SOURCE: West Corporation

January 30, 2008 16:30 ET

West Corporation Reports Fourth Quarter and Full Year 2007 Results and Provides 2008 Guidance

OMAHA, NE--(Marketwire - January 30, 2008) - West Corporation, a leading provider of outsourced communication solutions, today announced its fourth quarter and full year 2007 results.

Financial Summary (unaudited)
(Dollars in millions)


                        Three Months Ended            Year Ended
                           December 31,               December 31,
                   --------------------------  ---------------------------
                     2007      2006   Percent   2007       2006    Percent
                                      Change                       Change
                   ------    ------   ------- --------   --------  -------
Revenue            $539.6    $496.4    8.7%   $2,099.5   $1,856.0   13.1%
Adjusted
 EBITDA(1)         $142.6    $141.5    0.8%     $584.1     $501.9   16.4%
Adjusted EBITDA
 Margin              26.4%     28.5%              27.8%      27.0%
Adjusted EBITDA
 Excl. Interest
 Income(1)         $141.4    $137.1    3.1%     $572.7     $495.9   15.5%
Cash Flow
 from Operations    $68.2    $(32.1)    NM      $250.7     $196.6   27.5%

"West had another solid year of growth and profitability," said Thomas B. Barker, Chief Executive Officer of West Corporation. "For the first time, the company had revenues in excess of $2 billion. West also had record operating income in 2007. We will continue to focus our growth on those areas of our business that are most profitable."

Consolidated Operating Results

For the fourth quarter ended December 31, 2007, revenues were $539.6 million compared to $496.4 million for the same quarter last year, an increase of 8.7 percent. Revenue from acquired entities(2) accounted for $29.4 million of the $43.2 million increase during the fourth quarter.

During the quarter, the Company recorded a $15.0 million accrual in the Communication Services segment related to a potential settlement of its Sanford and Ritt class actions previously disclosed in its periodic filings with the Securities and Exchange Commission and $3.5 million in impairment and site closure charges in its Receivables Management segment. These two items resulted in a 530 basis point reduction in the Communication Services segment fourth quarter operating margin, a 490 basis point reduction in the Receivables Management fourth quarter operating margin and a 340 basis point reduction in consolidated fourth quarter operating margin.

For the year ended December 31, 2007, revenues were $2,099.5 million compared to $1,856.0 million for 2006, an increase of 13.1 percent. Revenue from acquired entities(2) accounted for $164.2 million of the $243.5 million increase. Organic revenue growth for 2007 was $79.3 million, an increase of 4.3 percent over 2006.

Balance Sheet and Liquidity

At December 31, 2007, West Corporation had cash and cash equivalents totaling $141.9 million and working capital of $187.8 million. Fourth quarter depreciation expense was $26.1 million and amortization expense was $19.8 million. Cash flow from operating activities was $68.2 million and was impacted by cash paid for interest expense of $106.9 million. Adjusted EBITDA for the fourth quarter was $142.6 million, or 26.4 percent of revenue.

Cash flow from operating activities for 2007 was $250.7 million, compared to $196.6 million for 2006. Cash paid for interest expense in 2007 was $302.5 million. Adjusted EBITDA for 2007 was $584.1 million ($572.7 million excluding non-recurring interest income), an increase of 16.4 percent, versus $501.9 million in 2006. Adjusted EBITDA as a percent of revenue grew to 27.8 percent in 2007 from 27.0 percent in 2006. A reconciliation of Adjusted EBITDA to cash flow from operating activities is presented below.

"During the quarter, we invested $29.9 million in capital expenditures primarily for equipment and infrastructure," stated Paul Mendlik, Chief Financial Officer of West Corporation. "For the year, our capital expenditures totaled $103.6 million, or 4.9% of revenues."

2008 Guidance

For 2008, the Company expects the following results. This guidance assumes no acquisitions or additional changes in the current operating environment.

In millions                 2007 Actual       2008 Guidance
-------------------------   -----------      ---------------
Revenue                      $2,099.5        $2,200 - $2,275
Adjusted EBITDA Excluding
 Interest Income               $572.7          $600 - $625
Cash Flow from Operations      $250.7          $235 - $260
Capital Expenditures           $103.6          $105 - $120

Conference Call

The Company will hold a conference call to discuss these topics on Thursday, January 31, 2008 at 11:00 AM Eastern Time (10:00 AM Central Time). Investors may access the call by visiting the Financials section of the West Corporation website at www.west.com and clicking on the Webcast link. A replay of the call will also be available on the website.

About West Corporation

West Corporation is a leading provider of outsourced communication solutions to many of the world's largest companies, organizations and government agencies. West helps its clients communicate effectively, maximize the value of their customer relationships and drive greater profitability from every interaction. The Company's integrated suite of customized solutions includes customer acquisition, customer care, automated voice services, emergency communications, conferencing and accounts receivable management services.

Founded in 1986 and headquartered in Omaha, Nebraska, West has a team of 42,000 employees based in North America, Europe and Asia. For more information, please visit www.west.com.

Forward-Looking Statements

This press release contains forward looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "continue" or similar terminology. These statements reflect only West's current expectations and are not guarantees of future performance or results. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties include the ability to integrate or achieve the objectives of our recent acquisitions, West's ability to complete future acquisitions, competition in West's highly competitive industries, extensive regulation in many of West's markets, West's ability to recover on its charged-off consumer receivables, capacity utilization of West's contact centers, the cost and reliability of voice and data services, availability of key personnel and employees, the cost of labor and turnover rates, the political, economic and other conditions in countries where West operates, the loss of any key clients, West's ability to purchase charged-off receivable portfolios on acceptable terms and in sufficient amounts, the nature of West's forward flow contracts, the non-exclusive nature of West's client contracts and the absence of revenue commitments, the possibility of an emergency interruption to West's data and contact centers, acts of terrorism or war, security or privacy breaches of West's systems and databases, West's ability to protect proprietary information or technology, West's ability to continue to keep pace with technological developments, the cost of pending and future litigation and other risk factors described in documents filed by the company with the United States Securities and Exchange Commission including West's annual report on Form 10-K for the year ended December 31, 2006 and quarterly report on Form 10-Q for the quarter ended September 30, 2007. These forward-looking statements speak only as of the date on which the statements were made. West undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

                             WEST CORPORATION
                    CONDENSED STATEMENTS OF OPERATIONS
         (Unaudited, in thousands except selected operating data)


                                        Three Months Ended
                                           December 31,             %
                                         2007         2006       Change
                                     -----------  -----------  -----------
Revenue                              $   539,575  $   496,377          8.7%
Cost of services                         240,790      214,375         12.3%
Selling, general and administrative
 expenses                                223,950      275,876        -18.8%
                                     -----------  -----------  -----------
Operating income                          74,835        6,126       1121.6%
Interest expense                          80,582       65,958         22.2%
Other expense (income), net                 (468)      (5,208)        91.0%
                                     -----------  -----------  -----------
Income before tax                         (5,279)     (54,624)        90.3%
Income tax expense (benefit)                (333)      (7,605)        95.6%
Minority Interest                          3,124        5,953        -47.5%
                                     -----------  -----------  -----------
Net income (loss)                    $    (8,070) $   (52,972)        84.8%
                                     ===========  ===========  ===========


SELECTED SEGMENT DATA:
Revenue:
     Communication Services          $   283,431  $   283,409          0.0%
     Conferencing                        185,594      158,691         17.0%
     Receivables Management               72,212       55,880         29.2%
     Inter segment eliminations           (1,662)      (1,603)        -3.7%
                                     -----------  -----------  -----------
     Total                           $   539,575  $   496,377          8.7%
                                     ===========  ===========  ===========

Operating Income:
     Communication Services          $    22,898  $     3,699        519.0%
     Conferencing                         42,677        5,509        674.7%
     Receivables Management                9,260       (3,082)       400.5%
                                     -----------  -----------  -----------
     Total                           $    74,835  $     6,126       1121.6%
                                     ===========  ===========  ===========

Operating Margin:
     Communication Services                  8.1%         1.3%       523.1%
     Conferencing                           23.0%         3.5%       557.1%
     Receivables Management                 12.8%        -5.5%       332.7%
                                     -----------  -----------  -----------
     Total                                  13.9%         1.2%      1058.3%
                                     ===========  ===========  ===========


SELECTED OPERATING DATA ($M):
Share-based compensation expense
 recognized                                  0.3         17.6
Cash flow from operations                   68.2        (32.1)
Term loan facility                       2,376.4      2,100.0
Senior notes                               650.0        650.0
Senior subordinated notes                  450.0        450.0



                                       Twelve Months Ended
                                           December 31,             %
                                         2007         2006       Change
                                     -----------  -----------  -----------
Revenue                              $ 2,099,492  $ 1,856,038         13.1%
Cost of services                         912,389      818,522         11.5%
Selling, general and administrative
 expenses                                840,532      800,301          5.0%
                                     -----------  -----------  -----------
Operating income                         346,571      237,215         46.1%
Interest expense                         332,372       94,804        250.6%
Other expense (income), net              (13,396)      (8,144)       -64.5%
                                     -----------  -----------  -----------
Income before tax                         27,595      150,555        -81.7%
Income tax expense (benefit)               6,814       65,505        -89.6%
Minority Interest                         15,399       16,287         -5.5%
                                     -----------  -----------  -----------
Net income (loss)                    $     5,382  $    68,763        -92.2%
                                     ===========  ===========  ===========


SELECTED SEGMENT DATA:
Revenue:
     Communication Services          $ 1,094,346  $ 1,020,242          7.3%
     Conferencing                        727,831      607,506         19.8%
     Receivables Management              283,446      234,521         20.9%
     Inter segment eliminations           (6,131)      (6,231)         1.6%
                                     -----------  -----------  -----------
     Total                           $ 2,099,492  $ 1,856,038         13.1%
                                     ===========  ===========  ===========

Operating Income:
     Communication Services          $   114,754  $    89,065         28.8%
     Conferencing                        181,673      119,437         52.1%
     Receivables Management               50,144       28,713         74.6%
                                     -----------  -----------  -----------
     Total                           $   346,571  $   237,215         46.1%
                                     ===========  ===========  ===========

Operating Margin:
     Communication Services                 10.5%         8.7%        20.7%
     Conferencing                           25.0%        19.7%        26.9%
     Receivables Management                 17.7%        12.2%        45.1%
                                     -----------  -----------  -----------
     Total                                  16.5%        12.8%        28.9%
                                     ===========  ===========  ===========



                                     Condensed Balance Sheets
                                     December 31, December 31,     %
                                         2007         2006       Change
                                     -----------  -----------  -----------
Current assets:
   Cash and cash equivalents         $   141,947  $   214,932        -34.0%
   Trust cash                             10,358        7,104         45.8%
Accounts receivable, net                 289,480      285,087          1.5%
   Portfolio receivables, current         77,909       64,651         20.5%
   Deferred income taxes receivable       33,718        4,636        627.3%
   Other current assets                   44,463       49,746        -10.6%
                                     -----------  -----------  -----------
     Total current assets                597,875      626,156         -4.5%
Net property and equipment               298,645      294,707          1.3%
Portfolio receivables, net               132,233       85,006         55.6%
Goodwill                               1,329,978    1,186,375         12.1%
Other assets                             487,759      343,612         42.0%
                                     -----------  -----------  -----------
     Total assets                    $ 2,846,490  $ 2,535,856         12.2%
                                     ===========  ===========  ===========
Current liabilities                  $   410,080  $   497,586        -17.6%
Long Term Obligations                  3,495,529    3,206,590          9.0%
Other liabilities                        138,297       45,279        205.4%
                                     -----------  -----------  -----------
      Total liabilities                4,043,906    3,749,455          7.9%

Minority interest                         12,937       10,299         25.6%
Class L common stock                   1,029,782      903,656         14.0%

Stockholders' deficit                 (2,240,135)  (2,127,554)         5.3%
                                     -----------  -----------  -----------
   Total liabilities and
    stockholders' deficit            $ 2,846,490  $ 2,535,856         12.2%
                                     ===========  ===========  ===========

Reconciliation of Financial Measures

The common definition of EBITDA is "Earnings Before Interest Expense, Taxes, Depreciation and Amortization." In evaluating liquidity, we use Adjusted EBITDA, which we define as earnings before interest expense, share based compensation, taxes, depreciation and amortization, minority interest, non-recurring litigation settlement costs, other non-cash reserves, transaction costs and after acquisition synergies and excluding unrestricted subsidiaries, or "Adjusted EBITDA." We also use Adjusted EBITDA Excluding Interest Income, which we define as earnings before interest expense and non-recurring interest income, share based compensation, taxes, depreciation and amortization, minority interest, non-recurring litigation settlement costs, other non-cash reserves, transaction costs and after acquisition synergies and excluding unrestricted subsidiaries, or "Adjusted EBITDA Excluding Interest Income." EBITDA, Adjusted EBITDA and Adjusted EBITDA Excluding Interest Income are not measures of financial performance or liquidity under generally accepted accounting principles ("GAAP"). EBITDA, Adjusted EBITDA and Adjusted EBITDA Excluding Interest Income should not be considered in isolation or as a substitute for net income, cash flow from operations or other income or cash flow data prepared in accordance with GAAP. Adjusted EBITDA and Adjusted EBITDA Excluding Interest Income, as presented, may not be comparable to similarly titled measures of other companies. Adjusted EBITDA and Adjusted EBITDA Excluding Interest Income are presented as we understand certain investors use them as one measure of our historical ability to service debt. Adjusted EBITDA is also used in our debt covenants. Set forth below is a reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Excluding Interest Income to cash flow from operations.

                               Three Months Ended
Amounts in thousands                Dec. 31,          Year Ended Dec. 31,
                                 2007       2006         2007       2006
                              ---------  ---------    ---------  ---------
Cash flow from operating
 activities                   $  68,235  $ (32,120)   $ 250,732  $ 196,638
Income tax expense (benefit)       (333)    (7,605)       6,814     65,505
Deferred income tax (expense)
 benefit                          7,847      6,587        8,917     (9,300)
Interest expense                 80,582     65,731      332,372     94,804
Minority interest in
 earnings, net of
 distributions                     (939)    (1,402)      (2,234)     2,814
Provision for share based
 compensation                      (325)   (17,643)      (1,276)   (28,738)
Debt amortization                (3,626)    (2,760)     (14,671)    (3,410)
Excess tax benefit from stock
 options exercised                    -     50,794            -     50,794
Other                              (141)      (516)         195       (877)
Changes in operating assets
 and liabilities, net of
 business acquisitions          (33,151)   (18,705)     (53,461)    (2,180)
                              ---------  ---------    ---------  ---------
EBITDA                          118,149     42,361      527,388    366,050
Minority interest                 3,124      5,953       15,399     16,287
Provision for share based
 compensation                       325     17,643        1,276     28,738
Recapitalization costs            1,820     73,210       12,912     78,835
Non-recurring litigation
 settlement costs                15,741          -       15,741          -
Acquisition synergies and
 costs                            2,197      1,800        7,244      7,000
Site closures and non-cash
 portfolio impairments            2,313          -        2,313          -
Vertical Alliance adjustment     (1,108)       552        1,850      3,727
Synthetic lease interest              -          -            -      1,305
                              ---------  ---------    ---------  ---------
Adjusted EBITDA               $ 142,561  $ 141,519    $ 584,123  $ 501,942
                              =========  =========    =========  =========

Interest income                   1,173      4,430       11,389      6,081
                              ---------  ---------    ---------  ---------
Adjusted EBITDA Excluding
 Interest Income              $ 141,388  $ 137,089    $ 572,734  $ 495,861
                              =========  =========    =========  =========


(1) See Reconciliation of Financial Measures.

(2) Acquired entities include CenterPost Communications, Inc. (acquired in February 2007) and TeleVox Software, Incorporated (acquired in March 2007) in the Communications Services segment and Omnium Worldwide, Inc. (acquired in May 2007) in the Receivables Management segment.

NM - Not meaningful

Contact Information

  • AT THE COMPANY:
    David Pleiss
    Investor Relations
    (402) 963-1500
    Email Contact

    West Corporation
    11808 Miracle Hills Drive
    Omaha, NE 68154