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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended September 30, 2003

OR

For the transition period from         to        

Commission File Number 000-21771

West Corporation

Registrant’s telephone number, including area code: (402) 963-1200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

At November 3, 2003, 67,198,611 shares of Common Stock, par value $.01 per share, of the registrant (“Common Stock”) were outstanding.

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INDEPENDENT ACCOUNTANTS’ REPORT

Board of Directors and Stockholders
West Corporation
Omaha, Nebraska

We have reviewed the accompanying consolidated balance sheet of West Corporation and subsidiaries (the “Company”) as of September 30, 2003, and the related consolidated statements of operations for the three-month and nine-month periods ended September 30, 2003 and 2002 and of cash flows for the nine-month periods ended September 30, 2003 and 2002. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of West Corporation and subsidiaries as of December 31, 2002, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 4, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2002 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Omaha, Nebraska
October 22, 2003

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

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

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WEST CORPORATION
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)

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

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WEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)

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

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WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.    BASIS OF CONSOLIDATION AND PRESENTATION

     West Corporation (the “Company”) is one of the largest independent providers of outsourced communication services and worldwide conferencing services. The Company enables its clients to outsource a full range of communication services as well as providing audio, video and web conferencing services. The Company provides services to its clients through two segments, communication services and conferencing services. The Company was founded in 1986 and is headquartered in Omaha, Nebraska.

     The Company’s communication services segment is composed of agent and automated services. Agent services provide clients with a comprehensive portfolio of agent-based services driven by both customer–initiated and Company-initiated transactions. The Company offers its clients large volume transaction-processing capabilities, including order processing, customer acquisition, customer retention, customer care, and accounts receivable management. Agent services are primarily directed towards consumer applications and has a presence in business-to-business applications. Automated services utilize over 140,000 Interactive Voice Response (“IVR”) ports, which provide large volume automated voice response services to clients. Examples of IVR services include secured automated credit card activation, prepaid calling card services, automated product information requests, answers to frequently asked questions, utility power outage reporting and call routing and call transfer services.

     The Company’s conferencing services include a integrated suite of audio, video and web conferencing services. Audio conferencing services include a full spectrum of audio conferencing solutions – from the most basic automated solutions to highly complex, operator-assisted, event driven solutions. Video conferencing services provide basic video conferencing services with the additional ability to visually share documents and presentations. Web conferencing services provide web conferencing and interactive web casting services.

     The communication services segment operates a network of state-of-the-art customer contact centers and automated voice and data processing centers throughout the United States and in Jamaica, India and Canada. The conferencing services segment operates facilities in the United States, the United Kingdom, Canada, Singapore, Australia and New Zealand.

     The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries and reflect all adjustments (all of which are normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results, and cash flows for the interim periods. The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, as amended. All intercompany balances and transactions have been eliminated. Certain amounts in prior fiscal periods have been reclassified for comparative purposes.

     Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

     Revenue recognition – The Company’s communication services segment recognizes revenue for customer-initiated, agent based services, including order processing, customer acquisition, customer retention and customer care in the month that calls are answered by an agent based on the number of calls and/or minutes received and processed on behalf of clients. For agent based services that are initiated by the Company including

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WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

order processing, customer acquisition, customer retention and customer care, revenue is recognized on an hourly basis or on a success rate basis in the month that the Company places calls to consumers on behalf of clients. Revenue for accounts receivable management services is recognized in the month collection payments are received based upon a percentage of cash collected or other agreed upon contractual parameters. Automated services revenue is recognized in the month that the calls are received or sent by automated voice response units and is billed based on call duration.

     The Company’s conferencing services segment recognizes revenue when services are provided and generally consists of per-minute charges. Revenues are reported net of any volume or special discounts.

     Stock-based compensation – The Company accounts for its stock-based compensation plans under the provisions of Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees, which utilizes the intrinsic value method. As a result of the exercise price being equal to the market price at the date of grant, the Company recognized no compensation expense for the nine months ended September 30, 2003 and 2002.

     For purposes of pro forma disclosures, the estimated fair value of the options is amortized over the options’ vesting period. Had the Company’s stock option and stock purchase plan been accounted for under Statement of Financial Accounting Standard (“SFAS”) No. 123, Accounting for Stock-Based Compensation; net income and earnings per share for the three and nine months ended September 30, 2003 and 2002 would have been reduced to the following pro forma amounts:

     The weighted average fair value per share of options granted during the three months ended September 30, 2003 and 2002 was $23.53 and $17.40, respectively. The weighted average fair value per share of options granted during the nine months ended September 30, 2003 and 2002 was $18.97 and $20.49, respectively. The fair value for options granted under the above described plans was estimated at the date of grant using the Black Scholes pricing model with the following assumptions:

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WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

2.    ACQUISITIONS

     During 2002, the Company acquired Tel Mark Sales, Inc., Dakotah Direct II, LLC and Attention, LLC for an aggregate cost of $80.4 million, net of cash received of $5.0 million, which was paid entirely in cash.

     For these three acquisitions completed in 2002, the Company allocated the excess of the cost over the fair value of the assets acquired and liabilities assumed to goodwill based on independent appraisals. The appraisals for the Tel Mark Sales, Inc. and Dakotah Direct II, LLC acquisitions were completed in 2002. The appraisal for the acquisition of Attention, LLC was completed during the three months ended June 30, 2003. Goodwill recognized in those three transactions amounted to $79.1 million. Other intangible assets recognized in those transactions amounted to $18.6 million. These intangible assets, include customer lists, a favorable lease, non-competition agreements, trade names and software, are being amortized over one to twenty years, on a straight line basis, depending on the estimated remaining useful lives of the various intangible assets.

     On March 27, 2003, the Company announced the acquisition of ITC Holding Company, Inc., the parent company of InterCall, Inc. (“InterCall”) for a net purchase price of $396.9 million in cash. Headquartered in Chicago, Illinois, InterCall was the largest privately held provider of conferencing services in the world. InterCall provides audio, video and web conferencing services that are designed to meet the teleconferencing needs of a broad range of customers across a diverse range of businesses.

     For the InterCall acquisition, the Company allocated the excess of the cost over the fair value of the assets acquired and liabilities assumed to goodwill, trade names and other finite lived intangible assets based on a preliminary estimate provided by a third-party appraiser. Pending completion of the independent appraisal of InterCall, expected to be completed prior to year-end, estimated goodwill is $294.5 million. The amount of other finite and indefinite lived intangible assets recognized in this acquisition is estimated to be $63.1 million. The finite lived intangible assets, include customer lists and software, are being amortized over five years based on the estimated remaining useful lives of the intangible assets. Amortization expense for the InterCall finite lived intangible assets was $1.9 million for the three months ended September 30, 2003 and $3.6 million for the period commencing May 9, 2003 through September 30, 2003.

     Below is a summary of the major intangible assets and weighted average amortization period for each intangible asset associated with the acquisitions noted above.

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WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

     Amortization expense on finite lived intangible assets, for all of the above-referenced acquisitions, was $2.3 million and $0.5 million for the three months ended September 30, 2003 and 2002, respectively, and $5.8 million and $1.2 for the nine months ended September 30, 2003 and 2002, respectively.

     Estimated amortization expense (in thousands) for the intangible assets acquired in all of the above-referenced acquisitions for the remainder of fiscal 2003 and each of the next five years is as follows:

     The following table presents the activity in goodwill by reporting segment for the nine months ended September 30, 2003 (in thousands):

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WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

     The Company’s unaudited pro forma results of operations for the nine months ended September 30, 2003 and 2002 assuming the acquisitions occurred as of the beginning of the periods presented (in thousands, except per share data) are as follows:

     The pro forma results above are not necessarily indicative of the operating results that would have actually occurred if the acquisitions had been in effect on the date indicated, nor are they necessarily indicative of future results of the combined companies. The 2002 pro forma net income does not reflect expense for the amortization of intangible assets, which would have been recognized had the acquisitions occurred at the beginning of 2002.

3.

ACCRUED EXPENSES

     Accrued expenses (in thousands) consisted of the following as of:

4.

LONG-TERM OBLIGATIONS

     The Company established two bank credit facilities for the InterCall acquisition. The first facility is a $200.0 million four-year term loan. The second facility is a revolving credit facility of up to $125.0 million. At September 30, 2003 $8.0 million was outstanding on the revolving credit facility. Both facilities bear interest at a variable rate over a selected LIBOR based on the Company’s leverage. The effective annual interest rate, inclusive of debt amortization costs, on the term loan for the three months ended September 30, 2003, was 3.20%. The weighted average contractual rate on the term loan at September 30, 2003 was 2.86%. The average daily outstanding balance of the revolving credit facility during the three months ended September 30, 2003, was $21.8 million. The effective annual interest rate, inclusive of debt amortization costs, on the revolving credit facility for the three months ended September 30, 2003, was 2.95%. The commitment fee on the unused revolving credit facility at September 30, 2003, was 0.35%. The facilities bear interest at a minimum of 100 basis points over the selected LIBOR and a maximum of 200 basis points over the selected LIBOR. The facilities are secured by the capital stock of all material existing and future domestic and foreign subsidiaries of the

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WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Company. All obligations of the Company under the facilities are unconditionally guaranteed by all material existing and subsequently acquired domestic subsidiaries of the Company. The facilities contain various financial covenants, which include a consolidated leverage ratio of funded debt to adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) which may not exceed 2.0 to 1.0 and a consolidated fixed charge coverage ratio of adjusted EBITDA to the sum of consolidated interest expense, scheduled funded debt payments, scheduled payments on acquisition earn-out obligations and income taxes paid, which must exceed 1.2 to 1.0. Both ratios are measured on a rolling four-quarter basis. The Company was in compliance with the financial covenants at September 30, 2003.

Long-term obligations (in thousands) consisted of the following as of:

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WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

     Scheduled maturities on long-term debt are as follows:

5.

OFF-BALANCE SHEET ARRANGEMENTS

     During the second quarter of 2003, the Company completed a transaction whereby a development company acquired the debt and equity holdings of the synthetic lease special purpose trust. The special purpose trust was terminated and the development company became the owner of the two buildings. The Company entered into a lease of the buildings from this development company. The development company is not a variable interest entity as defined by Financial Accounting Standards Board (“FASB”) Interpretation No. 46, Consolidation of Variable Interest Entities (an interpretation of ARB No. 51) (“FIN 46”). In addition, the development company partially utilized recourse capital to fund the acquisition of the buildings. The terms of the lease call for an initial lease term of five years with three renewal options of five years each subject to mutual agreement of the parties. The lease facility bears interest at a variable rate of 150 basis points over a selected LIBOR, which resulted in an annual effective interest rate of 2.74% at September 30, 2003. The aggregate lease expense on these leases with the development company and under the prior arrangement for the three months ended September 30, 2003 and 2002 were $246,515 and $78,948, respectively. The aggregate lease expense on these leases with the development company and under the prior arrangement for the nine months ended September 30, 2003 and 2002 were $630,375 and $227,450, respectively. Based on the Company’s variable-rate obligation at September 30, 2003, each 50 basis point increase would increase quarterly interest expense by approximately $50,000. The Company may, at any time, elect to exercise a purchase option of approximately $10.0 million for the San Antonio building and approximately $31.0 million for the Omaha building. If the Company elects not to purchase either building or renew either lease, the buildings would be returned to the lessee for remarketing. The Company has guaranteed a residual value of 85% to the lessor upon the sale of each building. At September 30, 2003, the fair value of the guaranteed residual value for the San Antonio and Omaha buildings was approximately $2.2 million.

     These synthetic lease arrangements qualify and are recorded as operating leases and therefore the requirements of FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN 45”) apply. The initial recognition and measurement provisions of FIN 45 are required on a prospective basis to guarantees issued or modified after December 31, 2002. Thus, the Company recognized the fair value of the guaranteed residual value in its financial statements upon completion of the lease arrangements during the second quarter of 2003.

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WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

6.

EARNINGS PER SHARE

     Basic earnings per share is calculated on the basis of weighted average outstanding common shares. Diluted earnings per share is computed on the basis of weighted average outstanding common shares plus equivalent shares assuming exercise of stock options. At September 30, 2003 and 2002, there were 837,749 and 872,026 options outstanding respectively, with exercise prices exceeding the market value of the Company’s Common Stock, that were therefore excluded from the computation of shares issuable upon exercise of the options.

7.

STOCK-BASED COMPENSATION

     The following table presents the activity of the stock options for the nine months ended September 30, 2003:

     The following table summarizes information about the Company’s employee and directors stock options outstanding at September 30, 2003:

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WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)