Convergys Corporation Revenues up 12 Percent -- Earnings of $0.21 -- on Strong Revenue Growth in Customer Care and Employee Care.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) ) in the Third Quarter: --The Customer Management Group grew 19 percent from the prior year and 9 percent from the prior quarter. --Employee Care signed a significant contract with the State of Texas. --The Information Management Group announced four new contracts. Convergys Corporation (NYSE:CVG), a global leader in integrated billing, employee care, and customer care services, announced today its financial results for the third quarter of 2004. Total revenues increased 12 percent to $639.9 million compared to $570.7 million reported in the third quarter of 2003. Net income was $30.1 million or $0.21 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 compared with $45.5 million or $0.31 in the third quarter of 2003. Convergys' results reflect significant improvement in overall revenue growth as a result of solid performance in Customer Care and Employee Care, which generated a 19 percent increase in Customer Management Group revenue. This was partially offset by a 3 percent decline in Information Management Group revenue. "I am encouraged that Convergys' growth momentum continued in the third quarter. Our Customer Management Group grew substantially from second quarter and prior year levels. The Information Management Group's performance remained stable, and margins in both these groups increased over second quarter numbers. Importantly, Convergys remains positioned for sustained growth," 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, 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. "Specifically, Customer Care continues to see strong demand and Employee Care continues to be well positioned in a large and developing global market. Our Information Management Group continues to see growing acceptance of our Infinys technology as the communications industry communications industry, broadly defined, the business of conveying information. Although communication by means of symbols and gestures dates to the beginning of human history, the term generally refers to mass communications. moves toward bundled service offerings, which plays to the strength of Infinys." In order to streamline its operations and cost structure while strengthening its prospects for 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. growth, Convergys is finalizing a 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). plan. Convergys expects to complete the plan, affecting approximately 250 employees both domestically and internationally, and take 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. in the fourth quarter. The plan will include a reduction in force primarily affecting management positions in its Information Management Group. "The restructuring plan reflects Convergys' continuing commitment to deliver value to clients by operating efficiently while realizing the increased effectiveness of research and development spending focused on a single billing platform - Infinys," said Orr. The reduction in force will take place through a combination of voluntary separation and layoffs starting immediately and being substantially completed by the end of the first quarter 2005. As a result of these actions, Convergys expects to take a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta business restructuring charge in the range of $15 million to $20 million in the fourth quarter 2004. Convergys would begin to realize the savings starting early in 2005. These savings in 2005 are expected to exceed the one time cost of the restructuring charge. Orr continued, "With this announcement, we are outlining strategic actions that will streamline our operations and reduce costs. We expect to move quickly to take the majority of these actions during the fourth quarter. This will allow Convergys to remain focused on building shareholder value while continuing our commitment to quality and client satisfaction." Highlights Since Last Quarterly Report --Convergys announced that the Texas Health and Human Services Noun 1. Health and Human Services - the United States federal department that administers all federal programs dealing with health and welfare; created in 1979 Department of Health and Human Services, HHS Commission (HHSC HHSC Health and Human Services Commission HHSC Headquarters & Headquarters Service Company (US Army) ), has signed a five-year contract with Convergys to provide comprehensive 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 payroll services for HHSC's 46,000 employees. This represents one of Employee Care's largest contracts to date. --Convergys announced it has entered into a long term billing contract with VIVO (Video In Video Out) Refers to a display adapter with analog video capture and analog video out (NTSC out) capabilities. See display adapter. , a joint venture in Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. led by Portugal Telecom Portugal Telecom (Euronext: PTC, NYSE: PT) is the biggest telecommunications operator in Portugal. It operates mainly in Portugal and Brazil. It also has a significant presence in Morocco, Guinea-Bissau, Cape Verde, Mozambique, Timor-Leste, Angola, Kenya, the People's Republic (NYSE:PT) and Telefonica Moviles SA (TEM TEM 1. transmission electron microscope. 2. triethylenemelamine. 3. transmissible encephalopathy of mink. ), to support VIVO's six million post-paid Adv. 1. post-paid - having the postage paid by the sender; "I will send it post-paid" post-free post-paid adj → porte pagado post-paid adj (Brit wireless subscribers. Convergys will license its Atlys (r) billing solution and use its local resources to replace and consolidate VIVO's six different billing systems onto the Convergys solution. --Convergys announced a contract with TeliaSonera TeliaSonera AB is the dominant telephone company and mobile network operator in Sweden and Finland, and is also active in other countries in Northern, Eastern Europe and Spain, with a total (2004) of 26 million customers. , the leading telecommunications company See telecom company. in the Nordic and Baltic regions For other uses, see Baltic (disambiguation). The Baltic region is an ambiguous term that refers to slightly different combinations of countries in the general area surrounding the Baltic Sea. . TeliaSonera will license Convergys' Infinys application for rating and billing. During the quarter, Convergys also announced Infinys contracts with Orbitel Orbitel (Bulgarian: Орбител) is Bulgaria's largest alternative wireline telecommunications and Internet service provider with national licenses for voice and data. and WildBlue. Operating Performance by Segment 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 ) - Customer Care and Employee Care Convergys CMG's revenues were $456.2 million, a 19 percent increase from the third quarter of 2003. Over half of this increase reflects growth with our Sprint-IBM partnership as well as new revenues from a large global industrial client and continued growth with AT&T Wireless. Also contributing to the increase were the acquisitions of Encore Receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed Management and DigitalThink, which combined, accounted for approximately 30 percent of the growth. The remaining variance The discrepancy between what a party to a lawsuit alleges will be proved in pleadings and what the party actually proves at trial. In Zoning law, an official permit to use property in a manner that departs from the way in which other property in the same locality reflects increased revenues from several other clients, partially offset by lower spending by CMG's largest wireline client and the impact of pricing changes. Convergys CMG's 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. and operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: were $35.7 million and 7.8 percent, respectively, compared with $46.3 million and 12.1 percent in the prior year. These changes primarily reflect increased investment in Employee Care operations and increased startup (STARTing UP) "At startup" means when the computer is first turned on or when a program is first loaded. See Startup folder. costs associated with ramping large clients. In addition, pricing changes and higher operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. resulting from the negative 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 impacted CMG's earnings. These were partially offset by the impact of realized economies of scale driven by CMG's growth in revenues. Information Management Group (IMG IMG International medical graduate, see there ) Convergys IMG's external revenues decreased 3 percent to $183.7 million in the third quarter of 2004 from $188.9 million in the same period last year. Revenue from recent acquisitions accounted for slightly less than 9 percent of revenues in the quarter. Importantly, the acquired businesses - under Convergys management - have experienced over 50 percent organic growth year over 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 of $98.6 million decreased 10 percent from the prior year. This decrease reflects lower average rates from wireless clients. Additionally, the decrease reflects the elimination of bill finishing services provided to a wireless client, that had minimal impact on operating margin. These declines were partially offset by revenue from the acquisition of certain billing assets from ALLTEL ALLTEL Corporation (NYSE: AT) is an American telecommunications company with headquarters in Little Rock, Arkansas. Alltel provides wireless services to residential and business customers in 35 states. in the fourth quarter 2003, and a full quarter of revenue from a wireless client that was not fully implemented in the third quarter of 2003. Professional and consulting revenues of $31.2 million increased 25 percent from the prior year. This increase reflects revenues resulting from the acquisition of the ALLTEL billing assets, partially offset by lower spending by various wireless clients. License and other revenues increased 44 percent from the prior year to $18.6 million. This increase reflects a license arrangement with a large North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. wireless provider and expanded relationships with several North American cable and wireless clients. International revenues decreased 15 percent to $35.3 million mainly caused by lower license and related implementation revenues from the Company's Asia Pacific and Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of operations. Convergys IMG's third quarter operating income and operating margin were $22.3 million and 12.1 percent, respectively, compared with $29.0 million and 15.4 percent in the prior year. This reflects the impact of lower revenues, partially offset by lower IMG operating expenses realized through cost reduction initiatives. Non Operating Items --Convergys' investments in the cellular partnerships recorded a pre-tax equity loss of $0.6 million. This compares to pre-tax equity income of $0.2 million from the prior year. --Interest expense was $3.0 million versus $1.8 million in the prior year, resulting from a higher debt balance and slightly higher interest rates. --Other expense was $2.4 million versus $0.7 million in the prior year, reflecting foreign currency exchange losses. --The company's cash flows from operations for the three months ended September September: see month. 30, 2004, were $87.6 million. During the quarter, Convergys had free cash flow of $46.8 million. --Included within free cash flow, the company used approximately $41 million in cash to fund capital expenditures, principally supporting facilities growth in CMG. --Days sales outstanding (DSO See CSO. ) were 78 days at September 30, 2004. Approximately 5 days consist of amounts due from the State of Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and . Convergys has received payments from the State of Florida, including one made after the end of the quarter, that would have further reduced DSO by two days. Convergys expects the state to be current on its payments shortly. --During the quarter, the company repurchased 1.5 million shares at a cost of $20.0 million. This leaves 4.5 million shares for future share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. under the Board's current authorization The right or permission to use a system resource; the process of granting access. See access control. . Business Outlook The following 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. reflect Convergys' expectations as of October October: see month. 20, 2004. Given the various risk factors discussed below, actual results may differ materially. 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 Guidance For the full year 2004, Convergys CMG's revenue is expected to increase by approximately 15 percent from the 2003 level, and Convergys IMG's revenue is expected to decline by approximately 5 percent from the 2003 level. For the fourth quarter of 2004, Convergys CMG's operating margin is expected to be up from the third quarter level. For the same period, Convergys IMG's operating margin is expected to be down from the third quarter level due to restructuring charges. Excluding the restructuring charges, Convergys IMG's operating margin is expected to be up. For the fourth quarter 2004, our 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. is expected to be $0.15 to $0.20. Excluding the restructuring expense, the range is expected to be $0.24 to $0.26. For 2005, Convergys' revenue is expected to be up approximately 10 percent, and excluding the costs of the fourth quarter 2004 restructuring charge, EPS is expected to grow somewhat faster. For the first quarter 2005, EPS is expected to be approximately in line with the prior year level. ABOUT CONVERGYS Convergys Corporation (NYSE:CVG), 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, is a global leader in integrated billing, employee care, and customer care services provided through 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. 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 See broadband and broadband service provider. , technology, 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. , and other industries in nearly 60 countries. We also provide integrated, outsourced, human resource services to leading companies across a broad range of industries. We bring together world-class world-class adj. 1. Ranking among the foremost in the world; of an international standard of excellence; of the highest order: a world-class figure skater. 2. resources, software, and expertise to help create valuable relationships between our clients and their customers and their employees. This commitment is 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. by the more than 1.5 million individual bills our software produces each day to support more than 100 million subscribers, and by the more than 1.7 million separate customer and employee contacts we manage each day, both live and via electronic interaction. Convergys(r) employs more than 63,000 people in 62 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. , Europe, the Middle East, and Asia. Convergys is on the net at www.convergys.com and has world headquarters in Cincinnati. (Infinys is a trademark and Convergys, Atlys, and the Convergys logo are registered trademarks of Convergys Corporation.) NON-GAAP MEASURES: This news release contains non-GAAP financial measures, including 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 operating income, pro forma net income, pro forma 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 and free cash flow, which are not prepared 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. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the attached financial tables. For the periods reported, pro forma results exclude the effects of the first quarter 2003 equity loss of $9.9 million resulting from a legal settlement by the cellular partnership. These non-GAAP financial measures should not be construed as being more important than comparable GAAP measures. They are presented because Convergys' management uses this information when evaluating current results of operations and cash flow, and we believe that this information provides the users of the financial statements with an additional and useful comparison of Convergys' current results of operations and cash flows with past and future periods. CONFERENCE CALL NOTE: Convergys will host a one-hour conference call on Wednesday, October 20, 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 first quarter results. It will feature Jim Orr, Chairman, President, 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. A link to the conference call is available at www.convergys.com "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 may contain forward-looking statements 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 or significant business from a client, difficulties in completing a contract or implementing its provisions, difficulties in completing or implementing an acquisition, potential terrorist activities and the United States' response thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. , changes in the legal and regulatory environment in which Convergys and its clients operate, and competitive 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, 2003, 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.
CONVERGYS CORPORATION
Revenues, Net Income and Earnings Per Common Share
In Millions Except Per Share Amounts
(Unaudited)
Third Quarter
Change
2004 2003 Amount %
Revenues:
- Customer Mgmt. Group $ 456.2 $ 381.8 $ 74.4 19
- Information Mgmt. Grp. 183.7 190.1 (6.4) (3)
- Eliminations - (1.2) 1.2 -
--------- --------- ------- ---
--Total $ 639.9 $ 570.7 $ 69.2 12
Operating Income (Loss):
- Customer Mgmt. Group $ 35.7 $ 46.3 $(10.6) (23)
- Information Mgmt. Grp. 22.3 29.0 (6.7) (23)
- Corporate & Other (4.4) (1.1) (3.3) -
--------- --------- ------- ---
--Total $ 53.6 $ 74.2 $(20.6) (28)
Net Income $ 30.1 $ 45.5 $(15.4) (34)
Earnings Per Common Share
- Basic $0.21 $0.32 ($0.11) (34)
- Diluted $0.21 $0.31 ($0.11) (32)
Weighted Average Common Shares Outstanding
- Basic 140.6 141.6 (1.0) (1)
- Diluted 144.9 145.2 (0.3) -
Nine Months
Change
2004 2003 Amount %
Revenues:
- Customer Mgmt. Group $1,264.9 $1,114.1 $ 150.8 14
- Information Mgmt. Grp. 550.6 583.6 (33.0) (6)
- Eliminations - (3.4) 3.4 -
--------- --------- -------- ---
--Total $1,815.5 $1,694.3 $ 121.2 7
Operating Income (Loss):
- Customer Mgmt. Group $ 96.9 $ 133.1 $ (36.2) (27)
- Information Mgmt. Grp. 67.7 86.3 (18.6) (22)
- Corporate & Other (9.9) (5.7) (4.2) 74
--------- --------- -------- ---
--Total $ 154.7 $ 213.7 $ (59.0) (28)
Net Income $ 91.3 $ 123.2 $ (31.9) (26)
Earnings Per Common Share
- Basic $0.64 $0.84 ($0.19) (24)
- Diluted $0.63 $0.82 ($0.19) (23)
Weighted Average Common Shares Outstanding
- Basic 141.6 146.9 (5.3) (4)
- Diluted 145.5 150.0 (4.5) (3)
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 September 30, 2004.
Convergys Corporation
Consolidated Statements of Income
In Millions Except Per Share Amounts
(Unaudited)
For the Three Mo.s For the Nine Mo.s
Ended Sept. 30, % Ended Sept. 30, %
2004 2003 Chg. 2004 2003 Chg.
Revenues:
Customer Management Grp.
Communications $255.1 $230.1 11 $ 730.0 $ 690.3 6
Technology 43.6 37.4 17 123.8 127.1 (3)
Financial Services 52.4 34.9 50 133.6 97.5 37
Other 105.1 79.4 32 277.5 199.2 39
------ ------ -- ------- ------- --
Total CMG Revenues 456.2 381.8 19 1,264.9 1,114.1 14
Information Mgmt. Grp.
Data Processing 98.6 109.3 (10) 292.1 339.9 (14)
Prof. & Consulting 31.2 25.0 25 84.1 78.4 7
License & Other 18.6 12.9 44 57.7 41.9 38
International 35.3 41.7 (15) 116.7 120.0 (3)
------ ------ -- ------- ------- --
External Revenues 183.7 188.9 (3) 550.6 580.2 (5)
Interco. Svcs. for CMG - 1.2 - - 3.4 -
------ ------ -- ------- ------- --
Total IMG Revenues 183.7 190.1 (3) 550.6 583.6 (6)
Eliminations & Other - (1.2) - - (3.4) -
------ ------ -- ------- ------- --
Total Revenues 639.9 570.7 12 1,815.5 1,694.3 7
Costs & Expenses:
Cost of Providing
Services & Products 394.9 329.8 20 1,123.6 976.0 15
Selling, General & Admin. 132.6 113.7 17 374.8 342.1 10
Research & Development 21.3 22.9 (7) 58.9 69.6 (15)
Depreciation 31.6 26.4 20 87.6 81.6 7
Amortization 5.9 3.7 59 15.9 11.3 41
------ ------ -- ------- ------- --
Total Costs & Expenses 586.3 496.5 18 1,660.8 1,480.6 12
Operating Income 53.6 74.2 (28) 154.7 213.7 (28)
Equity in Earnings (Losses)
of Cellular Partnerships (0.6) 0.2 - 1.0 (11.0) -
Other Expense, Net (2.4) (0.7) - (4.6) (2.7) 70
Interest Expense (3.0) (1.8) 67 (6.7) (5.0) 34
------ ------ -- ------- ------- --
Income Before Tax 47.6 71.9 (34) 144.4 195.0 (26)
Income Taxes 17.5 26.4 (34) 53.1 71.8 (26)
------ ------ -- ------- ------- --
Net Income $ 30.1 $ 45.5 (34) $ 91.3 $ 123.2 (26)
====== ====== == ======= ======= ==
Earnings Per Common Share
Basic $ 0.21 $ 0.32 (34) $ 0.64 $ 0.84 (24)
Diluted $ 0.21 $ 0.31 (32) $ 0.63 $ 0.82 (23)
Weighted Average Common Shares Outstanding
Basic 140.6 141.6 141.6 146.9
Diluted 144.9 145.2 145.5 150.0
Other Data
Operating Margin 8.4% 13.0% 8.5% 12.6%
Market Price Per Share
High $ 15.38 $ 19.60 $ 19.96 $ 19.60
Low $ 12.30 $ 15.23 $ 12.30 $ 11.30
Close $ 13.43 $ 18.34 $ 13.43 $ 18.34
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 September 30, 2004.
Convergys Corporation
Consolidated Balance Sheets
In Millions
(Unaudited)
Sept. 30, Dec. 31,
2004 2003
Assets
Cash and Cash Equivalents $ 50.0 $ 37.2
Receivables - Net 350.5 298.1
Other Current Assets 70.4 84.2
Property & Equipment - Net 402.3 363.8
Other Assets 1,158.5 1,026.9
--------- ---------
Total Assets $ 2,031.7 $ 1,810.2
Liabilities and Shareholders' Equity
Debt Maturing in One Year $ 227.7 $ 76.0
Other Current Liabilities 488.7 466.7
Other Liabilities 39.1 65.2
Long-Term Debt 54.5 58.8
Common Shareholders' Equity 1,221.7 1,143.5
--------- ---------
Total Liabilities
& Shareholders' Equity $ 2,031.7 $ 1,810.2
Convergys Corporation
Summarized Statement of Cash Flows
In Millions
(Unaudited)
For the Three Mo.s For the Nine Mo.s
Ended Sept. 30, Ended Sept. 30,
2004 2003 2004 2003
Cash provided
by operating activities $ 87.6 $120.3 $188.6 $276.2
Cash used in
investing activities (43.2)(a) (32.5)(a) (298.7)(b) (97.7)(b)
Cash provided by (used
in) financing activities (50.6) (73.2) 122.9 (142.0)
------- ------- ------- -------
Net increase
(decrease)in cash $ (6.2) $ 14.6 $ 12.8 $ 36.5
(a) Includes $40.8 and $26.8 of capital expenditures for the
three months ended Sept. 30, 2004 and 2003, respectively.
(b) Includes $112.6 and $73.8 of capital expenditures for the
nine months ended Sept. 30, 2004 and 2003, respectively.
Convergys Corporation
Customer Management Group
Operating Segment Data
In Millions
(Unaudited)
For the Three Mo.s For the Nine Mo.s
Ended Sept. 30, % Ended Sept. 30, %
2004 2003 Chg. 2004 2003 Chg.
Revenues:
Communications $255.1 $230.1 11 $ 730.0 $ 690.3 6
Technology 43.6 37.4 17 123.8 127.1 (3)
Financial Services 52.4 34.9 50 133.6 97.5 37
Other 105.1 79.4 32 277.5 199.2 39
------ ------ -- ------- ------- --
Total CMG Revenues 456.2 381.8 19 1,264.9 1,114.1 14
Costs & Expenses:
Cost of Providing
Services & Products 296.3 239.5 24 828.8 695.8 19
Selling, General & Admin. 97.3 74.9 30 267.7 220.6 21
Research & Development 3.1 1.6 94 7.3 4.4 66
Depreciation 20.8 17.3 20 56.2 53.6 5
Amortization 3.0 2.2 36 8.0 6.6 21
------ ------ -- ------- ------- --
Total Costs & Expenses 420.5 335.5 25 1,168.0 981.0 19
------ ------ -- ------- ------- --
Operating Income $ 35.7 $ 46.3 (23) $ 96.9 $ 133.1 (27)
====== ====== ======== ========
The operating segment data for the Customer Management Group (CMG)
shown above reflects the detailed revenue and expense data for CMG,
as reported under U.S. GAAP, that will be presented in the Convergys
10-Q for the quarterly period ended September 30, 2004.
Convergys Corporation
Information Management Group
Operating Segment Data
In Millions
(Unaudited)
For the Three Mo.s For the Nine Mo.s
Ended Sept. 30, % Ended Sept. 30, %
2004 2003 Chg. 2004 2003 Chg.
Revenues:
Data Processing $ 98.6 $109.3 (10) $292.1 $339.9 (14)
Prof. & Consulting 31.2 25.0 25 84.1 78.4 7
License & Other 18.6 12.9 44 57.7 41.9 38
International 35.3 41.7 (15) 116.7 120.0 (3)
----- ------ -- ----- ----- --
External Revenues 183.7 188.9 (3) 550.6 580.2 (5)
Interco. Svcs. for CMG - 1.2 - - 3.4 -
----- ------ -- ----- ----- --
Total IMG Revenues 183.7 190.1 (3) 550.6 583.6 (6)
Costs & Expenses:
Cost of Providing
Services & Products 98.9 91.5 8 295.6 284.7 4
Selling, General & Admin. 32.6 39.5 (17) 103.7 119.9 (14)
Research & Development 18.6 21.3 (13) 51.5 65.2 (21)
Depreciation 8.4 7.3 15 24.2 22.8 6
Amortization 2.9 1.5 93 7.9 4.7 68
------ ------ -- ------ ----- --
Total Costs & Expenses 161.4 161.1 - 482.9 497.3 (3)
------ ------ -- ------ ------ --
Operating Income $ 22.3 $ 29.0 (23) $ 67.7 $ 86.3 (22)
====== ====== ====== ======
The operating segment data for the Information Management Group
(IMG) shown above reflects the detailed revenue and expense data
for IMG, as reported under U.S. GAAP, that will be presented in
the Convergys 10-Q for the quarterly period ended September 30, 2004.
Convergys Corporation
Reconciliation of Pro Forma Operating Results
(In Millions Except Per Share Amounts)
Income Income
(Loss) Tax Net
Before (Expense)/ Income Diluted
Tax Benefit (Loss) EPS
------- -------- ------- -------
Third Quarter 2004:
--------------------
Results as reported
under U.S. GAAP $ 47.6 $(17.5) $ 30.1 $ 0.21
Less: Special items - - - -
------ ------ ------ ------
Results excluding
special items
(a non-GAAP measure) $ 47.6 $(17.5) $ 30.1 $ 0.21
====== ====== ====== ======
Year to Date 2004:
--------------------
Results as reported
under U.S. GAAP $144.4 $(53.1) $ 91.3 $ 0.63
Less: Special items - - - -
------ ------ ------ ------
Results excluding
special items
(a non-GAAP measure) $144.4 $(53.1) $ 91.3 $ 0.63
====== ====== ====== ======
Third Quarter 2003:
--------------------
Results as reported
under U.S. GAAP $ 71.9 $(26.4) $ 45.5 $ 0.31
Less: Special items - - - -
------ ------ ------ ------
Results excluding
special items
(a non-GAAP measure) $ 71.9 $(26.4) $ 45.5 $ 0.31
====== ====== ====== ======
Year to Date 2003:
--------------------
Results as reported
under U.S. GAAP $195.0 $ (71.8) $123.2 $ 0.82
Less: Special items (a) (9.9) 3.5 (6.4) (0.04)
------ ------- ------ ------
Results excluding
special items
(a non-GAAP measure) $204.9 $ (75.3) $129.6 $ 0.86
====== ======= ====== ======
The schedule above provides a reconciliation of the Company's
results of operations, as reported under U.S. Generally Accepted
Accounting Principles (U.S. GAAP), to the pro forma results of
operations (non-U.S. GAAP), which excludes special items.
(a) Reflects the $9.9 equity loss generated from the Company's
investment in Cincinnati SMSA LLP, that resulted from the
partnership's settlement of its lawsuit with West Side
Cellular Communications, Inc. during the first quarter of 2003.
Convergys Corporation
Reconciliation of Cash Provided by Operating
Activities to Free Cash Flow
(In Millions)
For the Three Mo.s For the Nine Mo.s
Ended Sept. 30, Ended Sept. 30,
2004 2003 2004 2003
Cash provided by
operating activities $ 87.6 $120.3 $188.6 $276.2
Accounts receivable
securitization - - (15.0) -
Capital expenditures (40.8) (26.8) (112.6) (73.8)
------- ------- ------- -------
Free cash flows $ 46.8 $ 93.5 $ 61.0 $202.4
The schedule above provides a reconciliation of the Company's
cash flow from operations as reported under U.S. Generally
Accepted Accounting Principles (U.S. GAAP), to free cash flow,
which is a non-GAAP measure. Free cash flow is defined as cash
flow from operations less the change in the balance of the
accounts receivable securitization and capital expenditures.
Free cash flows are presented as an alternative measure of the
Company's ability to generate cash flows.
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