Vonage 2014 Annual Report Download - page 41

Table of Contents
37 VONAGE ANNUAL REPORT 2014
LIQUIDITY AND CAPITAL RESOURCES
Overview
The following table sets forth a summary of our cash flows for the periods indicated:
For the years ended December 31,
(dollars in thousands) 2014 2013 2012
Net cash provided by operating activities $ 92,542 $88,243 $119,843
Net cash used in investing activities (118,528)(120,985) (25,472)
Net cash provided by (used in) financing activities (14,239) 21,891 (56,257)
For the three years ended December 31, 2014, 2013, and
2012 we generated income from operations. We expect to continue to
balance efforts to grow our customer base while consistently achieving
profitability. To grow our customer base, we continue to make
investments in marketing and application development as we seek to
launch new services, network quality and expansion, and customer
care. Although we believe we will maintain consistent profitability in the
future, we ultimately may not be successful and we may not achieve
consistent profitability. We believe that cash flow from operations and
cash on hand will fund our operations for at least the next twelve months.
Acquisition of Telesphere
Telesphere was acquired for $114,000, adjusted for $676 of
excess cash as of the closing date and the decrease in value of the
6,825 shares of Vonage common stock from the signing date to the
closing date of $241, resulting in a total acquisition cost of $114,435.
We financed the transaction through $24,708 of cash (of which $3,610
was paid in January 2015) and $67,000 from our credit facility.
Acquisition of Vocalocity
Vocalocity was acquired for $130,000 adjusted for $2,869 of
excess cash as of the closing date and the increase in value of the 7,983
shares of Vonage common stock from the signing date to the closing
date of $1,298, resulting in a total acquisition cost of $134,167. We
financed the transaction through $32,981 of cash and $75,000 from our
credit facility.
August 2014 Financing
On August 13, 2014, we entered into a credit agreement (the
“2014 Credit Facility”) consisting of a $100,000 senior secured term loan
and a $125,000 revolving credit facility. The co-borrowers under the
2014 Credit Facility are us and Vonage America Inc., our wholly owned
subsidiary. Obligations under the 2014 Credit Facility are guaranteed,
fully and unconditionally, by our other material United States subsidiaries
and are secured by substantially all of the assets of each borrower and
each guarantor. The lenders under the 2014 Credit Facility are
JPMorgan Chase Bank, N.A., Citizens Bank, N.A., Silicon Valley Bank,
SunTrust Bank, Fifth Third Bank, Keybank National Association, and
MUFG Union Bank, N.A. JPMorgan Chase Bank, N.A. is a party to the
agreement as administrative agent, Citizens Bank, N.A. as syndication
agent, and Silicon Valley Bank and SunTrust Bank as documentation
agents. J.P. Morgan Securities LLC and Citizens Bank, N.A. acted as
joint lead bookrunners, and J.P. Morgan Securities LLC, Citizens Bank,
N.A., Silicon Valley Bank, and SunTrust Robinson Humphrey Inc. acted
as joint lead arrangers.
Use of Proceeds
We used $90,000 of the net available proceeds of the 2014
Credit Facility to retire all of the debt under our 2013 Credit Facility.
Remaining proceeds from the senior secured term loan and the undrawn
revolving credit facility under the 2014 Credit Facility will be used for
general corporate purposes. We also incurred $1,910 of fees in
connection with the 2014 Credit Facility, which is amortized, along with
the unamortized fees of $668 in connection with the 2013 Credit Facility,
to interest expense over the life of the debt using the effective interest
method.
2014 Credit Facility Terms
The following description summarizes the material terms of
the 2014 Credit Facility:
The loans under the 2014 Credit Facility mature in August
2018. Principal amounts under the 2014 Credit Facility are repayable
in quarterly installments of $5,000 per quarter for the senior secured
term loan. The unused portion of our revolving credit facility incurs a
0.40% commitment fee.
Outstanding amounts under the 2014 Credit Facility, at our
option, will bear interest at:
> LIBOR (applicable to one-, two-, three-, six-, or twelve-month
periods) plus an applicable margin equal to 2.875% if our
consolidated leverage ratio is less than 0.75 to 1.00, 3.125%
if our consolidated leverage ratio is greater than or equal to
0.75 to 1.00 and less than 1.50 to 1.00, and 3.375% if our
consolidated leverage ratio is greater than or equal to 1.50
to 1.00, payable on the last day of each relevant interest
period or, if the interest period is longer than three months,
each day that is three months after the first day of the interest
period, or
> the base rate determined by reference to the highest of (a)
the federal funds effective rate from time to time plus 0.50% ,
(b) the prime rate of JPMorgan Chase Bank, N.A., and (c) the
adjusted LIBO rate applicable to one month interest periods
plus 1.00% , plus an applicable margin equal to 1.875% if our
consolidated leverage ratio is less than 0.75 to 1.00, 2.125%
if our consolidated leverage ratio is greater than or equal to
0.75 to 1.00 and less than 1.50 to 1.00, and 2.375% if our
consolidated leverage ratio is greater than or equal to 1.50
to 1.00, payable on the last business day of each March, June,
September, and December and the maturity date of the 2014
Credit Facility.
The 2014 Credit Facility provides greater flexibility to us in
funding acquisitions and restricted payments, such as stock buybacks,
than the 2013 Credit Facility.
We may prepay the 2014 Credit Facility at our option at any
time without premium or penalty. The 2014 Credit Facility is subject to
mandatory prepayments in amounts equal to:
> 100% of the net cash proceeds from any non-ordinary course
sale or other disposition of our property and assets for
consideration in excess of a certain amount subject to
customary reinvestment provisions and certain other
exceptions, and
> 100% of the net cash proceeds received in connection with
other non-ordinary course transactions, including insurance
proceeds not otherwise applied to the relevant insurance loss.