West Corporation, a leading provider of technology-driven, voice-oriented solutions, today announced its third quarter 2009 results.
Financial Summary (unaudited) | |||||||||||||||||
(Dollars in millions) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2009 | 2008 | Percent | 2009 | 2008 | Percent | ||||||||||||
| Change | Change | ||||||||||||||||
| Revenue | $559.0 | $598.5 | -6.6% | $1,772.9 | $1,675.7 | 5.8% | |||||||||||
Adjusted | $153.2 | $169.7 | -9.7% | $483.4 | $456.0 | 6.0% | |||||||||||
Adjusted | 27.4% | 28.4% | 27.3% | 27.2% | |||||||||||||
Cash Flow from | $99.8 | $86.0 | 16.0% | $200.8 | $160.6 | 25.0% | |||||||||||
1 See Reconciliation of Financial Measures below.
2
Revenue from an acquired entity includes Positron revenue in the
Communication Services segment.
Consolidated Operating Results
For the third quarter ended
September 30, 2009, revenue was $559.0 million compared to $598.5
million for the same quarter last year, a decrease of 6.6 percent.
Revenue from an acquired entity2 was $21.0 million during the
third quarter.
The downturn in the economy continues to affect the Company’s results, particularly agent-based services. During the quarter, the Company recorded a $25.5 million reduction in revenue in its receivables management business from an allowance for impairment of purchased accounts receivables. Revenue from other agent-based services was down $35.4 million in the third quarter of 2009 compared to the same period last year.
Consolidated revenue was negatively impacted by $6 million from volatility in foreign currency exchange rates compared to the third quarter of 2008.
Adjusted EBITDA for the third quarter was $153.2 million, or 27.4 percent of revenue. A reconciliation of Adjusted EBITDA to cash flow from operating activities is presented below.
Balance Sheet and Liquidity
At September 30, 2009, the
Company had cash and cash equivalents totaling $82.2 million and working
capital of $139.6 million.
During the quarter, the Company amended its Senior Secured Credit Facility which, among other things, extended the maturity of $1.0 billion of term debt from October 2013 to July 2016. The Company also entered into a three-year $125.0 million revolving trade accounts receivable financing facility. At September 30, 2009, there was no funding under this facility.
During the quarter, the Company invested $27.0 million in capital expenditures primarily for software, equipment and information technology systems.
Segment Reporting Change
As previously announced, in August
2009, the Company implemented certain organizational changes and the
Company’s Chief Executive Officer began making strategic and operational
decisions with respect to assessing performance and allocating resources
based on a new segment structure. The Company now operates in the
following two business segments.
- Unified Communications, including reservationless, operator-assisted, web and video conferencing services and alerts and notifications services
- Communication Services, including automated call processing, agent-based services and emergency communication infrastructure systems
Consistent with this approach, the receivables management business (formerly reported as a separate segment) is now part of the Communication Services segment, and the newly named Unified Communications segment is composed of the alerts and notifications business (formerly managed under the Communication Services segment) and the conferencing and collaboration business.
The revised organizational structure more closely aligns the resources used by the businesses in each segment.
Conference Call
The Company will hold a conference call to
discuss these topics on Thursday, October 22, 2009 at 11:00 AM Eastern
Time (10:00 AM Central Time). Investors may access the call by visiting
the Financials section of the West Corporation website at www.west.com
and clicking on the Webcast link. A replay of the call will be available
on the Company’s website at www.west.com.
About West Corporation
West Corporation is a leading
provider of technology-driven, voice-oriented solutions. West offers its
clients a broad range of communications and infrastructure management
solutions that help them manage or support critical communications.
West’s automated customer contact solutions and conferencing services
are designed to improve its clients’ cost structure and provide
reliable, high-quality services. West also provides mission-critical
services, such as public safety and emergency communications.
Founded in 1986 and headquartered in Omaha, Nebraska, West serves Fortune 1000 companies and other clients in a variety of industries, including telecommunications, banking, retail, financial, technology and healthcare. West has sales and operations in the United States, Canada, Europe, the Middle East, Asia Pacific and Latin America. For more information on West Corporation, please call 1-800-841-9000 or visit www.west.com.
Forward-Looking Statements
This press release contains
forward-looking statements. Forward-looking statements can be identified
by the use of words such as "may," "should," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "intends,"
"continue" or similar terminology. These statements reflect only West''s
current expectations and are not guarantees of future performance or
results. These statements are subject to risks and uncertainties that
could cause actual results to differ materially from those contained in
the forward-looking statements. These risks and uncertainties include,
but are not limited to, the effects of global economic trends on the
businesses of West’s clients; competition in West’s highly competitive
industries; West’s ability to keep pace with its clients’ needs for
rapid technological change and systems availability; the loss, financial
difficulties or bankruptcy of any key clients; the non-exclusive nature
of West’s client contracts and the absence of revenue commitments;
increases in the cost of voice and data services or significant
interruptions in these services; the cost of pending and future
litigation; extensive regulation affecting many of West’s businesses;
security and privacy breaches of the systems West uses to protect
personal data; West’s ability to protect its proprietary information or
technology; the cost of defending West against intellectual property
infringement claims; service interruptions to West’s data and operation
centers; West’s ability to retain key personnel and attract a sufficient
number of qualified employees; increases in labor costs and turnover
rates; the political, economic and other conditions in the countries
where West operates; changes in foreign exchange rates; West’s ability
to complete future acquisitions and integrate or achieve the objectives
of its recent and future acquisitions; West’s ability to recover
charged-off consumer receivables and decreases in collections in its
receivables management business. In addition, West is subject to risks
related to its level of indebtedness. Such risks include West’s ability
to generate sufficient cash to service its indebtedness and fund its
other liquidity needs; West’s ability to comply with covenants contained
in its debt instruments; the incurrence of significant additional
indebtedness by West and its subsidiaries and the ability of West’s
lenders to fulfill their lending commitments. West is also subject to
other risk factors described in documents filed by the company with the
United States Securities and Exchange Commission.
These forward-looking statements speak only as of the date on which the statements were made. West undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.
| WEST CORPORATION | ||||||||||||||||||||||
| CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||
| (Unaudited, in thousands except selected operating data) | ||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2009 | 2008 | % Change | 2009 | 2008 | % Change | |||||||||||||||||
| Revenue | $ | 559,012 | $ | 598,528 | -6.6 | % | $ | 1,772,878 | $ | 1,675,716 | 5.8 | % | ||||||||||
| Cost of services | 260,570 | 254,486 | 2.4 | % | 798,888 | 756,189 | 5.6 | % | ||||||||||||||
| Selling, general and administrative expenses | 221,428 | 232,736 | -4.9 | % | 680,775 | 657,954 | 3.5 | % | ||||||||||||||
| Operating income | 77,014 | 111,306 | -30.8 | % | 293,215 | 261,573 | 12.1 | % | ||||||||||||||
| Interest expense | 66,164 | 73,561 | -10.1 | % | 193,842 | 217,924 | -11.1 | % | ||||||||||||||
| Other expense (income), net | 4,000 | 1,215 | 229.2 | % | (1,687 | ) | 298 | -666.1 | % | |||||||||||||
| Income before tax | 6,850 | 36,530 | -81.2 | % | 101,060 | 43,351 | 133.1 | % | ||||||||||||||
| Income tax expense | 2,389 | 13,343 | -82.1 | % | 37,360 | 17,341 | 115.4 | % | ||||||||||||||
| Net income | 4,461 | 23,187 | -80.8 | % | 63,700 | 26,010 | 144.9 | % | ||||||||||||||
| Less net income (loss) - Noncontrolling interest | 565 | 1,447 | -61.0 | % | 2,745 | (2,255 | ) | 221.7 | % | |||||||||||||
| Net income - West Corporation | $ | 3,896 | $ | 21,740 | -82.1 | % | $ | 60,955 | $ | 28,265 | 115.7 | % | ||||||||||
| SELECTED SEGMENT DATA: | ||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||
| Unified Communications | $ | 278,345 | $ | 276,204 | 0.8 | % | $ | 845,388 | $ | 728,328 | 16.1 | % | ||||||||||
| Communication Services | 281,967 | 323,873 | -12.9 | % | 931,610 | 951,697 | -2.1 | % | ||||||||||||||
| Intersegment eliminations | (1,300 | ) | (1,549 | ) | -16.1 | % | (4,120 | ) | (4,309 | ) | 4.4 | % | ||||||||||
| Total | $ | 559,012 | $ | 598,528 | -6.6 | % | $ | 1,772,878 | $ | 1,675,716 | 5.8 | % | ||||||||||
| Depreciation & Amortization: | ||||||||||||||||||||||
| Unified Communications | $ | 23,268 | $ | 28,548 | -18.5 | % | $ | 68,525 | $ | 66,079 | 3.7 | % | ||||||||||
| Communication Services | 21,328 | 21,866 | -2.5 | % | 72,743 | 69,123 | 5.2 | % | ||||||||||||||
| Total | $ | 44,596 | $ | 50,414 | -11.5 | % | $ | 141,268 | $ | 135,202 | 4.5 | % | ||||||||||
| Operating Income: | ||||||||||||||||||||||
| Unified Communications | $ | 70,817 | $ | 66,852 | 5.9 | % | $ | 228,125 | $ | 178,870 | 27.5 | % | ||||||||||
| Communication Services | 6,197 | 44,454 | -86.1 | % | 65,090 | 82,703 | -21.3 | % | ||||||||||||||
| Total | $ | 77,014 | $ | 111,306 | -30.8 | % | $ | 293,215 | $ | 261,573 | 12.1 | % | ||||||||||
| Operating Margin: | ||||||||||||||||||||||
| Unified Communications | 25.4 | % | 24.2 | % | 5.0 | % | 27.0 | % | 24.6 | % | 9.8 | % | ||||||||||
| Communication Services | 2.2 | % | 13.7 | % | -83.9 | % | 7.0 | % | 8.7 | % | -19.5 | % | ||||||||||
| Total | 13.8 | % | 18.6 | % | -25.8 | % | 16.5 | % | 15.6 | % | 5.8 | % | ||||||||||
| SELECTED OPERATING DATA ($M): | ||||||||||||||||||||||
| Cash flow from operations | 99.8 | 86.0 | 200.8 | 160.6 | ||||||||||||||||||
| Term loan facility | 2,466.5 | 2,491.8 | ||||||||||||||||||||
| Revolving credit facility | 99.4 | 264.5 | ||||||||||||||||||||
| Senior and senior subordinated notes | 1,100.0 | 1,100.0 | ||||||||||||||||||||
| Purchases of receivables portfolios | - | 5.0 | 1.7 | 40.0 | ||||||||||||||||||
| Condensed Balance Sheets | |||||||||||
| Sept. 30, | December 31, | % | |||||||||
| 2009 | 2008 | Change | |||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 82,154 | $ | 168,340 | -51.2 | % | |||||
| Trust and restricted cash | 30,820 | 9,130 | 237.6 | % | |||||||
| Accounts receivable, net | 373,445 | 359,021 | 4.0 | % | |||||||
| Portfolio receivables, current | 28,023 | 64,204 | -56.4 | % | |||||||
| Deferred income taxes receivable | 26,457 | 52,647 | -49.7 | % | |||||||
| Other current assets | 82,641 | 85,706 | -3.6 | % | |||||||
| Total current assets | 623,540 | 739,048 | -15.6 | % | |||||||
| Net property and equipment | 333,542 | 320,152 | 4.2 | % | |||||||
| Portfolio receivables, net | 37,056 | 68,542 | -45.9 | % | |||||||
| Goodwill | 1,648,081 | 1,642,857 | 0.3 | % | |||||||
| Other assets | 503,994 | 544,190 | -7.4 | % | |||||||
| Total assets | $ | 3,146,213 | $ | 3,314,789 | -5.1 | % | |||||
| Current liabilities | $ | 483,936 | $ | 527,638 | -8.3 | % | |||||
| Long-term obligations | 3,640,889 | 3,843,536 | -5.3 | % | |||||||
| Other liabilities | 135,927 | 146,203 | -7.0 | % | |||||||
| Total liabilities | 4,260,752 | 4,517,377 | -5.7 | % | |||||||
| Class L common stock | 1,272,509 | 1,158,159 | 9.9 | % | |||||||
| Stockholders'' deficit | (2,387,048 | ) | (2,360,747 | ) | -1.1 | % | |||||
| Total liabilities and stockholders'' deficit | $ | 3,146,213 | $ | 3,314,789 | -5.1 | % | |||||
Reconciliation of Financial Measures
The common definition
of EBITDA is "Earnings Before Interest Expense, Taxes, Depreciation and
Amortization." In evaluating liquidity, we use earnings before interest
expense, share based compensation, taxes, depreciation and amortization,
minority interest, non-recurring litigation settlement costs, other
non-cash reserves, transaction costs and after acquisition synergies and
excluding unrestricted subsidiaries, or “Adjusted EBITDA.” EBITDA and
Adjusted EBITDA are not measures of financial performance or liquidity
under generally accepted accounting principles ("GAAP"). EBITDA and
Adjusted EBITDA should not be considered in isolation or as a substitute
for net income, cash flow from operations or other income or cash flow
data prepared in accordance with GAAP. Adjusted EBITDA, as presented,
may not be comparable to similarly titled measures of other companies.
Adjusted EBITDA is presented as we understand certain investors use it
as one measure of our historical ability to service debt. Adjusted
EBITDA is also used in our debt covenants, although the precise
adjustments used to calculate Adjusted EBITDA included in our credit
facility and indentures vary in certain respects among such agreements
and from those presented below. Set forth below is a reconciliation of
EBITDA and Adjusted EBITDA to cash flow from operations.
| Amounts in thousands | Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | ||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| Cash flow from operating activities | $ | 99,798 | $ | 86,024 | $ | 200,792 | $ | 160,621 | ||||||||
| Income tax expense | 2,389 | 13,343 | 37,360 | 17,341 | ||||||||||||
| Deferred income tax (expense) benefit | 11,496 | (11,791 | ) | 2,474 | (8,094 | ) | ||||||||||
| Interest expense, net of amortization | 66,164 | 73,561 | 193,842 | 217,923 | ||||||||||||
| Allowance for impairment of purchased | ||||||||||||||||
| accounts receivable | (25,464 | ) | - | (25,464 | ) | (44,076 | ) | |||||||||
| Provision for share based compensation | (559 | ) | (357 | ) | (1,274 | ) | (1,026 | ) | ||||||||
| Debt amortization | (4,110 | ) | (4,096 | ) | (12,399 | ) | (11,657 | ) | ||||||||
| Other | (4,147 | ) | (88 | ) | 2,249 | (59 | ) | |||||||||
| Changes in operating assets and liabilities, | ||||||||||||||||
| net of business acquisitions | (27,957 | ) | 3,908 | 38,590 | 65,503 | |||||||||||
| EBITDA | 117,610 | 160,504 | 436,170 | 396,476 | ||||||||||||
| Provision for share based compensation | 559 | 357 | 1,274 | 1,026 | ||||||||||||
| Site closures, settlements and other impairments | 948 | (41 | ) | 6,583 | 426 | |||||||||||
| Acquisition synergies and transaction costs | 4,874 | 8,921 | 14,743 | 13,984 | ||||||||||||
| Portfolio impairments | 25,464 | - | 25,464 | 44,076 | ||||||||||||
| Non-cash foreign currency loss (gain) | 3,710 | - | (882 | ) | - | |||||||||||
| Adjusted EBITDA | $ | 153,165 | $ | 169,741 | $ | 483,352 | $ | 455,988 | ||||||||
Contacts:
West Corporation
Investor Relations:
David Pleiss,
402-963-1500
dmpleiss@west.com