Convergys Reports Fourth Quarter Results

Convergys Corporation (NYSE: CVG), a global leader in customer management, today announced its financial results for the fourth quarter of 2012.

The Company also announced that the Board of Directors approved raising its regular quarterly dividend 20 percent to $0.06 per share and increasing the authorization for share repurchase to $250 million in the aggregate.

Fourth Quarter Summary
  • Total revenue from continuing operations of $509 million, up two percent compared with prior year;
  • GAAP EPS from continuing operations of $0.27; adjusted EPS from continuing operations of $0.25, compared with $0.21 in the prior year;
  • Adjusted EBITDA from continuing operations of $62 million, up five percent compared with adjusted EBITDA in the prior year;
  • Repurchased 3.7 million Convergys shares for $59 million, or $16.05 per share;
  • $639 million cash and short term investments on balance sheet at quarter end;
  • 2013 outlook includes continuing revenue and profit improvement with EPS growth to exceed 10 percent compared with 2012 adjusted results.

“We delivered our seventh consecutive quarter of revenue growth and profit improvement,” said Andrea Ayers, president and CEO. “Entering 2013, we continue to execute our growth strategy and expect another year of performance improvement. We repurchased $59 million of our stock in the fourth quarter consistent with our disciplined capital deployment strategy. Our strong capital position and confidence in the future allows us to pursue strategic growth and return cash to investors. We are pleased to raise the quarterly dividend 20 percent and increase our share repurchase authorization to $250 million.”

Fourth Quarter Results – Continuing Operations

Having completed the corporate simplification, the Company now reports results as a single segment.

Revenue – Revenue from continuing operations was $509 million, a two percent increase compared with $501 million in the same period last year. This included transition services revenue related to discontinued operations in both periods of $5 million and $1 million, respectively.

Operating Income – Adjusted operating income from continuing operations was $38 million, compared with $37 million in the same period last year. Including the Information Management sale impacts discussed below, GAAP operating income from continuing operations was $31 million in both periods.

EBITDA – Adjusted EBITDA was $62 million, compared with $59 million in the same period last year. Adjusted EBITDA excludes the Information Management sale impacts discussed below, and includes non-cash long-term compensation expense in both periods of $5 million and $4 million, respectively.

Net Income – Adjusted net income from continuing operations was $28 million, or $0.25 per diluted share, compared with $26 million, or $0.21 per diluted share, in the same period last year. Adjusted results exclude the Information Management sale impacts and tax benefit items discussed below and apply a normalized tax rate of 24 percent. GAAP net income from continuing operations was $30 million, or $0.27 per diluted share, compared with $39 million, or $0.33 per diluted share, in the same period last year.

Share Repurchase Convergys repurchased 3.7 million shares in the fourth quarter at a cost of $59 million. For the full year 2012, the Company repurchased 12.3 million shares at a cost of $184 million, or $15.04 per share. The Board of Directors of the Company increased the current authorization to purchase outstanding shares to $250 million.

Quarterly Dividend Convergys paid its regular quarterly dividend of $0.05 per share in January to holders of record at the close of business on December 21, 2012. The first raised dividend payment of $0.06 is scheduled to be made on April 5, 2013, to shareholders of record at the close of business on March 22, 2013.

Free Cash Flow – Free cash flow was a net use of $26 million, including $35 million for pension liability reduction and Information Management sale tax payments, compared with net cash inflows of $30 million, including approximately $15 million contribution from Information Management, in the same period last year.

Net Cash and Short Term Investments – At December 31, 2012, cash and short term investments were $639 million, debt maturing in one year was $1 million and long term debt was $60 million. Net cash and short term investments totaled $578 million at December 31, 2012, compared with $668 million at September 30, 2012, and $318 million at the end of the fourth quarter last year.

Information Management Sale Impacts and Certain Other Tax Items – GAAP fourth-quarter 2012 results from continuing operations include the expected $7 million non-cash pension plan settlement charge related to the Information Management business sold last year, and a $6 million tax benefit largely to reflect the mix of income by jurisdictions. GAAP fourth-quarter 2011 results include $6 million Information Management-related costs that did not qualify for presentation as discontinued operations and $17 million tax benefits from international transactions and certain discrete items.

Reconciliation tables of GAAP to non-GAAP results are attached.

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