ORGANIZATION AND BUSINESS (Policies)

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Changes in Basis of Presentation and Accounting

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the Company’s audited financial statements and footnotes thereto for the fiscal year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed on March 2, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to such rules and regulations.

The condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial position and its results of operations. The operating results for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full fiscal year 2020 or for any other interim period. The December 31, 2019 consolidated balance sheet is condensed from the audited financial statements as of that date.

Use of Estimates and Assumptions

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are used when establishing allowances for doubtful accounts, accruals for billing disputes and exit activities, determining useful lives for depreciation and amortization, assessing the need for impairment charges (including those related to intangible assets and goodwill), determining the fair values of assets acquired and liabilities assumed in business combinations, assessing the fair value of derivative financial instruments, accounting for income taxes and related valuation allowances against deferred tax assets, and estimating the grant date fair values used to compute the share-based compensation expense. Management evaluates these estimates and judgments on an ongoing basis and makes estimates based on historical experience, current conditions, and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from these estimates under different assumptions or conditions, including but not limited to assumptions or conditions due to uncertainty of the magnitude and duration of the impacts of the COVID-19 pandemic in the current economic environment.

Revenue Recognition

The Company's revenue is derived primarily from telecommunications services, which includes both revenue from contracts with customers and lease revenues. Lease revenue services include dark fiber, duct, and colocation services. All other services are considered revenue from contracts with customers. Revenue from contracts with customers is recognized when services are provided to the customer, in an amount that reflects the consideration the Company expects to receive in exchange for those services. Lease revenue represents an arrangement where the customer has the right to use an identified asset for a specified term and such revenue is recognized over the term the customer is given exclusive access to the asset.

Primary geographical market. The Company’s operations are located primarily in the United States and Europe. The nature and timing of revenue from contracts with customers across geographic markets is similar. The following table presents the

Company's revenue from contracts with customers disaggregated by primary geographic market based on legal entities (in millions):


	Three Months Ended March 31,
	2020		2019
Primary geographic market:
United States	$	171.7	$	204.2
Europe	205.3		196.5
Other	9.0		11.9
Total revenue from contracts with customers	386.0		412.6
Lease revenue	38.7		37.6
Total telecommunications services revenue	$	424.7	$	450.2

Universal Service Fund ("USF"), Gross Receipts Taxes and Other Surcharges. USF fees and other surcharges billed to customers and recorded on a gross basis (as service telecommunications services revenue and cost of telecommunications services) were $5.6 million and $5.9 million for the three months ended March 31, 2020 and 2019, respectively.

Contract balances. Contract assets consist of conditional or unconditional rights to consideration. Accounts receivable represent amounts billed to customers where the Company has an enforceable right to payment for performance completed to date (i.e., unconditional rights to consideration). The Company does not have contract assets that represent conditional rights to consideration. The Company’s accounts receivable balance at March 31, 2020 and December 31, 2019 includes $134.4 million and $145.9 million, respectively, related to contracts with customers. There were no other contract assets as of March 31, 2020 or December 31, 2019.

Contract liabilities are generally limited to deferred revenue. Deferred revenue is a contract liability, representing advance consideration received from customers primarily related to the pre-paid capacity sales, where transfer of control occurs over time, and therefore revenue is recognized over the related contractual service period.

Property and Equipment

Depreciation expense associated with property and equipment, including amortization of finance lease assets, was $46.4 million and $40.7 million for the three months ended March 31, 2020 and 2019, respectively.

The Company capitalized labor costs, including indirect and overhead costs, of $3.8 million and $4.2 million for the three months ended March 31, 2020 and 2019, respectively. The Company capitalized software costs of $1.1 million and $1.1 million for the three months ended March 31, 2020 and 2019, respectively.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the carrying amount of an asset were to exceed its estimated future undiscounted cash flows, the asset would be considered to be impaired. Impairment losses would then be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of, if any, are reported at the lower of the carrying amount or fair value less costs to sell.

Disputed Supplier Expenses

Disputed Supplier ExpensesIn the normal course of business, the Company identifies errors by suppliers with respect to the billing of services. The Company performs bill verification procedures to ensure that errors in the Company's suppliers' billed invoices are identified and resolved. If the Company concludes that a vendor has billed inaccurately, the Company will record a liability only for the amount that it believes is owed.

Newly Adopted Accounting Principles and Recent Accounting Pronouncements

Newly Adopted Accounting Principles

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendment to the initial guidance, ASU 2018-19, in November 2018. The updated guidance introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2019. The standard requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company adopted ASU 2016-13 as of January 1, 2020 using the modified retrospective approach related to its accounts receivables, resulting in a cumulative adjustment to retained earnings of approximately $9.1 million.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2019. The removed and modified disclosures are adopted on a retrospective basis and the new disclosures are adopted on a prospective basis. The Company adopted the guidance as of January 1, 2020. The adoption of the new standard did not have a material impact on the Company's condensed consolidated financial statements.

Recent Accounting Pronouncements

Other recent accounting pronouncements issued by the FASB during 2020 and through the filing date did not and are not believed by management to have a material impact on the Company's present or historical consolidated financial statements.