Convergys Delivers Record 2006 Revenue and Earnings Per Share.CINCINNATI -- Convergys Corporation (NYSE NYSE See: New York Stock Exchange :CVG CVG Convergys Corp CVG Corporación Venezolana de Guayana CVG Clear Vertical Grain (woodworking) CVG Carrier Group CVG Corporacion Venezolana de Guyana CVG Comprehensive Video Group (South Hackensack, NJ, USA) ), a global leader in providing customer care, human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. , and billing services, announced today its financial results for the fourth quarter and full year of 2006. HIGHLIGHTS * Record 2006 revenue of $2.8 billion, up 8 percent * Record 2006 earnings of $1.17 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, up 36 percent * Fourth quarter revenue of $720.0 million, up 8 percent * Earnings of $0.32 per diluted share in the fourth quarter, up 100 percent * Fourth quarter Customer Care revenue up 10 percent; operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. up 14 percent * Free cash flow of $97 million in the fourth quarter and $257 million for the full year. Convergys fourth quarter revenues of $720.0 million were up 8 percent compared to the fourth quarter of 2005 reflecting growth from the Customer Care and Employee Care segments. Fourth quarter net income increased 90 percent to $44.5 million, or $0.32 per diluted share, versus $23.4 million or $0.16 per diluted share in the prior year. "Our record 2006 results reflect the work begun in 2004 to deliver better shareholder returns while restoring earnings growth by transforming our business," said Jim Orr, Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Convergys. "Our significant focus on operating performance, management development, enhanced use of metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. and accountability have driven a higher level of performance. These efforts, combined with the key wins we are experiencing around the world, our financial capacity, and momentum have us well positioned to face future challenges and deliver further improvement in 2007 and beyond." Convergys Performance Overview Convergys net income improved $21.1 million in the fourth quarter compared to the same period last year. This improvement in net income was principally due to a $6.4 million increase in Customer Care operating income, a $9.3 million increase in Convergys' cellular partnership equity earnings, and a $19.0 million favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. change in income tax expense (improved international results in the fourth quarter of 2006 and the impact of foreign cash repatriations in the same period last year), offset in part by a $9.6 million decline in Information Management operating income and $5.5 million of additional long-term compensation expense. Operating Performance by Segment Customer Care Customer Care revenues of $468.1 million were up 10 percent in the fourth quarter compared to the same period last year. Strong growth from several existing clients in each of our verticals: Communication, 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, contributed to the revenue growth. Customer Care operating income and operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: were $53.5 million and 11.4 percent, respectively, compared with $47.1 million and 11.1 percent in the prior year. The operating income improvement reflects both revenue growth and operational efficiencies. Increased costs of approximately $12 million caused by the impact of a weakened U.S. dollar partially offset the improvements. Information Management Information Management revenues of $194.0 million were down one percent in the fourth quarter compared to the same period last year. Strong growth in international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. largely offset the decline in 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 revenue caused by a client migration. Information Management operating income and operating margin were $31.2 million and 16.1 percent, respectively, compared with $40.8 million and 20.7 percent in the prior year. The operating margin for the quarter is consistent with results recorded throughout the first nine months of 2006, but below a strong fourth quarter last year. Operating income for the fourth quarter included a restructuring action taken to better align cost structure to future business needs. Employee Care Employee Care revenues of $57.9 million were up 20 percent in the fourth quarter compared to $48.2 million in the same period last year. Revenue increased as a result of recent client implementations. Employee Care 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. increased to $12.0 million compared to an operating loss of $10.1 million in the prior year. A majority of the loss in the fourth quarter was due to a reserve for the resolution of issues relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the State of Florida contract, restructuring charges 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. , and increased costs related to a client implementation. Improvements resulting from cost reductions and on-going operating efficiencies partially offset these items. Other Items * Convergys recorded a restructuring charge of $12.5 million in the fourth quarter of 2006 versus $12.3 million in the fourth quarter of 2005. The $12.5 million restructuring charge includes $24.1 million of severance costs, $0.5 million of facility closure costs and the reversal of $12.1 million in abandonment costs for a facility being brought back into service to support consolidation of operations in the United Kingdom. Restructuring actions were taken in each business segment, including $6.5 million in Customer Care, $2.1 million in Employee Care, and $0.8 million in Information Management. The Information Management restructuring charge included severance charges of $12.9 million largely offset by the $12.1 million reversal described above. * The cellular partnerships contributed pre-tax equity earnings of $4.7 million during the fourth quarter. This compares to a loss of $4.6 million during the same period last year. Equity earnings of $11.8 million for the full year were in line with the $12.4 million in 2005. * The effective tax rate was 23.7 percent in the fourth quarter. The lower tax rate was due to a benefit from improved international performance, including the reversal of the UK facility costs mentioned above. * Cash flow from operating activities was $119.2 million in the fourth quarter. Free cash flow was $97.1 million compared to $105.8 million for the same period in the prior year. Free cash flow for the full year 2006 was $256.9 million. * Days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). (DSO See CSO. ) declined to 70 days at December 31, 2006. This compares to 73 days at September 30, 2006. * The increase in deferred charges in the quarter, net of amortization and deferred implementation revenue, was $7.9 million. * During the fourth quarter, Convergys recorded $10.5 million in non-cash stock based compensation expense. During the fourth quarter of 2005, this amount was $7.0 million. * During the fourth quarter, Convergys repurchased 2.8 million shares at a cost of $63.2 million and an average price of $22.72 per share. During 2006, Convergys repurchased 6.2 million shares at an average price of $20.56 per share. Financial Guidance * In a departure from previous practice, starting in 2007, Convergys will provide only annual earnings guidance but will provide updates to this annual guidance on a quarterly basis. * Convergys continues to expect overall revenue and earnings improvement to yield 2007 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. of more than $1.20 per share. * Convergys' 2007 expectations include:
-- Continued expansion in Customer Care revenue and earnings,
with seasonal effects driving relatively stronger
performance in the second half of the year.
-- Sequential declines in Information Management revenue,
operating income, and operating margin due to the Cingular
and Sprint migrations.
-- Improvement in Employee Care revenue and profitability.
FORWARD-LOOKING STATEMENTS forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. DISCLOSURE AND "SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " NOTE: This news release contains forward-looking statements that reflect Convergys' expectations as of January 24, 2007. Actual results of Convergys could differ materially from those discussed herein. Potential risk factors that could cause or contribute to actual results being materially different from those in the forward-looking statements include, but are not limited to, the loss of a significant client or significant business from a client, difficulties in completing a contract or implementing its provisions, difficulties in completing or implementing an acquisition, continued consolidation in the markets we serve, terrorist activities and responses of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and other nations to such activities, 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, 2005, and subsequent filings with the SEC by Convergys Corporation. The company has no current intention of updating any forward-looking statements that may be included herein, other than in publicly available statements. NON-GAAP FINANCIAL MEASURES: This news release contains non-GAAP financial measures as defined by the Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, reconciliations of these non-GAAP measures to their comparable GAAP measures are included in the attached financial tables. Convergys provides non-GAAP free cash flow, revenues excluding Cingular, and earnings excluding non-cash stock-based compensation expense. Convergys' management believes that these non-GAAP financial measures provide management and investors with (1) a more comprehensive understanding of the company's underlying performance, (2) a useful comparison of current results with past and future results, and (3) an enhanced understanding of the company's prospects for the future. However, Convergys recognizes that there are limitations associated with the use of these non-GAAP financial measures as they do not reflect all of the amounts associated with our results as determined in accordance with GAAP. These non-GAAP measures should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures. The non-GAAP financial information that we provide may be different from that provided by our competitors or other companies. As described above, Convergys uses the following non-GAAP measures: Free cash flow -- Management uses free cash flow to assess the financial performance of the company. Convergys' management believes that free cash flow is useful to investors because it relates the operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. of the company to the capital that is spent to continue and improve business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets , such as investment in the company's existing businesses. Further, free cash flow facilitates management's ability to strengthen the company's balance sheet, to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. the company's stock and to repay the company's debt obligations. Limitations associated with the use of free cash flow include that it does not represent the residual cash flow available for discretionary expenditures as it does not incorporate certain cash payments including payments made on capital lease obligations or cash payments for business acquisitions. Management compensates for these limitations by using both the non-GAAP measure, free cash flow, and the GAAP measure, cash from operating activities, in its evaluation of performance. There are no material purposes for which we use this non-GAAP measure beyond the purposes described above. Revenues excluding Cingular -- The company uses revenues excluding Cingular to assess the revenue growth of the business excluding the impact of Cingular's migration of acquired subscribers off AT&T Wireless's billing and customer care systems that was announced in 2004. Before the acquisition of AT&T Wireless by Cingular in 2004, AT&T Wireless was Convergys' largest client. For the first year after the merger, the company experienced a decline in customer care revenue primarily as a result of business changes instituted by Cingular related to former AT&T Wireless operations. Over the past year, the company has been assisting Cingular with migrating subscribers off the AT&T Wireless billing systems that Convergys supports onto Cingular's in-house systems, one of which Convergys continues to support. As a result of this migration, data processing revenues from Cingular have declined. Limitations associated with the use of this non-GAAP measure include that this measure does not include all of the amounts associated with our results as determined in accordance with GAAP. Management compensates for these limitations by using both the non-GAAP measure, revenues excluding Cingular, and the GAAP measure, revenues, in its evaluation of performance. There are no material purposes for which we use this non-GAAP measure beyond the purposes described above. Earnings excluding non-cash stock-based compensation expense -- Management uses earnings excluding non-cash stock-based compensation expense to compare operating results to competitors, without regard to the impact of various long-term incentive plans, including stock option and restricted stock compensation approaches. Management believes the stock-based compensation plans of competitors vary and therefore, comparison of the company's results to those of its competitors on a GAAP EPS basis alone would not be as useful, particularly during the transition to SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R reporting. Management also believes excluding these expenses facilitates comparison to the company's historical operating performance. For this latter reason, management does not allocate these expenses to the company's segment results, and excludes these expenses from internal analysis of business segment results. Limitations associated with the use of this non-GAAP measure include that this measure does not include all of the amounts associated with our results as determined in accordance with GAAP. Management compensates for these limitations by utilizing both the non-GAAP measures, earnings excluding non-cash stock-based compensation expense, and the GAAP measures, income before tax, net income and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of , in its evaluation of performance. There are no material purposes for which we use this non-GAAP measure beyond the purpose described above. CONFERENCE CALL NOTE: Convergys will host a conference call on Wednesday, January 24, 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 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 ABOUT CONVERGYS Convergys Corporation (NYSE:CVG) is a global leader in providing customer care, human resources, and billing services. Convergys combines specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. knowledge and expertise with solid execution to deliver outsourced solutions, consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" , and software support. Clients in more than 70 countries speaking nearly 35 languages depend on Convergys to manage the increasing complexity and cost of caring for customers and employees. Convergys serves the world's leading companies in many industries including communications, financial services, technology, and consumer products. Convergys is a member of the S&P 500 and a Fortune Most Admired Company. Headquartered in Cincinnati, Ohio “Cincinnati” redirects here. For other uses, see Cincinnati (disambiguation). Cincinnati is a city in the U.S. state of Ohio and the county seat of Hamilton County. , Convergys has approximately 74,000 employees in 75 customer contact centers, three data centers, and other facilities in the United States, 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. For more information visit www.convergys.com Convergys and the Convergys logo are registered trademarks of Convergys Corporation. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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