Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Jul. 31, 2019 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2019 | |
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 | 46,815,903 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Entity Central Index Key | 0001158324 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 409,279 | $ 276,093 |
Accounts receivable, net of allowance for doubtful accounts of $1,782 and $1,263, respectively | 40,684 | 41,709 |
Prepaid expenses and other current assets | 36,030 | 32,535 |
Total current assets | 485,993 | 350,337 |
Property and equipment, net | 375,936 | 375,325 |
Right-of-use leased assets | 72,255 | |
Deferred tax assets | 2,733 | |
Deposits and other assets | 14,881 | 11,455 |
Total assets | 949,065 | 739,850 |
Current liabilities: | ||
Accounts payable | 11,570 | 8,519 |
Accrued and other current liabilities | 51,615 | 51,431 |
Installment payment agreement, current portion, net of discount of $396 and $395, respectively | 8,693 | 8,283 |
Current maturities, operating lease liabilities | 10,639 | |
Current maturities, finance lease obligations | 7,700 | 7,074 |
Total current liabilities | 90,217 | 75,307 |
Senior secured 2022 notes, net of unamortized debt costs of $2,301 and $2,695, respectively and including premium of $1,197 and $1,405, respectively | 443,896 | 443,710 |
Operating lease liabilities, net of current maturities | 83,456 | |
Finance lease obligations, net of current maturities | 160,487 | 156,706 |
Other long term liabilities | 7,588 | 25,380 |
Total liabilities | 1,125,655 | 888,852 |
Commitments and contingencies: | ||
Stockholders' equity: | ||
Common stock, $0.001 par value; 75,000,000 shares authorized; 46,806,370 and 46,336,499 shares issued and outstanding, respectively | 47 | 46 |
Additional paid-in capital | 481,734 | 471,331 |
Accumulated other comprehensive income-foreign currency translation | (10,967) | (10,928) |
Accumulated deficit | (647,404) | (609,451) |
Total stockholders' deficit | (176,590) | (149,002) |
Total liabilities and stockholders' equity | 949,065 | 739,850 |
Senior unsecured 2024 Euro notes | ||
Current liabilities: | ||
Senior unsecured 2024 Euro and 2021 notes, net of unamortized debt costs of $1,550 and $1,171 and $1,476, respectively | 151,957 | |
Senior unsecured 2021 notes | ||
Current liabilities: | ||
Senior unsecured 2024 Euro and 2021 notes, net of unamortized debt costs of $1,550 and $1,171 and $1,476, respectively | $ 188,054 | $ 187,749 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Assets | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $ 1,782 | $ 1,263 |
Liabilities and stockholders' equity | ||
Installment payment agreement, current portion, net of discount | $ 396 | $ 395 |
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 | 46,806,370 | 46,806,370 |
Common stock, shares outstanding | 46,336,499 | 46,336,499 |
Senior secured 2022 notes | ||
Liabilities and stockholders' equity | ||
Unamortized debt costs | $ 2,301 | $ 2,695 |
Unamortized debt premium | 1,197 | 1,405 |
Senior unsecured 2024 Euro notes | ||
Liabilities and stockholders' equity | ||
Unamortized debt costs | 1,550 | |
Senior unsecured 2021 notes | ||
Liabilities and stockholders' equity | ||
Unamortized debt costs | $ 1,171 | $ 1,476 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Service revenue | $ 134,789 | $ 129,296 | $ 268,930 | $ 258,002 |
Operating expenses: | ||||
Network operations | 54,407 | 54,379 | 108,557 | 109,252 |
Selling, general, and administrative | 38,566 | 33,704 | 74,427 | 67,227 |
Depreciation and amortization | 19,979 | 20,216 | 40,240 | 40,004 |
Total operating expenses | 112,952 | 108,299 | 223,224 | 216,483 |
Gains on equipment transactions | 185 | 357 | 721 | 475 |
Operating income | 22,022 | 21,354 | 46,427 | 41,994 |
Interest income and other, net | 1,753 | 189 | 3,572 | 1,879 |
Interest expense | (13,595) | (12,373) | (27,051) | (24,780) |
Income before income taxes | 10,180 | 9,170 | 22,948 | 19,093 |
Income tax provision | (3,044) | (2,618) | (6,595) | (5,757) |
Net income | 7,136 | 6,552 | 16,353 | 13,336 |
Comprehensive income: | ||||
Net income | 7,136 | 6,552 | 16,353 | 13,336 |
Foreign currency translation adjustment | 1,786 | (6,198) | (39) | (3,587) |
Comprehensive income | $ 8,922 | $ 354 | $ 16,314 | $ 9,749 |
Net income per common share: | ||||
Basic net income per common share (in dollars per share) | $ 0.16 | $ 0.15 | $ 0.36 | $ 0.30 |
Diluted net income per common share (in dollars per share) | 0.16 | 0.14 | 0.36 | 0.29 |
Dividends declared per common share (in dollars per share) | $ 0.60 | $ 0.52 | $ 1.18 | $ 1.02 |
Weighted-average common shares - basic (in shares) | 45,354,327 | 45,016,767 | 45,349,397 | 45,011,616 |
Weighted-average common shares - diluted (in shares) | 45,912,291 | 45,536,473 | 45,838,918 | 45,456,831 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Equity-based compensation expense | $ 8,724 | $ 8,479 | ||
Network operations | ||||
Equity-based compensation expense | $ 226 | $ 232 | 406 | 421 |
Selling, general and administrative | ||||
Equity-based compensation expense | $ 5,063 | $ 4,463 | $ 8,318 | $ 8,058 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities: | ||
Net income | $ 16,353 | $ 13,336 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 40,240 | 40,004 |
Amortization of debt costs and premium | 842 | 751 |
Equity-based compensation expense (net of amounts capitalized) | 8,724 | 8,479 |
Gains - equipment transactions and other, net | (484) | (439) |
Deferred income taxes | 4,831 | 4,815 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 1,005 | (741) |
Prepaid expenses and other current assets | (3,547) | (631) |
Accounts payable, accrued liabilities and other long-term liabilities | 5,088 | (2,418) |
Deposits and other assets | (3,783) | (1,706) |
Net cash provided by operating activities | 69,269 | 61,450 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (25,008) | (26,893) |
Net cash used in investing activities | (25,008) | (26,893) |
Cash flows from financing activities: | ||
Dividends paid | (54,306) | (46,607) |
Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debt costs of $1,556 | 152,128 | |
Proceeds from exercises of common stock options | 919 | 1,002 |
Principal payments of installment payment agreement | (4,774) | (4,254) |
Principal payments of finance lease obligations | (5,006) | (6,059) |
Net cash provided by (used in) financing activities | 88,961 | (55,918) |
Effect of exchange rate changes on cash | (36) | (1,368) |
Net increase (decrease) in cash and cash equivalents | 133,186 | (22,729) |
Cash and cash equivalents, beginning of period | 276,093 | 247,011 |
Cash and cash equivalents, end of period | 409,279 | 224,282 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Non-cash component of network equipment obtained in exchange transactions | 684 | 460 |
PP&E obtained for installment payment agreement | 5,483 | 5,943 |
Finance lease obligations incurred | $ 8,562 | $ 10,735 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) $ in Thousands | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Senior unsecured 2024 Euro notes | |
Debt costs | $ 1,556 |
Description of the business and
Description of the business and recent developments: | 6 Months Ended |
Jun. 30, 2019 | |
Description of the business and recent developments: | |
Description of the business and recent developments: | 1. Description of the business and recent developments: Reorganization and merger On May 15, 2014, pursuant to the Agreement and Plan of Reorganization 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. Description of business The Company is a Delaware corporation and is headquartered in Washington, DC. The Company is a facilities-based provider of low-cost, high-speed Internet access services, private network services and data center colocation space. The Company’s network is specifically designed and optimized to transmit packet routed data. The Company delivers its services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in North America, Europe, and Asia and recently in Australia and Brazil. The Company offers on-net Internet access and private network services exclusively through its own facilities, which run from its network to its customers’ premises. 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 services because of its integrated network architecture. The Company offers its on-net services to customers located in buildings that are physically connected to its network. 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 of bandwidth. The Company provides its on-net Internet access services 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 and other professional services businesses. The Company’s net-centric customers include bandwidth-intensive users such as other Internet access providers, telephone companies, cable television companies, web hosting companies, content delivery network companies and commercial content and application service providers. These net-centric customers obtain the Company’s services in carrier neutral data centers and in the Company’s 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 its on-net services, the Company provides Internet connectivity and private network services to customers that are not located in buildings directly connected to its network. The Company provides this off-net service 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 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, 2018. 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 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. Financial instruments At June 30, 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 June 30, 2019 the fair value of the Company’s $189.2 million senior unsecured notes was $191.8 million, the fair value of the Company’s $445.0 million senior secured notes was $461.7 million and the fair value of the Company’s 135.0 million Euro ($153.5 million USD) senior unsecured notes was $153.7 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 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 $3.2 million and $3.1 million for the three months ended June 30, 2019 and June 30, 2018, respectively, and $6.6 million and $6.3 million for the six months ended June 30, 2019 and June 30, 2018, 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 Six Months Ended Six Months Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Weighted average common shares - basic 45,354,327 45,016,767 45,349,397 45,011,616 Dilutive effect of stock options 35,895 36,320 30,972 32,222 Dilutive effect of restricted stock 522,069 483,386 458,549 412,993 Weighted average common shares - diluted 45,912,291 45,536,473 45,838,918 45,456,831 The following details unvested shares of restricted common stock as well as the anti-dilutive effects of stock options and restricted stock awards outstanding: Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Unvested shares of restricted common stock 1,442,520 1,417,669 1,442,520 1,417,669 Anti-dilutive options for common stock 36,381 43,308 52,338 50,353 Anti-dilutive shares of restricted common stock 37,494 — 87,686 44,672 Stockholder’s Deficit The following details the changes in stockholder’s deficit for the three and six months ended June 30, 2019 and June 30, 2018 (in thousands except share amounts): Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder’s Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at March 31, 2019 46,350,434 $ 46 $ 475,275 $ (12,753) $ (626,799) $ (164,231) Forfeitures of shares granted to employees (1,702) — — — — — Equity-based compensation — — 5,714 — — 5,714 Foreign currency translation — — — 1,786 — 1,786 Issuances of common stock 438,478 1 — — — 1 Exercises of options 19,160 — 745 — — 745 Dividends paid — — — — (27,741) (27,741) Net income — — — — 7,136 7,136 Balance at June 30, 2019 46,806,370 $ 47 $ 481,734 $ (10,967) $ (647,404) $ (176,590) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder’s Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at March 31, 2018 46,283,140 $ 46 $ 461,154 $ (1,989) $ (556,266) $ (97,055) Forfeitures of shares granted to employees (4,749) — — — — — Equity-based compensation — — 5,149 — — 5,149 Foreign currency translation — — — (6,198) — (6,198) Issuances of common stock 145,978 — — — — — Exercises of options 19,576 — 704 — — 704 Dividends paid — — — — (23,788) (23,788) Net income — — — — 6,552 6,552 Balance at June 30, 2018 46,443,945 $ 46 $ 467,007 $ (8,187) $ (573,502) $ (114,636) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder's Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2018 46,336,499 $ 46 $ 471,331 $ (10,928) $ (609,451) $ (149,002) Forfeitures of shares granted to employees (3,886) — — — — — Equity-based compensation — — 9,484 — — 9,484 Foreign currency translation — — — (39) — (39) Issuances of common stock 448,978 1 — — — 1 Exercises of options 24,779 — 919 — — 919 Dividends paid — — — — (54,306) (54,306) Net income — — — — 16,353 16,353 Balance at June 30, 2019 46,806,370 $ 47 $ 481,734 $ (10,967) $ (647,404) $ (176,590) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder's Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2017 45,960,799 $ 46 $ 456,696 $ (4,600) $ (554,686) $ (102,544) Cumulative effect adjustment from adoption of ASC 606 — — — — 14,455 14,455 Forfeitures of shares granted to employees (11,528) — — — — — Equity-based compensation — — 9,310 — — 9,310 Foreign currency translation — — — (3,587) — (3,587) Issuances of common stock 463,978 — — — — — Exercises of options 30,696 — 1,001 — — 1,001 Dividends paid — — — — (46,607) (46,607) Net income — — — — 13,336 13,336 Balance at June 30, 2018 46,443,945 $ 46 $ 467,007 $ (8,187) $ (573,502) $ (114,636) Revenue recognition The Company recognizes revenue under ASU No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Under ASC 606 installation fees for contracts with terms longer than month-to-month are recognized over the contract term. The Company believes that the installation fee does not give rise to a material right as defined by ASC 606 for contracts with terms longer than month-to-month. The Company recognizes revenue over the estimated average customer life for installation fees associated with month-to-month contracts, because the fee represents a material right as defined by ASC 606. The Company capitalizes certain contract acquisition costs that relate directly to a customer contract, including commissions paid to its sales team and sales agents and amortizes these costs on straight-line basis over the period the services are transferred to the customer for commissions paid to its sales team (estimated customer life) and over the remaining original contract term for agent commissions. Management assesses these costs for impairment at least quarterly and as "triggering" events occur that indicate it is more likely than not that an impairment exists. 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 three months ended June 30, 2019 was $1.7 million and during the three months ended June 30, 2018 was $1.9 million. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the six months ended June 30, 2019 was $3.4 million and during the six months ended June 30, 2018 was $3.9 million. Amortization expense for contract costs was $4.3 million for the three months ended June 30, 2019 and $4.2 million for the three months ended June 30, 2018. Amortization expense for contract costs was $8.7 million for the six months ended June 30, 2019 and $8.3 million for the three months ended June 30, 2018. Recent Accounting Pronouncements— Adopted 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 ASU2016-02 including not separating lease and nonlease components on its finance and operating leases, not reassessing whether any existing contracts contained leases, not reconsidering lease classification, not reassessing initial direct costs and using hindsight in determining the lease reasonably certain term of its leases. Three Months Ended June 30, 2019 Finance lease cost Amortization of right-of-use assets $ 4,917 Interest expense on finance lease liabilities 4,415 Operating lease cost 3,486 Total lease costs 12,818 Six Months Ended June 30, 2019 Finance lease cost Amortization of right-of-use assets $ 9,888 Interest expense on finance lease liabilities 8,816 Operating lease cost 6,780 Total lease costs 25,484 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases (8,827) Operating cash flows from operating leases (6,780) Financing cash flows from finance leases (5,006) Right-of-use assets obtained in exchange for new finance lease liabilities 8,562 Right-of-use assets obtained in exchange for new operating lease liabilities 1,457 Weighted-average remaining lease term — finance leases (in years) 14.6 Weighted-average remaining lease term — operating leases (in years) 22.3 Weighted average discount rate — finance leases 10.6 % Weighted average discount rate — operating leases 5.7 % Finance leases—fiber lease agreements The Company has entered into lease agreements with numerous providers of dark fiber under indefeasible-right-of use agreements (“IRU’s). These IRU’s 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. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of June 30, 2019, 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 June 30, 2020 $ 24,926 2021 24,753 2022 23,742 2023 22,567 2024 21,704 Thereafter 225,184 Total minimum finance lease obligations 342,876 Less—amounts representing interest (174,689) Present value of minimum finance lease obligations 168,187 Current maturities (7,700) Finance lease obligations, net of current maturities $ 160,487 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. 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 are 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 June 30, 2020 $ 15,592 2021 13,504 2022 12,248 2023 10,985 2024 9,871 Thereafter 96,148 Total minimum operating lease obligations 158,348 Less—amounts representing interest (64,253) Present value of minimum operating lease obligations 94,095 Current maturities (10,639) Lease obligations, net of current maturities $ 83,456 Recent Accounting Pronouncements— to be Adopted In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments. |
Property and equipment_
Property and equipment: | 6 Months Ended |
Jun. 30, 2019 | |
Property and equipment: | |
Property and equipment: | 2. Property and equipment: Depreciation and amortization expense related to property and equipment and finance leases was $20.0 million and $20.2 million for the three months ended June 30, 2019, and 2018 respectively, and $40.2 million and $40.0 million for the six months ended June 30, 2019 and 2018, respectively. The Company capitalized salaries and related benefits of employees working directly on the construction and build-out of its network of $2.7 million and $2.7 million for the three months ended June 30, 2019 and 2018, respectively, and $5.3 million and $5.3 million for the six months ended June 30, 2019 and 2018, respectively. Exchange agreement In the three and six months ended June 30, 2019 and 2018, the Company exchanged certain used network equipment and cash consideration for new network equipment. The fair value of the equipment received was estimated to be $0.5 million and $1.1 million for the three months ended June 30, 2019 and 2018, respectively, and $2.2 million and $1.5 million for the six months ended June 30, 2019 and 2018, respectively and after considering the cash component the transactions resulted in gains of $0.1 million and $0.3 million for the three months ended June 30, 2019 and 2018, respectively, and $0.7 million and $0.5 million for the six months ended June 30, 2019 and 2018, 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 In March 2015, the Company entered into an installment payment agreement (“IPA”) with a vendor. Under the IPA the Company may purchase network equipment in exchange for interest free note obligations each with a term. There are 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 discount was |
Long-term debt_
Long-term debt: | 6 Months Ended |
Jun. 30, 2019 | |
Long-term debt: | |
Long-term debt: | 3. Long-term debt: Limitations under the indentures The Company has $189.2 million of senior unsecured notes, $445.0 million of senior secured notes and 135.0 million Euros ($153.5 million USD) of senior unsecured notes outstanding. The $189.2 million of senior unsecured notes are due on April 15, 2021 (the “2021 Notes”) and bear interest at a rate of 5.625% per year. Interest is paid semi-annually on April 15 and October 15. The $445.0 million of senior secured notes are due on March 1, 2022 (the “2022 Notes”) and bear interest at a rate of 5.375% per year. Interest is paid semi-annually on March 1 and September 1. The 135.0 million Euro ($153.5 million USD) of senior unsecured notes are due on June 30, 2024 (the “2024 Notes”) and bear interest at a rate of 4.375% per year. Interest is paid semi-annually on June 30 and December 30. The indentures governing the 2024 Notes, 2022 Notes and 2021 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 and 2021 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 and 2021 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 June 30, 2019. As of June 30, 2019, a total of Issuance of 2024 Notes On June 25, 2019, Group completed an offering of €135.0 million ($153.7 million) aggregate principal amount of 4.375% senior unsecured notes due 2024. The net proceeds from the offering, after deducting offering expenses, were approximately $152.1 million. The Company expects to use the proceeds for general corporate purposes and/or 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. 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 Groups’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. Application will be made for the 2024 Notes to be listed on the Official List of The International Stock Exchange; however, there can be no assurance that the application will be successful or that any such listing will be granted or maintained. The 2024 Notes bear interest at a rate of 4.375% per annum. Interest began to accrue on the 2024 Notes on June 25, 2019 and will be paid semi-annually in arrears on June 30 and December 30 of each year, commencing on December 30, 2019. Unless earlier redeemed, the 2024 Notes will mature on June 30, 2024. The 2024 Notes were issued at par for million USD) on June 25, 2019. The 2024 Notes were issued in Euros and are reported in the Company’s reporting currency – US Dollars. As of June 30, 2019 the 2024 Notes were valued at 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. 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. |
Commitments and contingencies_
Commitments and contingencies: | 6 Months Ended |
Jun. 30, 2019 | |
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 $3.0 million in excess of the amount accrued at June 30, 2019. 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 has accrued in 2015. The Company has counterclaimed for damages and is contesting its obligation to pay the termination liability in an arbitration proceeding in Spain. 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: | 6 Months Ended |
Jun. 30, 2019 | |
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 Six Months Ended Six Months Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Domestic $ 16,332 $ 15,446 $ 35,084 $ 29,582 Foreign (6,152) (6,276) (12,136) (10,489) Total $ 10,180 $ 9,170 $ 22,948 $ 19,093 |
Common stock buyback program st
Common stock buyback program stock option and award plan: | 6 Months Ended |
Jun. 30, 2019 | |
Common stock buyback program stock option and award plan: | |
Common stock buyback program stock option and award plan: | 6. Common stock buyback program stock option 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, 2019. At June 30, 2019, there was approximately In the second quarter of 2019 the Company granted 0.4 million shares of common stock to its employees valued at $23.5 million. The vesting of 24,050 of these shares granted to the Company's executives are subject to certain performance conditions and the vesting of 105,000 shares granted to the Company's CEO 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 remaining shares vest over periods ending in December 2022. |
Dividends on common stock_
Dividends on common stock: | 6 Months Ended |
Jun. 30, 2019 | |
Dividends on common stock: | |
Dividends on common stock: | 7. Dividends on common stock: On August 7, 2019, the Company’s Board of Directors approved the payment of a quarterly dividend of $0.62 per common share. This estimated $28.1 million dividend payment is expected to be made on September 9, 2019. 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: | 6 Months Ended |
Jun. 30, 2019 | |
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 is for five years which is cancellable by the Company upon 60 days’ notice. The Company’s audit committee reviews and approves all transactions with related parties. The Company paid $0.5 million and $0.5 million in the three months ended June 30, 2019 and 2018, respectively, and $0.9 million and $0.8 million in the six months ended June 30, 2019 and 2018, respectively, for rent and related costs (including taxes and utilities) to Sodium LLC for this lease. |
Segment information_
Segment information: | 6 Months Ended |
Jun. 30, 2019 | |
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 June 30, 2019 Revenues On net Off-net Non-core Total North America $ 78,484 $ 32,864 $ 111 $ 111,459 Europe 17,789 4,113 15 21,917 Latin America 71 3 — 74 Asia Pacific 1,128 211 — 1,339 Total $ 97,472 $ 37,191 $ 126 $ 134,789 Three months Ended June 30, 2018 Revenues On net Off-net Non-core Total North America $ 74,088 $ 32,028 $ 149 $ 106,265 Europe 18,382 3,942 14 22,338 Asia Pacific 556 137 — 693 Total $ 93,026 $ 36,107 $ 163 $ 129,296 Six months Ended June 30, 2019 Revenues On net Off-net Non-core Total North America $ 156,462 $ 65,499 $ 197 $ 222,158 Europe 35,969 8,139 41 44,149 Latin America 105 4 — 109 Asia Pacific 2,120 394 — 2,514 Total $ 194,656 $ 74,036 $ 238 $ 268,930 Six months Ended June 30, 2018 Revenues On net Off-net Non-core Total North America $ 147,144 $ 64,020 $ 313 $ 211,477 Europe 37,259 7,968 26 45,253 Asia Pacific 1,009 263 — 1,272 Total $ 185,412 $ 72,251 $ 339 $ 258,002 June 30, December 31, 2019 2018 Long lived assets, net North America $ 273,772 $ 275,367 Europe and other 102,183 99,978 Total $ 375,955 $ 375,345 The majority of North American revenue consists of services delivered within the United States. |
Description of the business a_2
Description of the business and recent developments: (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Description of the business and recent developments: | |
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 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, 2018. 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 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. |
Financial instruments | Financial instruments At June 30, 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 June 30, 2019 the fair value of the Company’s $189.2 million senior unsecured notes was $191.8 million, the fair value of the Company’s $445.0 million senior secured notes was $461.7 million and the fair value of the Company’s 135.0 million Euro ($153.5 million USD) senior unsecured notes was $153.7 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 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 $3.2 million and $3.1 million for the three months ended June 30, 2019 and June 30, 2018, respectively, and $6.6 million and $6.3 million for the six months ended June 30, 2019 and June 30, 2018, 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 Six Months Ended Six Months Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Weighted average common shares - basic 45,354,327 45,016,767 45,349,397 45,011,616 Dilutive effect of stock options 35,895 36,320 30,972 32,222 Dilutive effect of restricted stock 522,069 483,386 458,549 412,993 Weighted average common shares - diluted 45,912,291 45,536,473 45,838,918 45,456,831 The following details unvested shares of restricted common stock as well as the anti-dilutive effects of stock options and restricted stock awards outstanding: Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Unvested shares of restricted common stock 1,442,520 1,417,669 1,442,520 1,417,669 Anti-dilutive options for common stock 36,381 43,308 52,338 50,353 Anti-dilutive shares of restricted common stock 37,494 — 87,686 44,672 |
Stockholder's Deficit | Stockholder’s Deficit The following details the changes in stockholder’s deficit for the three and six months ended June 30, 2019 and June 30, 2018 (in thousands except share amounts): Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder’s Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at March 31, 2019 46,350,434 $ 46 $ 475,275 $ (12,753) $ (626,799) $ (164,231) Forfeitures of shares granted to employees (1,702) — — — — — Equity-based compensation — — 5,714 — — 5,714 Foreign currency translation — — — 1,786 — 1,786 Issuances of common stock 438,478 1 — — — 1 Exercises of options 19,160 — 745 — — 745 Dividends paid — — — — (27,741) (27,741) Net income — — — — 7,136 7,136 Balance at June 30, 2019 46,806,370 $ 47 $ 481,734 $ (10,967) $ (647,404) $ (176,590) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder’s Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at March 31, 2018 46,283,140 $ 46 $ 461,154 $ (1,989) $ (556,266) $ (97,055) Forfeitures of shares granted to employees (4,749) — — — — — Equity-based compensation — — 5,149 — — 5,149 Foreign currency translation — — — (6,198) — (6,198) Issuances of common stock 145,978 — — — — — Exercises of options 19,576 — 704 — — 704 Dividends paid — — — — (23,788) (23,788) Net income — — — — 6,552 6,552 Balance at June 30, 2018 46,443,945 $ 46 $ 467,007 $ (8,187) $ (573,502) $ (114,636) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder's Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2018 46,336,499 $ 46 $ 471,331 $ (10,928) $ (609,451) $ (149,002) Forfeitures of shares granted to employees (3,886) — — — — — Equity-based compensation — — 9,484 — — 9,484 Foreign currency translation — — — (39) — (39) Issuances of common stock 448,978 1 — — — 1 Exercises of options 24,779 — 919 — — 919 Dividends paid — — — — (54,306) (54,306) Net income — — — — 16,353 16,353 Balance at June 30, 2019 46,806,370 $ 47 $ 481,734 $ (10,967) $ (647,404) $ (176,590) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder's Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2017 45,960,799 $ 46 $ 456,696 $ (4,600) $ (554,686) $ (102,544) Cumulative effect adjustment from adoption of ASC 606 — — — — 14,455 14,455 Forfeitures of shares granted to employees (11,528) — — — — — Equity-based compensation — — 9,310 — — 9,310 Foreign currency translation — — — (3,587) — (3,587) Issuances of common stock 463,978 — — — — — Exercises of options 30,696 — 1,001 — — 1,001 Dividends paid — — — — (46,607) (46,607) Net income — — — — 13,336 13,336 Balance at June 30, 2018 46,443,945 $ 46 $ 467,007 $ (8,187) $ (573,502) $ (114,636) |
Revenue recognition | Revenue recognition The Company recognizes revenue under ASU No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Under ASC 606 installation fees for contracts with terms longer than month-to-month are recognized over the contract term. The Company believes that the installation fee does not give rise to a material right as defined by ASC 606 for contracts with terms longer than month-to-month. The Company recognizes revenue over the estimated average customer life for installation fees associated with month-to-month contracts, because the fee represents a material right as defined by ASC 606. The Company capitalizes certain contract acquisition costs that relate directly to a customer contract, including commissions paid to its sales team and sales agents and amortizes these costs on straight-line basis over the period the services are transferred to the customer for commissions paid to its sales team (estimated customer life) and over the remaining original contract term for agent commissions. Management assesses these costs for impairment at least quarterly and as "triggering" events occur that indicate it is more likely than not that an impairment exists. 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 three months ended June 30, 2019 was $1.7 million and during the three months ended June 30, 2018 was $1.9 million. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the six months ended June 30, 2019 was $3.4 million and during the six months ended June 30, 2018 was $3.9 million. Amortization expense for contract costs was $4.3 million for the three months ended June 30, 2019 and $4.2 million for the three months ended June 30, 2018. Amortization expense for contract costs was $8.7 million for the six months ended June 30, 2019 and $8.3 million for the three months ended June 30, 2018. |
Recent Accounting Pronouncements-Adopted | Recent Accounting Pronouncements— Adopted 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 ASU2016-02 including not separating lease and nonlease components on its finance and operating leases, not reassessing whether any existing contracts contained leases, not reconsidering lease classification, not reassessing initial direct costs and using hindsight in determining the lease reasonably certain term of its leases. Three Months Ended June 30, 2019 Finance lease cost Amortization of right-of-use assets $ 4,917 Interest expense on finance lease liabilities 4,415 Operating lease cost 3,486 Total lease costs 12,818 Six Months Ended June 30, 2019 Finance lease cost Amortization of right-of-use assets $ 9,888 Interest expense on finance lease liabilities 8,816 Operating lease cost 6,780 Total lease costs 25,484 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases (8,827) Operating cash flows from operating leases (6,780) Financing cash flows from finance leases (5,006) Right-of-use assets obtained in exchange for new finance lease liabilities 8,562 Right-of-use assets obtained in exchange for new operating lease liabilities 1,457 Weighted-average remaining lease term — finance leases (in years) 14.6 Weighted-average remaining lease term — operating leases (in years) 22.3 Weighted average discount rate — finance leases 10.6 % Weighted average discount rate — operating leases 5.7 % Finance leases—fiber lease agreements The Company has entered into lease agreements with numerous providers of dark fiber under indefeasible-right-of use agreements (“IRU’s). These IRU’s 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. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of June 30, 2019, 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 June 30, 2020 $ 24,926 2021 24,753 2022 23,742 2023 22,567 2024 21,704 Thereafter 225,184 Total minimum finance lease obligations 342,876 Less—amounts representing interest (174,689) Present value of minimum finance lease obligations 168,187 Current maturities (7,700) Finance lease obligations, net of current maturities $ 160,487 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. 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 are 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 June 30, 2020 $ 15,592 2021 13,504 2022 12,248 2023 10,985 2024 9,871 Thereafter 96,148 Total minimum operating lease obligations 158,348 Less—amounts representing interest (64,253) Present value of minimum operating lease obligations 94,095 Current maturities (10,639) Lease obligations, net of current maturities $ 83,456 |
Recent Accounting Pronouncements-to be Adopted | Recent Accounting Pronouncements— to be Adopted In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments. |
Description of the business a_3
Description of the business and recent developments: (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Description of the business and recent developments: | |
Schedule of diluted weighted average shares | Three Months Ended Three Months Ended Six Months Ended Six Months Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Weighted average common shares - basic 45,354,327 45,016,767 45,349,397 45,011,616 Dilutive effect of stock options 35,895 36,320 30,972 32,222 Dilutive effect of restricted stock 522,069 483,386 458,549 412,993 Weighted average common shares - diluted 45,912,291 45,536,473 45,838,918 45,456,831 |
Schedule of unvested and anti-dilutive shares | Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Unvested shares of restricted common stock 1,442,520 1,417,669 1,442,520 1,417,669 Anti-dilutive options for common stock 36,381 43,308 52,338 50,353 Anti-dilutive shares of restricted common stock 37,494 — 87,686 44,672 |
Schedule of Stockholder's Deficit | Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder’s Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at March 31, 2019 46,350,434 $ 46 $ 475,275 $ (12,753) $ (626,799) $ (164,231) Forfeitures of shares granted to employees (1,702) — — — — — Equity-based compensation — — 5,714 — — 5,714 Foreign currency translation — — — 1,786 — 1,786 Issuances of common stock 438,478 1 — — — 1 Exercises of options 19,160 — 745 — — 745 Dividends paid — — — — (27,741) (27,741) Net income — — — — 7,136 7,136 Balance at June 30, 2019 46,806,370 $ 47 $ 481,734 $ (10,967) $ (647,404) $ (176,590) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder’s Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at March 31, 2018 46,283,140 $ 46 $ 461,154 $ (1,989) $ (556,266) $ (97,055) Forfeitures of shares granted to employees (4,749) — — — — — Equity-based compensation — — 5,149 — — 5,149 Foreign currency translation — — — (6,198) — (6,198) Issuances of common stock 145,978 — — — — — Exercises of options 19,576 — 704 — — 704 Dividends paid — — — — (23,788) (23,788) Net income — — — — 6,552 6,552 Balance at June 30, 2018 46,443,945 $ 46 $ 467,007 $ (8,187) $ (573,502) $ (114,636) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder's Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2018 46,336,499 $ 46 $ 471,331 $ (10,928) $ (609,451) $ (149,002) Forfeitures of shares granted to employees (3,886) — — — — — Equity-based compensation — — 9,484 — — 9,484 Foreign currency translation — — — (39) — (39) Issuances of common stock 448,978 1 — — — 1 Exercises of options 24,779 — 919 — — 919 Dividends paid — — — — (54,306) (54,306) Net income — — — — 16,353 16,353 Balance at June 30, 2019 46,806,370 $ 47 $ 481,734 $ (10,967) $ (647,404) $ (176,590) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholder's Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2017 45,960,799 $ 46 $ 456,696 $ (4,600) $ (554,686) $ (102,544) Cumulative effect adjustment from adoption of ASC 606 — — — — 14,455 14,455 Forfeitures of shares granted to employees (11,528) — — — — — Equity-based compensation — — 9,310 — — 9,310 Foreign currency translation — — — (3,587) — (3,587) Issuances of common stock 463,978 — — — — — Exercises of options 30,696 — 1,001 — — 1,001 Dividends paid — — — — (46,607) (46,607) Net income — — — — 13,336 13,336 Balance at June 30, 2018 46,443,945 $ 46 $ 467,007 $ (8,187) $ (573,502) $ (114,636) |
Schedule of lease cost | Three Months Ended June 30, 2019 Finance lease cost Amortization of right-of-use assets $ 4,917 Interest expense on finance lease liabilities 4,415 Operating lease cost 3,486 Total lease costs 12,818 Six Months Ended June 30, 2019 Finance lease cost Amortization of right-of-use assets $ 9,888 Interest expense on finance lease liabilities 8,816 Operating lease cost 6,780 Total lease costs 25,484 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases (8,827) Operating cash flows from operating leases (6,780) Financing cash flows from finance leases (5,006) Right-of-use assets obtained in exchange for new finance lease liabilities 8,562 Right-of-use assets obtained in exchange for new operating lease liabilities 1,457 Weighted-average remaining lease term — finance leases (in years) 14.6 Weighted-average remaining lease term — operating leases (in years) 22.3 Weighted average discount rate — finance leases 10.6 % Weighted average discount rate — operating leases 5.7 % |
Schedule of future minimum payments under finance leases | For the twelve months ending June 30, 2020 $ 24,926 2021 24,753 2022 23,742 2023 22,567 2024 21,704 Thereafter 225,184 Total minimum finance lease obligations 342,876 Less—amounts representing interest (174,689) Present value of minimum finance lease obligations 168,187 Current maturities (7,700) Finance lease obligations, net of current maturities $ 160,487 |
Schedule of future minimum payments under operating lease agreements | For the twelve months ending June 30, 2020 $ 15,592 2021 13,504 2022 12,248 2023 10,985 2024 9,871 Thereafter 96,148 Total minimum operating lease obligations 158,348 Less—amounts representing interest (64,253) Present value of minimum operating lease obligations 94,095 Current maturities (10,639) Lease obligations, net of current maturities $ 83,456 |
Income taxes_ (Tables)
Income taxes: (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
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 Six Months Ended Six Months Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Domestic $ 16,332 $ 15,446 $ 35,084 $ 29,582 Foreign (6,152) (6,276) (12,136) (10,489) Total $ 10,180 $ 9,170 $ 22,948 $ 19,093 |
Segment information_ (Tables)
Segment information: (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Segment information: | |
Schedule of service revenue by geographic region and product class and long lived assets by geographic region | 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 June 30, 2019 Revenues On net Off-net Non-core Total North America $ 78,484 $ 32,864 $ 111 $ 111,459 Europe 17,789 4,113 15 21,917 Latin America 71 3 — 74 Asia Pacific 1,128 211 — 1,339 Total $ 97,472 $ 37,191 $ 126 $ 134,789 Three months Ended June 30, 2018 Revenues On net Off-net Non-core Total North America $ 74,088 $ 32,028 $ 149 $ 106,265 Europe 18,382 3,942 14 22,338 Asia Pacific 556 137 — 693 Total $ 93,026 $ 36,107 $ 163 $ 129,296 Six months Ended June 30, 2019 Revenues On net Off-net Non-core Total North America $ 156,462 $ 65,499 $ 197 $ 222,158 Europe 35,969 8,139 41 44,149 Latin America 105 4 — 109 Asia Pacific 2,120 394 — 2,514 Total $ 194,656 $ 74,036 $ 238 $ 268,930 Six months Ended June 30, 2018 Revenues On net Off-net Non-core Total North America $ 147,144 $ 64,020 $ 313 $ 211,477 Europe 37,259 7,968 26 45,253 Asia Pacific 1,009 263 — 1,272 Total $ 185,412 $ 72,251 $ 339 $ 258,002 June 30, December 31, 2019 2018 Long lived assets, net North America $ 273,772 $ 275,367 Europe and other 102,183 99,978 Total $ 375,955 $ 375,345 |
Description of the business a_4
Description of the business and recent developments: (Details) | 6 Months Ended |
Jun. 30, 2019MBGB | |
Minimum | |
Speed per second of bandwidth (in megabits and gigabits) | MB | 100 |
Maximum | |
Speed per second of bandwidth (in megabits and gigabits) | GB | 100 |
Description of the business a_5
Description of the business and recent developments - Financial instruments (Details) - Jun. 30, 2019 € in Millions, $ in Millions | EUR (€) | USD ($) |
Senior unsecured 2021 notes | ||
Financial instruments | ||
Senior notes | $ 189.2 | |
Senior notes, fair value | 153.7 | |
Senior secured notes | € 135 | 153.5 |
Senior unsecured 2021 notes | Level 2 | ||
Financial instruments | ||
Senior notes, fair value | 191.8 | |
Senior secured 2022 notes | ||
Financial instruments | ||
Senior notes | 445 | |
Senior secured notes | € 135 | 153.5 |
Senior secured 2022 notes | Level 2 | ||
Financial instruments | ||
Senior notes, fair value | $ 461.7 |
Description of the business a_6
Description of the business and recent developments: Gross receipts taxes, universal service fund and other surcharges (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Description of the business and recent developments: | ||||
Excise taxes and surcharge | $ 3.2 | $ 3.1 | $ 6.6 | $ 6.3 |
Description of the business a_7
Description of the business and recent developments: Basic and diluted net income per common share (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Diluted weighted average shares | ||||
Weighted-average common shares - basic (in shares) | 45,354,327 | 45,016,767 | 45,349,397 | 45,011,616 |
Weighted average common shares-diluted | 45,912,291 | 45,536,473 | 45,838,918 | 45,456,831 |
Stock options | ||||
Diluted weighted average shares | ||||
Dilutive effect (options or restricted stock) | 35,895 | 36,320 | 30,972 | 32,222 |
Anti-dilutive effects | ||||
Anti-dilutive (options or restricted stock) | 36,381 | 43,308 | 52,338 | 50,353 |
Restricted stock | ||||
Diluted weighted average shares | ||||
Dilutive effect (options or restricted stock) | 522,069 | 483,386 | 458,549 | 412,993 |
Anti-dilutive effects | ||||
Unvested shares of restricted common stock | 1,442,520 | 1,417,669 | 1,442,520 | 1,417,669 |
Anti-dilutive (options or restricted stock) | 37,494 | 87,686 | 44,672 |
Description of the business a_8
Description of the business and recent developments: Stockholder's deficit (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Increase (Decrease) in Stockholders' Equity | ||||
Balance | $ (164,231) | $ (97,055) | $ (149,002) | $ (102,544) |
Balance (in shares) | 46,806,370 | |||
Cumulative-effect adjustment from adoption | 14,455 | |||
Equity-based compensation | 5,714 | 5,149 | $ 9,484 | 9,310 |
Foreign currency translation | 1,786 | (6,198) | (39) | (3,587) |
Issuances of common stock | 1 | 1 | ||
Exercises of options | 745 | 704 | 919 | 1,001 |
Dividends paid | (27,741) | (23,788) | (54,306) | (46,607) |
Net income | 7,136 | 6,552 | 16,353 | 13,336 |
Balance | $ (176,590) | (114,636) | $ (176,590) | (114,636) |
Balance (in shares) | 46,806,370 | 46,806,370 | ||
Common Stock | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Balance | $ 46 | $ 46 | $ 46 | $ 46 |
Balance (in shares) | 46,350,434 | 46,283,140 | 46,336,499 | 45,960,799 |
Forfeitures of shares granted to employees (in shares) | (1,702) | (4,749) | (3,886) | (11,528) |
Issuances of common stock | $ 1 | $ 1 | ||
Issuances of common stock (in shares) | 438,478 | 145,978 | 448,978 | 463,978 |
Exercises of options (in shares) | 19,160 | 19,576 | 24,779 | 30,696 |
Balance | $ 47 | $ 46 | $ 47 | $ 46 |
Balance (in shares) | 46,806,370 | 46,443,945 | 46,806,370 | 46,443,945 |
Additional Paid-in Capital | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Balance | $ 475,275 | $ 461,154 | $ 471,331 | $ 456,696 |
Equity-based compensation | 5,714 | 5,149 | 9,484 | 9,310 |
Exercises of options | 745 | 704 | 919 | 1,001 |
Balance | 481,734 | 467,007 | 481,734 | 467,007 |
Accumulated Other Comprehensive Income (Loss) | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Balance | (12,753) | (1,989) | (10,928) | (4,600) |
Foreign currency translation | 1,786 | (6,198) | (39) | (3,587) |
Balance | (10,967) | (8,187) | (10,967) | (8,187) |
Accumulated Deficit | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Balance | (626,799) | (556,266) | (609,451) | (554,686) |
Cumulative-effect adjustment from adoption | 14,455 | |||
Dividends paid | (27,741) | (23,788) | (54,306) | (46,607) |
Net income | 7,136 | 6,552 | 16,353 | 13,336 |
Balance | $ (647,404) | $ (573,502) | $ (647,404) | $ (573,502) |
Description of the business a_9
Description of the business and recent developments: Revenue recognition (Details) - Accounting Standards Update 2014-09 - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Recent accounting pronouncements- adopted | ||||
Maximum contract lengths for billing due upon receipts (in months) | 60 months | |||
Service revenue recognized | $ 1.7 | $ 1.9 | $ 3.4 | $ 3.9 |
Amortization expense for contract costs | $ 4.3 | $ 4.2 | $ 8.7 | $ 8.3 |
Description of the business _10
Description of the business and recent developments: Recent Accounting Pronouncements - Adopted (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | Jan. 01, 2019 | Dec. 31, 2018 | |
Finance leases-fiber lease agreements | |||||
Additional finance lease future payments due | $ 12,300 | $ 12,300 | |||
Cash paid for amounts included in the measurement of lease liabilities | |||||
Operating cash flows from finance leases | (8,827) | ||||
Operating cash flows from operating leases | (6,780) | ||||
Financing cash flows from finance leases | (5,006) | $ (6,059) | |||
Future minimum payments (principal and interest) under these finance leases | |||||
2020 | 24,926 | 24,926 | |||
2021 | 24,753 | 24,753 | |||
2022 | 23,742 | 23,742 | |||
2023 | 22,567 | 22,567 | |||
2024 | 21,704 | 21,704 | |||
Thereafter | 225,184 | 225,184 | |||
Total minimum finance lease obligations | 342,876 | 342,876 | |||
Less-amounts representing interest | (174,689) | (174,689) | |||
Present value of minimum finance lease obligations | 168,187 | 168,187 | |||
Current maturities, finance lease obligations | (7,700) | (7,700) | $ (7,074) | ||
Finance lease obligations, net of current maturities | 160,487 | 160,487 | $ 156,706 | ||
Future minimum payments under these operating lease agreements | |||||
2020 | 15,592 | 15,592 | |||
2021 | 13,504 | 13,504 | |||
2022 | 12,248 | 12,248 | |||
2023 | 10,985 | 10,985 | |||
2024 | 9,871 | 9,871 | |||
Thereafter | 96,148 | 96,148 | |||
Total minimum operating lease obligations | 158,348 | 158,348 | |||
Less-amounts representing interest | (64,253) | (64,253) | |||
Present value of minimum operating lease obligations | 94,095 | 94,095 | |||
Current maturities, operating lease liabilities | (10,639) | (10,639) | |||
Lease obligations, net of current maturities | 83,456 | 83,456 | |||
Asset and lease liability | $ 97,300 | ||||
Finance lease cost Amortization of right-of-use assets | 4,917 | 9,888 | |||
Interest expense on finance lease liabilities | 4,415 | 8,816 | |||
Operating lease cost | 3,486 | 6,780 | |||
Total lease costs | $ 12,818 | 25,484 | |||
Right-of-use assets obtained in exchange for new finance lease liabilities | 8,562 | ||||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 1,457 | ||||
Weighted-average remaining lease term - finance leases (in years) | 14 years 7 months 6 days | 14 years 7 months 6 days | |||
Weighted-average remaining lease term - operating leases (in years) | 22 years 3 months 18 days | 22 years 3 months 18 days | |||
Weighted average discount rate - finance leases | 10.60% | 10.60% | |||
Weighted average discount rate - operating leases | 5.70% | 5.70% | |||
Initial terms | 20 years | 20 years | |||
Minimum | |||||
Future minimum payments under these operating lease agreements | |||||
Initial terms | 15 years | 15 years | |||
Maximum | |||||
Future minimum payments under these operating lease agreements | |||||
Initial terms | 20 years | 20 years |
Property and equipment_ (Detail
Property and equipment: (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Property and equipment: | ||||
Depreciation and amortization | $ 19,979 | $ 20,216 | $ 40,240 | $ 40,004 |
Capitalized salaries and related benefits of employees | $ 2,700 | $ 2,700 | $ 5,300 | $ 5,300 |
Property and equipment_ Exchang
Property and equipment: Exchange agreement (Details) - Exchange agreement - Network equipment - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Property and equipment | ||||
Non cash component of network equipment obtained in exchange transactions | $ 0.1 | $ 0.3 | $ 0.7 | $ 0.5 |
Level 3 | ||||
Property and equipment | ||||
Fair value of equipment | $ 0.5 | $ 1.1 | $ 2.2 | $ 1.5 |
Property and equipment_ Install
Property and equipment: Installment payment agreement (Details) $ in Thousands | 1 Months Ended | ||
Mar. 31, 2015payment | Jun. 30, 2019USD ($) | Dec. 31, 2018USD ($) | |
Installment payment agreement | |||
Unamortized discount | $ 396 | $ 395 | |
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 | 11,900 | 11,200 | |
Unamortized discount | $ 400 | $ 400 |
Long-term debt_ Limitations und
Long-term debt: Limitations under the Indentures (Details) € in Millions, $ in Millions | 6 Months Ended | ||||
Jun. 30, 2019USD ($) | Jun. 30, 2019EUR (€) | Jun. 30, 2019USD ($) | Jun. 25, 2019EUR (€) | Jun. 25, 2019USD ($) | |
Long-term debt | |||||
Interest rate (as a percent) | 4.375% | 4.375% | |||
debt instrument covenant permitted investments and payments | $ 166.9 | ||||
Minimum | |||||
Long-term debt | |||||
Consolidated leverage ratio | 4.25 | 4.25 | |||
Senior unsecured 2021 notes | |||||
Long-term debt | |||||
Senior notes outstanding | $ 189.2 | ||||
Principal amount | € 135 | $ 153.5 | |||
Interest rate (as a percent) | 5.625% | 5.625% | |||
After Deducting Offering Expenses | $ 153.7 | ||||
Senior secured 2022 notes | |||||
Long-term debt | |||||
Senior notes outstanding | 445 | ||||
Principal amount | € 135 | $ 153.5 | |||
Interest rate (as a percent) | 5.375% | 5.375% | |||
Restriction on incurring additional indebtedness | Minimum | |||||
Long-term debt | |||||
Consolidated leverage ratio | 6 | 6 | |||
Consolidated secured leverage ratio | 4 | 4 | |||
Restriction on incurring additional indebtedness | Senior secured 2022 Notes and 2021 Notes | Minimum | |||||
Long-term debt | |||||
Consolidated leverage ratio | 5 | 5 | |||
Consolidated secured leverage ratio | 3.5 | 3.5 | |||
Restriction on certain payments | Minimum | |||||
Long-term debt | |||||
Consolidated leverage ratio | 4.25 | 4.25 | |||
Increase in unrestricted payment amount | Maximum | |||||
Long-term debt | |||||
Consolidated leverage ratio | 4.25 | 4.25 | |||
4.375 Senior Unsecured Notes Due 2024 | |||||
Long-term debt | |||||
Senior notes outstanding | € 135 | $ 153.5 | |||
Principal amount | € 135 | $ 153.7 | |||
Interest rate (as a percent) | 4.375% | 4.375% | |||
After Deducting Offering Expenses | $ 153.5 |
Long-term debt_ Issuance of 202
Long-term debt: Issuance of 2024 Notes (Details) $ in Thousands, € in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Jun. 25, 2019EUR (€) | Jun. 25, 2019USD ($) | |
Long-term debt | ||||
Interest rate (as a percent) | 4.375% | 4.375% | ||
Net proceeds from issuance of senior unsecured 2024 Euro Notes | $ 152,128 | |||
4.375 Senior Unsecured Notes Due 2024 | ||||
Long-term debt | ||||
Senior secured notes | € 135 | $ 153,700 | ||
Interest rate (as a percent) | 4.375% | 4.375% | ||
Net proceeds from issuance of senior unsecured 2024 Euro Notes | 152,100 | |||
Senior notes, fair value | $ 153,500 | 153,500 | ||
Unrealized gain | $ 200 | $ 200 | ||
Redemption price ranging, (as a percent) | 102.188% | |||
Principal amount plus accrued and unpaid interest (as a percent) | 100.00% | |||
Redemption Price, Additional Percentage | 35.00% | |||
Redemption price percentage of principal amount redeemed | 104.375% | |||
Redemption Price, Percentage | 101.00% | |||
Redemption Price, Minimum Percentage for Redemption | 90.00% | |||
Percentage of Principal Amount Redeemable under Insolvency | 25.00% |
Commitments and contingencies_
Commitments and contingencies: Current and potential litigation (Details) - USD ($) $ in Millions | Jun. 30, 2019 | Mar. 31, 2015 |
Commitments and contingencies | ||
Estimate of possible loss in excess of accrual | $ 3 | |
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 | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Components of income before income taxes | ||||
Domestic | $ 16,332 | $ 15,446 | $ 35,084 | $ 29,582 |
Foreign | (6,152) | (6,276) | (12,136) | (10,489) |
Income before income taxes | $ 10,180 | $ 9,170 | $ 22,948 | $ 19,093 |
Common stock buyback program _2
Common stock buyback program stock option and award plan: (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Remaining authorized amount for common stock repurchases | $ 34.9 | $ 34.9 | ||
Repurchase of common stock (in shares) | 0 | 0 | 0 | 0 |
Shares issue (in shares) | 400,000 | |||
Shares issued, Value | $ 23.5 | |||
Executives | Performance conditions | ||||
Total shares subject to conditions (in shares) | 24,050 | 24,050 | ||
CEO | Performance conditions | ||||
Total shares subject to conditions (in shares) | 105,000 | 105,000 |
Dividends on common stock_ (Det
Dividends on common stock: (Details) - USD ($) $ / shares in Units, $ in Thousands | Sep. 09, 2019 | Aug. 07, 2019 | Jun. 30, 2019 | Jun. 30, 2018 |
Dividends on common stock and return of capital program | ||||
Quarterly dividend payment approved (per share) | $ 0.62 | |||
Dividends paid | $ 28,100 | $ 54,306 | $ 46,607 |
Related party transactions_ (De
Related party transactions: (Details) - CEO - Lease - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
May 31, 2015 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 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) | $ 0.5 | $ 0.5 | $ 0.9 | $ 0.8 |
Segment information_ (Details)
Segment information: (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($)segment | Jun. 30, 2018USD ($) | Dec. 31, 2018USD ($) | |
Geographic information | |||||
Number of operating segments | segment | 1 | ||||
Revenues | $ 134,789 | $ 129,296 | $ 268,930 | $ 258,002 | |
Long lived assets, net | 375,955 | 375,955 | $ 375,345 | ||
On-net | |||||
Geographic information | |||||
Revenues | 97,472 | 93,026 | 194,656 | 185,412 | |
Off-net | |||||
Geographic information | |||||
Revenues | 37,191 | 36,107 | 74,036 | 72,251 | |
Non-core | |||||
Geographic information | |||||
Revenues | 126 | 163 | 238 | 339 | |
North America | |||||
Geographic information | |||||
Revenues | 111,459 | 106,265 | 222,158 | 211,477 | |
Long lived assets, net | 273,772 | 273,772 | 275,367 | ||
North America | On-net | |||||
Geographic information | |||||
Revenues | 78,484 | 74,088 | 156,462 | 147,144 | |
North America | Off-net | |||||
Geographic information | |||||
Revenues | 32,864 | 32,028 | 65,499 | 64,020 | |
North America | Non-core | |||||
Geographic information | |||||
Revenues | 111 | 149 | 197 | 313 | |
Europe | |||||
Geographic information | |||||
Revenues | 21,917 | 22,338 | 44,149 | 45,253 | |
Europe | On-net | |||||
Geographic information | |||||
Revenues | 17,789 | 18,382 | 35,969 | 37,259 | |
Europe | Off-net | |||||
Geographic information | |||||
Revenues | 4,113 | 3,942 | 8,139 | 7,968 | |
Europe | Non-core | |||||
Geographic information | |||||
Revenues | 15 | 14 | 41 | 26 | |
Europe and other | |||||
Geographic information | |||||
Long lived assets, net | 102,183 | 102,183 | $ 99,978 | ||
Asia Pacific | |||||
Geographic information | |||||
Revenues | 1,339 | 693 | 2,514 | 1,272 | |
Asia Pacific | On-net | |||||
Geographic information | |||||
Revenues | 1,128 | 556 | 2,120 | 1,009 | |
Asia Pacific | Off-net | |||||
Geographic information | |||||
Revenues | 211 | $ 137 | 394 | $ 263 | |
Latin America | |||||
Geographic information | |||||
Revenues | 74 | 109 | |||
Latin America | On-net | |||||
Geographic information | |||||
Revenues | 71 | 105 | |||
Latin America | Off-net | |||||
Geographic information | |||||
Revenues | $ 3 | $ 4 |