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Convergys Corp. Reports Operating Results (10-Q)

November 08, 2010 | About:
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10qk

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Convergys Corp. (CVG) filed Quarterly Report for the period ended 2010-09-30.

Convergys Corp. has a market cap of $1.48 billion; its shares were traded at around $11.89 with a P/E ratio of 11.77 and P/S ratio of 0.52. CVG is in the portfolios of NWQ Managers of NWQ Investment Management Co, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC, Chuck Royce of Royce& Associates, Charles Brandes of Brandes Investment.

Highlight of Business Operations:

Historically, we had three reportable segments, Customer Management, Information Management and Human Resources Management (HR Management). In March 2010, we signed a definitive agreement to sell the HR Management line of business to NorthgateArinso for approximately $100 with $85 to be paid in cash at closing and $15 in cash over three years, subject to post-closing working capital adjustments. The sale substantially closed on June 1, 2010, for which we received approximately $80 in cash as well as a zero coupon note in the principal amount of $15. The sales of certain foreign operations of the HR Management business completed during the third quarter of 2010, resulted in a receipt of an additional $1 in cash. The sale of the remaining HR Management foreign operations are expected to close in the fourth quarter of 2010 and result in an additional $4 in cash received. Final settlement of working capital adjustments is expected to result in cash payments to NorthgateArinso of approximately $7 during the fourth quarter of 2010. In connection with the sale of the HR Management line of business, we reorganized our reportable segments into two segments; Customer Management, which provides agent-assisted services, self-service, and intelligent technology care solutions, and Information Management, which provides business support system (BSS) solutions. See Note 17 for information about these segments.

the prior year period. The decrease in revenue was largely driven by several of our clients own volume declines, volume shifts offshore and certain program completions. These declines were partially offset by increases in revenue from other clients. Customer Management operating income and operating margin were $73.1 and 5.3%, respectively, compared with $110.7 and 7.4% in the prior year period, reflecting lower revenues and restructuring charges of $15.3 in 2010 compared to $3.5 in 2009. Further detail on Customer Management results is presented in Results of Operations, below.

During the third quarter of 2010, we recognized equity income in the Cellular Partnerships of $11.9 compared to equity income of $10.2 in the prior year. Other income of $1.3 was due primarily to a gain on foreign exchange during the quarter. Interest expense improved to $4.1 from $7.4 in the prior year reflecting a lower level of debt outstanding throughout the third quarter of 2010. Our

As a result of the above, third quarter 2010 income from continuing operations and income from continuing operations per diluted share were $35.0 and $0.28, respectively, compared with $30.2 and $0.24, respectively, in the third quarter of 2009.

The results from discontinued operations include the operating results of the HR Management business that were discontinued as a result of the sale of the business. Discontinued operations include revenues of $0.2 and $174.6 in the third quarter of 2010 and 2009, respectively. The $6.2 loss from discontinued operations, net of tax, recognized during the third quarter of 2010 reflects completion of the sale of certain foreign subsidiaries, adjustments to purchase price for working capital and remaining operations of locations expected to be sold during the fourth quarter of 2010. The 2009 loss from discontinued operations, net of tax, included implementation-related, impairment and contract settlement charges of $224.6, including accelerated recognition of previously deferred costs of $148.5 upon contract termination and asset impairment charges of $76.1 primarily related to deferred costs. The 2009 charges were partially offset by accelerated recognition of $106.3 of previously received and deferred implementation revenue. As a result of the foregoing, the loss from discontinued operations, net of tax and the loss from discontinued operations per diluted share for the three months ended September 30, 2010 was $6.2 and $0.05, respectively, compared to $116.2 and $0.93, respectively, in the same period in the prior year.

Consolidated revenues for the first nine months of 2010 were $1,630.2 compared to $1,825.0 in the same period last year, reflecting revenue decreases from both Customer Management and Information Management. Operating income for the first nine months of 2010 was $64.6 compared to operating income of $107.0 in the prior year, due to revenue declines and restructuring charges of $17.6 during the first nine months of 2010 compared to $9.1 in the prior year same period.

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