OMAHA, Neb.--()--West Corporation, a leading provider of technology-driven communication services, today announced its third quarter 2012 results.
“Earnings Before Interest Expense, Taxes, Depreciation and Amortization.”
Financial Summary (unaudited)
(Dollars in millions)
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
Cash Flows from
Cash Flows used
Cash Flows used
1 See Reconciliation of Financial Measures below.
Consolidated Operating Results
For the third quarter of 2012, revenue was $656.9 million compared to $632.8 million for the same quarter last year, an increase of 3.8 percent. Revenue from acquired entities2 was $22.5 million during the third quarter of 2012. The Unified Communications segment had revenue of $359.0 million in the third quarter of 2012, an increase of 2.0 percent over the same quarter last year. The Communication Services segment had revenue of $300.8 million in the third quarter of 2012, 5.9 percent higher than the third quarter of 2011. The Company’s platform-based businesses3 had revenue of $472.7 million in the third quarter of 2012, an increase of 4.4 percent over the previous year.
Adjusted EBITDA for the third quarter of 2012 was $176.6 million, or 26.9 percent of revenue, compared to $175.1 million, or 27.7 percent of revenue, for the third quarter of 2011. Adjusted EBITDA would have been $3.7 million higher with constant foreign currency rates from the same quarter last year. A reconciliation of Adjusted EBITDA to cash flows from operating activities is presented below.
Cash flows from operations were $108.6 million for the third quarter of 2012, compared to $142.2 million in the same quarter last year. This decrease is due mainly to lower net income and changes in working capital.
Balance Sheet and Liquidity
At September 30, 2012, West Corporation had cash and cash equivalents totaling $148.9 million and working capital of $283.7 million.
Interest expense was $71.9 million during the three months ended September 30, 2012 compared to $67.4 million during the comparable period last year. The debt refinancing noted below resulted in $10.7 million of additional interest expense in the third quarter. The Company’s Adjusted EBITDA to net debt ratio was 5.45x at September 30, 2012.
During the third quarter of 2012, the Company invested $34.7 million in capital expenditures, primarily for software and computer equipment.
Debt Refinancing and Special Dividend
In the third quarter, the Company closed its previously announced $970 million new term loan under its senior secured credit facilities. The new term loan is due in 2018 and the proceeds were used to refinance $448.4 million of term loans due in October 2013, pay a cash dividend in the amount of approximately $500 million to West’s stockholders, and pay related fees and expenses. In connection with the payment of the cash dividend, the Company made dividend equivalent payments to holders of stock options. Incremental share-based and dividend equivalent compensation of $18.6 million was recognized during the quarter related to these transactions and the accelerated vesting of certain options granted in March 2012.
With the new term loan, the Company also received lender consent to amend its credit agreement. The amendment modified the step-down schedule in the financial covenants and certain covenant baskets. The refinancing improves the Company’s debt maturity profile with minimal funded debt maturities until mid-2016.
The Company will hold a conference call to discuss these topics on Thursday, October 18, 2012 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 communication services. West offers its clients a broad range of communications and network infrastructure solutions that help them manage or support critical communications. West’s 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, retail, financial services, public safety, 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.
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, competition in West’s highly competitive industries; increases in the cost of voice and data services or significant interruptions in these services; West’s ability to keep pace with its clients’ needs for rapid technological change and systems availability; the continued deployment and adoption of emerging technologies; the loss, financial difficulties or bankruptcy of any key clients; the effects of global economic trends on the businesses of West’s clients; the non-exclusive nature of West’s client contracts and the absence of revenue commitments; security and privacy breaches of the systems West uses to protect personal data; the cost of pending and future litigation; the cost of defending West against intellectual property infringement claims; extensive regulation affecting many of West’s businesses; West’s ability to protect its proprietary information or technology; 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; future impairments of our substantial goodwill, intangible assets, or other long-lived assets; and West’s ability to recover consumer receivables on behalf of its clients. 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 ability to obtain additional financing; 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.
|CONDENSED STATEMENTS OF OPERATIONS|
|(Unaudited, in thousands except selected operating data)|
|Three Months Ended September 30,||Nine Months Ended September 30,|
|2012||2011||% Change||2012||2011||% Change|
|Cost of services||307,699||284,406||8.2%||906,687||832,229||8.9%|
|Selling, general and administrative expenses||231,905||216,450||7.1%||698,133||660,707||5.7%|
|Interest expense, net||71,861||67,342||6.7%||194,548||203,485||-4.4%|
|Other expense (income), net||9,792||4,314||127.0%||8,753||(1,498||)||NM|
|Income before tax||35,639||60,291||-40.9%||149,732||171,518||-12.7%|
|SELECTED SEGMENT DATA:|
|Depreciation & Amortization:|
|SELECTED OPERATING DATA ($M):|
|Cash flows from operations||108.6||142.2||-23.6%||243.9||290.6||-16.1%|
|Term loan facility||2,423.9||1,916.4|
|Senior and senior subordinated notes||1,600.0||1,600.0|
|Revenue from platform-based services ($M) (3)||472.7||452.9||4.4%||1,406.6||1,328.3||5.9%|
|Revenue from agent-based services ($M)||186.9||182.2||2.6%||558.9||544.9||2.6%|
|Condensed Balance Sheets|
|Sept. 30,||Dec. 31,||%|
|Cash and cash equivalents||$||148,917||$||93,836||58.7%|
|Trust and restricted cash||13,203||16,446||-19.7%|
|Accounts receivable, net||460,424||413,813||11.3%|
|Deferred income taxes receivable||20,561||10,068||104.2%|
|Other current assets||82,192||50,581||62.5%|
|Total current assets||765,136||621,786||23.1%|
|Net property and equipment||352,657||350,855||0.5%|
|Total liabilities and stockholders' deficit||$||3,452,065||$||3,227,518||7.0%|
|NM: Not Meaningful|
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.” Adjusted EBITDA is not a measure of financial performance or liquidity under generally accepted accounting principles ("GAAP"). Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operations or other income or cash flows 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 Adjusted EBITDA to cash flows from operations.
|Amounts in thousands||Three Months Ended Sept. 30,||Nine Months Ended Sept. 30,|
|Cash flow from operating activities||$||108,573||$||142,183||$||243,947||$||290,608|
|Income tax expense||13,543||22,944||56,898||65,213|
|Deferred income tax expense||(2,611||)||(2,417||)||(10,317||)||(22,423||)|
|Interest expense, net of amortization||71,937||67,396||194,808||203,756|
|Amortization of debt issuance costs||(6,519||)||(3,363||)||(13,305||)||(10,056||)|
Changes in operating assets and liabilities, net of business acquisitions
|Site closures, settlements and other costs||(7,549||)||(785||)||(265||)||810|
|Acquisition synergies and transaction costs||6,688||3,781||15,151||8,955|
|Non-cash foreign currency loss (gain)||98||207||308||(3,728||)|
|Amounts in thousands||Three Months Ended Sept. 30,||Nine Months Ended Sept. 30,|
|Cash flows from operating activities||$||108,573||$||142,183||$||243,947||$||290,608|
|Cash flows used in investing activities||$||(29,657||)||$||(53,765||)||$||(165,287||)||$||(291,967||)|
|Cash flows from (used in) financing activities||$||(16,425||)||$||(76,302||)||$||(23,843||)||$||(23,342||)|
2 Net revenue from entities acquired includes the
acquisitions of PivotPoint and HyperCube in the Communication Services
3 Platform-based businesses include Unified Communications, Intrado, West Interactive and HyperCube.