CSI Reports Record Results for Third Quarter Fiscal 2012
PADUCAH, Ky., Jan. 12, 2012 /PRNewswire/ -- Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported record revenues and net income for the third quarter and nine months ended November 30, 2011.
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Third quarter revenues rose 18.5% to $47.6 million in fiscal 2012 compared with $40.2 million in the third quarter of fiscal 2011. Net income rose 9.1% to $6.2 million, and net income per diluted share increased 7.7% to $0.42 compared with the prior year's third quarter.
"CSI's record results highlight the continuing strength of our business generated by our long-term contracts and high percentage of recurring revenues," stated Chief Executive Officer Steven A. Powless. "This was our 30th consecutive quarter of revenue growth, and we benefited from continued demand for our core services and the contribution from HEIT Consulting, Inc. ("HEIT") that was acquired effective September 1, 2011. We also experienced strong demand for our new mobile and Internet banking products introduced earlier this year and from our regulatory and compliance services in response to the enactment of the Dodd-Frank bill.
"The HEIT acquisition is a key part of our strategy to expand services to our core bank customers and build on the security and compliance services. We have already integrated HEIT's cloud-based managed compliance, security and IT services into our new Managed Services Division and expect HEIT to be a solid contributor to our future growth. We also expect HEIT to be accretive to our earnings in fiscal 2013," continued Mr. Powless.
Third Quarter Results
Third quarter consolidated revenues rose 18.5% to a record $47.6 million compared with $40.2 million for the third quarter ended November 30, 2010. CSI's internal growth rate rose to 7.7% in the third quarter of fiscal 2012 with the remaining growth attributable to the HEIT acquisition. Processing revenues increased 2.1% to $29.8 million and accounted for 62.7% of total revenues compared with $29.2 million, or 72.7% of total revenues, in the third quarter of fiscal 2011. The growth in processing revenues benefitted from sales to new customers, cross-sales to existing customers and increases in transaction volumes from existing customers, partially offset by the effect of customers lost primarily due to mergers and government actions. Other revenues increased 62.1% to $17.8 million compared to $11.0 million in the third quarter of fiscal 2011. Internal growth rate for other revenues rose to 22.4% in the third quarter with the remaining growth attributable to the HEIT acquisition. Internal growth was driven primarily by sales within our newly formed Document Services Division, eBusiness products and compliance products.
Third quarter operating income rose 8.7% to $10.3 million compared with $9.5 million in the third quarter of fiscal 2011. Operating margin was 21.7% in the third quarter of fiscal 2012 compared with 23.6% in the third quarter of fiscal 2011. The decline in margin was primarily due to increased personnel costs associated with planned staffing additions as part of CSI's Strategic Growth Initiative and higher cost of goods sold related to revenue growth in our Document Services Division. Operating expenses rose 21.5% compared with the third quarter of fiscal 2011 and were up primarily due to the HEIT acquisition. Total operating expenses increased as a percentage of revenue to 78.3% in the third quarter of fiscal 2012 compared with 76.4% in the same period of fiscal 2011. Current quarter operating expenses included one-time costs of approximately $715,000 associated with the HEIT acquisition that were offset by a $1 million write down of a $2 million contingent consideration arrangement related to the Company's acquisition of Myriad Systems, Inc. ("MSI") on October 1, 2009. In accordance with the purchase agreement for that acquisition, CSI and the former owners of MSI are engaged in a process to resolve their differences with respect to the second 12-month period earn-out.
Net income rose 9.1% to a record $6.2 million in the third fiscal quarter of 2012 compared with $5.7 million in the prior-year period. Net income per fully diluted share increased 7.7% to $0.42 compared with $0.39 in the same quarter of fiscal year 2011. Weighted average shares outstanding were up 0.1% to 14.9 million compared with the third quarter of fiscal year 2011. CSI issued approximately 127,000 shares as part of the HEIT consideration which was partially offset by the repurchase of 53,710 shares during the third quarter of fiscal 2012.
CSI's Board of Directors authorized an additional $5.0 million to the Company's share repurchase program in December 2011. This amount is in addition to approximately $1.4 million outstanding at November 30, 2011, under previous share repurchase authorizations.
"Our balance sheet remains strong as we continue to build our cash position and pay down debt," stated Mr. Powless. "We used a portion of our cash and untapped credit lines to fund the HEIT acquisition while continuing to buy back CSI stock. In addition, we increased our cash dividend during the year by 13.6% compared with last year, highlighting our 23rd consecutive yearly increase in our cash dividend. Our Board remains committed to returning a portion of our earnings to shareholders through our dividend and stock buyback programs."
CSI's cash and cash equivalents rose to $10.0 million as of November 30, 2011, up from $6.8 million at November 30, 2010. The growth in cash was largely attributable to cash flow from operations that totaled $11.3 million in the third quarter of fiscal 2012, and a $7.0 million loan to fund, in part, the acquisition of HEIT. During the quarter, CSI paid down approximately $5.8 million in debt, paid $1.8 million in dividends and repurchased $1.5 million in CSI stock.
Nine Month Results
Consolidated revenues for the first nine months of fiscal 2012 rose 8.0% to a record $131.5 million compared with $121.8 million for the same period in fiscal 2011. CSI's growth in revenues benefited from a 4.4% internal growth rate, including higher processing revenues and growth in other revenues. The remaining growth was due in part to the HEIT acquisition.
Operating income rose 5.3% to $30.2 million for the first nine months of fiscal 2012 compared with $28.6 million for the same period of fiscal 2011. Operating margin was 22.9% in the first nine months of fiscal 2012 compared with 23.5% in the same period of fiscal 2011. For the first nine months of fiscal 2012, total operating expenses increased as a percentage of revenue to 77.1% compared with 76.5% in the same period of fiscal 2011. The increase was due in part to costs associated with the HEIT acquisition and planned staffing additions as part of CSI's Strategic Growth Initiative.
Net income for the first nine months of fiscal 2012 rose 6.0% to a record $18.3 million compared with $17.2 million in the first nine months of fiscal 2011. Net income per diluted share rose 6.9% to $1.24 for the latest nine month period compared with $1.16 for the same period of fiscal year 2011. Weighted average fully diluted shares outstanding were down 0.8% to 14.8 million for the first nine month period of fiscal 2012 primarily due to CSI shares repurchased under the Company's stock repurchase program.
About Computer Services, Inc.
Computer Services, Inc. (CSI) delivers core banking, payments processing, Internet, card services, risk assessment, fraud prevention, network management, regulatory compliance and document delivery solutions to financial institutions and corporate entities across the nation. Technology planning, personal account management and world-class customer service explain why CSI is known as one of the nation's premier providers of technology solutions for the financial services industry. CSI's stock is traded on OTCQX under the symbol CSVI. For more information about CSI, visit www.csiweb.com.
Forward-Looking Statements
This news release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. All statements except historical statements contained herein constitute "forward-looking statements." Forward-looking statements are inherently uncertain and are based only on current expectations and assumptions that are subject to future developments that may cause results to differ materially. Readers should carefully consider: (i) economic, competitive, technological and governmental factors affecting CSI's operations, customers, markets, services, products and prices; and (ii) other factors discussed in CSI's Information and Disclosure Statements and other documents posted from time to time on the OTCQX website (http://www.otcqx.com/qx/home), including without limitation, the description of the nature of CSI's business and its management discussion and analysis of financial condition and results of operations for reported periods. Unless required by law, CSI undertakes no obligation to update, and is not responsible for updating, the information contained in this release beyond the publication date, whether as a result of new information or future events, or to conform the statement to actual results or changes in CSI's expectations, or otherwise or for changes made to this document by wire services or Internet services.
COMPUTER SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended November 30, Nine Months Ended November 30,
2011 2010 2011 2010
---- ---- ---- ----
Processing revenues $29,818 $29,194 $89,855 $87,179
Other revenues 17,764 10,961 41,672 34,633
-------------- ------ ------ ------ ------
Total
revenues 47,582 40,155 131,527 121,812
Operating expenses 37,278 30,676 101,373 93,169
------------------ ------ ------ ------- ------
Operating
income 10,304 9,479 30,154 28,643
Interest income (expense), net (44) (37) (63) (144)
------------------------------ --- --- --- ----
Income
before
income
taxes 10,260 9,442 30,091 28,499
Provision for income taxes 4,026 3,730 11,810 11,257
-------------------------- ----- ----- ------ ------
Net income $6,234 $5,712 $18,281 $17,242
---------- ------ ------ ------- -------
Earnings per share
Basic $0.42 $0.39 $1.25 $1.18
Diluted $0.42 $0.39 $1.24 $1.16
Shares used in computing earnings per
common and common
equivalent share
Basic 14,720,524 14,588,769 14,636,671 14,636,736
Diluted 14,862,459 14,853,968 14,792,167 14,904,370
COMPUTER SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
11/30/2011 02/28/2011 11/30/2010
(Unaudited) (Audited) (Unaudited)
---------- -------- ----------
ASSETS
Current assets
Cash and cash equivalents $10,013 $3,527 $6,770
Accounts receivable 19,696 19,018 17,052
Income tax receivable - 2,042 -
Prepaid expenses and other current assets 5,296 5,933 5,187
----------------------------------------- ----- ----- -----
Total current assets 35,005 30,520 29,009
Property and equipment, net 31,500 30,008 30,548
Software and software licenses, net 15,762 18,245 16,595
Goodwill 56,166 48,761 48,761
Intangible assets 10,941 1,500 1,707
Other assets 7,565 7,088 6,827
------------ ----- ----- -----
Total assets $156,939 $136,122 $133,447
------------ -------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $16,198 $12,271 $15,309
Deferred revenue 7,811 6,575 6,406
Income taxes payable 2,923 - 213
Notes payable 220 191 187
Earn-out provision related to acquisition 1,000 2,000 2,000
----------------------------------------- ----- ----- -----
Total current liabilities 28,152 21,037 24,115
Long-term liabilities
Notes payable 2,069 3,099 3,152
Deferred income taxes 3,403 4,269 840
Other long-term liabilities 827 1,014 948
--------------------------- --- ----- ---
Total long-term liabilities 6,299 8,382 4,940
--------------------------- ----- ----- -----
Total liabilities 34,451 29,419 29,055
Shareholders' equity
Preferred stock; shares authorized, 5,000,000; none issued - - -
Common stock, no par; shares authorized, 20,000,000 in fiscal
2012 and
2011; shares issued and outstanding, 14,703,909 at November
30, 2011,
14,581,602 at February 28, 2011, and 14,574,130 at November
30, 2010 21,517 16,523 16,528
Retained earnings 104,077 93,055 90,688
Restricted stock (3,106) (2,875) (2,824)
---------------- ------ ------ ------
Total shareholders' equity 122,488 106,703 104,392
-------------------------- ------- ------- -------
Total liabilities and shareholders' equity $156,939 $136,122 $133,447
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SOURCE Computer Services, Inc.