7-30-13 4:39 PM EDT | Email Article

Convergys Corporation (NYSE: CVG), a global leader in customer management, today announced its financial results for the second quarter of 2013.

The Company also announced that it completed real estate transactions related to corporate simplification actions initiated in prior years.

Second Quarter Summary

  • Revenue of $504 million, up three percent compared with prior year;
  • Adjusted EBITDA of $61 million, up six percent compared with $58 million in the prior year;
  • Adjusted EPS from continuing operations of $0.25, compared with $0.19 in the prior year; GAAP EPS from continuing operations of $0.20, including expected pension settlement and real estate sale-related corporate simplification impacts;
  • Repurchased 1.5 million Convergys shares for $25 million, or $16.43 per share;
  • $587 million cash and short term investments on balance sheet at quarter end;
  • Confirmed expectations for revenue growth and profit improvement in 2013.

“We delivered steady improvement in revenue, EBITDA and EPS in the second quarter as we execute our plan for sustained growth and margin expansion,” said Andrea Ayers, president and CEO. “Our winning business model is driving predictable, consistent performance through a unique combination of global quality delivery, comprehensive solutions and close client engagement. We had another quarter of strong new business signings, and are confirming our full-year guidance.”

Ayers added, “As a well-capitalized market leader we are able to both invest in strategic growth and return capital to investors. We acquired Datacom’s Asia contact center operations for approximately $20 million, paid a $6 million dividend and repurchased $25 million of stock in the quarter, and will remain disciplined with our capital deployment strategy.”

Second Quarter Results – Continuing Operations

Revenue – Revenue was $504 million, a three percent increase compared with $491 million in the same period last year.

Operating Income – Adjusted operating income was $39 million, a 12 percent increase compared with adjusted operating income of $35 million in the same period last year. GAAP operating income was $30 million including the corporate simplification impacts discussed below. Prior-year GAAP operating loss of $61 million included Information Management sale and corporate simplification impacts.

Adjusted operating margin was 7.7 percent, up 70 basis points compared with 7.0 percent in the same period last year.

Adjusted EBITDA – Adjusted EBITDA was $61 million, a six percent increase compared with $58 million in the same period last year. Adjusted EBITDA excludes the corporate simplification impacts discussed below.

Adjusted EBITDA margin was 12.2 percent, up 50 basis points compared with 11.7 percent in the same period last year.

Net Income – Adjusted net income from continuing operations was $27 million, or $0.25 per diluted share, compared with $23 million, or $0.19 per diluted share, in the same period last year. GAAP net income from continuing operations was $22 million, or $0.20 per diluted share, including the corporate simplification impacts discussed below. Prior-year net loss from continuing operations of $54 million, or $0.47 per share, included Information Management sale and corporate simplification impacts in the same period last year.

Share Repurchase – Convergys repurchased 1.5 million shares in the second quarter at a cost of $25 million. The remaining authorization to purchase outstanding shares is $192 million.

Quarterly Dividend – Convergys paid a $6 million quarterly dividend in July to holders of record at the close of business on June 21, 2013. The next dividend payment of $0.06 per share is scheduled to be made on October 4, 2013, to shareholders of record at the close of business on September 20, 2013.

Free Cash Flow – Free cash flow was $35 million compared with $13 million in the same period last year.

Net Cash and Short Term Investments – At June 30, 2013, cash and short term investments were $587 million, debt maturing in one year was $1 million and long term debt was $60 million. Net cash and short term investments totaled $526 million at June 30, 2013, compared with $542 million at March 31, 2013, and $696 million at the end of the second quarter last year.

Corporate Simplification Impacts – GAAP second-quarter 2013 results include an expected $8 million non-cash pension settlement charge and $1 million net loss related to real estate transactions initiated in prior years. In July, the Company received cash proceeds of $47 million from the real estate sales. GAAP second-quarter 2012 results include $89 million of goodwill and asset impairment charges and $6 million of restructuring charges related to the Information Management sale and corporate simplification measures.

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

2013 Business Outlook

Convergys continues to expect revenue growth and profit improvement in 2013, including:

  • Revenue to exceed $2,055 million;
  • Adjusted EBITDA to exceed $248 million;
  • Diluted shares outstanding to approximate 109 million;
  • Adjusted EPS to exceed $1.05.

This full-year guidance includes the impact of restructuring charges in the third quarter of approximately $5 million related to the Company’s on-going efforts to further simplify the business and reduce costs.

Not included in this guidance is the impact of any future strategic acquisitions or share repurchase activities. Also not included in this guidance are results classified within discontinued operations related to the sale of the Information Management business as well as other impacts from corporate simplification actions initiated in prior years such as non-cash pension settlement charges.

Forward-Looking Statements Disclosure and "Safe Harbor" Note

This news release contains statements, estimates, or projections that constitute "forward-looking statements" as defined under U.S. federal securities laws. In some cases, one can identify forward looking statements by terminology such as "will," "expect," "estimate," "think," "forecast," "guidance, "outlook," "plan," "lead," "project" or other comparable terminology. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks include, but are not limited to: (i) the loss of a significant client or significant business from a client; (ii) the future financial performance of major industries that we serve; (iii) our inability to protect personally identifiable data against unauthorized access or unintended release; (iv) our inability to maintain and upgrade our technology and network equipment in a timely manner; (v) international business and political risks, including economic weakness and operational disruption as a result of natural events, political unrest, war, terrorist attacks or other civil disruption; (vi) the failure to meet expectations regarding the tax treatment of the Information Management transaction; (vii) higher than expected costs of providing transition services and other support to the Information Management business and (viii) those factors contained in our periodic reports filed with the SEC, including in the "Risk Factors" section of our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The forward-looking information in this document is given as of the date of the particular statement and we assume no duty to update this information. Our filings and other important information are also available on the investor relations page of our web site at www.convergys.com.

Non-GAAP Financial Measures

This news release contains non-GAAP financial measures as defined by the Securities and Exchange Commission Regulation G; pursuant to the requirements of this regulation, reconciliations of these non-GAAP measures to their comparable GAAP measures are included in the attached financial tables. To assess the underlying operational performance of the continuing operations of the business for the quarter and to have a basis to compare underlying operating results to prior and future periods, management uses 2013 and 2012 operating income, net income from continuing operations and diluted earnings per share from continuing operations metrics excluding asset impairment charges, corporate restructuring costs, certain Information Management-related costs, interest expense for debt reduction, net non-cash post-employment benefit plan charges, and tax benefits from certain discrete and other adjustments.

These charges are relevant in evaluating the overall performance of the business. Limitations associated with the use of these non-GAAP measures include that these measures do not include all of the amounts associated with our results as determined in accordance with GAAP. Management compensates for these limitations by using the non-GAAP measures, operating income, income from continuing operations, net of tax and diluted earnings per share from continuing operations excluding the items above, and the GAAP measures, operating income, income from continuing operations, net of tax and diluted earnings per share, in its evaluation of performance. There is no material purpose for which we use these non-GAAP measures beyond those described above.

The Company presents the non-GAAP financial measures EBITDA and Adjusted EBITDA because management uses these measures to monitor and evaluate the performance of the business and believes the presentation of these measures will enhance the investors' ability to analyze trends in the business and evaluate the Company's underlying performance relative to other companies in the industry.

Management uses the non-GAAP metric free cash flow to assess the financial performance of the Company. Convergys' management believes that free cash flow is useful to investors because it relates the operating cash flow of the Company to the capital that is spent to continue and improve business operations, such as investment in the Company's existing businesses. Further, free cash flow facilitates management's ability to strengthen the Company's balance sheet, to repurchase the Company's stock, and to repay the Company's debt obligations. Management also believes the presentation of this measure will enhance the investors' ability to analyze trends in the business and evaluate the Company's underlying performance relative to other companies in the industry. Limitations associated with the use of free cash flow include that it does not represent the residual cash flow available for discretionary expenditures as it does not incorporate certain cash payments including payments made on capital lease obligations or cash payments for business acquisitions. Management compensates for these limitations by using both the non-GAAP measure, free cash flow, and the GAAP measure, cash flow from operating activities, in its evaluation of performance. There is no material purpose for which we use these non-GAAP measures beyond the purposes described above.

These non-GAAP measures should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures. The non-GAAP financial information that we provide may be different from that provided by our competitors or other companies.

Webcast Presentation:

Convergys will hold its Second Quarter Financial Results webcast presentation at 9:00 a.m., Eastern time, Wednesday, July 31. It will feature its President and CEO Andrea Ayers and CFO Andre Valentine. The webcast presentation will take place live and will then be available for replay at this link - http://tinyurl.com/2Q13ConferenceCall. This link will replay the webcast presentation through August 31. You may also access the webcast or the recording via the Convergys website, www.convergys.com. Click “Company,” then “Investor Relations,” then “Events and Webcasts.”

Supporting Resources:

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About Convergys

As a leader in customer management for over 30 years, Convergys is uniquely focused on helping companies find new ways to enhance the value of their customer relationships and deliver consistent customer experiences across all channels and geographies. Every day, over 80,000 employees help our clients balance the demands of increasing revenue, improving customer satisfaction, and reducing overall cost using an optimal mix of agent, technology, andanalyticssolutions. Our actionable insight stems from handling billions of customer interactions annually for our clients. Visit www.convergys.com to learn more.

(Convergys and the Convergys logo are registered trademarks of Convergys Corporation.)

                   
 
CONVERGYS CORPORATION
Consolidated Statements of Income
(Unaudited)
 
 
For the Three MonthsFor the Six Months
Ended Jun 30, % Ended Jun 30, %
(In millions except per share amounts) 20132012Change20132012Change
 
Revenues:
Communications 301.1 295.2 2 593.9 590.4 1
Technology 47.6 42.6 12 92.2 84.4 9
Financial Services 45.5 52.5 (13 ) 91.6 105.1 (13 )
Other   110.1     100.8   9   220.1     208.7   5
Total Revenues $ 504.3 $ 491.1 3 $ 997.8 $ 988.6 1
 
Costs and Expenses:
Cost of Providing Services and Products Sold 327.3 316.5 3 645.5 634.2 2
Selling, General and Administrative 119.9 114.1 5 234.5 238.8 (2 )
Research and Development Costs 2.2 2.5 (12 ) 4.3 6.4 (33 )
Depreciation 21.2 20.5 3 42.1 40.8 3
Amortization 1.4 1.8 (22 ) 2.6 3.7 (30 )
Restructuring Charges 1.1 7.6 NM 1.1 7.6 (86 )
Asset Impairment   1.1     88.6   NM   1.1     88.6   (99 )
Total Costs and Expenses   474.2     551.6   (14 )   931.2     1,020.1   (9 )
 
Operating Income (Loss) 30.1 (60.5 ) NM 66.6 (31.5 ) NM
 
Other Income, net 0.0 0.7 (100 ) 2.3 2.1 10
Interest Expense   (2.9 )   (4.4 ) (34 )   (5.8 )   (8.0 ) (28 )
 
Income (Loss) Before Income Taxes and Discontinued Operations 27.2 (64.2 ) NM 63.1 (37.4 ) NM
 
Income Tax Expense (Benefit)   5.2     (10.5 ) NM   10.9     (5.1 ) NM
 
Income (Loss) from Continuing Operations, net of tax 22.0 (53.7 ) NM 52.2 (32.3 ) NM
Income (Loss) from Discontinued Operations, net of tax benefits of $1.1 and $4.0, for the three months ended June 30, 2013 and 2012, respectively and $4.0 and $1.0 for the six months ended June 30, 2013 and 2012, respectively   1.4     68.3   NM   (3.7 )   73.0   NM
 
Net Income $ 23.4   $ 14.6   60   48.5     40.7   19
 

Basic Earnings (Loss) Per Common Share

Continuing Operations $ 0.21 $ (0.47 ) $ 0.50 $ (0.28 )
Discontinued Operations $ 0.02   $ 0.59   $ (0.04 ) $ 0.63  
Net Basic Earnings Per Common Share $ 0.23   $ 0.13   $ 0.46   $ 0.35  
 

Diluted Earnings (Loss) Per Common Share

Continuing Operations $ 0.20 $ (0.47 ) $ 0.48 $ (0.28 )
Discontinued Operations $ 0.02   $ 0.59   $ (0.04 ) $ 0.63  
Net Diluted Earnings Per Common Share $ 0.22   $ 0.13   $ 0.44   $ 0.35  
 

Weighted Average Common Shares Outstanding

Basic 103.8 115.4 104.7 115.7
Diluted 108.1 115.4 109.3 115.7
 

Market Price Per Share

High $ 18.66 $ 14.82 $ 18.66 $ 14.82
Low $ 15.56 $ 12.40 $ 15.05 $ 12.13
Close $ 17.43 $ 14.77 $ 17.43 $ 14.77
 
           
 
CONVERGYS CORPORATION
Reconciliation of GAAP EPS from Continuing Operations to non-GAAP EPS from Continuing Operations
(In Millions Except Per Share Amounts)
 
Three Months
Ended Jun 30,
20132012
 
Revenue$504.3$491.1
 
Operating income (loss) as reported under U.S. GAAP$30.1$(60.5)
 
Operating Margin6.0%-12.3%
Net pension and other post employment benefit plan charges (a) 7.5 (2.7 )
Asset impairment (b) 1.1 88.6
Restructuring (c) - 6.4
Information Management costs not qualifying as Discontinued Operations (d)   -     2.8  
Total charges   8.6     95.1  
 
Adjusted operating income (a non-GAAP measure)$38.7   $34.6  
 
Adjusted Operating Margin7.7%7.0%
 
Income (Loss) Before Income Taxes and Discontinued Operations as reported under U.S. GAAP$27.2$(64.2)
 
Total operating charges from above 8.6 95.1
Orlando financing fees (e)   -     1.1  
Total charges (benefits)   8.6     96.2  
 
Adjusted Income Before Income Taxes and Discontinued Operations (a non-GAAP measure)$35.8   $32.0  
 
Income from continuing operations, net of tax, as reported under U.S. GAAP$22.0$(53.7)
 
Total operating charges from above, net of tax 5.4 75.5
Orlando financing fees of $1.1, net of tax (f)   -     0.7  
 
Adjusted net income from continuing operations, net of tax (a non-GAAP measure)$27.4   $22.5  
 
Diluted EPS from continuing operations as reported under U.S. GAAP$0.20$(0.47)
 
Net impact of total charges included in continuing operations   0.05     0.66  
 
Adjusted diluted EPS from continuing operations (a non-GAAP measure)$0.25   $0.19  
 

(a) During the three months ended June 30, 2013 and 2012, the Company recorded net pension and other post employment benefit plan charges (benefits) of $7.5 and ($2.7), respectively. The 2013 charge consists of a pension plan settlement charge while the 2012 net benefit includes $4.1 of curtailment credits from pension and other post employment benefits plans and $1.4 of post-retirement benefits costs related to changes in the executive management team.

(b) During the three months ended June 30, 2012, the Company recorded an impairment charge of $46.0 for the goodwill of the Customer Interaction Technology reporting unit. In addition, as the result of a decision to monetize certain real estate assets, these assets were reclassified to Held for Sale and the Company recorded an impairment charge of $1.1 and $42.6 for the three months ended June 30, 2013 and 2012, respectively, to reduce the carrying value to estimated fair value less cost to sell.

(c) The results for the three months ended June 30, 2012 include $6.4 of restructuring charges within Corporate and Other consisting of severance charges related to the change in the Company's executive team and streamlining of operations as a result of the sale of the Information Management business.

(d) In March 2012, the Company signed a definitive agreement to sell the Information Management business and the sale substantially closed in May 2012. The results of operations of this business met the criteria for presentation as discontinued operations and therefore are presented on this basis for all periods presented. Certain costs previously allocated to the Information Management business do not qualify for discontinued operations accounting treatment and are required to be reported as costs within continuing operations. The Company classified $2.8 of these costs, which previously would have been presented within the Information Management segment, within continuing operations for the three months ended June 30, 2012.

(e) In the second quarter of 2012, the Company exercised its option to purchase its leased office facility in Orlando, Florida by discharging the related lease financing obligation in the aggregate principal amount of $55.0. In connection with the purchase, the Company expensed $1.1 of previously deferred financing fees as interest expense.

Management uses operating income, income from continuing operations, net of tax and earnings per share from continuing operations excluding the above items to assess the underlying operational performance of the continuing operations of the business for the year and to have a basis to compare underlying operating results to prior and future periods. These charges and credits are relevant in evaluating the overall performance of the business.

Limitations associated with the use of these non-GAAP measures include that these measures do not include all of the amounts associated with our results as determined in accordance with GAAP. Management compensates for these limitations by using the non-GAAP measures, operating income, income from continuing operations, net of tax and diluted earnings per share excluding the charges, and the GAAP measures, operating income, income from continuing operations, net of tax and diluted earnings per share, in its evaluation of performance. There are no material purposes for which we use these non-GAAP measures beyond those described above.

           
 
CONVERGYS CORPORATION
Reconciliation of GAAP EPS from Continuing Operations to non-GAAP EPS from Continuing Operations
(In Millions Except Per Share Amounts)
 
For the Six Months
Ended Jun 30,
20132012
 
Revenue$997.8$988.6
 
Operating income (loss) as reported under U.S. GAAP$66.6$(31.5)
 
Operating Margin6.7%-3.2%
Net pension and other post employment benefit plan charges (a) 7.5 (2.7 )
Asset impairment (b) 1.1 88.6
Restructuring (c) - 6.4
Information Management costs not qualifying as Discontinued Operations (d)   -     8.8  
Total charges   8.6     101.1  
 
Adjusted operating income (a non-GAAP measure)$75.2   $69.6  
 
Adjusted Operating Margin7.5%7.0%
 
Income (Loss) Before Income Taxes and Discontinued Operations as reported under U.S. GAAP$63.1$(37.4)
 
Total operating charges from above 8.6 101.1
Orlando financing fees (e)   -     1.1  
Total charges (benefits)   8.6     102.2  
 
Adjusted Income Before Income Taxes and Discontinued Operations (a non-GAAP measure)$71.7   $64.8  
 
Income (Loss) from continuing operations, net of tax, as reported under U.S. GAAP$52.2$(32.3)
 
Total operating charges from above, net of tax 5.4 80.3
Orlando financing fees of $1.1, net of tax (e)   -     0.7  
 
Adjusted income from continuing operations, net of tax (a non-GAAP measure)$57.6   $48.7  
 
Diluted EPS from continuing operations as reported under U.S. GAAP$0.48$(0.28)
 
Net impact of total charges included in continuing operations   0.05     0.69  
 
Adjusted diluted EPS from continuing operations (a non-GAAP measure)$0.53   $0.41  
 

(a) During the six months ended June 30, 2013 and 2012, the Company recorded net pension and other post employment benefit plan charges (benefits) of $7.5 and ($2.7), respectively. The 2013 charge consists of a pension plan settlement charge while the 2012 net benefit includes $4.1 of curtailment credits from pension and other post employment benefits plans and $1.4 of post-retirement benefits costs related to changes in the executive management team.

(b) During the six months ended June 30, 2012, the Company recorded an impairment charge of $46.0 for the goodwill of the Customer Interaction Technology reporting unit. In addition, as the result of a decision to monetize certain real estate assets, these assets were reclassified to Held for Sale and the Company recorded an impairment charge of $1.1 and $42.6 for the three months ended June 30, 2013 and 2012, respectively, to reduce the carrying value to estimated fair value less cost to sell.

(c) The results for the six months ended June 30, 2012 include $6.4 of restructuring charges within Corporate and Other consisting of severance charges related to the change in the Company's executive team and streamlining of operations as a result of the sale of the Information Management business.

(d) In March 2012, the Company signed a definitive agreement to sell the Information Management business and the sale substantially closed in May 2012. The results of operations met the criteria for presentation as discontinued operations and therefore are presented on this basis for all periods presented. Certain costs previously allocated to the Information Management segment do not qualify for discontinued operations accounting treatment and are required to be reported as costs within continuing operations. The Company classified $8.8 of these costs, which previously would have been presented within the Information Management segment within continuing operations for the six months ended June 30, 2012.

(e) In the second quarter of 2012, the Company exercised its option to purchase its leased office facility in Orlando, Florida by discharging the related lease financing obligation in the aggregate principal amount of $55.0. In connection with the purchase, the Company expensed $1.1 of previously deferred financing fees as interest expense.

Management uses operating income, income from continuing operations, net of tax and earnings per share data excluding the items above to assess the underlying operational performance of the continuing operations of the business for the year and to have a basis to compare underlying operating results to prior and future periods. These charges and credits are relevant in evaluating the overall performance of the business.

Limitations associated with the use of these non-GAAP measures include that these measures do not include all of the amounts associated with our results as determined in accordance with GAAP. Management compensates for these limitations by using the non-GAAP measures, operating income, income from continuing operations, net of tax and diluted earnings per share excluding the charges, and the GAAP measures, operating income, income from continuing operations, net of tax and diluted earnings per share, in its evaluation of performance. There are no material purposes for which we use these non-GAAP measures beyond those described above.

                   
 
CONVERGYS CORPORATION
Reconciliation of Net Income (Loss) from Continuing Operations to Adjusted EBITDA
(Unaudited)
 
 
For the Three MonthsFor the Six Months
Ended Jun 30, % Ended Jun 30, %
(In millions) 20132012Change20132012Change
 
Income (Loss) from Continuing Operations, net of tax$22.0$(53.7) NM $52.2$(32.3) NM
Depreciation and Amortization 22.6 22.3 1 44.7 44.5 0
Interest expense 2.9 4.4 (34 ) 5.8 8.0 (28 )
Income tax expense   5.2     (10.5 ) NM   10.9    

(5.1

)

NM
EBITDA (a non-GAAP measure)$52.7$(37.5) NM 113.615.1 NM
 
 
Asset impairment charges 1.1 88.6 NM 1.1 88.6 NM
Restructuring - 6.4 NM - 6.4 NM
Information Management costs not qualifying as Discontinued Operations - 2.8 NM - 8.8 NM
Net pension and other post employment benefit plan charges   7.5     (2.7 ) NM   7.5     (2.7 ) NM
 
Adjusted EBITDA (a non-GAAP measure)$61.3   $57.6   6 $122.2   $116.2   5
 
EBITDA Margin 10.5 % -7.6 % 11.4 % 1.5 %
 
Adjusted EBITDA Margin 12.2 % 11.7 % 12.2 % 11.8 %
 

The Company presents the non-GAAP financial measures EBITDA and Adjusted EBITDA because management uses these measures to monitor and evaluate the performance of the business and believes the presentation of these measures will enhance the investors' ability to analyze trends in the business and evaluate the Company's underlying performance relative to other companies in the industry.

These non-GAAP measures should not be considered in isolation or as a substitute for income from continuing operations, net of tax or other income statement data prepared in accordance with GAAP and our presentation of these measures may not be comparable to similarly-titled measures used by other companies. Management uses both these non-GAAP measures and the GAAP measure, income from continuing operations, net of tax, in evaluation of its underlying performance. There are no material purposes for which we use these non-GAAP measures beyond the purposes described above. These non-GAAP measures should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures.

           
 
CONVERGYS CORPORATION
Consolidated Balance Sheets
(Unaudited)
 
 
Jun. 30,Dec. 31,
(In millions) 20132012
 

Assets

 
Cash and Cash Equivalents $ 515.2 $ 554.7
Short Term Investments 72.2 83.8
Receivables - Net 319.5 319.8
Other Current Assets 102.3 107.7
Current Assets - Held for Sale 47.2 34.6
Property and Equipment - Net 251.8 279.2
Other Assets   662.5   658.1
Total Assets $ 1,970.7 $ 2,037.9
 
 

Liabilities and Shareholders' Equity

 
Debt Maturing in One Year $ 0.9 $ 0.7
Other Current Liabilities 257.0 285.8
Other Liabilities 316.3 319.6
Long-Term Debt 60.1 59.9
Common Shareholders' Equity   1,336.4   1,371.9
Total Liabilities and Shareholders' Equity $ 1,970.7 $ 2,037.9
 
               
 
Convergys Corporation
Summarized Statement of Cash Flow
(Unaudited)
 
 
For the Three MonthsFor the Six Months
Ended Jun 30,Ended Jun 30,
(In millions) 2013201220132012
 
Net cash provided by operating activities $ 49.5 $ 39.7 $ 72.2 $ 51.6
 
Net cash used in investing activities (23.4 ) (a) 391.8 (a) (36.0 ) (b) 371.8
 
Net cash used in financing activities   (35.9 )   (123.2 )   (75.7 )   (126.4 )
 
Net decrease in cash $ (9.8 ) $ 308.3   $ (39.5 ) $ 297.0  
 

(a) Includes$14.2 and $27.0 of capital expenditures, net of proceeds for disposals, for the three months ended June 30, 2013 and 2012, respectively.

(b) Includes$26.3 and $47.0 of capital expenditures, net of proceeds for disposals, for the six months ended June 30, 2013 and 2012, respectively.

               
 
CONVERGYS CORPORATION
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
 
 
For the Three MonthsFor the Six Months
Ended Jun 30,Ended Jun 30,
(In millions) 2013201220132012
 
Net cash provided by operating activities $ 49.5 $ 39.7 $ 72.2 $ 51.6
 
Capital expenditures, net

 

  (14.2 )   (27.0 )   (26.3 )   (47.0 )
 
Free cash flow (a non-GAAP measure) $ 35.3   $ 12.7   $ 45.9   $ 4.6  
 

Management uses free cash flow to assess the financial performance of the Company. Convergys' Management believes that free cash flow is useful to investors because it relates the operating cash flow of the Company to the capital that is spent to continue and improve business operations, such as investment in the Company’s existing businesses. Further, free cash flow facilitates Management’s ability to strengthen the Company’s balance sheet, to repay the Company’s debt obligations and to repurchase the Company’s common shares. Management also believes the presentation of this measure will enhance the investors' ability to analyze trends in the business and evaluate the Company's underlying performance relative to other companies in the industry.

Limitations associated with the use of free cash flow include that they do not represent the residual cash flow available for discretionary expenditures as they do not incorporate certain cash payments including payments made on capital lease obligations or cash payments for business acquisitions. Management compensates for these limitations by using both the non-GAAP measure, free cash flow, and the GAAP measure, cash from operating activities, in its evaluation of performance. There are no material purposes for which we use this non-GAAP measure beyond the purposes described above. This non-GAAP measure should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures.

Convergys Corporation
David Stein, Investor Relations, +1 513-723-7768
investor@convergys.com
or
Krista Boyle, Public/Media Relations, +1 513-723-2061
krista.boyle@convergys.com

Copyright Business Wire 2013
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Morningstar - - Convergys Reports Second Quarter Results
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Author |  Collection |  Interest |  Popularity

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