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 21, 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 2.01. Completion of Acquisition or Disposition of Assets.
On May 16, 2012, Convergys Corporation (the Company) completed the previously announced sale of its Information Management business (the IM Business) to NetCracker Technology Corporation (NetCracker), a wholly owned subsidiary of NEC Corporation (NEC), for $449 million in cash, subject to post-close working capital adjustments.
In connection with the completion of the sale, the Company also entered into a Transition Services Agreement with NetCracker whereby Convergys would provide certain services to NetCracker subsequent to the completion of the sale. Additional documents that were negotiated as part of the completion of the transaction include various real property leases and subleases. Pursuant to the Transition Services Agreement, the Company and its subsidiaries will provide up to 15 months of various services, such as facilities services, finance and accounting services and information technology services, to NetCracker to facilitate the transition of the IM Business.
The foregoing descriptions of the transaction do not purport to be complete and are qualified in their entirety by reference to the Stock and Asset Purchase Agreement filed as Exhibit 2.1 to the Companys Current Report on Form 8-K dated March 22, 2012. The Stock and Asset Purchase Agreement is being filed to provide information regarding the terms of the sale and the Stock and Asset Purchase Agreement. No representation, warranty, covenant or agreement contained in the Stock and Asset Purchase Agreement is, or should be construed as, a representation or warranty by the Company to any investor, or covenant or agreement of the Company with any investor. The representations, warranties, covenants and agreements contained in the Stock and Asset Purchase Agreement are solely for the benefit of the parties thereto, may represent an allocation of risk between the parties, may be subject to standards of materiality that differ from those that are applicable to investors and may be qualified by disclosures between the parties.
Item 9.01. Financial Statements and Exhibits.
(d) | Exhibits: |
Exhibit 2.1 | Stock and Asset Purchase Agreement, dated March 22, 2012, between Convergys Corporation, NetCracker Technology Corporation and NEC Corporation. (Incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form 8-K dated March 22, 2012)* | |
Exhibit 99.1 | The Companys Unaudited Pro Forma Financial Information. |
* | Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the U.S. Securities and Exchange Commission. |
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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 | ||
Chief Accounting Officer, Vice President and Controller |
Date: May 21, 2012
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EXHIBIT INDEX
Exhibit No. |
Description | |
Exhibit 2.1 | Stock and Asset Purchase Agreement, dated March 22, 2012, between Convergys Corporation, NetCracker Technology Corporation and NEC Corporation. (Incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form 8-K dated March 22, 2012) | |
Exhibit 99.1 | The Companys Unaudited Pro Forma Financial Information. |
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Exhibit 99.1
CONVERGYS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following pro forma condensed consolidated financial information is based on the historical financial statements of Convergys Corporation (Convergys, or the Company), including certain pro forma adjustments, and has been prepared to illustrate the pro forma effect of the Companys sale of the Information Management business (the IM Business) to NetCracker Technology Corporation (NetCracker), a wholly owned subsidiary of NEC Corporation (NEC).
The unaudited pro forma consolidated statements of income for the three months ended March 31, 2012 and the years ended December 31, 2011, 2010 and 2009 assume that the sale occurred as of the beginning of the period presented. The unaudited pro forma consolidated balance sheet as of March 31, 2012 is presented as if the sale had occurred as of March 31, 2012.
The unaudited pro forma condensed consolidated financial information has been prepared based upon available information and management estimates; actual amounts may differ from these estimated amounts. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of the financial position or results of operations that might have occurred had the distribution occurred as of the dates stated above. The pro forma adjustments are described in the notes.
The unaudited pro forma condensed consolidated financial information should be read in conjunction with the financial statements and notes and related Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) included in the Companys Quarterly Report on Form 10-Q for the three months ended March 31, 2012 and the Companys Annual Report on Form 10-K for the year ended December 31, 2011.
CONVERGYS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Millions Except Per Share Amounts)
(1) Basis of Presentation
The accompanying unaudited pro forma consolidated financial statements give effect to the pro forma adjustments necessary to reflect the IM Business sale as if it occurred as of the beginning of the period presented in the pro forma statements of income for the three months ended March 31, 2012 and the years ended December 31, 2011, 2010, and 2009 and as of March 31, 2012 in the pro forma balance sheet.
(2) Pro Forma Adjustments
The unaudited pro forma condensed consolidated statements of income and balance sheet reflect the effect of the following pro forma adjustments:
a. | Elimination of revenue historically reported by the IM Business that would not have been recognized by Convergys as a result of the sale, partially offset by the addition of revenue that would have been received related to services provided to NetCracker subsequent to the sale. Assumptions related to this additional revenue are based upon monthly service fees under the Transition Services Agreement entered into by the Company with NetCracker upon completion of the sale. |
b. | Reduction of expenses as a result of the IM Business sale. For the indicated line items, all activity historically reported as part of the IM Business has been eliminated. No other adjustments or allocations have been assumed. |
c. | Reduction of selling, general and administrative costs as a result of the IM Business sale. These pro forma adjustments do not eliminate costs related to transition services to be provided subsequent to the sale and certain other costs determined to be not directly associated with the IM Business. Further, no adjustment has been made to reflect any potential reductions in corporate costs as a result of the sale of the IM Business. |
d. | Adjustment to tax expense to reflect the income tax rate for the Company excluding the impact of the IM business and the net tax expense associated with pro forma adjustments. |
e. | Reflects $449 of cash received upon completion of the sale of the IM Business, adjusted for payments expected to be made for liabilities incurred in connection with the sale process, including certain transaction costs and taxes. |
f. | Elimination of assets and liabilities associated with the IM Business included in the Companys historical consolidated financial statements. |
g. | Elimination of certain assets which will be disposed of at the time of and in connection with the sale of the IM business. |
h. | Establishment of liabilities for certain costs expected to be incurred by the Company in connection with the sale of the IM business. |
i. | Shareholders equity was adjusted as a result of adjustments (e), (f), (g) and (h) above. |
CONVERGYS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2012
(Amounts In Millions Except Per Share Amounts) |
Historical | Pro Forma Adjustments for Activity of Business and Net Assets Disposed |
Unaudited Pro Forma Statement of Income |
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Revenues |
$ | 497.5 | $ | 5.3 | (a) | $ | 502.8 | |||||
Operating Costs and Expenses: |
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Cost of providing services and products sold |
317.7 | | 317.7 | |||||||||
Selling, general and administrative expenses |
124.7 | | 124.7 | |||||||||
Research and development costs |
3.9 | | 3.9 | |||||||||
Depreciation |
20.3 | | 20.3 | |||||||||
Amortization |
1.9 | | 1.9 | |||||||||
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Total costs and expenses |
468.5 | | 468.5 | |||||||||
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Operating Income |
29.0 | 5.3 | 34.3 | |||||||||
Other income, net |
1.4 | | 1.4 | |||||||||
Interest expense |
(3.6 | ) | | (3.6 | ) | |||||||
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Income before income taxes |
26.8 | 5.3 | 32.1 | |||||||||
Income tax expense |
5.4 | 2.0 | (d) | 7.4 | ||||||||
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Income from continuing operations, net of tax |
$ | 21.4 | $ | 3.3 | $ | 24.7 | ||||||
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Earnings per share: |
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Basic |
$ | 0.19 | $ | 0.21 | ||||||||
Diluted |
$ | 0.18 | $ | 0.21 | ||||||||
Weighted Average Common Shares Outstanding: |
||||||||||||
Basic |
115.9 | 115.9 | ||||||||||
Diluted |
118.9 | 118.9 | ||||||||||
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CONVERGYS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2011
(Amounts In Millions Except Per Share Amounts) |
Historical | Pro Forma Adjustments for Activity of Business and Net Assets Disposed |
Unaudited Pro Forma Statement of Income |
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Revenues |
$ | 2,262.0 | $ | (309.3 | )(a) | $ | 1,952.7 | |||||
Operating Costs and Expenses: |
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Cost of providing services and products sold |
1,420.5 | (180.1 | )(b) | 1,240.4 | ||||||||
Selling, general and administrative expenses |
527.4 | (43.6 | )(c) | 483.8 | ||||||||
Research and development costs |
49.3 | (35.3 | )(b) | 14.0 | ||||||||
Depreciation |
86.9 | (10.6 | )(b) | 76.3 | ||||||||
Amortization |
9.6 | (2.2 | )(b) | 7.4 | ||||||||
Restructuring charges |
| 1.2 | (b) | 1.2 | ||||||||
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Total costs and expenses |
2,093.7 | (270.6 | ) | 1,823.1 | ||||||||
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Operating Income |
168.3 | (38.7 | ) | 129.6 | ||||||||
Earnings from Cellular Partnerships, net |
285.2 | | 285.2 | |||||||||
Other income, net |
9.8 | | 9.8 | |||||||||
Interest expense |
(16.1 | ) | | (16.1 | ) | |||||||
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Income before income taxes |
447.2 | (38.7 | ) | 408.5 | ||||||||
Income tax expense |
118.9 | (6.1 | )(d) | 112.8 | ||||||||
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Income from continuing operations, net of tax |
$ | 328.3 | $ | (32.6 | ) | $ | 295.7 | |||||
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Earnings per share: |
||||||||||||
Basic |
$ | 2.73 | $ | 2.46 | ||||||||
Diluted |
$ | 2.67 | $ | 2.41 | ||||||||
Weighted average common shares outstanding: |
||||||||||||
Basic |
120.2 | 120.2 | ||||||||||
Diluted |
122.9 | 122.9 | ||||||||||
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CONVERGYS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2010
(Amounts In Millions Except Per Share Amounts) |
Historical | Pro Forma Adjustments for Activity of Business and Net Assets Disposed |
Unaudited Pro Forma Statement of Income |
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Revenues |
$ | 2,203.4 | $ | (320.6 | )(a) | $ | 1,882.8 | |||||
Operating Costs and Expenses: |
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Cost of providing services and products sold |
1,340.9 | (183.1 | )(b) | 1,157.8 | ||||||||
Selling, general and administrative expenses |
575.7 | (40.9 | )(c) | 534.8 | ||||||||
Research and development costs |
56.2 | (38.2 | )(b) | 18.0 | ||||||||
Depreciation |
97.3 | (9.7 | )(b) | 87.6 | ||||||||
Amortization |
10.1 | (2.4 | )(b) | 7.7 | ||||||||
Restructuring charges |
36.7 | (8.0 | )(b) | 28.7 | ||||||||
Asset impairment |
181.1 | | (b) | 181.1 | ||||||||
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Total costs and expenses |
2,298.0 | (282.3 | ) | 2,015.7 | ||||||||
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Operating (Loss) Income |
(94.6 | ) | (38.3 | ) | (132.9 | ) | ||||||
Earnings from Cellular Partnerships, net |
47.2 | | 47.2 | |||||||||
Other income, net |
8.9 | | 8.9 | |||||||||
Interest expense |
(19.5 | ) | | (19.5 | ) | |||||||
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(Loss) income before income taxes |
(58.0 | ) | (38.3 | ) | (96.3 | ) | ||||||
Income tax expense |
16.7 | (8.9 | )(d) | 7.8 | ||||||||
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(Loss) income from continuing operations, net of tax |
$ | (74.7 | ) | $ | (29.5 | ) | $ | (104.2 | ) | |||
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(Loss) earnings per share: |
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Basic |
$ | (0.61 | ) | $ | (0.85 | ) | ||||||
Diluted |
$ | (0.61 | ) | $ | (0.85 | ) | ||||||
Weighted average common shares outstanding: |
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Basic |
123.1 | 123.1 | ||||||||||
Diluted |
123.1 | 123.1 | ||||||||||
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CONVERGYS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2009
(Amounts In Millions Except Per Share Amounts) |
Historical | Pro Forma Adjustments for Activity of Business and Net Assets Disposed |
Unaudited Pro Forma Statement of Income |
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Revenues |
$ | 2,421.0 | $ | (414.8 | )(a) | $ | 2,006.2 | |||||
Operating Costs and Expenses: |
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Cost of providing services and products sold |
1,461.6 | (226.0 | )(b) | 1,235.6 | ||||||||
Selling, general and administrative expenses |
616.4 | (47.1 | )(c) | 569.3 | ||||||||
Research and development costs |
74.2 | (52.0 | )(b) | 22.2 | ||||||||
Depreciation |
110.3 | (17.4 | )(b) | 92.9 | ||||||||
Amortization |
10.9 | (3.6 | )(b) | 7.3 | ||||||||
Restructuring charges |
43.3 | (30.4 | )(b) | 12.9 | ||||||||
Asset impairment |
3.1 | (3.1 | )(b) | | ||||||||
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Total costs and expenses |
2,319.8 | (379.6 | ) | 1,940.2 | ||||||||
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Operating Income |
101.2 | (35.2 | ) | 66.0 | ||||||||
Earnings from Cellular Partnerships, net |
41.0 | | 41.0 | |||||||||
Other expense, net |
(17.2 | ) | | (17.2 | ) | |||||||
Interest expense |
(28.9 | ) | | (28.9 | ) | |||||||
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Income before income taxes |
96.1 | (35.2 | ) | 60.9 | ||||||||
Income tax expense |
11.6 | (4.8 | )(d) | 6.8 | ||||||||
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Income from continuing operations, net of tax |
$ | 84.5 | $ | (30.5 | ) | $ | 54.0 | |||||
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Earnings per share: |
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Basic |
$ | 0.69 | $ | 0.44 | ||||||||
Diluted |
$ | 0.68 | $ | 0.43 | ||||||||
Weighted average common shares outstanding: |
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Basic |
122.8 | 122.8 | ||||||||||
Diluted |
124.9 | 124.9 | ||||||||||
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CONVERGYS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2012
(In Millions) |
Historical | Pro Forma Adjustments for Activity of Business and Net Assets Distributed |
Unaudited Pro Forma Balance Sheet |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
$ | 410.5 | $ | 350.5 | (e) | $ | 761.0 | |||||
Receivables, net of allowance of $6.2 |
302.6 | | 302.6 | |||||||||
Deferred income tax benefits |
28.6 | | 28.6 | |||||||||
Prepaid expenses |
36.5 | | 36.5 | |||||||||
Other current assets |
63.9 | | 63.9 | |||||||||
Current assets Held for Sale |
406.5 | (406.5 | )(f) | | ||||||||
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Total current assets |
1,248.6 | (56.0 | ) | 1,192.6 | ||||||||
Property and equipment, net |
338.8 | (4.0 | )(g) | 334.8 | ||||||||
Goodwill, net |
623.9 | | 623.9 | |||||||||
Other intangibles, net |
23.4 | | 23.4 | |||||||||
Deferred income tax assets |
34.6 | | 34.6 | |||||||||
Other Assets |
44.0 | | 44.0 | |||||||||
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Total Assets |
$ | 2,313.3 | $ | (60.0 | ) | $ | 2,253.3 | |||||
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current Liabilities |
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Debt maturing within one year |
$ | 1.0 | $ | | $ | 1.0 | ||||||
Payables and other current liabilities |
266.0 | 7.5 | (h) | 273.5 | ||||||||
Current liabilities Held for Sale |
118.8 | (118.8 | )(f) | | ||||||||
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Total current liabilities |
385.8 | (111.3 | ) | 274.5 | ||||||||
Long-term debt |
120.8 | | 120.8 | |||||||||
Deferred income tax liabilities |
101.9 | | 101.9 | |||||||||
Accrued pension liability |
110.8 | | 110.8 | |||||||||
Other liabilities |
135.4 | | 135.4 | |||||||||
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Total liabilities |
854.7 | (111.3 | ) | 743.4 | ||||||||
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Shareholders Equity |
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Preferred shares without par value, 5.0 authorized; none outstanding |
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Common shares without par value, 500.0 authorized; 186.0 issued, 116.5 outstanding |
1,117.6 | | 1,117.6 | |||||||||
Additional paid-in capital |
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Treasury stock 69.5 held |
(1,148.5 | ) | | (1,148.5 | ) | |||||||
Retained earnings |
1,521.2 | 51.3 | (i) | 1,572.5 | ||||||||
Accumulated other comprehensive income (loss) |
(31.7 | ) | | (31.7 | ) | |||||||
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Total shareholders equity |
1,458.6 | 51.3 | 1,509.9 | |||||||||
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Total Liabilities and Shareholders Equity |
$ | 2,313.3 | $ | (60.0 | ) | $ | 2,253.3 | |||||
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