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Exhibit 99.1

LOGO

 

West Corporation   

AT THE COMPANY:

11808 Miracle Hills Drive   

David Pleiss

Omaha, NE 68154   

Investor Relations

  

(402) 963-1500

  

dmpleiss@west.com

West Corporation Reports Fourth Quarter and Full Year 2013 Results

and Provides 2014 Guidance

Company Declares Quarterly Dividend

OMAHA, NE, January 30, 2014 – West Corporation (Nasdaq:WSTC), a leading provider of technology-driven communication services, today announced its fourth quarter and full year 2013 results.

Key Quarterly Highlights:

 

Unaudited, in millions except per share    Three Months Ended Dec. 31,     Twelve Months Ended Dec. 31,  
     2013     2012     % Change     2013     2012     % Change  

Consolidated Revenue

   $ 687.6      $ 680.2        1.1   $ 2,685.9      $ 2,638.0        1.8

Platform-based Revenue1

     495.8        479.9        3.3     1,955.2        1,886.5        3.6

Adjusted EBITDA2

     178.4        186.5        -4.3     704.4        686.9        2.6

EBITDA2

     175.8        182.0        -3.4     664.7        663.1        0.2

Adjusted Operating Income2

     144.9        146.3        -1.0     575.3        567.8        1.3

Operating Income

     128.8        125.1        2.9     480.2        478.2        0.4

Pro Forma Adjusted Net Income2,3

     N/A        N/A        N/A        244.8        N/A        N/A   

Adjusted Net Income2

     63.6        47.0        35.6     229.3        190.2        20.6

Net Income

     50.3        32.7        53.9     143.2        125.5        14.1

Pro Forma Adjusted EPS—Diluted2

     N/A        N/A        N/A        2.88        N/A        N/A   

Adjusted Earnings per Share—Diluted2

     0.75        0.74        1.4     2.86        2.99        -4.3

Earnings per Share—Diluted

     0.59        0.51        15.7     1.78        1.98        -10.1

Free Cash Flow2,4

     66.9        37.3        79.3     255.7        193.4        32.2

Cash Flows from Operations

     107.4        75.0        43.2     384.1        318.9        20.4

Cash Flows used in Investing

     (46.3     (36.3     27.6     (135.5     (201.6     -32.8

Cash Flows used in Financing

     (42.7     (9.3     NM        (196.8     (33.1     NM   

“West Corporation finished 2013 with its 27th consecutive year of revenue growth, record adjusted EBITDA and record cash flows from operations,” said Tom Barker, CEO. “The strong profitability and cash flow generation of the Company reinforces the strength of our business model and provides us with the flexibility to return capital to our shareholders and fund our growth initiatives.”

 

1


Dividend

The Company today also announced a $0.225 per common share quarterly dividend. The dividend is payable February 20, 2014, to shareholders of record as of the close of business on February 10, 2014.

Consolidated Operating Results

For the fourth quarter of 2013, revenue was $687.6 million compared to $680.2 million for the same quarter of the previous year, an increase of 1.1 percent. For the year ended December 31, 2013, revenue was $2,685.9 million compared to $2,638.0 million for 2012, an increase of 1.8 percent. Growth in consolidated revenue was driven by the Company’s platform-based businesses,1 which had revenue of $495.8 million in the fourth quarter of 2013, an increase of 3.3 percent over the same quarter of the previous year. Revenue from platform-based businesses increased 3.6 percent in 2013 to $1,955.2 million while revenue from agent-based businesses decreased 2.6 percent in 2013 to $742.2 million.

The Unified Communications segment had revenue of $377.0 million in the fourth quarter of 2013, an increase of 3.8 percent over the same quarter of the previous year. The Communication Services segment had revenue of $324.4 million in the fourth quarter of 2013, an increase of 1.2 percent over the same quarter of the previous year. For 2013, the Unified Communications segment had revenue of $1,498.2 million, an increase of 3.2 percent over 2012. The Communication Services segment had revenue of $1,223.9 million in 2013, an increase of 2.1 percent over 2012.

Adjusted EBITDA2 for the fourth quarter of 2013 was $178.4 million compared to $186.5 million for the fourth quarter of 2012. Adjusted EBITDA for 2013 was $704.4 million, or 26.2 percent of revenue, compared to $686.9 million, or 26.0 percent of revenue, in 2012. EBITDA2 was $175.8 million in the fourth quarter of 2013 compared to $182.0 million in the fourth quarter of 2012, a decrease of 3.4 percent. EBITDA was $664.7 million in 2013 compared to $663.1 million in 2012.

Adjusted operating income2 for the fourth quarter of 2013 was $144.9 million, or 21.1 percent of revenue, compared to $146.3 million, or 21.5 percent of revenue in the same quarter of 2012, a decrease of 1.0 percent. Operating income was $128.8 million in the fourth quarter of 2013 compared to $125.1 million in the fourth quarter of 2012, an increase of 2.9 percent. For the full year 2013, adjusted operating income was $575.3 million compared to $567.8 million in 2012, an increase of 1.3 percent. Operating income for 2013 was $480.2 million, 0.4 percent higher than 2012 operating income of $478.2 million.

 

1  Platform-based businesses include the Unified Communications segment, Intrado, West Interactive and HyperCube. Platform and agent-based revenue are presented prior to intercompany eliminations.
2  See Reconciliation of Non-GAAP Financial Measures below.
3  Reflects the impact of post-IPO reduced debt balances and lower interest rates resulting from the Company’s pricing amendments to its senior secured term loan facilities completed in February 2013 and redemption of the $450 million senior subordinated notes as if these transactions had been completed on January 1, 2013. Pro forma results also present shares outstanding as if the Company’s IPO had been completed on January 1, 2013.
4  Free cash flow is calculated as cash flows from operations less cash capital expenditures.

N/A: Not Applicable

NM: Not Meaningful

 

2


Adjusted net income2 was $63.6 million in the fourth quarter of 2013, an increase of 35.6 percent from the same quarter of 2012. Net income increased 53.9 percent to $50.3 million in the fourth quarter of 2013, compared to $32.7 million in the same quarter of 2012. In 2013, adjusted net income was $229.3 million, an increase of 20.6 percent over 2012. Net income in 2013 was $143.2 million compared to net income of $125.5 million in 2012, an increase of 14.1 percent. The improvement in profitability was driven by lower interest expense resulting from deleveraging and lower cost of debt.

Balance Sheet, Cash Flow and Liquidity

At December 31, 2013, West Corporation had cash and cash equivalents totaling $230.0 million and working capital of $363.9 million. Interest expense was $51.4 million during the three months ended December 31, 2013 compared to $77.1 million during the comparable period the prior year. Interest expense was $232.9 million in 2013 compared to $269.2 million in 2012.

The Company’s net debt to pro forma adjusted EBITDA ratio, as calculated pursuant to the Company’s senior secured term debt facilities, was 4.62x at December 31, 2013.

“West Corporation finished the year with a stronger balance sheet and improved profitability. During 2013, we reduced our interest expense by $36 million and improved our leverage from 5.34x to 4.62x,” said Paul Mendlik, CFO. “In January 2014, we completed a repricing amendment to our senior secured credit agreement which will decrease our annual cash interest expense by approximately $12 million. We will continue to evaluate opportunities to further reduce our debt and interest expense during 2014.”

Cash flows from operations were $384.1 million for the twelve months ended December 31, 2013 compared to $318.9 million in 2012. Free cash flow2,4 increased 32.2 percent to $255.7 million in 2013 compared to $193.4 million in 2012.

During the fourth quarter of 2013, the Company invested $49.6 million, or 7.2 percent of revenue, in capital expenditures primarily for software and computer equipment. For the full year 2013, the Company invested $127.7 million, or 4.8 percent of revenue, in capital expenditures.

2014 Guidance

For 2014, the Company expects the results presented below. This guidance assumes no acquisitions or changes in the current operating environment, capital structure or exchange rates, but does include the January 2014 repricing amendment to the Company’s senior secured credit agreement. The two most significant exchange rates used for 2014 guidance are the British Pound Sterling at 1.6158 and the Euro at 1.3258.

 

3


In millions except per share and leverage ratio    2013 Actual    2014 Guidance

Consolidated Revenue

   $2,685.9    $2,700 - $2,755

Platform-based Revenue1

   $1,955.2    $2,000 - $2,033

Agent-based Revenue

   $742.2    $710 - $730

Adjusted EBITDA2

   $704.4    $690 - $719

EBITDA2

   $664.7    $677 - $706

Adjusted Operating Income2

   $575.3    $547 - $576

Operating Income

   $480.2    $488 - $517

Adjusted Net Income2

   $229.3    $232 - $247

Net Income

   $143.2    $185 - $200

Adjusted Earnings per Share—Diluted2

   $2.86    $2.72 - $2.89

Earnings per Share—Diluted

   $1.78    $2.17 - $2.34

Free Cash Flow2,4

   $255.7    $225 - $250

Cash Flows from Operations

   $384.1    $375 - $400

Capital Expenditures

   $127.7    $140 - $160

Net Debt to pro forma Adjusted EBITDA ratio

   4.62x    4.4x - 4.5x

Full year average diluted share count

   80.318    85.3 - 85.5

“Our focus for revenue growth in 2014 is in our IP-based UC solutions, emergency communications and interactive services businesses. This growth is expected to be offset by a slight decrease in agent-based revenue, the loss of a large conferencing client and several one-time items we had in 2013. The revenue impact in 2014 of the client loss and one-time items is expected to be approximately $52 million and the EBITDA impact is expected to be approximately $26 million,” said Tom Barker. “Our platform-based businesses continue to grow and we anticipate another year of strong earnings and operating cash flow which will allow us to continue to fund future growth and maintain our dividend.”

Conference Call

The Company will hold a conference call to discuss these topics on Friday, January 31, 2014 at 11:00 AM Eastern Time (10:00 AM Central Time). Investors may access the call by visiting the Financials section of the West Corporation website at www.west.com and clicking on the Webcast link. A replay of the call will be available on the Company’s website at www.west.com.

About West Corporation

West Corporation (Nasdaq:WSTC) is a leading provider of technology-driven communication services. West offers its clients a broad range of communications and network infrastructure solutions that help them manage or support critical communications. West’s customer contact solutions and conferencing services are designed to improve its clients’ cost structure and provide reliable, high-quality services. West also provides mission-critical services, such as public safety and emergency communications.

 

4


Founded in 1986 and headquartered in Omaha, Nebraska, West serves Fortune 1000 companies and other clients in a variety of industries, including telecommunications, retail, financial services, public safety, technology and healthcare. West has sales and operations in the United States, Canada, Europe, the Middle East, Asia Pacific and Latin America. For more information on West Corporation, please call 1-800-841-9000 or visit www.west.com.

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements can be identified by the use of words such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “continue” or similar terminology. The statements contained in the 2014 guidance are forward-looking statements. These statements reflect only West’s current expectations and are not guarantees of future performance or results. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties include, but are not limited to, competition in West’s highly competitive industries; increases in the cost of voice and data services or significant interruptions in these services; West’s ability to keep pace with its clients’ needs for rapid technological change and systems availability; the continued deployment and adoption of emerging technologies; the loss, financial difficulties or bankruptcy of any key clients; security and privacy breaches of the systems West uses to protect personal data; the effects of global economic trends on the businesses of West’s clients; the non-exclusive nature of West’s client contracts and the absence of revenue commitments; the cost of pending and future litigation; the cost of defending West against intellectual property infringement claims; extensive regulation affecting many of West’s businesses; West’s ability to protect its proprietary information or technology; service interruptions to West’s data and operation centers; West’s ability to retain key personnel and attract a sufficient number of qualified employees; increases in labor costs and turnover rates; the political, economic and other conditions in the countries where West operates; changes in foreign exchange rates; West’s ability to complete future acquisitions and integrate or achieve the objectives of its recent and future acquisitions; future impairments of our substantial goodwill, intangible assets, or other long-lived assets; and West’s ability to recover consumer receivables on behalf of its clients. In addition, West is subject to risks related to its level of indebtedness. Such risks include West’s ability to generate sufficient cash to service its indebtedness and fund its other liquidity needs; West’s ability to comply with covenants contained in its debt instruments; the ability to obtain additional financing; the incurrence of significant additional indebtedness by West and its subsidiaries; and the ability of West’s lenders to fulfill their lending commitments. West is also subject to other risk factors described in documents filed by the company with the United States Securities and Exchange Commission.

These forward-looking statements speak only as of the date on which the statements were made. West undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.

 

5


WEST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands except selected per share and operating data)

 

     Three Months Ended December 31,  
     2013     2012           2013  
     Actual     Actual     % Change     Adjusted (2)  

Revenue

   $ 687,570      $ 680,171        1.1   $ 687,570   

Cost of services

     329,040        317,772        3.5     329,040   

Selling, general and administrative expenses

     229,770        237,257        -3.2     213,632   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     128,760        125,142        2.9     144,898   

Interest expense, net

     51,296        76,995        -33.4     46,760   

Other expense (income), net

     (703     (9,730     NM        (703
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     78,167        57,877        35.1     98,841   

Income tax

     27,836        25,170        10.6     35,198   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 50,331      $ 32,707        53.9   $ 63,643   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     83,627        61,802          83,627   

Diluted

     85,088        63,521          85,088   

Earnings per share:

        

Basic

   $ 0.60      $ 0.53        13.2   $ 0.76   

Diluted

   $ 0.59      $ 0.51        15.7   $ 0.75   

SELECTED SEGMENT DATA:

        

Revenue:

        

Unified Communications

   $ 377,025      $ 363,120        3.8  

Communication Services

     324,440        320,509        1.2  

Intersegment eliminations

     (13,895     (3,458     NM     
  

 

 

   

 

 

   

 

 

   

Total

   $ 687,570      $ 680,171        1.1  
  

 

 

   

 

 

   

 

 

   

Depreciation:

        

Unified Communications

   $ 17,105      $ 15,104        13.2  

Communication Services

     12,422        12,352        0.6  
  

 

 

   

 

 

   

 

 

   

Total

   $ 29,527      $ 27,456        7.5  
  

 

 

   

 

 

   

 

 

   

Amortization:

        

Unified Communications—SG&A

   $ 5,878      $ 6,827        -13.9  

Communication Services—COS

     2,676        2,377        12.6  

Communication Services—SG&A

     7,625        9,909        -23.0  

Corporate—deferred financing costs

     4,536        4,016        12.9  
  

 

 

   

 

 

   

 

 

   

Total

   $ 20,715      $ 23,129        -10.4  
  

 

 

   

 

 

   

 

 

   

Share-based Compensation

        

Unified Communications

   $ 1,121      $ 1,198        -6.4  

Communication Services

     1,280        1,375        -6.9  
  

 

 

   

 

 

   

 

 

   

Total

   $ 2,401      $ 2,573        -6.7  
  

 

 

   

 

 

   

 

 

   

Cost of services:

        

Unified Communications

   $ 163,605      $ 156,292        4.7  

Communication Services

     178,606        164,351        8.7  

Intersegment eliminations

     (13,171     (2,871     NM     
  

 

 

   

 

 

   

 

 

   

Total

   $ 329,040      $ 317,772        3.5  
  

 

 

   

 

 

   

 

 

   

Selling, general and administrative expenses:

        

Unified Communications

   $ 114,153      $ 115,550        -1.2  

Communication Services

     116,341        122,295        -4.9  

Intersegment eliminations

     (724     (588     NM     
  

 

 

   

 

 

   

 

 

   

Total

   $ 229,770      $ 237,257        -3.2  
  

 

 

   

 

 

   

 

 

   

Operating income:

        

Unified Communications

   $ 99,267      $ 91,279        8.8   $ 106,287   

Communication Services

     29,493        33,863        -12.9     38,611   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 128,760      $ 125,142        2.9   $ 144,898   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating margin:

        

Unified Communications

     26.3     25.1       28.2

Communication Services

     9.1     10.6       11.9
  

 

 

   

 

 

     

 

 

 

Total

     18.7     18.4       21.1
  

 

 

   

 

 

     

 

 

 

SELECTED OPERATING DATA:

        

Revenue from platform-based services (1)

   $ 495,808      $ 479,884        3.3  

Revenue from agent-based services

   $ 195,085      $ 203,196        -4.0  

 

6


WEST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands except selected per share and operating data)

 

     Twelve Months Ended December 31,  
     2013     2012           2013     2013 Adj.  
     Actual     Actual     % Change     Adjusted (2)     Pro Forma (2,3)  

Revenue

   $ 2,685,855      $ 2,638,024        1.8   $ 2,685,855      $ 2,685,855   

Cost of services

     1,260,579        1,224,459        2.9     1,260,579        1,260,579   

Selling, general and administrative expenses

     945,062        935,390        1.0     850,022        850,022   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     480,214        478,175        0.4     575,254        575,254   

Interest expense, net

     232,606        268,828        -13.5     214,360        189,650   

Subordinated debt call premium and accelerated amortization of deferred financing costs

     23,105        2,715        NM        —          —     

Other expense (income), net

     (2,258     (977     NM        (2,258     (2,258
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     226,761        207,609        9.2     363,152        387,862   

Income tax

     83,559        82,068        1.8     133,819        143,086   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 143,202      $ 125,541        14.1   $ 229,333      $ 244,776   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

          

Basic

     78,875        61,528          78,875        83,543   

Diluted

     80,318        63,523          80,318        84,986   

Earnings per share:

          

Basic

   $ 1.82      $ 2.04        -10.8   $ 2.91      $ 2.93   

Diluted

   $ 1.78      $ 1.98        -10.1   $ 2.86      $ 2.88   

SELECTED SEGMENT DATA:

          

Revenue:

          

Unified Communications

   $ 1,498,213      $ 1,451,301        3.2    

Communication Services

     1,223,855        1,198,320        2.1    

Intersegment eliminations

     (36,213     (11,597     NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 2,685,855      $ 2,638,024        1.8    
  

 

 

   

 

 

   

 

 

     

Depreciation:

          

Unified Communications

   $ 65,027      $ 59,851        8.6    

Communication Services

     49,672        47,604        4.3    
  

 

 

   

 

 

   

 

 

     

Total

   $ 114,699      $ 107,455        6.7    
  

 

 

   

 

 

   

 

 

     

Amortization:

          

Unified Communications—SG&A

   $ 24,600      $ 28,403        -13.4    

Communication Services—COS

     10,247        9,119        12.4    

Communication Services—SG&A

     30,738        37,445        -17.9    

Corporate—deferred financing costs

     18,246        14,606        24.9    

Corporate—accelerated amortization of deferred financing costs

     6,603        2,715        NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 90,434      $ 92,288        -2.0    
  

 

 

   

 

 

   

 

 

     

Share-based Compensation

          

Unified Communications

   $ 4,911      $ 7,190        -31.7    

Communication Services

     5,644        8,499        -33.6    

Corporate

     —          10,160        NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 10,555      $ 25,849        -59.2    
  

 

 

   

 

 

   

 

 

     

Cost of services:

          

Unified Communications

   $ 639,105      $ 616,899        3.6    

Communication Services

     655,380        616,894        6.2    

Intersegment eliminations

     (33,906     (9,334     NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 1,260,579      $ 1,224,459        2.9    
  

 

 

   

 

 

   

 

 

     

Selling, general and administrative expenses:

          

Unified Communications

   $ 472,672      $ 449,836        5.1    

Communication Services

     474,697        487,818        -2.7    

Intersegment eliminations

     (2,307     (2,264     NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 945,062      $ 935,390        1.0    
  

 

 

   

 

 

   

 

 

     

Operating income:

          

Unified Communications

   $ 386,436      $ 384,565        0.5   $ 433,741     

Communication Services

     93,778        93,610        0.2     141,513     
  

 

 

   

 

 

   

 

 

   

 

 

   

Total

   $ 480,214      $ 478,175        0.4   $ 575,254     
  

 

 

   

 

 

   

 

 

   

 

 

   

Operating margin:

          

Unified Communications

     25.8     26.5       29.0  

Communication Services

     7.7     7.8       11.6  
  

 

 

   

 

 

     

 

 

   

Total

     17.9     18.1       21.4  
  

 

 

   

 

 

     

 

 

   

SELECTED OPERATING DATA:

          

Revenue from platform-based services (1)

   $ 1,955,202      $ 1,886,504        3.6    

Revenue from agent-based services

   $ 742,222      $ 762,132        -2.6    

 

7


WEST CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

     December 31,     December 31,     %  
     2013     2012     Change  

Current assets:

      

Cash and cash equivalents

   $ 230,041      $ 179,111        28.4

Trust and restricted cash

     21,679        14,518        49.3

Accounts receivable, net

     450,189        444,411        1.3

Deferred income taxes receivable

     —          13,148        NM   

Prepaid assets

     36,032        42,129        -14.5

Other current assets

     83,629        67,775        23.4
  

 

 

   

 

 

   

 

 

 

Total current assets

     821,570        761,092        7.9

Net property and equipment

     364,765        364,896        0.0

Goodwill

     1,823,921        1,816,851        0.4

Other assets

     476,008        505,314        -5.8
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 3,486,264      $ 3,448,153        1.1
  

 

 

   

 

 

   

 

 

 

Current liabilities

   $ 457,642      $ 457,668        0.0

Long-term obligations

     3,513,470        3,992,531        -12.0

Other liabilities

     255,324        247,640        3.1
  

 

 

   

 

 

   

 

 

 

Total liabilities

     4,226,436        4,697,839        -10.0

Stockholders’ deficit

     (740,172     (1,249,686     40.8
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 3,486,264      $ 3,448,153        1.1
  

 

 

   

 

 

   

 

 

 

 

8


Reconciliation of Non-GAAP Financial Measures

Adjusted Operating Income Reconciliation

Adjusted operating income is not a measure of financial performance under generally accepted accounting principles (“GAAP”). The Company believes adjusted operating income provides a relevant measure of operating profitability and a useful basis for evaluating the ongoing operations of the Company. Adjusted operating income is used by the Company to assess operating income before the impact of IPO-related expenses, expenses terminated in connection with the IPO and non-cash items. Adjusted operating income should not be considered in isolation or as a substitute for operating income or other profitability data prepared in accordance with GAAP. Adjusted operating income, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of adjusted operating income to operating income.

Reconciliation of Adjusted Operating Income from Operating Income

 

Unaudited, in thousands       
     Three Months Ended December 31,  
     2013      2012     % Change  

Operating income

   $ 128,760       $ 125,142        2.9

Amortization of acquired intangible assets

     13,503         16,736     

Share-based compensation

     2,401         2,573     

Sponsor management/termination fee

     —           1,035     

M&A and acquisition related costs

     234         843     
  

 

 

    

 

 

   

 

 

 

Adjusted operating income

   $ 144,898       $ 146,329        -1.0
  

 

 

    

 

 

   

 

 

 
     Twelve Months Ended December 31,  
     2013      2012     % Change  

Operating income

   $ 480,214       $ 478,175        0.4

Amortization of acquired intangible assets

     55,338         65,848     

Share-based compensation

     10,555         25,849     

Sponsor management/termination fee

     25,000         4,123     

IPO bonus

     2,975         —       

M&A and acquisition related costs

     1,172         1,652     

Acquisition earnout reversal

     —           (7,887  
  

 

 

    

 

 

   

 

 

 

Adjusted operating income

   $ 575,254       $ 567,760        1.3
  

 

 

    

 

 

   

 

 

 

Adjusted Net Income, Adjusted EPS, Pro forma Adjusted Net Income and Pro forma Adjusted EPS Reconciliation

Adjusted net income, adjusted EPS, pro forma adjusted net income and pro forma adjusted EPS are non-GAAP measures. The Company believes these measures provide a useful indication of profitability and basis for assessing the operations of the Company without the impact of IPO-related expenses, expenses terminated in connection with the IPO, bond redemption premiums, M&A and acquisition related costs, the expiration of an earn-out payment obligation related to an acquisition and non-cash items.

 

9


Adjusted net income should not be considered in isolation or as a substitute for net income or other profitability metrics prepared in accordance with GAAP. Adjusted net income, as presented, may not be comparable to similarly titled measures of other companies.

Pro forma adjusted net income represents adjusted net income after giving effect to pro forma adjusted interest expense. Pro forma adjusted interest expense reflects the impact of lower debt balances and lower interest rates post IPO. This includes the pro forma savings for the full periods from the redemption of the $450 million senior subordinated notes and the pricing amendment to the senior secured term loan facilities completed in February 2013 as if these transactions had been completed January 1, 2013. Pro forma results also present shares outstanding as if the Company’s IPO had been completed January 1, 2013.

Set forth below is a reconciliation of adjusted net income and pro forma net income to net income.

 

10


Reconciliation of Adjusted Net Income & Pro forma Net Income from Net Income

 

Unaudited, in thousands except per share       
     Three Months Ended December 31,  
     2013      2012     % Change  

Net income

   $ 50,331       $ 32,707        53.9

Amortization of acquired intangible assets

     13,503         16,736     

Amortization of deferred financing costs

     4,536         4,016     

Share-based compensation

     2,401         2,573     

Sponsor management/termination fee

     —           1,035     

M&A and acquisition related costs

     234         843     
  

 

 

    

 

 

   

Pre-tax total

     20,674         25,203     

Income tax expense on adjustments

     7,362         10,960     
  

 

 

    

 

 

   

 

 

 

Adjusted net income

   $ 63,643       $ 46,950        35.6
  

 

 

    

 

 

   

 

 

 

Diluted shares outstanding

     85,088         63,521     

Adjusted EPS—diluted

   $ 0.75       $ 0.74        1.4
     Twelve Months Ended December 31,  
     2013      2012     % Change  

Net income

   $ 143,202       $ 125,541        14.1

Amortization of acquired intangible assets

     55,338         65,848     

Amortization of deferred financing costs

     18,246         14,606     

Accelerated amortization of deferred financing costs

     6,603         2,715     

Share-based compensation

     10,555         25,849     

Sponsor management/termination fee

     25,000         4,123     

IPO bonus

     2,975         —       

Subordinated debt call premium

     16,502         —       

M&A and acquisition related costs

     1,172         1,652     

Acquisition earnout reversal

     —           (7,887  
  

 

 

    

 

 

   

Pre-tax total

     136,391         106,906     

Income tax expense on adjustments

     50,260         42,228     
  

 

 

    

 

 

   

 

 

 

Adjusted net income

   $ 229,333       $ 190,219        20.6
     

 

 

   

 

 

 

Diluted shares outstanding

     80,318         63,523     

Adjusted EPS—diluted

   $ 2.86       $ 2.99        -4.3

Pro forma interest expense change, net of tax

   $ 15,443        
  

 

 

      

Pro forma adjusted net income

   $ 244,776         N/A     
  

 

 

      

Pro forma diluted shares outstanding

     84,986        

Pro forma adjusted EPS—diluted

   $ 2.88         N/A     

Free Cash Flow Reconciliation

The Company believes free cash flow provides a relevant measure of liquidity and a useful basis for assessing the Company’s ability to fund its activities, including the financing of acquisitions, debt service, stock repurchases and distribution of earnings to shareholders. Free cash flow is calculated as cash flows from operations less cash capital expenditures. Free cash flow is not a measure of financial performance under GAAP. Free cash flow should not be considered in isolation or as a substitute for cash flows from operations or other liquidity measures prepared in accordance with GAAP. Free cash flow, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of free cash flow to cash flows from operations.

 

11


Reconciliation of Free Cash Flow from Operating Cash Flow

 

Unaudited, in thousands       
     Three Months Ended December 31,  
     2013      2012      % Change  

Cash flows from operations

   $ 107,358       $ 74,969         43.2

Cash capital expenditures

     40,418         37,629         7.4
  

 

 

    

 

 

    

 

 

 

Free cash flow

   $ 66,940       $ 37,340         79.3
  

 

 

    

 

 

    

 

 

 
     Twelve Months Ended December 31,  
     2013      2012      % Change  

Cash flows from operations

   $ 384,087       $ 318,916         20.4

Cash capital expenditures

     128,398         125,489         2.3
  

 

 

    

 

 

    

 

 

 

Free cash flow

   $ 255,689       $ 193,427         32.2
  

 

 

    

 

 

    

 

 

 

EBITDA and Adjusted EBITDA Reconciliation

The common definition of EBITDA is “earnings before interest expense, taxes, depreciation and amortization.” In evaluating liquidity and performance, the Company uses earnings before interest expense, share based compensation, taxes, depreciation and amortization, and one-time IPO-related expenses, or “adjusted EBITDA.” EBITDA and adjusted EBITDA are not measures of financial performance or liquidity under GAAP. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operations or other income or cash flows data prepared in accordance with GAAP. EBITDA and adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. EBITDA and adjusted EBITDA are used by certain investors as measures to assess the Company’s ability to service debt. Adjusted EBITDA is also used in the Company’s debt covenants, although the precise adjustments used to calculate adjusted EBITDA included in the Company’s credit facility and indentures vary in certain respects among such agreements and from those presented below. Certain adjustments to adjusted EBITDA were excluded from the calculations below consistent with the adjustments made for adjusted operating income and adjusted net income. Set forth below is a reconciliation of EBITDA and adjusted EBITDA to cash flows from operations and net income.

 

12


Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow

 

Unaudited, in thousands             
     Three Months Ended Dec. 31,     Twelve Months Ended Dec. 31,  
     2013     2012     2013     2012  

Cash flows from operating activities

   $ 107,358      $ 74,969      $ 384,087      $ 318,916   

Income tax expense

     27,836        25,170        83,559        82,068   

Deferred income tax benefit (expense)

     (4,657     8,999        (8,325     (1,318

Interest expense and other financing charges

     51,904        77,566        257,696        273,117   

Provision for share-based compensation

     (2,401     (2,573     (10,555     (25,849

Amortization of deferred financing costs

     (4,536     (4,016     (18,246     (14,606

Accelerated amortization of deferred financing costs

     —          —          (6,603     (2,715

Asset impairment

     —          —          —          (3,715

Other

     (6     617        (99     432   

Changes in operating assets and liabilities, net of business acquisitions

     279        1,280        (16,773     36,818   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     175,777        182,012        664,741        663,148   

Provision for share-based compensation

     2,401        2,573        10,555        25,849   

Sponsor management/termination fee and IPO bonus

     —          1,035        27,975        4,123   

M&A and acquisition related costs

     234        843        1,172        1,652   

Acquisition earnout reversal

     —          —          —          (7,887
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 178,412      $ 186,463      $ 704,443      $ 686,885   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of EBITDA and Adjusted EBITDA from Net Income

 

Unaudited, in thousands             
     Three Months Ended Dec. 31,     Twelve Months Ended Dec. 31,  
     2013     2012     2013     2012  

Net income

   $ 50,331      $ 32,707      $ 143,202      $ 125,541   

Interest expense and other financing charges

     51,904        77,566        257,696        273,117   

Depreciation and amortization

     45,706        46,569        180,284        182,422   

Income tax expense

     27,836        25,170        83,559        82,068   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     175,777        182,012        664,741        663,148   

Provision for share-based compensation

     2,401        2,573        10,555        25,849   

Sponsor management/termination fee and IPO bonus

     —          1,035        27,975        4,123   

M&A and acquisition related costs

     234        843        1,172        1,652   

Acquisition earnout reversal

     —          —          —          (7,887
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 178,412      $ 186,463      $ 704,443      $ 686,885   
  

 

 

   

 

 

   

 

 

   

 

 

 
Unaudited, in thousands    Three Months Ended Dec. 31,     Twelve Months Ended Dec. 31,  
     2013     2012     2013     2012  

Cash flows from operating activities

   $ 107,358      $ 74,969      $ 384,087      $ 318,916   

Cash flows used in investing activities

   $ (46,349   $ (36,335   $ (135,508   $ (201,622

Cash flows used in financing activities

   $ (42,666   $ (9,287   $ (196,828   $ (33,130

###

 

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