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 September 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 November 15, 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 September 30, 2004 (unaudited) and December 31, 2003	3

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

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

	Notes to Condensed Consolidated Financial Statements—September 30, 2004 (unaudited)	6

ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

ITEM 3:	Quantitative and Qualitative Disclosures about Market Risk	34

ITEM 4:	Controls and Procedures	35

PART II:	OTHER INFORMATION

ITEM 1:	Legal Proceedings	36

ITEM 2:	Unregistered Sales of Equity Securities and Use of Proceeds	36

ITEM 3:	Defaults Upon Senior Securities	36

ITEM 4:	Submission of Matters to a Vote of Security Holders	36

ITEM 5:	Other Information	36

ITEM 6:	Exhibits	37

SIGNATURES		41

EXHIBIT INDEX		E-1

PART 1

FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SYNIVERSE HOLDINGS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)


	September 30, 2004			December 31, 2003
	(unaudited)
ASSETS
Current assets:
Cash	$	13,026		$	8,299
Accounts receivable, net of allowances of $1,260 and $2,535, respectively		73,627			61,611
Deferred tax assets		439			369
Prepaid and other current assets		4,855			6,284

Total current assets		91,947			76,563

Property and equipment, net		37,077			33,548
Capitalized software, net		55,128			67,653
Deferred costs, net		12,292			14,584
Goodwill		361,440			331,263
Identifiable intangibles, net:
Customer contract, net		6,327			9,705
Trademark		—			685
Customer base, net		212,830			196,270

Total assets	$	777,041		$	730,271

LIABILITIES AND UNITHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,886		$	4,029
Accrued payroll and related benefits		11,531			8,881
Accrued interest		5,239			14,136
Other accrued liabilities		22,924			17,419
Current portion of Term Note B, net of discount		1,490			33,589

Total current liabilities		48,070			78,054

Long-term liabilities:
Deferred taxes		26,045			19,700
Senior Subordinated Notes, net of discount		241,622			241,037
Term Note B, net of discount		234,101			174,749
Other long-term liabilities		2,759			2,955

Total long-term liabilities		504,527			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 September 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 September 30, 2004 and December 31, 2003, respectively		120,355			120,351
Accumulated deficit		(148,559	)		(159,368	)
Accumulated other comprehensive income		281			426

Total unitholders’ equity		224,444			213,776

Total liabilities and unitholders’ equity	$	777,041		$	730,271

See Notes to Condensed Consolidated Financial Statements.

SYNIVERSE HOLDINGS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues	$	82,480		$	69,448		$	244,091		$	201,236

Costs and expenses:
Cost of operations		33,557			27,108			104,983			80,388
Sales and marketing		4,615			4,007			15,059			13,659
General and administrative		10,393			9,418			27,918			28,237
Provision for (recovery of) uncollectible accounts		(21	)		245			(30	)		1,001
Depreciation and amortization		10,142			9,298			30,323			27,567
Restructuring		—			607			289			2,448
Impairment losses on intangible assets		8,982			—			8,982			—

		67,668			50,683			187,524			153,300

Operating income		14,812			18,765			56,567			47,936

Other income (expense), net:
Interest income		329			157			927			546
Interest expense		(13,841	)		(13,433	)		(40,165	)		(44,525	)
Other, net		(6	)		(1	)		(12	)		(1	)

		(13,518	)		(13,277	)		(39,250	)		(43,980	)

Income before provision for income taxes		1,294			5,488			17,317			3,956
Provision for income taxes		2,316			2,374			6,508			2,734

Net income (loss)		(1,022	)		3,114			10,809			1,222
Preferred unit dividends		(7,983	)		(7,230	)		(23,369	)		(21,168	)

Net loss attributable to common unitholders	$	(9,005	)	$	(4,116	)	$	(12,560	)	$	(19,946	)

See Notes to Condensed Consolidated Financial Statements.

SYNIVERSE HOLDINGS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)


	Nine Months Ended September 30,
	2004			2003
	(unaudited)			(unaudited)
Cash flows from operating activities
Net income	$	10,809		$	1,222
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization including amortization of deferred debt issuance costs		37,420			37,213
Provision for (recovery of) uncollectible accounts		(30	)		1,001
Deferred income tax expense		6,275			2,958
Gain on lease termination		—			(1,250	)
Loss on disposition of property		133			—
Impairment losses on intangible assets		8,982			—
Changes in operating assets and liabilities:
Accounts receivable		(9,929	)		(1,487	)
Other current assets		1,303			2,541
Accounts payable		3,964			324
Other current liabilities		(4,216	)		(7,636	)
Other assets and liabilities		(461	)		175

Net cash provided by operating activities		54,250			35,061

Cash flows from investing activities
Capital expenditures		(17,403	)		(12,121	)
Acquisition of IOS North America		(55,375	)		—

Net cash used in investing activities		(72,778	)		(12,121	)

Cash flows from financing activities
Principal payments on Term Note B		(20,100	)		(57,167	)
Borrowings under Term Note B		44,500			—
Debt issuance costs paid		(1,102	)		(1,683	)
Issuance of common units		4			35
Repurchase of common units		—			(9	)

Net cash provided by (used in) financing activities		23,302			(58,824	)

Effect of exchange rate changes on cash

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