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8-K - FORM 8-K - WEST CORPd52167d8k.htm

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 Third Quarter 2015 Results

Company Announces Two Acquisitions; Declares Quarterly Dividend

OMAHA, NE, November 2, 2015 – West Corporation (Nasdaq:WSTC), a leading provider of technology-enabled communication services, today announced its third quarter 2015 results.

Key Quarterly Highlights:

 

Unaudited, in millions except per share amounts    Three Months Ended Sept. 30,     Nine Months Ended Sept. 30,  
     2015     2014     % Change     2015     2014     % Change  

Revenue

   $ 574.4      $ 568.2        1.1   $ 1,711.8      $ 1,655.7        3.4

Adjusted EBITDA from Continuing Operations1

     171.3        171.2        0.1     511.1        494.9        3.3

EBITDA from Continuing Operations1

     165.5        166.2        -0.4     491.3        482.2        1.9

Adjusted Operating Income1

     146.6        137.7        6.5     420.8        400.3        5.1

Operating Income

     124.4        114.9        8.2     351.5        344.7        2.0

Adjusted Income from Continuing Operations1

     68.1        67.0        1.6     202.3        177.6        13.9

Income from Continuing Operations

     50.7        13.1        287.1     148.6        99.7        49.0

Adjusted Earnings per Share from Continuing Operations - Diluted1

     0.80        0.78        2.6     2.36        2.08        13.5

Earnings per Share from Continuing Operations - Diluted

     0.60        0.15        300.0     1.74        1.17        48.7

Free Cash Flow from Continuing Operating Activities1,2

     95.4        85.7        11.2     187.0        203.7        -8.2

Cash Flows from Continuing Operating Activities

     126.7        118.3        7.1     283.2        302.6        -6.4

Cash Flows used in Continuing Investing Activities

     (30.1     (77.1     -61.0     (113.8     (485.9     -76.6

Cash Flows from (used in) Continuing Financing Activities

     (74.0     (33.9     118.5     (364.8     110.9        NM   

“The Company was once again able to modestly grow its revenue base, successfully overcoming some previously disclosed near-term headwinds,” said Tom Barker, chairman and chief executive officer of West Corporation. “West generated double-digit growth in free cash flow during the quarter and continued to invest in future growth with the acquisitions of ClientTell and Magnetic North.”

“During the quarter, Gartner released its annual Unified Communications-as-a-Services (UCaaS) report and named West as one of three firms positioned in its Leader’s Quadrant. Gartner evaluates providers based on the completeness of their vision and their ability to execute. We are proud to be named a Leader by Gartner for the fourth consecutive year and appreciative of the recognition of our industry-leading solutions,” Barker continued.5


Dividend

The Company today also announced a $0.225 per common share dividend. The dividend is payable November 25, 2015 to shareholders of record as of the close of business on November 16, 2015.

Operating Results Reflect Previous Divestiture

As previously disclosed, on March 3, 2015, the Company completed the sale of several of its agent-based services businesses. The operating results for the businesses that were sold have been reflected as discontinued operations in the Company’s consolidated financial statements for all periods presented. Unless otherwise noted, the Company has presented herein its operating results from continuing operations, which excludes discontinued operations.

Consolidated Operating Results

For the third quarter of 2015, revenue was $574.4 million compared to $568.2 million for the same quarter of the previous year, an increase of 1.1 percent. Adjusted organic revenue growth was 3.9 percent for the quarter. Revenue from acquired entities3 was $5.4 million during the third quarter of 2015, contributing 0.9 percent to the Company’s revenue growth. The Company’s revenue growth rate was partially offset by $21.4 million, or 3.8 percent, from the impact of foreign currency exchange rates and two previously disclosed client losses. Details of the Company’s revenue growth are presented in the statements of operations below.

During the second quarter of 2015, the Company disclosed the loss of a large client in its telecom services line of business. The impact of this client loss to the Company’s third quarter 2015 revenue was $5.0 million. The Company expects its revenue in the fourth quarter to be negatively impacted by approximately $13-$14 million and 2016 revenue to be negatively impacted by approximately $40 million.

Adjusted EBITDA1 for the third quarter of 2015 was $171.3 million compared to $171.2 million for the third quarter of 2014. Adjusted EBITDA margin was 29.8 percent for the third quarter of 2015 compared to 30.1 percent in the same quarter last year. EBITDA1 was $165.5 million in the third quarter of 2015 compared to $166.2 million in the third quarter of 2014. EBITDA margin was 28.8 percent for the third quarter of 2015 compared to 29.3 percent in the same quarter last year.

Adjusted income from continuing operations1 was $68.1 million in the third quarter of 2015 compared to $67.0 million for the third quarter of 2014, an increase of 1.6 percent. Income from continuing operations increased 287.1 percent to $50.7 million in the third quarter of 2015 compared to $13.1 million in the same quarter of 2014. This increase was primarily due to $51.7 million of debt call premiums and accelerated amortization of deferred financing costs incurred when the Company repurchased a portion of its senior notes in the third quarter of 2014.

 

1  See Reconciliation of Non-GAAP Financial Measures below.
2  Free cash flow is calculated as cash flows from operating activities less cash capital expenditures.
3  Revenue growth attributable to acquired entities for the third quarter of 2015 includes 911 Enable through September 2, 2015 and full quarter results of SchoolReach and SharpSchool. Revenue growth attributable to acquired entities for the nine months ended September 30, 2015 includes School Messenger through April 21, 2015; Health Advocate through June 13, 2015; 911 Enable through September 2, 2015; SchoolReach for the entire period; and SharpSchool after June 1, 2015.
4  Based on loan covenants. Covenant leverage ratio is debt net of cash and excludes accounts receivable securitization debt.
5  To obtain a copy of the Gartner report, visit westipc.com/gartner_ucaas/

NM: Not Meaningful

 

2


Balance Sheet, Cash Flow and Liquidity

At September 30, 2015, West Corporation had cash and cash equivalents totaling $182.5 million and working capital of $(6.6) million. Working capital was negatively impacted by the Company’s Senior Secured Term Loan Facility balance of $250.0 million becoming current during the third quarter of 2015. The facility is due in July 2016.

Interest expense was $38.4 million during the third quarter of 2015 compared to $47.6 million during the comparable period the prior year. The decrease in interest expense is a result of the Company’s debt refinancing in 2014.

The Company’s net debt to pro forma adjusted EBITDA ratio, as calculated pursuant to the Company’s senior secured term debt facilities4, was 4.66x at September 30, 2015.

Cash flows from continuing operating activities were $126.7 million in the third quarter of 2015 compared to $118.3 million in the same period of 2014. Free cash flow1, 2 increased 11.2 percent to $95.4 million in the third quarter of 2015 compared to $85.7 million in the third quarter of 2014. During the third quarter of 2015, the Company invested $31.3 million, or 5.5 percent of revenue, in capital expenditures primarily for software and computer equipment.

“West’s third quarter 2015 cash flows from continuing operating activities were very strong at $126.7 million. We repaid $57.4 million of our 2016 term debt facility during the quarter and ended the quarter with a cash balance of $182.5 million,” said Jan Madsen, chief financial officer of West Corporation. “We continue to prioritize a balanced approach to capital allocation that includes strategic acquisitions, investing in our core business, reducing our outstanding debt and repurchasing shares.”

Acquisitions

The Company announced it had completed the acquisition of ClientTell, Inc., a provider of automated notifications and lab reporting services to the healthcare industry. ClientTell will become part of the Company’s interactive services line of business. The initial purchase price was approximately $38 million and was funded with cash on hand. Up to an additional $10.5 million in cash will be paid based on achievement of certain financial objectives over the next five years.

The Company also announced the acquisition of Magnetic North, Ltd., a leading U.K.-based provider of proprietary hosted customer contact center and unified communications solutions to enterprises. Magnetic North offers its international client base complete multi-channel, cloud-based solutions via a fully integrated, feature-rich platform. The technology that Magnetic North has developed will be used across West to provide clients with the capability to deliver seamless and contextual multi-channel consumer experiences. The purchase price was approximately $39 million and was funded with cash on hand.

“Both ClientTell and Magnetic North boast double digit revenue growth and Adjusted EBITDA margins exceeding our Company average,” added Barker. “Additionally, these highly strategic acquisitions enhance our solutions in growing markets and demonstrate our commitment to investing in leading technologies.”

 

3


Conference Call

The Company will hold a conference call to discuss these topics on Tuesday, November 3, 2015 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 global provider of communication and network infrastructure solutions. West helps manage or support essential enterprise communications with services that include unified communication services, public safety services, interactive services such as automated notifications, telecom services and specialty agent services.

For over 25 years, West has provided reliable, high-quality, voice and data services. West serves clients in a variety of industries including telecommunications, retail, financial services, public safety, technology and healthcare. West has a global organization with 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. These statements reflect only West’s current expectations and are not guarantees of future performance or results. These statements are subject to various 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 markets; 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 against intellectual property infringement claims; the effects of 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, integrate or achieve the objectives of its recent and future acquisitions; and future impairments of our substantial goodwill, intangible assets, or other long-lived assets. 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.

 

4


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 per share data)

 

     Three Months Ended September 30,  
     2015     2014           2015  
     Actual     Actual     % Change     Adjusted (1)  

Revenue

   $ 574,448      $ 568,197        1.1   $ 574,448   

Cost of services

     246,337        243,706        1.1     246,337   

Selling, general and administrative expenses

     203,757        209,545        -2.8     181,473   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     124,354        114,946        8.2     146,638   

Interest expense, net

     38,382        47,615        -19.4     33,374   

Debt call premium and accelerated amortization of deferred financing costs

     —          51,735        NM        —     

Other expense (income), net

     6,322        (2,336     NM        6,322   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before tax

     79,650        17,932        344.2     106,942   

Income tax expense attributed to continuing operations

     28,931        4,829        499.1     38,843   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     50,719        13,103        287.1     68,099   

Income (loss) from discontinued operations, net of income taxes

     (1,235     3,007        NM        (1,235
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 49,484      $ 16,110        207.2   $ 66,864   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     82,931        84,090          82,931   

Diluted

     84,834        85,611          84,834   

Earnings (loss) per share - Basic:

        

Continuing operations

   $ 0.61      $ 0.15        306.7   $ 0.82   

Discontinued operations

     (0.01     0.04        NM        (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Earnings Per Share - Basic

   $ 0.60      $ 0.19        215.8   $ 0.81   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share - Diluted:

        

Continuing operations

   $ 0.60      $ 0.15        300.0   $ 0.80   

Discontinued operations

     (0.01     0.04        NM        (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Earnings Per Share - Diluted**

   $ 0.58      $ 0.19        205.3   $ 0.79   
  

 

 

   

 

 

   

 

 

   

 

 

 

SELECTED FINANCIAL DATA:

        
           Contribution              
Changes in Revenue - 3Q15 compared to 3Q14:          to Rev. Growth              

Revenue for the three months ended Sept. 30, 2014

   $ 568,197         

Revenue from acquired entities3

     5,376        0.9    

Revenue from previously disclosed lost conferencing client

     (6,700     -1.2    

Revenue from previously disclosed lost telecom services client

     (5,000     -0.9    

Estimated impact of foreign currency exchange rates

     (9,706     -1.7    

Adjusted organic growth, net

     22,281        3.9    
  

 

 

   

 

 

     

Revenue for the three months ended Sept. 30, 2015

   $ 574,448        1.1    
  

 

 

   

 

 

     
Depreciation and Amortization:    3Q15     3Q14     % Change        

Depreciation

   $ 27,737      $ 27,765        -0.1  

Amortization - SG&A

     16,513        17,817        -7.3  

Amortization - COS

     3,002        3,078        -2.5  

Amortization - Deferred financing costs

     5,008        5,206        -3.8  

Amortization - Accelerated deferred financing costs

     —          7,748        NM     
  

 

 

   

 

 

   

 

 

   

Total depreciation and amortization

   $ 52,260      $ 61,614        -15.2  
  

 

 

   

 

 

   

 

 

   

Share-based Compensation

   $ 5,374      $ 3,908        37.5  

 

** 3Q15 Earnings Per Share does not foot due to rounding

 

6


WEST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands except per share data)

 

     Nine Months Ended September 30,  
     2015     2014           2015  
     Actual     Actual     % Change     Adjusted (1)  

Revenue

   $ 1,711,829      $ 1,655,656        3.4   $ 1,711,829   

Cost of services

     731,304        708,912        3.2     731,304   

Selling, general and administrative expenses

     629,045        602,047        4.5     559,762   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     351,480        344,697        2.0     420,763   

Interest expense, net

     115,657        144,952        -20.2     100,640   

Debt call premium and accelerated amortization of deferred financing costs

     —          51,735        NM        —     

Other expense (income), net

     2,583        (5,562     NM        2,583   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before tax

     233,240        153,572        51.9     317,540   

Income tax expense attributed to continuing operations

     84,664        53,845        57.2     115,265   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     148,576        99,727        49.0     202,275   

Income from discontinued operations, net of income taxes

     30,989        10,420        197.4     32,225   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 179,565      $ 110,147        63.0   $ 234,500   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     83,479        83,950          83,479   

Diluted

     85,554        85,400          85,554   

Earnings per share - Basic:

        

Continuing operations

   $ 1.78      $ 1.19        49.6   $ 2.42   

Discontinued operations

     0.37        0.12        208.3     0.38   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Earnings Per Share - Basic

   $ 2.15      $ 1.31        64.1   $ 2.80   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share - Diluted:

        

Continuing operations

   $ 1.74      $ 1.17        48.7   $ 2.36   

Discontinued operations

     0.36        0.12        200.0   $ 0.38   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Earnings Per Share - Diluted

   $ 2.10      $ 1.29        62.8   $ 2.74   
  

 

 

   

 

 

   

 

 

   

 

 

 

SELECTED FINANCIAL DATA:

        
           Contribution              
Changes in Revenue - YTD 3Q15 compared to YTD 3Q14:          to Rev. Growth              

Revenue for the nine months ended Sept. 30, 2014

   $ 1,655,656         

Revenue from acquired entities3

     66,742        4.0    

Revenue from previously disclosed lost conferencing client

     (26,200     -1.6    

Revenue from previously disclosed lost telecom services client

     (5,000     -0.3    

Estimated impact of foreign currency exchange rates

     (30,040     -1.8    

Adjusted organic growth, net

     50,671        3.1    
  

 

 

   

 

 

     

Revenue for the nine months ended Sept. 30, 2014

   $ 1,711,829        3.4    
  

 

 

   

 

 

     
Depreciation and Amortization:    3Q15 YTD     3Q14 YTD     % Change        

Depreciation

   $ 81,931      $ 79,116        3.6  

Amortization - SG&A

     49,480        42,978        15.1  

Amortization - COS

     9,504        8,995        5.7  

Amortization - Deferred financing costs

     15,017        14,960        0.4  

Amortization - Accelerated deferred financing costs

     —          7,748        NM     
  

 

 

   

 

 

   

 

 

   

Total depreciation and amortization

   $ 155,932      $ 153,797        1.4  
  

 

 

   

 

 

   

 

 

   

Share-based Compensation

   $ 16,785      $ 10,055        66.9  

 

7


WEST CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

     September 30,     December 31,     %  
     2015     2014     Change  

Assets:

      

Current assets:

      

Cash and cash equivalents

   $ 182,538      $ 115,061        58.6

Trust and restricted cash

     18,878        18,573        1.6

Accounts receivable, net

     387,639        355,625        9.0

Prepaid assets

     44,580        45,242        -1.5

Deferred expenses

     68,952        65,317        5.6

Other current assets

     25,919        30,575        -15.2

Assets held for sale

     17,541        304,605        -94.2
  

 

 

   

 

 

   

 

 

 

Total current assets

     746,047        934,998        -20.2

Property and Equipment:

      

Property and equipment

     1,025,279        1,045,769        -2.0

Accumulated depreciation and amortization

     (695,604     (695,739     0.0
  

 

 

   

 

 

   

 

 

 

Net property and equipment

     329,675        350,030        -5.8

Goodwill

     1,880,662        1,884,920        -0.2

Intangible assets

     346,483        388,166        -10.7

Other assets

     254,074        259,961        -2.3
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 3,556,941      $ 3,818,075        -6.8
  

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Deficit:

      

Current Liabilities:

      

Accounts payable

   $ 87,933      $ 91,353        -3.7

Deferred revenue

     157,688        144,413        9.2

Accrued expenses

     241,734        228,424        5.8

Current maturities of long-term debt

     265,313        16,246        1533.1

Liabilities held for sale

     —          84,788        NM   
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     752,668        565,224        33.2

Long-term obligations

     3,134,812        3,642,540        -13.9

Deferred income taxes

     90,343        96,632        -6.5

Other long-term liabilities

     174,622        173,320        0.8
  

 

 

   

 

 

   

 

 

 

Total liabilities

     4,152,445        4,477,716        -7.3

Stockholders’ Deficit:

      

Common stock

     85        84        1.2

Additional paid-in capital

     2,187,197        2,155,864        1.5

Retained deficit

     (2,650,579     (2,772,775     -4.4

Accumulated other comprehensive loss

     (66,942     (37,506     78.5

Treasury stock at cost

     (65,265     (5,308     NM   
  

 

 

   

 

 

   

 

 

 

Total stockholders’ deficit

     (595,504     (659,641     -9.7
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 3,556,941      $ 3,818,075        -6.8
  

 

 

   

 

 

   

 

 

 

 

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 acquisitions and acquisition-related costs and certain 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 from operating income.

 

Reconciliation of Adjusted Operating Income from Operating Income
Unaudited, in thousands

 

     Three Months Ended September 30,  
     2015      2014      % Change  

Operating income

   $ 124,354       $ 114,946         8.2

Amortization of acquired intangible assets

     16,513         17,817      

Share-based compensation

     5,374         3,908      

M&A and acquisition-related costs

     397         1,044      
  

 

 

    

 

 

    

 

 

 

Adjusted operating income

   $ 146,638       $ 137,715         6.5
  

 

 

    

 

 

    

 

 

 
     Nine Months Ended September 30,  
     2015      2014      % Change  

Operating income

   $ 351,480       $ 344,697         2.0

Amortization of acquired intangible assets

     49,480         42,978      

Share-based compensation

     16,785         10,055      

Secondary equity offering expense

     1,041         —        

M&A and acquisition-related costs

     1,977         2,558      
  

 

 

    

 

 

    

 

 

 

Adjusted operating income

   $ 420,763       $ 400,288         5.1
  

 

 

    

 

 

    

 

 

 

Adjusted Net Income and Adjusted Earnings per Share Reconciliation

Adjusted net income and adjusted earnings per share (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 bond redemption premiums, acquisitions and acquisition-related costs and certain non-cash items. 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. Set forth below is a reconciliation of adjusted net income from net income.

 

9


Reconciliation of Adjusted Net Income from Net Income
Unaudited, in thousands except per share data

 

CONTINUING OPERATIONS    Three Months Ended September 30,  
     2015      2014      % Change  

Income from continuing operations

   $ 50,719       $ 13,103         287.1

Amortization of acquired intangible assets

     16,513         17,817      

Amortization of deferred financing costs

     5,008         5,206      

Accelerated amortization of deferred financing costs

     —           7,748      

Share-based compensation

     5,374         3,908      

Debt call premiums

     —           43,987      

M&A and acquisition-related costs

     397         1,044      
  

 

 

    

 

 

    

Pre-tax total

     27,292         79,710      

Income tax expense on adjustments

     9,912         25,803      
  

 

 

    

 

 

    

 

 

 

Adjusted net income from continuing operations

   $ 68,099       $ 67,010         1.6
  

 

 

    

 

 

    

 

 

 

Diluted shares outstanding

     84,834         85,611      

Adjusted EPS from continuing operations - diluted

   $ 0.80       $ 0.78         2.6
DISCONTINUED OPERATIONS    Three Months Ended September 30,  
     2015      2014      % Change  

Income (loss) from discontinued operations

   $ (1,235    $ 3,007         NM   

Amortization of acquired intangible assets

     —           495      

Share-based compensation

     —           67      

M&A and acquisition-related costs

     —           440      
  

 

 

    

 

 

    

Pre-tax total

     —           1,002      

Income tax expense on adjustments

     —           501      
  

 

 

    

 

 

    

 

 

 

Adjusted net income (loss) from discontinued operations

   $ (1,235    $ 3,508         NM   
  

 

 

    

 

 

    

 

 

 

Diluted shares outstanding

     84,834         85,611      

Adjusted earnings (loss) per share from discontinued operations - diluted

   $ (0.01    $ 0.04         NM   
CONSOLIDATED    Three Months Ended September 30,  
     2015      2014      % Change  

Net income

   $ 49,484       $ 16,110         207.2

Amortization of acquired intangible assets

     16,513         18,312      

Amortization of deferred financing costs

     5,008         5,206      

Accelerated amortization of deferred financing costs

     —           7,748      

Share-based compensation

     5,374         3,975      

Debt call premiums

     —           43,987      

M&A and acquisition-related costs

     397         1,484      
  

 

 

    

 

 

    

Pre-tax total

     27,292         80,712      

Income tax expense on adjustments

     9,912         26,304      
  

 

 

    

 

 

    

 

 

 

Adjusted net income

   $ 66,864       $ 70,518         -5.2
  

 

 

    

 

 

    

 

 

 

Diluted shares outstanding

     84,834         85,611      

Adjusted EPS - diluted

   $ 0.79       $ 0.82         -4.9

 

10


Reconciliation of Adjusted Net Income from Net Income

Unaudited, in thousands except per share data

 

CONTINUING OPERATIONS    Nine Months Ended September 30,  
     2015      2014      % Change  

Income from continuing operations

   $ 148,576       $ 99,727         49.0

Amortization of acquired intangible assets

     49,480         42,978      

Amortization of deferred financing costs

     15,017         14,960      

Accelerated amortization of deferred financing costs

     —           7,748      

Share-based compensation

     16,785         10,055      

Debt call premiums

     —           43,987      

Secondary equity offering expense

     1,041         —        

M&A and acquisition-related costs

     1,977         2,558      
  

 

 

    

 

 

    

Pre-tax total

     84,300         122,286      

Income tax expense on adjustments

     30,601         44,368      
  

 

 

    

 

 

    

 

 

 

Adjusted net income from continuing operations

   $ 202,275       $ 177,645         13.9
  

 

 

    

 

 

    

 

 

 

Diluted shares outstanding

     85,554         85,400      

Adjusted EPS from continuing operations - diluted

   $ 2.36       $ 2.08         13.5
DISCONTINUED OPERATIONS    Nine Months Ended September 30,  
     2015      2014      % Change  

Income from discontinued operations

   $ 30,989       $ 10,420         197.4

Amortization of acquired intangible assets

     41         1,509      

Share-based compensation

     1,576         124      

M&A and acquisition-related costs

     386         648      
  

 

 

    

 

 

    

Pre-tax total

     2,003         2,281      

Income tax expense on adjustments

     767         1,099      
  

 

 

    

 

 

    

 

 

 

Adjusted net income from discontinued operations

   $ 32,225       $ 11,602         177.8
  

 

 

    

 

 

    

 

 

 

Diluted shares outstanding

     85,554         85,400      

Adjusted EPS from discontinued operations - diluted

   $ 0.38       $ 0.14         171.4
CONSOLIDATED    Nine Months Ended September 30,  
     2015      2014      % Change  

Net income

   $ 179,565       $ 110,147         63.0

Amortization of acquired intangible assets

     49,521         44,487      

Amortization of deferred financing costs

     15,017         14,960      

Accelerated amortization of deferred financing costs

     —           7,748      

Share-based compensation

     18,361         10,179      

Debt call premiums

     —           43,987      

Secondary equity offering expense

     1,041         —        

M&A and acquisition-related costs

     2,363         3,206      
  

 

 

    

 

 

    

Pre-tax total

     86,303         124,567      

Income tax expense on adjustments

     31,368         45,467      
  

 

 

    

 

 

    

 

 

 

Adjusted net income

   $ 234,500       $ 189,247         23.9
  

 

 

    

 

 

    

 

 

 

Diluted shares outstanding

     85,554         85,400      

Adjusted EPS - diluted

   $ 2.74       $ 2.22         23.4

 

11


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 operating activities 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 operating activities 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 from cash flows from operating activities.

Reconciliation of Free Cash Flow from Operating Cash Flow

Unaudited, in thousands

 

CONTINUING OPERATIONS    Three Months Ended September 30,     Nine Months Ended September 30,  
     2015     2014      % Change     2015     2014      % Change  

Cash flows from operating activities

   $ 126,697      $ 118,302         7.1   $ 283,221      $ 302,592         -6.4

Cash capital expenditures

     31,319        32,557         -3.8     96,182        98,886         -2.7
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Free cash flow

   $ 95,378      $ 85,745         11.2   $ 187,039      $ 203,706         -8.2
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
DISCONTINUED OPERATIONS    Three Months Ended September 30,     Nine Months Ended September 30,  
     2015     2014            2015     2014         

Cash flows from (used in) operating activities

   $ (1,235   $ 10,120         $ (8,197   $ 27,658      

Cash capital expenditures

     —          5,691           1,930        14,796      
  

 

 

   

 

 

      

 

 

   

 

 

    

Free cash flow

   $ (1,235   $ 4,429         $ (10,127   $ 12,862      
  

 

 

   

 

 

      

 

 

   

 

 

    
CONSOLIDATED    Three Months Ended September 30,     Nine Months Ended September 30,  
     2015     2014      % Change     2015     2014      % Change  

Cash flows from operating activities

   $ 125,462      $ 128,422         -2.3   $ 275,024      $ 330,250         -16.7

Cash capital expenditures

     31,319        38,248         -18.1     98,112        113,682         -13.7
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Free cash flow

   $ 94,143      $ 90,174         4.4   $ 176,912      $ 216,568         -18.3
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

12


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 “Adjusted EBITDA.” The Company defines Adjusted EBITDA as earnings before interest expense, share-based compensation, taxes, depreciation and amortization and transaction costs. EBITDA and Adjusted EBITDA are not measures of financial performance or liquidity under GAAP. Although the Company uses Adjusted EBITDA as a measure of its liquidity, the use of Adjusted EBITDA is limited because it does not include certain material costs, such as depreciation, amortization and interest, necessary to operate the business. EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flow from operating activities or other income or cash flow data prepared in accordance with GAAP. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. Adjusted EBITDA is presented here as the Company understands investors use it as a measure of its historical ability to service debt and compliance with covenants in its senior credit facilities. Further, Adjusted EBITDA is presented here as the Company uses it to measure its performance and to conduct and evaluate its business during its regular review of operating results for the periods presented. The Company utilizes this non-GAAP measure to make decisions about the use of resources, analyze performance and measure management’s performance with stated objectives. Set forth below is a reconciliation of EBITDA and Adjusted EBITDA from cash flow from operating activities and net income.

 

13


Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow
Unaudited, in thousands

 

CONTINUING OPERATIONS    Three Months Ended Sept. 30,      Nine Months Ended Sept. 30,  
     2015      2014      2015      2014  

Cash flows from operating activities

   $ 126,697       $ 118,302       $ 283,221       $ 302,592   

Income tax expense

     28,931         4,829         84,664         53,845   

Deferred income tax benefit

     8,160         17,915         5,958         27,684   

Interest expense and other financing charges

     38,642         99,644         117,120         197,579   

Provision for share-based compensation

     (5,374      (3,908      (16,785      (10,055

Amortization of deferred financing costs

     (5,008      (5,206      (15,017      (14,960

Accelerated amortization of deferred financing costs

     —           (7,748      —           (7,748

Other

     (4      —           (224      (6

Changes in operating assets and liabilities, net of business acquisitions

     (26,500      (57,591      32,338         (66,690
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     165,544         166,237         491,275         482,241   

Provision for share-based compensation

     5,374         3,908         16,785         10,055   

Secondary equity offering expense

     —           —           1,041         —     

M&A and acquisition-related costs

     397         1,044         1,977         2,558   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 171,315       $ 171,189       $ 511,078       $ 494,854   
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash flows from operating activities

   $ 126,697       $ 118,302       $ 283,221       $ 302,592   

Cash flows used in investing activities

   $ (30,061    $ (77,111    $ (113,782    $ (485,938

Cash flows from (used in) financing activities

   $ (74,048    $ (33,882    $ (364,790    $ 110,855   
DISCONTINUED OPERATIONS    Three Months Ended Sept. 30,      Nine Months Ended Sept. 30,  
     2015      2014      2015      2014  

Cash flows from (used in) operating activities

   $ (1,235    $ 10,120       $ (8,197    $ 27,658   

Income tax expense

     (665      2,959         19,345         9,467   

Deferred income tax expense

     —           (2,837      (2,293      (3,057

Provision for share-based compensation

     —           (67      (1,576      (124

Other

     —           (2      29,596         (2

Changes in operating assets and liabilities, net of business acquisitions

     —           (3      13,500         (1,170
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     (1,900      10,170         50,375         32,772   

Provision for share-based compensation

     —           67         1,576         124   

M&A and acquisition-related costs

     —           440         386         648   

(Gain) loss on sale of business

     1,900         —           (46,656      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ —         $ 10,677       $ 5,681       $ 33,544   
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash flows from (used in) operating activities

   $ (1,235    $ 10,120       $ (8,197    $ 27,658   

Cash flows from (used in) investing activities

   $ 6,275       $ (5,792    $ 275,815       $ (15,194

Cash flows used in financing activities

   $ —         $ —         $ —         $ —     

 

14


Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow, continued

 

CONSOLIDATED    Three Months Ended Sept. 30,      Nine Months Ended Sept. 30,  
     2015      2014      2015      2014  

Cash flows from operating activities

   $ 125,462       $ 128,422       $ 275,024       $ 330,250   

Income tax expense

     28,266         7,788         104,009         63,312   

Deferred income tax benefit

     8,160         15,078         3,665         24,627   

Interest expense and other financing charges

     38,642         99,644         117,120         197,579   

Provision for share-based compensation

     (5,374      (3,975      (18,361      (10,179

Amortization of deferred financing costs

     (5,008      (5,206      (15,017      (14,960

Accelerated amortization of deferred financing costs

     —           (7,748      —           (7,748

Other

     (4      (2      29,372         (8

Changes in operating assets and liabilities, net of business acquisitions

     (26,500      (57,594      45,838         (67,860
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     163,644         176,407         541,650         515,013   

Provision for share-based compensation

     5,374         3,975         18,361         10,179   

Secondary equity offering expense

     —           —           1,041         —     

M&A and acquisition-related costs

     397         1,484         2,363         3,206   

(Gain) loss on sale of business

     1,900         —           (46,656      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 171,315       $ 181,866       $ 516,759       $ 528,398   
  

 

 

    

 

 

    

 

 

    

 

 

 

CONSOLIDATED

           

Cash flows from operating activities

   $ 125,462       $ 128,422       $ 275,024       $ 330,250   

Cash flows from (used in) investing activities

   $ (23,786    $ (82,903    $ 162,033       $ (501,132

Cash flows from (used in) financing activities

   $ (74,048    $ (33,882    $ (364,790    $ 110,855   

 

15


Reconciliation of EBITDA and Adjusted EBITDA from Net Income
Unaudited, in thousands

 

CONTINUING OPERATIONS    Three Months Ended Sept. 30,      Nine Months Ended Sept. 30,  
     2015      2014      2015      2014  

Income from continuing operations

   $ 50,719       $ 13,103       $ 148,576       $ 99,727   

Interest expense and other financing charges

     38,642         99,644         117,120         197,579   

Depreciation and amortization

     47,252         48,661         140,915         131,090   

Income tax expense

     28,931         4,829         84,664         53,845   
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     165,544         166,237         491,275         482,241   

Provision for share-based compensation

     5,374         3,908         16,785         10,055   

Secondary equity offering expense

     —           —           1,041         —     

M&A and acquisition-related costs

     397         1,044         1,977         2,558   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 171,315       $ 171,189       $ 511,078       $ 494,854   
  

 

 

    

 

 

    

 

 

    

 

 

 
DISCONTINUED OPERATIONS    Three Months Ended Sept. 30,      Nine Months Ended Sept. 30,  
     2015      2014      2015      2014  

Income from discontinued operations

   $ (1,235    $ 3,007       $ 30,989       $ 10,420   

Depreciation and amortization

     —           4,204         41         12,885   

Income tax expense

     (665      2,959         19,345         9,467   
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     (1,900      10,170         50,375         32,772   

Provision for share-based compensation

     —           67         1,576         124   

M&A and acquisition-related costs

     —           440         386         648   

(Gain) loss on sale of business

     1,900         —           (46,656      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ —         $ 10,677       $ 5,681       $ 33,544   
  

 

 

    

 

 

    

 

 

    

 

 

 
CONSOLIDATED    Three Months Ended Sept. 30,      Nine Months Ended Sept. 30,  
     2015      2014      2015      2014  

Net income

   $ 49,484       $ 16,110       $ 179,565       $ 110,147   

Interest expense and other financing charges

     38,642         99,644         117,120         197,579   

Depreciation and amortization

     47,252         52,865         140,956         143,975   

Income tax expense

     28,266         7,788         104,009         63,312   
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     163,644         176,407         541,650         515,013   

Provision for share-based compensation

     5,374         3,975         18,361         10,179   

Secondary equity offering expense

     —           —           1,041         —     

M&A and acquisition-related costs

     397         1,484         2,363         3,206   

(Gain) loss on sale of business

     1,900         —           (46,656      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 171,315       $ 181,866       $ 516,759       $ 528,398   
  

 

 

    

 

 

    

 

 

    

 

 

 

###

 

16