CSI Reports Record Fourth Quarter and Fiscal Year 2012 Results Marks 12th Consecutive Year of Revenue Growth - 15th Consecutive Year of Income Growth

PADUCAH, Ky., May 8, 2012 /PRNewswire/ -- Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported record revenues and net income for the fourth quarter and fiscal year ended February 29, 2012.  The record results for fiscal 2012 marked CSI's 12th consecutive year of revenue growth and 15th consecutive year of growth in net income.

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

CSI's revenues for fiscal 2012 were a record $178.2 million and rose 8.8% compared with $163.8 million for fiscal 2011. Net income for fiscal 2012 was a record $25.5 million, a 6.2% increase compared with fiscal 2011 income of $24.0 million. Net income per fully diluted share increased 6.8% to $1.72 compared with $1.61 last year. 

Fourth quarter revenues rose 11.3% to a record $46.7 million in fiscal 2012 compared with $42.0 million in the fourth quarter of fiscal 2011. Net income was a record $7.2 million, or $0.49 per fully diluted share, in the fourth quarter of fiscal 2012 compared with $6.8 million, or $0.45 per fully diluted share, in the fourth quarter of fiscal 2011. 

"CSI's revenues accelerated in fiscal 2012 with the acquisition of HEIT Consulting, Inc. (HEIT) in September 2011 and the significant growth in transaction volume from our regulatory and compliance services," stated Chief Executive Officer Steven A. Powless. "We continue to benefit from growth in processing revenues generated from long-term contracts with high renewal rates.

"We made significant progress in executing our strategic initiatives during fiscal 2012 and remain focused on driving revenue growth through product innovation, combining resources to strengthen our product suite, and capitalizing on growth opportunities in our regulatory and compliance business. We also expect significant growth in transaction volume in the coming year and plan to continue our investments in infrastructure to support this business," continued Mr. Powless. 

Fiscal 2012 Results

Consolidated revenues rose 8.8% to $178.2 million for fiscal 2012 compared with $163.8 million for fiscal 2011. CSI's growth in revenues benefited from higher processing revenues, growth in other revenues and the contribution from the HEIT acquisition. Processing revenues rose 3.1% to $120.4 million for fiscal 2012 compared with $116.7 million for fiscal 2011. The growth in processing revenues included higher sales to new customers, cross-sales to existing customers and increases in transaction volumes from existing customers, partially offset by the effect of processing accounts that terminated during fiscal 2012 and 2011. Other revenues increased 22.9% to $57.8 million for fiscal 2012 compared with $47.1 million for fiscal 2011. The internal growth rate for other revenues was 4.1% for fiscal 2012 with the remaining growth attributable to the HEIT acquisition.

Operating expenses rose 11.3% to $137.8 million in fiscal 2012 compared with fiscal 2011. Internal operating expense growth was 3.0% in fiscal 2012 with the remaining growth in expenses attributable to the HEIT acquisition.  Operating expenses for fiscal 2012 were partially offset by a $2.0 million non-recurring gain from a reduction in the earn-out related to the acquisition of Myriad Systems, Inc. (MSI). MSI was acquired in October 2009.

Operating income rose 1.3% to $40.4 million in fiscal 2012 compared with $39.9 million in fiscal 2011. Operating margins declined to 22.7% in fiscal 2012 compared with 24.3% in fiscal 2011. The decrease was due primarily to short-term operating losses at MSI and expansion of MSI equipment and facilities to provide increased processing and failover redundancy.

Net income for fiscal 2012 rose 6.2% to $25.5 million compared with $24.0 million for fiscal 2011. Net income per fully diluted share increased 6.8% to $1.72 for fiscal 2012 on 14.8 million weighted average diluted shares outstanding compared with $1.61 for fiscal 2011 on 14.9 million weighted average diluted shares outstanding. Weighted average fully diluted shares outstanding declined 0.6% for the fiscal year due to CSI shares repurchased under the Company's stock repurchase program, partially offset by shares issued as partial consideration for the HEIT acquisition and the exercise of employee stock options. CSI repurchased nearly 165,000 shares of its stock in fiscal 2012.

CSI's cash flow from operations rose 19% to $45.8 million in fiscal 2012 compared with $38.5 million in fiscal 2011, and cash and cash equivalents increased to $8.5 million at February 29, 2012, compared with $3.5 million at February 28, 2011. 

"CSI's balance sheet remained strong at fiscal year-end with increased cash and lower debt compared with the prior year," continued Mr. Powless. "We used our strong cash flow to repurchase CSI stock, fund the increase in the cash dividend, partially fund the HEIT acquisition and make continued investments in our infrastructure. We invested over $24 million in new hardware, software and the HEIT acquisition in fiscal 2012. In addition, we returned over $11.5 million to CSI shareholders in cash dividends and stock repurchases."

Fourth Quarter Results

Fourth quarter consolidated revenues rose 11.3% to $46.7 million compared with $42.0 million for the fourth quarter ended February 28, 2011. Processing revenues increased 3.3% to $30.5 million in the fourth quarter of fiscal 2012 compared to $29.6 million in the fourth quarter of fiscal 2011. Other revenues were up 30.2% to $16.2 million in the fourth quarter of fiscal 2012 compared with $12.4 million in the fourth quarter of fiscal 2011. The growth in other revenues was primarily attributable to the HEIT acquisition and included higher sales from homeland security, fraud prevention services and eBusiness group revenues, partially offset by lower revenues from MSI due to the realignment of MSI resources during the fourth quarter that resulted in disruption of normal operations.

Fourth quarter 2012 operating expenses rose 18.7% to $36.5 million compared with $30.7 million in the fourth quarter of 2011. The internal operating expense growth rate rose 3.8% due to higher employee-related expenses attributed to personnel additions to support our Strategic Growth Initiative (SGI) announced in early fiscal 2012 and higher fees to Visa® and MasterCard® due to growth in transaction volume. The remainder of the growth in expenses was attributable to the HEIT acquisition and was partially offset by an additional $1.0 million non-recurring gain from the reduction in the earn-out related to the MSI acquisition (after an earlier non-recurring gain of $1.0 million in the third quarter of fiscal 2012).

Operating income for the fourth quarter was $10.2 million in fiscal 2012 compared with $11.2 million in fiscal 2011.  The decrease in operating income was due primarily to losses at MSI combined with higher expenses associated with our SGI.

"Expenses for the first half of fiscal 2013 will be affected by higher costs associated with our SGI and the ramp up of conversion costs to bring on major new processing customers. We expect the combined revenue of the new customers and growth from our other business units to contribute to another year's growth in revenue and net income.

"We expect our operating income to be lower in the first half of fiscal 2013 because higher expenses will not be rewarded immediately with a ramp up in revenues," continued Mr. Powless. "We expect increased revenues to overtake our increase in expenses by the third quarter of fiscal 2013 and, as a result, to report higher revenues and net income for the second half and full year." 

Net income for the fourth quarter of fiscal 2012 rose to $7.2 million, or $0.49 per fully diluted share, compared with $6.8 million, or $0.45 per fully diluted share, for the fourth quarter of fiscal 2011. The increase in net income was due primarily to a lower effective tax rate in the fourth quarter of fiscal 2012 compared with fiscal 2011.

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

(Audited)

(in thousands, except share and per share data)














Three Months Ended 


Year Ended 




February 29,


February 28,


February 29,


February 28,




2012


2011


2012


2011











Processing revenues

$                      30,526


$                      29,545


$               120,381


$               116,724

Other revenues

16,171


12,419


57,843


47,052


Total revenues

46,697


41,964


178,224


163,776

Operating expenses

36,466


30,729


137,839


123,898


Operating income

10,231


11,235


40,385


39,878

Interest income (expense), net

3


(38)


(60)


(182)


Income before income taxes

10,234


11,197


40,325


39,696

Provision for income taxes

3,009


4,423


14,819


15,680












Net income

$                        7,225


$                        6,774


$                 25,506


$                 24,016











Earnings per share









Basic

$                          0.49


$                          0.46


$                     1.74


$                     1.64


Diluted

$                          0.49


$                          0.45


$                     1.72


$                     1.61











Shares used in computing earnings per









common and common equivalent share










Basic

14,688,790


14,526,547


14,649,630


14,609,566



Diluted

14,792,351


14,786,686


14,792,213


14,875,352











 

COMPUTER SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Audited)

(in thousands, except share data)














02/29/2012


02/28/2011

ASSETS







Current assets






Cash and cash equivalents

$          8,514


$          3,527



Accounts receivable

21,306


19,018



Income tax receivable

2,444


2,042



Prepaid expenses and other current assets

6,664


5,933




Total current assets

38,928


30,520


Property and equipment, net

32,341


30,008


Software and software licenses, net

15,058


18,245


Goodwill


60,115


48,761


Intangible assets

10,643


1,500


Other assets

7,908


7,088









Total assets


$      164,993


$      136,122

















LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities






Accounts payable and accrued expenses

$        15,935


$        12,271



Deferred revenue

9,751


6,575



Notes payable

145


191



Earn-out provision related to acquisition

-


2,000




Total current liabilities

25,831


21,037


Long-term liabilities






Notes payable

77


3,099



Deferred income taxes

11,902


4,269



Other long-term liabilities

1,337


1,014




Total long-term liabilities

13,316


8,382












Total liabilities

39,147


29,419










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, 14,707,495 at February 29, 2012







and 14,581,602 at February 28, 2011

21,477


16,523



Retained earnings

107,474


93,055



Restricted stock

(3,105)


(2,875)




Total shareholders' equity

125,846


106,703









Total liabilities and shareholders' equity

$      164,993


$      136,122

























 

SOURCE Computer Services, Inc.



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