Cogent Communications Reports Second Quarter 2014 Results and Increases Regular Quarterly Dividend on Common Stock - KHGI-TV/KWNB-TV/KHGI-CD-Grand Island, Kearney, Hastings

Cogent Communications Reports Second Quarter 2014 Results and Increases Regular Quarterly Dividend on Common Stock

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SOURCE Cogent Communications Holdings, Inc.

WASHINGTON, Aug. 7, 2014 /PRNewswire/ -- 

Financial and Business Highlights

  • Service revenue for Q2 2014 of $94.6 million – an increase of 10.3% from $85.8 million for Q2 2013 and an increase of 1.8% from $92.9 million for Q1 2014
  • Cogent approves payment of its regular quarterly dividend of $0.30 per common share to be paid on September 19, 2014 to shareholders of record on August 29, 2014
    • The third quarter 2014 per share regular dividend of $0.30 represents a 114% increase from the third quarter 2013 regular dividend of $0.14 per share and an increase of 77% from the second quarter 2014 regular dividend of $0.17 per share
  • Under Cogent's return of capital program, Cogent purchased 522,000 shares of its common stock for $17.9 million during Q2 2014 at an average price of $34.27 per share
  • Cogent's board approves an additional $50.0 million under its stock buyback program
  • EBITDA, as adjusted, for Q2 2014 of $33.5 million – an increase of 13.0% from $29.6 million for Q2 2013 and an increase of 4.3% from $32.1 million for Q1 2014
  • EBITDA, as adjusted, margin increased 90 basis points from 34.5% for Q2 2013 to 35.4% for Q2 2014 and increased 80 basis points from 34.6% for Q1 2014
  • Legal fees included in SG&A and associated with defending net neutrality increased by $1.1 million from Q2 2013 to Q2 2014
  • Cogent issued $200.0 million of senior unsecured notes and repaid its $92.0 million of convertible notes at par
  • Cash and cash equivalents were $349.8 million at June 30, 2014
  • There were 2,057 buildings on the Cogent network at the end of Q2 2014
  • 43,287 customer connections were on the Cogent network at the end of Q2 2014 – an increase of 16.8% from 37,057 customer connections at the end of Q2 2013 and increase of 3.2% from 41,947 customer connections at the end of Q1 2014

Cogent Communications Holdings, Inc. (NASDAQ: CCOI) today announced  service revenue of $94.6 million for the three months ended June 30, 2014, an increase of 10.3% from $85.8 million for the three months ended June 30, 2013 and an increase of 1.8% from $92.9 million for the three months ended March 31, 2014.  The impact of foreign exchange positively impacted service revenue growth from Q2 2013 to Q2 2014 by $0.7 million and positively impacted service revenue growth from Q1 2014 to Q2 2014 by $0.1 million.  On a constant currency basis, service revenue grew by 9.5% from Q2 2013 to Q2 2014 and grew by 1.7% from Q1 2014 to Q2 2014.

Cogent Communications Logo.

On-net service is provided to customers located in buildings that are physically connected to Cogent's network by Cogent facilities. On-net revenue was $70.4 million for the three months ended June 30, 2014; an increase of 12.3% over $62.7 million for the three months ended June 30, 2013 and an increase of 1.9% over $69.1 million for the three months ended March 31, 2014.

Off-net customers are located in buildings directly connected to Cogent's network using other carriers' facilities and services to provide the last mile portion of the link from the customers' premises to Cogent's network. Off-net revenue was $23.9 million for the three months ended June 30, 2014; an increase of 5.6% over $22.6 million for the three months ended June 30, 2013 and an increase of 1.5% over $23.5 million for the three months ended March 31, 2014.

Non-core services are legacy services, which Cogent acquired and continues to support but does not actively sell.  Non-core revenue was $0.4 million for the three months ended June 30, 2014, $0.5 million for the three months ended June 30, 2013 and $0.4 million for the three months ended March 31, 2014. 

Non-GAAP gross profit increased by 12.9% from $48.9 million for the three months ended June 30, 2013 to $55.1 million for the three months ended June 30, 2014 and increased 1.7% from $54.2 million for the three months ended March 31, 2014.  Non-GAAP gross profit margin percentage was 58.3% for the three months ended June 30, 2014, 56.9% for the three months ended June 30, 2013 and 58.3% for the three months ended March 31, 2014. 

Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, increased 13.0% from $29.6 million for the three months ended June 30, 2013 to $33.5 million for the three months ended June 30, 2014 and increased 4.3% from $32.1 million for the three months ended March 31, 2014.   EBITDA, as adjusted, margin was 35.4% for the three months ended June 30, 2014, 34.5% for the three months ended June 30, 2013,  and 34.6% for the three months ended March 31, 2014.

Basic and diluted net income per share was $0.03 for the three months ended June 30, 2014, $0.03 for the three months ended June 30, 2013 and $0.00 for the three months ended March 31, 2014. 

Total customer connections increased 16.8% from 37,057 as of June 30, 2013 to 43,287 as of June 30, 2014 and increased 3.2% from 41,947 as of March 31, 2014.  On-net customer connections increased 17.4% from 31,876 as of June 30, 2013 to 37,411 as of June 30, 2014 and increased 3.0% from 36,306 as of March 31, 2014.  Off-net customer connections increased 16.0% from 4,728 as of June 30, 2013 to 5,486 as of June 30, 2014 and increased 4.6% from 5,244 as of March 31, 2014.  Non-core customer connections were 390 as of June 30, 2014, 453 as of June 30, 2013 and 397 as of March 31, 2014.

The number of on-net buildings increased by 136 on-net buildings from 1,921 on-net buildings as of June 30, 2013 to 2,057 on-net buildings as of June 30, 2014 and increased by 33 on-net buildings  from 2,024 on-net buildings as of March 31, 2014.

Quarterly Dividend and Dividend and Stock Buyback Plan Increases Approved

On August 6, 2014, Cogent's board approved a dividend of $0.30 per common share payable on September 19, 2014 to shareholders of record on August 29, 2014. The third quarter 2014 regular dividend of $0.30 per share represents a 114% increase from the third quarter 2013 regular dividend of $0.14 per share and an increase of 77% from the second quarter 2014 regular dividend of $0.17 per share.

On August 6, 2014 Cogent's board approved an additional $50.0 million under its stock buyback program to extend to February 2016.   Approximately $9.3 million remained available under the previous stock buyback program; as a result, there is a total of $59.3 million available under the current program.

During the quarter ended June 30, 2014 Cogent purchased 522,000 shares of its common stock for $17.9 million at an average price per share of $34.27 under Cogent's return of capital program.  Under Cogent's return of capital program, Cogent plans on returning additional capital to its shareholders each quarter through either stock buybacks or a special dividend or a combination of stock buybacks and a special dividend.  The aggregate payment under this program will total at least $10.5 million each quarter and this amount is in addition to Cogent's regular quarterly dividend payments.  Since the amount paid for stock buybacks in the second quarter was more than $10.5 million Cogent will not make a special dividend payment in the third quarter under the return of capital program.  The return of capital program is planned to continue until Cogent's net debt to trailing twelve months EBITDA, as adjusted, ratio reaches 2.50. Cogent's net debt to trailing twelve months EBITDA, as adjusted, ratio was 1.99 at June 30, 2014 and was 1.86 at March 31, 2014.

The payment of any future dividends and any other returns of capital will be at the discretion of Cogent's board of directors and may be reduced, eliminated or increased and will be dependent upon Cogent's financial position, results of operations, available cash, cash flow, capital requirements and other factors deemed relevant by Cogent's board of directors.

Conference Call and Website Information

Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on August 7, 2014 to discuss Cogent's operating results for the second quarter of 2014 and to discuss Cogent's expectations for full year 2014.  Investors and other interested parties may access a live audio webcast of the earnings call in the "Events" section of Cogent's website at www.cogentco.com/events.  A replay of the webcast, together with the press release, will be available on the website following the earnings call. 

About Cogent Communications

Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP.  Cogent specializes in providing businesses with high speed Internet access, Ethernet transport, and colocation services.  Cogent's facilities-based, all-optical IP network backbone provides services in 190 markets globally.

Cogent Communications is headquartered at 1015 31st Street, NW, Washington, D.C. 20007.  For more information, visit www.cogentco.com.  Cogent Communications can be reached in the United States at (202) 295-4200 or via email at info@cogentco.com.

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
Summary of Financial and Operational Results


Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

Q2 2014

Metric ($ in 000's, except share and per share data) – unaudited







On-Net revenue

$61,678

$62,693

$64,548

$66,032

$69,087

$70,409

  % Change from previous Qtr.

2.1%

1.6%

3.0%

2.3%

4.6%

1.9%

Off-Net revenue

$22,309

$22,604

$22,767

$23,438

$23,498

$23,859

% Change from previous Qtr.

3.1%

1.3%

0.7%

2.9%

0.3%

1.5%

Non-Core revenue (1)

$566

$506

$446

$389

$352

$355

  % Change from previous Qtr.

-3.4%

-10.6%

-11.9%

-12.8%

-9.5%

0.9%

Service revenue – total

$84,553

$85,803

$87,761

$89,859

$92,937

$94,623

  % Change from previous Qtr.

2.3%

1.5%

2.3%

2.4%

3.4%

1.8%

Network operations expenses (2)

$37,154

$36,950

$37,327

$38,288

$38,723

$39,491

% Change from previous Qtr.

-0.9%

-0.5%

1.0%

2.6%

1.1%

2.0%

Non-GAAP gross margin (2)

$47,399

$48,853

$50,434

$51,571

$54,214

$55,132

% Change from previous Qtr.

5.0%

3.1%

3.2%

2.3%

5.1%

1.7%

Non-GAAP gross margin percentage (2)

56.1%

56.9%

57.5%

57.4%

58.3%

58.3%

Selling, general and administrative expenses (3)

$19,106

$19,215

$19,772

$20,937

$24,392

$24,380

  % Change from previous Qtr.

10.4%

0.6%

2.9%

5.9%

16.5%

0.0%

Depreciation and amortization expense

$15,874

$15,900

$16,024

$16,562

$17,204

$17,301

% Change from previous Qtr.

-1.6%

0.2%

0.8%

3.4%

3.9%

0.6%

Equity-based compensation expense

$2,514

$2,137

$2,061

$2,007

$2,006

$1,873

% Change from previous Qtr.

-0.7%

-15.0%

-3.6%

-2.6%

0.0%

-6.6%

Operating  income

$9,905

$11,601

$12,577

$12,065

$12,907

$14,309

% Change from previous Qtr.

8.0%

17.1%

8.4%

-4.1%

7.0%

10.9%

Net income

$361

$1,607

$2,122

$52,599

$125

$1,208

Basic net income  per common share

$0.01

$0.03

$0.05

$1.14

$0.00

$0.03

Diluted net income  per common share

$0.01

$0.03

$0.05

$1.10

$0.00

$0.03

Weighted average common shares – basic

45,537,607

46,040,692

46,171,194

46,302,926

46,409,735

45,897,449

% Change from previous Qtr.

0.1%

1.1%

0.3%

0.3%

0.2%

-1.1%

Weighted average common shares – diluted

46,435,677

46,769,184

46,823,167

48,800,560

46,907,360

46,294,966

% Change from previous Qtr.

2.1%

0.7%

0.1%

4.2%

-3.9%

-1.3%

EBITDA, as adjusted (4)

$28,295

$29,638

$30,703

$31,548

$32,117

$33,483

  % Change from previous Qtr.

-0.9%

4.7%

3.6%

2.8%

1.8%

4.3%

EBITDA, as adjusted margin (4)

33.5%

34.5%

35.0%

35.1%

34.6%

35.4%

Net cash provided by operating activities

$14,962

$22,703

$14,898

$29,288

$10,636

$28,395

% Change from previous Qtr.

-53.7%

51.7%

-34.4%

96.6%

-63.7%

167.0%

Capital expenditures

$16,316

$12,455

$10,165

$10,095

$15,623

$15,985

  % Change from previous Qtr.

58.6%

-23.7%

-18.4%

-0.7%

54.8%

2.3%

Customer Connections – end of period







On-Net

30,914

31,876

33,310

34,671

36,306

37,411

  % Change from previous Qtr.

3.5%

3.1%

4.5%

4.1%

4.7%

3.0%

Off-Net

4,591

4,728

4,886

5,088

5,244

5,486

% Change from previous Qtr.

2.8%

3.0%

3.3%

4.1%

3.1%

4.6%

Non-Core (1)

463

453

443

415

397

390

  % Change from previous Qtr.

-1.7%

-2.2%

-2.2%

-6.3%

-4.3%

-1.8%

Total

35,968

37,057

38,639

40,174

41,947

43,287

  % Change from previous Qtr.

3.3%

3.0%

4.3%

4.0%

4.4%

3.2%

Other – end of period







Buildings On-Net

1,890

1,921

1,955

1,990

2,024

2,057

Employees

619

633

673

706

724

760








(1) Consists of legacy services of companies whose assets or businesses were acquired by Cogent, primarily including voice services (only provided in Toronto, Canada).

(2) Network operations expense excludes equity-based compensation expense of $155, $126, $114, $112, $113 and $114 in the three month periods ended March 31, 2013 through June 30, 2014, respectively. Non-GAAP gross margin represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation expense).

(3) Excludes equity-based compensation expense of $2,359, $2,011, $1,947, $1,895, $1,893 and $1,759 in the three month period ended March 31, 2013 through June 30, 2014, respectively.

(4) See schedule of non-GAAP metrics below for definition and reconciliation to GAAP measures. EBITDA, as adjusted, includes net gains (losses) from asset related transactions of $2, $41, $914, $2,295 and $2,731 in the three months ended March 31, 2013 and September 30, 2013, December 31, 2013, March 31, 2014 and June 30, 2014, respectively.








Schedule of Non-GAAP Measures 

EBITDA and EBITDA, as adjusted

EBITDA represents net cash flows from operating activities plus changes in operating assets and liabilities, cash interest expense and income tax expense.  Management believes the most directly comparable measure to EBITDA calculated in accordance with generally accepted accounting principles in the United States, or GAAP, is cash flows provided by operating activities.

EBITDA, as adjusted, represents EBITDA plus net gains (losses) on asset related transactions. The Company believes EBITDA, as adjusted, is a useful measure of its ability to service debt, fund capital expenditures and expand its business.  EBITDA, as adjusted, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. The Company also believes that EBITDA is a frequently used measure by securities analysts, investors, and other interested parties in their evaluation of issuers.

EBITDA and EBITDA, as adjusted, are not recognized terms under GAAP and accordingly, should not be viewed in isolation or as a substitute for the analysis of results as reported under GAAP, but rather as a supplemental measure to GAAP. For example, EBITDA is not intended to reflect the Company's free cash flow, as it does not consider certain current or future cash requirements, such as capital expenditures, contractual commitments, and changes in working capital needs, interest expenses and debt service requirements. The Company's calculations of EBITDA and EBITDA, as adjusted, may also differ from the calculation of EBITDA and EBITDA, as adjusted, by its competitors and other companies and as such, its utility as a comparative measure is limited.

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
EBITDA, as adjusted, is reconciled to cash flows provided by operating activities in the table below.


Q1  2013

 

Q2 2013

 

Q3 2013

 

Q4 2013

 

Q1 2014

 

Q2 2014

 

($ in 000's) – unaudited







Net cash flows provided by operating activities

$14,962

$22,703

$14,898

$29,288

$10,636

$28,395

Changes in operating assets and liabilities

5,365

(1,446)

6,771

(8,158)

9,048

(10,061)

Cash interest expense and income tax expense

7,966

8,381

8,993

9,504

10,138

12,418

Gains on asset related transactions

2

-

41

914

2,295

2,731

EBITDA, as adjusted

$28,295

$29,638

$30,703

$31,548

$32,117

$33,483

 

Impact of foreign currencies ("constant currency" impact) on change in sequential quarterly service revenue

($ in 000's) – unaudited

Q2 2014

Service revenue, as reported – Q2 2014

$94,623

Impact of foreign currencies on service revenue

(70)

Service revenue -  Q2 2014, as adjusted (1)

$94,553

Service revenue, as reported – Q1 2014

$92,937

Constant currency increase from Q1 2014 to Q2 2014 - (Service revenue,
as adjusted for Q2 2014 less service revenue, as reported for Q1 2014)

$1,616

Percent increase (Constant currency increase from Q1 2014 to Q2 2014
divided by service revenue, as reported for Q1 2014)

1.7%



(1) Service revenue, as adjusted, is determined by translating the service revenue for the three months ended June 30, 2014 at the average foreign currency exchange rates for the three months ended March 31, 2014. The Company believes that disclosing quarterly revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information.

 

Impact of foreign currencies ("constant currency" impact) on change in prior year quarterly service revenue

($ in 000's) – unaudited

Q2 2014

Service revenue, as reported – Q2 2014

$94,623

Impact of foreign currencies on service revenue

(653)

Service revenue -  Q2 2014, as adjusted (2)

$93,970

Service revenue, as reported – Q2 2013

$85,803

Constant currency increase from Q2 2013 to Q2 2014 - (Service revenue, as
adjusted for Q2 2014 less service revenue, as reported for Q2 2013)

$8,167

Percent increase (Constant currency increase from Q2 2013 to Q2 2014 divided
by service revenue, as reported for Q2 2013)

9.5%


(2) Service revenue, as adjusted, is determined by translating the service revenue for the three months ended June 30, 2014 at the average foreign currency exchange rates for the three months ended June 30, 2013. The Company believes that disclosing quarterly revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information.

Net debt to trailing 12 months EBITDA, as adjusted, ratio

Under Cogent's return of capital program Cogent plans on returning an additional at least $10.5 million to its shareholders each quarter through either stock buybacks or a special dividend or a combination of stock buybacks and a special dividend.  The aggregate payment under this program will total at least $10.5 million each quarter and this amount is in addition to Cogent's regular quarterly dividend payments.  The program is planned to continue until Cogent's net debt to trailing twelve months EBITDA, as adjusted, ratio reaches 2.50. Cogent's net debt to trailing twelve months EBITDA, as adjusted, ratio was 1.86 at March 31, 2014 and 1.99 at June 30, 2014 as shown below.

($ in 000's) – unaudited

As of March 31, 2014

As of June 30, 2014

Cash and cash equivalents

$263,747

$349,835

Debt



Capital leases – current portion

8,121

8,341

Convertible notes – par value

91,978

-

Capital leases – long term

154,233

155,899

Senior unsecured notes

-

200,000

Senior secured notes – par value

240,000

240,000

Total debt

494,332

604,240

Total net debt

230,585

254,405

Trailing 12 months EBITDA, as adjusted

124,006

127,851

Total net debt to trailing 12 months EBITDA, as adjusted

1.86

1.99

Cogent's SEC filings are available online via the Investor Relations section of www.cogentco.com or on the Securities and Exchange Commission's website at www.sec.gov.

 

 


COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(IN THOUSANDS, EXCEPT SHARE DATA)









June 30,
2014


December 31,
2013




(Unaudited)




Assets






Current assets:






Cash and cash equivalents


$

349,835


$

304,866


Accounts receivable, net of allowance for doubtful accounts of $1,817 and $1,871,
     respectively


33,505


30,628


Prepaid expenses and other current assets


22,481


18,777


Total current assets


405,821


354,271


Property and equipment, net


353,663


341,193


Deferred tax assets - noncurrent


50,122


50,861


Deposits and other assets - $447 and $448 restricted, respectively


13,181


8,776


Total assets


$

822,787


$

755,101








Liabilities and stockholders' equity






Current liabilities:






Accounts payable


$

16,969


$

14,098


Accrued liabilities


34,754


31,465


Convertible senior notes - current portion, net of discount of $3,099 (Note 3)


-


88,879


Current maturities, capital lease obligations


8,341


9,252


Total current liabilities


60,064


143,694


Senior secured notes including premium of $4,835 and $5,423, respectively


244,835


245,423


Senior unsecured notes


200,000


-


Capital lease obligations, net of current maturities


155,899


152,527


Other long term liabilities


21,367


19,965


Total liabilities


682,165


561,609


Commitments and contingencies:






Stockholders' equity:






Common stock, $0.001 par value; 75,000,000 shares authorized; 46,466,355 and
     47,334,218 shares issued and outstanding, respectively


46


47


Additional paid-in capital


480,794


508,256


Accumulated other comprehensive income - foreign currency translation


1,630


2,136


Accumulated deficit


(341,848)


(316,947)


Total stockholders' equity


140,622


193,492


Total liabilities and stockholders' equity


$

822,787


$

755,101















COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2014 AND JUNE 30, 2013

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)















Three Months
Ended
June 30, 2014


Three Months
Ended
June 30, 2013




(Unaudited)


(Unaudited)


Service revenue


$

94,623


$

85,803


Operating expenses:






Network operations (including $114 and $126 of equity-based compensation expense,
     respectively, exclusive of depreciation and amortization shown separately below)


39,605


37,076


Selling, general, and administrative (including $1,759 and $2,011 of equity-based
     compensation expense, respectively)


26,139


21,226


Gains on equipment transactions


(2,731)


-


Depreciation and amortization


17,301


15,900


Total operating expenses


80,314


74,202


Operating income


14,309


11,601


Interest income and other, net


268


589


Interest expense


(13,790)


(10,216)


Income before income taxes


787


1,974


Income tax benefit (provision)


421


(367)


Net income


$

1,208


$

1,607








Comprehensive income:






Net income


$

1,208


$

1,607


Foreign currency translation adjustment


(44)


326


Comprehensive income


$

1,164


$

1,933








Net income per common share:






Basic and diluted net income per common share


$

0.03


$

0.03








Dividends declared per common share


$

0.17


$

0.13








Weighted-average common shares - basic


45,897,449


46,040,692








Weighted-average common shares - diluted


46,294,966


46,769,184















COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND JUNE 30, 2013

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)















Six Months
Ended
June 30, 2014


Six Months
Ended
June 30, 2013




(Unaudited)


(Unaudited)


Service revenue


$

187,560


$

170,357


Operating expenses:






Network operations (including $227 and $281 of equity-based compensation expense,
     respectively, exclusive of depreciation and amortization shown separately below)


78,442


74,385


Selling, general, and administrative (including $3,651 and $4,370 of equity-based
     compensation expense, respectively)


52,423


42,691


Gains on equipment transactions


(5,026)




Depreciation and amortization


34,505


31,774


Total operating expenses


160,344


148,850


Operating income


27,216


21,507


Interest income and other, net


404


1,245


Interest expense


(25,092)


(20,084)


Income before income taxes


2,528


2,668


Income tax provision


(1,195)


(700)


Net income


$

1,333


$

1,968








Comprehensive income:






Net income


$

1,333


$

1,968


Foreign currency translation adjustment


(506)


(1,467)


Comprehensive income


$

827


$

501








Net income per common share:






Basic and diluted net income per common share


$

0.03


$

0.04








Dividends declared per common share


$

0.56


$

0.25








Weighted-average common shares - basic


46,200,844


46,028,855








Weighted-average common shares - diluted


46,648,415


46,842,136





















COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND JUNE 30, 2013

(IN THOUSANDS)





















Six months
Ended
June 30, 2014


Six months
Ended
June 30, 2013




(Unaudited)


(Unaudited)


Cash flows from operating activities:






Net income


$

1,333


$

1,968


Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation and amortization


34,505


31,774


Amortization of debt discount and premium


2,555


3,193


Equity-based compensation expense (net of amounts capitalized)


3,878


4,651


Losses (gains) - dispositions of assets and other, net


(4,959)


123


Deferred income taxes


772


204


Changes in operating assets and liabilities:






Accounts receivable


(2,970)


(3,409)


Prepaid expenses and other current assets


(3,678)


(4,693)


Accounts payable, accrued liabilities and other long-term liabilities


7,822


3,647


Deposits and other assets


(227)


207


Net cash provided by operating activities


39,031


37,665


Cash flows from investing activities:






Purchases of property and equipment


(31,608)


(28,771)


Proceeds from dispositions of assets


92


2


Net cash used in investing activities


(31,516)


(28,769)


Cash flows from financing activities:






Dividends paid


(26,234)


(11,634)


Purchases of common stock


(32,084)


-


Repayment of convertible senior notes


(91,978)


-


Net proceeds from issuance of senior unsecured notes


195,824


-


Proceeds from exercises of stock options


301


737


Principal payments of capital lease obligations


(8,146)


(7,045)


Net cash provided by (used in) financing activities


37,683


(17,942)


Effect of exchange rates changes on cash


(229)


(904)


Net increase (decrease) in cash and cash equivalents


44,969


(9,950)


Cash and cash equivalents, beginning of period


304,866


247,285


Cash and cash equivalents, end of period


$

349,835


$

237,335








Supplemental disclosure of non-cash financing activities:






Non-cash component of network equipment obtained in exchange transactions


$

4,900


$

-


Capital lease obligations incurred


$

7,671


$

21,224



 

Except for historical information and discussion contained herein, statements contained in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements include, but are not limited to statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "projects" and similar expressions.  The statements in this release are based upon the current beliefs and expectations of Cogent's management and are subject to significant risks and uncertainties.  Actual results may differ from those set forth in the forward-looking statements.  Numerous factors could cause or contribute to such differences, including future economic instability in the global economy or a contraction of the capital markets which could affect spending on Internet services and our ability to engage in financing activities; the impact of changing foreign exchange rates (in particular the Euro to USD and Canadian dollar to USD exchange rates) on the translation of our non-USD denominated revenues, expenses, assets and liabilities; legal and operational difficulties in new markets; the imposition of a requirement that we contribute to the U.S. Universal Service Fund and similar funds in other countries; changes in government policy and/or regulation, including net neutrality rules  by the United States Federal Communications Commission and in the area of data protection; increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering arrangements on favorable terms; our reliance on an equipment vendor, Cisco Systems Inc., and the potential for hardware or software problems associated with such equipment; the dependence of our network on the quality and dependability of third-party fiber providers; our ability to retain certain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; and outcomes in litigation as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our annual report on Form 10-K for the fiscal year ended December 31, 2013 and our quarterly report on Form 10-Q for the quarter ended June 30, 2014 to be filed with the Securities and Exchange Commission. Cogent undertakes no duty to update any forward-looking statement or any information contained in this press release or in other public disclosures at any time. 

 

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