CSI Reports Results For Second Quarter Fiscal 2013 Revenues Increase for 33rd Consecutive Quarter

PADUCAH, Ky., Oct. 8, 2012 /PRNewswire/ -- Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported results for the second quarter and six months ended August 31, 2012.

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

Second quarter revenues rose 11.8% to $48.6 million in fiscal 2013 compared with $43.5 million in the second quarter of fiscal 2012.  Second quarter net income was $6.1 million, or $0.41 per diluted share compared with $6.4 million, or $0.43 per diluted share, in the second quarter of last fiscal year.

"Our growth in revenue benefited from 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 quarter marked our 33rd consecutive quarter of revenue growth, which reflects continued higher processing revenues generated from long-term contracts and solid growth in transaction volume from our regulatory and compliance services.

"We expect revenues and operating income to ramp up in the second half of this fiscal year due to new processing customers coming online and to continued growth from our other business units," continued Mr. Powless.  "Our first half operating expenses increased at a faster rate than our revenue growth due to higher costs associated with our Strategic Growth Initiative (SGI) and the incurrence of conversion costs to bring on major new processing customers.  We expect the additional revenue from new accounts to more than offset higher expense levels in the second half of this fiscal year.  For the full fiscal year, we anticipate that CSI will report higher revenues and earnings compared with the prior fiscal year." 

Second Quarter Results

Second quarter consolidated revenues rose 11.8% to $48.6 million compared with $43.5 million for the second quarter ended August 31, 2011.  Processing revenues increased 1.2% to $30.8 million compared with $30.4 million in the second quarter of last year.  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. Other revenues rose 36.2% to $17.9 million in the second quarter of fiscal 2013 and accounted for 36.7% of total revenues compared with $13.1 million, or 30.1% of total revenues, in the second quarter of fiscal 2012.  Other areas of revenue growth were the result of higher transaction volume for regulatory and compliance services, higher eBusiness group revenues, and growth in Internet banking and mobile banking services.

Second quarter operating income declined 6.8% to $9.8 million compared with $10.6 million in the second quarter of the prior year.  Operating margin for the second quarter was 20.2% compared with 24.3% in the second quarter of fiscal 2012.  The decline in CSI's operating income and margin was primarily due to increased personnel costs associated with staffing additions as part of SGI and higher costs associated with the conversion of new accounts compared with the second quarter of the prior fiscal year. 

Net income declined 5.4% to $6.1 million in the second quarter compared with $6.4 million in the prior-year period.  Net income per fully diluted share was $0.41 in the second quarter of fiscal 2013 compared with $0.43 in the same quarter last year.  Weighted average shares outstanding were down 0.1% to14.8 million since last year due primarily to CSI shares repurchased under the Company's stock repurchase program.  CSI repurchased 52,431 shares during the first half of this fiscal year, including 33,296 in the second quarter.  CSI had approximately $2.6 million available under existing stock purchase authorizations outstanding as of August 31, 2012.

CSI's cash and cash equivalents rose to $10.4 million at August 31, 2012, up from $8.5 million at February 29, 2012.  The growth in cash was largely attributable to cash flow from operations that totaled $21.9 million in the first half of fiscal 2013. 

"CSI's strong balance sheet is highlighted by our growing cash position and low debt," said Mr. Powless.  "We continue to use our cash flow from operations to invest in our business.  During the first half of this fiscal year, we invested $14.1 million in new equipment and software, including $5.1 million for a new host processor. We also returned approximately $5.9 million to CSI shareholders through our cash dividend and stock repurchase programs during the first half of fiscal 2013. 

"Last quarter, the Board approved a 12% increase in our cash dividend to $0.14 per share, representing the 24th consecutive annual increase in CSI's cash dividend.  We remain committed to building long-term shareholder value by investing in our company and distributing a portion of our earnings to shareholders through our stock repurchase and cash dividend programs," concluded Mr. Powless.

Six Month Results

Consolidated revenues for the first six months of fiscal 2013 rose 15.1% to a record $96.6 million compared with $83.9 million for the same period in fiscal 2012.  CSI's growth in revenues benefited from a 3.0% increase in processing revenues and a 45.3% increase in other revenues compared with the first half of the prior fiscal year.

Operating income declined 2.6% to $19.3 million for the first six months of fiscal 2013 compared with $19.9 million for the same period last year.  Operating margin declined to 20.0% in the first six months of fiscal 2013 compared with 23.6% in the same period of fiscal 2012.  The decrease in operating income and margin was due to increased personnel costs associated with planned staffing additions as part of SGI and higher costs associated with the conversion of new accounts.  

Net income for the first six months of fiscal 2013 was $11.9 million compared with $12.0 million in the first six months of fiscal 2012.  Net income per diluted share was $0.81 for the latest six month period compared with $0.82 for the same period last year.

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 August 31,


Six Months Ended August 31,




2012


2011


2012


2011











Processing revenues

$ 30,777


$ 30,399


$ 61,855


$ 60,037

Other revenues

17,863


13,114


34,748


23,908


Total revenues

48,640


43,513


96,603


83,945

Operating expenses

38,807


32,961


77,264


64,095


Operating income

9,833


10,552


19,339


19,850

Interest income (expense), net

(8)


5


(10)


(19)


Income before income taxes

9,825


10,557


19,329


19,831

Provision for income taxes

3,759


4,144


7,394


7,784












Net income

$ 6,066


$ 6,413


$ 11,935


$ 12,047











Earnings per share









Basic

$ 0.41


$ 0.44


$ 0.81


$ 0.83


Diluted

$ 0.41


$ 0.43


$ 0.81


$ 0.82











Shares used in computing earnings per









common and common equivalent share










Basic

14,718,145


14,607,050


14,721,665


14,595,200



Diluted

14,750,121


14,767,710


14,755,580


14,755,017

 


COMPUTER SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)
















08/31/2012


02/29/2012


08/31/2011






(Unaudited)


(Audited)


(Unaudited)

ASSETS









Current assets








Cash and cash equivalents

$ 10,424


$ 8,514


$ 16,397



Accounts receivable

20,575


21,306


19,949



Income tax receivable

-


2,444


-



Prepaid expenses and other current assets

6,545


6,664


5,050




Total current assets

37,544


38,928


41,396


Property and equipment, net

36,414


32,341


31,337


Software and software licenses, net

18,293


15,058


16,952


Goodwill


60,115


60,115


48,761


Intangible assets

10,009


10,643


1,297


Other assets

8,540


7,908


6,734











Total assets


$ 170,915


$ 164,993


$ 146,477





















LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities








Accounts payable and accrued expenses

$ 14,249


$ 15,935


$ 13,083



Deferred revenue

9,923


9,751


7,414



Income taxes payable

37


-


2,616



Notes payable

84


145


168



Earn-out provision related to acquisition

-


-


2,000




Total current liabilities

24,293


25,831


25,281


Long-term liabilities








Notes payable

34


77


34



Deferred income taxes

11,902


11,902


4,060



Other long-term liabilities

1,128


1,337


1,224




Total long-term liabilities

13,064


13,316


5,318














Total liabilities

37,357


39,147


30,599












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, 14,700,284 at August 31, 2012,









14,707,495 at February 29, 2012, and 14,604,749 at August 31, 2011

22,502


21,477


17,916



Retained earnings

113,994


107,474


101,114



Restricted stock

(2,938)


(3,105)


(3,152)




Total shareholders' equity

133,558


125,846


115,878











Total liabilities and shareholders' equity

$ 170,915


$ 164,993


$ 146,477











SOURCE Computer Services, Inc.



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