Lender Processing Services, Inc. Reports Strong Fourth Quarter 2010 Earnings

JACKSONVILLE, Fla., Feb. 3, 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 $638.8 million for the fourth quarter of 2010, an increase of 5.0% compared to the fourth quarter of 2009, while net earnings of $70.7 million or 78 cents per diluted share in the fourth quarter of 2010 compared to $74.9 million or 77 cents per diluted share in the prior year quarter.

Adjusted net earnings for the fourth quarter of 2010 were $83.5 million, or 92 cents per diluted share, compared to $79.6 million, or 82 cents per diluted share in the fourth quarter of 2009, and, were higher primarily due to reduced interest expense and a lower share count.  Adjusted net earnings in the current quarter include an adjustment for purchase price amortization of 4 cents per diluted share and exclude charges of 7 cents per diluted share for a non-recurring accrual adjustment in our Loan Transaction Services segment (relating to 2007 and 2008) and 3 cents per diluted share relating to costs associated with the departure of our former CFO, while the prior year quarter included an adjustment for purchase price amortization of 5 cents per diluted share.

"LPS had a strong fourth quarter despite challenging conditions in the origination and default markets and a difficult macro-economic environment.  LPS, with its market leading presence and its broad-based technology driven solutions for the mortgage and real estate industries, remains well positioned to achieve its growth objectives in 2011 and beyond," said Lee A. Kennedy, Executive Chairman of LPS.

"Our Loan Facilitation business posted record growth in a difficult market while our Default Services business continued to be impacted by a sluggish market environment. Our Other TD&A segment continued to reflect strong growth due to additional market share gains. During 2010, we further strengthened our balance sheet and expanded our financial flexibility by paying down $40.1 million in debt. Also, we continued to be disciplined and aggressive in our capital deployment strategy by repurchasing 7.4 million shares during 2010," added Jeff Carbiener, President and CEO of LPS.

Operating income of $128.6 million in the quarter compared to $140.9 million in the fourth quarter of 2009. Adjusting for the charges noted earlier, operating income was $142.6 million in the fourth quarter of 2010.

Full year 2010 revenues of $2.5 billion were 3.6% above 2009 while net earnings of $302.3 million in 2010 compared to $275.7 million in the prior year.  Adjusted net earnings for full year 2010 of $326.4 million were a solid 8.7% higher than full year 2009.

Net cash provided by operating activities for full year 2010 was $448.7 million compared to $443.7 million in 2009.  Adjusted free cash flow (net cash provided by operating activities minus certain non-recurring expenses and additions to property, equipment and computer software) for  full year 2010 was $342.0 million compared to $349.2 million for 2009 and was lower primarily due to higher capital expenditures as well as from changes in working capital.

Technology, Data and Analytics (TD&A)

Revenues for the segment were $201.1 million compared to $189.4 million in the fourth quarter of 2009, while operating income of $60.4 million compared to $63.5 million in the prior year period.  Mortgage Processing revenues of $100.3 million compared to $104.2 million in the same period last year.  Other TD&A revenues of $100.7 million were 18.1% above the fourth quarter of 2009 primarily due to higher Desktop revenues as well as strong growth in our Other Software and Services offerings. Overall operating income for TD&A was lower compared to the prior year quarter primarily due to lower contributions from Mortgage Processing, somewhat offset by higher contributions from our Other Software and Services, and Desktop businesses.

Loan Transaction Services (LTS)

Revenues for the segment were $439.7 million compared to $421.6 million in the fourth quarter of 2009, and operating income of $105.7 million, excluding the non-recurring accrual adjustment noted earlier, compared to $97.2 million in the prior year quarter.  Loan Facilitation Services revenues of $188.3 million increased 31.8% compared to the fourth quarter of 2009.  This result compared very favorably to the Mortgage Bankers Association's (MBA) estimate of overall fourth quarter originations being lower by 24% compared to the same period last year and, this positive variance was primarily due to continued market share gains in our settlement services offerings. Default Services revenues of $251.3 million declined 9.8% compared to the fourth quarter of 2009 driven by continued delays in the initiation of foreclosure proceedings in the industry. Overall operating income for LTS grew 8.8% mainly due to higher income in Loan Facilitation Services partly offset by lower contributions from Default Services.

Corporate and Other

Net corporate expenses in the fourth quarter of 2010, excluding the personnel related charge noted earlier, were $23.5 million compared to $19.8 million in the prior year quarter and were higher primarily due to higher personnel related expenses.

The company noted that it had repurchased 2.6 million shares for $78.6 million in the fourth quarter.  Following these purchases, $171.4 million remains available under the current authorization.  

Outlook

"While the broader economy and the mortgage and real estate markets in particular were challenging in 2010, overall, we had a good year.  LPS continues to have a strong presence in each of its businesses and is well positioned to grow earnings per share in 2011," said Jeff Carbiener. "Building on the strong 2010 results, we expect first quarter 2011 adjusted earnings to be in the range of 81-84 cents per diluted share.  For full year 2011, we expect adjusted earnings to be in the $3.74 - $3.81 per diluted share range."

Use of Non-GAAP Financial Information

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 Friday, February 4, 2011, at 8:00 a.m. EST. Interested parties are invited to listen to the live webcast by logging on to the Investor Relations section 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 February 11, 2011 by dialing 888-203-1112 (access code: 4532202).

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 and services to the mortgage and real estate industries. LPS offers solutions that span the mortgage continuum, including lead generation, origination, workflow automation (Desktop), servicing, portfolio retention and default, augmented by the company's award-winning customer support and professional services. Approximately 50 percent of all U.S. mortgages by dollar volume are serviced using LPS's Mortgage Servicing Package (MSP). LPS also offers proprietary mortgage and real estate data and analytics for the mortgage and capital markets industries. 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.