EX-99.1 3 dex991.htm PRESS RELEASE Press Release

EXHIBIT 99.1

PRESS RELEASE DATED FEBRUARY 19, 2003

 

 

[SOURCECORP LOGO]

 

 

SOURCECORPTM REPORTS 2002 FOURTH QUARTER AND YEAR-END RESULTS

 

Company Provides Increased Outlook for Q1 and Initial Outlook for Q2 and 2003 Full Year

 

DALLAS, February 19, 2003 – SOURCECORPTM (Nasdaq: SRCP), one of the nation’s leading providers of business process outsourcing solutions, today reported 2002 annual revenues of $429.4 million and diluted earnings per share of $1.65. Compared with pro-forma 2001 annual results, revenues increased 2.4 percent and diluted earnings per share decreased 25 percent. Fourth quarter 2002 revenues and diluted earnings per share were $112.8 million and $.45, respectively, both at the upper end of the increased guidance for the quarter provided by the Company last month.

 

Summary of Financial Highlights (1)

(in $ millions, except for earnings per share data)

(Unaudited)

 

Fourth Quarter

       

Full Year

2002
GAAP

   

2001

     

2002 GAAP vs.

2001 Pro-forma

       

2002 GAAP

   

2001

       

2002 GAAP vs.
2001 Pro-forma

  

Pro-forma (2)

   

GAAP

               

Pro-forma (2)

   

GAAP

       

$112.8

   

$

99.7

   

$

99.7

     

13%

  

Revenue

   

$

429.4

   

$

419.4

   

$

454.7

 

     

    2%

14.2

   

 

11.3

   

 

8.8

     

26%

  

Operating
Income

   

 

53.4

   

 

69.4

   

 

(6.7

)

     

-23%

7.8

   

 

6.0

   

 

4.3

     

30%

  

Net Income

   

 

29.0

   

 

38.4

   

 

(18.1

)

     

-24%

$0.45

   

$

0.34

   

$

0.25

     

32%

  

Diluted EPS

   

$

1.65

   

$

2.20

   

$

(1.08

)

     

-25%

 

(1) Except as noted, all amounts are being reported using U.S. generally accepted accounting principals (GAAP).

(2) 2001 GAAP amounts have been adjusted to provide year-over-year comparability. Refer to the attached income statements for a detailed explanation of pro-forma adjustments.

 

“SOURCECORP extended its sequential improvement in financial performance with fourth quarter revenues and earnings per share results,” said Ed H. Bowman, Jr., President and CEO of SOURCECORP. “Revenue has increased four quarters and net income and earnings per share have grown three consecutive quarters.

 

“During 2002, the Company closed new sales expected to produce total revenues of approximately $139 million. All of our divisions showed solid profits for the year and annual cash flow from operations grew to a record $67.8 million. We reduced our debt by $26.6 million and our debt to total capital ratio to 23 percent during the year.

 

“During 2003, we plan to increase our investments in our Information Management national sales organization to pursue more large contract wins and invest in new sales resources in our legal claims business to broaden our high-margin project services and market coverage in this area. We also expect to continue making investments in technology that began during 2002 and Fastrieve, our electronic document repository, to reduce our overall labor costs and further strengthen and integrate our service platform.”

 

Outlook for First and Second Quarters and Full Year of 2003

 

The Company is providing its 2003 guidance as follows:

 

First Quarter, 2003 –

 

The Company is raising it’s previous guidance for first quarter revenues to $105 to $110 million from $104 to $108 million and diluted earnings per share to $.43 to $.47 from $.40 to $.46 to account for 1) the extension of work under the New York HRA contract, 2) strong seasonal first quarter performance from the Statement Solutions business and 3) increased overall visibility for the quarter.

 

Second Quarter, 2003 –

 

The Company is issuing initial guidance for the second quarter to include revenues of $100 to $105 million and diluted earnings per share of $.34 to $.40. This guidance includes, in particular 1) the expected impact of the end of the New York HRA and 2) Statement Solutions returning to normalized run-rates following the completion of year-end reports and annual statements during the first quarter.

 

Full Year 2003 –

 

The Company is issuing initial guidance for the full year 2003 to include revenues of $425 to $450 million, diluted earnings per share of $1.60 to $1.75 and annual cash flow from operations of $60 to $65 million.

 

In addition to the aforementioned, this 2003 guidance includes the expected impact of the following significant factors: 1) the increase in the annual effective income tax rate to 40% from 38% due to the Company’s expected income mix increasing in higher tax states, an anticipated impact of about $.05 in diluted earnings per share, 2) investments across our businesses during 2003 described above, and 3) internal revenue and earnings growth from our businesses and corporate initiatives to make up for the loss of the New York HRA contract.

 

Mr. Bowman concluded, “We have made solid progress throughout 2002, winning larger contracts and increasing revenue and earnings per share in the continuing uncertain business environment. We feel confident that the investments we expect to make in our business during 2003 will best position it for internal growth, margin expansion and strong competitive market

 

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presence for 2004 and beyond. We remain very positive about SOURCECORP and our long-term prospects as commercial and public sector enterprises expand the use of business process outsourcing to help achieve their goals, reducing costs and allowing them to focus on their core competencies.”

 

ABOUT SOURCECORPTM

 

SOURCECORP, Incorporated is a leading provider of value-added business process outsourcing solutions to clients nationwide. SOURCECORP targets information intensive, technology oriented, application driven industry segments, such as healthcare, legal, financial services and government, leveraging its expertise and experience in business processes for these and other similar business profiles. Headquartered in Dallas, the Company employs approximately 9,000 people and operates in over 40 states, Washington D.C. and Mexico.

 

SOURCECORP is a component of both the S&P SmallCap 600 Index and the Russell 2000 Index. In June 2001, the Company was cited among the Top 100 Hot Growth Companies by BusinessWeek magazine. SOURCECORP has previously been recognized twice by Forbes magazine as one of the 200 Best Small Companies, based on return equity, sales growth, and EPS growth, and by FORTUNE magazine as one of America’s 100 Fastest Growing Public Companies. For more information about SOURCECORP’s solutions, including case-study examples, visit the SOURCECORP website at www.srcp.com.

 

The statements in this press release, which are not historical fact, are forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from such forward-looking statements. These forward-looking statements include, but are not limited to, any financial estimates and projections included in this press release and the Company disclaims any intention or obligation to update or revise such estimates or forecasts, except as required by law. The aforementioned risks and uncertainties include, but are not limited to, the risks of integrating our operating companies, of managing our growth, of the timing and magnitude of technological advances, of the occurrences of future events that could diminish our existing customers’ needs for our services, of a change in the degree to which companies continue to outsource business processes, as well as the risks detailed in SOURCECORP’s filings with the Securities and Exchange Commission, including without limitation, those detailed under the heading “Risk Factors” in the company’s most recent annual report on Form 10-K. SOURCECORP disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events, or otherwise, except as required by law.

 

Contacts:

   

Barry Edwards, EVP & Chief Financial Officer: 214.740.6690

    

Lon Baugh, Director, Investor Relations: 214.740.6683

 

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SOURCECORP™

Summary of Financial Data

In Thousands (Except Earnings Per Share)

(Unaudited)

 

    

Three Months Ended

    

December 31,

   

September 30,

    

2002

   

2002

    

Actual

   

Actual

Total Revenue

   

$

112,844

   

$

107,465

Cost of Services

   

 

69,183

   

 

64,683

Depreciation

   

 

3,612

   

 

3,578

    
  

Gross Profit

   

 

40,049

   

 

39,204

SG&A

   

 

25,774

   

 

25,154

Amortization

   

 

89

   

 

89

    
  

Operating Income

   

 

14,186

   

 

13,961

Other (income) expense

   

 

1,547

   

 

1,602

    
  

Income before income taxes

   

 

12,639

   

 

12,359

Provision for income taxes

   

 

4,803

   

 

4,696

    
  

Net Income

   

$

7,836

   

$

7,663

    
  

Weighted Avg. Shares

              

Basic

   

 

17,378

   

 

17,358

Diluted

   

 

17,373

   

 

17,369

Earnings Per Share

              

Basic

   

$

0.45

   

$

0.44

    
  

Diluted

   

$

0.45

   

$

0.44

    
  

 

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SOURCECORP™

Summary of Financial Data

In Thousands (Except Earnings Per Share)

(Unaudited)

 

    

Year Ended

  
    

December 31,

  
    

2002

   

2001

  
    

GAAP

   

Pro-Forma

     

Adjustments (1),(2)

     

GAAP

  

Total Revenue

   

$

429,380

   

$

419,400

     

$

(35,295

)

   

$

454,695

 

Cost of Services

   

 

259,399

   

 

245,503

     

 

(26,973

)

   

 

272,476

 

Special Charges

   

 

—  

   

 

—  

     

 

(417

)

   

 

417

 

Depreciation

   

 

14,284

   

 

13,075

     

 

(1,557

)

   

 

14,632

 

    
  
    
  

Gross Profit

   

 

155,697

   

 

160,822

     

 

(6,348

)

   

 

167,170

 

SG&A

   

 

101,956

   

 

91,456

     

 

(10,177

)

   

 

101,633

 

Special Charges

   

 

—  

   

 

—  

     

 

(62,167

)

   

 

62,167

 

Amortization

   

 

356

   

 

—  

     

 

(10,032

)

   

 

10,032

 

    
  
    
  

Operating Income

   

 

53,385

   

 

69,366

     

 

76,028

 

   

 

(6,662

)

Other (income) expense

   

 

6,599

   

 

8,954

     

 

(409

)

   

 

9,363

 

    
  
    
  

Income before income taxes

   

 

46,786

   

 

60,412

     

 

76,437

 

   

 

(16,025

)

Provision for income taxes

   

 

17,779

   

 

22,050

     

 

19,926

 

   

 

2,124

 

    
  
    
  

Net Income

   

$

29,007

   

$

38,362

     

$

56,511

 

   

$

(18,149

)

    
  
    
  

Weighted Avg. Shares

                                  

Basic

   

 

17,334

   

 

16,748

              

 

16,748

 

Diluted

   

 

17,609

   

 

17,402

              

 

16,748

 

Earnings Per Share

                                  

Basic

   

$

1.67

   

$

2.29

              

$

(1.08

)

    
  
             

Diluted

   

$

1.65

   

$

2.20

              

$

(1.08

)

    
  
             

 

Operating results for 2001 include the following pro-forma adjustments in order to provide year-over-year comparability:

 

(1)   2001 strategic realignment plan
  Ÿ   Operating results of businesses divested in the second and third quarters of 2001;
  Ÿ   Acceleration of unamortized deferred debt costs associated with the credit facility terminated by the Company in April 2001.

 

(2)   Adoption of new accounting pronouncement
  Effective   January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 142 discontinues amortization expense of goodwill and other intangible assets with indefinite useful lives on a prospective basis. For comparative purposes, goodwill amortization expense and the related tax benefit have been excluded for the year ended December 31, 2001.

 

-5-

 

SOURCECORP™

Summary of Financial Data

In Thousands (Except Earnings Per Share)

(Unaudited)

 

    

Three Months Ended

    

December 31,

    

2002

   

2001

    

GAAP

   

Pro-Forma

     

Adjustments(1)

     

GAAP

Total Revenue

   

$

112,844

   

$

99,683

     

 

—  

 

   

$

99,683

Cost of Services

   

 

69,183

   

 

60,664

     

 

—  

 

   

 

60,664

Depreciation

   

 

3,612

   

 

3,429

     

 

—  

 

   

 

3,429

    
  
    
  

Gross Profit

   

 

40,049

   

 

35,590

     

 

—  

 

   

 

35,590

SG&A

   

 

25,774

   

 

24,264

     

 

—  

 

   

 

24,264

Amortization

   

 

89

   

 

—  

     

 

(2,526

)

   

 

2,526

    
  
    
  

Operating Income

   

 

14,186

   

 

11,326

     

 

2,526

 

   

 

8,800

Other (income) expense

   

 

1,547

   

 

1,825

     

 

—  

 

   

 

1,825

    
  
    
  

Income before income taxes

   

 

12,639

   

 

9,501

     

 

2,526

 

   

 

6,975

Provision for income taxes

   

 

4,803

   

 

3,468

     

 

817

 

   

 

2,651

    
  
    
  

Net Income

   

$

7,836

   

$

6,033

     

$

1,709

 

   

$

4,324

    
  
    
  

Weighted Avg. Shares

                                

Basic

   

 

17,378

   

 

17,271

              

 

17,271

Diluted

   

 

17,373

   

 

17,637

              

 

17,637

Earnings Per Share

                                

Basic

   

$

0.45

   

$

0.35

              

$

0.25

    
  
             

Diluted

   

$

0.45

   

$

0.34

              

$

0.25

    
  
             

 

(1)   Adoption of new accounting pronouncement
  Effective   January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 142 discontinues amortization expense of goodwill and other intangible assets with indefinite useful lives on a prospective basis. For comparative purposes, goodwill amortization expense and the related tax benefit have been excluded for the three months ended December 31, 2001.

 

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SOURCECORP™

CONSOLIDATED BALANCE SHEETS

In Thousands

(Unaudited)

 

ASSETS

   

December 31, 2002

     

December 31, 2001

  

CURRENT ASSETS

                  

Cash

   

$

3,217

 

   

$

7,182

 

Accounts receivable (net)

   

 

78,160

 

   

 

88,547

 

Deferred tax asset

   

 

8,254

 

   

 

9,805

 

Other current

   

 

6,247

 

   

 

8,999

 

    
  

Total current assets

   

 

95,878

 

   

 

114,533

 

Property, plant & equipment (net)

   

 

40,581

 

   

 

41,942

 

Goodwill and other intangibles (net)

   

 

321,574

 

   

 

298,519

 

Other noncurrent

   

 

8,382

 

   

 

8,077

 

    
  

Total Assets

   

$

466,415

 

   

$

463,071

 

    
  

LIABILITIES AND STOCKHOLDERS’ EQUITY

                  

CURRENT LIABILITIES

                  

Accounts payable and accrued liabilities

   

$

55,431

 

   

$

51,087

 

Current maturities of long-term obligations

   

 

113

 

   

 

324

 

Income taxes payable, current and deferred

   

 

142

 

   

 

4,588

 

    
  

Total current liabilities

   

 

55,686

 

   

 

55,999

 

Long-term debt

   

 

89,640

 

   

 

116,055

 

Deferred taxes and other long-term liabilities

   

 

17,613

 

   

 

19,844

 

    
  

Total Liabilities

   

 

162,939

 

   

 

191,898

 

STOCKHOLDERS’ EQUITY

                  

Common stock

   

 

175

 

   

 

174

 

Additional paid-in-capital

   

 

206,467

 

   

 

204,086

 

Treasury stock

   

 

(982

)

   

 

(982

)

Other Comprehensive Income

   

 

(329

)

   

 

(1,242

)

Retained earnings

   

 

98,145

 

   

 

69,137

 

    
  

Total stockholders’ equity

   

 

303,476

 

   

 

271,173

 

Total liabilities and stockholders’ equity

   

$

466,415

 

   

$

463,071

 

    
  

 

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SOURCECORP™

CONSOLIDATED STATEMENT OF CASH FLOWS

In Thousands

(Unaudited)

 

    

Year Ended

  
    

December 31,

  
    

2002

     

2001

  

Net Income (loss)

   

$

29,007

 

   

$

(18,149

)

Adjustments to reconcile net income (loss) to cash provided by operating activities

                  

Non-cash loss from divestitures & closures

   

 

—  

 

   

 

54,559

 

Depreciation and amortization

   

 

14,640

 

   

 

24,664

 

Deferred tax provision (benefit)

   

 

11,390

 

   

 

(7,572

)

Loss on sale of property, plant, and equipment

   

 

243

 

   

 

—  

 

Changes in working capital

   

 

12,493

 

   

 

502

 

    
  

Net cash provided by operating activities

   

 

67,773

 

   

 

54,004

 

Net cash used for investing activities

   

 

(44,720

)

   

 

(60,701

)

Net cash (used for) provided by financing activities

   

 

(27,018

)

   

 

4,375

 

    
  

Net decrease in cash and cash equivalents

   

 

(3,965

)

   

 

(2,322

)

Cash and cash equivalents, beginning of period

   

 

7,182

 

   

 

9,504

 

    
  

Cash and cash equivalents, end of period

   

$

3,217

 

   

$

7,182

 

    
  

 

 

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