R
|
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2010
|
|
OR
|
|
£
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR THE TRANSITION PERIOD FROM TO
|
Republic of Ireland
|
None
|
(State or Other Jurisdiction of
|
(I.R.S. Employer
|
Incorporation or Organization)
|
Identification No.)
|
107 Northeastern Boulevard
|
03062
|
Nashua, New Hampshire
|
(Zip Code)
|
(Address of Principal Executive Offices)
|
|
Large accelerated filer £ | Accelerated filer £ | ||
Non-accelerated filer R | Smaller reporting company £ | ||
(Do not check if a smaller reporting company) |
PAGE NO.
|
|
PART I — FINANCIAL INFORMATION
|
3 |
Item 1. Unaudited Consolidated Financial Statements:
|
3 |
Consolidated Balance Sheets as of October 31, 2010 (Successor) and January 31, 2010 (Predecessor)
|
3 |
Consolidated Statements of Operations for the Three Months Ended October 31, 2010 (Successor), the period from May 26, 2010 through October 31, 2010 (Successor) the period from February 1, 2010 through May 25, 2010 (Predecessor) and the Three and Nine Months Ended October 31, 2009 (Predecessor)
|
4 |
Consolidated Statements of Cash Flows for the period from May 26, 2010 through October 31, 2010 (Successor), the period from February 1, 2010 through May 25, 2010 (Predecessor) and Nine Months Ended October 31, 2009 (Predecessor)
|
5 |
Notes to Consolidated Financial Statements
|
6 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
30 |
Item 3. Quantitative and Qualitative Disclosures about Market Risk
|
42 |
Item 4. Controls and Procedures
|
43 |
PART II — OTHER INFORMATION
|
43 |
Item 1. Legal Proceedings
|
43 |
Item 1A. Risk Factors
|
43 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
43 |
Item 3. Defaults Upon Senior Securities
|
43 |
Item 4. Reserved
|
43 |
Item 5. Other Information
|
43 |
Item 6. Exhibits
|
43 |
SIGNATURE
|
44 |
EXHIBIT INDEX | 45 |
SUCCESSOR
|
PREDECESSOR
|
|||||||
OCTOBER 31,
2010
(Unaudited)
|
JANUARY 31,
2010
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
37,106
|
$
|
76,682
|
||||
Short-term investments
|
-
|
3,559
|
||||||
Restricted cash
|
922
|
2,786
|
||||||
Accounts receivable, net
|
64,933
|
141,828
|
||||||
Deferred tax assets
|
1,360
|
28,902
|
||||||
Prepaid expenses and other current assets
|
19,018
|
23,447
|
||||||
Total current assets
|
123,339
|
277,204
|
||||||
Property and equipment, net
|
5,415
|
6,288
|
||||||
Goodwill
|
554,682
|
238,550
|
||||||
Intangible assets, net
|
617,176
|
5,227
|
||||||
Deferred tax assets
|
318
|
49,127
|
||||||
Other assets
|
24,829
|
9,835
|
||||||
Total assets
|
$
|
1,325,759
|
$
|
586,231
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current maturities of long term debt
|
$
|
5,344
|
$
|
865
|
||||
Accounts payable
|
3,399
|
4,519
|
||||||
Accrued compensation
|
9,048
|
18,287
|
||||||
Accrued expenses
|
33,991
|
23,099
|
||||||
Deferred tax liabilities
|
308
|
-
|
||||||
Deferred revenue
|
109,597
|
200,369
|
||||||
Total current liabilities
|
161,687
|
247,139
|
||||||
Long term debt
|
626,887
|
83,500
|
||||||
Deferred tax liabilities
|
74,181
|
-
|
||||||
Other long term liabilities
|
4,056
|
4,432
|
||||||
Total long term liabilities
|
705,124
|
87,932
|
||||||
Commitments and contingencies (Note 11)
|
||||||||
Shareholders’ equity:
|
||||||||
Ordinary shares, €0.11 par value: 250,000,000 shares authorized; 94,905,067 shares issued at January 31, 2010
|
-
|
9,983
|
||||||
Ordinary shares, $1.00 par value:1,000,000,000 shares authorized; 534,513,270 shares issued at October 31, 2010
|
534,513
|
-
|
||||||
Additional paid-in capital
|
-
|
482,592
|
||||||
Treasury stock, at cost, 249,368 ordinary shares January 31, 2010
|
-
|
(2,471
|
)
|
|||||
Accumulated deficit
|
(88,258
|
)
|
(239,506
|
)
|
||||
Accumulated other comprehensive income
|
12,693
|
562
|
||||||
Total shareholders’ equity
|
458,948
|
251,160
|
||||||
Total liabilities and shareholders’ equity
|
$
|
1,325,759
|
$
|
586,231
|
Successor
|
Predecessor
|
Successor
|
Predecessor
|
|||||||||||||||||
Three Months Ended October 31, 2010
|
Three Months Ended
October 31, 2009
|
May 26, to October 31, 2010
|
February 1, to May 25, 2010
|
Nine Months Ended October 31, 2009
|
||||||||||||||||
Revenue
|
$
|
52,544
|
$
|
80,402
|
$
|
86,600
|
$
|
97,538
|
$
|
235,767
|
||||||||||
Cost of revenue (1)
|
7,036
|
6,845
|
12,247
|
9,226
|
21,842
|
|||||||||||||||
Cost of revenue – amortization of intangible assets
|
15,986
|
32
|
27,692
|
40
|
96
|
|||||||||||||||
Gross profit
|
29,522
|
73,525
|
46,661
|
88,272
|
213,829
|
|||||||||||||||
Operating expenses:
|
||||||||||||||||||||
Research and development (1)
|
10,275
|
12,508
|
17,653
|
17,131
|
31,212
|
|||||||||||||||
Selling and marketing (1)
|
22,254
|
23,336
|
36,775
|
40,378
|
70,134
|
|||||||||||||||
General and administrative (1)
|
7,569
|
7,857
|
13,244
|
21,828
|
25,070
|
|||||||||||||||
Amortization of intangible assets
|
10,752
|
2,118
|
18,541
|
1,137
|
6,690
|
|||||||||||||||
Acquisition related expenses
|
998
|
-
|
21,596
|
15,063
|
-
|
|||||||||||||||
Total operating expenses
|
51,848
|
45,819
|
107,809
|
95,537
|
133,106
|
|||||||||||||||
Operating (loss) income
|
(22,326
|
)
|
27,706
|
(61,148
|
)
|
(7,265
|
)
|
80,723
|
||||||||||||
Other (expense) interest, net
|
(487
|
)
|
(220
|
)
|
(1,522
|
)
|
385
|
(1,443
|
)
|
|||||||||||
Interest income
|
36
|
66
|
52
|
95
|
204
|
|||||||||||||||
Interest expense
|
(15,131
|
)
|
(1,633
|
)
|
(33,711
|
)
|
(3,723
|
)
|
(6,110
|
)
|
||||||||||
(Loss) income before (benefit) provision for income taxes
|
(37,908
|
)
|
25,919
|
(96,329
|
)
|
(10,508
|
)
|
73,374
|
||||||||||||
(Benefit) provision for income taxes
|
(2,620
|
)
|
6,289
|
(8,071
|
)
|
(1,894
|
)
|
17,794
|
||||||||||||
Net (loss) income
|
$
|
(35,288
|
)
|
$
|
19,630
|
$
|
(88,258
|
)
|
$
|
(8,614
|
)
|
$
|
55,580
|
(1)
|
Share-based compensation included in cost of revenue and operating expenses:
|
Cost of revenue
|
-
|
17
|
-
|
201
|
66
|
|||||||||||||||
Research and development
|
-
|
226
|
-
|
4,861
|
742
|
|||||||||||||||
Selling and marketing
|
-
|
486
|
-
|
8,260
|
1,725
|
|||||||||||||||
General and administrative
|
-
|
701
|
-
|
11,837
|
2,108
|
Successor
|
Predecessor
|
Predecessor
|
|||||||||
For the Periods
|
|||||||||||
May 26, to October 31, 2010
|
February 1, to May 25, 2010
|
Nine Months Ended October 31, 2009
|
|||||||||
Cash flows from operating activities:
|
|||||||||||
Net (loss) income
|
$
|
(88,258
|
)
|
$
|
(8,614
|
)
|
$
|
55,580
|
|||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||||||||
Share-based compensation
|
-
|
25,159
|
4,641
|
||||||||
Depreciation and amortization
|
1,661
|
1,374
|
3,419
|
||||||||
Amortization of intangible assets
|
46,233
|
1,177
|
6,786
|
||||||||
Recovery of bad debts
|
(90
|
)
|
(52
|
)
|
(130
|
)
|
|||||
(Benefit) provision for income tax — non-cash
|
(9,613
|
)
|
(2,800
|
)
|
11,924
|
||||||
Non-cash interest expense
|
1,903
|
3,219
|
854
|
||||||||
Tax effect related to exercise of non-qualified stock options
|
-
|
282
|
169
|
||||||||
Changes in current assets and liabilities, net of acquisitions
|
|||||||||||
Accounts receivable
|
(9,105
|
)
|
86,230
|
80,962
|
|||||||
Prepaid expenses and other current assets
|
(1,752
|
)
|
(2,218
|
)
|
3,951
|
||||||
Accounts payable
|
424
|
(1,559
|
)
|
(1,502
|
)
|
||||||
Accrued expenses, including long-term
|
3,204
|
(6,296
|
)
|
(10,809
|
)
|
||||||
Deferred revenue
|
28,140
|
(41,817
|
)
|
(68,029
|
)
|
||||||
Net cash (used in) provided by operating activities
|
(27,253
|
)
|
54,085
|
87,816
|
|||||||
Cash flows from investing activities:
|
|||||||||||
Purchases of property and equipment
|
(1,709
|
)
|
(438
|
)
|
(1,703
|
)
|
|||||
Acquisition of SkillSoft, net of cash acquired
|
(1,074,181
|
)
|
-
|
-
|
|||||||
Purchases of investments
|
-
|
(2,562
|
)
|
(7,762
|
)
|
||||||
Maturity of investments
|
-
|
6,122
|
5,212
|
||||||||
Decrease in restricted cash, net
|
1,837
|
27
|
998
|
||||||||
Net cash (used in) provided by investing activities
|
(1,074,053
|
)
|
3,149
|
(3,255
|
)
|
||||||
Cash flows from financing activities:
|
|||||||||||
Exercise of share options
|
-
|
3,065
|
1,343
|
||||||||
Proceeds from employee share purchase plan
|
-
|
1,666
|
2,192
|
||||||||
Proceeds from issuance of ordinary shares
|
534,513
|
-
|
-
|
||||||||
Proceeds from issuance of Senior Credit Facilities, net of fees
|
306,398
|
-
|
-
|
||||||||
Proceeds from issuance of Senior Notes, net of fees
|
296,448
|
-
|
-
|
||||||||
Principal payments on Senior Credit Facilities
|
(813
|
)
|
(84,365
|
)
|
(38,802
|
)
|
|||||
Acquisition of treasury stock
|
-
|
-
|
(29,817
|
)
|
|||||||
Tax effect related to exercise of non-qualified stock options
|
-
|
(282
|
)
|
(169
|
)
|
||||||
Net cash provided by (used in) financing activities
|
1,136,546
|
(79,916
|
)
|
(65,253
|
)
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
1,866
|
(1,315
|
)
|
2,641
|
|||||||
Net increase (decrease) in cash and cash equivalents
|
37,106
|
(23,997
|
)
|
21,949
|
|||||||
Cash and cash equivalents, beginning of period
|
-
|
76,682
|
37,853
|
||||||||
Cash and cash equivalents, end of period
|
$
|
37,106
|
$
|
52,685
|
$
|
59,802
|
Description
|
Contracted Maturity
|
Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
|||||||||||||
Cash and cash equivalents:
|
||||||||||||||||||
Cash
|
N/A
|
$
|
76,321
|
$
|
-
|
$
|
-
|
$
|
76,321
|
|||||||||
Commercial paper
|
0-3 months
|
160
|
-
|
-
|
160
|
|||||||||||||
Corporate debt securities
|
1 month
|
201
|
-
|
-
|
201
|
|||||||||||||
$
|
76,682
|
$
|
-
|
$
|
-
|
$
|
76,682
|
|||||||||||
Short-term investments:
|
||||||||||||||||||
Commercial paper
|
4-12 months
|
1,199
|
-
|
-
|
1,199
|
|||||||||||||
Treasury bills
|
4-12 months
|
1,649
|
-
|
-
|
1,649
|
|||||||||||||
Certificate of deposit
|
4-12 months
|
$
|
711
|
$
|
-
|
$
|
-
|
$
|
711
|
|||||||||
$
|
3,559
|
$
|
-
|
$
|
-
|
$
|
3,559
|
Share Options
|
Shares
|
Exercise Price
|
Weighted
Average
Exercise Price
|
Weighted
Average
Remaining
Contractual
Term (Years)
|
Aggregate Intrinsic Value
(in thousands)
|
||||||||||
Outstanding, January 31, 2010
|
11,988,938
|
$0.14 – $42.88
|
$
|
6.93
|
3.17
|
$
|
41,181
|
||||||||
Granted
|
-
|
-
|
-
|
||||||||||||
Exercised
|
(934,089
|
)
|
0.25 – 10.96
|
5.76
|
|||||||||||
Forfeited
|
(2,925
|
)
|
5.55 – 19.06
|
9.34
|
|||||||||||
Expired
|
(1,525,226
|
)
|
11.32 – 42.88
|
14.39
|
|||||||||||
Cancelled and paid out May 26, 2010
|
(9,526,698
|
)
|
5.85
|
||||||||||||
Outstanding, May 26, 2010
|
-
|
-
|
$
|
-
|
-
|
$
|
-
|
|
(a)
|
SkillSoft PLC
|
Total purchase price, cash paid
|
$
|
1,129,184
|
Description
|
Amount
|
|||
Current assets
|
$
|
125,089
|
||
Property and equipment
|
5,842
|
|||
Goodwill
|
561,055
|
|||
Other intangible assets
|
656,558
|
|||
Current liabilities
|
(141,960
|
)
|
||
Deferred revenue
|
(77,400
|
)
|
||
Total
|
$
|
1,129,184
|
Description
|
Amount
|
Life
|
||||
Trademark/tradename - SkillSoft
|
$
|
129,900
|
indefinite
|
|||
Trademark/tradename – Books 24X7
|
14,700
|
10 years
|
||||
Developed software and courseware
|
247,958
|
2 to 5 years
|
||||
Customer relationships
|
218,900
|
10 years
|
||||
Backlog
|
45,100
|
6 years
|
||||
$
|
656,558
|
THREE MONTHS ENDED
OCTOBER 31,
|
NINE MONTHS ENDED
OCTOBER 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenue
|
$
|
57,588
|
$
|
58,467
|
$
|
152,419
|
$
|
153,766
|
||||||||
Cost of revenue
|
7,036
|
6,828
|
21,272
|
21,776
|
||||||||||||
Cost of revenue – amortization of intangible assets
|
15,986
|
15,986
|
47,958
|
47,958
|
||||||||||||
Gross profit
|
34,566
|
35,653
|
83,189
|
84,032
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
10,275
|
12,282
|
29,923
|
30,470
|
||||||||||||
Selling and marketing
|
22,811
|
20,169
|
64,880
|
58,659
|
||||||||||||
General and administrative
|
7,569
|
7,450
|
23,524
|
23,845
|
||||||||||||
Amortization of intangible assets
|
12,056
|
12,056
|
36,167
|
36,167
|
||||||||||||
Acquisition related expenses
|
998
|
998
|
36,659
|
36,659
|
||||||||||||
Total operating expenses
|
53,709
|
52,955
|
191,153
|
185,800
|
||||||||||||
Operating loss
|
(19,143 | ) | (17,302 | ) | (107,964 | ) | (101,768 | ) | ||||||||
Other (expense) income, net
|
(487
|
)
|
(220
|
)
|
(1,137
|
)
|
(1,443
|
)
|
||||||||
Interest income
|
36
|
66
|
147
|
204
|
||||||||||||
Interest expense
|
(15,105
|
)
|
(15,131
|
)
|
(45,282
|
)
|
(45,218
|
)
|
||||||||
Income before provision for income taxes from continuing operations
|
(34,699
|
)
|
(32,587
|
)
|
(154,236
|
)
|
(148,225
|
)
|
||||||||
Provision for income taxes
|
1,182
|
|
(1,583
|
)
|
(1,631
|
)
|
(10,854
|
)
|
||||||||
Net income
|
$
|
(35,881
|
)
|
$
|
(31,004
|
)
|
$
|
(152,605
|
)
|
$
|
(137,371
|
)
|
Closedown of
Facilities
|
||||
Merger and exit accrual January 31, 2010
|
$
|
514
|
||
Payments made
|
(485
|
)
|
||
Merger and exit accrual October 31, 2010
|
$
|
29
|
Successor
|
Predecessor
|
|||||||||||||||||||||||
October 31, 2010
|
January 31, 2010
|
|||||||||||||||||||||||
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net
Carrying Amount
|
|||||||||||||||||||
Internally developed software/ courseware
|
$
|
247,958
|
$
|
27,787
|
$
|
220,171
|
$
|
38,717
|
$
|
38,590
|
$
|
127
|
||||||||||||
Customer contracts
|
225,915
|
13,946
|
211,969
|
36,848
|
32,648
|
4,200
|
||||||||||||||||||
Non-compete agreement
|
-
|
-
|
-
|
6,900
|
6,900
|
-
|
||||||||||||||||||
Trademarks and trade names
|
14,700
|
928
|
13,772
|
3,625
|
2,725
|
900
|
||||||||||||||||||
Backlog
|
45,100
|
3,736
|
41,364
|
-
|
-
|
-
|
||||||||||||||||||
SkillSoft trademark
|
129,900
|
-
|
129,900
|
-
|
-
|
-
|
||||||||||||||||||
$
|
663,573
|
$
|
46,397
|
$
|
617,176
|
$
|
86,090
|
$
|
80,863
|
$
|
5,227
|
Acquisition of SkillSoft PLC
|
561,055
|
|||
Purchase accounting adjustments
|
(12,767
|
)
|
||
Foreign currency translation adjustment
|
6,394
|
|||
Gross carrying amount of goodwill, October 31, 2010
|
$
|
554,682
|
Successor
|
Predecessor
|
Successor
|
Predecessor
|
|||||||||||||||||
Three Months Ended
2010
|
Three Months Ended
October 31, 2009
|
May 26, to October 31, 2010
|
February 1, to May 25, 2010
|
Nine Months Ended October 31, 2009
|
||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||
Net (loss) income
|
$
|
(35,288
|
)
|
$
|
19,630
|
$
|
(88,258
|
)
|
$
|
(8,614
|
)
|
$
|
55,580
|
|||||||
Other comprehensive (loss) income — Foreign currency adjustment, net of tax
|
4,654
|
45
|
12,693
|
210
|
(570
|
)
|
||||||||||||||
Change in fair value of interest rate hedge, net of tax
|
-
|
208
|
-
|
-
|
866
|
|||||||||||||||
Comprehensive income
|
$
|
(30,634
|
)
|
$
|
19,883
|
$
|
(75,565
|
)
|
$
|
(8,404
|
)
|
$
|
55,876
|
Successor
|
Predecessor
|
Successor
|
Predecessor
|
|||||||||||||||||
Three Months Ended
October 31, 2010
|
Three Months Ended
October 31, 2009
|
May 26, to October 31, 2010
|
February 1, to May 25, 2010
|
Nine Months Ended October 31, 2009
|
||||||||||||||||
Revenue:
|
||||||||||||||||||||
United States
|
$
|
59,092
|
$
|
60,284
|
$
|
101,301
|
$
|
72,583
|
$
|
179,036
|
||||||||||
United Kingdom
|
8,603
|
9,552
|
14,617
|
10,802
|
27,126
|
|||||||||||||||
Canada
|
3,788
|
3,350
|
6,498
|
4,789
|
9,090
|
|||||||||||||||
Europe, excluding United Kingdom
|
2,444
|
2,331
|
4,138
|
2,754
|
6,617
|
|||||||||||||||
Australia/New Zealand
|
3,653
|
3,321
|
6,160
|
4,268
|
9,186
|
|||||||||||||||
Other
|
1,817
|
1,564
|
3,701
|
2,342
|
4,712
|
|||||||||||||||
Purchase accounting adjustments
|
(26,853
|
)
|
-
|
(49,815
|
)
|
-
|
-
|
|||||||||||||
Total revenue
|
$
|
52,544
|
$
|
80,402
|
$
|
86,600
|
$
|
97,538
|
$
|
235,767
|
October 31, 2010
|
January 31, 2010
|
|||||||
Professional fees
|
$
|
3,637
|
$
|
2,921
|
||||
Sales tax payable/VAT payable
|
2,068
|
4,933
|
||||||
Accrued royalties
|
3,843
|
1,810
|
||||||
Accrued tax
|
820
|
1,082
|
||||||
Accrued interest
|
16,722
|
281
|
||||||
Other accrued liabilities
|
6,901
|
12,072
|
||||||
Total accrued expenses
|
$
|
33,991
|
$
|
23,099
|
October 31, 2010
|
January 31, 2010
|
|||||||
Debt financing cost – long term (See Note 16)
|
$
|
24,101
|
$
|
2,148
|
||||
Deferred charge
|
-
|
7,451
|
||||||
Other
|
728
|
236
|
||||||
Total other assets
|
$
|
24,829
|
$
|
9,835
|
October 31, 2010
|
January 31, 2010
|
|||||||
Uncertain tax positions; including interest and penalties – long term
|
3,817
|
4,152
|
||||||
Other
|
239
|
280
|
||||||
Total other long-term liabilities
|
$
|
4,056
|
$
|
4,432
|
|
·
|
a percentage initially expected to be 50% (subject to reduction to 25% and 0% based upon our leverage ratio) of our annual excess cash flow;
|
|
·
|
100% of the net cash proceeds of certain asset sales and casualty and condemnation events, subject to reinvestment rights and certain other exceptions; and
|
|
·
|
100% of the net cash proceeds of any incurrence of certain debt, other than debt permitted under our Senior Credit Facilities.
|
Fiscal 2011 (remaining 3 months)
|
$
|
813
|
||
Fiscal 2012
|
5,344
|
|||
Fiscal 2013
|
3,250
|
|||
Fiscal 2014
|
3,250
|
|||
Fiscal 2015
|
3,250
|
|||
Fiscal 2016
|
3,250
|
|||
Fiscal 2017
|
3,250
|
|||
Fiscal 2018
|
301,781
|
|||
Total
|
$
|
324,188
|
|
·
|
Level 1:
|
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
·
|
Level 2:
|
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
|
|
·
|
Level 3:
|
Unobservable inputs that reflect the Company’s assumptions about the assumptions that market participants would use in pricing the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Elimination
|
Consolidated
|
|||||||||||||||
ASSETS
|
|||||||||||||||||||
Current assets:
|
|||||||||||||||||||
Cash and cash equivalents
|
$
|
36
|
$
|
26,572
|
$
|
10,498
|
$
|
-
|
$
|
37,106
|
|||||||||
Restricted cash
|
-
|
862
|
60
|
-
|
922
|
||||||||||||||
Accounts receivable, net
|
-
|
58,233
|
6,700
|
-
|
64,933
|
||||||||||||||
Intercompany receivables
|
-
|
349,748
|
2,712
|
(352,460
|
)
|
-
|
|||||||||||||
Deferred tax assets
|
-
|
1,355
|
5
|
-
|
1,360
|
||||||||||||||
Prepaid expenses and other current assets
|
1,461
|
16,133
|
1,355
|
69
|
19,018
|
||||||||||||||
Total current assets
|
1,497
|
452,903
|
21,330
|
(352,391
|
)
|
123,339
|
|||||||||||||
Property and equipment, net
|
-
|
5,409
|
6
|
-
|
5,415
|
||||||||||||||
Goodwill
|
-
|
525,320
|
29,362
|
-
|
554,682
|
||||||||||||||
Intangible assets, net
|
-
|
592,381
|
24,795
|
-
|
617,176
|
||||||||||||||
Investment in subsidiaries
|
1,129,184
|
1,197,764
|
402
|
(2,327,350
|
)
|
-
|
|||||||||||||
Investment in, and advances to, nonconsolidated affiliates
|
-
|
69
|
-
|
(69
|
)
|
-
|
|||||||||||||
Deferred tax assets
|
-
|
186
|
132
|
-
|
318
|
||||||||||||||
Other assets
|
9,455
|
15,358
|
16
|
-
|
24,829
|
||||||||||||||
Total assets
|
$
|
1,140,136
|
$
|
2,789,390
|
$
|
76,043
|
$
|
(2,679,810
|
)
|
$
|
1,325,759
|
||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|||||||||||||||||||
Current liabilities:
|
|||||||||||||||||||
Current maturities of long term debt
|
$
|
-
|
$
|
5,344
|
$
|
-
|
$
|
-
|
$
|
5,344
|
|||||||||
Accounts payable
|
-
|
3,325
|
74
|
-
|
3,399
|
||||||||||||||
Accrued expenses
|
14,872
|
17,584
|
1,535
|
-
|
33,991
|
||||||||||||||
Accrued compensation
|
-
|
8,156
|
892
|
-
|
9,048
|
||||||||||||||
Intercompany payable
|
313,768
|
827,413
|
74,286
|
(1,215,467
|
)
|
-
|
|||||||||||||
Other liabilities
|
-
|
-
|
400
|
(400
|
)
|
-
|
|||||||||||||
Deferred tax liabilities
|
-
|
884
|
(576
|
)
|
-
|
308
|
|||||||||||||
Deferred revenue
|
-
|
94,518
|
15,079
|
-
|
109,597
|
||||||||||||||
Total current liabilities
|
328,640
|
957,224
|
91,690
|
(1,215,867
|
)
|
161,687
|
|||||||||||||
Long term debt
|
308,043
|
318,844
|
-
|
-
|
626,887
|
||||||||||||||
Deferred tax liabilities
|
-
|
71,396
|
2,785
|
-
|
74,181
|
||||||||||||||
Other long term liabilities
|
-
|
3,141
|
915
|
-
|
4,056
|
||||||||||||||
Total long term liabilities
|
308,043
|
393,381
|
3,700
|
-
|
705,124
|
||||||||||||||
Total shareholders' equity
|
503,453
|
1,438,785
|
(19,347
|
)
|
(1,463,943
|
)
|
458,948
|
||||||||||||
Total liabilities and shareholders' equity
|
$
|
1,140,136
|
$
|
2,789,390
|
$
|
76,043
|
$
|
(2,679,810
|
)
|
$
|
1,325,759
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Elimination
|
Consolidated
|
|||||||||||||||
ASSETS
|
|||||||||||||||||||
Current assets:
|
|||||||||||||||||||
Cash and cash equivalents
|
$
|
-
|
$
|
64,214
|
$
|
12,468
|
$
|
-
|
$
|
76,682
|
|||||||||
Short-term investments
|
-
|
3,559
|
-
|
-
|
3,559
|
||||||||||||||
Restricted cash
|
-
|
2,686
|
100
|
-
|
2,786
|
||||||||||||||
Accounts receivable, net
|
-
|
125,778
|
16,050
|
141,828
|
|||||||||||||||
Intercompany receivables
|
-
|
41,127
|
3,281
|
(44,408)
|
-
|
||||||||||||||
Deferred tax assets
|
-
|
27,873
|
1,029
|
-
|
28,902
|
||||||||||||||
Prepaid expenses and other current assets
|
-
|
19,202
|
2,009
|
2,236
|
23,447
|
||||||||||||||
Total current assets
|
-
|
284,439
|
34,937
|
(42,172)
|
277,204
|
||||||||||||||
Property and equipment, net
|
-
|
6,275
|
13
|
-
|
6,288
|
||||||||||||||
Goodwill
|
-
|
99,370
|
815
|
138,365
|
238,550
|
||||||||||||||
Intangible assets, net
|
-
|
338,670
|
-
|
(333,443
|
)
|
5,227
|
|||||||||||||
Investment in subsidiaries
|
-
|
37,122
|
401
|
(37,523
|
)
|
-
|
|||||||||||||
Investment in, and advances to, nonconsolidated affiliates
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||
Deferred tax assets
|
-
|
41,533
|
7,594
|
-
|
49,127
|
||||||||||||||
Other assets
|
-
|
3,854
|
39
|
5,942
|
9,835
|
||||||||||||||
Total assets
|
$
|
-
|
$
|
811,263
|
$
|
43,799
|
$
|
(268,831
|
)
|
$
|
586,231
|
||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|||||||||||||||||||
Current liabilities:
|
|||||||||||||||||||
Current maturities of long term debt
|
$
|
-
|
$
|
865
|
$
|
-
|
$
|
-
|
$
|
865
|
|||||||||
Accounts payable
|
-
|
4,462
|
57
|
-
|
4,519
|
||||||||||||||
Accrued expenses
|
-
|
19,752
|
3,347
|
-
|
23,099
|
||||||||||||||
Accrued compensation
|
-
|
16,587
|
1,700
|
-
|
18,287
|
||||||||||||||
Intercompany payable
|
-
|
186,339
|
41,127
|
(227,466
|
)
|
-
|
|||||||||||||
Other liabilities
|
-
|
-
|
400
|
(400
|
)
|
-
|
|||||||||||||
Deferred tax liabilities
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||
Deferred revenue
|
-
|
179,728
|
20,641
|
-
|
200,369
|
||||||||||||||
Total current liabilities
|
-
|
407,733
|
67,272
|
(227,866
|
)
|
247,139
|
|||||||||||||
Long term debt
|
-
|
83,500
|
-
|
-
|
83,500
|
||||||||||||||
Deferred tax liabilities
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||
Other long term liabilities
|
-
|
3,859
|
573
|
-
|
4,432
|
||||||||||||||
Total long term liabilities
|
-
|
87,359
|
573
|
-
|
87,932
|
||||||||||||||
Total shareholders' equity
|
-
|
316,171
|
(24,046
|
)
|
(40,965
|
)
|
251,160
|
||||||||||||
Total liabilities and shareholders' equity
|
$
|
-
|
$
|
811,263
|
$
|
43,799
|
$
|
(268,831
|
)
|
$
|
586,231
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Elimination
|
Consolidated
|
||||||||||||||||
Revenue
|
$
|
-
|
$
|
49,055
|
$
|
7,746
|
$
|
(4,257
|
)
|
$
|
52,544
|
|||||||||
Cost of revenue
|
-
|
7,001
|
4,292
|
(4,257
|
)
|
7,036
|
||||||||||||||
Cost of revenue - amortization of intangible assets
|
-
|
15,512
|
-
|
474
|
15,986
|
|||||||||||||||
Gross profit
|
-
|
26,542
|
3,454
|
(474
|
)
|
29,522
|
||||||||||||||
Operating expenses:
|
||||||||||||||||||||
Research and development
|
-
|
9,974
|
301
|
-
|
10,275
|
|||||||||||||||
Selling and marketing
|
-
|
20,003
|
2,251
|
-
|
22,254
|
|||||||||||||||
General and administrative
|
17
|
7,405
|
147
|
-
|
7,569
|
|||||||||||||||
Amortization of intangible assets
|
-
|
(3,574
|
)
|
908
|
13,418
|
10,752
|
||||||||||||||
Acquisition related expenses
|
-
|
998
|
-
|
-
|
998
|
|||||||||||||||
Total operating expenses
|
17
|
34,806
|
3,607
|
13,418
|
51,848
|
|||||||||||||||
Operating loss
|
(17
|
)
|
(8,264
|
)
|
(153
|
)
|
(13,892
|
)
|
(22,326
|
)
|
||||||||||
Other income (expense), net
|
-
|
10,890
|
(608
|
)
|
(10,769
|
)
|
(487
|
)
|
||||||||||||
Interest income
|
-
|
4
|
32
|
-
|
36
|
|||||||||||||||
Interest expense
|
(9,029
|
)
|
(6,102
|
)
|
-
|
-
|
(15,131
|
)
|
||||||||||||
Loss before benefit of income taxes
|
(9,046
|
)
|
(3,472
|
)
|
(729
|
)
|
(24,661
|
)
|
(37,908
|
)
|
||||||||||
Benefit of income taxes
|
-
|
(2,579
|
)
|
(41
|
)
|
-
|
(2,620
|
)
|
||||||||||||
Net loss
|
$
|
(9,046
|
)
|
$
|
(893
|
)
|
$
|
(688
|
)
|
$
|
(24,661
|
)
|
$
|
(35,288
|
)
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Elimination
|
Consolidated
|
||||||||||||||||
Revenue
|
$
|
-
|
$
|
85,457
|
$
|
7,465
|
$
|
(12,520
|
)
|
$
|
80,402
|
|||||||||
Cost of revenue
|
-
|
6,727
|
12,638
|
(12,520
|
)
|
6,845
|
||||||||||||||
Cost of revenue - amortization of intangible assets
|
-
|
810
|
-
|
(778
|
)
|
32
|
||||||||||||||
Gross profit
|
-
|
77,920
|
(5,173
|
)
|
778
|
73,525
|
||||||||||||||
Operating expenses:
|
||||||||||||||||||||
Research and development
|
-
|
12,264
|
244
|
-
|
12,508
|
|||||||||||||||
Selling and marketing
|
-
|
20,858
|
2,478
|
-
|
23,336
|
|||||||||||||||
General and administrative
|
-
|
7,648
|
209
|
-
|
7,857
|
|||||||||||||||
Amortization of intangible assets
|
-
|
21,209
|
27
|
(19,118
|
)
|
2,118
|
||||||||||||||
Acquisition related expenses
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Total operating expenses
|
61,979
|
2,958
|
(19,118
|
)
|
45,819
|
|||||||||||||||
Operating income (loss)
|
-
|
15,941
|
(8,131
|
)
|
19,896
|
27,706
|
||||||||||||||
Other income (expense), net
|
-
|
7,439
|
(675
|
)
|
(6,984
|
)
|
(220
|
)
|
||||||||||||
Interest income
|
-
|
60
|
6
|
-
|
66
|
|||||||||||||||
Interest expense
|
(1,641
|
)
|
8
|
-
|
(1,633
|
)
|
||||||||||||||
Income (loss) before provision for (benefit) income taxes
|
21,799
|
(8,792
|
)
|
12,912
|
25,919
|
|||||||||||||||
Provision for (benefit) income taxes
|
-
|
6,527
|
(28
|
)
|
(210
|
)
|
6,289
|
|||||||||||||
Net income (loss)
|
$
|
$
|
15,272
|
$
|
(8,764
|
)
|
$
|
13,122
|
$
|
19,630
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Elimination
|
Consolidated
|
||||||||||||||||
Revenue
|
$
|
-
|
$
|
81,251
|
$
|
13,695
|
$
|
(8,346
|
)
|
$
|
86,600
|
|||||||||
Cost of revenue
|
-
|
12,188
|
8,405
|
(8,346
|
)
|
12,247
|
||||||||||||||
Cost of revenue - amortization of intangible assets
|
-
|
27,692
|
-
|
-
|
27,692
|
|||||||||||||||
Gross profit
|
-
|
41,371
|
5,290
|
-
|
46,661
|
|||||||||||||||
Operating expenses:
|
||||||||||||||||||||
Research and development
|
-
|
17,172
|
481
|
-
|
17,653
|
|||||||||||||||
Selling and marketing
|
-
|
33,050
|
3,725
|
-
|
36,775
|
|||||||||||||||
General and administrative
|
23
|
13,005
|
216
|
-
|
13,244
|
|||||||||||||||
Amortization of intangible assets
|
-
|
17,004
|
1,537
|
-
|
18,541
|
|||||||||||||||
Acquisition related expenses
|
7,879
|
13,717
|
-
|
-
|
21,596
|
|||||||||||||||
Total operating expenses
|
7,902
|
93,948
|
5,959
|
-
|
107,809
|
|||||||||||||||
Operating loss
|
(7,902
|
)
|
(52,577
|
)
|
(669
|
)
|
-
|
(61,148
|
)
|
|||||||||||
Other income (expense), net
|
-
|
9,663
|
(1,119
|
)
|
(10,066
|
)
|
(1,522
|
)
|
||||||||||||
Interest income
|
-
|
19
|
45
|
(12
|
)
|
52
|
||||||||||||||
Interest expense
|
(23,158
|
)
|
(10,565
|
)
|
-
|
12
|
(33,711
|
)
|
||||||||||||
Loss before benefit of income taxes
|
(31,060
|
)
|
(53,460
|
)
|
(1,743
|
)
|
(10,066
|
)
|
(96,329
|
)
|
||||||||||
Benefit of income taxes
|
-
|
(7,949
|
)
|
(122
|
)
|
-
|
(8,071
|
)
|
||||||||||||
Net loss
|
$
|
(31,060
|
)
|
$
|
(45,511
|
)
|
$
|
(1,621
|
)
|
$
|
(10,066
|
)
|
$
|
(88,258
|
)
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Elimination
|
Consolidated
|
||||||||||||||||
Revenue
|
$
|
-
|
$
|
92,854
|
$
|
9,329
|
$
|
(4,645
|
)
|
$
|
97,538
|
|||||||||
Cost of revenue
|
-
|
9,166
|
4,705
|
(4,645
|
)
|
9,226
|
||||||||||||||
Cost of revenue - amortization of intangible assets
|
-
|
822
|
-
|
(782
|
)
|
40
|
||||||||||||||
Gross profit
|
-
|
82,866
|
4,624
|
782
|
88,272
|
|||||||||||||||
Operating expenses:
|
||||||||||||||||||||
Research and development
|
-
|
16,744
|
387
|
-
|
17,131
|
|||||||||||||||
Selling and marketing
|
-
|
36,825
|
3,553
|
-
|
40,378
|
|||||||||||||||
General and administrative
|
-
|
21,513
|
315
|
-
|
21,828
|
|||||||||||||||
Amortization of intangible assets
|
-
|
24,422
|
-
|
(23,285
|
)
|
1,137
|
||||||||||||||
Acquisition related expenses
|
-
|
15,063
|
-
|
-
|
15,063
|
|||||||||||||||
Total operating expenses
|
-
|
114,567
|
4,255
|
(23,285
|
)
|
95,537
|
||||||||||||||
Operating (loss) income
|
-
|
(31,701
|
)
|
369
|
24,067
|
(7,265
|
)
|
|||||||||||||
Other income (expense), net
|
-
|
22,569
|
54
|
(22,238
|
)
|
385
|
||||||||||||||
Interest income
|
-
|
64
|
31
|
-
|
95
|
|||||||||||||||
Interest expense
|
(3,723
|
)
|
-
|
-
|
(3,723
|
)
|
||||||||||||||
(Loss) income before benefit of income taxes
|
(12,791
|
)
|
454
|
1,829
|
(10,508
|
)
|
||||||||||||||
Benefit of income taxes
|
-
|
(1,866
|
)
|
(28
|
)
|
-
|
(1,894
|
)
|
||||||||||||
Net (loss) income
|
$
|
$
|
(10,925
|
)
|
$
|
482
|
$
|
1,829
|
$
|
(8,614
|
)
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Elimination
|
Consolidated
|
||||||||||||||||
Revenue
|
$
|
-
|
$
|
233,451
|
$
|
21,945
|
$
|
(19,629
|
)
|
$
|
235,767
|
|||||||||
Cost of revenue
|
-
|
21,349
|
20,122
|
(19,629
|
)
|
21,842
|
||||||||||||||
Cost of revenue - amortization of intangible assets
|
-
|
2,357
|
3
|
(2,264
|
)
|
96
|
||||||||||||||
Gross profit
|
-
|
209,745
|
1,820
|
2,264
|
213,829
|
|||||||||||||||
Operating expenses:
|
||||||||||||||||||||
Research and development
|
-
|
30,299
|
913
|
-
|
31,212
|
|||||||||||||||
Selling and marketing
|
-
|
62,894
|
7,240
|
-
|
70,134
|
|||||||||||||||
General and administrative
|
-
|
24,147
|
923
|
-
|
25,070
|
|||||||||||||||
Amortization of intangible assets
|
-
|
61,937
|
83
|
(55,330
|
)
|
6,690
|
||||||||||||||
Acquisition related expenses
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Total operating expenses
|
-
|
179,277
|
9,159
|
(55,330
|
)
|
133,106
|
||||||||||||||
Operating income (loss)
|
-
|
30,468
|
(7,339
|
)
|
57,594
|
80,723
|
||||||||||||||
Other income (expense), net
|
-
|
14,201
|
(1,675
|
)
|
(13,969
|
)
|
(1,443
|
)
|
||||||||||||
Interest income
|
-
|
162
|
42
|
-
|
204
|
|||||||||||||||
Interest expense
|
(6,110)
|
-
|
-
|
(6,110
|
)
|
|||||||||||||||
Income (loss) before provision for (benefit) income taxes
|
38,721
|
(8,972
|
)
|
43,625
|
73,374
|
|||||||||||||||
Provision for (benefit) income taxes
|
-
|
19,719
|
(346
|
)
|
(1,579
|
)
|
17,794
|
|||||||||||||
Net income (loss)
|
$
|
$
|
19,002
|
$
|
(8,626
|
)
|
$
|
45,204
|
$
|
55,580
|
Issuer
|
Guarantor
|
Non-Guarantor
|
SSI II
|
|||||||||||||||||
SSI II
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
Cash flows from operating activities:
|
||||||||||||||||||||
Net (loss) income
|
$
|
(31,060
|
)
|
$
|
(45,511
|
)
|
$
|
(1,621
|
)
|
$
|
(10,066
|
)
|
$
|
(88,258
|
)
|
|||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||||||||||
Depreciation & amortization
|
-
|
1,658
|
3
|
-
|
1,661
|
|||||||||||||||
Amortization of intangible assets
|
-
|
44,696
|
1,537
|
-
|
46,233
|
|||||||||||||||
Recovery of bad debts
|
-
|
(7
|
)
|
(83
|
)
|
-
|
(90
|
)
|
||||||||||||
Benefit for income taxes - non-cash
|
-
|
(9,450
|
)
|
(163
|
)
|
-
|
(9,613
|
)
|
||||||||||||
Non-cash interest expense
|
679
|
1,224
|
-
|
-
|
1,903
|
|||||||||||||||
Changes in current assets & liabilities, net of acquisitions
|
||||||||||||||||||||
Accounts receivable
|
-
|
(12,743
|
)
|
3,638
|
-
|
(9,105
|
)
|
|||||||||||||
Prepaid expenses and other current assets
|
-
|
(1,221
|
)
|
(531
|
)
|
-
|
(1,752
|
)
|
||||||||||||
Accounts payable
|
-
|
440
|
(16
|
)
|
-
|
424
|
||||||||||||||
Accrued expenses, including long-term
|
14,872
|
(18,680
|
)
|
7,012
|
-
|
3,204
|
||||||||||||||
Deferred revenue
|
-
|
31,432
|
(3,292
|
)
|
-
|
28,140
|
||||||||||||||
Net cash (used in) provided by operating activities
|
(15,509
|
)
|
(8,162
|
)
|
6,484
|
(10,066
|
)
|
(27,253
|
)
|
|||||||||||
Cash flows from investing activities:
|
||||||||||||||||||||
Purchases of property and equipment
|
-
|
(1,709
|
)
|
-
|
-
|
(1,709
|
)
|
|||||||||||||
Acquisition of SkillSoft, net of cash acquired
|
-
|
510,120
|
(38,187
|
)
|
(1,546,114
|
)
|
(1,074,181
|
)
|
||||||||||||
Decrease in restricted cash
|
-
|
1,806
|
31
|
-
|
1,837
|
|||||||||||||||
Net cash provided by (used in) investing activities
|
-
|
510,217
|
(38,156
|
)
|
(1,546,114
|
)
|
(1,074,053
|
)
|
||||||||||||
Cash flows from financing activities:
|
||||||||||||||||||||
Proceeds from intercompany investment in subsidiaries
|
(1,129,184
|
)
|
(1,129,184
|
)
|
-
|
2,258,368
|
-
|
|||||||||||||
Proceeds from payments (on) intercompany loans
|
313,768
|
346,541
|
41,879
|
(702,188
|
)
|
-
|
||||||||||||||
Proceeds from issuance of ordinary shares
|
534,513
|
.
|
-
|
-
|
534,513
|
|||||||||||||||
Proceeds from issuance of Senior Credit Facilities, net of fees
|
-
|
306,398
|
-
|
-
|
306,398
|
|||||||||||||||
Proceeds from issuance of Senior Notes, net of fees
|
296,448
|
-
|
-
|
-
|
296,448
|
|||||||||||||||
Principal payments on Senior Credit Facilities
|
-
|
(813
|
)
|
-
|
-
|
(813
|
)
|
|||||||||||||
Net cash provided by (used in) financing activities
|
15,545
|
(477,058
|
)
|
41,879
|
1,556,180
|
1,136,546
|
||||||||||||||
Effect of exchange rate changes on cash and cash equivalents
|
-
|
1,575
|
291
|
-
|
1,866
|
|||||||||||||||
Net increase in cash and cash equivalents
|
36
|
26,572
|
10,498
|
-
|
37,106
|
|||||||||||||||
Cash & cash equivalents, at beginning of period
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Cash & cash equivalents, at end of period
|
$
|
36
|
$
|
26,572
|
$
|
10,498
|
$
|
-
|
$
|
37,106
|
Issuer SSI II
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
SSI II Consolidated
|
||||||||||||||||
Cash flows from operating activities:
|
||||||||||||||||||||
Net (loss) income
|
$
|
-
|
$
|
(10,925
|
)
|
$
|
482
|
$
|
1,829
|
$
|
(8,614
|
)
|
||||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||||||||||
Share-based compensation
|
-
|
24,867
|
292
|
-
|
25,159
|
|||||||||||||||
Depreciation & amortization
|
-
|
1,370
|
4
|
-
|
1,374
|
|||||||||||||||
Amortization of intangible assets
|
-
|
25,244
|
-
|
(24,067
|
)
|
1,177
|
||||||||||||||
Recovery of bad debts
|
-
|
(99
|
)
|
47
|
-
|
(52
|
)
|
|||||||||||||
Provision for income taxes - non-cash
|
-
|
(2,764
|
)
|
(36
|
)
|
-
|
(2,800
|
)
|
||||||||||||
Non-cash interest expense
|
-
|
3,219
|
-
|
-
|
3,219
|
|||||||||||||||
Tax effect related to exercise of non-qualified stock options
|
-
|
282
|
-
|
|
-
|
282
|
||||||||||||||
Changes in current assets & liabilities, net of acquisitions
|
||||||||||||||||||||
Accounts receivable
|
-
|
80,168
|
6,062
|
-
|
86,230
|
|||||||||||||||
Prepaid expenses and other current assets
|
-
|
(2,578
|
)
|
360
|
-
|
(2,218
|
)
|
|||||||||||||
Accounts payable
|
-
|
(1,588
|
)
|
29
|
-
|
(1,559
|
)
|
|||||||||||||
Accrued expenses, including long-term
|
-
|
(4,410
|
)
|
(1,886
|
)
|
-
|
(6,296
|
)
|
||||||||||||
Deferred revenue
|
-
|
(38,592
|
)
|
(3,225
|
)
|
-
|
(41,817
|
)
|
||||||||||||
Net cash provided by (used in) operating activities
|
74,194
|
2,129
|
|
(22,238
|
)
|
54,085
|
||||||||||||||
Cash flows from investing activities:
|
||||||||||||||||||||
Purchases of property and equipment
|
-
|
(438
|
)
|
-
|
-
|
(438
|
)
|
|||||||||||||
Purchases of investments
|
-
|
(2,562
|
)
|
-
|
-
|
(2,562
|
)
|
|||||||||||||
Maturity of investments
|
-
|
6,122
|
-
|
-
|
6,122
|
|||||||||||||||
Decrease in restricted cash
|
-
|
18
|
9
|
-
|
27
|
|||||||||||||||
Net cash provided by (used in) investing activities
|
-
|
3,140
|
9
|
-
|
3,149
|
|||||||||||||||
Cash flows from financing activities:
|
||||||||||||||||||||
Exercise of share options
|
-
|
3,065
|
-
|
-
|
3,065
|
|||||||||||||||
Proceeds from employee share purchase plan
|
-
|
1,666
|
-
|
-
|
1,666
|
|||||||||||||||
Proceeds from payments (on) intercompany loans
|
-
|
(14,134
|
)
|
(8,104
|
)
|
22,238
|
-
|
|||||||||||||
Principal payments on long term debt
|
-
|
(84,365
|
)
|
-
|
-
|
(84,365
|
)
|
|||||||||||||
Tax effect related to exercise of non-qualified stock options
|
-
|
(282
|
)
|
-
|
-
|
(282
|
)
|
|||||||||||||
Net cash (used in) provided by financing activities
|
-
|
(94,050
|
)
|
(8,104
|
)
|
22,238
|
(79,916
|
)
|
||||||||||||
Effect of exchange rate changes on cash and cash equivalents
|
-
|
(726
|
)
|
(589
|
)
|
-
|
(1,315
|
)
|
||||||||||||
Net decrease in cash and cash equivalents
|
-
|
(17,442
|
)
|
(6,555
|
)
|
-
|
(23,997
|
)
|
||||||||||||
Cash & cash equivalents, at beginning of period
|
-
|
64,214
|
12,468
|
-
|
76,682
|
|||||||||||||||
Cash & cash equivalents, at end of period
|
$
|
-
|
$
|
46,772
|
$
|
5,913
|
$
|
-
|
$
|
52,685
|
Issuer SSI II
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
SSI II Consolidated
|
||||||||||||||||
Cash flows from operating activities:
|
||||||||||||||||||||
Net income (loss)
|
$
|
-
|
$
|
19,002
|
$
|
(8,626
|
)
|
$
|
45,204
|
$
|
55,580
|
|||||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||||||||||
Share-based compensation
|
-
|
4,549
|
92
|
-
|
4,641
|
|||||||||||||||
Depreciation & amortization
|
-
|
3,412
|
7
|
-
|
3,419
|
|||||||||||||||
Amortization of intangible assets
|
-
|
64,294
|
86
|
(57,594
|
)
|
6,786
|
||||||||||||||
Recovery of bad debts
|
-
|
(128
|
)
|
(2
|
)
|
-
|
(130
|
)
|
||||||||||||
Provision for income taxes - non-cash
|
-
|
12,384
|
(460
|
)
|
-
|
11,924
|
||||||||||||||
Non-cash interest expense
|
-
|
854
|
-
|
-
|
854
|
|||||||||||||||
Tax effect related to exercise of non-qualified stock options
|
-
|
169
|
-
|
-
|
169
|
|||||||||||||||
Changes in current assets & liabilities, net of acquisitions
|
||||||||||||||||||||
Accounts receivable
|
-
|
72,322
|
8,640
|
-
|
80,962
|
|||||||||||||||
Prepaid expenses and other current assets
|
-
|
3,162
|
2,368
|
(1,579
|
)
|
3,951
|
||||||||||||||
Accounts payable
|
-
|
(1,419
|
)
|
(83
|
)
|
-
|
(1,502
|
)
|
||||||||||||
Accrued expenses, including long-term
|
-
|
(7,631
|
)
|
(3,178
|
)
|
-
|
(10,809
|
)
|
||||||||||||
Deferred revenue
|
-
|
(59,589
|
)
|
(8,440
|
)
|
-
|
(68,029
|
)
|
||||||||||||
Net cash (used in) provided by operating activities
|
-
|
111,381
|
(9,596
|
)
|
(13,969
|
)
|
87,816
|
|||||||||||||
Cash flows from investing activities:
|
||||||||||||||||||||
Purchases of property and equipment
|
-
|
(1,692
|
)
|
(11
|
)
|
-
|
(1,703
|
)
|
||||||||||||
Purchases of investments
|
-
|
(7,762
|
)
|
-
|
-
|
(7,762
|
)
|
|||||||||||||
Maturity of investments
|
-
|
5,212
|
-
|
-
|
5,212
|
|||||||||||||||
Increase in restricted cash
|
-
|
(2
|
)
|
1,000
|
-
|
998
|
||||||||||||||
Net cash provided by (used in) investing activities
|
-
|
(4,244
|
)
|
989
|
-
|
(3,255
|
)
|
|||||||||||||
Cash flows from financing activities:
|
||||||||||||||||||||
Exercise of share options
|
-
|
1,343
|
-
|
-
|
1,343
|
|||||||||||||||
Proceeds from employee share purchase plan
|
-
|
2,192
|
-
|
-
|
2,192
|
|||||||||||||||
Proceeds from payments (on) intercompany loans
|
-
|
(27,676
|
)
|
13,707
|
13,969
|
-
|
||||||||||||||
Principal payments on long term debt
|
-
|
(38,802
|
)
|
-
|
-
|
(38,802
|
)
|
|||||||||||||
Acquisition of treasury stock
|
-
|
(29,817
|
)
|
-
|
-
|
(29,817
|
)
|
|||||||||||||
Tax effect related to exercise of non-qualified stock options
|
-
|
(169
|
)
|
-
|
-
|
(169
|
)
|
|||||||||||||
Net cash provided by (used in) financing activities
|
-
|
(92,929
|
)
|
13,707
|
13,969
|
(65,253
|
)
|
|||||||||||||
Effect of exchange rate changes on cash and cash equivalents
|
-
|
829
|
1,812
|
-
|
2,641
|
|||||||||||||||
Net increase in cash and cash equivalents
|
-
|
15,037
|
6,912
|
-
|
21,949
|
|||||||||||||||
Cash & cash equivalents, at beginning of period
|
-
|
34,104
|
3,749
|
-
|
37,853
|
|||||||||||||||
Cash & cash equivalents, at end of period
|
$
|
-
|
$
|
49,141
|
$
|
10,661
|
$
|
-
|
$
|
59,802
|
Three Months Ended October 31, 2010
|
Combined
Nine Months
October 31, 2010
|
|||||||
Current period impact to reductions to deferred revenue in purchase accounting
|
26.9
|
49.8
|
||||||
Amortization of intangible assets related to content and technology
|
16.0
|
27.7
|
||||||
Current period impact to reductions to prepaid commissions in purchase accounting
|
(3.4
|
)
|
(6.2
|
)
|
||||
Accelerated vesting and settlement of stock-based compensation
|
–
|
23.4
|
||||||
Acquisition related expenses
|
1.0
|
36.7
|
||||||
Amortization of intangible assets
|
10.7
|
18.5
|
||||||
Interest expense from new borrowings
|
15.1
|
33.7
|
||||||
Total other long-term liabilities
|
$
|
66.3
|
$
|
183.6
|
|
·
|
cross selling and up selling;
|
|
·
|
evaluating new markets
|
|
·
|
acquiring new customers
|
|
·
|
carefully managing our spending
|
|
·
|
continuing to execute on our new product and technologies and telesales distribution initiatives; and
|
|
·
|
continuing to evaluate merger and acquisition and possible partnership opportunities that could contribute to our long-term objectives
|
THREE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Revenue:
|
||||||||||||||||
United States
|
$
|
59,092
|
$
|
60,284
|
$
|
(1,192
|
)
|
(2
|
)%
|
|||||||
International
|
20,305
|
20,118
|
187
|
1
|
%
|
|||||||||||
Fair value adjustments to deferred revenue
|
(26,853
|
)
|
–
|
(26,853
|
)
|
*
|
||||||||||
Total
|
$
|
52,544
|
$
|
80,402
|
$
|
(27,858
|
)
|
(35
|
)%
|
THREE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Cost of revenue
|
$
|
7,036
|
$
|
6,845
|
$
|
191
|
3
|
%
|
||||||||
As a percentage of revenue
|
13
|
%
|
9
|
%
|
||||||||||||
Cost of revenue – amortization of intangible assets
|
15,986
|
32
|
15,954
|
*
|
|
|||||||||||
As a percentage of revenue
|
30
|
%
|
0
|
%
|
THREE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Research and development
|
$
|
10,275
|
$
|
12,508
|
$
|
(2,233
|
)
|
(18
|
)%
|
|||||||
As a percentage of revenue
|
20
|
%
|
16
|
%
|
THREE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Selling and marketing
|
$
|
22,254
|
$
|
23,336
|
$
|
(1,082
|
)
|
(5
|
)%
|
|||||||
As a percentage of revenue
|
42
|
%
|
29
|
%
|
THREE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
General and administrative
|
$
|
7,569
|
$
|
7,857
|
$
|
(288
|
)
|
(4
|
)%
|
|||||||
As a percentage of revenue
|
14
|
%
|
10
|
%
|
THREE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Amortization of intangible assets
|
$
|
10,752
|
$
|
2,118
|
$
|
8,634
|
408
|
%
|
||||||||
As a percentage of revenue
|
20
|
%
|
3
|
%
|
||||||||||||
Acquisition related expenses
|
998
|
0
|
998
|
*
|
||||||||||||
As a percentage of revenue
|
2
|
%
|
0
|
%
|
THREE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Other (expense) income, net
|
$
|
(487
|
)
|
$
|
(220
|
)
|
$
|
(267
|
)
|
(121
|
)%
|
|||||
As a percentage of revenue
|
(1
|
)%
|
0
|
%
|
||||||||||||
Interest income
|
$
|
36
|
$
|
66
|
$
|
(30
|
)
|
(45
|
)%
|
|||||||
As a percentage of revenue
|
0
|
%
|
0
|
%
|
||||||||||||
Interest expense
|
$
|
(15,131
|
)
|
$
|
(1,633
|
)
|
$
|
(13,498
|
)
|
*
|
|
|||||
As a percentage of revenue
|
(29
|
)%
|
(2
|
)%
|
THREE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Provision(Benefit) for income taxes
|
$
|
(2,620
|
)
|
$
|
6,289
|
$
|
(8,909
|
)
|
*
|
|
||||||
As a percentage of revenue
|
(5
|
)%
|
8
|
%
|
Successor
|
Predecessor
|
Combined (1)
|
Predecessor
|
|||||||||||||
May 26, to
October 31,
2010
|
February 1, to
May 25,
2010
|
Nine months
ended October 31,
2010
|
Nine months
ended
October 31,
2009
|
|||||||||||||
Revenue
|
$
|
86,600
|
$
|
97,538
|
$
|
184,138
|
$
|
235,767
|
||||||||
Cost of revenue
|
12,247
|
9,226
|
21,473
|
21,842
|
||||||||||||
Cost of revenue – amortization of intangible assets
|
27,692
|
40
|
27,732
|
96
|
||||||||||||
Gross profit
|
46,661
|
88,272
|
134,933
|
213,829
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
17,653
|
17,131
|
34,784
|
31,212
|
||||||||||||
Selling and marketing
|
36,775
|
40,378
|
77,153
|
70,134
|
||||||||||||
General and administrative
|
13,244
|
21,828
|
35,072
|
25,070
|
||||||||||||
Amortization of intangible assets
|
18,541
|
1,137
|
19,678
|
6,690
|
||||||||||||
Acquisition related expenses
|
21,596
|
15,063
|
36,659
|
-
|
||||||||||||
Total operating expenses
|
107,809
|
95,537
|
203,346
|
133,106
|
||||||||||||
Operating (loss) income
|
(61,148 | ) | (7,265 | ) | (68,413 | ) | 80,723 | |||||||||
Other (expense) income, net
|
(1,522
|
)
|
385
|
(1,137
|
)
|
(1,443
|
)
|
|||||||||
Interest income
|
52
|
95
|
147
|
204
|
||||||||||||
Interest expense
|
(33,711
|
)
|
(3,723
|
)
|
(37,434
|
)
|
(6,110)
|
|||||||||
Income before provision for income taxes from continuing operations
|
(96,329
|
)
|
(10,508
|
)
|
(106,837
|
)
|
73,374
|
|||||||||
Provision for income taxes
|
(8,071
|
)
|
(1,894
|
)
|
(9,965
|
)
|
17,794
|
|||||||||
Net income
|
$
|
(88,258
|
)
|
$
|
(8,614
|
)
|
$
|
(96,872
|
)
|
$
|
55,580
|
|
(1) This presentation does not comply with generally accepted accounting principles in the United States (GAAP), it is not an attempt to present pro-forma results, and may yield results that are not strictly comparable to prior periods as a result of purchase accounting adjustments. However, management believes it provides a meaningful method of comparing the current period to the prior period results.
|
NINE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Revenue:
|
||||||||||||||||
United States
|
$
|
173,884
|
$
|
179,036
|
$
|
(5,152
|
)
|
(3
|
)%
|
|||||||
International
|
60,069
|
56,731
|
3,338
|
6
|
%
|
|||||||||||
Fair value adjustments to deferred revenue
|
(49,815
|
)
|
–
|
(49,815
|
)
|
|||||||||||
Total
|
$
|
184,138
|
$
|
235,767
|
$
|
(51,629
|
)
|
(22
|
)%
|
NINE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Cost of revenue
|
$
|
21,473
|
$
|
21,842
|
$
|
(369
|
)
|
(2
|
)%
|
|||||||
As a percentage of revenue
|
12
|
%
|
9
|
%
|
||||||||||||
Cost of revenue – amortization of intangible assets
|
27,732
|
96
|
27,636
|
*
|
|
|||||||||||
As a percentage of revenue
|
15
|
%
|
0
|
%
|
NINE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Research and development
|
$
|
34,784
|
$
|
31,212
|
$
|
3,572
|
11
|
%
|
||||||||
As a percentage of revenue
|
19
|
%
|
13
|
%
|
NINE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Selling and marketing
|
$
|
77,153
|
$
|
70,134
|
$
|
7,019
|
10
|
%
|
||||||||
As a percentage of revenue
|
42
|
%
|
30
|
%
|
NINE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
General and administrative
|
$
|
35,072
|
$
|
25,070
|
$
|
10,002
|
40
|
%
|
||||||||
As a percentage of revenue
|
19
|
%
|
11
|
%
|
NINE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Amortization of intangible assets
|
$
|
19,678
|
$
|
6,690
|
$
|
12,988
|
194
|
%
|
||||||||
As a percentage of revenue
|
11
|
%
|
3
|
%
|
||||||||||||
Acquisition related expenses
|
36,659
|
-
|
36,659
|
*
|
||||||||||||
As a percentage of revenue
|
20
|
%
|
-
|
%
|
NINE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Other (expense) income, net
|
$
|
(1,137
|
)
|
$
|
(1,443
|
)
|
$
|
306
|
21
|
%
|
||||||
As a percentage of revenue
|
(1
|
)%
|
(1
|
)%
|
||||||||||||
Interest income
|
$
|
147
|
$
|
204
|
$
|
(57
|
)
|
(28
|
)%
|
|||||||
As a percentage of revenue
|
0
|
%
|
0
|
%
|
||||||||||||
Interest expense
|
$
|
(37,434
|
)
|
$
|
(6,110
|
)
|
$
|
(31,324
|
)
|
*
|
|
|||||
As a percentage of revenue
|
(20
|
)%
|
(3
|
)%
|
NINE MONTHS ENDED
OCTOBER 31,
|
Dollar Increase/(Decrease)
|
Percent Change
|
||||||||||||||
2010
|
2009
|
|||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Provision(Benefit) for income taxes
|
$
|
(9,965
|
)
|
$
|
17,794
|
$
|
(27,759
|
)
|
*
|
|
||||||
As a percentage of revenue
|
(5
|
)%
|
8
|
%
|
Successor
|
Predecessor
|
Combined (1)
|
Predecessor
|
|||||||||||||
May 26, to
October 31,
2010
|
February 1, to
May 25,
2010
|
Nine months
ended October 31,
2010
|
Nine months
ended
October 31,
2009
|
|||||||||||||
Net cash (used in) provided by operating activities
|
$
|
(27,253
|
)
|
$
|
54,085
|
$
|
26,832
|
$
|
87,816
|
|||||||
Net cash (used in) provided by investing activities
|
(1,074,053
|
)
|
3,149
|
(1,070,904
|
)
|
(3,255)
|
||||||||||
Net cash provided by (used in) financing activities
|
1,136,546
|
(79,916
|
)
|
1,056,630
|
(65,253)
|
|||||||||||
Effect of exchange rate changes on cash and cash equivalents
|
1,866
|
(1,315
|
)
|
551
|
2,641
|
|||||||||||
Net (decrease) increase in cash and cash equivalents
|
$
|
37,106
|
$
|
(23,997
|
)
|
$
|
13,109
|
$
|
21,949
|
Payments Due by Period | ||||||||||||||||||||
Contractual Obligation
|
Total
|
Less Than
1 Year
|
1 – 3
Years
|
3 – 5
Years
|
More Than
5 Years
|
|||||||||||||||
Operating Lease Obligations
|
$
|
8,329
|
$
|
3,222
|
$
|
4,709
|
$
|
398
|
$
|
–
|
||||||||||
Debt Obligations
|
634,188
|
5,344
|
6,500
|
6,500
|
615,844
|
|||||||||||||||
Total Obligations
|
$
|
642,517
|
$
|
8,566
|
$
|
11,209
|
$
|
6,898
|
$
|
615,844
|
Date: December 15, 2010
|
By: /s/ Thomas J. McDonald
|
|
Thomas J. McDonald
|
|
Chief Financial Officer
|
31.1
|
Certification of SSI Investments II Limited’s Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the Securities Exchange Act of 1934.
|
31.2
|
Certification of SSI Investments II Limited’s Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the Securities Exchange Act of 1934.
|
32.1
|
Certification of SSI Investments II Limited’s Chief Executive Officer pursuant to Rule 13a-14(b)/Rule 15d-14(b) under the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification of SSI Investments II Limited’s Chief Financial Officer pursuant to Rule 13a-14(b)/Rule 15d-14(b) under the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|