OMAHA, Neb.--(BUSINESS WIRE)--West Corporation, a leading provider of technology-driven, voice and data solutions, today announced its fourth quarter and full year 2010 results.
Financial Summary (unaudited)
(Dollars
in millions)
Three Months Ended | Year Ended | |||||||||||||||||
December 31, | December 31, | |||||||||||||||||
2010 | 2009 | Percent | 2010 | 2009 | Percent | |||||||||||||
Change | Change | |||||||||||||||||
Revenue | $599.4 | $602.9 | -0.6 | % | $2,388.2 | $2,375.7 | 0.5 | % | ||||||||||
Adjusted |
$162.8 | $164.6 | -1.1 | % | $654.7 | $647.9 | 1.0 | % | ||||||||||
Adjusted |
27.2 | % | 27.3 | % | 27.4 | % | 27.3 | % | ||||||||||
Cash Flow from |
$18.6 | $72.1 | -74.2 | % | $312.8 | $272.9 | 14.6 | % | ||||||||||
Cash Flows from |
($24.8 | ) | ($55.2 | ) | NM | ($137.9 | ) | ($112.6 | ) | NM | ||||||||
Cash Flows from |
($32.8 | ) | ($39.6 | ) | NM | ($133.7 | ) | ($271.8 | ) | NM | ||||||||
Net Income |
($3.6 | ) | $27.3 | -113.1 | % | $60.3 | $88.2 | -31.7 | % |
Consolidated Operating Results
For the fourth quarter of
2010, revenue was $599.4 million compared to $602.9 million for the same
quarter last year, a decrease of 0.6 percent. The net increase in
revenue from entities acquired or sold2 was $8.1 million
during the fourth quarter of 2010. The Unified Communications segment
had revenue of $304.4 million in the fourth quarter of 2010, an increase
of 8.3 percent over the same quarter last year. The Communication
Services segment had revenue of $296.7 million in the fourth quarter of
2010, 8.1 percent lower than the fourth quarter of 2009. The Company’s
automated services businesses3 had revenue of $406.7 million
in the fourth quarter of 2010, an increase of 4.4 percent over the
previous year.
For the year ended December 31, 2010, revenue was $2,388.2 million compared to $2,375.7 million for 2009, an increase of 0.5 percent. Revenue from automated services increased 6.3 percent in 2010 to $1,619.9 million while revenue from agent-based services decreased 9.8 percent to $768.3 million.
Adjusted EBITDA for the fourth quarter of 2010 was $162.8 million, or 27.2 percent of revenue, compared to $164.6 million, or 27.3 percent of revenue, for the fourth quarter of 2009. For the year 2010, Adjusted EBITDA was $654.7 million, or 27.4 percent of revenue. A reconciliation of Adjusted EBITDA to cash flow from operating activities is presented below.
Foreign currency exchange rates negatively impacted revenue and Adjusted EBITDA in the fourth quarter by $1.1 million and $1.7 million, respectively, compared to the rates used for 2010 guidance. For the year 2010, revenue and Adjusted EBITDA were lower by $16.2 million and $10.8 million, respectively, compared to the rates used for 2010 guidance due to foreign currency exchange rates. The two most significant exchange rates used for 2010 guidance provided in February 2010 were the British Pound Sterling at 1.63 and the Euro at 1.46.
Cash flow from operations was $18.6 million for the fourth quarter of 2010. For the year 2010, cash flow from operations was $312.8 million, 14.6 percent higher than that in 2009. The increase in net cash flows from operating activities is primarily due to improvements in operations and working capital utilization.
Balance Sheet and Liquidity
At December 31, 2010, West
Corporation had cash and cash equivalents totaling $97.8 million and
working capital of $213.5 million.
During the fourth quarter, the Company issued $650 million aggregate principal amount of 7.875 percent senior unsecured notes due January 2019. Proceeds of these notes were utilized to finance, in part, the repurchase of the Company’s outstanding $650 million principal amount of 9.5 percent senior notes due 2014. The Company also issued $500 million aggregate principal amount of 8.625 percent senior unsecured notes due October 2018. The proceeds of these notes were utilized to repay a portion of its term loan facilities. The Company recorded expense of $52.8 million as a result of accelerated debt amortization costs, redemption premium and associated fees related to these transactions. “These refinancing transactions significantly improved our capital structure and extended the maturities of our long-term debt,” said CFO, Paul Mendlik.
During the fourth quarter of 2010, the Company invested $37.2 million in capital expenditures primarily for software and computer equipment. For the full year 2010, the Company invested $122.0 million, or 5.1 percent of revenue, in capital expenditures.
Acquisitions
During the fourth quarter of 2010, the Company
acquired the assets of Specialty Pharmacy Network, Inc. (“SPN”), a
provider of billing and management information to payers and providers
that participate in managing, administrating and paying specialty
pharmacy claims.
On February 1, 2011, the Company announced it acquired Twenty First Century Communications, Inc. (“TFCC”) and Preferred One Stop Technologies Limited (“POSTcti”).
TFCC is a provider of automated alerts and notifications to the electric utilities industry, government, public safety and corporate markets. A significant number of the leading utilities use a high volume call answering system developed by TFCC to field the heavy incoming call traffic associated with power outages.
POSTcti is a leading provider of unified communications solutions and services in Europe. POSTcti enables and provides single source communication convergence from best-of-breed industry-leading providers, combined with customized professional services implementation and dedicated ongoing product support, to maximize investment.
“The addition of TFCC will enhance our alerts and notifications platform and our position in the U.S. utility vertical,” said CEO, Tom Barker. “POSTcti will provide West with additional experienced unified communications consulting resources and hosted services for our clients around the world.”
2011 Guidance
For 2011, the Company expects the results
presented below. This guidance includes the results of SPN, TFCC and
POSTcti but assumes no additional acquisitions or changes in the current
operating environment or exchange rates. The two most significant
exchange rates used for 2011 guidance are the British Pound Sterling at
1.571 and the Euro at 1.315.
2010 Actual | 2011 Guidance | |||
Revenue ($B) | $2.388 | $2.45 - $2.53 | ||
Adjusted EBITDA ($M) | $654.7 | $660 - $690 | ||
Cash Flow from Operations ($M) | $312.8 | $310 - $345 | ||
Capital Expenditures ($M) | $122.0 | $120 - $130 |
The Company estimates that automated services will represent approximately 70 percent of 2011 revenue. Assuming the Company’s results are within the guidance stated above and no additional acquisitions or refinancing transactions are made in 2011, the Company expects its leverage ratio to decrease from 5.23x at the end of 2010 to between 4.75x and 4.85x at the end of 2011.
Conference Call
The Company will hold a conference call to
discuss these topics on Thursday, February 3, 2011 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 and data solutions. 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, 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, 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 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; 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; the cost of
defending West against intellectual property infringement claims; 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; increases in the
cost of voice and data services or significant interruptions in these
services; 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 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 December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||
2010 | 2009 | % Change | 2010 | 2009 | % Change | |||||||||||||||||
Revenue | $ | 599,431 | $ | 602,870 | -0.6 | % | $ | 2,388,211 | $ | 2,375,748 | 0.5 | % | ||||||||||
Cost of services | 273,029 | 268,889 | 1.5 | % | 1,057,008 | 1,067,777 | -1.0 | % | ||||||||||||||
Selling, general and administrative expenses | 215,812 | 226,583 | -4.8 | % | 911,022 | 907,358 | 0.4 | % | ||||||||||||||
Operating income | 110,590 | 107,398 | 3.0 | % | 420,181 | 400,613 | 4.9 | % | ||||||||||||||
Interest expense, net | 70,352 | 60,261 | 16.7 | % | 252,469 | 253,792 | -0.5 | % | ||||||||||||||
Refinancing expense | 52,804 | - | NM | 52,804 | - | NM | ||||||||||||||||
Other expense (income), net | (3,261 | ) | 361 | NM | (5,872 | ) | (1,015 | ) | -478.5 | % | ||||||||||||
Income (loss) before tax | (9,305 | ) | 46,776 | -119.9 | % | 120,780 | 147,836 | -18.3 | % | |||||||||||||
Income tax | (5,742 | ) | 19,502 | -129.4 | % | 60,476 | 56,862 | 6.4 | % | |||||||||||||
Net income (loss) | (3,563 | ) | 27,274 | -113.1 | % | 60,304 | 90,974 | -33.7 | % | |||||||||||||
Less net income (loss) - Noncontrolling interest | - | - | - | - | 2,745 | NM | ||||||||||||||||
Net income (loss) - West Corporation | $ | (3,563 | ) | $ | 27,274 | -113.1 | % | $ | 60,304 | $ | 88,229 | -31.7 | % | |||||||||
SELECTED SEGMENT DATA: | ||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||
Unified Communications | $ | 304,399 | $ | 281,156 | 8.3 | % | $ | 1,220,216 | $ | 1,126,544 | 8.3 | % | ||||||||||
Communication Services | 296,665 | 322,937 | -8.1 | % | 1,173,945 | 1,254,547 | -6.4 | % | ||||||||||||||
Intersegment eliminations | (1,633 | ) | (1,223 | ) | -33.5 | % | (5,950 | ) | (5,343 | ) | -11.4 | % | ||||||||||
Total | $ | 599,431 | $ | 602,870 | -0.6 | % | $ | 2,388,211 | $ | 2,375,748 | 0.5 | % | ||||||||||
Depreciation & Amortization: | ||||||||||||||||||||||
Unified Communications | $ | 20,799 | $ | 22,966 | -9.4 | % | $ | 87,278 | $ | 91,491 | -4.6 | % | ||||||||||
Communication Services | 21,168 | 24,113 | -12.2 | % | 83,052 | 96,856 | -14.3 | % | ||||||||||||||
Total | $ | 41,967 | $ | 47,079 | -10.9 | % | $ | 170,330 | $ | 188,347 | -9.6 | % | ||||||||||
Operating Income: | ||||||||||||||||||||||
Unified Communications | $ | 77,902 | $ | 67,971 | 14.6 | % | $ | 320,411 | $ | 296,096 | 8.2 | % | ||||||||||
Communication Services | 32,688 | 39,427 | -17.1 | % | 99,770 | 104,517 | -4.5 | % | ||||||||||||||
Total | $ | 110,590 | $ | 107,398 | 3.0 | % | $ | 420,181 | $ | 400,613 | 4.9 | % | ||||||||||
Operating Margin: | ||||||||||||||||||||||
Unified Communications | 25.6 | % | 24.2 | % | 5.8 | % | 26.3 | % | 26.3 | % | 0.0 | % | ||||||||||
Communication Services | 11.0 | % | 12.2 | % | -9.8 | % | 8.5 | % | 8.3 | % | 2.4 | % | ||||||||||
Total | 18.4 | % | 17.8 | % | 3.4 | % | 17.6 | % | 16.9 | % | 4.1 | % | ||||||||||
SELECTED OPERATING DATA ($M): | ||||||||||||||||||||||
Cash flow from operations | 18.6 | 72.1 | -74.2 | % | 312.8 | 272.9 | 14.6 | % | ||||||||||||||
Term loan facility | 1,933.6 | 2,460.2 | ||||||||||||||||||||
Revolving credit facility | - | 72.9 | ||||||||||||||||||||
Senior and senior subordinated notes | 1,600.0 | 1,100.0 | ||||||||||||||||||||
Revenue from automated services ($M) (3) | 406.7 | 389.6 | 4.4 | % | 1,619.9 | 1,523.6 | 6.3 | % | ||||||||||||||
Revenue from agent-based services ($M) | 192.7 | 213.3 | -9.7 | % | 768.3 | 852.1 | -9.8 | % | ||||||||||||||
|
Condensed Balance Sheets |
|||||||||||||||||||||
Dec. 31, | Dec. 31, | % | ||||||||||||||||||||
2010 | 2009 | Change | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||||
Cash and cash equivalents | $ | 97,793 | $ | 59,068 | 65.6 | % | ||||||||||||||||
Trust and restricted cash | 15,122 | 14,750 | 2.5 | % | ||||||||||||||||||
Accounts receivable, net | 366,419 | 353,622 | 3.6 | % | ||||||||||||||||||
Deferred income taxes receivable | 29,968 | 35,356 | -15.2 | % | ||||||||||||||||||
Prepaid assets | 33,667 | 34,063 | -1.2 | % | ||||||||||||||||||
Other current assets | 34,058 | 46,757 | -27.2 | % | ||||||||||||||||||
Total current assets | 577,027 | 543,616 | 6.1 | % | ||||||||||||||||||
Net property and equipment | 341,366 | 333,267 | 2.4 | % | ||||||||||||||||||
Goodwill | 1,629,396 | 1,665,569 | -2.2 | % | ||||||||||||||||||
Other assets | 457,461 | 502,810 | -9.0 | % | ||||||||||||||||||
Total assets | $ | 3,005,250 | $ | 3,045,262 | -1.3 | % | ||||||||||||||||
Current liabilities | $ | 363,562 | $ | 368,609 | -1.4 | % | ||||||||||||||||
Long-term obligations | 3,518,141 | 3,607,872 | -2.5 | % | ||||||||||||||||||
Other liabilities | 162,602 | 161,525 | 0.7 | % | ||||||||||||||||||
Total liabilities | 4,044,305 | 4,138,006 | -2.3 | % | ||||||||||||||||||
Class L common stock | 1,504,445 | 1,332,721 | 12.9 | % | ||||||||||||||||||
Stockholders' deficit | (2,543,500 | ) | (2,425,465 | ) | -4.9 | % | ||||||||||||||||
Total liabilities and stockholders' deficit | $ | 3,005,250 | $ | 3,045,262 | -1.3 | % | ||||||||||||||||
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.” 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 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
EBITDA and Adjusted EBITDA to cash flows from operations.
Amounts in thousands | Three Months Ended Dec. 31, | Twelve Months Ended Dec. 31, | ||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Cash flow from operating activities | $ | 18,627 | $ | 72,065 | $ | 312,829 | $ | 272,857 | ||||||||
Income tax expense (benefit) | (5,742 | ) | 19,502 | 60,476 | 56,862 | |||||||||||
Deferred income tax (expense) benefit | (10,111 | ) | (30,748 | ) | (20,837 | ) | (28,274 | ) | ||||||||
Interest expense, net of amortization | 70,360 | 60,261 | 252,724 | 254,103 | ||||||||||||
Refinancing expense | 52,804 | - | 52,804 | - | ||||||||||||
Allowance for impairment of purchased | ||||||||||||||||
accounts receivable | - | - | - | (25,464 | ) | |||||||||||
Provision for share based compensation | (1,551 | ) | (2,566 | ) | (4,233 | ) | (3,840 | ) | ||||||||
Debt amortization | (23,254 | ) | (4,017 | ) | (35,263 | ) | (16,416 | ) | ||||||||
Other | (9 | ) | (70 | ) | (652 | ) | (375 | ) | ||||||||
Changes in operating assets and liabilities, | ||||||||||||||||
net of business acquisitions | 54,703 | 39,689 | 16,466 | 80,833 | ||||||||||||
EBITDA | 155,827 | 154,116 | 634,314 | 590,286 | ||||||||||||
Provision for share based compensation | 1,551 | 2,566 | 4,233 | 3,840 | ||||||||||||
Site closures, settlements and other impairments | 842 | 3,769 | 6,365 | 6,976 | ||||||||||||
Acquisition synergies and transaction costs | 1,941 | 3,260 | 5,035 | 18,003 | ||||||||||||
Portfolio impairments | - | - | - | 25,464 | ||||||||||||
Non-cash foreign currency loss (gain) | (492 | ) | 653 | 1,199 | (229 | ) | ||||||||||
Litigation costs | 3,174 | 225 | 3,504 | 3,601 | ||||||||||||
Adjusted EBITDA | $ | 162,843 | $ | 164,589 | $ | 654,650 | $ | 647,941 | ||||||||
Amounts in thousands | Three Months Ended Dec. 31, | Twelve Months Ended Dec. 31, | ||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Cash flows from operating activities | $ | 18,627 | $ | 72,065 | $ | 312,829 | $ | 272,857 | ||||||||
Cash flows used in investing activities | $ | (24,781 | ) | $ | (55,242 | ) | $ | (137,896 | ) | $ | (112,615 | ) | ||||
Cash flows used in financing activities | $ | (32,785 | ) | $ | (39,645 | ) | $ | (133,651 | ) | $ | (271,844 | ) |
1 See Reconciliation of Financial Measures below.
2 Net revenue from entities acquired or sold includes the acquisitions of Stream57 and SKT BCS in the Unified Communications segment and the acquisitions of Holly Connects, TuVox and Specialty Pharmacy Network, Inc. and the sale of the Positron CAD business in the Communications Services segment.
3 Automated services includes Unified Communications, Intrado and West Interactive