UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO
RULE 13a-16 OR 15d-16 OF THESECURITIES
EXCHANGE ACT OF 1934
For the month of March 2011
Commission
File Number 000-5149
CONTAX PARTICIPAÇÕES S.A.
(Exact name of Registrant as specified in its Charter)
Contax Holding Company
(Translation of Registrant's name in English)
Rua do Passeio, 56 – 16th floor
Rio de Janeiro, RJ
Federative Republic of Brazil
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.
Form 20-Fþ Form 40-Fo
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yeso Noþ
Contax Participações S.A. (Bovespa: CTAX3, CTAX4; OTC: CTXNY) announces its results for the fourth quarter (4Q10) and fiscal year 2010.
The financial information presented in this report was prepaired in accordance with the International Financial Reporting Standards (“IFRS”) and with accounting practices adopted in Brazil, which are predicted in the Brazilian corporate law and the pronouncements, orientations ans interpretations issued by the Accounting Pronouncements Committee (“CPC”) and approved by the Comissão de Valores Mobiliários (”CVM”), which are applicable to the Company’s operations.The data presented for 2009 was modified from previously reported figures to comply with IFRS and provide accurate comparisons with data for 2010, which are also disclosed in accordance with IFRS.
About Contax | 2 |
Highlights | 3 |
Key Figures | 4 |
Operating Performance | 5 |
Financial Performance | 6 |
Net Operating Revenue (NOR) | 7 |
Costs and Expenses | 9 |
EBITDA | 13 |
Depreciation | 16 |
Net Financial Result | 16 |
Net Income | 16 |
Net Cash | 17 |
Investments (CAPEX) | 18 |
Stock Performance | 19 |
Attachments | 21 |
1. Income Statement | 21 |
2. Balance Sheet | 23 |
3. Cash Flow | 24 |
4. EBITDA Reconciliation | 25 |
5. Net Cash Reconciliation | 25 |
Disclaimer | 26 |
Contax S.A. (“Contax”), a direct subsidiary of Contax Participações S.A., is one of the largest corporate service companies in Brazil and a leader in the contact center and debt collection industry, and has been expanding its portfolio of services to become the only Business Process Outsourcing (BPO) company with broad specialization in customer relationship management (CRM). By providing customized consulting services that differentiate it from competitors, Contax is an integral part of its clients’ ecosystem and delivery chain and helps them make the most of their business.
Today Contax's operations are concentrated in the segments of customer service, debt collection, telemarketing, retention, back-office, technology services and trade marketing. Contax has 82 clients and its business strategy prioritizes the development of long-term relationships with its clients, which are major companies in a variety of industries, such as telecommunications, finance, utilities and retailing, among others. In December 2010, the Company had86.4 thousand employees in contact centers located in9 Br azilian states and the Federal District.
The consolidated information of Contax Participações S.A., the results of which are disclosed in this earnings release, already includes, in addition to Contax, the results of Todo Soluções em Tecnologia S.A. (“Todo!”), Ability Comunicação Integrada Ltda. (“Ability”) and the Contax Sucursal Empresa Extranjera (“Contax Argentina”).
NET REVENUE GROWS 11% TO R$2,398 MILLION IN 2010
§Net Operating Revenue (NOR) totaledR$ 2,398 million in2010, for growth of11.0% on 2009, for additional net revenue in the year of R$ 237 million. In4Q10, Net Operating Revenue (NOR) totaledR$ 638 million, up9.2% from4Q09 and3.3% from3Q10.
§EBITDA wasR$ 297 millionin2010, reaching an EBITDA margin of12.4%. In4Q10,EBITDA amounted toR$ 82 million, with an EBITDA margin of12.9%.
§In December 2010, Contax received two additional installments from thelong-term financing line contracted in March this year from theBrazilian Development Bank (BNDES) andBanco do Nordeste do Brasil (BNB). The total amount received in December wasR$ 121 million, of which R$ 100 million came from the BNDES and R$ 21 million from BNB.
§Launching itsinternational expansion strategy, Contax set upoperations in Argentina in December 2010, after winning a customer service contract for one of Argentina's leading mobile telephone operators.
§Moving forward in its plan to expand its core business and accelerate the consolidation of its IT services in the market, on January 25, 2011, Contax announced aproposal to integrate its activities with Dedic GPTI, a subsidiary of Portugal Telecom. If approved, the transaction will be carried out through an incorporation of Dedic GPTI’s shares by Contax, with a capital increase at Contax and the delivery of the shares issued to the current shareholders of Ded ic GPTI.
§The management of Contax proposed the payment ofdividends ofR$ 100 million relative to net income in2010, following the allocations provided for by governing law, and which will be subject to approval by the Annual Shareholders’ Meeting. If approved, the amount to be distributed per common and preferred share will beR$ 1.68. This represents adividend yield of5.3% for both classes of shares, considering the share prices at the close of 2010.
Annual Data | 2010 vs. 2009 |
Key Figures | 2010 | 2009 | D% |
Net Revenues | R$Million | 2,398.0 | 2,161.0 | 11.0% |
EBITDA | R$Million | 297.1 | 339.3 | -12.4% |
EBITDA Margin | (%) | 12.4% | 15.7% | -3.3 p.ps. |
Net Income | R$Million | 108.5 | 131.7 | -17.6% |
Cash** | R$Million | 387.8 | 357.9 | 8.4% |
Debt* | R$Million | 387.1 | 218.6 | 77.1% |
Net Cash* | R$Million | 70.5 | 165.8 | -57.5% |
CAPEX | R$Million | 161.4 | 159.2 | 1.4% |
Workstations* | (units) | 38,680 | 34,820 | 11.1% |
Employees* | (units) | 86,357 | 78,200 | 10.4% |
| | | | |
* Position at end of period
** Considers only cash and cash equivalents under current assets
Quarterly Data | 4Q10 vs. 3Q10 | 4Q10 vs. 4Q09 |
Key Figures | 4Q10 | 3Q10 | 4Q09 | D% | D% |
Net Revenues | R$Million | 638.4 | 618.2 | 584.8 | 3.3% | 9.2% |
EBITDA | R$Million | 82.3 | 79.0 | 121.4 | 4.1% | -32.2% |
EBITDA Margin | (%) | 12.9% | 12.8% | 20.8% | 0.1 p.p. | -7.9 p.ps. |
Net Income | R$Million | 33.9 | 24.6 | 54.4 | 38.0% | -37.6% |
Cash** | R$Million | 387.8 | 306.5 | 357.9 | 26.5% | 8.4% |
Debt* | R$Million | 387.1 | 280.9 | 218.6 | 37.8% | 77.1% |
Net Cash* | R$Million | 70.5 | 89.7 | 165.8 | -21.4% | -57.5% |
CAPEX | R$Million | 54.7 | 51.5 | 49.2 | 6.3% | 11.2 % |
Workstations * | (units) | 38,680 | 36,789 | 34,820 | 5.1% | 11.1% |
Employees* | (units) | 86,357 | 84,551 | 78,200 | 2.1% | 10.4% |
* Position at end of period
** Considers only cash and cash equivalents under current assets
The year 2010 was marked by important developments in implementing the Company’s new strategic cycle, which was formulated and launched in 2009, and which has been positioning Contax as the only Business Process Outsourcing (BPO) company broadly specialized in Customer Relationship Management (CRM). This new and broader positioning seeks to maximize the value of the relationship between Contax’s clients and their final consumers, by integrating the multiple contact channels through which these relationships occur, a type of solution that has come to be known as "Customer Performance”.
In 2009, the first steps, in addition to the remote contact services via Contact Center, were taken to launch the operations of Todo!, which represents Contax’s structured entry into the IT services segment. In addition to providing full technological support to Contax's contact center and debt collection operations, Todo! is also a provider of complete solutions to the IT services market focused on the universe of CRM. In addition, Todo! has become the enabler of the design, implementation and operation of technological solutions provided as part of the newest BPO services offered by Contax.
Two new business fronts were established during the year, one increasing the diversification of the service offerings and the other expanding the geographic reach of the addressable market.
In September, it was announced the acquisition of Ability, aiming to complement Contax's service offering, which started providing its clients with on-site interaction services at the point of sale, a segment known as Trade Marketing, responsible for the sale and promotion of products and services to its clients.
In addition, in late 2010, Contax set up its branch office in Argentina, which effectively launched its international operations by winning the contract to provide customer service operations to one of that country's largest mobile phone operators, marking the initiation of its strategy to expand operations into Latin America.
The year 2010 was also marked by strong growth in Brazil's economy, with the latest estimates from the Central Bank pointing to GDP growth of 7.8% in relation to 2009. This environment of rapid growth helps to drive the strong growth in demand for the services offered by Contax, especially in the financial and retail segments, but also represents important challenges for the company's operations. This high growth rate directly impacts the labor market and consequently the unemployment rate, which ended December at the historical low of the data series (which began to be compiled by the IBGE in 2002) of 5.3%. This scenario has directly affected Contax’s operations, particularly in São Paulo, where the high supply of openings, especially in the retail and service sectors, has intensified the competition forqualified labor. This scenario impacted our operating margins in the period, due to the pressures generated in the personnel cost line.
Contax has been minimizing these impacts by adopting additional measures to increase the Company’s attractiveness for retaining, motivating and recruiting its operators. New channels for recruiting professionals were launched, not only to replace turnover and the higher absenteeism of the operations, but also to increase the Company’s capacity to meet the emerging demand in the market. Contax has also been working to further diversify in areas where its operations are installed, seeking regions with higher supplies of qualified labor that offer a more favorable labor market for employers, and migrating and implementing new services into these locations.
Annual Data | 2010 vs. 2009 |
R$ (Thousand) | 2010 | 2009 | D% |
Net Revenues | 2,397,996 | 2,161,019 | 11.0% |
Cost of Services Rendered | (1,914,363) | (1,661,378) | 15.2% |
Personnel | (1,535,701) | (1,315,520) | 16.7% |
Third-party | (268,413) | (241,304) | 11.2% |
Rent and Insurance | (93,062) | (91,981) | 1.2% |
Other | (17,187) | (12,573) | 36.7% |
SG&A | (162,045) | (148,678) | 9.0% |
Other Oper.Inc.&Exp., net | (24,447) | (11,643) | 110.0% |
EBITDA | 297,142 | 339,318 | -12.4% |
Deprec. &Amort. | (122,109) | (116,411) | 4.9% |
EBIT | 175,033 | 222,907 | -21.5% |
Financ. Res., net | 2,532 | (15,391) | n.m. |
Other Inc.& Exp., net | 7 | (1,795) | n.m. |
Income before inc.tax | 177,571 | 205,721 | -13.7% |
Inc.tax & Social Contr. | (68,518) | (74,664) | -8.2% |
Minority Interest | (555) | 634 | n.m. |
Net Income | 108,498 | 131,691 | -17.6% |
n.m. not measured
Quarterly Data | 4Q10 vs. 3Q10 | 4Q10 vs. 4Q09 |
R$ (Thousand) | 4Q10 | 3Q10 | 4Q09 | D% | D% |
Net Revenues | 638,436 | 618,174 | 584,799 | 3.3% | 9.2% |
Cost of Services Rendered | (498,620) | (492,376) | (422,230) | 1.3% | 18.1% |
Personnel | (403,170) | (380,448) | (334,705) | 6.0% | 20.5% |
Third-party | (66,887) | (84,392) | (62,861) | -20.7% | 6.4% |
Rent and Insurance | (24,173) | (22,751) | (22,127) | 6.3% | 9.2% |
Other | (4,389) | (4,785) | (2,537) | -8.3% | 73.0% |
SG&A | (52,111) | (40,213) | (37,412) | 29.6% | 39.3% |
Other Oper. Inc. & Exp., net | (5,430) | (6,548) | (3,794) | -17.1% | 43.0% |
EBITDA | 82,276 | 79,037 | 121,363 | 4.1% | -32.2% |
Deprec. & Amort. | (31,578) | (31,335) | (31,224) | 0.8% | 1.1% |
EBIT | 50,698 | 47,702 | 90,139 | 6.3% | -43.8% |
Financ. Res., net | 2,476 | (447) | (3,370) | n.m. | n.m. |
Other Inc.& Exp., net | (33) | 6 | (690) | n.m. | n.m. |
Income Before Inc. Tax | 53,141 | 47,261 | 86,079 | 12.4% | -38.3% |
Inc.tax & Social Contr. | (19,030) | (22,444) | (31,718) | -15.2% | -40.0% |
Minority Interest | (190) | (227) | 47 | -16.0% | n.m. |
Net Income | 33,920 | 24,590 | 54,407 | 37.9% | -37.6% |
n.m. not measured
Net Operating Revenue (NOR)
Net Operating Revenue (R$ million)
NOR in2010 wasR$ 2,398.0 million, for growth of11.0% in relation to2009. In absolute terms, revenue increasedR$ 237.0 million. The main factors contributing to this growth were: i) the highervolume of operations with existing clients (R$ 145.0 million); ii) the contractual price adjustments (R$ 58.9 million), which partially reflected the higher costs; iii) the revenue from the Trade Marketing segment (Ability) of R$ 33.5 million; iv) new deals in our core business in various segments such as government, healthcare, financial and services (R$ 18.7 million). These effects were partially offset by the nonrecurrence of the one-off revenue registered in 2009 of R$ 19.1 million.
NOR in4Q10 wasR$ 638.4 million, for growth of9.2% in relation to4Q09. The main factors contributing to this growth were: i) the higher volume of operations with existing clients (R$ 29.0 million); ii) the revenue from the Trade Marketing segment (Ability) of R$ 26.5 million; iii) new business in various segments such as government, healthcare, financial and services (R$ 10.1 million); iv) the contractual price adjustments (R$ 9.0 million), which partially reflected the higher costs. These effects were partially offset by the nonrecurrence of the one-off revenue and retroactive price adjustments registered in 4Q09 of R$ 20.9 million.
In relation to3Q10, NOR rose byR$ 20.3 million, or3.3%, basically reflecting the revenue increase in the Trade Marketing (Ability) segment of R$ 19.5 million and the higher volume of operations in the core business with new and existing clients of R$ 6.4 million, which were partially offset by the one-off revenue reversal of R$ 5 .6 million related to the conclusion of a contractual negotiation for price adjustment that had been provisioned in the previous period in an amount above that actually effected.
As was the case in the previous two quarters and despite the stronger demand from its clients, in 4Q10, Contax's growth was partially limited by the lack of infrastructure in certain locations. The expansion of new sites in Recife and Salvador, which will allow the Company to expand its operations, are being delivered between the end of 2010 and beginning of 2011.
From a product standpoint,Customer Service continues to account for the bulk of net revenue, representing63% of total revenue in 2010, with this share remaining practically stable in relation to 2009.Telemarketing / Retention and Debt Collection operations accounted for18% and13% of NOR, respectively. The Telemarketing / Retention operations increased its share by 2 p.p. from the previous year, partially offsetting the relative decline in Debt Collection operations of 3 p.p. on the prior year.
NOR by Service Type (R$ Million and Share in %)  |
Costs and Expenses
Annual Data | 2010 vs. 2009 |
Costs and Expenses (R$ Thousand) | 2010 | 2009 | D% |
Net Operating Revenue (NOR) | 2,397,996 | 2,161,019 | 11.0% |
Total Costs and Expenses | (2,100,855) | (1,821,698) | 15.3% |
% of NOR | 87.6% | 84.3% | 3.3 p.ps. |
Cost of Services Rendered | (1,914,363) | (1,661,378) | 15.2% |
% of NOR | 79.8% | 76.9% | 2.9 p.ps. |
Personnel | (1,535,701) | (1,315,520) | 16.7% |
Third-party | (268,413) | (241,304) | 11.2% |
Rent and Insurance | (93,062) | (91,981) | 1.2% |
Others | (17,187) | (12,573) | 36.7% |
SG&A | (162,045) | (148,678) | 9.0% |
% of NOR | 6.8% | 6.9% | -0.1 p.p. |
Other Oper. Inc. & Exp., net | (24,447) | (11,643) | 110.0% |
% of NOR | 1.0% | 0.5% | 0.5 p.p. |
Quarterly Data | 4Q10 vs. 3Q10 | 4Q10 vs. 4Q09 |
Costs and Expenses (R$ Thousand) | 4Q10 | 3Q10 | 4Q09 | D% | D% |
Net Operating Revenue (NOR) | 638,436 | 618,174 | 584,799 | 3.3% | 9.2% |
Total Costs and Expenses | (556,157) | (539,137) | (463,436) | 3.2% | 20.0% |
% of NOR | 87.1% | 87.2% | 79.2% | -0.1 p.p. | 7.9 p.ps. |
Cost of Services Rendered | (498,620) | (492,376) | (422,230) | 1.3% | 18.1 % |
% of NOR | 78.1% | 79.6% | 72.2% | -1.5 p.p. | 5.9 p.ps. |
Personnel | (403,170) | (380,448) | (334,705) | 6.0% | 20.5% |
Third-party | (66,887) | (84,392) | (62,861) | -20.7% | 6.4% |
Rent and Insurance | (24,173) | (22,751) | (22,127) | 6.3% | 9.2% |
Others | (4,389) | (4,785) | (2,537) | -8.3% | 73.0% |
SG&A | (52,111) | (40,213) | (37,412) | 29.6% | 39.3% |
% of NOR | 8.2% | 6.5% | 6.4% | 1.7 p.p. | 1.8 p.p. |
Other Oper. Inc. & Exp., net | (5,430) | (6,548) | (3,794) | -17.1% | 43.1% |
% of NOR | 0.9% | 1.1% | 0.6% | -0.2 p.p. | 0.3 p.p. |
In2010, Contax'sCosts and Expenses came toR$ 2,100.9 million, rising by15.3% on the previous year, which basically reflected the growth in the Co mpany's operating volumes, since the vast majority of costs and expenses originate from the service operations and accompany the variation in business volume. As a percentage of NOR, Costs and Expenses increased by 3.3 p.p., from 84.3% of NOR in 2009 to 87.6% in 2010. In general, this increase was mainly related to higher personnel costs due to higher personnel turnover and absenteeism, especially in São Paulo, in view of the significantly stronger job market, and also due to adjustments in wages, charges and benefits that were not fully passed through to prices.
On a quarterly basis, Contax'sCosts and Expenses in4Q10 totaledR$ 556.2 million, up20.0% from4Q09, reflecting the growth in the company’s operating volume and the increases in certain cost lines due to the factors explained below. As was the case in the annual comparison, as a percentage of NOR, costs and expenses increased by 7.9 p.p. in 4Q10 from 4Q09, going from 79.2% in 4Q09 to 87.1% in 4Q10. This increase was mainly due to the nonrecurrence of one-off increases and revenue that positively impacted 4Q09, which decreased the relative percentage of costs and expenses in that quarter, and, as was the case of the annual comparison, due to higher personnel cost caused by the stronger job market and by the increases in wages, charges and benefits not fully passed through to clients.
In the comparison of4Q10 with3Q10,Costs and Expenses increased by3.2%, reflecting the higher volume of services rendered. As a percentage of NOR, 4Q10 remained practically in line with 3Q10.
A more detailed breakdown of Contax’s Costs and Expenses follows below.
Cost of Services Rendered
2010 versus 2009
In2010, Cost of Services Rendered totaledR$ 1,914.4 million,15.2% higher than in2009. As a percentage of NOR, this item increased by 2.9 p.p. to 79.8% in 2010, from 76.9% in 2009.
· Personnel: increase ofR$ 220.2 million, or16.7%, basically reflecting: i) the increases in salaries, benefits and charges (R$ 95.0 million); ii) the expansion in the workforce due to the higher volume of services rendered (R$ 80.8 million); iii) the higher costs with training, rescissions and new hires to launch the new operations and due to the higher turnover and absenteeism in certain operations (R$ 28.0 million); iv) the personnel costs in the Trade Marketing (Ability) segment that were incorporated as of September (R$ 16.4 million).
· Third-party Services: increase ofR$ 27.1 million, or11.2%, basically explained by the higher costs with infrastructure maintenance services and facilities (electricity, security, cleaning and building maintenance) and with communication, sponsorship and donations.
· Rent and Insurance:increase ofR$ 1.1 million, or1.2%, reflecting the leasing of new sites and adjustments to existing contracts, which were partially offset by the return of infrastructu re rented from third parties.
4Q10 versus 4Q09
In 4Q10, Cost of Services Rendered wasR$ 498.6 million, up R$ 76.4 million, or18.1%, in relation to 4Q09. As a percentage of NOR, this item increased by 5.9 p.p., from 72.2% in 4Q09 to 78.1% in 4Q10.
· Personnel: increase ofR$ 68.5 million, or20.5%, basically reflecting: i) the increases in salaries, benefits and charges (R$ 21.0 million); ii) the expansion in the workforce due to the h igher volume of services rendered (R$ 20.1 million); iii) the higher costs with training, rescissions and new hires to launch the new operations and due to the higher turnover and absenteeism in certain operations (R$ 14.6 million); iv) the incorporation of the personnel costs from the Trade Marketing (Ability) segment of R$ 12.8 million.
· Third-party Services: increase ofR$ 4.0 million, or6.4%, mainly explained by the higher costs with infrastructure maintenance services and facilities (electricity, security, cleaning and building maintenance) and with communication, sponsorship and donations.
· Rent and Insurance:increase ofR$ 2.0 million, or9.2%, reflecting the leasing of new sites and the adjustments to existing contacts.
4Q10 versus 3Q10
In4Q10, Cost of Services Rendered increased byR$ 6.2 million, or1.3%, from3Q10. As a percentage of NOR, this item declined by 1.5 p.p., from 79.6% in 3Q10 to 78.1% in 4Q10.
· Personnel: increase ofR$ 22.7 million, or6.0%, basically reflecting: i) the expansion in the workforce due to the higher volume of services rendered (R$ 9.5 million); ii) the incorporatio n of the personnel costs from the Trade Marketing (Ability) segment (R$ 9.2 million); and iii) the higher costs with training, rescissions and new hires to launch the new operations and due to the higher turnover and absenteeism in certain operations (R$ 4.0 million).
· Third-party Services: decrease ofR$ 17.5 million, or20.7%, mainly due to lower costs with communications, sponsorships and donations.
· Rent and Insurance: increase ofR$ 1.4 million, or6.3%, mainly reflecting certain contractual increases.
Selling, General and Administrative Expenses
2010 versus 2009
SG&A Expenses accompanied the growth in operating volumes, closing2010 atR$ 162.0 million, for growth of9.0% from2009. This variation is basically explained by the expansion in the Company's management team (R$ 9.7 million) and the increase related to infrastructure and facility maintenance services (R$ 3.5 million) resulting from the growth in the operational support area of the core business and the incorporation of support expenses from the new businesses (Trade Marketing and Argentina).
4Q10 versus 4Q09 and 3Q10
SG&A Expenses in4Q10 totaledR$ 52.1 million, representing increases of39.3% and29.6% in relation to4Q09 and3Q10, respectively. The higher expenses were driven primarily by the incorporation of expenses related to support for the new businesses (Trade Marketing and Argentina) involving personnel, infrastructure and facilities, the increase in marketing expenses with advertising and corporate events, and specialized business support services.
Other Operating Revenue and Expenses
In 2010, Other Operating Revenue and Expenses totaledR$ 24.4 million, for an increase ofR$ 12.8 million from2009. This increase basically reflects the higher amount provisioned for labor contingencies due to the following factors: i) nonrecurring of the adjustments to credits in 2009 involving provisioned amounts that had been provisioned above the historical average of the effective losses; ii) the higher number of lawsuits as a result of the larger workforce; iii) the higher average amount provisioned for certain types of lawsuits.
In 4Q10, Other Operating Revenue and Expenses totaledR$ 5.4 million, for growth ofR$ 1.6 million from4Q09, basically explained by the higher number of lawsuits as a result of the larger workforce and the higher average amount provision ed for certain types of lawsuits. In accordance with3Q10,Other Operating Revenue and Expenses decreasedR$ 1.1 million, or17.1%, mainly due to the reduction in the average amounts provisioned in the period, reflecting the better management of labor litigation, either through the elimination of causes for future litigation or due to the successful outcome of existing lawsuits.
EBITDA[1]
In2010,EBITDA totaledR$ 297.1 million, a decrease of12.4% from2009.EBITDA margin in the period was12.4%, down 3.3 p.p. from 2009.
EBITDA (R$ Million) and Margin EBITDA (%)
[1]EBITDA is net income before tax, net financial expenses, expenses with depreciation and amortization and non-operating income and expenses. EBITDA is not recognized under IRFS, does not represent cash flow in the periods presented, should not be considered an alternative to net income and is not an indicator of performance. EBITDA is presented and used by Contax to measure its own performance. Contax believes that certain investors and financial analysts use EBITDA as an indicator of its operating performance.
In2010, the Company obtained significant gains in terms of productivity of its operations, which resulted in an improved performance of its operators through the optimization of its systems and processes achieved by means of improvements to its operational model. Despite this important improvement, EBITDA in general was adversely affected by the difficulties the Company faced because of the upturn in the economy and job market, especially in some locations whose economic activity is stronger, which is the case of the city of São Paulo. In addition to the increase in personnel costs caused by the higher turnover and absenteeism, given the greater difficulty contracting and retaining operato rs in these regions, part of the increase in wages, charges and benefits that was granted this year was not passed through to revenue in the contractual adjustments with clients.
In4Q10,EBITDA wasR$ 82.3 million, decreasing32.2% from4Q09 and growing by4.1% from3Q10.EBITDA margin in the period was12.9%, contracting by 7.9 p.p. from 4Q09, and in line with 3Q10.
The variations in EBITDA margin are explained in more detail below.[2]
The main factors responsible for the 3.3 p.p. decrease in EBITDA margin in the year in relation to 2009 were:
· Loss of 0.7 p.p. due to the lack of the nonrecurring revenue that positively impacted 2009;
*Net Adjustments: the net effect on EBITDA margin of the contractual price increases and the increases in direct costs (salaries, etc.).
· Gain of 0.5 p.p. from the higher productivity of the operations, as a result of an improved performance of its operators through the optimization of its systems and processes achieved by means of improvements to its operational model;
· Loss of 2.0 p.p. from the increase in personnel costs, mainly resulting from the higher staff turnover and absenteeism in locations with stronger economic activity;
· Loss of 1.3 p.p. from the increase in salaries and benefits, which was partially offset by the increases in contract prices implemented over the last 12 months;
· Gain of 0.2 p.p. from other costs.
In the comparison of 4Q10 with 4Q09, EBITDA margin narrowed from 20.8% to 12.9%. The main factors that explain this margin compression of 7.9 p.p. are:[
· Loss of 4.0 p.p. due to the lack of nonrecurring revenue that had a positive impact in 4Q09;
· Gain of 1.0 p.p. from the higher productivity of the operations, as a result of an improved performance of its operators through the optimization of its systems and processes achieved by means of improvements to its operational model;
· Loss of 3.2 p.p. from the increase in personnel costs, mainly resulting from the higher staff turnover and absenteeism in locations with stronger economic activity;
· Loss of 1.8 p.p. from the increase in salaries and benefits, which was partially offset by the increases in contract prices implemented over the last 12 months;
· Gain of 0.1 p.p. from other costs.
*Net Adjustments: the net effect on EBITDA margin of the contractual price increases and the increases in direct costs (salaries, etc.).
Depreciation
Depreciation came toR$ 122.1 million in2010,R$ 5.7 million, or4.9%, higher than in2009, reflecting the investments made in 2009 and 2010 to support the expansion of the business. In4Q10, depreciation wasR$ 31.6 million, upR$ 0.4 million, or1.1%, on4Q09, andR$ 0.2 million, or0.8%,higher than in 3Q10, reflecting investments made in the last few months to support the expansion of the business.
Net Financial Result
TheNet Financial Result was financial income ofR$ 2.5 million in2010, versus a financial expense ofR$ 15.4 million in2009. TheR$ 17.9 million increase mainly reflects the higher interest earned on financial investments, given the higher volume of these investments, the lower interest on leasing operations due to the amortization of leasing contracts, and the retroactive one-off credit adjustment related to the monetary correction of deposits in court.
In4Q10, theNet Financial Result was positiveR$ 2.5 million, upR$ 5.8 million from4Q09, basically reflecting the higher interest on financial investments due to the higher volume and the retroactive one-off credit adjustments related to the monetary correction of deposits in court.
In the analysis of4Q10 versus3Q10, theNet Financial Result wasR$ 2.9 million higher, basically reflecting the retroactive one-off credit adjustments related to the monetary correction of deposits in court.
Net Income
In2010, Contax postedNet Income ofR$ 108.5 million, for a decrease ofR$ 23.2 million, or17.6%, from2009. This contraction is basically explained by the R$ 42.2 million reduction in EBITDA detailed earlier and the R$ 5.7 million increase in Depreciation, which were partially offset by the R$ 17.9 million improvement in the Financial Result and the R$ 6.1 million decrease in Income Tax and Social Contribution Tax.
In4Q10,Net Income wasR$ 33.9 million, downR$ 20.5 million from4Q09. The contraction is basically explained by the R$ 39.1 million decrease in EBITDA detailed above, which was partially offset by the R$ 12.7 million decrease in Income and Social Contribution taxes and the R$ 5.8 million improvement in the Net Financial Result.
In comparison with3Q10,Net Income increased byR$ 9.3 million, or37.9%.This amount reflects the R$ 3.2 million increase in EBITDA detailed above, the R$ 2.9 million improvement in the Financial Result and the R$ 3.4 million reduction in Income and Social Contribution taxes.
Net Income (R$ Million)  |
Net Cash2[4]
Cash and cash equivalents ended2010 atR$ 457.7 million, for an increase ofR$ 73.2 million, or19.0%, from the position in December2009. This increase is mainly explained by the flows from financing activities, with net inflow of R$ 178.7 million related to the disbursement of the loans contracted with the BNDES and BNB, and by the operating cash flow of R$ 166.3 million, which were partially offset by the use of cash in the investment program of R$ 183.3 million and by the payment of R$ 89.5 million in dividends.
In comparison with3Q10, cash and cash equivalents increased byR$ 87.1 million, or23.5%. The increase was mainly explained by the flows from financing activities, with net inflow of R$ 112.8 million, and by the operating cash flow of R$ 30.7 million, which were partially offset by the use of cash in the investment program of R$ 5 6.4 million.
[4]2Net Cash is calculated by substracting from cash and financial investmetns the balances of "loans and financing" and "leasing”. Net Cash is not recognized under IFRS, does not represent cash flow in the periods presented, should not be considered an alternative to cash and cash equivalents and is not an indicator of performance. Net Cash is presented and used by Contax to measure its own performance. Contax believes that certain investors and financial analysts use Net Cash as an indicator of its operating and financial performance.
Contax's gross debt stood atR$ 387.1 million in December2010, for an increase ofR$ 168.5 million, or77.1%, from 2009, basically reflecting the disbur sement of the loans contracted with the BNDES and BNB, which was partially offset by the amortization of installments of loans contracted previously and of leasing agreements. In comparison with3Q10, gross debt increased byR$ 106.3 million, mainly due to the receipt of disbursements from the loans contracted with the BNDES and BNB, which was partially offset by the amortization of installments of loans contracted previously and of leasing agreements.
Net Cash ended December2010 atR$ 70.5 million, declining byR$ 95.3 million, or57.5%, from the position at the end of2009, due to the same factors mentioned above.
Investments (CAPEX)
In2010, Contax's investments totaledR$ 161.4 million, practically in line with the amount invested the previous year. The investments were mainly directed to support the expansion of the business, especially for the sites located in the states of Pernambuco, Minas Gerais and Bahia, which also began to house certain important operations that migrated from sites located in other regions, especially from São Paulo. Contax also made important investments in technology, acquiring new systems, dialers and recorders t hat will support improvements in operational productivity.
In4Q10, Contax’s investments totaledR$ 54.7 million. Of the total invested in the quarter, 69.5% was allocated to expanding the operations, especially for expanding the sites in the states of Pernambuco, Minas Gerais and Bahia.
Investments | 2010 vs. 2009 | 4Q10 vs. 3Q10 | 4Q10 vs. 4Q09 |
R$ (Thousand) | 2010 | 2009 | 4Q10 | 3Q10 | 4Q09 | D% | D% | D% |
Growth Revenue | 122,381 | 146,903 | 38,052 | 42,549 | 45,287 | -16.7% | -10.6% | -16.0% |
Reinvestments | 34,686 | 8,958 | 15,797 | 7,157 | 3,097 | 287.2% | 120.7% | 410.0% |
Others | 4,309 | 3,308 | 898 | 1,781 | 846 | 30.3% | -49.5% | 6.2% |
Total Investment | 161,376 | 159,169 | 54,747 | 51,486 | 49,230 | 1.4% | 6.3% | 11.2% |
The first six months of 2010 were marked by the worsening of the economic crisis in countries in the Euro Zone, reflecting more specifically the confidence crisis regarding the solvency of governments and financial systems in the so-called PIIGS, which is an acronym for Portugal, Ireland, Italy, Greece and Spain, which were the countries experiencing more delicate financial situations. This scenario influenced major world stock markets, which ended the six-month period with sharp losses, among them the São Paulo Stock Market (“BM&FBovespa”), whose benchmark IBovespa Index ended the period with a cumulative loss of 11%.
The second-half of the year was marked by improving expectations in world markets, with the perception that the governments of more developed economies would work together to maintain monetary and fiscal stimuli for a longer period of time. Also helping to improve expectations were the positive results reported by companies and the application of stress testing at European banks, which indicated that these balances were stronger than originally expected.
In the Brazilian market, uncertainties regarding the presidential elections and the mega capitalization carried out by Petrobras prevented the IBovespa Index from performing better, effectively limiting the recovery in the index, which registered a gain of only 1% in the whole of the year.
On the other hand, with the growth in the Brazilian economy registered in 2010 and the better prospects for the economy in the coming years, certain companies, especially those with higher exposure to the domestic market, recorded significant gains in their stock prices.
The index composed of small-cap stocks on the BM&FBovespa reflected this trend, registering a cumulative gain of 22.7% in the year.
Contax shares also enjoyed the benefits of the better domestic scenario, ending the year with a gain of 19.1% for the common stock and 28.0% for the preferred stock. The ADRs, which were additionaly influenced by the stronger Brazilian real, posted a gain of 35.2% in the same period.
Despite the fluctuations in world stock markets, the Brazilian market continues to recognize the quality of Contax’s management and services, its promising outlook for growth in its core business and its new strategic growth vectors.
Quarterly Data ¹ | 4Q10 vs. 3Q10 | 4Q10 vs. 4Q09 |
Share Performance | 4Q10 | 3Q10 | 4Q09 | D% | D% |
Number of Shares ('000) | 59,771 | 59,771 | 59,771 | - | - |
Market Cap (R$ Million) | 1,912 | 1,761 | 1,537 | 8.6% | 24.4% |
Price* | | | | | |
CTAX3 (R$) | 32.00 | 32.50 | 26.87 | -1.5% | 19.1% |
CTAX4 (R$) | 31.99 | 27.55 | 25.00 | 16.1% | 28.0% |
CTXNY (US$) | 3.65 | 3.14 | 2.70 | 16.2% | 35.2% |
Small Cap Index** | 1,440 | 1,341 | 1,173 | 7.3% | 22.7% |
Ibovespa | 69,305 | 69,430 | 68,588 | -0.2% | 1.0% |
Dow Jones | 11,578 | 10,788 | 10,428 | 7.3% | 11.0% |
Avg. Daily Vol. of Shares | | | | | |
CTAX3 | 19,153 | 18,570 | 7,047 | 3.1% | 171.8% |
CTAX4 | 86,511 | 94,924 | 153,733 | -8.9% | -43.7% |
CTXNY | 9,347 | 3,744 | 27,295 | 149.7% | -65.8% |
Avg. Daily Financial Vol. ('000) | | | | | |
CTAX3 (R$) | 596,892 | 574,271 | 152,455 | 3.9% | 291.5% |
CTAX4 (R$) | 2,565,568 | 2,844,169 | 2,935,947 | -9.8% | -12.6% |
CTXNY (US$) | 32,657 | 10,996 | 61,142 | 197.0% | -46.6% |
¹ Amounts adjusted to consider the stock grouping and split on January 15, 2010.
* End of quarter | ** Small Cap Index of the BM&FBovespa | Source: Bloomberg
CTAX3 X CTAX4 X SMLL* X IBOV** 
|
* BM&FBovespa’s Small Cap Index
** Bovespa Index
1) Consolidated Income Statement for the Period
Quarterly Data | 4Q10 vs. 3Q10 | 4Q10 vs. 4Q09 |
(R$ Thousand) | 4Q10 | 3Q10 | 4Q09 | D% | D% |
Sales and Services Revenues | 690,356 | 667,027 | 631,560 | 3.5% | 9.3% |
Deduction from Gross Revenues | (51,919) | (48,853) | (46,761) | 6.3% | 11.0% |
Net Revenues | 638,436 | 618,174 | 584,799 | 3.3% | 9.2% |
Cost of Goods Sold (COGS) | (527,666) | (521,243) | (448,304) | 1.2% | 17.7% |
Gross Profit | 110,770 | 96,931 | 136,495 | 14.3% | -18.8% |
Operating Revenue (Expenses) | (57,629) | (49,670) | (50,416) | 16.0% | 14.3% |
Selling Expenses | (7,925) | (6,720) | (6,565) | 17.9% | 20.7% |
G&A Expenses | (46,717) | (35,962) | (35,996) | 29.9% | 29.8% |
Financial Results | 2,476 | (447) | (3,370) | n.m. | n.m. |
Financial Revenues | 11,238 | 7,979 | 6,067 | 40.8% | 85.2% |
Financial Expenses | (8,761) | (8,426) | (9,437) | 4.0% | -7.2% |
Other Operating Revenues | 5,876 | 6,895 | 6,994 | -14.8% | -16.0% |
Other Operating Expenses | (11,340) | (13,436) | (11,479) | -15.6% | -1.2% |
Income Before Taxes | 53,141 | 47,261 | 86,078 | 12.4% | -38.3% |
Income tax and Social Contribution Provision | (18,788) | (23,098) | (30,438) | -18.7% | -38.3% |
Deferred Income Taxes | (242) | 654 | (1,281) | n.m. | n.m. |
Minority Interest | (190) | (227) | 47 | -16.0% | n.m. |
Net Income (loss) | 33,920 | 24,590 | 54,407 | 37.9% | -37.7% |
Number of Shares Excluding Treasury (in '000) * | 59,369 | 59,319 | 59,094 | 0.1% | 0.5% |
EPS (R$) | 0.57 | 0.41 | 0.92 | 37.8% | -37.9% |
* To improve comparability with 4Q10, the number of shares in 4Q09 was adjusted to reflect the stock grouping and split carried out on January 15, 2010.
n.m. not measured
Annual Data | 2010 vs. 2009 |
(R$ Thousand) | 2010 | 2009 | D% |
Sales and Services Revenues | 2,588,367 | 2,335,252 | 10.8% |
Deduction from Gross Revenues | (190,370) | (174,233) | 9.3% |
Net Revenues | 2,397,996 | 2,161,019 | 11.0% |
Cost of Goods Sold (COGS) | (2,026,392) | (1,760,164) | 15.1% |
Gross Profit | 371,604 | 400,855 | -7.3% |
Operating Revenue (Expenses) | (194,033) | (195,134) | -0.6% |
Selling Expenses | (26,976) | (27,709) | -2.6% |
G&A Expenses | (145,149) | (138,594) | 4.7% |
Financial Results | 2,532 | (15,391) | n.m. |
Financial Revenues | 33,213 | 24,531 | 35.4% |
Financial Expenses | (30,681) | (39,922) | -23.1% |
Other Operating Revenues | 18,705 | 15,332 | 22.0% |
Other Operating Expenses | (43,145) | (28,772) | 50.0% |
Income Before Taxes | 177,571 | 205,721 | -13.7% |
Income tax and Social Contribution Provision | (70,708) | (70,998) | -0.4% |
Deferred Income Taxes | 2,190 | (3,666) | n.m. |
Minority Interest | (555) | 634 | n.m. |
Net Income (loss) | 108,498 | 131,691 | -17.6% |
Number of Shares Excluding Treasury (in '000) * | 59,369 | 59,094 | 0.5% |
EPS (R$) | 1.83 | 2.23 | -18.0% |
* To improve comparability with 2010, the number of shares in 2009 was adjusted to reflect the stock grouping and split carried out on January 15, 2010.
n.m. not measured
2) Consolidated Balance Sheet
Balance Sheet (R$ Thousand) |
Assets | 12/31/2010 | 09/30/10 | 12/31/09 |
Total Assets | 1,378,357 | 1,290,855 | 1,071,673 |
Current Assets | 602,073 | 556,018 | 508,662 |
Cash and equivalents | 387,803 | 306,522 | 357,853 |
Credits (Clients) | 176,302 | 173,004 | 128,486 |
Deferred and Recoverable Taxes | 7,133 | 47,448 | 3,673 |
Prepaid Expenses and Others | 30,835 | 29,044 | 18,650 |
Non-current Assets | 776,484 | 734,837 | 563,011 |
Long-term Assets | 252,457 | 209,706 | 130,092 |
Judicial deposits | 93,865 | 81,823 | 53,382 |
Cash Investments | 69,869 | 64,075 | 26,590 |
Deferred and Recoverable Taxes | 74,652 | 48,837 | 37,351 |
Credits Receivable | 9,485 | 10,576 | 11,425 |
Restricted Cash | 2,013 | 2,006 | - |
Other assets | 2,573 | 2,389 | 1,344 |
Fixed Assets | 524,027 | 525,131 | 432,919 |
Investments | 49,081 | 74,365 | - |
Plant, property and equipment | 405,873 | 377,849 | 352,473 |
Intangible Assets | 69,073 | 72,917 | 80,446 |
Liabilities | 12/31/2010 | 09/30/10 | 12/31/09 |
Total Liabilities | 1,378,557 | 1,290,855 | 1,071,673 |
Current Liabilities | 504,476 | 528,028 | 453,883 |
Short-term loans & financing | 69,150 | 61,359 | 65,188 |
Suppliers | 83,160 | 69,933 | 77,033 |
Wages and benefits | 230,569 | 272,596 | 197,818 |
Taxes payable | 43,093 | 85,906 | 33,477 |
Dividends payable | 28,959 | 3,192 | 32,787 |
Others | 49,545 | 35,042 | 47,580 |
Long-term Liabilities | 453,110 | 352,761 | 214,285 |
Long-term loans & financing | 317,994 | 219,523 | 153,420 |
Provisions | 88,266 | 85,594 | 59,921 |
Others | 46,850 | 47,644 | 944 |
Minority Interest | 2,000 | 1,810 | 1,445 |
Shareholders' Equity | 418,971 | 408,256 | 402,060 |
Capital Stock | 223,873 | 223,873 | 223,873 |
Capital reserves | 14,731 | 9,311 | 19,639 |
Revenue reserves | 118,329 | 109,831 | 109,831 |
Accrued Income | 62,038 | 65,241 | 48,717 |
3) Accrued and Consolidated Cash Flow
Cash Flow (R$ Thousands) | 12/31/2010 | 12/31/2009 |
Net Cash from Operating Activities | 220,404 | 278,786 |
Net Cash Flow Generated in Operating Activities | 269,942 | 293,838 |
Net Income | 108,498 | 131,691 |
Depreciation and Amortization | 122,109 | 116,411 |
Accrued Interest Expenses | 21,242 | 31,015 |
Monetary Variation (Active) Passive, net | (3,868) | (1,890) |
Contingencies and Other Provisions | 20,913 | 1,874 |
Instrument Sheet for Share-based Compensation | 2,689 | 9,995 |
Deferred income tax and social contribution tax | (2,190) | 3,666 |
Participação de Acionistas não Controladores | 555 | (634) |
(Gains (Losses) from the Sale of Fixed Assets | (6) | 1,710 |
(Increase) Decrease in Assets and Liabilities | (49,539) | (15,052) |
Increase (Decrease) in Accounts Receivable | (34,280) | (26,351) |
Increase (Decrease) in Prepaid Expenses | (4,384) | (8,059) |
Increase (Decrease) in Deferred Taxes | (7,871) | (2,720) |
Increase (Decrease) in Other Assets | (7,571) | (2,017) |
Increase/ (Decrease) in Payroll and Related Charges | 25,537 | 15,894 |
Increase/(Decrease) in Suppliers | 2,862 | 186 |
Increase/(Decrease) in Taxes Payable | (7,848) | 10,362 |
Increase/ (Decrease) in Other Liabilities | 4,500 | 28,783 |
Interest Paid and Financial Debt | (20,483) | (31,130) |
Other | - | - |
Interest Paid on Financial Debt | - | - |
Net Cash used in Investing Activities | (260,111) | (201,951) |
Non-current Financial Investment | (39,497) | (26,590) |
Restricted Cash | (2,000) | - |
Acquisition of Fixed Assets | (162,533) | (158,901) |
Judicial Deposits | (36,241) | (16,487) |
Sale of Fixed Assets | 179 | 27 |
Ability Acquisition | (20,019) | - |
Net Cash used in Financing Activities | 69,657 | (74,910) |
Short-term loans & financing | - | - |
Long-term loans & financing | 177,458 | (13,542) |
Leasing Payments | (9,740) | (11,674) |
Dividend Payments | (89,000) | (49,380) |
Repurchase of Shares | (9,061) | (314) |
Sale of Shares | - | - |
Monetary variation | - | - |
Increase (Reduction) in Cash and Cash Equivalents | 29,950 | 1,925 |
Cash and Cash Equivalents – Beginning of Period | 357,853 | 355,928 |
Cash and Cash Equivalents – End of Period | 387,803 | 357,853 |
4) EBITDA Reconciliation
Quarterly Data | 4Q10 vs. 3Q10 | 4Q10 vs. 4Q09 |
EBITDA Reconciliation (R$ Thousand) | 4Q10 | 3Q10 | 4Q09 | D% | D% |
Net Income | 33,920 | 24,590 | 54,407 | 38.0% | -37.6% |
(-) Minority Interest | 190 | 227 | (47) | -16.0% | n.m. |
(+) Income Tax & Social Contr. | 19,030 | 22,444 | 31,718 | -15.2% | -40.0% |
Operating Income | 53,141 | 47,261 | 86,079 | 12.4% | -38.3% |
(-) Other Revenues and Expenses | 33 | (6) | 690 | n.m. | n.m. |
(+) Financial Expenses | 8,761 | 8,426 | 9,437 | 4.0% | -7.2% |
(-) Financial Revenues | (11,238) | (7,979) | (6,067) | 40.8% | 85.2% |
(-) Depreciation and Amortization | 31,578 | 31,335 | 31,224 | 0.8% | 1.1% |
EBITDA | 82,276 | 79,037 | 121,363 | 4.1% | -32.2% |
| | | | | |
n.m. not measured
Annual Data | 2010 vs. 2009 |
EBITDA Reconciliation (R$ Thousand) | 2010 | 2009 | D% |
Net Income | 108,498 | 131,691 | -17.6% |
(-) Minority Interest | 554 | (634) | n.m. |
(+) Income Tax & Social Contr. | 68,518 | 74,664 | -8.2% |
Operating Income | 177,571 | 205,721 | -13.7% |
(-) Other Revenues and Expenses | (7) | 1,795 | n.m. |
(+) Financial Expenses | 30,681 | 39,922 | -23.1% |
(-) Financial Revenues | (33,213) | (24,531) | 35.4% |
(-) Depreciation and Amortization | 122,109 | 116,411 | 4.9% |
EBITDA | 297,142 | 339,318 | -12.4% |
| | | |
n.m. not measured
5) Net Cash Reconciliation
Quarterly Data | 4Q10 vs. 3Q10 | 4Q10 vs. 4Q09 |
Net Cash Reconciliation (R$ Thousand) | 4Q10 | 3Q10 | 4Q09 | D% | D% |
(+) Cash and equivalents | 387,803 | 306,522 | 357,853 | 26.5% | 8.4% |
(+) Financial Investments | 69,869 | 64,075 | 26,590 | 9.0% | 162.8% |
(-) Loans & financing | (387,144) | (280,882) | (218,608) | 37.8% | 77.1% |
Net Cash | 70,528 | 89,715 | 165,835 | -21.4% | -57.5% |
n.m. not measured
The information contained in this document relating to the business prospects, estimates of operating and financial results, and growth prospects of Contax are merely projections and as such are based exclusively on Management’s expectations concerning the future of the business. These forward-looking statements depend materially on changes in market conditions, the performance of the Brazilian economy and the industry and international markets and are therefore subject to change without prior notice.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 02, 2011
CONTAX PARTICIPAÇÕES S.A. |
| | |
| By: | /S/ Michel Neves Sarkis
| |
| | Name: Michel Neves Sarkis Title: Investor Relations Officer | |
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.
