstanding preferred stock securities, leases and other agreements, including restricted payment and leverage covenants; and • the amount of cash that our subsidiaries may make available to us, whether by dividends, loans or other payments, may be subject to the legal, regulatory and contractual restrictions described in the immediately preceding risk factor.
Our costs of maintaining our pension and healthcare plans, and the future funding requirements for these plans, are affected by several factors, most of which are outside our control, including: • decreases in investment returns on funds held by our pension and other benefit plan trusts; • changes in prevailing interest rates and discount rates or other factors used to calculate the funding status of our pension and other post-retirement plans; • increases in healthcare costs generally or claims submitted under our healthcare plans specifically; • increasing longevity of our employees and retirees; • the impact of the continuing implementation, modification or potential repeal of current federal healthcare legislation and regulations promulgated thereunder; • increases in the number of retirees who elect to receive lump sum benefit payments; • increases in insurance premiums we are required to pay to the Pension Benefit Guaranty Corporation, an independent agency of the United States government that must cover its own underfunded status by collecting premiums from a declining population of pension plans that are qualified under the U.S. tax code; • changes in plan benefits; and • changes in funding laws or regulations.
Operating Revenues We categorize our products, services and revenues among the following five categories: • IP and data services, which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services and Vyvx broadcast services) and other ancillary services; • Transport and infrastructure, which include broadband, private line (including business data services), data center facilities and services, including cloud, hosting and application management solutions, wavelength, equipment sales and professional services, network security services and other ancillary services; • Voice and collaboration, which includes primarily local and long-distance voice, including wholesale voice, and other ancillary service; • IT and managed services, which include information technology services and managed services, which may be purchased in conjunction with our other network services; and • Regulatory revenues, which consist of Universal Service Fund ("USF") and Connect America Fund ("CAF") support payments and other operating revenues.
This pro forma information reflects certain adjustments to previously-reported operating results, consisting of primarily: • decreased operating revenues and expenses due to the elimination of deferred revenues associated with installation activities that were preliminarily assigned no value at the acquisition date (excluding certain deferred revenue associated with certain long-term prepaid customer capacity arrangements, which have been included at its current carrying value) and the elimination of transactions among CenturyLink and Level 3 that are now subject to intercompany elimination; • increased amortization expense related to identifiable intangible assets, net of decreased depreciation expense to reflect the preliminary fair value of property, plant and equipment; • increased interest expense resulting from (i) interest on the new debt to finance the combination and amortization of the related debt discount and debt issuance costs, (ii) the elimination of Level 3’s historical amortization of debt discount and debt issuance costs and (iii) a reduction in interest expense due to the accretion of an adjustment to reflect the increased preliminary fair value of the long-term debt of Level 3 recognized on the acquisition date; and • the related income tax effects.
Product and Service Categories We categorize our products, services and revenues among the following five categories: • IP and data services, which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services and Vyvx broadcast services) and other ancillary services; • Transport and infrastructure, which include broadband, private line (including business data services), data center facilities and services, including cloud, hosting and application management solutions, wavelength, equipment sales and professional services, network security services and other ancillary services; • Voice and collaboration, which includes primarily local and long-distance voice, including wholesale voice, and other ancillary service; • IT and managed services, which include information technology services and managed services, which may be purchased in conjunction with our other network services; • Regulatory revenues, which consists of Universal Service Fund ("USF") and Connect America Fund ("CAF") support payments, USF surcharges and other operating revenues.
Some of our current and potential competitors (i) offer products or services that are substitutes for our legacy wireline voice services, including wireless voice and non-voice communication services, (ii) offer a more comprehensive range of communications products and services, (iii) offer products or services with features that we cannot readily match in some or all of our markets, (iv) offer shorter installation intervals, allowing customers to begin receiving services sooner after ordering, (v) have greater marketing, engineering, research, development, technical, financial and other resources, (vi) have larger or more diverse networks with greater transmission capacity, (vii) conduct operations or raise capital at a lower cost than us, (viii) are subject to less regulation, which we believe enables such competitors to operate more flexibly than us with respect to certain offerings, (ix) offer services nationally or internationally to a larger geographic area or larger base of customers, (x) have substantially stronger brand names, which may provide them with greater pricing power than ours, or (xi) have larger operations than ours, which may enable them to compete more successfully in recruiting top talent, entering into operational or strategic partnerships or acquiring companies.
Disruptions, security breaches and other significant failures of the above-described networks and systems could: • disrupt the proper functioning of these networks and systems, which could in turn disrupt (i) our operational or administrative functions or (ii) the operations of certain of our customers who rely upon us to provide services critical to their operations; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, classified or otherwise valuable information of ours, our customers or our customers’ end users, including trade secrets, which others could use for competitive, disruptive, destructive or otherwise harmful purposes and outcomes; • require significant management attention or financial resources to remedy the resulting damages or to change our systems, including expenses to repair systems, add new personnel or develop additional protective systems; • require us to notify customers, regulatory agencies or the public of data breaches; • require us to provide credits for future service under certain service level commitments we have provided contractually to our customers or to offer expensive incentives to retain customers; • subject us to claims for damages, fines, penalties, termination or other remedies under our customer contracts or service standards set by state regulatory commissions, which in certain cases could exceed our insurance coverage; or • result in a loss of business, damage our reputation among our customers and the public generally, subject us to additional regulatory scrutiny or expose us to prolonged litigation.
In addition to these international regulatory risks, some of the other risks inherent in conducting business internationally include: • tax, licensing, political or other business restrictions or requirements; • uncertainty concerning import and export restrictions, including the risk of fines or penalties assessed for violations; • longer payment cycles and problems collecting accounts receivable; • domestic and foreign regulation of overseas operations, including regulation under the Foreign Corrupt Practices Act, or FCPA, as well as other anti-corruption laws; • economic, social and political instability, with the attendant risks of terrorism, kidnapping, extortion, civic unrest and potential seizure or nationalization of assets; • currency and exchange controls, repatriation restrictions and fluctuations in currency exchange rates; • challenges in securing and maintaining the necessary physical and telecommunications infrastructure; • the inability in certain jurisdictions to enforce contract rights either due to underdeveloped legal systems or government actions that result in a deprivation of contract rights; • the inability in certain jurisdictions to adequately protect intellectual property rights; • laws, policies or practices that restrict with whom we can contract or otherwise limit the scope of operations that can legally or practicably be conducted within any particular country; • potential submission of disputes to the jurisdiction of a foreign court or arbitration panel; • reliance on third parties, including those with which we have limited experience; • limitations in the availability, amount or terms of insurance coverage; • the imposition of unanticipated or increased taxes, increased communications or privacy regulations or other forms of public or governmental regulation that increase our operating expenses; and • challenges in staffing and managing foreign operations.
If the Level 3 acquisition is not completed, our ongoing businesses may be adversely affected and we will be subject to several risks, including the following: • the possibility that we could be required to pay Level 3 a substantial termination fee and, in some cases, certain expenses of Level 3 if the acquisition is terminated under certain qualifying circumstances; • the incurrence of costs and expenses relating to the proposed acquisition, such as financing, legal, accounting, financial advisor, filing, printing and mailing fees and expenses, including the potential expense reimbursement obligations described above; • the possibility of a change in the trading price of our common stock to the extent current trading prices reflect a market assumption that the acquisition will be completed; • the possibility that we could suffer potential negative reactions from our employees, customers or vendors; and • the possibility that we could suffer adverse consequences associated with our management's focus on the acquisition instead of on pursuing other opportunities that could have been beneficial to us, without realizing any of the benefits contemplated by the acquisition.
Potential difficulties the combined company may encounter in the integration process include the following: • the inability to successfully combine our business and Level 3’s business in a manner that permits the combined company to achieve the cost savings and operating synergies anticipated to result from the acquisition, which would result in the anticipated benefits of the acquisition not being realized in the time frame currently anticipated or at all; • lost sales and customers as a result of certain customers of either of the two companies deciding to terminate or reduce their business with the combined company; • the complexities associated with managing the combined businesses out of several different locations and integrating personnel from the two companies, while at the same time attempting to (i) provide consistent, high quality products and services under a unified culture and (ii) focus on other on-going transactions, including the pending divestiture of our data centers and colocation business and related transactions; • the additional complexities of combining two companies with different histories, regulatory restrictions, operating structures and markets; • the failure to retain key employees of either of the two companies; • potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the acquisition; and • performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the acquisition and integrating the companies’ operations.
Our significant levels of debt can adversely affect us in several other respects, including: • limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, refinancings or other general corporate purposes, particularly if, as discussed further in the risk factor disclosure below, (i) the ratings assigned to our debt securities by nationally recognized credit rating organizations are revised downward or (ii) we seek capital during periods of turbulent or unsettled market conditions; • requiring us to dedicate a substantial portion of our cash flow from operations to the payment of interest and principal on our debt, thereby reducing the funds available to us for other purposes, including acquisitions, capital expenditures, strategic initiatives, dividends, stock repurchases, marketing and other potential growth initiatives; • hindering our ability to capitalize on business opportunities and to plan for or react to changing market, industry, competitive or economic conditions; • increasing our future borrowing costs; • increasing the risk that third parties will be unwilling or unable to engage in hedging or other financial or commercial arrangements with us; • making us more vulnerable to economic or industry downturns, including interest rate increases; • placing us at a competitive disadvantage compared to less leveraged competitors; • increasing the risk that we will need to sell securities or assets, possibly on unfavorable terms, or take other unfavorable actions to meet payment obligations; or • increasing the risk that we may not meet the financial covenants contained in our debt agreements or timely make all required debt payments, either of which could result in the acceleration of some or all of our outstanding indebtedness.
Decisions on whether, when and in which amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of our Board of Directors, which reserves the right to change or terminate our dividend practices at any time and for any reason without prior notice, including without limitation any of the following: • our supply of cash or other liquid assets is anticipated to remain under pressure due to declining cash flows from operating activities, increased payments of post-retirement benefits and our projected payment of higher cash taxes prior to the pending Level 3 acquisition and might be further negatively impacted by any of the potential adverse events or developments described in this annual report, including (i) changes in competition, regulation, federal and state support, technology, taxes, capital markets, operating costs or litigation costs, or (ii) the impact of any liquidity shortfalls caused by the below-described restrictions on the ability of our subsidiaries to lawfully transfer cash to us; • our cash requirements or plans might change for a wide variety of reasons, including changes in our capital allocation plans (including a desire to retain or accumulate cash), capital spending plans, stock purchase plans, acquisition strategies, strategic initiatives, debt payment plans (including a desire to maintain or improve credit ratings on our debt securities), pension funding payments, or financial position; • our ability to service and refinance our current and future indebtedness and our ability to borrow or raise additional capital to satisfy our capital needs; • the amount of dividends that we may distribute to our shareholders is subject to restrictions under Louisiana law and restrictions imposed by our existing or future credit facilities, debt securities, outstanding preferred stock securities, leases and other agreements, including restricted payment and leverage covenants; and • the amount of cash that our subsidiaries may make available to us, whether by dividends, loans or other payments, may be subject to the legal, regulatory and contractual restrictions described in the immediately preceding risk factor.
Our costs of maintaining our pension and healthcare plans, and the future funding requirements for these plans, are affected by several factors, most of which are outside our control, including: • decreases in investment returns on funds held by our pension and other benefit plan trusts; • changes in prevailing interest rates and discount rates or other factors used to calculate the funding status of our pension and other post-retirement plans; • increases in healthcare costs generally or claims submitted under our healthcare plans specifically; • increasing longevity of our employees and retirees; • the impact of the continuing implementation, modification or potential repeal of current federal healthcare legislation and regulations promulgated thereunder; • increases in the number of retirees who elect to receive lump sum benefit payments; • increases in insurance premiums we are required to pay to the Pension Benefit Guaranty Corporation, an independent agency of the United States government that must cover its own underfunded status by collecting premiums from an ever shrinking population of pension plans that are qualified under the U.S. tax code; • changes in plan benefits; and • changes in funding laws or regulations.
We currently categorize our products, services and revenues among the following four categories: • Strategic services, which include primarily broadband, MPLS, Ethernet, colocation, hosting (including cloud hosting and managed hosting), video (including our facilities-based video services, which we offer in 16 markets), VoIP, information technology and other ancillary services; • Legacy services, which include primarily local and long-distance voice services, including the sale of UNEs, private line (including special access), Integrated Services Digital Network ("ISDN") (which use regular telephone lines to support voice, video and data applications), switched access and other ancillary services; • Data integration, which includes the sale of telecommunications equipment located on customers' premises and related products and professional services, such as network management, installation and maintenance of data equipment and the building of proprietary fiber-optic broadband networks for our governmental and business customers; and • Other operating revenues, which consists primarily of Connect America Fund ("CAF") support payments, Universal Service Fund ("USF") support payments and USF surcharges.
The following tables summarize the results of operations from our business segment: ______________________________________________________________________ (1) Includes MPLS and Ethernet revenue (2) Includes colocation, hosting (including cloud hosting and managed hosting) and hosting area network revenue (3) Includes primarily broadband, VoIP, video and IT services revenue (4) Includes local and long-distance voice revenue (5) Includes private line (including special access) revenue (6) Includes UNEs, public access, switched access and other ancillary revenue ______________________________________________________________________ (1) Includes MPLS and Ethernet revenue (2) Includes colocation, hosting (including cloud hosting and managed hosting) and hosting area network revenue (3) Includes primarily broadband, VoIP, video and IT services revenue (4) Includes local and long-distance voice revenue (5) Includes private line (including special access) revenue (6) Includes UNEs, public access, switched access and other ancillary revenue Segment Revenues Business segment revenues decreased by $294 million, or 3%, for the year ended December 31, 2016 as compared to the year ended December 31, 2015.
Level 3 Financing Commitment Letter In connection with entering into our merger agreement with Level 3 (discussed further in Note 2), on October 31, 2016, we obtained a debt commitment letter, which was amended and restated on November 13, 2016, and further amended on November 15, 2016 (the “Debt Commitment Letter”), from Bank of America, N.A., Morgan Stanley Senior Funding, Inc., The Bank of Tokyo-Mitsubishi UFJ, Ltd., Barclays Bank PLC, JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, Royal Bank of Canada, Goldman Sachs Bank USA, SunTrust Bank, Mizuho Bank, Ltd., Regions Bank, Fifth Third Bank, Credit Suisse AG, Cayman Islands Branch, and U.S. Bank, National Association (collectively the “Commitment Parties”), pursuant to which the Commitment Parties or certain of their affiliates agreed to provide a $2.0 billion senior secured revolving credit facility, a $1.5 billion senior secured term loan “A” credit facility, a $4.5 billion senior secured term loan “B” credit facility and a $2.225 billion senior secured bridge loan facility (collectively, the “Commitment Facilities”), together with certain backstop commitments designed to provide additional acquisition-related financing in certain limited instances.
We categorize our products, services and revenues among the following four categories: • Strategic services, which include primarily broadband, MPLS, Ethernet, colocation, hosting (including cloud hosting and managed hosting), video (including our facilities-based video services, which we offer in 16 markets), VoIP, information technology and other ancillary services; • Legacy services, which include primarily local and long-distance voice, including the sale of UNEs, private line (including special access), Integrated Services Digital Network ("ISDN") (which use regular telephone lines to support voice, video and data applications), switched access and other ancillary services; • Data integration, which includes the sale of telecommunications equipment located on customers' premises and related products and professional services, such as network management, installation and maintenance of data equipment and building of proprietary fiber-optic broadband networks for our governmental and business customers; and • Other operating revenues, which consist primarily of CAF support payments, USF support payments and USF surcharges.
Some of our current and potential competitors (i) offer products or services that are substitutes for our wireline voice services, including wireless voice and non-voice communication services, (ii) offer a more comprehensive range of communications products and services, (iii) offer products or services with features that we cannot readily match in some or all of our markets, including faster average broadband transmission speeds and greater content, (iv) have market presence, engineering and technical capabilities, and financial and other resources greater than ours, (v) have larger or more diverse networks with greater transmission capacity or more or larger data centers, (vi) conduct operations or raise capital at a lower cost than us, (vii) are subject to less regulation, which we believe enables such competitors to operate more flexibly than us with respect to certain offerings, (viii) offer services nationally or internationally to a larger geographic area or larger base of customers, (ix) have substantially stronger brand names, which may provide them with greater pricing power than ours, or (x) have larger operations than ours, which may enable them to offer higher compensation packages in connection with recruiting and retaining top technological, managerial and operational talent.
Disruptions, security breaches and other significant failures of the above-described networks and systems could: • disrupt the proper functioning of these networks and systems, which could in turn disrupt (i) our operations or (ii) the operations of certain of our customers who rely upon us to provide services critical to their operations; • require significant management attention or financial resources to remedy the damages that result or to change our systems, including expenses to repair systems, add new personnel or develop additional protective systems; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, classified or otherwise valuable information of ours, our customers or our customers’ end users, including trade secrets, which others could use for competitive, disruptive, destructive or otherwise harmful purposes and outcomes; • require us to notify customers, regulatory agencies or the public of data breaches; • require us to provide credits for future service under certain service level commitments we have provided contractually to our customers or to offer expensive incentives to retain customers; • subject us to claims for damages, fines, penalties, termination or other remedies under our customer contracts or service standards set by state regulatory commissions, which in certain cases could exceed our insurance coverage; or • result in a loss of business, damage our reputation among our customers and the public generally, subject us to additional regulatory scrutiny or expose us to prolonged litigation.
In addition to these international regulatory risks, some of the other risks inherent in conducting business internationally include: • tax, licensing, political or other business restrictions or requirements; • uncertainty concerning import and export restrictions, including the risk of fines or penalties assessed for violations; • longer payment cycles and problems collecting accounts receivable; • domestic and foreign regulation of overseas operations, including regulation under the Foreign Corrupt Practices Act, or FCPA, as well as other anti-corruption laws; • economic, social and political instability, with the attendant risks of terrorism, kidnapping, extortion, civic unrest and potential seizure or nationalization of assets; • currency and repatriation restrictions and fluctuations in currency exchange rates; • challenges in securing and maintaining the necessary physical and telecommunications infrastructure; • the inability in certain jurisdictions to enforce contract rights either due to underdeveloped legal systems or government actions that result in a deprivation of contract rights; • the inability in certain jurisdictions to adequately protect intellectual property rights; • laws, policies or practices that restrict with whom we can contract or otherwise limit the scope of operations that can legally or practicably be conducted within any particular country; • potential submission of disputes to the jurisdiction of a foreign court or arbitration panel; • reliance on third parties, including those with which we have limited experience; • limitations in the availability, amount or terms of insurance coverage; • the imposition of unanticipated or increased taxes, increased communications or privacy regulations or other forms of public or governmental regulation that increase our operating expenses; and • challenges in staffing and managing foreign operations.
Our significant levels of debt can adversely affect us in several other respects, including: • limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, refinancings or other general corporate purposes, particularly if, as discussed further in the risk factor disclosure below, (i) the ratings assigned to our debt securities by nationally recognized credit rating organizations are revised downward or (ii) we seek capital during periods of turbulent or unsettled market conditions; • requiring us to dedicate a substantial portion of our cash flow from operations to the payment of interest and principal on our debt, thereby reducing the funds available to us for other purposes, including acquisitions, capital expenditures, strategic initiatives, dividends, stock repurchases and marketing; • hindering our ability to capitalize on business opportunities and to plan for or react to changing market, industry, competitive or economic conditions; • increasing our future borrowing costs; • increasing the risk that third parties will be unwilling or unable to engage in hedging or other financial or commercial arrangements with us; • making us more vulnerable to economic or industry downturns, including interest rate increases; • placing us at a competitive disadvantage compared to less leveraged competitors; • increasing the risk that we will need to sell securities or assets, possibly on unfavorable terms, or take other unfavorable actions to meet payment obligations; or • increasing the risk that we may not meet the financial covenants contained in our debt agreements or timely make all required debt payments.
Decisions on whether, when and in which amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of our Board of Directors, which reserves the right to change or terminate our dividend practices at any time and for any reason without prior notice, including without limitation any of the following: • our supply of cash or other liquid assets is anticipated to decrease due to our projected payment of higher cash taxes and might decrease further for any of the reasons or potential adverse events or developments described in this Annual Report, including (i) changes in competition, regulation, federal and state support, technology, taxes, capital markets, operating costs or litigation costs, or (ii) the impact of any liquidity shortfalls caused by the below-described restrictions on the ability of our subsidiaries to lawfully transfer cash to us; • our cash requirements or plans might change for a wide variety of reasons, including changes in our capital allocation plans (including a desire to retain or accumulate cash), capital spending plans, stock purchase plans, acquisition strategies, strategic initiatives, debt payment plans (including a desire to maintain or improve credit ratings on our debt securities), pension funding payments, or financial position; • our ability to service and refinance our current and future indebtedness and our ability to borrow or raise additional capital to satisfy our capital needs; • the amount of dividends that we may distribute to our shareholders is subject to restrictions under Louisiana law and restrictions imposed by our existing or future credit facilities, debt securities, outstanding preferred stock securities, leases and other agreements, including restricted payment and leverage covenants; and • the amount of cash that our subsidiaries may make available to us, whether by dividends, loans or other payments, may be subject to the legal, regulatory and contractual restrictions described in the immediately preceding risk factor.
Our costs of maintaining our pension and healthcare plans, and the future funding requirements for these plans, are affected by several factors, most of which are outside our control, including: • decreases in investment returns on funds held by our pension and other benefit plan trusts; • changes in prevailing interest rates and discount rates used to calculate the funding status of our pension and other post-retirement plans; • increases in healthcare costs generally or claims submitted under our healthcare plans specifically; • increasing longevity of our employees and retirees; • the continuing implementation of the Patient Protection and Affordable Care Act, and the related reconciliation act and regulations promulgated thereunder; • increases in the number of retirees who elect to receive lump sum benefit payments; • increases in insurance premiums we are required to pay to the Pension Benefit Guaranty Corporation, an independent agency of the United States government that must cover its own underfunded status by collecting premiums from an ever shrinking population of pension plans that are qualified under the U.S. tax code; • changes in plan benefits; and • changes in funding laws or regulations.
Operating Revenues We currently categorize our products, services and revenues among the following four categories: • Strategic services, which include primarily high-speed Internet, MPLS (which is a data networking technology that can deliver the quality of service required to support real-time voice and video), private line (including special access), Ethernet, colocation, hosting (including cloud hosting and managed hosting), video (including our facilities-based video services, which we now offer in 16 markets), VoIP and Verizon Wireless services; • Legacy services, which include primarily local and long-distance voice services, including the sale of UNEs, switched access, and Integrated Services Digital Network ("ISDN") services (which use regular telephone lines to support voice, video and data applications); • Data integration, which includes the sale of telecommunications equipment located on customers' premises and related professional services, such as network management, installation and maintenance of data equipment and building of proprietary fiber-optic broadband networks for our business customers; and • Other operating revenues, which consists primarily of Connect America Fund ("CAF") support payments, Universal Service Fund ("USF") support payments and USF surcharges.
Product and Service Categories We categorize our products, services and revenues among the following four categories: • Strategic services, which include primarily high-speed Internet, MPLS (which is a data networking technology that can deliver the quality of service required to support real-time voice and video), private line (including special access), Ethernet, colocation, hosting (including cloud hosting and managed hosting), video (including our facilities-based video services, which we now offer in 16 markets), VoIP and Verizon Wireless and other ancillary services; • Legacy services, which include primarily local and long-distance voice services, including the sale of UNEs, switched access and Integrated Services Digital Network ("ISDN") services (which use regular telephone lines to support voice, video and data applications); • Data integration, which includes the sale of telecommunications equipment located on customers' premises and related professional services, such as network management, installation and maintenance of data equipment and building of proprietary fiber-optic broadband networks for our governmental and business customers; and • Other operating revenues, which consist primarily of CAF support payments, USF support payments and USF surcharges.
Our operating revenues for our products and services consisted of the following categories for the years ended December 31, 2015, 2014 and 2013: ______________________________________________________________________ (1) Includes MPLS and Ethernet revenue (2) Includes private line and high-speed Internet revenue (3) Includes colocation, hosting (including cloud hosting and managed hosting) and hosting area network revenue (4) Includes primarily VoIP, video and IT services revenue (5) Includes high-speed Internet and related services revenue (6) Includes video and Verizon wireless revenue (7) Includes local and long-distance voice revenue (8) Includes UNEs, public access and other ancillary revenue (9) Includes switched access and other ancillary revenue (10) Includes CAF Phase 1, CAF Phase 2 and federal and state USF support revenue (11) Includes USF surcharges During the first quarter of 2015, we determined that certain products and services associated with our acquisition of Savvis are more closely aligned to legacy services than to strategic services.
Network disruptions, security breaches and other significant failures of the above-described systems could: • disrupt the proper functioning of these networks and systems and therefore our operations or those of certain of our customers; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours, our customers or our customers’ end users, including trade secrets, which others could use for competitive, disruptive, destructive or otherwise harmful purposes and outcomes; • require significant management attention or financial resources to remedy the damages that result or to change our systems, including expenses to repair systems, add new personnel or develop additional protective systems; • require us to notify customers, regulatory agencies or the public of data breaches; • require us to offer expensive incentives to retain existing customers or subject us to claims for contract breach, damages, credits, fines, penalties, termination or other remedies, particularly with respect to service standards set by state regulatory commissions; or • result in a loss of business, damage our reputation among our customers and the public generally, subject us to additional regulatory scrutiny or expose us to litigation.
In addition to these international regulatory risks, some of the other risks inherent in conducting business internationally include: • tax, licensing, political or other business restrictions or requirements; • import and export restrictions, including the risk of fines or penalties assessed for violations; • longer payment cycles and problems collecting accounts receivable; • additional U.S. and other regulation of non-domestic operations, including regulation under the Foreign Corrupt Practices Act, or FCPA, as well as other anti-corruption laws; • economic, social and political instability, with the attendant risks of terrorism, kidnapping, extortion, civic unrest and potential seizure or nationalization of assets; • currency restrictions and exchange rate fluctuations; • the ability to secure and maintain the necessary physical and telecommunications infrastructure; • the inability in certain jurisdictions to enforce contract rights either due to underdeveloped legal systems or government actions that result in a deprivation of contract rights; • the inability in certain jurisdictions to adequately protect intellectual property rights; • laws, policies or practices that restrict with whom we can contract or otherwise limit the scope of operations that can legally or practicably be conducted within any particular country; • potential submission of disputes to the jurisdiction of a foreign court or arbitration panel; • limitations in the availability, amount or terms of insurance coverage; • the imposition of unanticipated or increased taxes, increased communications or privacy regulations or other forms of public or governmental regulation that increase our operating expenses; and • challenges in staffing and managing foreign operations.
We may encounter difficulties in the integration process, including the following • the inability to successfully combine our businesses in the manner contemplated, either due to technological or staffing challenges or otherwise, any of which could increase our acquisition integration costs or result in the anticipated benefits of the acquisitions not being realized partly or wholly in the time frame anticipated or at all; • the inability to successfully integrate the separate product development and service delivery processes of each of the companies, including delays or limitations in connection with offering existing or new products or services arising out of the multiplicity of different legacy systems, networks and processes used by each of the companies; • the complexities associated with managing the combined businesses out of several different locations and integrating personnel from multiple companies, while at the same time attempting to provide consistent, high-quality products and services under a unified culture; • the difficulties of producing combined financial information concerning a larger, more complex organization using dispersed personnel with different past practices and disparate billing systems, including the attendant risk of errors; • the complexities of combining companies with different histories, regulatory restrictions, cost structures, products, sales forces, markets, marketing strategies, and customer bases; • the failure to retain key employees, some of whom could be critical to integrating, operating or expanding the companies; • potential unknown liabilities and unforeseen increased expenses or regulatory conditions associated with the acquisitions; and • performance shortfalls at one or all of the companies as a result of the diversion of management’s attention caused by integrating the companies’ operations.