IRVING, Texas, May 24 /PRNewswire-FirstCall/ -- Aegis Communications
Group, Inc. (OTC Bulletin Board: AGIS), a marketing services company that
enables clients to make customer contact efforts more profitable, reported its
results for the first quarter of 2004.
REVENUES
First quarter 2004 revenues were $29.6 million as compared to
$40.4 million for the same period last year, a decrease of $10.8 million, or
26.8%. The decline in revenues is primarily the result of an inbound contract
with a cable services provider that expired in the fourth quarter of 2003 and
was not renewed by the client as they made a decision to consolidate their
customer service into available in-house capacity. The impact on our revenues
accounted for approximately 60% of our total decrease compared to the prior
year first quarter. Additionally, one of our telecommunications clients (who
is one of our three largest clients) reduced transaction volumes versus the
three months ending March 31, 2003 and a client in the membership services
industry ramped down a campaign in the first quarter of 2004.
OPERATING LOSS
Operating loss for the first quarter of 2004 was $3.9 million as compared
to operating losses of $2.0 million in the prior year first quarter. The
increase in net loss for the period ended March 31, 2004 versus the first
quarter of 2003 is primarily due to the decline in revenues experienced during
the period.
"While not pleased with our first quarter results, which were negatively
impacted by a decline in revenues as a result of a client moving their
business in-house, Aegis took some very important steps in the first quarter,"
commented Scot Brunke, President and CFO of Aegis. "First, we continued our
high level service to our clients during a period of transition from one
management team to another. Secondly, we took steps to reduce our SG&A
expense to levels that better suit the size of our company. We have reduced
headcount, restructured many of our vendor contracts and have taken steps to
right size our capacity," continued Brunke. "Despite the loss of a
significant client and reduced volumes from two others, we expanded our
relationship with several clients. As we continue to develop relationships
and bring costs into line, we expect our operating results to improve over the
coming quarters."
NET LOSS
The Company incurred a net loss applicable to common shareholders of
approximately $5.9 million, or $0.07 per common share, for the quarter ended
March 31, 2004. During the prior year comparable quarter, the Company
incurred a net loss applicable to common shareholders of approximately
$4.9 million, or $0.09 per common share. The increase in net loss applicable
to common shareholders for the period ended March 31, 2004 versus the first
quarter of 2003 is due to the decline in revenues experienced during the
period, charges recorded in association with the restructuring of the
Company's management team and the increase in interest expense due to the
additional amortization of the discount on notes payable.
Revenue Mix. Together, inbound customer relationship management ("CRM")
and non-voice & other revenues represented 66.9% of our revenues in the first
quarter of 2004 versus 79.1% in the first quarter of 2003. Outbound CRM
revenues accounted for 33.1% of total revenues for the three months ended
March 31, 2004 as compared to 20.9% in the comparable prior year period. The
increase in outbound CRM revenues for the first quarter of 2004 is due to
additional volume for an existing client program. For the three months ended
March 31, 2004 and 2003, the mix of revenues was as follows:
Three months ended March 31,
2004 % 2003 %
Inbound CRM $16.9 57.0% $27.5 68.1%
Outbound CRM 9.8 33.1% 8.5 20.9%
Non-Voice & Other 2.9 9.9% 4.4 11.0%
Total revenues $29.6 100.0% $40.4 100.0%
Cost of Services. Cost of services may vary substantially with changes in
revenue. For the quarter ended March 31, 2004, cost of services decreased by
approximately $7.6 million, to $21.2 million versus the quarter ended
March 31, 2003. Cost of services as a percentage of revenues for the quarter
ended March 31, 2004 increased to 71.7%, from 71.2% during the comparable
prior year period. Costs of services fell in total over the three months
ended March 31, 2004, due to the reduction experienced in revenue for the
comparable period.
Selling, General and Administrative. Selling, general and administrative
expenses, which include certain payroll costs, employee benefits, rent expense
and maintenance charges, among other expenses, were reduced to $9.0 million in
the quarter ended March 31, 2004 versus $10.5 million the prior year quarter.
As a percentage of revenue, selling, general and administrative expenses for
the quarter ended March 31, 2004 were 30.5% as compared to 26.1% for the prior
year period. The reduction in selling, general and administrative expenses
over the three months ended March 31, 2004 is primarily attributable to the
elimination of overhead costs due to the reduction of headcount compared to
the period ending March 31, 2003 as well as improved management of our self-
insured workers compensation plan during the same period. The increase as a
percentage of revenue is primarily due to the decrease in revenue period over
period.
Non-cash Interest Expense. Non-cash interest expense increased to
$1.8 million in the quarter ended March 31, 2004, from $0.4 million in the
quarter ended March 31, 2003. Non-cash interest for the three months ended
March 31, 2004, represents interest expense incurred on the Deutsche Bank and
Essar notes and the $1.7 million in amortization of the discount on notes
payable. On both of the notes, the unpaid interest is added to the principal
of the balance of the notes quarterly. For the three months ended
March 31, 2003, non-cash interest expense represents interest expense incurred
on two subordinated notes. In accordance with the terms of
the November 5, 2003, agreement with Deutsche Bank and Essar, the Company was
required to repay or otherwise retire its obligations to various lenders from
the proceeds of this transaction (and, to the extent the subordinated debt was
not paid off, the holders of the subordinated debt discharged the debt and
released the Company from any further liability under their promissory notes).
Restructuring Charges. In March 2004, the Company approved a plan to
restructure the management team. The restructuring plan was designed to bring
the Company's infrastructure in-line with the current business environment.
Related to these actions, the Company recorded $686 in severance costs during
the first quarter of 2004.
Depreciation and Amortization. Depreciation and amortization expenses,
excluding acquisition goodwill amortization, decreased $0.5 million, in the
quarter ended March 31, 2004 as compared to the quarter ended March 31, 2003.
As a percentage of revenue, depreciation and amortization expenses were 8.5%
in the quarter ended March 31, 2004 versus 7.7% in the quarter ended
March 31, 2003, primarily due to the decrease in revenue. The reduction in
depreciation expense is due to the effects of reduced capital spending coupled
with more mature assets becoming fully depreciated.
Income Tax Provision. The Company has not provided an income tax benefit
to the operating losses incurred during the quarter ended March 31, 2004, as
such benefit would exceed the projected realizable deferred tax asset.
Cash and liquidity. Cash and cash equivalents (excluding restricted cash)
were $0.04 million at March 31, 2004 and $1.7 million at December 31, 2003.
Working capital totaled $1.9 million and $5.7 million at the end of the same
periods. The change in working capital is primarily attributable to the
decrease in accounts receivable and the decrease in restricted cash from
December 31, 2003 to March 31, 2004. On January 26, 2004, we entered into a
new credit agreement with Wells Fargo Foothill that will allow the company to
borrow up to $25.0 million, with a maturity date of January 26, 2007. The
Company was not in compliance with covenants under the new credit agreement
for the two-month period ended February 29, 2004. On March 30, 2004, the
Company entered into an amended agreement, waiving all defaults and revising
covenants. The maturity date of the amended agreement has remained unchanged.
Outstanding bank borrowings under the line of credit at March 31, 2004 were
$6.1 million.
The Company failed to meet covenants regarding earnings before interest,
taxes, depreciation and amortization that are common to the Loan Agreement and
the Amended and Restated Secured Promissory Notes, dated January 28, 2004,
held by Deutsche Bank and Essar in the principal amounts of $10.088 million
and $10.144 million, respectively. As such, it represented a default under
these agreements and additionally, a cross default under the Loan Agreement.
Additionally, while the Company made payments of $10.0 million of the required
$12.344 million due in 2004, a portion of the amounts coming due were note
paid as prescribed, thus resulting in a default under the Notes and the Loan
Agreement. On March 30, 2004, the Company executed amended agreements with
revised covenants and received waivers from the lenders for all defaults in
the Loan Agreement and Notes. In addition, the amended Notes included an
extension of the due date for the balance of initial installment payments of
$2,344 to January 3, 2005. Accordingly, these balances were reclassified to
long-term debt as of December 31, 2003, thus improving our working capital
position. The principal amounts of the amended Notes were increased to
include capitalized interest of $166 through March 30, 2004. The aggregate
amount of the amended Notes at March 30, 2004 is $18,398. The Company was not
in compliance with the amended EBITDA covenants common to the Loan Agreement
and Notes for the period ending April 30, 2004. The noteholders have agreed
in principal to a waiver for these defaults and we are currently in
negotiations to remedy the situation with Foothill.
Aegis Profile
Aegis Communications Group, Inc. (Aegis) is a marketing services company
that enables clients to make customer contact efforts more profitable. Aegis'
services are provided to a blue chip, multinational client portfolio through a
network of client service centers employing approximately 3,700 people and
utilizing approximately 4,600 production workstations. Further information
regarding Aegis and its services can be found on its website at
http://www.aegiscomgroup.com .
The following is a "safe harbor" statement under the Private Securities
Litigation Reform Act of 1995: Statements contained in this document that are
not based on historical facts are "forward-looking statements". Terms such as
"anticipates", "believes", "estimates", "expects", "plans", "predicts", "may",
"should", "will", the negative thereof and similar expressions are intended to
identify forward-looking statements. Such statements are by nature subject to
uncertainties and risks, including but not limited to: the Company's reliance
on certain major clients; unanticipated losses of or delays in implementation
of client programs; higher than anticipated implementation costs associated
with new client programs; the successful combination of revenue growth with
operating expense reduction to result in improved profitability and cash flow;
government regulation and tax policy; economic conditions; competition and
pricing; dependence on the Company's labor force; reliance on technology;
telephone and internet service dependence; and other operational, financial or
legal risks or uncertainties detailed in the Company's SEC filings from time
to time. Should one or more of these uncertainties or risks materialize,
actual results may differ materially from those described in the forward-
looking statements. The Company does not intend to update any of those
forward-looking statements.
(financial statements follow)
Aegis Communications Group, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except share and per share data)
Three months ended March 31,
2004 % 2003 %
Revenues $29,571 100.0% $40,403 100.0%
Operating costs:
Cost of services 21,198 71.7% 28,751 71.2%
Selling, general and
administrative expenses 9,025 30.5% 10,545 26.1%
Depreciation and
amortization 2,517 8.5% 3,095 7.7%
Restructuring charges 686 2.3% --- ---
Total operating expenses 33,426 113.0% 42,391 105.0%
Operating loss (3,855) -13.0% (1,988) -5.0%
Interest expense, net 241 0.8% 274 0.7%
Non-cash interest expense 1,761 6.0% 418 1.0%
Loss before income taxes (5,857) -19.8% (2,680) -6.7%
Income tax expense --- --- --- ---
Net loss (5,857) -19.8% (2,680) -6.7%
Preferred stock dividends --- --- 2,236 5.5%
Net loss applicable to
common shareholders $(5,857) -19.8% $(4,916) -12.2%
Basic and diluted loss per
common share $(0.07) $(0.09)
Weighted average shares of
common stock outstanding:
Basic 85,005 52,171
Diluted 85,005 52,171
Aegis Communications Group, Inc.
Selected Financial Data
(Dollars in thousands)
(unaudited)
March 31, December 31,
2004 2003
Assets
Cash and cash equivalents $43 $1,703
Accounts receivable, net 20,901 23,615
Total current assets 23,405 31,326
Property and equipment, net 16,479 18,297
Total assets 41,345 50,294
Liabilities, Redeemable Convertible Preferred
Stock and Shareholders' Deficit
Current portions of long-term obligations $2,964 $6,248
Accounts payable 5,485 4,427
Revolving line of credit 6,074 ---
Total current liabilities 27,717 25,625
Long-term obligations, net of
current portions 14,572 19,756
Total liabilities 42,289 45,381
Redeemable convertible preferred stock 31,362 31,362
Total shareholders' deficit 32,306 26,449
SOURCE Aegis Communications Group, Inc.
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Related links:
http://www.aegiscomgroup.com
CONTACT:
Information Line of Aegis Communications
Group, Inc., +1-800-332-0266
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