West (WSTC) 10-Q 2011 Q1 Quarterly report

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, 2011

OR

¨ 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  ¨    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.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x	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  ¨    No  x

At April 29, 2011, 88,018,724.4624 shares of the registrant’s Class A common stock and 9,995,145.5578 shares of the registrant’s Class L common stock were outstanding.

INDEX

		Page No.
PART I. FINANCIAL INFORMATION			3
Item 1.	Financial Statements		3
	Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2011 and 2010 (unaudited)		4
	Condensed Consolidated Balance Sheets - March 31, 2011 (unaudited) and December 31, 2010		5
	Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2011 and 2010 (unaudited)		6
	Consolidated Statements of Stockholders’ Deficit - Three Months Ended March 31, 2011 and 2010 (unaudited)		7
	Notes to Condensed Consolidated Financial Statements (unaudited)		8
Item  2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Item  3.	Quantitative and Qualitative Disclosures About Market Risk		44
Item  4.	Controls and Procedures		45
PART II. OTHER INFORMATION			46
Item 1.	Legal Proceedings		46
Item 6.	Exhibits		46
SIGNATURES			47
EXHIBIT INDEX			48

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, 2011, and the related condensed consolidated statements of operations, stockholders’ deficit and cash flows for the three-month periods ended March 31, 2011 and 2010. 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, 2010, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year then ended (not presented herein); and in our report dated February 23, 2011, 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, 2010 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Omaha, Nebraska

May 3, 2011

3

WEST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(AMOUNTS IN THOUSANDS)

(UNAUDITED)

	Three Months Ended March 31,
	2011			2010
REVENUE	$	610,818		$	599,821
COST OF SERVICES		271,603			260,823
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		220,408			221,753
OPERATING INCOME		118,807			117,245
OTHER INCOME (EXPENSE):
Interest expense, net of interest income of $99 and $74		(67,725	)		(59,049	)
Other, net		4,692			(127	)
Other expense		(63,033	)		(59,176	)
INCOME BEFORE INCOME TAX EXPENSE		55,774			58,069
INCOME TAX EXPENSE		21,194			22,066
NET INCOME	$	34,580		$	36,003
EARNINGS (LOSS) PER COMMON SHARE:
Basic Class L	$	4.39		$	3.97
Diluted Class L	$	4.21		$	3.81
Basic Class A	$	(0.11	)	$	(0.04	)
Diluted Class A	$	(0.11	)	$	(0.04	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic Class L		9,995			9,971
Diluted Class L		10,416			10,392
Basic Class A		88,017			87,987
Diluted Class A		88,017			87,987

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

4

WEST CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS)

(UNAUDITED)

	March 31, 2011			December 31, 2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	100,097		$	97,793
Trust and restricted cash		13,332			15,122
Accounts receivable, net of allowance of $10,492 and $10,481		394,281			366,419
Deferred income taxes receivable		22,866			29,968
Prepaid assets		43,868			33,667
Other current assets		36,753			34,058
Total current assets		611,197			577,027
PROPERTY AND EQUIPMENT:
Property and equipment		1,054,120			1,032,205
Accumulated depreciation and amortization		(718,047	)		(690,839	)
Total property and equipment, net		336,073			341,366
GOODWILL		1,680,451			1,629,396
INTANGIBLE ASSETS, net of accumulated amortization of $375,267 and $357,500		321,305			299,685
OTHER ASSETS		160,139			157,776
TOTAL ASSETS	$	3,109,165		$	3,005,250
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	61,745		$	64,149
Accrued expenses		338,326			283,988
Current maturities of long-term debt		3,856			15,425
Total current liabilities		403,927			363,562
LONG-TERM OBLIGATIONS, less current maturities		3,512,509			3,518,141
DEFERRED INCOME TAXES		108,957			93,881
OTHER LONG-TERM LIABILITIES		78,668			68,721
Total liabilities		4,104,061			4,044,305
COMMITMENTS AND CONTINGENCIES (Note 11)
CLASS L COMMON STOCK $0.001 PAR VALUE, 100,000 SHARES AUTHORIZED, 9,995 and 9,988 SHARES ISSUED AND OUTSTANDING		1,549,687			1,504,445
STOCKHOLDERS’ DEFICIT:
Class A common stock $0.001 par value, 400,000 shares authorized, 88,134 and 88,071 shares issued and 88,019 and 87,956 shares outstanding		88			88
Retained deficit		(2,524,010	)		(2,516,315	)
Accumulated other comprehensive loss		(19,638	)		(26,250	)
Treasury stock at cost (115 shares)		(1,023	)		(1,023	)
Total stockholders’ deficit		(2,544,583	)		(2,543,500	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	3,109,165		$	3,005,250

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

5

WEST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

(UNAUDITED)

	Three Months Ended March 31,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	34,580		$	36,003
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation		25,843			26,111
Amortization		16,299			17,462
Provision for share based compensation		1,015			882
Deferred income tax expense		6,056			16,824
Amortization of debt acquisition costs		3,344			4,010
Other		139			10
Changes in operating assets and liabilities, net of business acquisitions:
Accounts receivable		(23,237	)		(18,794	)
Other assets		(18,090	)		(15,249	)
Accounts payable		2,746			19,190
Accrued expenses, other liabilities and income tax payable		55,008			29,032
Net cash flows from operating activities		103,703			115,481
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash acquired of $4,129 and $0		(60,712	)		(544	)
Collections applied to principal of portfolio receivables		—			2,124
Purchases of property and equipment		(28,196	)		(35,390	)
Other		90			29
Net cash flows from investing activities		(88,818	)		(33,781	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facilities		61,000			59,850
Payments on revolving credit facilities		(61,000	)		(132,781	)
Principal payments on long-term obligations		(17,201	)		(6,485	)
Payments of capital lease obligations		(225	)		(1,447	)
Other		(81	)		(168	)
Net cash flows from financing activities		(17,507	)		(81,031	)
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		4,926			(3,186	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		2,304			(2,517	)
CASH AND CASH EQUIVALENTS, Beginning of period		97,793			59,068
CASH AND CASH EQUIVALENTS, End of period	$	100,097		$	56,551
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	38,074		$	20,612
Cash paid during the period for income taxes, net of refunds of $522 and $261	$	6,266		$	6,496
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Acquisition of property through accounts payable commitments	$	4,291		$	653

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

6

WEST CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(AMOUNTS IN THOUSANDS )

	Class A Common Stock		Additional Paid - in Capital			Retained Deficit			Treasury Stock			Other Comprehensive Income (Loss) Foreign Currency Translation			Other Comprehensive Income (Loss) on Cash Flow Hedges			Total Stockholders’ Deficit
BALANCE, January 1, 2011	$	88	$	—		$	(2,516,315	)	$	(1,023	)	$	(9,065	)	$	(17,185	)	$	(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
Total comprehensive income																			41,192
Executive Deferred Compensation Plan activity				1,051															1,051
Stock options exercised including related tax benefits (2,000 Class A 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	)	$	(6,800	)	$	(12,838	)	$	(2,544,583	)
BALANCE, January 1, 2010	$	88	$	—		$	(2,408,770	)	$	(53	)	$	(4,147	)	$	(12,583	)	$	(2,425,465	)
Net income							36,003												36,003
Foreign currency translation adjustment, net of tax of $8,925													(14,562	)					(14,562	)
Unrealized loss on cash flow hedges, net of tax of $1,522																(3,234	)		(3,234	)
Total comprehensive income																			18,207
Purchase of stock at cost (4,779 Class A shares)										(43	)								(43	)
Executive Deferred Compensation Plan activity				240															240
Stock options exercised including related tax benefits (46,500 Class A shares)				69															69
Share based compensation				505															505
Accretion of Class L common stock priority return preference				(814	)		(38,767	)											(39,581	)
BALANCE, March 31, 2010	$	88	$	—		$	(2,411,534	)	$	(96	)	$	(18,709	)	$	(15,817	)	$	(2,446,068	)

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

7

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, voice and data solutions. “We,” “us” and “our” also refer to West and its consolidated subsidiaries, as applicable. We offer our clients a broad range of communications and infrastructure management solutions that help them manage or support critical communications. The scale and processing capacity of our proprietary technology platforms, combined with our world-class expertise and processes in managing telephony and human capital, enable us to provide our clients with premium outsourced communications solutions. Our automated service and conferencing solutions are designed to improve our clients’ cost structure and provide reliable, high-quality services. Our solutions also help deliver mission-critical services, such as public safety and emergency communications. We serve Fortune 1000 companies and other clients in a variety of industries, including telecommunications, banking, retail, financial services, technology and healthcare, and have sales and operations in the United States, Canada, Europe, the Middle East, Asia Pacific and Latin America.

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 and

agent-based 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, and managed over 115 million conference calls in 2010. We provide our clients with an integrated global suite of meeting replacement services. These include on-demand automated conferencing services, operator-assisted services for complex audio conferences or large events, web conferencing services that allow clients to make presentations and share applications and documents over the Internet, video conferencing applications that allow clients to experience real-time video presentations and conferences and streaming services to connect remote employees and host virtual events. We also provide consulting, project management and implementation of hosted and managed unified communications solutions.

• Alerts & Notifications Services.Our solutions leverage our proprietary technology platforms to allow clients to manage and deliver automated personalized communications quickly and through multiple delivery channels (voice, text messaging, email and fax). For example, we deliver patient notifications, appointment reminders and prescription reminders on behalf of our healthcare clients (medical and dental practices, hospitals and pharmacies), provide travelers with flight arrival and departure updates on behalf of our transportation clients, send and receive automated outage notifications and payment reminders on behalf of our utility clients and transmit emergency evacuation notices on behalf of municipalities. Our platform also enables two-way communications which allow the recipients of a message to respond with relevant information to our clients.

8

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Communication Services

• Automated Services

• Emergency Communications Services.We believe we are the largest provider of emergency communications infrastructure systems and services, based on our own estimates of the number of 9-1-1 calls that we and other participants in the industry facilitated. Our solutions are critical in facilitating public safety agencies’ ability to coordinate responses to emergency events. We provide the network database solution that routes emergency calls to the appropriate 9-1-1 centers and allows the appropriate first responders (police, fire, ambulance) to be assigned to those calls. Our clients generally enter into long-term contracts and fund their obligations through monthly charges on users’ local telephone bills. We also provide fully-integrated desk-top communications technology solutions to public safety agencies that enable enhanced 9-1-1 call handling.

• Automated Call Processing.Over the last 21 years we believe we have developed a best-in-class suite of automated voice-oriented solutions. Our solutions 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 automated services technology platforms serve as the backbone of our telephony management capabilities and our scale and operational flexibility have helped us launch and grow other key services, such as conferencing, alerts and notifications and West at Home.

• Agent-Based Services.We provide our clients with large-scale, agent-based services, including inbound customer care, customer acquisition and retention, business-to-business sales and account management, overpayment identification and recovery services, and collection of receivables on behalf of our clients. We have a flexible model with both on-shore and off-shore capabilities to fit our clients’ needs. We believe that we are known in the industry as a premium provider of these services, and we seek opportunities with clients for whom our services can add value while maintaining attractive margins for us. Our West at Home agent service is a remote call handling model that uses employees who work out of their homes. This service has a distinct advantage over traditional facility-based call center solutions by attracting higher quality agents. This model helps enhance our cost structure and significantly reduces our capital requirements.

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, 2010. All intercompany balances and transactions have been eliminated. Our results for the three months ended March 31, 2011 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.

9

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Revenue Recognition – In our Unified Communications segment, our conferencing and collaboration services 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. License fees charged for certain web services are recognized over the term of the license. Our Communication Services segment recognizes revenue for automated 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 and include contract-specified milestones representative of fair value, upon achieving such contract milestones. As it relates to installation sales, as of January 1, 2010, the Company early adopted new revenue recognition guidance for multiple element arrangements. For contracts entered into prior to January 1, 2010, revenue associated with advance payments are deferred until the system installations are completed or specified milestones are attained. Costs incurred on uncompleted contracts are accumulated and recorded as deferred costs until the system installations are completed or specified milestones are attained. This guidance was adopted prospectively and specifically for the product sales and installation for the emergency communications services revenue. 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 or the expected life of the client relationship, whichever is longer.

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. In December 2010, we sold the balance of the investment in receivable portfolios and no longer participate in purchased receivables collection. Prior to the sale, we used either the level-yield method or the cost recovery method to recognize revenue on these purchased receivable portfolios.

Common Stock –Our equity investors (i.e., an investment group led by Thomas H. Lee Partners, L.P. and Quadrangle Group, LLC (the “Sponsors”), Mary and Gary West, who are the founders of West (the “Founders”) and certain members of management) own 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) have been implemented with Class A shares/options only. General terms of these securities are:

• Class L shares: Each Class L share is entitled to a priority return preference equal to the sum of (x) $90 per share base amount plus (y) an amount sufficient to generate a 12% internal rate of return (“IRR”) on that base amount, compounded quarterly, from the date of the recapitalization in which the Class L shares were originally issued, October 24, 2006 until the priority return preference is paid in full. Each Class L share also participates in any equity appreciation beyond the priority return on the same per share basis as the Class A shares.

• Class A shares: Class A shares participate in the equity appreciation after the Class L priority return is satisfied.

• Voting: Each share (whether Class A or Class L) is entitled to one vote per share on all matters on which stockholders vote, subject to Delaware law regarding class voting rights.

• Distributions: Dividends and other distributions to stockholders in respect of shares, whether as part of an ordinary distribution of earnings, as a leveraged recapitalization or in the event of an ultimate liquidation and distribution of available corporate assets, are to be paid as follows. First, holders of Class L shares are entitled to receive an amount equal to the Class L base amount of $90 per share plus an amount sufficient to generate a 12% IRR on that base amount, compounded

10

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

quarterly, from the closing date of the recapitalization to the date of payment. Second, after payment of this priority return to Class L holders, the holders of Class A shares and Class L shares participate together, as a single class, in any and all distributions by the Company.

• Conversion of Class L shares: Class L shares automatically convert into Class A shares prior to an initial public offering (“IPO”). Also, the board of directors may elect to cause all Class L shares to be converted into Class A shares in connection with a transfer (by stock sale, merger or otherwise) of a majority of all common stock to a third party (other than to Thomas H. Lee Partners, LP and its affiliates). In the case of any such conversion (whether at an IPO or sale), if any unpaid Class L priority return (base $90/share plus accrued 12% IRR) remains unpaid at the time of conversion it will be “paid” in additional Class A shares valued at the deal price (in the case of an IPO, at the IPO price net of underwriter’s discount); that is, each Class L share would convert into a number of Class A shares equal to (i) one plus (ii) a fraction, the numerator of which is the unpaid priority return on such Class L share and the denominator of which is the value of a Class A share at the time of conversion.

As the Class L stockholders control a majority of the votes of the board of directors through direct representation on the board of directors and the conversion and redemption features are considered to be outside the control of the Company, all shares of Class L common stock have been presented outside of permanent equity in accordance with ASC 480-10-599,Classification and Measurement of Redeemable Securities.At March 31, 2011 and December 31, 2010, the 12% priority return preference has been accreted and included in the Class L share balance.

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

	Three months ended March  31, 2011		Three months ended March 31, 2010
Beginning of period balance	$	1,504,445	$	1,332,721
Accretion of class L common stock priority return preference		43,853		39,581
Executive Deferred Compensation Plan activity		1,389		287
End of period balance	$	1,549,687	$	1,372,589

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.

11

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Subsequent Events –In accordance with the provisions of ASC 855, we have evaluated subsequent events through May 3, 2011. No subsequent events requiring recognition were identified and therefore none were incorporated into the condensed consolidated financial statements presented herein, except as disclosed in Note 12.

Recently Issued Accounting Pronouncements:In December 2010, the Financial Accounting Standards Board (“FASB”) issued guidance requiring an entity, such as the Company, with reporting units that have carrying amounts that are zero or negative to assess whether it is more likely than not that the reporting units’ goodwill is impaired. The Company is required to perform step two of the goodwill impairment test if there are any adverse qualitative factors indicating that an impairment may exist for their reporting units with a zero or negative carrying value. This guidance became effective for the Company January 1, 2011 and the adoption had no immediate effect on our financial position, results of operations or cash flows.

2. ACQUISITIONS

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 will enhance 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.

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 will enhance 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 accounts receivable securitization facility. The results of TFCC have been included in the Unified Communications segment since February 2, 2011.

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. The purchase agreement for POSTcti includes a three year contingent earn-out provision with a maximum payment of approximately £12.0 million and £0.4 million of additional non-contingent deferred consideration withheld to secure sellers’ indemnification obligations. Based on a weighted average probability analysis, we have accrued $8.6 million at March 31, 2011 for the contingent earn-out. The results of the acquired POSTcti assets have been included in the Unified Communications segment since February 1, 2011.

12

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

SPN

On November 9, 2010, we completed the acquisition of substantially all of the assets of Specialty Pharmacy Network, Inc. (“SPN”), a provider of billing and management information to payors and providers that participate in managing, administering and paying specialty pharmacy claims. SPN’s primary offering is a server based application whose data mining capabilities allow SPN to identify indicators of medical claim overpayment based on a proprietary library of pharmacy edits. The purchase price was $3.2 million and was funded by cash on hand. The results of the acquired SPN assets have been included in the Communication Services segment since November 9, 2010.

TuVox

On July 21, 2010, we completed the acquisition of TuVox Incorporated, (“TuVox”) a provider of on-demand and interactive voice recognition applications. The purchase price was $16.5 million and was funded by cash on hand. The results of operations for TuVox have been included in the Communication Services segment since July 21, 2010.

Holly

On June 1, 2010, we completed the acquisition of Holly Australia Pty Ltd, (“Holly”), a provider of carrier- grade voice platforms. The purchase price was $9.2 million and was funded by cash on hand. The results of operations for Holly have been included in the Communication Services segment since June 1, 2010.

Total acquisition costs expensed during the three months ended March 31, 2011 were $1.5 million compared to $0.4 million for the three months ended March 31, 2010.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the respective acquisition dates for Unisfair, TFCC, POSTcti, SPN, TuVox, and Holly. 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 Unisfair, TFCC, POSTcti, SPN, TuVox and Holly are provisional and subject to adjustment.

(Amounts in thousands)	Unisfair			TFCC		POSTcti			SPN		TuVox			Holly
Working Capital	$	(3,694	)	$	1,326	$	(1,255	)	$	—	$	(1,480	)	$	1,704
Property and equipment		339			3,304		18			—		242			110
Other assets, net		42			—		—			—		10,365			—
Intangible assets		10,960			17,950		3,859			550		7,907			4,300
Goodwill		15,305			17,888		10,818			2,638		1,447			4,412
Total assets acquired		22,952			40,468		13,440			3,188		18,481			10,526
Non-current deferred taxes		3,452			—		610			—		2,030			1,290
Long-term liabilities		—			—		8,537			—		—			—
Total liabilities assumed		3,452			—		9,147			—		2,030			1,290
Net assets acquired	$	19,500		$	40,468	$	4,293		$	3,188	$	16,451		$	9,236

Assuming the acquisitions of Unisfair, TFCC, POSTcti, SPN, TuVox and Holly occurred as of the beginning of the periods presented, our unaudited pro forma results of operations for the three months ended March 31, 2011 and 2010 would have been, in thousands (except per share amounts), as follows:

13

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Three months ended March 31,
	2011			2010
Revenue	$	614,241		$	615,878
Net Income	$	33,827		$	33,635
Earnings per common L share—basic	$	4.39		$	3.97
Earnings per common L share—diluted	$	4.21		$	3.81
Loss per common A share—basic	$	(0.11	)	$	(0.07	)
Loss per common A share—diluted	$	(0.11	)	$	(0.07	)

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.

3. GOODWILL AND OTHER INTANGIBLE ASSETS

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

	Unified Communications		Communication Services			Consolidated
Gross carrying value at December 31, 2010	$	843,558	$	823,513		$	1,667,071
Acquisitions		44,011		—			44,011
Acquisition accounting adjustments		—		(2,697	)		(2,697	)
Foreign currency translation adjustment		9,663		78			9,741
Gross carrying value at March 31, 2011		897,232		820,894			1,718,126
Impairment in 2010		—		(37,675	)		(37,675	)
Net balance at March 31, 2011	$	897,232	$	783,219		$	1,680,451

The excess of the acquisition costs over the fair value of the assets acquired and liabilities assumed for the purchase of Unisfair, TFCC, POSTcti, SPN, TuVox and Holly 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. Goodwill recognized for Unisfair, TFCC, POSTcti, SPN, TuVox and Holly at March 31, 2011 was approximately $15.6 million, $17.9 million, $11.1 million, $2.6 million, $1.4 million and $5.6 million, respectively.

Factors contributing to the recognition of goodwill

Factors 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.

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.

14

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 POSTcti assets included the expansion of our hosted and managed unified communications solutions to Europe.

Factors that contributed to a purchase price resulting in the recognition of goodwill, non-deductible for tax purposes, for the purchase of the SPN assets included SPN’s expertise and the large market opportunity in pharmacy insurance claims.

Factors that contributed to a purchase price resulting in the recognition of goodwill, non-deductible for tax purposes, for the purchase of TuVox included a reduction of future costs.

Factors that contributed to a purchase price resulting in the recognition of goodwill, non-deductible for tax purposes, for the purchase of Holly included a reduction of future licensing costs and expansion of voice software product offerings.

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:

15

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	As of March 31, 2011							Weighted Average Amortization Period (Years)
Intangible assets	Acquired Cost		Accumulated Amortization			Net Intangible Assets
Customer lists	$	496,961	$	(303,285	)	$	193,676		9.1
Technology & Patents		115,425		(51,115	)		64,310		10.4
Trade names		58,710		—			58,710		Indefinite
Trade names (finite lived)		14,109		(10,511	)		3,598		4.2
Other intangible assets		11,367		(10,356	)		1,011		5.6
Total	$	696,572	$	(375,267	)	$	321,305
	As of December 31, 2010							Weighted Average Amortization Period (Years)
Intangible assets	Acquired Cost		Accumulated Amortization			Net Intangible Assets
Customer lists	$	473,144	$	(289,889	)	$	183,255		9.0
Technology & Patents		102,311		(47,376	)		54,935		10.5
Trade names		58,710		—			58,710		Indefinite
Trade names (finite lived)		12,379		(10,170	)		2,209		4.3
Other intangible assets		10,641		(10,065	)		576		5.6
Total	$	657,185	$	(357,500	)	$	299,685

Amortization expense for finite-lived intangible assets was $14.8 million and $16.5 million for the three months ended March 31, 2011 and 2010, respectively. Estimated amortization expense for the intangible assets noted above for 2011 and the next five years is as follows:

2011	$  54.6 million
2012	$  46.7 million
2013	$  41.1 million
2014	$  33.7 million
2015	$  26.5 million
2016	$  20.1 million

16

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

4. ACCRUED EXPENSES

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

	March 31, 2011		December 31, 2010
Accrued wages	$	60,245	$	46,673
Interest payable		59,551		31,318
Deferred revenue and customer deposits		51,547		48,845
Accrued other taxes (non-income related)		42,018		38,846
Accrued phone		34,341		25,568
Interest rate hedge position		19,230		26,123
Accrued employee benefit costs		15,317		17,214
Income taxes payable		10,308		1,055
Accrued lease expense		8,150		8,695
Accrued settlements		1,610		4,307
Other current liabilities		36,009		35,344
	$	338,326	$	283,988

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, 2011			December 31, 2010
Senior Secured Term Loan Facility, due 2013	$	448,434		$	450,210
Senior Secured Term Loan Facility, due 2016		1,467,931			1,483,356
Senior Secured Revolving Credit Facility, due 2012		—			—
Senior Secured Revolving Credit Facility, due 2016		—			—
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
		3,516,365			3,533,566
Less: current maturities		(3,856	)		(15,425	)
Long-term obligations	$	3,512,509		$	3,518,141

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 to fixed rate debt on our outstanding senior secured term loan facility. 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. During the three months ended March 31, 2011 we de-designated two interest rate swap contracts with a notional value of $400.0 million. At December 31, 2010, the associated other comprehensive loss for these two interest rate swap contracts were $8.4 million, net of tax, and will be reclassified into interest expense over the remaining life of the contracts which terminate in August, 2011.

17

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, 2011, the notional amount of debt outstanding under interest rate swap agreements was $1,600.0 million. The fixed interest rate on the interest rate swaps ranges from 1.685% to 3.532%.

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

	Liability Derivatives
	March 31, 2011			December 31, 2010
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Accrued expenses	$	11,276	Accrued expenses	$	21,765
Interest rate swaps	Other long-term liabilities		3,626	Other long-term liabilities		5,725
			14,902			27,490
Derivatives not designated as hedging instruments:
Interest rate swaps	Accrued expenses		7,953	Accrued expenses		4,358
Total derivatives		$	22,855		$	31,848

The following presents, in thousands the impact of interest rate swaps on the consolidated statement of operations for the three months ended March 31, 2011 and March 31, 2010, 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,
	2011		2010			2011		2010
Interest rate swaps	$	2,402	$	(3,234	)	$	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,
	2011		2010
Interest expense	$	1,945	$	—

18

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

7. FAIR VALUE DISCLOSURES

Accounting Standards Codification 820Fair 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 320Investments – Debt and Equity Securities (“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, therefore, the fair value of these interest rate swaps is based on a Level 2 input.

Assets and liabilities measured at fair value on a recurring basis at March 31, 2011 and December 31, 2010, in thousands, are summarized below:

19

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

			Fair Value Measurements at March 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	$	29,067	$	29,067	$	—	$	—	$	29,067
Total assets at fair value	$	29,067	$	29,067	$	—	$	—	$	29,067
Liabilities
Interest rate swaps	$	22,855	$	—	$	22,855	$	—	$	22,855
Total liabilities at fair value	$	22,855	$	—	$	22,855	$	—	$	22,855

			Fair Value Measurements at December 31, 2010 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	$	26,834	$	26,834	$	—	$	—	$	26,834
Total assets at fair value	$	26,834	$	26,834	$	—	$	—	$	26,834
Liabilities
Interest rate swaps	$	31,848	$	—	$	31,848	$	—	$	31,848
Total liabilities at fair value	$	31,848	$	—	$	31,848	$	—	$	31,848

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 at March 31, 2011 was approximately $3,587.2 million compared to the carrying amount of $3,516.4 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 at December 31, 2010 was approximately $3,604.6 million compared to the carrying amount of $3,533.6 million.

8. STOCK-BASED COMPENSATION

The 2006 Executive Incentive Plan (“EIP”) was established to advance the interests of the Company and its affiliates by providing for the grant to participants of stock-based and other incentive awards. 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, subject to approval by the board, 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. A maximum of 359,986 Equity Strips (each comprised of eight shares of Class A common stock and one share of Class L common stock), in each case pursuant to rollover options (“Management Rollover Options”), were authorized to be delivered in satisfaction of rollover option awards under the EIP. In addition, an aggregate maximum of 11,276,291 shares of Class A common stock may be delivered in satisfaction of other awards under the EIP.

20

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In general, stock options granted under the EIP become exercisable over a period of five years, with 20% of the stock option becoming vested and exercisable at the end of each year. Once an option has vested, it generally remains exercisable during the continuation of the option holder’s service until the tenth anniversary of the date of grant.

Stock Options

The following table presents the stock option activity under the EIP for the three months ended March 31, 2011 and 2010, respectively:

	Options Available for Grant			Options Outstanding
				Number of Options			Weighted Average Exercise Price
Balance at January 1, 2010		454,347			2,501,500		$	2.42
Granted		—			—			—
Canceled		33,000			(33,000	)		1.64
Exercised		—			(46,500	)		1.64
Balance at March 31, 2010		487,347			2,422,000		$	2.45
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

At March 31, 2011, we expect that approximately 72% of options granted will vest over the vesting period.

At March 31, 2011, the intrinsic value of vested options was approximately $13.9 million.

21

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following table summarizes the information on the options granted under the EIP at March 31, 2011:

Outstanding								Exercisable
Range of Exercise Prices		Number of Options		Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
$	1.64		1,797,500		5.69	$	1.64		1,402,500	$	1.64
	3.61		231,000		7.75		3.61		98,000		3.61
	6.36		270,000		6.83		6.36		162,000		6.36
	9.04		225,000		9.08		9.04		—		—
	10.60		160,000		9.83		10.60		—		—
$	1.64 -$10.60		2,683,500		6.51	$	3.44		1,662,500	$	2.22

We account for the stock option grants under the EIP in accordance with Accounting Standards Codification 718Compensation-Stock Compensation(“ASC 718”). The fair value of option awards granted under the EIP during the three months ended March 31, 2011 were $3.92. No options were granted during the three months ended March 31, 2010. 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, 2011
Risk-free interest rate		1.87
Dividend yield		0.0	%
Expected volatility		33.2	%
Expected life (years)		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 $1.5 million and $1.1 million unrecorded and unrecognized compensation expense related to unvested stock options under the EIP at March 31, 2011 and 2010, respectively.

Executive Management Rollover Options

During the three months ended March 31, 2011, no Management Rollover Options were exercised. At March 31, 2011, 287,326 Equity Strip options were fully vested and outstanding. The aggregate intrinsic value of these equity strip options was approximately $47.0 million.

Stock-Based Compensation Expense

The components of stock-based compensation expense in thousands are presented below:

22

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Three months ended March 31,
	2011		2010
Stock options	$	174	$	131
Restricted stock		346		374
Deferred compensation - notional shares		495		377
	$	1,015	$	882

The net income effect of stock-based compensation expense for the three months ended March 31, 2011 and 2010 was approximately $0.6 million and $0.5 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.

We have two classes of common stock (Class L common stock and Class A common stock). Each Class L share is entitled to a priority return preference equal to the sum of (x) $90 per share base amount plus (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 is paid in full. Each Class L share also participates in any equity appreciation beyond the priority return on the same per share basis as the Class A shares. Class A shares participate in the equity appreciation after the Class L priority return is satisfied.

The Class L common stock is 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 260Earnings Per Share. Losses are not allocated to the Class L common stock in the computation of basic earnings per share as the Class L common stock is not obligated to share in losses.

Basic earnings per share (“EPS”) excludes 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 Class A 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)	2011			2010
Net Income	$	34,580		$	36,003
Less accretion of Class L Shares (1)		43,853			39,581
Net loss attributable to Class A Shares	$	(9,273	)	$	(3,578	)

(1) The Class L shareholders are allocated their priority return which is equivalent to the accretion, while any losses are allocated to Class A shareholders as the Class L shareholders do not have a contractual obligation to share in losses.

23

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Three months ended March 31,
(In thousands, except per share amounts)	2011			2010
Earnings (loss) per common share:
Basic - Class L	$	4.39		$	3.97
Basic - Class A	$	(0.11	)	$	(0.04	)
Diluted - Class L	$	4.21		$	3.81
Diluted - Class A	$	(0.11	)	$	(0.04	)
Weighted average number of shares outstanding:
Basic - Class L		9,995			9,971
Basic - Class A		88,017			87,987
Dilutive impact of stock options:
Class L Shares		421			421
Diluted Class L Shares		10,416			10,392

For purposes of calculating the diluted earnings per share for the Class A shares, 2.7 million and 2.4 million options outstanding to purchase Class A shares at March 31, 2011 and 2010, respectively, have been excluded from the computation of diluted Class A shares outstanding because the income allocable to the Class A shares is a loss therefore the effect is anti-dilutive.

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 and agent-based services.

24

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	For the three months ended March 31,
	2011			2010
	Amounts in thousands
Revenue:
Unified Communications	$	331,122		$	299,192
Communication Services		282,077			301,829
Intersegment Eliminations		(2,381	)		(1,200	)
Total	$	610,818		$	599,821
Operating Income:
Unified Communications	$	94,011		$	77,482
Communication Services		24,796			39,763
Total	$	118,807		$	117,245
Depreciation and Amortization
(Included in Operating Income):
Unified Communications	$	21,144		$	23,966
Communication Services		20,998			19,607
Total	$	42,142		$	43,573
Capital Expenditures:
Unified Communications	$	8,406		$	15,315
Communication Services		9,274			11,370
Corporate		1,484			8,052
Total	$	19,164		$	34,737

	As of March 31,		As of December 31,
	2011		2010
	Amounts in thousands
Assets:
Unified Communications	$	1,521,805	$	1,401,242
Communication Services		1,348,988		1,375,643
Corporate		238,372		228,365
Total	$	3,109,165	$	3,005,250

For the three months ended March 31, 2011 and 2010, our largest 100 clients represented 56% and 57% 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, 2011 and 2010 was approximately 11% of our total revenue in both periods. No other client represented more than 10% of our aggregate revenue for the three months ended March 31, 2011 and 2010.

For the three months ended March 31, 2011 and 2010, revenues from non-U.S. countries were approximately 18% and 16%, respectively, of consolidated revenues. 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:

25

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	For the three months ended March 31,
	2011		2010
Revenue:
North America	$	500,715	$	505,722
Europe, Middle East & Africa (EMEA)		75,785		66,837
Asia Pacific		34,318		27,262
Total	$	610,818	$	599,821

	As of March 31, 2011		As of December 31, 2010
Long-Lived Assets:
North America	$	2,246,594	$	2,197,888
Europe, Middle East & Africa (EMEA)		231,650		210,689
Asia Pacific		19,724		19,646
Total	$	2,497,968	$	2,428,223

Canada and Mexico represented approximately 1% of North American revenue during the three months ended March 31, 2011 and 2010. Long-lived assets in Canada and Mexico represented less than 1% of North American long-lived assets at March 31, 2011 and December 31, 2010.

The aggregate gain (loss) on transactions denominated in currencies other than the functional currency of West Corporation or any of its subsidiaries was approximately $2.2 million and ($1.1) million for the three months ended March 31, 2011 and 2010, 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 adverse effect on our financial position, results of operations or cash flows.

12. SUBSEQUENT EVENTS

Subsequent to March 31, 2011, we announced an agreement to acquire Smoothstone IP Communications Corporation for cash paid of approximately $120.0 million. The acquisition will be integrated into our Unified Communications segment and is expected to close later in the second quarter of 2011 after satisfaction of certain closing conditions including customary regulatory approvals. Due to the limited time since the signing date and limitations on access to Smoothstone IP Communications’ information prior to the acquisition date, the initial accounting for the business combination is incomplete at this time. As a result, we are unable to provide the amounts recorded within assets and liabilities for the purchase price allocation as well as provide the pro-forma revenue and net income of the combined entity.

13. 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.

26

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Parent / Issuer			For the Three Months Ended March 31, 2011
				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		(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

27

WEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Parent / Issuer			For the Three Months Ended March 31, 2010
				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations and Consolidating Entries			Consolidated
REVENUE	$	—		$	494,689		$	105,132		$	—		$	599,821
COST OF SERVICES		—			221,946			38,877			—			260,823
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		819			186,876			34,058			—			221,753
OPERATING INCOME		(819	)		85,867			32,197			—			117,245
OTHER INCOME (EXPENSE):
Interest Expense, net of interest income		(37,351	)		(24,734	)		3,036			—			(59,049	)
Subsidiary Income		47,650			28,054			—			(75,704	)		—
Other, net		1,355			229			(1,711	)		—			(127	)
Other income (expense)		11,654			3,549			1,325			(75,704	)		(59,176	)
INCOME BEFORE INCOME TAX EXPENSE		10,835			89,416			33,522			(75,704	)		58,069
INCOME TAX EXPENSE (BENEFIT)		(25,168	)		42,000			5,234			—			22,066
NET INCOME	$	36,003		$	47,416		$	28,288		$	(75,704	)	$	36,003

28

WEST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUPPLEMENTAL CONDENSED BALANCE SHEET

(AMOUNTS IN THOUSANDS)

				March 31, 2011
	Parent / Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations and Consolidating Entries			Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	8,296		$	—	$	100,503		$	(8,702	)	$	100,097
Trust cash		—			13,332		—			—			13,332
Accounts receivable, net		—			50,558		343,723			—			394,281
Intercompany receivables		—			407,896		—			(407,896	)		—
Deferred income taxes receivable		4,791			16,546		1,529			—			22,866
Prepaid assets		3,091			31,951		8,826			—			43,868
Other current assets		3,773			23,471		9,509			—			36,753
Total current assets		19,951			543,754		464,090			(416,598	)		611,197
Property and equipment, net		67,792			237,709		30,572			—			336,073
INVESTMENT IN SUBSIDIARIES		1,185,662			311,624		—			(1,497,286	)		—
GOODWILL		—			1,490,561		189,890			—			1,680,451
INTANGIBLES, net		—			255,223		66,082			—			321,305
OTHER ASSETS		109,238			299,800		(248,899	)		—			160,139
TOTAL ASSETS	$	1,382,643		$	3,138,671	$	501,735		$	(1,913,884	)	$	3,109,165
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	3,509		$	56,317	$	10,621		$	(8,702	)	$	61,745
Intercompany payables		339,056			—		68,840			(407,896	)		—
Accrued expenses		72,195			191,169		74,962			—			338,326
Current maturities of long-term debt		588			3,268		—			—			3,856
Total current liabilities		415,348			250,754		154,423			(416,598	)		403,927
LONG - TERM OBLIGATIONS, less current maturities		1,891,900			1,620,609		—			—			3,512,509
DEFERRED INCOME TAXES		15,227			72,956		20,774			—			108,957
OTHER LONG-TERM LIABILITIES		55,064			13,422		10,182			—			78,668
CLASS L COMMON STOCK		1,549,687			—		—			—			1,549,687
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(2,544,583	)		1,180,930		316,356			(1,497,286	)		(2,544,583	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,382,643		$	3,138,671	$	501,735		$	(1,913,884	)	$	3,109,165

29

WEST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUPPLEMENTAL CONDENSED BALANCE SHEET

(AMOUNTS IN THOUSANDS)

				December 31, 2010
	Parent / Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations and Consolidating Entries			Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—		$	—	$	102,385		$	(4,592	)	$	97,793
Trust cash		—			15,122		—			—			15,122
Accounts receivable, net		—			48,738		317,681			—			366,419
Intercompany receivables		—			416,017		—			(416,017	)		—
Deferred income taxes receivable		9,848			16,532		3,588			—			29,968
Prepaid assets		2,981			24,451		6,235			—			33,667
Other current assets		2,559			23,680		7,819			—			34,058
Total current assets		15,388			544,540		437,708			(420,609	)		577,027
Property and equipment, net		68,026			243,300		30,040			—			341,366
INVESTMENT IN SUBSIDIARIES		1,069,843			271,278		—			(1,341,121	)		—
GOODWILL		—			1,471,124		158,272			—			1,629,396
INTANGIBLES, net		—			244,833		54,852			—			299,685
OTHER ASSETS		110,090			288,496		(240,810	)		—			157,776
TOTAL ASSETS	$	1,263,347		$	3,063,571	$	440,062		$	(1,761,730	)	$	3,005,250
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	7,448		$	52,291	$	9,002		$	(4,592	)	$	64,149
Intercompany payables		340,974			—		75,043			(416,017	)		—
Accrued expenses		10,412			214,349		59,227			—			283,988
Current maturities of long-term debt		4,777			10,648		—			—			15,425
Total current liabilities		363,611			277,288		143,272			(420,609	)		363,562
LONG - TERM OBLIGATIONS, less current maturities		1,888,775			1,629,366		—			—			3,518,141
DEFERRED INCOME TAXES		20,421			53,839		19,621			—			93,881
OTHER LONG-TERM LIABILITIES		29,595			37,644		1,482			—			68,721
CLASS L COMMON STOCK		1,504,445			—		—			—			1,504,445
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(2,543,500	)		1,065,434		275,687			(1,341,121	)		(2,543,500	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,263,347		$	3,063,571	$	440,062		$	(1,761,730	)	$	3,005,250

30

WEST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

31

WEST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

	Three Months Ended March 31, 2010
	Parent / Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination and Consolidating Entries			Consolidated
NET CASH PROVIDED BY OPERATING ACTIVITIES:	$	—		$	136,141		$	(6,387	)	$	(14,273	)	$	115,481
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions		—			—			(544	)		—			(544	)
Purchase of property and equipment		(8,052	)		(23,593	)		(3,745	)		—			(35,390	)
Collections applied to principal of portfolio receivables		—			2,124			—			—			2,124
Other		—			29			—			—			29
Net cash used in investing activities		(8,052	)		(21,440	)		(4,289	)		—			(33,781	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facilities		59,850			—			—			—			59,850
Payments on revolving credit facilities		(132,781	)		—			—			—			(132,781	)
Payments of portfolio notes payable		—			(178	)		—			—			(178	)
Principal payments on the senior secured term loan facility		(1,888	)		(4,597	)		—			—			(6,485	)
Proceeds from stock options exercised including excess tax benefits		69			—			—			—			69
Payments on capital lease obligations		(1,425	)		(8	)		(14	)		—			(1,447	)
Other		(59	)		—			—			—			(59	)
Net cash used in financing activities		(76,234	)		(4,783	)		(14	)		—			(81,031	)
Intercompany		100,547			(109,918	)		(892	)		10,263			—
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		—			—			(3,186	)		—			(3,186	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		16,261			—			(14,768	)		(4,010	)		(2,517	)
CASH AND CASH EQUIVALENTS, Beginning of period		2,349			—			66,982			(10,263	)		59,068
					��
CASH AND CASH EQUIVALENTS, End of period	$	18,610		$	—		$	52,214		$	(14,273	)	$	56,551

32

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 adequacy of our available capital for future capital requirements;

• our future contractual obligations;

• our capital expenditures;

• the cost and reliability of voice and data services;

• the cost of labor and turnover rates;

• the impact of changes in interest rates;

• substantial indebtedness incurred in connection with the 2006 recapitalization 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, voice and data solutions. We offer our clients a broad range of communications and network infrastructure solutions that help them manage or support critical communications. The scale and processing capacity of our proprietary technology platforms, combined with our world-class expertise and processes in managing telephony and human capital, enable us to provide our clients with premium outsourced communications solutions. Our automated service and conferencing solutions are designed to improve our clients’ cost structure and provide reliable, high-quality services. Our solutions also help deliver mission-critical services, such as public safety and emergency communications. We serve Fortune 1000 companies and other clients in a variety of industries, including telecommunications, banking, retail, financial services, technology and healthcare, and have sales and operations in the United States, Canada, Europe, the Middle East, Asia Pacific and Latin 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 into a predominantly automated processor of voice and data transactions and a provider of network infrastructure solutions.

33

Investing in technology and developing specialized expertise in the industries we serve are critical components to our strategy of enhancing our services and delivering operational excellence. In 2010, we managed approximately 24 billion telephony minutes and over 115 million conference calls, facilitated over 240 million 9-1-1 calls, and delivered over 720 million notification calls and data messages. With approximately 598,000 telephony ports to handle conference calls, alerts and notifications and customer service, 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 246,000 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 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 or transcription 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 automated 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.

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 automated, 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. 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.

34

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

Factors Related to Our Indebtedness. During 2009 and 2010, in order to improve our debt maturity profile, we extended the maturity for $1.5 billion of our existing term loans from October 24, 2013 to July 15, 2016, repaid $500.0 million of our term loans due October 24, 2013 with the proceeds of a new $500.0 million 8 5/8% senior notes offering with a maturity date of October 1, 2018 and refinanced $650.0 million of senior notes due October 2014 with the proceeds of a new $650.0 million 7 7/8% senior notes offering with a maturity date of January 15, 2019.

Evolution to Automated Technologies.As we have continued our evolution into a diversified and automated technology-driven service provider, our revenue from automated services businesses has grown from 37% of total revenue in 2005 to 70% for the three months ended March 31, 2011 and our operating income from automated services businesses has grown from 53% of total operating income to 94% over the same period.

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 capabilities across industries and service offerings. We expect this will occur through a combination of organic growth, as well as strategic partnerships, alliances and acquisitions to expand into new service offerings as well as into new industries. Since 2005, we have invested approximately $1.8 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, 2011 and 2010

Revenue:Total revenue for the three months ended March 31, 2011 increased approximately $11.0 million, or 1.8%, to $610.8 million from $599.8 million for the three months ended March 31, 2010. This increase included revenue of $12.0 million from entities acquired since April 1, 2010. Acquisitions made during the three months ended March 31, 2011 were of TFCC, POSTcti and Unisfair. These acquisitions closed February 1, 2011 for TFCC and POSTcti and March 1, 2011 for Unisfair. These acquisitions have been consolidated with our Unified Communications segment since their respective acquisition dates. Revenue from agent-based services for the three months ended March 31, 2011 decreased by $13.2 million as compared with the three months ended March 31, 2010.

For the three months ended March 31, 2011 and 2010, our largest 100 clients represented 56% and 57% 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, 2011 and 2010 were approximately 11% in both periods. No other client accounted for more than 10% of our total revenue in the three months ended March 31, 2011 or 2010.

35

Revenue by business segment:

	For the three months ended March 31,
	2011			% of Total Revenue			2010			% of Total Revenue			Change			% Change
Revenue in thousands:
Unified Communications	$	331,122			54.2	%	$	299,192			49.9	%	$	31,930			10.7	%
Communication Services		282,077			46.2	%		301,829			50.3	%		(19,752	)		-6.5	%
Intersegment eliminations		(2,381	)		-0.4	%		(1,200	)		-0.2	%		(1,181	)		98.4	%
Total	$	610,818			100.0	%	$	599,821			100.0	%	$	10,997			1.8	%

For the three months ended March 31, 2011, Unified Communications revenue increased $31.9 million, or 10.7%, to $331.1 million from $299.2 million for the three months ended March 31, 2010. The increase in revenue for the three months ended March 31, 2011 is primarily due to $23.1 million from organic growth and $8.8 million from the acquisitions made since April 1, 2010. Our international revenue grew to $110.1 million, an increase of 17.0% over the three months ended March 31, 2010. The average rate per minute that we charge our conferencing customers continues to decline while total minutes sold continues to increase.

For the three months ended March 31, 2011, Communication Services revenue decreased approximately $19.8 million, or 6.5%, to $282.1 million from $301.8 million for the three months ended March 31, 2010. The decrease in revenue for the three months ended March 31, 2011 is primarily the result of decreased revenue from our consumer agent-based services and a reduction in purchased paper revenue resulting from our decision in 2010 to discontinue portfolio receivable purchases.

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 $10.8 million, or 4.1%, in the three months ended March 31, 2011, to $271.6 million, from $260.8 million for the three months ended March 31, 2010. As a percentage of revenue, cost of services increased to 44.5% in the three months ended March 31, 2011 compared to 43.5% for the three months ended March 31, 2010.

Cost of services by business segment:

	For the three months ended March 31,
	2011			% of Revenue			2010			% of Revenue			Change			% Change
Cost of services in thousands:
Unified Communications	$	132,615			40.1	%	$	115,798			38.7	%	$	16,817			14.5	%
Communication Services		140,908			50.0	%		145,880			48.3	%		(4,972	)		-3.4	%
Intersegment eliminations		(1,920	)		*			(855	)		*			(1,065	)		*
Total	$	271,603			44.5	%	$	260,823			43.5	%	$	10,780			4.1	%

* Calculation not meaningful

Unified Communications cost of services for the three months ended March 31, 2011 increased $16.8 million, or 14.5%, to $132.6 million from $115.8 million for the three months ended March 31, 2010. Cost of services increased by $4.9 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 40.1% for the three months ended March 31, 2011 from 38.7% for the three months ended March 31, 2010. The increase in cost of services as a percentage of revenue is due primarily to changes in the product and geographic mix.

Communication Services cost of services decreased $5.0 million, or 3.4%, in the three months ended March 31, 2011 to $140.9 million from $145.9 million for the three months ended March 31, 2010. As a percentage of this segment’s revenue, Communication Services cost of services increased to 50.0% for the three months ended March 31, 2011 from 48.3%, for the three months ended March 31, 2010. The increase in the percentage of cost of services to revenue was largely due to declines in margins for agent-based services.

36

Selling, general and administrative (“SG&A”)expenses: SG&A expenses decreased by approximately $1.3 million, or 0.6%, to $220.4 million for the three months ended March 31, 2011 from $221.8 million for the three months ended March 31, 2010. As a percentage of revenue, SG&A expenses decreased to 36.1% for the three months ended March 31, 2011 from 37.0% for the three months ended March 31, 2010.

Selling, general and administrative expenses by business segment:

	For the three months ended March 31,
	2011			% of Revenue			2010			% of Revenue			Change			% Change
Selling, general and administrative expenses in thousands:
Unified Communications	$	104,496			31.6	%	$	105,912			35.4	%	$	(1,416	)		-1.3	%
Communication Services		116,372			41.3	%		116,186			38.5	%		186			0.2	%
Intersegment eliminations		(460	)		*			(345	)		*			(115	)		*
Total	$	220,408			36.1	%	$	221,753			37.0	%	$	(1,345	)		-0.6	%

* Calculation not meaningful

Unified Communications SG&A expenses for the three months ended March 31, 2011 decreased $1.4 million, or 1.3%, to $104.5 million from $105.9 million for the three months ended March 31, 2010. SG&A expenses from acquired entities of $5.1 million partially offset this decrease in SG&A expenses. As a percentage of this segment’s revenue, Unified Communications SG&A expenses decreased to 31.6% for the three months ended March 31, 2011 from 35.4% for the three months ended March 31, 2010.

Communication Services SG&A expenses increased $0.2 million, or 0.2%, to $116.4 million for the three months ended March 31, 2011 from $116.2 million for the three months ended March 31, 2010. SG&A expenses from acquired entities were $3.7 million. As a percentage of this segment’s revenue, Communication Services SG&A expenses increased to 41.3% for the three months ended March 31, 2011 from 38.5% for the three months ended March 31, 2010.

Operating income: Operating income increased $1.6 million, or 1.3%, to $118.8 million for the three months ended March 31, 2011 from $117.2 million for the three months ended March 31, 2010. As a percentage of revenue, operating income was 19.5% for each of the three months ended March 31, 2011 and the three months ended March 31, 2010.

Operating income by business segment:

	For the three months ended March 31,
	2011		% of Revenue			2010		% of Revenue			Change			% Change
Operating income in thousands:
Unified Communications	$	94,011		28.4	%	$	77,482		25.9	%	$	16,529			21.3	%
Communication Services		24,796		8.8	%		39,763		13.2	%		(14,967	)		-37.6	%
Total	$	118,807		19.5	%	$	117,245		19.5	%	$	1,562			1.3	%

Unified Communications operating income for the three months ended March 31, 2011 increased approximately $16.5 million, to $94.0 million from $77.5 million for the three months ended March 31, 2010. As a percentage of this segment’s revenue, Unified Communications operating income increased to 28.4% for the three months ended March 31, 2011 from 25.9% for the three months ended March 31, 2010 due to the factors discussed above for revenue, cost of services and SG&A expenses.

Communication Services operating income decreased $15.0 million, or 37.6%, to $24.8 million for the three months ended March 31, 2011 from $39.8 million for the three months ended March 31, 2010. As a percentage of this segment’s revenue, Communication Services operating income decreased to 8.8% for the three months ended March 31, 2011 from 13.2% for the three months ended March 31, 2010 due to the factors discussed above for revenue, cost of services and SG&A expenses.

37

Other income (expense):Other income (expense) includes interest expense from short-term and long-term borrowings under credit facilities, interest income from short-term investments and foreign currency transaction gains (losses) on affiliate transactions denominated in currencies other than the functional currency. Other income (expense) for the three months ended March 31, 2011 was ($63.0) million compared to ($59.2) million for the three months ended March 31, 2010. Interest expense for the three months ended March 31, 2011 was $67.8 million compared to $59.1 million during the three months ended March 31, 2010. The change in interest expense was primarily due to higher effective interest rates during the three months ended March 31, 2011 as a result of our fourth quarter 2010 bond and bank debt refinancing.

During the three months ended March 31, 2011, we recognized a $3.1 million gain on foreign currency exchange rate changes on affiliate transactions. During the three months ended March 31, 2010, we recognized $1.2 million loss on foreign currency exchange rate changes on affiliate transactions.

Net income –Net income decreased $1.4 million for the three months ended March 31, 2011 to $34.6 million from $36.0 million for the three months ended March 31, 2010. 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, 2011, and the three months ended March 31, 2010.

Earnings (Loss) per common share:Earnings per common L share-basic for the three months ended March 31, 2011 improved to $4.39 from $3.97 for the three months ended March 31, 2010. Earnings per common L share-diluted for the three months ended March 31, 2011 improved to $4.21 from $3.81 for the three months ended March 31, 2010. Loss per common A share-basic and diluted for the three months ended March 31, 2011 was ($0.11) compared to ($0.04) for the three months ended March 31, 2010.

Liquidity and Capital Resources

We have historically financed our operations and capital expenditures primarily through cash flows from operations, supplemented by borrowings under our bank credit 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 and April 14, 2011 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 to repurchase certain of our notes and for working capital and other general corporate purposes.

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,
	2011			2010			Change			% Change
Cash flows from operating activities	$	103,703		$	115,481		$	(11,778	)		-10.2	%
Cash flows from (used in) investing activities	$	(88,818	)	$	(33,781	)	$	(55,037	)		162.9	%
Cash flows from (used in) financing activities	$	(17,507	)	$	(81,031	)	$	63,524			-78.4	%

Net cash flows from operating activities decreased $11.8 million, or 10.2%, to $103.7 million for the three months ended March 31, 2011, compared to net cash flows from operating activities of $115.5 million for the three months ended March 31, 2010. 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 vendor payments.

38

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 58 days at March 31, 2011. At March 31, 2010, DSO was 56 days.

Net cash flows used in investing activities increased $55.0 million to $88.8 million for the three months ended March 31, 2011, compared to net cash flows used in investing activities of $33.8 million for the three months ended March 31, 2010. Cash used for business acquisitions during the three months ended March 31, 2011 was $60.7 million compared to $0.5 million for the three months ended March 31, 2010. We invested $28.2 million in capital expenditures during the three months ended March 31, 2011 compared to $35.4 million for the three months ended March 31, 2010.

Net cash flows used in financing activities decreased $63.5 million to $17.5 million for the three months ended March 31, 2011, compared to net cash flows used in financing activities of $81.0 million for the three months ended March 31, 2010. During the three months ended March 31, 2011 we made a $5.8 million payment on our senior secured term loan based upon an excess cash flow calculation provision in the senior secured term loan facility. We also made a voluntary $11.4 million prepayment on the senior secured term loan facility.

During the three months ended March 31, 2010, net cash flows used in financing activities primarily included net payments on our revolving credit facility of $72.9 million, which paid off the outstanding balance on our $250.0 million senior secured revolving credit facility.

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

The senior secured term loan facility and senior secured revolving credit facility bear interest at variable rates. During 2010, we and certain of our domestic subsidiaries, as borrowers and/or guarantors, Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, and the various lenders party thereto modified our senior secured credit facilities, including as described above, by entering into a Restatement Agreement (the “Restatement Agreement”), amending and restating the Credit Agreement, dated as of October 24, 2006, by and among us, Wells Fargo, as successor administrative agent and the various lenders party thereto, as lenders, (as so amended and restated, the “Restated Credit Agreement”).

After giving effect to the prepayment of amortization payments payable in respect of the term loans due 2013, 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 the Company’s corporate debt rating and the grid ranges from 2.125% to 2.75% for LIBOR rate loans (LIBOR plus 2.375% at March 31, 2011), and from 1.125% to 1.75% for Base Rate loans (Base Rate plus 1.375% at March 31, 2011). The interest rate margins for the amended and restated senior secured term loans due 2016 are based on the Company’s 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, 2011), and from 3.00% to 3.625% for base rate loans (Base Rate plus 3.25% at March 31, 2011). The effective annual interest rates, inclusive of debt amortization costs, on the senior secured term loan facility for the three months ended March 31, 2011 and 2010 were 6.56% and 4.49%, respectively.

The original maturity senior secured revolving credit facility pricing is based on the Company’s total leverage ratio and the grid ranges from 1.75% to 2.50% for LIBOR rate loans (LIBOR plus 2.0% at March 31, 2011), and the margin ranges from 0.75% to 1.50% for base rate loans (Base Rate plus 1.0% at March 31, 2011). The Company is required to pay each non-defaulting lender a commitment fee of 0.50% in respect of any unused

39

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. The average daily outstanding balance of the original maturity senior secured revolving credit facility during the three months ended March 31, 2011 and 2010 was $0.0 million and $33.7 million, respectively. The highest balance outstanding on the original maturity senior secured revolving credit facility during the three months ended March 31, 2011 and 2010 was $0.0 million and $80.9 million, respectively.

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 3.0% at March 31, 2011), and the margin ranges from 1.75% to 2.50% for base rate loans (Base Rate plus 2.0% at March 31, 2011). 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, 2011 was $9.0 million. Prior to this, there had been no borrowings on the extended maturity senior secured revolving credit facility since its inception on October 5, 2010.

Subsequent to March 31, 2011, the Company may request additional tranches of term loans or increases to the revolving credit facility in an aggregate amount not to exceed $848.6 million, including the aggregate amount of $617.6 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

The Company’s $450 million aggregate principal amount of 11% senior subordinated notes due 2016 (the “2016 Senior Subordinated Notes”) bear interest that is payable semiannually.

At any time prior to October 15, 2011, the Company may redeem all or a part of the 2016 Senior Subordinated Notes at a redemption price equal to 100% of the principal amount of such notes redeemed plus the applicable premium and accrued and unpaid interest to the date of redemption, subject to the rights of holders of 2016 Senior Subordinated Notes on the relevant record date to receive interest due on the relevant interest payment date.

On and after October 15, 2011, the Company 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”).

40

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 and all additional interest then owing pursuant to the registration rights agreement executed in connection with the 2018 Senior Notes, if any, 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 and all additional interest then owing pursuant to the registration rights agreement executed in connection with the 2018 Senior Notes, if any, 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 million aggregate principal amount of 7 ⁷/8% senior notes that mature January 15, 2019 (the “2019 Senior Notes���).

At any time prior to November 15, 2013, 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 and all additional interest then owing pursuant to the registration rights agreement executed in connection with the 2019 Senior Notes, if any, 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 and all additional interest then owing pursuant to the registration rights agreement executed in connection with the 2019 Senior Notes, if any, 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.

41

The Company and its subsidiaries, affiliates or significant shareholders may from time to time, in their sole discretion, purchase, repay, redeem or retire any of the Company’s 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.

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 5.75 to 1.0 at March 31, 2011 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, 2011. Both ratios are measured on a rolling four-quarter basis. We were in compliance with these financial covenants at March 31, 2011. The total leverage ratio will become more restrictive over time (adjusted periodically until the maximum leverage ratio reaches 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.

42

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.

Asset Securitization

During 2009, West Receivables LLC, a wholly-owned, bankruptcy-remote direct subsidiary of West Receivables Holdings LLC, entered into a three year $125.0 million revolving trade accounts receivable financing facility with Wachovia Bank, National Association. Under the 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 current facility is subject to renewal in August 2012. 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, 2011 and December 31, 2010, the facility was undrawn. The highest balance outstanding during the three months ended March 31, 2011 was $17.0 million. During the three months ended March 31, 2010 the facility was undrawn.

The 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.

Contractual Obligations

Our contractual obligations are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010. There were no material changes to our contractual obligations since December 31, 2010.

Capital Expenditures

Our operations continue to require significant capital expenditures for technology, capacity expansion and upgrades. Capital expenditures were $19.2 million for the three months ended March 31, 2011, compared to $34.7 million for the three months ended March 31, 2010. We currently estimate our capital expenditures for the remainder of 2011 to be approximately $100.8 million to $110.8 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 $848.6 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 accounts receivable 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.

43

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 February 2013 and are renewed as required. The outstanding commitment on these obligations at March 31, 2011 was $20.6 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, 2010.

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, 2011, we had $1,916.4 million outstanding under our senior secured term loan 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, 2011 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)	$	316,365	$	395.5
Variable rate debt	$	316,365	$	395.5

(1) Net of $1,600.0 million interest rate swaps

44

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, 2011, 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, 2011 and 2010, the Communication Services segment had no material revenue outside the United States. Our facilities in Canada, Jamaica, Mexico and the Philippines operate under revenue contracts denominated in U.S. dollars. These contact centers 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, 2011 and 2010, revenues from non-U.S. countries were approximately 18% and 16% of consolidated revenues, respectively. During these periods no individual foreign country accounted for greater than 10% of revenue. At March 31, 2011 and December 31, 2010, long-lived assets from non-U.S. countries were both approximately 10%. 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

In 2008, 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 aggregate notional value of $600.0 million with interest rates ranging from 3.38% to 3.532%, and expire in August 2011. 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. 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 ranges from 2.56% to 2.60%, and expire in January 2012. At March 31, 2011, the notional amount of debt outstanding under interest rate swap agreements was $1,600.0 million of the outstanding $1,916.4 million senior secured term loan facility hedged at rates from 1.685% to 3.532%.

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, 2011, 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.

45

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	Supplemental Indenture, dated as of April 21, 2011, by and among 760 Northlawn Drive, LLC, Twenty First Century International Services LLC, Twenty First Century Crisis Communications, LLC, Twenty First Century Communications, Inc., Twenty First Century Communications of Canada, Inc., InterCall Communications, Inc., West UC Solutions Holdings, Inc., West Corporation, and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of October 24, 2006, by and among West Corporation, the guarantors named therein and The Bank of New York, with respect to West Corporation’s $450.0 million aggregate principal amount of 11% senior subordinated notes due October 15, 2016
10.02	Supplemental Indenture, dated as of April 21, 2011, by and among 760 Northlawn Drive, LLC, Twenty First Century International Services LLC, Twenty First Century Crisis Communications, LLC, Twenty First Century Communications, Inc., Twenty First Century Communications of Canada, Inc., InterCall Communications, Inc., West UC Solutions Holdings, Inc., West Corporation, and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of October 5, 2010, by and among West Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., with respect to West Corporation’s $500.0 million aggregate principal amount of 8 5/8% senior notes due 2018
10.03	Supplemental Indenture, dated as of April 21, 2011, by and among 760 Northlawn Drive, LLC, Twenty First Century International Services LLC, Twenty First Century Crisis Communications, LLC, Twenty First Century Communications, Inc., Twenty First Century Communications of Canada, Inc., InterCall Communications, Inc., West UC Solutions Holdings, Inc., West Corporation, and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of November 24, 2010, by and among West Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., with respect to West Corporation’s $500.0 million aggregate principal amount of 7 7/8% senior notes due 2019
10.04	Amendment Number One to the West Corporation Stockholder Agreement dated as of April 12, 2011 by and among West Corporation, the THL Investors, the Quadrangle Investors and the Founders
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

46

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: May 3, 2011

47

Exhibit Index

Exhibit Number
10.01	Supplemental Indenture, dated as of April 21, 2011, by and among 760 Northlawn Drive, LLC, Twenty First Century International Services LLC, Twenty First Century Crisis Communications, LLC, Twenty First Century Communications, Inc., Twenty First Century Communications of Canada, Inc., InterCall Communications, Inc., West UC Solutions Holdings, Inc., West Corporation, and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of October 24, 2006, by and among West Corporation, the guarantors named therein and The Bank of New York, with respect to West Corporation’s $450.0 million aggregate principal amount of 11% senior subordinated notes due October 15, 2016
10.02	Supplemental Indenture, dated as of April 21, 2011, by and among 760 Northlawn Drive, LLC, Twenty First Century International Services LLC, Twenty First Century Crisis Communications, LLC, Twenty First Century Communications, Inc., Twenty First Century Communications of Canada, Inc., InterCall Communications, Inc., West UC Solutions Holdings, Inc., West Corporation, and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of October 5, 2010, by and among West Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., with respect to West Corporation’s $500.0 million aggregate principal amount of 8 5/8% senior notes due 2018
10.03	Supplemental Indenture, dated as of April 21, 2011, by and among 760 Northlawn Drive, LLC, Twenty First Century International Services LLC, Twenty First Century Crisis Communications, LLC, Twenty First Century Communications, Inc., Twenty First Century Communications of Canada, Inc., InterCall Communications, Inc., West UC Solutions Holdings, Inc., West Corporation, and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of November 24, 2010, by and among West Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., with respect to West Corporation’s $500.0 million aggregate principal amount of 7 7/8% senior notes due 2019
10.04	Amendment Number One to the West Corporation Stockholder Agreement dated as of April 12, 2011 by and among West Corporation, the THL Investors, the Quadrangle Investors and the Founders
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

48