32222896
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35
83656000
49589000
2576000
9.39
13985000
2275000
2400000
2418000
276761000
26554000
3667000
2337000
150000000
9000000
6252000
3083446
18.39
2437000
32223146
49838000
51187000
8255000
1100000
2900000
13.64
1951000
1700000
50000000
136707000
327948000
18.29
93800000
4981000
0.001
327948000
50103000
962000
2434000
113831000
32223146
2756000
-4983000
1071000
20000000
2000000
2800000
1925000
44255000
2330000
2954000
32000
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5078000
180230000
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68338000
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3227000
6655000
2870000
259678000
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2640000
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4366000
3083446
31520121
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43132000
13792000
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14.47
1693000
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129081000
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50103000
962000
90279000
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1096000
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1525000
33633000
1929000
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2567000
147152000
75045000
185014000
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31337000
2693000
164713000
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34105000
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-420000
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2818000
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900000
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424000
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219000
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19578000
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33643000
34034000
9851000
2098000
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1026000
-220000
33219000
198818000
12300000
-536000
21084000
-71000
-220000
317000
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IQNT
NEUTRAL TANDEM INC
false
Accelerated Filer
Q3
2012
10-Q
2012-09-30
0001292653
--12-31
193667000
0.016
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The
<font style="FONT-FAMILY: 'Times New Roman'" size="2">following
table reconciles earnings per common share for the three and nine
months ended September 30, 2012 and 2011.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 1px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="66%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Three Months
Ended<br />
September 30,</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Nine Months
Ended<br />
September 30,</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 140pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(In
thousands, except per share amounts)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Numerator:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top" nowrap="nowrap">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Net (loss) income
applicable to common stockholders, as reported</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(2,735</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">5,848</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">7,626</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">21,084</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Denominator:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Weighted average common
shares outstanding</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,993</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,450</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,817</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">33,219</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Effect of dilutive
securities:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 5em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Stock options</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">399</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">349</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">424</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Denominator for diluted
earnings per share</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,993</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,849</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">32,166</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">33,643</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Net (loss) earnings per
share:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 5em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Basic — as
reported</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(0.09</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.19</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.24</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.63</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 5em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Diluted — as
reported</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(0.09</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.18</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.24</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.63</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<font style="FONT-FAMILY: Times New Roman" size="2"><br class="Apple-interchange-newline" /></font></div>
4400000
14121000
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Revenue
Recognition</i></b> — The Company generates revenue from
sales of its voice, IP Transit, and Ethernet services. The Company
maintains tariffs and executed service agreements with each of its
customers in which specific fees and rates are determined. Voice
revenue is recorded each month on an accrual basis based upon
minutes of traffic switched by the Company’s network for each
customer, which is referred to as minute of use. The rates charged
per minute are determined by contracts between the Company and its
customers or by filed and effective tariffs.</font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">IP Transit
revenue and Ethernet services revenue are recorded each month on an
accrual basis based upon bandwidth used by each customer. The rates
charged are the total of a monthly fee for bandwidth (the Committed
Traffic Rate) plus additional charges for the sustained peak
bandwidth used monthly in excess of the Committed Traffic
Rate.</font></p>
</div>
-1462000
P5Y11M27D
51000
164000
6989000
2617000
9000000
300000
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Property
and Equipment</i></b> — Property and equipment are recorded
at historical cost. These costs are depreciated over the estimated
useful lives of the individual assets using the straight-line
method. Any gains and losses from the disposition of property and
equipment are included in operations as incurred. The estimated
useful life for switch equipment and tools and test equipment is
five years. The estimated useful life for computer equipment,
computer software and furniture and fixtures is three years.
Leasehold improvements are amortized on a straight-line basis over
an estimated useful life of five years or the life of the lease,
whichever is less. The impairment of long-lived assets is
periodically evaluated when events or changes in circumstances
indicate that a potential impairment has occurred.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Cash and
Cash Equivalents</i></b> — The Company considers all highly
liquid investments with an original maturity of 90 days or
less to be cash and cash equivalents. At September 30, 2012,
the Company had $20.0 million of cash in banks and $93.8 million in
two money market mutual funds. At December 31, 2011, the
Company had $11.5 million of cash in banks and $78.8 million in two
money market mutual funds.</font></p>
</div>
P6Y4M2D
8566000
11.75
36475000
0.24
17.77
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Recent
Accounting Pronouncements</i></b> — Effective January 1,
2012, the Company adopted the Financial Accounting Standards Board
Accounting Standards Update No. 2011-05, Presentation of
Comprehensive Income in U.S. GAAP (ASU 2011-05) and Accounting
Standards Update No. 2011-12, Deferral of the Effective Date
for Amendments to the Presentation of Reclassifications of Items
Out of Accumulated Other Comprehensive Income (ASU 2011-12). These
ASUs require that comprehensive income and the related components
of net income and of other comprehensive income be presented in a
single continuous statement of comprehensive income or in two
separate but consecutive statements. The amendments did not
change the items reported in other comprehensive income or when an
item of other comprehensive income is reclassified to net income.
As a result, the adoption of this guidance did not affect the
Company’s financial position, results of operations or cash
flows. The Company has presented the components in one continuous
statement.</font></p>
</div>
5666000
281000
161000
1452000
501000
200000
92936000
11000
1257000
349000
22798000
0.455
P7Y2M12D
1315000
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The
<font style="FONT-FAMILY: 'Times New Roman'" size="2">change in the
carrying amount of goodwill and other intangible assets during the
nine months ended September 30, 2012, is as
follows:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="59%"></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 75pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(Dollars
in thousands)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>December 31,</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Currency</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Translation Effect  and</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Other</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>September 30,</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Goodwill</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">48,137</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1,452</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">49,589</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
</table>
<font style="FONT-FAMILY: Times New Roman" size="2"><br class="Apple-interchange-newline" /></font></div>
43162000
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">A <font style="FONT-FAMILY: 'Times New Roman'" size="2">summary of the
Company’s non-vested share activity and related information
for the nine months ended September 30, 2012 is as
follows:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="84%" align="center">
<tr>
<td width="71%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Shares<br />
(000)</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Weighted-<br />
Average<br />
Grant Date<br />
Fair Value</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="4" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Aggregate<br />
Intrinsic<br />
Value<br />
($000)</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Non-vested shares
outstanding — January 1, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1,096</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">14.47</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Granted</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">300</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">12.15</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Vested</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(306</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">15.19</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Cancelled</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(19</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">13.06</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Non-vested shares
outstanding — September 30, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1,071</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">13.64</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">10,057</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Non-vested shares vested
or expected to vest — September 30, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1,000</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">13.64</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">9,390</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
</table>
<font style="FONT-FAMILY: Times New Roman" size="2"><br class="Apple-interchange-newline" /></font></div>
-20915000
12607000
306000
2.77
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Intangible
<font style="FONT-FAMILY: 'Times New Roman'" size="2">assets, net
consist of the following:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="64%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="10" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>September 30,
2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 75pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(Dollars
in thousands)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Gross 
Carrying</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amount</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Accumulated</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amortization</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Net 
Intangible</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Assets</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Customer
relationships</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,109</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(4,555</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">26,554</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr>
<td height="16"></td>
<td height="16" colspan="12"></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="10" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>December 31,
2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 75pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(Dollars
in thousands)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Gross
Carrying</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amount</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Accumulated</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amortization</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Net
Intangible</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Assets</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Customer
relationships</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,337</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(2,693</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">28,644</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
</table>
<font style="FONT-FAMILY: Times New Roman" size="2"><br class="Apple-interchange-newline" /></font></div>
1
21076000
23552000
19364000
-587000
15.19
<div>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>7. COMPREHENSIVE INCOME
(LOSS)</b></font></p>
<p style="MARGIN-TOP: 6px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Comprehensive
income (loss) for the three and nine months ended
September 30, 2012 and 2011 consists of net income (loss) and
other comprehensive income (loss). Other comprehensive income
(loss) includes certain changes in equity that are excluded from
net income (loss). Specifically, foreign currency translation
adjustments are included in accumulated other comprehensive income
(loss) in the consolidated balance sheets.</font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The following
table reconciles net income to comprehensive income for the three
and nine months ended September 30, 2012 and
September 30, 2011 (in thousands):</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="54%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Three Months Ended</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" colspan="2"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" colspan="2"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>September 30,<br />
2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>September 30,<br />
2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>September 30,<br />
2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>September 30,<br />
2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net (loss)
income</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(2,735</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">5,848</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">7,626</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">21,084</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Other comprehensive income
(loss)</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,958</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(4,259</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(637</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,098</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Total comprehensive (loss)
income</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(777</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,589</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6,989</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">23,182</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
5000
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>8. SUBSEQUENT
EVENTS</b></font></p>
<p style="MARGIN-TOP: 6px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">On
October 5, 2012, we declared a special cash dividend of $3.00
per outstanding share of common stock, or $96.7 million in the
aggregate. The special cash dividend was paid on October 30,
2012 entirely from the Company’s available cash on
hand.</font></p>
</div>
12.15
32166000
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The
<font style="FONT-FAMILY: 'Times New Roman'" size="2">following
summarizes activity under the Company’s stock option plan for
the nine months ended September 30, 2012:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="70%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Shares<br />
(000)</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Weighted-<br />
Average<br />
Exercise<br />
Price</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Aggregate<br />
Intrinsic<br />
Value<br />
($000)</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="4" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Weighted-<br />
Average<br />
Remaining<br />
Term (yrs)</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Options outstanding
— January 1, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">3,520</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">16.09</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Granted</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">5</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">11.75</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Exercised</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(501</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2.77</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Cancelled</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(70</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">17.77</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Options outstanding
— September 30, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,954</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">18.29</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,437</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">6.35</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Vested or expected to
vest-September 30, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,756</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">18.30</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,434</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">6.34</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Exercisable-September 30, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,418</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">18.39</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,337</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">5.99</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
</table>
<font style="FONT-FAMILY: Times New Roman" size="2"><br class="Apple-interchange-newline" /></font></div>
14005000
12001000
-637000
0.24
<div>
<p style="margin-top:18px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2"><b>1. DESCRIPTION OF THE
BUSINESS</b></font></p>
<p style="margin-top:6px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2"><b><i>Organization</i></b> — Neutral Tandem, Inc. d/b/a
Inteliquent (the Company) provides voice, IP Transit, and Ethernet
telecommunications services primarily on a wholesale basis. The
Company offers these services using an all-IP network, which
enables the Company to deliver global connectivity for a variety of
media, including voice, data and video. The Company’s
solutions enable carriers and other providers to deliver
telecommunications traffic or other services where they do not have
their own network or elect not to use their own network. These
solutions are sometimes called “off-net” services. The
Company also provides its solutions to customers, like content
providers, who also typically do not have their own
network.</font></p>
</div>
1528000
<div>
<p style="margin-top:0px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2"><b>3. LEGAL
PROCEEDINGS</b></font></p>
<p style="margin-top:6px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">From time to
time, the Company is a party to legal proceedings arising in the
normal course of its business. Aside from the matters discussed
below, the Company does not believe that it is a party to any
pending legal action that could reasonably be expected to have a
material effect on its business or operating results, financial
position or cash flows.</font></p>
<p style="margin-top:18px;margin-bottom:0px; margin-left:4%">
<font style="font-family:Times New Roman" size="2"><i>Breach of
Contract Dispute</i></font></p>
<p style="margin-top:6px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">The Company is
engaged in a contractual dispute with one of its largest customers,
which is a telecom carrier to whom the Company terminates long
distance voice traffic among other services. The carrier has
asserted that the Company has been improperly terminating long
distance voice traffic to it in breach of the parties’
agreement, and that this has been occurring for multiple years up
until the present time. As part of its claim, the carrier has
asserted that it has not been compensated for terminating this long
distance traffic. The Company and the carrier have reached a
preliminary verbal agreement to settle the dispute. The Company
expects that the pending settlement will include a $9.0 million
one-time payment to the carrier prior to December 31, 2012,
and accordingly, has recorded a $9.0 million expense in the three
month period ended September 30, 2012. There can be no
assurance that the Company and the carrier will reach a definitive
final settlement.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">In addition, the
settlement is also expected to include a new contractual
arrangement related to the existing voice services that the Company
currently provides to the carrier, and that the carrier will
provide to the Company. Under these proposed arrangements, the
Company would pay the carrier a significant amount to terminate
long distance traffic to the carrier. As previously mentioned, the
Company has not paid the carrier for such services in the past.
Also, the rates that the carrier pays to the Company for voice
services the Company provides would be significantly reduced. The
new contractual arrangements are expected to be effective
retroactively as of October 5, 2012. The Company cannot
predict the final amounts the Company will pay the carrier to
terminate long distance traffic to the carrier and the final rates
the carrier will pay the Company for the services the Company
provides, or whether the carrier will cease purchasing all or a
portion of such services from the Company.</font></p>
<p style="margin-top:18px;margin-bottom:0px; margin-left:4%">
<font style="font-family:Times New Roman" size="2"><i>Peerless
Network, Inc.</i></font></p>
<p style="margin-top:6px;margin-bottom:0px; margin-left:4%">
<font style="font-family:Times New Roman" size="2"><i>Proceeding in
the United States District Court for the Northern District of
Illinois</i></font></p>
<p style="margin-top:6px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">As previously
disclosed, on June 12, 2008, the Company commenced a patent
infringement action against Peerless Network, Inc., Peerless
Network of Illinois, LLC, and John Barnicle (collectively, Peerless
Network) in the United States District Court for the Northern
District of Illinois to enforce the ‘708 Patent (<i>Neutral
Tandem, Inc. v Peerless Network, Inc., Peerless Network of
Illinois, LLC and John Barnicle, 08 CV 3402</i>). On July 28,
2008, Peerless Network filed a response to the Company’s
complaint denying liability and asserting various affirmative
defenses and counterclaims. Peerless Network generally alleged that
(i) the ‘708 Patent was invalid and unenforceable under
a variety of theories, (ii) assertion of the ‘708 Patent
amounted to patent misuse and violation of certain monopolization
laws, and (iii) certain conduct surrounding the litigation
gave rise to tortious interference and business disparagement
claims and Lanham Act violations. On December 4, 2008, the
court granted the Company’s motion to dismiss the claims
alleging business disparagement and Lanham Act violations but
denied the Company’s motion to dismiss the claims related to
the allegations of tortious interference and alleged violation of
certain monopolization laws. On January 27, 2010, the court
issued an order construing each of the disputed terms in the patent
in the manner the Company had proposed. On March 30, 2010, the
court issued an order denying the Company’s motion dated
August 25, 2009 for preliminary injunctive relief which sought
to enjoin Peerless Network from providing certain tandem transit
services.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On
April 27, 2010, the court issued an order denying without
prejudice the motion of Peerless Network seeking leave to file a
motion to stay the patent litigation. Peerless Network sought to
stay the patent litigation pending the <i>inter partes</i>
reexamination by the United States Patent and Trademark Office (the
USPTO) of the validity of the ‘708 Patent, which is discussed
under “ <i>Inter partes proceeding before the United States
Patent and Trademark Office”</i> below.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On June 1,
2010, Peerless Network filed a renewed motion asking the court to
extend the trial date by nine months or stay proceedings pending
the <i>inter partes</i> reexamination by the USPTO of the validity
of the ‘708 Patent. The court heard the motion on
June 8, 2010. After hearing the motion, the court issued an
order that in substance removed the previously scheduled September
2010 trial date from the court’s calendar. However, the court
also ordered that proceedings on the parties’ respective
motions for summary judgment would continue, and the court set a
ruling date on the parties’ summary judgment motions for
September 1, 2010.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On
September 2, 2010, the court issued an opinion and order
granting Peerless Network’s motion for summary judgment. The
court found that the ‘708 Patent is invalid in light of a
prior patent, U.S. Patent No. 6,137,800. In light of the
summary judgment ruling, the court denied the Company’s
request to reinstate the trial date as moot.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">The
court’s September 2, 2010 order also denied the
Company’s motion for summary judgment. The Company sought
summary judgment on its claim that Peerless Network infringed the
‘708 Patent, as well as summary judgment on Peerless
Network’s claim that the ‘708 Patent is unenforceable.
At a hearing on September 22, 2010, the court allowed the
Company to file a new motion for summary judgment on Peerless
Network’s claim that the ‘708 Patent is unenforceable.
The court also dismissed Counts IV-VII of Peerless Network’s
counterclaims, which were claims against the Company based on
allegations of monopolization, monopoly leveraging, violations of
the Illinois Antitrust Act, and tortious interference with
prospective business relations.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On
December 9, 2010, the court issued an opinion and order
granting the Company’s motion for summary judgment on
Peerless Network’s claim that the ‘708 Patent was
unenforceable based on alleged “inequitable conduct”
and “patent misuse.” The court entered a final judgment
with respect to all claims in the litigation on December 17,
2010.</font></p>
<p style="font-size:1px;margin-top:12px;margin-bottom:0px">
 </p>
<p style="margin-top:0px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On
December 20, 2010, the Company filed notice that it planned to
appeal the court’s order granting Peerless Network’s
motion for summary judgment and finding that the ‘708 Patent
is invalid. On January 13, 2011, Peerless Network
cross-appealed the court’s order granting the Company’s
motion for summary judgment and finding that the ‘708 Patent
is not unenforceable, as well as the court’s earlier ruling
construing disputed terms of the patent in the Company’s
favor.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On June 6,
2011, Peerless Network agreed to withdraw its cross-appeal.
Briefing in the Company’s appeal was completed on
July 19, 2011. Oral argument in the Company’s appeal
occurred on December 8, 2011. On December 13, 2011, the
federal appellate court affirmed the finding that the
Company’s patent is invalid, and on January 30, 2012,
the appellate court denied our petition for rehearing of the
December 13, 2011 ruling. The Company had the option to ask
the United States Supreme Court to review that ruling. A petition
for such review was due by April 30, 2012. The Company has
elected not to ask the United States Supreme Court to review that
ruling. As such, the district court’s ruling that the
‘708 Patent is invalid has become final and
non-appealable.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On
September 1, 2011, the district court issued an order that
awarded approximately $102,000 in litigation-related costs to
Peerless Network, and approximately $48,000 in litigation-related
costs to the Company. The Company filed notice that it planned to
appeal that part of the court’s order awarding costs to
Peerless Network on September 30, 2011. On May 18, 2012,
the Company withdrew its appeal of the district court’s
award.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">Peerless Network
has notified the Company that it intends to pursue a claim for
attorney’s fees in the trial court. The Company believes that
a loss with respect to any such claim, if such a claim is made, is
remote.</font></p>
<p style="margin-top:18px;margin-bottom:0px; margin-left:4%">
<font style="font-family:Times New Roman" size="2"><i>Inter partes
proceeding before the United States Patent and Trademark
Office</i></font></p>
<p style="margin-top:6px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">As previously
disclosed, in a separate proceeding, on January 28, 2010,
Peerless Network filed a request with the USPTO requesting that the
USPTO reexamine the ‘708 Patent. On March 26, 2010, the
USPTO granted Peerless Network’s <i>inter partes</i>
reexamination request and issued an initial office action which
rejected the ‘708 Patent’s 23 claims. The claims of the
‘708 Patent as originally issued by the USPTO remain valid
and enforceable during the USPTO reexamination proceeding. Under
the USPTO’s rules, the Company was not allowed to respond to
Peerless Network’s request prior to the USPTO’s initial
determination.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On May 20,
2010, the USPTO granted the Company’s request to extend the
time by which it must file its response to the March 26, 2010
office action from May 26, 2010 to July 26,
2010.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On
April 12, 2010, the Company moved separately to suspend the
<i>inter partes</i> reexamination proceeding in its entirety,
pending resolution of the litigation between the Company and
Peerless Network. On June 30, 2010, the USPTO denied the
Company’s petition seeking to suspend the separate
reexamination proceeding. Although the USPTO did not suspend the
reexamination proceeding, the USPTO stated in its decision, among
other things, that it is “appropriate to continue both [the
reexamination and litigation] proceedings to obtain the results and
benefits of each, as they accrue.”</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On July 26,
2010, the Company responded to the USPTO’s March 26,
2010 office action. On November 24, 2010, the USPTO issued an
action closing prosecution, in which the USPTO maintained its
rejection of the ‘708 Patent’s 23 original claims, as
well as 35 additional claims added to the ‘708 Patent in the
Company’s July 26, 2010 response.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On
January 7, 2011, the Company filed a response to the
USPTO’s November 24, 2010 action closing prosecution.
Thereafter, Peerless Network filed comments in opposition to the
Company’s response on February 4, 2011.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On
March 11, 2011, the USPTO issued a right of appeal notice, in
which the USPTO maintained its rejection of the ‘708
Patent’s 23 original claims, as well as the 35 additional
claims added to the ‘708 Patent in the Company’s
July 26, 2010 response.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">On
April 11, 2011, the Company filed a notice of appeal of the
USPTO’s decision to the Board of Patent Appeals and
Interferences (the BPAI). Peerless Network filed a notice of appeal
of the USPTO’s decision to the BPAI on April 19, 2011.
Briefing in those appeals was completed in December
2011.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">Now that the
decision of the federal district court finding the Company’s
patent invalid has become final and non-appealable, proceedings at
the USPTO have ended with respect to existing claims, though the
Company has asked the BPAI to remand the matter to the USPTO in
order to continue proceedings with respect to new claims. The BPAI
has not yet issued a ruling on that request.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">The USPTO action
will determine whether the patent is valid or invalid. The USPTO
will not directly assess liability against the Company or Peerless
Network. For a discussion of the Company’s patent
infringement claim against Peerless Network, see
<i>“Proceeding in the United States District Court for the
Northern District of Illinois”</i> above.</font></p>
</div>
70000
963000
1176000
0.505
31817000
<div>
<p style="margin-top:18px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2"><b>4. INCOME
TAXES</b></font></p>
<p style="margin-top:6px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">Income taxes
were computed using an effective tax rate, which is subject to
ongoing review and evaluation by the Company. The Company’s
estimated effective income tax rate was 41.7% and 45.5% for the
three and nine months ended September 30, 2012, compared to
32.9% and 38.1% for the same period last year.</font></p>
<p style="font-size:1px;margin-top:12px;margin-bottom:0px">
 </p>
<p style="margin-top:0px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">The increase in
the Company’s effective income tax rate for the three months
ended September 30, 2012, as compared to the three months
ended September 30, 2011 was primarily due to the
Company’s net book loss for the quarter and the
Company’s change in estimated valuation allowance recorded
against the Company’s Illinois EDGE Credit tax
carryforward. The increase in the Company’s effective
income tax rate for the nine months ended September 30, 2012,
as compared to the nine months ended September 30, 2011 was
primarily due the company’s foreign entities’
nondeductible transaction tax and nondeductible noncash
compensation. In addition, the rate increased due to changes in the
Company’s estimated valuation allowance recorded against the
Company’s Illinois EDGE Credit tax carryforward, which was
recorded during the second quarter of 2012.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">We operate in
multiple income tax jurisdictions both inside and outside the
United States. Accordingly, we expect that the net amount of tax
liability for unrecognized tax benefits will change in the next
twelve months due to changes in audit status, expiration of
statutes of limitations and other events which could impact our
determination of unrecognized tax benefits. Currently, the Company
has estimated $1.1 million as its unrecognized tax benefit. At
December 31, 2011, the Company had estimated $1.0 million as
its unrecognized tax benefit.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 6px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Principles of Consolidation</i></b> — The condensed
consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All intercompany
balances and transactions have been eliminated in
consolidation.</font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Interim
Condensed Consolidated Financial Statements</i></b> — The
accompanying condensed consolidated balance sheets as of
September 30, 2012 and December 31, 2011, the condensed
consolidated statements of income (loss) and comprehensive income
(loss) for the three and nine months ended September 30, 2012
and 2011, and the condensed consolidated statements of cash flows
for the nine months ended September 30, 2012, and 2011 are
unaudited. The condensed consolidated balance sheet data as of
December 31, 2011 was derived from the audited consolidated
financial statements which are included in the Company’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2011. The accompanying statements should be read
in conjunction with the audited consolidated financial statements
and related notes contained in the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31,
2011.</font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The
accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles
generally accepted in the United States (GAAP) pursuant to the
rules and regulations of the Securities and Exchange Commission
applicable to interim periods. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to such rules
and regulations.</font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">In the opinion
of management, the unaudited interim condensed consolidated
financial statements as of September 30, 2012 and for the
three and nine months ended September 30, 2012 and 2011 have
been prepared on the same basis as the audited consolidated
statements and reflect all adjustments, which are normal recurring
adjustments, necessary for the fair presentation of its statement
of financial position, results of operations and cash flows. The
results of operations for the three and nine months ended
September 30, 2012 are not necessarily indicative of the
operating results for any subsequent quarter, for the full fiscal
year or any future periods.</font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The carrying
amounts of our cash and equivalents, receivables and accounts
payable approximate fair value due to their short-term
nature.</font></p>
</div>
P6Y4M6D
207788000
8600000
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Accounting for Stock-Based Compensation</i></b> —
The fair value of stock options is determined using the
Black-Scholes valuation model. This model takes into account the
exercise price of the stock option, the fair value of the common
stock underlying the stock option as measured on the date of grant
and an estimation of the volatility of the common stock underlying
the stock option. Such value is recognized as expense over the
service period, net of estimated forfeitures, using the straight
line method. The estimation of stock awards that will ultimately
vest requires judgment, and to the extent actual results or updated
estimates differ from the Company’s current estimates, such
amounts will be recorded as a cumulative adjustment in the period
estimates are revised. The Company considers many factors when
estimating expected forfeitures, including types of awards,
employee class, and historical experience. Actual results, and
future changes in estimates, may differ from the Company’s
current estimates.</font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Compensation
expense for non-vested shares is measured based upon the quoted
closing market price for the stock on the date of grant. The
compensation cost is recognized on a straight-line basis over the
vesting period. See Note 5, “Stock Options and Non-Vested
Shares.”</font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The amount of
non-cash share-based expense recorded in the three months ended
September 30, 2012 and 2011 was $2.5 million and $2.9 million,
respectively. The amount of non-cash share-based expense recorded
in the nine months ended September 30, 2012 and 2011 was $8.6
million and $12.3 million, respectively.</font></p>
</div>
<div>
<p style="margin-top:18px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2"><b>6. SEGMENT AND GEOGRAPHIC
INFORMATION</b></font></p>
<p style="margin-top:6px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">Segment
reporting establishes standards for reporting information about
operating segments. Operating segments are defined as components of
an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating
decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance.</font></p>
<p style="margin-top:12px;margin-bottom:0px; text-indent:4%">
<font style="font-family:Times New Roman" size="2">The
Company’s chief operating decision maker is the Chief
Executive Officer. The Chief Executive Officer reviews financial
information presented on a consolidated basis. The Company operates
in one industry segment, which is to provide voice, IP Transit and
Ethernet interconnection services via the Company’s
international telecommunications network to fulfill customer
agreements. Therefore, the Company has concluded that it has one
operating segment.</font></p>
</div>
-2435000
7626000
-116000
1176000
-178000
P15Y
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Foreign
Currency Translation</i></b> — The functional currency
of each of the Company’s subsidiaries is the currency of the
country in which the subsidiary operates. Assets and liabilities of
foreign operations are translated using period end exchange rates,
and revenues and expenses are translated using average exchange
rates during the period. Translation gains and losses are reported
in accumulated other comprehensive income (loss) as a component of
shareholders’ equity.</font></p>
</div>
2868000
100000
6379000
-223000
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES</b></font></p>
<p style="MARGIN-TOP: 6px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Principles of Consolidation</i></b> — The</font>
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">condensed consolidated
financial statements include the accounts of the Company and its
wholly owned subsidiaries. All intercompany balances and
transactions have been eliminated in
consolidation.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Interim Condensed
Consolidated Financial Statements</i></b> — The accompanying
condensed consolidated balance sheets as of September 30, 2012
and December 31, 2011, the condensed consolidated statements
of income (loss) and comprehensive income (loss) for the three and
nine months ended September 30, 2012 and 2011, and the
condensed consolidated statements of cash flows for the nine months
ended September 30, 2012, and 2011 are unaudited. The
condensed consolidated balance sheet data as of December 31,
2011 was derived from the audited consolidated financial statements
which are included in the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2011. The
accompanying statements should be read in conjunction with the
audited consolidated financial statements and related notes
contained in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2011.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The accompanying
unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States (GAAP) pursuant to the rules and
regulations of the Securities and Exchange Commission applicable to
interim periods. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to such rules and
regulations.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">In the opinion of
management, the unaudited interim condensed consolidated financial
statements as of September 30, 2012 and for the three and nine
months ended September 30, 2012 and 2011 have been prepared on
the same basis as the audited consolidated statements and reflect
all adjustments, which are normal recurring adjustments, necessary
for the fair presentation of its statement of financial position,
results of operations and cash flows. The results of operations for
the three and nine months ended September 30, 2012 are not
necessarily indicative of the operating results for any subsequent
quarter, for the full fiscal year or any future
periods.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The carrying amounts of
our cash and equivalents, receivables and accounts payable
approximate fair value due to their short-term
nature.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Cash and Cash
Equivalents</i></b> — The Company considers
all highly liquid investments with an original maturity of
90 days or less to be cash and cash equivalents. At
September 30, 2012, the Company had $20.0 million of cash in
banks and $93.8 million in two money market mutual funds. At
December 31, 2011, the Company had $11.5 million of cash in
banks and $78.8 million in two money market mutual
funds.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Current Assets Held
for Sale </i></b>— Current assets
classified as held for sale are measured at the lower of carrying
amount and fair value, less cost to sell. Current assets are
classified as held for sale if their carrying amounts will be
recovered through a sale transaction rather than through continuing
use. This condition is regarded as met only when the sale is highly
probable and the asset or disposal group is available for immediate
sale in its present condition subject only to terms that are usual
and customary for sales of such assets. Management must be
committed to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the date of
classification as held for sale. Property and intangible assets are
not depreciated once classified as held for sale.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">During the quarter ended
September 30, 2012, the Company ceased operations related to
its hosted services business offering. The equipment has no further
use in the Company’s network and is being held for sale. As a
result, the Company recorded an asset impairment charge of
approximately $1.3 million. As of September 30, 2012, the fair
value of the assets available for sale is $1.7 million and is
included in “Other current assets” on the condensed
consolidated balance sheet.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Property and
Equipment</i></b> — Property and equipment
are recorded at historical cost. These costs are depreciated over
the estimated useful lives of the individual assets using the
straight-line method. Any gains and losses from the disposition of
property and equipment are included in operations as incurred. The
estimated useful life for switch equipment and tools and test
equipment is five years. The estimated useful life for computer
equipment, computer software and furniture and fixtures is three
years. Leasehold improvements are amortized on a straight-line
basis over an estimated useful life of five years or the life of
the lease, whichever is less. The impairment of long-lived assets
is periodically evaluated when events or changes in circumstances
indicate that a potential impairment has
occurred.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 1px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Goodwill and
Intangible Assets, Net</i></b> — Goodwill is tested for
impairment at least annually as of October 1 or more
frequently if an event occurs or circumstances change that would
reduce the fair value of a reporting unit below its carrying value.
The Company’s reporting units are the Americas, Europe,
Middle East & Africa (EMEA) and Asia Pacific (APAC). The
evaluation of goodwill impairment is based upon the estimated fair
value of the Company’s reporting units compared to the net
carrying value of assets and liabilities. The Company uses internal
discounted cash flow estimates and market value comparisons to
determine estimated fair value. If this first test indicates that
impairment potentially exists, the second step is performed to
measure the amount of impairment, if any. Goodwill impairment
exists when the estimated implied fair value of goodwill, a
non-recurring Level 3 fair value measurement, is less than its
carrying value.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Factors that the Company
will consider in the fourth quarter when estimating the fair value
of the reporting units include (i) decrease in projected
revenues and operating margins due to continued competition and
related price pressure, (ii) decline in the Company’s
common stock price beginning late in the third quarter of 2012 and
sustained through the date of this filing, which required an
increase in the discount rate used in the present value calculation
in order to reconcile the Company’s market capitalization to
the aggregate estimated fair value of all of the Company’s
reporting units, and (iii) higher spending expected for
strategic product expansion in the near-term to mid-term, with
expected benefit to revenues and operating margin trailing the
increased spending.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">As of this filing, the
Company has not completed the analysis, due to the complexities
involved in determining the implied fair value of the goodwill of
the reporting units. The Company expects to finalize the
analysis during the fourth quarter of 2012. No assurance can be
given that the Company will not be required to record an impairment
loss on goodwill then or in the future.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The change in the
carrying amount of goodwill and other intangible assets during the
nine months ended September 30, 2012, is as
follows:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 6px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="59%"></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 75pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(Dollars
in thousands)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>December 31,</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Currency</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Translation Effect  and</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Other</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>September 30,</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Goodwill</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">48,137</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1,452</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">49,589</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
</table>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Intangible assets, net
consist of the following:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 6px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="64%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="10" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>September 30,
2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 75pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(Dollars
in thousands)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Gross 
Carrying</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amount</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Accumulated</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amortization</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Net 
Intangible</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Assets</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Customer
relationships</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,109</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(4,555</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">26,554</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr>
<td height="16"></td>
<td height="16" colspan="12"></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="10" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>December 31,
2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 75pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(Dollars
in thousands)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Gross
Carrying</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amount</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Accumulated</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amortization</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Net
Intangible</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Assets</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Customer
relationships</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,337</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(2,693</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">28,644</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
</table>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Intangible assets, which
consist of customer relationships, have a definite life and are
amortized on an accelerated basis based on the discounted cash
flows recognized over their estimated useful lives (15 years).
Intangible asset amortization expense was $0.6 million and $1.9
million, in the three and nine months ended September 30,
2012, respectively. Intangible asset amortization expense was $0.6
million and $1.7 million, in the three and nine months ended
September 30, 2011, respectively. Intangible asset
amortization for each of the five succeeding fiscal years is
estimated at $2.5 million for 2012, $2.9 million for 2013, $2.8
million for 2014, $2.4 million for 2015 and $2.0 million in
2016.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Revenue
Recognition</i></b> — The Company generates
revenue from sales of its voice, IP Transit, and Ethernet services.
The Company maintains tariffs and executed service agreements with
each of its customers in which specific fees and rates are
determined. Voice revenue is recorded each month on an accrual
basis based upon minutes of traffic switched by the Company’s
network for each customer, which is referred to as minute of use.
The rates charged per minute are determined by contracts between
the Company and its customers or by filed and effective
tariffs.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">IP Transit revenue and
Ethernet services revenue are recorded each month on an accrual
basis based upon bandwidth used by each customer. The rates charged
are the total of a monthly fee for bandwidth (the Committed Traffic
Rate) plus additional charges for the sustained peak bandwidth used
monthly in excess of the Committed Traffic Rate.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Earnings per
Share</i></b> — In calculating
earnings per common share, we allocate our earnings between common
shareholders and holders of unvested share-based payment awards
(i.e. non-vested shares) that contain rights to nonforfeitable
dividends. This earnings allocation is referred to as the two-class
method.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Under the two-class
method, undistributed earnings are allocated between common stock
and participating securities (non-vested shares) as if all of the
net earnings for the period had been distributed. Basic
earnings per common share excludes dilution and is calculated by
dividing net earnings allocable to common shares by the weighted
average number of common shares outstanding during the
period. Diluted earnings per common share is calculated by
dividing net earnings allocable to common shares by the weighted
average number of common shares outstanding during the period, as
adjusted for the potential dilutive effect of non-participating
share-based awards such as stock options. The following table
reconciles earnings per common share for the three and nine months
ended September 30, 2012 and 2011.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 1px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 6px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="66%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Three Months
Ended<br />
September 30,</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Nine Months
Ended<br />
September 30,</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 140pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(In
thousands, except per share amounts)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Numerator:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top" nowrap="nowrap">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Net (loss) income
applicable to common stockholders, as reported</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(2,735</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">5,848</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">7,626</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">21,084</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Denominator:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Weighted average common
shares outstanding</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,993</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,450</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,817</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">33,219</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Effect of dilutive
securities:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 5em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Stock options</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">399</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">349</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">424</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Denominator for diluted
earnings per share</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,993</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,849</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">32,166</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">33,643</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Net (loss) earnings per
share:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 5em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Basic — as
reported</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(0.09</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.19</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.24</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.63</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 5em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Diluted — as
reported</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(0.09</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.18</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.24</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.63</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">For the three months
ended September 30, 2012, 0.3 million incremental shares
related to share-based awards were not included in the computation
of diluted (loss) earnings per common share because of the net loss
during the three-month period. Outstanding share-based awards of
2.7 million, 2.8 million, 2.7 million and
2.8 million were outstanding during the three months ended
September 30, 2012 and September 30, 2011 and the nine
months ended September 30, 2012 and September 30, 2011,
respectively, but were not included in the computation of diluted
earnings per share because the effect would have been
antidilutive.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The undistributed
earnings allocable to participating securities were $0.3 million,
$0.2 million and $0.9 million for the three months ended
September 30, 2011 and the nine months ended
September 30, 2012 and September 30, 2011,
respectively.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Accounting for
Stock-Based Compensation</i></b> — The fair value of
stock options is determined using the Black-Scholes valuation
model. This model takes into account the exercise price of the
stock option, the fair value of the common stock underlying the
stock option as measured on the date of grant and an estimation of
the volatility of the common stock underlying the stock option.
Such value is recognized as expense over the service period, net of
estimated forfeitures, using the straight line method. The
estimation of stock awards that will ultimately vest requires
judgment, and to the extent actual results or updated estimates
differ from the Company’s current estimates, such amounts
will be recorded as a cumulative adjustment in the period estimates
are revised. The Company considers many factors when estimating
expected forfeitures, including types of awards, employee class,
and historical experience. Actual results, and future changes in
estimates, may differ from the Company’s current
estimates.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Compensation expense for
non-vested shares is measured based upon the quoted closing market
price for the stock on the date of grant. The compensation
cost is recognized on a straight-line basis over the vesting
period. See Note 5, “Stock Options and Non-Vested
Shares.”</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The amount of non-cash
share-based expense recorded in the three months ended
September 30, 2012 and 2011 was $2.5 million and $2.9 million,
respectively. The amount of non-cash share-based expense recorded
in the nine months ended September 30, 2012 and 2011 was $8.6
million and $12.3 million, respectively.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Foreign Currency
Translation</i></b> — The functional
currency of each of the Company’s subsidiaries is the
currency of the country in which the subsidiary operates. Assets
and liabilities of foreign operations are translated using period
end exchange rates, and revenues and expenses are translated using
average exchange rates during the period. Translation gains and
losses are reported in accumulated other comprehensive income
(loss) as a component of shareholders’
equity.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Recent Accounting
Pronouncements</i></b> — Effective
January 1, 2012, the Company adopted the Financial Accounting
Standards Board Accounting Standards Update No. 2011-05,
Presentation of Comprehensive Income in U.S. GAAP
(ASU 2011-05) and Accounting Standards Update
No. 2011-12, Deferral of the Effective Date for Amendments to
the Presentation of Reclassifications of Items Out of Accumulated
Other Comprehensive Income (ASU 2011-12). These ASUs require that
comprehensive income and the related components of net income and
of other comprehensive income be presented in a single continuous
statement of comprehensive income or in two separate but
consecutive statements. The amendments did not change the
items reported in other comprehensive income or when an item of
other comprehensive income is reclassified to net income. As a
result, the adoption of this guidance did not affect the
Company’s financial position, results of operations or cash
flows. The Company has presented the components in one continuous
statement.</font></font></p>
</div>
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Earnings
per Share</i></b> — In <font style="FONT-FAMILY: 'Times New Roman'" size="2">calculating earnings per
common share, we allocate our earnings between common shareholders
and holders of unvested share-based payment awards
(i.e. non-vested shares) that contain rights to nonforfeitable
dividends. This earnings allocation is referred to as the two-class
method.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Under the two-class
method, undistributed earnings are allocated between common stock
and participating securities (non-vested shares) as if all of the
net earnings for the period had been distributed. Basic
earnings per common share excludes dilution and is calculated by
dividing net earnings allocable to common shares by the weighted
average number of common shares outstanding during the
period. Diluted earnings per common share is calculated by
dividing net earnings allocable to common shares by the weighted
average number of common shares outstanding during the period, as
adjusted for the potential dilutive effect of non-participating
share-based awards such as stock options. The following table
reconciles earnings per common share for the three and nine months
ended September 30, 2012 and 2011.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 1px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="66%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Three Months
Ended<br />
September 30,</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Nine Months
Ended<br />
September 30,</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 140pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(In
thousands, except per share amounts)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Numerator:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top" nowrap="nowrap">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Net (loss) income
applicable to common stockholders, as reported</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(2,735</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">5,848</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">6,379</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">21,084</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Denominator:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Weighted average common
shares outstanding</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,993</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,450</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,817</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">33,219</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Effect of dilutive
securities:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 5em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Stock options</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">399</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">349</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">424</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Denominator for diluted
earnings per share</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,993</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,849</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">32,166</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">33,643</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Net (loss) earnings per
share:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 5em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Basic — as
reported</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(0.09</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.19</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.24</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.63</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 5em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Diluted — as
reported</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(0.09</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.18</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.24</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">0.63</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">For the three months
ended September 30, 2012, 0.3 million incremental shares
related to share-based awards were not included in the computation
of diluted (loss) earnings per common share because of the net loss
during the three-month period. Outstanding share-based awards of
2.7 million, 2.8 million, 2.7 million and
2.8 million were outstanding during the three months ended
September 30, 2012 and September 30, 2011 and the nine
months ended September 30, 2012 and September 30, 2011,
respectively, but were not included in the computation of diluted
earnings per share because the effect would have been
antidilutive.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The undistributed
earnings allocable to participating securities were $0.3 million,
$0.2 million and $0.9 million for the three months ended
September 30, 2011 and the nine months ended
September 30, 2012 and September 30, 2011,
respectively.</font></font></p>
</div>
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The
<font style="FONT-FAMILY: 'Times New Roman'" size="2">following
table summarizes the assumptions used for estimating the fair value
of options for the nine months ended September 30, 2012 and
September 30, 2011:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="67%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>September 30,<br />
2012</b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>September 30,<br />
2011</b></font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Expected life</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">7.2 years</font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">7.0 years</font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Risk-free interest
rate</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1.6%</font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1.3% — 2.9%</font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Expected
dividends</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">—</font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">—</font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Volatility</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">50.5%</font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">50.1% — 51.9%</font></td>
</tr>
</table>
<font style="FONT-FAMILY: Times New Roman" size="2"><br class="Apple-interchange-newline" /></font></div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>5. STOCK OPTIONS AND
NON-VESTED SHARES</b></font></p>
<p style="MARGIN-TOP: 6px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The
<font style="FONT-FAMILY: 'Times New Roman'" size="2">Company
established the 2003 Stock Option and Stock Incentive Plan (2003
Plan), which provided for the issuance of up to 4.7 million
options and non-vested shares to eligible employees, officers, and
independent contractors of the Company. In 2007 the Company adopted
the Neutral Tandem, Inc. 2007 Equity Incentive Plan (2007 Plan) and
ceased awarding equity grants under the 2003 Plan. As of
September 30, 2012, the Company had granted a total of
3.0 million options and 1.1 million non-vested shares
that remained outstanding under the 2007 Plan. Awards for
0.7 million shares, representing approximately 2.3% of the
Company’s outstanding common stock as of September 30,
2012, remained available for additional grants under the 2007
Plan.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The Company records
stock-based compensation expense in connection with any grant of
options and non-vested shares to its employees and independent
contractors. The Company calculates the expense associated with its
stock options and non-vested shares by determining the fair value
of the options and non-vested shares.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 18px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); MARGIN-LEFT: 75px; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Options</i></b></font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 6px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">All options granted under
the 2003 Plan and the 2007 Plan have an exercise price equal to the
market value of the underlying common stock on the date of the
grant. During both the three and nine months ended,
September 30, 2012, the Company granted less than
0.1 million options at a weighted-average exercise price of
$11.75. During the three and nine months ended, September 30,
2011, the Company granted 0.1 million and 0.4 million
options at a weighted-average exercise price of $12.34 and $14.51,
respectively.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The fair value of each
option granted is estimated on the date of grant using the
Black-Scholes option-pricing model. The following table summarizes
the assumptions used for estimating the fair value of options for
the nine months ended September 30, 2012 and
September 30, 2011:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 6px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="67%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>September 30,<br />
2012</b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>September 30,<br />
2011</b></font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Expected life</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">7.2 years</font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">7.0 years</font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Risk-free interest
rate</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1.6%</font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1.3% — 2.9%</font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Expected
dividends</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">—</font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">—</font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Volatility</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">50.5%</font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="2">50.1% — 51.9%</font></td>
</tr>
</table>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The weighted-average fair
value of options granted, as determined by using the Black-Scholes
valuation model, during the period was $11.75 and $7.95 for the
nine months ended September 30, 2012 and 2011, respectively.
The total grant date fair value of options that vested during the
nine months ended September 30, 2012 and 2011 was
approximately $5.1 million and $7.0 million, respectively. The
total intrinsic value (market value of stock option less option
exercise price) of stock options exercised was $4.4 million and
$1.1 million during the nine months ended September 30, 2012
and 2011, respectively.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The following summarizes
activity under the Company’s stock option plan for the nine
months ended September 30, 2012:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 6px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="70%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Shares<br />
(000)</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Weighted-<br />
Average<br />
Exercise<br />
Price</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Aggregate<br />
Intrinsic<br />
Value<br />
($000)</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="4" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Weighted-<br />
Average<br />
Remaining<br />
Term (yrs)</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Options outstanding
— January 1, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">3,520</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">16.09</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Granted</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">5</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">11.75</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Exercised</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(501</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2.77</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Cancelled</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(70</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">17.77</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Options outstanding
— September 30, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,954</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">18.29</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,437</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">6.35</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Vested or expected to
vest-September 30, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,756</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">18.30</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,434</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">6.34</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Exercisable-September 30, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,418</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">18.39</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">2,337</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">5.99</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
</table>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 1px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The unrecognized
compensation cost associated with options outstanding at
September 30, 2012 and December 31, 2011 was $4.8 million
and $8.5 million, respectively. The weighted average remaining term
that the compensation will be recorded is 1.8 years and 2.2 years
as of September 30, 2012 and December 31, 2011,
respectively.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 18px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); MARGIN-LEFT: 37px; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2"><b><i>Non-vested
Shares</i></b></font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 6px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">During the nine months
ended September 30, 2012, the Company granted 0.3 million
non-vested shares to members of the Company’s executive
management team as well as various employees within the Company. No
shares were issued during the three months ended September 30,
2012. During the three and nine months ended September 30,
2011, the Company granted approximately 0.1 million and
0.4 million non-vested shares to members of the
Company’s executive management team as well as various
employees within the Company. The non-vested shares were issued as
part of the 2007 plan. The shares typically vest over a four
year period. The fair value of the non-vested shares is determined
using the Company’s closing stock price on the grant
date. Compensation cost, measured using the grant date fair
value, is recognized over the requisite service period on a
straight-line basis.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">A summary of the
Company’s non-vested share activity and related information
for the nine months ended September 30, 2012 is as
follows:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 6px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="84%" align="center">
<tr>
<td width="71%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Shares<br />
(000)</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Weighted-<br />
Average<br />
Grant Date<br />
Fair Value</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="4" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Aggregate<br />
Intrinsic<br />
Value<br />
($000)</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Non-vested shares
outstanding — January 1, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1,096</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">14.47</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Granted</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">300</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">12.15</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Vested</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(306</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">15.19</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Cancelled</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(19</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">13.06</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Non-vested shares
outstanding — September 30, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1,071</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">13.64</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">10,057</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Non-vested shares vested
or expected to vest — September 30, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1,000</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">13.64</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">9,390</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
</table>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The aggregate intrinsic
value represents the total pre-tax intrinsic value based on the
Company’s closing stock price of $9.39 on September 30,
2012. The amount changes based upon the fair market value of the
Company’s common stock.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The unrecognized
compensation cost associated with non-vested shares at
September 30, 2012 and December 31, 2011 was $12.5
million and $14.3 million, respectively. The weighted average
remaining term that the compensation will be recorded is 2.4 years
and 2.4 years as of September 30, 2012 and December 31,
2011, respectively.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">During the quarter ended
March 31, 2011, Rian J. Wren, the Company’s Chief
Executive Officer since 2006, announced his decision to retire from
the Company on March 31, 2011. He continues to serve on the
Board of Directors following his retirement. As a result of this
decision, the Board approved the acceleration of the vesting on
approximately 0.2 million options and 0.1 million
non-vested shares, in addition to the forfeiture of
0.1 million non-vested shares. All options and non-vested
shares were fully vested as of March 31, 2011. Non-cash
share-based compensation expense of $6.6 million recorded in the
first quarter 2011 included $2.0 million related to the
acceleration of options and $1.6 million related to the
acceleration of non-vested shares.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">During the quarter ended
September 30, 2012, Surendra Saboo, the Company’s
President and Chief Operating Officer since 2006, and Rob
Junkroski, the Company’s Chief Financial Officer since 2003,
announced their decisions to step down from their executive
positions with the Company on October 1, 2012. As a result of
these decisions, during the fourth quarter of 2012, the Board
approved the acceleration of the vesting of some non-vested shares
and options outstanding for both individuals. As such, $2.6 million
of non-cash share-based compensation expense will be recorded
during the fourth quarter of 2012.</font></font></p>
</div>
1900000
19000
<div>
<p style="MARGIN-TOP: 0px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Goodwill
and Intangible Assets, Net</i></b> — Goodwill <font style="FONT-FAMILY: 'Times New Roman'" size="2">is tested for impairment
at least annually as of October 1 or more frequently if an
event occurs or circumstances change that would reduce the fair
value of a reporting unit below its carrying value. The
Company’s reporting units are the Americas, Europe, Middle
East & Africa (EMEA) and Asia Pacific (APAC). The
evaluation of goodwill impairment is based upon the estimated fair
value of the Company’s reporting units compared to the net
carrying value of assets and liabilities. The Company uses internal
discounted cash flow estimates and market value comparisons to
determine estimated fair value. If this first test indicates that
impairment potentially exists, the second step is performed to
measure the amount of impairment, if any. Goodwill impairment
exists when the estimated implied fair value of goodwill, a
non-recurring Level 3 fair value measurement, is less than its
carrying value.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Factors that the Company
will consider in the fourth quarter when estimating the fair value
of the reporting units include (i) decrease in projected
revenues and operating margins due to continued competition and
related price pressure, (ii) decline in the Company’s
common stock price beginning late in the third quarter of 2012 and
sustained through the date of this filing, which required an
increase in the discount rate used in the present value calculation
in order to reconcile the Company’s market capitalization to
the aggregate estimated fair value of all of the Company’s
reporting units, and (iii) higher spending expected for
strategic product expansion in the near-term to mid-term, with
expected benefit to revenues and operating margin trailing the
increased spending.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">As of this filing, the
Company has not completed the analysis, due to the complexities
involved in determining the implied fair value of the goodwill of
the reporting units. The Company expects to finalize the
analysis during the fourth quarter of 2012. No assurance can be
given that the Company will not be required to record an impairment
loss on goodwill then or in the future.</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">The change in the
carrying amount of goodwill and other intangible assets during the
nine months ended September 30, 2012, is as
follows:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 0px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="59%"></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 75pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(Dollars
in thousands)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>December 31,</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Currency</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Translation Effect  and</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Other</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>September 30,</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Goodwill</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">48,137</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">1,452</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">49,589</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
</table>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Intangible assets, net
consist of the following:</font></font></p>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 0px; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12px 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 0px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
</p>
<table style="WIDOWS: 2; TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; ORPHANS: 2; WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="64%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="10" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>September 30,
2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 75pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(Dollars
in thousands)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Gross 
Carrying</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amount</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Accumulated</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amortization</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Net 
Intangible</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Assets</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Customer
relationships</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,109</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(4,555</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">26,554</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
<tr>
<td height="16"></td>
<td height="16" colspan="12"></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="10" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>December 31,
2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom" nowrap="nowrap">
<p style="BORDER-BOTTOM: rgb(0,0,0) 1px solid; WIDTH: 75pt">
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>(Dollars
in thousands)</b></font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Gross
Carrying</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amount</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Accumulated</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Amortization</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Net
Intangible</b></font><br />
<font style="FONT-FAMILY: 'Times New Roman'" size="1"><b>Assets</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Customer
relationships</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">31,337</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">(2,693</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: 'Times New Roman'" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: 'Times New Roman'" size="2">28,644</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: 'Times New Roman'" size="2">  </font></td>
</tr>
</table>
<p style="WIDOWS: 2; TEXT-TRANSFORM: none; MARGIN-TOP: 12px; TEXT-INDENT: 4%; LETTER-SPACING: normal; FONT: medium 'Times New Roman'; WHITE-SPACE: normal; ORPHANS: 2; MARGIN-BOTTOM: 0px; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><font style="FONT-FAMILY: 'Times New Roman'" size="2">Intangible assets, which
consist of customer relationships, have a definite life and are
amortized on an accelerated basis based on the discounted cash
flows recognized over their estimated useful lives (15 years).
Intangible asset amortization expense was $0.6 million and $1.9
million, in the three and nine months ended September 30,
2012, respectively. Intangible asset amortization expense was $0.6
million and $1.7 million, in the three and nine months ended
September 30, 2011, respectively. Intangible asset
amortization for each of the five succeeding fiscal years is
estimated at $2.5 million for 2012, $2.9 million for 2013, $2.8
million for 2014, $2.4 million for 2015 and $2.0 million in
2016.</font></font></p>
</div>
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The following
table reconciles net income to comprehensive income for the three
and nine months ended September 30, 2012 and
September 30, 2011 (in thousands):</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="54%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Three Months Ended</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" colspan="2"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" colspan="2"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>September 30,<br />
2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>September 30,<br />
2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>September 30,<br />
2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>September 30,<br />
2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net (loss)
income</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(2,735</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">5,848</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">7,626</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">21,084</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Other comprehensive income
(loss)</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,958</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(4,259</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)</font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(637</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,098</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Total comprehensive (loss)
income</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(777</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,589</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6,989</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">23,182</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
15884000
11.75
<div>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b><i>Current
Assets Held for Sale</i></b> — Current assets classified as
held for sale are measured at the lower of carrying amount and fair
value, less cost to sell. Current assets are classified as held for
sale if their carrying amounts will be recovered through a sale
transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable and the asset
or disposal group is available for immediate sale in its present
condition subject only to terms that are usual and customary for
sales of such assets. Management must be committed to the sale,
which should be expected to qualify for recognition as a completed
sale within one year from the date of classification as held for
sale. Property and intangible assets are not depreciated once
classified as held for sale.</font></p>
<p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">During the
quarter ended September 30, 2012, the Company ceased
operations related to its hosted services business offering. The
equipment has no further use in the Company’s network and is
being held for sale. As a result, the Company recorded an asset
impairment charge of approximately $1.3 million. As of
September 30, 2012, the fair value of the assets available for
sale is $1.7 million and is included in “Other current
assets” on the condensed consolidated balance
sheet.</font></p>
</div>
13.06
90
66000
5100000
0.023
P2Y4M24D
2700000
P1Y9M18D
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