Summary Of Significant Accounting Policies (Policy) | 9 Months Ended |
Sep. 30, 2014 |
Summary Of Significant Accounting Policies [Abstract] | ' |
Principles Of Consolidation And Basis Of Presentation | ' |
Principles of Consolidation and Basis of Presentation |
The condensed consolidated financial statements include the accounts of the Company, Lumos Networks Operating Company, a wholly-owned subsidiary of the Company, and all of Lumos Networks Operating Company’s wholly-owned subsidiaries and those limited liability corporations where Lumos Networks Operating Company or certain of its subsidiaries, as managing member, exercise control. All significant intercompany accounts and transactions have been eliminated in consolidation. |
In the opinion of management, the accompanying unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2014 and three and nine months ended September 30, 2013 contain all adjustments necessary to present fairly in all material respects the financial position as of September 30, 2014, and the results of operations and cash flows for all periods presented on the respective condensed consolidated financial statements included herein. The results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated balance sheet as of December 31, 2013 has been derived from the audited consolidated 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. |
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Accounting Estimates | ' |
Accounting Estimates |
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) 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 periods. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets; the allowance for doubtful accounts; the valuation of interest rate swap derivatives, deferred tax assets, marketable securities, asset retirement obligations and equity-based compensation; goodwill impairment assessments and reserves for employee benefit obligations and income tax uncertainties. |
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Revenue Recognition | ' |
Revenue Recognition |
The Company recognizes revenue when services are rendered or when products are delivered, installed 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 revenue by providing services through access to and usage of its networks. Local service revenues are recognized as services are provided. Carrier data revenues are earned by providing switched access and other switched and dedicated services, including wireless roamer management, to other carriers. Revenues for equipment sales are recognized at the point of sale. |
The Company periodically makes claims for recovery of access charges on certain minutes of use terminated by the Company on behalf of other carriers. The Company recognizes such revenue in the period in which it is determined that the amounts can be estimated and collection is reasonably assured. |
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Cash Equivalents And Marketable Securities | ' |
Cash Equivalents and Marketable Securities |
The Company considers its investment in all highly liquid debt instruments with an original maturity of three months or less, when purchased, to be cash equivalents. The Company determines the appropriate classification of investment securities at the time of purchase and reevaluates this determination at the end of each reporting period. Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity and are carried at amortized cost. Debt securities not classified as held-to-maturity are classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in other comprehensive income or loss, net of tax. All of the Company’s debt securities not classified as cash equivalents were classified as available-for-sale securities as of September 30, 2014 and December 31, 2013. |
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Restricted Cash | ' |
Restricted Cash |
During 2010, the Company received a federal broadband stimulus award to bring broadband services and infrastructure to Alleghany County, Virginia. The total project is $16.1 million, of which 50% (approximately $8 million) is being funded by a grant from the federal government. The project is expected to be completed before September 30, 2015. The Company was required to deposit 100% of its portion for the grant (approximately $8 million) into a pledged account in advance of any reimbursements, which can be drawn down ratably following the grant reimbursement approvals, which are contingent on adherence to the program requirements. The Company received $0.1 million in cash reimbursements during the nine months ended September 30, 2014. As of September 30, 2014, the Company had a $0.8 million receivable for the reimbursable portion of the qualified recoverable expenditures, and the Company’s pledged account balance was $4.2 million. The escrow account is a non-interest bearing account with the Company’s primary commercial bank. |
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Trade Accounts Receivable | ' |
Trade Accounts Receivable |
The Company sells its services to other communication carriers and to business and residential customers primarily in Virginia and West Virginia and portions of Maryland, Pennsylvania, Ohio and Kentucky. The Company has credit and collection policies to maximize collection of trade receivables and requires deposits on certain sales. The Company maintains an allowance for doubtful accounts based on a review of specific customers with large receivable balances and for the remaining customer receivables the Company uses historical results, current and expected trends and changes in credit policies. Management believes the allowance adequately covers all anticipated losses with respect to trade receivables. Actual credit losses could differ from such estimates. The Company includes bad debt expense in selling, general and administrative expense in the condensed consolidated statements of income. Bad debt expense for the three months ended September 30, 2014 and 2013 was $0.2 million and $0.1 million, respectively, and bad debt expense for the nine months ended September 30, 2014 and 2013 was $0.7 million and $0.2 million, respectively. The Company’s allowance for doubtful accounts was $1.5 million as of September 30, 2014 and December 31, 2013. |
The following table presents a roll-forward of the Company’s allowance for doubtful accounts from December 31, 2013 to September 30, 2014: |
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(In thousands) | | 31-Dec-13 | | Charged to Expense | | Charged to Other Accounts | | Deductions | | 30-Sep-14 | | | | | | |
Allowance for doubtful accounts | | $ | 1,485 | | $ | 729 | | $ | -97 | | $ | -619 | | $ | 1,498 | | | | | | |
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Property, Plant And Equipment And Other Long-Lived Assets (Excluding Goodwill And Indefinite-Lived Intangible Assets) | ' |
Property, Plant and Equipment and Other Long-Lived Assets (Excluding Goodwill and Indefinite-Lived Intangible Assets) |
Property, plant and equipment, finite-lived intangible assets and long-term deferred charges are recorded at cost and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount should be evaluated pursuant to the subsequent measurement guidance described in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10-35. Impairment is determined by comparing the carrying value of these long-lived assets to management’s best estimate of future undiscounted cash flows expected to result from the use of the assets. If the carrying value exceeds the estimated undiscounted cash flows, the excess of the asset’s carrying value over the estimated fair value is recorded as an impairment charge. Management believes that no impairment indicators exist as of September 30, 2014 that would require the Company to perform impairment testing for long-lived assets, including property, plant and equipment, long-term deferred charges and finite-lived intangible assets to be held and used. |
Depreciation of property, plant and equipment is calculated on a straight-line basis over the estimated useful lives of the assets, which the Company periodically reviews and updates based on historical experiences and future expectations. Plant and equipment held under capital leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Amortization of assets held under capital leases, including certain software licenses, is included with depreciation expense. |
Intangibles with a finite life are classified as other intangibles on the condensed consolidated balance sheets. At September 30, 2014 and December 31, 2013, other intangibles were comprised of the following: |
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| | | 30-Sep-14 | | 31-Dec-13 | |
(Dollars in thousands) | Estimated Life | | Gross Amount | | Accumulated Amortization | | Gross Amount | | Accumulated Amortization | |
Customer relationships | 5 to 15 yrs | | $ | 103,108 | | $ | -86,151 | | $ | 103,153 | | $ | -79,399 |
Trademarks and franchise rights | 10 to 15 yrs | | | 2,862 | | | -1,638 | | | 3,518 | | | -2,201 |
Total | | | $ | 105,970 | | $ | -87,789 | | $ | 106,671 | | $ | -81,600 |
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The Company amortizes its finite-lived intangible assets using the straight-line method unless it determines that another systematic method is more appropriate. The amortization for certain customer relationship intangibles is being recognized using an accelerated amortization method based on the pattern of estimated earnings from these assets. |
The estimated life of amortizable intangible assets is determined from the unique factors specific to each asset, and the Company periodically reviews and updates estimated lives based on current events and future expectations. The Company capitalizes costs incurred to renew or extend the term of a recognized intangible asset and amortizes such costs over the remaining life of the asset. No such costs were incurred during the three or nine months ended September 30, 2014. Amortization expense for the three months ended September 30, 2014 and 2013 was $2.3 million and $2.5 million, respectively, and amortization expense for the nine months ended September 30, 2014 and 2013 was $6.9 million and $7.4 million, respectively. |
Amortization expense for the remainder of 2014 and for the next five years is expected to be as follows: |
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(In thousands) | | Customer Relationships | | Trademarks and Franchise Rights | | Total | | | | | | | | | | | | |
Remainder of 2014 | | $ | 2,256 | | $ | 41 | | $ | 2,297 | | | | | | | | | | | | |
2015 | | | 4,644 | | | 163 | | | 4,807 | | | | | | | | | | | | |
2016 | | | 2,412 | | | 163 | | | 2,575 | | | | | | | | | | | | |
2017 | | | 2,093 | | | 163 | | | 2,256 | | | | | | | | | | | | |
2018 | | | 1,781 | | | 163 | | | 1,944 | | | | | | | | | | | | |
2019 | | | 1,513 | | | 152 | | | 1,665 | | | | | | | | | | | | |
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Goodwill And Indefinite-Lived Intangible Assets | ' |
Goodwill and Indefinite-Lived Intangible Assets |
Goodwill and certain trademarks are considered to be indefinite-lived intangible assets. Indefinite-lived intangible assets are not subject to amortization but are instead tested for impairment annually or more frequently if an event indicates that the asset might be impaired. The Company’s policy is to assess the recoverability of indefinite-lived intangible assets annually on October 1 and whenever adverse events or changes in circumstances indicate that impairment may have occurred. Management believes there have been no events or circumstances to cause the Company to evaluate the carrying amount of goodwill during the nine months ended September 30, 2014. |
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Pension Benefits And Retirement Benefits Other Than Pensions | ' |
Pension Benefits and Retirement Benefits Other Than Pensions |
The Company sponsors a non-contributory defined benefit pension plan (the “Pension Plan”) covering all employees who meet eligibility requirements and were employed prior to October 1, 2003. Pension benefits vest after five years of plan service and are based on years of service and an average of the five highest consecutive years of compensation subject to certain reductions if the employee retires before reaching age 65 and elects to receive the benefit prior to age 65. The Company froze the Pension Plan effective December 31, 2012. As such, no further benefits are being accrued by participants for services rendered beyond that date. |
For the three and nine months ended September 30, 2014 and 2013, the components of the Company’s net periodic benefit income for the Pension Plan were as follows: |
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| Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | | | | |
(In thousands) | 2014 | | 2013 | | 2014 | | 2013 | | | | | | | | | | |
Service cost | $ | - | | $ | - | | $ | - | | $ | - | | | | | | | | | | |
Interest cost | | 656 | | | 608 | | | 1,968 | | | 1,824 | | | | | | | | | | |
Expected return on plan assets | | -1,093 | | | -975 | | | -3,279 | | | -2,926 | | | | | | | | | | |
Amortization of loss | | - | | | 229 | | | - | | | 689 | | | | | | | | | | |
Net periodic benefit income | $ | -437 | | $ | -138 | | $ | -1,311 | | $ | -413 | | | | | | | | | | |
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Pension plan assets were valued at $57.6 million and $57.8 million at September 30, 2014 and December 31, 2013, respectively. No funding contributions were made in the nine months ended September 30, 2014, and the Company does not expect to make a funding contribution during the remainder of 2014. |
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The Company also provides certain health care and life insurance benefits for retired employees that meet eligibility requirements through two postretirement welfare benefit plans (the “Other Postretirement Benefit Plans”). In July 2014, the Company notified participants that medical benefits under the Other Postretirement Benefit Plans will be discontinued effective December 31, 2014. Eligible retirees will receive partial compensation for settlement of accrued benefits through a series of supplemental pension payments. As a result, the Company recognized a curtailment gain of $10.2 million in the third quarter of 2014, which was calculated as the decrease in the accumulated benefit obligation resulting from the termination of the medical portion of the Other Postretirement Benefit Plans less unrecognized losses in accumulated other comprehensive loss and less the estimated cost of the benefit obligation to be transferred to the Pension Plan in the form of supplemental benefit payments on December 31, 2014. The estimated cost of the transferred benefit obligation is an estimate and subject to change until the the final actuarial determination is made on December 31, 2014, the effective date of the transfer. The Company does not expect any resulting change in estimate to have a material effect on the Company’s consolidated financial statements for the year ending December 31, 2014. |
For the three and nine months ended September 30, 2014 and 2013, the components of the Company’s net periodic benefit cost (income) for its Other Postretirement Benefit Plans were as follows: |
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| Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | | | | |
(In thousands) | 2014 | | 2013 | | 2014 | | 2013 | | | | | | | | | | |
Service cost | $ | 13 | | $ | 23 | | $ | 38 | | $ | 68 | | | | | | | | | | |
Interest cost | | 147 | | | 121 | | | 441 | | | 364 | | | | | | | | | | |
Amortization of loss | | 8 | | | 7 | | | 23 | | | 21 | | | | | | | | | | |
Curtailment gain recognized in net income | | -10,207 | | | - | | | -10,207 | | | - | | | | | | | | | | |
Net periodic benefit cost (income) | $ | -10,039 | | $ | 151 | | $ | -9,705 | | $ | 453 | | | | | | | | | | |
The Company recognized expense for certain nonqualified pension plans for each of the three months ended September 30, 2014 and 2013 of $0.1 million, and less than $0.1 million of this expense for each period relates to the amortization of actuarial loss. Expense for nonqualified pension plans for the nine months ended September 30, 2014 and 2013 was $0.3 million and $0.4 million, respectively, and $0.2 million of this expense for each period relates to the amortization of actuarial loss. |
The total amount reclassified out of accumulated other comprehensive loss related to amortization of actuarial losses for retirement plans for the three months ended September 30, 2014 and 2013 was $0.1 million and $0.3 million, respectively, and $0.2 million and $0.9 million for the nine months ended September 30, 2014 and 2013, respectively, all of which has been reclassified to selling, general and administrative expenses on the condensed consolidated statements of income. |
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Equity-Based Compensation | ' |
Equity-based Compensation |
The Company accounts for share-based employee compensation plans under FASB ASC 718, Stock Compensation. Equity-based compensation expense from share-based equity awards is recorded with an offsetting increase to additional paid-in capital on the condensed consolidated balance sheet. For equity awards with only service conditions, the Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award. |
The fair value of common stock options granted with service-only conditions is estimated at the respective measurement date using the Black-Scholes option-pricing model with assumptions related to risk-free interest rate, expected volatility, dividend yield and expected term. The fair value of restricted stock awards granted with service-only conditions is estimated based on the market value of the common stock on the date of grant reduced by the present value of expected dividends as applicable. Certain stock options and restricted shares granted by the Company contain vesting provisions that are conditional on achievement of a target market price for the Company’s common stock. The grant date fair value of these options and restricted shares is adjusted to reflect the probability of the achievement of the market condition based on management’s best estimate using a Monte Carlo model (see Note 10). The Company initially recognizes the related compensation cost for these awards that contain a market condition on a straight-line basis over the requisite service period as derived from the valuation model. The Company accelerates expense recognition if the market conditions are achieved prior to the end of the derived requisite service period. |
Total equity-based compensation expense related to all of the share-based awards and the Company’s 401(k) matching contributions was $1.1 million and $3.2 million for the three months ended September 30, 2014 and 2013, respectively, and $3.1 million and $5.5 million for the nine months ended September 30, 2014 and 2013, respectively, which amounts are included in selling, general and administrative expenses on the condensed consolidated statements of income. |
Future charges for equity-based compensation related to instruments outstanding at September 30, 2014 for the remainder of 2014 and for each of the years 2015 through 2019 are estimated to be $0.9 million, $3.0 million, $1.8 million, $0.9 million, $0.2 million and less than $0.1 million, respectively. |
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Fair Value Measurements | ' |
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Fair Value Measurements |
Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value or for certain financial instruments for which disclosure of fair value is required, the Company uses fair value techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, available observable and unobservable inputs. |
U.S. GAAP establishes a fair value hierarchy with three levels of inputs that may be used to measure fair value: |
| · | | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. | | | | | | | | | | | | | | | | | | |
| · | | Level 2 – Unadjusted quoted prices for similar assets or liabilities in active markets, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs other than quoted prices that are observable for the asset or liability. | | | | | | | | | | | | | | | | | | |
| · | | Level 3 – Unobservable inputs for the asset or liability. | | | | | | | | | | | | | | | | | | |
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Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements |
In July 2013, the FASB issued ASU 2013-11, Income Taxes - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax asset for that purpose. ASU 2013-11 was effective prospectively for public entities for annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Prospective application applies to unrecognized tax benefits that exist at the date of adoption and those that arise after adoption. The Company’s adoption of this ASU in the first quarter of 2014 did not have a material impact on its condensed consolidated balance sheet as of September 30, 2014. |
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU 2014-09 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. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method and is still evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and disclosures. |
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