10-Q 1 twtc3q1310q.htm 10-Q TWTC 3Q13 10Q
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number 1-34243

tw telecom inc.
(Exact name of Registrant as specified in its charter)
 
 
 
 
Delaware
 
84-1500624
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
 
10475 Park Meadows Drive
Littleton, Colorado
 
80124
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (303) 566-1000
 Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
 
 
 
 
 
Large accelerated filer
 
ý
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
o (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
The number of shares outstanding of tw telecom inc.’s common stock as of October 31, 2013 was 144,065,951 shares.
 
 
 
 
 



INDEX TO FORM 10-Q
 
 
 
 
 
 
Page
 
Item 1.
Financial Statements:
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.


2


Part I. Financial Information
Item 1. Financial Statements
tw telecom inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
September 30,
2013
 
December 31,
2012
 
 
(unaudited)
 
 
 
 
(amounts in thousands, except per share amounts)
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
411,337

 
$
806,728

Investments
 
158,184

 
167,564

Receivables, less allowances of $6,899 and $7,067, respectively
 
103,690

 
99,703

Prepaid expenses and other current assets
 
25,199

 
19,164

Deferred income taxes
 
76,160

 
76,160

Total current assets
 
774,570

 
1,169,319

Property, plant and equipment
 
4,495,600

 
4,247,868

Less accumulated depreciation
 
(2,921,701
)
 
(2,755,622
)
 
 
1,573,899

 
1,492,246

Deferred income taxes
 
81,718

 
101,885

Goodwill
 
412,694

 
412,694

Intangible assets, net of accumulated amortization
 
13,056

 
17,578

Other assets, net
 
45,368

 
30,015

Total assets
 
$
2,901,305

 
$
3,223,737

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
62,681

 
$
55,857

Deferred revenue
 
47,016

 
45,471

Accrued taxes, franchise and other fees
 
56,259

 
60,844

Accrued interest
 
27,480

 
20,343

Accrued payroll and benefits
 
48,554

 
45,727

Accrued carrier costs
 
16,330

 
30,765

Current portion debt and capital lease obligations, net
 
7,954

 
374,969

Other current liabilities
 
35,148

 
29,163

Total current liabilities
 
301,422

 
663,139

Long-term debt and capital lease obligations, net
 
1,822,817

 
1,384,242

Long-term deferred revenue
 
20,851

 
23,177

Other long-term liabilities
 
44,577

 
41,240

Commitments and contingencies (Note 7)
 


 


Stockholders’ equity:
 
 
 
 
Preferred stock, $0.01 par value, 20,000 shares authorized, no shares issued and outstanding
 

 

Common stock, $0.01 par value, 439,800 shares authorized, 153,760 and 151,953 shares issued, respectively
 
1,538

 
1,520

Additional paid-in capital
 
1,695,102

 
1,843,126

Treasury stock, 9,297 and 556 shares, at cost, respectively
 
(261,359
)
 
(10,979
)
Accumulated deficit
 
(723,773
)
 
(721,793
)
Accumulated other comprehensive income
 
130

 
65

Total stockholders’ equity
 
711,638

 
1,111,939

Total liabilities and stockholders’ equity
 
$
2,901,305

 
$
3,223,737

See accompanying notes to condensed consolidated financial statements.

3


tw telecom inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2013
 
2012
 
2013
 
2012
 
 
(amounts in thousands, except per share amounts)
Revenue:
 
 
 
 
 
 
 
 
Data and Internet services
 
$
215,876

 
$
189,164

 
$
627,592

 
$
548,495

Voice services
 
93,913

 
91,052

 
279,348

 
271,681

Network services
 
76,100

 
81,261

 
233,450

 
249,074

Intercarrier compensation
 
7,301

 
7,457

 
23,492

 
23,112

Total revenue
 
393,190

 
368,934

 
1,163,882

 
1,092,362

Costs and expenses (a):
 
 
 
 
 
 
 
 
Operating (exclusive of depreciation, amortization and accretion shown separately below)
 
164,254

 
156,195

 
489,467

 
458,374

Selling, general and administrative
 
103,438

 
83,341

 
293,438

 
254,011

Depreciation, amortization and accretion
 
78,566

 
70,726

 
228,613

 
209,589

Total costs and expenses
 
346,258

 
310,262

 
1,011,518

 
921,974

Operating income
 
46,932

 
58,672

 
152,364

 
170,388

Interest expense
 
(21,525
)
 
(21,825
)
 
(71,409
)
 
(65,266
)
Debt extinguishment costs
 
(38,915
)
 
(77
)
 
(39,314
)
 
(77
)
Interest income
 
98

 
84

 
548

 
281

Income (loss) before income taxes
 
(13,410
)
 
36,854

 
42,189

 
105,326

Income tax expense (benefit)
 
(3,976
)
 
15,885

 
21,132

 
45,706

Net income (loss)
 
$
(9,434
)
 
$
20,969

 
$
21,057

 
$
59,620

Earnings (loss) per share:
 
 
 
 
 
 
 
 
Basic
 
$
(0.07
)
 
$
0.14

 
$
0.14

 
$
0.40

Diluted
 
$
(0.07
)
 
$
0.14

 
$
0.14

 
$
0.39

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
142,920

 
147,973

 
146,351

 
147,481

Diluted
 
142,920

 
150,359

 
149,334

 
149,781


(a) Includes non-cash stock-based employee compensation expense (Note 6):
Operating
 
$
528

 
$
473

 
$
1,656

 
$
1,428

Selling, general and administrative
 
$
12,475

 
$
6,667

 
$
29,223

 
$
20,889


See accompanying notes to condensed consolidated financial statements.

4


tw telecom inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2013
 
2012
 
2013
 
2012
 
 
(amounts in thousands)
Net income (loss)
 
$
(9,434
)
 
$
20,969

 
$
21,057

 
$
59,620

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
Unrealized gain on available-for-sale securities
 
85

 
105

 
65

 
45

Other comprehensive income, net of tax
 
85

 
105

 
65

 
45

Comprehensive income (loss)
 
$
(9,349
)
 
$
21,074

 
$
21,122

 
$
59,665


See accompanying notes to condensed consolidated financial statements.

5


tw telecom inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
 
Nine Months Ended
September 30,
 
 
2013
 
2012
 
 
(amounts in thousands)
Cash flows from operating activities:
 
 
 
 
Net income
 
$
21,057

 
$
59,620

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation, amortization and accretion
 
228,613

 
209,589

Deferred income taxes
 
20,103

 
44,306

Stock-based compensation expense
 
30,879

 
22,317

Loss on debt extinguishment
 
39,314

 
77

Amortization of discount on debt and deferred debt issue costs and other
 
9,107

 
18,697

Changes in operating assets and liabilities:
 
 
 
 
Receivables, prepaid expenses and other assets
 
(8,737
)
 
(10,231
)
Accounts payable, deferred revenue and other liabilities
 
(9,870
)
 
(24,591
)
Net cash provided by operating activities
 
330,466

 
319,784

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(285,059
)
 
(241,049
)
Purchases of investments
 
(207,209
)
 
(139,740
)
Proceeds from sale of investments
 
215,291

 
126,881

Other investing activities, net
 
(2,555
)
 
4,529

Net cash used in investing activities
 
(279,532
)
 
(249,379
)
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of common stock upon exercise of stock options
 
59,729

 
20,097

Taxes paid related to net share settlement of equity awards
 
(20,830
)
 
(9,962
)
Purchases of treasury stock
 
(306,011
)
 
(11,519
)
Excess tax benefits from stock-based compensation
 
693

 
1,216

Proceeds from modification of debt, net of financing costs
 
49,684

 

Proceeds from issuance of debt, net of financing costs
 
766,155

 

Retirement of debt obligations
 
(991,978
)
 
(101,518
)
Payment of debt and capital lease obligations
 
(3,767
)
 
(5,313
)
Net cash used in financing activities
 
(446,325
)
 
(106,999
)
Decrease in cash and cash equivalents
 
(395,391
)
 
(36,594
)
Cash and cash equivalents at beginning of period
 
806,728

 
353,394

Cash and cash equivalents at end of period
 
$
411,337

 
$
316,800

Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid for interest
 
$
65,792

 
$
53,859

Cash paid for income taxes, net of refunds
 
$
4,529

 
$
6,566

Cash paid for debt extinguishment costs
 
$
32,662

 
$

Addition of capital lease obligation
 
$
8,789

 
$
2,752

See accompanying notes to condensed consolidated financial statements.

6


tw telecom inc.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Nine months ended September 30, 2013
(Unaudited)
 
 
 
Common Stock
 
Treasury Stock
 
Additional
paid-in
capital
 
Accumulated
deficit
 
Accumulated
other
comprehensive
income
 
Total
stockholders’
equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
(amounts in thousands)
Balance at December 31, 2012
 
151,953

 
$
1,520

 
(556
)
 
$
(10,979
)
 
$
1,843,126

 
$
(721,793
)
 
$
65

 
$
1,111,939

Net income
 

 

 

 

 

 
21,057

 

 
21,057

Unrealized gain on available-for-sale securities, net of tax
 

 

 

 

 

 

 
65

 
65

Reacquisition of the equity component of convertible debentures
 

 

 

 

 
(179,195
)
 

 

 
(179,195
)
Purchases of treasury stock
 

 

 
(11,244
)
 
(312,006
)
 

 

 

 
(312,006
)
Exercise of stock options net of withholdings to satisfy employee tax obligations upon vesting of stock awards
 
1,309

 
13

 
2,286

 
58,885

 
(3,702
)
 
(16,297
)
 

 
38,899

Stock-based compensation
 
498

 
5

 
217

 
2,741

 
34,873

 
(6,740
)
 

 
30,879

Balance at September 30, 2013
 
153,760

 
$
1,538

 
(9,297
)
 
$
(261,359
)
 
$
1,695,102

 
$
(723,773
)
 
$
130

 
$
711,638

See accompanying notes to condensed consolidated financial statements.

7


tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Description of Business and Capital Structure
tw telecom inc. (together with its wholly-owned subsidiaries, the “Company”) is a leading national provider of managed network services, specializing in business Ethernet, data networking, converged, Internet Protocol ("IP") based virtual private network or "IP VPN", Internet access, voice, including voice over Internet Protocol or “VoIP”, and network security services to enterprise organizations, including public sector entities, and carriers throughout the United States, including their global locations.
The Company has one class of common stock outstanding with one vote per share. The Company also is authorized to issue shares of preferred stock. The Company’s Board of Directors has the authority to establish voting powers, preferences, and special rights for the preferred stock. No shares of preferred stock have been issued.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. These condensed consolidated financial statements should therefore be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC. The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and include all adjustments of a normal, recurring nature that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the interim periods presented. The results of operations for an interim period are not necessarily indicative of the results of operations for a full fiscal year.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Recently Adopted Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (the "FASB") issued an accounting standard update that requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. Additionally, entities are required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income and the respective income statement line items affected by the reclassification. The guidance does not change the current requirements for reporting net income or other comprehensive income. The accounting standard update is effective on a prospective basis for interim and annual periods beginning after December 15, 2012. The Company adopted this accounting standard update in the three months ended March 31, 2013. This update affected presentation and disclosure, but did not affect the Company's consolidated financial position, results of operations or cash flows. See "Accumulated Other Comprehensive Income" below.
Accumulated Other Comprehensive Income
The balance in accumulated other comprehensive income as of September 30, 2013 relates to the Company's investments that are classified as available-for-sale securities. The Company recognized no material changes in accumulated other comprehensive income for the three and nine months ended September 30, 2013. There were no significant items reclassified out of accumulated other comprehensive income for the three and nine months ended September 30, 2013.

8

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Revenue
The Company’s revenue is derived primarily from business communications services comprised of the following:
Data and Internet services include services that enable customers to connect their internal computer networks between locations and to access external networks, including Internet access and data transport at high speeds using Ethernet protocol, local and wide-area business Ethernet and IP VPN solutions. Data and Internet services also include a portfolio of managed services including the data and Internet components of converged services, which fully integrates a combination of certain communication applications including IP VPN, Internet, enterprise Session Initiation Protocol (SIP), security and managed router service into a single managed IP solution, and the data and Internet components of integrated services, which enable customers to purchase a full array of access options that include Internet services.
Voice services are traditional voice capabilities, including those provided as standalone and bundled services, long distance and toll free services. Voice services also include the voice components of converged and integrated services.
Network services are point-to-point services that transmit voice, data and images using state-of-the-art fiber optics, and collocation services that provide secure space with controlled climate and power where customers can locate their equipment to connect to the Company’s network in facilities equipped for enterprise information technology environmental requirements.
The Company also generates revenue from intercarrier compensation. Intercarrier compensation is comprised of switched access services and reciprocal compensation. Switched access represents the compensation from another carrier for the delivery of traffic from a long distance carrier’s point of presence to an end-user’s premises provided through the Company’s switching facilities. The Federal Communications Commission ("FCC") and state public utility commissions regulate switched access rates in their respective jurisdictions. Reciprocal compensation represents compensation from local exchange carriers (“LECs”) for local exchange traffic originated on another LEC’s facilities and terminated on the Company’s facilities.
The Company’s customers include enterprise organizations in a wide variety of industry segments including, among others, the financial services, technology and scientific, health care, distribution, manufacturing and professional services industries, data center providers, cloud services providers, public sector entities, system integrators and communications service providers, including incumbent local exchange carriers ("ILECs"), competitive local exchange carriers ("CLECs"), wireless communications companies and cable companies.
Revenue for network, data and Internet, and the majority of voice services is generally billed in advance on a monthly fixed rate basis and recognized over the period the services are provided. Revenue for the majority of intercarrier compensation and certain components of voice services, such as long distance, is generally billed on a transactional basis in arrears based on a customer’s actual usage; therefore, estimates are used to recognize revenue in the period earned.
The Company evaluates whether receivables are reasonably assured of collection based on certain factors, including the likelihood of billing being disputed by customers. If there is a billing dispute with a customer, revenue generally is not recognized until the dispute is resolved. The Company does not recognize revenue associated with contract termination charges until cash is received.
The Company classifies certain taxes and fees billed to customers and remitted to government authorities on a gross versus net basis in revenue and expense. In making this determination, the Company assesses, among other things, whether the Company is the primary obligor or principal taxpayer for the taxes and fees assessed in each jurisdiction where the Company does business. In jurisdictions where the Company determines that it is the principal taxpayer, the Company records the taxes and fees on a gross basis, including the taxes and fees in revenue and expense. In jurisdictions where the Company determines that it is merely a collection agent for the government authority, the Company records the taxes on a net basis. The total amounts classified as revenue, primarily included in voice services, associated with such taxes and fees were approximately $20.5 million and $19.3 million for the three months ended September 30, 2013 and 2012, respectively, and approximately $61.7 million and $58.8 million for the nine months ended September 30, 2013 and 2012, respectively.

9

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Significant Customers
The Company has substantial business relationships with a few large customers, including major telecommunications carriers. The Company’s 10 largest customers accounted for an aggregate of 18% and 19% of the Company’s total revenue for the nine months ended September 30, 2013 and 2012, respectively. No customer accounted for 5% or more of total revenue for the nine months ended September 30, 2013 or 2012.
2. Earnings (Loss) per Common Share and Potential Common Share
Basic earnings (loss) per common share (“EPS”) is measured as the income or loss allocated to common stockholders divided by the weighted average outstanding common shares for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (such as convertible securities and stock options) as if they had been converted to shares at the beginning of the period presented. Potential common shares that have an anti-dilutive effect (e.g., those that increase income per share) are excluded from diluted EPS.
The following is a reconciliation of the numerators and denominators used in the basic and diluted EPS computations:
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2013
 
2012
 
2013
 
2012
 
 
(amounts in thousands, except per share amounts)
Numerator
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(9,434
)
 
$
20,969

 
$
21,057

 
$
59,620

Allocation of net income to unvested restricted stock awards
 

 
(437
)
 
(407
)
 
(1,245
)
Net income (loss) allocated to common stockholders, basic
 
$
(9,434
)
 
$
20,532

 
$
20,650

 
$
58,375

Net income (loss) allocated to common stockholders, diluted
 
$
(9,434
)
 
$
20,532

 
$
20,650

 
$
58,375

Denominator
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
 
142,920

 
147,973

 
146,351

 
147,481

Dilutive potential common shares:
 
 
 
 
 
 
 
 
Stock options
 

 
1,763

 
1,036

 
1,633

Unvested restricted stock
 

 
623

 
1,947

 
667

Diluted weighted average shares outstanding
 
142,920

 
150,359

 
149,334

 
149,781

Basic earnings (loss) per share
 
$
(0.07
)
 
$
0.14

 
$
0.14

 
$
0.40

Diluted earnings (loss) per share
 
$
(0.07
)
 
$
0.14

 
$
0.14

 
$
0.39

 
Options to purchase shares of the Company’s common stock and restricted stock awards and restricted stock units to be settled in common stock upon vesting, which were excluded from the computation of diluted weighted average shares outstanding because their inclusion would be anti-dilutive, totaled 5.3 million shares for the three months ended September 30, 2013. There were no anti-dilutive shares for the nine months ended September 30, 2013. Shares of common stock subject to issuance upon conversion of the Company’s 23/8% Convertible Senior Debentures due 2026 (the “Convertible Debentures”), options to purchase shares of the Company’s common stock and restricted stock awards and restricted stock units to be settled in common stock upon vesting, which were excluded from the computation of diluted weighted average shares outstanding because their inclusion would be anti-dilutive, totaled 23.2 million shares in each of the three and nine months ended September 30, 2012.


10

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

3. Investments
The Company’s investments at September 30, 2013 and December 31, 2012 are summarized as follows:
 
 
 
September 30,
2013
 
December 31,
2012
 
 
(amounts in thousands)
Cash equivalents:
 
 
 
 
Prime money market mutual funds
 
$
327,106

 
$
425,165

U.S. Treasury money market mutual funds
 
49,532

 
262,967

Commercial paper
 
19,995

 
30,692

Certificates of deposit
 
9,400

 
8,000

Debt securities issued by U.S. Government agencies
 

 
4,999

Total cash equivalents
 
406,033

 
731,823

Investments:
 
 
 
 
Debt securities issued by the U.S. Treasury
 
72,693

 
89,870

Commercial paper
 
59,473

 
32,480

Debt securities issued by U.S. Government agencies
 
26,018

 
45,214

Total investments
 
158,184

 
167,564

Total cash equivalents and investments
 
$
564,217

 
$
899,387

At September 30, 2013 and December 31, 2012, the carrying values of investments included in cash and cash equivalents approximated fair value. The aggregate fair value of available-for-sale securities by major security type is included in Note 5. The amortized cost basis of the available-for-sale securities was not materially different from the aggregate fair value. The contractual maturities of the Company’s available-for-sale securities are all within one year.
Proceeds from the sale and maturity of available-for-sale securities were $90.3 million and $20.8 million during the three months ended September 30, 2013 and 2012, respectively, and $215.3 million and $126.9 million during the nine months ended September 30, 2013 and 2012, respectively. Gains and losses on investments are calculated using the specific identification method and are recognized during the period the investment is sold. The Company recognized no material unrealized or realized net gains or losses during the three and nine months ended September 30, 2013 and 2012. 

4. Long-Term Debt and Capital Lease Obligations
The components of long-term debt and capital lease obligations at September 30, 2013 and December 31, 2012 were as follows:
 
 
 
September 30,
2013
 
December 31,
2012
 
 
(amounts in thousands)
Term Loan B - extended tranche, due 2016
 
$

 
$
463,019

8% Senior Notes, due 2018
 
23,479

 
430,000

Term Loan B, due 2020
 
518,700

 

53/8% Senior Notes, due 2022 issued October 2012
 
480,000

 
480,000

53/8% Senior Notes, due 2022 issued August 2013
 
450,000

 

63/8% Senior Notes, due 2023
 
350,000

 

23/8% Convertible Senior Debentures, due 2026
 

 
373,743

Capital lease obligations
 
27,835

 
20,091

Total obligations
 
1,850,014

 
1,766,853

Unamortized discounts
 
(19,243
)
 
(7,642
)
Current portion
 
(7,954
)
 
(374,969
)
Total long-term debt and capital lease obligations
 
$
1,822,817

 
$
1,384,242

 


11

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


As of September 30, 2013, tw telecom inc. and its wholly-owned subsidiary, tw telecom holdings inc. ("Holdings"), were in compliance with all of their debt covenants.
Modification of Term Loan and Revolver
As of December 31, 2012, Holdings had a senior secured credit facility consisting of an $463.0 million outstanding principal amount Term Loan B (the "Term Loan") due December 2016 and an undrawn $80 million Revolving Credit Facility (the "Revolver") expiring December 2014. In April 2013, Holdings entered into a Second Amended and Restated Credit Agreement ("Amendment and Restatement") to increase the Term Loan to $520 million and extend the maturity date to April 2020. The Term Loan was issued at an offering price of 99.5% of the principal amount. Additionally, the Amendment and Restatement increased the Revolver, which remains undrawn, to $100 million and extended the maturity date to April 2018. Components of the Amendment and Restatement are detailed below:
The Term Loan is a secured obligation, on a first lien basis, of Holdings. The Term Loan is guaranteed by the Company and Holdings' subsidiaries. Repayments of the Term Loan are due quarterly in an amount equal to 1/4 of 1% of the aggregate principal amount on the last day of each quarter commencing September 30, 2013. Interest on the Term Loan is computed based on a specified Eurodollar rate plus 2.5%. Interest is reset periodically and payable at least quarterly. Based on the Eurodollar rate in effect at September 30, 2013, the effective interest rate was 2.68%. In accordance with applicable accounting guidance, the amended and restated Term Loan agreement was accounted for as a modification of the existing debt. The fees paid to the lenders of $4.6 million were added to the existing deferred debt issuance costs and will be amortized through the maturity date of the Term Loan.
The Revolver is secured and guaranteed in the same manner as the Term Loan. Interest on outstanding Revolver amounts, if any, will be computed based on a specified Eurodollar rate plus 1.75%-2.75%, depending on the Company's consolidated total leverage ratio, as defined in the Revolver, and will be reset periodically and payable quarterly. The Company is required to pay a commitment fee on the undrawn commitment amounts on a quarterly basis of 0.375%-0.5% per annum. The Amendment and Restatement contains customary affirmative and negative covenants. Most of the Revolver covenants apply whether or not the Company draws on that facility. In addition, if the Revolver were drawn, certain financial maintenance covenants would apply. The fees paid to the lenders of $1.4 million were added to existing debt issuance costs and will be amortized through the expiration date.
Retirement of Convertible Debentures
As of December 31, 2012, the Company had outstanding $373.7 million principal amount of Convertible Debentures. The Convertible Debentures were redeemable in whole or in part at the Company’s option at any time on or after April 6, 2013 at a redemption price equal to 100% of the principal amount of the debentures to be redeemed, plus accrued and unpaid interest. On May 29, 2013, the Company called for redemption all of the remaining outstanding Convertible Debentures. Holders of the Convertible Debentures had the option to require the Company to purchase all or part of the Convertible Debentures on April 1, 2013, at 100% of the principal and unpaid interest, or at any time prior to April 1, 2026, to convert the debentures into shares of the Company’s common stock. Upon conversion, the Company had the right to deliver, in lieu of shares of common stock, cash or a combination of cash and shares of common stock. The Company elected to settle its conversion obligation entirely in cash.
In the three months ended June 30, 2013, the Company settled approximately $177.2 million principal amount of the Convertible Debentures for $255.8 million as a result of repurchases by the Company and conversions by holders of the Convertible Debentures. During the three months ended September 30, 2013, the remaining $196.5 million outstanding principal amount of the Convertible Debentures was settled for approximately $296.9 million as a result of conversions by holders of the Convertible Debentures in connection with the redemption, resulting in total settlements of repurchases and conversions of approximately $552.7 million for $373.7 million principal amount of the Convertible Debentures for the nine months ended September 30, 2013.
Debt Offering and Concurrent Cash Tender Offer
In August 2013, Holdings completed a private offering of $800 million Senior Notes, including $450 million principal amount of 5 3/8% Senior Notes due 2022 (the "2022 Mirror Notes") at an offering price of 96.250% of the principal amount and $350 million principal amount of 6 3/8% Senior Notes due 2023 (the "2023 Notes") at an offering price of 100% of the principal amount. The net proceeds from the offerings were used to fund Holdings' repurchase of a portion of its $430 million principal amount of 8% Senior Notes due March 2018 (the "2018 Notes") that were tendered in a concurrent cash tender offer (see discussion below) and for general corporate purposes.

12

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The 2022 Mirror Notes have substantially the same terms and conditions as Holdings' outstanding $480 million principal amount of 5 3/8% Senior Notes due 2022 that were issued in October 2012 and are unsecured obligations of Holdings guaranteed by the Company and substantially all of Holdings' subsidiaries. Interest is payable semi-annually on April 1 and October 1, commencing on October 1, 2013. Interest accrued on the 2022 Mirror Notes from April 1, 2013, and the first interest payment on the 2022 Mirror Notes included accrued interest from April 1, 2013. Purchasers of the 2022 Mirror Notes paid pre-settlement interest of $9.7 million from April 1, 2013 to the settlement date (August 26, 2013). The 2022 Mirror Notes are redeemable in whole or in part, at Holdings' option, at any time prior to October 1, 2017 at a price equal to 100% of the principal amount, plus accrued and unpaid interest, if any, liquidated damages, if any, plus a make-whole premium. The 2022 Mirror Notes are also redeemable in whole or in part, at the Company's option, at any time on or after October 1, 2017, 2018, 2019 and 2020 at redemption prices of 102.688%, 101.792%, 100.896% and 100%, respectively, of the principal amount, plus accrued and unpaid interest, if any, and liquidated damages, if any. In addition, at any time prior to October 1, 2015, at Holdings' option, Holdings may redeem up to 35% of the aggregate principal amount of the 2022 Mirror Notes with net proceeds from one or more equity offerings by the Company at a redemption price of 105.375% of their principal amount, plus accrued and unpaid interest, if any, and liquidated damages, if any. Offering costs of $9.8 million related to the 2022 Mirror Notes were deferred and will be amortized to interest expense over the term of the 2022 Mirror Notes.
The 2023 Notes are unsecured obligations of Holdings and are guaranteed by the Company and substantially all of Holdings' subsidiaries. Interest is payable semi-annually on March 1 and September 1, commencing on March 1, 2014. The 2023 Notes are redeemable in whole or in part, at Holdings' option, at any time prior to September 1, 2018 at a price equal to 100% of the principal amount, plus accrued and unpaid interest, if any, liquidated damages, if any, plus a make-whole premium. The 2023 Notes are also redeemable in whole or in part, at the Company's option, at any time on or after September 1, 2018, 2019, 2020 and 2021 at redemption prices of 103.188%, 102.125%, 101.063% and 100%, respectively, of the principal amount, plus accrued and unpaid interest, if any, and liquidated damages, if any. In addition, at any time prior to September 1, 2016, at Holdings' option, it may redeem up to 35% of the aggregate principal amount of the 2023 Notes with net proceeds from one or more equity offerings by the Company at a redemption price of 106.375% of their principal amount, plus accrued and unpaid interest, if any, and liquidated damages, if any. Offering costs of $7.6 million related to the 2023 Notes were deferred and will be amortized to interest expense over the term of the 2023 Notes.
The Company has agreed to file an exchange offer registration statement or in certain circumstances, a shelf registration statement, within 180 days of issuance of the 2022 Mirror Notes and 2023 Notes on August 26, 2013 to enable the holders of the 2022 Mirror Notes and 2023 Notes to exchange the unregistered 2022 Mirror Notes and 2023 Notes for notes registered under the Securities Act of 1933 with substantially identical terms.
In the three months ended September 30, 2013, Holdings received and accepted tenders of approximately $406.5 million aggregate principal amount of the 2018 Notes for $438.7 million. The completion of this tender offer resulted in debt extinguishment costs of $38.9 million, comprised of premiums and fees associated with this tender offer of $32.2 million and write-offs of unamortized deferred debt issuance costs and issuance discount related to the 2018 Notes of $5.1 million and $1.6 million, respectively. Approximately $23.5 million principal amount of the 2018 Notes remained outstanding as of September 30, 2013.
5. Fair Value Measurements
Fair value, as defined by relevant accounting standards, is the price that would be received from selling 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, the Company considers the principal or most advantageous market in which it would complete a transaction and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance.
 

13

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Fair Value Hierarchy
Relevant accounting standards set forth a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Relevant accounting standards establish three levels of inputs that may be used to measure fair value:
Level 1—Quoted prices in active markets for identical assets or liabilities. Level 1 assets that are measured at fair value on a recurring basis consist of the Company’s investments in prime money market mutual funds and U.S. Treasury money market mutual funds that are traded in an active market with sufficient volume and frequency of transactions, and are included as a component of cash and cash equivalents in the condensed consolidated balance sheets.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets that are measured at fair value on a recurring basis consist of the Company’s investments in certificates of deposit, commercial paper and debt securities issued by the U.S. Treasury and other U.S. government agencies using observable inputs in less active markets and are included as a component of cash and cash equivalents and investments in the condensed consolidated balance sheets. Level 2 liabilities that are measured, but not carried, at fair value on a recurring basis include the Company’s long-term debt. The Company’s long-term debt has not been listed on any securities exchange or quoted on an inter-dealer automated quotation system. The Company has estimated the fair value of its long-term debt based on indicative pricing published by certain investment banks or trading levels in its long-term debt.
Level 3—Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. The Company did not have any Level 3 assets or liabilities that were measured at fair value at September 30, 2013 and December 31, 2012.
 
The following table reflects assets and liabilities that are measured and carried at fair value on a recurring basis at September 30, 2013 and December 31, 2012:
 
 
 
Fair Value Measurements At September 30, 2013
 
Assets
at Fair Value
 
 
Level 1
 
Level 2
 
Level 3
 
 
 
(amounts in thousands)
Assets
 
 
 
 
 
 
 
 
Prime money market mutual funds
 
$
327,106

 
$

 
$

 
$
327,106

U.S. Treasury money market mutual funds
 
49,532

 

 

 
49,532

Commercial paper
 

 
19,995

 

 
19,995

Certificates of deposit
 

 
9,400

 

 
9,400

Investments included in cash and cash equivalents
 
$
376,638

 
$
29,395

 
$

 
$
406,033

Debt securities issued by the U.S. Treasury
 

 
72,693

 

 
72,693

Commercial paper
 

 
59,473

 

 
59,473

Debt securities issued by U.S. Government agencies
 

 
26,018

 

 
26,018

Short-term investments
 
$

 
$
158,184

 
$

 
$
158,184

Total assets
 
$
376,638

 
$
187,579

 
$

 
$
564,217

 

14

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

 
 
Fair Value Measurements At December 31, 2012
 
Assets
at Fair Value
 
 
Level 1
 
Level 2
 
Level 3
 
 
 
(amounts in thousands)
Assets
 
 
 
 
 
 
 
 
Prime money market mutual funds
 
$
425,165

 
$

 
$

 
$
425,165

U.S. Treasury money market mutual funds
 
262,967

 

 

 
262,967

Commercial paper
 

 
30,692

 

 
30,692

Certificates of deposit
 

 
8,000

 

 
8,000

Debt securities issued by U.S. Government agencies
 

 
4,999

 

 
4,999

Investments included in cash and cash equivalents
 
$
688,132

 
$
43,691

 
$

 
$
731,823

Debt securities issued by the U.S. Treasury
 

 
89,870

 

 
89,870

Debt securities issued by U.S. Government agencies
 

 
45,214

 

 
45,214

Commercial paper
 

 
32,480

 

 
32,480

Short-term investments
 
$

 
$
167,564

 
$

 
$
167,564

Total assets
 
$
688,132

 
$
211,255

 
$

 
$
899,387

The following table summarizes the carrying amounts and estimated fair values of the Company’s long-term debt, including the current portion, at September 30, 2013 and December 31, 2012:
 
 
September 30, 2013
 
December 31, 2012
 
 
Carrying
Value
 
Fair Value
Level 2
 
Carrying
Value
 
Fair Value
Level 2
 
 
(amounts in thousands)
Term Loan B - Extended tranche, due 2016
 
$

 
$

 
$
463,019

 
$
465,334

8% Senior Notes, net of discount
 
23,386

 
25,064

 
428,001

 
470,850

Term Loan B, net of discount
 
516,270

 
519,997

 

 

53/8% Senior Notes issued October 2012
 
480,000

 
460,800

 
480,000

 
505,200

53/8% Senior Notes, net of discount, issued August 2013
 
433,280

 
432,000

 

 

63/8% Senior Notes
 
350,000

 
352,625

 

 

23/8% Convertible Senior Debentures, net of discount
 

 

 
368,100

 
512,159

Total debt
 
$
1,802,936

 
$
1,790,486

 
$
1,739,120

 
$
1,953,543

6. Stock-Based Compensation
During the nine months ended September 30, 2013, the Company granted restricted stock awards and restricted stock units with respect to 1.4 million shares and no stock options. As of September 30, 2013, the Company had 4.0 million restricted stock awards and restricted stock units that were unvested and 1.3 million stock options outstanding, of which 1.1 million were exercisable.
As of September 30, 2013, there was $64.1 million of total unrecognized compensation expense related to unvested restricted stock awards and restricted stock units, which is expected to be recognized over a weighted-average period of 2.3 years, and $0.4 million of total unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 0.4 years.
7. Commitments and Contingencies
Management routinely reviews the Company’s exposure to liabilities incurred in the normal course of its business operations. Where a probable contingency exists and the amount of the loss can be reasonably estimated, the Company records the estimated liability. Considerable judgment is required in analyzing and recording such liabilities and actual results may vary from the estimates.
The Company’s pending legal proceedings are limited to litigation incidental to its business. In the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial statements.


15

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

8. Subsequent Event
On November 6, 2013, the Company announced an accelerated market expansion to increase its metropolitan fiber route miles by approximately 17% into five new markets and 27 existing markets. The Company is also expanding its regional fiber footprint in order to achieve greater network control and cost efficiency. To facilitate this expansion, the Company entered into long-term capital leases for fiber that the Company plans to light with its own electronics. The initial term of the leases is 20 years, with two ten-year renewals at the Company's option, and automatic renewals thereafter until terminated by either party. The Company expects to recognize a right-to-use asset and corresponding capital lease obligation of approximately $120 million in the three months ended December 31, 2013 representing the minimum commitment under the leases, which are expected to result in aggregate committed lease payments over the initial 20 year lease term of approximately $220 million.
9. Supplemental Guarantor Information
The 2018 Notes, 2022 Notes, 2022 Mirror Notes and 2023 Notes (collectively, the "Senior Notes") are unsecured obligations of Holdings ("Issuer") and are guaranteed by the Company (“Parent Guarantor”) and substantially all of the Issuer’s subsidiaries (“Combined Subsidiary Guarantors”). The guarantees are joint and several. A significant amount of the Issuer’s cash flow is generated by the Combined Subsidiary Guarantors. As a result, funds necessary to meet the Issuer’s debt service obligations are provided in large part by distributions or advances from the Combined Subsidiary Guarantors. The Senior Notes are governed by indentures that contain certain restrictive covenants. These restrictions affect, and in many respects limit or prohibit, among other things, the ability of the Parent Guarantor, the Issuer and its subsidiaries to incur indebtedness, make prepayments of certain indebtedness, pay dividends, make investments, engage in transactions with stockholders and affiliates, issue capital stock of subsidiaries, create liens, sell assets and engage in mergers and consolidations.
The following information sets forth the Company’s Condensed Consolidating Balance Sheets as of September 30, 2013 and December 31, 2012, Condensed Consolidating Statements of Operations for the three and nine months ended September 30, 2013 and 2012, Condensed Consolidating Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012, and Condensed Consolidating Statements of Cash Flows for the nine months ended September 30, 2013 and 2012.

16

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


tw telecom inc.
CONDENSED CONSOLIDATING BALANCE SHEET
September 30, 2013
(unaudited)


 
 
Parent
Guarantor
 
Issuer
 
Combined
Subsidiary
Guarantors
 
Eliminations
 
Consolidated
 
 
(amounts in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
24,544

 
$
386,793

 
$

 
$

 
$
411,337

Investments
 

 
158,184

 

 

 
158,184

Receivables, net
 

 

 
103,690

 

 
103,690

Prepaid expenses and other current assets
 

 
16,743

 
8,456

 

 
25,199

Deferred income taxes
 

 
76,140

 
20

 

 
76,160

Intercompany receivable
 
1,013,498

 
1,391,938

 

 
(2,405,436
)
 

Total current assets
 
1,038,042

 
2,029,798

 
112,166

 
(2,405,436
)
 
774,570

Property, plant and equipment, net
 

 
65,106

 
1,508,793

 

 
1,573,899

Deferred income taxes
 

 
81,234

 
484

 

 
81,718

Goodwill
 

 

 
412,694

 

 
412,694

Intangible and other assets, net
 

 
36,830

 
21,594

 

 
58,424

Total assets
 
$
1,038,042

 
$
2,212,968

 
$
2,055,731

 
$
(2,405,436
)
 
$
2,901,305

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$

 
$
10,441

 
$
52,240

 
$

 
$
62,681

Current portion debt and capital lease obligations
 

 
5,793

 
2,161

 

 
7,954

Other current liabilities
 

 
88,340

 
142,447

 

 
230,787

Intercompany payable
 

 

 
2,405,436

 
(2,405,436
)
 

Total current liabilities
 

 
104,574

 
2,602,284

 
(2,405,436
)
 
301,422

Losses in subsidiary in excess of investment
 
326,435

 
881,251

 

 
(1,207,686
)
 

Long-term debt and capital lease obligations, net
 

 
1,797,736

 
25,081

 

 
1,822,817

Long-term deferred revenue
 

 

 
20,851

 

 
20,851

Other long-term liabilities
 

 
7,144

 
37,433

 

 
44,577

Stockholders’ equity (deficit)
 
711,607

 
(577,737
)
 
(629,918
)
 
1,207,686

 
711,638

Total liabilities and stockholders’ equity
 
$
1,038,042

 
$
2,212,968

 
$
2,055,731

 
$
(2,405,436
)
 
$
2,901,305



17

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

 
tw telecom inc.
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2012
 
 
 
Parent
Guarantor
 
Issuer
 
Combined
Subsidiary
Guarantors
 
Eliminations
 
Consolidated
 
 
(amounts in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
24,544

 
$
782,184

 
$

 
$

 
$
806,728

Investments
 

 
167,564

 

 

 
167,564

Receivables, net
 

 

 
99,703

 

 
99,703

Prepaid expenses and other current assets
 

 
11,270

 
7,894

 

 
19,164

Deferred income taxes
 

 
76,140

 
20

 

 
76,160

Intercompany receivable
 
1,864,694

 
506,610

 

 
(2,371,304
)
 

Total current assets
 
1,889,238

 
1,543,768

 
107,617

 
(2,371,304
)
 
1,169,319

Property, plant and equipment, net
 

 
48,686

 
1,443,560

 

 
1,492,246

Deferred income taxes
 

 
101,401

 
484

 

 
101,885

Goodwill
 

 

 
412,694

 

 
412,694

Intangible and other assets, net
 
275

 
20,634

 
26,684

 

 
47,593

Total assets
 
$
1,889,513

 
$
1,714,489

 
$
1,991,039

 
$
(2,371,304
)
 
$
3,223,737

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$

 
$
7,141

 
$
48,716

 
$

 
$
55,857

Current portion debt and capital lease obligations, net
 
368,100

 
5,475

 
1,394

 

 
374,969

Other current liabilities
 
2,219

 
64,564

 
165,530

 

 
232,313

Intercompany payable
 

 

 
2,371,304

 
(2,371,304
)
 

Total current liabilities
 
370,319

 
77,180

 
2,586,944

 
(2,371,304
)
 
663,139

Losses in subsidiary in excess of investment
 
407,286

 
862,681

 

 
(1,269,967
)
 

Long-term debt and capital lease obligations, net
 

 
1,366,463

 
17,779

 

 
1,384,242

Long-term deferred revenue
 

 

 
23,177

 

 
23,177

Other long-term liabilities
 

 
7,024

 
34,216

 

 
41,240

Stockholders’ equity (deficit)
 
1,111,908

 
(598,859
)
 
(671,077
)
 
1,269,967

 
1,111,939

Total liabilities and stockholders’ equity (deficit)
 
$
1,889,513

 
$
1,714,489

 
$
1,991,039

 
$
(2,371,304
)
 
$
3,223,737

 

18

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


tw telecom inc.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended September 30, 2013
(unaudited)
 
 
 
Parent
Guarantor
 
Issuer
 
Combined
Subsidiary
Guarantors
 
Eliminations
 
Consolidated
 
 
(amounts in thousands)
Total revenue
 
$

 
$

 
$
393,190

 
$

 
$
393,190

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
Operating, selling, general and administrative
 

 
71,869

 
195,823

 

 
267,692

Depreciation, amortization and accretion
 

 
7,285

 
71,281

 

 
78,566

Corporate expense allocation
 

 
(79,154
)
 
79,154

 

 

Total costs and expenses
 

 

 
346,258

 

 
346,258

Operating income
 

 

 
46,932

 

 
46,932

Interest expense, net
 
(12
)
 
(18,231
)
 
(3,184
)
 

 
(21,427
)
Debt extinguishment costs
 

 
(38,915
)
 

 

 
(38,915
)
Interest expense allocation
 
12

 
57,146

 
(57,158
)
 

 

Income (loss) before income taxes and equity in undistributed earnings of subsidiaries
 

 

 
(13,410
)
 

 
(13,410
)
Income tax expense (benefit)
 

 
(4,187
)
 
211

 

 
(3,976
)
Net income (loss) before equity in undistributed earnings of subsidiaries
 

 
4,187

 
(13,621
)
 

 
(9,434
)
Equity in undistributed earnings (losses) of subsidiaries
 
(9,434
)
 
(13,621
)
 

 
23,055

 

Net income (loss)
 
$
(9,434
)
 
$
(9,434
)
 
$
(13,621
)
 
$
23,055

 
$
(9,434
)



19

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

 
tw telecom inc.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended September 30, 2012
(unaudited)
 
 
 
Parent
Guarantor
 
Issuer
 
Combined
Subsidiary
Guarantors
 
Eliminations
 
Consolidated
 
 
(amounts in thousands)
Total revenue
 
$

 
$

 
$
368,934

 
$

 
$
368,934

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
Operating, selling, general and administrative
 

 
55,911

 
183,625

 

 
239,536

Depreciation, amortization and accretion
 

 
6,171

 
64,555

 

 
70,726

Corporate expense allocation
 

 
(62,082
)
 
62,082

 

 

Total costs and expenses
 

 

 
310,262

 

 
310,262

Operating income
 

 

 
58,672

 

 
58,672

Interest expense, net
 
(7,903
)
 
(12,213
)
 
(1,625
)
 

 
(21,741
)
Debt extinguishment costs
 

 
(77
)
 

 

 
(77
)
Interest expense allocation
 
7,903

 
12,290

 
(20,193
)
 

 

Income before income taxes and equity in undistributed earnings of subsidiaries
 

 

 
36,854

 

 
36,854

Income tax expense
 

 
15,328

 
557

 

 
15,885

Net income (loss) before equity in undistributed earnings of subsidiaries
 

 
(15,328
)
 
36,297

 

 
20,969

Equity in undistributed earnings of subsidiaries
 
20,969

 
36,297

 

 
(57,266
)
 

Net income
 
$
20,969

 
$
20,969

 
$
36,297

 
$
(57,266
)
 
$
20,969




20

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


tw telecom inc.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Nine months ended September 30, 2013
(unaudited)

 
 
Parent
Guarantor
 
Issuer
 
Combined
Subsidiary
Guarantors
 
Eliminations
 
Consolidated
 
 
(amounts in thousands)
Total revenue
 
$

 
$

 
$
1,163,882

 
$

 
$
1,163,882

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
Operating, selling, general and administrative
 

 
203,843

 
579,062

 

 
782,905

Depreciation, amortization and accretion
 

 
20,571

 
208,042

 

 
228,613

Corporate expense allocation
 

 
(224,414
)
 
224,414

 

 

Total costs and expenses
 

 

 
1,011,518

 

 
1,011,518

Operating income
 

 

 
152,364

 

 
152,364

Interest expense, net
 
(9,717
)
 
(54,051
)
 
(7,093
)
 

 
(70,861
)
Debt extinguishment costs
 
(327
)
 
(38,987
)
 

 

 
(39,314
)
Interest expense allocation
 
10,044

 
93,038

 
(103,082
)
 

 

Income before income taxes and equity in undistributed earnings of subsidiaries
 

 

 
42,189

 

 
42,189

Income tax expense
 

 
20,102

 
1,030

 

 
21,132

Net income (loss) before equity in undistributed earnings of subsidiaries
 

 
(20,102
)
 
41,159

 

 
21,057

Equity in undistributed earnings of subsidiaries
 
21,057

 
41,159

 

 
(62,216
)
 

Net income
 
$
21,057

 
$
21,057

 
$
41,159

 
$
(62,216
)
 
$
21,057



21

tw telecom inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


tw telecom inc.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Nine months ended September 30, 2012
(unaudited)

 
 
Parent
Guarantor
 
Issuer
 
Combined
Subsidiary
Guarantors
 
Eliminations
 
Consolidated
 
 
(amounts in thousands)
Total revenue
 
$

 
$

 
$
1,092,362

 
$

 
$
1,092,362

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
Operating, selling, general and administrative
 

 
161,337

 
551,048

 

 
712,385

Depreciation, amortization and accretion
 

 
17,640

 
191,949

 

 
209,589

Corporate expense allocation
 

 
(178,977
)
 
178,977

 

 

Total costs and expenses
 

 

 
921,974