Lender Processing Services, Inc. Reports Second Quarter 2011 Earnings

JACKSONVILLE, Fla., July 25, 2011 /PRNewswire/ -- Lender Processing Services, Inc. (NYSE: LPS), a leading provider of integrated technology and services to the mortgage and real estate industries, today reported consolidated revenues of $517.5 million for the second quarter of 2011, a decrease of 12.8% compared to the second quarter of 2010, while net earnings of $21.4 million or 25 cents per diluted share in the second quarter of 2011 compared to $80.4 million or 85 cents per diluted share in the prior year quarter.

The company noted that, in light of current market conditions, it continues to evaluate its cost structure as well as potentially underperforming assets.  As a result, the company recognized a pre-tax restructuring charge of $7.9 million during the quarter primarily relating to continued personnel reductions.  Also, the company recognized a $31.8 million pre-tax asset impairment charge ($26.6 million for certain services now classified as discontinued operations and $5.2 million in continuing operations) relating to the write-down of certain investments that the company is evaluating for potential sale or wind down.

Adjusted net earnings for the second quarter of 2011 were $48.0 million, or 56 cents per diluted share, compared to $84.0 million, or 89 cents per diluted share in the second quarter of 2010.  Adjusted net earnings in the current quarter excluded the following charges: 18 cents per diluted share for asset impairment charges relating to discontinued operations, 6 cents per diluted share primarily relating to cost reduction initiatives and 4 cents per diluted share for asset impairment charges relating to continuing operations.  Also, the current quarter included an adjustment for purchase price amortization of 3 cents per diluted share while the second quarter of 2010 included a similar adjustment of 4 cents per diluted share.

"LPS continues to perform well despite very challenging conditions in the default and origination markets, as well as an ongoing difficult macro-economic environment.  LPS, with its strong market presence and unique set of end-to-end solutions for the mortgage and real estate marketplace, remains well-positioned for the years ahead," said Lee A. Kennedy, Chairman and interim CEO of LPS.

"Our Default Services and Loan Facilitation businesses continued to be impacted by lower industry volumes, however, our Mortgage Processing business had a good quarter while our Other TD&A businesses posted strong growth from continued market share gains," continued Lee A. Kennedy.

Operating income of $72.2 million in the second quarter of 2011 compared to $148.4 million in the prior year period. Adjusting for the charges noted earlier, operating income was $85.4 million in the second quarter of 2011.

Net cash provided by operating activities for the first half of 2011 was $226.9 million compared to $206.7 million for the same period last year.  Adjusted free cash flow (net cash provided by operating activities minus certain non-recurring charges and additions to property, equipment and computer software) for the first half of 2011 was $183.0 million compared to $149.5 million for the first half of 2010 and was higher primarily due to contributions from changes in working capital.

Technology, Data and Analytics (TD&A)

Revenues for the segment were $195.3 million compared to $179.8 million in the second quarter of 2010, while operating income of $58.2 million (excluding the charges noted earlier) compared to $64.8 million in the prior year quarter.  Mortgage Processing revenues of $102.8 million compared to $102.4 million in the same period last year.  Other TD&A revenues of $92.6 million were 19.5% above the second quarter of 2010 primarily due to strong growth in Desktop, as well as higher Data & Analytics revenues. Overall operating income for TD&A was lower compared to the second quarter of 2010 primarily due to lower income in our Other Software and Services offerings partly offset by higher contributions from Data & Analytics and Desktop.

Loan Transaction Services (LTS)

Revenues for the segment were $323.7 million compared to $415.5 million in the second quarter of 2010, and operating income of $58.9 million (excluding the charges noted earlier) compared to $101.6 million in the prior year period.  Loan Facilitation Services revenues of $113.4 million declined 19.3% compared to the second quarter of 2010 due to lower industry volumes. Default Services revenues of $210.3 million declined 23.5% compared to the same period last year as a result of continued delays in the initiation of foreclosure proceedings in the industry. This result compared favorably to RealtyTrac's report of a 36.6% decline in Default Notices compared to the prior year quarter.  This positive variance was primarily due to continued market share gains in our default title business.  Overall operating income for LTS declined mainly due to lower contributions from Loan Facilitation Services and to a lesser extent from Default Services.

Corporate and Other

Net corporate expenses were $33.9 million in the second quarter of 2011. Excluding the charges noted earlier, net corporate expenses of $31.7 million compared to $18.0 million in the second quarter of 2010 and were up primarily due to higher legal and compliance related expenses.

The company noted that it had repurchased 2.0 million shares for $53.0 million and $5.0 million of its public bonds in the second quarter.  Following these purchases, $95.1 million remains available under the current authorization.

Outlook

"While difficult market conditions persist in some of our businesses and the broader economy remains very sluggish, LPS with its strong market presence remains well-positioned," said Lee A. Kennedy.  "Given the current environment, we expect third quarter 2011 adjusted earnings to be in the range of 53-55 cents per diluted share."

Use of Non-GAAP Financial Information

U.S. Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting.  GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements.  In addition to reporting financial results in accordance with GAAP, LPS reports several non-GAAP measures, including "EBIT, as adjusted" (GAAP operating income adjusted for the impact of certain non-recurring adjustments, if applicable), "adjusted net earnings" (GAAP net earnings adjusted for the impact of certain non-recurring adjustments, if applicable, plus the after-tax purchase price amortization of intangible assets added through acquisitions), "adjusted net earnings per diluted share" (adjusted net earnings divided by diluted weighted average shares), and "adjusted free cash flow" (net cash provided by operating activities less additions to property, equipment and computer software, as well as non-recurring adjustments, if applicable). LPS provides these measures because it believes that they are helpful to investors in comparing year-over-year performance in light of certain non-recurring charges, and to better understand our financial performance, competitive position and future prospects.  Non-GAAP measures should be considered in conjunction with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings.  A reconciliation of these non-GAAP measures to related GAAP measures is included in the attachments to this release.

Conference Call and Webcast

LPS will host a conference call to discuss these results on Tuesday, July 26, 2011, at 8:00 a.m. ET. Interested parties are invited to listen to the live webcast by logging on to the Investor Relations section of the company's website at www.lpsvcs.com.  Supplemental materials will be available on the website.  Those wishing to participate via the conference call may do so by calling 866-823-5035.  A replay of the webcast will be available on the website shortly after the call where it will be archived for one month.  A replay of the conference call will be available through August 2, 2011 by dialing 888-203-1112 (access code: 3547305).

To access a printer friendly version of this release and accompanying exhibits, go to http://www.lpsvcs.com/investor.

About Lender Processing Services

Lender Processing Services, Inc. (LPS) is a leading provider of integrated technology, services and loan performance data and analytics to the mortgage, consumer lending, capital markets and real estate industries. LPS offers solutions that span the mortgage continuum, including lead generation, origination, servicing, workflow automation, portfolio retention and default, augmented by the company's award-winning customer support and professional services. Almost half of all U.S. mortgages are serviced using LPS' Mortgage Servicing Package (MSP). For more information about LPS, visit www.lpsvcs.com.

Forward-Looking Statements

This press release contains forward-looking statements that involve a number of risks and uncertainties. Those forward-looking statements include all statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements are based on management's beliefs, as well as assumptions made by and information currently available to management. Because such statements are based on expectations as to future economic performance and are not statements of historical fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.  The risks and uncertainties to which forward-looking statements are subject include, but are not limited to: our ability to adapt our services to changes in technology or the marketplace; the impact of adverse changes in the level of real estate activity (including among others, loan originations and foreclosures) on demand for certain of our services; our ability to maintain and grow our relationships with our customers; the effects of our substantial leverage on our ability to make acquisitions and invest in our business; the level of scrutiny being placed on participants in the foreclosure process; risks associated with federal and state inquiries and examinations currently underway or that may be commenced in the future with respect to our default management operations, and with civil litigation related to these matters; changes to the laws, rules and regulations that regulate our businesses as a result of the current economic and financial environment; changes in general economic, business and political conditions, including changes in the financial markets; the impact of any potential defects, development delays, installation difficulties or system failures on our business and reputation; risks associated with protecting information security and privacy; and other risks and uncertainties detailed in the "Statement Regarding Forward-Looking Information," "Risk Factors" and other sections of the Company's Form 10-K, the Company's subsequent reports on Form 10-Q and other filings with the Securities and Exchange Commission.

SOURCE Lender Processing Services, Inc.