Convergys Corporation Revenues up 13 Percent on Strong Growth in Customer Management Group.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 Fourth Quarter: --The Customer Management Group grew 21 percent from the prior year. --The Information Management Group continued to see strong acceptance of its Infinys technology with four new market wins, including an expanded relationship with Sprint. Convergys Corporation (NYSE:CVG), a global leader in integrated billing, employee care, and customer care services, announced today its financial results for the fourth quarter of 2004. Total revenues increased 13 percent to $672.2 million compared to $594.5 million reported in the fourth quarter of 2003. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income was $20.2 million or $0.14 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 $48.4 million or $0.33 in the fourth quarter of 2003. 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 net income, excluding a net 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. , was $41.2 million or $0.28 per diluted share compared with $47.8 million or $0.33 per diluted share in the prior year. Convergys' results reflect significant improvement in overall revenue growth as a result of solid performance in the Customer Management Group, which generated a 21 percent increase in revenue. This was partially offset by a 3 percent decline in Information Management Group revenue. "Convergys delivered strong revenue growth in the fourth quarter as our Customer Management Group grew substantially from prior year levels. We see significant 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. opportunities in the pipeline and strong market acceptance of our service offerings. The Information Management Group continued to experience strong acceptance of our Infinys (TM) technology with four new contract wins this quarter, including an expanded relationship with Sprint," 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. "As we enter 2005, we expect our growth momentum to continue." In the fourth quarter, Convergys recorded a net, pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta restructuring charge of $30.4 million. This included a severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when charge of $36.7 million related to the reduction in force initiated during the fourth quarter. The focus of this initiative is to reduce the number of management positions in Convergys' Information Management Group and to further streamline streamline, path of a fluid flowing steadily and without appreciable turbulence. A body is said to be streamlined if its shape offers the least possible resistance to a current of air, water, or other fluid. Convergys' Customer Management Group and corporate operations. In addition, Convergys reversed $6.3 million of facility closure costs accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. in a previous 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). , to support a new, large outsourcing agreement. "Our restructuring efforts should be substantially concluded by June June: see month. 30, 2005. When complete, we expect to generate annual savings in excess of $50 million. Beyond the restructuring, we continue to look for opportunities to improve our cost structure and operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: ," said Orr. Highlights Since Last Quarterly Report --Convergys made a significant announcement with Sprint during the quarter. Sprint is consolidating its wireless wholesale billing solution from an 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. system based on a competitor's platform to an outsourced Convergys billing platform. Convergys also announced that Sprint will license Infinys software to enable Sprint to combine rating activities across all lines of business. --Convergys signed a new, large, outsourced, customer care agreement supporting a communications company Communications Company is a communications unit of the United States Marine Corps. They are part of Combat Logistics Regiment 37 , 3rd Marine Logistics Group (3MLG) and III Marine Expeditionary Force (III MEF). The unit is based out of the Marine Corps Base Camp Smedley D. . The five-year agreement, valued at $300 million, encompasses a wide range of customer support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services . --Convergys announced its first customer care agreement with an Australian-based company. The four-year outsourced services contract is with Optus, a leading integrated communications provider. Convergys will supplement Optus' domestic contact center operations from a facility in India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. . --Convergys expanded its service capabilities with the acquisition of Finali. Finali transforms customer care operations through a unique blend of analytics, consulting, and automation, enabling Convergys to address the specific needs of the $130 billion in-house contact center market. --During the fourth quarter, Qatar Qatar or Katar (both: kŭ`tər, gŭ–, kətär`), officially State of Qatar, independent emirate (2005 est. pop. 863,000), c. Telecom launched one of the world's most advanced billing applications. Leveraging Infinys' technology from Convergys, Qatar now has a billing system that supports the Quadruple quad·ru·ple adj. 1. Consisting of four parts or members. 2. Four times as much in size, strength, number, or amount. 3. Music Having four beats to the measure. n. Play (TM) - fixed and mobile telephony Meaning "sound over distance," it refers to electronically transmitting the human voice. In the beginning, telephony dealt only with analog signals in the circuit-switched networks of the telephone companies. , video, and data. 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 $474.3 million, a 21 percent increase from the fourth quarter of 2003. Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. half of this increase reflects growth with our Sprint-IBM partnership as well as revenues from a large global industrial client and continued growth with DIRECTV DirecTV (trademarked as "DIRECTV") is a direct broadcast satellite (DBS) service based in El Segundo, California, USA, that transmits digital satellite television and audio to households in the United States, the Caribbean and Latin America except for Mexico. . Also contributing to the increase were the acquisitions of Encore, DigitalThink, and Finali, which combined, accounted for approximately one-third of the growth. The remaining growth 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 fourth quarter 2004 GAAP 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 were $34.5 million and 7.3 percent, respectively. This compares to prior year operating income and operating margin of $46.2 million and 11.8 percent. This decrease reflects in large part, our continuing commitment to grow Employee Care including investment in the company's learning capabilities. In addition to this ongoing investment, the margins 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 contract were lower than expected. This decrease also reflects increased costs associated with new large outsourcing clients, 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 . These items were partially offset by the impact of Convergys' continuous improvement initiatives and economies of scale driven by CMG's growth in revenues. Excluding the $0.9 million in restructuring income, CMG's fourth quarter 2004 pro forma operating income and operating margin were $33.6 million and 7.1 percent. Information Management Group (IMG IMG International medical graduate, see there ) Convergys IMG's external revenues decreased 3 percent to $197.9 million in the fourth quarter of 2004 from $203.7 million in the same period last year. Revenue from recent acquisitions accounted for approximately 8 percent of revenues in the quarter. 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 $97.1 million decreased 18 percent from the prior year. This decrease reflects lower average rates from wireless clients and the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. resolution of two client matters in the fourth quarter of 2003. The decrease was 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. at the end of 2003. Professional and consulting revenues of $38.4 million more than doubled from the prior year. This reflects revenues resulting from the acquisition of the ALLTEL billing assets as well as an increase in services provided to various wireless and cable clients. License and other revenues increased 18 percent from the prior year to $19.4 million. This increase reflects expanded relationships with several Convergys North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. cable and wireless clients. International revenues decreased 17 percent to $43.0 million primarily due to lower license and related implementation revenues from the company's Asia Pacific operation. These items were partially offset by the favorable impact of foreign exchange fluctuation Fluctuation A price or interest rate change. and increased license revenues from various European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. clients. Including the $25.8 million of severance costs recorded during the fourth quarter, IMG generated GAAP operating income of $5.3 million. Excluding the impact of this charge, IMG's pro forma operating income and operating margin were $31.1 million and 15.7 percent, respectively. This compares to prior year operating income and operating margin of $33.1 million and 16.3 percent, respectively. These changes mainly reflect the negative impact of lower data processing revenues, largely offset by lower spending on general and administrative and research and development costs. Other Items --As a result of our amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. 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 plan, Convergys incurred $7.8 million in stock compensation expense during the quarter. This includes approximately $3 million incurred with the fourth quarter severance charge, and $3 million associated with restricted stock units Restricted stock units Similar to restricted stock. However, the unit represents a promise that employees will receive stock in the future. The units do not pay dividends until the stock is vested. awarded in 2004. --Convergys' investments in the cellular partnerships contributed pre-tax equity earnings of $1.0 million. This compares to a pre-tax loss of $1.6 million from the prior year. --Interest expense was $3.6 million versus $1.9 million in the prior year, resulting from a higher debt balance and slightly higher interest rates. --Cash flows from operations for the three months and twelve months ended December December: see month. 31, 2004, were $4.5 million and $193.1 million, respectively. During the quarter and for the full year, Convergys had free cash flow of $50.9 million and $111.9 million, respectively. --Impacting free cash flow, the company used approximately $44 million in cash to fund capital expenditures, principally supporting growth in CMG. --Days sales outstanding (DSO See CSO. ) were 75 days at December 31, 2004. This represents an improvement from the 78 days outstanding at September September: see month. 30, 2004. --The effective tax rate for the year was 35.7 percent, resulting in an effective rate for the fourth quarter of 30.3 percent. This fourth quarter rate reflects in part greater than expected realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. of operating loss 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. carry-forwards. 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 January January: see month. 19, 2005. 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 2005, Convergys continues to expect revenue to grow approximately 10 percent with operating income, excluding the costs of the fourth quarter 2004 restructuring charge, growing somewhat faster. Convergys remains comfortable with the consensus 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. estimates of approximately $1.00. For 2005, Convergys expects the effective tax rate will approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. the 2003 rate of 36.8 percent. For the first quarter 2005, Convergys' CMG revenue is expected to increase roughly 20 percent and operating margin will be down slightly from the prior year levels. For the first quarter 2005, Convergys' IMG revenue is expected to be roughly flat and operating margin roughly in line with prior year levels. Consistent with our previous guidance, for the first quarter 2005, EPS is expected to be $0.20 to $0.22. 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 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 64 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 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. Convergys is
on the net at www.convergys.com and has world headquarters in
Cincinnati.(Infinys and Quadruple Play are trademarks and Convergys and the Convergys logo are registered trademarks of Convergys Corporation.) NON-GAAP MEASURES: This news release contains non-GAAP financial measures, including 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 impact of restructuring charges and 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 Wednesday: see week. , January 19, at 10:00 AM, EST EST electroshock therapy. EST abbr. electroshock therapy , to discuss the company's fourth 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 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 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)
Fourth Quarter
Change
2004 2003 Amount %
Revenues:
- Customer Mgmt. Group $ 474.3 $ 390.8 $ 83.5 21
- Information Mgmt. Grp. 197.9 205.1 (7.2) (4)
- Eliminations - (1.4) 1.4 -
--------- --------- ------- ---
--Total $ 672.2 $ 594.5 $ 77.7 13
Operating Income (Loss):
- Customer Mgmt. Group $ 34.5 $ 46.2 $(11.7) (25)
- Information Mgmt. Grp. 5.3 33.1 (27.8) (84)
- Corporate & Other (9.0) (0.6) (8.4) -
--------- --------- ------- ---
--Total $ 30.8 $ 78.7 $(47.9) (61)
Net Income $ 20.2 $ 48.4 $(28.2) (58)
Earnings Per Common Share
- Basic $0.14 $0.34 ($0.20) (59)
- Diluted $0.14 $0.33 ($0.19) (58)
Weighted Average Common Shares Outstanding
- Basic 140.6 141.9 (1.3) (1)
- Diluted 144.9 145.1 (0.2) -
Twelve Months
Change
2004 2003 Amount %
Revenues:
- Customer Mgmt. Group $1,739.2 $1,504.9 $ 234.3 16
- Information Mgmt. Grp. 748.5 788.7 (40.2) (5)
- Eliminations - (4.8) 4.8 -
--------- --------- -------- ---
--Total $2,487.7 $2,288.8 $ 198.9 9
Operating Income (Loss):
- Customer Mgmt. Group $ 131.4 $ 179.3 $ (47.9) (27)
- Information Mgmt. Grp. 73.0 119.4 (46.4) (39)
- Corporate & Other (18.9) (6.3) (12.6) -
--------- --------- -------- ---
--Total $ 185.5 $ 292.4 $(106.9) (37)
Net Income $ 111.5 $ 171.6 $ (60.1) (35)
Earnings Per Common Share
- Basic $0.79 $1.18 ($0.39) (33)
- Diluted $0.77 $1.15 ($0.39) (33)
Weighted Average Common Shares Outstanding
- Basic 141.4 145.7 (4.3) (3)
- Diluted 145.4 148.8 (3.4) (2)
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-K for the annual
period ended December 31, 2004.
Convergys Corporation
Consolidated Statements of Income
In Millions Except Per Share Amounts
(Unaudited)
For the Three Mo.s For the Twelve Mo.s
Ended Dec. 31, % Ended Dec. 31, %
2004 2003 Chg. 2004 2003 Chg.
Revenues:
Customer Management Grp.
Communications $256.6 $241.8 6 $ 986.6 $ 932.1 6
Technology 45.0 33.7 34 168.8 160.8 5
Financial Services 63.9 33.7 90 197.5 131.2 51
Other 108.8 81.6 33 386.3 280.8 38
------ ------ -- ------- ------- --
Total CMG Revenues 474.3 390.8 21 1,739.2 1,504.9 16
Information Mgmt. Grp.
Data Processing 97.1 118.1 (18) 389.2 458.0 (15)
Prof. & Consulting 38.4 17.4 121 122.5 95.8 28
License & Other 19.4 16.4 18 77.1 58.3 32
International 43.0 51.8 (17) 159.7 171.8 (7)
------ ------ -- ------- ------- --
External Revenues 197.9 203.7 (3) 748.5 783.9 (5)
Interco. Svcs. for CMG - 1.4 - - 4.8 -
------ ------ -- ------- ------- --
Total IMG Revenues 197.9 205.1 (4) 748.5 788.7 (5)
Eliminations & Other - (1.4) - - (4.8) -
------ ------ -- ------- ------- --
Total Revenues 672.2 594.5 13 2,487.7 2,288.8 9
Costs & Expenses:
Cost of Providing
Services & Products 418.4 344.9 21 1,542.0 1,320.9 17
Selling, General & Admin. 136.3 116.1 17 511.1 458.2 12
Research & Development 18.6 24.7 (25) 77.5 94.3 (18)
Depreciation 31.5 27.3 15 119.1 108.9 9
Amortization 6.2 3.8 63 22.1 15.1 46
Restructuring 30.4 (1.0) - 30.4 (1.0) -
------ ------ -- ------- ------- --
Total Costs & Expenses 641.4 515.8 24 2,302.2 1,996.4 15
Operating Income 30.8 78.7 (61) 185.5 292.4 (37)
Equity in Earnings (Losses)
of Cellular Partnerships 1.0 (1.6) - 2.0 (12.6) -
Other Income (Expense), Net 0.8 1.4 (43) (3.8) (1.3) -
Interest Expense (3.6) (1.9) 89 (10.3) (6.9) 49
------ ------ -- ------- ------- --
Income Before Tax 29.0 76.6 (62) 173.4 271.6 (36)
Income Taxes 8.8 28.2 (69) 61.9 100.0 (38)
------ ------ -- ------- ------- --
Net Income $ 20.2 $ 48.4 (58) $ 111.5 $ 171.6 (35)
====== ====== == ======= ======= ==
Earnings Per Common Share
Basic $ 0.14 $ 0.34 (59) $ 0.79 $ 1.18 (33)
Diluted $ 0.14 $ 0.33 (58) $ 0.77 $ 1.15 (33)
Weighted Average Common Shares Outstanding
Basic 140.6 141.9 141.4 145.7
Diluted 144.9 145.1 145.4 148.8
Other Data
Operating Margin 4.6% 13.2% 7.5% 12.8%
Market Price Per Share
High $ 15.31 $ 20.80 $ 19.96 $ 20.80
Low $ 12.42 $ 13.71 $ 12.30 $ 11.30
Close $ 14.99 $ 17.46 $ 14.99 $ 17.46
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-K for the
annual period ended December 31, 2004.
Convergys Corporation
Consolidated Balance Sheets
In Millions
(Unaudited)
Dec. 31, Dec. 31,
2004 2003
Assets
Cash and Cash Equivalents $ 58.4 $ 37.2
Receivables - Net 447.3 298.1
Other Current Assets 87.1 84.2
Property & Equipment - Net 416.6 363.8
Other Assets 1,198.7 1,026.9
--------- ---------
Total Assets $ 2,208.1 $ 1,810.2
Liabilities and Shareholders' Equity
Debt Maturing in One Year $ 49.5 $ 76.0
Other Current Liabilities 527.9 466.7
Other Liabilities 43.2 57.0
Long-Term Debt 302.2 58.8
Common Shareholders' Equity 1,285.3 1,151.7
--------- ---------
Total Liabilities
& Shareholders' Equity $ 2,208.1 $ 1,810.2
Convergys Corporation
Summarized Statement of Cash Flows
In Millions
(Unaudited)
For the Three Mo.s For the Twelve Mo.s
Ended Dec. 31, Ended Dec. 31,
2004 2003 2004 2003
Cash provided
by operating activities $ 4.5 $ 97.3 $193.1 $373.5
Cash used in
investing activities (66.2)(a) (139.5)(a) (364.9)(b) (237.2)(b)
Cash provided by (used
in) financing activities 70.1 30.7 193.0 (111.3)
------- ------- ------- -------
Net increase
(decrease)in cash $ 8.4 $(11.5) $ 21.2 $ 25.0
(a) Includes $43.6 and $100.0 of capital expenditures for the
three months ended Dec. 31, 2004 and 2003, respectively.
(b) Includes $156.2 and $173.8 of capital expenditures for the
twelve months ended Dec. 31, 2004 and 2003, respectively.
Convergys Corporation
Customer Management Group
Operating Segment Data
In Millions
(Unaudited)
For the Three Mo.s For the Twelve Mo.s
Ended Dec. 31, % Ended Dec. 31, %
2004 2003 Chg. 2004 2003 Chg.
Revenues:
Communications $256.6 $241.8 6 $ 986.6 $ 932.1 6
Technology 45.0 33.7 34 168.8 160.8 5
Financial Services 63.9 33.7 90 197.5 131.2 51
Other 108.8 81.6 33 386.3 280.8 38
------ ------ -- ------- ------- --
Total CMG Revenues 474.3 390.8 21 1,739.2 1,504.9 16
Costs & Expenses:
Cost of Providing
Services & Products 311.2 247.7 26 1,140.0 943.5 21
Selling, General & Admin. 103.1 75.6 36 370.8 296.2 25
Research & Development 2.9 2.1 38 10.2 6.5 57
Depreciation 20.1 17.0 18 76.3 70.6 8
Amortization 3.4 2.2 55 11.4 8.8 30
Restructuring (0.9) - - (0.9) - -
------ ------ -- ------- ------- --
Total Costs & Expenses 439.8 344.6 28 1,607.8 1,325.6 21
------ ------ -- ------- ------- --
Operating Income $ 34.5 $ 46.2 (25) $ 131.4 $ 179.3 (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-K for the annual period ended December 31, 2004.
Convergys Corporation
Information Management Group
Operating Segment Data
In Millions
(Unaudited)
For the Three Mo.s For the Twelve Mo.s
Ended Dec. 31, % Ended Dec. 31, %
2004 2003 Chg. 2004 2003 Chg.
Revenues:
Data Processing $ 97.1 $118.1 (18) $389.2 $458.0 (15)
Prof. & Consulting 38.4 17.4 121 122.5 95.8 28
License & Other 19.4 16.4 18 77.1 58.3 32
International 43.0 51.8 (17) 159.7 171.8 (7)
----- ------ -- ----- ----- --
External Revenues 197.9 203.7 (3) 748.5 783.9 (5)
Interco. Svcs. for CMG - 1.4 - - 4.8 -
----- ------ -- ----- ----- --
Total IMG Revenues 197.9 205.1 (4) 748.5 788.7 (5)
Costs & Expenses:
Cost of Providing
Services & Products 107.4 98.5 9 403.0 383.2 5
Selling, General & Admin. 32.2 41.5 (22) 135.9 161.4 (16)
Research & Development 15.7 22.6 (31) 67.2 87.8 (23)
Depreciation 8.7 7.8 12 32.9 30.6 8
Amortization 2.8 1.6 75 10.7 6.3 70
Restructuring 25.8 - - 25.8 - -
------ ------ -- ------ ----- --
Total Costs & Expenses 192.6 172.0 12 675.5 669.3 1
------ ------ -- ------ ------ --
Operating Income $ 5.3 $ 33.1 (84) $ 73.0 $119.4 (39)
====== ====== ====== ======
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-K for the annual period ended December 31, 2004.
Convergys Corporation
Reconciliation of Pro Forma Operating Results
(In Millions Except Per Share Amounts)
CMG IMG Corp. Consol.
Operating Operating Operating Operating
Income Income Income Income
(Loss) (Loss) (Loss) (Loss)
--------- -------- ------- -------
Fourth Quarter 2004:
--------------------
Results as reported
under U.S. GAAP $ 34.5 $ 5.3 $ (9.0) $ 30.8
Less:
Reconciling items (a) 0.9 (25.8) (5.5) (30.4)
------ ------ ------ ------
Pro forma results
(a non-GAAP measure) $ 33.6 $ 31.1 $ (3.5) $ 61.2
====== ====== ====== ======
Year to Date 2004:
--------------------
Results as reported
under U.S. GAAP $131.4 $ 73.0 $(18.9) $185.5
Less:
Reconciling items (a) 0.9 (25.8) (5.5) (30.4)
------ ------ ------ ------
Pro forma results
(a non-GAAP measure) $130.5 $ 98.8 $(13.4) $215.9
====== ====== ====== ======
Fourth Quarter 2003:
--------------------
Results as reported
under U.S. GAAP $ 46.2 $ 33.1 $ (0.6) $ 78.7
Less:
Reconciling items (b) - - 1.0 1.0
------ ------ ------ ------
Pro forma results
(a non-GAAP measure) $ 46.2 $ 33.1 $ (1.6) $ 77.7
====== ====== ====== ======
Year to Date 2003:
--------------------
Results as reported
under U.S. GAAP $179.3 $ 119.4 $ (6.3) $292.4
Less:
Reconciling items (b) - - 1.0 1.0
------ ------- ------ ------
Pro forma results
(a non-GAAP measure) $179.3 $ 119.4 $ (7.3) $291.4
====== ======= ====== ======
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).
(a) Reflects the net restructuring charge of $30.4 recorded in
the fourth quarter of 2004.
(b) Reflects the reversal of the excess restructuring accrual
that was initially recorded in the fourth quarter of 2002.
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
------- -------- ------- -------
Fourth Quarter 2004:
--------------------
Results as reported
under U.S. GAAP $ 29.0 $ (8.8) $ 20.2 $ 0.14
Less:
Reconciling items (a) (30.4) 9.4 (21.0) (0.14)
------ ------ ------ ------
Pro forma results
(a non-GAAP measure) $ 59.4 $(18.2) $ 41.2 $ 0.28
====== ====== ====== ======
Year to Date 2004:
--------------------
Results as reported
under U.S. GAAP $173.4 $(61.9) $111.5 $ 0.77
Less:
Reconciling items (a) (30.4) 9.4 (21.0) (0.14)
------ ------ ------ ------
Pro forma results
(a non-GAAP measure) $203.8 $(71.3) $132.5 $ 0.91
====== ====== ====== ======
Fourth Quarter 2003:
--------------------
Results as reported
under U.S. GAAP $ 76.6 $(28.2) $ 48.4 $ 0.33
Less:
Reconciling items (c) 1.0 (0.4) 0.6 -
------ ------ ------ ------
Pro forma results
(a non-GAAP measure) $ 75.6 $(27.8) $ 47.8 $ 0.33
====== ====== ====== ======
Year to Date 2003:
--------------------
Results as reported
under U.S. GAAP $271.6 $(100.0) $171.6 $ 1.15
Less:
Reconciling items (b,c) (8.9) 3.1 (5.8) (0.04)
------ ------- ------ ------
Pro forma results
(a non-GAAP measure) $280.5 $(103.1) $177.4 $ 1.19
====== ======= ====== ======
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).
(a) Reflects the net restructuring charge of $30.4 recorded in the
fourth quarter of 2004.
(b) 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.
(c) Reflects the $1.0 reversal of the excess restructuring accrual
that was initially recorded in the fourth quarter of 2002.
Convergys Corporation
Reconciliation of Cash Provided by Operating
Activities to Free Cash Flow
(In Millions)
For the Three Mo.s For the Twelve Mo.s
Ended Dec. 31, Ended Dec. 31,
2004 2003 2004 2003
Cash provided by
operating activities $ 4.5 $ 97.3 $193.1 $373.5
Accounts receivable
securitization 90.0 (25.0) 75.0 (25.0)
Capital expenditures (43.6) (100.0) (156.2) (173.8)
------- ------- ------- -------
Free cash flows $ 50.9 $(27.7) $111.9 $174.7
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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