SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2013 |
Principles of Consolidation | ' |
Principles of Consolidation — The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
Interim Condensed Consolidated Financial Statements — The accompanying condensed consolidated balance sheets as of September 30, 2013 and December 31, 2012, the condensed consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012, the condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2013 and 2012, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2013 and 2012 are unaudited. The condensed consolidated balance sheet data as of December 31, 2012 was derived from the audited consolidated financial statements which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012. Certain prior-year amounts that are related to the Company’s discontinued operations have been reclassified to conform to the current period presentation. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012. |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) pursuant to the rules and regulations of the Securities and Exchange Commission applicable to interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations. |
In the opinion of management, the unaudited interim condensed consolidated financial statements as of September 30, 2013 and for the three and nine months ended September 30, 2013 and 2012 have been prepared on the same basis as the audited consolidated statements and reflect all adjustments, which are normal recurring adjustments, necessary for the fair presentation of its statement of financial position, results of operations and cash flows. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the operating results for any subsequent quarter, for the full fiscal year or any future periods. |
The carrying amounts of our cash and equivalents, receivables and accounts payable approximate fair value due to their short-term nature. |
Changes in Presentation | ' |
Changes in Presentation — On April 30, 2013, the Company sold its global data business to GTT for $54.5 million, subject to certain adjustments. The Company determined that the appropriate level in which to assess discontinued operations was at its reporting unit level. As such, the Company’s Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) reporting units of the global data business consist of results of operations and cash flows that can be clearly distinguished from the rest of the entity and are therefore reflected in the condensed consolidated statements of operations and in the condensed consolidated balance sheets as discontinued operations. Historical information related to these reporting units have been reclassified accordingly. The Americas reporting unit of the global data business does not consist of results of operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. This reporting unit does not qualify for discontinued operations accounting treatment. Therefore, the Americas reporting unit of the global data business is reported in continuing operations in the condensed consolidated statements of operations and in the condensed consolidated balance sheets. Refer to Note 9, “Dispositions and Discontinued Operations”, for more information regarding the sale of the global data business. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents — The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash and cash equivalents. At September 30, 2013, the Company had $21.3 million of cash in banks and $41.8 million in three money market mutual funds. At December 31, 2012, the Company had $30.7 million of cash in banks and $0.8 million in two money market mutual funds. |
Property and Equipment | ' |
Property and Equipment — Property and equipment is recorded at cost. These values are depreciated over the estimated useful lives of the individual assets using the straight-line method. Any gains and losses from the disposition of property and equipment are included in operations as incurred. The estimated useful life for network equipment and tools and test equipment is five years. The estimated useful life for computer equipment, computer software and furniture and fixtures is three years. Leasehold improvements are amortized on a straight-line basis over an estimated useful life of five years or the life of the lease, whichever is less. The impairment of long-lived assets is periodically evaluated when events or changes in circumstances indicate that a potential impairment has occurred. |
Revenue Recognition | ' |
Revenue Recognition — The Company generates revenue from sales of its voice services. The Company maintains tariffs and executed service agreements with each of its customers in which specific fees and rates are determined. Voice revenue is recorded each month on an accrual basis based upon minutes of traffic switched by the Company’s network by each customer, which is referred to as minutes of use. The rates charged per minute are determined by contracts between the Company and its customers, or by filed and effective tariffs. |
IP Transit and Ethernet services revenues related to the Company’s Americas reporting unit are recorded each month on an accrual basis based upon bandwidth used by each customer. The rates charged are the total of a monthly fee for bandwidth (the Committed Traffic Rate) plus additional charges for the sustained peak bandwidth used monthly in excess of the Committed Traffic Rate. |
Earnings (Loss) per Share | ' |
Earnings (Loss) per Share — Basic earnings (loss) per share is computed based on the weighted average number of common shares and participating securities outstanding. Diluted earnings (loss) per share is computed based on the weighted average number of common shares and participating securities outstanding adjusted by the number of additional shares that would have been outstanding during the period had the potentially dilutive securities been issued. |
The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings (loss) per share of common stock: |
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| | Three Months Ended | | | Nine Months Ended | |
September 30, | September 30, |
(In thousands, except per share amounts) | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
Numerator: | | | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 6,550 | | | $ | 5,740 | | | $ | 53,138 | | | $ | 28,193 | |
Loss from discontinued operations, net of income tax provision | | | 68 | | | | 8,475 | | | | 7,102 | | | | 20,567 | |
Loss (gain) on disposal of discontinued operations | | | 11 | | | | — | | | | (783 | ) | | | — | |
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Net income (loss) | | $ | 6,471 | | | $ | (2,735 | ) | | $ | 46,819 | | | $ | 7,626 | |
Denominator: | | | | | | | | | | | | | | | | |
Weighted average common shares outstanding | | | 32,262 | | | | 31,993 | | | | 32,344 | | | | 31,817 | |
Effect of dilutive securities: | | | | | | | | | | | | | | | | |
Stock options | | | 295 | | | | — | | | | 204 | | | | 349 | |
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Denominator for diluted earnings per share | | | 32,557 | | | | 31,993 | | | | 32,548 | | | | 32,166 | |
Earnings per share – continuing operations | | | | | | | | | | | | | | | | |
Basic — as reported | | $ | 0.2 | | | $ | 0.18 | | | $ | 1.64 | | | $ | 0.89 | |
Diluted — as reported | | $ | 0.2 | | | $ | 0.18 | | | $ | 1.63 | | | $ | 0.88 | |
Loss per share – discontinued operations | | | | | | | | | | | | | | | | |
Basic — as reported | | $ | — | | | $ | (0.27 | ) | | $ | (0.20 | ) | | $ | (0.65 | ) |
Diluted — as reported | | $ | — | | | $ | (0.27 | ) | | $ | (0.19 | ) | | $ | (0.64 | ) |
Earnings (loss) per share – net income (loss) | | | | | | | | | | | | | | | | |
Basic — as reported | | $ | 0.2 | | | $ | (0.09 | ) | | $ | 1.45 | | | $ | 0.24 | |
Diluted — as reported | | $ | 0.2 | | | $ | (0.09 | ) | | $ | 1.44 | | | $ | 0.24 | |
Outstanding share-based awards of 2.4 million, 2.7 million, 2.4 million and 2.7 million were outstanding during the three months ended September 30, 2013 and September 30, 2012 and the nine months ended September 30, 2013 and September 30, 2012, respectively, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive. |
The undistributed earnings allocable to participating securities were $0.1 million and less than $0.1 million for the three months and nine months ended September 30, 2013, respectively. The undistributed earnings allocable to participating securities were $0.2 million for the nine months ended September 30, 2012. |
Accounting for Stock-Based Compensation | ' |
Accounting for Stock-Based Compensation — The fair value of stock options is determined using the Black-Scholes valuation model. This model takes into account the exercise price of the stock option, the fair value of the common stock underlying the stock option as measured on the date of grant and an estimation of the volatility of the common stock underlying the stock option. Such value is recognized as expense over the service period, net of estimated forfeitures, using the straight line method. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class and historical experience. Actual results, and future changes in estimates, may differ from the Company’s current estimates. |
The amount of non-cash share-based expense recorded in the three months ended September 30, 2013 and 2012 was $1.3 million and $2.5 million, respectively. The amount of non-cash share-based expense recorded in the nine months ended September 30, 2013 and 2012 was $5.2 million and $8.6 million, respectively. |
Compensation expense for non-vested shares is measured based upon the quoted closing market price for the stock on the date of grant. The compensation cost is recognized on a straight-line basis over the vesting period. See Note 5, “Stock Options and Non-Vested Shares.” |
Stock Repurchase | ' |
Stock Repurchase — On August 7, 2012, the Company announced that its Board of Directors authorized the repurchase of up to $50.0 million of its outstanding common stock as part of a stock repurchase program. During the nine months ended September 30, 2013, the Company repurchased approximately 0.3 million shares for $1.6 million under the program at an average cost of $5.80 per share. The Company funded the purchase of the common shares using cash on hand. The stock repurchase was accounted for under the cost method, whereby the entire cost of the repurchased shares was recorded to treasury stock. |
Business Interruption Insurance Claims and Recoveries | ' |
Business Interruption Insurance Claims and Recoveries — On October 29, 2012, as a result of Hurricane Sandy, the Company’s the New York switch site lost power from the utility company. Utility company power did not come back on-line until November 27, 2012. The Company carries business interruption coverage for certain lost profits and extra expenses associated with such events. On September 30, 2013, the Company received a correspondence from its insurance carrier approving a total net payment of $0.4 million, net of a $0.1 million deductible. As of September 30, 2013, the Company has recorded the expected payment of $0.4 million within its accounts receivable. For the three months and nine months ended September 30, 2013, the $0.4 million insurance recovery was recorded within general and administrative expenses in the condensed consolidated statements of operations. |
Foreign Currency Translation | ' |
Foreign Currency Translation — As a result of the sale of global data business, the Company now operates only within the United States and is no longer exposed to any significant foreign currency risk. |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements — Effective January 1, 2013, the Company adopted Financial Accounting Standards Board Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02). ASU 2013-02 requires entities to disclose additional information about reclassification adjustments, including changes in accumulated other comprehensive income balances by component and significant items reclassified out of accumulated other comprehensive income. The Company has complied with this disclosure requirement, and as a result, the amendment did not change the items reported in its other comprehensive income (loss) or when an item of its other comprehensive income (loss) is reclassified to net income. |