SYNIVERSE HOLDINGS LLC - 10-Q Quarterly Report

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from to


COMMISSION FILE NUMBER		333-88168-01
		333-88168

SYNIVERSE HOLDINGS, LLC

SYNIVERSE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware		30-0041664
Delaware		06-1262301

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

201 N. Franklin Street, Suite 700

Tampa, Fl 33602

(Address of principal executive office)

(Zip code)

(813) 273-3000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

As of August 12, 2004, there were 2,000 shares of Syniverse Technologies, Inc.’s no par value common stock outstanding, which are owned of record by Syniverse Holdings, Inc., a company that is owned by Syniverse Holdings, LLC.

TABLE OF CONTENTS


		Page
PART I:	FINANCIAL INFORMATION

ITEM 1:	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003	3

	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2004 (unaudited) and the three and six months ended June 30, 2003 (unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2004 (unaudited) and the six months ended June 30, 2003 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements – June 30, 2004 (unaudited)	6

ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

ITEM 3:	Quantitative and Qualitative Disclosures about Market Risk	29

ITEM 4:	Controls and Procedures	30

PART II:	OTHER INFORMATION	31

ITEM 1:	Legal Proceedings	31

ITEM 2:	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	31

ITEM 3:	Defaults Upon Senior Securities	31

ITEM 4:	Submission of Matters to a Vote of Security Holders	31

ITEM 5:	Other Information	31

ITEM 6:	Exhibits and Reports on Form 8-K	32

SIGNATURES		33

EXHIBIT INDEX		E-1

PART 1

FINANCIAL INFORMATION

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SYNIVERSE HOLDINGS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)


	June 30, 2004 (unaudited)			December 31, 2003
ASSETS
Current assets:
Cash	$	11,158		$	8,299
Accounts receivable, net of allowances of $1,283 and $2,535, respectively		72,786			61,611
Deferred tax assets		369			369
Prepaid and other current assets		6,176			6,284

Total current assets		90,489			76,563

Property and equipment, net		37,702			33,548
Capitalized software, net		63,687			67,653
Deferred costs, net		13,108			14,584
Goodwill		331,359			331,263
Identifiable intangibles, net:
Customer contract, net		7,459			9,705
Trademark		—			685
Customer base, net		190,843			196,270

Total assets	$	734,647		$	730,271

LIABILITIES AND UNITHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,850		$	4,029
Accrued payroll and related benefits		6,871			8,881
Accrued interest		13,859			14,136
Other accrued liabilities		22,970			17,419
Current portion of Term B Loan, net of discount		35,835			33,589

Total current liabilities		86,385			78,054

Long-term liabilities:
Deferred taxes		23,871			19,700
Subordinated Notes, net of discount		241,427			241,037
Term B Loan, net of discount		154,375			174,749
Other long-term liabilities		2,975			2,955

Total long-term liabilities		422,648			438,441

Unitholders’ equity:
Class A Preferred Units-an unlimited number authorized, none issued or outstanding		—			—
Class B Preferred Units-an unlimited number authorized, 252,367.50 units issued and outstanding at June 30, 2004 and December 31, 2003; liquidation preference of $252,367		252,367			252,367
Common Units-an unlimited number authorized, 90,640,541 and 90,505,405 units issued and outstanding at June 30, 2004 and December 31, 2003, respectively		120,355			120,351
Accumulated deficit		(147,537	)		(159,368	)
Accumulated other comprehensive income		429			426

Total unitholders’ equity		225,614			213,776

Total liabilities and unitholders’ equity	$	734,647		$	730,271

See Notes to Condensed Consolidated Financial Statements

SYNIVERSE HOLDINGS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS)


	Three Months Ended June 30,						Six Months Ended June 30,
	2004 (unaudited)			2003 (unaudited)			2004 (unaudited)			2003 (unaudited)
Revenues	$	84,941		$	67,476		$	161,611		$	131,788

Costs and expenses:
Cost of operations		36,271			26,637			71,426			53,280
Sales and marketing		5,169			4,527			10,444			9,652
General and administrative		8,904			9,763			17,525			18,819
Provision for (recovery of) uncollectible accounts		(257	)		387			(9	)		756
Depreciation and amortization		9,891			9,279			20,181			18,269
Restructuring		289			—			289			1,841

		60,267			50,593			119,856			102,617

Operating income		24,674			16,883			41,755			29,171

Other income (expense), net:
Interest income		427			121			598			389
Interest expense		(12,393	)		(13,898	)		(26,324	)		(31,092	)
Other, net		—			—			(6	)		—

		(11,966	)		(13,777	)		(25,732	)		(30,703	)

Income (loss) before provision for income taxes		12,708			3,106			16,023			(1,532	)
Provision for income taxes		2,088			1,819			4,192			360

Net income (loss)		10,620			1,287			11,831			(1,892	)
Preferred unit dividends		(7,788	)		(7,056	)		(15,386	)		(13,938	)

Net income (loss) attributable to common unitholders	$	2,832		$	(5,769	)	$	(3,555	)	$	(15,830	)

See Notes to Condensed Consolidated Financial Statements

SYNIVERSE HOLDINGS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)


	Six Months Ended June 30,
	2004 (unaudited)			2003 (unaudited)
Cash flows from operating activities
Net income (loss)	$	11,831		$	(1,892	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization including amortization of deferred debt issuance costs		25,020			25,777
Provision for (recovery of) uncollectible accounts		(9	)		756
Deferred income tax expense		4,171			795
Loss on disposition of property		127			—
Changes in operating assets and liabilities:
Accounts receivable		(11,166	)		(1,578	)
Other current assets		117			945
Accounts payable		1,407			3,252
Other current liabilities		4,618			(3,861	)
Other assets and liabilities		(980	)		1,045

Net cash provided by operating activities		35,136			25,239

Cash flows from investing activities
Capital expenditures		(12,135	)		(5,212	)

Net cash used in investing activities		(12,135	)		(5,212	)

Cash flows from financing activities
Principal payments on long-term debt		(20,100	)		(52,275	)
Issuance of common units		4			13
Repurchase of common units		—			(9	)

Net cash used in financing activities		(20,096	)		(52,271	)

Effect of exchange rate changes on cash		(46	)		—

Net increase (decrease) in cash		2,859			(32,244	)
Cash at beginning of period		8,299			42,190

Cash at end of period	$	11,158		$	9,946

Supplemental cash flow information
Interest paid	$	21,829		$	23,816
Income taxes paid		—

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