West ARM Unit Records $32 million Impairment, Swings to Loss in Q4

The accounts receivable management business of outsourced communications provider West Corporation recorded an operating loss of $25 million in the fourth quarter of 2008 as it was forced to take a massive impairment charge on purchased portfolios.

The ARM unit, called West Asset Management (WAM), reported late Tuesday a 56 percent decline in revenue to $31.7 million, primarily on the impact of a $32.3 million revenue impairment on its purchased debt. WAM reported a $25.2 million operating loss in the quarter compared to operating income of $9.3 million in the fourth quarter of 2007.

On a conference call Wednesday to discuss financial results, management said that without the impact of the impairment charges, WAM would have recorded operating income of $7.1 million in the fourth quarter.

WAM invested $5.4 million in debt portfolio purchases in the quarter, down sharply from the same quarter in 2007.

For the year, WAM reported an operating loss of $38.6 million, compared to operating income of $50.1 million for 2007. Revenues in the year declined nearly 30 percent to $200 million on the impact of impairments taken throughout 2008.

Looking forward into 2009, West Corp. CEO Tom Barker said on the conference call that projections for the WAM unit are predicated on a “very difficult” collection environment. But due to the low level of investment in the receivables management unit, the company expects WAM to contribute in 2009.

“The cost to collect is up while the amount we are able to collect is down and taking longer to realize,” said Barker. “[The ARM unit] is going to be working hard this year, but we expect some nice numbers.