EX-99.1 2 c19378exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1
(WEST CORPORATION LOGO)
     
West Corporation
11808 Miracle Hills Drive
Omaha, NE 68154
  AT THE COMPANY:
David Pleiss
Investor Relations
(402) 963-1500
dmpleiss@west.com
West Corporation Reports Third Quarter 2007 Results
OMAHA, NE, October 17, 2007 — West Corporation, a leading provider of outsourced communication solutions, today announced its third quarter 2007 results.
Financial Summary (unaudited)
(Dollars in millions)
                                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     Percent
Change
    2007     2006     Percent
Change
 
 
Revenue
  $ 531.1     $ 473.2       12.2 %   $ 1,559.9     $ 1,359.7       14.7 %
Adjusted EBITDA1
  $ 149.3     $ 127.4       17.2 %   $ 441.6     $ 360.4       22.5 %
Adjusted EBITDA Margin
    28.1 %     26.9 %             28.3 %     26.5 %        
Cash Flow from Operations
  $ 55.3     $ 70.2       -21.2 %   $ 182.5     $ 225.5       -19.1 %
“We are pleased with this quarter’s results and the ongoing integration of our recent acquisitions,” said Thomas B. Barker, Chief Executive Officer of West Corporation.
Consolidated Operating Results
For the third quarter ended September 30, 2007, revenues were $531.1 million compared to $473.2 million for the same quarter last year, an increase of 12.2 percent. Revenue
 
1   See Reconciliation of Financial Measures below.


 

from acquired entities2 accounted for $33.9 million of the $57.9 million increase during the third quarter and $134.8 million of the $200.2 million year-to-date increase. During the quarter, the Company recorded $8.8 million of goodwill amortization to write-off its investment in Vertical Alliance, a ticketing company. This resulted in a 320 basis point reduction in the Communication Services segment third quarter operating margin and a 170 basis point reduction in consolidated third quarter operating margin. This was offset by a related reduction of income tax valuation reserves and income tax expense of $8.0 million.
Balance Sheet and Liquidity
At September 30, 2007, West Corporation had cash and cash equivalents totaling $112.6 million and working capital of $175.4 million. Third quarter depreciation expense was $25.1 million and amortization expense was $29.2 million. Cash flow from operating activities was $55.3 million and was impacted by interest expense of $88.1 million. Adjusted EBITDA for the third quarter was $149.3 million, or 28.1 percent of revenue. A reconciliation of adjusted EBITDA to cash flow from operating activities is presented in the Reconciliation of Financial Measures below.
“During the quarter, we invested $26.8 million in capital expenditures primarily for equipment and infrastructure,” stated Paul Mendlik, Chief Financial Officer of West Corporation. “The Company also settled the pending litigation with Polygon during the quarter by paying Polygon $48.75 per share, the same amount received in the Recapitalization as all other former public shareholders of West, plus interest at 8.25%, for a total of approximately $183.9 million.”
Conference Call
The Company will hold a conference call to discuss these topics on Thursday, October 18, 2007 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 also be available on the website.
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.
 
2   Acquired entities include InPulse (acquired in October 2006), CenterPost (acquired in February 2007) and TeleVox (acquired in March 2007) in the Communications Services segment and Omnium (acquired May 2007) in the Receivables Management segment.


 

Founded in 1986 and headquartered in Omaha, Nebraska, West has a team of 37,000 employees based in North America, Europe and Asia. For more information, please 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 the ability to integrate or achieve the objectives of our recent acquisitions, West’s ability to complete future acquisitions, competition in West’s highly competitive industries, extensive regulation in many of West’s markets, West’s ability to recover on its charged-off consumer receivables, capacity utilization of West’s contact centers, the cost and reliability of voice and data services, availability of key personnel and employees, the cost of labor and turnover rates, the political, economic and other conditions in countries where West operates, the loss of any key clients, West’s ability to purchase charged-off receivable portfolios on acceptable terms and in sufficient amounts, the nature of West’s forward flow contracts, the non-exclusive nature of West’s client contracts and the absence of revenue commitments, the possibility of an emergency interruption to West’s data and contact centers, acts of terrorism or war, security or privacy breaches of West’s systems and databases, West’s ability to protect proprietary information or technology, West’s ability to continue to keep pace with technological developments, the cost of pending and future litigation and other risk factors described in documents filed by the company with the United States Securities and Exchange Commission including West’s annual report on Form 10-K for the year ended December 31, 2006 and quarterly report on Form 10-Q for the quarter ended June 30, 2007. 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.


 

WEST CORPORATION
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited, in thousands except selected operating data)
                                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2007     2006     % Change     2007     2006     % Change  
 
                                               
Revenue
  $ 531,098     $ 473,245       12.2 %   $ 1,559,917     $ 1,359,661       14.7 %
Cost of services
    228,309       206,733       10.4 %     671,600       604,147       11.2 %
Selling, general and administrative expenses
    217,213       183,315       18.5 %     616,581       524,425       17.6 %
 
                                   
Operating income
    85,576       83,197       2.9 %     271,736       231,089       17.6 %
Interest expense
    88,135       12,646       596.9 %     251,790       29,072       766.1 %
Other expense (income), net
    (4,820 )     (1,185 )     306.8 %     (12,928 )     (3,162 )     308.9 %
 
                                   
Income before tax
    2,261       71,736       -96.8 %     32,874       205,179       -84.0 %
Income tax expense (benefit)
    (3,780 )     25,105       -115.1 %     7,147       73,110       -90.2 %
Minority Interest
    4,120       3,710       11.1 %     12,275       10,334       18.8 %
 
                                   
Net income
  $ 1,921     $ 42,921       -95.5 %   $ 13,452     $ 121,735       -88.9 %
 
                                   
 
                                               
SELECTED SEGMENT DATA:
                                               
Revenue:
                                               
Communication Services
  $ 273,945     $ 259,106       5.7 %   $ 810,915     $ 736,833       10.1 %
Conferencing
    182,420       156,099       16.9 %     542,237       448,816       20.8 %
Receivables Management
    76,453       59,465       28.6 %     211,234       178,641       18.2 %
Inter segment eliminations
    (1,720 )     (1,425 )     20.7 %     (4,469 )     (4,629 )     -3.5 %
 
                                   
Total
  $ 531,098     $ 473,245       12.2 %   $ 1,559,917     $ 1,359,661       14.7 %
 
                                   
 
                                               
Operating Income:
                                               
Communication Services
  $ 26,556     $ 29,149       -8.9 %   $ 91,856     $ 85,321       7.7 %
Conferencing
    45,402       43,428       4.5 %     138,996       113,959       22.0 %
Receivables Management
    13,618       10,620       28.2 %     40,884       31,809       28.5 %
 
                                   
Total
  $ 85,576     $ 83,197       2.9 %   $ 271,736     $ 231,089       17.6 %
 
                                   
 
                                               
Operating Margin:
                                               
Communication Services
    9.7 %     11.2 %     -13.4 %     11.3 %     11.6 %     -2.6 %
Conferencing
    24.9 %     27.8 %     -10.4 %     25.6 %     25.4 %     0.8 %
Receivables Management
    17.8 %     17.9 %     -0.6 %     19.4 %     17.8 %     9.0 %
 
                                   
Total
    16.1 %     17.6 %     -8.5 %     17.4 %     17.0 %     2.4 %
 
                                   
 
                                               
SELECTED OPERATING DATA ($M):
                                               
Share-based compensation expense recognized
    0.3       3.8                                  
Cash flow from operations
    55.3       70.2                                  
Revolving Line of Credit ending balance
          665.0                                  
Term loan facility
    2,376.4                                        
Senior notes
    650.0                                        
Senior subordinated notes
    450.0                                        
Condensed Balance Sheets
                         
    September 30,     December 31,     %  
    2007     2006     Change  
 
                       
Current assets:
                       
Cash and cash equivalents
  $ 112,595     $ 214,932       -47.6 %
Trust cash
    22,802       7,104       221.0 %
Accounts receivable, net
    309,391       285,087       8.5 %
Portfolio receivables, current
    64,955       64,651       0.5 %
Other current assets
    46,470       54,382       -14.5 %
 
                 
Total current assets
    556,213       626,156       -11.2 %
 
                       
Net property and equipment
    297,218       294,707       0.9 %
Portfolio receivables, net
    126,625       85,006       49.0 %
Goodwill
    1,282,434       1,186,375       8.1 %
Other assets
    510,875       343,612       48.7 %
 
                 
Total assets
  $ 2,773,365     $ 2,535,856       9.4 %
 
                 
 
                       
Current liabilities
  $ 380,810     $ 497,586       -23.5 %
Long Term Obligations
    3,497,116       3,206,590       9.1 %
Other liabilities
    84,893       45,279       87.5 %
 
                   
Total liabilities
    3,962,819       3,749,455       5.7 %
 
                       
Minority interest
    11,998       10,299       16.5 %
Class L common stock
    997,891       903,656       10.4 %
 
                       
Stockholders’ deficit
    (2,199,343 )     (2,127,554 )     3.4 %
 
                 
Total liabilities and stockholders’ deficit
  $ 2,773,365     $ 2,535,856       9.4 %
 
                 


 

Reconciliation of Financial Measures
The common definition of EBITDA is “Earnings Before Interest Expense, Taxes, Depreciation and Amortization.” In evaluating liquidity, we use Adjusted EBITDA, which we define as earnings before interest expense, taxes, depreciation and amortization, share based compensation, minority interest, recapitalization transaction costs, after acquisition synergies and excluding unrestricted subsidiaries. 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.
                                 
Amounts in thousands   Three Months Ended Sept 30,     Nine Months Ended Sept 30,  
    2007     2006     2007     2006  
         
 
                               
Cash flow from operating activities
  $ 55,314     $ 70,157     $ 182,497     $ 225,501  
Income tax expense
    (3,781 )     25,105       7,147       73,110  
Deferred income tax (expense) benefit
    3,752       1,593       1,069       (15,887 )
Interest expense
    88,135       12,646       251,790       29,072  
Minority interest in earnings, net of distributions
    (1,010 )     1,078       (1,295 )     4,216  
Provision for share based compensation
    (322 )     (3,808 )     (952 )     (11,095 )
Debt amortization
    (3,637 )     (218 )     (11,045 )     (651 )
Other
    (95 )     (223 )     336       (359 )
Changes in operating assets and liabilities, net of business acquisitions
    2,176       10,117       (20,309 )     19,782  
         
EBITDA
    140,532       116,447       409,238       323,689  
Minority interest
    4,120       3,710       12,275       10,334  
Provision for share based compensation
    322       3,808       952       11,095  
Recapitalization costs
    2,517       625       11,092       5,625  
Synthetic lease interest
          409             1,305  
Acquisition synergies
    810       1,300       5,047       5,200  
Vertical Alliance Adjustment
    1,009       1,118       2,958       3,175  
         
Adjusted EBITDA
  $ 149,310     $ 127,417     $ 441,562     $ 360,423