This text is machine-read, and may contain errors. Check the original document to verify accuracy.
•
sheet distributed to Securus Team
: continuous NOC
doc:umentation
1.3.1.9.2.2.9.2.2
1.3.1.9.2.2.9.2.3
... -_...-.--_.
Center
-----.---..,.=:::.:..:.:::----,.--~-----I
•
documentation
1.1.2
Transition
cables from Incumbent tD Securus SCP
distributed to Securus Team
: continuous NOC
•
•
Outline level'
WBS
0
[8
1.3.1.9.2.3.1.3
1.3.1.9.2.3.1.3.1
9
1.3.1.9.2.3.1.3.3 9
1.3.1.9.2.3.1.4
j8
~
9
-.,
-
..
~erifications
1.3.1.9.2.3.2.2.3
Uve networt< traffic monitoring : contin~ous NOC monitoring
Network Operations Center
Post cutover ~quipment monitoring
ISite Engineer4
Installation Finalization
•
10
1.3.1.9.2.3.2.3
8
1.3.1.9.2.3.2.3.2
Update Site Design f Engineering documentation
~th
J
9
8
IFinal site review
aean-up and exit
1.3.1.9.2.3.2.4.1 19
1 hr
1 hr
-
I
8hrs
2hrs
Engineer and Project Manager
-
-_. --
Ilhr
9
...1Notice to MODOC Facility
Transition
1.3.1.9.2.3.3.2.1 .19
perso~nel-
Ready for ITS Transition
I Move 25 pair cables from Intumbent to SecuruS SCI' equipment
.
"
0
1.3.1.9.2.3.3.2.4 19
0
1.3.1..9.2.3.3.3
..
j8
1.3.1.9.2.3.3.3.1
9
1.3.1:~.2.:3.~:3.219
1.3.1.9.2.3.3.3.3
9
1 hr
I
."- _.
...._-
I:ield Service
Technician 7
Field Service'
Technician 7
Ilhr
Ilhr
...
_0'
Network Operations Center
I Post cutover equipment monitoring
Site Engineer 4
Ilnstallation Finalization
...
18 hrs
.
~--
Complete walk through
_I Update Site Design I Engineering documentation
I
B hrs
..
Final site revIew with Engineer and Project Manager
..
Ilhr
1 hr
I
Sh
1
116h
11h
". ._. 0.38d
-.--
IField Service
Technician 8
Field Service
Technician 8
Network Operations
Center
Network Operations
Center
ISite Engineer4
Site Engineer 4
1
1h
2h
I.Field Service
Technician 8
IUve network traffic monitoring: continuous NOC monitoring
_.
'. ..
Technician 7
[
10.5h
2d
." Field Service
Ilhr
0.5 hrs
...
-
I:ield Service
Technician 8
Field Service
Technician 8
Cut sheet distributed to Securus Team
9
1.3.1.9.2.3.3.2.3 19
'v
Debit balance verifications
1.3.1.9.2.3.3.1.319
1.3.1.9.2.3.3.2
8
1.3.1.9.2.3.3.2.2
_
1h
l~etwDrk Operations
Center
5ite Engineer'4
ISite Engineer 4
Ihr
~
1h
I.Field Service
Technician 7
"
2h
11h
IField Service
Technician 7
NetwDrk Operations
Center
I:ield Service
Technician 7
Ilhr
IPhone room and eqUipment inspection
-
-
lId
".
116 hrs
..
...
- ..
Field Servia!
Technician 7
1.3.1.9.2.3.3.1.1 19
1.3.1.9.2.3.3.1.2
11h
2d
IO.2Sd
[
1.3.1.9.2.3.2.4.2
1.3.1.9.2.3.3
17
1.3.1.9.2.3.3.1
8
•
..
13hr.
9
2h
Field Ser~ice
Technician 7
I
IPhone room dean-up
Customer meeting to transition installation materials, site property,
etc.
[South Central Correctional Center -79 ITS & 1 TOO
Transition Prep'eration
. "--
.-
Field Service
Technician 6
lField Service
Technician 6
field Sen-ice
Technician 7
Field Service
Technitian 7
..
1h
jO.25d
[
I
IcomPlete walk through
1.3.1.9.2.3.2.3.3
1.3.1.9.2.3.2.4
--
I
1 hr
-_ ..
1.3.1.9.2.3.2.3.1 19
9
.
lo.shrs
-.
..
J
9
11 hr
~-
ICut sheet distributed to Securus Team
10
2 hrs
11 Ilr
"
1.3.1.9.2.3.2.2.2 19
1.3.1.9.2.3.2.2.4
Ilh
.'
Move 2S pair cables from Incumbent to Securus SCP eqUipment
9
Sh
I
21lrs
"~-
,--_.
[ld
IField Service
Technician 6
Field Service
Technician 6
I
Notice to MODOC Facility Personnel· Ready for ITS Transition
..lTransition
...
- ...
.
9
L
Field Service
Tethnician 6
1 hr
.-
I Debit balance
1.3.1.9.2.3.2.1.3 9
1.3.1.9.2.3.2.2 J8
....
1.3.1.9.2.3.2.2.1
Final site review with Engineer and Project Manager
jClea<l-up and e~it
Phone room and equipment inspection
1.3.1.9.2.3.2.1.2 19
.,y--
Ilhr
-
.-
Scheduloe Duration
Resource Names
Site Engineer 4
Shrs
Phone room clean-up
I~ustomer meeting to transition installation materials. site property,
etc.
EaStern Reception & Diagnostic Center- 167 ITS & 1 TOO
.. ,,)Transition Preperation
-- -- .. _-
1.3.1.9.2.3.1.4.2 19
1.3.1.9.2.3.2
7
1.3.1.9.2.3.2.1 18
9
1
..
IUpdate Site Design f Engineering documentation
.-
1.3.1.9.2.3.2.1.1
DuratIon
Complete walk through
1.3.1.9.2.3.B.2 19
1.3.1.9.2.3.1.4.1
Task Name
Site Engineer 4
[Installation Finalization
13h
._.-
1h
[Id
O.13d
11h
.
.
...
Ih
11h
1d
11h
O.Sh
11h
ISh
I
-
--,-
-..
lId
FIeld Seiiiice
Technidan 8
..-
8h
IField Service
Technician 8
Field SeNite
Technician 8
11h
".
1h
-_
13192334
Outline Level
8
1.3.1.9.2.3.3.4.1
9
WBS
..
...
1.3.1.9.2.3.3.4:2..19
7
1.3.1.9.2.3.4
1.3.1.9.2.3.4.1 ~8
1.3.1.9.2.3.4.1.1
-_. -
Task Name
-
IDebit balance verifications
.. -
1.3.1.9.2.3.4.1.3 9
1.3.1.9.2.3.4.2
18
1.3.1.9.2.3.4.3
Field Service
Technician 9
Ifield Service'
Technician 9
Field Service
Technician 9
_.
I
0.5 hrs
distrib~.ted ~o Sewrus Team
_.
INetwork Operalions Center
Post cutover equipment monitoring
ISite Engineer 1
Installation Finalization'
Ihr
1
8 hrs
o'
I
_.
lcomPlete .walkthrough
-
.
Ih
lId
O.Sh
..
14 hr.
- --
10.5h
..
1h
I
- .-
8h
I
O.5e!
Technician 9
- --- Field Service
Ihr
IFinal site review with-Engineer and Project Manager
Clean.up and exit
.
1.3.1.9.2.3.4.3.3 19
8
1.3.1.9.2.3.4.4
11 hr
14h
ITechnician 9 ...
~ield Service
Technician 9
. -.-
Ih
11h
O.25d
_ r ___ '
-_
..
I Phone room clean·up
._.12 hrs
Customer meeting to transition installation materials, site property,
etc.
1 hr
IFarmington Correctional Center· 135 ITS & 1 TOO
I
- .'Transition Preperation
"
1.3.1.9.2.3.4.4.2 9
1.3.1.9.2.3.5
.17
8
1.3.1.9.2.3.5.1
.-.
1.3.1.9.2.3.5.1.1 19
1.3.1.9.2.3.5.1.2
9
.-
1.3.1.9.2.3.5.1.3 19
1.3.1.9.2.3.5.2
8
.
INotice to MODOC fadflty Personnel· Ready for lTS Transition
Transition
-
.- .
IMove 25 pair cables from Incumbent to Securus SCP equipment
. ...
-
1.3.1.9.2.3.5.2.1 19
CUt sheet distributed to Securus Team
1.3.1.9.2.3.5.2.2 9
':.3.1.9.2.3.5.2.3 19
IUve network traffic monitorins : ~:ntinuous NOC monitoring
---
0
1.3.1.9.2.3.5.2.4 19
.- 0
Ig
1.3.1.9.2.3.5.3
Network Operations Center
IPost cutover equipment monitOring
Site Engineer 4
IInstallation Finalization
..
1.3.1.9.2.3.5.3.1
1.3.1.9.2_3.5.3.2
r._~
Compiete walk through
9
19
1.3.1.9.2.3.5.3.3 9
1.3.1.9.2.3.5.4
18
1.3.1.9.2.3.5.4.1
..
9
1.3.1.9.2.3.5.4.2 19
1.3.1.9.2.3.6
7
1.3.1.9.2.3.6.1
18
IUpdate Site Design I Engineering documentation
-- ."
-
..
11 hr
I~ield Service
Technician 1
lal
0.511r5
lar
18 hrs
I
..
-
Final site review with Engineer and Project Manager
IClean-up and exit
Phone room clean·up
1~lIstomer meeting to transition installation materials. site property,
etc.
...
Southeast Correctional Center ·88 ITS & 1 TOO
jTransition Preperation
1h
12d
0.25d
I~ie1d Service
Technician 1
Field Service
Technician 1
12 hrs
.rr",
Debit balance verifications
. .J2h
I
1 hr
Iphone room and equipment inspection
-.
Technician 9
Field SerVice
Technician 9
--
16hrs
12hrs ... -
I.field Service
Technician 1
Field Service
Technician 1
"r
•
J~eld Service
1.3.1.9.2.3.4.4.1 19
.
I~ield Service
Update Site Design I Engineering documentation
-
--
I~ield Service
Technician 9
Network Operations
Center
1~etwork Operations
Center
Site Engineer 1
ISite Engineer 1
10.5 hrs
.
Uve network traffic monitoring: continuous NOC monitoring
10
9
10
8
11h
Field Service
Technician 9
Icut sheet
..
Ih
I
1 hr
•
."
11h
- . ...
Id
IO.13d
I
. Move 25 p,ir cables from Incumbent to Securll. SCP equipment
9
9
I
Ilhr
.
.-
.------
9
1.3.1.9.2.3.4.3.11
1.3.1.9.2.3.4.3.2
."
1 hr
-- -'
-..
2h
Ifield Service
Technician 8
Notice to MODOC Facility Personnel· Ready for ITS Transition
ITransition
..
1.3.1.9.2.3.4.2.2 .19
1.3.1.9.2.3.4.2.4
Field Service
Technician 8
11 hr
Phone room and equipment inspection
"."."
1.3.1.9.2.3.4.2.3
.--
.
9
2 hr.
Schedule Our.toon
025d
Resource Names
-
Phone room clean-up
1~lIstomer meeting to transition installation materials, site property,
etc.
--- .
Ozark Correttional Center· 26 ITS & lIDO
jTransition Preperation
1.3.1.9.2.3.4.1.2 19
1.3.1.9.2.3.4.2.1
DuratIOn
Clean up a d extt
12h
--
~~
Ih
11h
ld
_
.
11h
...
a.SIt
I
~etwork Operations
Center
Network OperatiDlis
Center
ISite Engineer 4
Site En!!in';;'r 4
11h
I~h
Ild
I
Field Service
Technician 1
.
-~.
~
.
16h
I.Field Service
"Technician 1
Field Service
Technician 1
12h
I
I
Ih
IO.38d
3 hr$
Field Service
Technician 1
- ----
3h
1 hr
11 hr
I:ield Service
Technician 1
_
I
I
""
r
11h
1d
IO.13d
--
•
•
ICut sheet distributed to Securus Team
... ._.
-
I
Network Operations Center
Post tutover equipment monitoring
[Site Engineer 4
Installation Finalization
..
10
B
._...
1.3.1.9.2.3.6.3.1 19
- --
1.3.1.9.2.3.6.4.2 9
1.4
12
•
1.4.1.16
1.4.1.16.1
1.4.1.16.2
1.4.1.16.3
. -... -
14
- ..4
15
5
..
Is
-.
4
--
.. 14
4
14
4
[4
4
15
5
15
5
14
5
Is
5
Is
5
..
IS
4
15
5
15
•
[
[Site Engi~:er 4
I
Ihr
I:ield Service
Technician 2
Field Sel\lice
Technician 2
11 hr
I:ield Service
Technician 2
.. -
..
e~it
IReview Guarded Exchange interface status
. ReView Guarded Exchange Monitoring program status
JGreen Llght for ITS Transition
Securus & Missouri DOC Project Team Meeting - Touch Point:
Transition Progress Review - Northwest Region
_LReview current progress on ITS transition
.
Review issues register
IReview risk register
_.
r
~
12 hr.
1 hr
I
..
.
Sh
12 hrs
2 hrs
12 hr.
2hrs
12 hrs
2 hrs
~
I
...
11 hr
2 hrs
12 hrs
2 hrs
12 hrs
2hrs
[2 hrs
Ih
11h
0.25d
I.Field Service
Technieian 2
Field SerVice
TechniCian 2
12h
0.2Sd
12h
2h
12h
2h
12h
2h
IProject Manager
Project Manager
IProject Manager
Project Manager
IProject Manager
Project Manager -
I
.•. Project Manager
- ...
10.5 hrs
0.5 his
10.5 hrs
0.5 hrs
I
0.5 hrs
10.5 hrs
0.5 hrs
10.5 hr.
O.S hrs
10.5 hrs
10.5 hrs
0.5 hrs
10.5 hrs
Project
IProject
Project
IProject
Project
Manager
Manager
Manager""
Manager
Manager
IProject Ma.nag-:r
Project Manager
IProject Manager
Project Manager
I
Project Manager
I Project Manager ..
...
IProject Manager
JProject Manager
Project Manager
IProject Manager
11h
--2h
12h
2h
12h
2h
12h
.
0.06d
10.Sh
O.Sh
10.5h
O.Sh
IProject Manager
I
.
10.13d
.O.Sh
- .. 10.Sh
0.5h·
Project Manager
IProject Manager
Project Manager
.
-
Ih
.12.5d
I
0.5 h ..
10.5 hrs
0.5 hrs
..
ISh .
I
..-
.
Ih
.I
.Is hrs
Distribute Information / Stakeholder Updates I Report Performance
IWeekly Project Stakeholder Meeting
..
Weeklv Project Stakeholder Meeting
IWeekiv Project Stakeholder Meeting
'. -Weekly Project Stakeholder Meeting
IWeekly Project Stakeholder Meeting
..
Weekly Project Stakeholder Meeting
I~ecuru. & Missouri DOC Project Team Meeting· Touch Point: PreTransition Installation Review
Review current progress
IConfirm LEC Tllnstallations complete
Confirm hardware Shipment. received at each' facility
l~evil!W and confirm Securus Installation Team schedules and fadlity
access
_.
Weekly Project Stakeholder Meeting
IWeekly Project Stakeholder Meeting
..
..
Weekly Project Stakeholder MIl!eting
IWeekly Project Stakeholder Meeting
Weekly Project Stakeholder Meeting
J~eeklY Project Stakeholder Meeting
Securus & Missouri DOC Project Team Meeting - Touch Point: Pre:
Transition Review
IReview Regional Summary Reports - Installation Activity
-Review Quality Control Documentation
IReview S-Gate User Interface training updates
Review Open Issues
I~ecurus & Missouri DOC ProjettTeam Meeting - Touch Point:
Transition Schedule Review
..
Reviewfinalized transition schedule
IReview Quality Control and Project Status reports
. _.
Review Huber interface status
~
'
Id
IPhone room dean-up
CustQmer meeting to transition installation materials, site prDperty,
etc.
""
I Project Monitor & C-;'~trol
.. -
14
5
1.4.1.15
1.4.1.1S.1
1.4.1.15.2
1.4.1.15.3
1.4.1.15.4
lA1.15.5
1.4.1.15.6
."
..
-"
lo.sh
.IINetwOrk Operations
Center
Site Engi"'ee'r 4 ..
Bhrs
..
IComplete walk through
Clean-up and
..
3
14
4
14
4
1.4.1.14
1.4.1.14.1
1.4.1.14.2
1.4.1.14.3
1.4.1.14.4
-
.10.5 hrs
..
Ih
I:ield Service
Technieian 2
Network Operations
Center
I
-
IFinal site review with Engineer and Project Manager
..-
1.3.1.9.2.3.6.4.1 19
..
.
1h
lId
Field Service
Technician 2
1 hr
Update Site Design / Engineering documentation
9
1.3.1.9.2.3.6.3.3 19
1.3.1.9.2.3.6.4
8
1.4.1.7.4
1.4.1.S
1.4.1.9
1.4.1.10
1.4.1.11
1.4.1.12
1.4.1.13
..
11h
I
1 hr
Llve network traffic monitoring: continuous NOC monitOring
10
1.3.1.9.2.3.6.2.4 9
1.4.1.7
1.4.1.7.1
1.4.1.7.2
1.4.1.7.3
1 hr
I
. _--
Move 25 pair cables from Incumbent to Securus SCP equipment
1.3.l.9.2.3.6.2.3 9
•
1h
I:ield Sel\lice
Technician :2
Field Service -Technician 2
11 hr
.-
J.Transi~io~
1.3.1.9.2.3.6.2.1 9
1.4.1
1.4.1.1
...
1.4.1.2
1.4.1.3
1.4.1.4
1.4.1.5
1.4.1.6
Field Sel\lice
Technician 2
Notice to MDDOC Facility Personnel - Ready for ITS Transition
1.3.1.9.2.3.6.1.3 9
1.3.1.9.2.3.6.2
[S_
1.3.1.9.2.3.6.3.2
Schedule DuratIOn
1 hr
IDebit balance verifications
1.3.1.9.2.3.6.1.2 19
1.3.1.9.2.3.6.3
Resource Names.
Phone room and equipment inspection
1.3.1.9.2.3.6.1.1 9
1.3.1.9.2.3.6.2.2 19
Our<"ttmn
Tas, Name
Outline Level
WSS
---
10.06d
O.5h
10.5h
O.Sh
10.Sh
OoSh
10.5h
0.06d
10.5h
O.Sh
10.5h
..
._-
WB!i
Outlin!! Level
Task Name
update schedule and registers as necessary
ISecurus & Missouri DOC Project Team Meeting - Touch Point:
ITransition Progre~s Review - Central Region
Review current progress on ITS transition
IReview issues register
Review' risk register
.Iupdate schedule and registers as necessary
S"i:urus & Missouri DOC Project Team Meeting - Touch Point:
_ _,::-_ _ _ _ ,.
Transition Progress Review - Southeast Reg"'i-',o,"'n_ _ _ _ _ __
IReview current progress Dn ITS transition
Review issues register ..
IReview risk register
update schedule and registers'as necessary
IPerform Quality Control
Integration Interface Quality Control
Duration
Resource Names
Project Manager
0.5hr~
1
1
la.Shrs
IProject Manager
'10.5 hrs
0.5 hrs
10.5 hrs
0.5 hrs
jProject Manager
Project Managern
IProject Manager
Project Manager
I
Perform quality control on Huber integration interface
Perform quality control on Guarded Exchange integration interface
IQuality Engineer
I,Quality Engineer 2
Quality Engineer
3,Qualily Engineer 4
0.5 wlts
Perform Production testing
'~~ Huber integration interface
12 days
1Integration Engineer I
Perform Production testing on Guarded Exchange integration interface 2 days
jInstallation Quality Control Checkpoint 1: Customer Provisioning
NortheaStern Region
Maryville Treatment Center - 23
._ .....
•
a.06d
lo.sh
O.Sh
10.5h
O.Sh
l2.5d
._--2.Sd
lo.sw
O_Sw
)2d
1
1
10.38d
O.38d
JQuality Control AnalvsJ3h
13 hrs
-.==
ITS.::..::&:..2~...:.T::D::D_ _ _ _ _ _ _ _ _...,.:3:..h:.::r",s_ _
lwestern Missouri Correctional Center· 93 ITS & 2 TOO
Western Reception, Diagnostic & Correctional Center -111 ITS & 2
TOO
13 hrs
3 hrs
1Chillicothe Correctional Center - 92 ITS & I TOO
Central Region
1Moberly Correctional Center· 64 ITS & 1 TOO
WDrnen'~
_ -.
..
Integration Engineer 2 2d
--
Icrossroads Correctional Center -93 ITS & 2 TOO
:
I ---
!0.5WkS
I
IO.06d
O.Sh
la.sh
O.Sh
10.Sh
Project Ma·n.-ger
jProject Manager
Project Manager' - ,
a.s hrs
10.5 hrs
O.Shes' ,
I
Schedule Duration
a.Sh
J2hrs
•
Reception, Diagnostic & Correctional Center· 1{) ITS & 1 TO-O- 2 Ius
INortheast Correctional (enter - 127 ITS & 1 TOO
12 hrs
BDonvilie (orrectional & Treatment Center - 59 ITS & 1 TOD
Icremer Therapeutic Center - 6 ITS
Fulton Reception & Diagnostic Center
Inpton Correctional (enter
Algoa Correctional (enter
)JefferSOn City Correctional (enter
Southeaslem Region
IMissouri Eastern Correctional Center
Easlern Reception & Diagnostic (orrectional (enter
[POlOSi Correctional Center
South (entral Correctional (enter
1Ozark Correctional Center
Farmington Correctional Center
ISoutheast Correctional Center
•
•
I.tm
•
4
1.4.2.3
1.4.2.3.1
1.4.2.3.1.1
1.4.2.3.2.2
1.4.2.3.2.3
I
2hrs
l:-ve.tern Reception, Diagnostic & Correctional Center -111 ITS & 2
TOO
6
2 hr•
.1
--~-~-,
Moberly Correctional Center - 64 ITS & 1 TOO
6
16
--
.!?I~S
I
Women's Reception. Oiagnostic & Correctional Center -.
.-
6
.2 hrs
& 1 TOO 2 hrs
Northeast Correctional Center - 127 ITS & 1 TOO
2 hr.
1.4.2.U.4
•
16
IBoonvilie Correctional & Treatment Center -S9'1TS & 1 TOO
2 hrs
1.4.2.~.2.5
6
Cremer Therapeutic Cente, - 6 ITS
2 hr.
1.4.2.3.2.6
.~.4.2.3.2.7
/6
--
,
-~
-.
[Fulton R@ception & Diagnostic Center
.
.~.
6
TIpton Correctional Center
1.4.2.3.2.8
16
lAlgoa.Corre~tional
1.4.2.3.2.9
1.4.2.3.3
..
Is
1.4.2.3.3.1
6
-
-
1.4.2.3.3.2
-
1.4.2.3.3.3
1.4.2.3.3.4
1.4.2.3.3.5
1.4.2.3.3.6
•
6
6
,..
~~~.
,
Southeast Correctional Center
\:n.tallation Quality Control Checkpoint 3: Equipment Testing I
Functional Validation
._--Northwest Region
",.
.IO'.25d
Field Service
Technician 3,Field
Service Technician 4
2h
Jield Service
Technician 3.Field
Service Technician 4
Field Service
Technician 3,Field
Service Technician 4
-
2h
~
2h
rId Service
Technician 3,Field
Service Technician 4
Field SerVice
Technician 5
2h
.
-
2h
Ireld Service
Technician 6,field
Service Technician 7
Field Service
Technician 6,Field
Service Technician 7
2h
2h
2h
2hrs
.. [Farmineton Correctional Center
2h
J
Field Service
Technician a,Field
Service Technician 9
2 hr.
- ...
Ozark Correctional Center
.
2h
2h
IO.2sd
2hrs
ISouth Central Correctional Center
/6
2h
I
2hrs
Polosi Correctional Center
--
2h
2 hr.
-----
..
2h
]
2 hr.
~
6
Field Service
Technician 1.Field
Service Technician 2
rldseMee
Technician 6,Field
Service Technician 7
Field Service
Technician 6,fiehl
Service Technician 7
.-
I Eastern Reception & Diagnostic Correctional Center
._.
..
16
14
S
2hrs
Missouri Eastern Correctional Center
6
1.4.2.4
1.4.2.4.1
-
O.2Sd
.lO.25d
]
2 hrs
Center
Jefferson City Correctional Center
]Southeastern..
_ Region
ls
1.4.2.3.3.7
..
2 hrs
-
'.
.I;ierd Service
Technician I.Field
Service Technician 2
Field SeNice
Technician 1. Field
Service Technician 2
2hrs
Chillicothe Correctional Center - 92 ITS & 1 TOO
]Central Region
.
-
]5
..
!;ield Service
Technician 1. Field
Service Technician 2
Field Service
Technician 1.Field
Service Technician 2
2hrs
-.
Western Missouri Correctional Center· 93 ITS & 2 TOO
.
..
'
2 hr.
Maryville Treatment Center - 23 ITS & 2 TOO
[6
..
----
I
6
1.4.2.3.1.4
]
Crossroads Correctional Center - 93 ITS & 2 TOO
16
1.4.2.3.1.3
1.4.B.2.1
..
6
1.4.2.3.1.2
._...
Installation Quality Control Checkpoint 2:Customer Pre-Installation
] Northwestern Region
15
-.
1.4.2.3.1.5
1.4.2.3.2
~
-- 2 hrs
~--.-
2hrs
2h
I;ield SeMcl'
Technician 8,Field
SeMce Technician 9
Field Sen,.ice
Technician 8.Field
Service Technician 9
2h
I
....
2h
reid Service
Technician a,Field
Service Technician 9
.. .
Field SeMel'
Technician 8,Fleld
SeMce Technician 9
[;ield Service
Technician a,Field
Service Technician 9
Field Service
Technician a.Field
Service Technician 9
"'.-
2h
2h
.
.. 2h
..
2h
D.2Sd
D.2Sd
~."~
-
•
-23 ITS & 1 TOO
IT5& 1 TOO
Diagnostic & Correctional Center - 111 ITS & 1
i & Correctional Center· 70 ITS & 1
Correctional Center· 127 ITS & 1 TDD
& Tre~tment Center -
&lTDD
·6 ITS
Center· 58 ITS & 1 TOO
Center - 94 ITS & 1 TOO
•
1 TOO
lTOO
Control Cne<lpoint 4: On Site Customer
1.4.2.5.1.2
Crossroads COrrectional Center· 93 ITS & 1 TOO
Center -
Technician 4.Project
Technican 7,Project
Center-
TOO
•
•
Mm.
•
1.4.2.5.2.4
6
1.4.2.5.2.5
Boonville Correctional & Treatment Center· 59 ITS & 1 TOO
16
1.4.2.5.2.6
6
1.4.2.5.2.7
16
...
rCremer Therapeutic
1.4.2.5.2.9
1.4.2.5.3
.
-.--
1.4.2.5.3.S
6
i3
0
13
1.4.5
1.4.5.1
1.51"5
~---.
I
Missouri Eastern Correctional Center· 53 ITS & 1 TOO
1.5 hrs
1.5 hrs
1.5 hrs
1.5 hrs
.-
Southeast Correctional Center ·88 ITS & 1 TOO
1.5 hrs
1.5 hrs
1Installation Quality Control Checkpoint 5: Custome, Acceptance
Account Miriager
0
1.4.4
1.5 hrs
1farmington Correctional Center- 135 ITS & I TOO
- .-
13
1.4.3
1.5hrs
... ...
Ozark Correctional Center - 26 ITS & 1 TOO
16
1.4.2.5.3.6
1.5 hrs
!south Central Conectional Center -79 ITS & I TOO
._.
6
1.4.2.5.3.4
1.511rs
..
Eastern Reception & Diagnostic Center· 167 ITS & 1 TOO
....
1
--.
--
IJefferson Citv Correctional Center· 94 ITS & 1 TOO
Southeast Region
6
1.4.2.5.3.3
_.
Algoa Correctional Center - 61 ITS & 2 TOO
16
1.4.2.5.3.2
- 6 ITS
I Fulton Reception & Diagnostic Center· 147 ITS & 1 TOO
--
16
5
1.4.2.5.3.1
C~nter
L5hrs
Tipton Correctional Center· 58 ITS & 1 TOO
6
1.4.2.5.2.8
•
. I!l!J1;m;m.
Production environment
1.4.5.2
interface to Production environment
14
4 ..hTS
...
11.5h
1.5h
reid Service
Technician 3, Project
Manager
Field Service
Technician 4,Project
Manager
"'
l.Sh
Jield Service
Technidan 5,Project
Manager
1.5h
D.19d
Jield Service
Technician 6,Project
Manager
15h
Fiel d Service
Technician 7,Project
1.511
Manager
reid Service
Technician 8,Project
Manager
field Service
Technidan 9,Project
Manager
11.5h
--
11.5h
- ....
lId
-. ....
ld
-
.
IO.5d
- ..
4h
~ntegration Manager
14h
. ..
~
Project Plan updates (risk register, issues log, schedule updates)
2hrs
Project Coordinator
2h
1.4.5.4
14
I Project Pia n upd ates (risk register, issues log, schedule updates)
2hrs
IProject Coordinator
12h
1.4.5.5
4
Project Plan updates (risk register, issues log, schedule updates)
2 hrs
Project Coordinator
2h
1.4.5.6
14
IProject Plan updates (risk register, issues log, sch~dule updates)
2hrs
1project Coordinator
2 hrs
Project Coordinator
2h
2 h"
.lProject Coordinator
J2h
Project Coordinator
2h
lId
ld
llh
1h
11h
Ih
4
1.4.5.8
14
1.4.5.9
1.5
1.5.1
1.5.1.1
1.5.1.2
1.5.1.3
1.5.1.4
.,
..
-
Project Plan updates (risk register, issues log, schedule updates]
Iproject Plan UPdat:s (risk register, issues log, schedule updates)
4
12
3
14
4
14
4
Project Plan updates (risk register, issues log, schedule updates)
I Project Close
...
Close Project Phase
IClose Project Initiation
Close Project Plan-ning
IClose Project Execution
Close Project Monitor & Control
-, ..
..
2hrs
1
..
. .llhr
1 hr
11 hr
lhr
..
1.511
4
1.4.5.7
~
1.511
JField Service
Technician 1,Project
Manager
Field Service
Technician 2,Project
Manager
1.4.5.3
•
..
11.5h__
Integration Manager
<lh"
,
1.5h
I;ield Service
Technician I,Project
Manager
. -Field Service
Technidan 2,Project
Manager
.1
I~ange control for promoting Guarded Exchange intergration
..
.,
ISite Engineer I
Site Engineer 1
IPerform Integrated Change Cont",1
Change control for promoting Huber intergration interface to
4
..
1Project
Manager,Account
Manager
Account Manager
1 day
Iin'tallation QualiW Control Checkpoint 6: Initiate Post Implementation
Site Engineering Monitoring (remote monitoring: 3D days]
1 day
Site Engineer 1
~.
- ---
'
Field Service
Technician 9,Project
Manager
I ..
IProject Manager
Project Manager
lProject Manager
Project Man~er
."
12h
--
~
WB~
Outline le"el
1.5.1.S
4
DuratIOn
Resource Names
~chedul" Duration
Idav
Task Name
PrOject Manager
ld
IProject Manager
O.13d
llh
I
I
I
I
j
I
J
I
J
J
I
I
I
I
I
I
I
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J
I
I
I
I
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I
I
I
I
I
I
I
I
I
I
I
I
1
I
1
11 hr
I hr
I
1h;
J
I hr
:::.
Accou;'t Manager
IAccOIlnt Manager
Account Manager
1Account Manager
Account Manager
IAccount Manager
Ih
I
Ih
~
1h
1
_.
I
I
I
I:
J
I
I
I
..1
I
I
I
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--
1
I
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•
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I
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1.S.2.3
I
I
1.5.2.2
3
14
4
10
4
10
4
10
I
1.S.2
1.5.2.1
Procurements
Securus &. Missouri DOC Project Team Meeting· Touch Point:
Customer Acceptance & A«ount Team Transition
IConfirm resolution of any open issues on issues log
Technical Support and Field SeNite Management Review
IAccount Manager
Sales'Account Team review
jAccount Manager
Estb~1i51" ongoing meeting schedules
IAccount Manager
aDS!!
•
J
-.-
-..1
I
:I
J
..1
I
J
.. 1
1
~
I
I
I
I
I
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I
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~
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I
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I
I
--
•
1[' SECURUS"
TECHNOLOGIES
1.1 Pl'olect Initiation
•
WBS
Missouri Dept. of Corrections Implementation Project
1.0 Securus Inrna1a Telephone &
Technology Project Plall
1.2 Prolect Planning
1.4 Project Monitor & Conlrol
1.3 Prolect Execution
1.4.1
Distribute Information
1.1.1
Contract Execution
1.4.1.1
Stakeholder Updates
1.1.2
Project Kickoff
1.5 Project Close
1.5.1
Close Projed: Phase
'.5.1.1
Close Project Initiation
1.4.2.1
Report Performance
Site lJ'1spections
1.2.4
ITS InstallatiOfl Timelil1e
Review
1.1.5
Scope verification
1.4.2.1
Report Performance
1.2.5
EngineeringlSite
Design/MOP updates
1.1.4
'.3.2.2
Cuet!)fIW)t [)ala Mgm!
'.3.:U
Norl...... IReglon
U.U
Ek)'-'",UI Rl!glan
1.3.:U
C...InIIReglon
1.3.4
S·Gate User Training
1.3.5
Transition Activities
1.3.5.1
Huber Data Xfer/upload·
1.3.5.2
Transfer to SewlUs
Document tnfonnation
Rev
Dl!scriptian~ Wark
Breakdown Structure {Maximum Slayer was
2/15(2011
Approwd by mmcmahon
.'
•
AppendixD
Provisioning Checklist
•
•
Site Name:
State:
AFCE Number:
SECURUS·
Project Manager:
1'ECHNOl..CJGIE8
Lead Technician:
CUSTOMER PROVISIONING CHECKLIST
PROJECT PREPARATION
Preparation Project Manager-
Create Installation Record within Installation Project Management System:
- Build Install Record to include:
- Site Name, State
- Inside Support Technician
- Contract ID
- Billing ANI
- AFCE Number
- Project Manager
Preparation Project Man\lgerCreate Install
Record
- Field Service Manager
- Site ID
-AFCE Outlay
o
- Field Service Technician
Review Contract, Master Service Agreement, and Statement of Work to identify specific project
requirements, including:
-Installation Scope
-Feature Requirements
- Installation Process Requirements, including timelines
o
-Service Level Agreements
-Recording Policy Requirements
Preparation Project Manager-
Update Installation Record within Installation Project Management System:
-Include:
-Installation Scope
-Feature Requirements
o
- Installation Process Requirements, including timelines
-Service Level Agreements
-Recording Policy Requirements
Preparation Project Manager I
Sales AssociatePreparation Project Manager I
Installation
Support Team
Output Installation Record and submit to Sales Associate(s) for pre-Installation review.
o
Conduct sit-down review of Installation Project, to review:
-Installation Scope
-Feature Requirements
o
- Installation Process Requirements, including timelines
-Service Level Agreements
Preparation Project Manager
Close Preparation
- Project
Manager
Lock finalized Installation Record within Installation Project Management System:
o
Signature
I
x
Project Manager
Securus Technologies, Customer Provisioning Checklist
Digital
Signature
Required
SCN CUSTOMER PROVISIONING
Provisioning Installation
Support
Provisioning Installation
Support
Access Installation Project Management System and review Installation Recen:l.
Before proceeding, ensure all necessary information is contained within the record.
D
Access the SCN Customer Provisioning System
-Create Customer Record, using Customer Name, Customer State, and Contract 10
-Select the required call recording and storage profile from drop down menu
D
-Create Sub-Customer Record (Site), using Site Name and State
-Select appropriate time-zone from drop down menu
-Select the "Home" Data Center from drop down menu
Provisioning Installation
Support
Provisioning Installation
Support
Access the Customer Setup WIZARD within the SCN Customer Provisioning System
-Create the MAIN, BOOKING, and DISABLED Management Port Groups (MPG)
D
Select the desired MPG group from the drop down menu, and select required features and dialing
instructionsfrestrictions from the Entitlements Section of the Customer Setup WIZARD.
This includes:
-Dialing class of service, such as Collect, Debit, etc.
D
-Site Name Audio Announcement
-Enable PINs I PANs and PIN I PAN Length
-MPG Call Duration and Time Schedules
-Billing ANI Identification
INTEGRATED ACCESS DEVICE (lAD) PROVISIONING
Provisioning
Installation
Support
~
Generate lAD Config File(s) by accessing lAD Config Generation Utility
-Enter Installation Record Number
-Enter Site 10
-Enter Site Name, State
-Choose Circuit Type (MPLS or DSL)
D
-Enter lAD Port Count (8/24)
-Enter InternallP Address (from InternallP Access list)
-Enter lEC Provided ExternallP
-Enter Securus Access Tag Number (from Asset Tag list)
-Save Configuration, and Click "GENERATE CONFIG"
Provisioning Installation
Support
E-mail the lAD Config File(s) to the appropriate Field Service Technician(s).
Upload lAO Config File(s) to Installation Record within Installation Project Management System.
D
Update Installation Record to include InternallP, ExternallP, and Asset Tag for the IAD(s).
Provisioning Installation
Support, Field
Service
Work with Field Technician to apply lAD Config file(s) to lAD Device(s) during the Onsite Test and
Turn-up (T&T) process.
Provisioning Installation
Support
link lAD device(s) to Customer Record within SCN Customer Provisioning System.
-Selecl lAD Type
-Input lAD Asset Tag
-Input lAD IP Address Configuration
Securus Technologies, Customer Provisioning Checklist
D
PROVISIONING REVIEW
Review - Project
Manager I
Installation
,:_,.,._ .. Team
Supervisor I
Engineer
Review Customer and Site Provisioning within the SCN Customer Provisioning System.
Review Installation Record within Installation Project Management System.
Validated Feature Requirements listed in the Installation Record match the features and configurations
established in the SCN Customer Provisioning System.
0
Validate IP 5<.."",,,,,,, lAD Config, and Network
Review - Project
Manager I
Installation
Support Team
Conduct sit-down review of Installation Project, to review:
-Installation Scope
-Feature Requirements
0
- Installation Process Requirements, including timelines
-Service Level Agreements
Review - Pr()ject
Manager
Lock finalized Installation Record within Instailation Project Management System:
Close Review Project Manager
Finalize and Lock Customer and Site Provisioning
x
•x
Project Manager
Installation Support Team Supervisor
x
Engineer
•
Securus Technologies, Customer Provisioning Checklist
0
Signature
I
Digital
Signature
Required
AppendixE
Field Technician Checklist
•
•
SECURUS~
TECHHOl.OG28
Installers Name:
Ticket
Number
Facility Narne
State:
: Date
Main Address:
Contact Name
LEGEND
~
X
'= Satisfactory/Complete
=Unsatisfactory
No Mark = Not Revie'
Site Inventory
Review Item
. __ I
Result
Notes
Does the equipment received match the equipment listed on the Sales
Order? Please include equipment receipt checklist with returned
survey.
Was all of the equipment received without damage?
Is any additional equipment required to complete project? Please
include equipment request form for any additional equipment.
Equipment Location and Security
Result
Notes
Is there evidence of any construction occurring in or around the phone
room?
Is there adequate perimeter space around the phone equipment?
Electrical
Result
Review Item
.i
Notes
Is a grounded, dedicated circuit being used to power the equipment?
Is there a secondary power source available in the phone room?
Is the equipment grounded with a #12 green insulated copper wire?
Is the equipment utilizing a UPS unit or building UPS?
Is the UPS plugged into the Towermax KSU?
Is the Towermax KSU installed correctly, and electrically grounded?
Is there lightning protection installed on the T1/C.O. side of the
system?
Is there lightning protection installed on the station side of the system? I
Review Item
Network f Telecom
Result
. Notes
Have alilines/circuits been identified, tagged, and terminated?
Please include circuiViine inventory.
Have all lines/circuits been tested?
Has the modem line and BTN been installed and tested?
. . all routers, channel banks, and lADs installed and visible on the ...
w.vork? Please include u dated network dia ram.
\
Is all wiring cleanly installed, utilizing wire management systems and
recommend best practices? Please include pictures of all phone room
wiring.
Has all network and telecom cabling been tested?
..
,
Telephones
eel with a logical port D and facility
the port assignments been setup in the SeN
Have the phones been associated
groups?
the correct management port
Has PIN information been obtained from previous system and
provided to Installation Support Team for import?
Has
calling list information been obtained from
previous system and provided to Installation Support team for import?
x
x
Facility Installer
•
Secondary Reviewer
:·IS'\
•
AppendixF
Text Validation Checklist
•
•
I~=...:--->--= SECURUS-
TeCHNOil CJ(HI;S
TEST I VALIDATION CHECKLIST
State:
: Installers Name:
i Ticket
: Number
Main Address:
: Date
Facility Name
Contact Name
LEGEND
_ _ _~o
_ _ _ _ _~ _ _ _ _
Verify phone lables are correct.
Go offhook on telephone al1d check for voice prompts.
Perform positive acceptance test call.
your name.
test call and verify that both parties are notified of monitoring and
Setup private test call and verify that call is not monitored or recorded.
Perform domestic LD collect test call, select rate quote, and validate the rate.
global speed dial numbers are input, and test calls complete ;;:ou",",g;;:o,
Perform test call to
number, and verify block call flow.
ber.
"ot Reviewed
IS
1
2
3
4
5
6
•
Appendix G
Customer Acceptance Checklist
•
•
•
CUSTOMER ACCEPTANCE FORM
.~
Site Name:
SECURUS·
TECHNOLOGIES
St:
AFCE Number:
Project Manager:
Customer Contact:
EQUIPMENT INSTALLATION
Notes:
Equipment Room
0
All phone equipment is professionally installed within designated
areas.
Notes:
Equipment Room
0
All phone equipment is properly labeled,
Notes:
Equipment Room
0
All telecom and electrical wiring is mounted securely, and
managed using best practices for wire/cable management.
Notes:
Equipment Room
0
The Equipment Assignment Record has been completed and is
attached the ~quipment rack.
Notes:
Equipment Room
0
All necessary equipment is grounded appropriately and using
designated power sources provided by the facility.
Notes:
Equipment Room
0
All excess eqUipment, trash, or other materials have been
removed from the equipment room.
Notes:
Telephone Installation
0
All phones have been installed in the correct locations.
Notes:
Telephone Installation
All phones have been securely mounted and inspected.
0
Notes:
Telephone Installation
All phone handsets and keypads have been inspected
0
Notes:
Telephone Installation
All informatloh placards have been installed.
0
Notes:
Telephone Installation
0
All telephones have been accurately identified, and logically
associated with their physical location.
Notes:
Workstation Installation
All workstations have been installed in designated locations.
Workstation Installation
0
Notes:
All workstations have been used to access S-Gate UI.
Securus Technologies, Customer Acceptance Checklist
0
EQUIPMENT OPERATION
Notes:
Phone System Operation
All custom prompts (tag prompts, facility name prompts) have
been reviewed and confirmed.
0
Notes:
Phone System Operation
Detainee and called party call flows have been reviewed and
confirmed.
0
Notes:
Phone System Operation
Call time limits have been reviewed and confirmed.
0
Notes:
Phone System Operation
Call schedules have been reviewed and confirmed.
0
Notes:
Phone System Operation
Applicable phone system features have been reviewed and
verified (further defined as necessary to include all feature
requirements)
0
Notes:
Workstation Operation
0
Workstations have access to S-Gate UI, and user logins have
been provided to necessary personnel.
Notes:
Workstation Operation
S-Gate UI functionality, including reports, block/unblock, calls
schedules, li\l'e call monitoring. and audio download/CDRW) have
been tested and confirmed
0
Notes:
Data Verification
All PIN/PAN data has been uploaded or input.
0
Notes:
Data Verification
All blocked/free/privileged calling lists have been uploaded or
input.
0
Notes:
Data Verification
All phone locations (such as POD B, Left) have been correctly
input into system.
0
FORM VERIFICATION
Notes:
Field Install.dion Checklist
The Field Installation Checklist has been completed with success,
reviewed, and signed by necessary parties.
0
Test I Validation Checklist
The TesWalidation Checklist has been completed with success,
reviewed, and signed by necessary parties
Notes:
3D-Day Support Plan
Notes:
0
The post-implementation support plan (acceptance criteria, SLAs.
support con18ct, and escalation list) has been completed, and
provided to appropriate customer contacts.
0
x
x
x
Customer Contact
Project Manager
Installaton Fietl Tecnnoan
Securus Technologies, Customer Acceptance Checklist
•
30-Day Post Implementation Acceptance
•
Installation Equipment & Provisioning User Acceptance Signature Form
Site Id: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Site Name:
--------------------
By my signature below I acknowledge I have reviewed the installation check list and I hereby confirm
completion ofthe scope of work as required for acceptance approval which includes equipment, system
functionality, and provisioning of the inmate phone system installed by Securus Technologies.
Facility Point of Contact Name:
Printed Name:
----------------------------
Signature: ______________________
Date:_ _ _ _ _ _ __
Install Field Technicians assigned to installation:
Printed Name:
Printed Name:
•
•
Securus Technologies, Customer Acceptance Checklist
Appendix H
Securus Certified Financial Statement
•
•
Page 1 ofl12
fonn 10- k.htm
•
IO-K 1 fonn10-k.htm 2009 FORM IO-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM10-K
I&l ANNUAL REPORT PURSUANT TO SECTION 13 OR lS(d) OF THE SECURITIES EXCHANGE ACT OF
1934
o
For the fiscal year ended December 31, 2009
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR IS(d) OF mE SECURITIES EXCHANGE ACT OF
1934
F or the transition period from to
Commission file number 333-124962
SECURUS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
20-0673095
(I.R.S. Employer
Identification Number)
Delaware
State or other jurisdiction of
incorporation or organization
•
14651 Dallas Parkway, Suite 600
Dallas, Texas 75254-8815
(972) 277-0300
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)
Securities registered pursuant to Section 12(b) oftbe Act:
None
Securities registered pursuant to Section 12(g) oftbe Act:
11% Second-priority Senior Secured Notes due 2011
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 40S of the Securities Act. Yes 0 No I&l
Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section IS(d) of the Act. Yes 0 No lID
Indicate by check mark whether the registrant (I) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchangc 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 PW;t 90 days. Yes I&J No 0
Indicate by check mark whether the registrant has submitted elcetronically and posted on its eorporatc Website, if any, every Interactive Date File
required to be submitted and posted pursuantto Rule 405 of Regulation S-T (§229.40S of this chapler) during the preceding 12 months (or for such shorter
period thallhe registrant was required to submit and post such files). Yes 0 No 0
Indicate by check mark if disclosure of delinquent filers pursuant to lIem 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and
will not be contained. tI) the best ofthe registrant's knowledge, in definitive prOJl:y or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form IO-K. IE
Indicate by check mark whether the registrant is a large accelerated tiler, an accelerated filer, or a non-accelerated tiler, or a smaller reporting company.
See the definitions of "large aceclerated filer," "aecelerated flier'· and "smaller reporting company" in Rule 12b-2 ofthe Exchange Act.
Large aecelerated filcr 0 Accelerated tiler 0 Non-accelerated filer lID Smaller reporting company 0
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes 0 No lID
No established published trading market exists for either the common stock, par value So.OOl per share, of Securus Technologies, Inc. or the Class B
common stock, par valllc $0.001 per share, of Securus Technologies, Inc.
Shares outstanding of each of the registrant's classes of common stock:
Class
Class A Common Stock
Class B Common Stock
Outstanding lit Marth 1, 2010
14,132 shares
135,221 sharcs
Documents Incorporated By Reference
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TABLE OF CONTENTS
PART I
JJEM I. BUSIN~S.S
ITEM IA. RISK FACTORS
ITEM I B. UNRESOLVED STAFF COMMENTS
JTEM 2..J~.ROPERTIES
1TEM 3. LEGAL PROCEEDINGS
JTEM 4. RESERVED
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQillTY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
PPERATIONS
ITEM 7A. OUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM !LCQNS.OLIDA TED FIN~1:i..CJALSTAJ'EMENTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
fINANCIAL DISCLOSURES
iI.EM 9A. CONTRQL$ AN"D£.R..PCEDURES
]IEM 9B. OTHER INFORMATION
3
3
•
12
25
25
25
26
27
27
28
30
40
43
66
67
69
~rn
~
ITEM 10. DIRECTORS. EXECUTIVE OFFICERS AND CORPORATION GOVERNANCE
JTEM I LEXE_CJJ.1'lYEJ:OMPENSATIQN
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
ITEM J3.,J2ERTAIN REL.~I.lONSHIP$.AND RELATED "(MN,SACIIONS, AND DIRECTO~
69
73
80
81
JNDE~E.NnENCE
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PARVY
ITEM tLE.XHtBll'SAND FINANCIAL STA_TEME.NTSCHEDULES
82
84
84
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PART I
ITEM 1. BUSINESS
Overview
We are one of the largest independent providers of inmate telecommunications services to correctional facilities operated
by city, county, state and federal authorities and other types of confinement facilities, such as juvenile detention centers and
private jails, in the United States and Canada. With 66 patents and and approximately 55 patent applications filed or in
process, we believe we are the leading technology innovator in the correctional industry. As of December 31,2009, we
provided service to approximately 2,400 correctional facilities in the United States and Canada, and processed over 10 million
calls per month during 2009.
Our core business consists of installing, operating, servicing and maintaining sophisticated call processing systems in
correctional facilities and providing related services. We enter into multi-year agreements (generally three to five years)
directly with the correctional facilities in which we serve as the exclusive provider of telecommunications services to inmates.
In exchange for the exclusive service rights, we pay a negotiated commission to the correctional facility based upon revenues
generated by actual inmate telephone use. On a limited basis, we may also partner with other telecommunications companies
whereby we provide our equipment and, as needed, back office support including validation, billing and collections services.
and charge a fee for such services. Based on the particular needs of the corrections industry and the requirements of the
individual correctional facility, we also sell platforms and specialized equipment and services such as law enforcement
management systems and call activity reporting.
We sell information management systems that work in conjunction with our communications systems and allow facilities
managers and law enforcement personnel to analyze and manage data to reduce costs, prevent and solve crimes and facilitate
inmate rehabilitation through a single user interface. We also offer investigative tools and bad debt risk management services
based on the particular needs ofthe corrections industry and the requirements of the individual correctional facility.
•
]n addition, we sell offender management systems and related systems and services through our wholly-owned subsidiary
Syscon Holdings, Ltd. ("Syscon"). Syscon is an enterprise software development company for the correctional facility
industry. Syscon's core product is a sophisticated and comprehensive software system utilized by correctional facilities and
law enforcement agencies for complete offender management. Syscon's system provides correctional facilities with the ability
to manage and monitor inmate parole and probation activity and development at a sophisticated level. We believe our offender
management software represents the leading enterprise solution for the corrections industry. Our offender management
software is operating in more than 500 correctional facilities and probation offices maintaining records for over 400,000
offenders in the United States, Canada, the United Kingdom and Australia.
The inmate telecommunications industry requires highly specialized systems and related services in order to address the
unique needs of the corrections industry. Security and public safety concerns require that correctional facilities have the ability
to control inmate access to telephones and certain telephone numbers and to monitor inmate telephone activity. In addition,
concerns regarding fraud and the credit quality of the parties billed for inmate telephone usage have led to the development of
billing and validation systems and procedures unique to this industry,
We estimate that the inmate telecommunications market opportunity for city, county, state and federal correctional
facilities in the United States is approximately $1.2 billion and the offender management technology market opportunity is
approximately $1.0 billion worldwide.
Our business is conducted primarily through our three principal subsidiaries: T-Netix, Inc. ("T-Netix"), acquired in
March 2004, Evercom Holdings, Inc. ("Evercom"), acquired in September 2004, and Syscon, acquired in June 2007.
For the year ended December 31, 2009, our revenues were $363.4 million, of which approximately 86% represented direct
call provisioning to correctional facilities, 6% represented sales and services related to our offender management software and
8% represented the wholesale service provision of solutions, telecommunications and billing services to our
telecommunication carrier partners.
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Securus was incorporated in Delaware on January 12,2004. We maintain a web site with the address
www.securustech.net. We are not including the information contained on our web site as a part of, or incorporating it by
reference into, this Annual Report on Form 10-K.
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Industry Overview
The corrections industry has experienced sustained growth over the last two decades as a result of societal and political
trends. Anti-crime legislation, limitations on parole and spending authorizations for crime prevention and construction of
additional correctional facilities have contributed to this industry growth.
•
The United States has one of the highest incarceration rates of any country in the world. The U.S. Department of Justice
estimates that as of year end 2008, there were approximately 2.3 million inmates housed in U.S. correctional facilities, or
approximately one inmate for every 133 U.S. residents. Of this total, approximately two-thirds were housed in federal and
state prisons and approximately one-third were housed in city and county correctional facilities. According to U.S.
Department of Justice statistics, the inmate population in federal and state prisons, which generally house inmates for longer
terms than city and county facilities, increased from approximately 1.2 million at December 31, 1998 to approximately
1.5 million at December 31,2008, representing an average annual growth rate of approximately 2.2%. The inmate population
in city and county facilities, which generally house inmates for terms of one year or less, increased from approximately 0.6
million at December 3.1, 1998 to approximately 0.8 million at December 31, 2008, an average annual growth rate of
approximately 2.9%. Between December 31, 1998 and December 31, 2008, the overall incarcerated population grew an
average of 2.4% annually. Population growth during the 12-month period ending December 31,2008 was higher in local jails
(up 0.7%) than in federal prisons (up 0.6%), and state prisons showed no growth.
The corrections industry requires specialized information technology, telecommunications systems and related services.
Security and public safety concems associated with inmate telephone use require that correctional facilities have the ability to
control inmate access to telephones and to certain telephone numbers and to monitor inmate telephone activity. In addition,
concems regarding fraud and the credit quality of the parties billed for inmate telephone usage have also led to the
development of systems and procedures unique to this industry. Correctional facilities also have unique information
technology requirements relating to managing and monitoring inmate (and probation) activity and development. These include
offender management, financial applications, health and activity records as well as predictive tools for future inmate behavior.
Facilities are increasingly seeking to utilize enhanced automated systems to offset the challenges of budget cuts, understaffing
and prison overpopulation.
Within the inmate telecommunications industry, companies compete for the right to serve as the exclusive provider of
inmate calling services within a particular correctional facility. Contracts may be awarded on a facility-by-facility basis, such
as for most city or county correctional systems, which generally include small and medium-sized facilities, or system-wide,
such as for most state and the federal prison systems. Generally, contracts for federal facilities and state systems are awarded
pursuant to a competitive bidding process, while contracts for city and county facilities are awarded both through competitive
bidding and negotiations with a single party. Contracts generally have multi-year terms and typically contain renewal options.
As part ofthe service contract, the service provider generally installs, operates and maintains all inmate telecommunications
equipment. In exchange for the exclusive contract rights, the service provider pays a commission to the operator of the
correctional facility based upon inmate telephone use. These commissions have historically been used by the facilities to
support their law enforcement activities.
•
Historically, offender management systems have been developed independently and internally by government agencies to
provide basic information management capabilities to run the business of an incarceration facility. Often, these agencies have
outsourced design, or certain aspects thereof, to third party consultants. We are one of a very small group of providers offering
a comprehensive off-the-shelf software package for offender management and related activities. The market is highly
fragmented and it is our belief that most of the "home-grown" systems may not effectively manage the inmate, parole and
probation populations. We believe that only a fraction of the market has been outsourced to firms that develop enterprise
inmate systems like we do, and that we have the largest portion ofthe outsourced market. Our systems currently track over
400,000 oftbe approximate 10 million people estimated to be incarcerated worldwide. For extremely large projects, we often
partner with larger systems integrators, such as mM and Hewlett Packard (formerly Electronic Data Systems).
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Competition
In the inmate telecommunications business, we historically have competed with numerous independent providers of
inmate telephone systems such as Global Tel*Link, as well as regional bell operating companies ("RBOCs"), local exchange
carriers ("LECs") and interexchange carriers ("IXCs") that include AT&T and Embarq. Unisys also has recently entered the
market. We believe that the principal competitive factors in the inmate telecommunications industry are system features and
functionality, system reliability and service. the ability to customize inmate call processing systems to the specific needs of the
particular correctional faCility, relationships with correctional facilities, rates of commissions paid to the correctional facilities,
end-user rates, called party and inmate customer satisfaction levels and the ability to identify and manage credit risks and bad
debt. We seek to cumpete for business on local. county, state and federal levels, and in privately managed correctional
facilities.
We believe that we are well positioned to expand our market share by offering new and enhanced products to our
existing customers, and attracting new facilities with "one stop shopping" for their communications and tecbnology needs at a
lower cost than our competitors. We believe we are well positioned relative to our competitors because of our belief that our
costs are lower as a result of our packet-based architecture and proprietary bad debt risk management systems. These lower
costs. coupled with our technological capabilities and robust patent portfolio enable us to make attractive bids to our
prospective or existing customers.
In the offender management market, we compete with a small group of offender management software providers, each of
whom we believe is smaller than we are. We also compete with large and small software consultant organizations who do not
offer off-the-shelf prepackaged software, but who can develop systems from scratch to the client's specifications.
Printary Sources of Revenues
The following chart summarizes the primary sources of our revenues by reportable segment for the year ended December
31,2009. See Note 5, Segment Information, in the Notes to the Consolidated Financial Statements in Part II of this report for
financial information about each of our segments.
•
% of Total
Revenue Source
Direct Call Provisioning
Description
Revenues
86% Direct call provisioning services through multi-year contracts directly to local
correctional facilities as well as large county jails and state departments of
corrections facilities. No direct customer accounted for more than 6% of our
total direct call provisioning revenues for the year ended December 31, 2009.
Wholesale Services
8% Wholesale Services include both solutions and billing services (validation, fraud
management and billing and collection services to third parties including some
ofthe world's largest communication service providers) and telecommunications
services (equipment, security enhanced call processing, validation and customer
service and support to corrections facilities through contracts with other inmate
telecommunications providers).
Offender Managernent Software
Software sales and development services for complete offender management,
6%
providing correctional facilities with the ability to manage and monitor inmate,
parole and probation activity and development at a sophisticated level.
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Direct Call Provisioning
We provide inmate telecommunications services directly as a state-certificated telecommunications provider to
correctional facilities. In a typical arrangement, we operate under a site-specific, exclusive contract, generally for a period of
three to five years. We provide the equipment, security-enhanced call processing, validation, and customer service and support
directly to the facility. We bill calls via the called party's local telephone bill, via our own proprietary billing platform or
through prepaid products purchased by the inmate or the inmate's called party. Direct call provisioning margins are
substantially higher than that of our wholesale services because we receive the entire retail value of the call. In our direct caIl
provisioning business, we are responsible for paying customer commissions, line charges and other operating costs, including
billing and bad debt oosts. Consequently, our gross profit dollars are higher compared to our wholesale services.
Wholesale Services
Our wholesale services business consists of (1) validation, uncollectible account management and billing services
(solutions services), (2) equipment, security enhanced call processing, call validation and service and support through the
primary inmate telecommunications providers (telecommunications services) and (3) the sale of equipment to other
telecommunications companies as customers or service partners. In 2009, we decided to no longer pursue a wholesale
strategy but rather will pursue business on a direct call provisioning basis only.
In our direct call provisioning and wholesale services businesses, we accumulate call activity data from our various
installations and bill our revenues related to this call activity against prepaid customer accounts or through direct billing
agreements with LEC billing agents, or in some cases through billing aggregators that bill end users. We also receive payment
on a prepaid basis for the majority of our services and record deferred revenue until the prepaid balances are used. In each
case, we recognize revenue when the calls are completed and record the related telecommunication costs for validating,
transmitting. billing and collection, bad debt, and line and long-distance charges, along with commissions payable to the
facilities. In our telecommunications services business, our service partner bills the called party and we either share the
revenues with our service partner or receive a prescribed fee for each call completed. We also charge fees for additional
services such as customer support and advanced validation.
Offender Management Software
We develop enterprise software for the correctional facility industry. We believe that we have the most functionally
complete offender management system available on the market. Our core product is a sophisticated and comprehensive
software system, "ELITE," utilized by correctional, probation and parole agencies for complete offender management. Our
system enables these clients to address the increasing challenge of managing an ever-growing number of offenders in
confinement and in the community on a cost-efficient basis.
•
Our offender management software is the centerpiece for the United Kingdom's National Offender Management
Information System for Her Majesty's Prison Service project, with Hewlett Packard (formerly Electronic Data Systems Inc.
("EDS") providing overall project management and certain testing and consulting services. Our offender management software
operates in more than 500 correctional facilities and probation and parole offices maintaining records for over 400,000
offenders in the United States, Canada, the United Kingdom and Australia.
Our offender management revenues have four main components:
•
License fees: The product purchase cost, providing clients with the license to use the core platform;
•
Implementation fees: The revenue associated with the physical installation of the system;
•
Consulting fees: Most of this work is done prior to implementation. The primary activities include: planning, design,
consultation, debugging, customization, etc.
Software maintenance and support: These post-sale fees provide a future annuity stream as we continue to generate fees
from assistance with new modules, training, version upgrades, etc.
Customers
We have direct contracts with federal, state and local agencies to provide inmate telecommunications services on either an
exclusive basis or jointly with another provider to approximately 2,400 correctional facilities ranging in size from small
municipal jails to large, state-operated facilities, as well as other types of confinement facilities, including juvenile detention
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centers and private jails.
Most of our direct call provisioning contracts have multi-year terms (generally three to five years) and typically contain
renewal options. We often seek to negotiate extensions of our contracts before the end of their stated tenns. For the year ended
December 31, 2009, we retained approximately 84% of our annualized revenue up for renewal. Many of our contracts provide
for automatic renewal unless terminated by written notice within a specified period of time before the end of the current term.
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In the ofTender management software segment, our customers consist typically oflarge national·and state or provincial
incarceration agencies, including Her Majesty's Prison Service in the United Kingdom via a sub-contracting agreement with
Hewlett Packard (formerly EDS), along with several states and provinces in the United States, Canada and Australia. We
believe that once a customer has selected us for offender management software and related services, it is less likely to switch
systems due to the high cost of switching. As a result, we have a strong growing base of customers for our new versions,
modules and ongoing maintenance. We believe that this allows us to derive sustainable revenue from new modules and
versions of our software rather than from long-term contracts.
•
Sales and Marketing
We seek new direct contracts by participating in competitive bidding processes and by negotiating directly with the
individuals or entities responsible for operating correctional facilities. We market our inmate telecommunications services
through a sales staff largely made up of former law enforcement officials and others with experience in the corrections and
telecommunications industries who understand the specialized needs of correctional facilities. Our marketing strategy
emphasizes our specialized products and services, our proprietary technology, our knowledge, experience and reputation in the
inmate telecommunications industry and our high level of service. We believe we have the largest national sales force
dedicated to serving the inmate telecommunications industry, and we rely on the experience and background of this sales staff
to effectively communicate our capabilities to both existing and potential customers. In addition to conducting in-person sales
calls to the operators of correctional facilities, we participate in trade shows and are active in local law enforcement
associations.
Principal Products and Services
We beli~ve that the specialized products and services we offer differentiate us from our competitors. Unlike many of our
competitors who specialize in specific segments of the market (such as call management systems, jail management systems,
etc.), our strategy is centered on the production and distribution of applications and services focused on the entire operation of
a facility. Our applications are designed to streamline the operations of corrections facilities and empower administrators with
administrative, investigative and economic capabilities. Additionally, we believe that the timely development of new products
and enhancements to existing products is essential to maintain our competitive position. We conduct ongoing development of
new products and enhancement of existing products that are complementary to our existing product line. Our principal
specialized applications and services include:
SCA Arc:hilecture™
Our SCA Architecture™ is comprised of a robust data repository housing multiple data marts, each holding billions of
bytes of stored information gathered from multiple sources. SeA's intelligent retrieval system retrieves all this information
and processes all user requests through a cross application, cross data-mart retrieval process. The backbone of our entire
system, SCA is expected to result in significantly lower operating and capital costs as its full implementation is realized. We
currently operate numerous inmate calling applications that preceded our development of this architecture. We are migrating
the majority of our customer installations to our new systems utilizing this architecture as current contracts expire, a process
likely to take several years.
.
•
SCN Secure Connect Network™
Our SCN Secure Connect Network™ is a packet-based, digital transmission system for all communications transport. SCN
allows our catling platform to provide real-time tum-ooltum-off flexibility for most system features, 24-7 offsite monitoring,
immediate system upgrades and repairs from one central location.
Secure Call Platform™
Our SCP Secure Call Platform™ call management system services correctional facilities as well as detainees and friends
and family members. Utilizing SCP alloWS this fully integrated inmate calling applications manager to offer innovative feature
applications tl1at give facilities extensive administrative and investigative control. The system offers networking functions.
robust system and application stability and redundancy, heightened security features, user auditing and password-specific
utilities.
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The Securus User Interface
Access to many of our applications is accomplished through our S-GATETM user interface. This portal provides single
point access to programs, applications and services.
Securus Support
We provide support through our own professional, dedicated customer support centers:
•
Accessible 24-7
Independent visibility into customers' account activity and information
Site status is monitored continuously by support systems and proactive actions are instituted to correct issues before
customers are impacted
Our field support services provides nationw:ide support by local area responsive technicians
Prepaid Calling Programs
Inmate telecommunications systems historically allowed calls to be placed as collect only, without the involvement ofa
live operator. Our prepaid calling systems offer a paperless, card-free prepaid calling solution for called parties or inmates.
Because prepayment greatly reduces bad debt, fewer calls are blocked and correctional facilities recognize the fmancial
benefits of higher call volumes, Our prepaid products include Advanced Connect, Inmate Debit and Prepaid Calling Cards.
Correctional Billing Services (CBS)
•
We are one of the few companies in the industry to provide an in-sourced, nationwide customer care and billing center
dedicated to the inmate's friends and family members. We offer multiple payment options including prepayment of charges,
remittance directly to the local phone company, credit card payments and check by phone.
Intelligent Call and Billing Management Solution (ICBS)
We develop and provide our customers with an Intelligent Call and Billing Management Solution, or ICBS system, which
is a proprietary call validation and billing technology that is designed to minimize bad debt expense. ICBS allows us to rapidly
identify and block collect calls from being connected to potential non-paying call recipients through a continuously growing
and improving database. As an enhancement to revenues, the blocked call recipient is notified that an inmate has attempted
contact and, upon request, can receive inmate calls through various prepaid methods. We believe our technology provides us
with generally lower bad debt expense as a percentage of revenues, while offering the broadest, most sophisticated suite of
paymeJlt method alternatives in the industry.
Additional Securus Applications
We also offer a multitude of additional applications and features that provide task-specific solutions designed to satisfy
focused areas of a facility's operations. These applications assist correctional facility investigators, administrators, and support
persorulel with investigative capabilities, recidivism programs, fraud prevention and detainee identifications. In addition, we
partner with other companies to offer value-added services that create operational efficiencies within the facilities we serve,
including providing two-way interactive voice response capabilities that allow routine questions to be answered without using
staff resources, installing jail management software to meet the software needs of smaller sites and adding e-mail, voice mail
and video conferencing capabilities to improve security and provide better labor utilization for correctional facilities.
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"ELITE" Software
The ELITE system provides correctional facilities with the ability to manage inmates and monitor parole and probation
activity and developmfint at a very sophisticated level. The key functions of the system include management of incarcerated
prisoners, management and monitoring of offenders on parole and probation, financial applications and electronic health
records. The ELITE system has more than 40 different modules and is a "smart" application that not only provides monitoring
tools, but has predictive tools for future inmate behavior.
•
We are continually developing new suites of applications that are designed to provide a wide array of solutions-based,
technologically advanced, fully integrated, industry best-practices applications and services for the criminal justice
community. These applications and services are focused on providing solutions targeted at the identified needs of the criminal
justice community.
Systems and Equipment
We currently utili2;e automated operator calling systems that consist of third-party and internally developed software
applications installed on specialized equipment. We have transitioned the majority of our customer installations from these
legacy systems to our Secure Connect Network as existing contracts expire. Our specialized systems limit inmates to collect
calls or prepaid calls, validate and verify the payment history of each number dialed for billing purposes, and confirm that the
destination number has not been blocked. Ifthe number is valid and has not been blocked, the system automatically requests
the inmate's name, records the inmate's response, and waits for the called party to answer. When the call is answered the
system informs the called party that there is a collect call, plays back the name of the inmate in the inmate's voice, and
instructs the called party to accept or reject the call. The system completes calls that have been accepted by the called party.
The system automatically records the number called and the length of the call and transmits the data to our centralized
billing center for bill ptocessing and input into our call activity database. Our database oftelephone numbers and call activity
allows us to provide ex.tensive call activity reports to correctional facilities and law enforcement authorities, in addition to
identifying n~mbers appropriate for blocking, thus helping to reduce the number of uncollectible calls. These include reports
that can further assist law enforcement authorities in connection with ongoing investigations. We believe this database offers
competitive advantages, particularly within states in which we have achieved substantial market penetration.
Maintenance, Service and Support Infrastructure
We provide and install telephone systems in correctional facilities at no cost to the facility and generally perfonn all
maintenance activities. We maintain a geographically dispersed staff of trained field service technicians and independent
contractors, which allows us to respond quickly to service interruptions and perform on-site repairs and maintenance. In
addition, we have the ability to make certain repairs remotely through electronic communication with the installed equipment
without the need of an on-site service call. We believe that system reliability and service quality are particularly important in
the inmate telecommunications industry because of the potential for disruptions among inmates if telephone service remains
unavailable for extended periods.
•
Billing and Collection
For some services, we use LEe and third-party clearinghouse billing agreements to bill and collect phone charges. Under
these agreements, the LEe includes collect call charges for our services on the local telephone bill sent to the recipient of the
inmate collect call. We generally receive payment from the LEC for such calls 50 to 60 days after the end of the month in
which the call is submitted to the LEe for billing. The payment that we receive is net ofa service fee and net of write-offs of
uncollectible accounts for which we previously received payment, or net of a reserve for future uncollectible accounts.
Unlike many smalJer independent service providers with lower telecommunications traffic, we have been able to enter into
direct billing agreements with LECs in most of our markets because of our high market penetration. We believe that direct
billing agreements with LEes decrease bad debt expense and billing expenses by eliminating an additional third-party billing
entity, while expediting and increasing collectibility. In addition, direct billing agreements help us resolve disputes with billed
parties by facilitating direct communication between us and the called party, thereby reducing the number of charge-offs.
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In the absence of a LEC direct billing arrangement, we bill and collect our collect calls through third-party billing and
collection clearinghouses that have billing and collection agreements with LECs, or through our proprietary direct billing.
When we employ thitd-party billing and collection clearinghouses, the account proceeds are forwarded by the various LECs to
the clearinghouses, which then forward the proceeds to us, less a processing fee. With both LEC direct and third-party billing
and collection agreements, we reconcile our call records with collections and write-offs on a regular basis. The entire billing
and collection cycle (including reconciliation), takes on average, between six to nine months after we submit the call record to
the LEC or to third-pa11y billing and collection cJearinghollses.
Our specialized billing and bad debt management system integrates our LEC direct billing arrangements with our call
blocking, validation and customer inquiry procedures.
Patents and Other Proprietary Rights
We rely on a combination of patents, copyrights and trade secrets to establish and protect our intellectual property rights.
We have 66 patents issued and approximately 55 patents pending. We believe that our intellectual property portfolio provides
our customers leading edge technology that is recognized as technologically superior within the inmate telecommunications
industry. We consider any patents issued or licensed to us to be a significant factor in enabling us to more effectively compete
in the inmate calling industry, and we vigorously defend our patents from infringement by other inmate telecommunications
providers.
Although we have filed many patent applications and hold several patents related to our internally developed call
processing and other technology, such technology and intellectual property rights could be contested or challenged or deemed
to infringe on other parties' intellectual property rights. Should our call processor or any material feature of our call processor
or other proprietary technology be detennined to violate applicable patents, we may be required to cease using these features
or to obtain appropriate licenses for the use of that technology, and we could be subject to material damages if our
infringement were determined to be lengthy or willful.
Regulation
•
The inmate telecommunications industry is subject to varying degrees of federal, state and local regulation. Regulatory
actions have affected, and are likely to continue to affect, our correctional facility customers, our telecommunications service
provider customers, our competitors and us.
The inmate telecommunications market is regulated at the federal level by the Federal Communications Commission
("FCC") and at the state level by public utilities commissions or equivalent agencies ("PUCs") of the various states. In
addition, from time to time, Congress or the various state legislatures may enact legislation that affects the telecommunications
industry generally and the inmate telecommunications industry specifically. Court decisions interpreting applicable laws and
regulations may also have a significant effect on the inmate telecommunications industry. Changes in existing laws and
regulations, as well as the adoption of new laws and regulations applicable to our activities or other telecommunications
businesses, could have a material adverse effect on us. See "Risk Factors - Regulatory Risks."
Federal Regulation
Prior to 1996, the federal government's role in the regulation of the inmate telecommunications industry was relatively
limited. The enactment of the Telecommunications Act of1996 (the "Telecom Act"), however, marked a significant change in
scope offederal regulation of the inmate telecommunications service. Generally, the Telecom Act (i) opened local exchange
service to competition and preempted states from imposing barriers preventing such competition, (ii) imposed new unbundling
and interconnection requirements on incumbent local exchange carrier networks, (iii) removed prohibitions on inter-local
access and transport area services ("LATA") and manufacturing when certain competitive conditions are met, (iv) transferred
any remaining requirements of the consent decree governing the 1984 Bell System divestiture (including its nondiscrimination
provisions) to the FCC's jurisdiction, (v) imposed requirements to conduct certain competitive activities only through
structurally separate affiliates, and (vi) eliminated many of the remaining cable and telephone company cross-ownership
restrictions.
•
This legislation and related rulings significantly changed the competitive landscape of the telecommunications industry as
a whole. For the inmate telecommunications industry, the Telecom Act added Section 276 to the principal U.S. federal
communications statute, the Communications Act of 1934. Section 276 directed the FCC to implement rules to overhaul the
regulation ofthe provisioning of pay phone service, which Congress defined to include the provisioning of inmate
telecommunications service in correctional institutions .
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Before the adoption of the Telecom Act, the regulatory landscape allowed the LECs to subsidize their inmate
telecommunications operations from regulated revenues. This allowed the LECs to offer commissions to correctional facilities
that were often significantly higher than those that independent inmate telecommunications service providers can offer. The
Telecom Act directed the FCC to adopt regulations to end the subsidization. Congress also directed the FCC to ensure that the
RBOCs could not discriminate in favor of their own operations to the competitive detriment of independent inmate
telecommunications service providers.
•
State Regulation
In most states, inmate telecommunications service providers must obtain prior authorization from, or register with, the
PUC and file tariffs or price lists of their rates. The most significant state involvement in the economic regulation of inmate
telecommunications service is the limit on the maximum rates that can be charged for intrastate collect calls set by many
states, referred to as "rate caps." Since collect calls are the only kind of calls that can be made by inmates at many facilities,
such state-imposed rate caps can have a significant effect on our business.
In many states, the rate caps on inmate collect calls are tied to the rates charged by the LEC or "dominant" long distance
carrier and subject to state regulatory approval. Thus, where the LEC or dominant long distance carrier chooses not to raise
their rates, independent inmate telecommunications service providers are precluded from raising theirs. Prior to the passage of
the Telecom Act, the LECs and dominant long distance carriers had less incentive to raise their rates than independent inmate
telecommunications service providers because they were able to subsidize their inmate telecommunications service operations
and discriminate in their favor, as described above. See "Federal Regulation."
In its rulemaking in implementing the Telecom Act, the FCC declined to address these state rate caps. The FCC ruled that
inmate telecommunications providers must first seek relief from the state rate caps at the state level. The outcome of any such
proceedings at the state level, if undertaken, is uncertain. Further, despite reserving the right to do so, it is uncertain whether
the FCC would intervene <lr if 00, h<lw, in the event a state failed t<l provide relief.
In addition to imposing rate caps, the states may regulate various other aspects of the inmate telecommunications industry.
While the degree of regulatory oversight varies significantly from state to state, state regulations generally establish minimum
technical and operating standards to ensure that public interest considerations are met. Among other things, most states have
established rules that govern the service provider in the form of postings or verbal announcements, and requirements for rate
quotes upon request.
The foregoing discussion does not describe all present and proposed federal, state and local regulations, legislation, and
related judicial or administrative proceedings relating to the telecommunications industry, including inmate
telecommunications services, and thereby affecting our business. The effect of increased competition on our operations will be
influenced by the future actions of regulators and legislators, who are increasingly advocating competition. While we would
attempt to modify our customer relationships and our service offerings to meet the challenges resulting from changes in the
telecommuniClltions competitive environment, there is no assurance we would be able to do so.
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Employees
As of December 31,2009, we employed 736 full-time equivalent employees, of which 422 are salaried and 314 are hourly
employees. None of our employees are represented by a labor union, and we have not experienced any material work
stoppages to date. We believe that management has a good relationship with our employees.
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FORWARD LOOKING STATEMENTS
This Annual Report on Fonn 1O-K and, in particular, the description of our Business set forth in Item I and our
Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 7 contain or
incorporate a number offorward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21 E of the Securities Exchange Act of 1934, including statements regarding:
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projected future sales growth;
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expected future revenues, operations, expenditures and cash needs;
estimates of the potential for our products and services, including the anticipated drivers for future growth;
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sales and marketing plans; and
assessment of competitors and potential competitors.
In addition, any statements contained in or incorporated by reference into this report that are not statements of historical
fact should be considered forward-looking statements. You can identify these forward-looking statement by use of the words
"thinks," "believes," "expects," "anticipates," "plans," "may," "will," "would," "intends," "estimates" and other similar
expressions, whether in the negative or affinnative. We cannot guarantee that we actually will achieve the plans, intentions or
expectations disclosed in the forward looking statements made. There are a number of important risks and uncertainties that
could cause our actual results to differ materially from those indicated by such forward-looking statements. These risks and
uncertainties include, without limitation, those set forth below under the heading "Risk Factors." We do not intend to update
publicly any forward-looking statements whether as a result of new information, future events or otherwise.
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ITEM lAo RISK FACTORS
You should carefully consider the risks described below. together with all ofthe other itiformation contained in this Form
lOoK. before making an investment decision. The risks described below are not the only ones facing us. Additional risks and
uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect
our financial condition, results of operations or cash flow. Any ofthe following risks could materially and adversely affect our
(inancial condition or results ofoperations.
Risks Related to our Senior Notes
We have a substantial amount of debt outstanding and have significant interest payments.
We have a significant amount of debt outstanding. As of December 31, 2009, we had 5287.8 million oflong-tenn debt
outstanding (net of$1.6 million ofOID for our 11% Second-priority Senior Secured Notes due 2011 and $2.0 million of fair
value attributable to warrants) and stockholders' deficit of$148.2 million.
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Our substantial debt could have significant consequences. For example, it could:
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require us to dedicate a substantial portion of our cash flow from operations to make payments on our debt, thereby
reducing funds available for operations, future business opportunities and other purposes;
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limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
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make it more difficult for us to satisfy our obligations with respect to our debt obligations;
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limit our ability to borrow additional funds, or to sell assets to raise funds, if needed, for working capital, capital
expenditures, acquisitions or other purposes;
•
•
increase our vulnerability to general adverse economic and industry conditions, including changes in interest rates;
place us at a competitive disadvantage compared to our competitors that have less debt; and
•
prevent us from raising the funds necessary to repurchase notes tendered to us ifthere is a change of control, which would
constitute a default under the indenture governing the notes and our revolving credit facility.
We cannot assure you that we will generate sufficient cash flow to service and repay our debt and have sufficient funds
left over to achieve or sustain profitability in our operations, meet our working capital and capital expenditure needs or
compete successfully in our markets. ]fwe cannot meet our debt service and repayment obligations, we would be in default
under the terms of the agreements governing our debt, which would allow the lenders under our revolving credit facility to
declare all borrowings outstanding to be due and payable, which would in tum trigger an event of default under the indenture
and the agreements governing our senior subordinated debt. In addition, our lenders could compel us to apply all of our
available cash to repay our borrowings. Ifthe amounts outstanding under our revolving credit facility or the notes were to be
accelerated, we cannot assure you that our assets would be sufficient to repay in full the money owed to the lenders or to our
other debt holders. In addition, we may need to refinance our debt, obtain additional financing or sell assets, which we may not
be able to do on commercially reasonable terms or at all. Any failure to do so on commercially reasonable terms could have a
material adverse effect on our business, operations and financial condition.
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We may he able to incur more debt, including secured debt, and some or all o/this debt may effectively rank senior to the
notes lind the guarantees.
Subject to the restrictions in our revolving credit facility, the indenture governing the notes and the senior subordinated
debt financing agreements, we may be able to incur additional debt, including secured debt that would effectively rank senior
to the notes. As of December 31, 2009, we would have been able to incur approximately $30.0 million of additional secured
debt under our revolving credit facility. Although the terms of our revolving credit facility, the indenture and the senior
subordinated debt financing agreements contain restrictions on our ability to incur additional debt, these restrictions are subject
to a number of important exceptions. If we incur additional debt, the risks associated with our substantial leverage. including
our ability to service our debt, would increase.
There may not he sufficient collateral to pay all or any ofthe notes.
Indebtedness under our revolving credit facility (referred to herein as the "First-Priority Lien Obligations") is secured by a
first-priority lien on substantially all of our and our subsidiary guarantors' tangible and intangible assets, except for certain
excluded collateral. The notes are secured by a second-priority lien on the assets that secure the First-Priority Lien Obligations,
other than our current assets. In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding against
us or any future domestic subsidiary, the assets that are pledged as shared collateral securing the First-Priority Lien
Obligations and the notes must be used first to pay the First-Priority Lien Obligations, as well as any other obligation secured
by a priority lien on the collateral, in full before making any payments on the notes.
At December 31, 2009, we had no outstanding balance under the senior indebtedness (excluding the notes and
guarantees); however, as of the same date, we could have borrowed approximately $30.0 million additional First-Priority Lien
Obligations under our revolving credit facility.
•
Certain of our assets, such as our accounts receivable and inventory and any proceeds thereof, are not part of the collateral
securing the notes, but do secure the First-Priority Lien Obligations. With respect to those assets that are not part of the
collateral securing the notes but that secure other obligations, the notes will be effectively junior to these obligations to the
extent of the value of such assets. There is no requirement that the lenders ofthe First-Priority Lien Obligations first look to
these excluded assets before foreclosing, selling or otherwise acting upon the collateral shared with the notes.
The value of the collateral for our indebtedness at any time will depend on market and other economic conditions,
including the availability of suitable buyers for the collateral. By their nature. some or all of the pledged assets may be illiquid
and may have no readily ascertainable market value. The value of the assets pledged as collateral for the notes could be
impaired in the future as a result of changing economic conditions, our failure to implement our business strategy, competition
and other future trends. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, no assurance can be given
that the proceeds from any sale or liquidation of the collateral will be sufficient to pay our obligations under the notes, in full
or at all, after first satisfying our obligations in full under the First-Priority Lien Ob1igations and any other obligations secured
by a priority lien on the collateral.
Accordingly, there may not be sufficient collateral to pay al1 or any of the amounts due on the notes. Any claim for the
difference between the amount, if any, realized by holders of the notes from the sale ofthe collateral securing the notes and the
obligations under the notes will rank equally in right of payment with all of our other unsecured unsubordinated indebtedness
and other obligations, including trade payables.
Holders Qf notes do not control decisions regarding collateral.
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The holders of the First-Priority Lien Obligations control substantially all matters related to the collateral securing the
First-Priority Lien Obligations and the notes. The holders ofthe First-Priority Lien Obligations may cause their administrative
agents to dispose of, release or foreclose on, or take other actions with respect to the shared collateral with which holders of
the notes may disagree or that may be contrary to the interests of holders of the notes. The security documents generally
provide that, so long as the First-Priority Lien Obligations are in effect, the holders of the First-Priority Lien Obligations may
change, waive, modify or vary the security documents without the consent of the holders of the notes, provided that any such
change, waiver or modification does not disproportionately affect the rights of the holders of the notes relative to the other
secured creditors. Furthermore, as long as no event of default under the indenture governing the notes has occurred, the
security documents generally allow us and our subsidiaries to remain in possession of, retain exclusive control over, to freely
operate, and to collect, invest and dispose of any income from, the collateral securing the notes.
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The capital stock securing the notes will automatically be released from the second-priority lien and no longer be deemed to
be collateral to the extent the pledge ofsuch capital stock would require the filing ofseparate financial statements/or any
ofour subsidiaries with the SEC.
The indenture governing the notes and the securitY documents provide that, to the extent that separate financial statements
of any of our subsidiaries would be required by the rules of the SEC (or any other governmental agency) due to the fact that
such subsidiary's capital stock or other securities secure the notes, then such capital stock. or other securities will automatically
be deemed not to be part of the collateral securing the notes to the extent necessary to not be subject to such requirement. As a
result, holders of the notes could lose a portion of their security interest in the capital stock or other securities while any such
rule is in effect. Currently, the provisions described above would have the effect oflimiting the amount of capital stock of TNetix, Evercom and Syscon that constitutes collateral to, in each case, 19.9% of the outstanding capital stock.
•
The indenture and revolving credit facility contain covenants that can limit the discretion ofour management in operating
our business and could prevent us/rom capitalizing on business opportunities and taking other corporate actions.
The indenture, our revolving credit facility and the senior subordinated debt financing agreements impose significant
operating and financial restrictions on us. These restrictions will limit or restrict, among other things, our and most of our
subsidiaries' ability to:
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incur additional debt and issue certain types of preferred stock;
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make restricted payments, including paying dividends on, redeeming, repurchasing or retiring our capital stock;
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make investments and prepay or redeem debt;
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enter into agreements restricting our subsidiaries' ability to pay dividends, make loans or transfer assets to us;
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create liens;
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sell or otherwise dispose of assets, including capital stock of subsidiaries;
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engage in transactions with affiliates;
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engage in sale and leaseback transactions;
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make capital expenditures; and
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consolidate or merge.
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In addition, the indenture governing the notes, our revolving credit facility and our senior subordinated debt financing
agreements require, and any future credit facilities may require, us to comply with specified financial covenants, including, in
each case, interest coverage ratios and, in the case of our revolving credit facility, minimum EBITDA levels and capital
expenditure limits. Our ability to comply with these covenants may be affected by events beyond our control. Furthermore, the
indenture governing the notes may require us to use a significant portion of our cash generated from operations to make an
offer to purchase notes on a pro rata basis. The restrictions contained in the indenture, our revolving credit facility and the
senior subordinated debt financing agreements could:
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limit our ability to plan for or react to market conditions, meet capital needs or otherwise restrict our activities or business
plans; and
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adversely affect OUr ability to finance our operations, enter into acquisitions or engage in other business activities that
would be in our interest.
A breach of any of the covenants contained in our revolving credit facility, debt agreements or any other future credit
facilities, or our inability to comply with the financial ratios could result in an event of default, which would allow the lenders
to declare all borrowings outstanding to be due and payable, which would in tum trigger an event of default under the
indenture. In addition, Our lenders could compel us to apply all of our available cash to repay our borrowings. If the amounts
outstanding under our n:volving credit facility or the notes were to be accelerated, we cannot assure you that our assets would
be sufficient to repay in full the money owed to the lenders or to our other debt holders. As of December 31,2009, we were in
compliance with all debt covenants.
We are a holding company and we may not have access to sufficient cash to make payments on the notes. In addition,
the notes are effectively subordinated to the liabilities of our subsidiaries.
•
Securus Technologies, Inc., the issuer ofthe notes, is a holding company with no direct operations. Its principal assets are
the equity interests it holds, directly and indirectly, in its subsidiaries. Since all of our operations are conducted through our
subsidiaries, our ability to service our indebtedness, including the notes, will be dependent upon the earnings of our
subsidiaries and the distribution of those earnings, or upon loans or other payments of funds, by our subsidiaries to us. Our
subsidiaries are legally distinct from us and have no obligation to pay amounts due on our debt or to make funds available to
us for such payment. The payment of dividends and the making of loans and advances to us by our subsidiaries may be subject
to various restrictions, including restrictions under our revolving credit facility more fully described below. In addition, the
ability of our subsidiaries to make such payments or advances to us may be limited by the laws of the relevant jurisdictions in
which our subsidiaries fire organized or located, including, in some instances, by requirements imposed by regulatory bodies
that oversee the telecommunications industry in such jurisdictions. In certain circumstances, the prior or subsequent approval
of such payments or advances by our subsidiaries to us is required from such regulatory bodies or other governmental entities.
The notes, therefore, without giving effect to any guarantees of the notes, will be effectively subordinated to creditors
(including trade creditors) of our subsidiaries. Although the indenture contains limitations on the amount of additional
indebtedness that we and our restricted subsidiaries may incur, the amounts of such indebtedness could be substantial and such
indebtedness may be First-Priority Lien Obligations. In addition, each of our subsidiaries has other liabilities, including
contingent liabilities (including the guarantee obligations under our revolving credit facility and the senior subordinated debt
financing) that may be ;ignificant.
In addition, our revolving credit facility will restrict all payments from our subsidiaries to us during the continuance of a
payment default and will also restrict payments to us for a period of up to 180 days during the continuance of a non-payment
default.
Our revolving credit facility is, and future credit facilities may be, guaranteed by our domestic restricted subsidiaries and
certain foreign subsidiaries. Although the indenture contains limitations,on the amount of additional indebtedness that we and
our restricted subsidiaries may incur, the amounts of such indebtedness could be substantial and such indebtedness may be
secured. As of December 31, 2009, we would have been able to incur approximately $30.0 million of additional secured debt
constituting First-Priority Lien Obligations under our revolving credit facility.
u.s. bankruptcy or fraudulent conveyance Jaw may interfere with the payment ofthe notes and the guarantees and the
enforcement ofthe security interests.
Our incurrence of debt, such as the notes and the guarantees, as well as the security interests related to the notes and the
guarantees. may be subject to review under U.S. federal bankruptcy law or relevant state fraudulent conveyance laws if a
bankruptcy proceeding or lawsuit is commenced by us or on behalf of our unpaid creditors. Under these laws, if in such a
proceeding or lawsuit a court were to find that, at the lime we incurred debt (including debt represented by the notes and the
guarantees),
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we incurred such debt with tbe intent of hindering, delaying or defrauding current or future creditors; or
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we received less than reasonably equivalent value or fair consideration for incurring such debt
and we:
•
were insolvent or were rendered insolvent by reason of any of the transactions;
•
were engaged, or about to engage, in a business or transaction for which our remaining assets constituted unreasonably
small capital to carry on our business;
•
intended to incur, or believed that we would incur, debts beyond our ability to pay as these debts matured (as all of the
foregoing terms are defined in or interpreted under the relevant fraudulent transfer or conveyance statutes); or
•
were defendants in an action for money damages or had a judgment for money damages entered against us (if, in either
case, after final judgment such judgment is unsatisfied);
then that court could avoid or subordinate the amounts owing under the notes to our presently ex.isting and future debt, void or
decline to enforce the security interest and take other actions detrimental to you.
The measure of insolvency for purposes ofthe foregoing considerations will vary depending upon the law of the
jurisdiction that is being applied in any proceeding. Generally, a company would be considered insolvent if, at the time it
incurred the debt:
the sum of its debts (including contingent liabilities) was greater than its assets, at fair valuation;
•
the present fair saleable value of its assets was less than the amount required to pay the probable liability on its total
ex.isting debts and liabilities (including contingent liabilities) as they became absolute and mature; or
it could not pay its debts as they became due.
We cannot predict what standards a court would use to determine whether we or our subsidiary guarantors were solvent at
the relevant time, or whether the notes, the guarantees or the security interests would be avoided or further subordinated on
another of the grounds set forth above.
We may be unable to repurchase the notes upon a change of control as required by the indenture.
•
Upon the occurrence of a change of control, we will be required to make an otTer to repurchase all outstanding notes. In
addition, our revolving credit facility contains prohibitions of certain events that would constitute a change of control or
require such senior indebtedness to be repurchased or repaid upon a change of control. Moreover, the exercise by the holders
of their right to require us to repurchase the notes could cause a default under such agreements, even if the change of control
itself does not, due to the financial etTect of such repurchase on us. Under any of these circumstances, we cannot assure you
that we will have sufficient funds available to repay all of our senior debt and any other debt that would become payable upon
a change of control and to repurchase the notes. Our failure to purchase the notes would be a default under the indenture,
which would in tum trigger a default under our revolving credit facility. We would need to refinance our revolving credit
facility or cure the defaults thereunder before making the change of control offer.
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The definition of change of control includes a phrase relating to the sale or other transfer of "all or substantially all" of
our assets. There is no precise definition ofthe phrase under applicable law. Accordingly, in certain circumstances there may
be a degree of uncertainty in ascertaining whether a particular transaction would involve a disposition of "all or substantia1ly
all" I)f our assets, and therefore it may be unclear as to whether a change of control has occurred and whether the holders of the
notes have the right to require us to repurchase such notes.
Rights ofholders of notes in the collateral may be adversely affected by bankruptcy proceedings.
The right of the administrative agent of the First Lien Priority Obligations to repossess and dispose of the collateral
securing the notes upon acceleration is likely to be significantly impaired by federal bankruptcy law if bankruptcy proceedings
are commenced by or against us or any of our subsidiaries prior to or possibly even after the administrative agent has
repossessed and disposed of the collateral. Under the U.S. Bankruptcy Code, a secured creditor, such as the administrative
agent, is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security
repossessed from a debtor, without bankruptcy court approval. Moreover, bankruptcy law pennits the debtor to oontinue to
retain and to use collateral, and the proceeds, products, rents or profits of the collateral, even though the debtor is in default
under the applicable debt instruments, provided that the secured creditor is given "adequate protection." The meaning of the
term "adequate protection" may vary according to circumstances, but it is intended in general to protect the value of the
secured creditor's interest in the collateral and may include cash payments or the granting of additional security, ifand at such
time as the court in its discretion determines, for any diminution in the value of the collateral as a result of the stay of
repossession or disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. In view of
the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments under the notes could be
delayed following commencement of a bankruptcy case, whether or when the administrative agent would repossess or dispose
of the collateral, or whether or to what extent holders of the notes would be compensated for any delay in payment or loss of
value ofthe collateral through the requirements of "adequate protection." Furthennore, in the event the bankruptcy court
detennines that the value ofthe collateral is not sufficient to repay all amounts due on the notes, the holders of the notes would
have "undersecured claims" as to the difference. Federal bankruptcy laws do not permit the payment or accrual of interest,
costs and attorneys' fees for "undersecured claims" during the debtor's bankruptcy case.
•
Risk Factors Relating to Our Business
Economic conditions,particularly the continued economic slowdown, could adversely impact ourfinancial condition and
results of operations.
Our business is directly affected by market conditions, trends in our industry and finance, legislative and regulatory
changes, and changes in the economy, all of which are beyond our control. Continued deterioration in economic conditions
could result in the following consequences, among others, any of which could have an adverse impact on our business
operations, results of operations and financial condition:
Demand for our products and services may continue to decline, resulting in lower billed calls and minutes, revenues and
operating income;
Our bad debt may rise and we may be required to further limit credit to billed parties, which would reduce our revenues;
Our existing and prospective software customers may continue to delay or defer spending on software and services;
Volatile credit markets can impact borrowing availability.
These risks are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we
currently view to be immaterial may also materially and adversely affect our business, financial condition, or results of
operations.
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Our financial results are dependent on the success 0/ our billing and bad debt risk management systems.
The inmate telecommunications business is subject to significant risk of bad debt or uncollectible accounts receivable. In
2009, our direct provisioning bad debt expense was approximately 8% of our direct provisioning revenues. Many calls are
collect calls paid by the called or billed party. Historically, such billed party's ability to pay for collect calls has been tied to
economic conditions, and unemployment rates in particular, that exist in their community. However, we have developed
statistical methods to identify high risk customers who we require to prepay. In 2008, approximately 46% of our direct call
provisioning revenue was prepaid, while over 55% of our direct provisioning revenue was prepaid in 2009. Due to current
economic conditions in the country and high unemployment rates, it is possible that bad debt results could
deteriorate. Because our bad debt visibility is delayed by six to nine months for calls that are placed on LEe bills, risks exists
that we will incur future write-offs causing bad debt to increase.
•
We bill our direct and wholesale services call records through LEes and billing aggregators, which aggregate our charges
with other service providers and bill through the applicable LEe. Our agreements with the LEes and the billing aggregators
specify that the LEes get paid their portion of a bill prior to ours and we share the remaining risk of nonpayment with other
non-LEe service providers. In certain circumstances, LEes are unable to trace the collect call to a proper billed number and
the call is unbillable. We are also subject to the risks that the LEe decides not to charge for a call on the basis ofbilling or
service error and that we may be unable to retain our current billing collection agreements with LEes, many of which are
terminable at will.
There is a significant lag time (averaging six to nine months) between the time a call is made and the time we learn that
the billed party has failed to pay for a call when we bill through LEes and billing aggregators. During this period, we may
continue to extend credit to the billed party prior to terminating service and thus increase our exposure to bad debt.
Additionally, because of the significant lag time, deteriorating trends in collection rates may not be immediately visible and
bad debt may therefore increase prior to our ability to adjust our algorithms and reduce credit limits. This risk is heightened in
light of the recent economic downturn. We seek to minimize our bad debt expense by using multi-variable algorithms to adjust
our credit policies and billing. We have enhanced our bad debt management systems by reducing the processing time of call
records through our back office systems. However, we cannot assure you that these initiatives will always be successful or that
our algorithms will remain accurate as circumstances change. Moreover, to the extent we overcompensate for bad debt
exposure by limiting credit to billed parties, our revenues and profitability may decline as we aHow fewer calls to be made. To
the extent our billing and bad debt risk management systems are less than effective or we are otherwise adversely affected by
the foregoing factors, our results of operations could be negatively impacted.
We expect significant declines in OUT wholesale revenues, which ifnot replaced by direct call provisioning or other
revenues, could have an adverse impact on our financial condition.
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Our wholesale revenues, which accounted for approximately 8% of our revenues in 2009, are expected to continue to
decline over the next few years. Our wholesale customers have historically been comprised of1arge telecommunications
carriers, which began exiting the inmate telecommunications business in early 2005. Since their exit, the larger county and
state facilities that they served are increasingly being serviced by independent inmate communications companies. As a result,
our wholesale revenues decreased by approximately $1.8 million, or 5.9%, from 2008 to 2009. Global Tel*Link comprised
31 % of our wholesale revenue in 2009. Global's master agreement with us expired on March 1, 2008 and we will stop
providing services to them as their underlying contracts at the individual facilities expire.
We aTe dependent on third party vendors for our in/ormation, billing and offender management systems.
Sophisticated information and billing systems are vital to our ability to monitor and control costs, bill customers, process
customer orders, provide customer service and achieve operating efficiencies. We currently rely on internal systems and third
party vendors to provide all of our information and processing systems. Some of OUf billing, customer service and
management information systems have been developed by third parties for us and may not perform as anticipated. 1n addition,
our plans for developing and implementing our information and billing systems rely substantially on the delivery of products
and services by third party vendors.
We also license critical third-party software for our offender management products that we incorporate into our own
software products and are likely to incorporate additional third-party software into our new product offerings. The operation of
our products would be impaired if errors occur in the third-party software that we utilize. It may be more difficult for us to
correct any defects in third-party software because the software is not within our control. Accordingly, our business could be
adversely affected in the event of any errors in this software. There can be no assurance that these third parties will continue to
invest the appropriate levels of resources in their products and services to maintain and enhance the capabilities of their
software. If the cost oflicensing any of these third-party software products significantly increases, our gross margin levels
could significantly decrease.
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Our right to use these systems is dependent upon license agreements with third party vendors. Some of these agreements
are cancelable by the vendor, and the cancellation or nonrenewable nature oftbese agreements could impair our ability to
process orders, bill our customers or sell our offender management products. Since we rely on third party vendors to provide
some of these services or products, any switch in vendors could be costly and could affect operating efficiencies.
Additionally, if our relations with any of our third-party information and offender management systems providers are
impaired or the third-party software infringes upon another party's intellectual property rights, our business could be harmed.
Although these third party software vendors generally indemnify us against claims that their technology infringes on the
proprietary rights of others, such indemnification is not always available for all types of intellectual property. Sometimes
software vendors are not well capitalized and may not be able to indemnify us in the event that their technology infringes on
the proprietary rights of others. Defending such infringement claims, regardless of their validity, could result in significant cost
and diversion of resources. As a result, we may face substantial exposure to liability in the event that technology we license
from a third-party infringes on another party's proprietary rights.
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We face challenges in growing our offender management software business.
Our future success and our ability to meet forecasted operating results and pay interest and principal on the notes will
depend in part on our ability to sustain our market share of the offender management software business. In 2009 and prior
years, the majority of these revenues were associated with our ongoing implementation of our software for Her Majesty's
Prison Service in the United Kingdom, through a sub-contracting agreement with Hewlett Packard (formerly EDS). We will
need to continue to generate new contracts to compensate for the loss of this revenue.
Our offender management software business has been affected by the poor economy as government budgets have been
negatively impacted. Corrections agencies have increased the amount of time they take to evaluate proposals, process contracts
and change orders, and in some cases have deferred or cancelled orders for the purchase of technology solutions. Agencies are
being extremely careful as all purchases are under increased scrutiny and require additional steps before approval. If we are
unable to continue to generate new contracts we will face the risk of not meeting our targeted revenue goals for 201 0, which
could further reduce profitability or operating losses and may materially and adversely affect our business, financial condition
and results of operations.
A number of our customers individually account/or a large percentage 0/ our revenues. and there/ore the loss 0/ one or
more o/these customers could harm our business.
If we lose existing customers and do not replace them with new customers, our revenues will decrease and may not be
sufficient to cover our costs. For the year ended December 31, 2009, our top five customers accounted for approximately 20%
of our total revenues. Ifwe lose one or more of these customers our revenues will be adversely affected, which could harm our
business.
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Our success depends on our ability to protect our proprietary technology and ensure that our systems are not in/ringing on
the proprietary technology 0/ other companies.
Our success depends to a significant degree on our protection of our proprietary technology, particularly in the areas of
three-way call prevention, automated operators and can processing technology, bad debt risk management, revenue generation
and ancillary products and services. The unauthorized reproduction or other misappropriation of our proprietary technology
could enable third parties to benefit from our technology without paying us for it. Although we have taken steps to protect our
proprietary technology, these steps may be inadequate. We rely on a combination of patent and copyright law and nondisclosure agreements to establish and protect our proprietary rights in OUI systems. However, existing trade secret, patent,
copyright and trademark laws offer only limited protection. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or obtain and use trade secrets or other information we regard as
proprietary. Ifwe resort to legal proceedings to enforce our intellectual property rights, the proceedings would be burdensome
and expensive and could involve a high degree of risk.
We cannot assure you that a third party will not accuse us of infringement on its intellectual property rights. There has
been litigation in the telecommunications industry regarding alleged infringement of certain of the technology used in intemet
telephony services. Although this litigation involves companies unrelated to us, and we believe, technology different from
ours, it is possible that similar litigation could be brought against us in the future. Certain parties to such litigation have
significantly greater financial and other resources than us. Any claim of infringement could cause us to incur substantial costs
defending against the claim, even if the claim is not valid, and could perhaps prevent us from adequately defending the claim.
Such a claim would also distract our management from our business. A claim may also result in a judgment involving
substantial damages or an injunction or other court order that could prevent us from selling our products and services or
operating our network architecture. Any of these events could have a material adverse effect on our business, operating results
and financial condition.
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We may not be able to adapt successfully to new technologies, to respond effectively to customer requirements or to provide
new services.
The communications and software industries, including inmate communications and offender management systems, are
subject to rapid and significant changes in technology, frequent new service introductions and evolving industry standards. As
a result, it is difficult for us to estimate the life cycles of our products. Technological developments may reduce the
competitiveness of our services and require unbudgeted upgrades, significant capital expenditures and the procurement of
additional services that could be expensive and time consuming. To the extent our existing or future competitors are successful
in developing competitive technologies, including through deployment ofthe packet based architecture that we believe
provides us with a competitive advantage, our competitive position, market share and the price we receive for services may be
adversely affected. To be competitive, we must develop and introduce product enhancements and new products. New products
and new technology often render existing infonnation services or technology infrastructure obsolete, excessively costly, or
otherwise unmarketable. As a result, our success depends on our ability to create and integrate new technologies into our
current products and services and to develop new products. If we fail to respond successfully to technological changes or
obsolescence or fail to obtain access to important new technologies, we could lose customers and be limited in our ability to
attract new customers or sell new services to our existing customers. The failure to adapt to new technologies could have a
material adverse effect on our business, financial condition and results of operations.
The successful development of new services, which is an element of our business strategy, is uncertain and dependent on
many factors, and we may not generate anticipated revenues from such services. In addition, as communications networks are
modernized and evolve from analog-based to digital·based systems, certain features offered by uS may diminish in value. We
cannot guarantee that we will have sufficient technical, managerial or financial resources to develop or acquire new technology
or to introduce new services or products that would meet our customers' needs in a timely manner.
Our business could be adversely affected if our products and services fail to perform or be performed properly.
Products as complex as ours may contain undetected errors or "bugs," which could result in product failures or security
breaches and render us unable to satisfy customer expectations. Further, our products must integrate with the many computer
systems and software programs of our customers. Any failure of our systems or an inability of our customer to implement or
integrate our products could result in a claim for substantial damages against us, regardless of our responsibility for the failure .
Although we test our products and maintain general liability insurance, including coverage for errOrs and omissions, we cannot
assure you that we will detect every error or that our existing coverage will continue to be available on reasonable tenns or
will be available in amounts sufficient to cover one or more large claims, or that the insurer will not disclaim coverage as to
any future claim. The occurrence of errors could result in a loss of data to us or our customers, which could cause a loss of
revenues, failure to achieve acceptance, diversion of development resources, injury to our reputation, or damages to our efforts
to build brand awareness, any of which could have a material adverse effect on our market share and, in tum, our operating
results and financial condition.
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A system failure could cause delays or interruptions ofservice, which could cause us to lose customers.
To be successful, we will need to continue to provide our customers with reliable service. Some of the events that could
adversely affect our ability to deliver reliable service include:
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physical damage to our network operations centers;
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disruptions beyond our control;
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power surges or outages; and
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software defects.
Disruptions may cause interruptions in service or reduced capacity for customers, either of which could cause us to lose
customers and incur unexpected expenses.
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We are dependent on the communications industry, which subjects our business to risks affecting the communications
industry generally.
Although we focus on the inmate communications industry, our business is directly affected by risks facing the
communications industry in general. The communications industry has been, and we believe it will continue to be,
characterized by several trends, including the following:
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rapid development and introduction of new technologies and services;
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increased competition within established markets from current and new market entrants that may provide competing or
alternative services;
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the increase in mergers and strategic alliances that allow one telecommunications provider to offer increased services or
access to wider geographic markets; and
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continued changes in the laws and regulations affecting rates for collect and prepaid calls.
The market for communications services is highly competitive. Our ability to compete successfully in our markets will
depend on several factors, including the following:
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the quality and reliability of our network and service;
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how well we market our existing services and develop new technologies;
our ability to anticipate and respond to various competitive factors affecting the communications industry, including a
changing regulatory environment that may affect us differently from our competitors, pricing strategies and the
introduction of new competitive services by our competitors, changes in consumer preferences, demographic trends and
economic conditions; and
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our ability to successfully defend claims against us .
Competition could intensify as a result of new competitors and the development of new technologies, products and
services. Some or all of these risks may cause us to have to spend significantly more in capital expenditures than we currently
anticipate in order to retain existing and attract new customers,
Some of our competitors have brand recognition and financial, personnel, marketing and other resources that are
significantly greater than ours. In addition, due to consolidation and strategic alliances within the communications industry, we
cannot predict the number of competitors that will emerge, especially as a result of existing or new federal and state regulatory
or legislative actions. Increased competition from existing and new entities could lead to higher commissions paid to
correctional facilities, loss of customers, reduced operating margins or loss of market share.
Most of our customers are governmental entities that require us to adhere to certain policies that may limit our ability to
attract and retain customers.
Our customers include U.S. and foreign federal, state and local governmental entities responsible for the administration
and operation of correctional facilities. We are subject, therefore, to the administrative policies and procedures employed by,
and the regulations that govern the activities of, these governmental entities, including policies, procedures, and regulations
concerning the procurement and retention of contract rights and the provision of services. Our operations may be adversely
affected by the policies and procedures employed by, or the regulations that govern the activities of, these governmental
entities and we may be limited in our ability to secure additional customer contracts, renew and retain existing customer
contracts, and consummate acquisitions as a result of such policies, procedures and regulations.
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Our offender management software's lengthy sales cycle and limited number oflarge non-recurring licenses sales make it
difficult to predict quarterly revenue levels and operating results.
It is difficult for us to forecast the timing and recognition of revenues from sales of our offender management products
because our existing and prospective customers often take significant time evaluating our products before licensing them. The
sales process for our offender management software products is lengthy and can exceed one year. License and implementation
fees for our offender management software products tend to be substantial when they occur. Additionally, the purchasing of
our offender management software products is relatively discretionary and the purchasing decision typically involves members
of our customers' senior management. Accordingly, the timing of our license revenues is difficult to predict. The delay of an
order could c8use our quarterly revenues to fall substantially below our expectations and those of public market analysts and
investors.
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Moreover, to the extent that we succeed in shifting customer purchases away from individual software products and
toward more costly integrated suites of software and services, our sales cycle may lengthen, which could increase the
likelihood of delays and cause the effect of a delay to become more pronounced. Delays in our offender management software
sales could cause significant shortfalls in our revenues and operating results for any particular period and could lead to future
impairment of goodwill or long-lived assets. The period between initial customer contact and a purchase by a customer may
vary from nine months to more than one year. During the evaluation period, prospective customers may decide not to purchase
or may scale down proposed orders of our products for various reasons, including:
reduced demand for offender management software solutions;
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introduction of products by our competitors;
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10wer prices offered by our competitors; and
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reduced Jteed to upgrade existing systems.
Additionally, because our customers and potential customers are federal, state and local government agencies that may
have limited funds allocated to information technology, decreases in any of our customers' budgets for information technology
could result in order cancellations that could have a significant adverse affect on our revenues and quarterly results.
We may not be successful in convincing potential customers to migrate to our offender management software products.
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Many correctional institutions have historically used internally developed software for their offender management systems
and to manage other resources. These institutions may not be willing to incur the costs or invest the resources necessary to
initially implement our software products or complete upgrades to current or future releases of our products. Consequently, it
may be difficult for us to convince these institutions to make substantial capital expenditures to migrate to our products. This
may impede our ability to increase our market share in existing markets as well as penetrate other geographic markets or to
generate new or recurring revenues.
Our internatitmal operations and sales subject us to risks associated with unexpected events.
The intemational reach of our business could cause us to be subject to unexpected, uncontrollable and rapidly changing
events and circumstances. The following factors, among others, could adversely affect our business and earnings:
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