EX-99.1 2 d576860dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

West Corporation      AT THE COMPANY:
11808 Miracle Hills Drive      David Pleiss
Omaha, NE 68154      Investor Relations
     (402) 963-1500
     dmpleiss@west.com

West Corporation Reports Second Quarter 2013 Results and

Declares Quarterly Dividend

OMAHA, NE, July 31, 2013 – West Corporation (Nasdaq:WSTC), a leading provider of technology-driven communication services, today announced its second quarter 2013 results.

Key Highlights:

 

   

Adjusted Net Income2 increased 18%

 

   

Adjusted Operating Income2 grew by 5.9%

 

   

Adjusted EBITDA2 improved by 6.1%

 

   

Free Cash Flow2 grew 257% to $69 million in the quarter, up 74% year-to-date

 

     Three Months Ended June 30,     Six Months Ended June 30,  
Unaudited, in millions except per share    2013     2012     % Change     2013     2012     % Change  

Consolidated Revenue

   $ 672.7      $ 661.9        1.6   $ 1,332.9      $ 1,301.0        2.5

Platform-based Revenue1

     494.9        485.2        2.0     976.4        933.9        4.5

Adjusted EBITDA2

     180.4        169.9        6.1     350.5        331.8        5.7

EBITDA2

     178.5        166.4        7.3     317.5        327.0        -2.9

Adjusted Operating Income2

     150.5        142.2        5.9     289.0        272.5        6.0

Operating Income

     134.7        121.5        10.9     228.0        235.7        -3.3

Cash Flows from Operations

     95.0        43.7        117.3     193.7        135.4        43.1

Free Cash Flow2,4

     69.0        19.4        256.6     134.1        76.9        74.3

Pro Forma Adjusted Net Income2,3

     63.3        NM        NM        121.4        NM        NM   

Adjusted Net Income2

     60.5        51.3        18.0     105.0        97.1        8.1

Net Income

     43.7        36.7        19.0     46.7        70.7        -33.9

Pro Forma Adjusted EPS—Diluted

     0.75        NM        NM        1.43        NM        NM   

Adjusted Earnings per Share—Diluted

     0.71        0.81        -12.3     1.40        1.53        -8.5

Earnings per Share—Diluted

     0.51        0.58        -12.1     0.62        1.11        -44.1

Net Cash Flows used in Investing

     (27.0     (25.0     8.3     (61.0     (135.6     -55.0

Net Cash Flows used in Financing

     (503.3     (27.7     NM        (93.7     (7.4     NM   

“We are pleased to report another quarter of solid operating results. Debt reduction and lower interest rates on our term debt combined with improvement in SG&A to fuel improved profitability for the quarter,” said Tom Barker, CEO. “We continue to execute on our strategic initiatives, while returning a portion of our earnings to our shareholders through our quarterly dividend.”


Dividend

The Company today also announced a $0.225 per common share quarterly dividend. The dividend is payable August 22, 2013, to shareholders of record as of the close of business on August 12, 2013.

Consolidated Operating Results

For the second quarter of 2013, revenue was $672.7 million compared to $661.9 million for the same quarter of the previous year, an increase of 1.6 percent. Fluctuations in currency exchange rates reduced revenue by approximately $1.1 million in the second quarter of 2013 compared to rates used for 2013 guidance.

The Unified Communications segment had revenue of $382.9 million in the second quarter of 2013, an increase of 3.6 percent over the same quarter of the previous year. The Communication Services segment had revenue of $296.8 million in the second quarter of 2013, 0.5 percent higher than the second quarter of 2012. The Company’s platform-based businesses1 had revenue of $494.9 million in the second quarter of 2013, an increase of 2.0 percent over the same quarter of the previous year.

Adjusted EBITDA2 for the second quarter of 2013 was $180.4 million, or 26.8 percent of revenue, compared to $169.9 million, or 25.7 percent of revenue, for the second quarter of 2012, an increase of 6.1%. EBITDA was $178.5 million in the second quarter of 2013 compared to $166.4 million in the second quarter of 2012, an increase of 7.3%.

Adjusted Operating Income2 for the second quarter of 2013 was $150.5 million, or 22.4 percent of revenue, compared to $142.2 million, or 21.5 percent of revenue in the same quarter of 2012, an increase of 5.9%. Operating Income was $134.7 million in the second quarter of 2013 compared to $121.5 million in the second quarter of 2012, an increase of 10.9%.

Adjusted Net Income2 was $60.5 million in the second quarter of 2013, an increase of 18.0 percent from the same quarter of 2012. The Company’s pro forma Adjusted Net Income2, which includes pro forma interest expense, net of tax, for the second quarter of 2013 was $63.3 million. Net Income was $43.7 million in the second quarter of 2013, compared to $36.7 million in the same quarter of 2012. The improvement in profitability was driven by recent deleveraging, a lower cost of debt and operating leverage.

 

 

1  Platform-based businesses include the Unified Communications segment, Intrado, West Interactive and HyperCube.
2  See Reconciliation of Non-GAAP Financial Measures below.
3 

Reflects the impact of post-IPO reduced debt balances and lower interest rates resulting from the Company’s pricing amendments to its senior secured term loan facilities and redemption of the $450 million senior subordinated notes as if these transactions had been completed on January 1, 2013. Pro forma results also present shares outstanding as if the Company’s IPO had been completed on January 1, 2013.

4 

Free Cash Flow is calculated as Cash Flows from Operations less cash Capital Expenditures.

NM: Not Meaningful

 

2


Balance Sheet, Cash Flow and Liquidity

At June 30, 2013, West Corporation had cash and cash equivalents totaling $214.4 million and working capital of $338.0 million. Interest expense was $57.2 million during the three months ended June 30, 2013 compared to $60.6 million during the comparable period last year. The Company expects its quarterly interest expense to be approximately $51.1 million per quarter for the remainder of 2013.

On April 26, 2013, the Company redeemed all of the outstanding $450.0 million principal amount of its 11% Senior Subordinated Notes (“Senior Subordinated Notes”). The redemption price was 103.667% of the principal amount of the Senior Subordinated Notes. In addition, the Company paid accrued and unpaid interest on the redeemed Senior Subordinated Notes up to the Redemption Date. Upon completion of the redemption, the Company recorded a one-time expense of $6.6 million for the remaining amortization of the balance of deferred financing costs associated with the Senior Subordinated Notes.

The Company’s net debt to pro forma Adjusted EBITDA ratio, as calculated pursuant to the Company’s senior secured term debt facilities, was 4.62x at June 30, 2013.

“Our strong cash flow generation continued in the second quarter of 2013,” said Paul Mendlik, CFO. “We reduced our interest expense through the redemption of our Senior Subordinated Notes and lower interest rates on our term loans negotiated earlier this year. We continue to make progress toward our goal of reducing our net leverage to less than 4x by the end of the first quarter of 2015.”

Cash Flows from Operations were $95.0 million for the second quarter of 2013 compared to $43.7 million in the same quarter last year. Free Cash Flow2 increased to $69.0 million in the second quarter of 2013 compared to $19.4 million in the second quarter of 2012.

During the second quarter of 2013, the Company invested $25.4 million, or 3.8 percent of revenues, in capital expenditures primarily for software and computer equipment.

Conference Call

The Company will hold a conference call to discuss these topics on Thursday, August 1, 2013 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 (Nasdaq:WSTC) 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.

 

3


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.

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; 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; security and privacy breaches of the systems West uses to protect personal data; 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; 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.

 

4


WEST CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited, in thousands except selected per share and operating data)

 

    Three Months Ended June 30,  
    2013     2012           2013     2013 Adj.  
    Actual     Actual     % Change     Adjusted (2)     Pro Forma (2,3)  

Revenue

  $ 672,695      $ 661,895        1.6   $ 672,695      $ 672,695   

Cost of services

    311,939        307,286        1.5     311,939        311,939   

Selling, general and administrative expenses

    226,018        233,110        -3.0     210,211        210,211   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    134,738        121,499        10.9     150,545        150,545   

Interest expense, net

    57,190        60,625        -5.7     52,666        48,120   

Subordinated debt call premium and accelerated amortization of deferred financing costs

    6,603        —          NM        —          —     

Other expense, net

    1,077        1,691        NM        1,077        1,077   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

    69,868        59,183        18.1     96,802        101,348   

Income tax

    26,200        22,489        16.5     36,301        38,005   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 43,668      $ 36,694        19.0   $ 60,501      $ 63,343   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

         

Basic

    83,524        61,384          83,524        83,524   

Diluted

    84,943        63,565          84,943        84,943   

Earnings per share:

         

Basic

  $ 0.52      $ 0.60        -13.3   $ 0.72      $ 0.76   

Diluted

  $ 0.51      $ 0.58        -12.1   $ 0.71      $ 0.75   

SELECTED SEGMENT DATA:

         

Revenue:

         

Unified Communications

  $ 382,869      $ 369,527        3.6    

Communication Services

    296,778        295,227        0.5    

Intersegment eliminations

    (6,952     (2,859     NM       
 

 

 

   

 

 

   

 

 

     

Total

  $ 672,695      $ 661,895        1.6    
 

 

 

   

 

 

   

 

 

     

Depreciation:

         

Unified Communications

  $ 15,633      $ 14,956        4.5    

Communication Services

    12,337        11,932        3.4    
 

 

 

   

 

 

   

 

 

     

Total

  $ 27,970      $ 26,888        4.0    
 

 

 

   

 

 

   

 

 

     

Amortization:

         

Unified Communications—SG&A

  $ 6,218      $ 7,181        -13.4    

Communication Services—COS

    2,506        2,180        15.0    

Communication Services—SG&A

    7,729        9,981        -22.6    

Corporate—deferred financing costs

    4,524        3,393        33.3    

Corporate—accelerated amortization of deferred financing costs

    6,603        —          NM       
 

 

 

   

 

 

   

 

 

     

Total

  $ 27,580      $ 22,735        21.3    
 

 

 

   

 

 

   

 

 

     

Share-based Compensation

         

Unified Communications

  $ 887      $ 1,262        -29.7    

Communication Services

    973        1,255        -22.5    
 

 

 

   

 

 

   

 

 

     

Total

  $ 1,860      $ 2,517        -26.1    
 

 

 

   

 

 

   

 

 

     

Cost of services:

         

Unified Communications

  $ 162,546      $ 156,550        3.8    

Communication Services

    155,710        153,053        1.7    

Intersegment eliminations

    (6,317     (2,317     NM       
 

 

 

   

 

 

   

 

 

     

Total

  $ 311,939      $ 307,286        1.5    
 

 

 

   

 

 

   

 

 

     

Selling, general and administrative expenses:

         

Unified Communications

  $ 110,353      $ 113,171        -2.5    

Communication Services

    116,299        120,480        -3.5    

Intersegment eliminations

    (634     (541     NM       
 

 

 

   

 

 

   

 

 

     

Total

  $ 226,018      $ 233,110        -3.0    
 

 

 

   

 

 

   

 

 

     

Operating income:

         

Unified Communications

  $ 109,969      $ 99,805        10.2   $ 117,074     

Communication Services

    24,769        21,694        14.2     33,470     
 

 

 

   

 

 

   

 

 

   

 

 

   

Total

  $ 134,738      $ 121,499        10.9   $ 150,544     
 

 

 

   

 

 

   

 

 

   

 

 

   

Operating margin:

         

Unified Communications

    28.7     27.0       30.6  

Communication Services

    8.3     7.3       11.3  
 

 

 

   

 

 

     

 

 

   

Total

    20.0     18.4       22.4  
 

 

 

   

 

 

     

 

 

   

SELECTED OPERATING DATA:

         

Revenue from platform-based services (1)

  $ 494,934      $ 485,195        2.0    

Revenue from agent-based services

  $ 180,635      $ 179,255        0.8    

 

5


     Six Months Ended June 30,  
     2013     2012           2013     2013 Adj.  
     Actual     Actual     % Change     Adjusted (2)     Pro Forma (2,3)  

Revenue

   $ 1,332,919      $ 1,300,957        2.5   $ 1,332,919      $ 1,332,919   

Cost of services

     621,006        598,988        3.7     621,006        621,006   

Selling, general and administrative expenses

     483,885        466,228        3.8     422,952        422,952   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     228,028        235,741        -3.3     288,961        288,961   

Interest expense, net

     130,068        122,687        6.0     120,890        94,550   

Subordinated debt call premium and accelerated amortization of deferred financing costs

     23,105        —          —          —          —     

Other expense (income), net

     99        (1,039     NM        99        99   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     74,756        114,093        -34.5     167,972        194,312   

Income tax

     28,033        43,355        -35.3     62,989        72,867   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 46,723      $ 70,738        -33.9   $ 104,983      $ 121,445   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

          

Basic

     73,716        61,345          73,716        83,472   

Diluted

     75,151        63,525          75,151        84,907   

Earnings per share:

          

Basic

   $ 0.63      $ 1.15        -45.2   $ 1.42      $ 1.45   

Diluted

   $ 0.62      $ 1.11        -44.1   $ 1.40      $ 1.43   

SELECTED SEGMENT DATA:

          

Revenue:

          

Unified Communications

   $ 750,437      $ 729,174        2.9    

Communication Services

     593,229        576,964        2.8    

Intersegment eliminations

     (10,747     (5,181     NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 1,332,919      $ 1,300,957        2.5    
  

 

 

   

 

 

   

 

 

     

Depreciation:

          

Unified Communications

   $ 31,081      $ 30,053        3.4    

Communication Services

     24,696        23,143        6.7    
  

 

 

   

 

 

   

 

 

     

Total

   $ 55,777      $ 53,196        4.9    
  

 

 

   

 

 

   

 

 

     

Amortization:

          

Unified Communications—SG&A

   $ 12,442      $ 14,430        -13.8    

Communication Services—COS

     5,095        4,309        18.2    

Communication Services—SG&A

     15,466        17,610        -12.2    

Corporate—deferred financing costs

     9,178        6,786        35.2    

Corporate—accelerated amortization of deferred financing costs

     6,603        —          NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 48,784      $ 43,135        13.1    
  

 

 

   

 

 

   

 

 

     

Share-based Compensation

          

Unified Communications

   $ 2,366      $ 1,278        85.1    

Communication Services

     2,684        1,372        95.6    
  

 

 

   

 

 

   

 

 

     

Total

   $ 5,050      $ 2,650        90.6    
  

 

 

   

 

 

   

 

 

     

Cost of services:

          

Unified Communications

   $ 319,652      $ 305,291        4.7    

Communication Services

     311,100        297,796        4.5    

Intersegment eliminations

     (9,746     (4,099     NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 621,006      $ 598,988        3.7    
  

 

 

   

 

 

   

 

 

     

Selling, general and administrative expenses:

          

Unified Communications

   $ 242,951      $ 226,941        7.1    

Communication Services

     241,934        240,369        0.7    

Intersegment eliminations

     (1,000     (1,082     NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 483,885      $ 466,228        3.8    
  

 

 

   

 

 

   

 

 

     

Operating income:

          

Unified Communications

   $ 187,834      $ 196,941        -4.6   $ 220,351     

Communication Services

     40,194        38,800        3.6     68,610     
  

 

 

   

 

 

   

 

 

   

 

 

   

Total

   $ 228,028      $ 235,741        -3.3   $ 288,961     
  

 

 

   

 

 

   

 

 

   

 

 

   

Operating margin:

          

Unified Communications

     25.0     27.0       29.4  

Communication Services

     6.8     6.7       11.6  
  

 

 

   

 

 

     

 

 

   

Total

     17.1     18.1       21.7  
  

 

 

   

 

 

     

 

 

   

SELECTED OPERATING DATA:

          

Revenue from platform-based services (1)

   $ 976,372      $ 933,947        4.5    

Revenue from agent-based services

   $ 362,007      $ 372,072        -2.7    

 

6


CONDENSED BALANCE SHEETS

(Unaudited, in thousands)

 

     June 30,     Dec. 31,     %  
     2013     2012     Change  

Current assets:

      

Cash and cash equivalents

   $ 214,380      $ 179,111        19.7

Trust and restricted cash

     15,961        14,518        9.9

Accounts receivable, net

     440,291        444,411        -0.9

Deferred income taxes receivable

     7,342        13,148        -44.2

Prepaid assets

     50,222        42,129        19.2

Other current assets

     76,176        67,775        12.4
  

 

 

   

 

 

   

 

 

 

Total current assets

     804,372        761,092        5.7

Net property and equipment

     349,487        364,896        -4.2

Goodwill

     1,813,665        1,816,851        -0.2

Other assets

     494,585        505,314        -2.1
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 3,462,109      $ 3,448,153        0.4
  

 

 

   

 

 

   

 

 

 

Current liabilities

   $ 466,405      $ 457,668        1.9

Long-term obligations

     3,566,391        3,992,531        -10.7

Other liabilities

     248,786        247,640        0.5
  

 

 

   

 

 

   

 

 

 

Total liabilities

     4,281,582        4,697,839        -8.9

Stockholders’ deficit

     (819,473     (1,249,686     34.4
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 3,462,109      $ 3,448,153        0.4
  

 

 

   

 

 

   

 

 

 

 

7


Reconciliation of Non-GAAP Financial Measures

Adjusted Operating Income Reconciliation

Adjusted Operating Income is a non-GAAP measure that reflects the Company’s Operating Income before the impact of IPO-related expenses, expenses terminated in connection with the IPO and non-cash items. Adjusted Operating Income is not a measure of financial performance under generally accepted accounting principles (“GAAP”). Adjusted Operating Income should not be considered in isolation or as a substitute for Operating Income or other profitability data prepared in accordance with GAAP. Adjusted Operating Income, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of Adjusted Operating Income to Operating Income.

Reconciliation of Adjusted Operating Income from Operating Income

Unaudited, in thousands

 

     Three Months Ended June 30,  
     2013      2012      % Change  

Operating income

   $ 134,738       $ 121,499         10.9

Amortization of acquired intangible assets

     13,947         17,162      

Share-based compensation

     1,860         2,517      

Sponsor management/termination fee

     —           1,032      
  

 

 

    

 

 

    

 

 

 

Adjusted operating income

   $ 150,545       $ 142,210         5.9
  

 

 

    

 

 

    

 

 

 

 

     Six Months Ended June 30,  
     2013      2012      % Change  

Operating income

   $ 228,028       $ 235,741         -3.3

Amortization of acquired intangible assets

     27,908         32,040      

Share-based compensation

     5,050         2,650      

Sponsor management/termination fee

     25,000         2,069      

IPO bonus

     2,975         —        
  

 

 

    

 

 

    

 

 

 

Adjusted operating income

   $ 288,961       $ 272,500         6.0
  

 

 

    

 

 

    

 

 

 

Adjusted Net Income, Adjusted EPS, Pro forma Adjusted Net Income and Pro forma Adjusted EPS Reconciliation

Adjusted Net Income is a non-GAAP measure that reflects the Company’s Net Income before the impact of IPO-related expenses, expenses terminated in connection with the IPO, bond redemption premiums and non-cash items. Adjusted Net Income is not a measure of financial performance under GAAP. Adjusted Net Income should not be considered in isolation or as a substitute for Net Income or other profitability metrics prepared in accordance with GAAP. Adjusted Net Income, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of Adjusted Net Income to Net Income.

Pro forma Adjusted Net Income represents Adjusted Net Income after giving effect to pro forma adjusted interest expense. Pro forma adjusted interest expense reflects the impact of lower debt balances and lower interest rates post IPO. This includes the pro forma savings for the full periods from the redemption of the $450 million senior subordinated notes and the pricing amendment to the senior secured term loan facilities as if these transactions had been completed January 1, 2013. Pro forma results also present shares outstanding as if the Company’s IPO had been completed January 1, 2013.

 

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Reconciliation of Adjusted Net Income & Pro forma Net Income from Net Income

Unaudited, in thousands except per share

 

     Three Months Ended June 30,  
     2013      2012      % Change  

Net income

   $ 43,668       $ 36,694         19.0

Amortization of acquired intangible assets

     13,947         17,162      

Amortization of deferred financing costs

     4,524         3,393      

Accelerated amortization of deferred financing costs

     6,603         —        

Share-based compensation

     1,860         2,517      

Sponsor management/termination fee

     —           1,032      
  

 

 

    

 

 

    

Pre-tax total

     26,934         24,104      

Income tax expense on adjustments

     10,101         9,521      
  

 

 

    

 

 

    

 

 

 

Adjusted net income

   $ 60,501       $ 51,277         18.0
     

 

 

    

 

 

 

Diluted shares outstanding

     84,943         63,565      

Adjusted EPS—diluted

   $ 0.71       $ 0.81         -12.3

Pro forma interest expense change, net of tax

   $ 2,842         
  

 

 

       

Pro forma adjusted net income

   $ 63,343         N/A      
  

 

 

       

Pro forma diluted shares outstanding

     84,943         

Pro forma adjusted EPS—diluted

   $ 0.75         N/A      

 

     Six Months Ended June 30,  
     2013      2012      % Change  

Net income

   $ 46,723       $ 70,738         -33.9

Amortization of acquired intangible assets

     27,908         32,040      

Amortization of deferred financing costs

     9,178         6,786      

Accelerated amortization of deferred financing costs

     6,603         —        

Share-based compensation

     5,050         2,650      

Sponsor management/termination fee

     25,000         2,069      

IPO bonus

     2,975         —        

Subordinated debt call premium

     16,502         —        
  

 

 

    

 

 

    

Pre-tax total

     93,216         43,545      

Income tax expense on adjustments

     34,956         17,200      
  

 

 

    

 

 

    

 

 

 

Adjusted net income

   $ 104,983       $ 97,083         8.1
     

 

 

    

 

 

 

Diluted shares outstanding

     75,151         63,525      

Adjusted EPS—diluted

   $ 1.40       $ 1.53         -8.5

Pro forma interest expense change, net of tax

   $ 16,462         
  

 

 

       

Pro forma adjusted net income

   $ 121,445         N/A      
  

 

 

       

Pro forma diluted shares outstanding

     84,907         

Pro forma adjusted EPS—diluted

   $ 1.43         N/A      

 

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Free Cash Flow Reconciliation

The Company believes Free Cash Flow provides a relevant measure of liquidity and a useful basis for assessing the Company’s ability to fund its activities, including the financing of acquisitions, debt service, stock repurchases and distribution of earnings to shareholders. Free Cash Flow is calculated as Cash Flows from Operations less cash Capital Expenditures. Free Cash Flow is not a measure of financial performance under GAAP. Free Cash Flow should not be considered in isolation or as a substitute for Cash Flows from Operations or other liquidity measures prepared in accordance with GAAP. Free Cash Flow, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of Free Cash Flow to Cash Flows from Operations.

Reconciliation of Free Cash Flow from Operating Cash Flow

Unaudited, in thousands

 

     Three Months Ended June 30,  
     2013      2012      % Change  

Cash flows from operations

   $ 94,998       $ 43,711         117.3

Cash capital expenditures

     25,985         24,356         6.7
  

 

 

    

 

 

    

 

 

 

Free cash flow

   $ 69,013       $ 19,355         256.6
  

 

 

    

 

 

    

 

 

 

 

     Six Months Ended June 30,  
     2013      2012      % Change  

Cash flows from operations

   $ 193,664       $ 135,374         43.1

Cash capital expenditures

     59,527         58,429         1.9
  

 

 

    

 

 

    

 

 

 

Free cash flow

   $ 134,137       $ 76,945         74.3
  

 

 

    

 

 

    

 

 

 

EBITDA and Adjusted EBITDA Reconciliation

The common definition of EBITDA is “Earnings Before Interest Expense, Taxes, Depreciation and Amortization.” In evaluating liquidity and performance, the Company uses earnings before interest expense, share based compensation, taxes, depreciation and amortization, and one-time IPO-related expenses, or “Adjusted EBITDA.” EBITDA and Adjusted EBITDA are not measures of financial performance or liquidity under 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. EBITDA and Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA are used by certain investors as measures to assess the Company’s ability to service debt. Adjusted EBITDA is also used in the Company’s debt covenants, although the precise adjustments used to calculate Adjusted EBITDA included in the Company’s credit facility and indentures vary in certain respects among such agreements and from those presented below. Certain adjustments to Adjusted EBITDA were excluded from the calculations below consistent with the adjustments made for Adjusted Operating Income and Adjusted Net Income. Set forth below is a reconciliation of EBITDA and Adjusted EBITDA to Cash Flows from Operations and Net Income.

 

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Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow

Unaudited, in thousands

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2013     2012     2013     2012  

Cash flows from operating activities

   $ 94,998      $ 43,711      $ 193,664      $ 135,374   

Income tax expense

     26,200        22,489        28,033        43,355   

Deferred income tax benefit (expense)

     (4,664     3,811        (9,007     (7,707

Interest expense and other financing charges

     64,249        60,987        153,943        123,397   

Provision for share-based compensation

     (1,860     (2,517     (5,050     (2,650

Amortization of deferred financing costs

     (4,524     (3,393     (9,178     (6,786

Accelerated amortization of deferred financing costs

     (6,603     —          (6,603     —     

Asset impairment

     —          —          —          (3,715

Other

     (10     (92     (37     (171

Changes in operating assets and liabilities, net of business acquisitions

     10,754        41,404        (28,286     45,938   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     178,540        166,400        317,479        327,035   

Provision for share-based compensation

     1,860        2,517        5,050        2,650   

Sponsor management/termination fee and IPO bonus

     —          1,032        27,975        2,069   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 180,400      $ 169,949      $ 350,504      $ 331,754   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of EBITDA and Adjusted EBITDA from Net Income

Unaudited, in thousands

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2013      2012      2013      2012  

Net income

   $ 43,668       $ 36,694       $ 46,723       $ 70,738   

Interest expense and other financing charges

     64,249         60,987         153,943         123,397   

Depreciation and amortization

     44,423         46,230         88,780         89,545   

Income tax expense

     26,200         22,489         28,033         43,355   
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     178,540         166,400         317,479         327,035   

Provision for share-based compensation

     1,860         2,517         5,050         2,650   

Sponsor management/termination fee and IPO bonus

     —           1,032         27,975         2,069   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 180,400       $ 169,949       $ 350,504       $ 331,754   
  

 

 

    

 

 

    

 

 

    

 

 

 

Unaudited, in thousands

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2013     2012     2013     2012  

Cash flows from operating activities

   $ 94,998      $ 43,711      $ 193,664      $ 135,374   

Cash flows used in investing activities

   $ (27,039   $ (24,978   $ (61,002   $ (135,630

Cash flows used in financing activities

   $ (503,274   $ (27,684   $ (93,693   $ (7,418

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