Convergys Corp. has a market cap of $1.25 billion; its shares were traded at around $10.12 with a P/E ratio of 9.2 and P/S ratio of 0.44. CVG is in the portfolios of Steven Cohen of SAC Capital Advisors, NWQ Managers of NWQ Investment Management Co, George Soros of Soros Fund Management LLC, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, Jeremy Grantham of GMO LLC.
Highlight of Business Operations:As a result of the sale of the HR Management line of business, the operating results and assets and liabilities related to HR Management have been reflected as discontinued operations for all periods presented. Certain costs previously allocated to the HR Management segment that do not qualify for discontinued operations accounting treatment are now reported as costs from continuing operations. These costs included in continuing operations in Corporate and Other prior to the close of the sale were $2.9 and $8.6 for the three months ended June 30, 2010 and 2009, respectively, and were $9.1 and $16.4 for the six months ended June 30, 2010 and 2009, respectively. We have taken and continue to take actions to reduce these costs and began receiving transition service revenue from services provided to the buyer subsequent to completion of the sale in June 2010. We received $4.1 in revenue under these transition services agreements subsequent to the close of the sale. This revenue is included in Corporate and Other and offsets costs incurred. The total gain on the sale of the HR Management business amounted to $38.0 pretax and $7.8 after tax. The sale of the HR Management business was a taxable transaction that resulted in $30.2 being recorded for the combined federal and state income tax obligation. Upon the successful closing of the sale of the HR Management operations in Singapore, India, and Russia, expected later in 2010, we anticipate an additional gain of approximately $1, net of tax.
Consolidated revenues for the second quarter of 2010 were $528.2 compared to $609.7 for the comparable period last year, reflecting revenue decreases in both Customer Management and Information Management. Operating income for the second quarter of 2010 was $7.8 compared to operating income of $39.7 in the prior year, due to revenue declines and restructuring charges of $17.6 during the second quarter of 2010.
During the second quarter of 2010, we recognized equity income in the Cellular Partnerships of $11.7 compared to equity income of $10.8 in the prior year. Other expense for the second quarter of 2010 improved to $1.7 compared to $4.9 in the prior year primarily due to lower foreign exchange losses in 2010. Interest expense decreased to $5.4 from $6.9 in the prior year reflecting a
The results of discontinued operations reflect the results from the HR Management business. Discontinued operations include revenues of $42.0 and $73.0 in the second quarter of 2010 and 2009, respectively. HR Management results improved $103.4 as prior year results included expensing of implementation costs of approximately $121. Current year results also include the gain on the sale of the HR Management line of business of $7.8, net of tax expense of $30.2. As a result of the foregoing, the income from discontinued operations, net of tax and the earnings from discontinued operations per diluted share for the three months ended June 30, 2010 was $16.2 and $0.13, respectively, compared to loss from discontinued operations, net of tax and the loss from discontinued operations per diluted share of $87.2 and $0.70 in the same period in the prior year.
Consolidated revenues for the first six months of 2010 were $1,074.2 compared to $1,234.2 in the same period last year, reflecting revenue decreases from both Customer Management and Information Management. Operating income for the first half of 2010 was $29.9 compared to operating income of $80.2 in the prior year, due to revenue declines and restructuring charges of $17.6 during the second quarter of 2010.
As a percentage of revenues, the cost of providing services and products sold was 59.7% compared to 60.3% during the corresponding period last year. Selling, general, and administrative expenses in the first half of 2010 decreased to $299.6 compared to $308.4 in the first half of 2009. As a percentage of revenue, these costs increased from 25.0% for the first six months of 2009 to 27.9% for the first six months of 2010 reflecting revenue declines. Severance and other transition costs associated with the change in our President and Chief Executive Officer in February 2010 resulted in additional selling, general and administrative costs in the first quarter of 2010 of $6.2. The 26% decrease in research and development costs primarily reflects more focused strategic spending on enhancement of our business support system offerings and the shift of this investment to lower cost geographies. Compared to the prior year, the $4.6 decrease in depreciation expense reflects the impact of lower capital expenditures and a reduced depreciable asset base. As noted under the heading, Restructuring Charges, we recorded a restructuring charge of $17.6 during the second quarter of 2010 mostly related to the realignment of resources, including headcount and facilities, to expected revenues and the separation of the HR Management business.
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