SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2014 |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation —The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
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 consolidated statements of operations and in the 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 consolidated statements of operations and in the consolidated balance sheets. Refer to Note 3 “Business Disposition” for more information regarding the sale of the global data business. |
Use of Estimates | Use of Estimates —The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. These accounting principles require management to make certain estimates and assumptions that can affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the periods presented. The Company believes that the estimates and assumptions upon which it relies are reasonable based upon information available to it at the time that these estimates and assumptions are made. To the extent there are material differences between these estimates and actual results, the Company’s consolidated financial statements will be affected. |
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 equivalents. The carrying values of our cash and cash equivalents approximate fair value. At December 31, 2014, the Company had $32.9 million of cash in banks and $71.8 million in three money market funds. At December 31, 2013, the Company had $35.2 million of cash in banks and $41.8 million in three money market 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. 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. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts—Accounts receivable consist of trade receivables recorded upon recognition of revenue from sales of voice services, reduced by reserves for estimated bad debts. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Credit is extended based on evaluation of the customer’s financial condition. We make judgments as to our ability to collect outstanding receivables and provide allowances for a portion of receivables when collection becomes doubtful. The specific identification method is applied to all significant outstanding invoices to determine this provision. At December 31, 2014 and December 31, 2013, our allowance for doubtful accounts was $2.3 million and $0.9 million, respectively. |
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. As discussed in further detail below, the impairment of long-lived assets is evaluated when events or changes in circumstances indicate that a potential impairment has occurred. |
Long-lived Assets | Long-lived Assets —The carrying value of long-lived assets, including property and equipment, are reviewed whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment of assets with definite lives is generally determined by comparing projected undiscounted cash flows to be generated by the asset, or appropriate grouping of assets, to its carrying value. If an impairment is identified, a loss is recorded equal to the excess of the asset’s net book value over its fair value. The fair value becomes the new cost basis of the asset. Determining the extent of an impairment, if any, typically requires various estimates and assumptions including using management’s judgment, cash flows directly attributable to the asset, the useful life of the asset and residual value, if any. In addition, the remaining useful life of the impaired asset is revised, if necessary. There were no property and equipment or intangible asset impairment charges in 2014 or 2013. |
The decline in our stock price and related market capitalization beginning late in the third quarter of 2012 and sustained through the date of filing of our Annual Report on Form 10-K for the year ended December 31, 2012 created an indication of potential impairment. We utilized Accounting Standards Codification 360, Property, Plant and Equipment (ASC 360), guidance to test the long-lived assets for realizability. During the year ended December 31, 2012, the Company recorded property and equipment and intangible assets impairment charges of $13.2 million and $25.8 million, respectively, as a result of the impairment test performed during fourth quarter of 2012. The Company recorded property and equipment impairment charges in each of its three reporting units, Americas, EMEA and APAC, in the amount of $4.9 million, $7.8 million and $0.5 million, respectively. The Company also recorded intangible assets impairment charges in each of our three reporting units, Americas, EMEA and APAC, in the amount of $17.3 million, $7.7 million and $0.8 million, respectively. In the 2012 consolidated statement of operations, the amounts related to EMEA and APAC are recorded as part of discontinued operations and the amount related to Americas is recorded as part of continuing operations. In addition, the Company ceased its hosted services offering during the year-ended December 31, 2012. As the equipment had no further use in the Company’s network the Company recorded an asset impairment charge of $2.9 million to write-off the related assets. |
Goodwill | Goodwill —Goodwill represents the excess of the purchase price of an acquired business over the fair value of assets and liabilities assumed in the business combination. Goodwill is not amortized, but rather is reviewed for impairment at least annually, or when events and circumstances indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying value. The Company compares each reporting unit’s fair value, by considering comparable company market valuations and estimating expected future discounted cash flows to be generated by the reporting unit, to its carrying value. If the carrying value exceeds the reporting unit’s fair value, the Company performs an additional fair value measurement calculation to determine the impairment loss. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill. |
Goodwill was recognized in 2010 as a result of the acquisition of Tinet, and in October 2011, the Company established the Americas, EMEA, and APAC reporting units as part of an internal reorganization. In the fourth quarter of 2012, we performed our annual goodwill impairment test. Factors that we considered in the fourth quarter of 2012 when estimating the fair value of the reporting units included (i) a decline in our common stock price beginning late in the third quarter of 2012 and sustained through the date of filing of our Annual Report on Form 10-K for the year ended December 31, 2012, which required an increase in the discount rate used in the present value calculation in order to reconcile our market capitalization to the aggregate estimated fair value of all of our reporting units, and (ii) a carrier dispute that was settled in the fourth quarter of 2012. We performed an impairment test of goodwill for each of our reporting units. The quantitative goodwill impairment test Step 1 was based upon the estimated fair value of our reporting units compared to the net carrying value of assets and liabilities of the reporting units. We used internal discounted cash flow estimates and considered market value comparisons to determine fair value. Because the fair value of the reporting units was below their carrying value, including goodwill, we performed an additional fair value measurement to determine the amount of impairment loss. During the year ended December 31, 2012 the Company recorded goodwill impairment charges in each of its three reporting units, Americas, EMEA and APAC, in the amount of $44.5 million, $4.5 million and $0.5 million, respectively, which in total, resulted in a charge of $49.5 million. In the 2012 consolidated statement of operations, the amounts related to EMEA and APAC are recorded as part of discontinued operations and the amount related to Americas is recorded as part of continuing operations. |
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 that related to the Company’s Americas reporting 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: |
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| | Years Ended December 31, | |
(In thousands, except per share amounts) | | 2014 | | | 2013 | | | 2012 | |
Numerator: | | | | | | | | | | | | |
Income (loss) from continuing operations | | $ | 38,523 | | | $ | 64,298 | | | $ | (34,246 | ) |
Loss from discontinued operations, net of provision for income taxes | | | — | | | | (3,808 | ) | | | (43,903 | ) |
Loss on sale of discontinued operations, net of provision for income taxes | | | — | | | | (4,837 | ) | | | — | |
Net income (loss) | | $ | 38,523 | | | $ | 55,653 | | | $ | (78,149 | ) |
Denominator: | | | | | | | | | | | | |
Weighted average common shares outstanding | | | 32,887 | | | | 32,306 | | | | 30,798 | |
Effect of dilutive securities: | | | | | | | | | | | | |
Stock options and non-vested shares | | | 497 | | | | 251 | | | | — | |
Denominator for diluted earnings per share | | | 33,384 | | | | 32,557 | | | | 30,798 | |
Earnings (loss) per share - continuing operations: | | | | | | | | | | | | |
Basic | | $ | 1.17 | | | $ | 1.99 | | | $ | (1.11 | ) |
Diluted | | $ | 1.15 | | | $ | 1.97 | | | $ | (1.11 | ) |
Loss per share - discontinued operations: | | | | | | | | | | | | |
Basic | | $ | — | | | $ | (0.27 | ) | | $ | (1.43 | ) |
Diluted | | $ | — | | | $ | (0.27 | ) | | $ | (1.43 | ) |
Earnings (loss) per share - net income: | | | | | | | | | | | | |
Basic | | $ | 1.17 | | | $ | 1.72 | | | $ | (2.54 | ) |
Diluted | | $ | 1.15 | | | $ | 1.71 | | | $ | (2.54 | ) |
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For the year ended December 31, 2012, the Company was in a net loss position and, accordingly, the assumed exercise of 0.3 million stock options was excluded from diluted weighted average shares outstanding because their inclusion would have been anti-dilutive. |
Share-based awards of 0.6 million, 2.4 million, and 3.5 million were outstanding during the years ended December 31, 2014, 2013 and 2012, respectively, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. |
For the years ended December 31, 2014 and 2013, the undistributed earnings allocable to participating securities were $0.3 million, $0.2 million, respectively. There were no undistributed earnings allocable to participating securities in 2012 as a result of the Company’s net loss. |
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 non-cash share-based expense recorded in the years ended December 31, 2014, 2013 and 2012 was $4.3 million, $6.2 million, and $13.2 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. Refer to Note 12 “Stock Options and Non-vested Shares.” |
Income Taxes | Income Taxes —Deferred income tax assets and liabilities are recognized for future income tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases and for net operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in income tax rates is recorded in earnings in the period of enactment. A valuation allowance is provided for deferred income tax assets when it is more likely than not that future tax benefits will not be realized. Deferred income tax assets are reviewed on a quarterly basis to determine if a valuation allowance is necessary based on current and historical performance, along with other relevant factors. |
The income tax provision includes United States federal, state and local income taxes and is based on pre-tax income or loss. |
The Company recognizes the benefits of uncertain tax positions taken or expected to be taken in tax returns in the provision for income taxes only for those positions that are more likely than not to be realized. The Company follows a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes. The Company’s policy is to include interest and penalties associated with income tax obligations in income tax expense. |
Foreign Currency Translation | Foreign Currency Translation —As a result of the sale of global data business, the Company is paid and makes payments in U.S. Dollars and is no longer exposed to any significant foreign currency risk. |
Concentration | Concentrations —For the years ended 2014, 2013 and 2012, the aggregate revenue of four customers accounted for 73%, 65% and 56% of total revenue from continuing operations, respectively. At December 31, 2014 and 2013, the aggregate accounts receivable of four customers accounted for 77% and 75% of the Company’s total trade accounts receivable balance, respectively. |
In 2014, the Company had two customers in excess of ten percent of revenue, which were 35% and 25% of the Company’s total revenue from continuing operations. At December 31, 2014, the Company had two customers that in aggregate accounted for 62% of the Company’s accounts receivable balance. |
In 2013, the Company had two customers in excess of ten percent of revenue, which were 34% and 20% of the Company’s total revenue from continuing operations. At December 31, 2013, the Company had two customers that in aggregate accounted for 61% of the Company’s accounts receivable balance. |
In 2012, the Company had two customers in excess of ten percent of revenue, which were 30% and 11% of the Company’s total revenue from continuing operations. At December 31, 2012, the Company had two customers that in aggregate accounted for 48% of the Company’s accounts receivable balance. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements — In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The ASU is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company is currently assessing the impact of this standard on the Company’s financial position, results of operations and cash flows. |
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to assess, at each annual and interim reporting period, the entity's ability to continue as a going concern within one year after the date that the financial statements are issued and provide related disclosures. The ASU is effective for the year ended December 31, 2016, with early adoption permitted. The Company has assessed the impact of this standard and does not believe that it will have a material impact on the Company’s consolidated financial statements or disclosures. |
No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on the consolidated financial statements. |