CSI Reports Record First Quarter Revenue and Net Income Revenues Increase for 32nd Consecutive Quarter

PADUCAH, Ky., July 3, 2012 /PRNewswire/ -- Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported growth in revenues and net income for the first quarter of fiscal 2013 ended May 31, 2012. 

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

CSI's revenues grew 18.6% to $48.0 million for the first fiscal quarter of fiscal 2013 compared with $40.4 million for the first quarter fiscal 2012.  Net income rose 4.2% to $5.9 million for the first quarter of fiscal 2013 compared with $5.6 million in the first quarter 2012.  Net income per fully diluted share increased 5.3% to $0.40 for the first quarter of 2013 compared with $0.38 for the prior year's first quarter. 

"CSI's growth in revenues and net income highlights the continued demand for our processing services and the contribution from HEIT Consulting, Inc. (HEIT) that we acquired in September 2011," stated Chief Executive Officer Steven A. Powless.  "This was our 32nd consecutive quarter of revenue growth as we benefited from higher processing revenues generated from long-term contracts and significant growth in transaction volume from our regulatory and compliance services compared with last year. 

"Our Board of Directors highlighted our continued growth by declaring at its June meeting an increase in our quarterly cash dividend to $0.14 per share, a 12% increase from the current quarterly dividend payment amount," continued Mr. Powless.  "The dividend increase marked the 24th consecutive annual increase in CSI's cash dividend."

"Our focus for fiscal 2013 will be on driving revenue growth through product innovation, merging resources company-wide to broaden our product suites, and capitalizing on growth opportunities in our regulatory and compliance businesses," continued Mr. Powless.  "We plan to use our strong balance sheet and cash flow to fund our continued growth.  We invested $5.3 million in new equipment and software during the first quarter to support the expected growth in transaction volume this year due in part to new vertical market opportunities arising from our HEIT acquisition and the continuing implementation of the Dodd-Frank law." 

First Quarter Results

Consolidated revenues rose 18.6% to $48.0 million for first quarter of fiscal 2013 compared with $40.4 million in the first quarter of fiscal 2012.  Processing revenues rose 4.9% to $31.1 million compared with $29.6 million for the first quarter of fiscal 2012.  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 the effect of lost business.  Other revenues rose 56.4% to $16.9 million compared with first quarter of fiscal 2012.  The internal growth rate was 11.8% with the remaining growth resulting from the HEIT acquisition.  The internal revenue growth was primarily due to growth in homeland security and fraud prevention services; higher eBusiness group revenues; growth in network monitoring services, partially offset by lower equipment-related revenues and lower software license revenues.

Operating income rose 2.2% to $9.5 million for the first quarter of fiscal 2013 compared with $9.3 million for the first quarter of fiscal 2012.  Operating margin was 19.8% in the first quarter of 2013 compared to 23.0% for the first quarter last year.  The decrease in operating margin was primarily due to the ramp up of expenses related to our Strategic Growth Initiative (SGI) launched in fiscal 2012.

"We expect our growth in operating expenses to increase in the second quarter due to higher costs associated with SGI and the ramp up of conversion costs to bring on major new processing customers," continued Mr. Powless.  "As a result, we expect to report lower operating income in the second quarter of fiscal 2013 that will not be offset by higher revenues until the second half of the year.  We expect revenues and operating income to ramp up in the second half due to new processing customers coming online and to continued growth from our other business units.  Our goal for fiscal 2013 is to report growth in both revenue and net income compared with fiscal 2012." 

Net income for the first quarter of fiscal 2013 rose 4.2% to $5.9 million compared with $5.6 million for the first quarter of fiscal 2012.  Net income per diluted share increased 5.3% to $0.40 for the first quarter 2013 on 14.7 million weighted average diluted shares outstanding compared with $0.38 for the first quarter 2012 on 14.6 million weighted average diluted shares outstanding.  

"CSI's balance sheet remains strong with increased cash and lower debt compared with last fiscal year," continued Mr. Powless.  "Our cash flow from operations rose to $13.9 million in the first quarter 2013, and cash and cash equivalents increased to $14.1 million at May 31, 2012, compared with $10.1 million at May 31, 2011. During the first quarter, we invested $5.3 million in new equipment and software, paid shareholders $1.8 million in cash dividends and repurchased or redeemed $1.2 million in common stock."

CSI repurchased 19,135 shares of the Company's stock during the first quarter of fiscal 2013 under existing stock repurchase authorizations.  CSI had approximately $3.6 million available under existing stock purchase authorizations outstanding as of May 31, 2012.

About Computer Services, Inc.

Computer Services, Inc. (CSI) delivers core processing, managed services, mobile and Internet, payments processing, print and electronic distribution, and regulatory and 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 in empowering businesses to remain competitive, compliant and profitable. 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 May 31,




2012


2011







Processing revenues

$       31,078


$       29,638

Other revenues

16,885


10,794


Total revenues

47,963


40,432

Operating expenses

38,457


31,134


Operating income

9,506


9,298

Interest income (expense), net

(2)


(24)


Income before income taxes

9,504


9,274

Provision for income taxes

3,635


3,640








Net income

$         5,869


$         5,634







Earnings per share





Basic

$           0.40


$           0.39


Diluted

$           0.40


$           0.38







Shares used in computing earnings per





common and common equivalent share






Basic

14,725,185


14,583,350



Diluted

14,761,038


14,818,475













COMPUTER SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)
















05/31/2012


02/29/2012


05/31/2011






(Unaudited)


(Audited)


(Unaudited)

ASSETS









Current assets








Cash and cash equivalents

$         14,080


$         8,514


$        10,051



Accounts receivable

19,258


21,306


17,080



Income tax receivable

-


2,444


-



Prepaid expenses and other current assets

5,609


6,664


5,023




Total current assets

38,947


38,928


32,154


Property and equipment, net

35,059


32,341


30,222


Software and software licenses, net

14,337


15,058


16,874


Goodwill


60,115


60,115


48,761


Intangible assets

10,326


10,643


1,414


Other assets

7,716


7,908


6,995











Total assets


$       166,500


$     164,993


$       136,420





















LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities








Accounts payable and accrued expenses

$         13,727


$       15,935


$        10,522



Deferred revenue

9,014


9,751


6,146



Income tax payable

475


-


1,256



Notes payable

105


145


189



Earn-out provision related to acquisition

-


-


2,000




Total current liabilities

23,321


25,831


20,113


Long-term liabilities








Notes payable

52


77


55



Deferred income taxes

11,902


11,902


4,079



Other long-term liabilities

911


1,337


861




Total long-term liabilities

12,865


13,316


4,995














Total liabilities

36,186


39,147


25,108












Shareholders' equity








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

-


-


-



Common stock, no par; shares authorized, 20,000,000 in fiscal 2013 and








2012; shares issued and outstanding, 14,729,871 at May 31, 2012,








14,707,495 at February 29, 2012 and 14,605,559 at May 31, 2011

22,441


21,477


17,831



Retained earnings

110,756


107,474


96,607



Restricted stock

(2,883)


(3,105)


(3,126)




Total shareholders' equity

130,314


125,846


111,312











Total liabilities and shareholders' equity

$       166,500


$     164,993


$       136,420

 

SOURCE Computer Services, Inc.



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