What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-24 compared with 2022-02-25 · 183 added, 176 removed, 668 unchanged (35% of the section changed)

3 unchanged sentences

Consolidated Statements of Comprehensive Income for Each of the Three Years Ended December 31, 2022

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for Each of the Three Years Ended December 31, 2021

Consolidated Statements of Changes in Stockholders’ Deficit for Each of the Three Years Ended December 31, 2022

Consolidated Statements of Cash Flows for Each of the Three Years Ended December 31, 2022

5 unchanged sentences

We have audited the accompanying consolidated balance sheets of Cogent Communications Holdings, Inc.

and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income, shareholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”).

and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of comprehensive (loss) income, shareholders’ deficit and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

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We believe that our audits provide a reasonable basis for our opinion

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Critical Audit Matter

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Determining the presentation and disclosure requirements for Indefeasible Right of Use Lease Assets and Liabilities

6 unchanged sentences

We tested the design and operating effectiveness of the Company’s controls over the process to determine the economic life of the underlying asset (the optical fiber) of the IRU leases.

To test the classification of IRU lease agreements, our audit procedures included among others, assessing the Company’s assumptions by evaluating industry practices in estimating the economic life of optical fiber, compared to those assumptions selected by management.

To test the classification of IRU lease agreements, our audit procedures included among others, assessing the Company’s assumptions by evaluating industry practices and the Company’s experience as a lessee of IRU leases, in estimating the economic life of optical fiber, compared to those assumptions selected by management.

/s/ Ernst & Young LLP

25 unchanged sentences

Current maturities, operating lease liabilities

Installment payment agreement, current portion, net of discount of $ 6 and $ 136 , respectively

Installment payment agreement, current portion, net of discount of $ 6

Finance lease obligations, current maturities

Total current liabilities

Senior secured 2022 notes, net of unamortized debt costs of $ 1,052 and including premium of $ 544

Senior unsecured 2024 Euro notes, net of unamortized debt costs of $ 2,121 and $ 2,961 , respectively and net of discount of $ 772 and $ 1,142 , respectively

Senior unsecured 2024 notes, net of unamortized debt costs of $ 2,121 and net of discount of $ 772

Senior secured 2026 notes, net of unamortized debt costs of $ 905 and $ 1,156 , respectively, and discount of $ 1,203 and $ 1,536 , respectively

Senior unsecured 2027 notes, net of unamortized debt costs of $ 1,173 and discount of $ 2,456

4 unchanged sentences

Commitments and contingencies

Stockholders’ equity:

Stockholders’ deficit:

Common stock, $ 0.001 par value;

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Accumulated deficit

( 1,074,588 )

Total stockholders’ deficit

Total liabilities and stockholders’ equity

Total liabilities and stockholders’ deficit

The accompanying notes are an integral part of these consolidated balance sheets.

1 unchanged sentence

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2022

4 unchanged sentences

Selling, general, and administrative (including $ 23,886 , $ 24,301 and $ 22,306 of equity-based compensation expense, respectively)

Acquisition costs – Sprint (T-Mobile Wireline) (Note 1)

Depreciation and amortization

4 unchanged sentences

Interest expense

Realized foreign exchange gain on 2024 Euro Notes

Unrealized foreign exchange gain (loss) on 2024 Euro Notes

Change in valuation – interest rate swap

Realized foreign exchange gain on 2024 Notes

Foreign exchange gain (loss) on 2024 Notes

Loss on debt extinguishment and redemption – 2021 Notes

Loss on debt extinguishment and redemption – 2022 Notes

Loss on debt extinguishment and redemption – 2024 Notes

Interest income and other

1 unchanged sentence

Income tax expense

Comprehensive income:

Comprehensive (loss) income:

Foreign currency translation adjustment

Comprehensive income

Comprehensive (loss) income

Basic net income per common share

6 unchanged sentences

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2022

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Income (Loss)

Equity (Deficit)

Balance at December 31, 2019

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Exercises of options

Common stock purchases and retirement

Dividends paid

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Exercises of options

Common stock purchases and retirement

Dividends paid

5 unchanged sentences

Exercises of options

Common stock purchases and retirement

Dividends paid

Balance at December 31, 2022

( 1,074,588 )

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8 unchanged sentences

Equity-based compensation expense (net of amounts capitalized)

Unrealized foreign currency exchange loss (gain) on 2024 Euro Notes

Realized foreign currency exchange gain on 2024 Euro Notes

Foreign currency exchange (gain) loss on 2024 Notes

Realized foreign currency exchange gain on 2024 Notes

Loss on extinguishment & redemption of 2024 notes

Loss on extinguishment & redemption of 2022 notes

Loss on extinguishment & redemption of 2021 notes

Gain – lease termination

4 unchanged sentences

Prepaid expenses and other current assets

Change in valuation – interest rate swap agreement

Deposits and other assets

6 unchanged sentences

Net proceeds from issuance of 2027 Notes, net of debt costs of $ 1,290

Net proceeds from issuance of 2024 Euro Notes, net of debt costs of $ 2,137 and $ 1,556 , respectively

Net proceeds from issuance of 2026 Notes, net of debt costs of $ 1,317

Net proceeds from issuance of 2024 Notes, net of debt costs of $ 2,137

Redemption and extinguishment of 2024 Notes

Redemption and extinguishment of 2022 Notes

Redemption and extinguishment of 2021 Notes

Dividends paid

3 unchanged sentences

Proceeds from exercises of common stock options

Net cash (used in) provided by financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash

Net (decrease) increase in cash and cash equivalents & restricted cash

Net decrease in cash and cash equivalents & restricted cash

Cash and cash equivalents & restricted cash, beginning of year

14 unchanged sentences

On May 15, 2014, pursuant to the Agreement and Plan of Reorganization (the “Merger Agreement”) by and among Cogent Communications Group, Inc.

(“Group”), a Delaware corporation, Cogent Communications Holdings, Inc., a Delaware corporation (“Holdings”) and Cogent Communications Merger Sub, Inc., a Delaware corporation, Group adopted a new holding company organizational structure whereby Group is now a wholly owned subsidiary of Holdings.

(“Group”), a Delaware corporation, Cogent Communications Holdings, Inc., a Delaware corporation (“Holdings” or the “Company”) and Cogent Communications Merger Sub, Inc., a Delaware corporation, Group adopted a new holding company organizational structure whereby Group is now a wholly owned subsidiary of Holdings.

Holdings is a “successor issuer” to Group pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

References to the “Company” for events that occurred prior to May 15, 2014 refer to Cogent Communications Group, Inc.

and its subsidiaries and on and after May 15, 2014 the “Company” refers to Cogent Communications Holdings, Inc.

and its subsidiaries.

Cogent Communications, Inc.

is wholly owned by Group and the vast majority of Cogent’s assets, contractual arrangements, and operations are executed by Cogent Communications, Inc.

is wholly owned by Group and the vast majority of Group’s assets, contractual arrangements, and operations are executed by Cogent Communications, Inc.

and its subsidiaries.

Description of business

1 unchanged sentence

The Company’s network is specifically designed and optimized to transmit packet switched data.

The Company delivers its services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 50 countries across North America, Europe, Asia, South America, Australia and Africa.

The Company delivers its services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 51 countries across North America, Europe, Asia, South America, Oceania and Africa.

The Company is a Delaware corporation and is headquartered in Washington, DC.

4 unchanged sentences

The Company provides its on-net Internet access and private network services to its corporate and net-centric customers.

The Company’s corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms, as well as health care providers, educational institutions and other professional services businesses.

The Company’s corporate customers are located in multi-tenant office buildings (“MTOBs”) and typically include law firms, financial services firms, advertising and marketing firms, as well as health care providers, educational institutions and other professional services businesses.

The Company’s net-centric customers include bandwidth-intensive users that leverage its network to either deliver content to end users or to provide access to residential or commercial internet users.

7 unchanged sentences

The Company continues to support but does not actively sell these non-core services.

In connection with the Company’s Sprint acquisition (discussed below), the Company will begin to provide optical wavelength services over the Company’s fiber network.

The Company will sell these wavelength services to its existing customers, Sprint customers and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

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Acquisition of Sprint Communications

On September 6, 2022, Cogent Infrastructure, Inc., a Delaware corporation (the “Buyer”) and a wholly owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Sprint Communications LLC, a Kansas limited liability company (“Sprint Communications”) and an indirect wholly owned subsidiary of T-Mobile US, Inc., a Delaware corporation (“T-Mobile”), and Sprint LLC, a Delaware limited liability company and a direct wholly owned subsidiary of T-Mobile (the “Seller”), pursuant to which the Company will acquire the U.S.

long-haul fiber network (including the non-U.S.

extensions thereof) of Sprint Communications and its subsidiaries (the “Wireline Business”).

The Purchase Agreement provides that, upon the terms and conditions set forth therein, the Company will purchase from the Seller all of the issued and outstanding membership interests (the “Purchased Interests”) of a Delaware limited liability company that holds Sprint Communications’ assets and liabilities relating to the Wireline Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).

The parties have agreed to a $ 1 purchase price in consideration for the Purchased Interests, subject to customary adjustments set forth in the Purchase Agreement.

In addition, at the consummation of the Transaction (the “Closing”), a T-Mobile affiliate will enter into an agreement for IP transit services, pursuant to which T-Mobile will pay the Company an aggregate of $ 700 million, consisting of (i) $ 350 million in equal monthly installments during the first year after the Closing and (ii) $ 350 million in equal monthly installments over the subsequent 42 months.

The Purchase Agreement includes customary representations, warranties, indemnities and covenants, including regarding the conduct of the Wireline Business prior to the Closing.

In addition, the Closing is subject to customary closing conditions, including as to the receipt of certain required regulatory approvals and consents.

Subject to the satisfaction or waiver of certain conditions and the other terms and conditions of the Purchase Agreement, the Transaction is expected to close in 2023.

The Purchase Agreement contains certain termination rights for the Buyer and Seller, including that, subject to certain limitations, either the Buyer or the Seller may terminate the Purchase Agreement if the Transaction is not consummated by September 6, 2023, subject to two automatic six-month extensions if certain regulatory approvals have not been obtained.

The Purchase Agreement also provides that each party may specifically enforce the other party’s obligations under the Purchase Agreement.

The Company has agreed to guarantee the obligations of the Buyer under the Purchase Agreement pursuant to the terms of a Guaranty, dated as of September 6, 2022, by and between the Company and the Seller (the “Parent Guaranty”).

The Parent Guaranty contains customary representations, warranties and covenants of the Company and the Seller.

Acquisition Related Costs

In connection with the Transaction and negotiation of the Purchase Agreement, the Company incurred $ 2.2 million of professional fees in the year ended December 31, 2022.

Principles of consolidation

1 unchanged sentence

All intercompany balances and transactions have been eliminated in consolidation.

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Use of estimates

1 unchanged sentence

Actual results may differ from these estimates.

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Allowance for credit losses

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The current-period provision for expected credit losses is net of bad debt recoveries of $ 1.9 million, $ 2.2 million and $ 1.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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In February 2016, the FASB issued ASU No.

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The Company has made an accounting policy election to not apply the recognition requirements of ASU 2016-02 to its short-term leases — leases with a term of one year or less.

The Company has also elected to apply certain practical expedients under ASU 2016-02 including not separating lease and non-lease components on its finance and operating leases, not reassessing whether any existing contracts contained leases, not reconsidering lease classification, not reassessing initial direct costs and using hindsight in determining the lease reasonably certain term of its leases.

The Company has also elected to apply certain practical expedients under ASU 2016-02 including not separating lease and non-lease components on its finance and operating leases,

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not reassessing whether any existing contracts contained leases, not reconsidering lease classification, not reassessing initial direct costs and using hindsight in determining the lease reasonably certain term of its leases.

December 31, 2022

26 unchanged sentences

These obligations begin when the related fiber is accepted, which is generally expected to occur in the next 12 months.

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Operating leases

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Once the Company has accepted the related fiber route or the facility lease term has begun, the present value of the aggregate future minimum operating lease payments is recorded as an operating lease liability and a right-of-use leased asset.

Lease incentives and deferred rent liabilities for facilities operating leases are presented with the right-of-use leased asset.

Lease incentives and deferred rent liabilities for facilities operating leases are presented with, and netted against, the right-of-use leased asset.

Lease expense for lease payments is recognized on a straight-line basis over the term of the lease.

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The future minimum payments under these operating lease and finance lease agreements are as follows (in thousands):

14 unchanged sentences

These contract costs were $ 23.7 million as of December 31, 2022 and were $ 21.4 million as of December 31, 2021.

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The Company’s service offerings consist of on-net and off-net telecommunications services.

11 unchanged sentences

5) Recognition of revenue when, or as, the Company satisfies a performance obligation.

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Fees billed in connection with customer installations are deferred (as deferred revenue) and recognized as noted above.

24 unchanged sentences

The Company determines the appropriate classification of its investments at the time of purchase and evaluates such designation at each balance sheet date.

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At December 31, 2022 and December 31, 2021, the carrying amount of cash and cash equivalents, restricted cash, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses approximated fair value because of the short-term nature of these instruments.

The Company measures its cash equivalents and restricted cash at amortized cost, which approximates fair value based upon quoted market prices (Level 1).

Based upon recent trading prices (Level 2—market approach) at December 31, 2021 the fair value of the Company’s $ 500.0 million senior secured notes due 2026 was $ 508.1 million, the fair value of the Company’s € 350.0 million ($ 397.0 million) senior unsecured notes due 2024 was $ 402.0 million and the estimated fair value of the Company’s interest rate swap agreement was $ 9.0 million.

Based upon recent trading prices (Level 2—market approach), at December 31, 2022, the fair value of the Company’s $ 500.0 million senior secured notes due 2026 was $ 452.5 million, the fair value of the Company’s $ 450.0 million senior unsecured notes due 2027 was $ 441.0 million and the estimated fair value of the Company’s Swap Agreement was $ 52.1 million.

Restricted cash and interest rate swap agreement

Restricted cash represents amounts held in segregated bank accounts by our clearing broker as margin in support of our interest rate swap agreement as discussed in Note 4 and was $ 9.0 million as of December 31, 2021.

Restricted cash represents amounts held in segregated bank accounts by our clearing broker as margin in support of our Swap Agreement, as discussed in Note 4, and was $ 52.1 million as of December 31, 2022.

Additional cash may be further restricted to maintain our interest rate swap instrument as interest rates fluctuate and margin requirements change.

The Company does not use derivative financial instruments for trading purposes.

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Concentrations of credit risk

2 unchanged sentences

The Company places its cash equivalents in instruments that meet high-quality credit standards as specified in the Company’s investment policy guidelines.

Accounts receivable are due from customers located in major metropolitan areas in the United States, Europe, Canada, Mexico, Asia, South America, Australia and Africa.

Accounts receivable are due from customers located in major metropolitan areas in the United States, Europe, Canada, Mexico, Asia, South America, Oceania and Africa.

Receivables from the Company’s net-centric (wholesale) customers are generally subject to a higher degree of credit risk than the Company’s corporate customers.

21 unchanged sentences

5 to 10 years

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Long-lived assets

7 unchanged sentences

The Company begins recording equity-based compensation expense related to performance awards when it is considered probable that the performance conditions will be met and for market-based awards compensation cost is recognized if the service condition is satisfied even if the market condition is not satisfied.

Equity-based compensation expense is recognized in the statement of operations in a manner consistent with the classification of the employee’s salary and other compensation.

Equity-based compensation expense is recognized in the statements of comprehensive income in a manner consistent with the classification of the employee’s salary and other compensation.

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The Company’s deferred tax assets or liabilities are computed based upon the differences between financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate.

17 unchanged sentences

Weighted average common shares—diluted

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The following details unvested shares of restricted common stock as well as the anti-dilutive effects of stock options and restricted stock awards outstanding:

2 unchanged sentences

Anti-dilutive shares of restricted common stock

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Property and equipment:

13 unchanged sentences

These amounts are included in system infrastructure costs.

Exchange agreement

In 2020 and 2019 the Company exchanged certain used network equipment and cash consideration for new network equipment.

The fair value of the new network equipment received was estimated to be $ 1.1 million and $ 3.3 million, respectively, resulting in gains of $ 0.3 million and $ 1.0 million, respectively.

The estimated fair value of the equipment received was based upon the cash consideration price the Company pays for the new network equipment on a standalone basis (Level 3).

There were no exchange transactions in 2021.

Installment payment agreement

The Company has entered into an installment payment agreement (“IPA”) with a vendor.

The Company had entered into an installment payment agreement (“IPA”) with a vendor.

Under the IPA the Company was able to purchase network equipment in exchange for interest free note obligations each with a twenty-four month term.

There are no payments under each note obligation for the first six months followed by eighteen equal installment payments for the remaining eighteen month term.

As of December 31, 2021 and December 31, 2020, there was $ 0.8 million and $ 7.7 million, respectively, of note obligations outstanding under the IPA, secured by the related equipment.

There were no payments under each note obligation for the first six months followed by eighteen equal installment payments for the remaining eighteen month term.

As of December 31, 2021, there was $ 0.8 million of note obligations outstanding under the IPA, secured by the related equipment.

The Company recorded the assets purchased and the present value of the note obligation utilizing an imputed interest rate.

The resulting discounts under the note obligations are being amortized over the note term using the effective interest rate method.

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The resulting discounts under the note obligations were amortized over the note term using the effective interest rate method.

The IPA was fully repaid in 2022.

Accrued and other liabilities:

1 unchanged sentence

Operating accruals

Interest rate swap agreement - current portion

Deferred revenue—current portion

1 unchanged sentence

Taxes—non-income based

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Long-term debt:

As of December 31, 2021, the Company had outstanding $ 500.0 million aggregate principal amount of Senior Secured Notes due 2026 (the “2026 Notes”) and € 350.0 million ($ 397.0 million USD) aggregate principal amount of Senior Unsecured Euro Notes due 2024 (the “2024 Notes”).

The 2026 Notes are due on May 1, 2026 and bear interest at a rate of 3.50 % per year.

Interest on the 2026 Notes is paid semi-annually on May 1 and November 1 of each year.

The 2024 Notes are due on June 30, 2024 and bear interest at a rate of 4.375 % per year.

As of December 31, 2022, the Company had outstanding $ 450.0 million aggregate principal amount of Senior Unsecured Notes due 2027 (the “2027 Notes”) and $ 500.0 million aggregate principal amount of Senior Secured Notes due 2026 (the “2026 Notes”).

The 2027 Notes were issued in June 2022, are due on June 15, 2027 and bear interest at a rate of 7.00 % per year.

Interest on the 2027 Notes is paid semi-annually on June 15 and December 15 of each year.

Interest rate swap agreement

As of December 31, 2021, the Company was party to an interest rate swap agreement (the “Swap Agreement”) that has the economic effect of modifying the fixed interest rate obligation associated with its 2026 Notes to a variable interest rate obligation based on the Secured Overnight Financing Rate (“SOFR”) so that the interest payable on the 2026 Notes effectively became variable based on overnight SOFR.

The critical terms of the Swap Agreement match the terms of the 2026 Notes, including the notional amount and the optional redemption date on February 1, 2026.

The Company did not elect hedge accounting for the Swap Agreement.

The Swap Agreement is recorded at its fair value at each reporting period, and the Company incurs gains and losses due to changes in market interest rates.

By entering into the Swap Agreement, the Company has assumed the risk associated with variable interest rates.

Changes in interest rates affect the interest expense that the Company recognizes in its consolidated statements of comprehensive income.

The values that the Company reports for the Swap Agreement as of each reporting date are recognized as interest expense with the corresponding amounts included in assets or liabilities in the Company’s consolidated balance sheets.

As of December 31, 2021 the fair value of the Swap Agreement was a net liability of $ 9.0 million of which $ 1.6 million is presented with prepaid expenses and $ 10.6 million is presented with other long-term liabilities.

The Company recorded an unrealized loss related to the Swap Agreement of $ 9.0 million in 2021, which is presented in interest expense on the statement of comprehensive income.

The Company has made a $ 20.0 million deposit with the counterparty to the Swap Agreement.

If the fair value of the Swap Agreement exceeds a net liability of $ 20.0 million the Company will be required to deposit additional funds with the counterparty equal to the net liability fair value in excess of $ 20.0 million.

As of December 31, 2021, $ 9.0 million of the $ 20.0 million deposit was restricted and $ 11.0 million was unrestricted.

Issuance of the 2026 Notes

On May 7, 2021 (the “Closing Date”), Group completed an offering of $ 500.0 million aggregate principal amount of its 2026 Notes for issuance in a private placement exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”).

The 2026 Notes were issued in May 2021, are due on May 1, 2026 and bear interest at a rate of 3.50 % per year.

Interest on the 2026 Notes is paid semi-annually on May 1 and November 1 of each year.

In June 2022, the Company redeemed and extinguished its € 350.0 million aggregate principal amount of Senior Unsecured Euro Notes due 2024 (the “2024 Notes”).

The 2024 Notes were due on June 30, 2024 and bore interest at a rate of 4.375 % per year.

Interest on the 2024 Notes was paid semi-annually on June 30 and December 30 of each year.

Issuance of 2027 Notes and redemption of 2024 Notes

On June 22, 2022 (the “2027 Notes Closing Date”), Group completed its offering of $ 450.0 million aggregate principal amount of its 2027 Notes for issuance in a private placement not registered under the Securities Act of 1933, as amended (the “Securities Act”).

The 2027 Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers in an unregistered offering pursuant to Rule 144A under the Securities Act and to certain non-U.S.

persons in transactions outside the United States in compliance with Regulation S under the Securities Act.

The 2027 Notes were issued pursuant to, and are governed by, an indenture (the “2027 Notes Indenture”), dated the 2027 Notes Closing Date by and among Group, Holdings, the other guarantors named therein and the trustee.

The 2027 Notes are jointly and severally guaranteed on a senior unsecured basis by each of the Company’s existing and future material domestic subsidiaries, subject to certain exceptions, and by the Company.

Under certain circumstances, the Guarantors may be released from these Guarantees without the consent of the holders of the 2027 Notes.

The net proceeds from the 2027 Notes offering were $ 446.0 million after deducting the $ 2.7 million discount and $ 1.3 million of offering expenses.

The Company used a portion of the net proceeds from the 2027 Notes offering to redeem its 2024 Notes.

The Company expects to use the remaining net proceeds from the 2027 Notes offering for general corporate purposes, and/or to repurchase the Company’s common stock or for special or recurring dividends to the Company’s stockholders.

In connection with full redemption of its 2024 Notes, Group issued a conditional notice of full redemption to holders of the 2024 Notes, specifying June 30, 2022 as the redemption date (the “Redemption Date”).

On the 2027 Notes Closing Date, Group satisfied and discharged its obligations under the 2024 Notes by depositing with a designee of the trustee for the 2024 Notes sufficient funds to pay the principal of the Premium (defined below) and accrued and unpaid interest on the Euro Notes to the Redemption Date.

The 2024 Notes were issued in Euros and were reported in the Company’s reporting currency, US dollars, until they were extinguished and redeemed.

Prior to the redemption of the 2024 Notes, the gain (loss) on foreign exchange on the 2024 Notes from converting Euros into US dollars was $ 31.6 million, $ 32.5 million and ($ 37.0 ) million for 2022, 2021 and 2020, respectively.

Unless earlier redeemed or repurchased, the 2027 Notes will mature on June 15, 2027.

Group may redeem some or all of the 2027 Notes at any time prior to June 15, 2024 at a price equal to 100 % of the principal amount of the 2027 Notes, plus a “make-whole” premium, as set forth in the 2027 Notes Indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, or may redeem up to 40.0 % of the 2027 Notes using proceeds of certain equity offerings completed prior to June 15, 2024 at 107.0 % of the principal amount plus accrued and unpaid interest, if any.

Thereafter, Group may redeem the 2027 Notes, in whole or in part, at a redemption price ranging from 103.5 % of the aggregate principal amount of the 2027 Notes redeemed to par (depending on the year), in each case, as set forth in the 2027 Notes Indenture, plus accrued and unpaid interest, if any.

On the Redemption Date, Group redeemed its € 350.0 million of 2024 Notes at a price of 101.094 % (€ 353.8 million or $ 375.2 million) of the principal amount (the “Premium”) plus € 7.7 million ($ 8.1 million) of interest paid through June 30, 2022, the Redemption Date where the Premium reduced to 101.094 %, for a total payment of € 361.5 million ($ 383.4 million).

Group entered into a short-term USD to Euro forward purchase agreement to mitigate the risk of foreign currency fluctuations.

As a result of these transactions, the Company incurred a loss on debt extinguishment and redemption of $ 11.9 million.

On the Redemption Date the 2024 Notes were valued at $ 365.8 million, resulting in a gain on foreign exchange of $ 31.6 million for the year ended December 31, 2022.

Issuance of the 2026 Notes and redemption of 2022 Notes

On May 7, 2021 (the “2026 Notes Closing Date”), Group completed an offering of $ 500.0 million aggregate principal amount of its 2026 Notes for issuance in a private placement exempt from registration under the Securities Act.

The 2026 Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S.

persons in transactions outside the United States in compliance with Regulation S under the Securities Act.

The 2026 Notes were issued pursuant to, and are governed by, an indenture (the “2026 Notes Indenture”), dated the 2026 Notes Closing Date by

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The net proceeds from the 2026 Notes offering were $ 496.9 million after deducting the $ 1.8 million discount and $ 1.3 million of offering expenses.

In May 2021 and prior to the consummation of the offering of the 2026 Notes, Group completed the redemption of $ 45.0 million of its 5.375 % Senior Secured Notes due 2022 (the “2022 Notes”), following which $ 284.1 million of its 2022 Notes remained outstanding.

On the Closing Date, Group issued a notice of full redemption to holders of its remaining 2022 Notes, specifying December 1, 2021 as the redemption date.

On the Closing Date, Group used the net proceeds from the offering of the 2026 Notes to satisfy and discharge its obligations under the remaining 2022 Notes by depositing with the trustee the funds necessary to pay the $ 284.1 million aggregate principal amount and $ 11.5 million of interest due on the 2022 Notes through December 1, 2021.

Under the indenture governing the 2022 Notes (the “2022 Notes Indenture”), Group could redeem the 2022 Notes, in whole or in part, at a price equal to 100 % of the principal amount of the 2022 Notes, plus accrued and unpaid interest beginning on December 1, 2021.

Prior to December 1, 2021, any redemption of the 2022 Notes would have included a “make-whole” premium as set forth in the 2022 Notes Indenture.

The Company expects to use the remaining net proceeds from the 2026 Notes offering for general corporate purposes, to repay debt obligations, to repurchase the Company’s common stock or for special or recurring dividends to the Company’s stockholders.

The 2026 Notes were issued pursuant to, and are governed by, an indenture (the “2026 Notes Indenture”), dated the Closing Date by and among Group, Holdings, the other guarantors named therein, the trustee and the collateral agent.

and among Group, Holdings, the other guarantors named therein, the trustee and the collateral agent.

The 2026 Notes are guaranteed on a senior secured basis, jointly and severally, by Group’s material domestic subsidiaries, subject to certain exceptions (the “Subsidiary Guarantors”).

1 unchanged sentence

Under certain circumstances, the Guarantors may be released from these guarantees without the consent of the holders of the 2026 Notes.

The 2026 Notes and the guarantees of the Subsidiary Guarantors (the “subsidiary guarantees”) are Group’s and the Subsidiary Guarantors’ senior obligations, secured by a first priority lien on substantially all of Group’s and the Subsidiary Guarantors’ assets, subject to certain exceptions, limitations and permitted liens.

The 2026 Notes and the subsidiary guarantees are effectively senior to any of Group’s and the Subsidiary Guarantors’ existing and future senior unsecured indebtedness and future indebtedness secured by liens on the collateral securing the 2026 Notes that are junior to the liens on the collateral securing the 2026 Notes, in each case, to the extent of the value of the collateral securing the 2026 Notes.

The 2026 Notes and the subsidiary guarantees rank pari passu in right of payment with Group’s and the Subsidiary Guarantors’ existing and future indebtedness that is not subordinated in right of payment to the 2026 Notes or the subsidiary guarantees.

The 2026 Notes and the subsidiary guarantees are effectively subordinated to any of Group’s and the Subsidiary Guarantors’ indebtedness that is secured by assets that do not constitute collateral or that is secured by liens on the collateral securing the 2026 Notes that are senior to the liens securing the 2026 Notes, in each case, to the extent of the value of the collateral securing such indebtedness.

In addition, the 2026 Notes and the subsidiary guarantees thereof rank contractually senior in right of payment to all of Group’s and the Subsidiary Guarantors’ future subordinated indebtedness and are structurally subordinated to the liabilities of the non-guarantor subsidiaries.

Holdings’ guarantee is its senior unsecured obligation, and ranks equally in right of payment with all of Holdings’ existing and future senior indebtedness and senior in right of payment to all of Holdings’ future subordinated indebtedness.

Holdings’ guarantee is effectively subordinated to its secured indebtedness to the extent of the value of the collateral securing such indebtedness.

The 2026 Notes bear interest at a rate of 3.50 % per annum.

Interest began to accrue on the 2026 Notes on May 7, 2021 and is paid semi-annually in arrears on May 1 and November 1 of each year, commencing on November 1, 2021.

The net proceeds from the 2026 Notes offering were $ 496.9 million after deducting the $ 1.8 million discount and $ 1.3 million of offering expenses.

Unless earlier redeemed or repurchased, the 2026 Notes will mature on May 1, 2026.

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Thereafter, Group may redeem the 2026 Notes, in whole or in part, at a price equal to 100 % of the principal amount of the 2026 Notes, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

Debt extinguishment and redemption of 2022 Notes

In March 2021, Group redeemed $ 115.9 million aggregate principal amount of its 2022 Notes at an average price of 103.2 % of the principal amount plus $ 0.4 million of accrued and unpaid interest.

In March 2021, Group redeemed $ 115.9 million aggregate principal amount of its 5.375 % Senior Secured Notes due 2022 (the “2022 Notes”) at an average price of 103.2 % of the principal amount plus $ 0.4 million of accrued and unpaid interest.

As a result of this transaction, the Company incurred a loss on debt extinguishment and redemption of $ 3.9 million from the premium payment above par value, the amortization of the remaining unamortized notes cost and certain transaction expenses.

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On April 6, 2021, Group issued a notice of conditional partial redemption for $ 45.0 million of its 2022 Notes.

Group redeemed the $ 45.0 million aggregate principal amount of its 2022 Notes on May 6, 2021 at par plus the “make-whole amount” as defined in the 2022 Notes Indenture of $ 1.9 million ($ 41.41533 per $1,000 aggregate principal amount) plus accrued interest to, but excluding, the redemption date of $ 0.4 million ($ 9.70486 per $1,000 aggregate principal amount).

Following this $ 45.0 million redemption there was $ 284.1 million aggregate principal amount of 2022 Notes remaining.

On the Closing Date of the issuance of the 2026 Notes, Group used the net proceeds from the offering of the 2026 Notes to satisfy and discharge its remaining obligations under its 2022 Notes.

As a result of these transactions, the Company incurred a loss on debt extinguishment and redemption of $ 10.8 million from the payment of $ 11.5 million of interest on the 2022 Notes through December 1, 2021 and the amortization of the remaining unamortized notes costs and debt premium.

Issuance of 2024 Notes

In June 2020, Group completed an offering of € 215.0 million of 4.375 % senior unsecured notes due 2024 (“2024 Notes”).

The net proceeds from the June 2020 offering, after deducting offering expenses, were $ 240.3 million.

In May 2021, Group redeemed $ 45.0 million aggregate principal amount of its 2022 Notes at par plus the “make-whole amount” as defined in the 2022 Notes indenture of $ 1.9 million ($ 41.41533 per $1,000 aggregate principal amount) plus accrued interest to, but excluding, the redemption date of $ 0.4 million ($ 9.70486 per aggregate principal amount).

Following the $ 115.9 million and the $ 45.0 million redemptions there was $ 284.1 million aggregate principal amount of 2022 Notes remaining.

On the 2026 Notes Closing Date, Group used the net proceeds from the offering of its 2026 Notes to fully satisfy and discharge its remaining obligations under its 2022 Notes.

As a result of these transactions, the Company incurred an additional loss on debt extinguishment and redemption of $ 10.8 million from the payment of $ 11.5 million of interest on the 2022 Notes through December 1, 2021 and the amortization of the remaining unamortized notes costs and debt premium.

Senior unsecured notes - €350.0 million 2024 Notes

In June 2019, Group completed an offering of € 135.0 million of 2024 Notes.

The net proceeds from the June 2019 offering, after deducting offering expenses, were $ 152.1 million.

The Company expects to use the proceeds from these offerings for general corporate purposes , to repay debt obligations, to repurchase the Company’s common stock or for special or recurring dividends to the Company’s stockholders.

The 2024 Notes are guaranteed (the “Guarantees”) on a senior unsecured basis, jointly and severally, by the Company’s material domestic subsidiaries, subject to certain exceptions, and by the Company (collectively, the “Guarantors”).

Under certain circumstances, the Guarantors may be released from these Guarantees without the consent of the holders of the 2024 Notes.

The 2024 Notes and the Guarantees are Group’s and the Guarantors’ senior unsecured obligations.

The 2024 Notes and the Guarantees are effectively subordinated to all of Group’s and the Guarantors’ existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, and are structurally subordinated to all indebtedness and other liabilities of subsidiaries that are not Guarantors.

Without giving effect to collateral arrangements, the 2024 Notes and the Guarantees rank pari passu in right of payment with Group’s and the Guarantors’ existing and future senior indebtedness.

The 2024 Notes and the Guarantees rank contractually senior in right of payment to all of Group’s and the Guarantors’ existing and future subordinated indebtedness.

The 2024 Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers in an unregistered offering pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Act”), and to certain non-U.S.

persons in transactions outside the United States in compliance with Regulation S under the Act.

The 2024 Notes have not been registered under the Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

The 2024 Notes are listed on the Official List of The International Stock Exchange;

however, there can be no assurance that the listing will be maintained.

The 2024 Notes bear interest at a rate of 4.375 % per annum and is paid semi-annually in arrears on June 30 and December 30 of each year.

Unless earlier redeemed, the 2024 Notes will mature on June 30, 2024.

The 2024 Notes were issued in Euros and are reported in the Company’s reporting currency — US Dollars.

As of December 31, 2019, the Company’s € 135.0 million of 2024 Notes were valued at $ 151.4 million resulting in an unrealized gain on foreign exchange of $ 2.3 million for the year ended December 31, 2019.

As of December 31, 2020, the Company’s € 350.0 million of 2024 Notes were valued at $ 429.3 million resulting in an unrealized loss on foreign exchange of $ 37.0 million for the year ended December 31, 2020.

As of December 31, 2021, the Company’s € 350.0 million of 2024 Notes were valued at $ 397.0 million resulting in an unrealized gain on foreign exchange of $ 32.5 million for the year ended December 31, 2021.

Group may redeem some or all of the 2024 Notes at any time prior to June 30, 2021 at a price equal to 100 % of the principal amount of the 2024 Notes, plus a “make-whole” premium as set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

Thereafter, Group may redeem the 2024 Notes, in whole or in part, at a redemption price ranging from 102.188 % to par (depending on the year), as set forth in the indenture.

Group may also redeem up to 35 % of the principal amount of the 2024 Notes using proceeds of certain equity offerings completed prior to June 30, 2021 at a redemption price equal to 104.375 %, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, subject to certain exceptions.

Group may also redeem the 2024 Notes, in whole but not in part, in the event of certain changes in the tax laws of the United States (or any taxing authority in the United States).

This redemption would be at 100 % of the principal amount of the 2024 Notes to be redeemed (plus any accrued interest and additional amounts then payable with respect to the 2024 Notes to, but not including, the redemption date).

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If Group undergoes specific kinds of change in control accompanied by certain ratings events, it will be required to offer to repurchase the 2024 Notes from holders at a price equal to 101 % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.

Additionally, if Group or any of its restricted subsidiaries sells assets and does not apply the proceeds from such sale in a certain manner or certain other events have not occurred, under certain circumstances, Group will be required to use the excess net proceeds to make an offer to purchase the 2024 Notes at an offer price in cash equal to 100 % of the principal amount of the 2024 Notes, plus accrued and unpaid interest, if any, to, but not including, the repurchase date.

In connection with any offer to purchase all or any of the 2024 Notes (including a change of control offer, asset sale offer or any tender offer), if holders of no less than 90 % of the aggregate principal amount of the 2024 Notes validly tender their 2024 Notes, Group or a third party is entitled to redeem any remaining 2024 Notes at the price offered to each holder.

The 2024 Notes indenture includes covenants that restrict Group and its restricted subsidiaries’ ability to, among other things:

incur indebtedness;

issue certain preferred stock or similar equity securities;

pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock;

make certain investments and other restricted payments, such as prepayment, redemption or repurchase of certain indebtedness;

create liens;

consolidate, merge, sell or otherwise dispose of all or substantially all of the assets of Group and its restricted subsidiaries taken as a whole;

incur restrictions on the ability of a subsidiary to pay dividends or make other payments;

and enter into transactions with affiliates.

However, the covenants provide for certain exceptions to these restrictions and the Company is not subject to the covenants under the 2024 Notes indenture.

Certain covenants will cease to apply to the 2024 Notes if, and for so long as, the 2024 Notes have investment grade ratings from any two of Moody’s Investors Service, Inc., Fitch Ratings, Inc.

and S&P Global Ratings and so long as no default or event of default under the Indenture has occurred and is continuing.

The principal amount of the 2024 Notes would become immediately due and payable upon the occurrence of certain bankruptcy or insolvency events involving Group or certain of its subsidiaries, and may be declared immediately due and payable by the trustee or the holders of at least 25% of the aggregate principal amount of the then-outstanding 2024 Notes upon the occurrence of certain events of default under the indenture.

In June 2020, Group completed an offering of € 215.0 million of 2024 Notes.

The net proceeds from the June 2020 offering, after deducting offering expenses, was $ 240.3 million.

The 2024 Notes were guaranteed (the “Guarantees”) on a senior unsecured basis, jointly and severally, by the Company’s material domestic subsidiaries, subject to certain exceptions, and by the Company (collectively, the “Guarantors”).

Under certain circumstances, the Guarantors could be released from these Guarantees without the consent of the holders of the 2024 Notes.

The 2024 Notes bore interest at a rate of 4.375 % per annum and was paid semi-annually in arrears on June 30 and December 30 of each year.

The 2024 Notes were scheduled to mature on June 30, 2024.

The 2024 Notes were issued in Euros and were reported in the Company’s reporting currency — US dollars.

As of December 31, 2020, the Company’s € 350.0 million of 2024 Notes were valued at $ 429.3 million resulting in a loss on foreign exchange of $ 37.0 million for the year ended December 31, 2020.

As of December 31, 2021, the 2024 Notes were valued at $ 397.0 million, resulting in a gain on foreign exchange of $ 32.5 million for the year ended December 31, 2021.

In June 2022, Group redeemed the 2024 Notes, as noted above.

Senior secured notes - $445.0 million 2022 Notes

In February 2015, Group issued $ 250.0 million of 5.375 % senior secured notes due 2022 (the “2022 Notes”).

In February 2015, Group issued $ 250.0 million of 2022 Notes.

In December 2016, the Company issued an additional $ 125.0 million par value of its 2022 Notes at a premium of 100.375 % of par value.

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The 2022 Notes were redeemable prior to December 1, 2021 (three months prior to the maturity date of the Notes) in whole or from time to time in part, at a redemption price equal to the sum of (1) 100 % of the principal amount plus accrued and unpaid interest, if any, to, but not including, the redemption date, and (2) a make-whole premium, if any.

The make-whole premium is the excess of (1) the net present value, on the redemption date, of the principal being redeemed or paid and the amount of interest (exclusive of interest accrued to the date of redemption) that would have been payable if such redemption had not been made, over (2) the aggregate principal amount of the notes being redeemed or paid.

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principal amount of the notes being redeemed or paid.

Net present value shall be determined by discounting, on a semi-annual basis, such principal and interest at the reinvestment rate (as determined in the indenture governing the 2022 Notes) from the respective dates on which such principal and interest would have been payable if such redemption had not been made.

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In the second quarter of 2016, the Company paid $ 10.9 million for the purchase of $ 10.8 million of par value and accrued interest on its 2021 Notes reducing the principal amount to $ 189.2 million.

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In June 2020, Group redeemed the 2021 Notes with the proceeds from its June 2020 issuance of its 2024 Notes.

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Limitations under the indentures

The indenture governing the 2024 Notes (the “2024 Notes Indenture”) and the 2026 Notes Indenture, among other things, limit the Company’s ability to incur indebtedness;

The 2027 Notes Indenture and the 2026 Notes Indenture (the “Indentures”), among other things, limit the Company’s ability to incur indebtedness;

to pay dividends or make other distributions;

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and to enter into certain transactions with its affiliates.

There are certain exceptions to the limitations on the Company’s ability to incur indebtedness under the 2024 Notes Indenture and the 2026 Notes Indenture, including IRU agreements incurred in the normal course of business and any additional indebtedness if (i) under the 2024 Notes Indenture, the Company’s consolidated leverage ratio, as defined in the 2024 Notes Indenture, is less than 6.0 to 1.0 and (ii) under the 2026 Notes Indenture, either the Company’s consolidated leverage ratio, as defined in the 2026 Notes Indenture, is less than 6.0 to 1.0 or the Company’s fixed charge coverage ratio, as defined in the 2026 Notes Indenture, is greater than 2.0 to 1.0 .

The Company can also incur unlimited liens (which can be used, together with capacity under the debt covenant, to incur additional secured indebtedness) if the Company’s consolidated secured leverage ratio, as defined in each of the 2024 Notes Indenture and the 2026 Notes Indenture, is less than 4.0 to 1.0 .

The 2024 Notes Indenture permits restricted payments, such as dividends and stock purchases, using accumulated consolidated cash flow, as defined in the 2024 Notes Indenture, when the Company’s consolidated leverage ratio, as defined by the 2024 Notes Indenture, is less than 4.25 to 1.00 .

Under the 2026 Notes Indenture, such accumulated consolidated cash flow, as defined therein, can be used to make such restricted payments if the Company is able to incur $ 1 of debt, as defined (i.e., either its consolidated leverage ratio is less than 6.0 to 1.0 or its fixed charge coverage ratio is greater than 2.0 to 1.0 ).

The Company’s consolidated leverage ratio was above 4.25 as of December 31, 2021, and the Company’s fixed charge coverage ratio was above 2.0 as of December 31, 2021.

As of December 31, 2021, a total of $ 185.5 million was unrestricted and permitted for restricted payments including dividends and stock purchases.

There are certain exceptions to the limitations on the Company’s ability to incur indebtedness under the Indentures, including IRU agreements incurred in the normal course of business and any additional indebtedness if the Company’s consolidated leverage ratio, as defined in the Indentures, is less than 6.0 to 1.0 or the Company’s fixed charge coverage ratio, as defined in the Indentures, is 2.0 to 1.0 or greater.

Under the Indentures, the Company can pay dividends, make other distributions, make certain investments and make other restricted payments under certain circumstances, including if, after giving pro forma effect to such restricted payment, the Company could still incur $ 1 of indebtedness, as defined (i.e., either its consolidated leverage ratio is less than 6.0 to 1.0 or its fixed charge coverage ratio is 2.0 to 1.0 or greater).

As of December 31, 2022, the Company’s consolidated leverage ratio was below 6.0 , the Company’s consolidated secured leverage ratio was below 4.0 and the Company’s fixed charge coverage ratio was above 2.0 .

As of December 31, 2022, a total of $ 442.4 million (inclusive of a $ 250.0 general basket) was unrestricted and permitted for restricted payments, including dividends and stock purchases.

The aggregate future contractual maturities of long-term debt were as follows as of December 31, 2022 (in thousands):

For the year ending December 31,

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Interest rate swap agreement

As of December 31, 2022, the Company was party to an interest rate swap agreement (the “Swap Agreement”) that has the economic effect of modifying the fixed interest rate obligation associated with its 2026 Notes to a variable interest rate obligation based on the Secured Overnight Financing Rate (“SOFR”) so that the interest payable on the 2026 Notes effectively became variable based on overnight SOFR.

The critical terms of the Swap Agreement match the terms of the 2026 Notes, including the notional amount and the optional redemption date on February 1, 2026.

The Company did not elect hedge accounting for the Swap Agreement.

The Swap Agreement is recorded at its fair value at each reporting period, and the Company incurs gains and losses due to changes in market interest rates.

By entering into the Swap Agreement, the Company has assumed the risk associated with variable interest rates.

Changes in interest rates affect the valuation of the Swap Agreement that the Company recognizes in its consolidated statements of comprehensive income.

The values that the Company reports for the Swap Agreement as of each reporting date are recognized as “change in valuation – interest rate swap” with the corresponding amounts included in assets or liabilities in the Company’s consolidated balance sheets.

As of December 31, 2022 the fair value of the Swap Agreement was a net liability of $ 52.1 million of which $ 20.3 million is presented with accrued and other current liabilities and $ 31.9 million is presented with other long-term liabilities.

In 2022 and 2021, the Company recorded an unrealized loss related to the Swap Agreement of $ 43.1 million and $ 9.0 million, respectively.

The Company has made a $ 61.7 million deposit with the counterparty to the Swap Agreement.

If the fair value of the Swap Agreement exceeds a net liability of $ 61.7 million the Company will be required to deposit additional funds with the counterparty equal to the net liability fair value.

As of December 31, 2022, $ 52.1 million of the deposit was restricted and $ 9.6 million was unrestricted.

Under the Swap Agreement, the Company pays the counterparty a semi-annual payment based upon overnight SOFR plus a contractual interest rate spread, and the counterparty pays the Company a semi-annual fixed 3.50 % interest payment.

The settlement payment is made each November and May until the Swap Agreement expires in February 2026.

Under the first Swap Agreement settlement in November 2021, the Company received a payment of $ 0.6 million from the counterparty for a net cash savings of $ 0.6 million for the period from August 9, 2021 (the Swap Agreement inception date) to October 31, 2021.

Under the settlement payment made in May 2022, the Company received a payment of $ 1.2 million from the counterparty for a net cash savings of $ 1.2 million for the period from November 1, 2021 to April 30, 2022.

Under the settlement payment made in November 2022, the Company made a payment of $ 3.4 million to the counterparty for a net cash interest cost of $ 3.4 million for the period from May 1, 2022 to October 31, 2022.

Income taxes:

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Total income before income taxes

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The income tax expense is comprised of the following (in thousands):

1 unchanged sentence

Total income tax expense

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Our consolidated temporary differences comprising our net deferred tax assets are as follows (in thousands):

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The Company considers all available positive and negative evidence in assessing the need for a valuation allowance.

The Company maintains a full valuation allowance against certain of its deferred tax assets consisting primarily of net operating loss carryforwards related to its foreign operations in Europe, Asia, South America, Australia and Africa and net operating losses in the United States that are limited for use under Section 382 of the Internal Revenue Code.

As of December 31, 2021, the Company has combined net operating loss carry-forwards of $ 1.0 billion.

As of December 31, 2022, the Company has combined net operating loss carry-forwards of $ 943.0 million.

This amount includes federal net operating loss carry-forwards in the United States of $ 19.2 million, net operating loss carry-forwards related to its European operations of $ 913.7 million and $ 10.1 million related to its other international operations.

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Of the net operating losses available at December 31, 2022 in the United States $ 19.2 million are limited for use under Section 382.

Net operating loss carryforwards outside of the United States totaling $ 1.0 billion are not subject to limitations similar to Section 382.

The net operating loss carryforwards in the United States will expire, if unused, between 2026 and 2036.

Net operating loss carryforwards outside of the United States totaling $ 923.8 million are not subject to limitations similar to Section 382.

The net operating loss carryforwards in the United States will expire, if unused, in 2026.

The net operating loss carry-forwards related to the Company’s European operations include $ 780.5 million that do not expire and $ 133.2 million that expire between 2023 and 2038.

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It is not practical to determine the amount of the unrecognized deferred tax liability on such undistributed earnings or cumulative translation adjustments.

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In the normal course of business the Company takes positions on its tax returns that may be challenged by taxing authorities.

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The Company is subject to tax examinations in its foreign jurisdictions generally for years 2005 to 2022.

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The following is a reconciliation of the Federal statutory income taxes to the amounts reported in the financial statements (in thousands).

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The Company reviews its accruals at least quarterly and adjusts them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter.

The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible could result in a loss of up to $ 3.6 million in excess of the amount accrued at December 31, 2021.

The Company is also engaged in litigation in Virginia in which a former provider of transoceanic capacity to the Company is seeking approximately $0.6 million for alleged unpaid fees and the Company’s early termination of the arrangement.

The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible to result in a loss of up to $ 3.8 million in excess of the amount accrued at December 31, 2022.

The Company was engaged in litigation in Virginia in which a former provider of transoceanic capacity to the Company was seeking approximately $ 0.6 million for alleged unpaid fees and the Company’s early termination of the arrangement.

The complaint was filed in December 2021 in the Circuit Court of Fairfax County, Virginia.

The Company is contesting its obligation to pay these amounts.

The Company was engaged in an arbitration proceeding in Spain in which a former provider of optical fiber to the Company was seeking approximately $ 9 million for the Company’s early termination of the optical fiber leases, which amount the Company accrued in 2015.

The Company counterclaimed for damages and contested its obligation to pay the termination liability.

The arbitration was being conducted by the Civil and Commercial Arbitration Court (CIMA) in Madrid, Spain.

On October 25, 2021, CIMA issued its decision, awarding the former provider approximately $ 0.7 million and rejecting the Company’s counterclaims.

Both parties had until (i) November 4, 2021 to request clarifications from CIMA regarding clerical or mathematical errors, unaddressed claims or other minor issues and (ii) two months from the later of the date of the award or a subsequent clarifying order from CIMA to file a court action before the High Court of Justice of Madrid to annul the award.

The Company’s policy is to not record the impact of legal proceedings until all appeals have been exhausted or legal counsel has advised that any further appeal will likely not change the outcome of the matter.

The appeal period has lapsed and the Company decided to pay the provider the $ 0.7 million award amount in the first quarter of 2022.

As a result, the Company recorded a gain on lease termination of $ 7.4 million in the year ended December 31, 2021.

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The trial took place in July 2022, and in August 2022, the Circuit Court issued an order requiring the Company to pay approximately $ 0.4 million in damages, inclusive of attorneys’ fees.

The Company paid a final payment of approximately $ 0.4 million, reflecting accumulated interest and additional attorneys’ fees, in October 2022.

In the ordinary course of business the Company is involved in other legal activities and claims.

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Expenses related to these arrangements were $ 21.8 million in 2022, $ 22.0 million in 2021 and $ 21.0 million in 2020.

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Unconditional purchase obligations

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These shares of common stock were subsequently retired.There were no purchases of common stock in 2022 or 2021.

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Dividends on common stock

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The indentures governing the Company’s notes limit the Company’s ability to return cash to its stockholders.

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Stock option and award plan:

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That cost is expected to be recognized over a weighted average period of 2.0 years.

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Related party transactions:

Office leases

The Company’s headquarters is located in an office building owned by Sodium LLC whose owner is the Company’s Chief Executive Officer.

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The Company paid $ 1.7 million in 2022, $ 1.7 million in 2021 and $ 1.7 million in 2020 for rent and related costs (including taxes and utilities) for this lease.

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On January 6, 2023, the Company entered into two lease agreements (the “New Leases”), one with Thorium LLC and one with Germanium LLC, entities owned by the Company’s Chief Executive Officer, David Schaeffer.

The Company’s Audit Committee, which is responsible for reviewing any related party transactions, reviewed and approved the Company’s entry into the New Leases.

The first of the New Leases is with Thorium LLC for approximately 54,803 square feet of office space, which will serve as office space for the Company replacing a portion of its current office space in the Northern Virginia area (“Office Lease”).

The second of the New Leases is with Germanium LLC for approximately 1,587 square feet of technical space, in the building which will serve as network operations space for the Company (“Network Operations Lease”).

The term for each of the New Leases is five years beginning March 1, 2023 (or an actual later date of occupancy).

Both of the New Leases are cancellable by the Company without penalty upon 60 days written notice.

The amount of fixed annual rent during the term of the Office Lease will be $ 1.2 million, and the Company is also responsible for paying its proportionate share of the building’s operating expenses that exceed a 2023 base year.

The amount of fixed annual rent during the term of the Network Operations Lease will be $ 34,914 , and the Company is also responsible for paying its metered utility costs and a proportionate share of the building’s other operating expenses that exceed a 2023 base year.

Geographic information:

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Weighted-average number of common shares—diluted

(1) Included in net income (loss) for the three months ended March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021 are unrealized gains (losses) on foreign exchange on the Company’s 2024 Notes of $ 18.9 million, ($ 5.3 ) million, $ 10.2 million and $ 8.8 million, respectively.

Included in net income (loss) for the three months ended March 31, 2021 and June 30, 2021, are losses on debt extinguishment and redemption on the Company’s 2022 Notes of $ 3.9 million and $ 10.8 million, respectively.

(1) Included in net income for the three months ended March 31, 2022 and June 30, 2022, are unrealized gains on foreign exchange on the 2024 Notes of $ 8.0 million and $ 23.5 million, respectively.

Included in net income (loss) for the three months ended June 30, 2022, is a loss on debt extinguishment and redemption on the 2024 Notes of $ 11.9 million.

Included in net income (loss) for the three months ended March 31, 2022, June 30, 2022, September 30, 2022 and December 31, 2022 are non-cash charges (benefit) from changes in the valuation of the Swap Agreement of $ 21.3 million, $ 7.5 million, $ 16.9 million and ( $ 2.6 ) million, respectively.

(2) Included in net income (loss) for the three months ended March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021 are unrealized gains (losses) on foreign exchange on the 2024 Notes of $ 18.9 million, ( $ 5.3 ) million, $ 10.2 million and $ 8.8 million, respectively.

Included in net income (loss) for the three months ended March 31, 2021 and June 30, 2021, are losses on debt extinguishment and redemption on the 2022 Notes of $ 3.9 million and $ 10.8 million, respectively.

Included in net income for the three months ended December 31, 2021 is a gain on lease termination of $ 7.4 million.

(2) Included in net income (loss) for the three months ended March 31, 2020, June 30, 2020, September 30, 2020 and December 31, 2020 are unrealized gains (losses) on foreign exchange on the Company’s 2024 Notes of $ 2.9 million, ( $ 3.4 ) million, ( $ 17.3 ) million and $( 19.2 ) million, respectively.

Included in net income for the three months ended June 30, 2020 was a realized gain on foreign exchange on the Company’s 2024 Notes of $ 2.5 million.

Included in net income for the three months ended September 30, 2021 and December 31, 2021 are non-c ash charges from changes in the valuation of the Swap Agreement of $ 3.1 million and $ 5.9 million, respectively.

Subsequent Events:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data