CSI Reports Record Second Quarter Revenues And Net Income Revenues Increase for 37th Consecutive Quarter

PADUCAH, Ky., Oct. 4, 2013 /PRNewswire/ -- Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported record revenues and net income for the fiscal second quarter and six months ended August 31, 2013.

(Logo: http://photos.prnewswire.com/prnh/20080418/CSILOGO

Second quarter revenues rose 11.1% to $54.0 million in fiscal 2014 compared with $48.6 million in the second quarter of fiscal 2013.  Second quarter net income increased 6.8% to $6.5 million, or $0.45 per diluted share, compared with $6.1 million, or $0.41 per diluted share, in the second quarter of fiscal 2013.

"CSI's record results for the second quarter benefited from higher processing revenues generated from our core processing customers and record transaction volume from our regulatory compliance services," stated Chief Executive Officer Steven A. Powless.  "This quarter marked our 37th consecutive quarter of revenue growth, and our outlook for the second half of fiscal 2014 remains positive based on our pipeline of new business, high contract renewal rates and solid growth in transaction volume."

"Our focus remains on driving revenue growth through our expanded sales and marketing programs," Powless continued.  "We increased our sales force as part of our Strategic Growth Initiative (SGI), and it has been successful in expanding our geographic reach to a national presence as well as increasing cross-sales of products and services to existing customers."

During the second quarter, CSI's Board of Directors approved a 14.3% increase in the quarterly cash dividend to $0.16 per share and authorized a $5.0 million increase in the Company's share repurchase program.  The increased dividend marked the 25th consecutive year of increasing CSI's cash dividend.  The dividend was paid on September 25, 2013, to shareholders of record as of the close of business on September 3, 2013.  The increase in the share repurchase program brought the total authorized for share repurchase to $70 million since CSI's share repurchase program was initially announced in March 2004.

Second Quarter Results

Second quarter consolidated revenues rose 11.1% to $54.0 million compared with $48.6 million for the second quarter ended August 31, 2012.  Processing revenues increased 10.5% to $34.0 million compared with $30.8 million in the second quarter of fiscal 2013.  The growth in processing revenues reflects sales to new customers, cross-sales to existing customers and increases in transaction volumes from existing customers, partially offset by lost business. Second quarter fiscal 2014 processing revenue included $1.2 million in early contract termination fees compared with $51,000 in the second quarter of fiscal 2013.  The early termination fees were due primarily to former customers being acquired by other non-customer financial institutions.  

Other revenues rose 12.1% to $20.0 million in the second quarter of fiscal 2014 and accounted for 37.1% of total revenues compared with $17.9 million, or 36.7% of total revenues, in the second quarter of fiscal 2013.  Other revenue growth benefited from higher sales of Internet and mobile banking services, growth in homeland security and fraud prevention services, higher eBusiness group revenues, and higher forms and envelope revenue within our Document Services Division.

Second quarter operating income rose 9.0% to $10.7 million compared with $9.8 million in the second quarter of fiscal 2013.  Operating margin for the second quarter was 19.8% compared with 20.2% in the second quarter of fiscal 2013.  The decrease in operating margin was due primarily to the ramp up of expenses related to the SGI launched in fiscal 2012, most of which have been incurred. In addition, expenses increased for equipment and travel related to the build out of our national sales team, increased fees related to growth in our ATM and debit card business, and higher network communications compared with the second quarter of last year.

Net income increased 6.8% to $6.5 million in the second quarter compared with $6.1 million in fiscal 2013.  Net income per fully diluted share rose 9.8% to $0.45 in the second quarter of fiscal 2014 compared with $0.41 in fiscal 2013.  Weighted average diluted shares outstanding were down 1.6% to 14.5 million for the second quarter of fiscal 2014 compared to the same period of fiscal 2013 due primarily to CSI shares repurchased under the Company's share repurchase program.  CSI repurchased 213,676 shares during the first half of fiscal 2014, including 129,606 in the second quarter.  CSI had approximately $2.7 million available under existing stock purchase authorizations outstanding as of August 31, 2013.

"CSI's balance sheet remained strong with $3.3 million in cash and no long-term debt at August 31, 2013," Powless said.  "We used our strong cash flow to reduce debt, increase CSI's cash dividend, repurchase CSI shares and invest in new hardware and software to support our continued growth.  During the second quarter, we invested about $2.2 million in new equipment and software, and we returned $6.0 million to shareholders in cash dividends and stock repurchases."

Six Month Results

Consolidated revenues for the first six months of fiscal 2014 rose 9.5% to a record $105.8 million compared with $96.6 million for the same period in fiscal 2013.  CSI's growth in revenues benefited from growth in processing and other revenues.

Operating income rose 7.1% to $20.7 million for the first six months of fiscal 2014 compared with $19.3 million for the same period in fiscal 2013.  Operating margin was 19.6% in the first six months of fiscal 2014 compared with 20.0% in the same period of fiscal 2013.  

Net income for the first six months of fiscal 2014 rose 4.9% to $12.5 million compared with $11.9 million in the first six months of fiscal 2013.  Net income per diluted share increased 6.2% to $0.86 for the first six months of fiscal 2014 compared with $0.81 for the same period of fiscal 2013.

About Computer Services, Inc.

Computer Services, Inc. (CSI) delivers core processing, managed services, mobile and Internet solutions, payments processing, print and electronic distribution, and regulatory compliance solutions to financial institutions and corporate customers across the nation. Exceptional service, dynamic solutions and superior results are the foundation of CSI's reputation, and have resulted in the company's inclusion in such top industry-wide rankings as the FinTech 100, Talkin' Cloud 100 and MSPmentor Top 501 Global Managed Service Providers List. 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 Annual Report, Quarterly Reports, Information and Disclosure Statements and other documents posted from time to time on the OTCQX website (www.otcqx.com), 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 report 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 August 31,


Six Months Ended August 31,





2013


2012


2013


2012












Processing revenues


$         34,004


$         30,777


$       67,627


$       61,855

Other revenues


20,026


17,863


38,123


34,748


Total revenues


54,030


48,640


105,750


96,603

Operating expenses


43,311


38,807


85,040


77,264


Operating income


10,719


9,833


20,710


19,339

Interest income (expense)


(11)


(8)


(23)


(10)


Income before income taxes


10,708


9,825


20,687


19,329

Provision for income taxes


4,229


3,759


8,171


7,394













Net income


$           6,479


$           6,066


$       12,516


$       11,935












Earnings per share










Basic


$            0.45


$            0.41


$           0.86


$           0.81


Diluted


$            0.45


$            0.41


$           0.86


$           0.81












Shares used in computing earnings per










common and common equivalent share











Basic


14,511,898


14,718,145


14,563,509


14,721,665



Diluted


14,511,898


14,750,121


14,563,509


14,755,580

 

 

COMPUTER SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)
















08/31/2013


02/28/2013


08/31/2012






(Unaudited)


(Audited)


(Unaudited)

ASSETS








Current assets









Cash and cash equivalents


$           3,275


$            499


$       10,424



Accounts receivable


22,657


21,953


20,575



Income tax receivable


452


797


-



Prepaid expenses and other current assets


8,034


6,625


6,545




Total current assets


34,418


29,874


37,544


Property and equipment, net


35,340


34,996


36,414


Software and software licenses, net


18,240


18,952


18,293


Goodwill


60,115


60,115


60,115


Intangible assets


8,920


9,374


10,009


Other assets


9,858


8,703


8,540











Total assets


$        166,891


$      162,014


$     170,915





















LIABILITIES AND SHAREHOLDERS' EQUITY








Current liabilities









Accounts payable and accrued expenses


$          17,646


$       12,979


$       14,249



Deferred revenue


8,762


9,337


9,923



Income taxes payable


-


-


37



Notes payable


27


60


84




Total current liabilities


26,435


22,376


24,293


Long-term liabilities









Notes payable


-


7


34



Deferred income taxes


13,193


13,193


11,902



Other long-term liabilities


1,174


1,071


1,128




Total long-term liabilities


14,367


14,271


13,064














Total liabilities


40,802


36,647


37,357












Shareholders' equity









Preferred stock; shares authorized, 5,000,000; none issued


-


-


-



Common stock, no par; shares authorized, 20,000,000 in fiscal 2014 and










2013; shares issued and outstanding, 14,430,952 at August 31, 2013,










14,620,743 at February 28, 2013, and 14,700,284 at August 31, 2012


20,513


19,522


19,564



Retained earnings


105,576


105,845


113,994




Total shareholders' equity


126,089


125,367


133,558











Total liabilities and shareholders' equity


$        166,891


$      162,014


$     170,915
































 

SOURCE Computer Services, Inc.



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