West Corporation Reports Third Quarter 2006 Results
OMAHA, Neb., Oct 16, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- West Corporation (Nasdaq: WSTC), a leading provider of outsourced communication solutions, today announced its third quarter 2006 results.
Financial Summary (unaudited)
(In millions, except per share amounts and percentages)
Three Months Ended Nine Months Ended
September 30, September 30,
Percent Percent
2006 2005 Change 2006 2005 Change
Revenue $473.2 $389.8 21.4% $1,359.7 $1,119.2 21.5%
Operating income $83.2 $68.7 21.2% $231.1 $193.8 19.2%
Net income $42.9 $37.8 13.5% $121.7 $108.8 11.9%
Earnings per share
(basic) $0.61 $0.55 10.9% $1.73 $1.58 9.5%
Earnings per share
(diluted) $0.59 $0.53 11.3% $1.67 $1.53 9.2%
"We are pleased to report continued growth for the third quarter," said Thomas B. Barker, Chief Executive Officer of West Corporation. "Our organic growth continues to be in line with our expectations and the integrations of our recent acquisitions are progressing well."
Consolidated Operating Results
For the third quarter ended September 30, 2006, revenues were $473.2 million compared to $389.8 million for the same quarter last year, an increase of 21.4%. Revenue from acquired entities(1) accounted for $59.7 million of this increase. Operating income for the third quarter was $83.2 million, an increase of 21.2%, versus $68.7 million in the third quarter of 2005. Net income was $42.9 million, up 13.5% compared to $37.8 million in the same quarter last year. Diluted earnings per share were $0.59 versus $0.53 in the same period of 2005.
The company reported consolidated operating margin of 17.6% in the third quarter of 2006, the same as that of the comparable quarter last year.
Balance Sheet and Liquidity
At September 30, 2006, West Corporation had cash and cash equivalents totaling $26.3 million and working capital of $118.1 million. Net cash flows from operating activities were $71.7 million for the third quarter. Depreciation expense was $25.0 million for the quarter and amortization expense was $10.8 million for the quarter. Quarterly adjusted EBITDA(2) was $123.5 million. Interest expense was $12.6 million for the third quarter of 2006, an increase of $7.9 million over the third quarter of 2005 due to the debt incurred to fund the Intrado and Raindance acquisitions.
At September 30, 2006, borrowings under the revolving credit facility totaled $665.0 million. The effective variable interest rate on the credit facility for the three months ended September 30, 2006 was approximately 6.2 percent.
"During the quarter, we invested $17.2 million in capital expenditures for equipment and infrastructure and to expand facilities domestically," stated Paul Mendlik, Chief Financial Officer of West Corporation, "Additionally, we purchased a building for $30.5 million which had previously been subject to a synthetic lease. We added approximately 150 workstations during the quarter, bringing our overall capacity to approximately 20,200 workstations."
Proposed Recapitalization
On May 31, 2006, West Corporation entered into a definitive agreement to recapitalize the Company in a transaction sponsored by an investor group led by Thomas H. Lee Partners and Quadrangle Group LLC.
Definitive proxy materials were filed with the SEC on September 19, 2006. The transaction is currently expected to close in the fourth quarter of 2006 and is subject to customary closing conditions including the approval of West Corporation's stockholders. The stockholders of West will vote on the recapitalization at a special meeting to be held on October 23, 2006.
Conference Call
The company will not host a conference call to discuss its third quarter results due to the proposed recapitalization. Several operating metrics normally discussed during the call are included in the attached tables.
About West Corporation
West Corporation is a leading provider of outsourced communication solutions to many of the world's largest companies, organizations and government agencies. West helps its clients communicate effectively, maximize the value of their customer relationships and drive greater profitability from every interaction. The company's integrated suite of customized solutions includes customer acquisition, customer care, automated voice services, emergency communications, conferencing and accounts receivable management services.
Founded in 1986 and headquartered in Omaha, Nebraska, West has a team of 29,000 employees based in North America, Europe and Asia. For more information, please visit http://www.west.com .
Forward Looking Statements
This news release contains forward looking statements within the meaning of the Federal securities laws. You can identify these and other forward looking statements by the use of such words as "will," "expect," "plans," "believes," "estimates," "intend," "continue," or the negative of such terms, or other comparable terminology. Forward looking statements also include the assumptions underlying or relating to any of the foregoing statements.
Actual results could differ materially from the expectations expressed in these statements. Factors that could cause actual results to differ include risks related to the satisfaction of the conditions to complete the proposed recapitalization, including the receipt of the required stockholder or regulatory approvals; the actual terms and availability of the financing that must be obtained for completion of the proposed recapitalization; substantial indebtedness incurred in connection with the consummation of the proposed recapitalization; the occurrence of any event, change or other circumstances that could give rise to the termination of the proposed recapitalization and the payment of a termination fee by West; the outcome of any legal proceedings that may be instituted against us and others following announcement of the proposed recapitalization; the failure of the proposed recapitalization to close for any other reason; the amount of the costs, fees, expenses and charges relating to the proposed recapitalization; the difficulty in retaining employees or clients as a result of the proposed recapitalization; the risk of unforeseen material adverse changes to the business or operations; the disruption of current plans, operations, and technology and product development efforts caused by the proposed transaction; and other factors described in West's SEC reports, including its annual report on Form 10-K for the year ended December 31, 2005 and quarterly report on Form 10-Q for the quarter ended June 30, 2006. West Corporation assumes no obligation to update any forecast or forward-looking statements included in this document, except as required by law.
Additional Information and Where to Find It
In connection with the proposed transaction, West Corporation filed a definitive proxy statement with the Securities and Exchange Commission ("SEC") on September 19, 2006. West Corporation has also filed other relevant documents with the SEC in connection with the proposed transaction. BEFORE MAKING ANY VOTING DECISION WITH RESPECT TO THE PROPOSED TRANSACTION, STOCKHOLDERS OF WEST CORPORATION ARE URGED TO READ THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The proxy statement and other relevant materials, and any other documents filed by West Corporation with the SEC, may be obtained (when available) free of charge at the SEC's website at http://www.sec.gov . In addition, stockholders of West Corporation may obtain free copies of the documents filed with the SEC by directing a request through the Investors Relations portion of West Corporation's website at http://www.west.com or by mail to West Corporation, 11808 Miracle Hills Drive, Omaha, NE, 68154, attention: Investor Relations, telephone: (402) 963-1500. You may also read and copy any reports, statements and other information filed by West Corporation with the SEC at the SEC public reference room at 450 Fifth Street, N.W. Room 1200, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC's website for further information on its public reference room.
Participants in the Solicitation
West Corporation and certain of its executive officers and directors may, under the rules of the SEC, be deemed to be "participants" in the solicitation of proxies from West Corporation stockholders in favor of the proposed transaction. Certain executive officers and directors of West Corporation have interests in the transaction that may differ from the interests of stockholders generally. Information regarding the persons who may be considered "participants" in the solicitation of proxies, their interests in the transaction and their beneficial ownership of West Corporation common stock is set forth in the West Corporation proxy statement described above.
(1) Acquired entities include Sprint Corporation's conferencing assets
(acquired in June 2005) and Raindance (acquired in April 2006) in the
Conferencing segment and Intrado (acquired in April 2006) in the
Communications Services segment.
(2) See attached reconciliation of financial measures.
WEST CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share and selected operating data)
Three Months Ended Nine Months Ended
September 30, % September 30, %
2006 2005 Change 2006 2005 Change
Revenue $473,245 $389,814 21.4% $1,359,661 $1,119,159 21.5%
Cost of services 206,733 174,239 18.6% 604,147 505,473 19.5%
Selling, general
and administrative
expenses 183,315 146,911 24.8% 524,425 419,838 24.9%
Operating income 83,197 68,664 21.2% 231,089 193,848 19.2%
Other expense,
net 11,461 4,293 167.0% 25,910 9,333 177.6%
Income before tax 71,736 64,371 11.4% 205,179 184,515 11.2%
Income tax expense 25,105 22,344 12.4% 73,110 63,656 14.9%
Minority Interest 3,710 4,202 -11.7% 10,334 12,036 -14.1%
Net income $42,921 $37,825 13.5% $121,735 $108,823 11.9%
Earnings per share:
Basic $0.61 $0.55 10.9% $1.73 $1.58 9.5%
Diluted $0.59 $0.53 11.3% $1.67 $1.53 9.2%
Weighted average
common shares
outstanding:
Basic 70,709 69,089 70,363 68,752
Diluted 72,728 71,586 72,941 71,185
SELECTED SEGMENT DATA:
Revenue:
Communication
Services $259,106 $213,476 21.4% $736,833 $644,002 14.4%
Conferencing 156,099 123,068 26.8% 448,816 315,192 42.4%
Receivables
Management 59,465 54,453 9.2% 178,641 163,413 9.3%
Inter segment
eliminations (1,425) (1,183) 20.5% (4,629) (3,448) 34.3%
Total $473,245 $389,814 21.4% $1,359,661 $1,119,159 21.5%
Operating Income:
Communication
Services $29,149 $28,461 2.4% $85,321 $88,518 -3.6%
Conferencing 43,428 30,692 41.5% 113,959 75,605 50.7%
Receivables
Management 10,620 9,511 11.7% 31,809 29,725 7.0%
Total $83,197 $68,664 21.2% $231,089 $193,848 19.2%
Operating Margin:
Communication
Services 11.2% 13.3% -15.8% 11.6% 13.7% -15.3%
Conferencing 27.8% 24.9% 11.6% 25.4% 24.0% 5.8%
Receivables
Management 17.9% 17.5% 2.3% 17.8% 18.2% -2.2%
Total 17.6% 17.6% 0.0% 17.0% 17.3% -1.7%
SELECTED OPERATING DATA:
Share-based
compensation expense
recognized ($M) 3.8 0.1
Cash flow from
operations ($M) 71.7 48.0
Revolving Line of
Credit ending
balance ($M) 665.0 282.0
Receivables
Management
Metrics ($M):
Revenue from
portfolios sales 5.5 4.5 22.2%
Ending portfolio
receivables 123.7 89.4 38.4%
Ending non-recourse
debt 65.9 32.8 100.9%
Ending number
of workstations 20,198 18,188 11.1%
Ending number
of international
workstations 3,329 2,928 13.7%
Ending number of
West at Home
agents 11,158 7,300 52.8%
Condensed Balance Sheets
September 30, December 31, %
2006 2005 Change
Current assets:
Cash and cash equivalents $26,274 $30,835 -14.8%
Trust cash 6,983 3,727 87.4%
Accounts and notes receivable,
net 274,762 217,806 26.1%
Portfolio receivables,
current 52,118 35,407 47.2%
Other current assets 37,464 28,567 31.1%
Total current assets 397,601 316,342 25.7%
Net property and equipment 298,218 234,871 27.0%
Portfolio receivables, net 71,563 59,043 21.2%
Goodwill 1,145,613 717,624 59.6%
Other assets 237,359 170,782 39.0%
Total assets $2,150,354 $1,498,662 43.5%
Current liabilities $279,521 $206,295 35.5%
Long Term Obligations 687,832 233,245 194.9%
Other liabilities & minority
interest 50,407 87,254 -42.2%
Stockholders' equity 1,132,594 971,868 16.5%
Total liabilities and
stockholders' equity $2,150,354 $1,498,662 43.5%
Reconciliation of Financial Measures
The common definition of EBITDA is "Earnings Before Interest Expense, Taxes, Depreciation and Amortization." In evaluating financial performance, we use earnings before interest, taxes, depreciation and amortization, share based compensation and minority interest 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 substitution 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. Set forth below is a reconciliation of EBITDA and adjusted EBITDA to cash flow from operations. We use EBITDA and adjusted EBITDA for its debt covenants as these are viewed as measures of liquidity.
Amounts in thousands
Three Months Ended September 30, 2006 2005
Cash flow from operating activities $71,658 $47,978
Income tax expense 25,105 22,344
Deferred income tax (expense) benefit 1,593 789
Interest expense 12,646 4,773
Minority interest in earnings, net of
distributions 1,078 (97)
Share based compensation (3,808) (132)
Other (441) (1,441)
Changes in operating assets and
liabilities, net of business
acquisitions 8,616 18,868
EBITDA 116,447 93,082
Minority interest 3,710 4,202
Interest income (488) (389)
Provision for share based compensation 3,808 132
ADJUSTED EBITDA $123,477 $97,027
Nine Months Ended September 30, 2006 2005
Cash flow from operating activities $228,758 $184,302
Income tax expense 73,110 63,656
Deferred income tax (expense) benefit (15,887) 1,934
Interest expense 29,072 10,917
Minority interest in earnings, net of
distributions 4,216 (3,505)
Share based compensation (11,095) (429)
Other (1,010) (2,553)
Changes in operating assets and
liabilities, net of business
acquisitions 16,525 9,425
EBITDA 323,689 263,747
Minority interest 10,334 12,036
Interest income (1,651) (1,138)
Provision for share based compensation 11,095 429
ADJUSTED EBITDA $343,467 $275,074
SOURCE West Corporation
David Pleiss, Investor Relations of West Corporation, +1-402-963-1500, dmpleiss@west.com
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