10-Q 1 svr-063014x10qword.htm 10-Q SVR-06.30.14-10Q (WORD)
 
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 10-Q
 _________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
OR
o
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    333-176382 
_________________________
SYNIVERSE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
__________________________
 
Delaware
30-0041666
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
8125 Highwoods Palm Way
Tampa, Florida 33647
(Address of principal executive office)
(Zip code)
(813) 637-5000
(Registrant’s telephone number, including area code)
________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  o    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 Regulations 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  o
    
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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company  o       
 
 
(Do not check if a smaller  reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
The number of shares of common stock of the registrant outstanding at August 7, 2014 was 1,000.
 
 
 
 
 


1



TABLE OF CONTENTS

 
 
Page
 
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2


PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SYNIVERSE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
June 30,
2014
 
December 31,
2013
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
314,249

 
$
306,400

Accounts receivable, net of allowances of $14,542 and $8,717, respectively
185,315

 
187,704

Deferred tax assets
9,530

 
14,964

Income taxes receivable
13,076

 
9,849

Prepaid and other current assets
40,700

 
39,525

Total current assets
562,870

 
558,442

Property and equipment, net
125,590

 
106,406

Capitalized software, net
227,448

 
238,288

Deferred costs, net
53,594

 
58,375

Goodwill
2,148,116

 
2,150,364

Identifiable intangibles, net
481,100

 
539,088

Deferred tax assets
5,584

 
5,584

Other assets
13,062

 
12,471

Total assets
$
3,617,364

 
$
3,669,018

LIABILITIES AND STOCKHOLDER EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
28,413

 
$
25,291

Income taxes payable
2,614

 
10,179

Accrued liabilities
93,827

 
113,757

Deferred revenues
9,499

 
6,164

Deferred tax liabilities
4,115

 
4,115

Current portion of capital lease obligation
3,162

 
6,571

Total current liabilities
141,630

 
166,077

Long-term liabilities:
 
 
 
Deferred tax liabilities
208,227

 
214,428

Long-term capital lease obligation, net of current maturities
4,675

 
409

Long-term debt, net of original issue discount
2,052,591

 
2,051,248

Other long-term liabilities
48,398

 
47,709

Total liabilities
2,455,521

 
2,479,871

Commitments and contingencies


 


Redeemable noncontrolling interest

 
501

Stockholder equity:
 
 
 
Common stock $0.01 par value; one thousand shares authorized, issued and outstanding as of June 30, 2014 and December 31, 2013

 

Additional paid-in capital
1,228,661

 
1,225,374

Accumulated deficit
(97,420
)
 
(71,244
)
Accumulated other comprehensive income
23,915

 
27,735

Total Syniverse Holdings, Inc. stockholder equity
1,155,156

 
1,181,865

Nonredeemable noncontrolling interest
6,687

 
6,781

Total equity
1,161,843

 
1,188,646

Total liabilities and stockholder equity
$
3,617,364

 
$
3,669,018

See accompanying notes to unaudited condensed consolidated financial statements

3


SYNIVERSE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
 
(Unaudited)
Revenues
$
227,136

 
$
193,271

 
$
446,836

 
$
377,153

Costs and expenses:
 
 
 
 
 
 
 
Cost of operations (excluding depreciation and amortization shown separately below)
92,368

 
71,934

 
180,760

 
143,865

Sales and marketing
20,038

 
16,528

 
42,591

 
36,677

General and administrative
32,166

 
28,690

 
70,205

 
59,831

Depreciation and amortization
56,099

 
49,500

 
111,906

 
94,587

Employee termination benefits
1,888

 
2,342

 
4,855

 
3,014

Restructuring

 
110

 
22

 
496

Acquisitions
1,476

 
16,553

 
1,476

 
20,945

 
204,035

 
185,657

 
411,815


359,415

Operating income
23,101

 
7,614

 
35,021

 
17,738

Other income (expense), net:
 
 
 
 
 
 
 
Interest income
220

 
162

 
414

 
211

Interest expense
(30,356
)
 
(31,117
)
 
(60,540
)
 
(57,961
)
Equity loss in investee
(404
)
 

 
(97
)
 

Other, net
(1,602
)
 
(553
)
 
(295
)
 
(1,237
)
 
(32,142
)
 
(31,508
)
 
(60,518
)

(58,987
)
Loss before (benefit from) provision for income taxes
(9,041
)
 
(23,894
)
 
(25,497
)
 
(41,249
)
(Benefit from) provision for income taxes
(24
)
 
250

 
(263
)
 
(4,058
)
Net loss from continuing operations
(9,017
)
 
(24,144
)
 
(25,234
)

(37,191
)
Loss from discontinued operations, net of tax
(560
)
 

 
(560
)
 

Net loss
(9,577
)
 
(24,144
)
 
(25,794
)

(37,191
)
Net income attributable to nonredeemable noncontrolling interest
102

 
192

 
382

 
604

Net loss attributable to Syniverse Holdings, Inc.
$
(9,679
)
 
$
(24,336
)
 
$
(26,176
)

$
(37,795
)
 
 
 
 
 
 
 
 
Amounts attributable to Syniverse Holdings, Inc.:
 
 
 
 
 
 
 
Loss from continuing operations, net of tax
$
(9,119
)
 
$
(24,336
)
 
$
(25,616
)
 
$
(37,795
)
Loss from discontinued operations, net of tax
(560
)
 

 
(560
)
 

Net loss attributable to Syniverse Holdings, Inc.
$
(9,679
)
 
$
(24,336
)
 
$
(26,176
)
 
$
(37,795
)

See accompanying notes to unaudited condensed consolidated financial statements


4


SYNIVERSE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(IN THOUSANDS)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
 
(Unaudited)
Net loss
$
(9,577
)
 
$
(24,144
)
 
$
(25,794
)
 
$
(37,191
)
Other comprehensive loss, net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustment (1)
(3,097
)
 
(912
)
 
(3,535
)
 
(1,999
)
Amortization of unrecognized loss included in net periodic pension cost (2)
24

 
36

 
128

 
36

Other comprehensive loss
(3,073
)
 
(876
)
 
(3,407
)

(1,963
)
Comprehensive loss
(12,650
)
 
(25,020
)
 
(29,201
)

(39,154
)
Less: comprehensive income (loss) attributable to nonredeemable noncontrolling interest
305

 
(140
)
 
795

 
387

Comprehensive loss attributable to Syniverse Holdings, Inc.
$
(12,955
)
 
$
(24,880
)
 
$
(29,996
)

$
(39,541
)

(1)
Foreign currency translation adjustment is shown net of income tax expense (benefit) of $113 and $(122) for the three and six months ended June 30, 2014, respectively, and net of income tax expense (benefit) of $317 and $(273) for the three and six months ended June 30, 2013, respectively.
(2)
Amortization of unrecognized loss included in net periodic pension cost is shown net of income tax benefit of $11 and $54 for the three and six months ended June 30, 2014, respectively, and net of income tax expense of $15 for the three and six months ended June 30, 2013.
See accompanying notes to unaudited condensed consolidated financial statements


5


SYNIVERSE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER EQUITY
(IN THOUSANDS)

 
Stockholder of Syniverse Holdings, Inc.
 
 
 
 
 
    Common Stock
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Additional Paid-In Capital
 
Accumulated Deficit
 
  Accumulated Other
Comprehensive 
(Loss) Income
 
Nonredeemable Noncontrolling Interest
 
Total
Balance, December 31, 2012
1

 
$

 
$
1,215,350

 
$
(24,713
)
 
$
(970
)
 
$
6,760

 
$
1,196,427

Net (loss) income

 

 

 
(37,795
)
 

 
604

 
(37,191
)
Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment

 

 

 

 
(1,782
)
 
(217
)
 
(1,999
)
Amortization of unrecognized loss included in net periodic pension cost

 

 

 

 
36

 

 
36

Stock-based compensation

 

 
5,180

 

 

 

 
5,180

Distribution to nonredeemable noncontrolling interest

 

 

 

 

 
(940
)
 
(940
)
Distribution to Syniverse Corporation

 

 
(17
)
 

 

 

 
(17
)
Balance, June 30, 2013 (Unaudited)
1
 
$

 
$
1,220,513

 
$
(62,508
)
 
$
(2,716
)
 
$
6,207

 
$
1,161,496

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2013
1
 
$

 
$
1,225,374

 
$
(71,244
)
 
$
27,735

 
$
6,781

 
$
1,188,646

Net (loss) income

 

 

 
(26,176
)
 

 
382

 
(25,794
)
Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment

 

 

 

 
(3,948
)
 
413

 
(3,535
)
Amortization of unrecognized loss included in net periodic pension cost

 

 

 

 
128

 

 
128

Stock-based compensation

 

 
3,913

 

 

 

 
3,913

Distribution to nonredeemable noncontrolling interest

 

 

 

 

 
(889
)
 
(889
)
Distribution to Syniverse Corporation

 

 
(626
)
 

 

 

 
(626
)
Balance, June 30, 2014 (Unaudited)
1

 
$

 
$
1,228,661

 
$
(97,420
)
 
$
23,915

 
$
6,687

 
$
1,161,843

See accompanying notes to unaudited condensed consolidated financial statements


6


SYNIVERSE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
 
Six Months Ended June 30,
 
2014
 
2013
 
(Unaudited)
Cash flows from operating activities
 
 
 
Net loss
$
(25,794
)
 
$
(37,191
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
111,906

 
94,587

Amortization of deferred debt issuance costs and original issue discount
6,124

 
4,454

Allowance for credit memos and uncollectible accounts
8,722

 
4,526

Deferred income tax expense (benefit)
209

 
(6,066
)
Stock-based compensation
3,913

 
5,180

Other, net
3,128

 
2,290

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(6,673
)
 
(17,042
)
Income taxes receivable or payable
(10,607
)
 
(34
)
Prepaid and other current assets
(7,511
)
 
(10,758
)
Accounts payable
3,058

 
8,558

Accrued liabilities and deferred revenues
(15,843
)
 
9,240

Other assets and other long-term liabilities
(1,920
)
 
(2,926
)
Net cash provided by operating activities
68,712

 
54,818

Cash flows from investing activities
 
 
 
Capital expenditures
(57,929
)
 
(41,743
)
Acquisition, net of acquired cash

 
(628,191
)
Redemption of certificate of deposit
3,701

 

Capital expenditures, assets held for sale

 
(4,615
)
Proceeds from sale of Divestment Business
717

 

Net cash used in investing activities
(53,511
)
 
(674,549
)
Cash flows from financing activities
 
 
 
Debt issuance costs paid

 
(25,236
)
Payments on capital lease obligation
(5,428
)
 
(4,931
)
Principal payments on Initial Term Loans

 
(4,750
)
Borrowings under Tranche B Term Loans, net of original issue discount

 
696,500

Distribution to Syniverse Corporation
(626
)
 
(17
)
Purchase of redeemable noncontrolling interest
(501
)
 

Distribution to nonredeemable noncontrolling interest
(889
)
 
(940
)
Net cash (used in) provided by financing activities
(7,444
)
 
660,626

Effect of exchange rate changes on cash
92

 
705

Net increase in cash
7,849

 
41,600

Cash at beginning of period
306,400

 
232,195

Cash at end of period
$
314,249

 
$
273,795

 
 
 
 
Supplemental noncash investing and financing activities
 
 
 
Assets acquired under capital lease
$
6,280

 
$
4,985

Supplemental cash flow information
 
 
 
Interest paid
$
55,156

 
$
53,190

Income taxes paid
$
10,167

 
$
2,040


See accompanying notes to unaudited condensed consolidated financial statements

7


SYNIVERSE HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business
Syniverse is the leading global transaction processor that connects mobile network operators (“MNOs”) and enterprises in nearly 200 countries enabling seamless mobile communications across disparate and rapidly evolving networks, devices and applications. We process transactions that include the authorization and delivery of end-user traffic, clearing of billing records and settlement of payments. We also analyze a unique portfolio of real-time data generated by these transactions to deliver a wide range of intelligence tools to our customers. Our portfolio of mission-critical services enable our customers to connect to the mobile ecosystem, optimize their businesses and enhance and personalize the mobile experience for their end-users. We process nearly 3 billion billable transactions daily and settle approximately $17 billion annually between our customers. We believe our global footprint and operational scale are unmatched in our industry. As a trusted partner with over 25 years of experience and a history of innovation, we believe we are well positioned to solve the technical, operational and financial complexities of the mobile ecosystem.
Our diverse and growing customer base includes a broad range of participants in the mobile ecosystem, including over 1,000 MNOs, and over 550 over-the-top providers (“OTTs”) and enterprises. Our customers include 97 of the top 100 MNOs globally, such as Verizon Wireless, América Móvil, Vodafone, Telefónica, China Unicom and Reliance Communications; OTTs, including 3 of the 4 largest social networking sites in the United States and one of the largest social networking sites in China; and blue-chip enterprise customers, including 7 of the 10 largest U.S. banks, 3 major banks in Asia and the top 3 credit card networks worldwide.
Founded in 1987, Syniverse now provides approximately 60 mission-critical services to manage the real-time exchange of information and traffic across the mobile ecosystem, enhance our customers’ brands and provide valuable intelligence about end-users. Our customers demand, and we deliver, a high quality of service as evidenced by our over 99.999% network availability.

In March 2014, our parent Buccaneer Holdings, Inc. (“Buccaneer”) completed a corporate restructuring (the “Restructuring”) to create a new holding company structure under Syniverse Corporation, a Delaware corporation formed on March 20, 2014. To effect the restructuring, (i) Syniverse Corporation was formed by Buccaneer and in turn, formed Buccaneer Holdings, LLC, a Delaware limited liability company (“Buccaneer LLC”) and (ii) pursuant to an agreement and plan of reorganization, dated as of March 26, 2014, Buccaneer merged with and into Buccaneer LLC in a common control transaction with Buccaneer LLC surviving as a direct and wholly-owned subsidiary of Syniverse Corporation. As a result of the Restructuring, Buccaneer LLC became our direct parent.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements of Syniverse Holdings, Inc. have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and on a basis that is consistent with the accounting principles applied in our audited financial statements for the fiscal year ended December 31, 2013 (the “2013 financial statements”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes included in our 2013 financial statements. Operating results for the interim periods noted herein are not necessarily indicative of the results that may be achieved for a full year.

The unaudited condensed consolidated financial statements include the accounts of Syniverse Holdings, Inc. and all of its wholly owned subsidiaries and a variable interest entity for which Syniverse Holdings, Inc. is deemed to be the primary beneficiary. References to “Syniverse,” “the Company,” “us,” or “we” include all of the consolidated companies. Redeemable and nonredeemable noncontrolling interest is recognized for the portion of consolidated joint ventures not owned by us. All significant intercompany balances and transactions have been eliminated.

8



Use of Estimates

We have prepared our financial statements in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the period. Actual results could differ from those estimates.

Restricted Cash

On occasion, we are required to maintain cash or certificates of deposit with certain banks with respect to contractual obligations related to acquisitions or other collateral required under certain contractual or other terms. As of June 30, 2014, the amount of restricted cash was $2.4 million, of which $1.5 million was included in Prepaid and other current assets and $0.9 million was included in Other assets in the unaudited condensed consolidated balance sheets. As of December 31, 2013, the amount of restricted cash was $6.2 million, of which $5.5 million was included in Prepaid and other current assets and $0.7 million was included in Other assets in the unaudited condensed consolidated balance sheets.
    
Customer Accounts

We provide financial settlement services to wireless operators to support the payment of roaming related charges to their roaming network partners. In accordance with our customer contracts, funds are held by us as an agent on behalf of our customers to settle their roaming related charges to other operators. These funds and the corresponding liability are not reflected in our unaudited condensed consolidated balance sheets. The off-balance sheet amounts totaled approximately $602.8 million and $492.9 million as of June 30, 2014 and December 31, 2013, respectively.

Capitalized Software Costs             

We capitalize the cost of externally purchased software, internal-use software and developed technology that has a useful life in excess of one year. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they enable the software to perform a task it previously was unable to perform. Software maintenance and training costs are expensed in the period in which they are incurred. Capitalized software and developed technology are amortized using the straight-line method over a period of 3 years and 3 to 7 years, respectively.

Foreign Currencies

We have operations in subsidiaries in Europe (primarily the United Kingdom, Germany and Luxembourg), India and the Asia-Pacific region, each of whose functional currency is their local currency. Gains and losses on transactions denominated in currencies other than the relevant functional currencies are included in Other, net in the unaudited condensed consolidated statements of operations. For the three and six months ended June 30, 2014, we recorded foreign currency transaction losses of $1.6 million and $0.3 million, respectively. For the three and six months ended June 30, 2013, we recorded foreign currency transaction losses of $0.6 million and $1.2 million, respectively.

The assets and liabilities of subsidiaries whose functional currency is other than the U.S. dollar are translated at the period-end rate of exchange. The resulting translation adjustment is recorded as a component of Accumulated other comprehensive income and is included in Stockholder equity in the unaudited condensed consolidated balance sheets. Transaction gains and losses on intercompany balances which are deemed to be of a long-term investment nature are also recorded as a component of Accumulated other comprehensive income. Items within the unaudited condensed consolidated statements of operations are translated at the average rates prevailing during the period.

Segment Information

We have evaluated our portfolio of service offerings, reportable segment and the financial information reviewed by our chief operating decision maker for purposes of making resource allocation decisions. We operate as a single operating segment, as our Chief Executive Officer serving as our chief operating decision maker, reviews financial information on the basis of our consolidated financial results for purposes of making resource allocation decisions.

    

9


Revenues by service offerings were as follows:
 
Three Months Ended June 30,
 
2014
 
2013
(in thousands)
(Unaudited)
Mobile Transaction Services
$
194,298

 
$
169,756

Enterprise & Intelligence Solutions
32,838

 
23,515

Revenues
$
227,136

 
$
193,271

 
Six Months Ended June 30,
 
2014
 
2013
(in thousands)
(Unaudited)
Mobile Transaction Services
$
381,372

 
$
331,606

Enterprise & Intelligence Solutions
65,464

 
45,547

Revenues
$
446,836


$
377,153


Revenues by geographic region, based on the “bill to” location on the invoice, were as follows:
 
Three Months Ended June 30,
 
2014
 
2013
(in thousands)
(Unaudited)
North America
$
149,652

 
$
146,046

Europe, Middle East and Africa
41,140

 
16,323

Asia Pacific
20,953

 
16,600

Caribbean and Latin America
15,391

 
14,302

Revenues
$
227,136

 
$
193,271

 
Six Months Ended June 30,
 
2014
 
2013
(in thousands)
(Unaudited)
North America
$
294,602

 
$
281,913

Europe, Middle East and Africa
78,982

 
31,766

Asia Pacific
40,721

 
32,866

Caribbean and Latin America
32,531

 
30,608

Revenues
$
446,836

 
$
377,153


Acquisitions

The Acquisitions line item in our unaudited condensed consolidated statements of operations includes professional services costs, such as legal, tax, audit and transaction advisory costs related to the MACH acquisition completed in 2013 and the Aicent acquisition in 2014 (collectively, the “Acquisitions”). See Note 4 for additional details regarding the MACH acquisition and Note 14 for additional details regarding the Aicent acquisition.
    
Reclassifications of Prior Year Presentation

Certain reclassifications of 2013 financial information have been made to conform to the current year presentation. The reclassifications had no effect on our reported results of operations. For the three and six months ended June 30, 2013, we reclassified certain non-retirement post-employment benefits out of Restructuring into the Employee termination benefits line item in our unaudited condensed consolidated statements of operations.

10



3. Recent Accounting Pronouncements
    
In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, which is included in the Accounting Standard Codification (“ASC”) in Topic 830 “Foreign Currency Matters”. ASU 2013-05 clarifies the treatment of cumulative translation adjustment (“CTA”) for entities that cease to hold a controlling financial interest in a subsidiary or group of assets within a foreign entity and those that acquire a business in stages by increasing an investment in a foreign entity from one accounted for under the equity method to one accounted for as a consolidated investment. The amendments in this update provide for the release of the CTA into net income only if a sale or transfer represents a sale or complete or substantially complete liquidation of an investment in a foreign entity. Additionally, the amendments in this ASU clarify that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity (that is, irrespective of any retained investment) and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date (sometimes also referred to as a step acquisition). Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events. This accounting standard was effective for our financial statements beginning January 1, 2014 and was applied prospectively. The adoption of this standard did not have a material impact on our unaudited condensed consolidated financial statements and related disclosures.

In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which is included in the ASC in Topic 740 “Income Taxes”. ASU 2013-11 eliminates the diversity in practice in the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Under this guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain circumstances. This accounting standard was effective for our financial statements beginning January 1, 2014. The adoption of this standard was applied prospectively and did not have a material impact on our unaudited condensed consolidated financial statements and related disclosures.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements and Property, Plant, and Equipment, which is included in the ASC in Topic 205 and 360. ASU 2014-08 changes the requirement for reporting discontinued operations. Under this guidance, a disposal of a component of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on an entity’s operations and financial results. Fewer disposals are expected to qualify as discontinued operations under the new guidance. It also requires the disclosure of pretax income of disposals that do not qualify as discontinued operations. The new guidance is effective for us with disposals that occur after January 1, 2015.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which is included in the ASC in Topic 606 “Revenue from Contracts with Customers”. ASU 2014-09 was issued as a converged guidance with the International Accounting Standards Board (IASB) on recognizing revenue in contracts with customers and is intended to improve the financial reporting requirements for revenue from contracts with customers by providing a principle based approach to the recognition of revenue. The update includes a five-step framework with applicable guidance, which supersedes existing revenue recognition guidance. This accounting standard is effective for our financial statements beginning January 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. Early application of the standard is not permitted. We are currently assessing the impact of implementing this guidance on our consolidated financial position, results of operations, and cash flows.

11



4. MACH Acquisition

On June 28, 2013 (the “MACH Acquisition Date”), we completed our acquisition of WP Roaming III S.à r.l. (“WP Roaming”), for a total purchase price of approximately $712.0 million. WP Roaming is a holding company which conducted the business of MACH S.à r.l. (“MACH”). As part of the transaction, we acquired from WP Roaming, a Luxembourg limited liability company (the “Seller”), all the shares and preferred equity certificates (whether convertible or not) in WP Roaming (the “MACH Acquisition”). The purchase price was funded through a portion of the net proceeds from a new $700.0 million senior secured credit facility and a deposit of €30.0 million paid to the Seller on July 2, 2012.

The MACH Acquisition was accounted for under the purchase method of accounting. The total purchase price was allocated to the acquired assets and liabilities assumed based on their estimated fair values at the MACH Acquisition Date. The following table summarizes the allocation of the purchase price, including adjustments to previously reported figures on June 30, 2013, to the estimated fair values of the assets acquired and liabilities assumed in connection with the MACH Acquisition based on their fair values on the acquisition date:
 
As initially reported on
 
Measurement period
 
June 30, 2013
 
June 30, 2013
 
adjustments
 
(as adjusted)
(in thousands)
 
 
 
 
 
Total purchase price
$
712,009

 
$

 
$
712,009

Less: cash acquired
44,644

 

 
44,644

Cash consideration
$
667,365

 
$

 
$
667,365

 
 
 
 
 
 
Fair value of net assets acquired:
 
 
 
 
 
Cash
$
44,644

 
$

 
$
44,644

Accounts receivable
26,887

 
(1,011
)
 
25,876

Prepaid and other current assets
10,456

 
(530
)
 
9,926

Assets held for sale
11,046

 
(226
)
 
10,820

Property and equipment
7,157

 

 
7,157

Capitalized software
74,229

 
(1,952
)
 
72,277

Customer relationships
207,037

 
(41,381
)
 
165,656

Other identifiable intangible assets
2,103

 

 
2,103

Deferred tax assets
897

 
2,752

 
3,649

Other assets
5,657

 
(390
)
 
5,267

Accounts payable
(8,847
)
 

 
(8,847
)
Income taxes payable
(1,993
)
 
584

 
(1,409
)
Accrued liabilities
(32,638
)
 
(15,021
)
 
(47,659
)
Deferred revenues
(1,484
)
 

 
(1,484
)
Liabilities related to assets held for sale
(2,693
)
 
226

 
(2,467
)
Deferred tax liabilities
(27,636
)
 
2,890

 
(24,746
)
Redeemable noncontrolling interest
(203
)
 
(298
)
 
(501
)
Net assets acquired
314,619

 
(54,357
)
 
260,262

Allocation to goodwill
$
397,390

 
$
54,357

 
$
451,747


The excess of the purchase price over the fair value of the net assets acquired resulted in goodwill of $451.7 million, which is primarily attributable to assembled workforce, operating synergies and potential expansion into other global markets. We do not expect goodwill to be deductible for tax purposes. We incurred MACH Acquisition related expenses of $16.6 million and $20.9 million for the three and six months ended June 30, 2013. These costs were recorded in the Acquisitions line item in our unaudited condensed consolidated statements of operations.We did not incur any MACH Acquisition related expenses for the three and six months ended June 30, 2014, nor do we expect to incur any further costs in the future.
 
Discontinued Operations

12



During the fourth quarter of 2013, we completed the sale of certain assets supporting MACH’s data clearing and near real-time roaming data exchange business in the European Economic Area, including technology platforms, necessary employees, customer contracts and the MACH brand (the “Divestment Business”). During the three months ended June 30, 2014, we received $0.7 million in proceeds related to a purchase price adjustment allowed for under the purchase agreement, and recognized a loss of $0.6 million in Loss from discontinued operations, net of tax in the unaudited condensed consolidated statement of operations.

Supplemental Pro Forma Financial Information
    
The following unaudited pro forma financial information for the three and six months ended June 30, 2013 represent combined revenue and loss from continuing operations as if the MACH Acquisition had taken place on January 1, 2013. The unaudited pro forma results reflect certain adjustments including additional estimated amortization expense associated with acquired intangible assets and interest expense associated with debt used to fund the MACH Acquisition. The pro forma financial information does not purport to be indicative of the results of operations that would have been achieved had the MACH Acquisition taken place on the date indicated or the results of operations that may result in the future.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2013
 
2013
Revenues
$
232,170

 
$
451,492

Loss from continuing operations attributable to Syniverse Holdings, Inc.
$
(2,747
)
 
$
(12,982
)

5. Detail of Accrued Liabilities

Accrued liabilities consisted of the following:
 
June 30, 2014
 
December 31, 2013
(in thousands)
(Unaudited)
 
 
   Accrued payroll and related benefits
$
23,379

 
$
41,036

   Accrued interest
26,345

 
27,245

   Accrued network payables
9,234

 
8,596

   Accrued revenue share expenses
4,808

 
3,560

   Other accrued liabilities
30,061

 
33,320

Total accrued liabilities
$
93,827

 
$
113,757


6. Debt and Credit Facilities

Our total outstanding debt as of June 30, 2014 and December 31, 2013 was as follows:
 
June 30, 2014
 
December 31, 2013
(in thousands)
(Unaudited)
 
 
Senior Credit Facility:
 
 
 
Initial Term Loans, due 2019
$
911,835

 
$
911,835

Original issue discount
(10,080
)
 
(11,166
)
Tranche B Term Loans, due 2019
678,665

 
678,665

Original issue discount
(2,829
)
 
(3,086
)
Senior Notes:
 
 
 
9.125% senior unsecured notes, due 2019
475,000

 
475,000

Total long-term debt
$
2,052,591

 
$
2,051,248

    
Amortization of original issue discount and deferred financing fees for the three and six months ended June 30, 2014 was $3.1 million and $6.1 million, respectively, and was related to our Senior Credit Facility (as defined below) and senior unsecured notes bearing interest at 9.125% that will mature on January 15, 2019 (the “Senior Notes”). Amortization of original

13


issue discount and deferred financing fees for the three and six months ended June 30, 2013 was $2.5 million and $4.5 million, respectively. Amortization is included in interest expense in the unaudited condensed consolidated statements of operations.

Senior Credit Facility

On April 23, 2012, we entered into a Credit Agreement with Buccaneer LLC (as successor by merger to Buccaneer), Barclays Bank PLC, as administrative agent, swing line lender and letters of credit issuer, and the other financial institutions and lenders from time to time party thereto, providing for a new senior credit facility (the “Senior Credit Facility”) consisting of (i) a $950.0 million term loan facility (the “Initial Term Loans”); and (ii) a $150.0 million revolving credit facility (the “Revolving Credit Facility”) for the making of revolving loans, swing line loans and issuance of letters of credit.

On June 28, 2013, the Company borrowed $700.0 million of incremental term loans (the “Tranche B Term Loans”), pursuant to an incremental amendment to its Credit Agreement. The proceeds of the Tranche B Term Loans were used to refinance, in full, the Escrow Term Loans (as defined below), a portion of which were used to fund the MACH Acquisition.

On September 23, 2013, the Company made a prepayment of $50.0 million on the Term Loan Facilities, of which $28.7 million was applied to the Initial Term Loans and $21.3 million was applied to the Tranche B Term Loans. In relation to the prepayment, Syniverse accelerated the amortization of $0.4 million of original issue discount and $0.6 million of deferred financing costs. In addition, on September 23, 2013 we refinanced the Initial Term Loans under the Credit Agreement to reduce the interest rate.
 
Tranche B Term Loans

On June 28, 2013, we received net proceeds of $696.5 million under the Tranche B Term Loans, the proceeds of which were used to refinance the Escrow Term Loans (as defined below) in full. We paid upfront fees of $3.5 million associated with the Escrow Term Loans which were recorded as original issue discount to be amortized over the life of the Tranche B Term Loans using the effective interest method. We incurred $25.2 million of debt issuance costs which were recorded as deferred financing costs to be amortized over the life of the Tranche B Term Loans using the effective interest method.

Delayed Draw Credit Agreement

On February 4, 2013, Syniverse Magellan Finance, LLC (the “Finance Sub”), our wholly owned subsidiary, entered into a delayed draw credit agreement (the “Delayed Draw Credit Agreement”) with Barclays Bank PLC, as administrative agent, and the other financial institutions and lenders from time to time party thereto, providing for a new senior credit facility consisting of a $700.0 million delayed draw term loan facility (the “Delayed Draw Facility”). On May 28, 2013, Finance Sub entered into an amendment to the Delayed Draw Credit Agreement. Upon the closing of this amendment, the lenders funded the Delayed Draw Facility into an escrow account (“Escrow Term Loans”) and the Company pre-funded the interest, upfront fees and ticking fees of $7.2 million, $3.5 million and $3.6 million, respectively (the “Escrowed Funds”). The Escrowed Funds were released to Finance Sub on June 28, 2013 (the “Release”). In addition to the pre-funded amount, we paid additional ticking fees of $1.0 million during the second quarter of 2013. These fees were paid to our committing arranger banks to compensate for a backstop commitment during the time lag between the commitment allocation and actual funding for the Delayed Draw Facility.

7. Stock-Based Compensation
    
Effective April 6, 2011, our parent established the 2011 Equity Incentive Plan (the "2011 Plan") for the employees, consultants, and directors of Syniverse Corporation and its subsidiaries. The 2011 Plan provides incentive compensation through grants of incentive or non-qualified stock options, stock purchase rights, restricted stock awards, restricted stock units, or any combination of the foregoing. Syniverse Corporation will issue shares of its common stock to satisfy equity based compensation instruments.     


14


Stock-based compensation expense for the three and six months ended June 30, 2014 and 2013 was as follows:
 
Three Months Ended June 30,

2014
 
2013
(in thousands)
(Unaudited)
Cost of operations
$
72

 
$
130

Sales and marketing
859

 
553

General and administrative
963

 
799

Total stock-based compensation
$
1,894

 
$
1,482

 
Six Months Ended June 30,

2014
 
2013
(in thousands)
(Unaudited)
Cost of operations
$
143

 
$
369

Sales and marketing
1,700

 
2,152

General and administrative
2,070

 
2,659

Total stock-based compensation
$
3,913

 
$
5,180


In February 2013, the Compensation Committee of our Board of Directors, utilizing the discretion afforded under the 2011 Plan, approved the vesting of the 2012 performance-based stock options resulting in a modification of the vesting terms, for which we recorded additional stock compensation expense of $2.1 million.
    
The following table summarizes our stock option activity under the 2011 Plan for the six months ended June 30, 2014:
Stock Options
Shares
 
Weighted-
Average
Exercise
Price
Outstanding at December 31, 2013
9,203,082

 
$
11.07

Granted
476,664

 
15.00

Exercised
(332,499
)
 
10.65

Canceled or expired
(595,834
)
 
11.42

Outstanding at June 30, 2014
8,751,413

 
$
11.27


The fair value of options granted during the six months ended June 30, 2014 was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions:
 Risk-free interest rate
2.18%
 Volatility factor
50.00%
 Dividend yield
—%
 Weighted average expected life of options (in years)
6.48


15


Restricted stock awards are issued and measured at market value on the date of grant. Vesting of restricted stock is based solely on time vesting. The following table summarizes our restricted stock activity under the 2011 Plan for the six months ended June 30, 2014:
Restricted Stock
Shares
 
Weighted-
Average
Grant-Date    
Fair Value
Balance at December 31, 2013
86,205

 
$
14.50

Forfeited
(17,241
)
 
14.50

Balance at June 30, 2014
68,964

 
$
14.50


8. Employee Termination Benefits and Restructuring

The following table summarizes the activity in our employee termination benefit liabilities for the six months ended June 30, 2014:
 
December 31, 2013
 
 
 
 
 
 
 
June 30, 2014
(in thousands)
Balance
 
Additions
 
Payments
 
Adjustments
 
Balance
Employee termination benefits
$
2,698

 
4,855

 
(4,183
)
 
(14
)
 
$
3,356


Employee termination benefits represents non-retirement post-employment benefit costs including severance, benefits and other employee related costs.

The following table summarizes the activity in our restructuring liabilities for the six months ended June 30, 2014:
 
December 31, 2013
 
 
 
 
 
 
 
June 30, 2014
(in thousands)
Balance (1)
 
Additions
 
Payments
 
Adjustments
 
Balance
December 2011 Plan
264

 
22

 
(12
)
 

 
274

December 2010 Plan
619

 

 

 
(5
)
 
614

 Total
$
883

 
$
22

 
$
(12
)
 
$
(5
)
 
$
888

(1)
December 31, 2013 balance has been adjusted to exclude Employee termination benefits, which has been reclassified into a single line item in our unaudited condensed consolidated statements of operations.
    
In December 2011, we implemented a restructuring plan primarily to regionalize our customer support workforce for better alignment with our customers’ needs. As a result of this plan, we incurred severance related costs of $3.7 million and contract termination costs of $0.4 million related to the exit of a leased facility. We have paid $3.8 million related to this plan as of June 30, 2014.

In December 2010, we implemented a restructuring plan primarily to realign certain senior management functions. As a result of this plan, we incurred severance related costs of $2.6 million. As of June 30, 2014, we have paid $2.1 million related to this plan.

We expect to pay the remainder of the benefits outstanding under each of these plans by the end of the second quarter of 2016.     

9. Income Taxes
    
We provide for federal, state and foreign income taxes currently payable, as well as for those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that includes the enactment date. The effective tax rate for the three and six months ended June 30, 2014, was a benefit of 0.3% and

16


1.0%, respectively. The effective tax rate for the three and six months ended June 30, 2013, was a provision of 1.0% and a benefit of 9.8%, respectively. The change in our effective tax rate was chiefly attributable to (i) the inclusion of a full year of the actual and forecasted earnings impact of the MACH entities in our 2014 effective tax rate, and (ii) the prior year effects of certain favorable permanent items, offset by (iii) the unfavorable effects of MACH Acquisition related costs.

We, and our eligible subsidiaries, file a consolidated U.S. federal income tax return under Syniverse Corporation. All subsidiaries incorporated outside of the U.S. are consolidated for financial reporting purposes; however, they are not eligible to be included in our consolidated U.S. federal income tax return. Separate provisions for income taxes have been recorded for these entities. We intend to reinvest substantially all of the unremitted earnings of our non-U.S. subsidiaries and postpone their remittance indefinitely. Accordingly, no provision for U.S. income taxes for these non-U.S. subsidiaries was recorded in the accompanying unaudited condensed consolidated statements of operations.

10. Commitments and Contingencies

We are currently a party to various claims and legal actions that arise in the ordinary course of business. We believe such claims and legal actions, individually and in the aggregate, will not have a material adverse effect on our business, financial condition, results of operations or cash flows. As of June 30, 2014, we have considered all of the claims and disputes of which we are aware and have provided for probable losses, which are not significant.

11. Fair Value Measurements

The accounting standards for fair value require disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:

Level 1—Quoted prices for identical assets and liabilities in active markets.

Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Unobservable inputs for the asset or liability.

Transfers between levels are determined at the end of the reporting period. No transfers between levels have been recognized for the three and six months ended June 30, 2014 and 2013.

Cash, accounts receivable, accounts payable and accrued liabilities are reflected in the financial statements at their carrying value, which approximate their fair value due to their short maturity.    

At June 30, 2014 and December 31, 2013, restricted cash included $1.3 million of cash held in escrow related to additional cash payments that will be made to the former owner of an entity acquired by MACH in 2011 as required under a purchase agreement existing at the MACH Acquisition Date. This amount is reflected in the financial statements at its carrying value, which approximates its fair value (Level 3).
    
From time to time, we measure certain assets at fair value on a non-recurring basis, specifically long-lived assets evaluated for impairment. We estimate the fair value of our long-lived assets using company-specific assumptions which would be categorized within Level 3 of the fair value hierarchy.


17


The carrying amounts and fair values of our long-term debt as of June 30, 2014 and December 31, 2013 were as follows:
 
June 30, 2014
 
December 31, 2013
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
(in thousands)
(Unaudited)
 
 
 
 
Initial Term Loans
$
911,835

 
$
913,545

 
$
911,835

 
$
916,394

Tranche B Term Loans
678,665

 
679,937

 
678,665

 
683,331

Senior Notes
475,000

 
511,219

 
475,000

 
520,125


The fair values of the Initial Term Loans, the Tranche B Term Loans and the Senior Notes were based upon quoted market prices in inactive markets for similar instruments (Level 2).

12. Related Party Transactions

Consulting Agreement with Carlyle
    
On January 13, 2011, we entered into a ten-year consulting agreement with Carlyle under which we pay Carlyle a management fee for consulting services Carlyle provides to us and our subsidiaries. Under this agreement, subject to certain conditions, we pay an annual management fee to Carlyle of $3.0 million and reimburse their out-of-pocket expenses. During the three and six months ended June 30, 2014, we recorded $0.8 million and $1.6 million, respectively, associated with the management fee and the reimbursement of out-of-pocket expenses. During the three and six months ended June 30, 2013, we recorded $0.8 million and $1.8 million, respectively.

Carlyle, from time to time, participates as a debt holder within the syndicate under our Initial Term Loans and Tranche B Term loans. As of June 30, 2014 and December 31, 2013, Carlyle held $49.0 million and $17.5 million of our Initial Term Loans and Tranche B Term loans, respectively.

13. Supplemental Consolidating Financial Information
    
We have presented supplemental condensed consolidating balance sheets, statements of operations, statements of comprehensive (loss) income and statements of cash flows for Syniverse Holdings, Inc., which we refer to in this footnote only as Syniverse, Inc., the subsidiary guarantors and the subsidiary non-guarantors for all periods presented to reflect the guarantor structure under the Senior Notes. The supplemental financial information reflects the investment of Syniverse, Inc. using the equity method of accounting.
 
Syniverse, Inc.’s payment obligations under the Senior Notes are guaranteed by the 100% owned subsidiary guarantors. Syniverse, Inc.’s other subsidiaries are included as non-guarantors (collectively, the “Subsidiary Non-Guarantors”). Such guarantees are irrevocable, full, unconditional and joint and several.

    

 

18


CONSOLIDATING BALANCE SHEET (UNAUDITED)
AS OF JUNE 30, 2014
(IN THOUSANDS)
 
Syniverse, Inc.
 
Subsidiary
Guarantors
 
Subsidiary
Non-Guarantors 
 
Adjustments 
 
Consolidated 
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
217,196

 
$
97,053

 
$

 
$
314,249

Accounts receivable, net of allowances

 
136,408

 
48,907

 

 
185,315

Accounts receivable - affiliates
1,921,768

 
2,054,670

 
339,053

 
(4,315,491
)
 

Interest receivable - affiliates
259

 

 
4,198

 
(4,457
)
 

Deferred tax assets
6,360

 
1,756

 
1,414

 

 
9,530

Income taxes receivable

 
9,377

 
3,699

 

 
13,076

Prepaid and other current assets
1,543

 
25,747

 
13,410

 

 
40,700

Total current assets
1,929,930

 
2,445,154

 
507,734

 
(4,319,948
)
 
562,870

Property and equipment, net

 
96,426

 
29,164

 

 
125,590

Capitalized software, net

 
175,705

 
51,743

 

 
227,448

Deferred costs, net
53,594

 

 

 

 
53,594

Goodwill

 
1,710,344

 
437,772

 

 
2,148,116

Identifiable intangibles, net

 
358,470

 
122,630

 

 
481,100

Long-term note receivable - affiliates
5,934

 

 
5,349

 
(11,283
)
 

Deferred tax assets

 

 
5,584

 

 
5,584

Other assets

 
3,305

 
9,757

 

 
13,062

Investment in subsidiaries
2,450,498

 
806,128

 

 
(3,256,626
)
 

Total assets
$
4,439,956

 
$
5,595,532

 
$
1,169,733

 
$
(7,587,857
)
 
$
3,617,364

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDER EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$
21,628

 
$
6,785

 
$

 
$
28,413

Accounts payable - affiliates
1,201,177

 
2,854,053

 
260,261

 
(4,315,491
)
 

Income taxes payable

 

 
2,614

 

 
2,614

Accrued liabilities
26,345

 
39,573

 
27,909

 

 
93,827

Accrued interest - affiliates

 
426

 
4,031

 
(4,457
)
 

Deferred revenues

 
3,842

 
5,657

 

 
9,499

Deferred tax liabilities

 

 
4,115

 

 
4,115

Current portion of capital lease obligation

 
3,036

 
126

 

 
3,162

Total current liabilities
1,227,522

 
2,922,558

 
311,498

 
(4,319,948
)
 
141,630

Long-term liabilities:
 
 
 
 
 
 
 
 
 
Long-term note payable - affiliates

 
11,283

 

 
(11,283
)
 

Deferred tax liabilities
4,687

 
183,264

 
20,276

 

 
208,227

Long-term capital lease obligation, net of current maturities

 
4,651

 
24

 

 
4,675

Long-term debt, net of original issue discount
2,052,591

 

 

 

 
2,052,591

Other long-term liabilities

 
23,278

 
25,120

 

 
48,398

Total liabilities
3,284,800

 
3,145,034

 
356,918

 
(4,331,231
)
 
2,455,521

Commitments and contingencies:
 
 
 
 
 
 
 
 
 
Stockholder equity:
 
 
 
 
 
 
 
 
 
Common stock

 

 
136,929

 
(136,929
)
 

Additional paid-in capital
1,253,546

 
2,247,277

 
558,819

 
(2,830,981
)
 
1,228,661

(Accumulated deficit) retained earnings
(97,420
)
 
202,688

 
93,838

 
(296,526
)
 
(97,420
)
Accumulated other comprehensive (loss) income
(970
)
 
533

 
23,229

 
1,123

 
23,915

Total Syniverse Holdings Inc. stockholder equity
1,155,156

 
2,450,498

 
812,815

 
(3,263,313
)
 
1,155,156

Nonredeemable noncontrolling interest

 

 

 
6,687

 
6,687

Total equity
1,155,156

 
2,450,498

 
812,815

 
(3,256,626
)
 
1,161,843

Total liabilities and stockholder equity
$
4,439,956

 
$
5,595,532

 
$
1,169,733

 
$
(7,587,857
)
 
$
3,617,364

 

19


CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 2014
(IN THOUSANDS)
 
Syniverse, Inc.
 
Subsidiary
Guarantors
 
Subsidiary
Non-Guarantors
 
Adjustments
 
Consolidated
Revenues
$

 
$
170,766

 
$
56,370

 
$

 
$
227,136

Costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of operations (excluding depreciation and amortization shown separately below)

 
66,206

 
26,162

 

 
92,368

Sales and marketing

 
11,281

 
8,757

 

 
20,038

General and administrative

 
35,843

 
(3,677
)
 

 
32,166

Depreciation and amortization

 
44,582

 
11,517

 

 
56,099

Employee termination benefits

 
817

 
1,071

 

 
1,888

Restructuring

 

 

 

 

Acquisition expenses

 
1,476

 

 

 
1,476

 

 
160,205

 
43,830

 

 
204,035

Operating income

 
10,561

 
12,540

 

 
23,101

Other income (expense), net:
 
 
 
 
 
 
 
 
 
Income (loss) from equity investment
16,208

 
23,309

 

 
(39,517
)
 

Interest income

 
1

 
219

 

 
220

Interest expense
(30,263
)
 
(89
)
 
(4
)
 

 
(30,356
)
Interest expense - affiliate
63

 
(148
)
 
85

 

 

Equity income in investee

 

 
(404
)
 

 
(404
)
Other, net
5,377

 
(9,728
)
 
2,749

 

 
(1,602
)
 
(8,615
)
 
13,345

 
2,645

 
(39,517
)
 
(32,142
)
(Loss) income before provision for (benefit from) income taxes
(8,615
)
 
23,906

 
15,185

 
(39,517
)
 
(9,041
)
Provision for (benefit from) income taxes
1,064

 
7,698

 
(8,786
)
 

 
(24
)
Net (loss) income from continuing operations
(9,679
)
 
16,208

 
23,971

 
(39,517
)
 
(9,017
)
Loss from discontinued operations, net of tax

 

 
(560
)
 

 
(560
)
Net (loss) income
(9,679
)
 
16,208

 
23,411

 
(39,517
)
 
(9,577
)
Net income attributable to nonredeemable noncontrolling interest

 

 

 
102

 
102

Net (loss) income attributable to Syniverse Holdings, Inc.
$
(9,679
)
 
$
16,208

 
$
23,411

 
$
(39,619
)
 
$
(9,679
)
 
 
 
 
 
 
 
 
 
 
Amounts attributable to Syniverse Holdings, Inc.:
 
 
 
 
 
 
 
 
 
(Loss) income from continuing operations, net of tax
$
(9,679
)
 
$
16,208

 
$
23,971

 
$
(39,619
)
 
$
(9,119
)
Loss from discontinued operations, net of tax

 

 
(560
)
 

 
(560
)
Net (loss) income attributable to Syniverse Holdings, Inc.
$
(9,679
)
 
$
16,208

 
$
23,411

 
$
(39,619
)
 
$
(9,679
)
 





20


CONSOLIDATING STATEMENT OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 2014
(IN THOUSANDS)
 
Syniverse, Inc.
 
Subsidiary
Guarantors
 
Subsidiary
Non-Guarantors
 
Adjustments
 
Consolidated
Net (loss) income
$
(9,679
)
 
$
16,208

 
$
23,411

 
$
(39,517
)
 
$
(9,577
)
Other comprehensive loss:
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment, net of tax benefit of $235

 

 
(3,097
)
 

 
(3,097
)
Amortization of unrecognized loss included in net periodic cost, net of tax benefit of $43

 

 
24

 

 
24

Other comprehensive loss

 

 
(3,073
)
 

 
(3,073
)
Comprehensive (loss) income
(9,679
)
 
16,208

 
20,338

 
(39,517
)
 
(12,650
)
Less: comprehensive loss attributable to nonredeemable noncontrolling interest

 

 

 
305

 
305

Comprehensive (loss) income attributable to Syniverse Holdings, Inc.
$
(9,679
)
 
$
16,208

 
$
20,338

 
$
(39,822
)
 
$
(12,955
)


21


CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2014
(IN THOUSANDS)

 
Syniverse, Inc.
 
Subsidiary
Guarantors
 
Subsidiary
Non-Guarantors
 
Adjustments
 
Consolidated
Revenues
$

 
$
336,591

 
$
110,245

 
$

 
$
446,836

Costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of operations (excluding depreciation and amortization shown separately below)

 
132,696

 
48,064

 

 
180,760

Sales and marketing

 
24,318

 
18,273

 

 
42,591

General and administrative

 
67,760

 
2,445

 

 
70,205

Depreciation and amortization

 
88,915

 
22,991

 

 
111,906

Employee termination benefits

 
2,497

 
2,358

 

 
4,855

Restructuring

 
22

 

 

 
22

Acquisition expenses

 
1,476

 

 

 
1,476

 

 
317,684

 
94,131

 

 
411,815

Operating income

 
18,907

 
16,114

 

 
35,021

Other income (expense), net:
 
 
 
 
 
 
 
 
 
Income (loss) from equity investment
33,013

 
19,210

 

 
(52,223
)
 

Interest income

 
6

 
408

 

 
414

Interest expense
(60,276
)
 
(181
)
 
(83
)
 

 
(60,540
)
Interest expense - affiliate
127

 
(148
)
 
21

 

 

Equity income in investee

 

 
(97
)
 

 
(97
)
Other, net
6,108

 
(9,266
)
 
2,863

 

 
(295
)
 
(21,028
)