According to the Cincinnati Bell quarterly earnings statement, Convergys results from 2q98 were great. The following information is taken directly from the CSN press release of this morning.
On April 27, Cincinnati Bell Inc. announced the formation of a new subsidiary, Convergys Corporation, which it intends to spin off to Cincinnati Bell shareholders by the end of this year. Convergys holds the businesses of Cincinnati Bell Information Systems (CBIS) and MATRIXX Marketing, and Cincinnati Bell's interest in its cellular- service partnership with Ameritech.
On May 26, Convergys filed a registration statement with the Securities and Exchange Commission for a proposed initial public offering by Convergys. The Commission is reviewing that filing.
Cincinnati Bell is therefore presenting consolidated quarterly results for Cincinnati Bell Inc., and for Convergys Corporation as if it were operating as a separate entity. Convergys' results are presented to show results for the CBIS and MATRIXX, and for the cellular partnership.
Convergys Consolidated Results
Convergys Corporation reported consolidated revenues for the second quarter of $363.6 million, up 50 percent from $243.1 million in the same quarter last year.
Earnings before interest and taxes (EBIT) was $48.4 million, up 16 percent for the quarter. EBIT is operating income excluding special items, plus cellular partnership earnings.
Convergys' second-quarter net income was $23.6 million, down 16 percent from $28.2 million for the second quarter of 1997, principally because of acquisition-related costs and increased Year-2000 compliance costs. Acquisition-related costs included $6 million in increased amortization of goodwill and other intangibles and $10 million in additional interest expense. Year-2000 compliance costs increased to $7.8 million in the second quarter from $1.5 million in the same period last year.
For the first half, Convergys reported revenues of $672.2 million and net income of $47.7 million, excluding $26.4 million net of tax in purchased research and development costs associated with the Transtech acquisition. That compares with revenues of $486.5 million and net income of $55 million for the first half of 1997.
Convergys' 1998 first-half results include $8 million in amortization and $13 million in interest related to acquisitions, plus $13.5 million in Year-2000 compliance costs. Year-2000 compliance costs were $2.1 million in the first half of 1997.
The cellular partnership contributed $6.8 million to other income of Convergys for the second quarter, and $10.8 million for the first half of 1998.
CBIS (Information Management Group)
Second-quarter revenues for CBIS, the Information Management Group of Convergys, increased 9 percent to $146 million. Operating income for the group increased 8 percent to $27.6 million. Data processing revenues, driven by subscriber growth among its communications clients, provided the majority of the gain in quarterly revenues.
These quarterly results include a significant increase in spending for Year-2000 compliance to $5 million, up from $1.5 million in the second quarter last year.
MATRIXX Marketing (Customer Management Group)
Second-quarter revenues for MATRIXX, the Customer Management Group of Convergys, doubled to $222 million and its operating income increased 11 percent to $14.1 million. Year-2000 compliance costs were $2.8 million for the second quarter. The group had no Year-2000 costs in the second quarter last year.
Revenue growth came largely from the Maritz and Transtech acquisitions. On an operating basis, those businesses were somewhat better than breakeven for the quarter.
In May, Cincinnati Bell disclosed that revenues from AT&T for business formerly provided by Transtech were running below its expectations. That revenue stream is subject to guaranteed minimums under the first three years of an 8-year contract signed at the time of the Transtech acquisition. The revenues of $57 million for the quarter continue to be below the anticipated $300 million annual run rate required by the contract that began in March 1998. AT&T has provided assurances that it plans to meet its requirements under the contract.
MATRIXX continues to move aggressively to complete its fourth-quarter 1997 restructuring program, including reducing its workforce, closing facilities, and capturing the efficiencies and scale advantages it anticipates from the integration of Transtech and the Maritz operations into its other businesses.
MATRIXX recently signed a contract to provide customer care and customer services support for Bell Atlantic Video's new direct broadcast satellite entertainment service. The contract follows Bell Atlantic's earlier award of a billing and customer management contract for the new service to CBIS. |
