Vonage 2012 Annual Report Download - page 79

F-26 VONAGE ANNUAL REPORT 2012
documentation for our 2008 credit facility) that was fully accepted and
allowed us to prepay, without premium, specified amounts, holders did
not fully accept our consolidated excess cash flow offer in July 2010,
indicating our ability to continue to repay debt at par was no longer
likely. We also determined that we could obtain financing at acceptable
terms, which along with our existing cash on hand, would be sufficient
to repurchase our prior senior secured first lien credit facility and our
prior senior secured second lien credit facility including any amounts
due pursuant to the make-whole premiums. Based upon these factors
and our valuation analysis, our prior senior secured first lien credit facility
and our prior senior secured second lien credit facility make-whole
premiums were estimated to have a fair value of $60,000 as of
September 30, 2010 and had a nominal fair value as of December 31,
2009. This value was increased in the fourth quarter of 2010 to $91,686
to reflect the actual value that was ultimately paid in December 2010.
Although management believed its valuation methods were
appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of
certain financial instruments could have resulted in a different fair value
measurement at the reporting date.
Fair Value of Other Financial Instruments
The carrying amounts of our financial instruments, including
cash and cash equivalents, accounts receivable, and accounts payable,
approximate fair value because of their short maturities. The carrying
amounts of our capital leases approximate fair value of these obligations
based upon management’s best estimates of interest rates that would
be available for similar debt obligations at December 31, 2012 and 2011.
We believe the fair value of our debt at December 31, 2012 was
approximately the same as its carrying amount as market conditions,
including available interest rates, credit spread relative to our credit
rating, and illiquidity, remain relatively unchanged from the issuance
date of our debt on July 29, 2011 for a similar debt instrument.
Note 8. Common Stock
Net Operating Loss Rights Agreement
On June 7, 2012, we entered into a Tax Benefits Preservation
Plan ("Preservation Plan") designed to preserve stockholder value and
tax assets. Our ability to use our tax attributes to offset tax on U.S.
taxable income would be substantially limited if there were an
"ownership change" as defined under Section 382 of the U.S. Internal
Revenue Code. In general, an ownership change would occur if one or
more "5-percent shareholders," as defined under Section 382,
collectively increase their ownership in us by more than 50 percent over
a rolling three-year period.
In connection with the adoption of the Preservation Plan, our
board of directors declared a dividend of one preferred share purchase
right for each outstanding share of the Company’s common stock. The
preferred share purchase rights were distributed to stockholders of
record as of June 18, 2012, as well as to holders of the Company's
common stock issued after that date, but will only be activated if certain
triggering events under the Preservation Plan occur.
Under the Preservation Plan, preferred share purchase rights
will work to impose significant dilution upon any person or group which
acquires beneficial ownership of 4.9% or more of the outstanding
common stock, without the approval of our board of directors, from and
after June 7, 2012. Stockholders that own 4.9% or more of the
outstanding common stock as of the opening of business on June 7,
2012, will not trigger the preferred share purchase rights so long as they
do not (i) acquire additional shares of common stock or (ii) fall under
4.9% ownership of common stock and then re-acquire shares that in
the aggregate equal 4.9% or more of the common stock.
The Preservation Plan will expire no later than the close of
business June 7, 2013, unless extended by our board of directors. Any
extension would be subject to approval by stockholders at the 2013
annual meeting.
Common Stock Repurchases
On July 25, 2012, our board of directors authorized a program
to repurchase up to $50,000 of Vonage common stock through
December 31, 2013. On February 7, 2013, Vonage's Board of Directors
discontinued this share repurchase program effective at the close of
business on February 12, 2013 with $16,682 remaining, and authorized
a new program to repurchase up to $100,000 of the Company's
outstanding shares by December 31, 2014. The specific timing and
amount of repurchases will vary based on available capital resources
and other financial and operational performance, market conditions,
securities law limitations, and other factors. The repurchases will be
made using our cash resources. The repurchase program may be
commenced, suspended or discontinued at any time without prior notice.
In any period, cash used in financing activities related to common stock
repurchased may differ from the comparable change in stockholders'
equity, reflecting timing differences between the recognition of share
repurchase transactions and their settlement for cash.
We repurchased the following shares of common stock as of December 31, 2012:
For the Quarter Ended
September 30, 2012 (1) December 31, 2012 (2) Total
Shares of common stock repurchased 4,090 8,157 12,247
Value of common stock repurchased $ 9,055 $ 18,889 $ 27,944
(1) including 307 shares, or $700, of common stock repurchases settled in October 2012; excluding commission of $82.
(2) including 278 shares, or $638, of common stock repurchases settled in January 2013; excluding commission of $163.
We repurchased all shares with cash resources. As of
December 31, 2012, approximately $22,056 remained of our $50,000
repurchase program that we announced on July 25, 2012. The
repurchase program was to expire on December 31, 2013, subject to
suspension or discontinuation at any time without notice.
Common Stock Warrant
On April 17, 2002, Vonage’s principal stockholder and
Chairman received a warrant to purchase 514 shares of Common Stock
at an exercise price of $0.70 per share that would have expired on June
20, 2012. As a result of the issuance of our prior Convertible Notes, the
VONAGE HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)