CSI Reports Record First Quarter Results Marks 28th Consecutive Quarter of Revenue Growth

PADUCAH, Ky., July 7, 2011 /PRNewswire/ -- Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported record revenues and net income for the first quarter of fiscal 2012 ended May 31, 2011.  

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

CSI reported record revenues of $40.4 million for the first fiscal quarter of 2012, a 1.8% increase compared with $39.7 million for first quarter 2011.  Net income for the first quarter of fiscal 2012 rose 5.7% to a record $5.6 million compared with first quarter 2011 income of $5.3 million. Net income per fully diluted share increased 5.6% to $0.38 for the first quarter of 2012 compared with $0.36 for the prior year's first quarter.  

"CSI set new company records for revenue and net income in the first quarter of fiscal 2012," stated Chief Executive Officer Steven A. Powless.  "This was our 28th consecutive quarter of revenue growth and highlights our solid base of recurring revenues, organic growth from our major business segments and contributions from acquisitions.  

"Our Board of Directors highlighted our continued record performance by announcing an increase in our quarterly cash dividend to $0.125 per share, a 13.6% increase from the current quarterly dividend payment amount," continued Mr. Powless.  "The dividend increase marked the 23rd consecutive annual increase in CSI's cash dividend.

"We enter fiscal 2012 with renewed focus on growing CSI as a goal of our Strategic Growth Initiative (SGI) that was launched recently.  We have already taken steps to accelerate our growth by expanding our opportunities in the regulatory and compliance area, seeking new acquisition and investment opportunities to expand our family of products and services, growing existing products and services and adding management depth and new talent to support our continued growth."

First Quarter Results

Consolidated revenues rose 1.8% to $40.4 million for first quarter 2012 compared with $39.7 million for first quarter of 2011.  Processing revenues rose 2.7% to $29.6 million compared with $28.9 million for the first quarter 2011.  The growth in processing revenues was primarily driven by sales to new customers, cross-sales to existing customers and increases in transaction volumes from existing customers, offset partially by customers lost primarily to mergers and customers migrating to in-bank check imaging systems.  Other revenues were down 0.8% to $10.8 million compared with first quarter 2011 due primarily to customers postponing large capital investments in technology during the slow economic recovery.

Operating income rose 4.8% to $9.3 million for the first quarter 2012 compared with $8.9 million for the first quarter 2011.  Operating margin increased to 23.0% in the first quarter of 2012 compared to 22.3% for the first quarter last year.  The increase in operating income benefited from a higher sales base and operating costs that rose only 0.9% compared with the first quarter of fiscal 2011.  

Net income for the first quarter 2012 rose 5.7% to $5.6 million compared with $5.3 million for the first quarter 2011.  Net income per diluted share increased 5.6% to $0.38 for the first quarter 2012 on 14.6 million weighted average diluted shares outstanding compared with $0.36 for the first quarter 2011 on 14.7 million weighted average diluted shares outstanding.  CSI repurchased 25,513 shares of the Company's stock during the first quarter of fiscal 2012 under existing stock repurchase authorizations.  CSI had approximately $3.2 million available under existing stock purchase authorizations outstanding as of May 31, 2011.

CSI's cash flow from operations rose to $13.8 million in the first quarter 2012, and cash and cash equivalents increased to $10.1 million at May 31, 2011, compared with $8.7 million at May 31, 2010.  "CSI's balance sheet remained very strong as evidenced by an increase in our cash position and reduced debt compared with prior periods," continued Mr. Powless.  "Our cash position grew by $6.5 million and we reduced notes payable by $3.0 million in the latest three months.  We have reduced our long-term debt to only $55,000 as of May 31, 2011, and that represents incidental debt of an acquired company.  We also returned almost $1.7 million to CSI stockholders during the first quarter in the form of cash dividends and stock repurchases.  Combined with our recent announcement about an increase in our cash dividend, our Board of Directors remains focused on building long-term shareholder value through our cash dividend and stock repurchase programs."

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 the 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, 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 May 31,




2011


2010







Processing revenues

$      29,638


$      28,850

Other revenues

10,794


10,884


Total revenues

40,432


39,734

Operating expenses

31,134


30,864


Operating income

9,298


8,870

Interest income (expense), net

(24)


(63)


Income before income taxes

9,274


8,807

Provision for income taxes

3,640


3,479








Net income

$        5,634


5,328







Earnings per share





Basic

$          0.39


$          0.36


Diluted

$          0.38


$          0.36







Shares used in computing earnings per





common and common equivalent share






Basic

14,583,350


14,666,984



Diluted

14,818,475


14,942,980



COMPUTER SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)
















5/31/2011


2/28/2011


5/31/2010






(Unaudited)


(Audited)


(Unaudited)

ASSETS









Current assets









Cash and cash equivalents

$10,051


$3,527


$8,652



Accounts receivable


17,080


19,018


17,288



Income tax receivable


-


2,042


-



Prepaid expenses and other current assets

5,023


5,933


4,478




Total current assets


32,154


30,520


30,418


Property and equipment, net


30,222


30,008


29,988


Software and software licenses, net

16,874


18,245


13,474


Goodwill



48,761


48,761


48,761


Intangible assets


1,414


1,500


2,012


Other assets


6,995


7,088


4,145











Total assets



$136,420


$136,122


$128,798





















LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities









Accounts payable and accrued expenses

$10,522


$12,271


$10,183



Deferred revenue


6,146


6,575


6,066



Income tax payable


1,256


-


3,236



Notes payable


189


191


183



Earn-out provision related to acquisition

2,000


2,000


2,000




Total current liabilities

20,113


21,037


21,668


Long-term liabilities









Notes payable


55


3,099


5,246



Deferred income taxes


4,079


4,269


900



Earn-out provision related to acquisition

-


-


2,000



Other long-term liabilities


861


1,014


882




Total long-term liabilities

4,995


8,382


9,028














Total liabilities


25,108


29,419


30,696












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, 14,605,559 at May 31, 2011
14,581,602 at February 28, 2011 and 14,701,603 at May 31, 2010

17,831


16,523


16,586



Retained earnings


96,607


93,055


84,500



Restricted stock


(3,126)


(2,875)


(2,984)




Total shareholders' equity

111,312


106,703


98,102











Total liabilities and shareholders' equity

$136,420


$136,122


$128,798



SOURCE Computer Services, Inc.



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