Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | Apr. 28, 2021 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2021 | |
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 | |
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 | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 47,535,572 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001158324 | |
Amendment Flag | false | |
ICFR Auditor Attestation Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 237,980 | $ 371,301 |
Accounts receivable, net of allowance for credit losses of $1,457 and $1,921, respectively | 41,234 | 44,185 |
Prepaid expenses and other current assets | 37,056 | 40,851 |
Total current assets | 316,270 | 456,337 |
Property and equipment, net | 425,492 | 430,335 |
Right-of-use leased assets | 97,365 | 99,666 |
Deposits and other assets | 13,835 | 14,139 |
Total assets | 852,962 | 1,000,477 |
Current liabilities: | ||
Accounts payable | 12,190 | 9,775 |
Accrued and other current liabilities | 49,656 | 51,029 |
Senior secured 2022 Notes, net of unamortized debt costs of $733 and including premium of $430 | 328,777 | |
Installment payment agreement, current portion, net of discount of $80 and $136, respectively | 5,035 | 6,786 |
Current maturities, operating lease liabilities | 11,055 | 11,151 |
Current maturities, finance lease obligations | 15,996 | 15,702 |
Total current liabilities | 422,709 | 94,443 |
Operating lease liabilities, net of current maturities | 109,377 | 111,318 |
Finance lease obligations, net of current maturities | 202,514 | 203,438 |
Other long term liabilities | 19,221 | 14,792 |
Total liabilities | 1,160,521 | 1,293,643 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, $0.001 par value; 75,000,000 shares authorized; 47,522,672 and 47,214,077 shares issued and outstanding, respectively | 48 | 47 |
Additional paid-in capital | 523,913 | 515,867 |
Accumulated other comprehensive income - foreign currency translation | (6,516) | (1,306) |
Accumulated deficit | (825,004) | (807,774) |
Total stockholders' deficit | (307,559) | (293,166) |
Total liabilities and stockholders' equity | 852,962 | 1,000,477 |
Senior secured 2022 Notes | ||
Current liabilities: | ||
Senior unsecured Notes | 444,492 | |
Senior unsecured 2024 Notes | ||
Current liabilities: | ||
Senior unsecured Notes | $ 406,700 | $ 425,160 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Assets | ||
Accounts receivable, allowance for credit losses (in dollars) | $ 1,457 | $ 1,921 |
Liabilities and stockholders' equity | ||
Installment payment agreement, current portion, net of discounts | $ 80 | $ 136 |
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 | 47,522,672 | 47,214,077 |
Common stock, shares outstanding | 47,522,672 | 47,214,077 |
Senior secured 2022 Notes | ||
Liabilities and stockholders' equity | ||
Unamortized debt issuance expense current | $ 733 | |
Unamortized debt costs | $ 1,052 | |
Unamortized debt premium current | 430 | |
Unamortized debt premium noncurrent | 544 | |
Senior unsecured 2024 Notes | ||
Liabilities and stockholders' equity | ||
Unamortized debt costs | 2,751 | 2,961 |
Unamortized debt premium noncurrent | $ 1,020 | $ 1,142 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Service revenue | $ 146,777 | $ 140,915 |
Operating expenses: | ||
Network operations (including $2,076 and $252 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below) | 57,092 | 55,921 |
Selling, general, and administrative (including $5,231 and $4,823 of equity-based compensation expense, respectively) | 41,442 | 39,675 |
Depreciation and amortization | 21,970 | 19,508 |
Total operating expenses | 120,504 | 115,104 |
Gains on equipment transactions | 18 | 39 |
Operating income | 26,291 | 25,850 |
Interest expense | (15,836) | (15,220) |
Unrealized foreign exchange gain on 2024 Euro Notes | 18,870 | 2,904 |
Loss on debt extinguishment and repurchase - 2022 Notes | (3,868) | |
Interest income and other, net | 744 | (699) |
Income before income taxes | 26,201 | 12,835 |
Income tax provision | (7,350) | (3,608) |
Net income | 18,851 | 9,227 |
Comprehensive income: | ||
Net income | 18,851 | 9,227 |
Foreign currency translation adjustment | (5,210) | (3,493) |
Comprehensive income | $ 13,641 | $ 5,734 |
Earnings Per Share, Basic and Diluted (in dollars per share) | $ 0.41 | $ 0.20 |
Dividends declared per common share (in dollars per share) | $ 0.755 | $ 0.660 |
Weighted-average common shares - basic (in shares) | 46,067,096 | 45,658,565 |
Weighted-average common shares - diluted (in shares) | 46,507,258 | 46,391,066 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Equity-based compensation expense | $ 7,307 | $ 5,075 |
Network operations | ||
Equity-based compensation expense | 2,076 | 252 |
Selling, general and administrative | ||
Equity-based compensation expense | $ 5,231 | $ 4,823 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash flows from operating activities: | ||
Net income | $ 18,851 | $ 9,227 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 21,970 | 19,508 |
Amortization of debt discount and premium | 441 | 477 |
Equity-based compensation expense (net of amounts capitalized) | 7,307 | 5,075 |
Gains - equipment transactions and other, net | 371 | (454) |
Unrealized foreign currency exchange gain on 2024 Euro notes | (18,870) | (2,904) |
Loss on extinguishment of 2022 Notes | 3,868 | |
Deferred income taxes | 4,497 | 2,439 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,420 | (2,790) |
Prepaid expenses and other current assets | 2,826 | (3,093) |
Accounts payable, accrued liabilities and other long-term liabilities | 2,951 | 1,067 |
Deposits and other assets | 474 | (94) |
Net cash provided by operating activities | 47,106 | 28,458 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (15,444) | (12,866) |
Net cash used in investing activities | (15,444) | (12,866) |
Cash flows from financing activities: | ||
Dividends paid | (36,081) | (30,557) |
Repurchase and extinguishment of 2022 Notes | (119,679) | |
Proceeds from exercises of common stock options | 215 | 718 |
Principal payments on installment payment agreement | (2,378) | (2,566) |
Principal payments of finance lease obligations | (5,744) | (6,167) |
Net cash used in financing activities | (163,667) | (38,572) |
Effect of exchange rates changes on cash | (1,316) | (1,326) |
Net decrease in cash and cash equivalents | (133,321) | (24,306) |
Cash and cash equivalents, beginning of period | 371,301 | 399,422 |
Cash and cash equivalents, end of period | 237,980 | 375,116 |
Supplemental disclosure of non-cash financing activities: | ||
Non-cash component of network equipment obtained in exchange transactions | 36 | |
PP&E obtained for installment payment agreement | 2,343 | |
Finance lease obligations incurred | $ 6,336 | $ 3,164 |
Description of the business_
Description of the business: | 3 Months Ended |
Mar. 31, 2021 | |
Description of the business: | |
Description of the business: | 1. Description of the business: 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 Group's assets, contractual arrangements, and operations are executed by Cogent Communications, Inc. and its subsidiaries. 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 48 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 Internet Service Providers (“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 the Company’s own 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. Basis of presentation The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments that the Company considers necessary for the fair presentation of its results of operations and cash flows for the interim periods covered, and of the financial position of the Company at the date of the interim condensed consolidated balance sheet. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. While the Company believes that the disclosures are adequate to not make the information misleading, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in its annual report on Form 10-K for the year ended December 31, 2020. The accompanying unaudited condensed consolidated financial statements include all wholly owned subsidiaries. All inter-company accounts and activity have been eliminated. Use of estimates The preparation of consolidated financial statements in conformity with US GAAP 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. Financial instruments At March 31, 2021 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 March 31, 2021 the fair value of the Company’s remaining $329.1 million senior secured notes due in 2022 (“2022 Notes”) was $337.3 million and the fair value of the Company’s €350.0 million ($410.5 million) senior unsecured notes due in 2024 (“2024 Notes”) was $419.7 million. 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 revenue and network operations expense. Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense)were $4.5 million and $3.7 million for the three months ended March 31, 2021 and March 31, 2020, respectively. 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 diluted weighted average shares: Three Months Ended Three Months Ended March 31, 2021 March 31, 2020 Weighted average common shares - basic 46,067,096 45,658,565 Dilutive effect of stock options 26,065 51,131 Dilutive effect of restricted stock 414,097 681,370 Weighted average common shares - diluted 46,507,258 46,391,066 The following details unvested shares of restricted common stock as well as the anti-dilutive effects of stock options and restricted stock awards outstanding: March 31, 2021 March 31, 2020 Unvested shares of restricted common stock 1,454,033 1,493,821 Anti-dilutive options for common stock 77,832 11,884 Anti-dilutive shares of restricted common stock 392,410 93,070 Stockholders’ Deficit The following details the changes in stockholders’ deficit for the three months ended March 31, 2021 and March 31, 2020 (in thousands except share amounts): Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2020 47,214,077 $ 47 $ 515,867 $ (1,306) $ (807,774) $ (293,166) Forfeitures of shares granted to employees (19,676) — — — — — Equity-based compensation — — 7,831 — — 7,831 Foreign currency translation — — — (5,210) — (5,210) Issuances of common stock 323,700 1 — — — 1 Exercises of options 4,571 — 215 — — 215 Dividends paid — — — — (36,081) (36,081) Net income — — — — 18,851 18,851 Balance at March 31, 2021 47,522,672 $ 48 $ 523,913 $ (6,516) $ (825,004) $ (307,559) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2019 46,840,434 $ 47 $ 493,178 $ (12,326) $ (684,578) $ (203,679) Forfeitures of shares granted to employees (36,308) — — — — — Equity-based compensation — — 5,559 — — 5,559 Foreign currency translation — — — (3,493) — (3,493) Issuances of common stock 319,750 — — — — — Exercises of options 15,493 — 719 — — 719 Dividends paid — — — — (30,557) (30,557) Net income — — — — 9,227 9,227 Balance at March 31, 2020 47,139,369 $ 47 $ 499,455 $ (15,819) $ (705,908) $ (222,225) Revenue recognition The Company recognizes revenue under ASU No. 2014-09, Revenue from Contracts with Customers 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, the Company satisfies its performance obligations 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 termination fees. The Company recognizes revenue for termination fees as they are collected. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the three months ended March 31, 2021 was $1.8 million and during the three months ended March 31, 2020 was $1.6 million. Amortization expense for contract costs was $4.6 million for the three months ended March 31, 2021 and $4.2 million for the three months ended March 31, 2020. Leases In February 2016, the FASB issued ASU No. 2016-02, Leases million. The operating lease liability is not considered a liability under the consolidated leverage ratio calculations in the indentures governing the Company’s senior unsecured and senior secured note obligations. The Company has made an accounting policy election to not apply the recognition requirements of ASU 2016-02 to its short-term leases - leases with a term of one year or less. The Company has also elected to apply certain practical expedients under ASU 2016-02 including not separating lease and nonlease components on its finance and operating leases. Three Months Three Months Ended Ended March 31, 2021 March 31, 2020 Finance lease costs Amortization of right-of-use assets $ 6,346 $ 4,762 Interest expense on finance lease liabilities 5,226 4,473 Operating lease cost 4,417 4,187 Total lease costs 15,989 13,422 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases (5,396) (4,780) Operating cash flows from operating leases (4,993) (4,441) Financing cash flows from finance leases (5,744) (6,167) Right-of-use assets obtained in exchange for new finance lease liabilities 6,336 3,164 Right-of-use assets obtained in exchange for new operating lease liabilities 2,720 5,530 Weighted-average remaining lease term — finance leases (in years) 12.4 14.1 Weighted-average remaining lease term — operating leases (in years) 19.9 20.9 Weighted average discount rate — finance leases 10.1 % 10.9 % Weighted average discount rate — operating leases 5.6 % 5.6 % 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 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. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of March 31, 2021, the Company had committed to additional dark fiber IRU lease agreements totaling The future minimum payments (principal and interest) under these finance leases are as follows (in thousands): For the twelve months ending March 31, 2022 $ 34,395 2023 33,263 2024 32,461 2025 32,907 2026 25,673 Thereafter 229,069 Total minimum finance lease obligations 387,768 Less—amounts representing interest (169,258) Present value of minimum finance lease obligations 218,510 Current maturities (15,996) Finance lease obligations, net of current maturities $ 202,514 Operating leases The Company leases office space and 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 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. 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, and netted against, 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 March 31, 2022 $ 17,434 2023 16,627 2024 16,398 2025 14,924 2026 12,126 Thereafter 114,121 Total minimum operating lease obligations 191,630 Less—amounts representing interest (71,198) Present value of minimum operating lease obligations 120,432 Current maturities (11,055) Lease obligations, net of current maturities $ 109,377 Allowance for credit losses 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 ("ASU 2016-13") later codified as Accounting Standards Codification ("ASC") 326 ("ASC 326"), using the modified retrospective transition approach. This guidance introduces a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. As of January 1, 2020, the Company maintained an allowance for credit losses to cover its current expected credit losses ("CECL") on its trade receivables arising from the failure of customers to make contractual payments. The Company estimates credit losses expected over the life of its trade receivables based on historical information combined with current conditions that may affect a customer's ability to pay and reasonable and supportable forecasts. While the Company uses various credit quality metrics, it primarily monitors collectability by reviewing the duration of collection pursuits on its delinquent trade receivables. Based on the Company's experience, the customer's delinquency status is the strongest indicator of the credit quality of the underlying trade receivables, which is analyzed monthly. Adoption of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements and related disclosures and no cumulative adjustment was recorded. Current-period Provision for Write offs Beginning Expected Credit Charged Against Ending Description Balance Losses Allowance Balance Allowance for credit losses (deducted from accounts receivable) Three months ending March 31, 2021 $ 1,921 $ 2,012 $ (2,476) $ 1,457 Three months ending March 31, 2020 $ 1,771 $ 1,336 $ (1,131) $ 1,976 Net bad debt expense for the three months ended March 31, 2021 was $0.8 million which is net of bad debt recoveries of $1.2 million. Net bad debt expense for the three months ended March 31, 2020 was $1.1 million which is net of bad debt recoveries of $0.2 million. |
Property and equipment_
Property and equipment: | 3 Months Ended |
Mar. 31, 2021 | |
Property and equipment: | |
Property and equipment: | 2. Property and equipment: Depreciation and amortization expense related to property and equipment and finance leases was 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 were no payments under each note obligation for the first six months followed by eighteen equal installment payments for the remaining eighteen month term until July 2020 when additional borrowings under the IPA expired. As of March 31, 2021 and December 31, 2020 there was million, respectively, of note obligations outstanding under the IPA, secured by the related equipment. The Company recorded the assets purchased and the net present value of the note obligation utilizing an imputed interest rate. The resulting discounts totaling |
Long-term debt_
Long-term debt: | 3 Months Ended |
Mar. 31, 2021 | |
Long-term debt: | |
Long-term debt: | 3. Long-term debt: Limitations under the indentures The indentures governing the Company's 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 Debt extinguishment and repurchase of 2022 Notes In March 2021, Group repurchased $115.9 million million from the premium payment above par value, the amortization of the remaining unamortized notes cost and certain transaction expenses. On April 6, 2021 Group issued a notice of conditional partial redemption for $45.0 million of its 2022 Notes. Subject to the satisfaction of conditions precedent stated therein, Group will redeem the million of 2022 Notes on May 6, 2021. The notes will be redeemed at par plus the “make-whole amount” as defined in the 2022 Notes indenture of per aggregate principal amount. Following this |
Commitments and contingencies_
Commitments and contingencies: | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and contingencies: | |
Commitments and contingencies: | 4. 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 $3.4 million in excess of the amount accrued at March 31, 2021. 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 million for the 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. |
Income taxes_
Income taxes: | 3 Months Ended |
Mar. 31, 2021 | |
Income taxes: | |
Income taxes: | 5. Income taxes: The components of income before income taxes consist of the following (in thousands): Three Months Ended Three Months Ended March 31, 2021 March 31, 2020 Domestic $ 28,502 $ 17,789 Foreign (2,301) (4,954) Total $ 26,201 $ 12,835 |
Common stock buyback program an
Common stock buyback program and stock option and award plan: | 3 Months Ended |
Mar. 31, 2021 | |
Common stock buyback program and stock option and award plan: | |
Common stock buyback program and stock option and award plan: | 6. Common stock buyback program and stock options and award plan: The Company’s Board of Directors has approved purchases of the Company’s common stock under a buyback program (the “Buyback Program”) through December 31, 2021. At March 31, 2021, there was approximately During the three months ended March 31, 2021 the Company granted 323,700 shares of common stock to its executive employees and directors valued at $19.5 million that primarily vest over periods ending in December 2024. The vesting of of these shares is subject to certain performance conditions. Of the |
Dividends on common stock_
Dividends on common stock: | 3 Months Ended |
Mar. 31, 2021 | |
Dividends on common stock: | |
Dividends on common stock: | 7. Dividends on common stock: On April 28, 2021, the Company’s Board of Directors approved the payment of a quarterly dividend of $0.78 per common share. This estimated $35.9 million dividend payment is expected to be made on May 28, 2021. 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. |
Related party transactions_
Related party transactions: | 3 Months Ended |
Mar. 31, 2021 | |
Related party transactions: | |
Related party transactions: | 8. Related party transactions: Office leases 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 by the Company at no cost upon 60 days' notice. The Company’s audit committee reviews and approves all transactions with related parties. The Company paid $0.4 million and $0.4 million in the three months ended March 31, 2021 and 2020, respectively, for rent and related costs (including taxes and utilities) to Sodium LLC for this lease. |
Segment information_
Segment information: | 3 Months Ended |
Mar. 31, 2021 | |
Segment information: | |
Segment information: | 9. Segment information: The Company operates as one operating segment. The Company’s service revenue by geographic region and product class and long-lived assets by geographic region are as follows (in thousands): Three months Ended March 31, 2021 Revenues On-net Off-net Non-core Total North America $ 84,464 $ 31,843 $ 89 $ 116,396 Europe 22,420 4,592 18 27,030 Asia Pacific 2,173 271 — 2,444 Latin America 812 16 — 828 Africa 78 1 — 79 Total $ 109,947 $ 36,723 $ 107 $ 146,777 Three months Ended March 31, 2020 Revenues On-net Off-net Non-core Total North America $ 82,546 $ 32,941 $ 126 $ 115,613 Europe 19,120 4,143 11 23,274 Asia Pacific 1,471 226 — 1,697 Latin America 320 11 — 331 Total $ 103,457 $ 37,321 $ 137 $ 140,915 March 31, December 31, 2021 2020 Long-lived assets, net North America $ 302,078 $ 306,652 Europe and other 123,428 123,699 Total $ 425,506 $ 430,351 The majority of North American revenue consists of services delivered within the United States. |
Description of the business_ (P
Description of the business: (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Description of the business: | |
Basis of presentation | Basis of presentation The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments that the Company considers necessary for the fair presentation of its results of operations and cash flows for the interim periods covered, and of the financial position of the Company at the date of the interim condensed consolidated balance sheet. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. While the Company believes that the disclosures are adequate to not make the information misleading, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in its annual report on Form 10-K for the year ended December 31, 2020. The accompanying unaudited condensed consolidated financial statements include all wholly owned subsidiaries. All inter-company accounts and activity have been eliminated. |
Use of estimates | Use of estimates The preparation of consolidated financial statements in conformity with US GAAP 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. |
Financial instruments | Financial instruments At March 31, 2021 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 March 31, 2021 the fair value of the Company’s remaining $329.1 million senior secured notes due in 2022 (“2022 Notes”) was $337.3 million and the fair value of the Company’s €350.0 million ($410.5 million) senior unsecured notes due in 2024 (“2024 Notes”) was $419.7 million. |
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 revenue and network operations expense. Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense)were $4.5 million and $3.7 million for the three months ended March 31, 2021 and March 31, 2020, respectively. |
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 diluted weighted average shares: Three Months Ended Three Months Ended March 31, 2021 March 31, 2020 Weighted average common shares - basic 46,067,096 45,658,565 Dilutive effect of stock options 26,065 51,131 Dilutive effect of restricted stock 414,097 681,370 Weighted average common shares - diluted 46,507,258 46,391,066 The following details unvested shares of restricted common stock as well as the anti-dilutive effects of stock options and restricted stock awards outstanding: March 31, 2021 March 31, 2020 Unvested shares of restricted common stock 1,454,033 1,493,821 Anti-dilutive options for common stock 77,832 11,884 Anti-dilutive shares of restricted common stock 392,410 93,070 |
Stockholders' Deficit | Stockholders’ Deficit The following details the changes in stockholders’ deficit for the three months ended March 31, 2021 and March 31, 2020 (in thousands except share amounts): Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2020 47,214,077 $ 47 $ 515,867 $ (1,306) $ (807,774) $ (293,166) Forfeitures of shares granted to employees (19,676) — — — — — Equity-based compensation — — 7,831 — — 7,831 Foreign currency translation — — — (5,210) — (5,210) Issuances of common stock 323,700 1 — — — 1 Exercises of options 4,571 — 215 — — 215 Dividends paid — — — — (36,081) (36,081) Net income — — — — 18,851 18,851 Balance at March 31, 2021 47,522,672 $ 48 $ 523,913 $ (6,516) $ (825,004) $ (307,559) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2019 46,840,434 $ 47 $ 493,178 $ (12,326) $ (684,578) $ (203,679) Forfeitures of shares granted to employees (36,308) — — — — — Equity-based compensation — — 5,559 — — 5,559 Foreign currency translation — — — (3,493) — (3,493) Issuances of common stock 319,750 — — — — — Exercises of options 15,493 — 719 — — 719 Dividends paid — — — — (30,557) (30,557) Net income — — — — 9,227 9,227 Balance at March 31, 2020 47,139,369 $ 47 $ 499,455 $ (15,819) $ (705,908) $ (222,225) |
Revenue recognition | Revenue recognition The Company recognizes revenue under ASU No. 2014-09, Revenue from Contracts with Customers 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, the Company satisfies its performance obligations 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 termination fees. The Company recognizes revenue for termination fees as they are collected. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the three months ended March 31, 2021 was $1.8 million and during the three months ended March 31, 2020 was $1.6 million. Amortization expense for contract costs was $4.6 million for the three months ended March 31, 2021 and $4.2 million for the three months ended March 31, 2020. |
Leases | Leases In February 2016, the FASB issued ASU No. 2016-02, Leases million. The operating lease liability is not considered a liability under the consolidated leverage ratio calculations in the indentures governing the Company’s senior unsecured and senior secured note obligations. The Company has made an accounting policy election to not apply the recognition requirements of ASU 2016-02 to its short-term leases - leases with a term of one year or less. The Company has also elected to apply certain practical expedients under ASU 2016-02 including not separating lease and nonlease components on its finance and operating leases. Three Months Three Months Ended Ended March 31, 2021 March 31, 2020 Finance lease costs Amortization of right-of-use assets $ 6,346 $ 4,762 Interest expense on finance lease liabilities 5,226 4,473 Operating lease cost 4,417 4,187 Total lease costs 15,989 13,422 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases (5,396) (4,780) Operating cash flows from operating leases (4,993) (4,441) Financing cash flows from finance leases (5,744) (6,167) Right-of-use assets obtained in exchange for new finance lease liabilities 6,336 3,164 Right-of-use assets obtained in exchange for new operating lease liabilities 2,720 5,530 Weighted-average remaining lease term — finance leases (in years) 12.4 14.1 Weighted-average remaining lease term — operating leases (in years) 19.9 20.9 Weighted average discount rate — finance leases 10.1 % 10.9 % Weighted average discount rate — operating leases 5.6 % 5.6 % 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 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. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of March 31, 2021, the Company had committed to additional dark fiber IRU lease agreements totaling The future minimum payments (principal and interest) under these finance leases are as follows (in thousands): For the twelve months ending March 31, 2022 $ 34,395 2023 33,263 2024 32,461 2025 32,907 2026 25,673 Thereafter 229,069 Total minimum finance lease obligations 387,768 Less—amounts representing interest (169,258) Present value of minimum finance lease obligations 218,510 Current maturities (15,996) Finance lease obligations, net of current maturities $ 202,514 Operating leases The Company leases office space and 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 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. 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, and netted against, 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 March 31, 2022 $ 17,434 2023 16,627 2024 16,398 2025 14,924 2026 12,126 Thereafter 114,121 Total minimum operating lease obligations 191,630 Less—amounts representing interest (71,198) Present value of minimum operating lease obligations 120,432 Current maturities (11,055) Lease obligations, net of current maturities $ 109,377 |
Allowance for credit losses | Allowance for credit losses 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 ("ASU 2016-13") later codified as Accounting Standards Codification ("ASC") 326 ("ASC 326"), using the modified retrospective transition approach. This guidance introduces a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. As of January 1, 2020, the Company maintained an allowance for credit losses to cover its current expected credit losses ("CECL") on its trade receivables arising from the failure of customers to make contractual payments. The Company estimates credit losses expected over the life of its trade receivables based on historical information combined with current conditions that may affect a customer's ability to pay and reasonable and supportable forecasts. While the Company uses various credit quality metrics, it primarily monitors collectability by reviewing the duration of collection pursuits on its delinquent trade receivables. Based on the Company's experience, the customer's delinquency status is the strongest indicator of the credit quality of the underlying trade receivables, which is analyzed monthly. Adoption of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements and related disclosures and no cumulative adjustment was recorded. Current-period Provision for Write offs Beginning Expected Credit Charged Against Ending Description Balance Losses Allowance Balance Allowance for credit losses (deducted from accounts receivable) Three months ending March 31, 2021 $ 1,921 $ 2,012 $ (2,476) $ 1,457 Three months ending March 31, 2020 $ 1,771 $ 1,336 $ (1,131) $ 1,976 Net bad debt expense for the three months ended March 31, 2021 was $0.8 million which is net of bad debt recoveries of $1.2 million. Net bad debt expense for the three months ended March 31, 2020 was $1.1 million which is net of bad debt recoveries of $0.2 million. |
Description of the business_ (T
Description of the business: (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Description of the business: | |
Schedule of diluted weighted average shares | Three Months Ended Three Months Ended March 31, 2021 March 31, 2020 Weighted average common shares - basic 46,067,096 45,658,565 Dilutive effect of stock options 26,065 51,131 Dilutive effect of restricted stock 414,097 681,370 Weighted average common shares - diluted 46,507,258 46,391,066 |
Schedule of unvested and anti-dilutive shares | March 31, 2021 March 31, 2020 Unvested shares of restricted common stock 1,454,033 1,493,821 Anti-dilutive options for common stock 77,832 11,884 Anti-dilutive shares of restricted common stock 392,410 93,070 |
Schedule of Stockholders' Deficit | The following details the changes in stockholders’ deficit for the three months ended March 31, 2021 and March 31, 2020 (in thousands except share amounts): Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2020 47,214,077 $ 47 $ 515,867 $ (1,306) $ (807,774) $ (293,166) Forfeitures of shares granted to employees (19,676) — — — — — Equity-based compensation — — 7,831 — — 7,831 Foreign currency translation — — — (5,210) — (5,210) Issuances of common stock 323,700 1 — — — 1 Exercises of options 4,571 — 215 — — 215 Dividends paid — — — — (36,081) (36,081) Net income — — — — 18,851 18,851 Balance at March 31, 2021 47,522,672 $ 48 $ 523,913 $ (6,516) $ (825,004) $ (307,559) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2019 46,840,434 $ 47 $ 493,178 $ (12,326) $ (684,578) $ (203,679) Forfeitures of shares granted to employees (36,308) — — — — — Equity-based compensation — — 5,559 — — 5,559 Foreign currency translation — — — (3,493) — (3,493) Issuances of common stock 319,750 — — — — — Exercises of options 15,493 — 719 — — 719 Dividends paid — — — — (30,557) (30,557) Net income — — — — 9,227 9,227 Balance at March 31, 2020 47,139,369 $ 47 $ 499,455 $ (15,819) $ (705,908) $ (222,225) |
Schedule of lease cost | Three Months Three Months Ended Ended March 31, 2021 March 31, 2020 Finance lease costs Amortization of right-of-use assets $ 6,346 $ 4,762 Interest expense on finance lease liabilities 5,226 4,473 Operating lease cost 4,417 4,187 Total lease costs 15,989 13,422 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases (5,396) (4,780) Operating cash flows from operating leases (4,993) (4,441) Financing cash flows from finance leases (5,744) (6,167) Right-of-use assets obtained in exchange for new finance lease liabilities 6,336 3,164 Right-of-use assets obtained in exchange for new operating lease liabilities 2,720 5,530 Weighted-average remaining lease term — finance leases (in years) 12.4 14.1 Weighted-average remaining lease term — operating leases (in years) 19.9 20.9 Weighted average discount rate — finance leases 10.1 % 10.9 % 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 March 31, 2022 $ 34,395 2023 33,263 2024 32,461 2025 32,907 2026 25,673 Thereafter 229,069 Total minimum finance lease obligations 387,768 Less—amounts representing interest (169,258) Present value of minimum finance lease obligations 218,510 Current maturities (15,996) Finance lease obligations, net of current maturities $ 202,514 |
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 March 31, 2022 $ 17,434 2023 16,627 2024 16,398 2025 14,924 2026 12,126 Thereafter 114,121 Total minimum operating lease obligations 191,630 Less—amounts representing interest (71,198) Present value of minimum operating lease obligations 120,432 Current maturities (11,055) Lease obligations, net of current maturities $ 109,377 |
Schedule of impact on financial statement line items from adopting ASC 326 | Current-period Provision for Write offs Beginning Expected Credit Charged Against Ending Description Balance Losses Allowance Balance Allowance for credit losses (deducted from accounts receivable) Three months ending March 31, 2021 $ 1,921 $ 2,012 $ (2,476) $ 1,457 Three months ending March 31, 2020 $ 1,771 $ 1,336 $ (1,131) $ 1,976 |
Income taxes_ (Tables)
Income taxes: (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Income taxes: | |
Schedule of components of income before income taxes | The components of income before income taxes consist of the following (in thousands): Three Months Ended Three Months Ended March 31, 2021 March 31, 2020 Domestic $ 28,502 $ 17,789 Foreign (2,301) (4,954) Total $ 26,201 $ 12,835 |
Segment information_ (Tables)
Segment information: (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Segment information: | |
Schedule of service revenue by geographic region and product class and long lived assets by geographic region | The Company operates as one operating segment. The Company’s service revenue by geographic region and product class and long-lived assets by geographic region are as follows (in thousands): Three months Ended March 31, 2021 Revenues On-net Off-net Non-core Total North America $ 84,464 $ 31,843 $ 89 $ 116,396 Europe 22,420 4,592 18 27,030 Asia Pacific 2,173 271 — 2,444 Latin America 812 16 — 828 Africa 78 1 — 79 Total $ 109,947 $ 36,723 $ 107 $ 146,777 Three months Ended March 31, 2020 Revenues On-net Off-net Non-core Total North America $ 82,546 $ 32,941 $ 126 $ 115,613 Europe 19,120 4,143 11 23,274 Asia Pacific 1,471 226 — 1,697 Latin America 320 11 — 331 Total $ 103,457 $ 37,321 $ 137 $ 140,915 March 31, December 31, 2021 2020 Long-lived assets, net North America $ 302,078 $ 306,652 Europe and other 123,428 123,699 Total $ 425,506 $ 430,351 |
Description of the business_ (D
Description of the business: (Details) | 3 Months Ended |
Mar. 31, 2021countryMBGB | |
Number of countries entity operates | country | 48 |
Minimum | |
On-net service speed range | MB | 100 |
Maximum | |
On-net service speed range | GB | 100 |
Description of the business_ Fi
Description of the business: Financial instruments (Details) - Mar. 31, 2021 € in Millions, $ in Millions | USD ($) | EUR (€) |
Senior secured 2022 Notes | ||
Financial instruments | ||
Senior notes | $ 329.1 | |
Senior secured 2022 Notes | Level 2 | ||
Financial instruments | ||
Senior notes, fair value | 337.3 | |
Senior unsecured 2024 Notes | ||
Financial instruments | ||
Senior notes | 410.5 | € 350 |
Senior unsecured 2024 Notes | Level 2 | ||
Financial instruments | ||
Senior notes, fair value | $ 419.7 |
Description of the business_ Gr
Description of the business: Gross receipts taxes, universal service fund and other surcharges (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Description of the business: | ||
Excise taxes and surcharge | $ 4.5 | $ 3.7 |
Description of the business_ Ba
Description of the business: Basic and diluted net income per common share (Details) - shares | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Diluted weighted average shares | ||
Weighted average common shares - basic (in shares) | 46,067,096 | 45,658,565 |
Weighted average common shares - diluted | 46,507,258 | 46,391,066 |
Stock options | ||
Diluted weighted average shares | ||
Dilutive effect (options or restricted stock) | 26,065 | 51,131 |
Anti-dilutive effects | ||
Anti-dilutive (options or restricted stock) | 77,832 | 11,884 |
Restricted stock | ||
Diluted weighted average shares | ||
Dilutive effect (options or restricted stock) | 414,097 | 681,370 |
Anti-dilutive effects | ||
Unvested shares of restricted common stock | 1,454,033 | 1,493,821 |
Anti-dilutive (options or restricted stock) | 392,410 | 93,070 |
Description of the business_ St
Description of the business: Stockholders' deficit (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Increase (Decrease) in Stockholders' Equity | ||
Balance | $ (293,166) | $ (203,679) |
Balance (in shares) | 47,214,077 | |
Equity-based compensation | $ 7,831 | 5,559 |
Foreign currency translation | (5,210) | (3,493) |
Issuances of common stock | 1 | |
Exercises of options | 215 | 719 |
Dividends paid | (36,081) | (30,557) |
Net income | 18,851 | 9,227 |
Balance | $ (307,559) | (222,225) |
Balance (in shares) | 47,522,672 | |
Common Stock | ||
Increase (Decrease) in Stockholders' Equity | ||
Balance | $ 47 | $ 47 |
Balance (in shares) | 47,214,077 | 46,840,434 |
Forfeitures of shares granted to employees (in shares) | (19,676) | (36,308) |
Issuances of common stock | $ 1 | |
Issuances of common stock (in shares) | 323,700 | 319,750 |
Exercises of options (in shares) | 4,571 | 15,493 |
Balance | $ 48 | $ 47 |
Balance (in shares) | 47,522,672 | 47,139,369 |
Additional Paid-in Capital | ||
Increase (Decrease) in Stockholders' Equity | ||
Balance | $ 515,867 | $ 493,178 |
Equity-based compensation | 7,831 | 5,559 |
Exercises of options | 215 | 719 |
Balance | 523,913 | 499,455 |
Accumulated Other Comprehensive Income (Loss) | ||
Increase (Decrease) in Stockholders' Equity | ||
Balance | (1,306) | (12,326) |
Foreign currency translation | (5,210) | (3,493) |
Balance | (6,516) | (15,819) |
Accumulated Deficit | ||
Increase (Decrease) in Stockholders' Equity | ||
Balance | (807,774) | (684,578) |
Dividends paid | (36,081) | (30,557) |
Net income | 18,851 | 9,227 |
Balance | $ (825,004) | $ (705,908) |
Description of the business_ Re
Description of the business: Revenue recognition (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Recent accounting pronouncements- adopted | ||
Service revenue recognized | $ 1.8 | $ 1.6 |
Amortization expense for contract costs | $ 4.6 | $ 4.2 |
ASU 2014-09 | ||
Recent accounting pronouncements- adopted | ||
Maximum contract lengths for billing due upon receipts (in months) | 60 months |
Description of the business_ Le
Description of the business: Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Finance leases-fiber lease agreements | |||
Additional finance lease future payments due | $ 25,400 | ||
Cash paid for amounts included in the measurement of lease liabilities | |||
Finance lease cost, Amortization of right-of-use assets | 6,346 | $ 4,762 | |
Interest expense on finance lease liabilities | 5,226 | 4,473 | |
Operating lease cost | 4,417 | 4,187 | |
Total lease costs | 15,989 | 13,422 | |
Operating cash flows from finance leases | (5,396) | (4,780) | |
Operating cash flows from operating leases | (4,993) | (4,441) | |
Financing cash flows from finance leases | (5,744) | (6,167) | |
Right-of-use assets obtained in exchange for new finance lease liabilities | 6,336 | 3,164 | |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 2,720 | $ 5,530 | |
Weighted-average remaining lease term - finance leases (in years) | 12 years 4 months 24 days | 14 years 1 month 6 days | |
Weighted-average remaining lease term - operating leases (in years) | 19 years 10 months 24 days | 20 years 10 months 24 days | |
Weighted average discount rate - finance leases | 10.10% | 10.90% | |
Weighted average discount rate - operating leases | 5.60% | 5.60% | |
Future minimum payments (principal and interest) under these finance leases | |||
2022 | $ 34,395 | ||
2023 | 33,263 | ||
2024 | 32,461 | ||
2025 | 32,907 | ||
2026 | 25,673 | ||
Thereafter | 229,069 | ||
Total minimum finance lease obligations | 387,768 | ||
Less-amounts representing interest | (169,258) | ||
Present value of minimum finance lease obligations | 218,510 | ||
Current maturities, finance lease obligations | (15,996) | $ (15,702) | |
Finance lease obligations, net of current maturities | 202,514 | 203,438 | |
Future minimum payments under these operating lease agreements | |||
2022 | 17,434 | ||
2023 | 16,627 | ||
2024 | 16,398 | ||
2025 | 14,924 | ||
2026 | 12,126 | ||
Thereafter | 114,121 | ||
Total minimum operating lease obligations | 191,630 | ||
Less-amounts representing interest | (71,198) | ||
Present value of minimum operating lease obligations | 120,432 | ||
Current maturities, operating lease liabilities | (11,055) | (11,151) | |
Lease obligations, net of current maturities | $ 109,377 | $ 111,318 | |
Minimum | |||
Finance leases-fiber lease agreements | |||
Initial terms | 15 years | ||
Maximum | |||
Finance leases-fiber lease agreements | |||
Initial terms | 20 years |
Description of the business_ _2
Description of the business: Recent Accounting Pronouncements - to be adopted (Details) $ in Millions | Jan. 01, 2019USD ($) |
ASU 2016-02 | |
Recent accounting pronouncements- adopted | |
Asset and lease liability | $ 97.3 |
Description of the business_ Al
Description of the business: Allowance for credit losses (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Description of the business: | ||
Balance at Beginning of Period | $ 1,921 | $ 1,771 |
Current-period Provision for Expected Credit Losses | 2,012 | 1,336 |
Write offs Charged Against Allowance | (2,476) | (1,131) |
Balance at End of Period | 1,457 | 1,976 |
Bad debt recoveries | $ 1,200 | $ 200 |
Description of the business_ _3
Description of the business: Allowance for doubtful accounts (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Description of the business: | ||
Bad debt expense, net of recoveries | $ 0.8 | $ 1.1 |
Property and equipment_ (Detail
Property and equipment: (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Property and equipment: | |||
Total property and equipment, net | $ 425,492 | $ 430,335 | |
Depreciation and amortization | 21,970 | $ 19,508 | |
Capitalized salaries and related benefits of employees | $ 3,200 | $ 2,900 |
Property and equipment_ Install
Property and equipment: Installment payment agreement (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021USD ($)payment | Dec. 31, 2020USD ($) | |
Installment payment agreement | ||
Unamortized discount | $ 80 | $ 136 |
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 | $ 5,300 | 7,700 |
Unamortized discount | $ 100 | $ 100 |
Long-term debt_ Limitations und
Long-term debt: Limitations under the Indentures (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Long-term debt | |
Amount unrestricted and permitted for investment payments | $ 57.9 |
Restriction on incurring additional indebtedness | Senior secured 2022 Notes | Minimum | |
Long-term debt | |
Consolidated secured leverage ratio | 4.25 |
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 | 3.5 |
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 redemptions of 2022 Notes (Details) € in Millions | May 06, 2021USD ($) | Apr. 06, 2021USD ($) | Mar. 31, 2021USD ($) | Mar. 31, 2021EUR (€) |
Senior unsecured 2024 Notes | ||||
Long-term debt | ||||
Senior notes outstanding | $ 410,500,000 | € 350 | ||
Senior secured 2022 Notes | ||||
Long-term debt | ||||
Principal amount plus accrued and unpaid interest (as a percent) | 103.20% | |||
Face amount | $ 115,900,000 | |||
Interest | 400,000 | |||
Loss on debt purchase | 3,900,000 | |||
Senior notes outstanding | $ 329,100,000 | |||
Senior secured 2022 Notes | Subsequent Event | ||||
Long-term debt | ||||
Notice issued for redemption of debt | $ 45,000,000 | |||
Amount of debt redeemed | $ 45,000,000 | |||
Redemption price per $1,000 aggregate principal amount | 41.41533 | |||
Accrued interest per $1,000 aggregate principal amount | 9.70486 | |||
Senior notes outstanding | $ 284,100,000 |
Commitments and contingencies_
Commitments and contingencies: Current and potential litigation (Details) - USD ($) $ in Millions | Mar. 31, 2021 | Mar. 31, 2015 |
Commitments and contingencies | ||
Estimate of possible loss in excess of accrual | $ 3.4 | |
Spain | ||
Commitments and contingencies | ||
Estimate of possible loss | $ 9 |
Income taxes_ Components of inc
Income taxes: Components of income before income taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Components of income before income taxes | ||
Domestic | $ 28,502 | $ 17,789 |
Foreign | (2,301) | (4,954) |
Income before income taxes | $ 26,201 | $ 12,835 |
Common stock buyback program _2
Common stock buyback program and stock option and award plan (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Remaining authorized amount for common stock repurchases | $ 30.4 | |
Repurchase of common stock (in shares) | 0 | 0 |
Performance conditions | ||
Stock Repurchase Program, Number of Shares Authorized to be Repurchased | 129,000 | |
Executive employees and directors | ||
Shares issue (in shares) | 323,700,000,000 | |
Shares issued, Value | $ 19.5 | |
CEO | Performance conditions | ||
Stock Repurchase Program, Number of Shares Authorized to be Repurchased | 35,000 |
Dividends on common stock_ (Det
Dividends on common stock: (Details) - USD ($) $ / shares in Units, $ in Thousands | May 28, 2021 | Apr. 28, 2021 | Mar. 31, 2021 | Mar. 31, 2020 |
Dividends on common stock and return of capital program | ||||
Dividends paid | $ 36,081 | $ 30,557 | ||
Subsequent Event | ||||
Dividends on common stock and return of capital program | ||||
Quarterly dividend payment approved (per share) | $ 0.78 | |||
Estimated | ||||
Dividends on common stock and return of capital program | ||||
Dividends paid | $ 35,900 |
Related party transactions_ (De
Related party transactions: (Details) - CEO - Lease - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | |
May 31, 2015 | Mar. 31, 2021 | Mar. 31, 2020 | |
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) | $ 0.4 | $ 0.4 |
Segment information_ (Details)
Segment information: (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021USD ($)segment | Mar. 31, 2020USD ($) | |
Geographic information | ||
Number of operating segments | segment | 1 | |
Revenues | $ 146,777 | $ 140,915 |
Long-lived assets, net | 425,506 | 430,351 |
On-net | ||
Geographic information | ||
Revenues | 109,947 | 103,457 |
Off-net | ||
Geographic information | ||
Revenues | 36,723 | 37,321 |
Non-core | ||
Geographic information | ||
Revenues | 107 | 137 |
North America | ||
Geographic information | ||
Revenues | 116,396 | 115,613 |
Long-lived assets, net | 302,078 | 306,652 |
North America | On-net | ||
Geographic information | ||
Revenues | 84,464 | 82,546 |
North America | Off-net | ||
Geographic information | ||
Revenues | 31,843 | 32,941 |
North America | Non-core | ||
Geographic information | ||
Revenues | 89 | 126 |
Europe | ||
Geographic information | ||
Revenues | 27,030 | 23,274 |
Europe | On-net | ||
Geographic information | ||
Revenues | 22,420 | 19,120 |
Europe | Off-net | ||
Geographic information | ||
Revenues | 4,592 | 4,143 |
Europe | Non-core | ||
Geographic information | ||
Revenues | 18 | 11 |
Europe and other | ||
Geographic information | ||
Long-lived assets, net | 123,428 | 123,699 |
Asia Pacific | ||
Geographic information | ||
Revenues | 2,444 | 1,697 |
Asia Pacific | On-net | ||
Geographic information | ||
Revenues | 2,173 | 1,471 |
Asia Pacific | Off-net | ||
Geographic information | ||
Revenues | 271 | 226 |
Latin America | ||
Geographic information | ||
Revenues | 828 | 331 |
Latin America | On-net | ||
Geographic information | ||
Revenues | 812 | 320 |
Latin America | Off-net | ||
Geographic information | ||
Revenues | 16 | $ 11 |
Africa | ||
Geographic information | ||
Revenues | 79 | |
Africa | On-net | ||
Geographic information | ||
Revenues | 78 | |
Africa | Off-net | ||
Geographic information | ||
Revenues | $ 1 |