Convergys Corporation EPS Up 56 Percent on Strong Operating Performance in Second Quarter; Increases Full Year 2006 Guidance.CINCINNATI Cincinnati (sĭnsənăt`ē, –năt`ə), city (1990 pop. 364,040), seat of Hamilton co., extreme SW Ohio, on the Ohio River opposite Newport and Covington, Ky.; inc. as a city 1819. -- Convergys Convergys (NYSE: CVG) is a multi-national corporation that provides management consulting services, outsourced billing, customer care and employee care, and transaction management software. Corporation (NYSE NYSE See: New York Stock Exchange :CVG CVG Convergys Corp CVG Corporación Venezolana de Guayana CVG Clear Vertical Grain (woodworking) CVG Carrier Group CVG Corporacion Venezolana de Guyana CVG Comprehensive Video Group (South Hackensack, NJ, USA) ), a global leader in providing customer care, human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. , and billing services, announced today its financial results for the second quarter of 2006. HIGHLIGHTS --Convergys total revenue up 10 percent; operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. up 65 percent --Customer Care operating income jumped 146 percent; revenue up 14 percent --Strong international growth in Information Management --Employee Care revenue up 32 percent; operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. reduced by 34 percent --2006 GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. guidance increased to at least $1.11 per share Revenues of $691.8 million were up 10 percent compared to the second quarter of 2005 reflecting growth in both Customer Care and Employee Care. Operating income increased 65 percent to $62.8 million compared with $38.0 million in the prior year. Second quarter 2005 results included a restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $8.9 million. Revenue growth and cost savings from 2005 initiatives at both Customer Care and Employee Care contributed to the improvement in results. Net income increased 55 percent to $39.8 million versus $25.6 million in the prior year. EPS increased 56 percent to $0.28 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share versus $0.18 per diluted share in the prior year. Non-cash stock-based compensation expense in the second quarter was $7.4 million, or $0.04 per diluted share, compared to $6.5 million in the prior year. "We delivered strong operating results in the second quarter and continue to see healthy demand for our solutions," said Jim Orr Orr , Robert Gordon Called "Bobby." Born 1948. Canadian-born hockey player. He led the National Hockey League in scoring in 1970 and 1975 and was the first defenseman to score more than 100 points in a season. Noun 1. , Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Convergys. "Our Customer Care business generated strong organic revenue growth and significantly improved operating performance. Information Management international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. achieved very strong revenue growth and Employee Care continued to make good progress. We are on track for revenue growth and earnings improvement for the remainder of 2006 and 2007." Operating Performance by Segment Customer Care Customer Care revenues of $446.2 million were up 14 percent compared to prior year. Revenues increased in each Customer Care industry vertical -- Communications, Financial, Technology and Other. Customer Care's operating income and operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: were $48.2 million and 10.8 percent, respectively, compared with $19.6 and 5.0 percent in the prior year. Second quarter 2005 results included an $8.3 million restructuring charge. The operating income improvement reflects both revenue growth and operational efficiencies. Increased costs caused by the impact of a weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. U.S. versus Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin"loonie dollar - the basic monetary unit in many countries; equal to 100 cents partially offset these items. Information Management Information Management revenues were down to $195.4 million from $200.7 million in the same period last year. Strong growth in international operations largely offset declines in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . Information Management operating income of $30.5 million was down 16 percent compared to prior year. Operating income margin of 15.6 percent was down 250 basis points from the prior year. The majority of the decrease from last year was due to changes in the revenue mix from data processing data processing or information processing, operations (e.g., handling, merging, sorting, and computing) performed upon data in accordance with strictly defined procedures, such as recording and summarizing the financial transactions of a to license and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. , partially offset by operational improvements. Employee Care Employee Care revenues of $50.2 million were up 32 percent compared to $38.0 million in the same period last year. Revenues increased from two recent client implementations. Employee Care operating loss improved 34 percent to $8.2 million compared to an operating loss of $12.5 million in the prior year. Improvements resulted from cost reductions initiated in 2005 and on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" operating efficiencies. Other Items --The cellular partnerships contributed pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta equity earnings of $1.5 million during the quarter. This compares to $5.8 million during the same period last year. --The effective tax rate declined from 36.7 percent in the first quarter to 32.9 percent in the second quarter due to declines in taxes paid outside the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and changes in certain state income tax laws. The effective tax rate for the full year is expected to be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 35 percent. --Cash from operating activities was $63.3 million. Free cash flow was $36.4 million compared to $4.9 million in the prior year. --Net increase in deferred charges in the quarter was $22.7 million. --Net capital expenditures for the quarter were $26.9 million. --During the second quarter, Convergys repurchased 1.7 million shares at a cost of $31.7 million and an average price of $18.82 per share. Total shares repurchased during the first six months were 2.1 million at an average price of $18.44 per share. Financial Guidance --Convergys is increasing full year 2006 guidance and now expects GAAP EPS of at least $1.11 per share, including non-cash stock-based compensation expense of approximately $29 million, or $0.13 per share. --For the third quarter 2006, Convergys expects GAAP EPS to be $0.27 to $0.28, including non-cash stock-based compensation expense of approximately $7.5 million, or $0.03 per share. --Convergys expects 2007 GAAP EPS to exceed $1.20. FORWARD-LOOKING STATEMENTS forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. DISCLOSURE AND "SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " NOTE: This news release contains forward-looking statements that reflect Convergys' expectations as of July July: see month. 27, 2006. Actual results of Convergys could differ materially from those discussed herein. Potential risk factors that could cause or contribute to actual results being materially different from those in the forward-looking statements include, but are not limited to, the loss of a significant client or significant business from a client, difficulties in completing a contract or implementing its provisions, difficulties in completing or implementing an acquisition, continued consolidation in the markets we serve, terrorist activities and responses of the United States and other nations to such activities, changes in the legal and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. environment in which Convergys and its clients operate, and competitive and other factors disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in the Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2005, and subsequent filings with the SEC by Convergys Corporation. The company has no current intention of updating any forward-looking statements that may be included herein, other than in publicly available statements. 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. Convergys provides non-GAAP free cash flow, revenues excluding Cingular, and earnings excluding non-cash stock-based compensation expense. Convergys' management believes that these non-GAAP financial measures provide management and investors with (1) a more comprehensive understanding of the company's underlying performance, (2) a useful comparison of current results with past and future results, and (3) an enhanced understanding of the company's prospects for the future. However, Convergys recognizes that there are limitations associated with the use of these non-GAAP financial measures as they do not reflect all of the amounts associated with our results as determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. 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 COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. or other companies. As described above, Convergys uses the following non-GAAP measures: Free cash flow -- 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 Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. of the company to the capital that is spent to continue and improve business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets , such as investment in the company's existing businesses. Further, free cash flow facilitates management's ability to strengthen the company's balance sheet, to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. the company's stock and to repay the company's debt obligations. Limitations associated with the use of free cash flow include that it does not represent the residual Residual See:Residual value 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 utilizing 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. Revenues excluding Cingular -- The company uses revenues excluding Cingular to assess the revenue growth of the business excluding the impact of Cingular's migration of acquired subscribers off of AT&T Wireless's billing and customer care systems that was announced in 2004. Prior to the acquisition of AT&T Wireless by Cingular in 2004, AT&T Wireless was Convergys' largest client. For the first year after the merger, the company experienced a decline in customer care revenue primarily as a result of business changes instituted by Cingular related to former AT&T Wireless operations. Over the past year, the company has been assisting Cingular with migrating subscribers off of the AT&T Wireless billing systems that Convergys supports onto Cingular's in-house In-house In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. systems, one of which Convergys continues to support. As a result of this migration, data processing revenues from Cingular have declined. Limitations associated with the use of this non-GAAP measure include that this measure does not include all of the amounts associated with our results as determined in accordance with GAAP. Management compensates for these limitations by utilizing both the non-GAAP measure, revenues excluding Cingular, and the GAAP measure, revenues, in its evaluation of performance. There are no material purposes for which we use this non-GAAP measure beyond the purposes described above. Earnings excluding non-cash stock-based compensation expense -- Management uses earnings excluding non-cash stock-based compensation expense to compare operating results to competitors, without regard to the impact of various long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. incentive plans, including stock option and restricted stock compensation approaches. Management believes the stock-based compensation plans of competitors vary and therefore, comparison of the company's results to those of its competitors on a GAAP EPS basis alone would not be as useful, particularly during the transition to SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R reporting. Management also believes excluding these expenses facilitates comparison to the company's historical operating performance. For this latter reason, management does not allocate To reserve a resource such as memory or disk. See memory allocation. these expenses to the company's segment results, and excludes these expenses from internal analysis of business segment results. Limitations associated with the use of this non-GAAP measure include that this measure does not include all of the amounts associated with our results as determined in accordance with GAAP. Management compensates for these limitations by utilizing both the non-GAAP measures, earnings excluding non-cash stock-based compensation expense, and the GAAP measures, income before tax, net income and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of , in its evaluation of performance. There are no material purposes for which we use this non-GAAP measure beyond the purpose described above. CONFERENCE CALL NOTE: Convergys will host a conference call on Thursday Thursday: see week. , July 27 at 10:00 AM, EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT , to discuss the company's second quarter results. It will feature Jim Orr, Chairman and CEO, and Earl Shanks
The shanks and tattlers are wading bird species in a number of genera characterised by a medium length bill and long, often brightly coloured legs. , CFO See Chief Financial Officer. . This call will be carried live (with scheduled repeats) on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . A link to the conference call is available at http://www.convergys.com ABOUT CONVERGYS Convergys Corporation (NYSE: CVG) is a global leader in providing customer care, human resources, and billing services. Convergys combines specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. knowledge and expertise with solid execution to deliver outsourced Outsourced is a modern day comedy of cross-cultural conflict and romance, directed by John Jeffcoat, released in 2007. Synopsis Todd Anderson (Josh Hamilton) spends his days managing a customer call center for American Novelty Products in Seattle, until his job, solutions, consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" , and software support. Clients in more than 70 countries speaking nearly 35 languages depend on Convergys to manage the increasing complexity and cost of caring for customers and employees. Convergys serves the world's leading companies in many industries including communications, financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. , technology, and consumer products. Convergys is a member of the S&P 500 and a Fortune Most Admired ad·mire v. ad·mired, ad·mir·ing, ad·mires v.tr. 1. To regard with pleasure, wonder, and approval. 2. To have a high opinion of; esteem or respect. 3. Company. Headquartered in Cincinnati, Ohio “Cincinnati” redirects here. For other uses, see Cincinnati (disambiguation). Cincinnati is a city in the U.S. state of Ohio and the county seat of Hamilton County. , Convergys has more than 65,000 employees in 74 customer contact centers, three data centers, and other facilities in the United States, Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). ,
the Middle East, and Asia. For more information visit www.convergys.com
Convergys and the Convergys logo are registered trademarks of Convergys Corporation.
Convergys Corporation
Revenues, Net Income and Earnings Per Common Share
In Millions Except Per Share Amounts
(Unaudited)
Second Quarter Six Months
------------------------- -----------------------------
Change Change
---------- ----------
2006 2005 Amount % 2006 2005 Amount %
------ ------ ---------- -------- -------- ----------
Revenues:
Customer
Care $446.2 $391.7 $54.5 14 $ 880.2 $ 803.6 $76.6 10
Information
Management 195.4 200.7 (5.3) (3) 384.2 390.5 (6.3) (2)
Employee
Care 50.2 38.0 12.2 32 102.7 73.6 29.1 40
------ ------ ----- -------- -------- -----
Total $691.8 $630.4 $61.4 10 $1,367.1 $1,267.7 $99.4 8
Operating
Income
(Loss):
Customer
Care $ 48.2 $ 19.6 $28.6 146 $ 94.4 $ 58.4 $36.0 62
Information
Management 30.5 36.4 (5.9)(16) 62.0 69.8 (7.8)(11)
Employee
Care (8.2) (12.5) 4.3 34 (17.8) (29.8) 12.0 40
Corporate
and
Other (7.7) (5.5) (2.2) 40 (13.8) (8.5) (5.3) 62
------ ------ ----- -------- -------- -----
Total $ 62.8 $ 38.0 $24.8 65 $ 124.8 $ 89.9 $34.9 39
Net Income $ 39.8 $ 25.6 $14.2 55 $ 76.5 $ 56.8 $19.7 35
Earnings Per
Common
Share
- Basic $ 0.29 $ 0.18 $0.11 61 $ 0.55 $ 0.40 $0.15 38
- Diluted $ 0.28 $ 0.18 $0.10 56 $ 0.54 $ 0.40 $0.14 35
Weighted
Average
Common
Shares
Outstanding
- Basic 139.1 140.4 (1.3) (1) 139.2 140.8 (1.6) (1)
- Diluted 142.4 142.9 (0.5) 0 142.3 143.4 (1.1) (1)
The above amounts reflect the Company's results of operations, as
reported under U.S. Generally Accepted Accounting Principles (U.S.
GAAP), that will be presented in the Convergys 10-Q for the quarterly
period ended June 30, 2006.
Convergys Corporation
Consolidated Statements of Income
In Millions Except Per Share Amounts
(Unaudited)
For the For the
Three Months Six Months
(In millions except Ended June 30, % Ended June 30, %
per share amounts) 2006 2005 Change 2006 2005 Change
------ ------ ------ -------- -------- ------
Revenues:
Customer Care
Communications $230.2 $210.8 9 $ 445.8 $ 439.3 1
Technology 38.7 33.6 15 77.6 67.2 15
Financial Services 62.3 60.0 4 125.6 123.7 2
Other 115.0 87.3 32 231.2 173.4 33
------ ------ -------- --------
Total
Customer
Care
Revenues 446.2 391.7 14 880.2 803.6 10
Information
Management
Data Processing 74.2 84.4 (12) 153.4 174.4 (12)
Professional and
Consulting 73.0 72.2 1 146.1 133.2 10
License and Other 48.2 44.1 9 84.7 82.9 2
------ ------ -------- --------
Total
Information
Management
Revenues 195.4 200.7 (3) 384.2 390.5 (2)
Employee Care 50.2 38.0 32 102.7 73.6 40
------ ------ -------- --------
Total Revenues 691.8 630.4 10 1,367.1 1,267.7 8
------ ------ -------- --------
Costs and Expenses:
Cost of Providing
Services and
Products Sold 438.6 394.7 11 862.0 792.0 9
Selling, General and
Administrative 132.0 132.6 0 264.8 265.9 0
Research and
Development Costs 21.4 19.7 9 41.8 37.3 12
Depreciation 32.3 31.0 4 65.1 62.3 4
Amortization 4.7 5.5 (15) 8.6 11.4 (25)
Restructuring
Charges - 8.9 (100) - 8.9 (100)
------ ------ -------- --------
Total Costs and
Expenses 629.0 592.4 6 1,242.3 1,177.8 5
------ ------ -------- --------
Operating Income 62.8 38.0 65 124.8 89.9 39
Equity in Earnings
(Losses) of Cellular
Partnerships 1.5 5.8 (74) 2.9 9.6 (70)
Other Income
(Expense), net 0.8 0.4 100 1.1 (1.0) -
Interest Expense (5.8) (4.9) 18 (11.5) (9.7) 19
------ ------ -------- --------
Income Before Income
Taxes 59.3 39.3 51 117.3 88.8 32
Income Taxes 19.5 13.7 42 40.8 32.0 28
------ ------ -------- --------
Net Income $ 39.8 $ 25.6 55 $ 76.5 $ 56.8 35
====== ====== ======== ========
Earnings Per Common
Share
-------------------
Basic $ 0.29 $ 0.18 61 $ 0.55 $ 0.40 38
====== ====== ======== ========
Diluted $ 0.28 $ 0.18 56 $ 0.54 $ 0.40 35
====== ====== ======== ========
Weighted Average
Common Shares
Outstanding
----------------
Basic 139.1 140.4 139.2 140.8
Diluted 142.4 142.9 142.3 143.4
Other
Data
---------
Operating Margin 9.1% 6.0% 9.1% 7.1%
Market Price Per
Share
----------------
High $19.87 $15.09 $ 19.87 $ 15.76
Low $17.73 $12.57 $ 15.43 $ 12.57
Close $19.50 $14.22 $ 19.50 $ 14.22
The above amounts reflect the Company's results of operations, as
reported under U.S. Generally Accepted Accounting Principles (U.S.
GAAP), that will be presented in the Convergys 10-Q for the quarterly
period ended June 30, 2006.
Convergys Corporation
Consolidated Balance Sheets
In Millions
(Unaudited)
Jun. 30, Dec. 31,
2006 2005
-------- --------
Assets
------
Cash and Cash Equivalents $ 201.1 $ 196.0
Receivables - Net 558.8 521.1
Other Current Assets 134.5 131.9
Property and Equipment - Net 386.4 404.7
Other Assets 1,173.3 1,157.7
-------- --------
Total Assets $2,454.1 $2,411.4
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Debt Maturing in One Year $ 89.6 $ 134.7
Other Current Liabilities 502.0 483.1
Other Liabilities 149.7 141.0
Long-Term Debt 299.3 297.5
Common Shareholders' Equity 1,413.5 1,355.1
-------- --------
Total Liabilities and Shareholders' Equity $2,454.1 $2,411.4
======== ========
Convergys Corporation
Summarized Statement of Cash Flows
In Millions
(Unaudited)
Three Months Six Months Ended
Ended Jun. 30, Jun. 30,
---------------- ----------------
(In millions) 2006 2005 2006 2005
------ ------ ------ ------
Cash provided by operating
activities $ 63.3 $ 31.1 $120.2 $ 42.0
Cash used in investing
activities (26.9)(a) (27.0)(a) (44.3)(b) (51.4)(b)
Cash used in financing
activities (42.8) 17.3 (70.8) 9.6
------ ------ ------ ------
Net increase (decrease) in
cash $ (6.4) $ 21.4 $ 5.1 $ 0.2
====== ====== ====== ======
(a) Includes $26.9 and $26.2 of capital expenditures, net, for the
three months ended June 30, 2006 and 2005, respectively.
(b) Includes $50.1 and $49.6 of capital expenditures, net, for the six
months ended June 30, 2006 and 2005, respectively.
Convergys Corporation
Customer Care
Operating Segment Data
In Millions
(Unaudited)
For the For the
Three Months Six Months
Ended June 30, % Ended June 30, %
2006 2005 Change 2006 2005 Change
------ ------ ------- ------ ------ -------
Revenues:
Communications $230.2 $210.8 9 $445.8 $439.3 1
Technology 38.7 33.6 15 77.6 67.2 15
Financial Services 62.3 60.0 4 125.6 123.7 2
Other 115.0 87.3 32 231.2 173.4 33
------ ------ ------ ------
Total Customer
Care Revenues 446.2 391.7 14 880.2 803.6 10
Costs and Expenses:
Cost of Providing
Services and
Products Sold 296.0 265.7 11 578.2 536.5 8
Selling, General
and
Administrative 83.3 76.2 9 168.0 157.2 7
Research and
Development Costs 2.3 2.5 (8) 4.4 3.6 22
Depreciation 15.7 16.7 (6) 32.5 34.2 (5)
Amortization 0.7 2.7 (74) 2.7 5.4 (50)
Restructuring
Charges - 8.3 (100) - 8.3 (100)
------ ------ ------ ------
Total Costs
and Expenses 398.0 372.1 7 785.8 745.2 5
------ ------ ------ ------
Operating Income $ 48.2 $ 19.6 146 $ 94.4 $ 58.4 62
====== ====== ====== ======
Operating Margin 10.8% 5.0% 10.7% 7.3%
====== ====== ====== ======
The operating segment data for Customer Care shown above reflects the
detailed revenue and expense data for Customer Care, as reported under
U.S. GAAP, that will be presented in the Convergys 10-Q for the
quarterly period ended June 30, 2006.
Convergys Corporation
Information Management
Operating Segment Data
In Millions
(Unaudited)
For the For then
Three Months Six Months
Ended June 30, % Ended June 30, %
2006 2005 Change 2006 2005 Change
------ ------ ------ ------ ------ ------
Revenues:
Data Processing $ 74.2 $ 84.4 (12) $153.4 $174.4 (12)
Professional and
Consulting 73.0 72.2 1 146.1 133.2 10
License and Other 48.2 44.1 9 84.7 82.9 2
------ ------ ------ ------
Total Information
Management
Revenues 195.4 200.7 (3) 384.2 390.5 (2)
Costs and Expenses:
Cost of Providing
Services and
Products Sold 107.1 104.2 3 209.5 203.2 3
Selling, General and
Administrative 27.0 32.8 (18) 54.2 63.7 (15)
Research and
Development Costs 18.8 17.0 11 36.6 32.9 11
Depreciation 8.4 8.1 4 17.0 16.0 6
Amortization 3.6 2.2 64 4.9 4.9 0
------ ------ ------ ------
Total Costs and
Expenses 164.9 164.3 0 322.2 320.7 0
------ ------ ------ ------
Operating Income $ 30.5 $ 36.4 (16) $ 62.0 $ 69.8 (11)
====== ====== ====== ======
Operating Margin 15.6% 18.1% 16.1% 17.9%
====== ====== ====== ======
The operating segment data for Information Management shown above
reflects the detailed revenue and expense data for Information
Management, as reported under U.S. GAAP, that will be presented in the
Convergys 10-Q for the quarterly period ended June 30, 2006.
Convergys Corporation
Employee Care
Operating Segment Data
In Millions
(Unaudited)
For the For the
Three Months Six Months
Ended June 30, % Ended June 30, %
2006 2005 Change 2006 2005 Change
----- ------ ------- ------ ------ -------
Revenues $50.2 $ 38.0 32 $102.7 $ 73.6 40
Costs and Expenses:
Cost of Providing
Services and
Products Sold 35.5 24.7 44 74.3 52.2 42
Selling, General
and
Administrative 18.7 22.3 (16) 38.1 43.9 (13)
Research and
Development Costs 0.3 0.2 50 0.8 0.8 0
Depreciation 3.5 2.7 30 6.3 5.4 17
Amortization 0.4 0.6 (33) 1.0 1.1 (9)
----- ------ ------ ------
Total Costs and
Expenses 58.4 50.5 16 120.5 103.4 17
----- ------ ------ ------
Operating Income $(8.2) $(12.5) 34 $(17.8) $(29.8) 40
===== ====== ====== ======
The operating segment data for Employee Care shown above reflects the
detailed revenue and expense data for Employee Care, as reported under
U.S. GAAP, that will be presented in the Convergys 10-Q for the
quarterly period ended June 30, 2006.
CONVERGYS CORPORATION
Reconciliation of Cash Provided by Operating Activities to Free Cash
Flow
In Millions
(Unaudited)
Three Months Ended Six Months Ended
Jun. 30, Jun. 30,
----------------- ----------------
2006 2005 2006 2005
------- -------- ------- -------
Cash provided by operating
activities $ 63.3 $ 31.1 $ 120.2 $ 42.0
Accounts receivable
securitization - - - 50.0
Capital expenditures, net (26.9) (26.2) (50.1) (49.6)
------- -------- ------- -------
Free cash flows (a non-GAAP
measure) $ 36.4 $ 4.9 $ 70.1 $ 42.4
======= ======== ======= =======
Free cash flow - 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
Company's existing businesses. Further, free cash flow facilitates
management's ability to strengthen the Company's balance sheet, to
repurchase the Company's stock and to repay the Company's debt
obligations. 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 utilizing 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.
Convergys Corporation
Reconciliation of GAAP Revenues to Revenues Excluding
Cingular
In Millions Except Per Share Amounts
(Unaudited)
Consolidated
------------
Second Quarter 2006
-------------------
Revenues as reported $ 691.8
Adjustments:
Revenues from Cingular 84.7
-----------
Revenues excluding Cingular (a non-GAAP measure) $ 607.1
===========
Year to Date 2006
-----------------
Revenues as reported $ 1,367.1
Adjustments:
Revenues from Cingular 173.3
-----------
Revenues excluding Cingular (a non-GAAP measure) $ 1,193.8
===========
Second Quarter 2005
-------------------
Revenues as reported $ 630.4
Adjustments:
Revenues from Cingular 107.1
-----------
Revenues excluding Cingular (a non-GAAP measure) $ 523.3
===========
Year to Date 2005
-----------------
Revenues as reported $ 1,267.7
Adjustments:
Revenues from Cingular 225.1
-----------
Revenues excluding Cingular (a non-GAAP measure) $ 1,042.6
===========
The Company uses revenues excluding Cingular to assess the revenue
growth of the business excluding the impact of Cingular's migration of
acquired subscribers off of AT&T Wireless' billing and customer care
systems that was announced in 2004. Prior to the acquisition of AT&T
Wireless by Cingular in 2004, AT&T Wireless was Convergys' largest
client. For the first year after the merger, the Company experienced a
decline in customer care revenue primarily as a result of business
changes instituted by Cingular related to former AT&T Wireless
operations. Over the past year, the Company has been assisting
Cingular with migrating subscribers off of the AT&T Wireless billing
systems that Convergys supports onto Cingular's in-house systems, one
of which Convergys continues to support. As a result of this
migration, data processing revenues from Cingular have declined.
Limitations associated with the use of this non-GAAP measure include
that this measure does not include all of the amounts associated with
our results as determined in accordance with GAAP. Management
compensates for these limitations by utilizing both the non-GAAP
measure, revenues excluding Cingular, and the GAAP measure, revenues,
in its evaluation of performance. There are no material purposes for
which we use this non-GAAP measure beyond the purposes described
above.
Convergys Corporation
Reconciliation of GAAP Earnings to Earnings Excluding Non-cash Stock-
based Compensation Expense
In Millions Except Per Share Amounts
(Unaudited)
Income Income Tax
(Loss) (Expense)/ Net Income Diluted
Before Tax Benefit (Loss) EPS
--------- --------- --------- -------
Second Quarter 2006
-------------------
Results as reported under
U.S. GAAP $ 59.3 $ (19.5) $ 39.8 $ 0.28
Adjustments:
Non-cash stock-based
compensation expense 7.4 (2.4) 5.0 0.04
--------- --------- --------- -------
Results excluding non-cash
stock-based compensation
expense (a non-GAAP measure)$ 66.7 $ (21.9) $ 44.8 $ 0.32
========= ========= ========= =======
Year to Date 2006
-----------------
Results as reported under
U.S. GAAP $ 117.3 $ (40.8) $ 76.5 $ 0.54
Adjustments:
Non-cash stock-based
compensation expense 13.7 (4.8) 8.9 0.06
--------- --------- --------- -------
Results excluding non-cash
stock-based compensation
expense (a non-GAAP measure)$ 131.0 $ (45.6) $ 85.4 $ 0.60
========= ========= ========= =======
Second Quarter 2005
-------------------
Results as reported under
U.S. GAAP $ 39.3 $ (13.7) $ 25.6 $ 0.18
Adjustments:
Non-cash stock-based
compensation expense 6.5 (2.3) 4.2 0.03
--------- --------- --------- -------
Results excluding non-cash
stock-based compensation
expense (a non-GAAP
measure) $ 45.8 $ (16.0) $ 29.8 $ 0.21
========= ========= ========= =======
Year to Date 2005
-----------------
Results as reported under
U.S. GAAP $ 88.8 $ (32.0) $ 56.8 $ 0.40
Adjustments:
Non-cash stock-based
compensation expense 10.1 (3.6) 6.5 0.05
--------- --------- --------- -------
Results excluding non-cash
stock-based compensation
expense (a non-GAAP
measure) $ 98.9 $ (35.6) $ 63.3 $ 0.45
========= ========= ========= =======
Earnings excluding non-cash stock-based compensation expense -
Management uses earnings excluding non-cash stock-based compensation
expense to compare operating results to competitors, without regard to
the impact of various long-term incentive plans, including stock
option and restricted stock compensation approaches. Management
believes the stock-based compensation plans of competitors vary, and,
therefore, comparison of the Company's results to those of its
competitors on a GAAP EPS basis alone would not be as useful,
particularly during the transition to SFAS 123R reporting.
Management also believes excluding these expenses facilitates
comparison to the Company's historical performance. For this latter
reason, Management does not allocate these expenses to the Company's
segment results, and excludes these expenses from internal analysis of
business segment results. Limitations associated with the use of this
non-GAAP measure include that this measure does not include all of the
amounts associated with our results as determined in accordance with
GAAP. Management compensates for these limitations by utilizing both
the non-GAAP measures, earnings excluding non-cash stock-based
compensation expense, and the GAAP measures, income before tax, net
income and diluted earnings per share, in its evaluation of
performance. There are no material purposes for which we use this
non-GAAP measure beyond the purpose described above.
Convergys Corporation
Reconciliation of Expected Diluted Earnings Per Share
(Unaudited)
(Per share amounts)
3rd Quarter Full Year
2006 2006
------------ -------------
Expected diluted EPS under U.S. GAAP $0.27 - 0.28 At least $1.11
Adjustments:
Expected non-cash stock-based
compensation $ 0.03 $ 0.13
------------ -------------
Expected diluted EPS excluding non-cash
stock-based compensation (a non-GAAP
measure) $0.30 - 0.31 At least $1.24
============ ==============
Earnings excluding non-cash stock-based compensation expense -
Management uses earnings excluding non-cash stock-based compensation
expense to compare operating results to competitors, without regard to
the impact of various long-term incentive plans, including stock
option and restricted stock compensation approaches. Management
believes the stock-based compensation plans of competitors vary, and,
therefore, comparison of the Company's results to those of its
competitors on a GAAP EPS basis alone would not be as useful,
particularly during the transition to SFAS 123R reporting.
Management also believes excluding these expenses facilitates
comparison to the Company's historical performance. For this latter
reason, Management does not allocate these expenses to the Company's
segment results, and excludes these expenses from internal analysis of
business segment results. Limitations associated with the use of this
non-GAAP measure include that this measure does not include all of the
amounts associated with our results as determined in accordance with
GAAP. Management compensates for these limitations by utilizing both
the non-GAAP measures, earnings excluding non-cash stock-based
compensation expense, and the GAAP measures, income before tax, net
income and diluted earnings per share, in its evaluation of
performance. There are no material purposes for which we use this
non-GAAP measure beyond the purpose described above.
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion