WEST CORP - FORM 10-Q - April 30, 2012

WEST CORP - FORM 10-Q - April 30, 2012

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2012

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

For the transition period from to

Commission File Number 000-21771

West Corporation

(Exact name of registrant as specified in its charter)


DELAWARE		47-0777362
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

11808 Miracle Hills Drive, Omaha, Nebraska		68154
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (402) 963-1200

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 preceding 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 ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

At April 27, 2012, 490,995,694.893 shares of the registrant’s common stock were outstanding.

INDEX


	Page No.
PART I. FINANCIAL INFORMATION		3
Item 1. Financial Statements
Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2012 and 2011 (unaudited)		4
Condensed Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 2012 and 2011 (unaudited)		5
Condensed Consolidated Balance Sheets - March 31, 2012 (unaudited) and December 31, 2011		6
Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2012 and 2011 (unaudited)		7
Condensed Consolidated Statements of Stockholders’ Deficit - Three Months Ended March 31, 2012 and 2011 (unaudited)		8
Notes to Condensed Consolidated Financial Statements (unaudited)		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		36
Item 3. Quantitative and Qualitative Disclosures About Market Risk		48
Item 4. Controls and Procedures		49

PART II. OTHER INFORMATION		50
Item 1. Legal Proceedings		50
Item 6. Exhibits		50
SIGNATURES		51
EXHIBIT INDEX		52

In this report, “West,” the “Company”, “we,” “us” and “our” refers to West Corporation and subsidiaries.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

West Corporation and subsidiaries

Omaha, Nebraska

We have reviewed the accompanying condensed consolidated balance sheet of West Corporation and subsidiaries (the “Company”) as of March 31, 2012, and the related condensed consolidated statements of operations, comprehensive income, stockholders’ deficit and cash flows for the three-month periods ended March 31, 2012 and 2011. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of West Corporation and subsidiaries as of December 31, 2011, and the related consolidated statements of operations, comprehensive income, stockholders’ deficit, and cash flows for the year then ended (not presented herein); and in our report dated February 13, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2011 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Omaha, Nebraska

April 30, 2012

WEST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(AMOUNTS IN THOUSANDS)

(UNAUDITED)


	Three Months Ended March 31,
	2012			2011
REVENUE	$	639,062		$	610,818
COST OF SERVICES		291,702			271,603
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		233,118			220,408

OPERATING INCOME		114,242			118,807

OTHER INCOME (EXPENSE):
Interest expense, net of interest income of $102 and $99		(62,062	)		(67,725	)
Other, net		2,730			4,692

Other expense		(59,332	)		(63,033	)

INCOME BEFORE INCOME TAX EXPENSE		54,910			55,774

INCOME TAX EXPENSE		20,866			21,194

NET INCOME	$	34,044		$	34,580

EARNINGS (LOSS) PER COMMON SHARE:
Basic Class L		N/A		$	4.39
Diluted Class L		N/A		$	4.21
Basic Common	$	0.07		$	(0.11	)
Diluted Common	$	0.07		$	(0.11	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic Class L		N/A			9,995
Diluted Class L		N/A			10,416
Basic Common		490,608			88,017
Diluted Common		508,041			88,017

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

WEST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(AMOUNTS IN THOUSANDS)


	Three Months Ended
	March 31,
	2012		2011
Net income	$	34,044	$	34,580

Foreign currency translation adjustments, net of tax of $4,736 and $1,388		7,728		2,265

Reclassification of a cash flow hedge into earnings, net of tax of $0 and $1,193		—		1,945

Unrealized gain on cash flow hedges, net of tax of $268 and $1,472		437		2,402

Comprehensive income - West Corporation	$	42,209	$	41,192

The accompanying notes are an integral part of these condensed consolidated financial statements, unaudited.

WEST CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS)

(UNAUDITED)


	March 31,			December 31,
	2012			2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	97,861		$	93,836
Trust and restricted cash		13,793			16,446
Accounts receivable, net of allowance of $11,264 and $11,627		456,535			413,813
Deferred income taxes receivable		15,570			10,068
Prepaid assets		49,319			37,042
Other current assets		60,736			50,581

Total current assets		693,814			621,786
PROPERTY AND EQUIPMENT:
Property and equipment		1,154,107			1,133,070
Accumulated depreciation and amortization		(802,114	)		(782,215	)

Total property and equipment, net		351,993			350,855
GOODWILL		1,818,219			1,762,635
INTANGIBLE ASSETS, net of accumulated amortization of $441,610 and $424,705		339,047			333,147
OTHER ASSETS		164,295			159,095

TOTAL ASSETS	$	3,367,368		$	3,227,518

LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	92,523		$	79,439
Accrued expenses		360,162			323,436
Current maturities of long-term debt		15,425			15,425

Total current liabilities		468,110			418,300
LONG-TERM OBLIGATIONS, less current maturities		3,520,984			3,500,940
DEFERRED INCOME TAXES		144,979			121,521
OTHER LONG-TERM LIABILITIES		86,818			83,170

Total liabilities		4,220,891			4,123,931

COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS’ DEFICIT:
Common stock $0.001 par value, 1,000,000 shares authorized, 491,337 and 490,650
shares issued and 490,946 and 490,271 shares outstanding		491			491
Additional paid-in capital		1,696,209			1,695,477
Retained deficit		(2,522,481	)		(2,556,525	)
Accumulated other comprehensive loss		(23,871	)		(32,036	)
Treasury stock at cost (391 and 379 shares)		(3,871	)		(3,820	)

Total stockholders’ deficit		(853,523	)		(896,413	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	3,367,368		$	3,227,518

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

WEST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

(UNAUDITED)


	Three Months Ended
	March 31,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	34,044		$	34,580
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation		26,308			25,843
Amortization		17,007			16,299
Asset impairment		3,715			—
Provision for share based compensation		133			1,015
Deferred income tax expense		11,518			6,056
Amortization of debt acquisition costs		3,393			3,344
Other		79			139
Changes in operating assets and liabilities, net of business acquisitions:
Accounts receivable		(33,524	)		(23,237	)
Other assets		(25,401	)		(18,090	)
Accounts payable		18,489			2,746
Accrued expenses, other liabilities and income tax payable		35,902			55,008

Net cash flows from operating activities		91,663			103,703

CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash acquired of $1,350 and $4,129		(76,579	)		(60,712	)
Purchases of property and equipment		(34,073	)		(28,196	)
Other		—			90

Net cash flows from investing activities		(110,652	)		(88,818	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facilities		71,100			61,000
Payments on revolving credit facilities		(47,200	)		(61,000	)
Principal payments on long-term obligations		(3,856	)		(17,201	)
Payments of capital lease obligations		(20	)		(225	)
Other		242			(81	)

Net cash flows from financing activities		20,266			(17,507	)

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		2,748			4,926
NET CHANGE IN CASH AND CASH EQUIVALENTS		4,025			2,304
CASH AND CASH EQUIVALENTS, Beginning of period		93,836			97,793

CASH AND CASH EQUIVALENTS, End of period	$	97,861		$	100,097

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	50,778		$	38,074

Cash paid during the period for income taxes, net of refunds of $1,733 and $522	$	16,907		$	6,266

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Accrued obligations for the purchase of property and equipment	$	5,329		$	4,291

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

WEST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(AMOUNTS IN THOUSANDS )


			Additional									Accumulated Other			Total
	Common		Paid - in			Retained			Treasury			Comprehensive			Stockholders’
	Stock		Capital			Deficit			Stock			Income (Loss)			Deficit
BALANCE, January 1, 2012	$	491	$	1,695,477		$	(2,556,525	)	$	(3,820	)	$	(32,036	)	$	(896,413	)
Net income							34,044									34,044
Foreign currency translation adjustment, net of tax of $4,736													7,728			7,728
Unrealized gain on cash flow hedges, net of tax of $268													437			437
Executive Deferred Compensation Plan activity				741												741
Stock options exercised including related tax benefits (519,321 shares)				120												120
Share based compensation				(129	)											(129	)
Purchase of stock at cost (12,000 shares)										(51	)					(51	)

BALANCE, March 31, 2012	$	491	$	1,696,209		$	(2,522,481	)	$	(3,871	)	$	(23,871	)	$	(853,523	)

BALANCE, January 1, 2011	$	88	$	—		$	(2,516,315	)	$	(1,023	)	$	(26,250	)	$	(2,543,500	)
Net income							34,580									34,580
Foreign currency translation adjustment, net of tax of $1,388													2,265			2,265
Reclassification of a cash flow hedge into earnings, net of tax of $1,193													1,945			1,945
Unrealized gain on cash flow hedges, net of tax of $1,472													2,402			2,402
Executive Deferred Compensation Plan activity				1,051												1,051
Stock options exercised including related tax benefits (2,000 shares)				7												7
Share based compensation				520												520
Accretion of Class L common stock priority return preference				(1,578	)		(42,275	)								(43,853	)

BALANCE, March 31, 2011	$	88	$	—		$	(2,524,010	)	$	(1,023	)	$	(19,638	)	$	(2,544,583	)

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF CONSOLIDATION AND PRESENTATION

Business Description: West Corporation (the “Company” or “West”) is a leading provider of technology-driven communication services. “We,” “us” and “our” also refer to West and its consolidated subsidiaries, as applicable. The scale and processing capacity of our proprietary technology platforms, combined with our expertise in managing voice and data transactions, enable us to offer a broad portfolio of services, including conferencing and collaboration, unified communications, alerts and notifications, emergency communications and business processing outsourcing. Our services provide reliable, high-quality, mission-critical communications designed to maximize return on investment for our clients. Our clients include Fortune 1000 companies, along with small and medium enterprises in a variety of industries, including telecommunications, retail, financial services, public safety, technology and healthcare. We have sales and operations in the United States, Canada, Europe, the Middle East, Asia Pacific, Latin America and South America.

We operate in two business segments:

•

Unified Communications, including conferencing and collaboration services, event services, alerts and notification services and IP-based unified communication solutions; and

•

Communication Services, including emergency communication services, automated call processing, agent-based services and telephony / interconnect services.

Unified Communications

— Conferencing & Collaboration Services. Operating under the InterCall^® brand, we are the largest conferencing services provider in the world based on conferencing revenue, according to Wainhouse Research. We managed approximately 121 million conference calls in 2011, a 13 percent increase over 2010. We provide our clients with an integrated global suite of meeting services. These include on-demand audio conferencing services, video managed services and web collaboration tools that allow clients to make presentations and share applications and documents over the Internet.

— Event Services. InterCall offers an event services team to help clients who would like extra assistance planning, conducting and gathering report information for large scale or high-value meetings or conferences. Event services include audio and video webcasting services, virtual event design and hosting, operator-assisted audio conferencing services and web event services.

— Alerts & Notifications Services. Our technology platforms allow clients to manage and deliver automated, proactive and personalized communications. We use multiple delivery channels (voice, text messaging, email, social media and fax) based on the preference of the recipient. For example, we deliver patient notifications, send and confirm appointments and prescription reminders on behalf of our healthcare clients, provide travelers with flight arrival and departure updates on behalf of our transportation clients, send and receive automated outage notifications on behalf of our utility clients and transmit emergency evacuation notices on behalf of municipalities. Our scalable platform enables a high volume of messages to be sent in a short amount of time. Our platform also enables two-way communication which allows the recipients of a message to respond with relevant information to our clients.

— IP-Based Unified Communications Solutions. We provide our clients with enterprise class IP-based communications solutions enabled by our technology. We offer hosted IP-private branch exchange (“PBX”) and enterprise call management, hosted and managed multi-protocol label switching (“MPLS”) network solutions, unified communications partner solution portfolio services, cloud-based security services, integrated conferencing/desktop messaging and presence tools, and professional services and systems integration expertise.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Communication Services

— Emergency Communications Services. We believe we are one of the largest providers of emergency communications services, based on the number of 9-1-1 calls that we and other participants in the industry facilitate. Our services are critical in facilitating public safety agencies’ ability to receive emergency calls from citizens. Our clients generally enter into long-term contracts and fund their obligations through monthly charges on users’ telephone bills.

— Automated Call Processing. We believe we have developed a best-in-class automated customer service platform. Our services allow our clients to effectively communicate with their customers through inbound and outbound interactive voice response (“IVR”) applications using natural language speech recognition, automated voice prompts and network-based call routing services. In addition to these front-end customer service applications, we also provide analyses that help our clients improve their automated communications strategy. Our open standards-based platform allows the flexibility to integrate new capabilities, such as mobility, social media and cloud-based services.

— Agent-Based Services. We provide our clients with large-scale, agent-based services, including inbound customer care, customer retention, business-to-business, account management, receivables management, overpayment identification and recovery solutions, as well as direct response and language services. We target opportunities to provide our agent-based services as part of larger strategic client engagements and with clients for whom these services can add value. We believe that we are known in the industry as a premium provider of these services. We have a flexible model that offers on-shore, off-shore and virtual home-based capabilities to fit our clients’ needs.

— Telephony / Interconnect Services. Our Telephony / Interconnect services support the merging of traditional telecom, mobile and IP technologies to service providers and enterprises. We are a leading provider of local and national tandem switching services in the middle mile to carriers throughout the United States. We leverage our proprietary customer traffic information system, sophisticated call routing and control facility to provide tandem interconnection services to the competitive marketplace, including wireless, wire-line, cable telephony and VoIP companies. We entered this market through the acquisition of HyperCube in March, 2012.

Basis of Consolidation—The unaudited condensed consolidated financial statements include the accounts of West and our wholly-owned subsidiaries and reflect all adjustments (all of which are normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results, and cash flows for the interim periods. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the year ended December 31, 2011. All intercompany balances and transactions have been eliminated. Our results for the three months ended March 31, 2012 are not necessarily indicative of what our results will be for other interim periods or for the full fiscal year.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition – In our Unified Communications segment, our conferencing and collaboration services, event services and IP-based unified communications solutions are generally billed and revenue recognized on a per participant minute basis or per seat basis and our alerts and notifications services are generally billed, and revenue recognized, on a per message or per minute basis. We also charge clients for additional features, such as conference call recording, transcription services or professional services. Our Communication Services segment

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

recognizes revenue for platform-based and agent-based services in the month that services are performed and services are generally billed based on call duration, hours of input, number of calls or a contingent basis. Emergency communications services revenue within the Communication Services segment is generated primarily from monthly fees based on the number of billing telephone numbers and cell towers covered under contract. In addition, product sales and installations are generally recognized upon completion of the installation and client acceptance of a fully functional system or, for contracts that are completed in stages, recognized upon completion of such stages.

Contracts for annual recurring services such as support and maintenance agreements are generally billed in advance and are recognized as revenue ratably (on a monthly basis) over the contractual periods. Nonrefundable up-front fees and related costs are recognized ratably over the term of the contract except in certain instances where the future benefit is linked to the customer relationship, which may necessitate a longer recognition period.

Revenue for contingent collection services and overpayment identification and recovery services is recognized in the month collection payments are received based upon a percentage of cash collected or other agreed upon contractual parameters.

Revenue for telephony / interconnect services is recognized in the period the service is provided and when collection is reasonably assured. These telephony / interconnect services are primarily comprised of switched access charges for toll-free origination services, which are paid primarily by interexchange carriers.

Conversion—On December 30, 2011, we completed the conversion of our outstanding Class L Common Stock into shares of Class A Common Stock (the “Conversion”) by filing amendments to our amended and restated certificate of incorporation (the “Charter Amendments”) with the Delaware Secretary of State. Upon the effectiveness of the filing of the Charter Amendments, each share of our outstanding Class L Common Stock was converted into 40.29 shares of Class A Common Stock.

Prior to the Conversion, our equity investors (i.e., the Sponsors, the Founders and certain members of management) owned a combination of Class L and Class A shares (in strips of eight Class A shares and one Class L share per strip). Supplemental management incentive equity awards (restricted stock and option programs) were implemented with Class A shares/options only.

As the Class L stockholders controlled a majority of the votes of the board of directors through direct representation on the board of directors and the conversion and redemption features were considered to be outside the control of the Company, all shares of Class L common stock, prior to the Conversion, were presented outside of permanent equity in accordance with ASC 480-10-599, Classification and Measurement of Redeemable Securities. Subsequent to the Conversion, the Class L accreted value was reclassified to Common Stock and Additional Paid-In Capital.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

A reconciliation of the Class L common shares is presented below, in thousands:


	Three months ended March 31, 2011
Beginning period balance	$	1,504,445
Accretion of class L common stock priority return preference		43,853
Executive Deferred Compensation Plan activity		1,389

End of period balance	$	1,549,687

Reclassification of Common Stock—On December 30, 2011, following the Conversion, all of the then outstanding shares of Class A Common Stock were reclassified as shares of Common Stock pursuant to the filing of the Charter Amendments (the “Reclassification”). Following the Reclassification, all shares of Common Stock share proportionately in dividends. The Charter Amendments also increased our number of authorized shares to nine hundred million (900,000,000) shares of Class A Common Stock and one hundred million (100,000,000) shares of Class L Common Stock. Following consummation of the Conversion and the Reclassification, we had one billion authorized shares of Common Stock.

As a result of the reclassification of Class A common stock to common stock, references to “Class A common stock” have been changed to “common stock” for all periods presented.

Cash and Cash Equivalents—We consider short-term investments with original maturities of three months or less at acquisition to be cash equivalents.

Trust and Restricted Cash—Trust cash represents cash collected on behalf of our clients that has not yet been remitted to them. A related liability is recorded in accounts payable until settlement with the respective clients. Restricted cash primarily represents cash held as collateral for certain letters of credit.

Foreign Currency and Translation of Foreign Subsidiaries—The functional currencies of the Company’s foreign operations are the respective local currencies. All assets and liabilities of the Company’s foreign operations are translated into U.S. dollars at fiscal period-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the fiscal period. The resulting translation adjustments are recorded as a component of stockholders’ deficit and comprehensive income. Foreign currency transaction gains or losses are recorded in the statement of operations.

Subsequent Events – We have evaluated subsequent events. No subsequent events requiring recognition were identified and therefore none were incorporated into the condensed consolidated financial statements presented herein.

Recent Accounting Pronouncements—In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U. S. GAAP and IFRS. The amendments in ASU 2011-04 change the wording used to describe many of the requirements in U. S. Generally Accepted Accounting Principles (“GAAP”) for measuring fair value and disclosing information about fair value measurements. Some of the amendments clarify FASB’s intent about the application of existing fair value measurement and disclosure requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This guidance became effective for the Company January 1, 2012, and the adoption had no immediate effect on our financial position, results of operations or cash flows.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In June 2011, the FASB issued ASU No. 2011- 05, Comprehensive Income (Topic 220), requiring entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. ASU No. 2011-05 is effective for statements issued by the Company after January 1, 2012. In December 2011, the FASB issued ASU 2011-12 Comprehensive Income, which defers certain portions of ASU 2011-05 and indefinitely deferred the requirement to present reclassification adjustments out of accumulated other comprehensive income by component. The Company early adopted the provisions of ASU No. 2011-05 and ASU No. 2011-12 and accordingly all previous periods have been retrospectively presented.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350), permitting entities the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. ASU No. 2011-08 became effective for the Company January 1, 2012 and the adoption had no immediate effect on our financial position, results of operations or cash flows.

2. ACQUISITIONS

HyperCube

On March 23, 2012, we completed the acquisition of HyperCube LLC, (“HyperCube”), a provider of switching services to telecommunications carriers throughout the United States. HyperCube exchanges or interconnects communications traffic to all carriers, including wireless, wire-line, cable telephony and Voice over Internet Protocol (VoIP) companies. The purchase price was $77.9 million and was funded by cash on hand and partial use of our asset securitization financing facility. The results of HyperCube have been included in the Communication Services segment since March 23, 2012.

Factors that contributed to a purchase price resulting in the recognition of goodwill, partially deductible for tax purposes, for the purchase of HyperCube included the synergy related to telecommunication transport costs and new products and services related to IP and mobile communications.

PivotPoint

On August 10, 2011, we completed the acquisition of substantially all of the telecommunication business assets of PivotPoint Solutions, LLC (“PivotPoint”), a provider of wireless location accuracy compliance reporting, analysis and optimization. PivotPoint’s technology allows wireless carriers to monitor and optimize their location finding networks. The purchase price was $22.9 million and was funded by cash on hand and partial use of our revolving credit facilities. The results of the acquired PivotPoint assets have been included in the Communication Services segment since August 10, 2011.

Factors that contributed to a purchase price resulting in the recognition of goodwill, non-deductible for tax purposes, for the purchase of the PivotPoint assets included PivotPoints’ expertise in location accuracy compliance reporting mandated by the Federal Communications Commission, expansion of 9-1-1 products and services, market expansion and operational efficiencies.

Contact One

On June 7, 2011, we completed the acquisition of substantially all of the assets of Contact One, Inc. (“Contact One”), a provider of 9-1-1 database, mapping/GIS (Geographic Information System) and 9-1-1 products and services. The purchase price was $7.6 million and was funded by cash on hand and partial use of our revolving credit facilities. The results of the acquired Contact One assets have been included in the Communication Services segment since June 7, 2011.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Factors that contributed to a purchase price resulting in the recognition of goodwill, non-deductible for tax purposes, for the purchase of the Contact One assets included Contact One’s expertise in 9-1-1 database, mapping/GIS and expansion of 9-1-1 products and services.

Smoothstone

On June 3, 2011, we completed the acquisition of Smoothstone IP Communications Corporation, now known as West IP Communications, Inc. (“WIPC”), a provider of cloud-based communications for the enterprise. The acquisition of WIPC added cloud-based IP telephony and network management to our Unified Communications solutions portfolio. The purchase price was $120.0 million and was funded by cash on hand and partial use of our revolving credit facilities. The results of WIPC have been included in the Unified Communications segment since June 3, 2011.

Factors that contributed to a purchase price resulting in the recognition of goodwill, non-deductible for tax purposes, for the purchase of WIPC included a complete product portfolio of cloud-based, network-centric Unified Communications solutions, a flexible deployment model which enables a menu of solutions to be implemented to replace or complement customers’ existing on-premise equipment, expansion of the target market of potential clients and capital expenditure and operating cost avoidance.

Unisfair

On March 1, 2011, we completed the acquisition of Unisfair, Inc. (“Unisfair”), a provider of hosted virtual events and business environments. These virtual events and environments offer a highly interactive experience through speaking sessions, exhibition floors and networking areas that support many business purposes, including sales and lead generation, training, product marketing and corporate and employee communications. The addition of Unisfair enhances our virtual event offering by permitting us to offer a complete end-to-end solution on a proprietary platform within our Unified Communications segment. The purchase price was $19.5 million and was funded by cash on hand. The results of Unisfair have been included in the Unified Communications segment since March 1, 2011.

A factor that contributed to a purchase price resulting in the recognition of goodwill, non-deductible for tax purposes, for the purchase of Unisfair included enhancement of our virtual events and business environment services offering.

TFCC

On February 1, 2011, we completed the acquisition of Twenty First Century Communications, Inc. (“TFCC”), a provider of automated alerts and notification solutions to the electric utilities industry, government, public safety and corporate markets. The addition of TFCC enhances our alerts and notifications platform and our position as a service provider to the U.S. utility industry. The purchase price was $40.5 million and was funded by cash on hand and partial use of our revolving credit facilities. The results of TFCC have been included in the Unified Communications segment since February 2, 2011.

Factors that contributed to a purchase price resulting in the recognition of goodwill, deductible for tax purposes, for the purchase of TFCC included expansion of our presence in emergency alerts and notification services particularly in the utilities industry and the potential to drive additional services into this market.

POSTcti

On February 1, 2011, we completed the acquisition of Preferred One Stop Technologies Limited (“POSTcti”), a provider of unified communications solutions and services in Europe. POSTcti enables and provides single source communication convergence from best-of-breed industry-leading providers, combined with customized professional services implementation and dedicated ongoing product support. The purchase price included $4.3 million of non-contingent consideration paid in Sterling at closing and was funded with cash on hand.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The purchase agreement for POSTcti also includes a three year contingent earn-out provision with a maximum payment of approximately £12.0 million and £0.4 million (approximately $19.2 million and $0.6 million at the March 31, 2012 exchange rate) of additional non-contingent deferred consideration withheld to secure sellers’ indemnification obligations. The contingent earn-out will be determined based on the achievement of specified revenue and EBITDA objectives. Based on a weighted average probability analysis, we have accrued $8.2 million at March 31, 2012 for the contingent earn-out. The results of POSTcti have been included in the Unified Communications segment since February 1, 2011.

A factor that contributed to a purchase price resulting in the recognition of goodwill, non-deductible for tax purposes, for the purchase of POSTcti included the expansion of our hosted and managed unified communications solutions to Europe.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the respective acquisition dates for HyperCube, PivotPoint, Contact One, WIPC, Unisfair, TFCC and POSTcti,. The finite lived intangible assets are comprised of trade names, technology, non-competition agreements and customer relationships. We are in the process of completing the valuation of certain intangible assets and the acquisition accounting allocation, and accordingly the information presented with respect to the acquisitions of HyperCube, PivotPoint, Contact One and WIPC are provisional and subject to adjustment.


(Amounts in thousands)	HyperCube		PivotPoint		Contact One			WIPC		Unisfair			TFCC		POSTcti
Working Capital	$	321	$	231	$	(390	)	$	4,635	$	(3,732	)	$	1,080	$	(1,255	)
Property and equipment		10,114		307		56			1,484		339			3,304		18
Other assets, net		391		30		—			—		42			—		—
Intangible assets		19,110		10,791		2,785			48,610		10,960			17,250		3,859
Goodwill		50,589		11,542		5,189			79,538		15,343			18,870		11,221

Total assets acquired		80,525		22,901		7,640			134,267		22,952			40,504		13,843

Non-current deferred taxes		2,594		—		—			13,182		3,452			—		1,013
Long-term liabilities		50		—		—			1,047		—			—		8,537

Total liabilities assumed		2,644		—		—			14,229		3,452			—		9,550

Net assets acquired	$	77,881	$	22,901	$	7,640		$	120,038	$	19,500		$	40,504	$	4,293

Assuming the acquisitions of HyperCube, PivotPoint, Contact One, WIPC, Unisfair, TFCC and POSTcti, occurred as of the beginning of the periods presented, our unaudited pro forma results of operations for the three months ended March 31, 2012 and 2011 would have been, in thousands, (except per share amount) as follows:


	Three months ended March 31,
	2012		2011
Revenue	$	655,438	$	644,903
Net Income	$	33,991	$	32,023
Earnings per common L share—basic		N/A	$	4.39
Earnings per common L share—diluted		N/A	$	4.21
Income (loss) per common share—basic	$	0.07	$	(0.13	)
Income (loss) per common share—diluted	$	0.07	$	(0.13	)

The pro forma results above are not necessarily indicative of the operating results that would have actually occurred if the acquisitions had been in effect on the dates indicated, nor are they necessarily indicative of future results of the combined companies.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Our acquisitions were included in the consolidated results of operations from their respective dates of acquisition and included revenue of $18.8 million and $12.0 million for the three months ended March 31, 2012 and 2011, respectively. The net income for the three months ended March 31, 2012 and 2011 of those acquisitions were not material. Acquisition costs for the three months ended March 31, 2012 and 2011 were $0.5 million and $1.5 million, respectively, and are included in selling general and administrative expenses.

3. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table presents the activity in goodwill by reporting segment, in thousands, for the year ended December 31, 2011 and the three months ended March 31, 2012:


	Unified			Communication
	Communications			Services			Consolidated
Balance at January 1, 2011	$	843,558		$	823,513		$	1,667,071
Accumulated impairment losses		—			(37,675	)		(37,675	)

Net balance at January 1, 2011		843,558			785,838			1,629,396
Acquisitions		124,989			16,839			141,828
Acquisition accounting adjustments		—			(3,023	)		(3,023	)
Foreign currency translation adjustment		(5,565	)		(1	)		(5,566	)

Balance at December 31, 2011		962,982			837,328			1,800,310

Accumulated impairment losses		—			(37,675	)		(37,675	)

Net balance at December 31, 2011	$	962,982		$	799,653		$	1,762,635


	Unified			Communication
	Communications			Services			Consolidated
Balance at January 1, 2012	$	962,982		$	837,328		$	1,800,310
Accumulated impairment losses		—			(37,675	)		(37,675	)

Net balance at January 1, 2012		962,982			799,653			1,762,635
Acquisitions		—			50,589			50,589
Acquisition accounting adjustments		(17	)		(108	)		(125	)
Foreign currency translation adjustment		5,042			78			5,120

Balance at March 31, 2012		968,007			887,887			1,855,894

Accumulated impairment losses		—			(37,675	)		(37,675	)

Net balance at March 31, 2012	$	968,007		$	850,212		$	1,818,219

The excess of the acquisition costs over the fair value of the assets acquired and liabilities assumed for the purchase of HyperCube, PivotPoint, Contact One, WIPC, Unisfair, TFCC and POSTcti were assigned to goodwill based on preliminary estimates. We are in the process of completing the acquisition accounting for certain intangible assets and liabilities. The process of completing the acquisition accounting involves numerous time consuming steps for information gathering, verification and review. We expect to finalize this process within twelve months following the respective acquisition dates.

During the three months ended March 31, 2012, we completed the acquisition accounting for Unisfair, TFCC and POSTcti with no significant changes required to our provisional acquisition accounting estimates.

Other intangible assets

Below is a summary of the major intangible assets and weighted average amortization periods (in years) for each identifiable intangible asset, in thousands:

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


								Weighted Average Amortization Period (Years)
	As of March 31, 2012
Intangible assets	Acquired Cost		Accumulated Amortization			Net Intangible Assets
Customer lists	$	554,685	$	(353,394	)	$	201,291		9.4
Technology & Patents		136,619		(63,886	)		72,733		10.3
Trade names		47,110		—			47,110		Indefinite
Trade names (finite-lived)		27,341		(13,969	)		13,372		4.3
Other intangible assets		14,902		(10,361	)		4,541		4.6

Total	$	780,657	$	(441,610	)	$	339,047


								Weighted Average Amortization Period (Years)
	As of December 31, 2011
Intangible assets	Acquired Cost		Accumulated Amortization			Net Intangible Assets
Customer lists	$	538,154	$	(341,236	)	$	196,918		9.2
Technology & Patents		131,446		(61,098	)		70,348		10.3
Trade names		47,110		—			47,110		Indefinite
Trade names (finite-lived)		26,690		(12,423	)		14,267		4.3
Other intangible assets		14,452		(9,948	)		4,504		4.6

Total	$	757,852	$	(424,705	)	$	333,147

Amortization expense for finite-lived intangible assets was $14.9 million and $14.8 million for the three months ended March 31, 2012 and 2011, respectively. Estimated amortization expense for the intangible assets noted above for 2012 and the next five years is as follows:


2012	$	65.4 million
2013	$	54.6 million
2014	$	44.3 million
2015	$	35.1 million
2016	$	26.6 million
2017	$	19.8 million

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

4. ACCRUED EXPENSES

Accrued expenses, in thousands, consisted of the following as of:


	March 31,		December 31,
	2012		2011
Deferred revenue and customer deposits	$	83,127	$	78,173
Accrued wages		64,237		54,259
Interest payable		55,466		47,724
Accrued phone		40,837		27,500
Accrued other taxes (non-income related)		40,510		37,980
Accrued employee benefit costs		14,779		12,763
Income taxes payable		9,419		17,997
Accrued lease expense		7,645		7,211
Interest rate hedge position		5,479		5,194
Other current liabilities		38,663		34,635

	$	360,162	$	323,436

5. LONG-TERM OBLIGATIONS

Long-term debt is carried at amortized cost. Long-term obligations, in thousands, consist of the following as of:


	March 31,			December 31,
	2012			2011
Senior Secured Term Loan Facility, due 2013	$	448,434		$	448,434
Senior Secured Term Loan Facility, due 2016		1,464,075			1,467,931
Asset Securitization Facility, due 2014		23,900			—
11% Senior Subordinated Notes, due 2016		450,000			450,000
8 5/8% Senior Notes, due 2018		500,000			500,000
7 7/8% Senior Notes, due 2019		650,000			650,000

		3,536,409			3,516,365

Less: current maturities		(15,425	)		(15,425	)

Long-term obligations	$	3,520,984		$	3,500,940

6. HEDGING ACTIVITIES

Periodically, we have entered into interest rate swaps to hedge the cash flows from our variable rate debt, which effectively converts the hedged portion under our outstanding senior secured term loan facility to fixed rate debt. The initial assessments of hedge effectiveness were performed using regression analysis. The periodic measurements of hedge ineffectiveness are performed using the change in variable cash flows method.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The cash flow hedges are recorded at fair value with a corresponding entry, net of taxes, recorded in other comprehensive income (“OCI”) until earnings are affected by the hedged item. At March 31, 2012, the notional amount of debt outstanding under interest rate swap agreements was $500.0 million. The fixed interest rate on the interest rate swaps ranges from 1.685% to 1.6975%. During the three months ended March 31, 2012, three interest rate swaps with a notional value of $500.0 million matured. The interest rate on these three interest rate swaps ranged from 2.56% to 2.60%.

The following table presents, in thousands, the fair value of the Company’s derivatives and consolidated balance sheet location.


	Liability Derivatives
	March 31, 2012			December 31, 2011
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Accrued expenses	$	5,479	Accrued expenses	$	5,194
Interest rate swaps	Other long-term liabilities		920	Other long-term liabilities		1,911

Total derivatives		$	6,399		$	7,105

The following presents, in thousands the impact of interest rate swaps on the consolidated statement of operations for the three months ended March 31, 2012 and March 31, 2011, respectively.


Derivatives designated as hedging instruments	Amount of gain (loss) recognized in OCI March 31,				Amount of gain (loss) recognized in net income on hedges (ineffective portion) three months ended March 31,
	2012		2011		2012		2011
Interest rate swaps	$	437	$	2,402	$	—	$	202


Location of gain (loss) reclassified from OCI into net income	Amount of gain (loss) reclassified from OCI into net income for the three months ended March 31,
	2012		2011
Interest expense	$	—	$	1,945

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

7. FAIR VALUE DISCLOSURES

Accounting Standards Codification 820 Fair Value Measurements and Disclosures (“ASC 820”) defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC 820 apply to other accounting pronouncements that require or permit fair value measurements. ASC 820:

•

Defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date; and

•

Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. To increase consistency and comparability in fair value measurements and related disclosures, the fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are defined as follows:

•

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

•

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly for substantially the full term of the financial instrument.

•

Level 3 inputs are unobservable inputs for assets or liabilities.

The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value.

Trading Securities (Asset). The assets held in the West Corporation Executive Retirement Savings Plan and the West Corporation Non-qualified Deferred Compensation Plan represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with ASC 320 considering the employee’s ability to change the investment allocation of their deferred compensation at any time. Quoted market prices are available for these securities in an active market therefore, the fair value of these securities is determined by Level 1 inputs.

Interest rate swaps. The effect of the interest rate swaps is to change a variable rate debt obligation to a fixed rate for that portion of the debt that is hedged. We record the interest rate swaps at fair value. The fair value of the interest rate swaps is based on a model whose inputs are observable (LIBOR swap rates); therefore, the fair value of these interest rate swaps is based on a Level 2 input.

The Company looks at classification within the fair value hierarchy at each period. There were no transfers between any levels of the fair value hierarchy during the periods presented in the table below.

Assets and liabilities measured at fair value on a recurring basis, in thousands, are summarized below:

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


			Fair Value Measurements at March 31, 2012 Using
Description	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Assets / Liabilities at Fair Value
Assets
Trading securities	$	32,467	$	32,467	$	—	$	—	$	32,467

Liabilities
Interest rate swaps	$	6,399	$	—	$	6,399	$	—	$	6,399


			Fair Value Measurements at December 31, 2011 Using
Description	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Assets / Liabilities at Fair Value
Assets
Trading securities	$	29,535	$	29,535	$	—	$	—	$	29,535

Liabilities
Interest rate swaps	$	7,105	$	—	$	7,105	$	—	$	7,105

The fair value of our senior secured term loan facility, 11% senior subordinated notes, 8 5/8% senior notes and 7 7/8% senior notes based on market quotes, which we determined to be Level I inputs, at March 31, 2012 was approximately $3,634.9 million compared to the carrying amount of $3,512.5 million. The fair value of our senior secured term loan facility, 11% senior subordinated notes, 8 5/8% senior notes and 7 7/8% senior notes based on market quotes, which we determined to be Level I inputs, at December 31, 2011 was approximately $3,529.0 million compared to the carrying amount of $3,516.4 million. The Company believes the fair value of our variable rate asset securitization financing facility at March 31, 2012 equals the carrying value of $23.9 million. There was no outstanding balance on the asset securitization financing facility at December 31, 2011.

8. STOCK-BASED COMPENSATION

On December 30, 2011, our Board of Directors approved amendments to certain of our compensation plans. The Board of Directors approved an amendment to the Company’s 2006 Executive Incentive Plan (“EIP”) which amendment increased the maximum number of shares of common stock of the Company, par value $0.001 per share (“Common Stock”) that may be issued pursuant to or subject to outstanding awards under the 2006 EIP from 11,276,291 to 38,435,427. Such increased pool is in addition to shares issuable upon exercise of executive management rollover options. The Board of Directors also took action in accordance with the terms of the 2006 EIP to adjust the number and kind of shares of stock or securities subject to awards outstanding under the 2006 EIP to give effect to the Conversion and the Reclassification.

Awards under the EIP are intended to align the incentives of the Company’s executives and investors and to improve the performance of the Company. The administrator will select participants from among those key employees and directors of and consultants and advisors to, the Company or its affiliates who, in the opinion of the administrator, are in a position to make a significant contribution to the success of the Company and its affiliates.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Stock options granted under the EIP prior to 2012 become exercisable over a period of five years, with 20% of the stock option becoming exercisable on each of the first through fifth anniversaries of the grant date. During 2012, a form of option certificate was adopted such that the 2012 grants become exercisable over a period of four years, with 25% of the stock option becoming exercisable on each of the first through fourth anniversaries of the grant date. Once an option has vested, it generally remains exercisable until the tenth anniversary of the grant date so long as the participant continues to provide services to the Company.

Stock Options

The following table presents the stock option activity under the EIP for the three months ended March 31, 2011 and 2012, respectively:


				Options Outstanding
	Options Available for Grant			Number of Options			Weighted Average Exercise Price
Balance at January 1, 2011		333,447			2,544,000		$	3.00
Granted		(160,000	)		160,000			10.60
Canceled		18,500			(18,500	)		4.92
Exercised		—			(2,000	)		3.61

Balance at March 31, 2011		191,947			2,683,500		$	3.44

Balance at January 1, 2012		27,434,083			2,524,500		$	3.38
Granted		(20,910,000	)		20,910,000			4.19
Canceled		35,000			(35,000	)		7.26
Exercised		—			—			—

Balance at March 31, 2012		6,559,083			23,399,500		$	4.10

At March 31, 2012, we expect that approximately 72% of options granted will vest over the vesting period.

At March 31, 2012, the intrinsic value of vested options was approximately $3.6 million.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following table presents information regarding the options granted under the EIP at March 31, 2012:


Outstanding								Exercisable
Range of Exercise Prices		Number of Options		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
$	1.64		1,706,500		4.69	$	1.64		1,686,500	$	1.64
	3.61		218,000		6.75		3.61		129,000		3.61
	4.19		20,910,000		9.99		4.19		—		—
	6.36		235,000		5.83		6.36		192,000		6.36
	9.04		200,000		8.08		9.04		40,000		9.04
	10.60		130,000		8.83		10.60		26,000		10.60

$	1.64 - $10.60		23,399,500		9.52	$	4.10		2,073,500	$	2.45


			Options Outstanding
Executive Management Rollover Options	Options Available for Grant		Number of Shares			Weighted Average Exercise Price
Balance at January 1, 2011		17		287,326		$	33.34
Canceled		—		—			—
Exercised		—		—			—

Balance at March 31, 2011		17		287,326		$	33.34

Balance at January 1, 2012		821		12,958,670		$	0.6923
Canceled		—		—			—
Exercised		—		(588,728	)		0.6985

Balance at March 31, 2012		821		12,369,942		$	0.6920

Prior to the Conversion and Reclassification in December 2011, an Equity Strip was comprised of eight shares of Class A common stock and one share of Class L common stock. The executive management rollover options are fully vested.

The following table summarizes the outstanding and exercisable information on executive management rollover options granted under the EIP at March 31, 2012:


Outstanding and Exercisable
Range of Exercise Prices		Number of Options		Average Remaining Contractual Life (years)		Weighted Average Exercise Price
$	0.5846		147,115		0.5	$	0.5846
	0.6834		11,083,859		1.5		0.6834
	0.7900		1,138,968		1.0		0.7900

$	0.5846 - $0.79		12,369,942		1.5	$	0.6920

The aggregate intrinsic value of these options at March 31, 2012 was approximately $43.3 million.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

We account for the stock option grants under the EIP in accordance with Accounting Standards Codification 718, Compensation-Stock Compensation (“ASC 718”). The fair value of option awards granted under the EIP during the three months ended March 31, 2012 and 2011 were $1.53 and $3.92, respectively. We have estimated the fair value of EIP option awards on the grant date using a Black-Scholes option pricing model that uses the assumptions noted in the following table:


	Three months ended
	March 31,			March 31,
	2012			2011
Risk-free interest rate		1.35	%		1.87	%
Dividend yield		0.0	%		0.0	%
Expected volatility		34.7	%		33.2	%
Expected life (years)		6.25			6.5

The risk-free rate for periods within the expected life of the option is based on the zero-coupon U.S. government treasury strip with a maturity which approximates the expected life of the option at the time of grant.

There was approximately $23.9 million and $1.5 million of unrecorded and unrecognized compensation expense related to unvested stock options under the EIP at March 31, 2012 and 2011, respectively.

Restricted Stock

The Company is party to Restricted Stock Award and Special Bonus Agreements and Restricted Stock Award Agreements (collectively, “Restricted Stock Agreements”) with certain officers and employees of the Company, which Restricted Stock Agreements provide for the issuance of shares of Common Stock that were subject to time-based or performance vesting. On December 30, 2011, the Board of Directors approved the amendment of the Restricted Stock Agreements with each of the current employees party to a Restricted Stock Agreement with the Company in accordance with the terms of the 2006 EIP to provide for immediate vesting of all shares awarded thereunder outstanding for more than five years, such vesting to become effective as of the Conversion and Reclassification. For shares outstanding for less than five years, the board of directors approved the amendment to the Restricted Stock Agreement to provide for vesting of all such awards upon the earlier of the five year anniversary of grant or a change of control of the Company. The amendments to the Restricted Stock Agreements provided for the acceleration of an aggregate of 4,371,864 shares of Common Stock. Previously, Tranches 2 and 3 of these awards vested only upon meeting certain performance criteria and therefore share-based compensation had not been recognized.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

We account for the restricted stock in accordance with ASC 718. No restricted stock was granted during the three months ended March 31, 2012 or 2011. At March 31, 2012 and 2011, there was approximately $2.7 million and $1.8 million of unrecorded and unrecognized compensation expense related to unvested restricted stock under the EIP, respectively.

Stock-Based Compensation Expense

For the three months ended March 31, 2012 and 2011, stock-based compensation expense was $0.1 million and $1.0 million, respectively.

9. EARNINGS PER SHARE

On October 2, 2009, the Company announced its intention to commence an equity offering and accordingly is providing the following information related to earnings per share.

On December 30, 2011, we completed the conversion of our outstanding Class L Common Stock into shares of Class A Common Stock and thereafter the reclassification of all of our Class A Common Stock as a single class of Common Stock. As a result, earnings per share calculations in future periods will be presented as a single class of Common Stock.

Through December 30, 2011, we had two classes of common stock (Class L stock and Class A stock) outstanding. Each Class L share was entitled to a priority return preference equal to the sum of (x) $90 per share base amount and (y) an amount sufficient to generate a 12% internal rate of return on that base amount from the date of the recapitalization until the priority return preference was paid in full or converted to Class A shares. Each Class L share also participated in any equity appreciation beyond the priority return on the same per share basis as the Class A shares. Class A shares participated in the equity appreciation after the Class L priority return was satisfied.

The Class L stock was considered a participating stock security requiring use of the “two-class” method for the computation of basic net income (loss) per share in accordance with ASC 260, Earnings Per Share. Losses were not allocated to the Class L stock in the computation of basic earnings per share as the Class L stock was not obligated to share in losses.

Prior to the Conversion, basic earnings per share (“EPS”) excluded the effect of common stock equivalents and is computed using the “two-class” computation method, which divides earnings attributable to the Class L preference from total earnings. Any remaining income or loss is attributed to the common shares. Diluted earnings per share reflects the potential dilution that could result if options or other contingently issuable shares were exercised or converted into common stock and notional shares from the Deferred Compensation Plan were granted. Diluted earnings per common share assumes the exercise of stock options using the treasury stock method.


	Three months ended
	March 31,
(Amount in thousands)	2012		2011
Net income	$	34,044	$	34,580
Less accretion of Class L Shares (1)		—		43,853

Net income (loss) attributable to Class A Shares	$	34,044	$	(9,273	)

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1)	Prior to the Conversion, the Class L shareholders were allocated their priority return which is equivalent to the accretion, while any losses were allocated to common shareholders as the Class L shareholders did not have a contractual obligation to share in losses.


	Three months ended
	March 31,
(In thousands, except per share amounts)	2012		2011
Earnings (loss) per common share:
Basic-Class L		N/A	$	4.39
Basic-Common	$	0.07	$	(0.11	)

Diluted-Class L		N/A	$	4.21
Diluted-Common	$	0.07	$	(0.11	)

Weighted average number of shares outstanding:
Basic-Class L		N/A		9,995
Basic- Common		490,608		88,017

Dilutive impact of stock options:
Class L Shares		N/A		421
Diluted Class L Shares		N/A		10,416
Common Shares		17,433		—
Diluted Common Shares		508,041		88,017

N/A - Not Applicable

Diluted earnings per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares result from the assumed exercise of outstanding stock options, by application of the treasury stock method, that have a dilutive effect on earnings per share. At March 31, 2012, 21,475,000 stock options were outstanding with an exercise price equal to or exceeding the market value of our common stock that were therefore excluded from the computation of shares contingently issuable upon exercise of the options.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

10. BUSINESS SEGMENTS

We operate in two business segments:

Unified Communications, including reservationless, operator-assisted, web and video conferencing services, streaming services, alerts and notifications services and consulting, project management and implementation of hosted and managed unified communications solutions; and

Communication Services, including emergency communication services, automated call processing, agent-based services and telephony/interconnect services.


	For the three months ended March 31,
Amounts in thousands	2012			2011
Revenue:
Unified Communications	$	359,647		$	331,122
Communication Services		281,737			282,077
Intersegment Eliminations		(2,322	)		(2,381	)

Total	$	639,062		$	610,818

Operating Income:
Unified Communications	$	97,136		$	94,011
Communication Services		17,106			24,796

Total	$	114,242		$	118,807

Depreciation and Amortization
(Included in Operating Income):
Unified Communications	$	22,346		$	21,144
Communication Services		20,969			20,998

Total	$	43,315		$	42,142

Capital Expenditures:
Unified Communications	$	9,109		$	8,406
Communication Services		11,535			9,274
Corporate		3,232			1,484

Total	$	23,876		$	19,164


	As of March 31, 2012			As of December 31, 2011
Assets:
Unified Communications	$	1,651,794		$	1,620,444
Communication Services		1,456,889			1,379,125
Corporate		258,685			227,949

Total	$	3,367,368		$	3,227,518

For the three months ended March 31, 2012 and 2011, our largest 100 clients represented 55% and 56% of our total revenue, respectively. The aggregate revenue as a percentage of our total revenue from our largest client, AT&T, during the three months ended March 31, 2012 and 2011 was approximately 8% and 11%, respectively. No client represented more than 10% of our aggregate revenue for the three months ended March 31, 2012 and no client other than AT&T represented more than 10% of our aggregate revenue for the three months ended March 31, 2011.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For the three months ended March 31, 2012 and 2011, revenues from non-U.S. countries were approximately 19% of consolidated revenues in both periods. During these periods no individual foreign country accounted for greater than 10% of revenue. Revenue is attributed to an organizational region based on location of the billed customer’s account. Geographic information by organizational region, in thousands, is noted below:


	For the three months ended March 31,
	2012		2011
Revenue:
Americas—United States	$	517,514	$	496,128
Americas—Other		5,793		4,587
Europe, Middle East & Africa (EMEA)		75,821		75,785
Asia Pacific		39,934		34,318

Total	$	639,062	$	610,818


	As of March 31, 2012		As of December 31, 2011
Long-Lived Assets:
Americas—United States	$	2,439,238	$	2,373,428
Americas—Other		3,585		4,107
Europe, Middle East & Africa (EMEA)		208,311		206,598
Asia Pacific		22,420		21,599

Total	$	2,673,554	$	2,605,732

The aggregate gain (loss) on transactions denominated in currencies other than the functional currency of West Corporation or any of its subsidiaries was approximately $(1.6) million and $2.2 million for the three months ended March 31, 2012 and 2011, respectively.

11. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, we and certain of our subsidiaries are defendants in various litigation matters and are subject to claims from our clients for indemnification, some of which may involve claims for damages that are substantial in amount. We do not believe the disposition of matters and claims currently pending will have a material effect on our financial position, results of operations or cash flows.

12. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND SUBSIDIARY NON- GUARANTORS

West Corporation and our U.S. based wholly owned subsidiary guarantors, jointly, severally, fully and unconditionally are responsible for the payment of principal, premium and interest on our senior notes and senior subordinated notes. Presented below, in thousands, is condensed consolidated financial information for West Corporation and our subsidiary guarantors and subsidiary non-guarantors for the periods indicated.

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands)


	For the Three Months Ended March 31, 2012
	Parent / Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations and Consolidating Entries			Consolidated
REVENUE	$	—		$	500,074		$	138,988		$	—		$	639,062
COST OF SERVICES		—			233,479			58,223			—			291,702
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		4,613			189,078			39,427			—			233,118

OPERATING INCOME (LOSS)		(4,613	)		77,517			41,338			—			114,242

OTHER INCOME (EXPENSE):
Interest Expense, net of interest income		(40,933	)		(25,528	)		4,399			—			(62,062	)
Subsidiary Income		47,019			21,857			—			(68,876	)		—
Other, net		5,080			4,006			(6,356	)		—			2,730

Other income (expense)		11,166			335			(1,957	)		(68,876	)		(59,332	)

INCOME BEFORE INCOME TAX EXPENSE		6,553			77,852			39,381			(68,876	)		54,910

INCOME TAX EXPENSE (BENEFIT)		(27,491	)		28,678			19,679			—			20,866

NET INCOME	$	34,044		$	49,174		$	19,702		$	(68,876	)	$	34,044

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(AMOUNTS IN THOUSANDS)


	For the Three Months Ended March 31, 2011
	Parent / Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations and Consolidating Entries			Consolidated
REVENUE	$	—		$	484,750		$	126,068		$	—		$	610,818
COST OF SERVICES		—			220,685			50,918			—			271,603
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		2,698			180,281			37,429			—			220,408

OPERATING INCOME (LOSS)		(2,698	)		83,784			37,721			—			118,807

OTHER INCOME (EXPENSE):
Interest Expense, net of interest income		(41,055	)		(30,055	)		3,385			—			(67,725	)
Subsidiary Income		76,615			31,299			—			(107,914	)		—
Other, net		2,513			5,365			(3,186	)		—			4,692

Other income (expense)		38,073			6,609			199			(107,914	)		(63,033	)

INCOME BEFORE INCOME TAX EXPENSE		35,375			90,393			37,920			(107,914	)		55,774

INCOME TAX EXPENSE		795			13,975			6,424			—			21,194

NET INCOME	$	34,580		$	76,418		$	31,496		$	(107,914	)	$	34,580

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(AMOUNTS IN THOUSANDS)


	For the Three Months Ended March 31, 2012
	Parent / Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations and Consolidating Entries			Consolidated
Net income	$	34,044	$	49,174	$	19,702	$	(68,876	)	$	34,044

Foreign currency translation adjustments, net of tax of $4,736		—		—		7,728		—			7,728

Unrealized gain on cash flow hedges, net of tax of $268		437		—		—		—			437

Comprehensive income—West Corporation	$	34,481	$	49,174	$	27,430	$	(68,876	)	$	42,209


	For the Three Months Ended March 31, 2011
	Parent / Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations and Consolidating Entries			Consolidated
Net income	$	34,580	$	76,418	$	31,496	$	(107,914	)	$	34,580

Foreign currency translation adjustments, net of tax of $1,388		—		—		2,265		—			2,265

Reclassification of a cash flow hedge into earnings, net of tax of $1,193		1,945		—		—		—			1,945

Unrealized gain on cash flow hedges, net of tax of $1,472		2,402		—		—		—			2,402

Comprehensive income—West Corporation	$	38,927	$	76,418	$	33,761	$	(107,914	)	$	41,192

WEST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS)


	March 31, 2012
	Parent / Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations and Consolidating Entries			Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,012		$	75	$	95,774		$	—		$	97,861
Trust and restricted cash		—			13,793		—			—			13,793
Accounts receivable, net		—			60,704		395,831			—			456,535
Intercompany receivables		—			526,725		—			(526,725	)		—
Deferred income taxes receivable		426			9,466		5,678			—			15,570
Prepaid assets		5,036			32,900		11,383			—			49,319
Other current assets		4,242			309,656		(253,162	)		—			60,736

Total current assets		11,716			953,319		255,504			(526,725	)		693,814
Property and equipment, net		70,371			246,849		34,773			—			351,993
INVESTMENT IN SUBSIDIARIES		1,512,264			358,607		—			(1,870,871	)		—
GOODWILL		—			1,637,452		180,767			—			1,818,219
INTANGIBLES, net		—			291,883		47,164			—			339,047
OTHER ASSETS		98,709			63,353		2,233			—			164,295

TOTAL ASSETS	$	1,693,060		$	3,551,463	$	520,441		$	(2,397,596	)	$	3,367,368

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	9,992		$	73,045	$	9,486		$	—		$	92,523
Intercompany payables		513,253			—		13,472			(526,725	)		—
Accrued expenses		43,554			236,122		80,486			—			360,162
Current maturities of long-term debt		2,354			13,071		—			—			15,425

Total current liabilities		569,153			322,238		103,444			(526,725	)		468,110
LONG-TERM OBLIGATIONS, less current maturities		1,889,546			1,607,538		23,900			—			3,520,984
DEFERRED INCOME TAXES		52,472			72,799		19,708			—			144,979
OTHER LONG-TERM LIABILITIES		35,412			41,457		9,949			—			86,818

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(853,523	)		1,507,431		363,440			(1,870,871	)		(853,523	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,693,060		$	3,551,463	$	520,441		$	(2,397,596	)	$	3,367,368

WEST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS)


	December 31, 2011
	Parent / Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations and Consolidating Entries			Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10,503		$	—	$	89,572		$	(6,239	)	$	93,836
Trust cash		—			16,446		—			—			16,446
Accounts receivable, net		—			50,480		363,333			—			413,813
Intercompany receivables		—			573,280		—			(573,280	)		—
Deferred income taxes receivable		73,709			13,034		462			(77,137	)		10,068
Prepaid assets		3,222			25,232		8,588			—			37,042
Other current assets		5,089			306,273		(260,781	)		—			50,581

Total current assets		92,523			984,745		201,174			(656,656	)		621,786
Property and equipment, net		73,105			243,170		34,580			—			350,855
INVESTMENT IN SUBSIDIARIES		1,460,108			351,329		—			(1,811,437	)		—
GOODWILL		—			1,586,988		175,647			—			1,762,635
INTANGIBLES, net		—			283,807		49,340			—			333,147
OTHER ASSETS		98,673			58,378		2,044			—			159,095

TOTAL ASSETS	$	1,724,409		$	3,508,417	$	462,785		$	(2,468,093	)	$	3,227,518

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	5,001		$	68,317	$	12,360		$	(6,239	)	$	79,439
Intercompany payables		572,554			—		726			(573,280	)		—
Accrued expenses		70,680			260,490		69,403			(77,137	)		323,436
Current maturities of long-term debt		2,354			13,071		—			—			15,425

Total current liabilities		650,589			341,878		82,489			(656,656	)		418,300
LONG-TERM OBLIGATIONS, less current maturities		1,890,134			1,610,806		—			—			3,500,940
DEFERRED INCOME TAXES		22,766			84,918		13,837			—			121,521
OTHER LONG-TERM LIABILITIES		57,333			16,299		9,538			—			83,170

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(896,413	)		1,454,516		356,921			(1,811,437	)		(896,413	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,724,409		$	3,508,417	$	462,785		$	(2,468,093	)	$	3,227,518

WEST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)


	Three Months Ended March 31, 2012
	Parent / Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination and Consolidating Entries			Consolidated
NET CASH PROVIDED BY OPERATING ACTIVITIES:	$	—		$	75,850		$	15,813		$	—		$	91,663

CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions		—			(76,564	)		(15	)		—			(76,579	)
Purchase of property and equipment		(3,232	)		(25,857	)		(4,984	)		—			(34,073	)

Net cash used in investing activities		(3,232	)		(102,421	)		(4,999	)		—			(110,652	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facilities		27,600			—			43,500			—			71,100
Payments on revolving credit facilities		(27,600	)		—			(19,600	)		—			(47,200	)
Principal payments on long-term obligations		(589	)		(3,267	)		—			—			(3,856	)
Payments on capital lease obligations		—			(9	)		(11	)		—			(20	)
Other		242			—			—			—			242

Net cash used in financing activities		(347	)		(3,276	)		23,889			—			20,266

Intercompany		(4,912	)		29,922			(31,249	)		6,239			—
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		—			—			2,748			—			2,748

NET CHANGE IN CASH AND CASH EQUIVALENTS		(8,491	)		75			6,202			6,239			4,025
CASH AND CASH EQUIVALENTS, Beginning of period		10,503			—			89,572			(6,239	)		93,836

CASH AND CASH EQUIVALENTS, End of period	$	2,012		$	75		$	95,774		$	—		$	97,861

WEST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)


	Three Months Ended March 31, 2011
	Parent / Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination and Consolidating Entries			Consolidated
NET CASH PROVIDED BY OPERATING ACTIVITIES:	$	—		$	97,665		$	14,740		$	(8,702	)	$	103,703

CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions		—			(39,306	)		(21,406	)		—			(60,712	)
Purchase of property and equipment		(2,351	)		(23,036	)		(2,809	)		—			(28,196	)
Other		—			90			—			—			90

Net cash used in investing activities		(2,351	)		(62,252	)		(24,215	)		—			(88,818	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facilities		14,000			—			47,000			—			61,000
Payments on revolving credit facilities		(14,000	)		—			(47,000	)		—			(61,000	)
Principal payments on long-term obligations		(5,327	)		(11,874	)		—			—			(17,201	)
Payments on capital lease obligations		(204	)		(21	)		—			—			(225	)
Other		7			(88	)		—			—			(81	)

Net cash used in financing activities		(5,524	)		(11,983	)		—			—			(17,507	)

Intercompany		16,171			(23,430	)		2,667			4,592			—
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		—			—			4,926			—			4,926

NET CHANGE IN CASH AND CASH EQUIVALENTS		8,296			—			(1,882	)		(4,110	)		2,304
CASH AND CASH EQUIVALENTS, Beginning of period		—			—			102,385			(4,592	)		97,793

CASH AND CASH EQUIVALENTS, End of period	$	8,296		$	—		$	100,503		$	(8,702	)	$	100,097

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include estimates regarding:

•

the impact of changes in government regulation and related litigation;

•

the impact of pending litigation;

•

the impact of integrating or completing mergers or strategic acquisitions;

•

the cost and reliability of voice and data services;

•

the adequacy of our available capital for future capital requirements;

•

our future contractual obligations;

•

our capital expenditures;

•

the cost of labor and turnover rates;

•

the impact of changes in interest rates;

•

substantial indebtedness incurred in connection with the 2006 recapitalization, subsequent refinancings and acquisitions; and

•

the impact of foreign currency fluctuations;

as well as other statements regarding our future operations, financial condition and prospects, and business strategies.

Forward-looking statements can be identified by the use of words such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “continue,” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report.

All forward-looking statements included in this report are based on information available to us on the date hereof. We assume no obligation to update any forward-looking statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements (unaudited) and the Notes thereto.

Business Overview

We are a leading provider of technology-driven communication services. The scale and processing capacity of our proprietary technology platforms, combined with our expertise in managing voice and data transactions, enable us to offer a broad portfolio of services, including conferencing and collaboration, unified communications, alerts and notifications, emergency communications and business processing outsourcing. Our services provide reliable, high-quality, mission-critical communications designed to maximize return on investment for our clients. Our clients include Fortune 1000 companies, along with small and medium enterprises in a variety of industries, including telecommunications, retail, financial services, public safety, technology and healthcare. We have sales and operations in the United States, Canada, Europe, the Middle East, Asia Pacific, Latin America and South America.

Since our founding in 1986, we have invested significantly to expand our technology platforms and develop our operational processes to meet the complex communication needs of our clients. We have evolved our business mix from labor-intensive communication services to focus more on diversified and platform-based, technology-driven services.

Investing in technology and developing specialized expertise in the industries we serve are critical components to our strategy of enhancing our services and our value proposition. In 2011, we managed approximately 27 billion telephony minutes and approximately 121 million conference calls, facilitated over 260 million 9-1-1 calls, and delivered over 1 billion notification calls and data messages. With approximately 652,000 telephony ports to handle conference calls, alerts and notifications and customer service at March 31, 2012, we believe our platforms provide scale and flexibility to handle greater transaction volume than our competitors, offer superior service and develop new offerings. These ports include approximately 310,000 Internet Protocol (“IP”) ports, which we believe provide us with the only large-scale proprietary IP-based global conferencing platform deployed and in use today. Our technology-driven platforms allow us to provide a broad range of complementary automated and agent-based service offerings to our diverse client base.

Financial Operations Overview

Revenue

In our Unified Communications segment, our conferencing and collaboration services, event services and IP-based unified communication solutions are generally billed on a per participant minute or per seat basis and our alerts and notifications services are generally billed on a per message or per minute basis. Billing rates for these services vary depending on participant geographic location, type of service (such as audio, video or web conferencing) and type of message (such as voice, text, email or fax). We also charge clients for additional features, such as conference call recording, transcription services or professional services. Since we entered the conferencing services business, the average rate per minute that we charge has declined while total minutes sold has increased. This is consistent with industry trends. We expect this trend to continue for the foreseeable future.

In our Communication Services segment, our emergency communications solutions are generally billed per month based on the number of billing telephone numbers or cell towers covered under each client contract. We also bill monthly for our premise-based database solution. In addition, we bill for sales, installation and maintenance of our communication equipment technology solutions. Our platform-based and agent-based customer service solutions are generally billed on a per minute or per hour basis. We are generally paid on a contingent fee basis for our receivables management and overpayment identification and recovery services as well as for certain other agent-based services. Our telephony / interconnect services are generally billed based on usage for toll -free origination services.

Cost of Services

The principal component of cost of services for our Unified Communications segment is our variable telephone expense. Significant components of our cost of services in this segment also include labor expense, primarily related to commissions for our sales force. Because the services we provide in this segment are largely platform-based, labor expense is less significant than the labor expense we experience in our Communication Services segment.

The principal component of cost of services for our Communication Services segment is labor expense. Labor expense included in costs of services primarily reflects compensation for the agents providing our agent-based services, but also includes compensation for personnel dedicated to emergency communications database management, manufacturing and development of our premise-based public safety solution as well as collection expenses, such as costs of letters and postage, incurred in connection with our receivables management services. We generally pay commissions to sales professionals on both new sales and incremental revenue generated from existing clients. Significant components of our cost of services in this segment also include variable telephone expense.

Selling, General and Administrative Expenses

The principal component of our selling, general and administrative expenses (“SG&A”) is salary and benefits for our sales force, client support staff, technology and development personnel, senior management and other personnel involved in business support functions. SG&A also includes certain fixed telephone costs as well as other expenses that support the ongoing operation of our business, such as facilities costs, certain service contract costs, equipment depreciation and maintenance, and amortization of finite-lived intangible assets.

Key Drivers Affecting Our Results of Operations

Evolution to Automated Technologies. We have evolved into a diversified and platform-based technology-driven service provider. Since 2005, our revenue from platform-based services has grown from 37% of total revenue to 70% for the three months ended March 31, 2012 and our operating income from platform-based services has grown from 53% of total operating income to 91% over the same period. As in the past, we will continue to seek and invest in higher margin businesses, irrespective of whether the associated services are delivered to our customers through an agent-based or a platform-based environment. We expect our platform-based service lines to grow at a faster pace than agent-based services and as a result will continue to increase as a percentage of our total revenue. However, many of our customers require an integrated service offering that incorporates both agent-based and platform-based services—for example, an automated voice response system with the option for the client’s customer to speak to an agent. Accordingly, we expect agent-based services will continue to represent a meaningful portion of our service offerings for the foreseeable future.

Acquisition Activities. Identifying and successfully integrating acquisitions of value-added service providers has been a key component of our growth strategy. We will continue to seek opportunities to expand our suite of communication services across industries, geographies and end-markets. While we expect this will occur primarily through organic growth, we have and will continue to acquire assets and businesses that strengthen our value proposition to clients and drive value to us. We have developed an internal capability to source, evaluate and integrate acquisitions that we believe has created value for shareholders. Since 2005, we have invested approximately $2.0 billion in strategic acquisitions. We believe there are acquisition candidates that will enable us to expand our capabilities and markets and intend to continue to evaluate acquisitions in a disciplined manner and pursue those that provide attractive opportunities to enhance our growth and profitability.

Results of Operations

Comparison of the Three Months Ended March 31, 2012 and 2011

Revenue: Total revenue for the three months ended March 31, 2012 increased approximately $28.2 million, or 4.6%, to $639.1 million from $610.8 million for the three months ended March 31, 2011. This increase included revenue of $18.8 million from entities acquired since January 1, 2011. During the three months ended March 31, 2012, the HyperCube acquisition was closed. The HyperCube results have been included in the Communication Services segment since the March 23, 2012 acquisition date.

For the three months ended March 31, 2012 and 2011, our largest 100 clients represented 55% and 56% of total revenue, respectively. The aggregate revenue as a percentage of our total revenue from our largest client, AT&T, in the three months ended March 31, 2012 and 2011 were approximately 8% and 11%, respectively.

Revenue by business segment:


	For the three months ended March 31,
	2012			% of Total Revenue			2011			% of Total Revenue			Change			% Change
Revenue in thousands:
Unified Communications	$	359,647			56.3	%	$	331,122			54.2	%	$	28,525			8.6	%
Communication Services		281,737			44.1	%		282,077			46.2	%		(340	)		-0.1	%
Intersegment eliminations		(2,322	)		-0.4	%		(2,381	)		-0.4	%		59			-2.5	%

Total	$	639,062			100.0	%	$	610,818			100.0	%	$	28,244			4.6	%

For the three months ended March 31, 2012, Unified Communications revenue increased $28.5 million, or 8.6%, to $359.6 million from $331.1 million for the three months ended March 31, 2011. The increase in revenue for the three months ended March 31, 2012 included $15.8 million from acquisitions. The remaining $12.7 million increase was attributable primarily to the addition of new customers as well as an increase in usage of our web and audio-based conferencing services by our existing customers. Revenue attributable to increased usage and new customer usage was partially offset by a decline in the rates charged to existing customers for those services. The volume of minutes used for our reservationless conferencing services, which accounts for the majority of our Unified Communications revenue, grew approximately 11.4% for the three months ended March 31, 2012 over the three months ended March 31, 2011, while the average rate per minute for reservationless services declined by approximately 7.9%. Since we entered the conferencing services business, the average rate per minute that we charge has declined while total minutes sold has increased. This is consistent with industry trends which we expect to continue for the foreseeable future. Our Unified Communications international revenue grew to $114.2 million, an increase of 5.0% over the three months ended March 31, 2011.

For the three months ended March 31, 2012, Communication Services revenue decreased $0.3 million, or 0.1%, to $281.7 million from $282.1 million for the three months ended March 31, 2011. The decrease in revenue for the three months ended March 31, 2012 is primarily the result of decreased revenue from automated services. For the three months ended March 31, 2012, Communication Services automated revenue decreased $8.2 million from the three months ended March 31, 2011. We expect automated revenue will revert to positive growth in future periods. Partially offsetting the reduction in revenue for the three months ended March 31, 2012 was revenue from acquired entities of $3.0 million.

Cost of services: Cost of services consists of direct labor, telephone expense, commissions and other costs directly related to providing services to our clients. Cost of services increased approximately $20.1 million, or 7.4%, in the three months ended March 31, 2012, to $291.7 million, from $271.6 million for the three months ended March 31, 2011. As a percentage of revenue, cost of services increased to 45.6% in the three months ended March 31, 2012 compared to 44.5% for the three months ended March 31, 2011.

Cost of services by business segment:


	For the three months ended March 31,
	2012			% of Revenue			2011			% of Revenue			Change		% Change
Cost of services in thousands:
Unified Communications	$	148,740			41.4	%	$	132,615			40.1	%	$	16,125		12.2	%
Communication Services		144,742			51.4	%		140,908			50.0	%		3,834		2.7	%
Intersegment eliminations		(1,780	)		NM			(1,920	)		NM			140		NM

Total	$	291,702			45.6	%	$	271,603			44.5	%	$	20,099		7.4	%

NM - Not meaningful

Unified Communications cost of services for the three months ended March 31, 2012 increased $16.1 million, or 12.2%, to $148.7 million from $132.6 million for the three months ended March 31, 2011. Cost of services increased by $8.9 million as a result of acquired entities. The remaining increase is primarily driven by increased service volume. As a percentage of this segment’s revenue, Unified Communications cost of services increased to 41.4% for the three months ended March 31, 2012 from 40.1% for the three months ended March 31, 2011. The increase in cost of services as a percentage of revenue is due primarily to changes in the product mix, geographic mix and the impact of acquired entities.

Communication Services cost of services increased $3.8 million, or 2.7%, for the three months ended March 31, 2012 to $144.7 million from $140.9 million for the three months ended March 31, 2011. The increase in cost of services for the three months ended March 31, 2012 was the result of a changing mix of automated and agent based services, lower margins in our agent-based service offerings and $1.4 million of additional costs from acquired entities. As a percentage of this segment’s revenue, Communication Services cost of services increased to 51.4% for the three months ended March 31, 2012 from 50.0%, for the three months ended March 31, 2011.

Selling, general and administrative (“SG&A”) expenses: SG&A expenses increased by approximately $12.7 million, or 5.8%, to $233.1 million for the three months ended March 31, 2012 from $220.4 million for the three months ended March 31, 2011. An asset impairment and site closure accrual accounted for $5.3 million of this increase. As a percentage of revenue, SG&A expenses increased to 36.5% for the three months ended March 31, 2012 from 36.1% for the three months ended March 31, 2011. The asset impairment and site closure accrual had an 83 basis point impact on SG&A as a percentage of revenue.

Selling, general and administrative expenses by business segment:


	For the three months ended March 31,
	2012			% of Revenue			2011			% of Revenue			Change			% Change
Selling, general and administrative expenses in thousands:
Unified Communications	$	113,770			31.6	%	$	104,496			31.6	%	$	9,274			8.9	%
Communication Services		119,889			42.6	%		116,372			41.3	%		3,517			3.0	%
Intersegment eliminations		(541	)		NM			(460	)		NM			(81	)		NM

Total	$	233,118			36.5	%	$	220,408			36.1	%	$	12,710			5.8	%

NM - Not meaningful

Unified Communications SG&A expenses for the three months ended March 31, 2012 increased $9.3 million, or 8.9%, to $113.8 million from $104.5 million for the three months ended March 31, 2011. For the three months ended March 31, 2012, SG&A expenses from acquired entities was $9.4 million. As a percentage of this segment’s revenue, Unified Communications SG&A expenses was 31.6% for the three months ended March 31, 2012 and March 31, 2011.

Communication Services SG&A expenses increased $3.5 million, or 3.0%, to $119.9 million for the three months ended March 31, 2012 from $116.4 million for the three months ended March 31, 2011. The asset impairment and site closure accrual was $4.8 million in the Communication Services segment. SG&A expenses from acquired entities were $1.3 million. As a percentage of this segment’s revenue, Communication Services SG&A expenses increased to 42.6% for the three months ended March 31, 2012 from 41.3% for the three months ended March 31, 2011. The asset impairment and site closure accrual had a 171 basis point impact on SG&A as a percentage of revenue for the Communications Service segment.

Operating income: Operating income decreased $4.6 million, or 3.8%, to $114.2 million for the three months ended March 31, 2012 from $118.8 million for the three months ended March 31, 2011. As a percentage of revenue, operating income decreased to 17.9% for the three months ended March 31, 2012 from 19.5% for the three months ended March 31, 2011. The asset impairment and site closure accrual had an 83 basis point impact on operating income as a percentage of revenue.

Operating income by business segment:


	For the three months ended March 31,
	2012		% of Revenue			2011		% of Revenue			Change			% Change
Operating income in thousands:
Unified Communications	$	97,136		27.0	%	$	94,011		28.4	%	$	3,125			3.3	%
Communication Services		17,106		6.1	%		24,796		8.8	%		(7,690	)		-31.0	%

Total	$	114,242		17.9	%	$	118,807		19.5	%	$	(4,565	)		-3.8	%

Unified Communications operating income for the three months ended March 31, 2012 increased approximately $3.1 million, to $97.1 million from $94.0 million for the three months ended March 31, 2011. As a percentage of this segment’s revenue, Unified Communications operating income decreased to 27.0% for the three months ended March 31, 2012 from 28.4% for the three months ended March 31, 2011 due to the factors discussed above for revenue, cost of services and SG&A expenses.

Communication Services operating income decreased $7.7 million, or 31.0%, to $17.1 million for the three months ended March 31, 2012 from $24.8 million for the three months ended March 31, 2011. As a percentage of this segment’s revenue, Communication Services operating income decreased to 6.1% for the three months ended March 31, 2012 from 8.8% for the three months ended March 31, 2011 due to the factors discussed above for revenue, cost of services and SG&A expenses.

Other income (expense): Other income (expense) includes interest expense from borrowings under credit facilities and outstanding notes, the aggregate foreign exchange gain (loss) on affiliate transactions denominated in currencies other than the functional currency and interest income from short-term investments. Other income (expense) for the three months ended March 31, 2012 was ($59.3) million compared to ($63.0) million for the three months ended March 31, 2011. Interest expense for the three months ended March 31, 2012 was $62.2 million compared to $67.8 million during the three months ended March 31, 2011. This decrease was due primarily to lower effective interest rates on our variable rate senior secured term loan facilities.

During the three months ended March 31, 2012, we recognized a $0.5 million loss on foreign currency exchange rate changes on affiliate transactions. During the three months ended March 31, 2011, we recognized a $3.1 million gain on foreign currency exchange rate changes on affiliate transactions.

Net income – Net income decreased $0.5 million for the three months ended March 31, 2012 to $34.0 million from $34.6 million for the three months ended March 31, 2011. Net income includes a provision for income tax expense at an effective rate of approximately 38.0% for each of the three months ended March 31, 2012, and 2011.

Earnings (loss) per common share: On December 30, 2011, we completed the conversion of our outstanding Class L Common Stock into shares of Class A Common Stock and thereafter the reclassification of all of our Class A Common Stock as a single class of Common Stock. As a result, subsequent earnings per share calculations are presented as a single class of Common Stock and references to Class A common stock have been changed to common stock for all periods. Earnings per common share-basic and diluted for the three months ended March 31, 2012 were $0.07. Earnings per common L share-basic for the three months ended March 31, 2011 were $4.39. Earnings per common L share-diluted for the three months ended March 31, 2011 were $4.21.

Diluted earnings per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares result from the assumed exercise of outstanding stock options, by application of the treasury stock method, that have a dilutive effect on earnings per share. At March 31, 2012, 21,475,000 stock options were outstanding with an exercise price at or exceeding the market value of our common stock, which market value was determined based on the results of an independent appraisal preformed as of November 30, 2011 by Corporate Valuation Advisors, Inc. These options were therefore excluded from the computation of shares contingently issuable upon exercise of the options.

Liquidity and Capital Resources

We have historically financed our operations and capital expenditures primarily through cash flows from operations supplemented by borrowings under our senior secured credit and asset securitization facilities.

On October 2, 2009, we filed a Registration Statement on Form S-1 (Registration No. 333-162292) under the Securities Act of 1933 and amendments to the Registration Statement on November 6, 2009, December 1, 2009, December 16, 2009, February 16, 2010, April 14, 2011, August 17, 2011, September 9, 2011, November 2, 2011 and February 24, 2012 pursuant to which we proposed to offer up to $500.0 million of our common stock (“Proposed Offering”). We expect to use a part of the net proceeds from the Proposed Offering received by us to repay or repurchase indebtedness. We also expect to use a part of the net proceeds from this offering to fund the amounts payable upon the termination of the management agreement entered into in connection with the consummation of our recapitalization in 2006 between us and the Sponsors. We may also use a portion of the net proceeds received by us for working capital and other general corporate purposes. Given current market conditions, the timing of our initial public offering is uncertain.

Our current and anticipated uses of our cash, cash equivalents and marketable securities are to fund operating expenses, acquisitions, capital expenditures, interest payments, tax payments and the repayment of principal on debt.

The following table summarizes our cash flows by category for the periods presented (dollars in thousands):


	For the Three Months Ended March 31,
	2012			2011			Change			% Change
Cash flows from operating activities	$	91,663		$	103,703		$	(12,040	)		-11.6	%
Cash flows used in investing activities	$	(110,652	)	$	(88,818	)	$	(21,834	)		24.6	%
Cash flows from (used in) financing activities	$	20,266		$	(17,507	)	$	37,773			215.8	%

Net cash flows from operating activities decreased $12.0 million, or 11.6%, to $91.7 million for the three months ended March 31, 2012, compared to net cash flows from operating activities of $103.7 million for the three months ended March 31, 2011. The decrease in net cash flows from operating activities is primarily due to changes in working capital, primarily related to the timing of interest and tax payments and customer receipts.

Days sales outstanding (“DSO”), a key performance indicator that we utilize to monitor the accounts receivable average collection period and assess overall collection risk, was 63 days at March 31, 2012, when adjusted for the HyperCube acquisition, which closed on March 23, 2012. At March 31, 2011, DSO was 58 days.

Net cash flows used in investing activities increased $21.8 million to $110.7 million for the three months ended March 31, 2012, compared to net cash flows used in investing activities of $88.8 million for the three months ended March 31, 2011. Cash used for business acquisitions, net of cash acquired, during the three months ended March 31, 2012 was $76.6 million compared to $60.7 million for the three months ended March 31, 2011. On March 23, 2012, we completed the acquisition of HyperCube for $77.9 million, which was funded by cash on hand and partial use of our asset securitization financing facility. We invested $34.1 million in capital expenditures during the three months ended March 31, 2012 compared to $28.2 million for the three months ended March 31, 2011.

Net cash flows from financing activities increased $37.8 million to $20.3 million for the three months ended March 31, 2012, compared to net cash flows used in financing activities of $(17.5) million for the three months ended March 31, 2011. During the three months ended March 31, 2012, net proceeds from various revolving credit facilities were $23.9 million. During the three months ended March 31, 2011, we made a voluntary $11.4 million prepayment on the senior secured term loan facility.

As of March 31, 2012, the amount of cash and cash equivalents held by our foreign subsidiaries was $91.8 million. We have accrued U.S. taxes on $185.7 million of unremitted foreign earnings and profits. Our intent is to permanently reinvest a portion of these funds outside the U.S. for acquisitions and capital expansion, and to repatriate a portion of these funds. Based on our current projected capital needs and the current amount of cash and cash equivalents held by our foreign subsidiaries, we do not anticipate incurring any material tax costs beyond our accrued tax position in connection with such repatriation, but we may be required to accrue for unanticipated additional tax costs in the future if our expectations or the amount of cash held by our foreign subsidiaries change.

Given the Company’s current levels of cash on hand, anticipated cash flows from operations and available borrowing capacity, the Company believes it has sufficient liquidity to conduct its normal operations and pursue its business strategy in the ordinary course.

Senior Secured Term Loan Facility and Senior Secured Revolving Credit Facility

Our senior secured term loan facility and senior secured revolving credit facility bear interest at variable rates. The amended and restated senior secured term loan facility requires annual principal payments of approximately $15.4 million, paid quarterly with balloon payments at maturity dates of October 24, 2013 and July 15, 2016 of approximately $450.2 million and $1,398.5 million, respectively. Pricing of the amended and restated senior secured term loan facility, due 2013, is based on our corporate debt rating and the grid ranges from 2.125% to 2.75% for LIBOR rate loans (LIBOR plus 2.375% at March 31, 2012), and from 1.125% to 1.75% for Base Rate loans (Base Rate plus 1.375% at March 31, 2012). The interest rate margins for the amended and restated senior secured term loans due 2016 are based on our corporate debt rating based on a grid, which ranges from 4.00% to 4.625% for LIBOR rate loans (LIBOR plus 4.25% at March 31, 2012), and from 3.00% to 3.625% for Base Rate loans (Base Rate plus 3.25% at March 31, 2012). The effective annual interest rates, inclusive of debt amortization costs, on the senior secured term loan facility for the three months ended March 31, 2012 and 2011 were 5.04% and 6.56%, respectively.

Our senior secured revolving credit facilities provide senior secured financing of up to $250 million, of which approximately $92 million matures October 2012 (original maturity) and approximately $158 million matures January 2016 (extended maturity). We have also received commitments for approximately $43 million of additional extended maturity senior secured revolving credit facility commitments, which commitments would replace a portion of the original maturity senior secured revolving credit facility.

The original maturity senior secured revolving credit facility pricing is based on our total leverage ratio and the grid ranges from 1.75% to 2.50% for LIBOR rate loans (LIBOR plus 1.75% at March 31, 2012), and the margin ranges from 0.75% to 1.50% for base rate loans (Base Rate plus 0.75% at March 31, 2012). We are required to pay each non-defaulting lender a commitment fee of 0.50% in respect of any unused commitments under the original maturity senior secured revolving credit facility. The commitment fee in respect of unused commitments under the original maturity senior secured revolving credit facility is subject to adjustment based upon our total leverage ratio. For the three months ended March 31, 2012 and 2011, the original maturity senior secured revolving credit facility was undrawn.

The extended maturity senior secured revolving credit facility pricing is based on the Company’s total leverage ratio and the grid ranges from 2.75% to 3.50% for LIBOR rate loans (LIBOR plus 2.75% at March 31, 2012), and the margin ranges from 1.75% to 2.50% for base rate loans (Base Rate plus 1.75% at March 31, 2012). The Company is required to pay each non-defaulting lender a commitment fee of 0.50% in respect of any unused commitments under the extended maturity senior secured revolving credit facility. The commitment fee in respect of unused commitments under the extended maturity senior secured revolving credit facility is subject to adjustment based upon our total leverage ratio. The highest balance outstanding on the extended maturity senior secured revolving credit facility during the three months ended March 31, 2012 and 2011 was $11.5 million and $9.0 million, respectively. The average daily balance outstanding of the extended maturity senior secured revolving credit facility during the three months ended March 31, 2012 and 2011 was $0.8 million and $0.5 million, respectively. The extended maturity senior secured revolving credit facility was undrawn at March 31, 2012 and 2011.

Subsequent to March 31, 2012, the Company may request additional tranches of term loans or increases to the revolving credit facility in an aggregate amount not to exceed $852.4 million, including the aggregate amount of $621.4 million of principal payments previously made in respect of the term loan facility. Availability of such additional tranches of term loans or increases to the revolving credit facility is subject to the absence of any default and pro forma compliance with financial covenants and, among other things, the receipt of commitments by existing or additional financial institutions.

2016 Senior Subordinated Notes

Our $450.0 million aggregate principal amount of 11% senior subordinated notes due 2016 (the “2016 Senior Subordinated Notes”) bear interest that is payable semiannually.

We may redeem the 2016 Senior Subordinated Notes in whole or in part at the redemption prices (expressed as percentages of principal amount of the senior subordinated notes to be redeemed) set forth below plus accrued and unpaid interest thereon to the applicable date of redemption, subject to the right of holders of 2016 Senior Subordinated Notes of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on October 15 of each of the years indicated below:


Year	Percentage
2011		105.500
2012		103.667
2013		101.833
2014 and thereafter		100.000

2018 Senior Notes

On October 5, 2010, we issued $500 million aggregate principal amount of 8 5/8% senior notes that mature on October 1, 2018 (the “2018 Senior Notes”).

At any time prior to October 1, 2014, we may redeem all or a part of the 2018 Senior Notes at a redemption price equal to 100% of the principal amount of 2018 Senior Notes redeemed plus the applicable premium (as defined in the indenture governing the 2018 Senior Notes) as of, and accrued and unpaid interest to the date of redemption, subject to the rights of holders of 2018 Senior Notes on the relevant record date to receive interest due on the relevant interest payment date.

On and after October 1, 2014, we may redeem the 2018 Senior Notes in whole or in part at the redemption prices (expressed as percentages of principal amount of the 2018 Senior Notes to be redeemed) set forth below plus accrued and unpaid interest thereon to the applicable date of redemption, subject to the right of holders of 2018 Senior Notes of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on October 1 of each of the years indicated below:


Year	Percentage
2014		104.313
2015		102.156
2016 and thereafter		100.000

At any time (which may be more than once) before October 1, 2013, we can choose to redeem up to 35% of the outstanding notes with money that we raise in one or more equity offerings, as long as we pay 108.625% of the face amount of the notes, plus accrued and unpaid interest; we redeem the notes within 90 days after completing the equity offering; and at least 65% of the aggregate principal amount of the applicable series of notes issued remains outstanding afterwards.

2019 Senior Notes

On November 24, 2010, we issued $650.0 million aggregate principal amount of 7⁷/8% senior notes that mature January 15, 2019 (the “2019 Senior Notes”).

At any time prior to November 15, 2014, we may redeem all or a part of the 2019 Senior Notes at a redemption price equal to 100% of the principal amount of 2019 Senior Notes redeemed plus the applicable premium (as defined in the indenture governing the 2019 Senior Notes) as of, and accrued and unpaid interest to, the date of redemption, subject to the rights of holders of 2019 Senior Notes on the relevant record date to receive interest due on the relevant interest payment date.

On and after November 15, 2014, we may redeem the 2019 Senior Notes in whole or in part at the redemption prices (expressed as percentages of principal amount of the 2019 Senior Notes to be redeemed) set forth below plus accrued and unpaid interest thereon to the applicable date of redemption, subject to the right of holders of 2019 Senior Notes of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on November 15 of each of the years indicated below:


Year	Percentage
2014		103.938
2015		101.969
2016 and thereafter		100.000

At any time (which may be more than once) before November 15, 2013, we can choose to redeem up to 35% of the outstanding notes with money that we raise in one or more equity offerings, as long as we pay 107.875% of the face amount of the notes, plus accrued and unpaid interest; we redeem the notes within 90 days after completing the equity offering; and at least 65% of the aggregate principal amount of the applicable series of notes issued remains outstanding afterwards.

We and our subsidiaries, affiliates or significant shareholders may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt or equity securities (including any publicly issued debt or equity securities), in privately negotiated or open market transactions, by tender offer or otherwise.

Amended and Extended Asset Securitization

On September 12, 2011, the revolving trade accounts receivable financing facility between West Receivables LLC, a wholly-owned, bankruptcy-remote direct subsidiary of West Receivables Holdings LLC and Wells Fargo Bank, National Association, was amended and extended. The amended and extended facility provides for $150.0 million in available financing and is extended to September 12, 2014, reduces the unused commitment fee by 25 basis points and lowers the LIBOR spread on borrowings by 150 basis points. Under the amended and extended facility, West Receivables Holdings LLC sells or contributes trade accounts receivables to West Receivables LLC, which sells undivided interests in the purchased or contributed accounts receivables for cash to one or more financial institutions. The availability of the funding is subject to the level of eligible receivables after deducting certain concentration limits and reserves. The proceeds of the facility are available for general corporate purposes. West Receivables LLC and West Receivables Holdings LLC are consolidated in our condensed consolidated financial statements included elsewhere in this report. At March 31, 2012 $23.9 million was outstanding under this facility. At March 31, 2011, the facility was undrawn. The highest balance outstanding during the three months ended March 31, 2012 and 2011 was $39.0 million and $17.0 million, respectively.

The amended and extended asset securitization facility contains various customary affirmative and negative covenants and also contains customary default and termination provisions, which provide for acceleration of amounts owed under the program upon the occurrence of certain specified events, including, but not limited to, failure to pay yield and other amounts due, defaults on certain indebtedness, certain judgments, changes in control, certain events negatively affecting the overall credit quality of collateralized accounts receivable, bankruptcy and insolvency events and failure to meet financial tests requiring maintenance of certain leverage and coverage ratios, similar to those under our senior secured credit facility.

Debt Covenants

Senior Secured Term Loan Facility and Senior Secured Revolving Credit Facility – We are required to comply on a quarterly basis with a maximum total leverage ratio covenant and a minimum interest coverage ratio covenant. The total leverage ratio of consolidated total debt to Consolidated EBITDA (as defined by our Restated Credit Agreement) may not exceed 5.25 to 1.0 at March 31, 2012 and the interest coverage ratio of Consolidated EBITDA (as defined in the Restated Credit Agreement) to the sum of consolidated interest expense must exceed 2.0 to 1.0 at March 31, 2012. Both ratios are measured on a rolling four-quarter basis. We were in compliance with these financial covenants at March 31, 2012. The leverage ratio covenant will become 5.00 to 1.0 in the fourth quarter of 2012. We believe that for the foreseeable future we will continue to be in compliance with our financial covenants. The senior secured credit facilities also contain various negative covenants, including limitations on indebtedness, liens, mergers and consolidations, asset sales, dividends and distributions or repurchases of our capital stock, investments, loans and advances, capital expenditures, payment of other debt, including the senior subordinated notes, transactions with affiliates, amendments to material agreements governing our subordinated indebtedness, including the senior subordinated notes and changes in our lines of business.

The senior secured credit facilities include certain customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, the invalidity of material provisions of the documentation with respect to the senior secured credit facilities, the failure of collateral under the security documents for the senior secured credit facilities, the failure of the senior secured credit facilities to be senior debt under the subordination provisions of certain of the Company’s subordinated debt and a change of control of the Company. If an event of default occurs, the lenders under the senior secured credit facilities will be entitled to take certain actions, including the acceleration of all amounts due under the senior secured credit facilities and all actions permitted to be taken by a secured creditor.

2016 Senior Subordinated Notes, 2018 Senior Notes and 2019 Senior Notes—The 2016 Senior Subordinated Notes, the 2018 Senior Notes and the 2019 Senior Notes indentures contain covenants limiting, among other things, our ability and the ability of our restricted subsidiaries to: incur additional debt or issue certain preferred shares, pay dividends on or make distributions in respect of our capital stock or make other restricted payments, make certain investments, sell certain assets, create liens on certain assets to secure debt, consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets, enter into certain transactions with our affiliates and designate our subsidiaries as unrestricted subsidiaries.

Our failure to comply with these debt covenants may result in an event of default which, if not cured or waived, could accelerate the maturity of our indebtedness. If our indebtedness is accelerated, we may not have sufficient cash resources to satisfy our debt obligations and we may not be able to continue our operations as planned. If our cash flows and capital resources are insufficient to fund our debt service obligations and keep us in compliance with the covenants under our senior secured credit facilities or to fund our other liquidity needs, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness including the notes. We cannot ensure that we would be able to take any of these actions, that these actions would be successful and would permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements, including our senior secured credit facilities and the indentures that govern the notes. Our senior secured credit facilities documentation and the indentures that govern the notes restrict our ability to dispose of assets and use the proceeds from the disposition. As a result, we may not be able to consummate those dispositions or use the proceeds to meet our debt service or other obligations, and any proceeds that are available may not be adequate to meet any debt service or other obligations then due.

If we cannot make scheduled payments on our debt, we will be in default, and as a result:

•

our debt holders could declare all outstanding principal and interest to be due and payable;

•

the lenders under our new senior secured credit facilities could terminate their commitments to lend us money and foreclose against the assets securing our borrowings; and

•

we could be forced into bankruptcy or liquidation.

Contractual Obligations

We have contractual obligations that may affect our financial condition. However, based on management’s assessment of the underlying provisions and circumstances of our material contractual obligations, there is no known trend, demand, commitment, event or uncertainty that is reasonably likely to occur which would have a material effect on our financial condition or results of operations.

The following table summarizes our contractual obligations at March 31, 2012 (amounts in thousands):


	Payment due by period
Contractual Obligations	Total		Less than 1 year		1 - 3 years		4 - 5 years		After 5 years
Senior Secured Term Loan Facility, due 2013	$	448,434	$	—	$	448,434	$	—	$	—
Asset Securitization Facility, due 2014		23,900		—		23,900		—		—
Senior Secured Term Loan Facility, due 2016		1,464,075		15,425		30,858		1,417,792		—
11% Senior Suborninated Notes, due 2016		450,000		—		—		450,000		—
8 5/8% Senior Notes, due 2018		500,000		—		—		—		500,000
7 7/8% Senior Notes, due 2019		650,000		—		—		—		650,000
Interest payments on fixed rate debt		894,660		143,813		287,626		287,626		175,595
Estimated interest payments on variable rate debt (1)		345,742		98,597		150,044		97,101		—
Contractual minimums under telephony agreements (2)		174,250		103,130		71,120		—		—
Operating leases		127,448		33,547		44,196		21,263		28,442
Purchase obligations (3)		97,775		87,820		9,955		—		—
Interest rate swaps		6,399		5,479		920		—		—
Capital lease obligations		33		33		—		—		—

Total contractual cash obligations	$	5,182,716	$	487,844	$	1,067,053	$	2,273,782	$	1,354,037

(1)	Interest rate assumptions based on April 10, 2012 LIBOR U.S. dollar swap rate curves for the next five years.

(2)	Based on projected telephony minutes through 2014. The contractual minimum is usage based and could vary based on actual usage.

(3)	Represents future obligations for capital and expense projects that are in progress or are committed.

The table above excludes amounts to be paid for taxes and long-term obligations under our Nonqualified Executive Retirement Savings Plan and Nonqualified Executive Deferred Compensation Plan. The table also excludes amounts to be paid for income tax contingencies because the timing thereof is highly uncertain. At March 31, 2012, we have accrued $23.2 million, including interest and penalties for uncertain tax positions.

Capital Expenditures

Our operations continue to require significant capital expenditures for technology, capacity expansion and upgrades. Capital expenditures were $23.9 million for the three months ended March 31, 2012, compared to $19.2 million for the three months ended March 31, 2011. We currently estimate our capital expenditures for the remainder of 2012 to be between $101.1 million to $111.1 million, primarily for equipment and upgrades at existing facilities.

Our senior secured term loan facility discussed above includes covenants which allow us the flexibility to issue additional indebtedness that is pari passu with or subordinated to our debt under our existing credit facilities in an aggregate principal amount not to exceed $852.4 million including the aggregate amount of principal payments made in respect of the senior secured term loan, incur capital lease indebtedness, finance acquisitions, construction, repair, replacement or improvement of fixed or capital assets, incur asset securitization indebtedness and non-recourse indebtedness; provided we are in pro forma compliance with our total leverage ratio and interest coverage ratio financial covenants. We or any of our affiliates may be required to guarantee any existing or additional credit facilities.

Off-Balance Sheet Arrangements

We utilize standby letters of credit to support primarily workers’ compensation policy requirements and certain operating leases. Performance obligations of several of our subsidiaries are supported by performance bonds and letters of credit. These obligations will expire at various dates through March 2013 and are renewed as required. The outstanding commitment on these obligations at March 31, 2012 was $19.4 million.

Effects of Inflation

We do not believe that inflation has had a material effect on our financial position or results of operations. However, there can be no assurance that our business will not be affected by inflation in the future.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements requires the use of estimates and assumptions on the part of management. The estimates and assumptions used by management are based on our historical experiences combined with management’s understanding of current facts and circumstances. Certain of our accounting policies are considered critical as they are both important to the portrayal of our financial condition and results of operations and require significant or complex judgment on the part of management. The accounting policies we consider critical are our accounting policies with respect to revenue recognition, allowance for doubtful accounts, goodwill and other intangible assets, and income taxes.

For additional discussion of these critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2011. There have not been any significant changes with respect to these policies during the three months ended March 31, 2012.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk Management

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and changes in the market value of investments. The effect of inflation on our variable interest rate debt is discussed below in “Interest Rate Risk.”

Interest Rate Risk

As of March 31, 2012, we had $1,912.5 million outstanding under our senior secured term loan facility, $23.9 million under our asset securitization facility, $450 million outstanding under our 2016 Senior Subordinated Notes, $500 million outstanding under our 2018 Senior Notes and $650 million outstanding under our 2019 Senior Notes.

Long-term obligations at variable interest rates subject to interest rate risk and the impact of a 50 basis point change in the variable interest rate, in thousands, at March 31, 2012 consisted of the following:


	Outstanding at variable interest rates		Quarterly Impact of a 0.5% change in the variable interest rate
Senior Secured Term Loan Facility (1)	$	1,412,509	$	1,765.6
Asset Secritization Facility		23,900		29.9

Variable rate debt	$	1,436,409	$	1,795.5

(1)	Net of $500.0 million interest rate swaps

Foreign Currency Risk

Our Unified Communications segment conducts business in countries outside of the United States. Revenue and expenses from these foreign operations are typically denominated in local currency, thereby creating exposure to changes in exchange rates. Generally, we do not hedge the foreign currency transactions. Changes in exchange rates may positively or negatively affect our revenue and net income attributed to these subsidiaries. Based on our level of operating activities in foreign operations during the three months ended March 31, 2012, a five percent change in the value of the U.S. dollar relative to the Euro and British Pound Sterling would have positively or negatively affected our net operating income by less than one percent.

On March 31, 2012 and 2011, the Communication Services segment had no material revenue outside the United States. Our facilities in Canada, Jamaica, Mexico and the Philippines receive calls only from customers in North America under contracts denominated in U.S. dollars and therefore our foreign currency exposure is primarily for expenses incurred in the respective country.

For the three months ended March 31, 2012 and 2011, revenues from non-U.S. countries were approximately 19% of consolidated revenues. During these periods no individual foreign country accounted for greater than 10% of revenue. At March 31, 2012 and December 31, 2011, long-lived assets from non-U.S. countries were both approximately 9%. We have generally not entered into forward exchange or option contracts for transactions denominated in foreign currency to hedge against foreign currency risk. We are exposed to translation risk because our foreign operations are in local currency and must be translated into U.S. dollars. As currency exchange rates fluctuate, translation of our Statements of Operations of non-U.S. businesses into U.S. dollars affects the comparability of revenue, expenses, and operating income between periods.

Investment Risk

During 2009, we entered into three eighteen month forward starting interest rate swaps for a total notional value of $500.0 million. These forward starting interest rate swaps commenced during the third quarter of 2010. The fixed interest rate on these interest rate swaps ranged from 2.56% to 2.60%, and expired in January 2012. In 2010, we entered into three three-year interest rate swap agreements (cash flow hedges) to convert variable long-term debt to fixed rate debt. These swaps were for an additional aggregate notional value of $500.0 million, with interest rates ranging from 1.685% to 1.6975% and expire in June 2013. At March 31, 2012, the notional amount of debt outstanding under these interest rate swap agreements was $500.0 million of the outstanding $1,912.5 million senior secured term loan facility.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. Our management team continues to review our internal controls and procedures and the effectiveness of those controls. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer and Treasurer concluded that, as of March 31, 2012, our disclosure controls and procedures are effective in ensuring that the

information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and (ii) that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting or in other factors during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. No corrective actions were required or taken.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we and certain of our subsidiaries are defendants in various litigation matters and are subject to claims from our clients for indemnification, some of which may involve claims for damages that are substantial in amount. We do not believe the disposition of claims currently pending will have a material adverse effect on our financial position, results of operations or cash flows.

Item 6. Exhibits

10.01

Amendment Number Three to the West Corporation 2006 Executive Incentive Plan

10.02

Form of Option Certificate

10.03

Alternative Form of Option Certificate

10.04

Amendment Number Two to the West Corporation Nonqualified Deferred Compensation Plan

31.01

Certification pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.02

Certification pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.01

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.02

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

Financial statements from the quarterly report on Form 10-Q of West Corporation for the quarter ended March 31, 2012, filed on April 30, 2012, formatted in XBRL: (i) the Condensed Consolidated Statements of Operations; (ii) the Condensed Consolidated Statements of Comprehensive Income; (iii) the Condensed Consolidated Balance Sheets; (iv) the Condensed Consolidated Statements of Cash Flows; (v) the Condensed Consolidated Statements of Stockholders’ Deficit and (vi) the Notes to Condensed Consolidated Financial Statements furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


WEST CORPORATION

By:		/s/ Thomas B. Barker
		Thomas B. Barker
		Chief Executive Officer

By:		/s/ Paul M. Mendlik
		Paul M. Mendlik
		Chief Financial Officer and Treasurer

By:		/s/ R. Patrick Shields
		R. Patrick Shields
		Senior Vice President -
		Chief Accounting Officer

Date: April 30, 2012

Exhibit Index


Exhibit Number

10.01		Amendment Number Three to the West Corporation 2006 Executive Incentive Plan

10.02		Form of Option Certificate

10.03		Alternative Form of Option Certificate

10.04		Amendment Number Two to the West Corporation Nonqualified Deferred Compensation Plan

31.01		Certification pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.02		Certification pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.01		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.02		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		Financial statements from the quarterly report on Form 10-Q of West Corporation for the quarter ended March 31, 2012, filed on April 30, 2012, formatted in XBRL: (i) the Condensed Consolidated Statements of Operations; (ii) the Condensed Consolidated Statements of Comprehensive Income; (iii) the Condensed Consolidated Balance Sheets; (iv) the Condensed Consolidated Statements of Cash Flows; (v) the Condensed Consolidated Statements of Stockholders’ Deficit and (vi) the Notes to Condensed Consolidated Financial Statements furnished herewith.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company