Restatement

As previously described in the "Explanatory Note" to this amendment, we have restated our consolidated financial statements for the year ended December 31, 2007 to correct the accounting for interest rate swaps entered into in August 2007 associated with our credit facility. The restatement is more fully described in Note 3 to our consolidated financial statements. As more fully described in Item 9A. "Controls and Procedures," we have also determined that a control deficiency related to our accounting for these derivatives giving rise to the restatement constituted a material weakness in our internal control over financial reporting.

Overview

We are a global provider of applied communication technologies that help businesses automate and improve their business processes. Our PGiCOS delivers multiple industry- and function-specific business applications. We go to market on a global basis in three segments in North America, Europe and Asia with the following five solution sets: Conferencing & Collaboration, Desktop Document Solutions, Enterprise Document Solutions, Notifications & Reminders and eMarketing.

Key highlights of our financial and strategic accomplishments for 2007 include:

º Grew consolidated net revenues by nearly 13% in 2007 compared to 2006;

º Grew cash flows provided by operating activities by greater than 24% compared to 2006;

º Expanded our credit facility to $325.0 million to augment our access to capital (which was further expanded to $375.0 million in January 2008);

º Repurchased more than 10 million shares of our common stock, or approximately 15% of our total shares outstanding; and

º Launched our web portal, PGiConnect.com, to bring all of our capabilities online.

Our primary corporate objectives in 2008 are focused on continuing to enhance our customer and shareholder value, which we believe will enhance the positive momentum we have generated in our business.

Specifically, in the year ahead our plan is to:

º Focus our sales efforts on selling additional PGiCOS solutions and applications into our existing base of customers;

º Introduce new PGiCOS business applications that meet the specific needs of targeted industries and horizontal job functions;

º Introduce new pricing options, including subscription and license pricing options, that are more common with other on-demand service providers; and

º Continue to enhance our web presence, including adding greater functionality to our web portal at PGiConnect.com.

We believe our success against these objectives will enable us to continue to increase our market share and to improve shareholder value throughout the remainder of 2008.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of net revenues and expenses during the reporting period. Actual results could differ from the estimates. See the section in this annual report entitled "Critical Accounting Policies." The following discussion and analysis provides information which we believe is relevant to an assessment and understanding of our consolidated results of operations and financial condition. This discussion should be read in conjunction with our consolidated financial statements contained herein and notes thereto.

The following table presents the percentage relationship of certain consolidated statements of operations line items to total net revenues for our consolidated operating results for the periods indicated, with certain 2007 results of operations restated to reflect adjustments as described in Note 3 to our consolidated financial statements:

                                                         Year Ended December 31,
                                                 ----------------------------------------
                                                       2007           2006        2005
                                                  (As restated)
                                                 ---------------- ------------ ----------
Net revenues                                           100.0 %      100.0 %    100.0 %

Operating expenses
       Cost of revenues (exclusive of
depreciation and amortization                           40.6         40.5       36.3
       shown separately below)
       Selling and marketing                            25.2         26.7       25.8
       General and administrative (exclusive of
net legal settlements shown
               separately below)                        11.8         11.8       11.8
       Research and development                          2.5          2.4        2.2
       Depreciation                                      5.4          4.9        5.0
       Amortization                                      2.8          2.6        2.7
       Restructuring costs                               0.6          1.7        0.7
       Asset impairments                                   -            -          -
       Net legal settlements and related
expenses                                                 0.1          0.1        0.4
                                                 -----------      -------      -----
               Total operating expenses                 89.0         90.7       84.9
                                                 -----------      -------      -----
Operating income                                        11.0          9.3       15.1
                                                 -----------      -------      -----
Other (expense) income
       Interest expense                                 (2.4 )       (1.8 )     (1.1 )
       Unrealized loss on change in fair value
of interest rate swaps                                  (0.8 )          -          -
       Interest income                                   0.1          0.1        0.1
       Other, net                                        0.3          0.3          -
                                                 -----------      -------      -----
               Total other (expense) income             (2.8 )       (1.4 )     (1.0 )
                                                 -----------      -------      -----
Income from continuing operations
       before income taxes                               8.2          7.9       14.1
Income tax expense                                       2.7          2.8        4.3
                                                 -----------      -------      -----
Income from continuing operations                        5.5 %        5.1 %      9.8 %
                                                 -----------      -------      -----
Discontinued operations:
       Loss from operations of Voicecom                    -            -       (0.4 )
       Income tax benefit                                  -            -       (0.1 )
                                                 -----------      -------      -----
       Loss on discontinued operations                     -            -       (0.3 )
                                                 -----------      -------      -----
Net income                                               5.5 %        5.1 %      9.5 %
                                                 -----------      -------      -----

                                                      Year Ended December 31,
                                               --------------------------------------
                                                     2007          2006       2005
                                                (As restated)
                                               ---------------- ----------- ---------
     NET REVENUES:
     Net revenues from continuing operations:
            North America                         $     356.7     $ 319.3   $ 321.4
            Europe                                      103.3        93.0      99.1
            Asia Pacific                                 99.7        84.2      77.0
                                               ---- ---------     - -----   - -----
                                                  $     559.7     $ 496.5   $ 497.5
                                               ---- ---------     - -----   - -----
     INCOME (LOSS):
     Income (loss) from continuing operations:
            North America                         $      20.3     $  21.5   $  41.8
            Europe                                        5.3        (0.7 )     2.3
            Asia Pacific                                  4.8         4.7       4.6
                                               ---- ---------     - -----   - -----
                                                  $      30.4     $  25.5   $  48.7
                                               ---- ---------     - -----   - -----
     Loss from discontinued operations:
            North America - Voicecom                        -           -      (1.3 )
                                               ---- ---------     - -----   - -----
            Net income:                           $      30.4     $  25.5   $  47.4
                                               ---- ---------     - -----   - -----

Net revenues

Consolidated net revenues from continuing operations were $559.7 million in 2007, $496.5 million in 2006 and $497.5 million in 2005. Consolidated net revenues in 2007 increased from the previous year by 12.7% and in 2006 decreased from the previous year by 0.2%. Net revenues increased in 2007 from the previous year primarily as a result of organic growth in our Conferencing & Collaboration Solutions, the strengthening of various currencies to the U.S. dollar, our acquisitions of the following Conferencing & Collaboration Solutions providers:
eNunciate, EC Teleconferencing Pty Ltd. (ECT), Budget Conferencing Inc. and Meet24, the conferencing and web collaboration division of NetConnect Systems AS, our acquisition of an E-Marketing Solutions provider, Accucast, Inc., offset in part by declines in broadcast fax revenues. Strengthening of various currencies to the U.S. dollar resulted in increased revenues in 2007 compared to 2006 of approximately $10.6 million. Consolidated net revenues decreased in 2006 from the previous year primarily as a result of declines in broadcast fax revenue and declines in Conferencing & Collaboration Solutions revenue from historically our largest customer, offset in part by organic growth in our Conferencing & Collaboration Solutions excluding this one customer, our acquisitions of the following Conferencing & Collaboration Solutions providers:
Citizens Communications Company's conferencing services business, Intelligent Meetings Corporation, Netspoke, Inc., eNunciate and ECT, and our acquisition of Accucast.

North America net revenue was 63.7%, 64.3%, and 64.6% of consolidated net revenues for 2007, 2006 and 2005, respectively. North America net revenue was $356.7 million in 2007, $319.3 million in 2006 and $321.4 million in 2005. North America net revenue in 2007 increased from the previous year by 11.7% and, in 2006, decreased from the previous year by 0.7%. North America net revenue increased in 2007 from the previous year primarily as a result of organic growth in our Conferencing & Collaboration Solutions, our acquisitions of eNunciate, Budget Conferencing and Accucast, Desktop Document Solutions and strengthening of the Canadian Dollar to the U.S. dollar by approximately $0.4 million. This growth was offset primarily by declines in our broadcast fax revenue. North America net revenue decreased in 2006 from the previous year primarily as a result of declines in our broadcast fax revenue and Conferencing & Collaboration Solutions revenue from historically our largest customer, offset in part by our acquisitions of Citizens Communications conferencing services business, Intelligent Meetings, Netspoke, eNunciate, and Accucast and organic growth in our Conferencing & Collaboration Solutions excluding this one customer, and Desktop Document Solutions. Our Conferencing & Collaboration Solutions revenue in North America was $269.6 million, $219.5 million and $203.3 million in 2007, 2006 and 2005, respectively. Our broadcast fax revenue in North America was $20.3 million, $28.3 million and $44.8 million in 2007, 2006 and 2005, respectively.

Asia Pacific net revenue was 17.8%, 17.0%, and 15.5% of consolidated net revenues for 2007, 2006 and 2005, respectively. Asia Pacific net revenue was $99.7 million in 2007, $84.2 million in 2006 and $77.0 million in 2005. Asia Pacific net revenue in 2007 and 2006 increased from each of the previous years by 18.4% and 9.4%, respectively. Asia Pacific net revenue increased in 2007 primarily as a result of organic growth in our Conferencing & Collaboration Solutions, our acquisition of ECT, the strengthening of various currencies to the U.S. dollar, growth in our Maritime Notifications and Reminders Solutions (which we resale from a third party to shipping companies in this region), offset in part by declines in our broadcast fax revenue. Asia Pacific net revenue increased in 2006 primarily as a result of organic growth of our solution sets and our acquisition of ECT, offset in part by a weakening of the Yen to the U.S. dollar and declines in broadcast fax revenue. Strengthening of the various currencies in Asia Pacific to the U.S. dollar resulted in increased revenue in 2007 compared to 2006 of approximately $2.6 million. Our Conferencing & Collaboration Solutions revenue in Asia Pacific was $42.5 million, $29.5 million and $23.1 million in 2007, 2006 and 2005, respectively. Our broadcast fax revenue in Asia Pacific was $32.4 million, $34.3 million and $36.4 million in 2007, 2006 and 2005, respectively.

Cost of revenues

Consolidated cost of revenues were 40.6%, 40.5%, and 36.3% of consolidated revenues in 2007, 2006 and 2005, respectively. Consolidated cost of revenues from continuing operations increased 13.4% to $227.3 million in 2007 from $200.5 million in 2006 and increased 10.8% in 2006 from $181.0 million in 2005. Consolidated cost of revenues as a percentage of consolidated net revenues remained flat in 2007 compared to 2006 as a as a result of renegotiated lower telecommunications costs, our continued migration to VoIP and the initial benefits of our service delivery organization re-engineering efforts. These cost reductions, however were offset by declines in high margin broadcast fax services and price compression in our Conferencing & Collaboration Solutions. Consolidated cost of revenues as a percentage of consolidated net revenues increased in 2006 compared to 2005 as a result of decreased revenues due to declines in a significant higher margin Conferencing & Collaboration Solutions revenue from historically our largest customer and higher margin broadcast fax services.

North America cost of revenue totaled $142.0 million in 2007, $124.4 million in 2006 and $108.7 million in 2005, or 39.8%, 39.0% and 33.8% of segment net revenue, in 2007, 2006 and 2005, respectively. North America cost of revenue includes approximately $0.3 million, $0.7 million and $0.2 million for 2007, 2006 and 2005, respectively, of equity-based compensation costs which increased in 2006 as a result of our adoption of SFAS No. 123(R), "Share Based Payment" (SFAS 123(R)). In 2007, North America cost of revenue increased as a percentage of segment net revenue primarily due to lower average selling prices per minute in our Conferencing & Collaboration Solutions, declines in broadcast fax services and growth in our web conferencing services that carry a higher percentage cost of revenue, offset by lower negotiated telecommunications costs per minute and reduced customer service costs associated with our non-Conferencing & Collaboration Solutions revenue. These reduced non-Conferencing & Collaboration Solutions customer service costs are a result of re-engineering efforts in the first half of 2007. In 2006, North America cost of revenue increased as a percentage of segment net revenue primarily due to regulatory telecommunications costs, our acquisition of Accucast (with our eMarketing Solutions carrying a higher percentage cost of revenue), lower average selling prices per minute in our organic Conferencing & Collaboration Solutions, the decline of revenue from historically our largest Conferencing & Collaboration Solutions customer with higher margins, declines in lower cost of revenue for broadcast fax services and growth in our web conferencing services that carry a higher percentage cost of revenue.

Asia Pacific cost of revenue totaled $48.3 million in 2007, $40.7 million in 2006 and $33.3 million in 2005, or 48.4%, 48.3% and 43.3% of segment net revenue, in 2007, 2006 and 2005, respectively. In 2007, Asia Pacific cost of revenue increased as a percentage of segment net revenue primarily as a result of lower average selling price per minute in our Conferencing & Collaboration Solutions, offset in part by reductions in telecommunication costs from network performance improvements. In 2006, Asia Pacific cost of revenue increased as a percentage of segment net revenue primarily as a result of lower average selling price per minute in Conferencing & Collaboration Solutions and broadcast fax services and telecommunications cost increases in certain countries where telecommunications remain highly regulated by the government. Increases in costs related to certain of our reseller arrangements that carry higher costs of revenue also contributed to this increase.

Selling and marketing

Consolidated selling and marketing expenses from continuing operations as a percent of consolidated net revenues were 25.2%, 26.7% and 25.8% in 2007, 2006 and 2005, respectively. Consolidated selling and marketing expenses from continuing operations increased 6.8% to $141.3 million in 2007 from $132.3 million in 2006, and increased 2.9% in 2006 from $128.6 million in 2005. Consolidated selling and marketing expense as a percentage of net revenue declined in 2007 as compared with 2006 and increased in 2006 as compared with 2005. The increase in consolidated selling and marketing expenses in 2007 compared to 2006 are associated with $4.3 million from our acquisitions of Accucast, eNunciate, ECT, Budget Conferencing and Meet24, $2.7 million from the strengthening of various currencies to the U.S. dollar and $2.0 million from increased investments in our sales and marketing efforts throughout 2007. The increase in selling and marketing expenses in 2006 compared to 2005 were associated primarily with our increased investment in sales and marketing efforts throughout 2006.

North America selling and marketing expenses as a percent of segment net revenue were 24.7%, 27.6% and 26.3%, in 2007, 2006 and 2005, respectively. North America selling and marketing expense increased 0.1% to $88.1 million in 2007 from $88.0 million in 2006, and increased 4.0% in 2006 from $84.6 million in 2005. North America selling and marketing expense includes $1.8 million, $1.8 million and $1.0 million for 2007, 2006 and 2005, respectively, of equity-based compensation expense which increased in 2006 as a result of our adoption of SFAS
123(R). The increase in North America selling and marketing expense in 2007 compared to 2006 is associated with increased costs of $2.9 million from our acquisitions of Accucast, eNunciate and Budget Conferencing, additional investment sales personnel of $1.2 million, offset in part by a reduction of $4.0 million in marketing support costs associated with our 2006 corporate branding initiatives and non-Conferencing & Collaboration Solutions promotions. The increase in North America selling and marketing expense in 2006 compared to 2005 is primarily associated with our acquisitions of Accucast and eNunciate and costs associated with corporate branding initiatives related to corporate organizational changes.

Europe selling and marketing expenses as a percent of segment net revenue were 30.8%, 27.5% and 26.0%, in 2007, 2006 and 2005, respectively. Europe selling and marketing expense increased 24.3% to $31.8 million in 2007 from $25.6 million in 2006, and decreased 0.8% in 2006 from $25.8 million in 2005. Europe selling and marketing expense includes $0.3 million, $0.2 million and $0.0 million for 2007, 2006 and 2005, respectively, of equity-based compensation expense which increased in 2006 as a result of our adoption of SFAS 123(R). The increase in Europe selling and marketing costs in 2007 compared to 2006 is associated with $2.1 million related to the Euro and British Pound strengthening to the U.S. dollar, $1.0 million from our acquisition of Meet24 and $3.1 million from our investments in sales personnel to support our solution sets. The increase in Europe selling and marketing costs in 2006 compared to 2005 is associated with increases in Conferencing & Collaboration Solutions

Asia selling and marketing expenses as a percent of segment net revenue were 21.4%, 22.2% and 23.7%, in 2007, 2006 and 2005, respectively. Asia Pacific selling and marketing expense increased 14.4% to $21.4 million in 2007 from $18.7 million in 2006, and increased 2.7% in 2006 from $18.2 million in 2005. Asia Pacific selling and marketing expense includes $0.1 million, $0.1 million and $0.0 million for 2007, 2006 and 2005, respectively, of equity-based compensation expense which increased in 2006 as a result of our adoption of SFAS
123(R). The increase in Asia selling and marketing costs in 2007 compared to 2006 is associated with $0.6 million from various currencies strengthening to the U.S. dollar and $1.6 million of investments in sales personnel to support our solution sets. The increase in Asia selling and marketing costs in 2006 compared to 2005 is primarily associated with increases in Conferencing & Collaboration Solutions sales personnel offset in part by reductions in sales personnel associated with our broadcast fax services.

Research and development

Consolidated research and development expenses from continuing operations as a percentage of consolidated net revenues were 2.5%, 2.4% and 2.2% in 2007, 2006 and 2005, respectively. Consolidated research and development expenses from continuing operations increased 16.5% to $14.1 million in 2007 from $12.1 million in 2006 and increased 11.3% in 2006 from $10.8 million in 2005. Consolidated research and development expense included approximately $0.8 million, $0.8 million and $0.1 million for 2007, 2006 and 2005, respectively, of equity-based compensation expense which increased in 2006 as a result of our adoption of SFAS 123(R). Research and development costs increased as a percentage of consolidated net revenues in 2007 and 2006 as a result of a greater amount of internal costs incurred for maintenance of our platforms. We capitalized $9.8 million, $8.0 million and $9.1 million in 2007, 2006 and 2005, respectively, of internal software development costs. The increase in internal costs capitalized is primarily the result of increased product offerings and product enhancements within our solution sets. Research and development expenses are primarily incurred in the U.S.

General and administrative

Consolidated general and administrative expenses from continuing operations as a percentage of consolidated net revenue were 11.8% in 2007, 2006 and 2005, respectively. Consolidated general and administrative expenses from continuing operations increased 12.6% to $66.0 million in 2007 from $58.6 million in 2006, and increased 0.2% in 2006 from $58.5 million in 2005. Consolidated general and administrative expenses from continuing operations increased in 2007 compared to 2006 as a result of $2.9 million in increased proxy-related costs, $1.9 million related to our acquisitions of Accucast, eNunciate, ECT, Budget Conferencing and Meet24, $1.0 million associated with various currencies strengthening to the U.S. dollar with the remaining increases associated with duplicative rent from our corporate headquarters relocation and with legal expenses associated with various matters in our commitments and contingencies footnote to our consolidated financial statements.

North America general and administrative expenses as a percentage of segment net revenue were 12.6%, 12.9% and 12.5% in 2007, 2006 and 2005, respectively. North America general and administrative expense increased 9.5% to $45.1 million in 2007 from $41.2 million in 2006 and increased 4.8% in 2006, from $40.0 million in 2005. North America general and administrative expenses include $6.6 million, $6.2 million and $5.7 million, respectively, of equity-based compensation expense which increased in 2006 as a result of our adoption of SFAS
123(R). The increase in North America general and administrative expenses is . . .