SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2014 |
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 March 31, 2014 and December 31, 2013, the condensed consolidated statements of income for the three months ended March 31, 2014 and 2013, the condensed consolidated statements of comprehensive income for the three months ended March 31, 2014 and 2013, and the condensed consolidated statements of cash flows for the three months ended March 31, 2014 and 2013 are unaudited. The condensed consolidated balance sheet data as of December 31, 2013 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, 2013. The accompanying 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, 2013. |
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 GAAP 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 March 31, 2014 and for the three months ended March 31, 2014 and 2013 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 months ended March 31, 2014 are not necessarily indicative of the operating results for any subsequent quarter, for the full fiscal year or any future periods. |
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 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. Refer to Note 9 “Business Disposition” 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. The carrying values of our cash and cash equivalents approximate fair value. At March 31, 2014, the Company had $23.9 million of cash in banks and $46.8 million in three money market mutual funds. At December 31, 2013, the Company had $35.2 million of cash in banks and $41.8 million in three money market mutual funds. |
Fair Value Measurements | ' |
Fair Value Measurements —Certain assets and liabilities are required to be recorded at fair value on a recurring basis. Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Assets measured at fair value on a nonrecurring basis include long-lived assets held and used, long-lived assets held for sale, goodwill and other intangible assets. The fair value of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying values. The three-tier value hierarchy, which prioritizes valuation methodologies based on the reliability of the inputs, is: |
Level 1— Valuations based on quoted prices for identical assets and liabilities in active markets. |
Level 2— Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. |
Level 3— Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. |
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. |
Prior to the sale of the Company’s global data business in April 2013, IP Transit and Ethernet services revenues related to the Company’s Americas reporting unit for the first four months of 2013 were recorded each month on an accrual basis based upon bandwidth used by each customer. The rates charged were 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: |
|
| | | | | | | | |
Three Months Ended March 31, | | 2014 | | | 2013 | |
Numerator: | | | | |
Income from continuing operations | | $ | 9,193 | | | $ | 12,236 | |
Loss from discontinued operations, net of provision for income taxes | | | — | | | | (5,336 | ) |
| | | | | | | | |
Net income | | $ | 9,193 | | | $ | 6,900 | |
Denominator: | | | | |
Weighted average common shares outstanding | | | 32,273 | | | | 32,337 | |
Effect of dilutive securities: | | | | |
Stock options | | | 343 | | | | 116 | |
| | | | | | | | |
Denominator for diluted earnings per share | | | 32,616 | | | | 32,453 | |
Earnings per share-continuing operations: | | | | |
Basic | | $ | 0.28 | | | $ | 0.38 | |
Diluted | | $ | 0.28 | | | $ | 0.38 | |
Loss per share—discontinued operations: | | | | |
Basic | | $ | — | | | $ | (0.17 | ) |
Diluted | | $ | — | | | $ | (0.16 | ) |
Earnings per share—net income: | | | | |
Basic | | $ | 0.28 | | | $ | 0.21 | |
Diluted | | $ | 0.28 | | | $ | 0.21 | |
Outstanding share-based awards of 2.0 million and 3.6 million were outstanding during the three months ended March 31, 2014 and March 31, 2013, respectively, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive. |
|
For the three months ended March 31, 2014 and 2013, the undistributed earnings allocable to participating securities were $0.1 million and $0.2 million, respectively. |
Accounting for Share-Based Payments | ' |
Accounting for Share-Based Payments — 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 share-based expense recorded in the three months ended March 31, 2014 and 2013 was $1.0 million and $1.9 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” |
Foreign Currency Translation | ' |
Foreign Currency Translation — As a result of the sale of the global data business, the Company now operates substantially only within the United States and is no longer exposed to any foreign currency risk. |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements — No new accounting pronouncement issued or effective during the three months ended March 31, 2014 had or is expected to have a material impact on the condensed consolidated financial statements. |