Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 31, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2020 | |
Entity File Number | 000-51829 | |
Entity Registrant Name | COGENT COMMUNICATIONS HOLDINGS, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 46-5706863 | |
Entity Address, Address Line One | 2450 N Street N.W. | |
Entity Address, Country | US | |
Entity Address, City or Town | Washington, D.C | |
Entity Address, Postal Zip Code | 20037 | |
City Area Code | 202 | |
Local Phone Number | 295-4200 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | CCOI | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 47,251,320 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001158324 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 393,293 | $ 399,422 |
Accounts receivable, net of allowance for credit losses of $2,204 and $1,771, respectively | 42,053 | 40,484 |
Prepaid expenses and other current assets | 40,007 | 35,822 |
Total current assets | 475,353 | 475,728 |
Property and equipment, net | 421,251 | 368,929 |
Right-of-use leased assets | 90,400 | 73,460 |
Deposits and other assets | 13,910 | 14,007 |
Total assets | 1,000,914 | 932,124 |
Current liabilities: | ||
Accounts payable | 11,983 | 11,075 |
Accrued and other current liabilities | 47,714 | 51,301 |
Installment payment agreement, current portion, net of discounts of $245 and $350, respectively | 8,292 | 9,063 |
Current maturities, operating lease liabilities | 12,006 | 10,101 |
Current maturities, finance lease obligations | 15,252 | 8,154 |
Total current liabilities | 95,247 | 89,694 |
Operating lease liabilities, net of current maturities | 101,447 | 86,690 |
Finance lease obligations, net of current maturities | 197,688 | 161,635 |
Other long term liabilities | 16,800 | 15,327 |
Total liabilities | 1,261,605 | 1,135,803 |
Commitments and contingencies: | ||
Stockholders' equity: | ||
Common stock, $0.001 par value; 75,000,000 shares authorized; 47,284,336 and 46,840,434 shares issued and outstanding, respectively | 47 | 47 |
Additional paid-in capital | 513,454 | 493,178 |
Accumulated other comprehensive income - foreign currency translation | (7,498) | (12,326) |
Accumulated deficit | (766,694) | (684,578) |
Total stockholders' deficit | (260,691) | (203,679) |
Total liabilities and stockholders' deficit | 1,000,914 | 932,124 |
Senior secured 2022 notes | ||
Current liabilities: | ||
Senior secured 2022 notes, net of unamortized debt costs of $1,267 and $1,897, respectively and including premiums of $656 and $985, respectively | 444,389 | 444,088 |
Senior unsecured 2024 notes | ||
Current liabilities: | ||
Senior unsecured notes | $ 406,034 | 150,001 |
Senior unsecured 2021 notes | ||
Current liabilities: | ||
Senior unsecured notes | $ 188,368 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Assets | ||
Accounts receivable, allowance for credit losses (in dollars) | $ 2,204 | $ 1,771 |
Liabilities and stockholders' equity | ||
Installment payment agreement, current portion, net of discounts | $ 245 | $ 350 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 47,284,336 | 46,840,434 |
Common stock, shares outstanding | 47,284,336 | 46,840,434 |
Senior secured 2022 notes | ||
Liabilities and stockholders' equity | ||
Unamortized debt costs | $ 1,267 | $ 1,897 |
Unamortized debt premium | 656 | 985 |
Senior unsecured 2024 notes | ||
Liabilities and stockholders' equity | ||
Unamortized debt costs | 3,166 | 1,410 |
Unamortized debt premium | 1,164 | $ 0 |
Senior unsecured 2021 notes | ||
Liabilities and stockholders' equity | ||
Unamortized debt costs | $ 857 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Service revenue | $ 142,302 | $ 136,942 | $ 424,205 | $ 405,866 |
Operating expenses: | ||||
Network operations | 54,519 | 55,253 | 164,326 | 163,811 |
Selling, general, and administrative | 39,722 | 35,971 | 119,232 | 110,396 |
Depreciation and amortization | 21,619 | 20,006 | 61,022 | 60,246 |
Total operating expenses | 115,860 | 111,230 | 344,580 | 334,453 |
Loss on finance lease amendment | (505) | (423) | ||
Gains on equipment transactions | 99 | 87 | 343 | 808 |
Operating income | 26,036 | 25,799 | 79,545 | 72,221 |
Interest expense | (15,760) | (15,191) | (46,481) | (42,243) |
Realized foreign exchange gain on issuance on 2024 Euro Notes | 2,547 | |||
Unrealized foreign exchange (loss) gain on 2024 Euro Notes | (17,315) | 6,162 | (17,827) | 6,339 |
Interest income and other, net | 484 | 2,185 | 430 | 5,588 |
Loss on debt extinguishment and redemption- 2021 Notes | (638) | |||
(Loss) Income before income taxes | (6,555) | 18,955 | 17,576 | 41,905 |
Income tax benefit (provision) | 1,600 | (5,254) | (4,740) | (11,851) |
Net (loss) income | (4,955) | 13,701 | 12,836 | 30,054 |
Comprehensive income: | ||||
Net (loss) income | (4,955) | 13,701 | 12,836 | 30,054 |
Foreign currency translation adjustment | 5,408 | (4,709) | 4,828 | (4,748) |
Comprehensive income | $ 453 | $ 8,992 | $ 17,664 | $ 25,306 |
Net (loss) income per common share: | ||||
Basic net (loss) income per common share (in dollars per share) | $ (0.11) | $ 0.30 | $ 0.28 | $ 0.66 |
Diluted net (loss) income per common share (in dollars per share) | (0.11) | 0.30 | 0.28 | 0.65 |
Dividends declared per common share (in dollars per share) | $ 0.705 | $ 0.620 | $ 2.045 | $ 1.800 |
Weighted-average common shares - basic (in shares) | 45,815,718 | 45,438,656 | 45,818,677 | 45,428,305 |
Weighted-average common shares - diluted (in shares) | 45,815,718 | 46,019,691 | 46,598,870 | 45,948,331 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Equity-based compensation expense | $ 17,679 | $ 13,520 | ||
Network operations | ||||
Equity-based compensation expense | $ 346 | $ 282 | 903 | 688 |
Selling, general and administrative | ||||
Equity-based compensation expense | $ 6,176 | $ 4,515 | $ 16,776 | $ 12,832 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 12,836 | $ 30,054 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 61,022 | 60,246 |
Amortization of debt costs, discounts and premiums | 1,426 | 1,328 |
Equity-based compensation expense (net of amounts capitalized) | 17,679 | 13,520 |
Loss on debt extinguishment and redemption - 2021 Notes | 638 | |
Unrealized losses (gains) on foreign exchange | 17,281 | (6,305) |
Realized foreign exchange gain on issuance on 2024 Euro Notes | (2,547) | |
Gains - equipment transactions and other, net | 80 | (131) |
Deferred income taxes | 2,100 | 9,285 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (1,102) | (43) |
Prepaid expenses and other current assets | (3,253) | (4,862) |
Accounts payable, accrued liabilities and other long-term liabilities | (2,783) | 1,350 |
Deposits and other assets | (628) | (1,730) |
Net cash provided by operating activities | 102,749 | 102,712 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (40,092) | (37,059) |
Net cash used in investing activities | (40,092) | (37,059) |
Cash flows from financing activities: | ||
Dividends paid | (94,952) | (82,871) |
Purchases of common stock | (270) | |
Redemption and extinguishment of 2021 Notes | (189,225) | |
Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debt costs of $2,137 and $1,556, respectively | 240,285 | 152,128 |
Principal payments on installment payment agreement | (7,855) | (7,348) |
Principal payments of finance lease obligations | (19,392) | (7,035) |
Proceeds from exercises of stock options | 1,175 | 1,270 |
Net cash (used in) provided by financing activities | (70,234) | 56,144 |
Effect of exchange rates changes on cash | 1,448 | (1,619) |
Net (decrease) increase in cash and cash equivalents | (6,129) | 120,178 |
Cash and cash equivalents, beginning of period | 399,422 | 276,093 |
Cash and cash equivalents, end of period | 393,293 | 396,271 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Non-cash component of network equipment obtained in exchange transactions | 310 | 771 |
PP&E obtained for installment payment agreement | 5,771 | 8,945 |
Finance lease obligations incurred | 61,504 | 11,342 |
Fair value of equipment acquired in leases | $ 536 | $ 1,207 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Senior unsecured 2024 notes | ||
Debt costs | $ 2,137 | $ 1,556 |
Description of the business and
Description of the business and recent developments: | 9 Months Ended |
Sep. 30, 2020 | |
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, 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. Group and its subsidiaries represent the operating subsidiaries of Cogent and the vast majority of Cogent's assets, contractual arrangements, and operations are executed by Group and its subsidiaries. Description of business We are a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space. Our network is specifically designed and optimized to transmit packet switched data. We deliver our services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 47 countries across North America, Europe, Asia, South America, Australia and Africa. We are a Delaware corporation and we are headquartered in Washington, DC. We offer on-net Internet access services exclusively through our own facilities, which run from our network to our customers’ premises. We offer our on-net services to customers located in buildings that are physically connected to our network. As a result, we are not dependent on local telephone companies or cable TV companies to serve our customers for our on-net Internet access and private network service. Our 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. We provide our on-net Internet access and private network services to our corporate and net-centric customers. Our corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms as well as health care providers, educational institutions and other professional services businesses. Our net-centric customers include bandwidth-intensive users which leverage our network to either deliver content to end users or to provide access to residential or commercial internet users. Content delivery customers include over the top (“OTT”) media service providers, content delivery networks, web hosting companies, and commercial content and application software providers. Access customers include over access networks comprised of other Internet access providers, telephone companies, and cable television companies that collectively provide internet access to a substantial number of broadband subscribers across the world. These net-centric customers generally receive our services in carrier neutral colocation facilities and in our data centers. We operate data centers throughout North America and Europe that allow our customers to collocate their equipment and access our network. In addition to providing our on-net services, we provide Internet access and private network services to customers that are not located in buildings directly connected to our network. We provide these off-net services primarily to corporate customers using other carriers’ circuits to provide the “last mile” portion of the link from the customers’ premises to our network. We also provide certain non-core services that resulted from acquisitions. We continue to support but do 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, 2019. 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 September 30, 2020, 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 September 30, 2020 the fair value of the Company’s $445.0 million senior secured notes was $455.0 million and the fair value of the Company’s €350.0 million Euro ($410.4 million USD) senior unsecured notes was $416.5 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 $3.9 million and $4.0 million for the three months ended September 30, 2020 and September 30, 2019, respectively, and $10.9 million and $10.6 million for the nine months ended September 30, 2020 and September 30, 2019, 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 Nine Months Ended Nine Months Ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Weighted average common shares - basic 45,815,718 45,438,656 45,818,677 45,428,305 Dilutive effect of stock options — 34,593 99,581 32,179 Dilutive effect of restricted stock — 546,442 680,612 487,847 Weighted average common shares - diluted 45,815,718 46,019,691 46,598,870 45,948,331 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 Nine Months Nine Months Ended Ended Ended Ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Unvested shares of restricted common stock 1,472,572 1,379,446 1,472,572 1,379,446 Anti-dilutive options for common stock 87,214 37,606 24,453 50,928 Anti-dilutive shares of restricted common stock 925,866 — 191 50,292 Stockholders’ Deficit The following details the changes in stockholders’ deficit for the three and nine months ended September 30, 2020 and September 30, 2019 (in thousands except share amounts): Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at June 30, 2020 47,279,201 $ 47 $ 506,391 $ (12,906) $ (729,082) $ (235,550) Forfeitures of shares granted to employees (4,932) — — — — — Equity-based compensation — — 7,147 — — 7,147 Foreign currency translation — — — 5,408 — 5,408 Issuances of common stock 10,500 — — — — — Exercises of options 4,134 — 185 — — 185 Common stock purchases and retirement (4,567) — (269) — — (269) Dividends paid — — — — (32,657) (32,657) Net loss — — — — (4,955) (4,955) Balance at September 30, 2020 47,284,336 $ 47 $ 513,454 $ (7,498) $ (766,694) $ (260,691) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at June 30, 2019 46,806,370 $ 47 $ 481,734 $ (10,967) $ (647,404) $ (176,590) Forfeitures of shares granted to employees (4,508) — — — — — Equity-based compensation — — 5,311 — — 5,311 Foreign currency translation — — — (4,709) — (4,709) Issuances of common stock 10,572 — — — — — Exercises of options 9,152 — 351 — — 351 Dividends paid — — — — (28,565) (28,565) Net income — — — — 13,701 13,701 Balance at September 30, 2019 46,821,586 $ 47 $ 487,396 $ (15,676) $ (662,268) $ (190,501) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders' Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2019 46,840,434 $ 47 $ 493,178 $ (12,326) $ (684,578) $ (203,679) Forfeitures of shares granted to employees (42,212) — — — — — Equity-based compensation — — 19,371 — — 19,371 Foreign currency translation — — — 4,828 — 4,828 Issuances of common stock 465,530 — — — — — Exercises of options 25,151 — 1,174 — — 1,174 Common stock purchases and retirement (4,567) — (269) — — (269) Dividends paid — — — — (94,952) (94,952) Net income — — — — 12,836 12,836 Balance at September 30, 2020 47,284,336 $ 47 $ 513,454 $ (7,498) $ (766,694) $ (260,691) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders' 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 (8,394) — — — — — Equity-based compensation — — 14,796 — — 14,796 Foreign currency translation — — — (4,748) — (4,748) Issuances of common stock 459,550 1 — — — 1 Exercises of options 33,931 — 1,269 — — 1,269 Dividends paid — — — — (82,871) (82,871) Net income — — — — 30,054 30,054 Balance at September 30, 2019 46,821,586 $ 47 $ 487,396 $ (15,676) $ (662,268) $ (190,501) 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 September 30, 2020 was $1.6 million and during the three months ended September 30, 2019 was $1.7 million. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the nine months ended September 30, 2020 was $3.9 million and during the nine months ended September 30, 2019 was $5.1 million. Amortization expense for contract costs was $4.2 million for the three months ended September 30, 2020 and $4.3 million for the three months ended September 30, 2019. Amortization expense for contract costs was 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 ASU 2016-02 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 Three Months Ended Ended September 30, 2020 September 30, 2019 Finance lease cost Amortization of right-of-use assets $ 6,382 $ 4,963 Interest expense on finance lease liabilities 4,804 4,414 Operating lease cost 4,269 3,716 Total lease costs $ 15,455 $ 13,093 Nine Months Nine Months Ended Ended September 30, 2020 September 30, 2019 Finance lease cost Amortization of right-of-use assets $ 16,117 $ 14,851 Interest expense on finance lease liabilities 13,794 13,230 Operating lease cost 12,860 10,497 Total lease costs $ 42,771 $ 38,578 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases $ (14,150) $ (12,957) Operating cash flows from operating leases (13,785) (8,443) Financing cash flows from finance leases (19,392) (7,035) Right-of-use assets obtained in exchange for new finance lease liabilities 61,504 11,342 Right-of-use assets obtained in exchange for new operating lease liabilities 24,866 6,912 Weighted-average remaining lease term — finance leases (in years) 12.3 14.5 Weighted-average remaining lease term — operating leases (in years) 20.4 21.7 Weighted average discount rate — finance leases 10.5 % 10.5 % Weighted average discount rate — operating leases 5.4 % 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 (“IRUs). These IRUs typically have initial terms of 15- 20 years and include renewal options after the initial lease term. The Company establishes the number of renewal option periods used in determining the lease term based upon its assessment at the inception of the lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the dark fiber provider and the Company. Once the Company has accepted the related fiber route, leases that meet the criteria for treatment as finance leases are recorded as a finance lease obligation and an IRU asset. The interest rate used in determining the present value of the aggregate future minimum lease payments is the Company’s incremental borrowing rate for the reasonably certain lease term. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of September 30, 2020, 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 September 30, 2021 $ 33,471 2022 32,638 2023 31,650 2024 31,753 2025 28,495 Thereafter 225,320 Total minimum finance lease obligations 383,327 Less—amounts representing interest (170,387) Present value of minimum finance lease obligations 212,940 Current maturities (15,252) Finance lease obligations, net of current maturities $ 197,688 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 September 30, 2021 $ 17,579 2022 16,535 2023 15,674 2024 14,198 2025 12,124 Thereafter 103,809 Total minimum operating lease obligations 179,919 Less—amounts representing interest (66,466) Present value of minimum operating lease obligations 113,453 Current maturities (12,006) Lease obligations, net of current maturities $ 101,447 Adopted accounting pronouncements Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Current-period Balance at Provision for Write offs Balance at June 30, Expected Credit Charged Against September 30, Description 2020 Losses Allowance 2020 Allowance for credit losses (deducted from accounts receivable) Three months ending September 30, 2020 $ 2,115 $ 1,174 $ (1,085) $ 2,204 Current-period Balance at Provision for Write offs Balance at December 31, Expected Credit Charged Against September 30, Description 2019 Losses Allowance 2020 Allowance for credit losses (deducted from accounts receivable) Nine months ending September 30, 2020 $ 1,771 $ 3,942 $ (3,509) $ 2,204 Net bad debt expense for the three months ended September 30, 2020 was $0.8 million which is net of bad debt recoveries of $0.4 million. Net bad debt expense for the nine months ended September 30, 2020 was $3.2 million which is net of bad debt recoveries of $0.8 million. |
Property and equipment_
Property and equipment: | 9 Months Ended |
Sep. 30, 2020 | |
Property and equipment: | |
Property and equipment: | 2. Property and equipment: Depreciation and amortization expense related to property and equipment and finance leases was million for the three months ended September 30, 2020, and 2019 respectively, and September 30, 2020 and 2019, respectively, and $8.9 million and $8.0 million for the nine months ended September 30, 2020 and 2019, respectively. Exchange agreement In the three and nine months ended September 30, 2020 and 2019, 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 $0.2 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively, and $1.1 million and $2.6 million for the nine months ended September 30, 2020 and 2019, respectively. After considering the cash component the transactions resulted in gains of $0.1 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and Installment payment agreement In March 2015, the Company entered into an installment payment agreement (“IPA”) with a vendor. Under the IPA the Company was allowed to purchase network equipment in exchange for interest free note obligations each with a term until July 2020 when additional borrowings under the IPA expired. 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: | 9 Months Ended |
Sep. 30, 2020 | |
Long-term debt: | |
Long-term debt: | 3. Long-term debt: The Company has $445.0 million of senior secured notes (the "2022 Notes") and million USD as of September 30, 2020) of senior unsecured notes (the "2024 Notes") outstanding. The 2022 Notes are due on March 1, 2022 and bear interest at a rate of 2024 Notes issuances In June 2020, Group completed an offering of €215.0 million aggregate principal amount of 4.375% senior unsecured notes. The net proceeds from the June 2020 offering, after deducting offering expenses, were $240.3 million. In June 2019, Group completed an offering of €135.0 million aggregate principal amount of 4.375% senior unsecured notes. The net proceeds from the June 2019 offering, after deducting offering expenses, were $152.1 million. The Company expects to use the proceeds from these offerings for general corporate purposes, to repay debt obligations, to repurchase the Company’s common stock or for special or recurring dividends to the Company’s stockholders. The 2024 Notes bear interest at a rate of 4.375% per annum. Interest began to accrue on the 2024 Notes issued in June 2020, on June 4, 2020 and interest began to accrue on the 2024 Notes issued in June 2019 on June 25, 2019. Interest is paid semi-annually in arrears on June 30 and December 30 of each year. Unless earlier redeemed, the 2024 Notes will mature on June 30, 2024. The June 2020 issuance of €215.0 million 2024 Notes were issued at a discount of 99.5% for €213.9 million Euros ($240.0 million USD) on June 3, 2020 at a Euro to USD rate of $1.112. The discount is amortized to interest expense to the maturity date under the effective interest rate method. The Company received proceeds in USD on the June 2020 2024 Notes on June 9, 2020 at a Euro to USD rate of $1.133 resulting in a realized gain on foreign exchange of $2.5 million. The June 2019 issuance of 2024 Notes were issued at par for €135.0 million on June 25, 2019. The issuances of the 2024 Notes were in Euros and are reported in the Company’s reporting currency – US Dollars. As of September 30, 2020 the carrying value of our 2024 Notes was million. The unrealized (loss) gain on foreign exchange on the Company’s 2024 Notes from converting the 2024 Notes into USD was Debt extinguishment and redemption 2021 Notes In June 2020, Group redeemed its 5.625% senior unsecured notes due in 2021 (the "2021 Notes") with the proceeds from its June 2020 issuance of €215.0 million 2024 Notes. The Company redeemed the entire outstanding amount of the 2021 Notes at a redemption price of 100.00% of the $189.2 million principal amount plus $1.6 million of accrued interest. As a result of this transaction the Company incurred a loss on debt extinguishment and redemption of $0.6 million from the amortization of the remaining unamortized notes cost and certain transaction expenses. Limitations under the indentures The indentures governing the 2024 Notes and 2022 Notes among other things, limit the Company’s ability to incur indebtedness; to pay dividends or make other distributions; to make certain investments and other restricted payments; to create liens; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; to incur restrictions on the ability of a subsidiary to pay dividends or make other payments; and to enter into certain transactions with its affiliates. Limitations on the ability to incur additional indebtedness (excluding IRU agreements incurred in the normal course of business) include a restriction on incurring additional indebtedness if the Company’s consolidated leverage ratio, as defined in the indentures, is greater than 6.0 for the 2024 Notes and greater than 5.0 for the 2022 Notes. Limitations on the ability to incur additional secured indebtedness include a restriction on incurring additional secured indebtedness if the Company’s consolidated secured leverage ratio, as defined in the indentures, is greater than 4.0 for the 2024 Notes and greater than 3.5 for the 2022 Notes. The indentures prohibit certain payments, such as dividends and stock purchases, when the Company’s consolidated leverage ratio, as defined by the indentures, is greater than |
Commitments and contingencies_
Commitments and contingencies: | 9 Months Ended |
Sep. 30, 2020 | |
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 $3.3 million in excess of the amount accrued at September 30, 2020. The Company is engaged in an arbitration proceeding in Spain in which a former provider of optical fiber to the Company is seeking approximately $9.0 million for Company’s early termination of the optical fiber leases, which amount the Company accrued in 2015. The Company has counterclaimed for damages and is contesting its obligation to pay the termination liability. The arbitration is being conducted by the Civil and Commercial Arbitration Court (CIMA) in Madrid, Spain. In the ordinary course of business the Company is involved in other legal activities and claims. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the liability related to these legal actions and claims cannot be determined with certainty. Management does not believe that such claims and actions will have a material impact on the Company’s financial condition or results of operations. Judgment is required in estimating the ultimate outcome of any dispute resolution process, as well as any other amounts that may be incurred to conclude the negotiations or settle any litigation. Actual results may differ from these estimates under different assumptions or conditions and such differences could be material. |
Income taxes_
Income taxes: | 9 Months Ended |
Sep. 30, 2020 | |
Income taxes: | |
Income taxes: | 5. Income taxes: The components of (loss) income before income taxes consist of the following (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Domestic $ (4,084) $ 24,452 $ 27,818 $ 59,537 Foreign (2,471) (5,497) (10,242) (17,632) Total $ (6,555) $ 18,955 $ 17,576 $ 41,905 |
Common stock buyback program st
Common stock buyback program stock option and award plan: | 9 Months Ended |
Sep. 30, 2020 | |
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, 2021. At September 30, 2020, there was approximately In the first quarter of 2020 the Company granted 319,750 shares of common stock to its executive employees and directors valued at million. Shares granted to the Company’s directors vest upon grant and the shares granted to the Company’s employees that are not subject to performance conditions generally vest over periods ending in December 2023. |
Dividends on common stock_
Dividends on common stock: | 9 Months Ended |
Sep. 30, 2020 | |
Dividends on common stock: | |
Dividends on common stock: | 7. Dividends on common stock: On November 4, 2020, the Company’s Board of Directors approved the payment of a quarterly dividend of $0.73 per common share. This estimated $33.5 million dividend payment is expected to be paid on December 4, 2020. 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: | 9 Months Ended |
Sep. 30, 2020 | |
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 original lease term was for five years which was cancellable by the Company upon ’ notice. In February 2020 the lease term was extended to May 2025. The Company’s audit committee reviews and approves all transactions with related parties. The Company paid |
Segment information_
Segment information: | 9 Months Ended |
Sep. 30, 2020 | |
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 September 30, 2020 Revenues On-net Off-net Non-core Total North America $ 82,730 $ 32,416 $ 107 $ 115,253 Europe 19,966 4,422 12 24,400 South America 599 14 — 613 Asia Pacific 1,786 240 — 2,026 Africa 10 — — 10 Total $ 105,091 $ 37,092 $ 119 $ 142,302 Three months Ended September 30, 2019 Revenues On-net Off-net Non-core Total North America $ 80,176 $ 33,172 $ 104 $ 113,452 Europe 17,921 4,053 4 21,978 South America 139 5 — 144 Asia Pacific 1,180 188 — 1,368 Africa — — — — Total $ 99,416 $ 37,418 $ 108 $ 136,942 Nine months Ended September 30, 2020 Revenues On-net Off-net Non-core Total North America $ 247,679 $ 97,951 $ 369 $ 345,999 Europe 58,433 12,781 32 71,246 South America 1,344 34 — 1,378 Asia Pacific 4,880 692 — 5,572 Africa 10 — — 10 Total $ 312,346 $ 111,458 $ 401 $ 424,205 Nine months Ended September 30, 2019 Revenues On-net Off-net Non-core Total North America $ 236,636 $ 98,670 $ 300 $ 335,606 Europe 53,889 12,192 45 66,126 South America 244 8 — 252 Asia Pacific 3,300 582 — 3,882 Africa — — — — Total $ 294,069 $ 111,452 $ 345 $ 405,866 September 30, December 31, 2020 2019 Long-lived assets, net North America $ 305,648 $ 269,364 Europe and other 115,619 99,582 Total $ 421,267 $ 368,946 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) | 9 Months Ended |
Sep. 30, 2020 | |
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, 2019. 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 September 30, 2020, 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 September 30, 2020 the fair value of the Company’s $445.0 million senior secured notes was $455.0 million and the fair value of the Company’s €350.0 million Euro ($410.4 million USD) senior unsecured notes was $416.5 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 $3.9 million and $4.0 million for the three months ended September 30, 2020 and September 30, 2019, respectively, and $10.9 million and $10.6 million for the nine months ended September 30, 2020 and September 30, 2019, 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 Nine Months Ended Nine Months Ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Weighted average common shares - basic 45,815,718 45,438,656 45,818,677 45,428,305 Dilutive effect of stock options — 34,593 99,581 32,179 Dilutive effect of restricted stock — 546,442 680,612 487,847 Weighted average common shares - diluted 45,815,718 46,019,691 46,598,870 45,948,331 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 Nine Months Nine Months Ended Ended Ended Ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Unvested shares of restricted common stock 1,472,572 1,379,446 1,472,572 1,379,446 Anti-dilutive options for common stock 87,214 37,606 24,453 50,928 Anti-dilutive shares of restricted common stock 925,866 — 191 50,292 |
Stockholders' Deficit | Stockholders’ Deficit The following details the changes in stockholders’ deficit for the three and nine months ended September 30, 2020 and September 30, 2019 (in thousands except share amounts): Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at June 30, 2020 47,279,201 $ 47 $ 506,391 $ (12,906) $ (729,082) $ (235,550) Forfeitures of shares granted to employees (4,932) — — — — — Equity-based compensation — — 7,147 — — 7,147 Foreign currency translation — — — 5,408 — 5,408 Issuances of common stock 10,500 — — — — — Exercises of options 4,134 — 185 — — 185 Common stock purchases and retirement (4,567) — (269) — — (269) Dividends paid — — — — (32,657) (32,657) Net loss — — — — (4,955) (4,955) Balance at September 30, 2020 47,284,336 $ 47 $ 513,454 $ (7,498) $ (766,694) $ (260,691) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at June 30, 2019 46,806,370 $ 47 $ 481,734 $ (10,967) $ (647,404) $ (176,590) Forfeitures of shares granted to employees (4,508) — — — — — Equity-based compensation — — 5,311 — — 5,311 Foreign currency translation — — — (4,709) — (4,709) Issuances of common stock 10,572 — — — — — Exercises of options 9,152 — 351 — — 351 Dividends paid — — — — (28,565) (28,565) Net income — — — — 13,701 13,701 Balance at September 30, 2019 46,821,586 $ 47 $ 487,396 $ (15,676) $ (662,268) $ (190,501) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders' Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2019 46,840,434 $ 47 $ 493,178 $ (12,326) $ (684,578) $ (203,679) Forfeitures of shares granted to employees (42,212) — — — — — Equity-based compensation — — 19,371 — — 19,371 Foreign currency translation — — — 4,828 — 4,828 Issuances of common stock 465,530 — — — — — Exercises of options 25,151 — 1,174 — — 1,174 Common stock purchases and retirement (4,567) — (269) — — (269) Dividends paid — — — — (94,952) (94,952) Net income — — — — 12,836 12,836 Balance at September 30, 2020 47,284,336 $ 47 $ 513,454 $ (7,498) $ (766,694) $ (260,691) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders' 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 (8,394) — — — — — Equity-based compensation — — 14,796 — — 14,796 Foreign currency translation — — — (4,748) — (4,748) Issuances of common stock 459,550 1 — — — 1 Exercises of options 33,931 — 1,269 — — 1,269 Dividends paid — — — — (82,871) (82,871) Net income — — — — 30,054 30,054 Balance at September 30, 2019 46,821,586 $ 47 $ 487,396 $ (15,676) $ (662,268) $ (190,501) |
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 September 30, 2020 was $1.6 million and during the three months ended September 30, 2019 was $1.7 million. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the nine months ended September 30, 2020 was $3.9 million and during the nine months ended September 30, 2019 was $5.1 million. Amortization expense for contract costs was $4.2 million for the three months ended September 30, 2020 and $4.3 million for the three months ended September 30, 2019. Amortization expense for contract costs was |
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 ASU 2016-02 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 Three Months Ended Ended September 30, 2020 September 30, 2019 Finance lease cost Amortization of right-of-use assets $ 6,382 $ 4,963 Interest expense on finance lease liabilities 4,804 4,414 Operating lease cost 4,269 3,716 Total lease costs $ 15,455 $ 13,093 Nine Months Nine Months Ended Ended September 30, 2020 September 30, 2019 Finance lease cost Amortization of right-of-use assets $ 16,117 $ 14,851 Interest expense on finance lease liabilities 13,794 13,230 Operating lease cost 12,860 10,497 Total lease costs $ 42,771 $ 38,578 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases $ (14,150) $ (12,957) Operating cash flows from operating leases (13,785) (8,443) Financing cash flows from finance leases (19,392) (7,035) Right-of-use assets obtained in exchange for new finance lease liabilities 61,504 11,342 Right-of-use assets obtained in exchange for new operating lease liabilities 24,866 6,912 Weighted-average remaining lease term — finance leases (in years) 12.3 14.5 Weighted-average remaining lease term — operating leases (in years) 20.4 21.7 Weighted average discount rate — finance leases 10.5 % 10.5 % Weighted average discount rate — operating leases 5.4 % 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 (“IRUs). These IRUs typically have initial terms of 15- 20 years and include renewal options after the initial lease term. The Company establishes the number of renewal option periods used in determining the lease term based upon its assessment at the inception of the lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the dark fiber provider and the Company. Once the Company has accepted the related fiber route, leases that meet the criteria for treatment as finance leases are recorded as a finance lease obligation and an IRU asset. The interest rate used in determining the present value of the aggregate future minimum lease payments is the Company’s incremental borrowing rate for the reasonably certain lease term. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of September 30, 2020, 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 September 30, 2021 $ 33,471 2022 32,638 2023 31,650 2024 31,753 2025 28,495 Thereafter 225,320 Total minimum finance lease obligations 383,327 Less—amounts representing interest (170,387) Present value of minimum finance lease obligations 212,940 Current maturities (15,252) Finance lease obligations, net of current maturities $ 197,688 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 September 30, 2021 $ 17,579 2022 16,535 2023 15,674 2024 14,198 2025 12,124 Thereafter 103,809 Total minimum operating lease obligations 179,919 Less—amounts representing interest (66,466) Present value of minimum operating lease obligations 113,453 Current maturities (12,006) Lease obligations, net of current maturities $ 101,447 |
Adopted accounting pronouncement | Adopted accounting pronouncements Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Current-period Balance at Provision for Write offs Balance at June 30, Expected Credit Charged Against September 30, Description 2020 Losses Allowance 2020 Allowance for credit losses (deducted from accounts receivable) Three months ending September 30, 2020 $ 2,115 $ 1,174 $ (1,085) $ 2,204 Current-period Balance at Provision for Write offs Balance at December 31, Expected Credit Charged Against September 30, Description 2019 Losses Allowance 2020 Allowance for credit losses (deducted from accounts receivable) Nine months ending September 30, 2020 $ 1,771 $ 3,942 $ (3,509) $ 2,204 Net bad debt expense for the three months ended September 30, 2020 was $0.8 million which is net of bad debt recoveries of $0.4 million. Net bad debt expense for the nine months ended September 30, 2020 was $3.2 million which is net of bad debt recoveries of $0.8 million. |
Description of the business_ (T
Description of the business: (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Description of the business and recent developments: | |
Schedule of diluted weighted average shares | Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Weighted average common shares - basic 45,815,718 45,438,656 45,818,677 45,428,305 Dilutive effect of stock options — 34,593 99,581 32,179 Dilutive effect of restricted stock — 546,442 680,612 487,847 Weighted average common shares - diluted 45,815,718 46,019,691 46,598,870 45,948,331 |
Schedule of unvested and anti-dilutive shares | Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Unvested shares of restricted common stock 1,472,572 1,379,446 1,472,572 1,379,446 Anti-dilutive options for common stock 87,214 37,606 24,453 50,928 Anti-dilutive shares of restricted common stock 925,866 — 191 50,292 |
Schedule of Stockholders' Deficit | The following details the changes in stockholders’ deficit for the three and nine months ended September 30, 2020 and September 30, 2019 (in thousands except share amounts): Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at June 30, 2020 47,279,201 $ 47 $ 506,391 $ (12,906) $ (729,082) $ (235,550) Forfeitures of shares granted to employees (4,932) — — — — — Equity-based compensation — — 7,147 — — 7,147 Foreign currency translation — — — 5,408 — 5,408 Issuances of common stock 10,500 — — — — — Exercises of options 4,134 — 185 — — 185 Common stock purchases and retirement (4,567) — (269) — — (269) Dividends paid — — — — (32,657) (32,657) Net loss — — — — (4,955) (4,955) Balance at September 30, 2020 47,284,336 $ 47 $ 513,454 $ (7,498) $ (766,694) $ (260,691) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at June 30, 2019 46,806,370 $ 47 $ 481,734 $ (10,967) $ (647,404) $ (176,590) Forfeitures of shares granted to employees (4,508) — — — — — Equity-based compensation — — 5,311 — — 5,311 Foreign currency translation — — — (4,709) — (4,709) Issuances of common stock 10,572 — — — — — Exercises of options 9,152 — 351 — — 351 Dividends paid — — — — (28,565) (28,565) Net income — — — — 13,701 13,701 Balance at September 30, 2019 46,821,586 $ 47 $ 487,396 $ (15,676) $ (662,268) $ (190,501) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders' Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2019 46,840,434 $ 47 $ 493,178 $ (12,326) $ (684,578) $ (203,679) Forfeitures of shares granted to employees (42,212) — — — — — Equity-based compensation — — 19,371 — — 19,371 Foreign currency translation — — — 4,828 — 4,828 Issuances of common stock 465,530 — — — — — Exercises of options 25,151 — 1,174 — — 1,174 Common stock purchases and retirement (4,567) — (269) — — (269) Dividends paid — — — — (94,952) (94,952) Net income — — — — 12,836 12,836 Balance at September 30, 2020 47,284,336 $ 47 $ 513,454 $ (7,498) $ (766,694) $ (260,691) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders' 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 (8,394) — — — — — Equity-based compensation — — 14,796 — — 14,796 Foreign currency translation — — — (4,748) — (4,748) Issuances of common stock 459,550 1 — — — 1 Exercises of options 33,931 — 1,269 — — 1,269 Dividends paid — — — — (82,871) (82,871) Net income — — — — 30,054 30,054 Balance at September 30, 2019 46,821,586 $ 47 $ 487,396 $ (15,676) $ (662,268) $ (190,501) |
Schedule of lease cost | Three Months Three Months Ended Ended September 30, 2020 September 30, 2019 Finance lease cost Amortization of right-of-use assets $ 6,382 $ 4,963 Interest expense on finance lease liabilities 4,804 4,414 Operating lease cost 4,269 3,716 Total lease costs $ 15,455 $ 13,093 Nine Months Nine Months Ended Ended September 30, 2020 September 30, 2019 Finance lease cost Amortization of right-of-use assets $ 16,117 $ 14,851 Interest expense on finance lease liabilities 13,794 13,230 Operating lease cost 12,860 10,497 Total lease costs $ 42,771 $ 38,578 Other lease information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from finance leases $ (14,150) $ (12,957) Operating cash flows from operating leases (13,785) (8,443) Financing cash flows from finance leases (19,392) (7,035) Right-of-use assets obtained in exchange for new finance lease liabilities 61,504 11,342 Right-of-use assets obtained in exchange for new operating lease liabilities 24,866 6,912 Weighted-average remaining lease term — finance leases (in years) 12.3 14.5 Weighted-average remaining lease term — operating leases (in years) 20.4 21.7 Weighted average discount rate — finance leases 10.5 % 10.5 % Weighted average discount rate — operating leases 5.4 % 5.7 % |
Schedule of future minimum payments under finance leases | The future minimum payments (principal and interest) under these finance leases are as follows (in thousands): For the twelve months ending September 30, 2021 $ 33,471 2022 32,638 2023 31,650 2024 31,753 2025 28,495 Thereafter 225,320 Total minimum finance lease obligations 383,327 Less—amounts representing interest (170,387) Present value of minimum finance lease obligations 212,940 Current maturities (15,252) Finance lease obligations, net of current maturities $ 197,688 |
Schedule of future minimum payments under operating lease agreements | The future minimum payments under these operating lease agreements are as follows (in thousands): For the twelve months ending September 30, 2021 $ 17,579 2022 16,535 2023 15,674 2024 14,198 2025 12,124 Thereafter 103,809 Total minimum operating lease obligations 179,919 Less—amounts representing interest (66,466) Present value of minimum operating lease obligations 113,453 Current maturities (12,006) Lease obligations, net of current maturities $ 101,447 |
Schedule of impact on financial statement line items from adopting ASC 606 | Current-period Balance at Provision for Write offs Balance at June 30, Expected Credit Charged Against September 30, Description 2020 Losses Allowance 2020 Allowance for credit losses (deducted from accounts receivable) Three months ending September 30, 2020 $ 2,115 $ 1,174 $ (1,085) $ 2,204 Current-period Balance at Provision for Write offs Balance at December 31, Expected Credit Charged Against September 30, Description 2019 Losses Allowance 2020 Allowance for credit losses (deducted from accounts receivable) Nine months ending September 30, 2020 $ 1,771 $ 3,942 $ (3,509) $ 2,204 |
Income taxes_ (Tables)
Income taxes: (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Income taxes: | |
Schedule of components of (loss) income before income taxes | The components of (loss) income before income taxes consist of the following (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Domestic $ (4,084) $ 24,452 $ 27,818 $ 59,537 Foreign (2,471) (5,497) (10,242) (17,632) Total $ (6,555) $ 18,955 $ 17,576 $ 41,905 |
Segment information_ (Tables)
Segment information: (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segment information: | |
Schedule of service revenue by geographic region and product class and long lived assets by geographic region | Three months Ended September 30, 2020 Revenues On-net Off-net Non-core Total North America $ 82,730 $ 32,416 $ 107 $ 115,253 Europe 19,966 4,422 12 24,400 South America 599 14 — 613 Asia Pacific 1,786 240 — 2,026 Africa 10 — — 10 Total $ 105,091 $ 37,092 $ 119 $ 142,302 Three months Ended September 30, 2019 Revenues On-net Off-net Non-core Total North America $ 80,176 $ 33,172 $ 104 $ 113,452 Europe 17,921 4,053 4 21,978 South America 139 5 — 144 Asia Pacific 1,180 188 — 1,368 Africa — — — — Total $ 99,416 $ 37,418 $ 108 $ 136,942 Nine months Ended September 30, 2020 Revenues On-net Off-net Non-core Total North America $ 247,679 $ 97,951 $ 369 $ 345,999 Europe 58,433 12,781 32 71,246 South America 1,344 34 — 1,378 Asia Pacific 4,880 692 — 5,572 Africa 10 — — 10 Total $ 312,346 $ 111,458 $ 401 $ 424,205 Nine months Ended September 30, 2019 Revenues On-net Off-net Non-core Total North America $ 236,636 $ 98,670 $ 300 $ 335,606 Europe 53,889 12,192 45 66,126 South America 244 8 — 252 Asia Pacific 3,300 582 — 3,882 Africa — — — — Total $ 294,069 $ 111,452 $ 345 $ 405,866 September 30, December 31, 2020 2019 Long-lived assets, net North America $ 305,648 $ 269,364 Europe and other 115,619 99,582 Total $ 421,267 $ 368,946 |
Description of the business a_3
Description of the business and recent developments: (Details) | 9 Months Ended |
Sep. 30, 2020countrycustomerMBGB | |
Number of countries operating in | country | 47 |
Access networks | customer | 7,200 |
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_4
Description of the business and recent developments: Financial instruments (Details) - Sep. 30, 2020 € in Millions, $ in Millions | USD ($) | EUR (€) |
Senior secured 2022 notes | ||
Financial instruments | ||
Senior notes | $ 445 | |
Senior secured 2022 notes | Level 2 | ||
Financial instruments | ||
Senior notes, fair value | 455 | |
Senior unsecured 2024 notes | ||
Financial instruments | ||
Senior notes | 410.4 | € 350 |
Senior unsecured 2024 notes | Level 2 | ||
Financial instruments | ||
Senior notes, fair value | $ 416.5 |
Description of the business a_5
Description of the business and recent developments: Gross receipts taxes, universal service fund and other surcharges (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Description of the business and recent developments: | ||||
Excise taxes and surcharge | $ 3.9 | $ 4 | $ 10.9 | $ 10.6 |
Description of the business a_6
Description of the business and recent developments: Basic and diluted net income per common share (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Diluted weighted average shares | ||||
Weighted-average common shares - basic (in shares) | 45,815,718 | 45,438,656 | 45,818,677 | 45,428,305 |
Weighted average common shares-diluted | 45,815,718 | 46,019,691 | 46,598,870 | 45,948,331 |
Stock options | ||||
Diluted weighted average shares | ||||
Dilutive effect (options or restricted stock) | 34,593 | 99,581 | 32,179 | |
Anti-dilutive effects | ||||
Anti-dilutive (options or restricted stock) | 87,214 | 37,606 | 24,453 | 50,928 |
Restricted stock | ||||
Diluted weighted average shares | ||||
Dilutive effect (options or restricted stock) | 546,442 | 680,612 | 487,847 | |
Anti-dilutive effects | ||||
Unvested shares of restricted common stock | 1,472,572 | 1,379,446 | 1,472,572 | 1,379,446 |
Anti-dilutive (options or restricted stock) | 925,866 | 191 | 50,292 |
Description of the business a_7
Description of the business and recent developments: Stockholders' deficit (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Increase (Decrease) in Stockholders' Equity | ||||
Balance | $ (235,550) | $ (176,590) | $ (203,679) | $ (149,002) |
Balance (in shares) | 46,840,434 | |||
Equity-based compensation | 7,147 | 5,311 | $ 19,371 | 14,796 |
Foreign currency translation | 5,408 | (4,709) | 4,828 | (4,748) |
Issuances of common stock | 1 | |||
Exercises of options | 185 | 351 | 1,174 | 1,269 |
Common stock purchases and retirement | (269) | (269) | ||
Dividends paid | (32,657) | (28,565) | (94,952) | (82,871) |
Net (loss) income | (4,955) | 13,701 | 12,836 | 30,054 |
Balance | $ (260,691) | (190,501) | $ (260,691) | (190,501) |
Balance (in shares) | 47,284,336 | 47,284,336 | ||
Common Stock | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Balance | $ 47 | $ 47 | $ 47 | $ 46 |
Balance (in shares) | 47,279,201 | 46,806,370 | 46,840,434 | 46,336,499 |
Forfeitures of shares granted to employees (in shares) | (4,932) | (4,508) | (42,212) | (8,394) |
Issuances of common stock | $ 1 | |||
Issuances of common stock (in shares) | 10,500 | 10,572 | 465,530 | 459,550 |
Exercises of options (in shares) | 4,134 | 9,152 | 25,151 | 33,931 |
Common stock purchases and retirement (in shares) | (4,567) | (4,567) | ||
Balance | $ 47 | $ 47 | $ 47 | $ 47 |
Balance (in shares) | 47,284,336 | 46,821,586 | 47,284,336 | 46,821,586 |
Additional Paid-in Capital | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Balance | $ 506,391 | $ 481,734 | $ 493,178 | $ 471,331 |
Equity-based compensation | 7,147 | 5,311 | 19,371 | 14,796 |
Exercises of options | 185 | 351 | 1,174 | 1,269 |
Common stock purchases and retirement | (269) | (269) | ||
Balance | 513,454 | 487,396 | 513,454 | 487,396 |
Accumulated Other Comprehensive Income (Loss) | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Balance | (12,906) | (10,967) | (12,326) | (10,928) |
Foreign currency translation | 5,408 | (4,709) | 4,828 | (4,748) |
Balance | (7,498) | (15,676) | (7,498) | (15,676) |
Accumulated Deficit | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Balance | (729,082) | (647,404) | (684,578) | (609,451) |
Dividends paid | (32,657) | (28,565) | (94,952) | (82,871) |
Net (loss) income | (4,955) | 13,701 | 12,836 | 30,054 |
Balance | $ (766,694) | $ (662,268) | $ (766,694) | $ (662,268) |
Description of the business a_8
Description of the business and recent developments: Revenue recognition (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Recent accounting pronouncements- adopted | ||||
Service revenue recognized | $ 1.6 | $ 1.7 | $ 3.9 | $ 5.1 |
Amortization expense for contract costs | $ 4.2 | $ 4.3 | $ 12.6 | $ 13 |
ASU 2014-09 | ||||
Recent accounting pronouncements- adopted | ||||
Maximum contract lengths for billing due upon receipts (in months) | 60 months |
Description of the business a_9
Description of the business and recent developments: Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Jan. 01, 2019 | |
Finance leases-fiber lease agreements | ||||||
Additional finance lease future payments due | $ 20,700 | $ 20,700 | ||||
Cash paid for amounts included in the measurement of lease liabilities | ||||||
Finance lease cost Amortization of right-of-use assets | 6,382 | $ 4,963 | 16,117 | $ 14,851 | ||
Interest expense on finance lease liabilities | 4,804 | 4,414 | 13,794 | 13,230 | ||
Operating lease cost | 4,269 | 3,716 | 12,860 | 10,497 | ||
Total lease costs | $ 15,455 | $ 13,093 | 42,771 | 38,578 | ||
Operating cash flows from finance leases | (14,150) | (12,957) | ||||
Operating cash flows from operating leases | (13,785) | (8,443) | ||||
Financing cash flows from finance leases | (19,392) | (7,035) | ||||
Right-of-use assets obtained in exchange for new finance lease liabilities | 61,504 | 11,342 | ||||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 24,866 | $ 6,912 | ||||
Weighted-average remaining lease term - finance leases (in years) | 12 years 3 months 18 days | 14 years 6 months | 12 years 3 months 18 days | 14 years 6 months | ||
Weighted-average remaining lease term - operating leases (in years) | 20 years 4 months 24 days | 21 years 8 months 12 days | 20 years 4 months 24 days | 21 years 8 months 12 days | ||
Weighted average discount rate - finance leases | 10.50% | 10.50% | 10.50% | 10.50% | ||
Weighted average discount rate - operating leases | 5.40% | 5.70% | 5.40% | 5.70% | ||
Future minimum payments (principal and interest) under these finance leases | ||||||
2021 | $ 33,471 | $ 33,471 | ||||
2022 | 32,638 | 32,638 | ||||
2023 | 31,650 | 31,650 | ||||
2024 | 31,753 | 31,753 | ||||
2025 | 28,495 | 28,495 | ||||
Thereafter | 225,320 | 225,320 | ||||
Total minimum finance lease obligations | 383,327 | 383,327 | ||||
Less-amounts representing interest | (170,387) | (170,387) | ||||
Present value of minimum finance lease obligations | 212,940 | 212,940 | ||||
Current maturities, finance lease obligations | (15,252) | (15,252) | $ (8,154) | |||
Finance lease obligations, net of current maturities | 197,688 | 197,688 | 161,635 | |||
Future minimum payments under these operating lease agreements | ||||||
2021 | 17,579 | 17,579 | ||||
2022 | 16,535 | 16,535 | ||||
2023 | 15,674 | 15,674 | ||||
2024 | 14,198 | 14,198 | ||||
2025 | 12,124 | 12,124 | ||||
Thereafter | 103,809 | 103,809 | ||||
Total minimum operating lease obligations | 179,919 | 179,919 | ||||
Less-amounts representing interest | (66,466) | (66,466) | ||||
Present value of minimum operating lease obligations | 113,453 | 113,453 | ||||
Current maturities, operating lease liabilities | (12,006) | (12,006) | (10,101) | |||
Lease obligations, net of current maturities | $ 101,447 | $ 101,447 | $ 86,690 | |||
Asset and lease liability | $ 97,300 | |||||
Minimum | ||||||
Finance leases-fiber lease agreements | ||||||
Initial terms | 15 years | 15 years | ||||
Maximum | ||||||
Finance leases-fiber lease agreements | ||||||
Initial terms | 20 years | 20 years |
Description of the business _10
Description of the business and recent developments: Allowance for credit losses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2020 | Sep. 30, 2020 | |
Description of the business and recent developments: | ||
Balance | $ 2,115 | $ 1,771 |
Current-period Provision for Expected Credit Losses | 1,174 | 3,942 |
Write offs Charged Against Allowance (Write-offs) | (1,085) | (3,509) |
Balance | 2,204 | 2,204 |
Bad debt expense, net of recoveries | 800 | 3,200 |
Bad debt recoveries | $ 400 | $ 800 |
Property and equipment_ (Detail
Property and equipment: (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Property and equipment: | ||||
Depreciation and amortization | $ 21,619 | $ 20,006 | $ 61,022 | $ 60,246 |
Capitalized salaries and related benefits of employees | $ 3,000 | $ 2,700 | $ 8,900 | $ 8,000 |
Property and equipment_ Exchang
Property and equipment: Exchange agreement (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Property and equipment | ||||
Cash component of network equipment obtained in exchange transactions | $ 0.1 | $ 0.1 | $ 0.3 | $ 0.8 |
Level 3 | ||||
Property and equipment | ||||
Fair value of new equipment | $ 0.2 | $ 0.3 | $ 1.1 | $ 2.6 |
Property and equipment_ Install
Property and equipment: Installment payment agreement (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020USD ($)payment | Dec. 31, 2019USD ($) | |
Installment payment agreement | ||
Unamortized discount | $ 245 | $ 350 |
Network equipment | Note obligations | ||
Installment payment agreement | ||
Term of debt (in months) | 24 months | |
Number of payments first six months | payment | 0 | |
Number of equal payments | payment | 18 | |
Outstanding obligation | $ 10,400 | 12,500 |
Unamortized discount | $ 300 | $ 400 |
Long-term debt_ 2024 Notes issu
Long-term debt: 2024 Notes issuances (Details) $ in Thousands, € in Millions | Jun. 09, 2020USD ($) | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020EUR (€) | Jun. 30, 2020EUR (€) | Jun. 03, 2020EUR (€) | Jun. 30, 2019EUR (€) |
Long-term debt | |||||||||||
Realized foreign exchange gain on issuance on 2024 Euro Notes | $ 2,547 | ||||||||||
Foreign Currency Transaction Gain Loss Unrealized On 2024 Euro Notes | $ (17,315) | $ 6,162 | (17,827) | $ 6,339 | |||||||
Net proceeds from issuance of senior unsecured 2024 Euro Notes | 240,285 | 152,128 | |||||||||
Redemption and extinguishment of 2021 Notes | (189,225) | ||||||||||
Senior secured 2022 notes | |||||||||||
Long-term debt | |||||||||||
Face amount | $ 445,000 | $ 445,000 | |||||||||
Interest rate (as a percent) | 5.375% | 5.375% | 5.375% | ||||||||
Senior secured 2022 notes | Level 2 | |||||||||||
Long-term debt | |||||||||||
Senior notes, fair value | $ 455,000 | $ 455,000 | |||||||||
Senior unsecured 2024 notes | |||||||||||
Long-term debt | |||||||||||
Face amount | 410,400 | 410,400 | € 350 | € 135 | € 215 | € 135 | |||||
Interest rate (as a percent) | 4.375% | 4.375% | 4.375% | ||||||||
Discount rate (as a percent) | 99.50% | ||||||||||
Original amount issued at a discount | $ 240,000 | € 213.9 | |||||||||
Foreign currency exchange rate at Euro to USD | 1.133 | 1.112 | 1.112 | ||||||||
Realized foreign exchange gain on issuance on 2024 Euro Notes | $ 2,500 | ||||||||||
Foreign Currency Transaction Gain Loss Unrealized On 2024 Euro Notes | (17,300) | $ 6,200 | (17,800) | $ 6,300 | |||||||
Net proceeds from issuance of senior unsecured 2024 Euro Notes | $ 240,300 | $ 152,100 | |||||||||
Senior unsecured 2024 notes | Level 2 | |||||||||||
Long-term debt | |||||||||||
Face amount | 410,400 | 410,400 | |||||||||
Senior notes, fair value | $ 416,500 | $ 416,500 | |||||||||
Senior unsecured 2021 notes | |||||||||||
Long-term debt | |||||||||||
Face amount | $ 189,200 | ||||||||||
Interest rate (as a percent) | 5.625% | 5.625% |
Long-term debt_ Debt extinguish
Long-term debt: Debt extinguishment and redemption 2021 Notes (Details) $ in Thousands, € in Millions | 1 Months Ended | 9 Months Ended | ||||||
Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020EUR (€) | Jun. 30, 2020EUR (€) | Jun. 03, 2020EUR (€) | Jun. 30, 2019EUR (€) | |
Long-term debt | ||||||||
Net proceeds from issuance of senior unsecured 2024 Euro Notes | $ 240,285 | $ 152,128 | ||||||
Senior unsecured 2021 notes | ||||||||
Long-term debt | ||||||||
Interest rate (as a percent) | 5.625% | 5.625% | ||||||
Principal amount plus accrued and unpaid interest (as a percent) | 100.00% | |||||||
Face amount | $ 189,200 | |||||||
Accrued interest | $ 1,600 | |||||||
Senior unsecured 2024 notes | ||||||||
Long-term debt | ||||||||
Interest rate (as a percent) | 4.375% | 4.375% | 4.375% | |||||
Net proceeds from issuance of senior unsecured 2024 Euro Notes | $ 240,300 | $ 152,100 | ||||||
Face amount | $ 410,400 | € 350 | € 135 | € 215 | € 135 | |||
Loss on debt purchase | $ 600 |
Long-term debt_ Limitations und
Long-term debt: Limitations under the Indentures (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Long-term debt | |
Amount permitted for investment payments | $ 132.6 |
Restriction on incurring additional indebtedness | Senior secured 2022 notes | Minimum | |
Long-term debt | |
Consolidated secured leverage ratio | 3.5 |
Restriction on incurring additional indebtedness | Senior unsecured 2024 notes | Minimum | |
Long-term debt | |
Consolidated leverage ratio | 6 |
Consolidated secured leverage ratio | 4 |
Restriction on incurring additional indebtedness | Senior secured 2022 Notes and 2021 Notes | Minimum | |
Long-term debt | |
Consolidated leverage ratio | 5 |
Consolidated secured leverage ratio | 4.25 |
Restriction on dividends and stock purchases | Minimum | |
Long-term debt | |
Consolidated leverage ratio | 4.25 |
Increase in unrestricted payment amount | Maximum | |
Long-term debt | |
Consolidated leverage ratio | 4.25 |
Commitments and contingencies_
Commitments and contingencies: Current and potential litigation (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Mar. 31, 2015 |
Commitments and contingencies | ||
Estimate of possible loss in excess of accrual | $ 3.3 | |
Spain | ||
Commitments and contingencies | ||
Estimate of possible loss | $ 9 |
Income taxes_ Components of inc
Income taxes: Components of income before income taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Components of income before income taxes | ||||
Domestic | $ (4,084) | $ 24,452 | $ 27,818 | $ 59,537 |
Foreign | (2,471) | (5,497) | (10,242) | (17,632) |
(Loss) Income before income taxes | $ (6,555) | $ 18,955 | $ 17,576 | $ 41,905 |
Common stock buyback program _2
Common stock buyback program stock option and award plan: (Details) - USD ($) $ in Millions | Oct. 01, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
Remaining authorized amount for common stock repurchases | $ 34.6 | $ 34.6 | |||||
Repurchase of common stock (in shares) | 53,516 | 4,567 | 0 | 4,567 | 0 | ||
Cost of shares of common stock | $ 3.1 | $ 0.3 | $ 0.3 | ||||
Performance conditions | |||||||
Stock Repurchase Program, Number of Shares Authorized to be Repurchased | 94,050 | ||||||
Executive employees and directors | |||||||
Shares issue (in shares) | 135,280 | 319,750 | |||||
Shares issued, Value | $ 10.6 | $ 23.7 | |||||
CEO | Performance conditions | |||||||
Stock Repurchase Program, Number of Shares Authorized to be Repurchased | 35,000 |
Dividends on common stock_ (Det
Dividends on common stock: (Details) - USD ($) $ / shares in Units, $ in Thousands | Dec. 04, 2020 | Nov. 04, 2020 | Sep. 30, 2020 | Sep. 30, 2019 |
Dividends on common stock and return of capital program | ||||
Quarterly dividend payment approved (per share) | $ 0.73 | |||
Dividends paid | $ 33,500 | $ 94,952 | $ 82,871 |
Related party transactions_ (De
Related party transactions: (Details) - CEO - Lease - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
May 31, 2015 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
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 | $ 0.3 | $ 1.3 | $ 1.2 |
Segment information_ (Details)
Segment information: (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)segment | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | |
Geographic information | |||||
Number of operating segments | segment | 1 | ||||
Revenues | $ 142,302 | $ 136,942 | $ 424,205 | $ 405,866 | |
Long-lived assets, net | 421,267 | 421,267 | $ 368,946 | ||
On-net | |||||
Geographic information | |||||
Revenues | 105,091 | 99,416 | 312,346 | 294,069 | |
Off-net | |||||
Geographic information | |||||
Revenues | 37,092 | 37,418 | 111,458 | 111,452 | |
Non-core | |||||
Geographic information | |||||
Revenues | 119 | 108 | 401 | 345 | |
North America | |||||
Geographic information | |||||
Revenues | 115,253 | 113,452 | 345,999 | 335,606 | |
Long-lived assets, net | 305,648 | 305,648 | 269,364 | ||
North America | On-net | |||||
Geographic information | |||||
Revenues | 82,730 | 80,176 | 247,679 | 236,636 | |
North America | Off-net | |||||
Geographic information | |||||
Revenues | 32,416 | 33,172 | 97,951 | 98,670 | |
North America | Non-core | |||||
Geographic information | |||||
Revenues | 107 | 104 | 369 | 300 | |
Europe | |||||
Geographic information | |||||
Revenues | 24,400 | 21,978 | 71,246 | 66,126 | |
Europe | On-net | |||||
Geographic information | |||||
Revenues | 19,966 | 17,921 | 58,433 | 53,889 | |
Europe | Off-net | |||||
Geographic information | |||||
Revenues | 4,422 | 4,053 | 12,781 | 12,192 | |
Europe | Non-core | |||||
Geographic information | |||||
Revenues | 12 | 4 | 32 | 45 | |
Europe and other | |||||
Geographic information | |||||
Long-lived assets, net | 115,619 | 115,619 | $ 99,582 | ||
South America | |||||
Geographic information | |||||
Revenues | 613 | 144 | 1,378 | 252 | |
South America | On-net | |||||
Geographic information | |||||
Revenues | 599 | 139 | 1,344 | 244 | |
South America | Off-net | |||||
Geographic information | |||||
Revenues | 14 | 5 | 34 | 8 | |
Asia Pacific | |||||
Geographic information | |||||
Revenues | 2,026 | 1,368 | 5,572 | 3,882 | |
Asia Pacific | On-net | |||||
Geographic information | |||||
Revenues | 1,786 | 1,180 | 4,880 | 3,300 | |
Asia Pacific | Off-net | |||||
Geographic information | |||||
Revenues | 240 | $ 188 | 692 | $ 582 | |
Africa | |||||
Geographic information | |||||
Revenues | 10 | 10 | |||
Africa | On-net | |||||
Geographic information | |||||
Revenues | $ 10 | $ 10 |