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Discontinued Operations | 9 Months Ended
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Sep. 30, 2013
Discontinued Operations And Disposal Groups [Abstract] |
Discontinued Operations | 10. DISCONTINUED OPERATIONS Discontinued Operations—nine months ended September 30, 2013 On April 17, 2013, the Company completed the sale of its BLACKIRON Data segment to Rogers Communications Inc., a Canadian telecommunications company, and its affiliates (together “Rogers”) for CAD$200.0 million (or approximately USD$195.6 million giving effect to the currency exchange rate on the day of sale). The Company recorded a $135.0 million gain from the sale of this segment during the second quarter of 2013. In addition, the purchase agreement contains customary indemnification obligations, representations, warranties and covenants for a transaction of this nature. In connection with the closing of the transaction, CAD$20.0 million (or approximately USD$19.5 million giving effect to the currency exchange rate on the day of sale) was retained from the purchase price and placed into escrow until July 17, 2014 for purposes of satisfying potential indemnification claims pursuant to the purchase agreement. The escrow has been recorded as part of prepaid expenses and other current assets at September 30, 2013 in the condensed consolidated balance sheet. On July 31, 2013, the Company completed the sale of Primus Telecommunications, Inc. (“PTI”), Lingo, Inc. (“Lingo”), iPrimus, USA, Inc. (“iPrimus”), 3620212 Canada Inc. (“PTGi Canada”), PTCI, Telesonic Communications Inc. (“Telesonic”), and Globility Communications Corporation (“Globility”, and together with PTI, Lingo, iPrimus, PTGi Canada, PTCI and Telesonic, the “NAT Companies”) to affiliates of York Capital Management, an investment firm (together “York”) for $129 million. The Company recorded a $15.6 million gain from the sale of this segment during the third quarter of 2013. The purchase price is subject to potential downward or upward post-closing adjustments based on net working capital and cash at closing. In addition, the purchase agreement contains customary indemnification obligations, representations, warranties and covenants for a transaction of this nature. Certain indemnification obligations are subject to a cap of $12.9 million. In addition, the purchase agreement provides that the Company must, for 14 months after the closing of the transaction, maintain a minimum balance of cash and cash equivalents necessary to satisfy potential indemnification obligations under the purchase agreement. The Company received $126.0 million, net of $15.25 million held in escrow as part of the initial closing, with an additional $3.0 million held in escrow to be paid upon closing of the sale of PTI. Subject to regulatory approvals, the sale of PTI is expected to close subsequent to the fourth quarter of 2013. The escrow has been recorded as part of prepaid expenses and other current assets as of September 30, 2013 in the condensed consolidated balance sheet. Pursuant to the terms of the purchase agreement, $6.45 million of the purchase price will be placed in escrow to be released 14 months after the closing date, subject to any deductions required to satisfy indemnification obligations of PTGi under the purchase agreement. In addition, $4.0 million of the purchase price will be placed in escrow to cover any payments required in connection with the post-closing working capital and cash adjustments, which escrow amount will be released when such adjustments are conclusively agreed upon. Furthermore, $4.8 million of the purchase price will be placed in escrow to cover certain tax liabilities, which escrow amount will be released after a positive ruling with respect to the underlying matter is received or 30 days after expiration of the applicable statute of limitations relating to the underlying matter. The $6.45 million and $4.0 million escrow deposits are recorded in prepaid expenses and other current assets, while the $4.8 million escrow deposit is recorded in other assets in the condensed consolidated balance sheet. The Company evaluated the remaining carrying value of North America Telecom, i.e. PTI, in the third quarter of 2013 which resulted in it being higher than its fair value less costs to sell by $0.3 million and have attributed such adjustment to the long-lived assets of PTI. As the adjustment is related to North America Telecom, it is classified within income (loss) from discontinued operations, net of tax on the condensed consolidated statements of operations in the third quarter of 2013. Discontinued Operations—year ended December 31, 2012 On May 31, 2012, the Company completed the sale of its Australian segment to M2 Telecommunications Group Ltd. (“M2”), an Australian telecommunications company, for approximately AUD$192.4 million (or approximately USD$195.7 million giving effect to a currency hedge that the Company put in place in connection with the transaction). The Company recorded a $98.6 million gain from the sale of this segment during the second quarter of 2012. In connection with the closing of the transaction, $9.8 million was retained from the purchase price and placed into escrow until May 31, 2013 for purposes of satisfying potential indemnification claims pursuant to the purchase agreement. The purchase price was also subject to a customary post-closing working capital adjustment. In the fourth quarter of 2012, the Company and M2 settled on a working capital adjustment and the escrow was released. The Company received $5.4 million and M2 received $4.4 million. The $4.4 million was recorded as an adjustment to the gain that was recorded in the second quarter of 2012, which resulted in a net gain for the year ended December 31, 2012 of $94.3 million. On June 28, 2012, the Board of Directors of PTGi committed to dispose of the Company’s ICS business unit and as a result classified ICS as a discontinued operation. In the fourth quarter of 2012, the Company began discussions with potential buyers for BLACKIRON Data and North America Telecom. The special committee of the Board of Directors believed that the Company’s focus was best served on these potential deals as they would provide a greater return to our shareholders. These events, although unanticipated at the time, took precedence over the ICS sale process, and therefore resulted in the need to extend the allowable period to complete the sale of ICS under ASC 360 to beyond one year. The Company continues to actively solicit a sale or other disposition of its ICS business unit. In conjunction with the commitment to dispose of ICS and classification of ICS as a discontinued operation, the Company evaluated the carrying value of ICS in the second quarter of 2012 which resulted in it being higher than its fair value less costs to sell by $10.3 million and have attributed such adjustment to the long-lived assets of ICS. As the adjustment is related to ICS, it is classified within Income (loss) from discontinued operations, net of tax on the consolidated statements of operations in the second quarter of 2012. The Company performed the same analysis as of September 30, 2013 and December 31, 2012 and determined that the fair value less costs to sell exceeded the carrying value and therefore no additional adjustment was required. As a result of these events, the Company’s condensed consolidated financial statements reflect the BLACKIRON Data, North America Telecom, Australian and ICS segments, as well as PTHI’s interest expense and loss on early extinguishment or restructuring of debt as discontinued operations for the three and nine months ended September 30, 2013 and 2012. Accordingly, revenue, costs and expenses of the discontinued operations have been excluded from the respective captions in the condensed consolidated statements of operations. The net operating results of the discontinued operations have been reported, net of applicable income taxes as income or loss (where applicable) from discontinued operations. Additionally, the assets and liabilities of ICS and the remaining portion of North America Telecom, PTI, have been classified as held for sale assets and liabilities as of September 30, 2013 and the assets and liabilities of ICS have been classified as held for sale assets and liabilities as of December 31, 2012. The held for sale assets and liabilities were removed from the specific line items on the condensed consolidated balance sheets as of September 30, 2013 and December 31, 2012. Summarized operating results of the discontinued operations are as follows (in thousands):
|  | Three Months Ended September 30, 2013 |  |  | Three Months Ended September 30, 2012 |  |  | Nine Months Ended September 30, 2013 |  |  | Nine Months Ended September 30, 2012 |
Net revenue |  | $ | 78,866 |  |  | $ | 134,960 |  |  | $ | 307,475 |  |  | $ | 552,319 |
Operating expenses |  |  | 78,557 |  |  |  | 132,058 |  |  |  | 299,122 |  |  |  | 543,630 |
Income (loss) from operations |  |  | 309 |  |  |  | 2,902 |  |  |  | 8,353 |  |  |  | 8,689 |
Interest expense |  |  | (2,851 | ) |  |  | (6,381 | ) |  |  | (11,365 | ) |  |  | (20,779 | )
Gain (loss) on early extinguishment or restructuring of debt |  |  | (21,178 | ) |  |  | (21,083 | ) |  |  | (21,178 | ) |  |  | (21,083 | )
Interest income and other income (expense) |  |  | (153 | ) |  |  | (38 | ) |  |  | (212 | ) |  |  | 309 |
Foreign currency transaction gain (loss) |  |  | (345 | ) |  |  | 291 |  |  |  | (1,317 | ) |  |  | (2,467 | )
Income (loss) before income tax |  |  | (24,218 | ) |  |  | (24,309 | ) |  |  | (25,719 | ) |  |  | (35,331 | )
Income tax (expense) benefit |  |  | 474 |  |  |  | 181 |  |  |  | 176 |  |  |  | (4,976 | )
Income (loss) from discontinued operations |  | $ | (23,744 | ) |  | $ | (24,128 | ) |  | $ | (25,543 | ) |  | $ | (40,307 | )
Summarized assets and liabilities of ICS and the remaining portion of North America Telecom, PTI, classified as held for sale as of September 30, 2013 and assets and liabilities of ICS classified as held for sale as of December 31, 2012 are as follows (in thousands):
|  | ICS |  |  | North America Telecom |
|  | September 30, 2013 |  |  | December 31, 2012 |  |  | September 30, 2013 |
Accounts receivable |  | $ | 20,515 |  |  | $ | 16,070 |  |  | $ | 949 |
Prepaid expenses and other current assets |  |  | 3,964 |  |  |  | 4,196 |  |  |  | 1,020 |
Restricted cash |  |  | 50 |  |  |  | 487 |  |  |  | — |
Long-lived assets |  |  | 20,292 |  |  |  | 19,313 |  |  |  | 6,688 |
Assets held for sale |  | $ | 44,821 |  |  | $ | 40,066 |  |  | $ | 8,657 |
Accounts payable |  | $ | 6,858 |  |  | $ | 10,580 |  |  | $ | 1,053 |
Accrued interconnection costs |  |  | 14,121 |  |  |  | 6,961 |  |  |  | 915 |
Accrued expenses and other liabilities |  |  | 5,093 |  |  |  | 6,763 |  |  |  | 3,689 |
Liabilities held for sale |  | $ | 26,072 |  |  | $ | 24,304 |  |  | $ | 5,657 |

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- Definition The entire disclosure for the facts and circumstances leading to the completed or expected disposal, manner and timing of disposal, the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the segment in which the disposal group was reported, and the classification (whether sold or classified as held for sale) and carrying value of the assets and liabilities comprising the disposal group. Includes all disposal groups, including those classified as components of the entity (discontinued operations). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6391110&loc=d3e2941-110230 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1361-107760 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e957-107759 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e1012-107759 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1510-107760 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e1020-107759 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 45 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=8077374&loc=d3e2443-110228 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1474-107760 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1436-107760 + Details
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