SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 8, 2012
CONVERGYS CORPORATION
(Exact name of registrant as specified in its charter)
Ohio | 1-4379 | 31-1598292 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
201 East Fourth Street Cincinnati, Ohio |
45202 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (513) 723-7000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On May 8, 2012, Convergys Corporation (the Company or Convergys) issued a press release reporting its financial results for the quarter ended March 31, 2012. A copy of the May 8, 2012, press release for the quarter ended March 31, 2012 is furnished as Exhibit 99.1 and incorporated by this reference and will be published on the Companys website at www.convergys.com. The press release contains certain forward-looking statements, all of which are subject to the cautionary statement about forward-looking statements set forth therein. Except as otherwise provided in the press release, the press release speaks only as of the date of such press release, and it shall not create any implication that the affairs of the Company will have continued unchanged since such date. The press release contains certain non-GAAP financial information. The reconciliation of such non-GAAP financial information to GAAP financial measures is included in the press release.
The information contained in Item 2.02 of this Current Report on Form 8-K is to be considered furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended, nor shall it be deemed incorporated by reference into any Convergys filing or report with the Securities and Exchange Commission, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in any such filing or report.
Item 8.01. Other Events.
Today, the Company announced that its Board of Directors declared a quarterly dividend of $0.05 per common share of the Company to be paid out of the Companys retained earnings on July 6, 2012, to holders of the issued and outstanding common shares of the Company as of the close of business on June 22, 2012.
Today, the Company announced several planned management changes to occur in the third and fourth quarters of 2012. A copy of the press release is attached as Exhibit 99.2.
Item 9.01. Financial Statements and Exhibits.
(d) | Exhibits. |
Exhibit No. |
Description | |
Exhibit 99.1 | Convergys Corporation Press Release dated May 8, 2012 | |
Exhibit 99.2 | Convergys Corporation Press Release dated May 8, 2012 |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CONVERGYS CORPORATION | ||
By: |
/s/ Taylor C. Greenwald | |
Taylor C. Greenwald | ||
Controller |
Date: May 8, 2012
3
EXHIBIT INDEX
Exhibit No. |
Description | |
Exhibit 99.1 | Convergys Corporation Press Release dated May 8, 2012 | |
Exhibit 99.2 | Convergys Corporation Press Release dated May 8, 2012 |
Exhibit 99.1
CONVERGYS NEWS RELEASE
Convergys Reports First Quarter Results
Raises 2012 Revenue and Earnings Guidance
Company to Initiate $0.05/Share Quarterly Dividend
(Cincinnati; May 8, 2012) Convergys Corporation (NYSE: CVG), a global leader in relationship management, today announced its financial results for the first quarter of 2012.
The Board of Directors of the company also declared its first regular quarterly dividend of $0.05 per share. The payment of the dividend will be made on July 6, 2012, to shareholders of record at the close of business on June 22, 2012.
Convergys announced planned management changes that will align its leadership team with the companys focus on the Customer Management business. The management changes will be effective in the third and fourth quarter of 2012, and are detailed in a separate press release issued today.
First Quarter Summary Continuing Operations
As a result of the companys agreement to sell its Information Management business, results for the Information Management segment are reported as Discontinued Operations. Results from continuing operations include:
| Total revenue of $498 million, up seven percent compared with prior year; |
| Customer Management operating income of $39 million, up 21 percent compared with prior year; |
| Customer Management operating margin of 7.9 percent, up 90 basis points compared with prior year; |
| Customer Management EBITDA of $58 million, up 18 percent compared with prior year; |
| Non-GAAP EPS from continuing operations of $0.22 compared with $0.17 in prior year period; GAAP EPS from continuing operations of $0.18. |
We performed well in the first quarter with improvement in revenue, operating income and earnings per share, said Jeff Fox, president and CEO of Convergys. We are raising our guidance for the full year to reflect our solid execution. In Customer Management, we are investing to expand our capacity, deliver quality service and win more business. With the sale of the Information Management business we significantly increase our strategic and financial flexibility and are making excellent progress completing the simplification of our company. We will emerge as a well capitalized market-leading customer management business, and will remain disciplined with our capital deployment strategy.
Fox added, Based on our current financial strength and our confidence in the future, we are pleased to initiate a dividend.
First Quarter Results Continuing Operations
Revenue Total revenue was $498 million, a seven percent increase compared with $465 million in the same period last year.
Operating Income Customer Management operating income was $39 million, a 21 percent increase compared with $32 million in the same period last year. Customer Management operating margin was 7.9 percent, a 90 basis point improvement compared with 7.0 percent in the same period last year. Corporate and Other operating expense in the current period was $10 million compared with $8 million in the same period last year. Corporate and Other operating expense in both periods included $6 million of Information Management-related costs as discussed below.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Customer Management EBITDA was $58 million, up 18 percent compared with $49 million in the same period last year. Total adjusted EBITDA was $59 million compared with $52 million in the same period last year. Total adjusted EBITDA excluded $6 million of Information Management-related costs in both periods and $10 million of equity earnings from the Cellular Partnerships and a $7 million gain on the sale of the finance and accounting business in the prior year period.
Net Income Adjusted net income from continuing operations was $26 million, or $0.22 per diluted share, compared with $22 million, or $0.17 per diluted share, in the same period last year excluding the Information Management-related costs, sale of the finance and accounting business and equity earnings from the Cellular Partnerships. GAAP net income from continuing operations was $21 million, or $0.18 per diluted share, in the current year.
Free Cash Flow Free cash flow was a net use of $8 million, including $45 million of items related to corporate simplification initiatives, compared with net cash inflows of $17 million in the same period last year.
Net Cash (Debt) Cash and cash equivalents was $411 million, debt maturing in one year was $1 million, and long-term debt was $121 million, yielding net cash of $289 million at March 31, 2012. This compared with net cash of $295 million at December 31, 2011, and net debt of $17 million at the end of the first quarter last year.
Information Management Sale In March, Convergys signed a definitive agreement to sell the Information Management business. Accordingly, the net assets of Information Management are presented separately as held for sale, and the operating results are presented within discontinued operations. Accounting rules require certain costs previously allocated to the Information Management business to be included in continuing operations. These costs were $6 million in the first quarter of 2012 and $6 million in the same period last year. The company is taking actions to reduce these costs and expects remaining costs to be largely offset by revenue resulting from transition services to be provided to the buyer. Convergys expects minimal impact on results from continuing operations after sale closure.
Reconciliation tables of GAAP to non-GAAP results are attached.
2012 Business Outlook Continuing Operations
Convergys expects improved results from continuing operations for full year 2012 compared with prior guidance, including:
| Customer Management revenue of $1.975 billion to $2 billion, revised from prior guidance to exceed $1.960 billion; |
| Adjusted EBITDA of $220 million to $230 million, improving from prior guidance of adjusted EBITDA of $215 million to $225 million; |
| Adjusted EPS of $0.75 to $0.80, improving from prior guidance of adjusted EPS of $0.70 to $0.75. |
Not included in this guidance is the impact of any future strategic acquisitions or share repurchase activities. Also not included in this guidance are results classified within discontinued operations, including the impact of the sale of the Information Management business, as well as other costs that may be incurred related to or as a result of the transaction.
Forward-Looking Statements Disclosure and Safe Harbor Note
This news release contains statements, estimates, or projections that constitute forward-looking statements as defined under U.S. federal securities laws. In some cases, one can identify forward looking statements by terminology such as will, expect, estimate, think, forecast, guidance, outlook, plan, lead, project or other comparable terminology. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks include, but are not limited to: (i) the loss of a significant client or significant business from a client; (ii) the future financial performance of major industries that we serve; (iii) our inability to protect personally identifiable data against unauthorized access or unintended release; (iv) our inability to maintain and upgrade our technology and network equipment in a timely manner; (v) international business and political risks, including economic weakness and operational disruption as a result of natural events, political unrest, war, terrorist attacks or other civil disruption; (vi) risks that the conditions to the completion of the proposed transaction are not satisfied in a timely manner or at all; (vii) the failure to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction; (viii) risks of separating the Information Management business from the remainder of Convergys businesses and higher than expected costs of replacing services provided by the Information Management business to the rest of Convergys businesses; (ix) higher than expected costs of providing transition services and other support to the Information Management business following the consummation of the proposed transaction and (x) those factors contained in our periodic reports filed with the SEC, including in the Risk Factors section of our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The forward-looking information in this document is given as of the date of the particular statement and we assume no duty to update this information. Our filings and other important information are also available on the investor relations page of our web site at www.convergys.com
Non-GAAP Financial Measures
This news release contains non-GAAP financial measures as defined by the Securities and Exchange Commission Regulation G; pursuant to the requirements of this regulation, reconciliations of these non-GAAP measures to their comparable GAAP measures are included in the attached financial tables. To assess the underlying operational performance of the continuing operations of the business for the quarter and to have a basis to compare underlying operating results to prior and future periods, management uses first-quarter 2012 operating income, net income from continuing operations and diluted earnings per share from continuing operations metrics excluding certain Information Management-related costs that did not meet the criteria for presentation as discontinued operations, and first-quarter 2011 operating income excluding the Information Management-related costs as well as net income from continuing operations and diluted earnings per share from continuing operations also excluding contributions from the Companys investments in the Cellular Partnerships and the gain on the sale of the Finance and Accounting Outsourcing line of business.
These charges are relevant in evaluating the overall performance of the business. Limitations associated with the use of these non-GAAP measures include that these measures do not include all of the amounts associated with our results as determined in accordance with GAAP. Management compensates for these limitations by using the non-GAAP measures, operating income, income from continuing operations, net of tax and diluted earnings per share excluding the items above, and the GAAP measures, operating income, income from continuing operations, net of tax and diluted earnings per share, in its evaluation of performance. There is no material purpose for which we use these non-GAAP measures beyond those described above.
The Company presents the non-GAAP financial measures EBITDA and Adjusted EBITDA because management uses these measures to monitor and evaluate the performance of the business and believes the presentation of these measures will enhance the investors ability to analyze trends in the business and evaluate the Companys underlying performance relative to other companies in the industry.
Management uses free cash flow to assess the financial performance of the company. Convergys management believes that free cash flow is useful to investors because it relates the operating cash flow of the company to the capital that is spent to continue and improve business operations, such as investment in the companys existing businesses. Further, free cash flow facilitates managements ability to strengthen the companys balance sheet, to repurchase the companys stock, and to repay the companys debt obligations. Management also believes the presentation of this measure will enhance the investors ability to analyze trends in the business and evaluate the Companys underlying performance relative to other companies in the industry. Limitations associated with the use of free cash flow include that it does not represent the residual cash flow available for discretionary expenditures as it does not incorporate certain cash payments including payments made on capital lease obligations or cash payments for business acquisitions. Management compensates for these limitations by using both the non-GAAP measure, free cash flow, and the GAAP measure, cash from operating activities, in its evaluation of performance. There is no material purpose for which we use these non-GAAP measures beyond the purposes described above.
These non-GAAP measures should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures. The non-GAAP financial information that we provide may be different from that provided by our competitors or other companies.
Webcast Presentation:
Convergys will hold its First Quarter Financial Results webcast presentation at 8:30 a.m., Eastern time, Wednesday, May 9. It will feature President and CEO Jeff Fox, CFO Earl Shanks, and Customer Management President and Chief Operating Officer Andrea Ayers. The webcast presentation will take place live and will then be available for replay at this link - http://tinyurl.com/1Q12ConferenceCall. This link will replay the webcast presentation through June 9th. You may also access the webcast or the recording via the Convergys website, www.convergys.com. Click Company, then Investor Relations, then Events and Webcasts.
Supporting Resources:
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About Convergys
Convergys Corporation (NYSE: CVG) is a global leader in relationship management. We provide solutions that drive more value from the relationships our clients have with their customers. Convergys turns these everyday interactions into a source of profit and strategic advantage for our clients.
For more than 30 years, our unique combination of domain expertise, operational excellence, and innovative technologies has delivered process improvement and actionable business insight to marquee clients all over the world.
Convergys has approximately 75,000 employees in 69 customer contact centers and other facilities in the United States, Canada, Latin America, Europe, the Middle East, Africa, and Asia, and our global headquarters in Cincinnati, Ohio. For more information, visit www.convergys.com
(Convergys and the Convergys logo are registered trademarks of Convergys Corporation.)
Contacts:
David Stein, Investor Relations
+1 513 723 7768 or investor@convergys.com
Jeff Hazel, Public/Media Relations
+1 513 723 7153 or jeff.hazel@convergys.com
CONVERGYS CORPORATION
Consolidated Statements of Income
(Unaudited)
For the Three Months | ||||||||||||
Ended Mar 31, | % | |||||||||||
(In millions except per share amounts) | 2012 | 2011 | Change | |||||||||
Revenues |
||||||||||||
Customer Management |
$ | 497.5 | $ | 458.5 | 9 | |||||||
Corporate and Other |
| 6.3 | (100 | ) | ||||||||
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Total Revenues |
497.5 | 464.8 | 7 | |||||||||
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Costs and Expenses: |
||||||||||||
Cost of Providing Services and Products Sold |
317.7 | 295.6 | 7 | |||||||||
Selling, General and Administrative |
124.7 | 119.8 | 4 | |||||||||
Research and Development Costs |
3.9 | 3.9 | 0 | |||||||||
Depreciation |
20.3 | 18.9 | 7 | |||||||||
Amortization |
1.9 | 1.9 | 0 | |||||||||
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Total Costs and Expenses |
468.5 | 440.1 | 6 | |||||||||
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Operating Income |
29.0 | 24.7 | 17 | |||||||||
Equity in Earnings of Cellular Partnerships |
| 10.2 | (100 | ) | ||||||||
Other Income, net |
1.4 | 7.6 | (82 | ) | ||||||||
Interest Expense |
(3.6 | ) | (4.6 | ) | (22 | ) | ||||||
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Income Before Income Taxes and Discontinued Operations |
26.8 | 37.9 | (29 | ) | ||||||||
Income Tax Expense |
5.4 | 10.0 | (46 | ) | ||||||||
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Income from Continuing Operations, net of tax |
21.4 | 27.9 | (23 | ) | ||||||||
Income from Discontinued Operations, net of tax expense of $3.0 and $5.3, respectively |
4.7 | 7.0 | (33 | ) | ||||||||
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Net Income |
$ | 26.1 | $ | 34.9 | (25 | ) | ||||||
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Basic Earnings (Loss) Per Common Share |
||||||||||||
Continuing Operations |
$ | 0.19 | $ | 0.23 | (19 | ) | ||||||
Discontinued Operations |
$ | 0.04 | $ | 0.06 | (28 | ) | ||||||
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Net Basic Earnings Per Common Share |
$ | 0.23 | $ | 0.29 | (22 | ) | ||||||
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Diluted Earnings (Loss) Per Common Share |
||||||||||||
Continuing Operations |
$ | 0.18 | $ | 0.22 | (19 | ) | ||||||
Discontinued Operations |
$ | 0.04 | $ | 0.06 | (29 | ) | ||||||
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Net Diluted Earnings Per Common Share |
$ | 0.22 | $ | 0.28 | (21 | ) | ||||||
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Weighted Average Common Shares Outstanding |
||||||||||||
Basic |
115.9 | 122.1 | ||||||||||
Diluted |
118.9 | 126.0 | ||||||||||
Market Price Per Share |
||||||||||||
High |
$ | 14.23 | $ | 15.00 | ||||||||
Low |
$ | 12.13 | $ | 13.17 | ||||||||
Close |
$ | 13.35 | $ | 14.36 |
CONVERGYS CORPORATION
Segment Revenues and Operating Income
(Unaudited)
For the Three Months | ||||||||||||
Ended Mar 31, | % | |||||||||||
(In millions) | 2012 | 2011 | Change | |||||||||
Revenues: |
||||||||||||
Customer Management |
$ | 497.5 | $ | 458.5 | 9 | |||||||
Corporate |
| 6.3 | (100 | ) | ||||||||
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Revenue from Continuing Operations |
$ | 497.5 | $ | 464.8 | 7 | |||||||
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Operating Income (Loss): |
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Customer Management |
$ | 39.1 | $ | 32.2 | 21 | |||||||
Corporate and Other |
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Information Management costs not qualified as Discontinued Operations |
(6.0 | ) | (5.6 | ) | 7 | |||||||
Other costs |
(4.1 | ) | (1.9 | ) | NM | |||||||
(10.1 | ) | (7.5 | ) | 35 | ||||||||
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Operating Income from Continuing Operations |
$ | 29.0 | $ | 24.7 | 17 | |||||||
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CONVERGYS CORPORATION
Consolidated Balance Sheets
(Unaudited)
Mar. 31, | Dec. 31, | |||||||
(In millions) | 2012 | 2011 | ||||||
Assets |
||||||||
Cash and Cash Equivalents |
$ | 410.5 | $ | 421.8 | ||||
ReceivablesNet |
302.6 | 305.9 | ||||||
Other Current Assets |
129.0 | 132.9 | ||||||
Current AssetsHeld for Sale |
406.5 | 90.5 | ||||||
Property and EquipmentNet |
338.8 | 343.9 | ||||||
Other Assets |
725.9 | 724.8 | ||||||
Other AssetsHeld for Sale |
| 306.1 | ||||||
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Total Assets |
$ | 2,313.3 | $ | 2,325.9 | ||||
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Liabilities and Shareholders Equity |
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Debt Maturing in One Year |
$ | 1.0 | $ | 6.2 | ||||
Other Current Liabilities |
266.0 | 311.2 | ||||||
Current LiabilitiesHeld for Sale |
118.8 | 64.8 | ||||||
Other Liabilities |
348.1 | 365.5 | ||||||
Long-Term Debt |
120.8 | 120.9 | ||||||
Other LiabilitiesHeld for Sale |
| 45.8 | ||||||
Common Shareholders Equity |
1,458.6 | 1,411.5 | ||||||
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Total Liabilities and Shareholders Equity |
$ | 2,313.3 | $ | 2,325.9 | ||||
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Convergys Corporation
Summarized Statement of Cash Flow
(Unaudited)
For the Three
Months Ended Mar 31, |
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(In millions) | 2012 | 2011 | ||||||
Net cash provided by operating activities |
$ | 11.9 | $ | 34.8 | ||||
Net cash used in investing activities |
(20.0 | )(a) | (7.7 | )(a) | ||||
Net cash used in financing activities |
(3.2 | ) | (46.9 | ) | ||||
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Net decrease in cash |
$ | (11.3 | ) | $ | (19.8 | ) | ||
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(a) | Includes $20.0 and $17.7 of capital expenditures, net, for the three months ended March 31, 2012 and 2011, respectively. |
CONVERGYS CORPORATION
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
For the Three Months Ended Mar 31, |
||||||||
(In millions) | 2012 | 2011 | ||||||
Net cash provided by operating activities |
$ | 11.9 | $ | 34.8 | ||||
Capital expenditures, net |
(20.0 | ) | (17.7 | ) | ||||
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Free cash flow (a non-GAAP measure) |
$ | (8.1 | ) | $ | 17.1 | |||
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Management uses free cash flow to assess the financial performance of the Company. Convergys Management believes that free cash flow is useful to investors because it relates the operating cash flow of the Company to the capital that is spent to continue and improve business operations, such as investment in the Companys existing businesses. Further, free cash flow facilitates Managements ability to strengthen the Companys balance sheet, to repay the Companys debt obligations and to repurchase the Companys common shares. Management also believes the presentation of this measure will enhance the investors ability to analyze trends in the business and evaluate the Companys underlying performance relative to other companies in the industry.
Limitations associated with the use of free cash flow include that they do not represent the residual cash flow available for discretionary expenditures as they do not incorporate certain cash payments including payments made on capital lease obligations or cash payments for business acquisitions. Management compensates for these limitations by using both the non-GAAP measure, free cash flow, and the GAAP measure, cash from operating activities, in its evaluation of performance. There are no material purposes for which we use this non-GAAP measure beyond the purposes described above. This non-GAAP measure should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures.
CONVERGYS CORPORATION
Reconciliation of Net Income from Continuing Operations to Adjusted EBITDA
(Unaudited)
For the Three Months | ||||||||
Ended Mar 31, | ||||||||
(In millions) | 2012 | 2011 | ||||||
Income from Continuing Operations, net of tax |
$ | 21.4 | $ | 27.9 | ||||
Depreciation and Amortization |
22.2 | 20.8 | ||||||
Interest expense |
3.6 | 4.6 | ||||||
Income tax expense |
5.4 | 10.0 | ||||||
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EBITDA (a non-GAAP measure) |
$ | 52.6 | $ | 63.3 | ||||
Earnings from interests in Cellular Partnerships for the three months ended March 31, 2011 |
| (10.2 | ) | |||||
Gain on sale of F&A line of business |
| (7.0 | ) | |||||
Information Management costs not qualifying as Discontinued Operations |
6.0 | 5.6 | ||||||
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Adjusted EBITDA (a non-GAAP measure) |
$ | 58.6 | $ | 51.7 | ||||
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The Company presents the non-GAAP financial measures EBITDA and Adjusted EBITDA because management uses these measures to monitor and evaluate the performance of the business and believes the presentation of these measures will enhance the investors ability to analyze trends in the business and evaluate the Companys underlying performance relative to other companies in the industry.
These non-GAAP measures should not be considered in isolation or as a substitute for income from continuing operations, net of tax or other income statement data prepared in accordance with GAAP and our presentation of these measures may not be comparable to similarly-titled measures used by other companies. Management uses both these non-GAAP measures and the GAAP measure, income from continuing operations, net of tax, in evaluation of its underlying performance. There are no material purposes for which we use these non-GAAP measures beyond the purposes described above. These non-GAAP measures should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures.
CONVERGYS CORPORATION
Reconciliation of GAAP EPS from Continuing Operations to non-GAAP EPS from Continuing Operations
(In Millions Except Per Share Amounts)
Three Months Ended Ended Mar 31, |
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2012 | 2011 | |||||||
Operating income as reported under U.S. GAAP |
$ | 29.0 | $ | 24.7 | ||||
Information Management costs not qualifying as Discontinued Operations (a) |
6.0 | 5.6 | ||||||
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Adjusted operating income (a non-GAAP measure) |
$ | 35.0 | $ | 30.3 | ||||
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Income Before Income Taxes and Discontinued Operations as reported under U.S. GAAP |
$ | 26.8 | $ | 37.9 | ||||
Operating charges above |
6.0 | 5.6 | ||||||
Earnings from investment in Cellular Partnerships, net (b) |
| (10.2 | ) | |||||
Gain on sale of F&A line of business (c) |
| (7.0 | ) | |||||
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Adjusted Income Before Income Taxes and Discontinued Operations (a non-GAAP measure) |
$ | 32.8 | $ | 26.3 | ||||
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Income from continuing operations, net of tax, as reported under U.S. GAAP |
$ | 21.4 | $ | 27.9 | ||||
Total operating charges of $6.0 and $5.6 for the three months ended March 31, 2012 and 2011, respectively, from above, net of tax |
4.8 | 4.5 | ||||||
Earnings from investment in Cellular Partnerships of $10.2, net of tax (b) |
| (6.6 | ) | |||||
Gain on sale of F&A line of business of $7.0, net of tax (c) |
| (4.3 | ) | |||||
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Adjusted net income from continuing operations (a non-GAAP measure) |
$ | 26.2 | $ | 21.5 | ||||
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Diluted EPS from continuing operations as reported under U.S. GAAP |
$ | 0.18 | $ | 0.22 | ||||
Impact of total charges included in continuing operations, net of tax |
0.04 | (0.05 | ) | |||||
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Adjusted diluted EPS from continuing operations (a non-GAAP measure) |
$ | 0.22 | $ | 0.17 | ||||
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(a) | In March 2012, the Company signed a definite agreement to sell the Information Management business. The assets and liabilities of Information Management have met the criteria for presentation as held-for-sale and the results of operations met the criteria for presentation as discontinued operations and therefore are presented on this basis for all periods presented. Certain costs previously allocated to the Information Management segment do not qualify for discontinued operations accounting treatment and are required to be reported as costs within continuing operations. The Company classified $6.0 and $5.6 of these costs which previously would have been presented within the Information Management segment within continuing operations for the three months ended March 31, 2012 and 2011, respectively. |
(b) | In July 2011, Convergys completed the sale of its 33.8% interest in the Cincinnati SMSA Limited Partnership and its 45.0% interest in Cincinnati SMSA Tower Holdings LLC (together the Cellular Partnerships) for $320. The Company recognized a pre-tax gain on the sale of these investments of $265 in the third quarter of 2011. In addition, upon completion of the sale, the Company no longer reports ongoing income from this investment. For comparability, we are excluding the impact of $10.2 of earnings from the investment in the Cellular Partnerships, net of tax for the three months ended March 31, 2011. |
(c) | In the first quarter of 2011, the Company completed the sale of the Finance and Accounting outsourcing line of business for approximately $10, resulting in a pre-tax gain of $7.0 and an after tax gain of $4.3. |
Management uses operating income excluding the above items to assess the underlying operational performance of the continuing operations of the business for the year and to have a basis to compare underlying operating results to prior and future periods. These charges and credits are relevant in evaluating the overall performance of the business.
Limitations associated with the use of these non-GAAP measures include that these measures do not include all of the amounts associated with our results as determined in accordance with GAAP. Management compensates for these limitations by using the non-GAAP measures, operating income, income from continuing operations, net of tax and diluted earnings per share excluding the charges, and the GAAP measures, operating income, income from continuing operations, net of tax and diluted earnings per share, in its evaluation of performance. There are no material purposes for which we use these non-GAAP measures beyond those described above.
CONVERGYS CORPORATION
Customer ManagementOperating Segment Data
(Unaudited)
For the Three Months Ended Mar 31, |
% |
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(In millions) | 2012 | 2011 | Change | |||||||||
Revenues: |
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Communications |
$ | 295.2 | $ | 267.6 | 10 | |||||||
Technology |
41.8 | 41.9 | (0 | ) | ||||||||
Financial Services |
52.6 | 54.6 | (4 | ) | ||||||||
Other |
107.9 | 94.4 | 14 | |||||||||
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Total Customer Management Revenues |
497.5 | 458.5 | 9 | |||||||||
Costs and Expenses: |
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Cost of Providing Services and Products Sold |
318.4 | 291.5 | 9 | |||||||||
Selling, General and Administrative |
117.3 | 114.1 | 3 | |||||||||
Research and Development Costs |
3.9 | 3.9 | 0 | |||||||||
Depreciation |
16.9 | 14.9 | 13 | |||||||||
Amortization |
1.9 | 1.9 | 0 | |||||||||
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Total Costs and Expenses |
458.4 | 426.3 | 8 | |||||||||
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Operating Income as reported under U.S. GAAP |
$ | 39.1 | $ | 32.2 | 21 | |||||||
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Depreciation |
16.9 | 14.9 | ||||||||||
Amortization |
1.9 | 1.9 | ||||||||||
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EBITDA (a non-GAAP measure) |
$ | 57.9 | $ | 49.0 | 18 | |||||||
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Operating Margin |
7.9 | % | 7.0 | % | ||||||||
EBITDA Margin (a non-GAAP measure) |
11.6 | % | 10.7 | % |
The Company presents the non-GAAP financial measures EBITDA and Adjusted EBITDA because management uses these measures to monitor and evaluate the performance of the business and believes the presentation of these measures will enhance the investors ability to analyze trends in the business and evaluate the Companys underlying performance relative to other companies in the industry.
On a segment basis, Operating Income is the most closely related GAAP measure to the non-GAAP measures EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for operating income or other income statement data prepared in accordance with GAAP and our presentation of EBITDA and Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies. Management uses the non-GAAP measures, EBITDA and Adjusted EBITDA, and the GAAP measure, operating income, in evaluation of the segments underlying performance. There are no material purposes for which we use these non-GAAP measures beyond the purposes described above. These non-GAAP measures should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures.
Exhibit 99.2
CONVERGYS NEWS RELEASE
Convergys Announces Planned Executive Leadership Changes
Jeff Fox to be Executive Chairman of the Board of Directors;
Andrea Ayers to be President and Chief Executive Officer;
Andre Valentine to be Chief Financial Officer
(Cincinnati; May 8, 2012) Convergys Corporation (NYSE: CVG), a global leader in relationship management, today announced several planned management changes that will align the leadership team with the companys sharpened focus on the Customer Management business. The management changes will be effective in the third and fourth quarter of 2012.
Jeff Fox, currently President and CEO and a director of the company, will become Executive Chairman of the Board of Directors in the fourth quarter of 2012. Phil Odeen, currently non-Executive Chairman, will continue to serve as a director of the company.
Fox will be succeeded as President and CEO by Andrea Ayers, currently President and COO of Customer Management. Previously, Ayers served as President of Customer Management, where she was responsible for all delivery operations. Ayers has also held senior positions in sales, operations and marketing during her 22-year tenure at Convergys.
Earl Shanks, currently CFO, plans to leave the company in the third quarter of 2012 after leading the corporate simplification process and reporting the companys second quarter results.
Shanks will be succeeded as CFO by Andre Valentine, currently Senior Vice President Finance for Customer Management. Previously, Valentine served as Senior Vice President and Controller. Valentine has been with Convergys and its predecessor companies since 1997.
Odeen said, Jeff Fox and Earl Shanks have been central to our effort to sharpen the Companys focus through the sales of our HR Management business in 2010, our cellular partnership holdings in 2011 and our soon-to-close sale of the Information Management business. We are grateful for their many contributions to the company, their strong focus on positioning the company to deliver shareholder value and their continued commitment to ensuring a seamless management transition that will position the company well for the future.
Odeen continued, We are pleased that Jeff has agreed to serve as Executive Chairman and provide important continuity as we focus on the disciplined deployment of capital to generate returns for our shareholders. As for Earl, I speak for the whole board and management team in offering our sincere thanks for his service and best wishes as he plans his next chapter.
Fox added, As executive chairman I will assist the management team to build on our unique position as a well capitalized market-leading customer management business and strategically deploy our significant capital position as we work to reward our shareholders.
Fox continued, Andrea Ayers is a talented and proven leader, with deep expertise and strong operational experience in the customer care industry. Andre Valentine, a highly talented finance executive, has been instrumental in improving profitability while guiding our investment strategy for the business. Both have worked diligently to enhance our delivery and distribution capabilities, strengthen client relationships and increase program retention. Under their leadership, we are confident that Convergys will continue to deliver outstanding value for clients and superior returns for our shareholders.
About Convergys
Convergys Corporation (NYSE: CVG) is a global leader in relationship management. We provide solutions that drive more value from the relationships our clients have with their customers. Convergys turns these everyday interactions into a source of profit and strategic advantage for our clients.
For more than 30 years, our unique combination of domain expertise, operational excellence, and innovative technologies has delivered process improvement and actionable business insight to marquee clients all over the world.
Convergys has approximately 75,000 employees in 69 customer contact centers and other facilities in the United States, Canada, Latin America, Europe, the Middle East, Africa, and Asia, and our global headquarters in Cincinnati, Ohio. For more information, visit www.convergys.com
(Convergys and the Convergys logo are registered trademarks of Convergys Corporation.)
Contacts:
David Stein, Investor Relations
+1 513 723 7768 or investor@convergys.com
Jeff Hazel, Public/Media Relations
+1 513 723 7153 or jeff.hazel@convergys.com