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1003-1143347 09 Audit Report-Limited BSG Comments FINALx

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34 pages
C ONSOLIDATED FINANCIAL STATEMENTS Billing Services Group Limited Years Ended December 31, 2009 and 2008 With Report of Independent Auditors Billing Services Group Limited Consolidated Financial Statements Years Ended December 31, 2009 and 2008 Contents Report of Independent Auditors.......................................................................................................1 Consolidated Financial Statements Consolidated Balance Sheets ..........................................................................................................2 Consolidated Statements of Operations ..........................................................................................4 ents of Changes in Shareholders’ Equity .......................................................6 ents of Cash Flows .7 Notes to Consolidated Financial Statements ....................................................................................9 1003-1143347 Ernst & Young LLP Frost Bank Tower Suite 1800 100 West Houston Street San Antonio, Texas 78205-1403 Tel: +1 210 228 9696 Fax: +1 210 242 7252 www.ey.com Report of Independent Auditors The Board of Directors Billing Services Group Limited We have audited the accompanying consolidated balance sheets of Billing Services Group Limited (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for the years ...
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CO N S O L I D A T E DFI N A N C I A LST A T E M E N T S 
Billing Services Group Limited Years Ended December 31, 2009 and 2008 With Report of Independent Auditors
   
Billing Services Group Limited
Consolidated Financial Statements
Years Ended December 31, 2009 and 2008
Contents
Report of Independent Auditors.......................................................................................................1 
Consolidated Financial Statements
Consolidated Balance Sheets ..........................................................................................................2 Consolidated Statements of Operations ..........................................................................................4 Consolidated Statements of Changes in Shareholders Equity .......................................................6 Consolidated Statements of Cash Flows .........................................................................................7 Notes to Consolidated Financial Statements....................................................................................9   
1003-1143347
Report of Independent Auditors
Ernst & Young LLP Frost Bank Tower Suite 1800 100 West Houston Street San Antonio, Texas 78205-1403 Tel: +1 210 228 9696 Fax: +1 210 242 7252 www.ey.com
The Board of Directors Billing Services Group Limited We have audited the accompanying consolidated balance sheets of Billing Services Group Limited (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in shareholders equity, and cash flows for the years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Billing Services Group Limited as of December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. EY  
March 26, 2010
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1 A member firm of Ernst & Young Global Limited
Billing Services Group Limited Consolidated Balance Sheets (In thousands, except shares) 
  
December 31 2009 2008 Assets   Current assets: Cash and cash equivalents$ 14,425$ 27,354 Accounts receivable19,00522,188 Purchased receivables19,39018,259 Income tax receivable1,262Prepaid expenses and other current assets588535 Deferred taxes  current1,4333,752 Total current assets56,10372,088    Property, equipment and software38,57635,352 Less accumulated depreciation and amortization19,47014,710 et property, equipment and software19,10620,642    Deferred finance costs, net of accumulated amortization of $659 and $375 at December 31, 2009 and 2008, respectively687971 Intangible assets, net of accumulated amortization of $50,964 and $42,322 at December 31, 2009 and 2008, respectively42,81151,453 Goodwill34,49234,739 Other assets534534 Total assets$ 153,733$ 180,427    
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Billing Services Group Limited Consolidated Balance Sheets (continued) (In thousands, except shares)  December 31  2009 2008 Liabilities and shareholders equity  Current liabilities: Trade accounts payable$ 12,447$ 13,409 Third-party payables24,19745,247 Accrued liabilities2,3924,923 Income tax payable1,064 Current portion of long-term debt11,2508,562 Total current liabilities50,28673,205    Long-term debt, net of current portion and unamortized original issue discount of $2,319 and $3,273 at December 31, 2009 and 2008, respectively66,50981,769 Deferred taxes  noncurrent5,5605,428 Other liabilities6,114,362 11 Total liabilities128,469171,764    Commitments and contingencies      Shareholders equity:  Common stock, $0.59446 par value; 350,000,000 shares authorized and 279,863,248 shares issued and outstanding at December 31, 2009 and 2008166,368166,368 Additional paid-in capital (deficit)(175,786)(174,611) Retained earnings36,39619,538 Accumulated other comprehensive loss(1,714)(2,632) Total shareholders equity25,2648,663 Total liabilities and shareholders equity$ 153,733$ 180,427 See accompanying notes. 1003-11433473
Billing Services Group Limited Consolidated Statements of Operations (In thousands, except per share amounts) 
  
 Operating revenues Cost of services Gross profit  Selling, general, and administrative expenses Depreciation and amortization expense Impairment loss Restructuring expense Stock-based compensation expense Other nonrecurring expenses Operating income  Other income (expense): Interest expense, net of $86 and $99 capitalized in 2009 and 2008, respectively Settlement and mark-to-market of derivatives Interest income Other income, net Total other income (expense), net  Income before income taxes  Income tax expense et income
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Years Ended December 31 2009 2008   $ 146,458$ 142,611 86,46282,635 59,99659,976   21,10922,769 13,40213,664 120  2,808 628213 182   24,85720,220     (7,365)(10,354) (633)(813) 9321,626 7,7451,777 679(7,764)   25,53612,456   8,6784,595  $ 16,858$ 7,861
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Billing Services Group Limited
Consolidated Statements of Operations (continued) (In thousands, except per share amounts) 
   et income per basic and diluted share: Basic net income per share Diluted net income per share et income per share Basic weighted-average shares outstanding Diluted weighted-average shares outstanding
See accompanying notes.
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Years Ended December 31 2009 2008     $ 0.06$ 0.03 0.060.03 $ 0.06$ 0.03 279,863279,863 280,872279,863
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Billing Services Group Limited
Consolidated Statements of Changes in Shareholders Equity (In thousands) 
See accompanying notes.
 
Additional Accumulated Paid-In Other Number of Common Capital Retained Comprehensive Shares Stock (Deficit) Earnings Income (Loss) Total     279,863 $ 166,368 $ (174,824) $ 11,677 $ (53) $ 3,168   213   213       9 9    7,861  7,861     (2,588) (2,588)  5,282 279,863 166,368 (174,611) 19,538 (2,632) 8,663   628   628    (1,803)   (1,803)     10 10      16,858  16,858     908 908      17,776    279,863 $ 166,368 $ (175,786) $ 36,396 $ (1,714) $ 25,264
  Shareholders equity, December 31, 2007 Stock-based compensation expense recognized in earnings Translation adjustment Net income Derivative loss, net of taxes of $1,395 Total comprehensive income Shareholders equity, December 31, 2008 Stock-based compensation expense recognized in earnings Repurchase and cancellation of exercised options Translation adjustment Net income Derivative gain, net of taxes of $796 Total comprehensive income Shareholders equity, December 31, 2009
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Billing Services Group Limited Consolidated Statements of Cash Flows (In thousands) 
  Operating activities et income  Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Amortization of intangibles Amortization of deferred finance costs Impairment loss Stock-based compensation expense Gain on extinguishment of debt Changes in operating assets and liabilities: Decrease (increase) in accounts receivable (Increase) decrease in income taxes receivable, net Increase in prepaid expenses and other assets (Decrease) increase in trade accounts payable Decrease in third-party payables Decrease in accrued liabilities Provision for deferred taxes Increase (decrease) in other liabilities et cash provided by operating activities  Investing activities Purchases of property, equipment and software, including $86 and $99 of capitalized interest in 2009 and 2008, respectively et (advances) receipts on purchased receivables et cash used in investing activities   
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Years Ended December 31 2009 2008   $ 16,858$ 7,861     4,7604,323 8,6429,341 1,0501,386 120 628213 (185)(83)   3,183(1,524) (421)4,725 (53)(12) (962)1,845 (26,014)(14,408) (2,531)(5,915) 1,853(873) 633(885) 7,4416,114     (3,224)(2,789) (1,131)1,673 (4,355)(1,116)
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Billing Services Group Limited Consolidated Statements of Cash Flows (continued) (In thousands) 
 Years Ended December 31  2009 2008 Financing activities  Payments on long-term debt$ (13,154)$ (18,640) Payments on settlement of derivative contracts(835)Repurchase of exercised options(2,036)Restricted cash7,858 et cash used in financing activities(16,025)(10,782)    Effect of exchange rate changes on cash109 et decrease in cash and cash equivalents(12,929)(5,775) Cash and cash equivalents at beginning of year27,35433,129 Cash and cash equivalents at end of year$ 14,425$ 27,354    Supplemental cash information Cash paid during the year for:  Interest$ 5,811$ 9,073 Taxes$ 6,900$ 2,950    Noncash investing and financing activities Adjustment to goodwill, third-party payables, accrued liabilities and other liabilities, net of tax effect$ 185$ 5,324 Derivative gain (loss), net of tax (expense) benefit of $(796) and $1,395$ 908$ (2,588) See accompanying notes.
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Billing Services Group Limited
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
1. Organization and Summary of Significant Accounting Policies Organization Billing Services Group Limited (the Company or BSG Limited) commenced operations effective with the completion of its admission to AiM (a market operated by the London Stock Exchange plc) on June 15, 2005. The Company was formed to succeed to the business of Billing Services Group, LLC and its subsidiaries. The Company is a leading provider of clearing and settlement, payment services, and financial risk management solutions to communications service providers. The Company was incorporated and registered in Bermuda on May 13, 2005. Principles of Consolidation The Companys consolidated financial statements include the accounts of the Company and its subsidiary, Billing Services Group North America, Inc. (BSG North America), and its respective subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Cash and Cash Equivalents Cash and cash equivalents include all cash and highly liquid investments with original maturities of three months or less. The Company holds cash and cash equivalents at several major financial institutions in amounts which often exceed Federal Deposit Insurance Corporation insured limits for United States deposit accounts. The Company has entered into control agreements with its lenders and certain financial institutions covering certain of its deposit accounts. Purchased Receivables The Company offers advance funding arrangements to certain of its customers. Under the terms of the arrangements, the Company purchases the customers accounts receivable for an amount equal to the face amount of the call record value submitted to the local exchange carriers (LECs) by the Company, less various items, including financing fees, LEC charges, rejects, and other similar items. The Company advances 15% to 80% of the purchased amount to the customer and charges financing fees at rates up to 8% per annum over prime (prime was 3.25% per annum at December 31, 2009) until the funds are received from the LECs. The face amount of the call record value is recorded as purchased receivables in the consolidated balance sheets.
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