SOURCE: West Corporation

October 21, 2008 17:30 ET

West Corporation Reports Third Quarter 2008 Results

OMAHA, NE--(Marketwire - October 21, 2008) - West Corporation, a leading provider of outsourced communication solutions, today announced its third quarter 2008 results.

Financial Summary (unaudited)
(Dollars in millions)

                         Three Months Ended          Nine Months Ended
                            September 30,              September 30,
                      ------------------------  --------------------------
                                        Percent                     Percent
                        2008     2007   Change    2008      2007    Change
                      -------  -------  ------  --------  --------  ------
Revenue               $ 598.5  $ 531.1    12.7% $1,675.7  $1,559.9     7.4%
                      -------  -------  ------  --------  --------  ------
Adjusted EBITDA(1)    $ 169.7  $ 149.3    13.7% $  456.0  $  441.6     3.3%
                      -------  -------  ------  --------  --------  ------
Adjusted EBITDA
 Margin                  28.4%    28.1%             27.2%     28.3%
                      -------  -------  ------  --------  --------  ------
Adjusted EBITDA Excl.
 Interest Income(1)   $ 169.4  $ 145.9    16.1% $  453.8  $  431.3     5.2%
                      -------  -------  ------  --------  --------  ------
Cash Flow from
 Operations           $  84.4  $  55.3    52.6% $  155.1  $  182.5   -15.0%
                      -------  -------  ------  --------  --------  ------

(1) See Reconciliation of Financial Measures below.

Consolidated Operating Results

For the third quarter ended September 30, 2008, revenues were $598.5 million compared to $531.1 million for the same quarter last year, an increase of 12.7 percent. Revenue from acquired entities(2) was $59.5 million during the third quarter, including $58.3 million from Genesys.

Adjusted EBITDA for the third quarter was $169.7 million, or 28.4 percent of revenue. A reconciliation of Adjusted EBITDA to cash flow from operating activities is presented below.

Balance Sheet and Liquidity

At September 30, 2008, West Corporation had cash and cash equivalents totaling $254.9 million and working capital of $283.8 million.

At September 30, 2008, the Company had $204.0 million outstanding on its $250.0 million revolving credit facility. An additional $20.0 million was borrowed by the Company subsequent to September 30, 2008. Funding requests made to Lehman Commercial Paper Inc. of $26.0 million were not advanced to the Company. "The borrowings on the revolving credit facility were made to ensure near term liquidity," said Paul Mendlik, Chief Financial Officer of West Corporation. The Company believes that it has sufficient liquidity to conduct its normal operations and does not believe that the potential reduction in available capacity under this revolving credit facility will have a material impact on its short-term or long-term liquidity.

During the quarter, the Company invested $21.6 million in capital expenditures primarily for software, equipment and information technology systems.

Conference Call

The Company will hold a conference call to discuss these topics on Wednesday, October 22, 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 be available on the Company's website at www.west.com.

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 41,000 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, and finance the acquisition of, 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, 2007 and quarterly report on Form 10-Q for the quarter ended June 30, 2008. 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 Sept. 30,   Nine Months Ended Sept. 30,
                  2008      2007   % Change    2008        2007    % Change
                --------  --------  ------  ----------  ----------  ------
Revenue         $598,528  $531,098    12.7% $1,675,716  $1,559,917     7.4%
Cost of services 254,486   228,309    11.5%    756,189     671,600    12.6%
Selling, general
 and
 administrative
 expenses        232,736   217,213     7.1%    657,954     616,581     6.7%
                --------  --------  ------  ----------  ----------  ------
Operating income 111,306    85,576    30.1%    261,573     271,736    -3.7%
Interest expense  73,561    88,135   -16.5%    217,924     251,790   -13.5%
Other expense
 (income), net     1,215    (4,820)  125.2%        298     (12,928)  102.3%
                --------  --------  ------  ----------  ----------  ------
Income before
 tax              36,530     2,261  1515.7%     43,351      32,874    31.9%
Income tax
 expense          13,343    (3,780)  453.0%     17,341       7,147   142.6%
Minority
 Interest          1,447     4,120   -64.9%     (2,255)     12,275  -118.4%
                --------  --------  ------  ----------  ----------  ------
Net income      $ 21,740  $  1,921  1031.7% $   28,265  $   13,452   110.1%
                ========  ========  ======  ==========  ==========  ======


SELECTED SEGMENT
 DATA:
Revenue:
  Communication
   Services     $272,395  $273,945    -0.6% $  825,170  $  810,915     1.8%
  Conferencing   260,855   182,420    43.0%    686,568     542,237    26.6%
  Receivables
   Management     66,861    76,453   -12.5%    168,314     211,234   -20.3%
  Inter segment
   eliminations   (1,583)   (1,720)    8.0%     (4,336)     (4,469)    3.0%
                --------  --------  ------  ----------  ----------  ------
  Total         $598,528  $531,098    12.7% $1,675,716  $1,559,917     7.4%
                ========  ========  ======  ==========  ==========  ======

Depreciation &
 Amortization:
  Communication
   Services     $ 18,296  $ 31,187   -41.3% $   55,533  $   74,108   -25.1%
  Conferencing    27,303    16,067    69.9%     62,454      47,707    30.9%
  Receivables
   Management      4,815     7,002   -31.2%     17,215      15,035    14.5%
                --------  --------  ------  ----------  ----------  ------
  Total         $ 50,414  $ 54,256    -7.1% $  135,202  $  136,850    -1.2%
                ========  ========  ======  ==========  ==========  ======

Operating Income:
  Communication
   Services     $ 38,894  $ 26,556    46.5% $  102,269  $   91,856    11.3%
  Conferencing    63,154    45,402    39.1%    172,712     138,996    24.3%
  Receivables
   Management      9,258    13,618   -32.0%    (13,408)     40,884  -132.8%
                --------  --------  ------  ----------  ----------  ------
  Total         $111,306  $ 85,576    30.1% $  261,573  $  271,736    -3.7%
                ========  ========  ======  ==========  ==========  ======

Operating Margin:
  Communication
   Services         14.3%      9.7%   47.4%       12.4%       11.3%    9.7%
  Conferencing      24.2%     24.9%   -2.8%       25.2%       25.6%   -1.6%
  Receivables
   Management       13.8%     17.8%  -22.5%       -8.0%       19.4% -141.2%
                --------  --------  ------  ----------  ----------  ------
  Total             18.6%     16.1%   15.5%       15.6%       17.4%  -10.3%
                ========  ========  ======  ==========  ==========  ======


SELECTED OPERATING DATA ($M):
Cash flow from
 operations         84.4      55.3
Term loan
 facility        2,491.8   2,376.4
Revolving line
 of credit         204.0         -
Multi-currency
 revolving credit
 facility           60.5         -
Senior notes       650.0     650.0
Senior
 subordinated
 notes             450.0     450.0



                                     Condensed Balance Sheets
                                      Sept. 30,     Dec. 31,        %
                                         2008         2007       Change
                                     -----------  -----------  -----------
Current assets:
   Cash and cash equivalents         $   254,851  $   141,947         79.5%
   Trust cash                             13,908       10,358         34.3%
Accounts receivable, net                 353,115      289,480         22.0%
   Portfolio receivables, current         52,790       77,909        -32.2%
   Deferred income taxes receivable       19,417       33,718        -42.4%
   Other current assets                   53,818       44,463         21.0%
                                     -----------  -----------  -----------
     Total current assets                747,899      597,875         25.1%
Net property and equipment               315,382      298,645          5.6%
Portfolio receivables, net               113,385      132,233        -14.3%
Goodwill                               1,543,846    1,329,978         16.1%
Other assets                             550,259      487,759         12.8%
                                     -----------  -----------  -----------
     Total assets                    $ 3,270,771  $ 2,846,490         14.9%
                                     ===========  ===========  ===========
Current liabilities                  $   464,100  $   410,080         13.2%
Long Term Obligations                  3,845,597    3,495,529         10.0%
Other liabilities                        143,216      138,297          3.6%
                                     -----------  -----------  -----------
      Total liabilities                4,452,913    4,043,906         10.1%

Minority interest                          4,991       12,937        -61.4%
Class L common stock                   1,125,908    1,029,782          9.3%

Stockholders' deficit                 (2,313,041)  (2,240,135)         3.3%
                                     -----------  -----------  -----------
   Total liabilities and
    stockholders' deficit            $ 3,270,771  $ 2,846,490         14.9%
                                     ===========  ===========  ===========

Reconciliation of Financial Measures

The common definition of EBITDA is "Earnings Before Interest Expense, Taxes, Depreciation and Amortization." In evaluating liquidity, we use 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. 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, although the precise adjustments used to calculate Adjusted EBITDA included in our credit facility and indentures vary in certain respects among such agreements and from those presented below. Set forth below is a reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Excluding Interest Income to cash flow from operations.

                                 Three Months Ended     Nine Months Ended
Amounts in thousands                  Sept. 30,             Sept. 30,
                                  2008       2007       2008       2007
                                ---------  ---------  ---------  ---------
Cash flow from operating
 activities                     $  84,402  $  55,314  $ 155,057  $ 182,497
Income tax expense (benefit)       13,343     (3,781)    17,341      7,147
Deferred income tax (expense)
 benefit                          (11,791)     3,752     (8,094)     1,069
Interest expense                   73,561     88,135    217,923    251,790
Allowance for impairment of
 purchased accounts receivable          -          -    (44,076)         -
Minority interest in earnings,
 net of distributions                 174     (1,010)     7,819     (1,295)
Provision for share based
 compensation                        (357)      (322)    (1,026)      (952)
Debt amortization                  (4,096)    (3,637)   (11,657)   (11,045)
Other                                 (88)       (95)       (59)       336
Changes in operating assets and
 liabilities, net of business
 acquisitions                       3,908      2,176     65,503    (20,309)
                                ---------  ---------  ---------  ---------
EBITDA                            159,056    140,532    398,731    409,238
Minority interest                   1,448      4,120     (2,255)    12,275
Provision for share based
 compensation                         357        322      1,026        952
Recapitalization costs              1,000      2,517      3,113     11,092
Acquisition synergies               7,921        810     10,897      5,047
Site closures                         (41)         -       (313)         -
Non-cash portfolio impairment           -          -     44,076          -
Asset impairment                        -          -        739          -
Acquisition costs                       -          -        (26)         -
Vertical Alliance Adjustment            -      1,009          -      2,958
                                ---------  ---------  ---------  ---------
Adjusted EBITDA                 $ 169,741  $ 149,310  $ 455,988  $ 441,562
                                =========  =========  =========  =========

Interest income                       378      3,384      2,169     10,216
                                ---------  ---------  ---------  ---------
Adjusted EBITDA Excluding
 Interest Income                $ 169,363  $ 145,926  $ 453,819  $ 431,346
                                =========  =========  =========  =========

(2) Acquired entities include HBF Communications (acquired in April 2008) in the Communications Services segment and Genesys (acquired in May 2008) in the Conferencing Services segment.

Contact Information

  • West Corporation
    11808 Miracle Hills Drive
    Omaha, NE 68154

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