West Asset Management Posts Sharp Rise in Income in First Quarter

West Asset Management (WAM), the accounts receivable management business of call center operator West Corp., reported net operating income of $3.8 million for the first quarter of 2009, compared to a loss in the year ago period and in the fourth quarter.

West said that WAM recorded total revenues of $57.4 million in the quarter, a 12.2 percent increase from the first quarter of 2008. The increase in revenue led to net operating income of $3.8 million in the period, up from a net operating loss of $12.7 million in the first quarter of 2008 and a loss of $25 million in the previous quarter (“West ARM Unit Records $32 million Impairment, Swings to Loss in Q4,” Feb. 5).

The losses in the previous periods were driven by large impairment charges. In a conference call to discuss company results, management noted that WAM did not take an impairment charge on portfolios in the first quarter of 2009.

In the first quarter, WAM spent $2 million on debt portfolio purchases compared to $22.5 million in the first quarter of 2008. The decrease in debt buying activity stems from a dispute with one of its funding sources, CarVal, a unit of Cargill (“WAM to Reduce Debt Buying in 2008 Over Funding Flap,” April 18, 2008).

When asked on the conference call about a lawsuit with Cargill, West CEO Tom Barker declined to comment but did acknowledge that the suit was ongoing. He also said that the debt buying operations are now an “opportunistic business” and that WAM would only purchase debt when most attractive. He noted that in their view, the lowered prices on portfolios does not outweigh deterioration in collections and liquidations in the current economy.

The $2 million in purchases in Q1 were funded with cash flows and were part of a forward flow agreement.

Overall, West reported net income of $30.6 million in the first quarter of 2009, compared to a $1.2 million loss in the first quarter of 2008. Total revenues were up 15.4 percent to $607 million.

West is a communications provider focusing on traditional call center services, teleconferencing, accounts receivable management and emergency communications. The company employs 48,000 people in North America, Europe and Asia.