Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2020 | Jan. 31, 2021 | Jun. 30, 2020 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2020 | ||
Entity File Number | 000-51829 | ||
Entity Registrant Name | COGENT COMMUNICATIONS HOLDINGS, INC. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 46-5706863 | ||
Entity Address, Address Line One | 2450 N Street N.W. | ||
Entity Address, Country | US | ||
Entity Address, City or Town | Washington, D.C | ||
Entity Address, Postal Zip Code | 20037 | ||
City Area Code | (202) | ||
Local Phone Number | 295-4200 | ||
Title of 12(b) Security | Common Stock, par value $0.001 per share | ||
Trading Symbol | CCOI | ||
Security Exchange Name | NASDAQ | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | false | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 47,224,589 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Entity Central Index Key | 0001158324 | ||
Amendment Flag | false | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 3.3 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 371,301 | $ 399,422 |
Accounts receivable, net of allowance for credit losses of $1,921 and $1,771, respectively | 44,185 | 40,484 |
Prepaid expenses and other current assets | 40,851 | 35,822 |
Total current assets | 456,337 | 475,728 |
Property and equipment | 1,515,867 | 1,366,782 |
Accumulated depreciation and amortization | (1,085,532) | (997,853) |
Total property and equipment, net | 430,335 | 368,929 |
Right-of-use leased assets | 99,666 | 73,460 |
Deposits and other assets | 14,139 | 14,007 |
Total assets | 1,000,477 | 932,124 |
Current liabilities: | ||
Accounts payable | 9,775 | 11,075 |
Accrued and other current liabilities | 51,029 | 51,301 |
Current maturities, operating lease liabilities | 11,151 | 10,101 |
Installment payment agreement, current portion, net of discount of $136 and $350, respectively | 6,786 | 9,063 |
Finance lease obligations, current maturities | 15,702 | 8,154 |
Total current liabilities | 94,443 | 89,694 |
Operating lease liabilities, net of current maturities | 111,318 | 86,690 |
Finance lease obligations, net of current maturities | 203,438 | 161,635 |
Other long term liabilities | 14,792 | 15,327 |
Total liabilities | 1,293,643 | 1,135,803 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, $0.001 par value; 75,000,000 shares authorized; 47,214,077 and 46,840,434 shares issued and outstanding, respectively | 47 | 47 |
Additional paid-in capital | 515,867 | 493,178 |
Accumulated other comprehensive income (loss) | (1,306) | (12,326) |
Accumulated deficit | (807,774) | (684,578) |
Total stockholders' deficit | (293,166) | (203,679) |
Total liabilities and stockholders' equity | 1,000,477 | 932,124 |
Senior secured 2022 notes | ||
Current liabilities: | ||
Senior secured 2022 notes, net of unamortized debt costs of $1,052 and $1,897 respectively and including premium of $544 and $985, respectively | 444,492 | 444,088 |
Senior unsecured 2024 notes | ||
Current liabilities: | ||
Senior unsecured notes | $ 425,160 | 150,001 |
Senior unsecured 2021 notes | ||
Current liabilities: | ||
Senior unsecured notes | $ 188,368 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Assets | ||
Accounts receivable, allowance for credit losses (in dollars) | $ 1,921 | $ 1,771 |
Liabilities and stockholders' equity | ||
Installment payment agreement, current portion, net of discounts | $ 136 | $ 350 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 47,214,077 | 46,840,434 |
Common stock, shares outstanding | 47,214,077 | 46,840,434 |
Senior secured 2022 notes | ||
Liabilities and stockholders' equity | ||
Unamortized debt costs | $ 1,052 | $ 1,897 |
Unamortized debt premium | 544 | 985 |
Senior unsecured 2024 notes | ||
Liabilities and stockholders' equity | ||
Unamortized debt costs | 2,961 | 1,410 |
Unamortized debt premium | $ 1,142 | 0 |
Senior unsecured 2021 notes | ||
Liabilities and stockholders' equity | ||
Unamortized debt costs | $ 857 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Service revenue | $ 568,103 | $ 546,159 | $ 520,193 |
Operating expenses: | |||
Network operations (including $1,219, $994 and $895 of equity-based compensation expense, respectively), exclusive of amounts shown separately | 219,157 | 219,801 | 219,526 |
Selling, general, and administrative (including $22,306, $17,466 and $16,813 of equity-based compensation expense, respectively) | 158,476 | 146,913 | 133,858 |
Depreciation and amortization | 83,477 | 80,247 | 81,233 |
Total operating expenses | 461,110 | 446,961 | 434,617 |
Gains on equipment transactions | 352 | 1,059 | 982 |
Losses on lease terminations | (423) | ||
Operating income | 106,922 | 100,257 | 86,558 |
Interest expense | (62,486) | (57,453) | (51,056) |
Realized foreign exchange gain on issuance on 2024 Euro Notes | 2,533 | ||
Unrealized foreign exchange (loss) gain on 2024 Euro Notes | (36,997) | 2,271 | |
Loss on debt extinguishment and redemption- 2021 Notes | (638) | ||
Interest income and other | 978 | 7,599 | 5,880 |
Income before income taxes | 10,312 | 52,674 | 41,382 |
Income tax expense | (4,096) | (15,154) | (12,715) |
Net income | 6,216 | 37,520 | 28,667 |
Comprehensive income: | |||
Net income | 6,216 | 37,520 | 28,667 |
Foreign currency translation adjustment | 11,020 | (1,398) | (6,328) |
Comprehensive income | $ 17,236 | $ 36,122 | $ 22,339 |
Basic net income per common share (in dollars per share) | $ 0.14 | $ 0.82 | $ 0.63 |
Diluted net income per common share (in dollars per share) | 0.13 | 0.81 | 0.63 |
Dividends declared per common share (in dollars per share) | $ 2.78 | $ 2.44 | $ 2.12 |
Weighted-average common shares - basic (in shares) | 45,947,772 | 45,542,315 | 45,280,161 |
Weighted-average common shares - diluted (in shares) | 46,668,198 | 46,080,395 | 45,780,954 |
CONSOLIDATED STATEMENTS OF CO_2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Equity-based compensation expense | $ 23,525 | $ 18,460 | $ 17,708 |
Network operations | |||
Equity-based compensation expense | 1,219 | 994 | 895 |
Selling, general and administrative | |||
Equity-based compensation expense | $ 22,306 | $ 17,466 | $ 16,813 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total |
Balance at Dec. 31, 2017 | $ 46 | $ 456,696 | $ (4,600) | $ (554,686) | $ (102,544) |
Balance (in shares) at Dec. 31, 2017 | 45,960,799 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Cumulative effect adjustment from adoption of ASC 606 | 14,455 | 14,455 | |||
Forfeitures of shares granted to employees (in shares) | (24,973) | ||||
Equity-based compensation | 19,431 | 19,431 | |||
Foreign currency translation | (6,328) | (6,328) | |||
Issuances of common stock (in shares) | 496,228 | ||||
Exercises of options | 1,768 | 1,768 | |||
Exercised (in shares) | 52,440 | ||||
Common stock purchases and retirement | (6,564) | (6,564) | |||
Common stock purchases and retirement (in shares) | (147,995) | ||||
Dividends paid | (97,887) | (97,887) | |||
Net income | 28,667 | 28,667 | |||
Balance at Dec. 31, 2018 | $ 46 | 471,331 | (10,928) | (609,451) | (149,002) |
Balance (in shares) at Dec. 31, 2018 | 46,336,499 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Forfeitures of shares granted to employees (in shares) | (12,632) | ||||
Equity-based compensation | 20,210 | 20,210 | |||
Foreign currency translation | (1,398) | (1,398) | |||
Issuances of common stock | $ 1 | 1 | |||
Issuances of common stock (in shares) | 473,550 | ||||
Exercises of options | 1,637 | 1,637 | |||
Exercised (in shares) | 43,017 | ||||
Common stock purchases and retirement | (112,647) | (112,647) | |||
Net income | 37,520 | 37,520 | |||
Balance at Dec. 31, 2019 | $ 47 | 493,178 | (12,326) | (684,578) | $ (203,679) |
Balance (in shares) at Dec. 31, 2019 | 46,840,434 | 46,840,434 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Forfeitures of shares granted to employees (in shares) | (53,428) | ||||
Equity-based compensation | 25,802 | $ 25,802 | |||
Foreign currency translation | 11,020 | 11,020 | |||
Issuances of common stock | $ 0 | ||||
Issuances of common stock (in shares) | 476,030 | ||||
Exercises of options | 1,382 | 1,382 | |||
Exercised (in shares) | 30,097 | ||||
Common stock purchases and retirement | (4,495) | (4,495) | |||
Common stock purchases and retirement (in shares) | (79,056) | ||||
Dividends paid | (129,412) | (129,412) | |||
Net income | 6,216 | 6,216 | |||
Balance at Dec. 31, 2020 | $ 47 | $ 515,867 | $ (1,306) | $ (807,774) | $ (293,166) |
Balance (in shares) at Dec. 31, 2020 | 47,214,077 | 47,214,077 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Cash flows from operating activities: | |||
Net income | $ 6,216 | $ 37,520 | $ 28,667 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 83,477 | 80,247 | 81,233 |
Amortization of debt discount and premium | 1,894 | 1,807 | 1,533 |
Equity-based compensation expense (net of amounts capitalized) | 23,525 | 18,460 | 17,708 |
Unrealized foreign currency exchange loss (gain) on 2024 Euro notes | 36,997 | (2,271) | |
Realized foreign exchange gain on issuance on 2024 Euro Notes | (2,533) | ||
Loss on extinguishment of 2021 notes | 638 | ||
Gains - equipment transactions and other, net | (546) | (358) | (1,109) |
Deferred income taxes | 282 | 12,158 | 11,117 |
Changes in operating assets and liabilities: | |||
Accounts receivable | (2,702) | 1,067 | (3,204) |
Prepaid expenses and other current assets | (2,771) | (3,730) | (438) |
Deposits and other assets | (873) | (1,131) | (1,490) |
Accounts payable, accrued liabilities and other long-term liabilities | (3,284) | 5,040 | (96) |
Net cash provided by operating activities | 140,320 | 148,809 | 133,921 |
Cash flows from investing activities: | |||
Purchases of property and equipment | (55,952) | (46,958) | (49,937) |
Net cash used in investing activities | (55,952) | (46,958) | (49,937) |
Cash flows from financing activities: | |||
Net proceeds from issuance of senior 2024 Euro Notes, net of debt costs of $2,137 and $1,556, respectively | 240,285 | 152,134 | |
Net proceeds from issuance of 2022 Notes, net of debt costs of $1,364 | 69,861 | ||
Redemption and extinguishment of 2021 Notes | (189,225) | ||
Dividends paid | (129,412) | (112,647) | (97,887) |
Principal payments of finance lease obligations | (23,990) | (9,097) | (10,286) |
Principal payments on installment payment agreement | (10,547) | (10,007) | (9,437) |
Purchases of common stock | (4,495) | (6,564) | |
Proceeds from exercises of common stock options | 1,382 | 1,637 | 1,768 |
Net cash (used in) provided by financing activities | (116,002) | 22,020 | (52,545) |
Effect of exchange rates changes on cash | 3,513 | (542) | (2,357) |
Net (decrease) increase in cash and cash equivalents | (28,121) | 123,329 | 29,082 |
Cash and cash equivalents, beginning of year | 399,422 | 276,093 | 247,011 |
Cash and cash equivalents, end of year | 371,301 | 399,422 | 276,093 |
Supplemental disclosures of cash flow information: | |||
Cash paid for interest | 62,917 | 56,022 | 48,918 |
Cash paid for income taxes | 3,446 | 3,409 | 2,444 |
Non-cash investing and financing activities: | |||
Finance lease obligations incurred | 71,622 | 14,307 | 20,050 |
PP&E obtained for installment payment agreement | 5,771 | 11,255 | 9,925 |
Fair value of equipment acquired in leases | 536 | 1,207 | |
Non-cash component of network equipment obtained in exchange transactions | $ 320 | $ 978 | $ 968 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Senior unsecured 2024 notes | |||
Cash flows from operating activities: | |||
Debt costs | $ 2,137 | $ 1,556 | |
Senior secured 2022 notes | |||
Cash flows from operating activities: | |||
Debt costs | $ 1,364 |
Description of the business and
Description of the business and summary of significant accounting policies: | 12 Months Ended |
Dec. 31, 2020 | |
Description of the business and summary of significant accounting policies: | |
Description of the business and summary of significant accounting policies: | 1. Description of the business and summary of significant accounting policies: Reorganization and merger On May 15, 2014, pursuant to the Agreement and Plan of Reorganization (the “Merger Agreement”) by and among Cogent Communications Group, Inc. (“Group”), a Delaware corporation, Cogent Communications Holdings, Inc., a Delaware corporation (“Holdings”) and Cogent Communications Merger Sub, Inc., a Delaware corporation, Group adopted a new holding company organizational structure whereby Group is now a wholly owned subsidiary of Holdings. Holdings is a “successor issuer” to Group pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). References to the “Company” for events that occurred prior to May 15, 2014 refer to Cogent Communications Group, Inc. and its subsidiaries and on and after May 15, 2014 the “Company” refers to Cogent Communications Holdings, Inc. and its subsidiaries. Cogent Communications, Inc. is wholly owned by Group and the vast majority of Cogent's assets, contractual arrangements, and operations are executed by Cogent Communications, Inc. Description of business The Company is a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space. The Company’s network is specifically designed and optimized to transmit packet switched data. The Company delivers its services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 47 countries across North America, Europe, Asia, South America, Australia and Africa. The Company is a Delaware corporation and is headquartered in Washington, DC. The Company offers on-net Internet access services exclusively through its own facilities, which run from its network to its customers’ premises. The Company offers its on-net services to customers located in buildings that are physically connected to its network. As a result, the Company is not dependent on local telephone companies or cable TV companies to serve its customers for its on-net Internet access and private network service. The Company’s on- net service consists of high-speed Internet access and private network services offered at speeds ranging from 100 megabits per second to 100 gigabits per second. The Company provides its on-net Internet access and private network services to its corporate and net-centric customers. The Company’s corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms, as well as health care providers, educational institutions and other professional services businesses. The Company’s net-centric customers include bandwidth-intensive users that leverage its network to either deliver content to end users or to provide access to residential or commercial internet users. Content delivery customers include over the top (“OTT”) media service providers, content delivery networks, web hosting companies, and commercial content and application software providers. Access customers include access networks comprised of other ISPs, telephone companies, mobile phone operators and cable television companies that collectively provide internet access to a substantial number of broadband subscribers and mobile phone subscribers across the world. These net-centric customers generally receive the Company’s services in carrier neutral colocation facilities and in its data centers. The Company operates data centers throughout North America and Europe that allow its customers to collocate their equipment and access the Company’s network. In addition to providing on-net services, the Company provides Internet access and private network services to customers that are not located in buildings directly connected to its network. The Company provides these off-net services primarily to corporate customers using other carriers’ circuits to provide the “last mile” portion of the link from the customers’ premises to the Company’s network. The Company also provides certain non-core services that resulted from acquisitions. The Company continues to support but does not actively sell these non-core services. Principles of consolidation The consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles and include the accounts of the Company and all of its wholly-owned and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of estimates The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. 1. Description of the business and summary of significant accounting policies: (Continued) Allowance for credit losses The Company establishes an allowance for credit losses and other sales credit adjustments related to its trade receivables. Trade receivables are recorded at the invoiced amount and can bear interest. Allowances for sales credits are established through a reduction of revenue, while allowances for credit losses are established through a charge to selling, general, and administrative expenses as bad debt expense. The Company assesses the adequacy of these reserves by evaluating factors, such as the length of time individual receivables are past due, historical collection experience, and changes in the credit worthiness of its customers. The Company also assesses the ability of specific customers to meet their financial obligations and establishes specific allowances related to these customers. If circumstances relating to specific customers change or economic conditions change such that the Company’s past collection experience and assessment of the economic environment are no longer appropriate, the Company’s estimate of the recoverability of its trade receivables could be impacted. Accounts receivable balances are written-off against the allowance for credit losses after all means of internal collection activities have been exhausted and the potential for recovery is considered remote. Recent accounting pronouncements— adopted Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Current-period Balance at Provision for Write offs Balance at Beginning Expected Credit Charged Against End of Description of Period Losses Allowance Period Allowance for credit losses (deducted from accounts receivable) Year ending December 31, 2020 $ 1,771 $ 4,997 $ (4,847) $ 1,921 Year ending December 31, 2019 $ 1,263 $ 6,190 $ (5,682) $ 1,771 Year ending December 31, 2018 $ 1,499 $ 4,115 $ (4,351) $ 1,263 The current-period provision for expected credit losses is net of bad debt recoveries of $1.2 million, $1.9 million and $0.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. 1. Description of the business and summary of significant accounting policies: (Continued) Leases In February 2016, the FASB issued ASU No. 2016-02, Leases Year Year Ended Ended December 31, 2020 December 31, 2019 Finance lease cost amortization of right-of-use assets $ 22,850 $ 19,823 Interest expense on finance lease liabilities 18,892 17,709 Operating lease cost 17,362 15,688 Total lease costs 59,104 53,220 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases (19,121) (17,959) Operating cash flows from operating leases (18,664) (17,106) Financing cash flows from finance leases (23,990) (9,097) Right-of-use assets obtained in exchange for new finance lease liabilities 71,622 14,307 Right-of-use assets obtained in exchange for new operating lease liabilities 35,659 9,754 Weighted-average remaining lease term — finance leases (in years) 12.4 14.3 Weighted-average remaining lease term — operating leases (in years) 20.2 21.9 Weighted average discount rate — finance leases 10.3 % 11.0 % Weighted average discount rate — operating leases 5.6 % 5.6 % 1. Description of the business and summary of significant accounting policies: (Continued) Finance leases—fiber lease agreements The Company has entered into lease agreements with numerous providers of dark fiber under indefeasible-right-of use agreements (“IRUs”). These IRUs typically have initial terms of 15-20 years and include renewal options after the initial lease term. The Company establishes the number of renewal option periods used in determining the lease term based upon its assessment at the inception of the lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the dark fiber provider and the Company. Once the Company has accepted the related fiber route, leases that meet the criteria for treatment as finance leases are recorded as a finance lease obligation and an IRU asset. The interest rate used in determining the present value of the aggregate future minimum lease payments is the Company’s incremental borrowing rate for the reasonably certain lease term. The determination of the Company's incremental borrowing rate requires judgment. The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including level of collateralization and term to align with the term of the lease. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of December 31, 2020, the Company had committed to additional dark fiber IRU lease agreements totaling $21.0 million in future payments to be paid over periods of up to 20 years. These obligations begin when the related fiber is accepted, which is generally expected to occur in the next 12 months. The future minimum payments (principal and interest) under these finance leases are as follows (in thousands): For the Twelve Months Ending December 31, 2021 $ 34,246 2022 33,269 2023 32,353 2024 32,614 2025 27,399 Thereafter 232,145 Total minimum finance lease obligations 392,026 Less—amounts representing interest (172,886) Present value of minimum finance lease obligations 219,140 Current maturities (15,702) Finance lease obligations, net of current maturities $ 203,438 1. Description of the business and summary of significant accounting policies: (Continued) Operating leases The Company leases office space and certain data center facilities under operating leases. In certain cases the Company also enters into short-term operating leases for dark fiber. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments under the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the reasonably certain lease term. The implicit rates within the Company’s operating leases are generally not determinable and the Company uses its incremental borrowing rate at the lease commencement date to determine the present value of its lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including level of collateralization and term to align with the term of the lease. The determination of the Company's incremental borrowing rate requires judgment. The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including level of collateralization and term to align with the term of the lease. Certain of the Company’s leases include options to extend or terminate the lease. The Company establishes the number of renewal option periods used in determining the operating lease term based upon its assessment at the inception of the operating lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the landlord or dark fiber provider and the Company. Once the Company has accepted the related fiber route or the facility lease term has begun, the present value of the aggregate future minimum operating lease payments is recorded as an operating lease liability and a right-of-use leased asset. Lease incentives and deferred rent liabilities for facilities operating leases are presented with the right-of-use leased asset. Lease expense for lease payments is recognized on a straight-line basis over the term of the lease. The future minimum payments under these operating lease agreements are as follows (in thousands): For the Twelve Months Ending December 31, 2021 $ 17,755 2022 16,391 2023 16,490 2024 15,007 2025 12,554 Thereafter 118,157 Total minimum operating lease obligations 196,354 Less—amounts representing interest (73,885) Present value of minimum operating lease obligations 122,469 Current maturities (11,151) Lease obligations, net of current maturities $ 111,318 Revenue recognition The Company recognizes revenue under ASU No. 2014-09, Revenue from Contracts with Customers 1. Description of the business and summary of significant accounting policies: (Continued) The Company’s service offerings consist of on-net and off-net telecommunications services. Fixed fees are billed monthly in advance and usage fees are billed monthly in arrears. Amounts billed are due upon receipt and contract lengths range from month to month to 60 months . The Company satisfies its performance obligations to provide services to customers over time as the services are rendered. In accordance with ASC 606, revenue is recognized when a customer obtains the promised service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. The Company has adopted the practical expedient related to certain performance obligation disclosures since it has a right to consideration from its customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date. To achieve this core principle, the Company follows the following five steps: 1) Identification of the contract, or contracts with a customer 2) Identification of the performance obligations in the contract 3) Determination of the transaction price 4) Allocation of the transaction price to the performance obligations in the contract 5) Recognition of revenue when, or as, we satisfy a performance obligation Fees billed in connection with customer installations are deferred (as deferred revenue) and recognized as noted above. To the extent a customer contract is terminated prior to its contractual end the customer is subject to termination fees. The Company vigorously seeks payment of these amounts. The Company recognizes revenue for these amounts as they are collected. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the years ended December 31, 2020, 2019 and 2018 was $4.4 million, $4.4 million and $5.0 million, respectively. Amortization expense for contract costs for the years ended December 31, 2020, 2019 and 2018 was $17.1 million, $17.3 million and $16.8 million , respectively. Gross receipts taxes, universal service fund and other surcharges Revenue recognition standards include guidance relating to taxes or surcharges assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer and may include, but are not limited to, gross receipts taxes, excise taxes, Universal Service Fund fees and certain state regulatory fees. Such charges may be presented gross or net based upon the Company’s accounting policy election. The Company records certain excise taxes and surcharges on a gross basis and includes them in its revenues and costs of network operations. Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense) were $15.1 million, $14.9 million, and $12.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. Network operations Network operations expenses include the costs of personnel and related operating expenses associated with service delivery, network management, and customer support, network facilities costs, fiber and equipment maintenance fees, leased circuit costs, access fees paid to building owners and certain excise taxes and surcharges recorded on a gross basis. The Company estimates its accruals for any disputed leased circuit obligations based upon the nature and age of the dispute. Network operations costs are impacted by the timing and amounts of disputed circuit costs. The Company generally records these disputed amounts when billed by the vendor and reverses these amounts when the vendor credit has been received or the dispute has otherwise been resolved. The Company does not allocate depreciation and amortization expense to its network operations expense. Foreign currency translation adjustment and comprehensive income The consolidated financial statements of the Company’s non-US operations are translated into US dollars using the period-end foreign currency exchange rates for assets and liabilities and the average foreign currency exchange rates for revenues and expenses. Gains and losses on translation of the accounts are accumulated and reported as a component of other comprehensive income in stockholders’ equity. The Company’s only components of “other comprehensive income” are currency translation adjustments for all periods presented. The Company considers the majority of its investments in its foreign subsidiaries to be long-term in nature. The Company’s foreign exchange transaction gains (losses) are included within interest income and other on the consolidated statements of comprehensive income. 1. Description of the business and summary of significant accounting policies: (Continued) Financial instruments The Company considers all highly liquid investments with an original maturity of three months or less at purchase to be cash equivalents. The Company determines the appropriate classification of its investments at the time of purchase and evaluates such designation at each balance sheet date. At December 31, 2020 and December 31, 2019, the carrying amount of cash and cash equivalents, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses approximated fair value because of the short-term nature of these instruments. The Company measures its cash equivalents at amortized cost, which approximates fair value based upon quoted market prices (Level 1). Based upon recent trading prices (Level 2—market approach) at December 31, 2020 the fair value of the Company's $445.0 million senior secured notes due 2022 was $458.4 million and the fair value of the Company’s €350.0 million ($429.3 million) senior unsecured notes due 2024 was $437.8 million. Concentrations of credit risk The Company's assets that are exposed to credit risk consist of its cash and cash equivalents, other assets and accounts receivable. As of December 31, 2020 and 2019, the Company's cash equivalents were invested in demand deposit accounts, overnight investments and money market funds. The Company places its cash equivalents in instruments that meet high-quality credit standards as specified in the Company's investment policy guidelines. Accounts receivable are due from customers located in major metropolitan areas in the United States, Europe, Canada, Mexico, Asia, South America, Australia and Africa. Receivables from the Company's net-centric (wholesale) customers are generally subject to a higher degree of credit risk than the Company's corporate customers. The Company relies upon an equipment vendor for the majority of its network equipment and is also dependent upon many third-party fiber providers for providing its services to its customers. Property and equipment Property and equipment are recorded at cost and depreciated once deployed using the straight-line method over the estimated useful lives of the assets. Useful lives are determined based on historical usage with consideration given to technological changes and trends in the industry that could impact the asset utilization. System infrastructure costs include the capitalized compensation costs of employees directly involved with construction activities and costs incurred by third-party contractors. Assets and liabilities under finance leases are recorded at the lesser of the present value of the aggregate future minimum lease payments or the fair value of the assets under lease. Leasehold improvements include costs associated with building improvements. The Company determines the number of renewal option periods, if any, included in the lease term for purposes of amortizing leasehold improvements and the lease term of its finance leases based upon its assessment at the inception of the lease for which the failure to renew the lease imposes a penalty on the Company in such amount that a renewal appears to be reasonably assured. Expenditures for maintenance and repairs are expensed as incurred. Depreciation and amortization periods are as follows: Type of asset Depreciation or amortization period Indefeasible rights of use (IRUs) Shorter of useful life or the IRU lease agreement; generally 15 Network equipment 3 Leasehold improvements Shorter of lease term, including reasonably assured renewal periods, or useful life Software 5 years Owned buildings 40 years Office and other equipment 3 to 7 years System infrastructure 5 1. Description of the business and summary of significant accounting policies: (Continued) Long-lived assets The Company’s long-lived assets include property and equipment. These long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment is determined by comparing the carrying value of these long-lived assets to management’s probability weighted estimate of the future undiscounted cash flows expected to result from the use of the assets. In the event an impairment exists, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset, which would be determined by using quoted market prices or valuation techniques such as the discounted present value of expected future cash flows, appraisals, or other pricing models. In the event there are changes in the planned use of the Company’s long-term assets or the Company’s expected future undiscounted cash flows are reduced significantly, the Company’s assessment of its ability to recover the carrying value of these assets could change. Equity-based compensation The Company recognizes compensation expense for its share-based payments granted to its employees based on their grant date fair values with the expense being recognized on a straight-line basis over the requisite service period. The Company begins recording equity-based compensation expense related to performance awards when it is considered probable that the performance conditions will be met and for market-based awards compensation cost is recognized if the service condition is satisfied even if the market condition is not satisfied. Equity-based compensation expense is recognized in the statement of operations in a manner consistent with the classification of the employee's salary and other compensation. Income taxes The Company’s deferred tax assets or liabilities are computed based upon the differences between financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. Deferred income tax expenses or benefits are based upon the changes in the assets or liability from period to period. At each balance sheet date, the Company assesses the likelihood that it will be able to realize its deferred tax assets. Valuation allowances are established when management determines that it is “more likely than not” that some portion or all of the deferred tax asset may not be realized. The Company considers all available positive and negative evidence in assessing the need for a valuation allowance including its historical operating results, ongoing tax planning, and forecasts of future taxable income, on a jurisdiction by jurisdiction basis. The Company reduces its valuation allowance if the Company concludes that it is “more likely than not” that it would be able to realize its deferred tax assets. Management determines whether a tax position is more likely than not to be sustained upon examination based on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured to determine the amount of benefit to be recognized in the financial statements. The Company adjusts its estimated liabilities for uncertain tax positions periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of its income tax expense. Basic and diluted net income per common share Basic earnings per share (“EPS”) excludes dilution for common stock equivalents and is computed by dividing net income or (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding during each period, adjusted for the effect of dilutive common stock equivalents. 1. Description of the business and summary of significant accounting policies: (Continued) Shares of restricted stock are included in the computation of basic EPS as they vest and are included in diluted EPS, to the extent they are dilutive, determined using the treasury stock method. The following details the determination of the diluted weighted average shares: Year Ended Year Ended Year Ended December 31, December 31, December 31, 2020 2019 2018 Weighted average common shares—basic 45,947,772 45,542,315 45,280,161 Dilutive effect of stock options 80,849 32,222 33,134 Dilutive effect of restricted stock 639,577 505,858 467,659 Weighted average common shares—diluted 46,668,198 46,080,395 45,780,954 The following details unvested shares of restricted common stock as well as the anti-dilutive effects of stock options and restricted stock awards outstanding: December 31, December 31, December 31, 2020 2019 2018 Unvested shares of restricted common stock 1,339,596 1,283,281 1,187,586 Anti-dilutive options for common stock 32,324 39,608 53,114 Anti-dilutive shares of restricted common stock 223,118 348 3,545 |
Property and equipment_
Property and equipment: | 12 Months Ended |
Dec. 31, 2020 | |
Property and equipment: | |
Property and equipment: | 2. Property and equipment: Property and equipment consisted of the following (in thousands): December 31, 2020 2019 Owned assets: Network equipment $ 611,265 $ 566,936 Leasehold improvements 241,379 227,388 System infrastructure 148,533 134,726 Software 10,609 10,035 Office and other equipment 19,611 18,169 Building 1,376 1,252 Land 116 106 1,032,889 958,612 Less—Accumulated depreciation and amortization (856,859) (790,033) 176,030 168,579 Assets under finance leases: IRUs 482,978 408,170 Less—Accumulated depreciation and amortization (228,673) (207,820) 254,305 200,350 Property and equipment, net $ 430,335 $ 368,929 Depreciation and amortization expense related to property and equipment and finance leases was $83.5 million, $80.2 million and $81.2 million, for 2020, 2019 and 2018, respectively. The Company capitalizes the compensation cost of employees directly involved with its construction activities. In 2020, 2019 and 2018, the Company capitalized compensation costs of $12.1 million, $10.7 million and $10.5 million, respectively. These amounts are included in system infrastructure costs. 2. Property and equipment: (Continued) Exchange agreement In 2020, 2019 and 2018 the Company exchanged certain used network equipment and cash consideration for new network equipment. The fair value of the new network equipment received was estimated to be $1.1 million, $3.3 million and $3.2 million, respectively, resulting in gains of $0.3 million, $1.0 million and $1.0 million, respectively. The estimated fair value of the equipment received was based upon the cash consideration price the Company pays for the new network equipment on a standalone basis (Level 3). Installment payment agreement The Company has entered into an installment payment agreement (“IPA”) with a vendor. Under the IPA the Company was able to purchase network equipment in exchange for interest free note obligations each with a twenty-four month term. There are no payments under each note obligation for the first six months followed by eighteen equal installment payments for the remaining eighteen month term. As of December 31, 2020 and December 31, 2019, there was $7.7 million and $12.5 million, respectively, of note obligations outstanding under the IPA, secured by the related equipment. The Company recorded the assets purchased and the present value of the note obligation utilizing an imputed interest rate. The resulting discounts totaling $0.1 million and $0.4 million as of December 31, 2020 and December 31, 2019, respectively, under the note obligations are being amortized over the note term using the effective interest rate method. |
Accrued and other liabilities_
Accrued and other liabilities: | 12 Months Ended |
Dec. 31, 2020 | |
Accrued and other liabilities: | |
Accrued and other liabilities: | 3. Accrued and other liabilities: Accrued and other current liabilities consist of the following (in thousands): December 31, 2020 2019 Operating accruals $ 24,168 $ 23,695 Deferred revenue—current portion 4,651 4,316 Payroll and benefits 8,024 6,613 Taxes—non-income based 5,918 6,053 Interest 8,268 10,624 Total $ 51,029 $ 51,301 |
Long-term debt_
Long-term debt: | 12 Months Ended |
Dec. 31, 2020 | |
Long-term debt: | |
Long-term debt: | 4. Long-term debt: Issuance of 2024 Notes In June 2020, Group completed an offering of €215.0 million aggregate principal amount of 4.375% senior unsecured notes due 2024 ("2024 Notes"). The net proceeds from the June 2020 offering, after deducting offering expenses, were $240.3 million. In June 2019, Group completed an offering of €135.0 million aggregate principal amount of 2024 Notes. The net proceeds from the June 2019 offering, after deducting offering expenses, were $152.1 million. The Company expects to use the proceeds from these offerings for general corporate purposes , to repay debt obligations, to repurchase the Company’s common stock or for special or recurring dividends to the Company’s stockholders. The 2024 Notes are guaranteed (the “Guarantees”) on a senior unsecured basis, jointly and severally, by the Company’s material domestic subsidiaries, subject to certain exceptions, and by the Company (collectively, the “Guarantors”). Under certain circumstances, the Guarantors may be released from these Guarantees without the consent of the holders of the 2024 Notes. 4. Long-term debt: (Continued) The 2024 Notes and the Guarantees are Group’s and the Guarantors’ senior unsecured obligations. The 2024 Notes and the Guarantees are effectively subordinated to all of Group’s and the Guarantors’ existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, and are structurally subordinated to all indebtedness and other liabilities of subsidiaries that are not Guarantors. Without giving effect to collateral arrangements, the 2024 Notes and the Guarantees rank pari passu in right of payment with Group’s and the Guarantors’ existing and future senior indebtedness. The 2024 Notes and the Guarantees rank contractually senior in right of payment to all of Group’s and the Guarantors’ existing and future subordinated indebtedness. The 2024 Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers in an unregistered offering pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Act”), and to certain non-U.S. persons in transactions outside the United States in compliance with Regulation S under the Act. The 2024 Notes have not been registered under the Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The 2024 Notes are listed on the Official List of The International Stock Exchange; however, there can be no assurance that the listing will be maintained. The 2024 Notes bear interest at a rate of 4.375% per annum and will be paid semi-annually in arrears on June 30 and December 30 of each year. Unless earlier redeemed, the 2024 Notes will mature on June 30, 2024. The 2024 Notes were issued in Euros and are reported in the Company’s reporting currency — US Dollars. As of December 31, 2019, the 2024 Notes were valued at $151.4 million resulting in an unrealized gain on foreign exchange of $2.3 million for the year ended December 31, 2019. As of December 31, 2020, the 2024 Notes were valued at $429.3 million resulting in an unrealized loss on foreign exchange of $37.0 million for the year ended December 31, 2020. Group may redeem some or all of the 2024 Notes at any time prior to June 30, 2021 at a price equal to 100% of the principal amount of the 2024 Notes, plus a “make-whole” premium as set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. Thereafter, Group may redeem the 2024 Notes, in whole or in part, at a redemption price ranging from 102.188% to par (depending on the year), as set forth in the indenture. Group may also redeem up to 35% of the principal amount of the 2024 Notes using proceeds of certain equity offerings completed prior to June 30, 2021 at a redemption price equal to 104.375%, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, subject to certain exceptions. Group may also redeem the 2024 Notes, in whole but not in part, in the event of certain changes in the tax laws of the United States (or any taxing authority in the United States). This redemption would be at 100% of the principal amount of the 2024 Notes to be redeemed (plus any accrued interest and additional amounts then payable with respect to the 2024 Notes to, but not including, the redemption date). If Group undergoes specific kinds of change in control accompanied by certain ratings events, it will be required to offer to repurchase the 2024 Notes from holders at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase. Additionally, if Group or any of its restricted subsidiaries sells assets and does not apply the proceeds from such sale in a certain manner or certain other events have not occurred, under certain circumstances, Group will be required to use the excess net proceeds to make an offer to purchase the 2024 Notes at an offer price in cash equal to 100% of the principal amount of the 2024 Notes, plus accrued and unpaid interest, if any, to, but not including, the repurchase date. In connection with any offer to purchase all or any of the 2024 Notes (including a change of control offer, asset sale offer or any tender offer), if holders of no less than 90% of the aggregate principal amount of the 2024 Notes validly tender their 2024 Notes, Group or a third party is entitled to redeem any remaining 2024 Notes at the price offered to each holder. The 2024 Notes indenture includes covenants that restrict Group and its restricted subsidiaries’ ability to, among other things: incur indebtedness; issue certain preferred stock or similar equity securities; pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock; make certain investments and other restricted payments, such as prepayment, redemption or repurchase of certain indebtedness; create liens; consolidate, merge, sell or otherwise dispose of all or substantially all of the assets of Group and its restricted subsidiaries taken as a whole; incur restrictions on the ability of a subsidiary to pay dividends or make other payments; and enter into transactions with affiliates. However, the covenants provide for certain exceptions to these restrictions and the Company is not subject to the covenants under the 2024 Notes indenture. Certain covenants will cease to apply to the 2024 Notes if, and for so long as, the 2024 Notes have investment grade ratings from any two of Moody’s Investors Service, Inc., Fitch Ratings, Inc. and S&P Global Ratings and so long as no default or event of default under the Indenture has occurred and is continuing. 4. Long-term debt: (Continued) The principal amount of the 2024 Notes would become immediately due and payable upon the occurrence of certain bankruptcy or insolvency events involving Group or certain of its subsidiaries, and may be declared immediately due and payable by the trustee or the holders of at least 25% of the aggregate principal amount of the then-outstanding 2024 Notes upon the occurrence of certain events of default under the indenture. Senior secured notes -$445.0 million 2022 Notes In February 2015, Group issued $250.0 million of 5.375% senior secured notes due 2022 (the “2022 Notes”). The net proceeds from the offering were $248.6 million after deducting discounts and offering costs. In December 2016, the Company issued an additional $125.0 million par value of its 2022 Notes at a premium of 100.375 % of par value. The Company received net proceeds of $124.3 million after deducting offering costs. In August 2018, the Company issued an additional $70.0 million par value of its 2022 Notes at a premium of 101.75% of par value. The Company received net proceeds of $69.9 million after deducting offering costs. The premium and offering costs are amortized to interest expense to the maturity date using the effective interest rate method. The net proceeds from these offerings are intended to be used for general corporate purposes. The 2022 Notes were sold in private offerings for resale to qualified institutional buyers pursuant to SEC Rule 144A and mature on March 1, 2022. Interest accrues at 5.375% and is paid semi-annually in arrears on March 1 and September 1 of each year. The indenture governing the 2022 Notes provides that the Company and each of the Company’s existing domestic subsidiaries and future material domestic subsidiaries guarantee the 2022 Notes, subject to certain exceptions and permitted liens. The 2022 Notes are also secured by a pledge of all of the equity interests in Group’s domestic subsidiaries and 65% of the equity interests in Group’s first-tier foreign subsidiaries. The 2022 Notes and the subsidiary guarantees will be the Company’s and the subsidiary guarantors’ senior indebtedness and will rank pari passu The 2022 Notes may be redeemed prior to December 1, 2021 (three months prior to the maturity date of the Notes) in whole or from time to time in part, at a redemption price equal to the sum of (1) 100% of the principal amount plus accrued and unpaid interest, if any, to, but not including, the redemption date, and (2) a make-whole premium, if any. The make-whole premium is the excess of (1) the net present value, on the redemption date, of the principal being redeemed or paid and the amount of interest (exclusive of interest accrued to the date of redemption) that would have been payable if such redemption had not been made, over (2) the aggregate principal amount of the notes being redeemed or paid. Net present value shall be determined by discounting, on a semi-annual basis, such principal and interest at the reinvestment rate (as determined in the indenture governing the 2022 Notes) from the respective dates on which such principal and interest would have been payable if such redemption had not been made. In addition, at any time on or after December 1, 2021 (three months prior to the maturity date of the 2022 Notes), the Issuer may redeem the 2022 Notes, in whole and or in part, at a redemption price equal to 100% of the principal amount of the 2022 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date. Senior unsecured notes—$189.2 million 2021 Notes On April 9, 2014, Cogent Communications Finance, Inc. ( “Cogent Finance”), a newly formed financing subsidiary of Group, completed an offering at par of $200.0 million in aggregate principal amount of 5.625% Senior Notes due 2021 (the “2021 Notes”). The 2021 Notes were sold in private offerings for resale to qualified institutional buyers pursuant to SEC Rule 144A, accrued interest at a rate of 5.625% and were to mature on April 15, 2021. Interest was paid semi-annually on April 15 and October 15. Cogent Finance merged with Group, with Group continuing as the surviving corporation (the “Finance Merger”). At the time of consummation of the Finance Merger, Group assumed the obligations of Cogent Finance under the 2021 Notes and the indenture governing the 2021 Notes (the “Indenture”) and Group and each of Group’s domestic subsidiaries became party to the Indenture pursuant to a supplemental indenture to the Indenture and the obligations under the Indenture became obligations solely of Group and each of Group’s domestic subsidiaries. Holdings also provided a guarantee of the 2021 Notes but Holdings was not subject to the covenants under the Indenture. In the second quarter of 2016, the Company paid $10.9 million for the purchase of $10.8 million of par value and accrued interest on its 2021 Notes reducing the principal amount to $189.2 million. 4. Long-term debt: (Continued) Debt extinguishment and redemption 2021 Notes In June 2020, Group redeemed the 2021 Notes with the proceeds from its June 2020 issuance of 2024 Notes. The Company redeemed the entire outstanding amount of the 2021 Notes at a redemption price of 100.00% of the $189.2 million principal amount plus $1.6 million of accrued interest. As a result of this transaction, the Company incurred a loss on debt extinguishment and redemption of $0.6 million from the amortization of the remaining unamortized notes cost and certain transaction expenses. Limitations under the indentures The indentures governing the 2024 Notes and 2022 Notes, among other things, limit the Company’s ability to incur indebtedness; to pay dividends or make other distributions; to make certain investments and other restricted payments; to create liens; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; to incur restrictions on the ability of a subsidiary to pay dividends or make other payments; and to enter into certain transactions with its affiliates. Limitations on the ability to incur additional indebtedness (excluding IRU agreements incurred in the normal course of business) include a restriction on incurring additional indebtedness if the Company’s consolidated leverage ratio, as defined in the indentures, is greater than 6.0 for the 2024 Notes and greater than 5.0 for the 2022 Notes. Limitations on the ability to incur additional secured indebtedness include a restriction on incurring additional secured indebtedness if the Company’s consolidated secured leverage ratio, as defined in the indentures, is greater than 4.0 for the 2024 Notes and greater than 3.5 for the 2022 Notes. The indentures prohibit certain payments, such as dividends and stock purchases, when the Company’s consolidated leverage ratio, as defined by the indentures, is greater than 4.25. A certain amount of such unrestricted payments is permitted notwithstanding this prohibition. The unrestricted payment amount may be increased by the Company’s consolidated cash flow, as defined in the indentures, as long as the Company’s consolidated leverage ratio is less than 4.25. The Company’s consolidated leverage ratio was above 4.25 as of December 31, 2020. As of December 31, 2020, a total of $94.0 million was permitted for investment payments including dividends and stock purchases. Long-term debt maturities The aggregate future contractual maturities of long-term debt were as follows as of December 31, 2020 (in thousands): For the year ending December 31, 2021 $ 6,922 2022 445,790 2023 — 2024 429,263 2025 — Thereafter — Total $ 881,975 |
Income taxes_
Income taxes: | 12 Months Ended |
Dec. 31, 2020 | |
Income taxes: | |
Income taxes: | 5. Income taxes: The components of income before income taxes consist of the following (in thousands): Years Ended December 31, 2020 2019 2018 Domestic $ 23,808 $ 72,773 $ 63,878 Foreign (13,496) (20,099) (22,496) Total income before income taxes $ 10,312 $ 52,674 $ 41,382 5. Income taxes: (Continued) The income tax expense is comprised of the following (in thousands): Years Ended December 31, 2020 2019 2018 Current: Federal $ 32 $ — $ — State (2,908) (2,647) (1,522) Foreign (947) (370) (75) Deferred: Federal (1,867) (10,899) (9,746) State 1,241 (1,285) (802) Foreign 353 47 (570) Total income tax expense $ (4,096) $ (15,154) $ (12,715) Our consolidated temporary differences comprising our net deferred tax assets are as follows (in thousands): December 31, 2020 2019 Deferred Tax Assets: Net operating loss carry-forwards $ 273,999 $ 255,269 Tax credits 1,965 2,261 Equity-based compensation 4,901 4,116 Operating leases 40,081 32,289 Total gross deferred tax assets 320,946 293,935 Valuation allowance (150,589) (131,069) 170,357 162,866 Deferred Tax Liabilities: Depreciation and amortization 37,364 34,884 Accrued liabilities and other 105,554 107,711 Right-of-use assets 37,097 29,670 Gross deferred tax liabilities 180,015 172,265 Net deferred tax liabilities $ 9,658 $ 9,399 At each balance sheet date, the Company assesses the likelihood that it will be able to realize its deferred tax assets. The Company considers all available positive and negative evidence in assessing the need for a valuation allowance. The Company maintains a full valuation allowance against certain of its deferred tax assets consisting primarily of net operating loss carryforwards related to its foreign operations in Europe, Asia, South America, Australia and Africa and net operating losses in the United States that are limited for use under Section 382 of the Internal Revenue Code. As of December 31, 2020, the Company has combined net operating loss carry-forwards of $1.1 billion. This amount includes federal net operating loss carry-forwards in the United States of $60.3 million, net operating loss carry-forwards related to its European operations of $1.0 billion and $5.3 million related to its other international operations. Section 382 of the Internal Revenue Code in the United States limits the utilization of net operating losses when ownership changes, as defined by that section, occur. The Company has performed an analysis of its Section 382 ownership changes and has determined that the utilization of certain of its net operating loss carryforwards in the United States is limited based on the annual Section 382 limitation and remaining carryforward period. Of the net operating losses available at December 31, 2020 in the United States $32.0 million are limited for use under Section 382. Net operating loss carryforwards outside of the United States totaling $1.0 billion are not subject to limitations similar to Section 382. The net operating loss carryforwards in the United States will expire, if unused, between 2025 and 2036. The net operating loss carry-forwards related to the Company's European operations include $870.0 million that do not expire and $153.9 million that expire between 2021 and 2036. The Company has not provided for United States deferred income taxes or foreign withholding taxes on its undistributed earnings for certain non-US subsidiaries earnings or cumulative translation adjustments because these earnings and adjustments are intended to be permanently reinvested in operations outside the United States. It is not practical to determine the amount of the unrecognized deferred tax liability on such undistributed earnings or cumulative translation adjustments. 5. Income taxes: (Continued) In the normal course of business the Company takes positions on its tax returns that may be challenged by taxing authorities. The Company evaluates all uncertain tax positions to assess whether the position will more likely than not be sustained upon examination. If the Company determines that the tax position is not more likely than not to be sustained, the Company records a liability for the amount of the benefit that is not more likely than not to be realized when the tax position is settled. The Company does not have a material liability for uncertain tax positions at December 31, 2020 and does not expect that its liability for uncertain tax positions will materially increase during the twelve months ended December 31, 2021, however, actual changes in the liability for uncertain tax positions could be different than currently expected. If recognized, changes in the Company's total unrecognized tax benefits would impact the Company's effective income tax rate. The Company or one of its subsidiaries files income tax returns in the US federal jurisdiction and various state and foreign jurisdictions. The Company is subject to US federal tax and state tax examinations for years 2004 to 2020. The Company is subject to tax examinations in its foreign jurisdictions generally for years 2005 to 2020. The following is a reconciliation of the Federal statutory income taxes to the amounts reported in the financial statements (in thousands). Years Ended December 31, 2020 2019 2018 Federal income tax expense at statutory rates $ (2,166) $ (11,061) $ (8,690) Effect of: State income taxes, net of federal benefit (1,091) (2,973) (2,665) Impact of foreign operations (365) (505) (694) Non-deductible expenses (411) (491) (1,218) Tax effect of TCJA from foreign earnings (66) (28) (130) Other 32 (32) — Changes in valuation allowance (29) (64) 682 Income tax expense $ (4,096) $ (15,154) $ (12,715) |
Commitments and contingencies_
Commitments and contingencies: | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and contingencies: | |
Commitments and contingencies: | 6. Commitments and contingencies: Current and potential litigation In accordance with the accounting guidance for contingencies, the Company accrues its estimate of a contingent liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the range is more likely than any other amount, the Company accrues at the low end of the range. The Company reviews its accruals at least quarterly and adjusts them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter. The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible could result in a loss of up to $3.3 million in excess of the amount accrued at December 31, 2020. The Company is engaged in an arbitration proceeding in Spain in which a former provider of optical fiber to the Company is seeking approximately $9.0 million for Company’s early termination of the optical fiber leases, which amount the Company accrued in 2015. The Company has counterclaimed for damages and is contesting its obligation to pay the termination liability. The arbitration is being conducted by the Civil and Commercial Arbitration Court (CIMA) in Madrid, Spain. In the ordinary course of business the Company is involved in other legal activities and claims. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the liability related to these legal actions and claims cannot be determined with certainty. Management does not believe that such claims and actions will have a material impact on the Company’s financial condition or results of operations. Judgment is required in estimating the ultimate outcome of any dispute resolution process, as well as any other amounts that may be incurred to conclude the negotiations or settle any litigation. Actual results may differ from these estimates under different assumptions or conditions and such differences could be material. 6. Commitments and contingencies: (Continued) Network equipment sites and data center facilities The Company enters into leases for network equipment sites and for space in data center facilities. Future minimum annual payments under these arrangements are as follows (in thousands): For the year ending December 31, 2021 $ 19,235 2022 8,531 2023 5,586 2024 3,119 2025 1,240 Thereafter 1,690 $ 39,401 Expenses related to these arrangements were $21.0 million in 2020, $20.6 million in 2019 and $20.8 million in 2018. Unconditional purchase obligations Unconditional purchase obligations for equipment and services totaled $10.6 million at December 31, 2020. As of December 31, 2020, the Company had also committed to additional dark fiber IRU capital and operating lease agreements totaling $21.0 million in future payments to be paid over periods of up to 20 years. These obligations begin when the related fiber is accepted, which is generally expected to occur in 2021. Future minimum payments under these obligations are $2.5 million, $0.8 million, $0.7 million, $0.7 million and $0.7 million for the years ending December 31, 2021 to December 31, 2025, respectively, and $15.6 million, thereafter. Defined contribution plan The Company sponsors a 401(k) defined contribution plan that provides for a Company matching payment. The Company matching payments were paid in cash and were $0.9 million for 2020, $0.8 million for 2019 and $0.8 million for 2018. |
Stockholders' equity_
Stockholders' equity: | 12 Months Ended |
Dec. 31, 2020 | |
Stockholders' equity: | |
Stockholders' equity: | 7. Stockholders’ equity: Authorized shares The Company has 75.0 million shares of authorized $0.001 par value common stock and 10,000 authorized but unissued shares of $0.001 par value preferred stock. The holders of common stock are entitled to one vote per common share and, subject to any rights of any series of preferred stock, dividends may be declared and paid on the common stock when determined by the Company’s Board of Directors. Common stock buybacks The Company’s Board of Directors has approved $50.0 million for purchases of the Company’s common stock under a buyback program (the “Buyback Program”). At December 31, 2020, there was $30.4 million remaining for purchases under the Buyback Program. During 2020 and 2018 the Company purchased 79,056 and 147,995 shares of its common stock for $4.5 million and $6.6 million, respectively. These shares of common stock were subsequently retired.There were no purchases of common stock in 2019. 7. Stockholders’ equity: (Continued) Dividends on common stock Dividends are recorded as a reduction to retained earnings. Dividends on unvested restricted shares of common stock are paid as the awards vest. The payment of any future dividends and any other returns of capital, including stock buybacks, will be at the discretion of the Company’s Board of Directors and may be reduced, eliminated or increased and will be dependent upon the Company’s financial position, results of operations, available cash, cash flow, capital requirements, limitations under the Company’s debt indentures and other factors deemed relevant by the Company’s Board of Directors. The Company is a Delaware Corporation and under the General Corporate Law of the State of Delaware distributions may be restricted including a restriction that distributions, including stock purchases and dividends, do not result in an impairment of a corporation’s capital, as defined under Delaware Law. The indentures governing the Company’s notes limit the Company’s ability to return cash to its stockholders. |
Stock option and award plan_
Stock option and award plan: | 12 Months Ended |
Dec. 31, 2020 | |
Stock option and award plan: | |
Stock option and award plan: | 8. Stock option and award plan: Incentive award plan The Company grants restricted stock and options for common stock under its award plan, as amended (the “Award Plan”). Stock options granted under the Award Plan generally vest over a four-year period and have a term of ten years. Grants of shares of restricted stock granted under the Award Plan generally vest over periods ranging from three The accounting for equity-based compensation expense requires the Company to make estimates and judgments that affect its financial statements. These estimates for stock options include the following. Expected Dividend Yield—The Company uses an expected dividend yield based upon expected annual dividends and the Company’s stock price. Expected Volatility—The Company uses its historical volatility for a period commensurate with the expected term of the option. Risk-Free Interest Rate—The Company uses the zero coupon US Treasury rate during the quarter having a term that most closely resembles the expected term of the option. Expected Term of the Option—The Company estimates the expected life of the option term by analyzing historical stock option exercises. Forfeiture Rates—The Company estimates its forfeiture rate based on historical data with further consideration given to the class of employees to whom the options or shares were granted. 8. Stock option and award plan: (Continued) The weighted-average per share grant date fair value of options was $13.21 in 2020, $8.92 in 2019 and $8.45 in 2018. The following assumptions were used for determining the fair value of options granted in the three years ended December 31, 2020: Years Ended December 31, Black-Scholes Assumptions 2020 2019 2018 Dividend yield 3.4 % 4.5 % 4.6 % Expected volatility 31.5 % 28.3 % 28.7 % Risk-free interest rate 1.1 % 2.5 % 2.5 % Expected life of the option term (in years) 4.2 4.3 4.4 Stock option activity under the Company’s Award Plan during the year ended December 31, 2020, was as follows: Number of Weighted-Average Options Exercise Price Outstanding at December 31, 2019 156,666 $ 46.21 Granted 73,148 $ 74.90 Cancelled and expired (39,837) $ 67.45 Exercised—intrinsic value $0.8 million; cash received $1.4 million (30,097) $ 45.94 Outstanding at December 31, 2020—$1.7 million intrinsic value and 6.9 years weighted-average remaining contractual term 159,880 $ 54.09 Exercisable at December 31, 2020—$1.5 million intrinsic value and 5.9 years weighted-average remaining contractual term 100,050 $ 47.63 Expected to vest—$1.6 million intrinsic value and 6.7 years weighted-average remaining contractual term 144,490 $ 52.71 A summary of the Company’s non-vested restricted stock awards as of December 31, 2020 and the changes during the year ended December 31, 2020 are as follows: Weighted-Average Grant Date Non-vested awards Shares Fair Value Non-vested at December 31, 2019 1,283,281 $ 45.40 Granted 476,030 $ 75.18 Vested (366,287) $ 46.13 Forfeited (53,428) $ 47.55 Non-vested at December 31, 2020 1,339,596 $ 55.70 The weighted average per share grant date fair value of restricted stock granted was $75.18 in 2020 (0.5 million shares), $53.53 in 2019 (0.5 million shares) and $44.02 in 2018 (0.5 million shares). The fair value was determined using the quoted market price of the Company’s common stock on the date of grant. Valuations were obtained to determine the fair value for the shares granted to the Company’s CEO that are subject to the total shareholder return of the Company’s common stock compared to the total shareholder return of the Nasdaq Telecommunications Index. The fair value of shares of restricted stock vested in 2020, 2019 and 2018 was $25.4 million, $20.8 million and $19.1 million, respectively. Equity-based compensation expense related to stock options and restricted stock was $23.5 million, $18.5 million, and $17.7 million for 2020, 2019, and 2018, respectively. The income tax benefit related to stock options and restricted stock was $4.2 million, $3.0 million, and $1.8 million for 2020, 2019, and 2018, respectively. The Company capitalized compensation expense related to stock options and restricted stock for 2020, 2019, and 2018 of $2.3 million, $1.8 million and $1.7 million, respectively. As of December 31, 2020, there was $40.7 million of total unrecognized compensation cost related to non-vested equity-based compensation awards. That cost is expected to be recognized over a weighted average period of 2.0 years. |
Related party transactions_
Related party transactions: | 12 Months Ended |
Dec. 31, 2020 | |
Related party transactions: | |
Related party transactions: | 9. Related party transactions: Office lease The Company’s headquarters is located in an office building owned by Sodium LLC whose owner is the Company’s Chief Executive Officer. The fixed annual rent for the headquarters building is $1.0 million per year plus an allocation of taxes and utilities. The lease began in May 2015 and the lease term was for five years . In February 2020 the lease term was extended to May 2025. The lease is cancellable at no cost by the Company upon 60 days ’ notice. The Company’s audit committee reviews and approves all transactions with related parties. The Company paid $1.7 million in 2020, $1.7 million in 2019 and $1.7 million in 2018 for rent and related costs (including taxes and utilities) for this lease. |
Geographic information_
Geographic information: | 12 Months Ended |
Dec. 31, 2020 | |
Geographic information: | |
Geographic information: | 10. Geographic information: Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing the Company’s performance. The Company has one operating segment. Revenues are attributed to regions based on where the services are provided. Below are the Company’s service revenues and long lived assets by geographic region (in thousands): Year Ended December 31, 2020 On-net Off-net Non-core Total North America $ 330,924 $ 129,879 $ 474 $ 461,277 Europe 79,568 17,252 47 96,867 Asia Pacific 6,834 949 — 7,783 South America 2,056 48 — 2,104 Africa 72 — — 72 Total $ 419,454 $ 148,128 $ 521 $ 568,103 Year Ended December 31, 2019 On-net Off-net Non-core Total North America $ 319,330 $ 131,815 $ 422 $ 451,567 Europe 72,320 16,323 53 88,696 Asia Pacific 4,615 778 — 5,393 South America 488 15 — 503 Total $ 396,753 $ 148,931 $ 475 $ 546,159 Year Ended December 31, 2018 On-net Off-net Non-core Total North America $ 299,021 $ 128,510 $ 572 $ 428,103 Europe 72,958 15,918 62 88,938 Asia Pacific 2,562 576 — 3,138 South America 14 — — 14 Total $ 374,555 $ 145,004 $ 634 $ 520,193 December 31, December 31, 2020 2019 Long lived assets, net North America $ 306,652 $ 269,364 Europe and other 123,699 99,582 Total $ 430,351 $ 368,946 |
Quarterly financial information
Quarterly financial information (unaudited): | 12 Months Ended |
Dec. 31, 2020 | |
Quarterly financial information (unaudited): | |
Quarterly financial information (unaudited): | 11. Quarterly financial information (unaudited): Three months ended March 31, June 30, September 30, December 31, 2020 2020 2020 2020 (in thousands, except share and per share amounts) Service revenue $ 140,915 $ 140,990 $ 142,302 $ 143,901 Network operations, including equity-based compensation expense 55,921 53,886 54,519 54,829 Operating income 25,850 27,574 26,036 27,384 Net income (loss) (1) 9,227 8,564 (6,555) (6,620) Net income (loss) per common share - basic 0.20 0.19 (0.11) (0.14) Net income (loss) per common share - diluted 0.20 0.18 (0.11) (0.14) Weighted-average number of common shares—basic 45,658,565 45,754,880 45,815,718 45,904,943 Weighted-average number of common shares—diluted 46,391,066 46,686,665 45,815,718 45,904,943 Three months ended March 31, June 30, September 30, December 31, 2019 2019 2019 2019 (in thousands, except share and per share amounts) Service revenue $ 134,137 $ 134,789 $ 136,942 $ 140,292 Network operations, including equity-based compensation expense 54,150 54,407 55,253 55,990 Operating income 24,400 22,022 25,799 28,033 Net income (2) 9,217 7,136 13,701 7,465 Net income per common share—basic and diluted 0.20 0.16 0.30 0.16 Weighted-average number of common shares—basic 45,223,157 45,354,327 45,438,656 45,553,727 Weighted-average number of common shares—diluted 45,644,236 45,912,291 46,019,691 46,145,970 (1) Included in net income (loss) for the three months ended March 31, 2020, June 30, 2020, September 30, 2020 and December 31, 2020 are unrealized gains and (losses) on foreign exchange on the Company's 2024 Notes of $2.9 million, ($3.4) million, ($17.3) million and $(19.2) million, respectively. Included in net income for the three months ended June 30, 2020 was a realized gain on foreign exchange on the Company’s 2024 Notes of $ 2.5 million. (2) Included in net income for the three months ended September 30, 2019 and December 31, 2019 are an unrealized gain (loss) on foreign exchange on the Company’s 2024 Notes of $6.1 million and ($4.0) million, respectively. |
Subsequent Events_
Subsequent Events: | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events: | |
Subsequent Events: | 12. Subsequent Events: Dividend On February 24, 2021, the Company’s Board of Directors approved the payment of a quarterly dividend of $0.755 per common share. The dividend for the first quarter of 2021 will be paid to holders of record on March 12, 2021. This estimated $34.6 million dividend payment is expected to be made on March 26, 2021. |
Schedule II VALUATION AND QUALI
Schedule II VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended |
Dec. 31, 2020 | |
Schedule II VALUATION AND QUALIFYING ACCOUNTS | |
Schedule II VALUATION AND QUALIFYING ACCOUNTS | Schedule II COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES ) Balance at Charged to Balance at Beginning of Costs and End of Description Period Expenses (Deductions) Period Deferred tax valuation allowance Year ended December 31, 2018 $ 129,673 $ 2,138 $ (5,232) $ 126,579 Year ended December 31, 2019 $ 126,579 $ 5,785 $ (1,295) $ 131,069 Year ended December 31, 2020 $ 131,069 $ 20,599 $ (1,079) $ 150,589 |
Description of the business a_2
Description of the business and summary of significant accounting policies: (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Description of the business and summary of significant accounting policies: | |
Principles of consolidation | Principles of consolidation The consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles and include the accounts of the Company and all of its wholly-owned and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
Use of estimates | Use of estimates The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. |
Allowance for credit losses | Allowance for credit losses The Company establishes an allowance for credit losses and other sales credit adjustments related to its trade receivables. Trade receivables are recorded at the invoiced amount and can bear interest. Allowances for sales credits are established through a reduction of revenue, while allowances for credit losses are established through a charge to selling, general, and administrative expenses as bad debt expense. The Company assesses the adequacy of these reserves by evaluating factors, such as the length of time individual receivables are past due, historical collection experience, and changes in the credit worthiness of its customers. The Company also assesses the ability of specific customers to meet their financial obligations and establishes specific allowances related to these customers. If circumstances relating to specific customers change or economic conditions change such that the Company’s past collection experience and assessment of the economic environment are no longer appropriate, the Company’s estimate of the recoverability of its trade receivables could be impacted. Accounts receivable balances are written-off against the allowance for credit losses after all means of internal collection activities have been exhausted and the potential for recovery is considered remote. |
Recent accounting pronouncements-adopted | Recent accounting pronouncements— adopted Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Current-period Balance at Provision for Write offs Balance at Beginning Expected Credit Charged Against End of Description of Period Losses Allowance Period Allowance for credit losses (deducted from accounts receivable) Year ending December 31, 2020 $ 1,771 $ 4,997 $ (4,847) $ 1,921 Year ending December 31, 2019 $ 1,263 $ 6,190 $ (5,682) $ 1,771 Year ending December 31, 2018 $ 1,499 $ 4,115 $ (4,351) $ 1,263 The current-period provision for expected credit losses is net of bad debt recoveries of $1.2 million, $1.9 million and $0.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. |
Leases | Leases In February 2016, the FASB issued ASU No. 2016-02, Leases Year Year Ended Ended December 31, 2020 December 31, 2019 Finance lease cost amortization of right-of-use assets $ 22,850 $ 19,823 Interest expense on finance lease liabilities 18,892 17,709 Operating lease cost 17,362 15,688 Total lease costs 59,104 53,220 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases (19,121) (17,959) Operating cash flows from operating leases (18,664) (17,106) Financing cash flows from finance leases (23,990) (9,097) Right-of-use assets obtained in exchange for new finance lease liabilities 71,622 14,307 Right-of-use assets obtained in exchange for new operating lease liabilities 35,659 9,754 Weighted-average remaining lease term — finance leases (in years) 12.4 14.3 Weighted-average remaining lease term — operating leases (in years) 20.2 21.9 Weighted average discount rate — finance leases 10.3 % 11.0 % Weighted average discount rate — operating leases 5.6 % 5.6 % 1. Description of the business and summary of significant accounting policies: (Continued) Finance leases—fiber lease agreements The Company has entered into lease agreements with numerous providers of dark fiber under indefeasible-right-of use agreements (“IRUs”). These IRUs typically have initial terms of 15-20 years and include renewal options after the initial lease term. The Company establishes the number of renewal option periods used in determining the lease term based upon its assessment at the inception of the lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the dark fiber provider and the Company. Once the Company has accepted the related fiber route, leases that meet the criteria for treatment as finance leases are recorded as a finance lease obligation and an IRU asset. The interest rate used in determining the present value of the aggregate future minimum lease payments is the Company’s incremental borrowing rate for the reasonably certain lease term. The determination of the Company's incremental borrowing rate requires judgment. The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including level of collateralization and term to align with the term of the lease. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of December 31, 2020, the Company had committed to additional dark fiber IRU lease agreements totaling $21.0 million in future payments to be paid over periods of up to 20 years. These obligations begin when the related fiber is accepted, which is generally expected to occur in the next 12 months. The future minimum payments (principal and interest) under these finance leases are as follows (in thousands): For the Twelve Months Ending December 31, 2021 $ 34,246 2022 33,269 2023 32,353 2024 32,614 2025 27,399 Thereafter 232,145 Total minimum finance lease obligations 392,026 Less—amounts representing interest (172,886) Present value of minimum finance lease obligations 219,140 Current maturities (15,702) Finance lease obligations, net of current maturities $ 203,438 1. Description of the business and summary of significant accounting policies: (Continued) Operating leases The Company leases office space and certain data center facilities under operating leases. In certain cases the Company also enters into short-term operating leases for dark fiber. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments under the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the reasonably certain lease term. The implicit rates within the Company’s operating leases are generally not determinable and the Company uses its incremental borrowing rate at the lease commencement date to determine the present value of its lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including level of collateralization and term to align with the term of the lease. The determination of the Company's incremental borrowing rate requires judgment. The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including level of collateralization and term to align with the term of the lease. Certain of the Company’s leases include options to extend or terminate the lease. The Company establishes the number of renewal option periods used in determining the operating lease term based upon its assessment at the inception of the operating lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the landlord or dark fiber provider and the Company. Once the Company has accepted the related fiber route or the facility lease term has begun, the present value of the aggregate future minimum operating lease payments is recorded as an operating lease liability and a right-of-use leased asset. Lease incentives and deferred rent liabilities for facilities operating leases are presented with the right-of-use leased asset. Lease expense for lease payments is recognized on a straight-line basis over the term of the lease. The future minimum payments under these operating lease agreements are as follows (in thousands): For the Twelve Months Ending December 31, 2021 $ 17,755 2022 16,391 2023 16,490 2024 15,007 2025 12,554 Thereafter 118,157 Total minimum operating lease obligations 196,354 Less—amounts representing interest (73,885) Present value of minimum operating lease obligations 122,469 Current maturities (11,151) Lease obligations, net of current maturities $ 111,318 |
Revenue recognition | Revenue recognition The Company recognizes revenue under ASU No. 2014-09, Revenue from Contracts with Customers 1. Description of the business and summary of significant accounting policies: (Continued) The Company’s service offerings consist of on-net and off-net telecommunications services. Fixed fees are billed monthly in advance and usage fees are billed monthly in arrears. Amounts billed are due upon receipt and contract lengths range from month to month to 60 months . The Company satisfies its performance obligations to provide services to customers over time as the services are rendered. In accordance with ASC 606, revenue is recognized when a customer obtains the promised service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. The Company has adopted the practical expedient related to certain performance obligation disclosures since it has a right to consideration from its customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date. To achieve this core principle, the Company follows the following five steps: 1) Identification of the contract, or contracts with a customer 2) Identification of the performance obligations in the contract 3) Determination of the transaction price 4) Allocation of the transaction price to the performance obligations in the contract 5) Recognition of revenue when, or as, we satisfy a performance obligation Fees billed in connection with customer installations are deferred (as deferred revenue) and recognized as noted above. To the extent a customer contract is terminated prior to its contractual end the customer is subject to termination fees. The Company vigorously seeks payment of these amounts. The Company recognizes revenue for these amounts as they are collected. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the years ended December 31, 2020, 2019 and 2018 was $4.4 million, $4.4 million and $5.0 million, respectively. Amortization expense for contract costs for the years ended December 31, 2020, 2019 and 2018 was $17.1 million, $17.3 million and $16.8 million , respectively. |
Gross receipts taxes, universal service fund and other surcharges | Gross receipts taxes, universal service fund and other surcharges Revenue recognition standards include guidance relating to taxes or surcharges assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer and may include, but are not limited to, gross receipts taxes, excise taxes, Universal Service Fund fees and certain state regulatory fees. Such charges may be presented gross or net based upon the Company’s accounting policy election. The Company records certain excise taxes and surcharges on a gross basis and includes them in its revenues and costs of network operations. Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense) were $15.1 million, $14.9 million, and $12.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. |
Network operations | Network operations Network operations expenses include the costs of personnel and related operating expenses associated with service delivery, network management, and customer support, network facilities costs, fiber and equipment maintenance fees, leased circuit costs, access fees paid to building owners and certain excise taxes and surcharges recorded on a gross basis. The Company estimates its accruals for any disputed leased circuit obligations based upon the nature and age of the dispute. Network operations costs are impacted by the timing and amounts of disputed circuit costs. The Company generally records these disputed amounts when billed by the vendor and reverses these amounts when the vendor credit has been received or the dispute has otherwise been resolved. The Company does not allocate depreciation and amortization expense to its network operations expense. |
Foreign currency translation adjustment and comprehensive income | Foreign currency translation adjustment and comprehensive income The consolidated financial statements of the Company’s non-US operations are translated into US dollars using the period-end foreign currency exchange rates for assets and liabilities and the average foreign currency exchange rates for revenues and expenses. Gains and losses on translation of the accounts are accumulated and reported as a component of other comprehensive income in stockholders’ equity. The Company’s only components of “other comprehensive income” are currency translation adjustments for all periods presented. The Company considers the majority of its investments in its foreign subsidiaries to be long-term in nature. The Company’s foreign exchange transaction gains (losses) are included within interest income and other on the consolidated statements of comprehensive income. |
Financial instruments | Financial instruments The Company considers all highly liquid investments with an original maturity of three months or less at purchase to be cash equivalents. The Company determines the appropriate classification of its investments at the time of purchase and evaluates such designation at each balance sheet date. At December 31, 2020 and December 31, 2019, the carrying amount of cash and cash equivalents, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses approximated fair value because of the short-term nature of these instruments. The Company measures its cash equivalents at amortized cost, which approximates fair value based upon quoted market prices (Level 1). Based upon recent trading prices (Level 2—market approach) at December 31, 2020 the fair value of the Company's $445.0 million senior secured notes due 2022 was $458.4 million and the fair value of the Company’s €350.0 million ($429.3 million) senior unsecured notes due 2024 was $437.8 million. |
Concentrations of credit risk | Concentrations of credit risk The Company's assets that are exposed to credit risk consist of its cash and cash equivalents, other assets and accounts receivable. As of December 31, 2020 and 2019, the Company's cash equivalents were invested in demand deposit accounts, overnight investments and money market funds. The Company places its cash equivalents in instruments that meet high-quality credit standards as specified in the Company's investment policy guidelines. Accounts receivable are due from customers located in major metropolitan areas in the United States, Europe, Canada, Mexico, Asia, South America, Australia and Africa. Receivables from the Company's net-centric (wholesale) customers are generally subject to a higher degree of credit risk than the Company's corporate customers. The Company relies upon an equipment vendor for the majority of its network equipment and is also dependent upon many third-party fiber providers for providing its services to its customers. |
Property and equipment | Property and equipment Property and equipment are recorded at cost and depreciated once deployed using the straight-line method over the estimated useful lives of the assets. Useful lives are determined based on historical usage with consideration given to technological changes and trends in the industry that could impact the asset utilization. System infrastructure costs include the capitalized compensation costs of employees directly involved with construction activities and costs incurred by third-party contractors. Assets and liabilities under finance leases are recorded at the lesser of the present value of the aggregate future minimum lease payments or the fair value of the assets under lease. Leasehold improvements include costs associated with building improvements. The Company determines the number of renewal option periods, if any, included in the lease term for purposes of amortizing leasehold improvements and the lease term of its finance leases based upon its assessment at the inception of the lease for which the failure to renew the lease imposes a penalty on the Company in such amount that a renewal appears to be reasonably assured. Expenditures for maintenance and repairs are expensed as incurred. Depreciation and amortization periods are as follows: Type of asset Depreciation or amortization period Indefeasible rights of use (IRUs) Shorter of useful life or the IRU lease agreement; generally 15 Network equipment 3 Leasehold improvements Shorter of lease term, including reasonably assured renewal periods, or useful life Software 5 years Owned buildings 40 years Office and other equipment 3 to 7 years System infrastructure 5 |
Long-lived assets | Long-lived assets The Company’s long-lived assets include property and equipment. These long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment is determined by comparing the carrying value of these long-lived assets to management’s probability weighted estimate of the future undiscounted cash flows expected to result from the use of the assets. In the event an impairment exists, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset, which would be determined by using quoted market prices or valuation techniques such as the discounted present value of expected future cash flows, appraisals, or other pricing models. In the event there are changes in the planned use of the Company’s long-term assets or the Company’s expected future undiscounted cash flows are reduced significantly, the Company’s assessment of its ability to recover the carrying value of these assets could change. |
Equity-based compensation | Equity-based compensation The Company recognizes compensation expense for its share-based payments granted to its employees based on their grant date fair values with the expense being recognized on a straight-line basis over the requisite service period. The Company begins recording equity-based compensation expense related to performance awards when it is considered probable that the performance conditions will be met and for market-based awards compensation cost is recognized if the service condition is satisfied even if the market condition is not satisfied. Equity-based compensation expense is recognized in the statement of operations in a manner consistent with the classification of the employee's salary and other compensation. |
Income taxes | Income taxes The Company’s deferred tax assets or liabilities are computed based upon the differences between financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. Deferred income tax expenses or benefits are based upon the changes in the assets or liability from period to period. At each balance sheet date, the Company assesses the likelihood that it will be able to realize its deferred tax assets. Valuation allowances are established when management determines that it is “more likely than not” that some portion or all of the deferred tax asset may not be realized. The Company considers all available positive and negative evidence in assessing the need for a valuation allowance including its historical operating results, ongoing tax planning, and forecasts of future taxable income, on a jurisdiction by jurisdiction basis. The Company reduces its valuation allowance if the Company concludes that it is “more likely than not” that it would be able to realize its deferred tax assets. Management determines whether a tax position is more likely than not to be sustained upon examination based on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured to determine the amount of benefit to be recognized in the financial statements. The Company adjusts its estimated liabilities for uncertain tax positions periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of its income tax expense. |
Basic and diluted net income per common share | Basic and diluted net income per common share Basic earnings per share (“EPS”) excludes dilution for common stock equivalents and is computed by dividing net income or (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding during each period, adjusted for the effect of dilutive common stock equivalents. Shares of restricted stock are included in the computation of basic EPS as they vest and are included in diluted EPS, to the extent they are dilutive, determined using the treasury stock method. The following details the determination of the diluted weighted average shares: Year Ended Year Ended Year Ended December 31, December 31, December 31, 2020 2019 2018 Weighted average common shares—basic 45,947,772 45,542,315 45,280,161 Dilutive effect of stock options 80,849 32,222 33,134 Dilutive effect of restricted stock 639,577 505,858 467,659 Weighted average common shares—diluted 46,668,198 46,080,395 45,780,954 The following details unvested shares of restricted common stock as well as the anti-dilutive effects of stock options and restricted stock awards outstanding: December 31, December 31, December 31, 2020 2019 2018 Unvested shares of restricted common stock 1,339,596 1,283,281 1,187,586 Anti-dilutive options for common stock 32,324 39,608 53,114 Anti-dilutive shares of restricted common stock 223,118 348 3,545 |
Description of the business a_3
Description of the business and summary of significant accounting policies: (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Description of the business and summary of significant accounting policies: | |
Schedule of impact on financial statement line items from adopting ASC 326 | Current-period Balance at Provision for Write offs Balance at Beginning Expected Credit Charged Against End of Description of Period Losses Allowance Period Allowance for credit losses (deducted from accounts receivable) Year ending December 31, 2020 $ 1,771 $ 4,997 $ (4,847) $ 1,921 Year ending December 31, 2019 $ 1,263 $ 6,190 $ (5,682) $ 1,771 Year ending December 31, 2018 $ 1,499 $ 4,115 $ (4,351) $ 1,263 |
Schedule of lease cost | Year Year Ended Ended December 31, 2020 December 31, 2019 Finance lease cost amortization of right-of-use assets $ 22,850 $ 19,823 Interest expense on finance lease liabilities 18,892 17,709 Operating lease cost 17,362 15,688 Total lease costs 59,104 53,220 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases (19,121) (17,959) Operating cash flows from operating leases (18,664) (17,106) Financing cash flows from finance leases (23,990) (9,097) Right-of-use assets obtained in exchange for new finance lease liabilities 71,622 14,307 Right-of-use assets obtained in exchange for new operating lease liabilities 35,659 9,754 Weighted-average remaining lease term — finance leases (in years) 12.4 14.3 Weighted-average remaining lease term — operating leases (in years) 20.2 21.9 Weighted average discount rate — finance leases 10.3 % 11.0 % Weighted average discount rate — operating leases 5.6 % 5.6 % |
Schedule of future minimum payments under finance leases | The future minimum payments (principal and interest) under these finance leases are as follows (in thousands): For the Twelve Months Ending December 31, 2021 $ 34,246 2022 33,269 2023 32,353 2024 32,614 2025 27,399 Thereafter 232,145 Total minimum finance lease obligations 392,026 Less—amounts representing interest (172,886) Present value of minimum finance lease obligations 219,140 Current maturities (15,702) Finance lease obligations, net of current maturities $ 203,438 |
Schedule of future minimum payments under operating lease agreements | The future minimum payments under these operating lease agreements are as follows (in thousands): For the Twelve Months Ending December 31, 2021 $ 17,755 2022 16,391 2023 16,490 2024 15,007 2025 12,554 Thereafter 118,157 Total minimum operating lease obligations 196,354 Less—amounts representing interest (73,885) Present value of minimum operating lease obligations 122,469 Current maturities (11,151) Lease obligations, net of current maturities $ 111,318 |
Schedule of depreciation and amortization periods | Type of asset Depreciation or amortization period Indefeasible rights of use (IRUs) Shorter of useful life or the IRU lease agreement; generally 15 Network equipment 3 Leasehold improvements Shorter of lease term, including reasonably assured renewal periods, or useful life Software 5 years Owned buildings 40 years Office and other equipment 3 to 7 years System infrastructure 5 |
Schedule of diluted weighted average shares | Year Ended Year Ended Year Ended December 31, December 31, December 31, 2020 2019 2018 Weighted average common shares—basic 45,947,772 45,542,315 45,280,161 Dilutive effect of stock options 80,849 32,222 33,134 Dilutive effect of restricted stock 639,577 505,858 467,659 Weighted average common shares—diluted 46,668,198 46,080,395 45,780,954 |
Schedule of unvested and anti-dilutive shares | December 31, December 31, December 31, 2020 2019 2018 Unvested shares of restricted common stock 1,339,596 1,283,281 1,187,586 Anti-dilutive options for common stock 32,324 39,608 53,114 Anti-dilutive shares of restricted common stock 223,118 348 3,545 |
Property and equipment_ (Tables
Property and equipment: (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property and equipment: | |
Schedule of property and equipment | Property and equipment consisted of the following (in thousands): December 31, 2020 2019 Owned assets: Network equipment $ 611,265 $ 566,936 Leasehold improvements 241,379 227,388 System infrastructure 148,533 134,726 Software 10,609 10,035 Office and other equipment 19,611 18,169 Building 1,376 1,252 Land 116 106 1,032,889 958,612 Less—Accumulated depreciation and amortization (856,859) (790,033) 176,030 168,579 Assets under finance leases: IRUs 482,978 408,170 Less—Accumulated depreciation and amortization (228,673) (207,820) 254,305 200,350 Property and equipment, net $ 430,335 $ 368,929 |
Accrued and other liabilities_
Accrued and other liabilities: (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Accrued and other liabilities: | |
Schedule of accrued and other current liabilities | Accrued and other current liabilities consist of the following (in thousands): December 31, 2020 2019 Operating accruals $ 24,168 $ 23,695 Deferred revenue—current portion 4,651 4,316 Payroll and benefits 8,024 6,613 Taxes—non-income based 5,918 6,053 Interest 8,268 10,624 Total $ 51,029 $ 51,301 |
Long-term debt_ (Tables)
Long-term debt: (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Long-term debt: | |
Schedule of aggregate future contractual maturities of long-term debt | The aggregate future contractual maturities of long-term debt were as follows as of December 31, 2020 (in thousands): For the year ending December 31, 2021 $ 6,922 2022 445,790 2023 — 2024 429,263 2025 — Thereafter — Total $ 881,975 |
Income taxes_ (Tables)
Income taxes: (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income taxes: | |
Schedule of components of (loss) income before income taxes | Years Ended December 31, 2020 2019 2018 Domestic $ 23,808 $ 72,773 $ 63,878 Foreign (13,496) (20,099) (22,496) Total income before income taxes $ 10,312 $ 52,674 $ 41,382 |
Schedule of income tax expense | The income tax expense is comprised of the following (in thousands): Years Ended December 31, 2020 2019 2018 Current: Federal $ 32 $ — $ — State (2,908) (2,647) (1,522) Foreign (947) (370) (75) Deferred: Federal (1,867) (10,899) (9,746) State 1,241 (1,285) (802) Foreign 353 47 (570) Total income tax expense $ (4,096) $ (15,154) $ (12,715) |
Schedule of net deferred tax assets | Our consolidated temporary differences comprising our net deferred tax assets are as follows (in thousands): December 31, 2020 2019 Deferred Tax Assets: Net operating loss carry-forwards $ 273,999 $ 255,269 Tax credits 1,965 2,261 Equity-based compensation 4,901 4,116 Operating leases 40,081 32,289 Total gross deferred tax assets 320,946 293,935 Valuation allowance (150,589) (131,069) 170,357 162,866 Deferred Tax Liabilities: Depreciation and amortization 37,364 34,884 Accrued liabilities and other 105,554 107,711 Right-of-use assets 37,097 29,670 Gross deferred tax liabilities 180,015 172,265 Net deferred tax liabilities $ 9,658 $ 9,399 |
Schedule of reconciliation of the Federal statutory income taxes to the amounts reported in the financial statements | The following is a reconciliation of the Federal statutory income taxes to the amounts reported in the financial statements (in thousands). Years Ended December 31, 2020 2019 2018 Federal income tax expense at statutory rates $ (2,166) $ (11,061) $ (8,690) Effect of: State income taxes, net of federal benefit (1,091) (2,973) (2,665) Impact of foreign operations (365) (505) (694) Non-deductible expenses (411) (491) (1,218) Tax effect of TCJA from foreign earnings (66) (28) (130) Other 32 (32) — Changes in valuation allowance (29) (64) 682 Income tax expense $ (4,096) $ (15,154) $ (12,715) |
Commitments and contingencies_
Commitments and contingencies: (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and contingencies: | |
Schedule of future minimum annual payments under operating leases, other facility leases and building access agreements | The Company enters into leases for network equipment sites and for space in data center facilities. Future minimum annual payments under these arrangements are as follows (in thousands): For the year ending December 31, 2021 $ 19,235 2022 8,531 2023 5,586 2024 3,119 2025 1,240 Thereafter 1,690 $ 39,401 |
Stock option and award plan_ (T
Stock option and award plan: (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Stock option and award plan: | |
Schedule of assumptions used for determining the fair value of options granted | Years Ended December 31, Black-Scholes Assumptions 2020 2019 2018 Dividend yield 3.4 % 4.5 % 4.6 % Expected volatility 31.5 % 28.3 % 28.7 % Risk-free interest rate 1.1 % 2.5 % 2.5 % Expected life of the option term (in years) 4.2 4.3 4.4 |
Schedule of stock option activity | Number of Weighted-Average Options Exercise Price Outstanding at December 31, 2019 156,666 $ 46.21 Granted 73,148 $ 74.90 Cancelled and expired (39,837) $ 67.45 Exercised—intrinsic value $0.8 million; cash received $1.4 million (30,097) $ 45.94 Outstanding at December 31, 2020—$1.7 million intrinsic value and 6.9 years weighted-average remaining contractual term 159,880 $ 54.09 Exercisable at December 31, 2020—$1.5 million intrinsic value and 5.9 years weighted-average remaining contractual term 100,050 $ 47.63 Expected to vest—$1.6 million intrinsic value and 6.7 years weighted-average remaining contractual term 144,490 $ 52.71 |
Schedule of non-vested restricted stock awards | Weighted-Average Grant Date Non-vested awards Shares Fair Value Non-vested at December 31, 2019 1,283,281 $ 45.40 Granted 476,030 $ 75.18 Vested (366,287) $ 46.13 Forfeited (53,428) $ 47.55 Non-vested at December 31, 2020 1,339,596 $ 55.70 |
Geographic information_ (Tables
Geographic information: (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Geographic information: | |
Schedule of service revenue by geographic region and product class and long lived assets by geographic region | Year Ended December 31, 2020 On-net Off-net Non-core Total North America $ 330,924 $ 129,879 $ 474 $ 461,277 Europe 79,568 17,252 47 96,867 Asia Pacific 6,834 949 — 7,783 South America 2,056 48 — 2,104 Africa 72 — — 72 Total $ 419,454 $ 148,128 $ 521 $ 568,103 Year Ended December 31, 2019 On-net Off-net Non-core Total North America $ 319,330 $ 131,815 $ 422 $ 451,567 Europe 72,320 16,323 53 88,696 Asia Pacific 4,615 778 — 5,393 South America 488 15 — 503 Total $ 396,753 $ 148,931 $ 475 $ 546,159 Year Ended December 31, 2018 On-net Off-net Non-core Total North America $ 299,021 $ 128,510 $ 572 $ 428,103 Europe 72,958 15,918 62 88,938 Asia Pacific 2,562 576 — 3,138 South America 14 — — 14 Total $ 374,555 $ 145,004 $ 634 $ 520,193 December 31, December 31, 2020 2019 Long lived assets, net North America $ 306,652 $ 269,364 Europe and other 123,699 99,582 Total $ 430,351 $ 368,946 |
Quarterly financial informati_2
Quarterly financial information (unaudited): (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Quarterly financial information (unaudited): | |
Schedule of quarterly financial information | Three months ended March 31, June 30, September 30, December 31, 2020 2020 2020 2020 (in thousands, except share and per share amounts) Service revenue $ 140,915 $ 140,990 $ 142,302 $ 143,901 Network operations, including equity-based compensation expense 55,921 53,886 54,519 54,829 Operating income 25,850 27,574 26,036 27,384 Net income (loss) (1) 9,227 8,564 (6,555) (6,620) Net income (loss) per common share - basic 0.20 0.19 (0.11) (0.14) Net income (loss) per common share - diluted 0.20 0.18 (0.11) (0.14) Weighted-average number of common shares—basic 45,658,565 45,754,880 45,815,718 45,904,943 Weighted-average number of common shares—diluted 46,391,066 46,686,665 45,815,718 45,904,943 Three months ended March 31, June 30, September 30, December 31, 2019 2019 2019 2019 (in thousands, except share and per share amounts) Service revenue $ 134,137 $ 134,789 $ 136,942 $ 140,292 Network operations, including equity-based compensation expense 54,150 54,407 55,253 55,990 Operating income 24,400 22,022 25,799 28,033 Net income (2) 9,217 7,136 13,701 7,465 Net income per common share—basic and diluted 0.20 0.16 0.30 0.16 Weighted-average number of common shares—basic 45,223,157 45,354,327 45,438,656 45,553,727 Weighted-average number of common shares—diluted 45,644,236 45,912,291 46,019,691 46,145,970 (1) Included in net income (loss) for the three months ended March 31, 2020, June 30, 2020, September 30, 2020 and December 31, 2020 are unrealized gains and (losses) on foreign exchange on the Company's 2024 Notes of $2.9 million, ($3.4) million, ($17.3) million and $(19.2) million, respectively. Included in net income for the three months ended June 30, 2020 was a realized gain on foreign exchange on the Company’s 2024 Notes of $ 2.5 million. (2) Included in net income for the three months ended September 30, 2019 and December 31, 2019 are an unrealized gain (loss) on foreign exchange on the Company’s 2024 Notes of $6.1 million and ($4.0) million, respectively. |
Description of the business a_4
Description of the business and summary of significant accounting policies: (Details) | 12 Months Ended |
Dec. 31, 2020countryMBGB | |
Number of countries entity operates | country | 47 |
Minimum | |
On-net service speed range | MB | 100 |
Maximum | |
On-net service speed range | GB | 100 |
Description of the business a_5
Description of the business and summary of significant accounting policies: Allowance for credit losses (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Description of the business and summary of significant accounting policies: | |||
Balance at Beginning of Period | $ 1,771 | $ 1,263 | $ 1,499 |
Current-period Provision for Expected Credit Losses | 4,997 | 6,190 | 4,115 |
Write offs Charged Against Allowance (Write-offs) | (4,847) | (5,682) | (4,351) |
Balance at End of Period | 1,921 | 1,771 | 1,263 |
Net of bad debt recoveries | $ 1,200 | $ 1,900 | $ 900 |
Description of the business a_6
Description of the business and summary of significant accounting policies: Recent Accounting Pronouncements - to be adopted (Details) $ in Millions | Jan. 01, 2019USD ($) |
Description of the business and summary of significant accounting policies: | |
Asset and lease liability | $ 97.3 |
Description of the business a_7
Description of the business and summary of significant accounting policies: Leases (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Finance leases-fiber lease agreements | |||
Additional finance lease future payments due | $ 21,000 | ||
Cash paid for amounts included in the measurement of lease liabilities | |||
Finance lease cost amortization of right-of-use assets | 22,850 | $ 19,823 | |
Interest expense on finance lease liabilities | 18,892 | 17,709 | |
Operating lease cost | 17,362 | 15,688 | |
Total lease costs | 59,104 | 53,220 | |
Operating cash flows from finance leases | (19,121) | (17,959) | |
Operating cash flows from operating leases | (18,664) | (17,106) | |
Financing cash flows from finance leases | (23,990) | (9,097) | $ (10,286) |
Right-of-use assets obtained in exchange for new finance lease liabilities | 71,622 | 14,307 | |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 35,659 | $ 9,754 | |
Weighted-average remaining lease term - finance leases (in years) | 12 years 4 months 24 days | 14 years 3 months 18 days | |
Weighted-average remaining lease term - operating leases (in years) | 20 years 2 months 12 days | 21 years 10 months 24 days | |
Weighted average discount rate - finance leases | 10.30% | 11.00% | |
Weighted average discount rate - operating leases | 5.60% | 5.60% | |
Future minimum payments (principal and interest) under these finance leases | |||
2021 | $ 34,246 | ||
2022 | 33,269 | ||
2023 | 32,353 | ||
2024 | 32,614 | ||
2025 | 27,399 | ||
Thereafter | 232,145 | ||
Total minimum finance lease obligations | 392,026 | ||
Less-amounts representing interest | (172,886) | ||
Present value of minimum finance lease obligations | 219,140 | ||
Current maturities, finance lease obligations | (15,702) | $ (8,154) | |
Finance lease obligations, net of current maturities | 203,438 | 161,635 | |
Future minimum payments under these operating lease agreements | |||
2021 | 17,755 | ||
2022 | 16,391 | ||
2023 | 16,490 | ||
2024 | 15,007 | ||
2025 | 12,554 | ||
Thereafter | 118,157 | ||
Total minimum operating lease obligations | 196,354 | ||
Less-amounts representing interest | (73,885) | ||
Present value of minimum operating lease obligations | 122,469 | ||
Current maturities, operating lease liabilities | (11,151) | (10,101) | |
Lease obligations, net of current maturities | $ 111,318 | $ 86,690 | |
Minimum | |||
Finance leases-fiber lease agreements | |||
Initial terms | 15 years | ||
Maximum | |||
Finance leases-fiber lease agreements | |||
Initial terms | 20 years |
Description of the business a_8
Description of the business and summary of significant accounting policies: Revenue recognition (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Recent accounting pronouncements- adopted | |||
Contract costs | $ 20.6 | $ 18.7 | |
Maximum contract lengths for billing due upon receipts (in months) | 60 months | ||
ASU 2014-09 | |||
Recent accounting pronouncements- adopted | |||
Service revenue recognized | $ 4.4 | 4.4 | $ 5 |
Amortization expense for contract costs | $ 17.1 | $ 17.3 | $ 16.8 |
Description of the business a_9
Description of the business and summary of significant accounting policies: Gross receipts taxes, universal service fund and other surcharges (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Description of the business and summary of significant accounting policies: | |||
Excise taxes and surcharge | $ 15.1 | $ 14.9 | $ 12.5 |
Description of the business _10
Description of the business and summary of significant accounting policies: Financial instruments (Details) - Dec. 31, 2020 € in Millions, $ in Millions | USD ($) | EUR (€) |
Senior unsecured 2021 notes | ||
Financial instruments | ||
Senior notes | $ 445 | |
Senior unsecured 2021 notes | Level 2 | ||
Financial instruments | ||
Senior notes, fair value | 458.4 | |
Senior unsecured 2024 notes | ||
Financial instruments | ||
Senior notes | 429.3 | € 350 |
Senior unsecured 2024 notes | Level 2 | ||
Financial instruments | ||
Senior notes, fair value | $ 437.8 |
Description of the business _11
Description of the business and summary of significant accounting policies: Property and equipment (Details) | 12 Months Ended |
Dec. 31, 2020 | |
IRU | Minimum | |
Property and equipment | |
Depreciation or amortization period (in years) | 15 years |
IRU | Maximum | |
Property and equipment | |
Depreciation or amortization period (in years) | 20 years |
Network equipment | Minimum | |
Property and equipment | |
Depreciation or amortization period (in years) | 3 years |
Network equipment | Maximum | |
Property and equipment | |
Depreciation or amortization period (in years) | 8 years |
Software | |
Property and equipment | |
Depreciation or amortization period (in years) | 5 years |
Building | |
Property and equipment | |
Depreciation or amortization period (in years) | 40 years |
Office and other equipment | Minimum | |
Property and equipment | |
Depreciation or amortization period (in years) | 3 years |
Office and other equipment | Maximum | |
Property and equipment | |
Depreciation or amortization period (in years) | 7 years |
System infrastructure | Minimum | |
Property and equipment | |
Depreciation or amortization period (in years) | 5 years |
System infrastructure | Maximum | |
Property and equipment | |
Depreciation or amortization period (in years) | 10 years |
Description of the business _12
Description of the business and summary of significant accounting policies: Basic and diluted net income per common share (Details) - shares | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Diluted weighted average shares | |||
Weighted-average common shares - basic (in shares) | 45,947,772 | 45,542,315 | 45,280,161 |
Weighted average common shares-diluted | 46,668,198 | 46,080,395 | 45,780,954 |
Stock options | |||
Diluted weighted average shares | |||
Dilutive effect (options or restricted stock) | 80,849 | 32,222 | 33,134 |
Anti-dilutive effects | |||
Anti-dilutive (options or restricted stock) | 32,324 | 39,608 | 53,114 |
Restricted stock | |||
Diluted weighted average shares | |||
Dilutive effect (options or restricted stock) | 639,577 | 505,858 | 467,659 |
Anti-dilutive effects | |||
Unvested shares of restricted common stock | 1,339,596 | 1,283,281 | 1,187,586 |
Anti-dilutive (options or restricted stock) | 223,118 | 348 | 3,545 |
Property and equipment_ (Detail
Property and equipment: (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Property and equipment | |||
Property and equipment, gross | $ 1,515,867 | $ 1,366,782 | |
Accumulated depreciation and amortization | (1,085,532) | (997,853) | |
Total property and equipment, net | 430,335 | 368,929 | |
Depreciation and amortization | 83,477 | 80,247 | $ 81,233 |
Owned assets | |||
Property and equipment | |||
Property and equipment, gross | 1,032,889 | 958,612 | |
Accumulated depreciation and amortization | (856,859) | (790,033) | |
Total property and equipment, net | 176,030 | 168,579 | |
Network equipment | Owned assets | |||
Property and equipment | |||
Property and equipment, gross | 611,265 | 566,936 | |
Leasehold improvements | Owned assets | |||
Property and equipment | |||
Property and equipment, gross | 241,379 | 227,388 | |
System infrastructure | Owned assets | |||
Property and equipment | |||
Property and equipment, gross | 148,533 | 134,726 | |
Capitalized salaries and related benefits of employees | 12,100 | 10,700 | $ 10,500 |
Software | Owned assets | |||
Property and equipment | |||
Property and equipment, gross | 10,609 | 10,035 | |
Office and other equipment | Owned assets | |||
Property and equipment | |||
Property and equipment, gross | 19,611 | 18,169 | |
Building | Owned assets | |||
Property and equipment | |||
Property and equipment, gross | 1,376 | 1,252 | |
Land | Owned assets | |||
Property and equipment | |||
Property and equipment, gross | 116 | 106 | |
IRU | |||
Property and equipment | |||
Property and equipment, gross | 482,978 | 408,170 | |
Accumulated depreciation and amortization | (228,673) | (207,820) | |
Total property and equipment, net | $ 254,305 | $ 200,350 |
Property and equipment_ Exchang
Property and equipment: Exchange agreement (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Property and equipment | |||
Cash component of network equipment obtained in exchange transactions | $ 0.3 | $ 1 | $ 1 |
Exchange agreement | Level 3 | Network equipment | |||
Property and equipment | |||
Fair value of new equipment | $ 1.1 | $ 3.3 | $ 3.2 |
Property and equipment_ Install
Property and equipment: Installment payment agreement (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020USD ($)payment | Dec. 31, 2019USD ($) | |
Installment payment agreement | ||
Unamortized discount | $ 136 | $ 350 |
Network equipment | Note obligations | ||
Installment payment agreement | ||
Term of debt (in months) | 24 months | |
Number of payments first six months | payment | 0 | |
Number of equal payments | payment | 18 | |
Outstanding obligation | $ 7,700 | 12,500 |
Unamortized discount | $ 100 | $ 400 |
Accrued and other liabilities_2
Accrued and other liabilities: (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Accrued and other liabilities: | ||
Operating accruals | $ 24,168 | $ 23,695 |
Deferred revenue - current portion | 4,651 | 4,316 |
Payroll and benefits | 8,024 | 6,613 |
Taxes-non-income based | 5,918 | 6,053 |
Interest | 8,268 | 10,624 |
Total | $ 51,029 | $ 51,301 |
Long-term debt_ (Details)
Long-term debt: (Details) $ in Thousands, € in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Aug. 31, 2018USD ($) | Dec. 31, 2016USD ($) | Feb. 28, 2015USD ($) | Dec. 31, 2020USD ($) | Sep. 30, 2020USD ($) | Jun. 30, 2020USD ($) | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2020EUR (€) | Jun. 30, 2020EUR (€) | Jun. 30, 2019EUR (€) | |
Debt extinguishment, redemption and new debt issuances | ||||||||||||||||
Unrealized foreign currency exchange gain | $ (19,200) | $ (17,300) | $ (3,400) | $ 2,900 | $ (4,000) | $ 6,100 | $ (36,997) | $ 2,271 | ||||||||
Senior unsecured 2024 notes | ||||||||||||||||
Debt extinguishment, redemption and new debt issuances | ||||||||||||||||
Senior notes outstanding | 429,300 | 429,300 | € 350 | |||||||||||||
Face amount | € | € 215 | € 135 | ||||||||||||||
Interest rate (as a percent) | 4.375% | |||||||||||||||
Net proceeds | $ 240,300 | $ 152,100 | ||||||||||||||
Debt fair value | $ 429,300 | $ 151,400 | 429,300 | 151,400 | ||||||||||||
Unrealized foreign currency exchange gain | $ 37,000 | $ 2,300 | ||||||||||||||
Principal amount plus accrued and unpaid interest (as a percent) | 100.00% | |||||||||||||||
Senior secured 2022 notes | ||||||||||||||||
Debt extinguishment, redemption and new debt issuances | ||||||||||||||||
Face amount | $ 70,000 | $ 125,000 | $ 250,000 | |||||||||||||
Interest rate (as a percent) | 5.375% | |||||||||||||||
Net proceeds | $ 69,900 | $ 124,300 | $ 248,600 | |||||||||||||
Premium percentage (as a percent) | 101.75% | 100.375% | ||||||||||||||
Equity interest in foreign entities as collateral (in percent) | 65.00% | |||||||||||||||
Prior to June 30, 2021 | Senior unsecured 2024 notes | ||||||||||||||||
Debt extinguishment, redemption and new debt issuances | ||||||||||||||||
Premium percentage (as a percent) | 35.00% | |||||||||||||||
Principal amount plus accrued and unpaid interest (as a percent) | 104.375% | |||||||||||||||
After June 30, 2021 | Senior unsecured 2024 notes | ||||||||||||||||
Debt extinguishment, redemption and new debt issuances | ||||||||||||||||
Principal amount plus accrued and unpaid interest (as a percent) | 102.188% | |||||||||||||||
Prior to December 1, 2021 | Senior secured 2022 notes | ||||||||||||||||
Debt extinguishment, redemption and new debt issuances | ||||||||||||||||
Principal amount plus accrued and unpaid interest (as a percent) | 100.00% | |||||||||||||||
On or after December 1, 2021 | Senior secured 2022 notes | ||||||||||||||||
Debt extinguishment, redemption and new debt issuances | ||||||||||||||||
Principal amount plus accrued and unpaid interest (as a percent) | 100.00% |
Long-term debt_ Senior unsecure
Long-term debt: Senior unsecured notes (Details) € in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||
Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2016USD ($) | Dec. 31, 2020 | Jun. 30, 2020EUR (€) | Jun. 30, 2020USD ($) | Jun. 30, 2019EUR (€) | Apr. 09, 2014USD ($) | |
Senior unsecured 2021 notes | ||||||||
Senior unsecured notes- $189.2 million 2021 Notes | ||||||||
Principal amount | $ 189.2 | $ 189.2 | $ 200 | |||||
Interest rate (as a percent) | 5.625% | |||||||
Interest expense on original debt | 10.9 | |||||||
Interest expense on repurchased debt | $ 10.8 | |||||||
Senior unsecured 2021 notes | On or After April 15, 2017 | ||||||||
Senior unsecured notes- $189.2 million 2021 Notes | ||||||||
Principal amount plus accrued and unpaid interest (as a percent) | 100.00% | |||||||
Senior unsecured 2024 notes | ||||||||
Senior unsecured notes- $189.2 million 2021 Notes | ||||||||
Principal amount | € | € 215 | € 135 | ||||||
Interest rate (as a percent) | 4.375% | 4.375% | ||||||
Net proceeds | $ 240.3 | $ 152.1 | ||||||
Loss on extinguishment debt purchases | $ 0.6 | |||||||
Percentage of principal amount at which notes will be required to be repurchased in the event of a change of control | 101.00% | |||||||
Principal amount plus accrued and unpaid interest (as a percent) | 100.00% | |||||||
Minimum | ||||||||
Senior unsecured notes- $189.2 million 2021 Notes | ||||||||
Percentage of principal amount by debt holders entitled to redeem remaining 2024 notes | 90.00% |
Long-term debt_ Limitations und
Long-term debt: Limitations under the Indentures (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Long-term debt | |
Amount permitted for investment payments | $ 94 |
Restriction on incurring additional indebtedness | Senior secured 2022 notes | Minimum | |
Long-term debt | |
Consolidated secured leverage ratio | 3.5 |
Restriction on incurring additional indebtedness | Senior unsecured 2024 notes | Minimum | |
Long-term debt | |
Consolidated leverage ratio | 6 |
Consolidated secured leverage ratio | 4 |
Restriction on incurring additional indebtedness | Senior secured 2022 Notes and 2021 Notes | Minimum | |
Long-term debt | |
Consolidated leverage ratio | 5 |
Consolidated secured leverage ratio | 4.25 |
Restriction on dividends and stock purchases | Minimum | |
Long-term debt | |
Consolidated leverage ratio | 4.25 |
Increase in unrestricted payment amount | Maximum | |
Long-term debt | |
Consolidated leverage ratio | 4.25 |
Long-term debt_ Debt extinguish
Long-term debt: Debt extinguishment and redemption 2021 Notes (Details) $ in Thousands, € in Millions | 1 Months Ended | 12 Months Ended | |||||
Jun. 30, 2020USD ($) | Dec. 31, 2020USD ($) | Jun. 30, 2020EUR (€) | Dec. 31, 2019USD ($) | Jun. 30, 2019EUR (€) | Jun. 30, 2016USD ($) | Apr. 09, 2014USD ($) | |
Long-term debt | |||||||
Interest | $ 8,268 | $ 10,624 | |||||
Senior unsecured 2021 notes | |||||||
Long-term debt | |||||||
Interest rate (as a percent) | 5.625% | ||||||
Face amount | $ 189,200 | $ 189,200 | $ 200,000 | ||||
Interest | $ 1,600 | ||||||
Senior unsecured 2024 notes | |||||||
Long-term debt | |||||||
Interest rate (as a percent) | 4.375% | 4.375% | |||||
Principal amount plus accrued and unpaid interest (as a percent) | 100.00% | ||||||
Face amount | € | € 215 | € 135 | |||||
Loss on debt purchase | $ 600 |
Long-term debt_ Long-term debt
Long-term debt: Long-term debt maturities (Details) $ in Thousands | Dec. 31, 2020USD ($) |
Long-term debt: | |
2021 | $ 6,922 |
2022 | 445,790 |
2024 | 429,263 |
Total | $ 881,975 |
Income taxes_ Components of inc
Income taxes: Components of income before income taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Components of income before income taxes | |||
Domestic | $ 23,808 | $ 72,773 | $ 63,878 |
Foreign | (13,496) | (20,099) | (22,496) |
Income before income taxes | $ 10,312 | $ 52,674 | $ 41,382 |
Income taxes_ Income tax expens
Income taxes: Income tax expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Current: | |||
Federal | $ 32 | ||
State | (2,908) | $ (2,647) | $ (1,522) |
Foreign | (947) | (370) | (75) |
Deferred: | |||
Federal | (1,867) | (10,899) | (9,746) |
State | 1,241 | (1,285) | (802) |
Foreign | 353 | 47 | (570) |
Income tax expense | $ (4,096) | $ (15,154) | $ (12,715) |
Income taxes_ Temporary differe
Income taxes: Temporary differences (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred Tax Assets: | ||
Net operating loss carry-forwards | $ 273,999 | $ 255,269 |
Tax credits | 1,965 | 2,261 |
Equity-based compensation | 4,901 | 4,116 |
Operating leases | 40,081 | 32,289 |
Total gross deferred tax assets | 320,946 | 293,935 |
Deferred Tax Liabilities: | ||
Depreciation and amortization | 37,364 | 34,884 |
Accrued liabilities and other | 105,554 | 107,711 |
Right-of-use assets | 37,097 | 29,670 |
Gross deferred tax liabilities | 180,015 | 172,265 |
Deferred tax assets (liabilities) | ||
Net deferred tax liabilities | 9,658 | 9,399 |
Valuation allowance | (150,589) | (131,069) |
Net deferred tax assets | $ 170,357 | $ 162,866 |
Income taxes_ Loss carry-forwar
Income taxes: Loss carry-forwards (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Net operating loss carry-forwards | |||
Net operating loss carry-forwards | $ 1,100,000 | ||
Transition tax | 66 | $ 28 | $ 130 |
United States | |||
Net operating loss carry-forwards | |||
Net operating loss carry-forwards | 60,300 | ||
Carry-forwards limited for use | 32,000 | ||
Europe | |||
Net operating loss carry-forwards | |||
Net operating loss carry-forwards | 1,000,000 | ||
Carry-forwards limited for use | 153,900 | ||
Carry-forwards not limited for use | 870,000 | ||
Mexico | |||
Net operating loss carry-forwards | |||
Net operating loss carry-forwards | 5,300 | ||
Other than United States | |||
Net operating loss carry-forwards | |||
Carry-forwards not limited for use | $ 1,000,000 |
Income taxes_ Effective Income
Income taxes: Effective Income Tax Rate Reconciliation (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Reconciliation of the Federal statutory income taxes to the amounts reported in the financial statements | |||
Federal income tax expense at statutory rates | $ (2,166) | $ (11,061) | $ (8,690) |
State income tax, net of federal benefit | (1,091) | (2,973) | (2,665) |
Impact of foreign operations | (365) | (505) | (694) |
Non-deductible expenses | (411) | (491) | (1,218) |
Tax effect of TCJA from foreign earnings | (66) | (28) | (130) |
Other | 32 | (32) | |
Change in valuation allowance | (29) | (64) | 682 |
Income tax expense | $ (4,096) | $ (15,154) | $ (12,715) |
Commitments and contingencies_2
Commitments and contingencies: Current and potential litigation (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Mar. 31, 2015 |
Commitments and contingencies | ||
Estimate of possible loss in excess of accrual | $ 3.3 | |
Spain | ||
Commitments and contingencies | ||
Estimate of possible loss | $ 9 |
Commitments and contingencies_3
Commitments and contingencies: Capital leases - future minimum payments (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Future minimum payments under capital lease agreements | |||
2021 | $ 19,235 | ||
2022 | 8,531 | ||
2023 | 5,586 | ||
2024 | 3,119 | ||
2025 | 1,240 | ||
Thereafter | 1,690 | ||
Total minimum lease obligations | 39,401 | ||
Expenses related to operating lease arrangements | $ 21,000 | $ 20,600 | $ 20,800 |
Commitments and contingencies_4
Commitments and contingencies: Unconditional purchase obligations (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Unconditional purchase obligations | ||
2021 | $ 2,500 | |
2022 | 800 | |
2023 | 700 | |
2024 | 700 | |
2025 | 700 | |
Thereafter | 15,600 | |
Unconditional purchase obligation | 6,786 | $ 9,063 |
Equipment and services | ||
Unconditional purchase obligations | ||
Unconditional purchase obligation | 10,600 | |
IRU | ||
Unconditional purchase obligations | ||
Unconditional purchase obligation | $ 21,000 | |
Maximum period of maintenance payment (in years) | 20 years |
Commitments and contingencies_5
Commitments and contingencies: Defined contribution plan (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Commitments and contingencies: | |||
Matching cash payments towards defined contribution plan | $ 0.9 | $ 0.8 | $ 0.8 |
Stockholders' equity_ Authorize
Stockholders' equity: Authorized shares (Details) | 12 Months Ended | |
Dec. 31, 2020Vote / shares$ / sharesshares | Dec. 31, 2019$ / sharesshares | |
Stockholders' equity: | ||
Common stock, shares authorized | shares | 75,000,000 | 75,000,000 |
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 |
Preferred stock, authorized but unissued shares (in shares) | shares | 10,000 | |
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | |
Voting rights per common share | Vote / shares | 1 |
Stockholders' equity_ Common st
Stockholders' equity: Common stock buybacks (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Common stock buyback program stock option and award plan: | |||
Authorized amount for common stock repurchases | $ 50 | ||
Remaining authorized amount for common stock repurchases | $ 30.4 | ||
Repurchase of common stock (in shares) | 79,056 | 0 | 147,995 |
Cost of shares of common stock | $ 4.5 | $ 6.6 |
Stock option and award plan_ In
Stock option and award plan: Incentive award plan (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Stock options | |
Incentive award plan | |
Vesting period | 4 years |
Expiration period | 10 years |
Exercise period of options vested, when an employee is terminated prior to full vesting | 90 days |
Restricted stock | Minimum | |
Incentive award plan | |
Vesting period | 3 years |
Restricted stock | Maximum | |
Incentive award plan | |
Vesting period | 4 years |
Stock option and award plan_ _2
Stock option and award plan: Incentive award plan fair value assumptions (Details) - Stock options - $ / shares | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Incentive award plan | |||
Weighted-average per share grant date fair value (in dollars per share) | $ 13.21 | $ 8.92 | $ 8.45 |
Assumptions used for determining the fair value of options granted | |||
Dividend yield (as a percent) | 3.40% | 4.50% | 4.60% |
Expected volatility (as a percent) | 31.50% | 28.30% | 28.70% |
Risk-free interest rate (as a percent) | 1.10% | 2.50% | 2.50% |
Expected life of the option term (in years) | 4 years 2 months 12 days | 4 years 3 months 18 days | 4 years 4 months 24 days |
Stock option and award plan_ _3
Stock option and award plan: Incentive award plan - activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Stock option activity parenthetical | |||
Proceeds from exercises of common stock options | $ 1,382 | $ 1,637 | $ 1,768 |
Stock options | |||
Stock option activity | |||
Outstanding at the beginning of the period (in shares) | 156,666 | ||
Granted (in shares) | 73,148 | ||
Cancelled and expired (in shares) | (39,837) | ||
Exercised (in shares) | (30,097) | ||
Outstanding at the end of the period (in shares) | 159,880 | 156,666 | |
Exercisable at the end of the period (in shares) | 100,050 | ||
Expected to vest (in shares) | 144,490 | ||
Weighted-Average Exercise Price | |||
Outstanding at the beginning of the period (in dollars per share) | $ 46.21 | ||
Granted (in dollars per share) | 74.90 | ||
Cancelled and expired (in dollars per share) | 67.45 | ||
Exercised (in dollars per share) | 45.94 | ||
Outstanding at the end of the period (in dollars per share) | 54.09 | $ 46.21 | |
Exercisable at the end of the period (in dollars per share) | 47.63 | ||
Expected to vest (in dollars per share) | $ 52.71 | ||
Stock option activity parenthetical | |||
Exercised - intrinsic value | $ 800 | ||
Proceeds from exercises of common stock options | 1,400 | ||
Outstanding end of period - intrinsic value | $ 1,700 | ||
Outstanding - weighted-average term | 6 years 10 months 24 days | ||
Exercisable - intrinsic value | $ 1,500 | ||
Exercisable - weighted average term | 5 years 10 months 24 days | ||
Expected to vest - intrinsic value | $ 1,600 | ||
Expected to vest - weighted average term | 6 years 8 months 12 days |
Stock option and award plan_ No
Stock option and award plan: Non-vested restricted stock (Details) - Restricted stock - $ / shares | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Number of shares | |||
Non-vested at the beginning of the period (in shares) | 1,283,281 | ||
Granted (in shares) | 476,030 | 500,000 | 500,000 |
Vested (in shares) | (366,287) | ||
Forfeited (in shares) | (53,428) | ||
Non-vested at the end of the period (in shares) | 1,339,596 | 1,283,281 | |
Weighted-Average Grant Date Fair Value | |||
Non-vested at the beginning of the period (in dollars per share) | $ 45.40 | ||
Granted (in dollars per share) | 75.18 | $ 53.53 | $ 44.02 |
Vested (in dollars per share) | 46.13 | ||
Forfeited (in dollars per share) | 47.55 | ||
Non-vested at the end of the period (in dollars per share) | $ 55.70 | $ 45.40 |
Stock option and award plan_ _4
Stock option and award plan: Incentive award plan, additional information (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Incentive Award Plan, additional information | |||
Equity-based compensation expense | $ 23,525 | $ 18,460 | $ 17,708 |
Income tax benefit related to stock options and restricted stock | 4,200 | 3,000 | 1,800 |
Capitalized compensation expense | 2,300 | $ 1,800 | $ 1,700 |
Total unrecognized compensation cost | $ 40,700 | ||
Weighted-average period to recognize unrecognized compensation cost | 2 years | ||
Restricted stock | |||
Incentive Award Plan, additional information | |||
Granted (in dollars per share) | $ 75.18 | $ 53.53 | $ 44.02 |
Granted (in shares) | 476,030 | 500,000 | 500,000 |
Fair value of shares | $ 25,400 | $ 20,800 | $ 19,100 |
Related party transactions_ (De
Related party transactions: (Details) - CEO - Lease - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended | ||
May 31, 2015 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Office lease | ||||
Fixed annual rent | $ 1 | |||
Lease term (in years) | 5 years | |||
Notice period for cancellation of lease | 60 days | |||
Payment for rent and related costs (in dollars) | $ 1.7 | $ 1.7 | $ 1.7 |
Geographic information_ (Detail
Geographic information: (Details) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020USD ($)segment | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
Geographic information | |||
Number of operating segments | segment | 1 | ||
Revenues | $ 568,103 | $ 546,159 | $ 520,193 |
Long-lived assets, net | 430,351 | 368,946 | |
On-net | |||
Geographic information | |||
Revenues | 419,454 | 396,753 | 374,555 |
Off-net | |||
Geographic information | |||
Revenues | 148,128 | 148,931 | 145,004 |
Non-core | |||
Geographic information | |||
Revenues | 521 | 475 | 634 |
North America | |||
Geographic information | |||
Revenues | 461,277 | 451,567 | 428,103 |
Long-lived assets, net | 306,652 | 269,364 | |
North America | On-net | |||
Geographic information | |||
Revenues | 330,924 | 319,330 | 299,021 |
North America | Off-net | |||
Geographic information | |||
Revenues | 129,879 | 131,815 | 128,510 |
North America | Non-core | |||
Geographic information | |||
Revenues | 474 | 422 | 572 |
Europe | |||
Geographic information | |||
Revenues | 96,867 | 88,696 | 88,938 |
Europe | On-net | |||
Geographic information | |||
Revenues | 79,568 | 72,320 | 72,958 |
Europe | Off-net | |||
Geographic information | |||
Revenues | 17,252 | 16,323 | 15,918 |
Europe | Non-core | |||
Geographic information | |||
Revenues | 47 | 53 | 62 |
Europe and other | |||
Geographic information | |||
Long-lived assets, net | 123,699 | 99,582 | |
South America | |||
Geographic information | |||
Revenues | 2,104 | 503 | 14 |
South America | On-net | |||
Geographic information | |||
Revenues | 2,056 | 488 | 14 |
South America | Off-net | |||
Geographic information | |||
Revenues | 48 | 15 | |
Asia Pacific | |||
Geographic information | |||
Revenues | 7,783 | 5,393 | 3,138 |
Asia Pacific | On-net | |||
Geographic information | |||
Revenues | 6,834 | 4,615 | 2,562 |
Asia Pacific | Off-net | |||
Geographic information | |||
Revenues | 949 | $ 778 | $ 576 |
Africa | |||
Geographic information | |||
Revenues | 72 | ||
Africa | On-net | |||
Geographic information | |||
Revenues | $ 72 |
Quarterly financial informati_3
Quarterly financial information (unaudited): (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Service revenue | $ 568,103 | $ 546,159 | $ 520,193 | ||||||||
Network operations, including equity-based compensation expense | 219,157 | 219,801 | 219,526 | ||||||||
Operating income | 106,922 | 100,257 | 86,558 | ||||||||
Net income (loss) | $ 6,216 | $ 37,520 | $ 28,667 | ||||||||
Net income (loss) per common share - basic | $ 0.14 | $ 0.82 | $ 0.63 | ||||||||
Net income (loss) per common share - diluted | $ 0.13 | $ 0.81 | $ 0.63 | ||||||||
Weighted-average number of common shares-basic | 45,947,772 | 45,542,315 | 45,280,161 | ||||||||
Weighted-average number of common shares-diluted | 46,668,198 | 46,080,395 | 45,780,954 | ||||||||
Unrealized foreign currency exchange gain | $ (19,200) | $ (17,300) | $ (3,400) | $ 2,900 | $ (4,000) | $ 6,100 | $ (36,997) | $ 2,271 | |||
Realized foreign exchange gain on issuance on 2024 Euro Notes | 2,500 | $ 2,533 | |||||||||
Unaudited | |||||||||||
Service revenue | 143,901 | 142,302 | 140,990 | 140,915 | 140,292 | 136,942 | $ 134,789 | $ 134,137 | |||
Network operations, including equity-based compensation expense | 54,829 | 54,519 | 53,886 | 55,921 | 55,990 | 55,253 | 54,407 | 54,150 | |||
Operating income | 27,384 | 26,036 | 27,574 | 25,850 | 28,033 | 25,799 | 22,022 | 24,400 | |||
Net income (loss) | $ (6,620) | $ (6,555) | $ 8,564 | $ 9,227 | $ 7,465 | $ 13,701 | $ 7,136 | $ 9,217 | |||
Net income (loss) per common share - basic | $ (0.14) | $ (0.11) | $ 0.19 | $ 0.20 | |||||||
Net income (loss) per common share - diluted | $ (0.14) | $ (0.11) | $ 0.18 | $ 0.20 | |||||||
Net income per common share-basic and diluted | $ 0.16 | $ 0.30 | $ 0.16 | $ 0.20 | |||||||
Weighted-average number of common shares-basic | 45,904,943 | 45,815,718 | 45,754,880 | 45,658,565 | 45,553,727 | 45,438,656 | 45,354,327 | 45,223,157 | |||
Weighted-average number of common shares-diluted | 45,904,943 | 45,815,718 | 46,686,665 | 46,391,066 | 46,145,970 | 46,019,691 | 45,912,291 | 45,644,236 |
Subsequent Events_ (Details)
Subsequent Events: (Details) - USD ($) $ / shares in Units, $ in Thousands | Mar. 26, 2021 | Feb. 24, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Subsequent events | |||||
Dividends paid | $ 129,412 | $ 112,647 | $ 97,887 | ||
Gains (Losses) on Extinguishment of Debt | $ (638) | ||||
Subsequent Event | |||||
Subsequent events | |||||
Quarterly dividend payment approved (per share) | $ 0.755 | ||||
Dividends paid | $ 34,600 |
Schedule II VALUATION AND QUA_2
Schedule II VALUATION AND QUALIFYING ACCOUNTS (Details) - Deferred tax valuation allowance - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Movement in valuation and qualifying accounts | |||
Balance at Beginning of Period | $ 131,069 | $ 126,579 | $ 129,673 |
Charged to Costs and Expenses | 20,599 | 5,785 | 2,138 |
Deductions | (1,079) | (1,295) | (5,232) |
Balance at End of Period | $ 150,589 | $ 131,069 | $ 126,579 |