Convergys Corporation Reports Record Quarterly Revenues and Operating Income.CINCINNATI--(BUSINESS WIRE)--Oct. 15, 1998-- -- Revenues increase 55 percent in third quarter -- 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. rises 33 percent in third quarter -- 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 $0.18 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) ) reported results today for the third quarter and nine-month period ended September September: see month. 30, 1998. Convergys' third quarter revenues were $370.3 million, up 55 percent from $238.5 million in the third quarter of 1997. In the first quarter of 1998, Convergys acquired AT&T Solutions Customer Care (formerly Transtech For the Finnish railway rolling stock manufacturer, see . Transtech is an unreleased line of toys under the Transformers umbrella. History After the Beast Machines line ended, Hasbro planned a follow-up series called Transtech. ) and the teleservices (1) Refers to a variety of enhanced services via telephone, including fax-on-demand, voice mail and computer telephone integration. See CTI and IVR. (2) Services by human operators for taking orders and providing customer assistance and other tasks via telephone. operations of Maritz
Operating income increased 33 percent, to $45.8 million, compared to $34.5 million in the same quarter last year. Net income increased 8 percent to $25.6 million in the third quarter of 1998 from $23.6 million in the second quarter of 1998, but fell 3 percent compared to the third quarter of 1997. Results for the third quarter 1998 compared with the third quarter of 1997 reflect a $6 million increase in amortization of goodwill and other intangibles and approximately $8 million in additional interest expense related to the acquisitions. Additionally, third quarter Year 2000 compliance spending grew to $7 million from $3 million last year. Diluted earnings per share totaled $0.18 for the third quarter 1998, compared to $0.19 for the same period last year. The company's revenues for the first nine months of 1998 increased 44 percent to $1,042.5 million from $725.0 million in the same period last year. Transtech and Maritz contributed $261 million to the increase. Excluding acquisitions, revenues grew nearly 8 percent. Excluding an acquisition-related first quarter special item, operating income for the first nine months of 1998 was $128.7 million, up 17 percent from the same period last year. Net income for the first nine months of 1998 was $73.3 million or $.52 per share, excluding the special item. Net income for the first nine months of 1997 was $81.4 million. Results for the first nine months of 1998 include $14 million in additional goodwill and other intangible asset Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. amortization expense and $21 million in interest expense related to the Transtech and Maritz acquisitions. Results for the nine months also include $21 million in Year 2000 compliance spending compared to $5 million for the first nine months of 1997. Convergys' investment in a cellular partnership contributed $4.6 million for the third quarter and $15.4 million for the nine months in 1998. "The third quarter 1998 marked significant developments for Convergys," stated James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. F. Orr, 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. "We completed our IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. amid difficult market conditions and achieved growth in revenues and operating income to record levels. The strong operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. and the proceeds of the IPO enabled us to strengthen our balance sheet and position the company for future growth. We saw a strong rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective in our Customer Management Group. We remain confident in our ability to execute our strategy of expanding existing client relationships, developing new products and services, and building our international presence." Information Management Group (formerly CBIS CBIS Computer Based Information System CBIS Christian Brothers Investment Services CBIS Cincinnati Bell Information Systems CBIS Chinese Biodiversity Information System CBIS Certified Brain Injury Specialist ) Third quarter 1998 revenues for Convergys' Information Management Group increased 8 percent to $148 million as a result of higher 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 for billing services reflecting subscriber growth among its communications clients. Lower international revenues, resulting from the completion of two 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. system development contracts, partially offset this growth. Operating income for the Group grew 3 percent to $28.9 million, despite a $2 million increase in Year 2000 compliance spending. The Information Management Group won new contracts in the third quarter including Comcast Corporation and the Ethnic American Broadcasting Company Noun 1. broadcasting company - a company that manages tv or radio stations company - an institution created to conduct business; "he only invests in large well-established companies"; "he started the company in his garage" . Since the end of the third quarter, the Group has been awarded a new contract with Birmingham Cable, one of the largest cable providers in the United Kingdom. Customer Management Group (formerly MATRIXX Marketing) Convergys' Customer Management Group reported revenues of $231 million in the third quarter 1998, an increase of 125 percent. Revenues for the Group grew by 17 percent, excluding the Transtech and Maritz acquisitions. Operating income increased by more than 175 percent, to $17.1 million, reflecting a strong recovery from the downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. that affected the customer management industry during the second half of 1997. The growth in operating income was achieved while the Group increased spending on Year 2000 compliance by $2 million. Revenues from AT&T for services previously provided by Transtech grew 14 percent over the second quarter of 1998, totaling approximately $65 million in the third quarter, and by quarter's end had approached the monthly run rate initially anticipated in the contract. The Group continues to implement its restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). program that began in the fourth quarter of 1997. The continuing benefits of the restructuring and integration efforts are reflected in the improvement in the Group's operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: to 7.4 percent in the third quarter of 1998 from 6.4 percent in the second quarter of 1998. Earlier this week, the Group announced that it had signed a contract with Compaq Computer's EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. General Business Group to provide call center support for Compaq France. Convergys will initially provide services under the contract in Sweden, Finland, and Belgium. Initial Public Offering In August, 1998, Convergys issued approximately 10 percent of its common shares in an initial public offering (IPO). Cincinnati Bell Cincinnati Bell is the dominant telephone company for Cincinnati, Ohio and its nearby suburbs in Ohio, Indiana and Kentucky. The parent company is named Cincinnati Bell Inc. , Inc. (CBI CBI abbr. cumulative book index CBI Confederation of British Industry CBI n abbr (= Confederation of British Industry) → C.E.O.E. ) holds the remaining 90 percent of the Company's common shares. CBI expects to complete the spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. by distributing the remaining Convergys shares to CBI shareholders by the end of this year. The IPO raised approximately $207 million that was used to repay indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. to CBI. As a result of the IPO and strong cash flows from its operations during the quarter, Convergys reduced its outstanding debt to approximately $479 million at the end of the third quarter 1998, from approximately $756 million at the end of the second quarter 1998. About Convergys Corporation Convergys Corporation is a leader in providing outsourced, integrated, customer care and billing services, bringing together a broad range of resources and expertise to help clients transform customer relationships into a competitive advantage. Convergys software produces more that one million bills each day, and Convergys customer care handles more than one million calls each day. Convergys serves the top companies in a wide range of industries, including communications, technology, cable and broadband services See broadband and broadband service provider. , consumer products, 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. , utilities, healthcare, hospitality, and direct response. 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 employs over 30,000 people at its more than 30 call centers, 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, and Europe. Additional information on Convergys is available at http://www.convergys.com 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, Year 2000 compliance, and other factors disclosed in the S-1 registration statement and Form 10-Q Form 10-Q See 10-Q. for the quarter ended June 30, 1998, filed with the SEC by Convergys Corporation. -0-
CONVERGYS CORPORATION
Revenues, Net Income and Earnings Per Common Share
In Millions Except Per Share Amounts
(Unaudited)
Third Quarter
Change
1998 1997 Amount %
Revenues:
- Information Mgmt. Grp. $147.9 $137.2 $ 10.7 8
- Customer Mgmt. Group 231.4 103.0 128.4 125
- Eliminations & Other (9.0) (1.7) (7.3) -
------- ------- ------- ---
--Total $370.3 $238.5 $131.8 55
Operating Income:
- Information Mgmt. Grp. $ 28.9 $ 28.2 $ 0.7 3
- Customer Mgmt. Group 17.1 6.2 10.9 176
- Eliminations & Other (0.2) 0.1 (0.3) -
------- ------- ------- ---
--Total $ 45.8 $ 34.5 $ 11.4 33
Net Income $ 25.6 $ 26.3 $ (0.7) (3)
Earnings Per Common Share (b)
- Basic $0.18 $0.19 $(0.01) (5)
- Diluted $0.18 $0.19 $(0.01) (5)
Weighted Average Common Shares Outstanding (millions) (b)
- Basic 144.8 137.0 7.8
- Diluted 145.1 137.0 8.1
Nine Months
Change
1998 1997 Amount %
Revenues:
- Information Mgmt. Grp. $ 437.9 $ 401.7 $ 36.2 9
- Customer Mgmt. Group 620.4 329.4 291.0 88
- Eliminations & Other (15.8) (6.1) (9.7) -
------- ------- ------- ---
--Total $1042.5 $ 725.0 $317.5 44
Operating Income:
- Information Mgmt. Grp. $ 83.5 $ 76.4 $ 7.1 9
- Customer Mgmt. Group 2.9 (a) 33.4 (30.6) (91)
- Eliminations & Other (0.2) - (0.2) -
------- ------- ------- ---
--Total $ 86.1 $ 109.8 $(23.7) (22)
Net Income $ 46.9 $ 81.4 $(34.5) (42)
Earnings Per Common Share (b)
- Basic $0.34 (a) $0.59 $(0.25) (42)
- Diluted $0.34 (a) $0.59 $(0.25) (42)
Weighted Average Common Shares Outstanding (millions) (b)
- Basic 139.6 137.0 2.6
- Diluted 139.7 137.0 2.7
(a) Includes $42.6 million in acquired research and development costs which decreased net income by $26.4 million or $.19 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. common share. (b) Effective August 4, 1998, the Company approved a share split, which increased the number of outstanding common shares to 137.0 million. Basic and diluted earnings per share for all periods prior to August 12, 1998 have been calculated using the 137.0 common share total. The dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of Company stock options that may be issued in the future to holders of CBI stock options has not been considered in the calculation of earnings per share. -0-
Convergys Corporation
Consolidated Statement of Income
(Unaudited)
For the Three Months For the Nine Months
Ended Sep. 30, % Ended Sep. 30, %
1998 1997 Chg. 1998 1997 Chg.
Revenues:
Information Mgmt. Grp. $147.9 $137.2 8 $437.9 $401.7 9
Customer Management Grp. 231.4 103.0 125 620.4 329.4 88
Eliminations & Other (9.0) (1.7) - (15.8) (6.1) -
----- ------ -- ----- ----- --
Total Revenues 370.3 238.5 55 1,042.5 725.0 44
Costs & Expenses:
Cost of Providing
Services & Products Sold 210.8 127.4 65 597.5 392.9 52
Selling, General & Admin. 54.5 39.7 37 160.3 117.1 37
Research & Development 24.2 17.7 38 62.8 55.5 13
Deprec. & Amortization 27.8 15.9 75 72.5 44.3 64
Year 2000 Programming 7.2 3.3 118 20.7 5.4 -
Purchased R&D Costs - - - 42.6 - -
----- ----- -- ----- ----- --
Total Costs and Expenses 324.5 204.0 59 956.4 615.2 55
Operating Income 45.8 34.5 33 86.1 109.8 (22)
Other Income(Expense), Net 4.4 6.9 (36) 15.9 16.6 (4)
Interest Expense 9.1 1.6 - 26.7 3.7 -
----- ----- -- ----- ----- --
Income Before Income Taxes 41.1 39.8 3 75.3 122.7 (39)
Income Taxes 15.5 13.5 15 28.4 41.3 (31)
----- ------ -- ----- ----- --
Net Income $ 25.6 $ 26.3 (3) $ 46.9 $ 81.4 (42)
----- ------ -- ----- ----- --
----- ------ -- ----- ----- --
Earnings Per Common Share (a)
-Basic $ 0.18 $ 0.19 (5) $ 0.34 $ 0.59 (42)
-Diluted $ 0.18 $ 0.19 (5) $ 0.34 $ 0.59 (42)
Weighted Average Common Shares Outstanding (millions) (a)
-Basic 144.8 137.0 139.6 137.0
-Diluted 145.1 137.0 139.7 137.0
Other Data
Operating Margin (b) 12.4% 14.5% 12.3% 15.1%
Market Price Per Share
High $ 17.438 $ - $ 17.438 $ -
Low $ 11.375 $ - $ 11.375 $ -
Close $ 14.938 $ - $ 14.938 $ -
(a) Effective August 4, 1998, the Company approved a share split, which increased the number of outstanding common shares to 137.0 million. Basic and diluted earnings per share for all periods prior to August 12, 1998 have been calculated using the 137.0 million common share total. The dilutive effect of Company stock options that may be issued in the future to holders of CBI stock options has not been considered in the calculation of earnings per share. (b) Excludes purchased research and development costs resulting from acquisitions for the nine months ended September 30, 1998. -0-
Convergys Corporation
Consolidated Balance Sheet
(Unaudited)
Sep. 30, Dec. 31, Sep. 30,
(Dollars in millions) 1998 1997 1997
Assets
Cash and Cash Equivalents $ 1.4 $ 2.1 $ 2.2
Receivables - Net 307.9 222.9 218.2
Other Current Assets 36.3 40.8 29.0
Property, Plant & Equipment-Net 229.4 130.0 126.4
Other Assets 797.2 258.6 261.2
Total Assets $ 1,372.2 $ 654.4 $ 637.0
Liabilities and Shareowners' Equity
Debt Maturing in One Year $ 478.5 $ 59.1 $ 59.3
Other Current Liabilities 201.3 157.5 116.5
Long-Term Debt .3 1.2 1.6
Deferred Credits, Other Liabilities 12.7 5.8 12.4
Common Shareowners' Equity 679.4 430.8 447.2
Total Liabilities
& Shareowners' Equity $ 1,372.2 $ 654.4 $ 637.0
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