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West Corporation Reports Fourth Quarter and Full Year 2015 Results and Provides 2016 Guidance

OMAHA, Neb., Feb. 01, 2016 (GLOBE NEWSWIRE) -- West Corporation (Nasdaq:WSTC), a leading provider of technology-enabled communication services, today announced its fourth quarter and full year 2015 results.

Key Quarterly Highlights:

Unaudited, in millions except per share amounts Three Months Ended Dec. 31, Year Ended Dec. 31,
2015 2014 % Change 2015 2014 % Change
Revenue$568.4 $562.9 1.0% $2,280.3 $2,218.6 2.8%
Adjusted EBITDA from Continuing Operations1 165.1 173.4 -4.8% 676.1 668.3 1.2%
EBITDA from Continuing Operations1 158.0 167.0 -5.4% 649.3 649.2 0.0%
Adjusted Operating Income1 131.0 141.2 -7.2% 551.8 541.5 1.9%
Operating Income 105.0 116.7 -10.1% 456.5 461.4 -1.1%
Adjusted Income from Continuing Operations1 63.7 68.1 -6.5% 265.9 247.2 7.5%
Income from Continuing Operations 42.3 34.9 21.4% 190.9 134.6 41.8%
Adjusted Earnings per Share from Continuing Operations - Diluted1 0.75 0.79 -5.1% 3.11 2.89 7.6%
Earnings per Share from Continuing Operations - Diluted 0.50 0.41 22.0% 2.24 1.57 42.7%
Free Cash Flow from Continuing Operating Activities1,2 86.9 75.5 15.2% 274.0 279.2 -1.9%
Cash Flows from Continuing Operating Activities 127.5 106.9 19.3% 410.8 409.5 0.3%
Cash Flows used in Continuing Investing Activities (118.7) (38.4) 208.7% (232.4) (524.4) -55.7%
Cash Flows used in Continuing Financing Activities (23.5) (135.9) -82.7% (388.2) (25.0) NM

“2015 was an important year for West Corporation. We had strong cash flow generation and continued refining our portfolio of services. We divested several agent-based services businesses, made three acquisitions, refinanced our term loan, paid down debt and repurchased two million shares of stock. We believe these actions will enhance the growth of the Company going forward,” said Tom Barker, chairman and chief executive officer.

“The adjusted organic growth5 in our core business was 4.1 percent in the fourth quarter of 2015 and 3.3 percent for the year. With the expected growth in our non-conferencing businesses, we believe we will finish 2016 in a stronger growth position. As we move through the year, we will continue to focus on capital generation and deployment. In addition, in an effort to provide investors with enhanced visibility into how our underlying businesses are performing, we will now report results in four segments,” Mr. Barker continued.

Dividend

The Company today also announced a $0.225 per common share dividend. The dividend is payable on March 3, 2016, to shareholders of record as of the close of business on February 22, 2016.

Operating Results Reflect Previous Divestiture

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

Change in Segment Reporting

During the fourth quarter of 2015, we implemented a revised organizational structure under which our reportable segments are as follows:

  • Unified Communications, including conferencing and collaboration services, unified communications services and telecom services;
  • Safety Services, including 9-1-1 network services, 9-1-1 telephony systems and services, 9-1-1 solutions for enterprise VoIP and UC and database management;
  • Interactive Services, including proactive notifications and mobility, IVR self-service, cloud contact center and professional services; and
  • Specialized Agent Services, including healthcare advocacy services, revenue generation and cost management services.

Consolidated Operating Results

For the fourth quarter of 2015, revenue was $568.4 million compared to $562.9 million for the same quarter of the previous year, an increase of 1.0 percent. Revenue from acquired entities3 was $5.2 million during the fourth quarter of 2015, contributing 0.9 percent to the Company’s revenue growth. The Company’s revenue growth rate was negatively impacted by $22.7 million, or 4.0 percent, from the impact of foreign currency exchange rate fluctuations and two previously disclosed client losses. Adjusted organic growth5 for the fourth quarter was 4.1 percent.

For the year ended December 31, 2015, revenue was $2,280.3 million compared to $2,218.6 million for 2014, an increase of 2.8 percent. Revenue from acquired entities3 was $71.9 million during 2015, contributing 3.2 percent to the Company’s revenue growth. The Company’s revenue growth rate was partially offset by $84.0 million, or 3.8 percent, from the impact of foreign currency exchange rate fluctuations and two previously disclosed client losses. Adjusted organic growth5 for 2015 was 3.3 percent. Details of the Company’s revenue growth are presented in the selected financial data table below.

The Unified Communications segment had revenue of $357.8 million in the fourth quarter of 2015, a 0.9 percent decrease compared to the same quarter of 2014. This decrease was partially due to $16.0 million from the two previously disclosed lost telecom services and conferencing clients and was offset by $1.4 million in revenue from Magnetic North, which was acquired on October 31, 2015.

The Safety Services segment had revenue of $72.9 million in the fourth quarter of 2015, a decrease of 1.9 percent from the fourth quarter of 2014.

The Interactive Services segment had revenue of $71.3 million in the fourth quarter of 2015, 13.5 percent higher than the same quarter last year. This increase included $3.8 million from the acquisitions of SchoolReach, SharpSchool and ClientTell.

The Specialized Agent Services segment had revenue of $73.1 million in the fourth quarter of 2015, an increase of 7.3 percent compared to the same quarter of 2014.

Adjusted EBITDA1 for the fourth quarter of 2015 was $165.1 million compared to $173.4 million for the fourth quarter of 2014, a decrease of 4.8 percent. EBITDA1 was $158.0 million in the fourth quarter of 2015 compared to $167.0 million in the fourth quarter of 2014. Adjusted EBITDA for 2015 was $676.1 million, or 29.7 percent of revenue, compared to $668.3 million, or 30.1 percent of revenue, in 2014. EBITDA was $649.3 million in 2015 compared to $649.2 million in 2014.

Adjusted operating income1 for the fourth quarter of 2015 was $131.0 million, or 23.0 percent of revenue, compared to $141.2 million, or 25.1 percent of revenue, in the same quarter of 2014, a decrease of 7.2 percent. Operating income was $105.0 million in the fourth quarter of 2015 compared to $116.7 million in the fourth quarter of 2014. For the full year 2015, adjusted operating income was $551.8 million compared to $541.5 million in 2014. Operating income for 2015 was $456.5 million compared to 2014 operating income of $461.4 million.

Adjusted income from continuing operations1 was $63.7 million in the fourth quarter of 2015, a decrease of 6.5 percent from the same quarter of 2014. Income from continuing operations increased 21.4 percent to $42.3 million in the fourth quarter of 2015 compared to $34.9 million in the same quarter of 2014. In 2015, adjusted income from continuing operations was $265.9 million, an increase of 7.5 percent compared to 2014. Income from continuing operations in 2015 was $190.9 million compared to $134.6 million in 2014, an increase of 41.8 percent. The growth in 2015 net income was primarily due to decreased interest expense as a result of the Company’s debt repayment in 2015 and refinancing activities in 2014.

Balance Sheet, Cash Flow and Liquidity

At December 31, 2015, West Corporation had cash and cash equivalents totaling $182.3 million and working capital of $243.1 million. Interest expense was $38.4 million during the three months ended December 31, 2015 compared to $42.9 million during the comparable period the prior year. Interest expense was $154.3 million in 2015 compared to $188.1 million in 2014.

The Company’s net debt to pro forma adjusted EBITDA ratio, as calculated pursuant to the Company’s senior secured term debt facilities4, was 4.68x at December 31, 2015.

Cash flows from operations were $410.8 million for the twelve months ended December 31, 2015 compared to $409.5 million in 2014. Free cash flow1,2 decreased 1.9 percent to $274.0 million in 2015 compared to $279.2 million in 2014.

During the fourth quarter of 2015, the Company closed on a new $250 million term loan due 2021. The loan will bear interest at a rate of LIBOR + 3.50% with a 0.75% LIBOR floor. Proceeds of the new term loan, together with cash on hand, were used to retire in full the $250 million remaining outstanding on the term loan due July 2016.

“We ended 2015 in a strong financial position, with more than $180 million of cash on our balance sheet and no funded debt maturities until mid-2018. During the year we generated more than $400 million of cash from operations and reduced our debt by nearly $260 million while lowering our interest expense by nearly $34 million,” said Jan Madsen, chief financial officer.

During the fourth quarter of 2015, the Company invested $40.6 million, or 7.1 percent of revenue, in capital expenditures, primarily for software and computer equipment. For the full year 2015, the Company invested $136.8 million, or 6.0 percent of revenue, in capital expenditures.

2016 Guidance

For 2016, the Company expects the results presented in the table 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 2016 guidance are the British Pound Sterling at 1.43 and the Euro at 1.05. These foreign currency exchange rates, reflected in the guidance below, would negatively impact 2016 revenue by approximately $24 million and 2016 adjusted diluted earnings per share by $0.05 as compared to 2015 actual rates.

In millions except per share and leverage ratio
2015 Actual 2016 Guidance
Revenue$2,280.3 $2,276 - $2,346
Adjusted EBITDA from Continuing Operations1$676.1 $653 - $679
EBITDA from Continuing Operations1$649.3 $627 - $653
Adjusted Operating Income1$551.8 $524 - $551
Operating Income$456.5 $433 - $458
Adjusted Income from Continuing Operations1$265.9 $249 - $264
Income from Continuing Operations$190.9 $177 - $191
Adjusted Earnings per Share from Continuing Operations - Diluted1$3.11 $2.93 - $3.09
Earnings per Share from Continuing Operations - Diluted$2.24 $2.08 - $2.24
Cash Flows from Continuing Operating Activities$410.8 $390 - $420
Capital Expenditures$136.8 $135 - $160
Free Cash Flow from Continuing Operating Activities1,2$274.0 $235 - $265
Net Debt to pro forma Adjusted EBITDA ratio4.68x 4.48x - 4.68x
Full year average diluted share count 85.4 84.8 - 85.2

“We expect the Company to generate significant free cash flow again this year. We plan to use this cash, along with the $180 million in cash on our balance sheet, to make West Corporation more valuable with acquisitions, debt reduction, dividends and buybacks, while continuing to invest in the core business. We currently expect to use $75 million for dividends, $100-$150 million to pay down debt and an equal amount for acquisitions and stock buybacks in 2016. We expect to end the year with an improving growth profile, a more diverse stream of revenue and less debt,” said Tom Barker.

“The previously disclosed lost telecom services client is expected to negatively impact 2016 revenue by approximately $45 million, primarily in the first half of the year,” continued Mr. Barker.

Share Repurchase Program

The Company’s Board of Directors has approved a share repurchase program under which the Company may repurchase up to an aggregate of $75 million of its outstanding common stock. Purchases under the program may be made from time to time through open market purchases, block transactions or privately negotiated transactions. The Company expects to fund the program using its cash on hand and cash generated from operations. The program may be suspended or discontinued at any time without prior notice.

Conference Call

The Company will hold a conference call to discuss these topics on Tuesday, February 2, 2016 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 communications services, safety services, interactive services such as automated notifications, telecom services and specialty agent services.

For over 25 years, West has provided reliable, high-quality, voice and data services. West serves clients in a variety of industries including telecommunications, retail, financial services, public safety, technology and healthcare. West has a global organization with sales and operations in the United States, Canada, Europe, the Middle East, Asia Pacific and Latin America. For more information on West Corporation, please call 1-800-841-9000 or visit www.west.com.

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "continue" or similar terminology. The statements contained in the 2016 guidance and other statements concerning the Company’s prospects and potential uses of cash 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, competition in West’s highly competitive markets; increases in the cost of voice and data services or significant interruptions in these services; West’s ability to keep pace with its clients’ needs for rapid technological change and systems availability; the continued deployment and adoption of emerging technologies; the loss, financial difficulties or bankruptcy of any key clients; security and privacy breaches of the systems West uses to protect personal data; the effects of global economic trends on the businesses of West’s clients; the non-exclusive nature of West’s client contracts and the absence of revenue commitments; the cost of pending and future litigation; the cost of defending against intellectual property infringement claims; the effects of extensive regulation affecting many of West’s businesses; West’s ability to protect its proprietary information or technology; service interruptions to West’s data and operation centers; West’s ability to retain key personnel and attract a sufficient number of qualified employees; increases in labor costs and turnover rates; the political, economic and other conditions in the countries where West operates; changes in foreign exchange rates; West’s ability to complete future acquisitions, integrate or achieve the objectives of its recent and future acquisitions; and future impairments of our substantial goodwill, intangible assets, or other long-lived assets. In addition, West is subject to risks related to its level of indebtedness. Such risks include West’s ability to generate sufficient cash to service its indebtedness and fund its other liquidity needs; West’s ability to comply with covenants contained in its debt instruments; West’s 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)
Three Months Ended December 31,
2015 2014 2015
Actual Actual % Change Adjusted (1)
Revenue$568,430 $562,938 1.0% $568,430
Cost of services 239,389 234,419 2.1% 239,389
Selling, general and administrative expenses 224,071 211,809 5.8% 198,043
Operating income 104,970 116,710 -10.1% 130,998
Interest expense, net 38,411 42,911 -10.5% 33,787
Debt call premium and accelerated amortization of
deferred financing costs 2,304 21,574 -89.3% -
Other expense (income), net (1,178) (1,493) NM (1,178)
Income from continuing operations before tax 65,433 53,718 21.8% 98,389
Income tax expense attributed to continuing operations 23,093 18,834 22.6% 34,723
Income from continuing operations 42,340 34,884 21.4% 63,666
Income from discontinued operations, net of income taxes 19,935 13,374 49.1% 19,935
Net income$62,275 $48,258 29.0% $83,601
Weighted average shares outstanding:
Basic 83,243 84,178 83,243
Diluted 84,809 86,033 84,809
Earnings per share - Basic:
Continuing operations$0.51 $0.41 24.4% $0.76
Discontinued operations 0.24 0.16 50.0% 0.24
Total Earnings Per Share - Basic$0.75 $0.57 31.6% $1.00
Earnings per share - Diluted:
Continuing operations$0.50 $0.41 22.0% $0.75
Discontinued operations 0.24 0.15 60.0% 0.24
Total Earnings Per Share - Diluted$0.74 $0.56 32.1% $0.99
SELECTED FINANCIAL DATA:
Contribution
Changes in Revenue - 4Q15 compared to 4Q14: to Rev. Growth
Revenue for the three months ended Dec. 31, 2014$562,938
Revenue from acquired entities3 5,163 0.9%
Revenue from previously disclosed lost conferencing client (2,400) -0.4%
Revenue from previously disclosed lost telecom services client (13,600) -2.4%
Estimated impact of foreign currency exchange rates (6,680) -1.2%
Adjusted organic growth, net 23,009 4.1%
Revenue for the three months ended Dec. 31, 2015$568,430 1.0%
Three Months Ended December 31,
2015 2014
SELECTED REPORTABLE SEGMENT DATA: Actual Actual % Change
Revenue:
Unified Communications$357,780 $361,001 -0.9%
Safety Services 72,863 74,264 -1.9%
Interactive Services 71,332 62,839 13.5%
Specialized Agent Services 73,143 68,146 7.3%
Intersegment eliminations (6,688) (3,312) NM
Total$568,430 $562,938 1.0%
Depreciation:
Unified Communications$17,713 $18,338 -3.4%
Safety Services 5,027 5,202 -3.4%
Interactive Services 3,978 3,303 20.4%
Specialized Agent Services 2,566 1,343 91.1%
Total$29,284 $28,186 3.9%
Amortization:
Unified Communications - SG&A$3,618 $3,968 -8.8%
Safety Services - SG&A 5,436 4,816 12.9%
Safety Services - COS 3,088 3,219 -4.1%
Interactive Services - SG&A 4,512 3,922 15.0%
Specialized Agent Services - SG&A 5,411 5,336 1.4%
Deferred financing costs 4,624 5,075 -8.9%
Accelerated deferred financing costs 2,304 3,853 -40.2%
Total$28,993 $30,189 -4.0%
Share-based compensation:
Unified Communications$3,399 $3,516 -3.3%
Safety Services 973 982 -0.9%
Interactive Services 611 606 0.8%
Specialized Agent Services 1,157 415 178.8%
Total$6,140 $5,519 11.3%
Cost of services:
Unified Communications$163,296 $163,629 -0.2%
Safety Services 27,441 26,790 2.4%
Interactive Services 15,926 13,097 21.6%
Specialized Agent Services 37,400 32,216 16.1%
Intersegment eliminations (4,674) (1,313) NM
Total$239,389 $234,419 2.1%
Selling, general and administrative expenses:
Unified Communications$107,346 $108,951 -1.5%
Safety Services 39,986 38,005 5.2%
Interactive Services 48,968 40,292 21.5%
Specialized Agent Services 29,785 26,560 12.1%
Intersegment eliminations (2,014) (1,999) 0.8%
Total$224,071 $211,809 5.8%
Operating income:
Unified Communications$87,138 $88,421 -1.5%
Safety Services 5,436 9,469 -42.6%
Interactive Services 6,438 9,450 -31.9%
Specialized Agent Services 5,958 9,370 -36.4%
Total$104,970 $116,710 -10.1%
Operating margin:
Unified Communications 24.4% 24.5%
Safety Services 7.5% 12.8%
Interactive Services 9.0% 15.0%
Specialized Agent Services 8.1% 13.7%
Total 18.5% 20.7%

WEST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share data)
Year Ended December 31,
2015 2014 2015
Actual Actual % Change Adjusted (1)
Revenue$2,280,259 $2,218,594 2.8% $2,280,259
Cost of services 970,693 943,331 2.9% 970,693
Selling, general and administrative expenses 853,116 813,856 4.8% 757,804
Operating income 456,450 461,407 -1.1% 551,762
Interest expense, net 154,068 187,834 -18.0% 134,427
Debt call premium and accelerated amortization of
deferred financing costs 2,304 73,309 NM -
Other expense (income), net 1,405 (7,026) NM 1,405
Income from continuing operations before tax 298,673 207,290 44.1% 415,930
Income tax expense attributed to continuing operations 107,757 72,679 48.3% 150,063
Income from continuing operations 190,916 134,611 41.8% 265,867
Income from discontinued operations, net of income taxes 50,924 23,794 114.0% 52,942
Net income$241,840 $158,405 52.7% $318,809
Weighted average shares outstanding:
Basic 83,420 84,007 83,420
Diluted 85,394 85,507 85,394
Earnings per share - Basic:
Continuing operations$2.29 $1.60 43.1% $3.19
Discontinued operations 0.61 0.29 110.3% 0.62
Total Earnings Per Share - Basic$2.90 $1.89 53.4% $3.81
Earnings per share - Diluted:
Continuing operations$2.24 $1.57 42.7% $3.11
Discontinued operations 0.59 0.28 110.7% 0.62
Total Earnings Per Share - Diluted$2.83 $1.85 53.0% $3.73
SELECTED FINANCIAL DATA:
Contribution
Changes in Revenue - 2015 compared to 2014: to Rev. Growth
Revenue for the fiscal year 2014$2,218,594
Revenue from acquired entities3 71,905 3.2%
Revenue from previously disclosed lost conferencing client (28,600) -1.3%
Revenue from previously disclosed lost telecom services client (18,600) -0.8%
Estimated impact of foreign currency exchange rates (36,720) -1.7%
Adjusted organic growth, net 73,680 3.3%
Revenue for the fiscal year 2015$2,280,259 2.8%
Year Ended December 31,
2015 2014
SELECTED REPORTABLE SEGMENT DATA: Actual Actual % Change
Revenue:
Unified Communications$1,467,711 $1,491,639 -1.6%
Safety Services 281,391 278,317 1.1%
Interactive Services 265,664 235,481 12.8%
Specialized Agent Services 276,983 224,621 23.3%
Intersegment eliminations (11,490) (11,464) NM
Total$2,280,259 $2,218,594 2.8%
Depreciation:
Unified Communications$69,769 $71,677 -2.7%
Safety Services 18,847 19,217 -1.9%
Interactive Services 14,385 12,167 18.2%
Specialized Agent Services 8,213 4,242 93.6%
Total$111,214 $107,303 3.6%
Amortization:
Unified Communications - SG&A$13,414 $17,771 -24.5%
Safety Services - SG&A 19,055 16,682 14.2%
Safety Services - COS 12,592 12,216 3.1%
Interactive Services - SG&A 16,210 12,908 25.6%
Specialized Agent Services - SG&A 19,779 13,657 44.8%
Deferred financing costs 19,641 20,035 -2.0%
Accelerated deferred financing costs 2,304 11,601 -80.1%
Total$102,995 $104,870 -1.8%
Share-based compensation:
Unified Communications$13,119 $9,649 36.0%
Safety Services 3,697 3,002 23.2%
Interactive Services 2,328 1,822 27.8%
Specialized Agent Services 3,781 1,101 243.4%
Total$22,925 $15,574 47.2%
Cost of services:
Unified Communications$673,475 $685,593 -1.8%
Safety Services 108,742 103,752 4.8%
Interactive Services 59,125 49,118 20.4%
Specialized Agent Services 135,672 109,584 23.8%
Intersegment eliminations (6,321) (4,716) NM
Total$970,693 $943,331 2.9%
Selling, general and administrative expenses:
Unified Communications$415,815 $441,912 -5.9%
Safety Services 150,064 144,092 4.1%
Interactive Services 181,384 151,132 20.0%
Specialized Agent Services 111,022 83,468 33.0%
Intersegment eliminations (5,169) (6,748) -23.4%
Total$853,116 $813,856 4.8%
Operating income:
Unified Communications$378,421 $364,134 3.9%
Safety Services 22,585 30,473 -25.9%
Interactive Services 25,155 35,231 -28.6%
Specialized Agent Services 30,289 31,569 -4.1%
Total$456,450 $461,407 -1.1%
Operating margin:
Unified Communications 25.8% 24.4%
Safety Services 8.0% 10.9%
Interactive Services 9.5% 15.0%
Specialized Agent Services 10.9% 14.1%
Total 20.0% 20.8%

WEST CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
December 31, December 31, %
2015 2014 Change
Assets:
Current assets:
Cash and cash equivalents$182,338 $115,061 58.5%
Trust and restricted cash 19,829 18,573 6.8%
Accounts receivable, net 373,087 355,625 4.9%
Income taxes receivable 19,332 - NM
Prepaid assets 43,093 45,242 -4.8%
Deferred expenses 65,781 65,317 0.7%
Other current assets 22,040 30,575 -27.9%
Assets held for sale 17,672 304,605 -94.2%
Total current assets 743,172 934,998 -20.5%
Property and Equipment:
Property and equipment 1,053,678 1,045,769 0.8%
Accumulated depreciation and amortization (718,834) (695,739) 3.3%
Net property and equipment 334,844 350,030 -4.3%
Goodwill 1,915,690 1,884,920 1.6%
Intangible assets 370,021 388,166 -4.7%
Other assets 248,552 259,961 -4.4%
Total assets$3,612,279 $3,818,075 -5.4%
Liabilities and Stockholders' Deficit:
Current Liabilities:
Accounts payable$92,935 $91,353 1.7%
Deferred revenue 161,828 144,413 12.1%
Accrued expenses 220,926 228,424 -3.3%
Current maturities of long-term debt 24,375 16,246 50.0%
Liabilities held for sale - 84,788 NM
Total current liabilities 500,064 565,224 -11.5%
Long-term obligations 3,375,750 3,642,540 -7.3%
Deferred income taxes 102,530 96,632 6.1%
Other long-term liabilities 186,073 173,320 7.4%
Total liabilities 4,164,417 4,477,716 -7.0%
Stockholders' Deficit:
Common stock 85 84 1.2%
Additional paid-in capital 2,193,193 2,155,864 1.7%
Retained deficit (2,607,415) (2,772,775) -6.0%
Accumulated other comprehensive loss (72,736) (37,506) 93.9%
Treasury stock at cost (65,265) (5,308) NM
Total stockholders' deficit (552,138) (659,641) -16.3%
Total liabilities and stockholders' deficit$3,612,279 $3,818,075 -5.4%

Supplemental Financial Information

The following is a summary of the unaudited quarterly results by reportable segment for the year ended December 31, 2015 and annual results for the previous three years.

Year Ended Year Ended Three Months Ended Year Ended
Dec. 31, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
SELECTED SEGMENT DATA: 2013 2014 2015 2015 2015 2015 2015
Revenue:
Unified Communications$1,475,016 $1,491,639 $369,458 $374,651 $365,822 $357,780 $1,467,711
Safety Services 259,120 278,317 68,578 66,138 73,812 72,863 281,391
Interactive Services 224,440 235,481 62,467 63,628 68,237 71,332 265,664
Specialized Agent Services 170,345 224,621 67,078 68,566 68,196 73,143 276,983
Intersegment eliminations (7,949) (11,464) (2,091) (1,092) (1,619) (6,688) (11,490)
Total$2,120,972 $2,218,594 $565,490 $571,891 $574,448 $568,430 $2,280,259
Cost of services:
Unified Communications$672,407 $685,593 $168,315 $173,127 $168,737 $163,296 $673,475
Safety Services 94,464 103,752 26,505 26,678 28,118 27,441 108,742
Interactive Services 46,465 49,118 13,662 13,569 15,968 15,926 59,125
Specialized Agent Services 84,551 109,584 31,571 32,462 34,239 37,400 135,672
Intersegment eliminations (3,259) (4,716) (352) (570) (725) (4,674) (6,321)
Total$894,628 $943,331 $239,701 $245,266 $246,337 $239,389 $970,693
Selling, general and administrative expenses:
Unified Communications$444,018 $441,912 $107,230 $103,324 $97,915 $107,346 $415,815
Safety Services 140,750 144,092 39,122 36,411 34,545 39,986 150,064
Interactive Services 134,421 151,132 43,405 43,552 45,459 48,968 181,384
Specialized Agent Services 60,551 83,468 27,078 27,427 26,732 29,785 111,022
Intersegment eliminations (4,690) (6,748) (1,739) (522) (894) (2,014) (5,169)
Total$775,050 $813,856 $215,096 $210,192 $203,757 $224,071 $853,116
Operating income:
Unified Communications$358,590 $364,134 $93,913 $98,200 $99,170 $87,138 $378,421
Safety Services 23,907 30,473 2,951 3,049 11,149 5,436 22,585
Interactive Services 43,554 35,231 5,400 6,507 6,810 6,438 25,155
Specialized Agent Services 25,243 31,569 8,429 8,677 7,225 5,958 30,289
Total$451,294 $461,407 $110,693 $116,433 $124,354 $104,970 $456,450
Operating margin:
Unified Communications 24.3% 24.4% 25.4% 26.2% 27.1% 24.4% 25.8%
Safety Services 9.2% 10.9% 4.3% 4.6% 15.1% 7.5% 8.0%
Interactive Services 19.4% 15.0% 8.6% 10.2% 10.0% 9.0% 9.5%
Specialized Agent Services 14.8% 14.1% 12.6% 12.7% 10.6% 8.1% 10.9%
Total 21.3% 20.8% 19.6% 20.4% 21.6% 18.5% 20.0%

Reconciliation of Non-GAAP Financial Measures

Adjusted Operating Income Reconciliation

Adjusted operating income is not a measure of financial performance under generally accepted accounting principles ("GAAP"). The Company believes adjusted operating income provides a relevant measure of operating profitability and a useful basis for evaluating the ongoing operations of the Company. Adjusted operating income is used by the Company to assess operating income before the impact of acquisitions and acquisition-related costs and certain non-cash items. Adjusted operating income should not be considered in isolation or as a substitute for operating income or other profitability data prepared in accordance with GAAP. Adjusted operating income, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of adjusted operating income from operating income.

Reconciliation of Adjusted Operating Income from Operating Income
Unaudited, in thousands
Three Months Ended December 31,
2015 2014 % Change
Operating income$104,970 $116,710 -10.1%
Amortization of acquired intangible assets 18,977 18,040
Share-based compensation 6,140 5,519
Secondary equity offering expense (186) -
M&A and acquisition-related costs 1,097 909
Adjusted operating income$130,998 $141,178 -7.2%
Year Ended December 31,
2015 2014 % Change
Operating income$456,450 $461,407 -1.1%
Amortization of acquired intangible assets 68,458 61,018
Share-based compensation 22,925 15,574
Secondary equity offering expense 855 -
M&A and acquisition-related costs 3,074 3,467
Adjusted operating income$551,762 $541,466 1.9%

Adjusted Net Income and Adjusted Earnings per Share Reconciliation

Adjusted net income and adjusted earnings per share (EPS) are non-GAAP measures. The Company believes these measures provide a useful indication of profitability and basis for assessing the operations of the Company without the impact of bond redemption premiums, acquisitions and acquisition-related costs and certain non-cash items. Adjusted net income should not be considered in isolation or as a substitute for net income or other profitability metrics prepared in accordance with GAAP. Adjusted net income, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of adjusted net income from net income.

Reconciliation of Adjusted Net Income from Net Income
Unaudited, in thousands except per share data
CONTINUING OPERATIONS Three Months Ended December 31,
2015 2014 % Change
Income from continuing operations$42,340 $34,884 21.4%
Amortization of acquired intangible assets 18,977 18,040
Amortization of deferred financing costs 4,624 5,075
Accelerated amortization of deferred financing costs 2,304 3,853
Share-based compensation 6,140 5,519
Debt call premiums - 17,721
Secondary equity offering expense (186) -
M&A and acquisition-related costs 1,097 909
Pre-tax total 32,956 51,117
Income tax expense on adjustments 11,630 17,921
Adjusted income from continuing operations$63,666 $68,080 -6.5%
Diluted shares outstanding 84,809 86,033
Adjusted EPS from continuing operations - diluted$0.75 $0.79 -5.1%
DISCONTINUED OPERATIONS Three Months Ended December 31,
2015 2014 % Change
Income from discontinued operations$19,935 $13,374 49.1%
Amortization of acquired intangible assets - 6,191
Share-based compensation - 30
M&A and acquisition-related costs - 1,268
Pre-tax total - 7,489
Income tax benefit on adjustments - (10,314)
Adjusted income from discontinued operations$19,935 $31,177 -36.1%
Diluted shares outstanding 84,809 86,033
Adjusted EPS from discontinued operations - diluted$0.24 $0.36 -33.3%
CONSOLIDATED Three Months Ended December 31,
2015 2014 % Change
Net income$62,275 $48,258 29.0%
Amortization of acquired intangible assets 18,977 24,231
Amortization of deferred financing costs 4,624 5,075
Accelerated amortization of deferred financing costs 2,304 3,853
Share-based compensation 6,140 5,549
Debt call premiums - 17,721
Secondary equity offering expense (186) -
M&A and acquisition-related costs 1,097 2,177
Pre-tax total 32,956 58,606
Income tax expense on adjustments 11,630 7,607
Adjusted net income$83,601 $99,257 -15.8%
Diluted shares outstanding 84,809 86,033
Adjusted EPS - diluted$0.98 $1.15 -14.8%

Reconciliation of Adjusted Net Income from Net Income
Unaudited, in thousands except per share data
CONTINUING OPERATIONS Year Ended December 31,
2015 2014 % Change
Income from continuing operations$190,916 $134,611 41.8%
Amortization of acquired intangible assets 68,458 61,018
Amortization of deferred financing costs 19,641 20,035
Accelerated amortization of deferred financing costs 2,304 11,601
Share-based compensation 22,925 15,574
Debt call premiums - 61,708
Secondary equity offering expense 855 -
M&A and acquisition-related costs 3,074 3,467
Pre-tax total 117,257 173,403
Income tax expense on adjustments 42,306 60,792
Adjusted income from continuing operations$265,867 $247,222 7.5%
Diluted shares outstanding 85,394 85,507
Adjusted EPS from continuing operations - diluted$3.11 $2.89 7.6%
DISCONTINUED OPERATIONS Year Ended December 31,
2015 2014 % Change
Income from discontinued operations$50,924 $23,794 114.0%
Amortization of acquired intangible assets 41 7,700
Share-based compensation 1,576 154
M&A and acquisition-related costs 386 1,916
Pre-tax total 2,003 9,770
Income tax benefit on adjustments (15) (4,375)
Adjusted income from discontinued operations$52,942 $37,939 39.5%
Diluted shares outstanding 85,394 85,507
Adjusted EPS from discontinued operations - diluted$0.62 $0.44 40.9%
CONSOLIDATED Year Ended December 31,
2015 2014 % Change
Net income$241,840 $158,405 52.7%
Amortization of acquired intangible assets 68,499 68,718
Amortization of deferred financing costs 19,641 20,035
Accelerated amortization of deferred financing costs 2,304 11,601
Share-based compensation 24,501 15,728
Debt call premiums - 61,708
Secondary equity offering expense 855 -
M&A and acquisition-related costs 3,460 5,383
Pre-tax total 119,260 183,173
Income tax expense on adjustments 42,291 56,417
Adjusted net income$318,809 $285,161 11.8%
Diluted shares outstanding 85,394 85,507
Adjusted EPS - diluted$3.73 $3.33 12.0%

Free Cash Flow Reconciliation

The Company believes free cash flow provides a relevant measure of liquidity and a useful basis for assessing the Company’s ability to fund its activities, including the financing of acquisitions, debt service, stock repurchases and distribution of earnings to shareholders. Free cash flow is calculated as cash flows from operating activities less cash capital expenditures. Free cash flow is not a measure of financial performance under GAAP. Free cash flow should not be considered in isolation or as a substitute for cash flows from operating activities or other liquidity measures prepared in accordance with GAAP. Free cash flow, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of free cash flow from cash flows from operating activities.

Reconciliation of Free Cash Flow from Operating Cash Flow
Unaudited, in thousands
CONTINUING OPERATIONS Three Months Ended December 31, Year Ended December 31,
2015 2014 % Change 2015 2014 % Change
Cash flows from operating activities$127,547 $106,899 19.3% $410,768 $409,491 0.3%
Cash capital expenditures 40,628 31,432 29.3% 136,810 130,318 5.0%
Free cash flow$86,919 $75,467 15.2% $273,958 $279,173 -1.9%
DISCONTINUED OPERATIONS Three Months Ended December 31, Year Ended December 31,
2015 2014 2015 2014
Cash flows from operating activities$15,419 $25,574 $7,222 $53,232
Cash capital expenditures - 5,602 1,930 20,398
Free cash flow$15,419 $19,972 $5,292 $32,834
CONSOLIDATED Three Months Ended December 31, Year Ended December 31,
2015 2014 % Change 2015 2014 % Change
Cash flows from operating activities$142,966 $132,473 7.9% $417,990 $462,723 -9.7%
Cash capital expenditures 40,628 37,034 9.7% 138,740 150,716 -7.9%
Free cash flow$102,338 $95,439 7.2% $279,250 $312,007 -10.5%

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

Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow
Unaudited, in thousands
CONTINUING OPERATIONS Three Months Ended Dec. 31, Year Ended Dec. 31,
2015 2014 2015 2014
Cash flows from operating activities$127,547 $106,899 $410,768 $409,491
Income tax expense 23,093 18,834 107,757 72,679
Deferred income tax benefit (expense) (14,888) (1,052) (8,930) 26,632
Interest expense and other financing charges 41,236 63,825 158,356 261,404
Provision for share-based compensation (6,140) (5,519) (22,925) (15,574)
Amortization of deferred financing costs (4,624) (5,075) (19,641) (20,035)
Accelerated amortization of deferred financing costs (2,304) (3,853) (2,304) (11,601)
Other (448) 323 (672) 316
Changes in operating assets and liabilities,
net of business acquisitions (5,454) (7,392) 26,884 (74,081)
EBITDA 158,018 166,990 649,293 649,231
Provision for share-based compensation 6,140 5,519 22,925 15,574
Secondary equity offering expense (186) - 855 -
M&A and acquisition-related costs 1,097 909 3,074 3,467
Adjusted EBITDA$165,069 $173,418 $676,147 $668,272
Cash flows from operating activities$127,547 $106,899 $410,768 $409,491
Cash flows used in investing activities$(118,651) $(38,438) $(232,433) $(524,376)
Cash flows used in financing activities$(23,453) $(135,882) $(388,243) $(25,027)
DISCONTINUED OPERATIONS Three Months Ended Dec. 31, Year Ended Dec. 31,
2015 2014 2015 2014
Cash flows from operating activities$15,419 $25,574 $7,222 $53,232
Income tax expense (19,717) (11,637) (372) (2,169)
Deferred income tax expense 4,516 5,571 2,223 2,514
Provision for share-based compensation - (30) (1,576) (154)
Other - (2) 29,596 (4)
Changes in operating assets and liabilities,
net of business acquisitions - (7,238) 13,500 (8,409)
EBITDA 218 12,238 50,593 45,010
Provision for share-based compensation - 30 1,576 154
M&A and acquisition-related costs - 1,268 386 1,916
Gain on sale of business (182) - (46,838) -
Adjusted EBITDA$36 $13,536 $5,717 $47,080
Cash flows from operating activities$15,395 $25,574 $7,222 $53,232
Cash flows from (used in) investing activities$- $(5,336) $275,815 $(20,530)
Cash flows used in financing activities$- $- $- $-
Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow, continued
CONSOLIDATED Three Months Ended Dec. 31, Year Ended Dec. 31,
2015 2014 2015 2014
Cash flows from operating activities$142,966 $132,473 $417,990 $462,723
Income tax expense 3,376 7,197 107,385 70,510
Deferred income tax benefit (expense) (10,372) 4,519 (6,707) 29,146
Interest expense and other financing charges 41,236 63,825 158,356 261,404
Provision for share-based compensation (6,140) (5,549) (24,501) (15,728)
Amortization of deferred financing costs (4,624) (5,075) (19,641) (20,035)
Accelerated amortization of deferred financing costs (2,304) (3,853) (2,304) (11,601)
Other (448) 321 28,924 312
Changes in operating assets and liabilities,
net of business acquisitions (5,454) (14,630) 40,384 (82,490)
EBITDA 158,236 179,228 699,886 694,241
Provision for share-based compensation 6,140 5,549 24,501 15,728
Secondary equity offering expense (186) - 855 -
M&A and acquisition-related costs 1,097 2,177 3,460 5,383
Gain on sale of business (182) - (46,838) -
Adjusted EBITDA$165,105 $186,954 $681,864 $715,352
CONSOLIDATED
Cash flows from operating activities$142,966 $132,473 $417,990 $462,723
Cash flows from (used in) investing activities$(118,651) $(43,774) $43,382 $(544,906)
Cash flows used in financing activities$(23,453) $(135,882) $(388,243) $(25,027)

Reconciliation of EBITDA and Adjusted EBITDA from Net Income
Unaudited, in thousands
CONTINUING OPERATIONS Three Months Ended Dec. 31, Year Ended Dec. 31,
2015 2014 2015 2014
Income from continuing operations$42,340 $34,884 $190,916 $134,611
Interest expense and other financing charges 41,236 63,825 158,356 261,404
Depreciation and amortization 51,349 49,447 192,264 180,537
Income tax expense 23,093 18,834 107,757 72,679
EBITDA 158,018 166,990 649,293 649,231
Provision for share-based compensation 6,140 5,519 22,925 15,574
Secondary equity offering expense (186) - 855 -
M&A and acquisition-related costs 1,097 909 3,074 3,467
Adjusted EBITDA$165,069 $173,418 $676,147 $668,272
DISCONTINUED OPERATIONS Three Months Ended Dec. 31, Year Ended Dec. 31,
2015 2014 2015 2014
Income from discontinued operations$19,935 $13,374 $50,924 $23,794
Depreciation and amortization - 10,501 41 23,385
Income tax expense (19,717) (11,637) (372) (2,169)
EBITDA 218 12,238 50,593 45,010
Provision for share-based compensation - 30 1,576 154
M&A and acquisition-related costs - 1,268 386 1,916
Gain on sale of business (182) - (46,838) -
Adjusted EBITDA$36 $13,536 $5,717 $47,080
CONSOLIDATED Three Months Ended Dec. 31, Year Ended Dec. 31,
2015 2014 2015 2014
Net income$62,275 $48,258 $241,840 $158,405
Interest expense and other financing charges 41,236 63,825 158,356 261,404
Depreciation and amortization 51,349 59,948 192,305 203,922
Income tax expense 3,376 7,197 107,385 70,510
EBITDA 158,236 179,228 699,886 694,241
Provision for share-based compensation 6,140 5,549 24,501 15,728
Secondary equity offering expense (186) - 855 -
M&A and acquisition-related costs 1,097 2,177 3,460 5,383
Gain on sale of business (182) - (46,838) -
Adjusted EBITDA$165,105 $186,954 $681,864 $715,352

1 See Reconciliation of Non-GAAP Financial Measures below.
2 Free cash flow is calculated as cash flows from operating activities less cash capital expenditures.
3 Revenue growth attributable to acquired entities for the fourth quarter of 2015 includes SchoolReach, SharpSchool, Magnetic North and ClientTell. Revenue growth attributable to acquired entities for the full year 2015 includes SchoolMessenger, Health Advocate, 911 Enable, SchoolReach, SharpSchool, Magnetic North and ClientTell.
4 Based on loan covenants. Covenant loan ratio is debt net of cash and excludes accounts receivable securitization debt.
5 Adjusted organic growth is provided on the Selected Financial Data tables and excludes revenue from acquired entities, revenue from previously disclosed lost clients and the estimated impact of foreign currency exchange rates.
NM: Not Meaningful

AT THE COMPANY: Dave Pleiss Investor Relations West Corporation (402) 963-1500 DMPleiss@west.com

Source:West Corporation