Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Jul. 31, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'COGENT COMMUNICATIONS HOLDINGS, INC. | ' |
Entity Central Index Key | '0001158324 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Jun-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 46,345,049 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q2 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets: | ' | ' |
Cash and cash equivalents | $349,835 | $304,866 |
Accounts receivable, net of allowance for doubtful accounts of $1,817 and $1,871, respectively | 33,505 | 30,628 |
Prepaid expenses and other current assets | 22,481 | 18,777 |
Total current assets | 405,821 | 354,271 |
Property and equipment, net | 353,663 | 341,193 |
Deferred tax assets - noncurrent | 50,122 | 50,861 |
Deposits and other assets - $447 and $448 restricted, respectively | 13,181 | 8,776 |
Total assets | 822,787 | 755,101 |
Current liabilities: | ' | ' |
Accounts payable | 16,969 | 14,098 |
Accrued liabilities | 34,754 | 31,465 |
Convertible senior notes - current portion, net of discount of $3,099 (Note 3) | ' | 88,879 |
Current maturities, capital lease obligations | 8,341 | 9,252 |
Total current liabilities | 60,064 | 143,694 |
Senior secured notes including premium of $4,835 and $5,423, respectively | 244,835 | 245,423 |
Senior unsecured notes | 200,000 | ' |
Capital lease obligations, net of current maturities | 155,899 | 152,527 |
Other long term liabilities | 21,367 | 19,965 |
Total liabilities | 682,165 | 561,609 |
Commitments and contingencies: | ' | ' |
Stockholders' equity: | ' | ' |
Common stock, $0.001 par value; 75,000,000 shares authorized; 46,466,355 and 47,334,218 shares issued and outstanding, respectively | 46 | 47 |
Additional paid-in capital | 480,794 | 508,256 |
Accumulated other comprehensive income - foreign currency translation | 1,630 | 2,136 |
Accumulated deficit | -341,848 | -316,947 |
Total stockholders' equity | 140,622 | 193,492 |
Total liabilities and stockholders' equity | $822,787 | $755,101 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
CONDENSED CONSOLIDATED BALANCE SHEETS | ' | ' |
Accounts receivable, allowance for doubtful accounts (in dollars) | $1,817 | $1,871 |
Deposits and other assets, restricted (in dollars) | 447 | 448 |
Convertible senior notes, discount (in dollars) | ' | 3,099 |
Senior secured notes, premium (in dollars) | $4,835 | $5,423 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 46,466,355 | 47,334,218 |
Common stock, shares outstanding | 46,466,355 | 47,334,218 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ' | ' | ' | ' |
Service revenue | $94,623 | $85,803 | $187,560 | $170,357 |
Operating expenses: | ' | ' | ' | ' |
Network operations (including $114, $126 and $227, $281 of equity-based compensation expense for the three and six months ended June 30, 2014, and 2013, respectively, exclusive of depreciation and amortization shown separately below) | 39,605 | 37,076 | 78,442 | 74,385 |
Selling, general, and administrative (including $1,759, $2,011 and $3,651 and $4,370 of equity-based compensation expense for the three and six months ended June 30, 2014, and 2013, respectively) | 26,139 | 21,226 | 52,423 | 42,691 |
Gains on equipment transactions | -2,731 | ' | -5,026 | ' |
Depreciation and amortization | 17,301 | 15,900 | 34,505 | 31,774 |
Total operating expenses | 80,314 | 74,202 | 160,344 | 148,850 |
Operating income | 14,309 | 11,601 | 27,216 | 21,507 |
Interest income and other, net | 268 | 589 | 404 | 1,245 |
Interest expense | -13,790 | -10,216 | -25,092 | -20,084 |
Income before income taxes | 787 | 1,974 | 2,528 | 2,668 |
Income tax benefit (provision) | 421 | -367 | -1,195 | -700 |
Net income | 1,208 | 1,607 | 1,333 | 1,968 |
Comprehensive income: | ' | ' | ' | ' |
Net income | 1,208 | 1,607 | 1,333 | 1,968 |
Foreign currency translation adjustment | -44 | 326 | -506 | -1,467 |
Comprehensive income | $1,164 | $1,933 | $827 | $501 |
Net income per common share: | ' | ' | ' | ' |
Basic and diluted net income per common share (in dollars per share) | $0.03 | $0.03 | $0.03 | $0.04 |
Dividends declared per common share (in dollars per share) | $0.17 | $0.13 | $0.56 | $0.25 |
Weighted-average common shares - basic (in shares) | 45,897,449 | 46,040,692 | 46,200,844 | 46,028,855 |
Weighted-average common shares - diluted (in shares) | 46,294,966 | 46,769,184 | 46,648,415 | 46,842,136 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ' | ' | ' | ' |
Network operations, equity-based compensation expense | $114 | $126 | $227 | $281 |
Selling, general, and administrative, equity-based compensation expense | $1,759 | $2,011 | $3,651 | $4,370 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Cash flows from operating activities: | ' | ' |
Net income | $1,333 | $1,968 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Depreciation and amortization | 34,505 | 31,774 |
Amortization of debt discount and premium | 2,555 | 3,193 |
Equity-based compensation expense (net of amounts capitalized) | 3,878 | 4,651 |
(Gains) losses - dispositions of assets and other, net | -4,959 | 123 |
Deferred income taxes | 772 | 204 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | -2,970 | -3,409 |
Prepaid expenses and other current assets | -3,678 | -4,693 |
Accounts payable, accrued liabilities and other long-term liabilities | 7,822 | 3,647 |
Deposits and other assets | -227 | 207 |
Net cash provided by operating activities | 39,031 | 37,665 |
Cash flows from investing activities: | ' | ' |
Purchases of property and equipment | -31,608 | -28,771 |
Proceeds from dispositions of assets | 92 | 2 |
Net cash used in investing activities | -31,516 | -28,769 |
Cash flows from financing activities: | ' | ' |
Dividends paid | -26,234 | -11,634 |
Purchases of common stock | -32,084 | ' |
Repayment of convertible senior notes | -91,978 | ' |
Net proceeds from issuance of senior unsecured notes | 195,824 | ' |
Proceeds from exercises of stock options | 301 | 737 |
Principal payments of capital lease obligations | -8,146 | -7,045 |
Net cash provided by (used in) financing activities | 37,683 | -17,942 |
Effect of exchange rates changes on cash | -229 | -904 |
Net increase (decrease) in cash and cash equivalents | 44,969 | -9,950 |
Cash and cash equivalents, beginning of period | 304,866 | 247,285 |
Cash and cash equivalents, end of period | 349,835 | 237,335 |
Supplemental disclosure of non-cash financing activities: | ' | ' |
Non-cash component of network equipment obtained in exchange transactions | 4,900 | ' |
Capital lease obligations incurred | $7,671 | $21,224 |
Description_of_the_business_an
Description of the business and recent developments: | 6 Months Ended | |||||||||
Jun. 30, 2014 | ||||||||||
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 (the “ Merger Agreement “) by and among Cogent Communications Group, Inc. (“Group”) , a Delaware corporation, Cogent Communications Holdings, Inc., a Delaware corporation (“Holdings”) and Cogent Communications Merger Sub, Inc., a Delaware corporation (“ Merger Sub “), 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 “). In connection with the succession, the common stock of Holdings is deemed to be registered under Section 12(b) of the Exchange Act by operation of law. | ||||||||||
The holding company organizational structure was effected by a merger (the “ Merger “) structured as a tax-free transaction and conducted pursuant to Section 251(g) of Delaware General Corporation Law which provides for the formation of a holding company structure without a vote of the stockholders of the constituent corporations. Because the holding company organizational structure has occurred at the parent company level, the remainder of the Company’s subsidiaries, operations and customers were not affected by the Merger. Accordingly, the historical financial statements reflect the effect of the reorganization for all periods presented. Under the terms of the Merger Agreement, Merger Sub merged with and into Group, with Group surviving the merger and becoming a direct, wholly owned subsidiary of Holdings. | ||||||||||
Pursuant to the Merger Agreement, all of the outstanding capital stock of Group was converted, on a share for share basis, into common stock of Holdings. As a result, each former stockholder of Group became the owner of an identical number of shares of common stock of Holdings, evidencing the same proportional interests in the Company (as defined below) and having the same designations, rights, powers and preferences, qualifications, limitations and restrictions, as those that the stockholder held in Group. Additionally, each outstanding option to purchase shares of common stock of Group was automatically converted into an option to purchase, upon the same terms and conditions, an identical number of shares of Holding’s common stock. Each outstanding restricted share of common stock of Group was also converted into a restricted share of common stock of Holdings upon the same terms and conditions. The directors and executive officers of the Company immediately after completion of the Merger are comprised of the same persons who were directors of and executive officers of Group immediately prior to the Merger. | ||||||||||
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 and Internet Protocol (“IP”) communications services. The Company’s network is specifically designed and optimized to transmit data using IP. 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 Japan. | ||||||||||
The Company offers on-net Internet access services exclusively through its own facilities, which run from its network to its customers’ premises. The Company is not dependent on local telephone companies to serve its customers for its on-net Internet access 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 IP connectivity ranging from 100 Megabits per second to 100 Gigabits per second of bandwidth. The Company provides its on-net Internet access services to its net-centric and corporate customers. The Company’s net-centric customers include bandwidth-intensive users such as universities, other Internet service providers, telephone companies, cable television companies, web hosting companies, content delivery network companies and commercial content and application providers. These net-centric customers generally receive service in colocation facilities and in the Company’s data centers. The Company operates data centers throughout North America and Europe that allow customers to collocate their equipment and access the Company’s network. 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. | ||||||||||
In addition to providing its on-net services, the Company provides Internet connectivity 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’ facilities 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 2013 annual report on Form 10-K. | ||||||||||
The accompanying unaudited 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, 2014 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, 2014 the fair value of the Company’s $200.0 million senior unsecured notes was $200.5 million and the fair value of the Company’s $240.0 million senior secured notes was $256.5million. | ||||||||||
The Company was party to letters of credit totaling $0.4 million as of June 30, 2014. These letters of credit are secured by investments that are restricted and included in other assets. | ||||||||||
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 common stock equivalents, if dilutive. | ||||||||||
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. As of June 30, 2014 and 2013, 0.8 million and 1.2 million unvested shares of restricted common stock, respectively, are not included in the computation of basic income per share, as the shares were not vested. Using the “if-converted” method, the shares issuable upon conversion of the Company’s convertible senior notes (the “Convertible Notes”) were anti-dilutive for the three and six months ended June 30, 2013. Accordingly, the impact has been excluded from the computation of diluted loss per share. The Convertible Notes were convertible into 1.9 million shares of the Company’s common stock at June 30, 2013. The Convertible Notes were repaid in June 2014 and are no longer outstanding. For the three and six months ended June 30, 2014 and 2013, the Company’s employees exercised options for 15,278, 25,035, 42,693 and 56,963 common shares, respectively. | ||||||||||
The following details the determination of diluted weighted average shares for the three and six months ended June 30, 2014: | ||||||||||
Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | |||||||
June 30, 2014 | June 30, 2014 | June 30, 2013 | June 30, 2013 | |||||||
Weighted average common shares - basic | 45,897,449 | 46,200,844 | 46,040,692 | 46,028,855 | ||||||
Dilutive effect of stock options | 59,270 | 68,504 | 77,868 | 79,669 | ||||||
Dilutive effect of restricted stock | 338,247 | 379,067 | 650,624 | 733,612 | ||||||
Weighted average common shares - diluted | 46,294,966 | 46,648,415 | 46,769,184 | 46,842,136 | ||||||
Recent Accounting Pronouncements | ||||||||||
On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, 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. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. | ||||||||||
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists . Prior to the issuance of ASU 2013-11 there was no explicit guidance on the presentation of unrecognized tax benefits when such carryforwards exist, which has led to diversity in practice. ASU 2013-11 requires entities to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. The ASU is effective for fiscal years beginning after December 15, 2013, and interim periods within those years. The adoption of this guidance did not have any effect on our consolidated financial condition. |
Property_and_equipment
Property and equipment: | 6 Months Ended |
Jun. 30, 2014 | |
Property and equipment: | ' |
Property and equipment: | ' |
2. Property and equipment: | |
Depreciation and amortization expense related to property and equipment and capital leases was $17.3 million $34.5 million, $15.8 million and $31.8 million for the three and six months ended June 30, 2014 and 2013, respectively. The Company capitalized salaries and related benefits of employees working directly on the construction and build-out of its network of $1.9 million, $3.9 million, $1.8 million and $3.8 million for the three and six months ended June 30, 2014 and 2013, respectively. | |
In the first and second quarters of 2014, the Company exchanged certain used network equipment for new network equipment and cash consideration resulting in gains of $2.2 million and $2.7 million, respectively, based upon the estimated fair value of the new network equipment less the carrying amount of the used network equipment and cash paid. |
Longterm_debt
Long-term debt: | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Long-term debt: | ' | |||||||||||||
Long-term debt: | ' | |||||||||||||
3. Long-term debt: | ||||||||||||||
Senior unsecured notes | ||||||||||||||
On April 9, 2014, Cogent Communications Finance, Inc. ( “Cogent Finance”), a newly formed financing subsidiary of Group, completed an offering of $200.0 million in aggregate principal amount at par of 5.625% Senior Notes due 2021 (the “2021 Notes”). The 2021 Notes were sold in private offerings for resale to qualified institutional buyers pursuant to SEC Rule 144A. The offering closed into escrow pursuant to an escrow agreement, dated as of April 9, 2014 (the “Escrow Agreement”). The term “Issuer” refers to Cogent Finance prior to the release of the funds from the escrow account (such date of release, the “Escrow Release Date”) and to Group after the Escrow Release Date. As a condition to releasing the funds from escrow the Company redeemed its remaining outstanding Convertible Notes on June 20, 2014 (the “Redemption Transaction”). After consummation of the Redemption Transaction, Cogent Finance merged with Group, with Group continuing as the surviving corporation (the “Finance Merger”). At the time of consummation of the Finance Merger, Group assumed the obligations of Cogent Finance under the 2021 Notes and the indenture governing the 2021 Notes (the “Indenture”) and Group and each of Group’s domestic subsidiaries became party to the Indenture pursuant to a supplemental indenture to the Indenture and the obligations under the Indenture became obligations solely of Group and each of Group’s domestic subsidiaries. Holdings also provided a guarantee of the 2021 Notes but is not subject to any of the covenants under the Indenture. After the conditions to the release of the escrow proceeds were satisfied, on June 25, 2014 (the “Escrow Release Date”) the proceeds from the 2021 Notes were released. The net proceeds from the offering were $195.8 million after deducting discounts and commissions and offering expenses. Issuance costs are included in deposits and other assets. The net proceeds from the offering are intended to be used for general corporate purposes. | ||||||||||||||
The 2021 Notes were issued pursuant to, and are governed by the Indenture between Cogent Finance and the trustee. The 2021 Notes bear interest at a rate of 5.625% per year and will mature on April 15, 2021. Interest began to accrue on the 2021 Notes on April 9, 2014 and will be paid semi-annually on April 15 and October 15, commencing on October 15, 2014. Following the Escrow Release Date, the 2021 Notes became Group’s senior unsecured obligations and are guaranteed on a senior unsecured basis by the Company. The 2021 Notes are effectively subordinated in right of payment to all of Group’s and each guarantor’s secured indebtedness, including the Group’s existing $240.0 million of senior secured notes and future secured indebtedness, if any, to the extent of the value of the assets securing such indebtedness. The 2021 Notes are equal in right of payment with Group’s and each guarantor’s unsecured indebtedness that is not subordinated in right of payment to the 2021 Notes. The 2021 Notes will rank senior in right of payment to Group’s and each guarantor’s future subordinated debt, if any; and will be structurally subordinated in right of payment to all indebtedness and other liabilities of any of the Group’s subsidiaries that are not guarantors, which will only consist of immaterial subsidiaries and foreign subsidiaries that do not guarantee other indebtedness of Group. | ||||||||||||||
The Company may redeem the 2021 Notes, in whole or in part, at any time prior to April 15, 2017 at a price equal to 100% of the principal amount plus an “applicable” premium, plus accrued and unpaid interest, if any, to the date of redemption. The “applicable” premium means, with respect to a note at any date of redemption, the greater of (i) 1.0% of the then-outstanding principal amount of such note and (ii) the excess of (A) the present value at such date of redemption of (1) the redemption price of 104.219% plus (2) all remaining required interest payments due on such note through April 15, 2017 (excluding accrued but unpaid interest to the date of redemption), computed using a discount rate equal to the Treasury Rate as of such date of redemption plus 50 basis points, over (B) the then-outstanding principal amount of such note. The Company may also redeem the 2021 Notes, in whole or in part, at any time on or after April 15, 2017 at the applicable redemption prices specified under the indenture governing the 2021 Notes plus accrued and unpaid interest, if any, to the date of redemption. The redemption prices (expressed as a percentage of the principal amount) are 104.219% during the 12-month period beginning on April 15, 2017, 102.813% during the 12-month period beginning on April 15, 2018, 101.406% during the 12-month period beginning on April 15, 2019 and 100.0% during the 12-month period beginning on April 15, 2020 and thereafter. In addition, the Company may redeem up to 35% of the 2021 Notes before April 15, 2017 with the net cash proceeds from certain equity offerings at a redemption price of 105.625% of the principal amount plus accrued and unpaid interest. If the Company experiences specific kinds of changes of control, the Company must offer to repurchase all of the 2021 Notes at a purchase price of 101.0% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date. | ||||||||||||||
The indenture governing the 2021 Notes, among other things, limits 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 Indenture is greater than 5.0. Permitted investments and payments that are not restricted include an amount of up to $150.0 million. This amount may be increased by the Company’s consolidated cash flow, as defined in the Indenture as long as the Company’s consolidated leverage ratio is less than 4.25. Holdings has cash and cash equivalents totaling $80.0 million as of June 30, 2014 which are not subject to these limitations. | ||||||||||||||
Senior secured notes | ||||||||||||||
On January 26, 2011 and on August 19, 2013, the Company issued its 8.375% Senior Secured Notes (the “Senior Notes”) due February 15, 2018, for aggregate principal amounts of $175.0 million and $65.0 million, respectively, in private offerings for resale to qualified institutional buyers pursuant to SEC Rule 144A. The Senior Notes are secured and bear interest at 8.375% per annum. Interest is payable in cash semiannually in arrears on February 15 and August 15, of each year. On January 26, 2011, the Company received net proceeds of $170.5 million after deducting $4.5 million of issuance costs from issuing $175.0 million of Senior Notes. On August 19, 2013, the Company received net proceeds of approximately $69.9 million after deducting $1.0 million of issuance costs from issuing $65.0 million of Senior Notes. The Senior Notes sold in August 2013 were sold at 109.00% of par value. The $5.9 million premium is being amortized as a reduction to interest expense to the maturity date using the effective interest rate method. Issuance costs are included in deposits and other assets. | ||||||||||||||
Convertible senior notes | ||||||||||||||
In June 2007, the Company issued its Convertible Notes for an aggregate principal amount of $200.0 million in a private offering for resale to qualified institutional buyers pursuant to SEC Rule 144A. The Convertible Notes were scheduled to mature on June 15, 2027, were unsecured, and bore interest at 1.00% per annum. Interest was payable in cash semiannually in arrears on June 15 and December 15, of each year, beginning on December 15, 2007. The Company received net proceeds from the issuance of the Convertible Notes of approximately $195.1 million, after deducting the original issue discount of 2.25% and issuance costs. The discount and other issuance costs were being amortized to interest expense using the effective interest method through June 15, 2014, which was the earliest put date. In 2008, the Company purchased an aggregate of $108.0 million of face value of the Convertible Notes for $48.6 million in cash in a series of transactions resulting in $92.0 million of principal amount of the Convertible Notes remaining after these purchase transactions. | ||||||||||||||
Holders of the Convertible Notes had the right to require the Company to repurchase for cash all or some of their notes on June 15, 2014, 2017 and 2022 at a redemption price of 100% of the principal amount plus accrued interest. Holders of $58.5 million of principal amount of the Convertible Notes issued a repurchase notice to the Company and on June 16, 2014 the Company repaid $58.5 million of Convertible Notes principal amount plus accrued interest. The Convertible Notes may have been redeemed by the Company at any time on and after June 20, 2014 at a redemption price of 100% of the principal amount plus accrued interest. On June 20, 2014 the Company redeemed the remaining $33.5 million principal amount of the Convertible Notes. | ||||||||||||||
The debt and equity components for the Convertible Notes and of December 31, 2013 were as follows (in thousands): | ||||||||||||||
December 31, | ||||||||||||||
2013 | ||||||||||||||
Principal amount | $ | 91,978 | ||||||||||||
Unamortized discount | (3,099 | ) | ||||||||||||
Net carrying amount | 88,879 | |||||||||||||
Additional paid-in capital | 74,933 | |||||||||||||
The amount of interest expense recognized and effective interest rate for the Convertible Notes were as follows (in thousands): | ||||||||||||||
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||
June 30, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 | |||||||||||
Contractual coupon interest | $ | 189 | $ | 230 | $ | 419 | $ | 460 | ||||||
Amortization of discount and costs on Notes | 1,417 | 1,585 | 3,106 | 3,136 | ||||||||||
Interest expense | $ | 1,606 | $ | 1,815 | $ | 3,525 | $ | 3,596 | ||||||
Effective interest rate | 8.7 | % | 8.7 | % | 8.7 | % | 8.7 | % | ||||||
Commitments_and_contingencies
Commitments and contingencies: | 6 Months Ended |
Jun. 30, 2014 | |
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 circuit and dark fiber costs which could result in a loss of up to $2.0 million in excess of the amount accrued at June 30, 2014. | |
Certain former sales employees of the Company filed a collective action against the Company in December 2011 in the United States District Court, Southern District of Texas, Houston Division alleging misclassification of the Company’s sales employees throughout the US in violation of the Fair Labor Standards Act. The lawsuit seeks to recover pay for allegedly unpaid overtime and other damages, including attorney’s fees. In March 2014 the judge de-certified the collective action. Each of the former employees that opted-in to the collective action retains the right to file an individual action. Approximately 70 former employees have done so. In several of the jurisdictions in which the lawsuits have been filed the plaintiffs seek certification of a collective action related to the employees in that jurisdiction. The Company denies the claims and believes that the claims for unpaid overtime are without merit. The Company believes its classification of sales employees is in compliance with applicable law. | |
In the normal 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, 2014 | ||||||||
Income taxes: | ' | |||||||
Income taxes: | ' | |||||||
5. Income taxes: | ||||||||
The effective income tax rates for the three and six months ended June 30, 2014 and 2013 are different from the U.S. federal income tax statutory rate of 35.0% primarily due to the impact of state taxes and foreign losses that have not met the criteria for recording as an income tax benefit. The components of income (loss) before income taxes consist of the following (in thousands): | ||||||||
Three Months | Three Months | |||||||
Ended | Ended | |||||||
June 30, 2014 | June 30, 2013 | |||||||
Domestic | $ | 7,578 | $ | 7,943 | ||||
Foreign | (6,791 | ) | (5,969 | ) | ||||
Total | $ | 787 | $ | 1,974 | ||||
Six Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, 2014 | June 30, 2013 | |||||||
Domestic | $ | 16,014 | $ | 14,139 | ||||
Foreign | (13,486 | ) | (11,471 | ) | ||||
Total | $ | 2,528 | $ | 2,668 | ||||
Common_stock_buyback_program
Common stock buyback program: | 6 Months Ended |
Jun. 30, 2014 | |
Common stock buyback program: | ' |
Common stock buyback program: | ' |
6. Common stock buyback program: | |
The Company’s board of directors has approved $50.0 million of purchases of the Company’s common stock under a buyback program (the “Buyback Program”). At June 30, 2014, there was approximately $13.7 million remaining for purchases under the Buyback Program. During the three and six months ended June 30, 2014, the Company purchased 521,891 shares and 926,888 shares of its common stock for $17.9 million and $32.1 million, respectively. In July 2014 the Company purchased an additional 130,681 shares for $4.4 million. There were no purchases made during the six months ended June 30, 2013. | |
In August 2014, the Company’s board of directors approved an additional $50.0 million under the Buyback Program. There is now a total of $59.3 million available under the Buyback Program. |
Dividends_on_common_stock
Dividends on common stock: | 6 Months Ended | |||||||||||
Jun. 30, 2014 | ||||||||||||
Dividends on common stock: | ' | |||||||||||
Dividends on common stock: | ' | |||||||||||
7. Dividends on common stock: | ||||||||||||
Dividends are recorded as a reduction to retained earnings. Dividends on unvested restricted shares of common stock are paid as the awards vest. The Company’s initial quarterly dividend payment was made in the third quarter of 2012. In addition to the Company’s regular quarterly dividends, in 2013, the Company’s board of directors approved an additional return of capital program (the “Capital Program”) for the Company’s shareholders. Under the Capital Program the Company plans on returning additional capital to the Company’s shareholders each quarter through either stock buybacks or a special dividend or a combination of stock buybacks and a special dividend. The aggregate payment under the Capital Program initially was at least $10.0 million each quarter and was increased to be at least $10.5 million each quarter. Amounts paid under the Capital Program are in addition to the Company’s regular quarterly dividend payments. The initial $10.0 million ($0.22 per share) quarterly dividend payment under the Capital Program was paid on December 20, 2013. The Company bought $14.2 million of its stock in the first quarter of 2014 which was greater than the minimum amount of $10.5 million under the Capital Program, as a result, a special dividend under the Capital Program was not included with the second quarter 2014 dividend payment. The Company bought $17.9 million of its stock in the second quarter of 2014 which was greater than the minimum amount of $10.5 million under the Capital Program, as a result, a special dividend under the Capital Program will not be included with the third quarter 2014 dividend payment. | ||||||||||||
On August 6, 2014, the Company’s board of directors approved the payment of the Company’s regular quarterly dividend of $0.30 per common share. The dividend for the third quarter of 2014 will be paid to holders of record on August 29, 2014. This estimated $13.7 million dividend payment is expected to be made on September 19, 2014. | ||||||||||||
A summary of the Company’s quarterly dividends paid since its initial dividend payment is as follows (in thousands, except per share amounts): | ||||||||||||
Dividend Period | Amount per | Record Date | Payment Date | Dividends Paid | ||||||||
Common Share | ||||||||||||
Q3 2012 | $ | 0.1 | August 22, 2012 | September 12, 2012 | $ | 4,537 | ||||||
Q4 2012 | $ | 0.11 | November 21, 2012 | December 12, 2102 | $ | 5,012 | ||||||
Q1 2013 | $ | 0.12 | March 4, 2013 | March 15, 2013 | $ | 5,489 | ||||||
Q2 2013 | $ | 0.13 | May 31, 2013 | June 18, 2013 | $ | 6,145 | ||||||
Q3 2013 | $ | 0.14 | September 5, 2013 | September 25, 2013 | $ | 6,512 | ||||||
Q4 2013 | $ | 0.37 | November 27, 2013 | December 20, 2013 | $ | 17,206 | ||||||
Q1 2014 | $ | 0.39 | March 7, 2014 | March 27, 2014 | $ | 18,352 | ||||||
Q2 2014 | $ | 0.17 | May 30, 2014 | June 18, 2014 | $ | 7,882 | ||||||
The payment of any future dividends and any other returns of capital 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 and other factors deemed relevant by the Company’s board of directors. |
Related_party_transactions
Related party transactions: | 6 Months Ended |
Jun. 30, 2014 | |
Related party transactions: | ' |
Related party transactions: | ' |
8. Related party transactions: | |
Office lease | |
The Company’s headquarters is located in an office building owned by Niobium LLC (a successor to 6715 Kenilworth Avenue Partnership). The two owners of the company are the Company’s Chief Executive Officer, David Schaeffer, who has a 51% interest in the partnership and his wife who has a 49% interest. The Company paid $0.1 million and $0.3 million in the three and six months ended June 30, 2014 and paid $0.1 million and $0.3 million in the three and six months ended June 30, 2013, for rent and related costs (including taxes and utilities) to this company, respectively. The lease ends on August 31, 2016. |
Segment_information
Segment information: | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Segment information: | ' | |||||||||||||
Segment information: | ' | |||||||||||||
9. Segment information: | ||||||||||||||
The Company operates as one operating segment. The Company’s service revenue and long lived assets by geographic region are as follows (in thousands): | ||||||||||||||
Three Months | Three Months | Six Months | Six Months | |||||||||||
Ended | Ended | Ended | Ended | |||||||||||
June 30, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 | |||||||||||
Revenues | ||||||||||||||
North America | $ | 74,567 | $ | 67,916 | $ | 147,610 | $ | 134,596 | ||||||
Europe | 20,056 | 17,887 | 39,950 | 35,761 | ||||||||||
Total | $ | 94,623 | $ | 85,803 | $ | 187,560 | $ | 170,357 | ||||||
June 30, | December 31, | |||||||||||||
2014 | 2013 | |||||||||||||
Long lived assets, net | ||||||||||||||
North America | $ | 260,544 | $ | 251,352 | ||||||||||
Europe | 93,159 | 89,879 | ||||||||||||
Total | $ | 353,703 | $ | 341,231 | ||||||||||
The majority of North American revenue consists of services delivered within the United States. |
Description_of_the_business_an1
Description of the business and recent developments: (Policies) | 6 Months Ended | |||||||||
Jun. 30, 2014 | ||||||||||
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 2013 annual report on Form 10-K. | ||||||||||
The accompanying unaudited 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, 2014 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, 2014 the fair value of the Company’s $200.0 million senior unsecured notes was $200.5 million and the fair value of the Company’s $240.0 million senior secured notes was $256.5million. | ||||||||||
The Company was party to letters of credit totaling $0.4 million as of June 30, 2014. These letters of credit are secured by investments that are restricted and included in other assets. | ||||||||||
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 common stock equivalents, if dilutive. | ||||||||||
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. As of June 30, 2014 and 2013, 0.8 million and 1.2 million unvested shares of restricted common stock, respectively, are not included in the computation of basic income per share, as the shares were not vested. Using the “if-converted” method, the shares issuable upon conversion of the Company’s convertible senior notes (the “Convertible Notes”) were anti-dilutive for the three and six months ended June 30, 2013. Accordingly, the impact has been excluded from the computation of diluted loss per share. The Convertible Notes were convertible into 1.9 million shares of the Company’s common stock at June 30, 2013. The Convertible Notes were repaid in June 2014 and are no longer outstanding. For the three and six months ended June 30, 2014 and 2013, the Company’s employees exercised options for 15,278, 25,035, 42,693 and 56,963 common shares, respectively. | ||||||||||
The following details the determination of diluted weighted average shares for the three and six months ended June 30, 2014: | ||||||||||
Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | |||||||
June 30, 2014 | June 30, 2014 | June 30, 2013 | June 30, 2013 | |||||||
Weighted average common shares - basic | 45,897,449 | 46,200,844 | 46,040,692 | 46,028,855 | ||||||
Dilutive effect of stock options | 59,270 | 68,504 | 77,868 | 79,669 | ||||||
Dilutive effect of restricted stock | 338,247 | 379,067 | 650,624 | 733,612 | ||||||
Weighted average common shares - diluted | 46,294,966 | 46,648,415 | 46,769,184 | 46,842,136 | ||||||
Recent Accounting Pronouncements | ' | |||||||||
Recent Accounting Pronouncements | ||||||||||
On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, 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. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. | ||||||||||
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists . Prior to the issuance of ASU 2013-11 there was no explicit guidance on the presentation of unrecognized tax benefits when such carryforwards exist, which has led to diversity in practice. ASU 2013-11 requires entities to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. The ASU is effective for fiscal years beginning after December 15, 2013, and interim periods within those years. The adoption of this guidance did not have any effect on our consolidated financial condition. |
Description_of_the_business_an2
Description of the business and recent developments: (Tables) | 6 Months Ended | |||||||||
Jun. 30, 2014 | ||||||||||
Description of the business and recent developments: | ' | |||||||||
Schedule of diluted weighted average shares | ' | |||||||||
Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | |||||||
June 30, 2014 | June 30, 2014 | June 30, 2013 | June 30, 2013 | |||||||
Weighted average common shares - basic | 45,897,449 | 46,200,844 | 46,040,692 | 46,028,855 | ||||||
Dilutive effect of stock options | 59,270 | 68,504 | 77,868 | 79,669 | ||||||
Dilutive effect of restricted stock | 338,247 | 379,067 | 650,624 | 733,612 | ||||||
Weighted average common shares - diluted | 46,294,966 | 46,648,415 | 46,769,184 | 46,842,136 | ||||||
Longterm_debt_Tables
Long-term debt: (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Long-term debt: | ' | |||||||||||||
Schedule of debt and equity components for the Convertible Notes | ' | |||||||||||||
The debt and equity components for the Convertible Notes and of December 31, 2013 were as follows (in thousands): | ||||||||||||||
December 31, | ||||||||||||||
2013 | ||||||||||||||
Principal amount | $ | 91,978 | ||||||||||||
Unamortized discount | (3,099 | ) | ||||||||||||
Net carrying amount | 88,879 | |||||||||||||
Additional paid-in capital | 74,933 | |||||||||||||
Schedule of interest expense recognized and the effective interest rate for the Convertible Notes | ' | |||||||||||||
The amount of interest expense recognized and effective interest rate for the Convertible Notes were as follows (in thousands): | ||||||||||||||
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||
June 30, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 | |||||||||||
Contractual coupon interest | $ | 189 | $ | 230 | $ | 419 | $ | 460 | ||||||
Amortization of discount and costs on Notes | 1,417 | 1,585 | 3,106 | 3,136 | ||||||||||
Interest expense | $ | 1,606 | $ | 1,815 | $ | 3,525 | $ | 3,596 | ||||||
Effective interest rate | 8.7 | % | 8.7 | % | 8.7 | % | 8.7 | % | ||||||
Income_taxes_Tables
Income taxes: (Tables) | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Income taxes: | ' | |||||||
Schedule of components of income (loss) before income taxes | ' | |||||||
The components of income (loss) before income taxes consist of the following (in thousands): | ||||||||
Three Months | Three Months | |||||||
Ended | Ended | |||||||
June 30, 2014 | June 30, 2013 | |||||||
Domestic | $ | 7,578 | $ | 7,943 | ||||
Foreign | (6,791 | ) | (5,969 | ) | ||||
Total | $ | 787 | $ | 1,974 | ||||
Six Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, 2014 | June 30, 2013 | |||||||
Domestic | $ | 16,014 | $ | 14,139 | ||||
Foreign | (13,486 | ) | (11,471 | ) | ||||
Total | $ | 2,528 | $ | 2,668 | ||||
Dividends_on_common_stock_Tabl
Dividends on common stock: (Tables) | 6 Months Ended | |||||||||||
Jun. 30, 2014 | ||||||||||||
Dividends on common stock: | ' | |||||||||||
Summary of the Company's quarterly dividends since the initial dividend payment | ' | |||||||||||
A summary of the Company’s quarterly dividends paid since its initial dividend payment is as follows (in thousands, except per share amounts): | ||||||||||||
Dividend Period | Amount per | Record Date | Payment Date | Dividends Paid | ||||||||
Common Share | ||||||||||||
Q3 2012 | $ | 0.1 | August 22, 2012 | September 12, 2012 | $ | 4,537 | ||||||
Q4 2012 | $ | 0.11 | November 21, 2012 | December 12, 2102 | $ | 5,012 | ||||||
Q1 2013 | $ | 0.12 | March 4, 2013 | March 15, 2013 | $ | 5,489 | ||||||
Q2 2013 | $ | 0.13 | May 31, 2013 | June 18, 2013 | $ | 6,145 | ||||||
Q3 2013 | $ | 0.14 | September 5, 2013 | September 25, 2013 | $ | 6,512 | ||||||
Q4 2013 | $ | 0.37 | November 27, 2013 | December 20, 2013 | $ | 17,206 | ||||||
Q1 2014 | $ | 0.39 | March 7, 2014 | March 27, 2014 | $ | 18,352 | ||||||
Q2 2014 | $ | 0.17 | May 30, 2014 | June 18, 2014 | $ | 7,882 | ||||||
Segment_information_Tables
Segment information: (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
Segment information: | ' | |||||||||||||
Schedule of service revenues and long lived assets by geographic region | ' | |||||||||||||
The Company’s service revenue and long lived assets by geographic region are as follows (in thousands): | ||||||||||||||
Three Months | Three Months | Six Months | Six Months | |||||||||||
Ended | Ended | Ended | Ended | |||||||||||
June 30, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 | |||||||||||
Revenues | ||||||||||||||
North America | $ | 74,567 | $ | 67,916 | $ | 147,610 | $ | 134,596 | ||||||
Europe | 20,056 | 17,887 | 39,950 | 35,761 | ||||||||||
Total | $ | 94,623 | $ | 85,803 | $ | 187,560 | $ | 170,357 | ||||||
June 30, | December 31, | |||||||||||||
2014 | 2013 | |||||||||||||
Long lived assets, net | ||||||||||||||
North America | $ | 260,544 | $ | 251,352 | ||||||||||
Europe | 93,159 | 89,879 | ||||||||||||
Total | $ | 353,703 | $ | 341,231 | ||||||||||
Description_of_the_business_an3
Description of the business and recent developments: (Details) (USD $) | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Aug. 19, 2013 | Jan. 26, 2011 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 |
In Millions, unless otherwise specified | Minimum | Maximum | Senior notes | Senior notes | Senior notes | Senior notes | Senior unsecured notes | Senior unsecured notes | |
MB | MB | Level 2 | Level 2 | ||||||
Financial instruments | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Aggregate principal amount of debt issued | ' | ' | ' | $240 | $65 | $175 | ' | $200 | ' |
Debt instrument, amount | ' | ' | ' | ' | ' | ' | 256.5 | ' | 200.5 |
Letters of credit, outstanding amount | $0.40 | ' | ' | ' | ' | ' | ' | ' | ' |
On-net service - high-speed Internet access and IP connectivity | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Speed per second of bandwidth (in megabits) | ' | 100 | 10,240 | ' | ' | ' | ' | ' | ' |
Description_of_the_business_an4
Description of the business and recent developments: (Details 2) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Diluted weighted average shares | ' | ' | ' | ' |
Weighted average common shares-basic | 45,897,449 | 46,040,692 | 46,200,844 | 46,028,855 |
Weighted average common shares-diluted | 46,294,966 | 46,769,184 | 46,648,415 | 46,842,136 |
Convertible senior notes | ' | ' | ' | ' |
Basic and diluted net (loss) income per common share | ' | ' | ' | ' |
Number of shares yield after conversion | ' | ' | ' | 1,900,000 |
Restricted stock | ' | ' | ' | ' |
Basic and diluted net (loss) income per common share | ' | ' | ' | ' |
Restricted common stock not included in computation of basic income per share as shares were not vested (in shares) | 800,000 | 1,200,000 | 800,000 | 1,200,000 |
Diluted weighted average shares | ' | ' | ' | ' |
Dilutive effect of awards (in shares) | 338,247 | 650,624 | 379,067 | 733,612 |
Options | ' | ' | ' | ' |
Basic and diluted net (loss) income per common share | ' | ' | ' | ' |
Options exercised during the period (in shares) | 15,278 | 42,693 | 25,035 | 56,963 |
Diluted weighted average shares | ' | ' | ' | ' |
Dilutive effect of awards (in shares) | 59,270 | 77,868 | 68,504 | 79,669 |
Property_and_equipment_Details
Property and equipment: (Details) (USD $) | 3 Months Ended | 6 Months Ended | 3 Months Ended | |||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Mar. 31, 2014 | |
Network equipment | Network equipment | |||||
Property and equipment | ' | ' | ' | ' | ' | ' |
Depreciation and amortization expense | $17,301,000 | $15,900,000 | $34,505,000 | $31,774,000 | ' | ' |
Gain on network equipment obtained in exchange transaction | ' | ' | 4,900,000 | ' | 2,700,000 | 2,200,000 |
Capitalized salaries and related benefits of employees | $1,900,000 | $1,800,000 | $3,900,000 | $3,800,000 | ' | ' |
Longterm_debt_Details
Long-term debt: (Details) (USD $) | 6 Months Ended | 0 Months Ended | 0 Months Ended | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 0 Months Ended | 6 Months Ended | |||||||||||||||
Jun. 30, 2014 | Dec. 31, 2013 | Aug. 19, 2013 | Jan. 26, 2011 | Jun. 30, 2014 | Jun. 20, 2014 | Jun. 16, 2014 | Jun. 30, 2007 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2008 | Dec. 31, 2013 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Apr. 09, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | |
Senior Notes | Senior Notes | Senior Notes | Convertible senior notes | Convertible senior notes | Convertible senior notes | Convertible senior notes | Convertible senior notes | Convertible senior notes | Convertible senior notes | Convertible senior notes | Convertible senior notes | Convertible senior notes | Convertible senior notes | 2021 Notes | 2021 Notes | 2021 Notes | 2021 Notes | 2021 Notes | 2021 Notes | 2021 Notes | 2021 Notes | 2021 Notes | |||
June 15, 2014, 2017 and 2022 | After June 20, 2014 | Cogent Finance | Minimum | Maximum | Prior to April 15, 2017 | 12-month period beginning on April 15, 2017 | 12-month period beginning on April 15, 2018 | 12-month period beginning on April 15, 2019 | 12-month period beginning on April 15, 2020 and thereafter | ||||||||||||||||
Long-term debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Aggregate principal amount of debt issued | ' | ' | $65,000,000 | $175,000,000 | $240,000,000 | ' | ' | $200,000,000 | ' | ' | ' | ' | $92,000,000 | ' | ' | ' | $200,000,000 | $200,000,000 | ' | ' | ' | ' | ' | ' | ' |
Interest rate (as a percent) | ' | ' | 8.38% | 8.38% | 8.38% | ' | ' | 1.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5.63% | ' | ' | ' | ' | ' | ' | ' |
Proceeds from issuance of long-term debt, net of issuance costs | ' | ' | 69,900,000 | 170,500,000 | ' | ' | ' | 195,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | 195,800,000 | ' | ' | ' | ' | ' | ' | ' |
Debt issuance costs | ' | ' | 1,000,000 | 4,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of principal amount that the holders of the Convertible Notes may require the Company to repurchase | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | 100.00% | ' | ' | ' | ' | 100.00% | 104.22% | 102.81% | 101.41% | 100.00% |
Percentage of outstanding principal amount used in calculation of make-whole premium | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1.00% | ' | ' | ' | ' |
Percentage of redemption price of principal amount accrued interest | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 104.22% | ' | ' | ' | ' |
Discount rate used to compute make-whole premium, description of variable interest rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 'Treasury Rate | ' | ' | ' | ' | ' | ' | ' | ' |
Discount rate used to compute make-whole premium, basis points added to reference rate (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.50% | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum percentage of principal amount of debt instrument which the entity may redeem with proceeds from certain equity offerings | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 35.00% | ' | ' | ' | ' |
Percentage of redemption price which may redeem with net cash proceeds from certain equity offerings | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 105.63% | ' | ' | ' | ' |
Percentage of principal amount at which notes will be required to be repurchased in the event of a change of control | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 101.00% | ' | ' | ' | ' | ' | ' | ' | ' |
Consolidated leverage ratio to restrict on incurring additional indebtedness | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5 | ' | ' | ' | ' | ' | ' |
Permitted investments and payments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 150,000,000 | ' | ' | ' | ' | ' |
Consolidated leverage ratio to be maintained to increase amount of permitted investments and payments by consolidated cash flow | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4.25 | ' | ' | ' | ' | ' |
Cash and cash equivalents not subject to debt limitations | 80,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Premium price of debt instrument (as a percent) | ' | ' | 109.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Senior secured notes, premium (in dollars) | 4,835,000 | 5,423,000 | 5,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of original issuance discount | ' | ' | ' | ' | ' | ' | ' | 2.25% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Aggregate face value of debt purchased | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 108,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Purchase of convertible notes in cash | 91,978,000 | ' | ' | ' | ' | 33,500,000 | 58,500,000 | ' | ' | ' | ' | ' | 48,600,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt and equity components for the Convertible Notes | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Principal amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 91,978,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unamortized discount | ' | -3,099,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -3,099,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net carrying amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 88,879,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Additional paid-in capital | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 74,933,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount of interest expense recognized and effective interest rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Contractual coupon interest | ' | ' | ' | ' | ' | ' | ' | ' | 189,000 | 230,000 | 419,000 | 460,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amortization of discount and costs on Notes | ' | ' | ' | ' | ' | ' | ' | ' | 1,417,000 | 1,585,000 | 3,106,000 | 3,136,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest expense | ' | ' | ' | ' | ' | ' | ' | ' | $1,606,000 | $1,815,000 | $3,525,000 | $3,596,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Effective interest rate (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | 8.70% | 8.70% | 8.70% | 8.70% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Commitments_and_contingencies_
Commitments and contingencies: (Details) (USD $) | 6 Months Ended |
In Millions, unless otherwise specified | Jun. 30, 2014 |
employee | |
Commitments and contingencies | ' |
Number of employees who opted to file an action | 70 |
Leased circuit and dark fiber costs | Maximum | ' |
Commitments and contingencies | ' |
Estimate of possible loss in excess of the amount accrued | 2 |
Income_taxes_Details
Income taxes: (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Income taxes: | ' | ' | ' | ' |
Federal income tax at statutory rates (as a percent) | ' | ' | 35.00% | ' |
Components of (loss) income before income taxes | ' | ' | ' | ' |
Domestic | $7,578 | $7,943 | $16,014 | $14,139 |
Foreign | -6,791 | -5,969 | -13,486 | -11,471 |
Income before income taxes | $787 | $1,974 | $2,528 | $2,668 |
Common_stock_buyback_program_D
Common stock buyback program: (Details) (USD $) | 3 Months Ended | 6 Months Ended | 0 Months Ended | 1 Months Ended | ||
In Millions, except Share data, unless otherwise specified | Jun. 30, 2014 | Mar. 31, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | Aug. 08, 2014 | Jul. 31, 2014 |
Subsequent Event | Subsequent Event | |||||
Common stock buyback program: | ' | ' | ' | ' | ' | ' |
Authorized amount of common stock repurchases under the Buyback Program | ' | ' | $50 | ' | ' | ' |
Common stock buyback program | ' | ' | ' | ' | ' | ' |
Remaining authorized amount of common stock repurchases under the Buyback Program | ' | ' | 13.7 | ' | 59.3 | ' |
Repurchase of common stock (in shares) | 521,891 | ' | 926,888 | 0 | ' | 130,681 |
Repurchase under the common stock buyback program | 17.9 | 14.2 | 32.1 | ' | ' | 4.4 |
Additional authorized amount of common stock repurchases under the Buyback Program | ' | ' | ' | ' | $50 | ' |
Dividends_on_common_stock_Deta
Dividends on common stock: (Details) (USD $) | 0 Months Ended | 3 Months Ended | 6 Months Ended | 0 Months Ended | 1 Months Ended | ||||||||||||||||||
Jun. 18, 2014 | Mar. 27, 2014 | Dec. 20, 2013 | Sep. 25, 2013 | Jun. 18, 2013 | Mar. 15, 2013 | Dec. 12, 2012 | Sep. 12, 2012 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Dec. 20, 2013 | Aug. 06, 2014 | Jul. 31, 2014 | Aug. 06, 2014 | |
Minimum | Minimum | Subsequent Event | Subsequent Event | Subsequent Event | |||||||||||||||||||
Expected | |||||||||||||||||||||||
Dividends on common stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Approved quarterly payments under Capital Program | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $10,500,000 | $10,000,000 | ' | ' | ' |
Quarterly payment under return of capital program | ' | ' | 10,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Dividend per common share under Capital Program (in dollars per share) | ' | ' | $0.22 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Dividends paid | 7,882,000 | 18,352,000 | 17,206,000 | 6,512,000 | 6,145,000 | 5,489,000 | 5,012,000 | 4,537,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount per Common Share (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | $0.17 | $0.39 | $0.37 | $0.14 | $0.13 | $0.12 | $0.11 | $0.10 | $0.56 | $0.25 | ' | ' | ' | ' | ' |
Regular quarterly dividend (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.30 | ' | ' |
Expected value of dividend to be paid | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 13,700,000 |
Repurchase of common stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Repurchase under the common stock buyback program | ' | ' | ' | ' | ' | ' | ' | ' | $17,900,000 | $14,200,000 | ' | ' | ' | ' | ' | ' | $32,100,000 | ' | ' | ' | ' | $4,400,000 | ' |
Related_party_transactions_Det
Related party transactions: (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Millions, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Lease | ' | ' | ' | ' |
Office lease | ' | ' | ' | ' |
Payment for rent and related costs (in dollars) | $0.10 | $0.10 | $0.30 | $0.30 |
Headquarters building | ' | ' | ' | ' |
Office lease | ' | ' | ' | ' |
Number of owners of the LLC | ' | ' | 2 | ' |
Chief Executive Officer | Headquarters building | ' | ' | ' | ' |
Office lease | ' | ' | ' | ' |
Ownership interest of related parties held in the partnership (as a percent) | ' | ' | 51.00% | ' |
Chief Executive Officer's wife | Headquarters building | ' | ' | ' | ' |
Office lease | ' | ' | ' | ' |
Ownership interest of related parties held in the partnership (as a percent) | ' | ' | 49.00% | ' |
Segment_information_Details
Segment information: (Details) (USD $) | 3 Months Ended | 6 Months Ended | |||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 |
Segment | |||||
Segment information: | ' | ' | ' | ' | ' |
Number of operating segments | ' | ' | 1 | ' | ' |
Geographic information | ' | ' | ' | ' | ' |
Revenue | $94,623 | $85,803 | $187,560 | $170,357 | ' |
Long lived assets, net | 353,703 | ' | 353,703 | ' | 341,231 |
North America | ' | ' | ' | ' | ' |
Geographic information | ' | ' | ' | ' | ' |
Revenue | 74,567 | 67,916 | 147,610 | 134,596 | ' |
Long lived assets, net | 260,544 | ' | 260,544 | ' | 251,352 |
Europe | ' | ' | ' | ' | ' |
Geographic information | ' | ' | ' | ' | ' |
Revenue | 20,056 | 17,887 | 39,950 | 35,761 | ' |
Long lived assets, net | $93,159 | ' | $93,159 | ' | $89,879 |