EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: John Mongelli
Investor Relations
(770) 752-6171
CHOICEPOINT(R) REPORTS RECORD SECOND QUARTER CORE REVENUE
ALPHARETTA, GA. - JULY 22, 2003- ChoicePoint Inc. (NYSE: CPS), today reported
record second quarter total revenue of $199.2 million resulting in revenue
growth over the comparable period of 2002 of 9 percent. Excluding $10.4 million
of reimbursable expenses grossed up as revenue under EITF 01-14, second quarter
core revenue was $188.8 million. This core revenue represents a 10 percent
increase over comparable revenue in the second quarter of 2002.
During the second quarter of 2003, the Company recorded a $19.8 million ($12.2
million after tax) charge related to the realignment of certain of its
operations subsequent to the sale of its CP Commercial Specialists ("CPCS")
business, the opening of its new data center and the consolidation of some of
its public records and drug testing operations. Total earnings per share ("EPS")
for the second quarter was $0.23 per share which includes the $0.14 per share
dilutive effect of the aforementioned charge. Excluding the effect of this
charge, EPS would have been $0.37 per share.
"I am very pleased with our ability to continue delivering strong results
despite difficult operating conditions," commented Derek V. Smith, Chairman and
CEO. "During the quarter, the team did a great job of flexing our cost structure
to deliver strong profitability. Additionally, we continued to position
ourselves for strong future growth through our new product initiatives, customer
additions and business development efforts."
Chief Financial Officer Steve Surbaugh added, "Once again this quarter we
delivered record revenues, strong earnings and outstanding cash flows. With a
low net debt-to-capital ratio of 10 percent and record DSO levels this quarter,
our balance sheet provides us significant financial flexibility to execute our
operating and acquisition strategies."
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FINANCIAL HIGHLIGHTS
- - Core revenue increased 10 percent to $188.8 million for the second
quarter of 2003 from $172.2 million for the second quarter of 2002,
including an internal revenue growth rate of 2.4 percent (which
represents core revenue less revenue from acquisitions). Second quarter
2003 total revenue increased 9 percent to $199.2 million from $182.2
million in 2002.
- - Operating income was $34.7 million for the second quarter of 2003
compared to $38.7 million for the second quarter of 2002. Excluding the
realignment charges discussed below, operating income was $54.5 million
for the second quarter of 2003, an increase of 18 percent from $46.1
million in 2002.
- - In the second quarter of 2003, the Company recorded a pre-tax charge of
$19.8 million ($12.2 million net of taxes) intended to realign our
technology infrastructure and operations following the divestiture of
our CPCS business, the transition to our new data center and the
further consolidation of some of our public records and drug testing
operations. Due to recent changes in accounting principles which
preclude recognition until specific conditions or events occur, the
Company also anticipates recording an additional pre-tax realignment
charge of $5 million to $7 million in connection with this realignment
during the second half of the year. During the second quarter of 2002,
the Company recorded a pre-tax charge of $7.3 million ($4.5 million net
of taxes) primarily related to a write-down of minority investments in
start-up companies and expenses primarily related to the closure of two
facilities and remaining obligations.
- - Free cash flow (net cash provided by operating activities of continuing
operations of $62.9 million less capital expenditures of $9.0 million)
was a very strong $53.9 million for the second quarter of 2003, an
increase of $36.5 million compared to $17.4 million for the second
quarter of 2002.
- - Net debt (total debt less cash) for the six months ended June 30, 2003,
decreased by $66.5 million to $81.6 million as we used proceeds from
the sale of CPCS in the first quarter and cash from operations to pay
down debt. Our additional remaining debt capacity under our committed
financing lines is approximately $340 million.
- - In the second quarter, ChoicePoint acquired Mortgage Asset Research
Institute, Inc., which operates databases that help monitor and
identify fraud, misrepresentation and
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misconduct in the mortgage industry based in Reston, Virginia, and made
a minority investment in Logistics Health, Inc., which provides third
party administrative support services to employers requiring
occupational medical services, based in La Crosse, Wisconsin.
OPERATIONAL HIGHLIGHTS
INSURANCE SERVICES
- - Total revenue increased 16 percent to $77.9 million in the second
quarter of 2003 compared to $67.0 million in the prior year, including
an internal revenue growth rate of 15 percent. These results exclude
CPCS which was sold in February 2003 and is reported as discontinued
operations in the accompanying financial information. The 2003 results
were positively impacted by the continued marketplace acceptance of new
products and increased unit volumes in the personal lines business and
the continued expansion of our business outsourcing product line at
Insurity.
- - Operating income in Insurance Services was $44.4 million for the second
quarter of 2003, up 25 percent from $35.5 million in the prior year.
Operating profit margin in Insurance Services for the quarter was 56.9
percent, 390 basis points above 53.0 percent in the second quarter of
2002 and 120 basis points above the first quarter of 2003. The increase
in operating income is due primarily to the revenue growth discussed
above and product mix.
BUSINESS & GOVERNMENT SERVICES
- - Total revenue increased 11 percent to $83.8 million in 2003 in the
second quarter of 2003 compared to $75.7 million in the prior year
primarily due to revenue from acquisitions and moderate growth in our
backgrounds products offset by declines in our public records, drug
testing and nursery product lines and the continued delay in the
release of NIJ (National Institute of Justice) funds to the states for
DNA testing by labs such as Bode. Internal revenue declined 2 percent
for the second quarter of 2003 over the comparable period in 2002.
- - Operating income in Business & Government Services was $18.6 million
for the second quarter of 2003, up 8 percent from $17.3 million in the
prior year due to our continued focus on cost controls and income from
some of our recent acquisitions. Operating profit margin in
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Business & Government Services for the second quarter of 2003 was 22.2
percent, down 60 basis points from 22.8 percent for the prior year, but
an improvement of 300 basis points over first quarter margin of 19.2
percent as cost control initiatives have begun to positively impact our
financial results.
MARKETING SERVICES
- - In the second quarter of 2003, revenue excluding reimbursable expenses
decreased 8 percent over the prior year from $28.0 million in 2002 to
$25.7 million in 2003. Improved data sales and call center revenues
offset a softness in demand for our print services and e-mail marketing
products. The internal revenue declined 14 percent. Total revenue for
the segment decreased 5 percent from $37.9 million in 2002 to $36.1
million in 2003. The Company excludes the revenue from reimbursable
expenses in its operational analyses because these items are fully
reimbursed by our customers without markup and have no impact on
operating income, net income, EPS, cash flows or the balance sheet.
- - Operating income in Marketing Services was $7.4 million for the second
quarter of 2003, down 20 percent from $9.2 million in the prior year.
Second quarter operating profit margin, as a percentage of revenue
without reimbursable expenses, was 28.7 percent (20.4 percent of total
revenue), up 170 basis points from the first quarter of 2003. Despite
revenue weakness in the quarter, this continues to be a highly
profitable business for us.
OUTLOOK
Based on recent operating and economic conditions, ChoicePoint continues to
expect full year core revenue growth to be in the 10 to 12 percent range.
Additionally, the Company expects year-over-year margin expansion of 100 to 200
basis points based on these revenue assumptions and lower costs associated with
the cost reduction initiatives taken in the second quarter of 2003.
WEBCAST
ChoicePoint's second quarter results will be discussed in more detail on July
22, 2003, at 8:30 am EDT via teleconference. The live audio Webcast of the call
will be available on
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ChoicePoint's Web site at www.choicepoint.com. There will
also be a replay of the call available beginning at approximately 10:00 am EDT
at the same Web address.
About ChoicePoint
ChoicePoint Inc. (NYSE: CPS) is the leading provider of identification and
credential verification services for making smarter decisions in a world
challenged by increased risks. Serving the needs of business, government,
non-profit organizations and individuals, ChoicePoint works to create a safer
and more secure society through the responsible use of information while
ensuring the protection of personal privacy. For more information about
ChoicePoint, visit the company's Web site at www.choicepoint.com.
Forward-Looking Statements
Certain written statements in this release and oral statements made by or on
behalf of the Company may constitute "forward-looking statements" as defined
under the Private Securities Litigation Reform Act of 1995. Words or phrases
such as "should result," "are expected to," "we anticipate," "we estimate," "we
project," or similar expressions are intended to identify forward-looking
statements. These statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those expressed in any
forward-looking statements. These risks and uncertainties include, but are not
limited to, the following important factors: demand for the Company's services,
product development, maintaining acceptable margins, ability to control costs,
the impact of federal, state and local regulatory requirements on the Company's
business, including the public records market and privacy matters affecting the
Company, the impact of competition and the uncertainty of economic conditions in
general. Additional information concerning these and other risks and
uncertainties is contained in the Company's filings with the Securities and
Exchange Commission, including the Company's Annual Report on Form 10-K for the
year ended December 31, 2002. Readers are cautioned not to place undue reliance
on forward-looking statements, since the statements speak only as of the date
that they are made, and the Company undertakes no obligation to publicly update
these statements based on events that may occur after the date of this press
release.
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CHOICEPOINT INC.
Financial Highlights
(Unaudited) Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
(Dollars in thousands, except per share data) 2003 2002 2003 2002
-------- -------- -------- --------
Core revenue (a) ........................................................ $188,779 $172,236 $372,784 $330,806
Revenue from divested and discontinued product lines .................... -- -- -- 72
-------- -------- -------- --------
Revenue from products and services ...................................... 188,779 172,236 372,784 330,878
Reimbursable expenses per EITF 01-14 (b) ................................ 10,470 9,923 21,414 19,942
-------- -------- -------- --------
Total revenue ........................................................... 199,249 182,159 394,198 350,820
======== ======== ======== ========
Cost of services ........................................................ 98,987 89,068 198,773 173,082
Reimbursable expenses ................................................... 10,470 9,923 21,414 19,942
Selling, general and administrative expenses ............................ 35,312 37,093 67,728 67,499
Other operating charges (c) ............................................. 19,817 7,342 19,817 7,342
-------- -------- -------- --------
Total costs and expenses ................................................ 164,586 143,426 307,732 267,865
Operating income ........................................................ 34,663 38,733 86,466 82,955
Interest expense ........................................................ (810) (2,369) (1,816) (4,655)
-------- -------- -------- --------
Income from continuing operations before income taxes ................... 33,853 36,364 84,650 78,300
Provision for income taxes .............................................. 13,000 13,958 32,506 30,055
-------- -------- -------- --------
Income from continuing operations ....................................... 20,853 22,406 52,144 48,245
Income from discontinued operations, net of taxes (d) ................... -- 1,707 991 3,282
Gain on sale of discontinued operations, net of taxes (d) ............... -- -- 32,893 --
Cumulative effect of change in accounting principle, net of taxes (e) ... -- -- -- (24,416)
-------- -------- -------- --------
Net income .............................................................. $ 20,853 $ 24,113 $ 86,028 $ 27,111
======== ======== ======== ========
EPS - diluted (f):
Income from continuing operations ................................. $ 0.23 $ 0.25 $ 0.58 $ 0.54
Discontinued operations, net of taxes ............................. -- 0.02 0.01 0.04
Gain on sale of discontinued operations, net of taxes ............. -- -- 0.37 --
Cumulative effect of change in accounting principle, net of taxes . -- -- -- (0.28)
-------- -------- -------- --------
Net Income ........................................................ $ 0.23 $ 0.27 $ 0.96 $ 0.30
======== ======== ======== ========
Weighted average shares - diluted (f) ................................. 89,354 89,692 89,379 89,330
======== ======== ======== ========
EBITDA (g) .............................................................. $ 47,800 $ 49,171 $112,994 $103,976
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CHOICEPOINT INC.
Financial Highlights (continued)
RECONCILIATION TO FINANCIAL INFORMATION EXCLUDING OTHER OPERATING CHARGES(C)
(Unaudited) Three Months Ended Six Months Ended
June 30, June 30,
--------------------- -----------------------
(Dollars in thousands, except per share data) 2003 2002 2003 2002
------- ------- -------- --------
Operating income ........................................................ $34,663 $38,733 $ 86,466 $ 82,955
Add back other operating charges (c) .................................... 19,817 7,342 19,817 7,342
------- ------- -------- --------
Operating income before other operating charges ......................... 54,480 46,075 106,283 90,297
Interest Expense ........................................................ (810) (2,369) (1,816) (4,655)
------- ------- -------- --------
Income from continuing operations before income taxes & other
operating charges ..................................................... 53,670 43,706 104,467 85,642
Provision for income taxes .............................................. 20,609 16,776 40,115 32,873
------- ------- -------- --------
Income from continuing operations before other operating charges ........ $33,061 $26,930 $ 64,352 $ 52,769
======= ======= ======== ========
Effective tax rate ...................................................... 38.4% 38.4% 38.4% 38.4%
Earnings per share - diluted excluding other operating charges .......... $ 0.37 $ 0.30 $ 0.72 $ 0.59
EBITDA excluding other operating charges (g) ............................ $67,617 $56,513 $132,811 $111,318
(a) Core revenue excludes revenue from reimbursable expenses (see (b)
below) and divested and discontinued product lines. The Company uses
the core revenue metric to measure its continuing operations without
the effect of reimbursable expenses.
(b) Reimbursable expenses per Emerging Issues Task Force ("EITF") 01-14
represent out-of-pocket expenses fully reimbursed by ChoicePoint's
customers and recorded as revenues and expenses in accordance with EITF
01-14 "Income Statement Characterization of Reimbursements Received for
`Out-of-Pocket' Expenses Incurred". As these expenses are fully
reimbursed, without mark-up, by our customers and in a majority of
cases prepaid by the customers, there is no impact on operating income,
net income, EPS, cash flows or the balance sheet. In addition,
management excludes these expenses from its revenue analysis for
operational management and incentive purposes; therefore, we have
separately identified these expenses and excluded the impact of them
from calculations of core revenue, internal revenue growth and
operating margins. Other pass-through expenses such as motor vehicle
registry fees will continue to be accounted for on a net basis and, as
such, excluded from revenues in our financial statements in accordance
with generally accepted accounting principles. Second quarter
pass-through expenses totaled $150.4 million in 2003 and $120.1 million
in 2002. Pass-through expenses totaled $300.3 million for the six
months ended June 30, 2003 and $235.3 million for the six months ended
June 30, 2002.
(c) During the second quarter of 2003, the Company recorded other operating
charges of $19.8 million ($12.2 million net of taxes) as a result of
the realignment of our technology infrastructure and operations
following the divestiture of our CPCS business, the transition to our
new data center and the further consolidation of some of our public
records and drug testing operations. This charge included asset
impairments of $12.5 million primarily related to closed facilities or
abandoned technology in the realignment, $2.8 million in severance and
termination benefits, and $4.5 million of abandoned lease and other
contractual commitments. During the second quarter of 2002, the Company
recorded other operating charges of $7.3 million ($4.5 million net of
taxes). This charge included a write-down of minority investments in
start-up companies of $2.4 million, asset impairments of technology
initiatives of $3.0 million, $0.5 million in severance and termination
benefits and $1.4 million of expenses primarily related to the closure
of two facilities and remaining obligations. The Company has presented
analysis with and without these items because they represent costs that
management excludes in its assessments of operating results and in
determining operational incentive awards.
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(d) On February 28, 2003, the Company sold its CPCS operating unit. The
pre-tax proceeds from the sale of CPCS were approximately $87 million.
CPCS is reported as a discontinued operation for all periods presented
and the results of its operations are reflected separately from the
results of continuing operations.
(e) The change in accounting principle, net of taxes represents the
goodwill impairment charge recorded by the Company retroactive to
January 1, 2002 in accordance with Financial Accounting Standards Board
("FASB") Statement No. 142, "Goodwill and Other Intangible Assets,"
("FASB Statement No. 142").
(f) Earnings per share and weighted average shares reflect the 4-for-3
stock split paid on June 6, 2002.
(g) Earnings before interest, taxes, depreciation and amortization
("EBITDA"), is not presented as a substitute for operating income, net
income or cash flows from operating activities. The Company has
included EBITDA data (which are not a measure of financial performance
under generally accepted accounting principles) because such data are
used by the Company to compare its performance to its competitors and
to manage its on-going business and is also used by certain investors
to analyze and compare companies on the basis of operating performance,
leverage and liquidity, and to determine a company's ability to service
debt.
CHOICEPOINT INC.
Financial Highlights (continued)
(Unaudited) Six Months Ended
June 30,
-------------------------------
(Dollars in thousands) 2003 2002
---------- ----------
CASH FLOW HIGHLIGHTS
Income from continuing operations ......................................... $ 52,144 $ 48,245
Depreciation & amortization ............................................... 26,528 21,021
Changes in assets & liabilities and other ................................. 15,414 (14,239)
---------- ----------
Net cash provided by operating activities of continuing operations ........ $ 94,086 $ 55,027
Net cash (used) provided by activities of discontinued operations ......... $ (34,802) $ 4,388
Acquisitions & investments, net of cash acquired .......................... $ (63,383) $ (35,000)
Cash proceeds from sale of business ....................................... 87,000 --
Capital expenditures ...................................................... (21,671) (26,197)
Other investing activities ................................................ -- --
---------- ----------
Net cash provided (used) by investing activities .......................... $ 1,946 $ (61,197)
Net cash used by financing activities ..................................... $ (87,986) $ (15,646)
KEY BALANCE SHEET HIGHLIGHTS June 30, 2003
-------------
Debt.................................................................. $ 89,219
Cash.................................................................. 7,603
---------
Debt (net of cash).................................................... $ 81,616
Shareholders' Equity.................................................. $ 719,687
Days sales outstanding (adjusted for pass through expenses)........... 39 days
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CHOICEPOINT INC.
2003 SEGMENT RESULTS
Q1 2003 Q2 2003
---------- ----------
REVENUE
Insurance Services $ 76,134 $ 77,922
Business & Government Services 80,995 83,792
Marketing Services 25,573 25,676
Royalty 1,303 1,389
---------- ----------
Core Revenue 184,005 188,779
Divested & Discontinued Product Lines -- --
---------- ----------
Revenue from products and services 184,005 188,779
Reimbursable Expenses per EITF 01-14 10,944 10,470
---------- ----------
Total Revenue $ 194,949 $ 199,249
========== ==========
OPERATING INCOME
Insurance Services $ 42,436 $ 44,364
Business & Government Services 15,571 18,585
Marketing Services 6,908 7,374
Royalty 646 626
Income from Reimbursable Expenses -- --
Divested & Discontinued Product Lines -- --
Corporate & Shared Expenses (a) (13,758) (16,469)
---------- ----------
Operating Income before other charges (b) $ 51,803 $ 54,480
========== ==========
Other operating charges (b) -- (19,817)
---------- ----------
Operating Income $ 51,803 $ 34,663
========== ==========
CORE REVENUE (REVENUE W/O REIMBURSABLE
EXPENSES AND DIVESTED & DISCONTINUED PRODUCT
LINES) GROWTH RATE 16.0% 9.6%
INTERNAL REVENUE GROWTH RATES
Insurance Services 17.2% 15.0%
Business & Government Services 3.9% -2.5%
Marketing Services -2.4% -13.6%
Continuing operations 8.1% 2.4%
OPERATING MARGINS
Insurance Services 55.7% 56.9%
Business & Government Services 19.2% 22.2%
Marketing Services 27.0% 28.7%
Operating income before other operating 28.2% 28.9%
charges, percentage of revenue from
products and services (b)
Operating income, as a percentage of
total revenue 26.6% 17.4%
(a) Corporate and shared expenses represent costs of support functions,
research and development initiatives, incentives and profit sharing
that benefit all three segments.
(b) The Company has presented analysis above with and without these items
because they represent costs that management excludes in its
assessments of operating results and in determining operational
incentive awards.
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CHOICEPOINT INC.
2002 SEGMENT RESULTS
Q1 2002 Q2 2002 Q3 2002 Q4 2002 Total 2002
-------- -------- -------- -------- --------
REVENUE
Insurance Services $ 64,140 $ 67,031 $ 70,495 $ 68,616 $270,282
Business & Government Services 69,116 75,713 79,307 84,625 308,761
Marketing Services 23,717 27,950 27,467 26,699 105,833
Royalty 1,597 1,542 1,563 1,153 5,855
-------- -------- -------- -------- --------
Core revenue 158,570 172,236 178,832 181,093 690,731
Divested & Discontinued Product Lines 72 -- -- -- 72
-------- -------- -------- -------- --------
Revenue from products and services 158,642 172,236 178,832 181,093 690,803
Reimbursable Expenses per EITF 01-14 10,019 9,923 10,098 8,480 38,520
-------- -------- -------- -------- --------
Total Revenue $168,661 $182,159 $188,930 $189,573 $729,323
======== ======== ======== ======== ========
OPERATING INCOME
Insurance Services $ 35,024 $ 35,502 $ 37,163 $ 36,950 $144,639
Business & Government Services 12,520 17,293 19,549 20,062 69,424
Marketing Services 7,405 9,232 8,509 7,720 32,866
Royalty 997 933 932 464 3,326
Income from Reimbursable Expenses -- -- -- -- --
Divested & Discontinued Product Lines (206) -- -- -- (206)
Corporate & Shared Expenses (11,518) (16,885) (16,163) (15,619) (60,185)
-------- -------- -------- -------- --------
Operating Income before other charges $ 44,222 $ 46,075 $ 49,990 $ 49,577 $189,864
======== ======== ======== ======== ========
Other operating charges -- (7,342) -- -- (7,342)
-------- -------- -------- -------- --------
Operating Income $ 44,222 $ 38,733 $ 49,990 $ 49,577 $182,522
======== ======== ======== ======== ========
CORE REVENUE (REVENUE W/O REIMBURSABLE
EXPENSES AND DIVESTED & DISCONTINUED
PRODUCT LINES) GROWTH RATE 18.0% 22.9% 16.9% 20.1% 19.4%
INTERNAL REVENUE GROWTH RATES
Insurance Services 17.5% 17.0% 18.5% 18.0% 17.8%
Business & Government Services -3.8% 5.6% 12.3% 17.6% 8.4%
Marketing Services 3.4% 5.4% 4.9% 6.7% 5.2%
Continuing operations 5.7% 10.0% 13.4% 15.6% 11.4%
OPERATING MARGINS
Insurance Services 54.6% 53.0% 52.7% 53.9% 53.5%
Business & Government Services 18.1% 22.8% 24.6% 23.7% 22.5%
Marketing Services 31.2% 33.0% 31.0% 28.9% 31.1%
Operating income before other operating
charges, as a percentage of revenue
from products and services 27.9% 26.8% 28.0% 27.4% 27.5%
Operating income, as a percentage of
total revenue 26.2% 21.3% 26.5% 26.2% 25.0%
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