CSI Reports Record Fourth Quarter and Fiscal Year 2013 Results
Net Income Increases for 16th Consecutive Year
PADUCAH, Ky. (May 9, 2013) – Computer Services, Inc. (CSI) (OTCQX: CSVI) today reported record revenues and net income for the fourth quarter and fiscal year ended February 28, 2013. The record results for fiscal 2013 marked CSI’s 13th consecutive year of revenue growth and 16th consecutive year of growth in net income.
Fourth quarter revenues rose 11.5% to a record $52.1 million in fiscal 2013 compared with $46.7 million in the fourth quarter of fiscal 2012. Net income was a record $7.3 million, or $0.50 per fully diluted share, in the fourth quarter of fiscal 2013 compared with $7.2 million, or $0.49 per fully diluted share, in the fourth quarter of fiscal 2012.
CSI’s revenues for fiscal 2013 were a record $198.3 million and rose 11.2% compared with $178.2 million for fiscal 2012. Net income for fiscal 2013 was a record $25.8 million, a 1.3% increase compared with fiscal 2012 income of $25.5 million. Net income per fully diluted share increased 2.3% to $1.76 compared with $1.72 last year.
“Our record results for fiscal 2013 benefitted from higher processing revenues generated from our core processing customers and record transaction volume from our regulatory compliance services,” stated Chief Executive Officer Steven A. Powless. “We had a record year for new bank sales, including the addition of our largest core customer in our history, a $3.4 billion bank with more than 50 branches. We also processed over 32 billion transactions during fiscal 2013.
“Our outlook for fiscal 2014 is positive based on the continued growth of our processing business, our solid base of recurring revenues, high contract renewal rates and opportunities to expand our regulatory compliance services,” continued Mr. Powless.
Fiscal 2013 Results
Consolidated revenues rose 11.2% to $198.3 million for fiscal 2013 compared with $178.2 million for fiscal 2012. CSI’s growth in revenues reflects new customers added since last year, cross-sales to existing customers, increased transaction volume from existing customers, and the contribution from the HEIT acquisition. Processing revenues rose 4.7% to $126.0 million for fiscal 2013 compared with $120.4 million for fiscal 2012. 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 2013 and 2012. Other revenues increased 24.9% to $72.3 million for fiscal 2013 compared with $57.8 million for fiscal 2012. The growth in other revenues reflected the significant growth in transactions processed for new and existing customers, increased demand for document services, continued growth in eBusiness and the contribution from the HEIT acquisition. HEIT, a provider of cloud-based managed compliance, security and IT services, was acquired September 1, 2011.
Operating expenses rose 13.5% to $156.4 million in fiscal 2013 compared with fiscal 2012. The increase in operating expense growth was due partly to higher employee-related expenses attributed to personnel additions to support our Strategic Growth Initiative (SGI) announced in early fiscal 2012, higher card-related fees due to growth in ATM and debit card processing, and to the acquisition of HEIT. Fiscal 2012 operating expenses reflect a $2.0 million non-recurring gain from the reduction in earn-out of an acquisition.
Operating income rose 3.7% to $41.9 million in fiscal 2013 compared with $40.4 million in fiscal 2012. Operating margins declined to 21.1% in fiscal 2013 compared with 22.6% in fiscal 2012. The decline in CSI’s operating margin was due primarily to staffing additions as part of SGI compared with the prior fiscal year.
Net income for fiscal 2013 rose 1.3% to $25.8 million compared with $25.5 million for fiscal 2012. Net income per fully diluted share increased 2.3% to $1.76 for fiscal 2013 compared with $1.72 for fiscal 2012. Weighted average fully diluted shares outstanding declined 0.5% from fiscal year 2012 due to CSI shares repurchased under the Company’s stock repurchase program. CSI repurchased 167,472 shares of its stock in fiscal 2013.
CSI’s cash flow from operations was $41.1 million in fiscal 2013. The Company returned a record $28.1 million to shareholders during fiscal 2013 in cash dividends and stock repurchases or otherwise redeemed. Total long-term debt was reduced to $7,000 in fiscal 2013 from $77,000 in the prior year. Cash and cash equivalents totaled $499,000 at February 28, 2013.
“We used our strong cash flow to reduce debt, repurchase CSI shares and increase our cash dividend during fiscal 2013, while investing $21 million in hardware and software to support our continued growth,” stated Mr. Powless. “We paid shareholders a record $22.5 million in cash dividends in fiscal 2013, the highest amount returned to CSI shareholders in our 48-year history. The growth in our dividend payout included a 12% increase in our quarterly cash dividend to $0.14 per share, our 24th consecutive year of increased dividends, and a special $1.00 per share cash dividend paid in December 2012. We also repurchased $5.1 million in CSI stock during the year. Our Board remains focused on building shareholder value through our cash dividend and stock repurchase programs.”
Fourth Quarter Results
Fourth quarter consolidated revenues rose 11.5% to a record $52.1 million compared with $46.7 million for the fourth quarter ended February 29, 2012. Processing revenues increased 6.5% to $32.5 million in the fourth quarter of fiscal 2013 compared with $30.5 million in the fourth quarter of fiscal 2012. Other revenues were up 21.0% to $19.6 million in the fourth quarter of fiscal 2013 compared with $16.2 million in the fourth quarter of fiscal 2012. The significant growth in other revenues benefitted from new customers for regulatory compliance services, growth in transaction volume, and higher sales of eBusiness and document services.
Fourth quarter 2013 operating expenses rose 10.3% to $40.2 million compared with $36.5 million in the fourth quarter of 2012. The increase in operating expenses was due partly to higher employee-related expenses attributed to personnel additions to support SGI, which was announced in early fiscal 2012.
Operating income for the fourth quarter rose 16.1% to $11.9 million in fiscal 2013 compared with $10.2 million in fiscal 2012. Operating margins increased to 22.8% in the fourth quarter of fiscal 2013 compared with 21.9% in the fourth quarter of fiscal 2012. The improvement in CSI’s operating margin was due primarily to growth in revenues and improved sales mix compared with the prior fiscal year’s results.
Income before taxes rose 16.0% to $11.9 million in the fourth quarter of fiscal 2013 compared with $10.2 million in the same quarter of fiscal 2012. Provision for income taxes rose to $4.5 million in the fourth quarter of fiscal 2013 compared with $3.0 million in the fourth quarter of fiscal 2012. The effective income tax rate was 38.3% in the fourth quarter of fiscal 2013 compared with 29.4% in the fourth quarter of fiscal 2012. The lower tax rate in fiscal 2012 was primarily due to deductions in fiscal 2012 related to the recharacterization of expense with respect to various stock option exercises, in addition to state income taxes and adjustments to various deferred tax assets and liabilities.
Net income for the fourth quarter of fiscal 2013 rose to $7.3 million, or $0.50 per fully diluted share, compared with $7.2 million, or $0.49 per fully diluted share, for the fourth quarter of fiscal 2012.
About Computer Services, Inc.
Computer Services, Inc. (CSI) delivers core processing, managed services, mobile and Internet solutions, payments processing, print and electronic distribution, and regulatory 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, and have resulted in the company’s inclusion in such top industry-wide rankings as the FinTech 100, Talkin’ Cloud 100 and MSPmentor Top 501 Global Managed Service Providers List. CSI’s stock is traded on OTCQX under the symbol CSVI. For more information about CSI, visit www.csiweb.com.
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 Annual Report, Quarterly Report, Information and Disclosure Statements and other documents posted from time to time on the OTCQX website (www.otcqx.com), 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 report 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.