OMAHA, Neb., July 31, 2013 (GLOBE NEWSWIRE) -- West Corporation (Nasdaq:WSTC), a leading provider of technology-driven communication services, today announced its second quarter 2013 results.
Key Highlights:
- Adjusted Net Income2 increased 18%
- Adjusted Operating Income2 grew by 5.9%
- Adjusted EBITDA2 improved by 6.1%
- Free Cash Flow2 grew 257% to $69 million in the quarter, up 74% year-to-date
| Unaudited, in millions except per share | Three Months Ended June 30, | Six Months Ended June 30, | ||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | |
| Consolidated Revenue | $ 672.7 | $ 661.9 | 1.6% | $1,332.9 | $1,301.0 | 2.5% |
| Platform-based Revenue1 | 494.9 | 485.2 | 2.0% | 976.4 | 933.9 | 4.5% |
| Adjusted EBITDA2 | 180.4 | 169.9 | 6.1% | 350.5 | 331.8 | 5.7% |
| EBITDA2 | 178.5 | 166.4 | 7.3% | 317.5 | 327.0 | -2.9% |
| Adjusted Operating Income2 | 150.5 | 142.2 | 5.9% | 289.0 | 272.5 | 6.0% |
| Operating Income | 134.7 | 121.5 | 10.9% | 228.0 | 235.7 | -3.3% |
| Cash Flows from Operations | 95.0 | 43.7 | 117.3% | 193.7 | 135.4 | 43.1% |
| Free Cash Flow2,4 | 69.0 | 19.4 | 256.6% | 134.1 | 76.9 | 74.3% |
| Pro Forma Adjusted Net Income2,3 | 63.3 | NM | NM | 121.4 | NM | NM |
| Adjusted Net Income2 | 60.5 | 51.3 | 18.0% | 105.0 | 97.1 | 8.1% |
| Net Income | 43.7 | 36.7 | 19.0% | 46.7 | 70.7 | -33.9% |
| Pro Forma Adjusted EPS - Diluted | 0.75 | NM | NM | 1.43 | NM | NM |
| Adjusted Earnings per Share - Diluted | 0.71 | 0.81 | -12.3% | 1.40 | 1.53 | -8.5% |
| Earnings per Share - Diluted | 0.51 | 0.58 | -12.1% | 0.62 | 1.11 | -44.1% |
| Net Cash Flows used in Investing | (27.0) | (25.0) | 8.3% | (61.0) | (135.6) | -55.0% |
| Net Cash Flows used in Financing | (503.3) | (27.7) | NM | (93.7) | (7.4) | NM |
"We are pleased to report another quarter of solid operating results. Debt reduction and lower interest rates on our term debt combined with improvement in SG&A to fuel improved profitability for the quarter," said Tom Barker, CEO. "We continue to execute on our strategic initiatives, while returning a portion of our earnings to our shareholders through our quarterly dividend."
Dividend
The Company today also announced a $0.225 per common share quarterly dividend. The dividend is payable August 22, 2013, to shareholders of record as of the close of business on August 12, 2013.
Consolidated Operating Results
For the second quarter of 2013, revenue was $672.7 million compared to $661.9 million for the same quarter of the previous year, an increase of 1.6 percent. Fluctuations in currency exchange rates reduced revenue by approximately $1.1 million in the second quarter of 2013 compared to rates used for 2013 guidance.
The Unified Communications segment had revenue of $382.9 million in the second quarter of 2013, an increase of 3.6 percent over the same quarter of the previous year. The Communication Services segment had revenue of $296.8 million in the second quarter of 2013, 0.5 percent higher than the second quarter of 2012. The Company's platform-based businesses1 had revenue of $494.9 million in the second quarter of 2013, an increase of 2.0 percent over the same quarter of the previous year.
Adjusted EBITDA2 for the second quarter of 2013 was $180.4 million, or 26.8 percent of revenue, compared to $169.9 million, or 25.7 percent of revenue, for the second quarter of 2012, an increase of 6.1%. EBITDA was $178.5 million in the second quarter of 2013 compared to $166.4 million in the second quarter of 2012, an increase of 7.3%.
Adjusted Operating Income2 for the second quarter of 2013 was $150.5 million, or 22.4 percent of revenue, compared to $142.2 million, or 21.5 percent of revenue in the same quarter of 2012, an increase of 5.9%. Operating Income was $134.7 million in the second quarter of 2013 compared to $121.5 million in the second quarter of 2012, an increase of 10.9%.
Adjusted Net Income2 was $60.5 million in the second quarter of 2013, an increase of 18.0 percent from the same quarter of 2012. The Company's pro forma Adjusted Net Income2, which includes pro forma interest expense, net of tax, for the second quarter of 2013 was $63.3 million. Net Income was $43.7 million in the second quarter of 2013, compared to $36.7 million in the same quarter of 2012. The improvement in profitability was driven by recent deleveraging, a lower cost of debt and operating leverage.
Balance Sheet, Cash Flow and Liquidity
At June 30, 2013, West Corporation had cash and cash equivalents totaling $214.4 million and working capital of $338.0 million. Interest expense was $57.2 million during the three months ended June 30, 2013 compared to $60.6 million during the comparable period last year. The Company expects its quarterly interest expense to be approximately $51.1 million per quarter for the remainder of 2013.
On April 26, 2013, the Company redeemed all of the outstanding $450.0 million principal amount of its 11% Senior Subordinated Notes ("Senior Subordinated Notes"). The redemption price was 103.667% of the principal amount of the Senior Subordinated Notes. In addition, the Company paid accrued and unpaid interest on the redeemed Senior Subordinated Notes up to the Redemption Date. Upon completion of the redemption, the Company recorded a one-time expense of $6.6 million for the remaining amortization of the balance of deferred financing costs associated with the Senior Subordinated Notes.
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 June 30, 2013.
"Our strong cash flow generation continued in the second quarter of 2013," said Paul Mendlik, CFO. "We reduced our interest expense through the redemption of our Senior Subordinated Notes and lower interest rates on our term loans negotiated earlier this year. We continue to make progress toward our goal of reducing our net leverage to less than 4x by the end of the first quarter of 2015."
Cash Flows from Operations were $95.0 million for the second quarter of 2013 compared to $43.7 million in the same quarter last year. Free Cash Flow2 increased to $69.0 million in the second quarter of 2013 compared to $19.4 million in the second quarter of 2012.
During the second quarter of 2013, the Company invested $25.4 million, or 3.8 percent of revenues, in capital expenditures primarily for software and computer equipment.
Conference Call
The Company will hold a conference call to discuss these topics on Thursday, August 1, 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. 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.
| WEST CORPORATION | |||||
| CONDENSED STATEMENTS OF OPERATIONS | |||||
| (Unaudited, in thousands except selected per share and operating data) | |||||
| Three Months Ended June 30, | |||||
| 2013 | 2012 | 2013 | 2013 Adj. | ||
| Actual | Actual | % Change | Adjusted (2) | Pro Forma (2,3) | |
| Revenue | $ 672,695 | $ 661,895 | 1.6% | $ 672,695 | $ 672,695 |
| Cost of services | 311,939 | 307,286 | 1.5% | 311,939 | 311,939 |
| Selling, general and administrative expenses | 226,018 | 233,110 | -3.0% | 210,211 | 210,211 |
| Operating income | 134,738 | 121,499 | 10.9% | 150,545 | 150,545 |
| Interest expense, net | 57,190 | 60,625 | -5.7% | 52,666 | 48,120 |
| Subordinated debt call premium and accelerated amortization of deferred financing costs | 6,603 | -- | NM | -- | -- |
| Other expense, net | 1,077 | 1,691 | NM | 1,077 | 1,077 |
| Income before tax | 69,868 | 59,183 | 18.1% | 96,802 | 101,348 |
| Income tax | 26,200 | 22,489 | 16.5% | 36,301 | 38,005 |
| Net income | $ 43,668 | $ 36,694 | 19.0% | $ 60,501 | $ 63,343 |
| Weighted average shares outstanding: | |||||
| Basic | 83,524 | 61,384 | 83,524 | 83,524 | |
| Diluted | 84,943 | 63,565 | 84,943 | 84,943 | |
| Earnings per share: | |||||
| Basic | $ 0.52 | $ 0.60 | -13.3% | $ 0.72 | $ 0.76 |
| Diluted | $ 0.51 | $ 0.58 | -12.1% | $ 0.71 | $ 0.75 |
| SELECTED SEGMENT DATA: | |||||
| Revenue: | |||||
| Unified Communications | $ 382,869 | $ 369,527 | 3.6% | ||
| Communication Services | 296,778 | 295,227 | 0.5% | ||
| Intersegment eliminations | (6,952) | (2,859) | NM | ||
| Total | $ 672,695 | $ 661,895 | 1.6% | ||
| Depreciation: | |||||
| Unified Communications | $ 15,633 | $ 14,956 | 4.5% | ||
| Communication Services | 12,337 | 11,932 | 3.4% | ||
| Total | $ 27,970 | $ 26,888 | 4.0% | ||
| Amortization: | |||||
| Unified Communications - SG&A | $ 6,218 | $ 7,181 | -13.4% | ||
| Communication Services - COS | 2,506 | 2,180 | 15.0% | ||
| Communication Services - SG&A | 7,729 | 9,981 | -22.6% | ||
| Corporate - deferred financing costs | 4,524 | 3,393 | 33.3% | ||
| Corporate - accelerated amortization of deferred financing costs | 6,603 | -- | NM | ||
| Total | $ 27,580 | $ 22,735 | 21.3% | ||
| Share-based Compensation | |||||
| Unified Communications | $ 887 | $ 1,262 | -29.7% | ||
| Communication Services | 973 | 1,255 | -22.5% | ||
| Total | $ 1,860 | $ 2,517 | -26.1% | ||
| Cost of services: | |||||
| Unified Communications | $ 162,546 | $ 156,550 | 3.8% | ||
| Communication Services | 155,710 | 153,053 | 1.7% | ||
| Intersegment eliminations | (6,317) | (2,317) | NM | ||
| Total | $ 311,939 | $ 307,286 | 1.5% | ||
| Selling, general and administrative expenses: | |||||
| Unified Communications | $ 110,353 | $ 113,171 | -2.5% | ||
| Communication Services | 116,299 | 120,480 | -3.5% | ||
| Intersegment eliminations | (634) | (541) | NM | ||
| Total | $ 226,018 | $ 233,110 | -3.0% | ||
| Operating income: | |||||
| Unified Communications | $ 109,969 | $ 99,805 | 10.2% | $ 117,074 | |
| Communication Services | 24,769 | 21,694 | 14.2% | 33,470 | |
| Total | $ 134,738 | $ 121,499 | 10.9% | $ 150,544 | |
| Operating margin: | |||||
| Unified Communications | 28.7% | 27.0% | 30.6% | ||
| Communication Services | 8.3% | 7.3% | 11.3% | ||
| Total | 20.0% | 18.4% | 22.4% | ||
| SELECTED OPERATING DATA: | |||||
| Revenue from platform-based services (1) | $ 494,934 | $ 485,195 | 2.0% | ||
| Revenue from agent-based services | $ 180,635 | $ 179,255 | 0.8% | ||
| WEST CORPORATION | |||||
| CONDENSED STATEMENTS OF OPERATIONS | |||||
| (Unaudited, in thousands except selected per share and operating data) | |||||
| Six Months Ended June 30, | |||||
| 2013 | 2012 | 2013 | 2013 Adj. | ||
| Actual | Actual | % Change | Adjusted (2) | Pro Forma (2,3) | |
| Revenue | $1,332,919 | $1,300,957 | 2.5% | $ 1,332,919 | $ 1,332,919 |
| Cost of services | 621,006 | 598,988 | 3.7% | 621,006 | 621,006 |
| Selling, general and administrative expenses | 483,885 | 466,228 | 3.8% | 422,952 | 422,952 |
| Operating income | 228,028 | 235,741 | -3.3% | 288,961 | 288,961 |
| Interest expense, net | 130,068 | 122,687 | 6.0% | 120,890 | 94,550 |
| Subordinated debt call premium and accelerated amortization of deferred financing costs | 23,105 | -- | -- | -- | -- |
| Other expense (income), net | 99 | (1,039) | NM | 99 | 99 |
| Income before tax | 74,756 | 114,093 | -34.5% | 167,972 | 194,312 |
| Income tax | 28,033 | 43,355 | -35.3% | 62,989 | 72,867 |
| Net income | $ 46,723 | $ 70,738 | -33.9% | $ 104,983 | $ 121,445 |
| Weighted average shares outstanding: | |||||
| Basic | 73,716 | 61,345 | 73,716 | 83,472 | |
| Diluted | 75,151 | 63,525 | 75,151 | 84,907 | |
| Earnings per share: | |||||
| Basic | $ 0.63 | $ 1.15 | -45.2% | $ 1.42 | $ 1.45 |
| Diluted | $ 0.62 | $ 1.11 | -44.1% | $ 1.40 | $ 1.43 |
| SELECTED SEGMENT DATA: | |||||
| Revenue: | |||||
| Unified Communications | $ 750,437 | $ 729,174 | 2.9% | ||
| Communication Services | 593,229 | 576,964 | 2.8% | ||
| Intersegment eliminations | (10,747) | (5,181) | NM | ||
| Total | $1,332,919 | $1,300,957 | 2.5% | ||
| Depreciation: | |||||
| Unified Communications | $ 31,081 | $ 30,053 | 3.4% | ||
| Communication Services | 24,696 | 23,143 | 6.7% | ||
| Total | $ 55,777 | $ 53,196 | 4.9% | ||
| Amortization: | |||||
| Unified Communications - SG&A | $ 12,442 | $ 14,430 | -13.8% | ||
| Communication Services - COS | 5,095 | 4,309 | 18.2% | ||
| Communication Services - SG&A | 15,466 | 17,610 | -12.2% | ||
| Corporate - deferred financing costs | 9,178 | 6,786 | 35.2% | ||
| Corporate - accelerated amortization of deferred financing costs | 6,603 | -- | NM | ||
| Total | $ 48,784 | $ 43,135 | 13.1% | ||
| Share-based Compensation | |||||
| Unified Communications | $ 2,366 | $ 1,278 | 85.1% | ||
| Communication Services | 2,684 | 1,372 | 95.6% | ||
| Total | $ 5,050 | $ 2,650 | 90.6% | ||
| Cost of services: | |||||
| Unified Communications | $ 319,652 | $ 305,291 | 4.7% | ||
| Communication Services | 311,100 | 297,796 | 4.5% | ||
| Intersegment eliminations | (9,746) | (4,099) | NM | ||
| Total | $ 621,006 | $ 598,988 | 3.7% | ||
| Selling, general and administrative expenses: | |||||
| Unified Communications | $ 242,951 | $ 226,941 | 7.1% | ||
| Communication Services | 241,934 | 240,369 | 0.7% | ||
| Intersegment eliminations | (1,000) | (1,082) | NM | ||
| Total | $ 483,885 | $ 466,228 | 3.8% | ||
| Operating income: | |||||
| Unified Communications | $ 187,834 | $ 196,941 | -4.6% | $ 220,351 | |
| Communication Services | 40,194 | 38,800 | 3.6% | 68,610 | |
| Total | $ 228,028 | $ 235,741 | -3.3% | $ 288,961 | |
| Operating margin: | |||||
| Unified Communications | 25.0% | 27.0% | 29.4% | ||
| Communication Services | 6.8% | 6.7% | 11.6% | ||
| Total | 17.1% | 18.1% | 21.7% | ||
| SELECTED OPERATING DATA: | |||||
| Revenue from platform-based services (1) | $ 976,372 | $ 933,947 | 4.5% | ||
| Revenue from agent-based services | $ 362,007 | $ 372,072 | -2.7% | ||
| CONDENSED BALANCE SHEETS | |||
| (Unaudited, in thousands) | |||
| June 30, | Dec. 31, | % | |
| 2013 | 2012 | Change | |
| Current assets: | |||
| Cash and cash equivalents | $ 214,380 | $ 179,111 | 19.7% |
| Trust and restricted cash | 15,961 | 14,518 | 9.9% |
| Accounts receivable, net | 440,291 | 444,411 | -0.9% |
| Deferred income taxes receivable | 7,342 | 13,148 | -44.2% |
| Prepaid assets | 50,222 | 42,129 | 19.2% |
| Other current assets | 76,176 | 67,775 | 12.4% |
| Total current assets | 804,372 | 761,092 | 5.7% |
| Net property and equipment | 349,487 | 364,896 | -4.2% |
| Goodwill | 1,813,665 | 1,816,851 | -0.2% |
| Other assets | 494,585 | 505,314 | -2.1% |
| Total assets | $3,462,109 | $3,448,153 | 0.4% |
| Current liabilities | $ 466,405 | $ 457,668 | 1.9% |
| Long-term obligations | 3,566,391 | 3,992,531 | -10.7% |
| Other liabilities | 248,786 | 247,640 | 0.5% |
| Total liabilities | 4,281,582 | 4,697,839 | -8.9% |
| Stockholders' deficit | (819,473) | (1,249,686) | 34.4% |
| Total liabilities and stockholders' deficit | $3,462,109 | $3,448,153 | 0.4% |
| NM: Not Meaningful | |||
Reconciliation of Non-GAAP Financial Measures
Adjusted Operating Income Reconciliation
Adjusted Operating Income is a non-GAAP measure that reflects the Company's Operating Income before the impact of IPO-related expenses, expenses terminated in connection with the IPO and non-cash items. Adjusted Operating Income is not a measure of financial performance under generally accepted accounting principles ("GAAP"). 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 June 30, | |||
| 2013 | 2012 | % Change | |
| Operating income | $ 134,738 | $ 121,499 | 10.9% |
| Amortization of acquired intangible assets | 13,947 | 17,162 | |
| Share-based compensation | 1,860 | 2,517 | |
| Sponsor management/termination fee | -- | 1,032 | |
| Adjusted operating income | $ 150,545 | $ 142,210 | 5.9% |
| Six Months Ended June 30, | |||
| 2013 | 2012 | % Change | |
| Operating income | $ 228,028 | $ 235,741 | -3.3% |
| Amortization of acquired intangible assets | 27,908 | 32,040 | |
| Share-based compensation | 5,050 | 2,650 | |
| Sponsor management/termination fee | 25,000 | 2,069 | |
| IPO bonus | 2,975 | -- | |
| Adjusted operating income | $ 288,961 | $ 272,500 | 6.0% |
Adjusted Net Income, Adjusted EPS, Pro forma Adjusted Net Income and Pro forma Adjusted EPS Reconciliation
Adjusted Net Income is a non-GAAP measure that reflects the Company's Net Income before the impact of IPO-related expenses, expenses terminated in connection with the IPO, bond redemption premiums and non-cash items. Adjusted Net Income is not a measure of financial performance under GAAP. 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 to Net Income.
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.
| Reconciliation of Adjusted Net Income & Pro forma Net Income from Net Income | |||
| Unaudited, in thousands except per share | |||
| Three Months Ended June 30, | |||
| 2013 | 2012 | % Change | |
| Net income | $ 43,668 | $ 36,694 | 19.0% |
| Amortization of acquired intangible assets | 13,947 | 17,162 | |
| Amortization of deferred financing costs | 4,524 | 3,393 | |
| Accelerated amortization of deferred financing costs | 6,603 | -- | |
| Share-based compensation | 1,860 | 2,517 | |
| Sponsor management/termination fee | -- | 1,032 | |
| Pre-tax total | 26,934 | 24,104 | |
| Income tax expense on adjustments | 10,101 | 9,521 | |
| Adjusted net income | $ 60,501 | $ 51,277 | 18.0% |
| Diluted shares outstanding | 84,943 | 63,565 | |
| Adjusted EPS - diluted | $ 0.71 | $ 0.81 | -12.3% |
| Pro forma interest expense change, net of tax | $ 2,842 | ||
| Pro forma adjusted net income | $ 63,343 | N/A | |
| Pro forma diluted shares outstanding | 84,943 | ||
| Pro forma adjusted EPS - diluted | $ 0.75 | N/A | |
| Six Months Ended June 30, | |||
| 2013 | 2012 | % Change | |
| Net income | $ 46,723 | $ 70,738 | -33.9% |
| Amortization of acquired intangible assets | 27,908 | 32,040 | |
| Amortization of deferred financing costs | 9,178 | 6,786 | |
| Accelerated amortization of deferred financing costs | 6,603 | -- | |
| Share-based compensation | 5,050 | 2,650 | |
| Sponsor management/termination fee | 25,000 | 2,069 | |
| IPO bonus | 2,975 | -- | |
| Subordinated debt call premium | 16,502 | -- | |
| Pre-tax total | 93,216 | 43,545 | |
| Income tax expense on adjustments | 34,956 | 17,200 | |
| Adjusted net income | $ 104,983 | $ 97,083 | 8.1% |
| Diluted shares outstanding | 75,151 | 63,525 | |
| Adjusted EPS - diluted | $ 1.40 | $ 1.53 | -8.5% |
| Pro forma interest expense change, net of tax | $ 16,462 | ||
| Pro forma adjusted net income | $ 121,445 | N/A | |
| Pro forma diluted shares outstanding | 84,907 | ||
| Pro forma adjusted EPS - diluted | $ 1.43 | 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.
| Reconciliation of Free Cash Flow from Operating Cash Flow | |||
| Unaudited, in thousands | |||
| Three Months Ended June 30, | |||
| 2013 | 2012 | % Change | |
| Cash flows from operations | $ 94,998 | $ 43,711 | 117.3% |
| Cash capital expenditures | 25,985 | 24,356 | 6.7% |
| Free cash flow | $ 69,013 | $ 19,355 | 256.6% |
| Six Months Ended June 30, | |||
| 2013 | 2012 | % Change | |
| Cash flows from operations | $ 193,664 | $ 135,374 | 43.1% |
| Cash capital expenditures | 59,527 | 58,429 | 1.9% |
| Free cash flow | $ 134,137 | $ 76,945 | 74.3% |
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.
| Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow | ||||
| Unaudited, in thousands | ||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| Cash flows from operating activities | $ 94,998 | $ 43,711 | $ 193,664 | $ 135,374 |
| Income tax expense | 26,200 | 22,489 | 28,033 | 43,355 |
| Deferred income tax benefit (expense) | (4,664) | 3,811 | (9,007) | (7,707) |
| Interest expense and other financing charges | 64,249 | 60,987 | 153,943 | 123,397 |
| Provision for share-based compensation | (1,860) | (2,517) | (5,050) | (2,650) |
| Amortization of deferred financing costs | (4,524) | (3,393) | (9,178) | (6,786) |
| Accelerated amortization of deferred financing costs | (6,603) | -- | (6,603) | -- |
| Asset impairment | -- | -- | -- | (3,715) |
| Other | (10) | (92) | (37) | (171) |
| Changes in operating assets and liabilities, net of business acquisitions | 10,754 | 41,404 | (28,286) | 45,938 |
| EBITDA | 178,540 | 166,400 | 317,479 | 327,035 |
| Provision for share-based compensation | 1,860 | 2,517 | 5,050 | 2,650 |
| Sponsor management/termination fee and IPO bonus | -- | 1,032 | 27,975 | 2,069 |
| Adjusted EBITDA | $ 180,400 | $ 169,949 | $ 350,504 | $ 331,754 |
| Reconciliation of EBITDA and Adjusted EBITDA from Net Income | ||||
| Unaudited, in thousands | ||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| Net income | $ 43,668 | $ 36,694 | $ 46,723 | $ 70,738 |
| Interest expense and other financing charges | 64,249 | 60,987 | 153,943 | 123,397 |
| Depreciation and amortization | 44,423 | 46,230 | 88,780 | 89,545 |
| Income tax expense | 26,200 | 22,489 | 28,033 | 43,355 |
| EBITDA | 178,540 | 166,400 | 317,479 | 327,035 |
| Provision for share-based compensation | 1,860 | 2,517 | 5,050 | 2,650 |
| Sponsor management/termination fee and IPO bonus | -- | 1,032 | 27,975 | 2,069 |
| Adjusted EBITDA | $ 180,400 | $ 169,949 | $ 350,504 | $ 331,754 |
| Unaudited, in thousands | Three Months Ended June 30, | Six Months Ended June 30, | ||
| 2013 | 2012 | 2013 | 2012 | |
| Cash flows from operating activities | $ 94,998 | $ 43,711 | $ 193,664 | $ 135,374 |
| Cash flows used in investing activities | $ (27,039) | $ (24,978) | $ (61,002) | $ (135,630) |
| Cash flows used in financing activities | $ (503,274) | $ (27,684) | $ (93,693) | $ (7,418) |
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.
NM: Not Meaningful