Supplemental Financial Information | 6 Months Ended |
Jun. 30, 2014 |
Supplemental Financial Information [Abstract] | ' |
Supplemental Financial Information | ' |
Basis of Presentation and Other Information |
Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the financial position have been included. |
The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. The accompanying condensed consolidated balance sheet as of December 31, 2013 has been derived from the audited financial statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 (the “2013 Form 10-K”). These financial statements should be read in conjunction with the Company’s 2013 Form 10-K. |
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Revenue Recognition |
The Company recognizes revenue when services are rendered or when products are delivered and functional, as applicable. Certain services of the Company require payment in advance of service performance. In such cases, the Company records a service liability at the time of billing and subsequently recognizes revenue ratably over the service period. The Company bills customers certain transactional taxes on service revenues. These transactional taxes are not included in reported revenues as they are recognized as liabilities at the time customers are billed. |
The Company earns retail and wholesale revenues by providing access to and usage of its networks. Retail and certain wholesale revenues are recognized as services are provided. In long term contracts certain fixed elements are required to be recognized on a straight-line basis over the term of the agreement. Revenues for equipment sales are recognized at the point of sale. Wireless handsets and other devices sold with service contracts are generally sold at prices below cost, based on the terms of the service contracts. The Company recognizes the entire cost of the handsets at the time of sale. |
The Company evaluates related transactions to determine whether they should be viewed as multiple deliverable arrangements, which impact revenue recognition. Multiple deliverable arrangements are presumed to be bundled transactions and the total consideration is measured and allocated to the separate units based on their relative selling price with certain limitations. The Company has determined that sales of handsets with service contracts related to these sales generated from Company-operated retail stores are multiple deliverable arrangements. Accordingly, substantially all of the nonrefundable activation fee revenues (as well as the associated direct costs) are allocated to the wireless handset and are recognized at the time of the sale, based on the fact that the handsets are generally sold well below cost and thus appropriately allocated to the point of sale based on the relative selling price evaluation. However, revenue and certain associated direct costs for activations sold at third-party retail locations are deferred and amortized over the estimated life of the customer relationship as the Company is not a principal in the transaction to sell the handset and therefore any activation fees charged are fully attributable to the service revenues. |
The Company recognizes revenue in the period that persuasive evidence of an arrangement exists, delivery of the product has occurred or services have been rendered, it is able to determine the amount and when the collection of such amount is considered probable. |
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Cash |
The Company’s cash was held in market rate savings accounts and non-interest bearing deposit accounts. The total held in the market rate savings accounts at June 30, 2014 and December 31, 2013 was $63.6 million and $36.5 million, respectively. The remaining $44.7 million and $51.9 million of cash at June 30, 2014 and December 31, 2013, respectively, was held in non-interest bearing deposit accounts. |
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Restricted Cash |
The Company is eligible to receive up to $5.0 million in connection with its winning bid in the Connect America Fund's Mobility Fund Phase I Auction ("Auction 901"). Pursuant to the terms of Auction 901, the Company was required to obtain a Letter of Credit (“LOC”) for the benefit of the Universal Service Administrative Company (“USAC”) to cover each disbursement plus the amount of the performance default penalty (10% of the total eligible award). USAC may draw upon the LOC in the event the Company fails to demonstrate the required coverage by the applicable deadline in 2016. The Company obtained the LOC in the amount of $2.2 million, representing the first disbursement of $1.7 million received in September 2013, plus the performance default penalty of $0.5 million. In accordance with the terms of the LOC, the Company deposited $2.2 million into a separate account at the issuing bank to serve as cash collateral. Such funds will be released when the LOC is terminated without being drawn upon by USAC. |
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Allowance for Doubtful Accounts |
The Company includes bad debt expense in customer operations expense in the unaudited condensed consolidated statements of operations. Bad debt expense for the three months ended June 30, 2014 and 2013 was $3.3 million and $4.0 million, respectively. Bad debt expense for the six months ended June 30, 2014 and 2013 was $7.3 million and $7.2 million, respectively. The Company’s allowance for doubtful accounts was $5.8 million and $6.5 million at June 30, 2014 and December 31, 2013, respectively. |
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Pension Benefits and Retirement Benefits Other Than Pensions |
For the three and six months ended June 30, 2014 and 2013, the components of the Company’s net periodic benefit cost for its defined benefit pension plan were as follows: |
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| Three Months Ended June 30, | | Six Months Ended June 30, |
(In thousands) | 2014 | | 2013 | | 2014 | | 2013 |
Service cost | $ | — | | | $ | — | | | $ | — | | | $ | — | |
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Interest cost | 344 | | | 331 | | | 687 | | | 662 | |
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Recognized net actuarial loss | — | | | 76 | | | — | | | 152 | |
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Expected return on plan assets | (439 | ) | | (399 | ) | | (910 | ) | | (798 | ) |
Net periodic benefit cost | $ | (95 | ) | | $ | 8 | | | $ | (223 | ) | | $ | 16 | |
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Pension plan assets were valued at $25.8 million at June 30, 2014. |
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For the three and six months ended June 30, 2014 and 2013, the components of the Company’s net periodic benefit cost for its other postretirement benefit plans were as follows: |
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| Three Months Ended June 30, | | Six Months Ended June 30, |
(In thousands) | 2014 | | 2013 | | 2014 | | 2013 |
Service cost | $ | 10 | | | $ | 14 | | | $ | 20 | | | $ | 27 | |
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Interest cost | 25 | | | 21 | | | 49 | | | 42 | |
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Recognized net actuarial loss | 8 | | | 4 | | | 15 | | | 8 | |
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Fees | — | | | — | | | 8 | | | — | |
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Net periodic benefit cost | $ | 43 | | | $ | 39 | | | $ | 92 | | | $ | 77 | |
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The total expense recognized for the Company’s nonqualified pension plans was $0.1 million for both the three months ended June 30, 2014 and 2013 and $0.3 million and $0.2 million for the six months ended June 30, 2014 and 2013, respectively, a portion of which related to the amortization of unrealized loss. |
The total amount reclassified out of accumulated other comprehensive income related to actuarial (gains)/losses from the defined benefit plans was $(0.3) million and $0.1 million for the three months ended June 30, 2014 and 2013, respectively, and $(0.5) million and $0.1 million for the six months ended June 30, 2014 and 2013, respectively, all of which has been reclassified to cost of sales and services, customer operations, and corporate operations on the unaudited condensed consolidated statement of income for the respective periods. |
The Company also sponsors a contributory defined contribution plan under Internal Revenue Code (“IRC”) Section 401(k) for substantially all employees. The Company’s current policy is to make matching contributions in shares of the Company’s common stock. |
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Equity-Based Compensation |
The Company accounts for equity-based compensation plans under FASB Accounting Standards Codification (“ASC”) 718, Stock Compensation. Equity-based compensation expense from stock-based awards is recorded with an offsetting increase to additional paid in capital on the unaudited condensed consolidated balance sheet. The Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award. |
Total equity-based compensation expense related to all of the Company’s stock-based equity awards for the three and six months ended June 30, 2014 and 2013 and the Company’s 401(k) matching contributions was allocated as follows: |
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| Three Months Ended June 30, | | Six Months Ended June 30, |
(In thousands) | 2014 | | 2013 | | 2014 | | 2013 |
Cost of sales and services | $ | 167 | | | $ | 170 | | | $ | 318 | | | $ | 310 | |
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Customer operations | 259 | | | 303 | | | 509 | | | 551 | |
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Corporate operations | 857 | | | 987 | | | 1,767 | | | 1,920 | |
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Equity-based compensation expense | $ | 1,283 | | | $ | 1,460 | | | $ | 2,594 | | | $ | 2,781 | |
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Future charges for equity-based compensation related to securities outstanding at June 30, 2014 for the remainder of 2014 and for the years 2015 through 2018 are estimated to be $2.0 million, $2.9 million, $1.4 million, $0.2 million and less than $0.1 million, respectively. |
Sale of Intangible Assets |
During the three months ended June 30, 2013, the Company completed the sale of certain intangible assets for approximately $4.6 million. This amount, less fees and expenses of sale, is recorded as a gain of $4.4 million in the unaudited condensed consolidated statements of income for the three and six months ended June 30, 2013. |
Recent Accounting Pronouncements |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU provides a framework that replaces the existing revenue recognition guidance and is intended to improve the financial reporting requirements. The guidance is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those years, with early adoption being prohibited. The impact of application of this ASU on the Company's financial statements has not been determined. |