OMAHA, Neb., Jan. 28, 2015 (GLOBE NEWSWIRE) -- West Corporation (Nasdaq:WSTC), a leading provider of technology-enabled communication services, today announced its fourth quarter and full year 2014 results.
On January 7, 2015, the Company announced it had entered into a definitive agreement to sell several of its agent services businesses to Alorica Inc. for approximately $275 million in cash. The businesses being sold are reflected as discontinued operations in the Company's consolidated financial statements. The sale is expected to close in the first quarter of 2015, subject to regulatory approvals and other customary closing conditions. The Company has presented below its historical operating results, which includes discontinued operations, as well as its results from continuing operations, which excludes discontinued operations. The assets and liabilities of the businesses being sold have been reflected as held for sale for the periods presented.
Key Quarterly Highlights:
HISTORICAL (1) | ||||||
Unaudited, in millions except per share amounts | Three Months Ended Dec. 31, | Twelve Months Ended Dec. 31, | ||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | |
Consolidated Revenue | $ 716.2 | $ 687.6 | 4.2% | $2,796.7 | $2,685.9 | 4.1% |
Platform-based Revenue2 | 497.0 | 495.8 | 0.2% | 2,001.4 | 1,955.2 | 2.4% |
Adjusted EBITDA4 | 187.0 | 178.4 | 4.8% | 715.4 | 704.4 | 1.5% |
EBITDA4 | 179.2 | 175.8 | 2.0% | 694.2 | 664.7 | 4.4% |
Adjusted Operating Income4 | 151.3 | 144.9 | 4.4% | 573.9 | 575.3 | -0.2% |
Operating Income | 119.4 | 128.8 | -7.3% | 484.1 | 480.2 | 0.8% |
Adjusted Net Income4 | 99.3 | 63.6 | 56.0% | 285.2 | 229.3 | 24.3% |
Net Income | 48.3 | 50.3 | -4.1% | 158.4 | 143.2 | 10.6% |
Adjusted Earnings per Share - Diluted4 | 1.15 | 0.75 | 53.3% | 3.33 | 2.86 | 16.4% |
Earnings per Share - Diluted | 0.56 | 0.59 | -5.1% | 1.85 | 1.78 | 3.9% |
Free Cash Flow4,5 | 95.4 | 66.9 | 42.6% | 312.0 | 255.7 | 22.0% |
Cash Flows from Operations | 132.5 | 107.4 | 23.4% | 462.7 | 384.1 | 20.5% |
Cash Flows used in Investing | (43.8) | (46.3) | NM | (544.9) | (135.5) | NM |
Cash Flows used in Financing | (135.9) | (42.7) | NM | (25.0) | (196.8) | NM |
CONTINUING OPERATIONS | ||||||
Unaudited, in millions except per share amounts | Three Months Ended Dec. 31, | Twelve Months Ended Dec. 31, | ||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | |
Consolidated Revenue | $ 562.9 | $ 537.0 | 4.8% | $2,218.6 | $2,121.0 | 4.6% |
Adjusted EBITDA4 | 173.4 | 163.7 | 5.9% | 668.3 | 655.6 | 1.9% |
EBITDA4 | 167.0 | 161.1 | 3.7% | 649.2 | 616.1 | 5.4% |
Adjusted Operating Income4 | 141.2 | 134.5 | 4.9% | 541.5 | 544.1 | -0.5% |
Operating Income | 116.7 | 119.0 | -1.9% | 461.4 | 451.3 | 2.2% |
Adjusted Net Income4 | 68.1 | 55.4 | 22.9% | 247.2 | 207.7 | 19.0% |
Net Income | 34.9 | 42.5 | -18.0% | 134.6 | 123.1 | 9.4% |
Adjusted Earnings per Share - Diluted4 | 0.79 | 0.65 | 21.5% | 2.89 | 2.59 | 11.6% |
Earnings per Share - Diluted | 0.41 | 0.50 | -18.0% | 1.57 | 1.53 | 2.6% |
Free Cash Flow4,5 | 279.2 | 204.5 | 36.5% | |||
Cash Flows from Operations | 409.5 | 318.8 | 28.5% | |||
Cash Flows used in Investing | (524.4) | (121.9) | NM | |||
Cash Flows used in Financing | (25.0) | (196.8) | NM |
"In 2014, we delivered on our operational goals by achieving our revenue guidance, positioning the company for a reacceleration of growth and effectively deploying our capital," said Tom Barker, chairman and chief executive officer of West Corporation. "We began 2015 by announcing the divestiture of several of our agent services businesses which should result in a faster growing, more profitable and ultimately more valuable company."
Dividend
The Company today also announced a $0.225 per common share dividend. The dividend is payable February 19, 2015, to shareholders of record as of the close of business on February 9, 2015.
Consolidated Operating Results (Historical1)
For the fourth quarter of 2014, revenue was $716.2 million compared to $687.6 million for the same quarter of the previous year, an increase of 4.2 percent. Revenue from acquired entities3 was $35.6 million during the fourth quarter of 2014.
For the year ended December 31, 2014, revenue was $2,796.7 million compared to $2,685.9 million for 2013, an increase of 4.1 percent. Revenue from acquired entities3 was $74.7 million during 2014.
The Unified Communications segment had revenue of $395.4 million in the fourth quarter of 2014, a decrease of 1.9 percent compared to the same quarter of the previous year. The Communication Services segment had revenue of $336.3 million in the fourth quarter of 2014, an increase of 12.5 percent compared to the same quarter of the previous year. For 2014, the Unified Communications segment had revenue of $1,616.8 million, an increase of 0.8 percent compared to 2013. The Communication Services segment had revenue of $1,239.4 million in 2014, an increase of 10.7 percent compared to 2013.
Adjusted EBITDA4 for the fourth quarter of 2014 was $187.0 million compared to $178.4 million for the fourth quarter of 2013, an increase of 4.8 percent. EBITDA4 was $179.2 million in the fourth quarter of 2014 compared to $175.8 million in the fourth quarter of 2013. Adjusted EBITDA for 2014 was $715.4 million, or 25.6 percent of revenue, compared to $704.4 million, or 26.2 percent of revenue, in 2013. EBITDA was $694.2 million in 2014 compared to $664.7 million in 2013, an increase of 4.4 percent.
Adjusted operating income4 for the fourth quarter of 2014 was $151.3 million, or 21.1 percent of revenue, compared to $144.9 million, or 21.1 percent of revenue in the same quarter of 2013, an increase of 4.4 percent. Operating income was $119.4 million for the fourth quarter of 2014 compared to $128.8 million in the fourth quarter of 2013, a decrease of 7.3 percent. The decrease in 2014 operating income was due primarily to higher amortization and share-based compensation expense. For the full year 2014, adjusted operating income was $573.9 million compared to $575.3 million in 2013. Operating income for 2014 was $484.1 million compared to 2013 operating income of $480.2 million.
Adjusted net income4 was $99.3 million in the fourth quarter of 2014, an increase of 56.0 percent from the same quarter of 2013. Net income decreased 4.1 percent to $48.3 million in the fourth quarter of 2014, compared to $50.3 million in the same quarter of 2013. This decrease was mainly due to $21.6 million of debt call premium and accelerated amortization of deferred financing costs associated with the Company's November 15, 2014 redemption of its 7.875 percent Senior Notes due 2019 (the "2019 Notes"). In 2014, adjusted net income was $285.2 million, an increase of 24.3 percent compared to 2013. Net income in 2014 was $158.4 million compared to net income of $143.2 million in 2013, an increase of 10.6 percent. The improvement in profitability was driven by higher operating income and lower effective income tax rates.
Consolidated Operating Results (Continuing Operations)
For the fourth quarter of 2014, revenue was $562.9 million compared to $537.0 million for the same quarter of the previous year, an increase of 4.8 percent. Revenue from acquired entities3 was $35.6 million during the fourth quarter of 2014.
For the year ended December 31, 2014, revenue was $2,218.6 million compared to $2,121.0 million for 2013, an increase of 4.6 percent. Revenue from acquired entities3 was $74.7 million during 2014.
The Unified Communications segment had revenue of $395.4 million in the fourth quarter of 2014, a decrease of 1.9 percent compared to the same quarter of the previous year. The Communication Services segment had revenue of $180.8 million in the fourth quarter of 2014, an increase of 24.0 percent compared to the same quarter of the previous year. For 2014, the Unified Communications segment had revenue of $1,616.8 million, an increase of 0.8 percent compared to 2013. The Communication Services segment had revenue of $653.6 million in 2014, an increase of 19.7 percent compared to 2013. The growth in revenue for the Communication Services segment in the fourth quarter and full year 2014 was primarily due to the acquisition of Health Advocate in June 2014.
Adjusted EBITDA4 for the fourth quarter of 2014 was $173.4 million compared to $163.7 million for the fourth quarter of 2013, an increase of 5.9 percent. EBITDA4 was $167.0 million in the fourth quarter of 2014 compared to $161.1 million in the fourth quarter of 2013. Adjusted EBITDA for 2014 was $668.3 million, or 30.1 percent of revenue, compared to $655.6 million, or 30.9 percent of revenue, in 2013. EBITDA was $649.2 million in 2014 compared to $616.1 million in 2013.
Adjusted operating income4 for the fourth quarter of 2014 was $141.2 million, or 25.1 percent of revenue, compared to $134.5 million, or 25.1 percent of revenue in the same quarter of 2013, an increase of 4.9 percent. Operating income was $116.7 million in the fourth quarter of 2014 compared to $119.0 million in the fourth quarter of 2013. For the full year 2014, adjusted operating income was $541.5 million compared to $544.1 million in 2013. Operating income for 2014 was $461.4 million compared to 2013 operating income of $451.3 million.
Adjusted net income4 was $68.1 million in the fourth quarter of 2014, an increase of 22.9 percent from the same quarter of 2013. Net income decreased 18.0 percent to $34.9 million in the fourth quarter of 2014, compared to $42.5 million in the same quarter of 2013. This decrease was mainly due to $21.6 million of debt call premium and accelerated amortization of deferred financing costs associated with the Company's November 15, 2014 redemption of its 2019 Notes. In 2014, adjusted net income was $247.2 million, an increase of 19.0 percent compared to 2013. Net income in 2014 was $134.6 million compared to net income of $123.1 million in 2013, an increase of 9.4 percent. The improvement in profitability was driven by higher operating income and lower effective income tax rates.
Balance Sheet, Cash Flow and Liquidity
At December 31, 2014, West Corporation had cash and cash equivalents totaling $115.1 million and working capital of $369.8 million. Interest expense was $42.9 million during the three months ended December 31, 2014 compared to $51.4 million during the comparable period the prior year. Interest expense was $188.1 million in 2014 compared to $232.9 million in 2013. The reduction in interest expense was due to refinancing of debt completed by the Company during 2014.
The Company's net debt to pro forma adjusted EBITDA ratio, as calculated pursuant to the Company's senior secured term debt facilities6 and using historical1 adjusted EBITDA, was 4.59x at December 31, 2014. This ratio would be 4.56x using the Company's adjusted EBITDA from continuing operations and proceeds from the sale of the Company's agent services businesses.
On November 15, 2014, the Company redeemed the remaining $450 million of its outstanding 2019 Notes. The redemption price for the 2019 Notes was $467.7 million, including the call premium.
Cash flows from operations on a historical1 basis were $462.7 million for the twelve months ended December 31, 2014 compared to $384.1 million in 2013. Free cash flow4,5 on a historical1 basis increased 22.0 percent to $312.0 million in 2014 compared to $255.7 million in 2013.
"West had significant growth in cash flow in 2014," said Paul Mendlik, chief financial officer of West Corporation. "Our accounts receivable days sales outstanding at year end were 57 days, compared to 60 days at the end of 2013. This contributed $28 million to the improvement in cash flows from operations for the year."
Cash flows from operations on a continuing operations basis were $409.5 million for the twelve months ended December 31, 2014 compared to $318.8 million in 2013. Free cash flow4,5 on a continuing operations basis increased 36.5 percent to $279.2 million in 2014 compared to $204.5 million in 2013.
During the fourth quarter of 2014, on a historical1 basis, the Company invested $55.2 million, or 7.7 percent of revenue, in capital expenditures primarily for software and computer equipment. For the full year 2014, the Company invested $155.8 million, or 5.6 percent of revenue, in capital expenditures. On a continuing operations basis, the Company invested $136.3 million, or 6.1 percent of revenue, in capital expenditures during 2014.
Acquisitions
On November 3, 2014, the Company completed the previously announced acquisition of the assets of GroupCast, L.L.C., a provider of alert and notification services for corporations, government entities and K-12 school districts that operates under two brands, GroupCast and SchoolReach ("SchoolReach"). SchoolReach is an award-winning provider of notification systems for thousands of smaller public school districts and private schools throughout the U.S. The purchase price was approximately $12.6 million, net of working capital, and was funded with cash on hand. SchoolReach will be combined with the Company's SchoolMessenger business in the Unified Communication operating segment.
2015 Guidance
For 2015, the Company expects the results presented below. This guidance assumes no acquisitions or changes in the current operating environment, capital structure or exchange rates. The two most significant exchange rates used for 2015 guidance are the British Pound Sterling at 1.55 and the Euro at 1.19. The Company expects foreign exchange rates to negatively impact 2015 revenue by approximately $32 million and 2015 adjusted EBITDA by approximately $9 million.
The 2015 guidance does not include the gain the Company expects to report on the sale of its agent services businesses.
The 2015 guidance does not include any interest reduction associated with the proceeds from the sale of the agent services businesses or proceeds from the previously disclosed planned sale of real estate associated with the Company's agent services businesses. The Company estimates the total cash it will realize from the sale of the businesses and real estate, net of fees and taxes, will be approximately $285 million.
The 2015 leverage ratio guidance range includes the net cash the Company expects to receive for the sale of its agent services businesses.
The 2015 operating income guidance includes approximately $15 million in stranded and rebranding costs and an increase in share-based compensation of approximately $9 million. Adjusted operating income includes approximately $12 million of stranded and rebranding costs.
The 2015 capital expenditure guidance includes several one-time items. The Company expects to invest approximately $27 million on data center consolidation activities, including approximately $8 million which was carried over from what was expected to be spent on these activities in 2014. Additionally, the Company expects to invest approximately $8 million to replace systems being sold along with its agent services businesses. The Company also expects approximately $4 to $5 million of capital expenditures for discontinued operations which is not included in the guidance range below.
The Company's 2015 guidance for Adjusted EBITDA includes approximately $6 to $7 million that the Company expects to receive from discontinued operations during the first quarter of 2015.
In millions except per share and leverage ratio | CONTINUING OPERATIONS | ||||
2014 Actual | 2015 Guidance | Growth | |||
Consolidated Revenue | $ 2,218.6 | $2,295 - $2,340 | 3.4% | - | 5.5% |
Adjusted Operating Income4 | $ 541.5 | $536 - $560 | -1.0% | - | 3.4% |
Operating Income | $ 461.4 | $445 - $470 | -3.6% | - | 1.9% |
Adjusted Net Income4 | $ 247.2 | $257 - $267 | 4.0% | - | 8.0% |
Net Income | $ 134.6 | $190 - $200 | 41.1% | - | 48.6% |
Adjusted Earnings per Share - Diluted4 | $ 2.89 | $2.96 - $3.08 | 2.4% | - | 6.6% |
Earnings per Share - Diluted | $ 1.57 | $2.20 - $2.31 | 40.1% | - | 47.1% |
Cash Flows from Operations | $ 409.5 | $420 - $460 | 2.6% | - | 12.3% |
Capital Expenditures | $ 136.3 | $150 - $170 | 10.1% | - | 24.7% |
Free Cash Flow4,5 | $ 279.2 | $270 - $300 | -3.3% | - | 7.5% |
Net Debt to pro forma Adjusted EBITDA ratio6 | 4.59x | 4.30x - 4.50x | |||
Full year average diluted share count | 85.5 | 86.6 - 86.8 | |||
Company will report actual EBITDA and Adjusted EBITDA for 2015 | |||||
2014 Actual | 2015 Guidance | Growth | |||
Adjusted EBITDA4 | $ 668.3 | $680 - $703 | 1.8% | - | 5.2% |
EBITDA4 | $ 649.2 | $653 - $678 | 0.6% | - | 4.4% |
"This year we intend to further invest in our highest growth businesses and will be carefully evaluating our options for reinvesting the divestiture proceeds upon closing," said Tom Barker. "We expect very strong growth in net income this year due to the debt restructuring we completed in 2014."
Conference Call
The Company will hold a conference call to discuss these topics on Thursday, January 29, 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, carrier services and 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. The statements contained in the 2015 guidance and other statements concerning the Company's prospects 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 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, West's ability to complete the announced divestiture of several of its agent services businesses, 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 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.
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 CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(Unaudited, in thousands except per share data) | ||||||||
HISTORICAL (1) | CONTINUING OPERATIONS | |||||||
Three Months Ended December 31, | Three Months Ended December 31, | |||||||
2014 | 2013 | 2014 | 2014 | 2013 | 2014 | |||
Actual | Actual | % Change | Adjusted (4) | Actual | Actual | % Change | Adjusted (4) | |
Revenue | $ 716,243 | $ 687,570 | 4.2% | $ 716,243 | $ 562,938 | $ 536,954 | 4.8% | $ 562,938 |
Cost of services | 333,888 | 329,040 | 1.5% | 333,888 | 234,419 | 230,699 | 1.6% | 234,419 |
Selling, general and administrative expenses | 262,984 | 229,770 | 14.5% | 231,027 | 211,809 | 187,302 | 13.1% | 187,341 |
Operating income | 119,371 | 128,760 | -7.3% | 151,328 | 116,710 | 118,953 | -1.9% | 141,178 |
Interest expense, net | 42,911 | 51,296 | -16.3% | 37,836 | 42,911 | 51,296 | -16.3% | 37,836 |
Debt call premium and accelerated amortization of deferred financing costs | 21,574 | -- | NM | -- | 21,574 | -- | NM | -- |
Other expense (income), net | (569) | (703) | NM | (569) | (1,493) | (683) | NM | (1,493) |
Income before tax | 55,455 | 78,167 | -29.1% | 114,061 | 53,718 | 68,340 | -21.4% | 104,835 |
Income tax expense | 7,197 | 27,836 | -74.1% | 14,804 | 18,834 | 25,798 | -27.0% | 36,755 |
Net income | $ 48,258 | $ 50,331 | -4.1% | $ 99,257 | $ 34,884 | $ 42,542 | -18.0% | $ 68,080 |
Weighted average shares outstanding: | ||||||||
Basic | 84,178 | 83,627 | 84,178 | 84,178 | 83,627 | 84,178 | ||
Diluted | 86,033 | 85,088 | 86,033 | 86,033 | 85,088 | 86,033 | ||
Earnings per share: | ||||||||
Basic | $ 0.57 | $ 0.60 | -5.0% | $ 1.18 | $ 0.41 | $ 0.51 | -19.6% | $ 0.81 |
Diluted | $ 0.56 | $ 0.59 | -5.1% | $ 1.15 | $ 0.41 | $ 0.50 | -18.0% | $ 0.79 |
SELECTED SEGMENT DATA: | ||||||||
Revenue: | ||||||||
Unified Communications | $ 395,449 | $ 403,150 | -1.9% | $ 395,449 | $ 403,150 | -1.9% | ||
Communication Services | 336,301 | 298,841 | 12.5% | 180,782 | 145,777 | 24.0% | ||
Intersegment eliminations | (15,507) | (14,421) | NM | (13,293) | (11,973) | NM | ||
Total | $ 716,243 | $ 687,570 | 4.2% | $ 562,938 | $ 536,954 | 4.8% | ||
Depreciation: | ||||||||
Unified Communications | $ 19,901 | $ 18,841 | 5.6% | $ 19,901 | $ 18,841 | 5.6% | ||
Communication Services | 12,595 | 10,686 | 17.9% | 8,285 | 6,341 | 30.7% | ||
Total | $ 32,496 | $ 29,527 | 10.1% | $ 28,186 | $ 25,182 | 11.9% | ||
Amortization: | ||||||||
Unified Communications - SG&A | $ 7,424 | $ 6,337 | 17.2% | $ 7,424 | $ 6,337 | 17.2% | ||
Communication Services - COS | 3,221 | 2,676 | 20.4% | 3,221 | 2,676 | 20.4% | ||
Communication Services - SG&A | 16,807 | 7,166 | 134.5% | 10,616 | 6,660 | 59.4% | ||
Corporate - deferred financing costs | 5,075 | 4,536 | 11.9% | 5,075 | 4,536 | 11.9% | ||
Corporate - accelerated amortization of deferred financing costs | 3,853 | -- | NM | 3,853 | -- | NM | ||
Total | $ 36,380 | $ 20,715 | 75.6% | $ 30,189 | $ 20,209 | 49.4% | ||
Share-based Compensation | ||||||||
Unified Communications | $ 3,069 | $ 1,310 | 134.3% | $ 3,069 | $ 1,310 | 134.3% | ||
Communication Services | 2,480 | 1,091 | 127.3% | 2,450 | 1,044 | 134.7% | ||
Total | $ 5,549 | $ 2,401 | 131.1% | $ 5,519 | $ 2,354 | 134.5% | ||
Cost of services: | ||||||||
Unified Communications | $ 164,946 | $ 170,143 | -3.1% | $ 164,946 | $ 170,143 | -3.1% | ||
Communication Services | 182,279 | 171,839 | 6.1% | 80,836 | 71,321 | 13.3% | ||
Intersegment eliminations | (13,337) | (12,942) | NM | (11,363) | (10,765) | NM | ||
Total | $ 333,888 | $ 329,040 | 1.5% | $ 234,419 | $ 230,699 | 1.6% | ||
Selling, general and administrative expenses: | ||||||||
Unified Communications | $ 137,650 | $ 132,555 | 3.8% | $ 138,968 | $ 133,256 | 4.3% | ||
Communication Services | 127,504 | 98,694 | 29.2% | 74,771 | 55,254 | 35.3% | ||
Intersegment eliminations | (2,170) | (1,479) | NM | (1,930) | (1,208) | NM | ||
Total | $ 262,984 | $ 229,770 | 14.5% | $ 211,809 | $ 187,302 | 13.1% | ||
Operating income: | ||||||||
Unified Communications | $ 92,853 | $ 100,452 | -7.6% | $ 104,062 | $ 91,535 | $ 99,751 | -8.2% | $ 102,744 |
Communication Services | 26,518 | 28,308 | -6.3% | 47,266 | 25,175 | 19,202 | 31.1% | 38,434 |
Total | $ 119,371 | $ 128,760 | -7.3% | $ 151,328 | $ 116,710 | $ 118,953 | -1.9% | $ 141,178 |
Operating margin: | ||||||||
Unified Communications | 23.5% | 24.9% | 26.3% | 23.1% | 24.7% | 26.0% | ||
Communication Services | 7.9% | 9.5% | 14.1% | 13.9% | 13.2% | 21.3% | ||
Total | 16.7% | 18.7% | 21.1% | 20.7% | 22.2% | 25.1% | ||
SELECTED OPERATING DATA2: | ||||||||
Revenue from platform-based services | $ 496,988 | $ 495,807 | 0.2% | $ 496,988 | $ 495,807 | 0.2% | ||
Revenue from agent services | $ 223,665 | $ 195,623 | 14.3% | $ 68,146 | $ 42,559 | 60.1% |
WEST CORPORATION | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(Unaudited, in thousands except per share data) | ||||||||
HISTORICAL (1) | CONTINUING OPERATIONS | |||||||
Twelve Months Ended December 31, | Twelve Months Ended December 31, | |||||||
2014 | 2013 | 2014 | 2014 | 2013 | 2014 | |||
Actual | Actual | % Change | Adjusted (4) | Actual | Actual | % Change | Adjusted (4) | |
Revenue | $ 2,796,659 | $ 2,685,855 | 4.1% | $ 2,796,659 | $ 2,218,594 | $ 2,120,972 | 4.6% | $ 2,218,594 |
Cost of services | 1,319,716 | 1,260,579 | 4.7% | 1,319,716 | 943,331 | 894,628 | 5.4% | 943,331 |
Selling, general and administrative expenses | 992,851 | 945,062 | 5.1% | 903,022 | 813,856 | 775,050 | 5.0% | 733,797 |
Operating income | 484,092 | 480,214 | 0.8% | 573,921 | 461,407 | 451,294 | 2.2% | 541,466 |
Interest expense, net | 187,834 | 232,606 | -19.2% | 167,799 | 187,834 | 232,606 | -19.2% | 167,799 |
Debt call premium and accelerated amortization of deferred financing costs | 73,309 | 23,105 | 217.3% | -- | 73,309 | 23,105 | 217.3% | -- |
Other expense (income), net | (5,966) | (2,258) | NM | (5,966) | (7,026) | (2,159) | NM | (7,026) |
Income before tax | 228,915 | 226,761 | 0.9% | 412,088 | 207,290 | 197,742 | 4.8% | 380,693 |
Income tax expense | 70,510 | 83,559 | -15.6% | 126,927 | 72,679 | 74,651 | -2.6% | 133,471 |
Net income | $ 158,405 | $ 143,202 | 10.6% | $ 285,161 | $ 134,611 | $ 123,091 | 9.4% | $ 247,222 |
Weighted average shares outstanding: | ||||||||
Basic | 84,007 | 78,875 | 84,007 | 84,007 | 78,875 | 84,007 | ||
Diluted | 85,507 | 80,318 | 85,507 | 85,507 | 80,318 | 85,507 | ||
Earnings per share: | ||||||||
Basic | $ 1.89 | $ 1.82 | 3.8% | $ 3.39 | $ 1.60 | $ 1.56 | 2.6% | $ 2.94 |
Diluted | $ 1.85 | $ 1.78 | 3.9% | $ 3.33 | $ 1.57 | $ 1.53 | 2.6% | $ 2.89 |
SELECTED SEGMENT DATA: | ||||||||
Revenue: | ||||||||
Unified Communications | $ 1,616,777 | $ 1,603,311 | 0.8% | $ 1,616,777 | $ 1,603,311 | 0.8% | ||
Communication Services | 1,239,437 | 1,119,809 | 10.7% | 653,571 | 545,850 | 19.7% | ||
Intersegment eliminations | (59,555) | (37,265) | NM | (51,754) | (28,189) | NM | ||
Total | $ 2,796,659 | $ 2,685,855 | 4.1% | $ 2,218,594 | $ 2,120,972 | 4.6% | ||
Depreciation: | ||||||||
Unified Communications | $ 77,838 | $ 72,388 | 7.5% | $ 77,838 | $ 72,388 | 7.5% | ||
Communication Services | 45,150 | 42,311 | 6.7% | 29,465 | 24,720 | 19.2% | ||
Total | $ 122,988 | $ 114,699 | 7.2% | $ 107,303 | $ 97,108 | 10.5% | ||
Amortization: | ||||||||
Unified Communications - SG&A | $ 28,873 | $ 26,488 | 9.0% | $ 28,873 | $ 26,488 | 9.0% | ||
Communication Services - COS | 12,216 | 10,247 | 19.2% | 12,216 | 10,247 | 19.2% | ||
Communication Services - SG&A | 39,845 | 28,850 | 38.1% | 32,145 | 26,826 | 19.8% | ||
Corporate - deferred financing costs | 20,035 | 18,246 | 9.8% | 20,035 | 18,246 | 9.8% | ||
Corporate - accelerated amortization of deferred financing costs | 11,601 | 6,603 | 75.7% | 11,601 | 6,603 | 75.7% | ||
Total | $ 112,570 | $ 90,434 | 24.5% | $ 104,870 | $ 88,410 | 18.6% | ||
Share-based Compensation | ||||||||
Unified Communications | $ 8,739 | $ 5,877 | 48.7% | $ 8,739 | $ 5,877 | 48.7% | ||
Communication Services | 6,989 | 4,678 | 49.4% | 6,835 | 4,506 | 51.7% | ||
Total | $ 15,728 | $ 10,555 | 49.0% | $ 15,574 | $ 10,383 | 50.0% | ||
Cost of services: | ||||||||
Unified Communications | $ 680,916 | $ 663,835 | 2.6% | $ 680,916 | $ 663,835 | 2.6% | ||
Communication Services | 691,251 | 628,872 | 9.9% | 307,765 | 255,004 | 20.7% | ||
Intersegment eliminations | (52,451) | (32,128) | NM | (45,350) | (24,211) | NM | ||
Total | $ 1,319,716 | $ 1,260,579 | 4.7% | $ 943,331 | $ 894,628 | 5.4% | ||
Selling, general and administrative expenses: | ||||||||
Unified Communications | $ 550,822 | $ 539,655 | 2.1% | $ 555,129 | $ 545,791 | 1.7% | ||
Communication Services | 449,133 | 410,544 | 9.4% | 265,131 | 233,237 | 13.7% | ||
Intersegment eliminations | (7,104) | (5,137) | NM | (6,404) | (3,978) | NM | ||
Total | $ 992,851 | $ 945,062 | 5.1% | $ 813,856 | $ 775,050 | 5.0% | ||
Operating income: | ||||||||
Unified Communications | $ 385,039 | $ 399,821 | -3.7% | $ 425,131 | $ 380,732 | $ 393,685 | -3.3% | $ 420,823 |
Communication Services | 99,053 | 80,393 | 23.2% | 148,790 | 80,675 | 57,609 | 40.0% | 120,643 |
Total | $ 484,092 | $ 480,214 | 0.8% | $ 573,921 | $ 461,407 | $ 451,294 | 2.2% | $ 541,466 |
Operating margin: | ||||||||
Unified Communications | 23.8% | 24.9% | 26.3% | 23.5% | 24.6% | 26.0% | ||
Communication Services | 8.0% | 7.2% | 12.0% | 12.3% | 10.6% | 18.5% | ||
Total | 17.3% | 17.9% | 20.5% | 20.8% | 21.3% | 24.4% | ||
SELECTED OPERATING DATA2: | ||||||||
Revenue from platform-based services | $ 2,001,363 | $ 1,955,203 | 2.4% | $ 2,001,363 | $ 1,955,203 | 2.4% | ||
Revenue from agent services | $ 810,487 | $ 744,304 | 8.9% | $ 224,621 | $ 170,345 | 31.9% |
WEST CORPORATION | |||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||
(Unaudited, in thousands) | |||
December 31, | December 31, | % | |
2014 | 2013 | Change | |
Current assets: | |||
Cash and cash equivalents | $ 115,061 | $ 230,041 | -50.0% |
Trust and restricted cash | 18,573 | 19,400 | -4.3% |
Accounts receivable, net | 355,625 | 357,588 | -0.5% |
Prepaid assets | 45,242 | 31,235 | 44.8% |
Other current assets | 95,892 | 90,462 | 6.0% |
Assets held for sale | 304,605 | 300,049 | 1.5% |
Total current assets | 934,998 | 1,028,775 | -9.1% |
Net property and equipment | 350,030 | 331,904 | 5.5% |
Goodwill | 1,884,920 | 1,671,205 | 12.8% |
Other assets | 648,127 | 464,760 | 39.5% |
Total assets | $ 3,818,075 | $ 3,496,644 | 9.2% |
Current liabilities | $ 480,436 | $ 421,359 | 14.0% |
Liabilities held for sale | 84,788 | 75,628 | 12.1% |
Long-term obligations | 3,642,540 | 3,513,470 | 3.7% |
Other liabilities | 269,952 | 226,359 | 19.3% |
Total liabilities | 4,477,716 | 4,236,816 | 5.7% |
Stockholders' deficit | (659,641) | (740,172) | 10.9% |
Total liabilities and stockholders' deficit | $ 3,818,075 | $ 3,496,644 | 9.2% |
Supplemental Financial Information
The following is a summary of the unaudited quarterly results from continuing operations for the two years ended December 31, 2014 and 2013, in thousands.
Three Months Ended | Year Ended | ||||
March 31, | June 30, | Sept. 30, | Dec. 31, | Dec. 31, | |
2014 | 2014 | 2014 | 2014 | 2014 | |
Revenue | $ 535,140 | $ 552,319 | $ 568,197 | $ 562,938 | $ 2,218,594 |
Cost of services | 225,511 | 239,695 | 243,706 | 234,419 | 943,331 |
Gross profit | 309,629 | 312,624 | 324,491 | 328,519 | 1,275,263 |
Selling, general and administrative expenses | 195,439 | 197,063 | 209,545 | 211,809 | 813,856 |
Operating income | 114,190 | 115,561 | 114,946 | 116,710 | 461,407 |
Net income from continuing operations | $ 42,097 | $ 44,527 | $ 13,103 | $ 34,884 | $ 134,611 |
Earnings per share from continuing operations: | |||||
Basic | $ 0.50 | $ 0.53 | $ 0.16 | $ 0.41 | $ 1.60 |
Diluted | $ 0.49 | $ 0.52 | $ 0.15 | $ 0.41 | $ 1.57 |
Three Months Ended | Year Ended | ||||
March 31, | June 30, | Sept. 30, | Dec. 31, | Dec. 31, | |
2013 | 2013 | 2013 | 2013 | 2013 | |
Revenue | $ 521,601 | $ 536,716 | $ 525,701 | $ 536,954 | $ 2,120,972 |
Cost of services | 219,287 | 225,308 | 219,334 | 230,699 | 894,628 |
Gross profit | 302,314 | 311,408 | 306,367 | 306,255 | 1,226,344 |
Selling, general and administrative expenses | 215,914 | 183,310 | 188,524 | 187,302 | 775,050 |
Operating income | 86,400 | 128,098 | 117,843 | 118,953 | 451,294 |
Net income (loss) from continuing operations | $ (1,438) | $ 39,410 | $ 42,577 | $ 42,542 | $ 123,091 |
Earnings (loss) per share from continuing operations: | |||||
Basic | $ (0.02) | $ 0.47 | $ 0.51 | $ 0.51 | $ 1.56 |
Diluted | $ (0.02) | $ 0.46 | $ 0.50 | $ 0.50 | $ 1.53 |
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, M&A 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 to operating income.
Reconciliation of Adjusted Operating Income from Operating Income | ||||||||||||
Unaudited, in thousands | ||||||||||||
HISTORICAL (1) | CONTINUING OPERATIONS | |||||||||||
Three Months Ended Dec. 31, | Three Months Ended Dec. 31, | |||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||
Operating income | $ 119,371 | $ 128,760 | -7.3% | $ 116,710 | $ 118,953 | -1.9% | ||||||
Amortization of acquired intangible assets | 24,231 | 13,503 | 18,040 | 12,997 | ||||||||
Share-based compensation | 5,549 | 2,401 | 5,519 | 2,354 | ||||||||
M&A and acquisition related costs | 2,177 | 234 | 909 | 233 | ||||||||
Adjusted operating income | $ 151,328 | $ 144,898 | 4.4% | $ 141,178 | $ 134,537 | 4.9% | ||||||
Twelve Months Ended Dec. 31, | Twelve Months Ended Dec. 31, | |||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||
Operating income | $ 484,092 | $ 480,214 | 0.8% | $ 461,407 | $ 451,294 | 2.2% | ||||||
Amortization of acquired intangible assets | 68,718 | 55,338 | 61,018 | 53,314 | ||||||||
Share-based compensation | 15,728 | 10,555 | 15,574 | 10,383 | ||||||||
Sponsor management/termination fee | -- | 25,000 | -- | 25,000 | ||||||||
IPO bonus | -- | 2,975 | -- | 2,975 | ||||||||
M&A and acquisition related costs | 5,383 | 1,172 | 3,467 | 1,172 | ||||||||
Adjusted operating income | $ 573,921 | $ 575,254 | -0.2% | $ 541,466 | $ 544,138 | -0.5% |
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 IPO-related expenses, expenses terminated in connection with the IPO, bond redemption premiums, M&A 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 to net income.
Reconciliation of Adjusted Net Income from Net Income | ||||||
Unaudited, in thousands except per share | ||||||
HISTORICAL (1) | CONTINUING OPERATIONS | |||||
Three Months Ended Dec. 31, | Three Months Ended Dec. 31, | |||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | |
Net income | $ 48,258 | $ 50,331 | -4.1% | $ 34,884 | $ 42,542 | -18.0% |
Amortization of acquired intangible assets | 24,231 | 13,503 | 18,040 | 12,997 | ||
Amortization of deferred financing costs | 5,075 | 4,536 | 5,075 | 4,536 | ||
Accelerated amortization of deferred financing costs | 3,853 | -- | 3,853 | -- | ||
Share-based compensation | 5,549 | 2,401 | 5,519 | 2,354 | ||
Debt call premiums | 17,721 | -- | 17,721 | -- | ||
M&A and acquisition related costs | 2,177 | 234 | 909 | 233 | ||
Pre-tax total | 58,606 | 20,674 | 51,117 | 20,120 | ||
Income tax expense on adjustments | 7,607 | 7,362 | 17,921 | 7,247 | ||
Adjusted net income | $ 99,257 | $ 63,643 | 56.0% | $ 68,080 | $ 55,415 | 22.9% |
Diluted shares outstanding | 86,033 | 85,088 | 86,033 | 85,088 | ||
Adjusted EPS - diluted | $ 1.15 | $ 0.75 | 53.3% | $ 0.79 | $ 0.65 | 21.5% |
Twelve Months Ended Dec. 31, | Twelve Months Ended Dec. 31, | |||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | |
Net income | $ 158,405 | $ 143,202 | 10.6% | $ 134,611 | $ 123,091 | 9.4% |
Amortization of acquired intangible assets | 68,718 | 55,338 | 61,018 | 53,314 | ||
Amortization of deferred financing costs | 20,035 | 18,246 | 20,035 | 18,246 | ||
Accelerated amortization of deferred financing costs | 11,601 | 6,603 | 11,601 | 6,603 | ||
Share-based compensation | 15,728 | 10,555 | 15,574 | 10,383 | ||
Sponsor management/termination fee | -- | 25,000 | -- | 25,000 | ||
IPO bonus | -- | 2,975 | -- | 2,975 | ||
Debt call premiums | 61,708 | 16,502 | 61,708 | 16,502 | ||
M&A and acquisition related costs | 5,383 | 1,172 | 3,467 | 1,172 | ||
Pre-tax total | 183,173 | 136,391 | 173,403 | 134,195 | ||
Income tax expense on adjustments | 56,417 | 50,260 | 60,792 | 49,586 | ||
Adjusted net income | $ 285,161 | $ 229,333 | 24.3% | $ 247,222 | $ 207,700 | 19.0% |
Diluted shares outstanding | 85,507 | 80,318 | 85,507 | 80,318 | ||
Adjusted EPS - diluted | $ 3.33 | $ 2.86 | 16.4% | $ 2.89 | $ 2.59 | 11.6% |
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 | ||||||
HISTORICAL (1) | ||||||
Three Months Ended Dec. 31, | ||||||
2014 | 2013 | % Change | ||||
Cash flows from operations | $ 132,473 | $ 107,358 | 23.4% | |||
Cash capital expenditures | 37,034 | 40,418 | -8.4% | |||
Free cash flow | $ 95,439 | $ 66,940 | 42.6% | |||
CONTINUING OPERATIONS | ||||||
Twelve Months Ended Dec. 31, | Twelve Months Ended Dec. 31, | |||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | |
Cash flows from operations | $ 462,723 | $ 384,087 | 20.5% | $ 409,491 | $ 318,769 | 28.5% |
Cash capital expenditures | 150,716 | 128,398 | 17.4% | 130,318 | 114,260 | 14.1% |
Free cash flow | $ 312,007 | $ 255,689 | 22.0% | $ 279,173 | $ 204,509 | 36.5% |
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, M&A and acquisition-related costs 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 | ||||
HISTORICAL (1) | ||||
Three Months Ended Dec. 31, | Year Ended Dec. 31, | |||
2014 | 2013 | 2014 | 2013 | |
Cash flows from operating activities | $ 132,473 | $ 107,358 | $ 462,723 | $ 384,087 |
Income tax expense | 7,197 | 27,836 | 70,510 | 83,559 |
Deferred income tax benefit | 4,519 | 6,193 | 29,146 | 2,525 |
Interest expense and other financing charges | 63,825 | 51,904 | 261,404 | 257,696 |
Provision for share-based compensation | (5,549) | (2,401) | (15,728) | (10,555) |
Amortization of deferred financing costs | (5,075) | (4,536) | (20,035) | (18,246) |
Accelerated amortization of deferred financing costs | (3,853) | -- | (11,601) | (6,603) |
Other | 321 | (6) | 312 | (99) |
Changes in operating assets and liabilities, net of business acquisitions | (14,630) | (10,571) | (82,490) | (27,623) |
EBITDA | 179,228 | 175,777 | 694,241 | 664,741 |
Provision for share-based compensation | 5,549 | 2,401 | 15,728 | 10,555 |
Sponsor management/termination fee | -- | -- | -- | 25,000 |
IPO bonus | -- | -- | -- | 2,975 |
M&A and acquisition related costs | 2,177 | 234 | 5,383 | 1,172 |
Adjusted EBITDA | $ 186,954 | $ 178,412 | $ 715,352 | $ 704,443 |
Cash flows from operating activities | $ 132,473 | $ 107,358 | $ 462,723 | $ 384,087 |
Cash flows used in investing activities | $ (43,774) | $ (46,349) | $ (544,906) | $ (135,508) |
Cash flows used in financing activities | $ (135,882) | $ (42,666) | $ (25,027) | $ (196,828) |
Reconciliation of EBITDA and Adjusted EBITDA from Net Income | ||||
Unaudited, in thousands | ||||
HISTORICAL (1) | ||||
Three Months Ended Dec. 31, | Year Ended Dec. 31, | |||
2014 | 2013 | 2014 | 2013 | |
Net income | $ 48,258 | $ 50,331 | $ 158,405 | $ 143,202 |
Interest expense and other financing charges | 63,825 | 51,904 | 261,404 | 257,696 |
Depreciation and amortization | 59,948 | 45,706 | 203,922 | 180,284 |
Income tax expense | 7,197 | 27,836 | 70,510 | 83,559 |
EBITDA | 179,228 | 175,777 | 694,241 | 664,741 |
Provision for share-based compensation | 5,549 | 2,401 | 15,728 | 10,555 |
Sponsor management/termination fee | -- | -- | -- | 25,000 |
IPO bonus | -- | -- | -- | 2,975 |
M&A and acquisition related costs | 2,177 | 234 | 5,383 | 1,172 |
Adjusted EBITDA | $ 186,954 | $ 178,412 | $ 715,352 | $ 704,443 |
Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow | ||||
Unaudited, in thousands | ||||
CONTINUING OPERATIONS | ||||
Year Ended Dec. 31, | ||||
2014 | 2013 | |||
Cash flows from operating activities | $ 409,491 | $ 318,769 | ||
Income tax expense | 72,679 | 74,651 | ||
Deferred income tax benefit | 26,632 | 6,827 | ||
Interest expense and other financing charges | 261,404 | 257,696 | ||
Provision for share-based compensation | (15,574) | (10,383) | ||
Amortization of deferred financing costs | (20,035) | (18,246) | ||
Accelerated amortization of deferred financing costs | (11,601) | (6,603) | ||
Other | 316 | (13) | ||
Changes in operating assets and liabilities, net of business acquisitions | (74,081) | (6,592) | ||
EBITDA | 649,231 | 616,106 | ||
Provision for share-based compensation | 15,574 | 10,383 | ||
Sponsor management/termination fee | -- | 25,000 | ||
IPO bonus | -- | 2,975 | ||
M&A and acquisition related costs | 3,467 | 1,172 | ||
Adjusted EBITDA | $ 668,272 | $ 655,636 | ||
Cash flows from operating activities | $ 409,491 | $ 318,769 | ||
Cash flows used in investing activities | $ (524,376) | $ (121,882) | ||
Cash flows used in financing activities | $ (25,027) | $ (196,828) | ||
Reconciliation of EBITDA and Adjusted EBITDA from Net Income | ||||
Unaudited, in thousands | ||||
CONTINUING OPERATIONS | ||||
Three Months Ended Dec. 31, | Year Ended Dec. 31, | |||
2014 | 2013 | 2014 | 2013 | |
Net income | $ 34,884 | $ 42,542 | $ 134,611 | $ 123,091 |
Interest expense and other financing charges | 63,825 | 51,904 | 261,404 | 257,696 |
Depreciation and amortization | 49,447 | 40,855 | 180,537 | 160,668 |
Income tax expense | 18,834 | 25,798 | 72,679 | 74,651 |
EBITDA | 166,990 | 161,099 | 649,231 | 616,106 |
Provision for share-based compensation | 5,519 | 2,354 | 15,574 | 10,383 |
Sponsor management/termination fee | -- | -- | -- | 25,000 |
IPO bonus | -- | -- | -- | 2,975 |
M&A and acquisition related costs | 909 | 233 | 3,467 | 1,172 |
Adjusted EBITDA | $ 173,418 | $ 163,686 | $ 668,272 | $ 655,636 |
____________________________________________________________
1 Historical includes the results of both continuing operations and discontinued operations.
2 Platform-based businesses include the Unified Communications segment and public safety and telecom services within our Communication Services segment. Platform-based and agent services revenue are presented prior to intercompany eliminations.
3 Revenue from acquired entities includes SchoolMessenger after April 21, 2014, Health Advocate after June 13, 2014, 911 Enable after September 2, 2014 and SchoolReach after November 3, 2014.
4 See Reconciliation of Non-GAAP Financial Measures below.
5 Free cash flow is calculated as cash flows from operations less cash capital expenditures.
6 Based on loan covenants except that the leverage ratio presented includes adjusted EBITDA from discontinued operations. Covenant leverage ratio is net of cash and excludes accounts receivable securitization debt.
NM: Not Meaningful