Convergys Corporation Reports Record First Quarter 2001 Financial Results.Business Editors NOTE: A photo and slide show relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc this story will be available for journalists to download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. beginning today at www.newstream.com and at www.businesswire.com CINCINNATI--(BUSINESS WIRE)--April 23, 2001 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) ) -- Revenues increased 13 percent to $577.8 million -- Operating income increased 23 percent to $92 million -- Net income increased 20 percent to $ 53.5 million and diluted earnings per share increased 21 percent to $0.34 -- Cash earnings per share of $0.38 -- Geneva Technology Ltd. acquisition successfully completed Convergys Corporation (NYSE:CVG), the global leader in integrated billing and customer care, announced today its financial results for the first quarter ended March 31, 2001. During the first quarter 2001, total revenues increased 13 percent to $577.8 million compared to $513.6 million reported in the first quarter of 2000. 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. increased 23 percent to $92 million, up from $74.7 million, excluding special items recorded in the first quarter of 2000. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: increased to 15.9 percent from 14.5 percent. Net income increased to $53.5 million from $44.4 million, and earnings per share (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. ) increased 21 percent to $0.34 per share (diluted) from $0.28 per share (diluted) last year. Cash earnings per share excluding goodwill amortization increased 15 percent to $0.38 from $0.33 in the first quarter of 2000. Commenting on the company's financial performance, Jim Orr, chairman, president, 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 said, "We are very pleased with our record first quarter financial results. They reflect healthy increases across both business units, with particularly strong revenue growth coming from Information Management. The strategy we announced last year of focusing for faster growth is producing results and all our key financial metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. are growing led by increasing subscriber counts and greater outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. needs, as well as the expansion of the market for broadband telephony See VoIP. services." First Quarter 2001 Highlights During the first quarter of 2001, Convergys: -- Acquired UK-based Geneva Geneva, canton and city, Switzerland Geneva (jənē`və), Fr. Genève, canton (1990 pop. 373,019), 109 sq mi (282 sq km), SW Switzerland, surrounding the southwest tip of the Lake of Geneva. Technology Ltd., a leading provider of convergent billing solutions. The deal unites one of the world's largest billing services companies with the leading international provider of convergent billing software. -- Renewed Sprint PCS (1) (Personal Communications Services) Refers to wireless services that emerged after the U.S. government auctioned commercial licenses in 1994 and 1995. This radio spectrum in the 1. contract for four years during which Convergys will provide billing and customer care services. Sprint PCS serves approximately 10 million wireless subscribers. -- Signed a five-year contract with Telepak, Inc. for billing and customer care using Convergys' Atlys (R) solution. Telepak operates as Cellular South in five southeastern states with a population of over 5.8 million people. -- Signed two contracts with AT&T Broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). : first, a seven-year agreement under which Convergys will provide outsourced billing for AT&T Broadband's residential phone customers. Second, a five-year pact that calls for Convergys to use ICOMS ICOMS Integrated Communications Operations Management system ICOMS Improved Conventional Mine System to bill AT&T Broadband's commercial business customers for their telephone services beginning later this year. -- Signed a 7-year managed services An umbrella term for third-party monitoring and maintaining of computers, networks and software. The actual equipment may be inhouse or at the third-party's facilities, but the "managed" implies an ongoing effort; for example, making sure the equipment is running at a certain quality agreement with WideOpenWest, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , a new broadband services See broadband and broadband service provider. provider, and expanded our existing 5-year services agreement with Insight Communications Insight Communications is the ninth largest cable operator in the United States with approximately 1.4 million customer relationships in the four contiguous states of Illinois, Kentucky, Indiana and Ohio. to provide billing and customer care for broadband telephony services, both utilizing the ICOMS solution. -- Signed a license billing implementation and support agreement with Germany's largest private cable network operator, Kabel Nordrhein-Westfalen GmbH & Co. KG (Kabel NRW NRW Nordrhein-Westfalen (German Federal State; Capital Düsseldorf) NRW Non-Revenue Water NRW Northern Right Whale NRW Nicolson-Ross-Weir (measurement technique) NRW Nonradioactive Waste ). Kabel NRW provides cable to approximately 4.2 million German households. -- Signed an agreement with IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) under which Atlys will be ported onto IBM's UNIX server A medium to large-scale computer system in a network that runs under Unix. Unix servers are widely used as application servers and database servers and are available from a variety of vendors, including Sun, IBM, HP and others. platform. This porting allows Convergys' clients greater flexibility in choosing hardware providers. -- Signed a three-year contract with XM Satellite Radio (Nasdaq:XMSR XMSR XM Satellite Radio (formerly AMRC) ) for integrated contact center services. -- Acquired additional technical help desk resources from Keane, Inc. The acquisition expands Convergys' existing world-class, integrated, technical help desk support for leading global firms in high-tech software and hardware as well as in 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. . -- Entered into an alliance with RightNow Technologies RightNow Technologies NASDAQ: RNOW is a U.S. software company that develops customer relationship management (CRM) software for small and mid-market businesses. It is incorporated in Delaware and headquartered in Bozeman, Montana. (Nasdaq:RTNW) to expand its eCRM offering. Mr. Orr continued, "Our commitment to faster growth was made more evident by this quarter's new business wins, the renewed contract with Sprint PCS, the two new contracts with AT&T, and of course, the Geneva Technology acquisition. International expansion is a critical component to our continued success and we believe that Geneva will help us to accelerate our international revenue growth." April 2001 Highlights -- Announced a five-year contract with RCN Corporation RCN Corporation, (NASDAQ: RCNI), founded in 1993 and based in Herndon, Virginia, is the first American facilities-based competitive provider of bundled telephone, cable television and high speed Internet service delivered over its own fiber-optic local network to consumers in (Nasdaq:RCNC RCNC Royal Corps of Naval Constructors (naval architects, mechanical, electrical engineers for UK Royal Navy) RCNC Royal Corps of Naval Constructors ) to license Convergys' ICOMS solution. -- Announced a two-year billing services contract with Vodacom World Online South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. to implement Convergys' Catalys (TM) IP billing solution. Operating Performance by Segment Information Management Group (IMG IMG International medical graduate, see there ) Excluding intercompany sales, first quarter 2001 IMG revenues increased 18 percent to $205.6 million, from $173.6 million in the same period last year. 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 revenues increased 12 percent to $126.3 million from $112.9 million, reflecting continued strong wireless subscriber growth for IMG's clients. Professional and consulting revenues increased 22 percent to $41.2 million from $33.9 million, reflecting continued enhancement work for wireless clients. License and other revenues increased 10 percent to $15.3 million from $13.9 million due to continued growth in our cable/broadband business. International revenues increased nearly $10 million or 77 percent to $22.8 million, primarily reflecting billing services provided to Telesp Celular in Brazil. Operating income for IMG increased 29 percent to $46.2 million from $35.9 million. This increase reflects profits from higher revenues. Operating margin for IMG in the first quarter was 22.5 percent, up from 20.7 percent in the first quarter last year. These results reflect earnings from higher revenues partially offset by increased spending on sales and marketing activities, research and development, and higher depreciation from data center upgrades. Customer Management Group (CMG CMG Coastal & Marine Geology (USGS) CMG Chipotle Mexican Grill, Inc. (stock symbol) CMG Companion (of the Order Of) St Michael and St George CMG Computer Measurement Group ) CMG revenues were $372.2 million, up 9 percent compared to $340.0 million in the first quarter of 2000, reflecting continued growth from technology clients. These revenue increases were partially offset by a decrease in traditional, program-based services and international revenues. Operating income for CMG increased 16 percent to $47.4 million, up from $40.7 million in last year's first quarter. Operating margin improved to 12.7 percent in the first quarter 2001 versus 12.0 percent reported in the comparable year-ago period. This improvement stems from earnings from higher revenues, business mix changes, and the benefits of continuous process enhancement programs. Mr. Orr concluded, "Fiscal 2001 is clearly off to a strong start. Significant contract renewals and extensions coupled with several new client wins have further validated val·i·date tr.v. val·i·dat·ed, val·i·dat·ing, val·i·dates 1. To declare or make legally valid. 2. To mark with an indication of official sanction. 3. Convergys as the leader in integrated billing and customer care services provided through outsourcing or licensing. We remain committed to our mission of helping clients unlock potential revenue sources, while at the same time enhancing their customer relationships. In today's challenging business environment, customer loyalty has never been more critical." Geneva Technology Acquisition Convergys' acquisition of Geneva Technology closed on April 6, 2001. Consequently, Convergys' reported results for the first quarter of 2001 and 2000 do not include Geneva's results. However, the companies' combined pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma results (as if the acquisition had occurred at the beginning of 2000) would reflect combined revenues, operating income, net income, diluted 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. , and cash EPS of $591 million, $90 million, $52 million, $0.30, and $0.34 for the first quarter of 2001, and of $518 million, $73 million, $43 million, $0.25, and $0.29 for the first quarter of 2000, respectively. Convergys remains comfortable with the consensus EPS estimate of $1.52 for its pre-acquisition businesses in 2001. The acquisition of Geneva is expected to reduce EPS in 2001 by $0.11 to $0.15. Under new purchase accounting rules proposed by the FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). , beginning July 1, 2001, Convergys would no longer amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. goodwill balances that have resulted from past acquisitions. This change in accounting for goodwill would be expected to increase EPS by $0.16 for a full year. Since this proposed change would take place in mid- mid- pref. Middle: midbrain. 2001 and would be reflected prospectively in Convergys' results, the company would anticipate this change having a $0.08 positive impact on 2001 EPS. Accordingly, the company believes that 2001 EPS as reported will be in the range of $1.45 to $1.49. Giving pro forma effect to the proposed change in accounting for goodwill (as if the change were effective at the beginning of 2001), Convergys' 2001 EPS would be in the range of $1.53 to $1.57. If the proposed change in accounting were applied to the results for the combined Convergys and Geneva operations in the first quarter of 2001 and 2000, the pro forma diluted EPS would have been $0.34 and $0.29, respectively. About Convergys Convergys Corporation (NYSE:CVG), a member of the S&P 500 and the Forbes' Platinum 400, is the global leader in integrated billing and customer care services provided through outsourcing or licensing. We serve top companies in telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , 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 , cable and broadband services, technology, financial services, and other industries in more than 30 countries. We bring together world-class resources, software, and expertise to help create valuable relationships between our clients and their customers. This commitment is validated by the more than 1.3 million individual bills our software produces each day to support more than 100 million subscribers, and by the more than 1.2 million separate customer contacts we manage each day, both live and via electronic interaction. Convergys (TM) employs over 45,000 people in 50 customer contact centers and in our data centers and other offices in 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. , Canada, 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. , Israel, and Europe. On the net at www.convergys.com, Convergys has world headquarters 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. , USA. (Convergys, the Convergys logo, and Catalys are trademarks and Atlys is a registered trademark of Convergys Corporation.) CONFERENCE CALL NOTE: Convergys will host an hour-long conference call on Monday, April 23 at 10:00 A.M., Eastern Daylight Time, to discuss the company's first quarter results. It will feature Jim Orr, chairman, president, & CEO, and Steve Rolls, CFO See Chief Financial Officer. . This call will be carried live on the Internet on www.streetfusion.com. Internet replays will be available from this source through April 30. "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: Information included in this news release contains 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. that involve potential risks for Convergys Corporation. The future results of Convergys could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, the loss of a significant client, difficulties in completing or integrating acquisitions, and other factors disclosed 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 31, 2000, filed with the SEC by Convergys Corporation. The company intends to continue its practice of not updating forward-looking statements until its next quarterly results announcement, other than in publicly available statements. (Financial Tables Follow)
CONVERGYS CORPORATION
Revenues, Net Income and Earnings Per Common Share
In Millions Except Per Share Amounts
(Unaudited)
First Quarter
Change
2001 2000 Amount %
Revenues:
- Information Mgmt. Grp. $ 208.9 $ 179.8 $ 29.1 16
- Customer Mgmt. Group 372.2 340.0 32.2 9
- Eliminations & Other (3.3) (6.2) 2.9 (47)
--------- --------- ------- ---
--Total $ 577.8 $ 513.6 $ 64.2 13
Operating Income:
- Information Mgmt. Grp. $ 46.2 $ 35.9 $ 10.3 29
- Customer Mgmt. Group 47.4 40.7 6.7 16
- Eliminations & Other (1.6) (1.9) 0.3 (16)
--------- --------- ------- ---
--Total $ 92.0 $ 74.7 $ 17.3 23
Net Income $ 53.5 $ 44.4 $ 9.1 20
Earnings Per Common Share
- Basic $0.35 $0.29 $ 0.06 21
- Diluted $0.34 $0.28 $ 0.06 21
Weighted Average Common Shares Outstanding
- Basic 154.4 151.9 2.5
- Diluted 159.0 156.8 2.2
Convergys Corporation
Consolidated Statements of Income
In Millions Except Per Share Amounts
(Unaudited)
For the Three Months
Ended Mar. 31,
%
2001 2000 Chg.
Revenues:
Information Mgmt. Grp.
Information Processing $126.3 $112.9 12
Prof. & Consulting 41.2 33.9 22
License & Other 15.3 13.9 10
International 22.8 12.9 77
------ ------ ----
External Revenues 205.6 173.6 18
Interco. Svcs. for CMG 3.3 6.2 (47)
------ ------ ----
Total IMG Revenues 208.9 179.8 16
Customer Management Grp.
Communications 226.7 223.1 2
Technology 65.5 42.3 55
Financial Services 21.4 25.3 (15)
Other 58.6 49.3 19
------ ------ ----
Total CMG Revenues 372.2 340.0 9
Eliminations & Other (3.3) (6.2) (47)
------- ------- ----
Total Revenues 577.8 513.6 13
Costs & Expenses:
Cost of Providing
Services & Products Sold 319.4 292.1 9
Selling, General & Admin. 98.5 86.0 15
Research & Development 23.2 23.0 1
Depreciation 31.4 25.0 26
Amortization 13.3 12.5 6
Year 2000 Programming - 0.3 -
------ ------ ----
Total Costs and Expenses 485.8 438.9 11
Operating Income 92.0 74.7 23
Equity in Earnings of
Cellular Partnership 1.8 5.8 (69)
Other Income(Expense), Net 0.1 (0.1) -
Interest Expense (6.9) (8.1) (15)
------ ------ ----
Income Before Inc. Taxes 87.0 72.3 20
Income Taxes 33.5 27.9 20
------ ------ ----
Net Income $ 53.5 $ 44.4 20
====== ====== ====
Earnings Per Common Share
-Basic $ 0.35 $ 0.29 21
-Diluted $ 0.34 $ 0.28 21
Weighted Average Common Shares Outstanding (millions)
-Basic 154.4 151.9
-Diluted 159.0 156.8
Other Data
Operating Margin 15.9% 14.5%
Market Price Per Share
High $ 50.250 $ 42.063
Low $ 30.330 $ 26.625
Close $ 36.070 $ 38.688
Convergys Corporation
Consolidated Balance Sheets
In Millions
(Unaudited)
Mar. 31, Dec. 31, Mar. 31,
2001 2000 2000
Assets
Cash and Cash Equivalents $ 43.5 $ 28.2 $ 27.1
Receivables - Net 357.5 386.4 195.1
Other Current Assets 80.3 66.5 68.8
Property & Equipment-Net 371.7 392.6 348.2
Other Assets 906.6 905.8 929.3
Total Assets $ 1,759.6 $ 1,779.5 $ 1,568.5
Liabilities and Shareholders' Equity
Debt Maturing in One Year $ 1.2 $ - $ 43.8
Other Current Liabilities 318.7 359.0 292.7
Other Liabilities 18.1 17.3 14.3
Long-Term Debt 244.2 290.7 252.2
Common Shareholders' Equity 1,177.4 1,112.5 965.5
Total Liabilities
& Shareholders' Equity $ 1,759.6 $ 1,779.5 $ 1,568.5
Convergys Corporation
Information Management Group
Operating Segment Data
In Millions
(Unaudited)
For the Three Months
Ended March 31,
%
2001 2000 Chg.
Revenues:
Information Processing $126.3 $ 112.9 12
Prof. & Consulting 41.2 33.9 22
License & Other 15.3 13.9 10
International 22.8 12.9 77
----- ------ ----
External Revenues 205.6 173.6 18
Interco. Svcs. for CMG 3.3 6.2 (47)
----- ------ ----
Total IMG Revenues 209.9 179.8 16
Costs & Expenses:
Cost of Providing
Services & Products Sold 103.4 91.7 13
Selling, General & Admin. 25.6 19.5 31
Research & Development 20.2 18.7 8
Depreciation 9.0 9.1 (1)
Amortization 4.5 4.6 (2)
Year 2000 Programming - 0.3 -
------ ------ ----
Total Costs and Expenses 162.7 143.9 13
------ ------ ----
Operating Income $ 46.2 $ 35.9 29
====== ======
Note: The operating segment data for the Information Management Group
(IMG) shown above reflects the detailed revenue and expense
data for IMG that will be presented in the Convergys 10-Q for
the three months ended March 31, 2001.
Convergys Corporation
Customer Management Group
Operating Segment Data
In Millions
(Unaudited)
For the Three Months
Ended March 31,
%
2001 2000 Chg.
Revenues:
Communications $226.7 $223.1 2
Technology 65.5 42.3 55
Financial Services 21.4 25.3 (15)
Other 58.6 49.3 19
------ ------ ----
Total CMG Revenues 372.2 340.0 9
Costs & Expenses:
Cost of Providing
Services & Products Sold 219.3 206.6 6
Selling, General & Admin. 73.0 64.9 12
Research & Development 3.0 4.3 (30)
Depreciation 20.7 15.6 33
Amortization 8.8 7.9 11
------ ------ ----
Total Costs and Expenses 324.8 299.3 9
------ ------ ----
Operating Income $ 47.4 $ 40.7 16
======= ======
Note: The operating segment data for the Customer Management Group
(CMG) shown above reflects the detailed revenue and expense
data for CMG that will be presented in the Convergys 10-Q for
the three months ended March 31, 2001.
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