Aspect Software
Aspect Software Parent, Inc. (Form: 10-Q, Received: 08/11/2015 08:23:58)
Table of Contents

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
  
(Mark One)
ý
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2015
OR
¨
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 333-170936
 
  
ASPECT SOFTWARE PARENT, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
20-3503231
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

2325 E. Camelback Road, Suite 700
Phoenix, Arizona, 85016
(Address of principal executive offices) (Zip code)
Telephone Number: Telephone: (978) 250-7900
 
  
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   ý     No   ¨
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   ý     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 the definitions “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   (Do not check if a smaller reporting company)
  
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   ý

The registrant had one ordinary share outstanding as of July 31, 2015.
 
 
 
 
 


Table of Contents

TABLE OF CONTENTS
 
 
Page
Part I
Financial Information:
 
 
 
 
Item 1 .
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Part II
Other Information:
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 6.
 
 
 
 

2

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Aspect Software Parent, Inc.
Condensed Consolidated Balance Sheets (unaudited)
( in thousands, except par value and share amounts)
June 30,
2015
 
December 31,
2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
21,593

 
$
17,030

Accounts receivable, net
43,342

 
59,923

Receivable due from Aspect Software Group Holdings Ltd.
482

 
415

Deferred tax assets
3,675

 
3,716

Other current assets
23,946

 
21,505

Total current assets
93,038

 
102,589

Property, plant, and equipment, net
22,079

 
21,573

Intangible assets, net
52,778

 
59,480

Goodwill
751,322

 
751,063

Other assets
8,869

 
17,156

Total assets
$
928,086

 
$
951,861

Liabilities and deficit
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
8,412

 
$
15,087

Current portion of long-term debt
448,080

 
17,094

Accrued liabilities
46,425

 
53,691

Deferred revenues
81,767

 
69,912

Total current liabilities
584,684

 
155,784

Deferred tax liabilities
32,619

 
32,619

Long-term deferred revenue
1,609

 
2,468

Long-term debt (1)
319,615

 
764,411

Other long-term liabilities
49,137

 
51,273

Total liabilities
987,664

 
1,006,555

Commitments and contingencies ( Note 8 )

 

Deficit:
 
 
 
Ordinary shares, $1.00 par value: 50,000 share authorized and 1 share issued

 

Additional paid-in capital
35,736

 
35,588

Accumulated other comprehensive loss
(5,467
)
 
(5,645
)
Accumulated deficit
(92,654
)
 
(88,269
)
Total Aspect Software Parent, Inc. deficit
(62,385
)
 
(58,326
)
Noncontrolling interest
2,807

 
3,632

Total deficit
(59,578
)
 
(54,694
)
Total liabilities and deficit
$
928,086

 
$
951,861


(1)
$50.0 million held by a related party as of June 30, 2015 and December 31, 2014 .

See accompanying notes.
3

Table of Contents

Aspect Software Parent, Inc.
Condensed Consolidated Statements of Operations (unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(in thousands)
2015
 
2014
 
2015
 
2014
Net revenues:
 
 
 
 
 
 
 
Product revenue
$
13,665

 
$
12,927

 
$
32,706

 
$
29,781

Recurring revenue
69,514

 
73,761

 
139,427

 
145,508

Services revenue
18,084

 
20,898

 
35,161

 
39,983


Total net revenues

101,263

 
107,586

 
207,294

 
215,272

Cost of revenues:
 
 
 
 
 
 
 
Cost of product revenue
3,633

 
3,876

 
7,936

 
9,205

Cost of recurring revenue
21,075

 
22,190

 
44,092

 
45,450

Cost of services revenue
16,277

 
19,607

 
31,426

 
36,999

Amortization expense for acquired intangible assets
1,215

 
1,225

 
2,429

 
2,449

Total cost of revenues
42,200

 
46,898

 
85,883

 
94,103


Gross profit

59,063

 
60,688

 
121,411

 
121,169

Operating expenses:
 
 
 
 
 
 
 
Research and development
11,527

 
12,404

 
23,239

 
26,691

Selling, general and administrative
31,679

 
33,531

 
59,200

 
64,560

Amortization expense for acquired intangible assets
2,033

 
2,088

 
4,073

 
4,170

Restructuring charges
887

 

 
659

 

Total operating expenses
46,126

 
48,023

 
87,171

 
95,421

Income from operations
12,937

 
12,665

 
34,240

 
25,748

Interest and other expense, net
(17,921
)
 
(19,018
)
 
(36,870
)
 
(37,883
)
Loss before income taxes
(4,984
)
 
(6,353
)
 
(2,630
)
 
(12,135
)
Provision for (benefit from) income taxes
914

 
(2,001
)
 
2,580

 
(387
)
Net loss
$
(5,898
)
 
$
(4,352
)
 
$
(5,210
)
 
$
(11,748
)
Less: Net loss attributable to noncontrolling interest
(435
)
 
(454
)
 
(825
)
 
(746
)
Net loss attributable to Aspect Software Parent, Inc.
$
(5,463
)
 
$
(3,898
)
 
$
(4,385
)
 
$
(11,002
)
Aspect Software Parent, Inc.
Condensed Consolidated Statements of Comprehensive Loss (unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(in thousands)
2015
 
2014
 
2015
 
2014
Net loss
$
(5,898
)
 
$
(4,352
)
 
$
(5,210
)
 
$
(11,748
)
Change in cumulative translation adjustment
(577
)
 
(527
)
 
178

 
(839
)
Comprehensive loss
(6,475
)
 
(4,879
)
 
(5,032
)
 
(12,587
)
Comprehensive loss attributable to noncontrolling interest
(435
)
 
(454
)
 
(825
)
 
(746
)
Comprehensive loss attributable to Aspect Software Parent, Inc.
$
(6,040
)
 
$
(4,425
)
 
$
(4,207
)
 
$
(11,841
)

See accompanying notes.
4

Table of Contents

Aspect Software Parent, Inc.
Condensed Consolidated Statements of Deficit (unaudited)
(In Thousands, Except Share Amounts)
 
 
 
Ordinary Shares
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Accumulated
Deficit
 
Total Aspect Software Parent, Inc. Shareholder's Deficit
 
Non-controlling Interest
 
Total Deficit
 
 
Shares
 
Par
Value
 
Balance at December 31, 2014
 
1

 
$

 
$
35,588

 
$
(5,645
)
 
$
(88,269
)
 
$
(58,326
)
 
$
3,632

 
$
(54,694
)
Net loss
 

 

 

 

 
(4,385
)
 
(4,385
)
 
(825
)
 
(5,210
)
Other comprehensive income
 

 

 

 
178

 

 
178

 

 
178

Stock-based compensation
 

 

 
148

 

 

 
148

 

 
148

Balance at June 30, 2015
 
1

 
$

 
$
35,736

 
$
(5,467
)
 
$
(92,654
)
 
$
(62,385
)
 
$
2,807

 
$
(59,578
)


See accompanying notes.
5

Table of Contents

Aspect Software Parent, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
 
 
Six Months Ended
 
June 30,
(in thousands)
2015
 
2014
Cash flows from operating activities:
 
 
 
Net loss
$
(5,210
)
 
$
(11,748
)
Reconciliation of net income (loss) to net cash and cash equivalents provided by operating activities:
 
 
 
Depreciation
4,885

 
4,477

Amortization expense for acquired intangible assets
6,502

 
6,619

Non-cash interest expense
3,624

 
3,060

Non-cash compensation expense
148

 
114

Increase to accounts receivable allowances
572

 
1,248

Deferred income taxes

 
1,142

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
15,457

 
5,766

Receivable due from Aspect Software Group Holdings Ltd.
19

 
1,441

Other current assets and other assets
1,973

 
459

Accounts payable
(6,558
)
 
(526
)
Accrued liabilities and other liabilities
(8,530
)
 
(13,446
)
Deferred revenues
11,538

 
15,570

Net cash and cash equivalents provided by operating activities
24,420

 
14,176

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(5,419
)
 
(6,297
)
Net cash and cash equivalents used in investing activities
(5,419
)
 
(6,297
)
Cash flows from financing activities:
 
 
 
Repayment of borrowings
(14,050
)
 
(28,200
)
Borrowings under debt facilities

 
15,000

Proceeds received from capital contribution

 
4

Net cash and cash equivalents used in financing activities
(14,050
)
 
(13,196
)
Effect of exchange rate changes on cash
(388
)
 
(757
)
Net change in cash and cash equivalents
4,563

 
(6,074
)
Cash and cash equivalents:
 
 
 
Beginning of period
17,030

 
26,694

End of period
$
21,593

 
$
20,620

Supplemental disclosure of cash flow information
 
 
 
Cash paid for interest
$
34,224

 
$
35,262

Cash paid for income taxes
$
1,512

 
$
2,225


See accompanying notes.
6

Table of Contents

Aspect Software Parent, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
NOTE 1—DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND RECENT ACCOUNTING STANDARDS
Description of Business
Aspect Software Parent, Inc. (together with its subsidiaries, “Aspect Software” or the “Company”), a subsidiary of Aspect Software Group Holdings Ltd., a Cayman Islands company, provides customer engagement solutions such as; unified interaction management, workforce optimization, and back-office solutions to improve the customer experience. The Company’s technologies streamline and enhance customer-facing business processes by optimizing workflows across multiple communication channels and automating smarter business processes across the contact center and related functions. The Company offers the business and technology expertise to help its customers build, enhance and sustain relationships with their customers by bringing enterprise technologies like customer relationship management ("CRM") and content management together with unified multi-channel communications and effective people management to enrich customer interactions.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, the financial information reflects all adjustments, consisting of adjustments of a normal recurring nature necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods presented. The results of operations for the three and six months ended June 30, 2015 , are not necessarily indicative of the results to be expected for the full year or any future periods. For further information, refer to the consolidated financial statements and footnotes for the year ended December 31, 2014, included in the Annual Report on Form 10-K. All intercompany amounts related to the Company's consolidated subsidiaries have been eliminated in consolidation.
First Lien Credit Facility
The Company’s first lien credit facility, maturing in May 2016, has been classified as a current liability as of June 30, 2014. The public and private capital markets have served as the Company’s primary source of financing to fund large acquisitions and other large transactions, such as debt refinancings. The Company’s ability to access the debt and equity capital markets on economic terms is affected by general economic conditions, the domestic and global financial markets, the credit ratings assigned to its debt by independent credit rating agencies, its operational and financial performance, the value and performance of its equity and debt securities, and other macroeconomic factors outside of its control. The Company believes that it can and will arrange for alternative sources of debt financing, prior to the maturity of its Credit Facility in May 2016.
Recent Accounting Standards
In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs . The updated standard requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for periods beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. ASU 2015-03 should be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The Company intends to adopt ASU No. 2015-03 as of December 31, 2015, and its adoption will result in the reclassification of debt issuance costs currently classified in other current assets and long-term assets to be offset against the carrying value of the Company's debt. Approximately $4.9 million and $2.5 million were classified as other current assets and other long-term assets, respectively, on the Company's Condensed Consolidated Balance Sheet as of June 30, 2015.
Also in April 2015, the FASB issued ASU No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement , which provides guidance on whether a cloud-computing arrangement contains a software license, and whether that license should be accounted for separately as an asset or solely as a service contract. This standard also aligns the accounting for licenses of internal-use software with the accounting for licenses of other acquired intangible assets. This standard is effective for interim and annual periods beginning January 1, 2016, but early adoption is permitted. It may be adopted either prospectively to all arrangements entered into or materially modified after the effective date, or retrospectively. The Company is currently evaluating the potential impact of this standard on its Consolidated Financial Statements and determining which adoption method to use.

7


In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis , which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). This ASU focuses on the consolidation evaluation for reporting organizations (public and private companies and not-for-profit organizations) that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification by: i) placing more emphasis on risk of loss when determining a controlling financial interest; ii) reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (“VIE”); and iii) changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs. ASU No. 2015-02 is effective for periods beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The adoption of this standard is not expected to have a material impact on the Company's Consolidated Financial Statements.
In January 2015, the FASB issued ASU No. 2015-01 - Income Statement - Extraordinary and Unusual Items ("ASU 2015-01"), which eliminates the concept of extraordinary items. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The adoption of this standard is not expected to have an impact on the Company's Consolidated Financial Statements.
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern , which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The adoption of this standard is not expected to have a material impact on the Company's Consolidated Financial Statements.
In June 2014, the FASB issued ASU No. 2014-12 - Compensation - Stock Compensation ("ASU 2014-12") which provides guidance that a performance target that affects vesting of a share-based payment and that could be achieved after the requisite service period is a performance condition. As a result, the target is not reflected in the estimation of the award’s grant date fair value. Compensation cost for such an award would be recognized over the required service period, if it is probable that the performance condition will be achieved. ASU 2014-12 is effective for all entities for annual periods beginning after December 15, 2015 and interim periods within those annual periods. ASU 2014-12 should be applied on a prospective basis to awards that are granted or modified on or after the effective date. The adoption of this standard is not expected to have an impact on the Company's Consolidated Financial Statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). While the standard supersedes existing revenue recognition guidance, it closely aligns with current GAAP. Under the new standard, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received for that specific good or service. This update could impact the timing and amounts of revenue recognized. In July 2015, the FASB voted to defer the effective date by one year to annual reporting periods (including interim periods within those periods) beginning December 15, 2017 and early adoption during 2016 is permitted. This ASU shall still be applied using either a full retrospective or modified retrospective approach. The Company is currently assessing when it will adopt ASU 2014-09 and evaluating the method of adoption and the effect that implementation of this update will have on its Consolidated Financial Statements upon adoption.
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company’s financial position, results of operations or cash flows.
NOTE 2—REVENUE RECOGNITION
The Company derives its revenue from (i) product revenues, which typically include perpetual software licenses and hardware, (ii) recurring revenues comprised of (a) maintenance revenues, which include software license updates and product support, and (b) hosting and managed services revenues, which include subscription fees for access to and use of our on-demand applications and (iii) services revenues, which include installation, consulting and education. Revenues have been derived from sales to end users through the Company's direct sales force, distributors and resellers.
The Company recognizes revenue from the sale of software licenses and hardware (the “Product”) when persuasive evidence of an arrangement exists, the Product has been delivered, the fee is fixed or determinable and collection of the resulting receivable is probable. Revenue recognition for software licenses with multiple-element arrangements generally requires recognition of

8


revenue using the residual method. Under the residual method, the portion of the total arrangement fee attributable to undelivered elements is deferred based upon its vendor-specific objective evidence (“VSOE”) of fair value, or the stated amount if higher, and subsequently recognized as the service is delivered. The difference between the total arrangement fee and the amount deferred for the undelivered elements is recognized as revenue related to the delivered elements, which is generally Product.
Certain of the Company's multiple-element arrangements include software and hardware components that function together to deliver the product's essential functionality. When these software and non-software elements are sold together, the Company believes the arrangements meet the scope exception in Accounting Standards Codification 985-605, Software Revenue Recognition, (“ASC 985-605") because of (i) the infrequency of the tangible product's sale without a software element, (ii) the degree of integration between the tangible product and the software element, which is considered significant and (iii) the non-software element of the tangible product's substantive contributions to the tangible product's essential functionality. For these multiple-element arrangements, the Company allocates the total arrangement fee to all deliverables based on a selling price hierarchy. The selling price for a deliverable is based on VSOE, if available, third party evidence (“TPE"), if VSOE is not available, or estimated selling price (“ESP”), if neither VSOE nor TPE is available. The Company generally expects that it will not be able to establish TPE due to the nature of the products sold and the markets in which it competes, and therefore relies upon VSOE or ESP in allocating the arrangement's arrangement fee. Once the arrangement fee has been allocated to each deliverable, revenue is recognized as each item is delivered.
VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. The Company has established VSOE for support and maintenance services, certain professional services, and education services.
ESP reflects the Company's best estimate of what the selling prices of elements would be if they were sold regularly on a standalone basis. ESP is based upon all reasonably available information including both market data and conditions and entity-specific factors. These factors include market trends and competitive conditions, product maturity, differences related to geography, distribution channel, deal size, and cumulative customer purchases. The Company has established ESP for software licenses, hardware and subscriptions and reviews them annually or more frequently when a significant change in the Company's business or selling practices occurs.
Delivery generally occurs when the Product is delivered to a common carrier at the Company's loading dock unless title and risk of loss transfers upon delivery to the customer. In sales transactions through a distributor or reseller, the Company generally recognizes revenues upon shipment to the distributor, reseller or identified end user, as applicable.
At the time of the Product sale, the Company assesses whether the fee associated with the revenue transaction is fixed or determinable and whether collection is probable. The assessment of whether the fee is fixed or determinable is based in part on the payment terms associated with the transaction. If any portion of a fee is due beyond the Company's normal payment terms, the Company evaluates the specific facts and circumstances to determine if the fee is fixed or determinable. If it is determined that the fee is not fixed or determinable, the Company recognizes revenue as the fees become due. If the Company determines that collection of a fee is not probable, then the Company will defer the entire fee and recognize revenue upon receipt of cash.
Product revenue for software licenses sold on a perpetual basis, along with hardware, is recognized at the inception of the arrangement, presuming all other relevant revenue recognition criteria are met. Product revenue for software sold on a non-perpetual basis (Rental or Term) is recognized ratably over the license term.
In connection with the sale of its software licenses, the Company sells support and maintenance services, which are recognized ratably over the term of the arrangement, typically one year . Under support and maintenance services, customers receive unspecified software product upgrades, maintenance and patch releases during the term, as well as internet and telephone access to technical support personnel.

Many of the Company's software arrangements also include professional services for consulting and implementation sold under separate agreements. Professional services revenue from these arrangements is generally accounted for separately from the software license because the services qualify as a separate element under ASC 985-605. The more significant factors considered in determining whether professional services revenue should be accounted for separately include (i) the nature of the services and whether they are essential to the functionality of the licensed product, (ii) the degree of risk, (iii) the availability of services from other vendors, (iv) the timing of payments and (v) the impact of milestones or acceptance criteria on the realizability of the software license fee. Professional services revenue under these arrangements, as well as when sold on a standalone basis, is generally recognized as the services are performed.
The Company recognizes revenue associated with education as these services are performed.

9


Hosting and managed services revenue reflects subscription and other recurring revenues which includes fees for access rights to software solutions offered under a subscription-based delivery model where the users do not take possession of the software. Under this model, the software applications are hosted by us or by a third party and the customer accesses and uses the software on an as-needed basis over the internet or via a dedicated line. The underlying arrangements typically (i) include a single fee for the service that is billed monthly, quarterly or annually, (ii) cover a period from 12 to 36 months and (iii) do not provide the customer with an option to take delivery of the software at any time during or after the subscription term. Hosting revenues are recognized ratably over the subscription term beginning on the commencement dates of each contract, which is the date the Company's hosting and managed services are made available to the customer. Professional services revenue for consulting or training services, when sold with hosted offerings, are accounted for separately if they have standalone value to the customer. The Company believes its professional services have standalone value because those services are sold separately by us and similar services are sold by other vendors. In addition, the Company’s hosted offerings have standalone value as such offerings are often sold separately.
Deferred revenues primarily represent payments received from customers for software licenses and updates, hardware, product support, installation services, educational services and hosting prior to satisfying the revenue recognition criteria related to those payments.The deferred revenue balance does not represent the total contract value of annual or multi-year, non-cancelable hosting and managed services agreements. Deferred revenue that will be recognized during the succeeding twelve month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent.
The Company records its estimate for customer returns or other customer allowances as a reduction in revenues. In determining the Company’s revenue reserve estimate, and in accordance with internal policy, the Company relies on historical data and known returned goods in transit. These factors, and unanticipated changes in the economic and industry environment, could cause the Company’s return estimates to differ from actual results.
NOTE 3—EQUITY
Stock-based compensation expense is reflected within the Company’s condensed consolidated statements of operations as follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Cost of services
$
10

 
$
2

 
$
18

 
$
16

Research and development
17

 
27

 
32

 
50

Selling, general and administrative
51

 
21

 
98

 
48

Total
$
78

 
$
50

 
$
148

 
$
114

NOTE 4—FAIR VALUE

Financial Assets and Liabilities Recorded at Fair Value
The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value as of June 30, 2015 (in thousands):
 
 
 
Total
Fair Value
 
Quoted
Prices in
Active Markets
(Level 1)
 
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
21,593

 
$
21,593

 
$

 
$



10


The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value as of December 31, 2014 (in thousands):
 
 
 
Total
Fair Value
 
Quoted
Prices in
Active Markets
(Level 1)
 
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
17,030

 
$
17,030

 
$

 
$


Financial Assets and Liabilities Not Recorded at Fair Value
The estimated fair values of the amounts borrowed under the Company's debt obligations were based on a Level 2 input using quotes from third-party banks for the Company's debt which is subject to infrequent transactions (i.e. a less active market). As of June 30, 2015 and December 31, 2014, the Company's first lien credit facility had a fair value of approximately $442.7 million and $448.5 million , respectively. As of June 30, 2015 and December 31, 2014, the Company's senior second lien notes had a fair value of approximately $306.4 million and $302.4 million , respectively.

On February 4, 2013 the Company purchased 1,712,392 ordinary shares of eg solutions plc. ("eg"), a back office optimization software company in the United Kingdom at a cost of approximately £1.25 million , or $1.9 million . The Company concurrently entered into a reseller agreement which grants Aspect the right to market and distribute eg's products and services in all territories with exclusivity rights in all territories other than Europe, Middle East and Africa. The Company must achieve minimum annual revenue targets to maintain the exclusivity rights and was issued a conditional warrant to purchase up to 400,000 shares ,which is approximately 2% of its current outstanding equity, at a price of 0.79 pence per share based upon annual revenue levels within the first two years of the agreement. In addition, during 2014 the Company issued a convertible loan note to eg of approximately £0.55 million plus interest at an annual rate of 10% , which was converted to 435,945 shares at a price of 0.50 pence per share in the first quarter of 2015. The Company recorded the acquired shares at cost and has accounted for this investment under the equity method. Under this method, the Company recorded a reduction in the investment of less than $0.1 million for the three and six month periods ended June 30, 2014 for its proportionate share of eg’s net loss based on the most recently available financial statements. The Company's aggregate investment in eg was $2.2 million and $1.8 million as of June 30, 2015 and December 31, 2014, respectively.
NOTE 5—GOODWILL
Changes in the carrying amount of goodwill are as follows (in thousands):
Balance as of December 31, 2014
$
751,063

Foreign currency translation
259

Balance as of June 30, 2015
$
751,322

NOTE 6—INCOME TAXES
The Company’s income tax expense was $0.9 million and $2.6 million for the three and six months ended June 30, 2015, respectively compared to an income tax benefit of $2.0 million and $0.4 million for the three months and six months ended June 30, 2014, respectively. The Company’s tax provision in each period differs from the amount resulting from applying statutory rates primarily due to foreign operations in lower tax jurisdictions, tax reserve adjustments, valuation allowance adjustments, and foreign withholding taxes.
The Company’s total unrecognized tax benefits were approximately $35.4 million and $34.0 million as of June 30, 2015 and December 31, 2014, respectively. T he amount of unrecognized tax benefits could be reduced upon closure of tax examinations or if the statute of limitations on certain tax filings expires without assessment from the relevant tax authorities. The Company believes that it is reasonably possible that there could be a reduction in unrecognized tax benefits during the next 12 months of approximately $2.0 million .


11


NOTE 7—RESTRUCTURING
Components of the restructuring accrual were as follows (in thousands):
 
 
Consolidation of
Facilities Costs
 
Balance as of December 31, 2014
 
$
3,046

 
Charges
 
659

 
Interest accretion
 
66

 
Payments
 
(743
)
 
Balance as of June 30, 2015
 
$
3,028

 
Restructuring adjustments during the six months ended June 30, 2015, primarily reflect revisions to prior year charges related to vacating excess capacity office space in certain facilities in the United States. There were no such charges as of June 30, 2014.
NOTE 8—CONTINGENCIES
Litigation
The Company, from time to time, is party to litigation arising in the ordinary course of its business. Management does not believe that the outcome of these claims will have a material adverse effect on the consolidated financial condition of the Company based on the nature and status of proceedings at this time.
At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. Legal costs are expensed as incurred.
NOTE 9—RELATED PARTY TRANSACTIONS
The Company incurred advisory fees from Holdings' majority shareholder totaling $0.5 million for the three months ended June 30, 2015 and 2014 and $1.0 million for the six months ended June 30, 2015 and 2014. The fees related to management and advisory services rendered in connection with a consulting agreement entered into by both parties. The advisory fees are included in general and administrative expenses in the accompanying condensed consolidated statements of operations, with a related accrued expense of $4.0 million and $3.0 million as of June 30, 2015 and December 31, 2014 , respectively.
As of June 30, 2015 and December 31, 2014 , approximately $50.0 million of the second lien credit facility was held by a corporation owned by certain of Holdings' shareholders to which the Company paid semi-annual interest of $2.7 million during the six months ended June 30, 2015 and 2014. The Company had accrued interest expense of approximately and $0.7 million related to certain of Holdings' shareholders' second lien credit facility holdings as of June 30, 2015 and December 31, 2014 .

In March 2014, the majority shareholder of Aspect Software Group Holdings Ltd. acquired LiveVox, Inc. (“LiveVox”) a
leading provider of cloud contact center solutions. The Company concurrently entered into a strategic partnership with LiveVox
which initially focuses on a joint go to market between the companies. Aspect and LiveVox will cross-license and cross-sell
each other’s products to better serve current and new customers. The companies will leverage the scale of both organizations to
optimize efficiencies in network and telecommunications infrastructure. The Company’s Chief Executive Officer, Stewart
Bloom, was appointed to the board of directors of LiveVox. There were no amounts recorded in the accompanying condensed consolidated statements of operations or condensed consolidated balance sheet during the six month periods ended June 30, 2015 or 2014 related to this partnership.
NOTE 10—SUBSEQUENT EVENTS

On August 4, 2015, the Company invested approximately $2 million to acquire certain assets of a natural language processing software company. This investment will enhance the Company's solution portfolio by providing real-time multilingual text analytics, automatic translation and fast, cost-effective natural language interfaces.

The Company has evaluated all subsequent events and determined that there are no further material recognized or unrecognized
subsequent events requiring disclosure.


See accompanying notes.
12


NOTE 11—SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIALS
The Company’s debt issued in May 2010 is fully and unconditionally and jointly and severally guaranteed by Aspect Software Parent, Inc. and each of its domestic subsidiaries. Aspect Software Inc. is the issuer of the Company’s debt. Each of the guarantor subsidiaries is 100% owned, directly or indirectly by Aspect Software Parent, Inc. The following represents the supplemental condensed financial information of Aspect Software Parent, Inc. and its guarantor and non-guarantor subsidiaries, as of June 30, 2015 and December 31, 2014 , and for the three and six months ended June 30, 2015 and 2014 .

Supplemental Condensed Consolidating Balance Sheet (unaudited)
June 30, 2015
 
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
7,448

 
$
14,145

 
$

 
$
21,593

Accounts receivable, net
 
55,298

 
70,725

 
(82,681
)
 
43,342

Receivable due from Aspect Software Group Holdings Ltd.
 
482

 

 

 
482

Deferred tax assets
 
1,809

 
1,866

 

 
3,675

Other current assets
 
18,784

 
5,162

 

 
23,946

Total current assets
 
83,821

 
91,898

 
(82,681
)
 
93,038

Property, plant, and equipment, net
 
19,006

 
3,073

 

 
22,079

Intangible assets, net
 
45,243

 
7,535

 

 
52,778

Goodwill
 
714,795

 
36,527

 

 
751,322

Investment in subsidiaries
 
77,937

 

 
(77,937
)
 

Other assets
 
(557
)
 
9,426

 

 
8,869

Total assets
 
$
940,245

 
$
148,459

 
$
(160,618
)
 
$
928,086

Liabilities and deficit
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Accounts payable
 
$
63,218

 
$
27,875

 
$
(82,681
)
 
$
8,412

Current portion of long-term debt
 
448,080

 

 

 
448,080

Accrued liabilities
 
35,592

 
10,833

 

 
46,425

Deferred revenues
 
60,722

 
21,045

 

 
81,767

Total current liabilities
 
607,612

 
59,753

 
(82,681
)
 
584,684

Deferred tax liabilities
 
28,989

 
3,630

 

 
32,619

Long-term deferred revenue
 
1,156

 
453

 

 
1,609

Long-term debt
 
319,615

 

 

 
319,615

Other long-term liabilities
 
42,451

 
6,686

 

 
49,137

Total liabilities
 
999,823

 
70,522

 
(82,681
)
 
987,664

Total Aspect Software Parent, Inc. deficit
 
(59,578
)
 
75,130

 
(77,937
)
 
(62,385
)
Noncontrolling interest
 

 
2,807

 

 
2,807

Total deficit
 
(59,578
)
 
77,937

 
(77,937
)
 
(59,578
)
Total liabilities and deficit
 
$
940,245

 
$
148,459

 
$
(160,618
)
 
$
928,086


13


Supplemental Condensed Consolidating Balance Sheet (unaudited)
December 31, 2014
 
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
2,124

 
$
14,906

 
$

 
$
17,030

Accounts receivable, net
 
71,021

 
65,701

 
(76,799
)
 
59,923

Receivable due from Aspect Software Group Holdings Ltd.
 
415

 

 

 
415

Deferred tax assets
 
1,808

 
1,908

 

 
3,716

Other current assets
 
16,496

 
5,009

 

 
21,505

Total current assets
 
91,864

 
87,524

 
(76,799
)
 
102,589

Property, plant, and equipment, net
 
18,146

 
3,427

 

 
21,573

Intangible assets, net
 
50,855

 
8,625

 

 
59,480

Goodwill
 
714,795

 
36,268

 

 
751,063

Investment in subsidiaries
 
67,041

 

 
(67,041
)
 

Other assets
 
8,166

 
8,990

 

 
17,156

Total assets
 
$
950,867

 
$
144,834

 
$
(143,840
)
 
$
951,861

Liabilities and deficit
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Accounts payable
 
$
59,718

 
$
32,168

 
$
(76,799
)
 
$
15,087

Current portion of long-term debt
 
17,094

 

 

 
17,094

Accrued liabilities
 
39,423

 
14,268

 

 
53,691

Deferred revenues
 
52,045

 
17,867

 

 
69,912

Total current liabilities
 
168,280

 
64,303

 
(76,799
)
 
155,784

Deferred tax liabilities
 
28,988

 
3,631

 

 
32,619

Long-term deferred revenue
 
1,571

 
897

 

 
2,468

Long-term debt
 
764,411

 

 

 
764,411

Other long-term liabilities
 
42,311

 
8,962

 

 
51,273

Total liabilities
 
1,005,561

 
77,793

 
(76,799
)
 
1,006,555

Total Aspect Software Parent, Inc. deficit
 
(54,694
)
 
63,409

 
(67,041
)
 
(58,326
)
Noncontrolling interest
 

 
3,632

 

 
3,632

Total deficit
 
(54,694
)
 
67,041

 
(67,041
)
 
(54,694
)
Total liabilities and deficit
 
$
950,867

 
$
144,834

 
$
(143,840
)
 
$
951,861







14


Supplemental Condensed Consolidating Statement of Operations (unaudited)
For the Three Months Ended June 30, 2015
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net revenues
 
$
71,973

 
$
33,559

 
$
(4,269
)
 
$
101,263

Cost of revenues
 
32,278

 
14,191

 
(4,269
)
 
42,200

Gross profit
 
39,695

 
19,368

 

 
59,063

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
8,609

 
2,918

 

 
11,527

Selling, general and administrative
 
21,192

 
10,487

 

 
31,679

Amortization expense for acquired intangible assets
 
1,789

 
244

 

 
2,033

Restructuring charges
 
863

 
24

 

 
887

Total operating expenses
 
32,453

 
13,673

 

 
46,126

Income from operations
 
7,242

 
5,695

 

 
12,937

Interest and other expense, net
 
(16,562
)
 
(1,359
)
 

 
(17,921
)
(Loss) income before income taxes
 
(9,320
)
 
4,336

 

 
(4,984
)
Provision for income taxes
 
855

 
59

 

 
914

Equity in earnings of subsidiaries
 
4,709

 

 
(4,709
)
 

Net (loss) income
 
(5,466
)
 
4,277

 
(4,709
)
 
(5,898
)
Less: Net loss attributable to noncontrolling interest
 

 
(435
)
 

 
(435
)
Net (loss) income attributable to Aspect Software Parent, Inc.
 
$
(5,466
)
 
$
4,712

 
$
(4,709
)
 
$
(5,463
)
  
For the Three Months Ended June 30, 2014
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net revenues
 
$
72,104

 
$
40,865

 
$
(5,383
)
 
$
107,586

Cost of revenues
 
34,766

 
17,515

 
(5,383
)
 
46,898

Gross profit
 
37,338

 
23,350

 

 
60,688

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
9,329

 
3,075

 

 
12,404

Selling, general and administrative
 
22,045

 
11,486

 

 
33,531

Amortization expense for acquired intangible assets
 
1,792

 
296

 

 
2,088

Total operating expenses
 
33,166

 
14,857

 

 
48,023

Income from operations
 
4,172

 
8,493

 

 
12,665

Interest and other expense, net
 
(17,555
)
 
(1,463
)
 

 
(19,018
)
Income (loss) before income taxes
 
(13,383
)
 
7,030

 

 
(6,353
)
(Benefit from) provision for income taxes
 
(3,033
)
 
1,032

 

 
(2,001
)
Equity in earnings of subsidiaries
 
6,452

 

 
(6,452
)
 

Net (loss) income
 
(3,898
)
 
$
5,998

 
$
(6,452
)
 
$
(4,352
)
Less: Net loss attributable to noncontrolling interest
 

 
(454
)
 

 
(454
)
Net (loss) income attributable to Aspect Software Parent, Inc.
 
$
(3,898
)
 
$
6,452

 
$
(6,452
)
 
$
(3,898
)

15


Supplemental Condensed Consolidating Statement of Operations (unaudited)
For the Six Months Ended June 30, 2015
 
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net revenues
 
$
147,607

 
$
68,224

 
$
(8,537
)
 
$
207,294

Cost of revenues
 
65,916

 
28,504

 
(8,537
)
 
85,883

Gross profit
 
81,691

 
39,720

 

 
121,411

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
17,461

 
5,778

 

 
23,239

Selling, general and administrative
 
41,377

 
17,823

 

 
59,200

Amortization expense for acquired intangible assets
 
3,579

 
494

 

 
4,073

Restructuring charges
 
635

 
24

 

 
659

Total operating expenses
 
63,052

 
24,119

 

 
87,171

Income from operations
 
18,639

 
15,601

 

 
34,240

Interest and other expense, net
 
(33,042
)
 
(3,828
)
 

 
(36,870
)
(Loss) income before income taxes
 
(14,403
)
 
11,773

 

 
(2,630
)
Provision for income taxes
 
1,577

 
1,003

 

 
2,580

Equity in earnings of subsidiaries
 
11,592

 

 
(11,592
)
 

Net income
 
(4,388
)
 
10,770

 
(11,592
)
 
(5,210
)
Less: Net loss attributable to noncontrolling interest
 

 
(825
)
 

 
(825
)
Net (loss) income attributable to Aspect Software Parent, Inc.
 
$
(4,388
)
 
$
11,595

 
$
(11,592
)
 
$
(4,385
)
For the Six Months Ended June 30, 2014
 
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net revenues
 
$
145,042

 
$
80,128

 
$
(9,898
)
 
$
215,272

Cost of revenues
 
69,451

 
34,550

 
(9,898
)
 
94,103

Gross profit
 
75,591

 
45,578

 

 
121,169

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
20,603

 
6,088

 

 
26,691

Selling, general and administrative
 
42,887

 
21,673

 

 
64,560

Amortization expense for acquired intangible assets
 
3,584

 
586

 

 
4,170

Total operating expenses
 
67,074

 
28,347

 

 
95,421

Income from operations
 
8,517

 
17,231

 

 
25,748

Interest and other expense, net
 
(33,594
)
 
(4,289
)
 

 
(37,883
)
(Loss) income before income taxes
 
(25,077
)
 
12,942

 

 
(12,135
)
(Benefit from) provision for income taxes
 
(2,140
)
 
1,753

 

 
(387
)
Equity in earnings of subsidiaries
 
11,935

 

 
(11,935
)
 

Net (loss) income
 
(11,002
)
 
11,189

 
(11,935
)
 
(11,748
)
Less: Net loss attributable to noncontrolling interest
 

 
(746
)
 

 
(746
)
Net (loss) income attributable to Aspect Software Parent, Inc.
 
$
(11,002
)
 
$
11,935

 
$
(11,935
)
 
$
(11,002
)


16


Supplemental Condensed Consolidating Statement of Comprehensive Income (Loss) (unaudited)

For the Three Months Ended June 30, 2015
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net (loss) income
 
$
(5,466
)
 
$
4,277

 
$
(4,709
)
 
$
(5,898
)
Change in cumulative translation adjustment
 
639

 
(1,261
)
 
45

 
(577
)
Comprehensive (loss) income
 
(4,827
)
 
3,016

 
(4,664
)
 
(6,475
)
Comprehensive loss attributable to noncontrolling interest
 

 
(435
)
 

 
(435
)
Comprehensive (loss) income attributable to Aspect Software Parent, Inc.
 
$
(4,827
)
 
$
3,451

 
$
(4,664
)
 
$
(6,040
)
For the Three Months Ended June 30, 2014
 
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net (loss) income
 
$
(3,898
)
 
$
5,998

 
$
(6,452
)
 
$
(4,352
)
Change in cumulative translation adjustment
 
238

 
(742
)
 
(23
)
 
(527
)
Comprehensive income (loss)
 
$
(3,660
)
 
$
5,256

 
$
(6,475
)
 
$
(4,879
)
Comprehensive loss attributable to noncontrolling interest
 

 
(454
)
 

 
(454
)
Comprehensive income (loss) attributable to Aspect Software Parent, Inc.
 
$
(3,660
)
 
$
5,710

 
$
(6,475
)
 
$
(4,425
)

For the Six Months Ended June 30, 2015
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net (loss) income
 
$
(4,388
)
 
$
10,770

 
$
(11,592
)
 
$
(5,210
)
Change in cumulative translation adjustment
 
12

 
136

 
30

 
178

Comprehensive (loss) income
 
(4,376
)
 
10,906

 
(11,562
)
 
(5,032
)
Comprehensive loss attributable to noncontrolling interest
 

 
(825
)
 

 
(825
)
Comprehensive (loss) income attributable to Aspect Software Parent, Inc.
 
$
(4,376
)
 
$
11,731

 
$
(11,562
)
 
$
(4,207
)
For the Six Months Ended June 30, 2014
 
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net (loss) income
 
$
(11,002
)
 
$
11,189

 
$
(11,935
)
 
$
(11,748
)
Change in cumulative translation adjustment
 
(97
)
 
(735
)
 
(7
)
 
(839
)
Comprehensive (loss) income
 
$
(11,099
)
 
$
10,454

 
$
(11,942
)
 
$
(12,587
)
Comprehensive loss attributable to noncontrolling interest
 

 
(746
)
 

 
(746
)
Comprehensive (loss) income attributable to Aspect Software Parent, Inc.
 
$
(11,099
)
 
$
11,200

 
$
(11,942
)
 
$
(11,841
)


17


Supplemental Condensed Consolidating Statement of Cash Flows (unaudited)
For the Six Months Ended June 30, 2015
 
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Operating activities:
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
24,290

 
$
130

 
$

 
$
24,420

Investing activities:
 
 
 
 
 
 
 
 
Purchases of property and equipment
 
$
(4,916
)
 
$
(503
)
 
$

 
$
(5,419
)
Net cash used in investing activities
 
(4,916
)
 
(503
)
 

 
(5,419
)
Financing activities:
 
 
 
 
 
 
 
 
Repayment of borrowings
 
(14,050
)
 

 

 
(14,050
)
Net cash used in by financing activities
 
(14,050
)
 

 

 
(14,050
)
Effect of exchange rate changes on cash
 

 
(388
)
 

 
(388
)
Net change in cash and cash equivalents
 
5,324

 
(761
)
 

 
4,563

Cash and cash equivalents:
 
 
 
 
 
 
 
 
Beginning of period
 
2,124

 
14,906

 

 
17,030

End of period
 
$
7,448

 
$
14,145

 
$

 
$
21,593


Supplemental Condensed Consolidating Statement of Cash Flows (unaudited)
For the Six Months Ended June 30, 2014
 
(in thousands)
 
Issuer /
Guarantor
Subsidiaries
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Operating activities:
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
 
$
21,266

 
$
(7,090
)
 
$

 
$
14,176

Investing activities:
 
 
 
 
 
 
 
 
Purchases of property and equipment
 
(5,322
)
 
(975
)
 

 
(6,297
)
Net cash used in investing activities
 
(5,322
)
 
(975
)
 

 
(6,297
)
Financing activities:
 
 
 
 
 
 
 
 
Repayment of borrowings
 
(28,200
)
 

 

 
(28,200
)
Borrowings under debt facilities
 
15,000

 

 

 
15,000

Proceeds received from capital contribution
 
4

 


 


 
4

Net cash provided by financing activities
 
(13,196
)
 

 

 
(13,196
)
Effect of exchange rate changes on cash
 

 
(757
)
 

 
(757
)
Net change in cash and cash equivalents
 
2,748

 
(8,822
)
 

 
(6,074
)
Cash and cash equivalents:
 
 
 
 
 
 
 
 
Beginning of period
 
3,764

 
22,930

 

 
26,694

End of period
 
$
6,512

 
$
14,108

 
$

 
$
20,620



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