EX-99.1 2 d617967dex991.htm EX-99.1 EX-99.1

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 2013 Results and

Declares Quarterly Dividend

Company Updates 2013 Guidance

OMAHA, NE, October 28, 2013 – West Corporation (Nasdaq:WSTC), a leading provider of technology-driven communication services, today announced its third quarter 2013 results.

Key Quarterly Highlights:

 

Unaudited, in millions except per share    Three Months Ended Sept. 30,     Nine Months Ended Sept. 30,  
     2013     2012     % Change     2013     2012     % Change  

Consolidated Revenue

   $ 665.4      $ 656.9        1.3   $ 1,998.3      $ 1,957.9        2.1

Platform-based Revenue1

     483.0        472.7        2.2     1,459.4        1,406.6        3.8

Adjusted EBITDA2

     174.8        168.2        3.9     526.0        500.4        5.1

EBITDA2

     171.5        154.1        11.3     489.0        481.1        1.6

Adjusted Operating Income2

     140.6        148.4        -5.2     430.4        421.4        2.1

Operating Income

     123.4        117.3        5.2     351.5        353.0        -0.4

Pro Forma Adjusted Net Income2,3

     N/A        N/A        N/A        180.6        N/A        N/A   

Adjusted Net Income2

     59.7        44.9        33.2     165.2        142.3        16.1

Net Income

     46.1        22.1        108.9     92.9        92.8        0.0

Pro Forma Adjusted EPS—Diluted2

     N/A        N/A        N/A        2.13        N/A        N/A   

Adjusted Earnings per Share—Diluted2

     0.70        0.71        -1.4     2.10        2.24        -6.3

Earnings per Share—Diluted

     0.54        0.35        54.3     1.18        1.46        -19.2

Free Cash Flow2,4

     54.6        79.1        -31.0     188.7        156.1        20.9

Cash Flows from Operations

     83.1        108.6        -23.5     276.7        243.9        13.4

Cash Flows used in Investing

     (28.2     (29.7     -5.1     (89.2     (165.3     -46.1

Cash Flows used in Financing

     (60.5     (16.4     NM        (154.2     (23.8     NM   

“West Corporation continued to drive strong profitability during the third quarter,” said Tom Barker, CEO. “We grew Adjusted EBITDA and Adjusted Net Income during the quarter and our free cash flow generation remains robust, growing by nearly 21 percent through the first nine months of the year.”


Dividend

The Company today also announced a $0.225 per common share quarterly dividend. The dividend is payable November 18, 2013, to shareholders of record as of the close of business on November 8, 2013.

Consolidated Operating Results

For the third quarter of 2013, revenue was $665.4 million compared to $656.9 million for the same quarter of the previous year, an increase of 1.3 percent.

The Unified Communications segment had revenue of $370.8 million in the third quarter of 2013, an increase of 3.3 percent over the same quarter of the previous year. The Communication Services segment had revenue of $306.2 million in the third quarter of 2013, 1.8 percent higher than the third quarter of 2012. The Company’s platform-based businesses1 had revenue of $483.0 million in the third quarter of 2013, an increase of 2.2 percent over the same quarter of the previous year.

Adjusted EBITDA2 for the third quarter of 2013 was $174.8 million, or 26.3 percent of revenue, compared to $168.2 million, or 25.6 percent of revenue, for the third quarter of 2012, an increase of 3.9 percent. EBITDA was $171.5 million in the third quarter of 2013 compared to $154.1 million in the third quarter of 2012, an increase of 11.3 percent.

Adjusted Operating Income2 for the third quarter of 2013 was $140.6 million, or 21.1 percent of revenue, compared to $148.4 million, or 22.6 percent of revenue in the same quarter of 2012, a decrease of 5.2 percent. Operating Income was $123.4 million in the third quarter of 2013 compared to $117.3 million in the third quarter of 2012, an increase of 5.2 percent.

Adjusted Net Income2 was $59.7 million in the third quarter of 2013, an increase of 33.2 percent from the same quarter of 2012. Net Income was $46.1 million in the third quarter of 2013, compared to $22.1 million in the same quarter of 2012. The improvement in profitability was driven by lower share-based compensation, deleveraging, a lower cost of debt and operating leverage.

 

1  Platform-based businesses include the Unified Communications segment, Intrado, West Interactive and HyperCube.
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 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

 

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Balance Sheet, Cash Flow and Liquidity

At September 30, 2013, West Corporation had cash and cash equivalents totaling $211.0 million and working capital of $349.0 million. Interest expense was $51.3 million during the three months ended September 30, 2013 compared to $69.2 million during the comparable period last year.

The Company’s net debt to pro forma Adjusted EBITDA ratio, as calculated pursuant to the Company’s senior secured term debt facilities, was 4.60x at September 30, 2013.

“Our cash flow generation continued at a strong pace for the nine months ended September 30, 2013. In the third quarter we realized the full effect of our debt reduction and lower interest rates from financing activities completed during the first half of the year,” said Paul Mendlik, CFO. “During the third quarter, we repaid $35 million of debt outstanding on our revolving trade accounts receivable financing facility. We also completed an amendment to that facility which increased the line of credit to $185 million and extended the maturity to June 2018, providing West Corporation with increased financial flexibility.”

Cash Flows from Operations were $276.7 million for the nine months ended September 30, 2013 compared to $243.9 million in the period last year. Free Cash Flow2,4 increased to $188.7 million in the year-to-date period of 2013 compared to $156.1 million in the same period of 2012.

During the third quarter of 2013, the Company invested $29.4 million, or 4.4 percent of revenues, in capital expenditures primarily for software and computer equipment.

2013 Guidance Update

The Company has updated some of its guidance ranges for the year ending December 31, 2013 in the table below. The Company is reiterating the previous guidance provided for all other metrics. This revised guidance assumes no acquisitions or changes in the current operating environment, no additional capital structure changes and foreign currency exchange rates used in its previous guidance.

 

     Previous Guidance      Revised Guidance  

Consolidated Revenue ($B)

   $ 2.715 - $2.770       $ 2.660 - $2.675   

Cash Flows from Operations ($M)

     $320 - $350         $345 - $365   

Capital Expenditures ($M)

     $130 - $140         $120 - $130   

Free Cash Flow ($M)

     $180 - $220         $215 - $235   

“Organic revenue growth for the year has been more challenging than we anticipated,” said Tom Barker. “Despite reduced revenue expectations, we anticipate strong profitability and cash flows. The midpoint of our Free Cash Flow guidance has been increased by $25 million.”

 

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Conference Call

The Company will hold a conference call to discuss these topics on Tuesday, October 29, 2013 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.

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 2013 guidance update 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

 

4


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 September 30,  
     2013     2012           2013  
     Actual     Actual     % Change     Adjusted (2)  

Revenue

   $ 665,366      $ 656,896        1.3   $ 665,366   

Cost of services

     310,533        307,699        0.9     310,533   

Selling, general and administrative expenses

     231,407        231,905        -0.2     214,187   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     123,426        117,292        5.2     140,646   

Interest expense, net

     51,242        69,146        -25.9     46,710   

Subordinated debt call premium and accelerated amortization of deferred financing costs

       2,715        NM        —     

Other expense (income), net

     (1,654     9,792        NM        (1,654
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     73,838        35,639        107.2     95,590   

Income tax

     27,690        13,543        104.5     35,846   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 46,148      $ 22,096        108.9   $ 59,744   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     83,581        61,452          83,581   

Diluted

     85,042        63,531          85,042   

Earnings per share:

        

Basic

   $ 0.55      $ 0.36        52.8   $ 0.71   

Diluted

   $ 0.54      $ 0.35        54.3   $ 0.70   

SELECTED SEGMENT DATA:

        

Revenue:

        

Unified Communications

   $ 370,751      $ 359,007        3.3  

Communication Services

     306,186        300,847        1.8  

Intersegment eliminations

     (11,571     (2,958     NM     
  

 

 

   

 

 

   

 

 

   

Total

   $ 665,366      $ 656,896        1.3  
  

 

 

   

 

 

   

 

 

   

Depreciation:

        

Unified Communications

   $ 16,841      $ 14,694        14.6  

Communication Services

     12,554        12,109        3.7  
  

 

 

   

 

 

   

 

 

   

Total

   $ 29,395      $ 26,803        9.7  
  

 

 

   

 

 

   

 

 

   

Amortization:

        

Unified Communications—SG&A

   $ 6,281      $ 7,146        -12.1  

Communication Services—COS

     2,475        2,433        1.7  

Communication Services—SG&A

     7,648        9,926        -22.9  

Corporate—deferred financing costs

     4,532        3,804        19.1  

Corporate—accelerated amortization of deferred financing costs

     —          2,715        NM     
  

 

 

   

 

 

   

 

 

   

Total

   $ 20,936      $ 26,024        -19.6  
  

 

 

   

 

 

   

 

 

   

Share-based Compensation

        

Unified Communications

   $ 1,424      $ 4,713        -69.8  

Communication Services

     1,680        5,753        -70.8  

Corporate

     —          10,160       
  

 

 

   

 

 

   

 

 

   

Total

   $ 3,104      $ 20,626        -85.0  
  

 

 

   

 

 

   

 

 

   

Cost of services:

        

Unified Communications

   $ 155,848      $ 155,316        0.3  

Communication Services

     165,674        154,747        7.1  

Intersegment eliminations

     (10,989     (2,364     NM     
  

 

 

   

 

 

   

 

 

   

Total

   $ 310,533      $ 307,699        0.9  
  

 

 

   

 

 

   

 

 

   

Selling, general and administrative expenses:

        

Unified Communications

   $ 115,568      $ 107,345        7.7  

Communication Services

     116,421        125,154        -7.0  

Intersegment eliminations

     (582     (594     NM     
  

 

 

   

 

 

   

 

 

   

Total

   $ 231,407      $ 231,905        -0.2  
  

 

 

   

 

 

   

 

 

   

Operating income:

        

Unified Communications

   $ 99,335      $ 96,345        3.1   $ 107,049   

Communication Services

     24,091        20,947        15.0     33,597   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 123,426      $ 117,292        5.2   $ 140,646   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating margin:

        

Unified Communications

     26.8     26.8       28.9

Communication Services

     7.9     7.0       11.0
  

 

 

   

 

 

     

 

 

 

Total

     18.6     17.9       21.1
  

 

 

   

 

 

     

 

 

 

SELECTED OPERATING DATA:

        

Revenue from platform-based services (1)

   $ 483,024      $ 472,674        2.2  

Revenue from agent-based services

   $ 185,128      $ 186,864        -0.9  

 

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     Nine Months Ended September 30,  
     2013     2012           2013     2013 Adj.  
     Actual     Actual     % Change     Adjusted (2)     Pro Forma (2,3)  

Revenue

   $ 1,998,285      $ 1,957,853        2.1   $ 1,998,285      $ 1,998,285   

Cost of services

     931,539        906,687        2.7     931,539        931,539   

Selling, general and administrative expenses

     715,292        698,133        2.5     636,390        636,390   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     351,454        353,033        -0.4     430,356        430,356   

Interest expense, net

     181,310        191,833        -5.5     167,600        142,890   

Subordinated debt call premium and accelerated amortization of deferred financing costs

     23,105        2,715        —          —          —     

Other expense (income), net

     (1,555     8,753        NM        (1,555     (1,555
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     148,594        149,732        -0.8     264,311        289,021   

Income tax

     55,723        56,898        -2.1     99,117        108,383   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 92,871      $ 92,834        0.0   $ 165,194      $ 180,638   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

          

Basic

     77,274        61,424          77,274        83,509   

Diluted

     78,720        63,530          78,720        84,955   

Earnings per share:

          

Basic

   $ 1.20      $ 1.51        -20.5   $ 2.14      $ 2.16   

Diluted

   $ 1.18      $ 1.46        -19.2   $ 2.10      $ 2.13   

SELECTED SEGMENT DATA:

          

Revenue:

          

Unified Communications

   $ 1,121,188      $ 1,088,181        3.0    

Communication Services

     899,415        877,811        2.5    

Intersegment eliminations

     (22,318     (8,139     NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 1,998,285      $ 1,957,853        2.1    
  

 

 

   

 

 

   

 

 

     

Depreciation:

          

Unified Communications

   $ 47,922      $ 44,747        7.1    

Communication Services

     37,250        35,252        5.7    
  

 

 

   

 

 

   

 

 

     

Total

   $ 85,172      $ 79,999        6.5    
  

 

 

   

 

 

   

 

 

     

Amortization:

          

Unified Communications—SG&A

   $ 18,722      $ 21,576        -13.2    

Communication Services—COS

     7,571        6,742        12.3    

Communication Services—SG&A

     23,113        27,536        -16.1    

Corporate—deferred financing costs

     13,710        10,590        29.5    

Corporate—accelerated amortization of deferred financing costs

     6,603        2,715        NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 69,719      $ 69,159        0.8    
  

 

 

   

 

 

   

 

 

     

Share-based Compensation

          

Unified Communications

   $ 3,790      $ 5,992        -36.7    

Communication Services

     4,364        7,124        -38.7    

Corporate

     —          10,160         
  

 

 

   

 

 

   

 

 

     

Total

   $ 8,154      $ 23,276        -65.0    
  

 

 

   

 

 

   

 

 

     

Cost of services:

          

Unified Communications

   $ 475,500      $ 460,607        3.2    

Communication Services

     476,774        452,543        5.4    

Intersegment eliminations

     (20,735     (6,463     NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 931,539      $ 906,687        2.7    
  

 

 

   

 

 

   

 

 

     

Selling, general and administrative expenses:

          

Unified Communications

   $ 358,519      $ 334,286        7.2    

Communication Services

     358,356        365,523        -2.0    

Intersegment eliminations

     (1,583     (1,676     NM       
  

 

 

   

 

 

   

 

 

     

Total

   $ 715,292      $ 698,133        2.5    
  

 

 

   

 

 

   

 

 

     

Operating income:

          

Unified Communications

   $ 287,169      $ 293,286        -2.1   $ 327,454     

Communication Services

     64,285        59,747        7.6     102,902     
  

 

 

   

 

 

   

 

 

   

 

 

   

Total

   $ 351,454      $ 353,033        -0.4   $ 430,356     
  

 

 

   

 

 

   

 

 

   

 

 

   

Operating margin:

          

Unified Communications

     25.6     27.0       29.2  

Communication Services

     7.1     6.8       11.4  
  

 

 

   

 

 

     

 

 

   

Total

     17.6     18.0       21.5  
  

 

 

   

 

 

     

 

 

   

SELECTED OPERATING DATA:

          

Revenue from platform-based services (1)

   $ 1,459,395      $ 1,406,620        3.8    

Revenue from agent-based services

   $ 547,136      $ 558,936        -2.1    

 

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WEST CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

     September 30,     December 31,     %  
     2013     2012     Change  

Current assets:

      

Cash and cash equivalents

   $ 210,973      $ 179,111        17.8

Trust and restricted cash

     15,749        14,518        8.5

Accounts receivable, net

     458,850        444,411        3.2

Deferred income taxes receivable

     8,672        13,148        -34.0

Prepaid assets

     41,715        42,129        -1.0

Other current assets

     85,814        67,775        26.6
  

 

 

   

 

 

   

 

 

 

Total current assets

     821,773        761,092        8.0

Net property and equipment

     347,740        364,896        -4.7

Goodwill

     1,820,107        1,816,851        0.2

Other assets

     491,060        505,314        -2.8
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 3,480,680      $ 3,448,153        0.9
  

 

 

   

 

 

   

 

 

 

Current liabilities

   $ 472,771      $ 457,668        3.3

Long-term obligations

     3,525,347        3,992,531        -11.7

Other liabilities

     265,171        247,640        7.1
  

 

 

   

 

 

   

 

 

 

Total liabilities

     4,263,289        4,697,839        -9.2

Stockholders’ deficit

     (782,609     (1,249,686     37.4
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 3,480,680      $ 3,448,153        0.9
  

 

 

   

 

 

   

 

 

 

 

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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 September 30,  
     2013      2012     % Change  

Operating income

   $ 123,426       $ 117,292        5.2

Amortization of acquired intangible assets

     13,929         17,072     

Share-based compensation

     3,104         20,626     

Sponsor management/termination fee

     —           1,019     

M&A and acquisition related costs

     187         293     

Acquisition earnout reversal

     —           (7,887  
  

 

 

    

 

 

   

 

 

 

Adjusted operating income

   $ 140,646       $ 148,415        -5.2
  

 

 

    

 

 

   

 

 

 
     Nine Months Ended September 30,  
     2013      2012     % Change  

Operating income

   $ 351,454       $ 353,033        -0.4

Amortization of acquired intangible assets

     41,835         49,112     

Share-based compensation

     8,154         23,276     

Sponsor management/termination fee

     25,000         3,088     

IPO bonus

     2,975         —       

M&A and acquisition related costs

     938         809     

Acquisition earnout reversal

     —           (7,887  
  

 

 

    

 

 

   

 

 

 

Adjusted operating income

   $ 430,356       $ 421,431        2.1
  

 

 

    

 

 

   

 

 

 

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.

 

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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 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.

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

Unaudited, in thousands except per share

 

     Three Months Ended September 30,  
     2013      2012     % Change  

Net income

   $ 46,148       $ 22,096        108.9

Amortization of acquired intangible assets

     13,929         17,072     

Amortization of deferred financing costs

     4,532         3,804     

Accelerated amortization of deferred financing costs

     —           2,715     

Share-based compensation

     3,104         20,626     

Sponsor management/termination fee

     —           1,019     

M&A and acquisition related costs

     187         293     

Acquisition earnout reversal

     —           (7,887  
  

 

 

    

 

 

   

Pre-tax total

     21,752         37,642     

Income tax expense on adjustments

     8,156         14,869     
  

 

 

    

 

 

   

 

 

 

Adjusted net income

   $ 59,744       $ 44,869        33.2
  

 

 

    

 

 

   

 

 

 

Diluted shares outstanding

     85,042         63,531     

Adjusted EPS—diluted

   $ 0.70       $ 0.71        -1.4
     Nine Months Ended September 30,  
     2013      2012     % Change  

Net income

   $ 92,871       $ 92,834        0.0

Amortization of acquired intangible assets

     41,835         49,112     

Amortization of deferred financing costs

     13,710         10,590     

Accelerated amortization of deferred financing costs

     6,603         2,715     

Share-based compensation

     8,154         23,276     

Sponsor management/termination fee

     25,000         3,088     

IPO bonus

     2,975         —       

Subordinated debt call premium

     16,502         —       

M&A and acquisition related costs

     938         809     

Acquisition earnout reversal

     —           (7,887  
  

 

 

    

 

 

   

Pre-tax total

     115,717         81,703     

Income tax expense on adjustments

     43,394         32,273     
  

 

 

    

 

 

   

 

 

 

Adjusted net income

   $ 165,194       $ 142,264        16.1
     

 

 

   

 

 

 

Diluted shares outstanding

     78,720         63,530     

Adjusted EPS—diluted

   $ 2.10       $ 2.24        -6.3

Pro forma interest expense change, net of tax

   $ 15,444        
  

 

 

      

Pro forma adjusted net income

   $ 180,638         N/A     
  

 

 

      

Pro forma diluted shares outstanding

     84,955        

Pro forma adjusted EPS—diluted

   $ 2.13         N/A     

 

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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.

Reconciliation of Free Cash Flow from Operating Cash Flow

Unaudited, in thousands

 

     Three Months Ended September 30,  
     2013      2012      % Change  

Cash flows from operations

   $ 83,065       $ 108,573         -23.5

Cash capital expenditures

     28,453         29,431         -3.3
  

 

 

    

 

 

    

 

 

 

Free cash flow

   $ 54,612       $ 79,142         -31.0
  

 

 

    

 

 

    

 

 

 
     Nine Months Ended September 30,  
     2013      2012      % Change  

Cash flows from operations

   $ 276,729       $ 243,947         13.4

Cash capital expenditures

     87,980         87,860         0.1
  

 

 

    

 

 

    

 

 

 

Free cash flow

   $ 188,749       $ 156,087         20.9
  

 

 

    

 

 

    

 

 

 

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.

 

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Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow

 

Unaudited, in thousands    Three Months
Ended Sept. 30,
    Nine Months
Ended Sept. 30,
 
     2013     2012     2013     2012  

Cash flows from operating activities

   $ 83,065      $ 108,573      $ 276,729      $ 243,947   

Income tax expense

     27,690        13,543        55,723        56,898   

Deferred income tax benefit (expense)

     5,339        (2,611     (3,668     (10,317

Interest expense and other financing charges

     51,850        72,153        205,792        195,551   

Provision for share-based compensation

     (3,104     (20,626     (8,154     (23,276

Amortization of deferred financing costs

     (4,532     (3,804     (13,710     (10,590

Accelerated amortization of deferred financing costs

     —          (2,715     (6,603     (2,715

Asset impairment

     —          —          —          (3,715

Other

     (55     (13     (93     (185

Changes in operating assets and liabilities, net of business acquisitions

     11,234        (10,400     (17,052     35,538   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     171,487        154,100        488,964        481,136   

Provision for share-based compensation

     3,104        20,626        8,154        23,276   

Sponsor management/termination fee and IPO bonus

     —          1,019        27,975        3,088   

M&A and acquisition related costs

     187        293        938        809   

Acquisition earnout reversal

     —          (7,887     —          (7,887
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 174,778      $ 168,151      $ 526,031      $ 500,422   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of EBITDA and Adjusted EBITDA from Net Income

 

Unaudited, in thousands    Three Months
Ended Sept. 30,
    Nine Months
Ended Sept. 30,
 
     2013     2012     2013     2012  

Net income

   $ 46,148      $ 22,096      $ 92,871      $ 92,834   

Interest expense and other financing charges

     51,850        72,153        205,792        195,551   

Depreciation and amortization

     45,799        46,308        134,578        135,853   

Income tax expense

     27,690        13,543        55,723        56,898   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     171,487        154,100        488,964        481,136   

Provision for share-based compensation

     3,104        20,626        8,154        23,276   

Sponsor management/termination fee and IPO bonus

     —          1,019        27,975        3,088   

M&A and acquisition related costs

     187        293        938        809   

Acquisition earnout reversal

     —          (7,887     —          (7,887
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 174,778      $ 168,151      $ 526,031      $ 500,422   
  

 

 

   

 

 

   

 

 

   

 

 

 
Unaudited, in thousands    Three Months
Ended Sept. 30,
    Nine Months
Ended Sept. 30,
 
     2013     2012     2013     2012  

Cash flows from operating activities

   $ 83,065      $ 108,573      $ 276,729      $ 243,947   

Cash flows used in investing activities

   $ (28,157   $ (29,657   $ (89,159   $ (165,287

Cash flows used in financing activities

   $ (60,469   $ (16,425   $ (154,162   $ (23,843

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