EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: John Mongelli
Investor Relations
(770) 752-6171
CHOICEPOINT(R) REPORTS THIRD QUARTER RESULTS
ALPHARETTA, GA. - OCTOBER 21, 2003 - ChoicePoint Inc. (NYSE: CPS), today
reported third quarter total revenue of $201.5 million, resulting in revenue
growth over the comparable period of 2002 of 7 percent. Excluding $12.4 million
of reimbursable expenses grossed up as revenue under EITF 01-14, third quarter
core revenue was $189.1 million. This core revenue represents a 6 percent
increase over comparable revenue in the third quarter of 2002.
Related to the previously announced consolidation of certain public records and
drug testing operations and the reengineering of our e-mail direct marketing
business, the Company recorded an additional charge of $4.0 million ($2.5
million after tax) during the third quarter of 2003. Total earnings per share
("EPS") for the third quarter was $0.32 per share which includes the $0.03 per
share dilutive effect of the aforementioned charge. Excluding the effect of this
charge, EPS would have been $0.35 per share.
"As expected, weak customer spending in our Marketing Services segment impacted
our results this quarter. I am nevertheless pleased with the underlying trends I
am seeing in many of our businesses heading into 2004 and the progress we're
making against our long-term growth initiatives," commented Derek V. Smith,
chairman and CEO.
Chief Financial Officer Steven W. Surbaugh added, "While we achieved our revised
expectations, the softness in our Marketing Services segment and the cycling of
the 2002 homeland security successes tempered our comparable operating results
for the quarter, and will also impact our fourth quarter comparables. We have
analyzed our operations and are confident of our long-term revenue and profit
prospects. I am very pleased that our balance sheet and cash flows continue to
remain very strong and provide us significant flexibility to execute our
business strategies over the long-term."
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FINANCIAL HIGHLIGHTS
- - Core revenue increased 6 percent to $189.1 million for the third quarter
of 2003 from $178.8 million for the third quarter of 2002. Internal
revenue (which represents core revenue less revenue from acquisitions)
declined 1 percent from the third quarter of 2002, primarily related to
the continued weakness in our Marketing Services businesses. Third quarter
2003 total revenue increased 7 percent to $201.5 million from $188.9
million in 2002.
- - Operating income was $47.8 million for the third quarter of 2003 compared
to $50.0 million for the third quarter of 2002. Excluding the realignment
charges discussed below, operating income was $51.8 million for the third
quarter of 2003, an increase of 4 percent from 2002.
- - In the third quarter of 2003, the Company recorded an additional pre-tax
charge of $4.0 million ($2.5 million net of taxes) related to the
previously announced consolidation of certain public records and drug
testing operations and the reengineering of our e-mail direct marketing
business. 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 $2
million to $5 million in connection with this realignment during the
fourth quarter of the year. Through September 30, 2003, the Company has
recorded $23.8 million of realignment charges against the previously
announced estimate in the mid $20 million range. The fourth quarter range
of estimated charges relates primarily to our on-going review of the
Marketing Services segment.
- - Free cash flow (net cash provided by operating activities of continuing
operations of $42.4 million less capital expenditures of $10.5 million)
was a very strong $31.8 million for the third quarter of 2003, an increase
of $5.8 million compared to $26.0 million for the third quarter of 2002.
- - Net debt (total debt less cash) for the nine months ended September 30,
2003, decreased by $90.3 million to $57.8 million as we used proceeds from
the first quarter sale of CPCS and cash from operations to pay down debt.
Our additional remaining debt capacity under our committed financing lines
is approximately $355 million.
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- - During the quarter ended September 30, 2003, the Company acquired TML
Information Services, Inc., a provider of MVRs to the insurance industry,
and effective September 30, 2003, ChoicePoint acquired certain assets of
Bridger Systems, Inc., related to its authentication products which assist
customers in their compliance with OFAC, USA PATRIOT Act and other
requirements, and certain assets of insuranceDecisions, Inc., a provider
of full service claims administration applications to the P&C commercial
lines insurance industry. Effective October 1, 2003, the Company acquired
CITI Network, Inc. d/b/a Apartment Screening and Processing (ASAP), a
provider of residential screening services to apartment communities
located in Florida.
OPERATIONAL HIGHLIGHTS
INSURANCE SERVICES
- - Total revenue increased 11 percent to $78.1 million in the third quarter
of 2003 compared to $70.5 million in the prior year, including an internal
revenue growth rate of 10 percent. These results exclude CPCS which was
sold in February 2003 and is reported as discontinued operations in the
accompanying financial information. The personal lines business posted
strong mid-teen internal growth driven by marketplace acceptance of new
products and increased unit volumes in the personal lines business. A
decline in internal revenues at Insurity Inc. due to the project-oriented
nature of its operations impacted the overall growth rate for the segment
during the quarter.
- - Operating income in Insurance Services was $44.0 million for the third
quarter of 2003, up 18 percent from $37.2 million in the prior year.
Operating profit margin in Insurance Services for the quarter was 56.3
percent, 360 basis points above 52.7 percent in the third quarter of 2002.
The increase in operating income is due primarily to the revenue growth
discussed above and product mix.
BUSINESS & GOVERNMENT SERVICES
- - Total revenue increased 10 percent to $87.1 million in the third quarter
of 2003 compared to $79.3 million in the prior year primarily due to
growth from acquisitions and our nursery initiatives, which offset
declines in our public records and drug testing product lines and
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tougher homeland security revenue comparisons verses the third quarter of
2002. Internal revenue declined 4 percent for the third quarter of 2003
over the comparable period in 2002.
- - Operating income in Business & Government Services was $18.7 million for
the third quarter of 2003, down 5 percent from $19.5 million in the prior
year primarily due to change in product mix. Operating profit margin in
Business & Government Services for the third quarter of 2003 was 21.4
percent. While above the average margin for the first six months of 2003,
the margins were negatively impacted this quarter by product mix and
additional expenses incurred in our new product initiatives.
MARKETING SERVICES
- - In the third quarter of 2003, revenue excluding reimbursable expenses
decreased 18 percent over the prior year from $27.5 million in 2002 to
$22.6 million in 2003 due primarily to weakness in our e-mail and print
products. The internal revenue declined 22 percent. Total revenue for the
segment decreased 7 percent from $37.6 million in 2002 to $35.0 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 $3.6 million for the third
quarter of 2003, down 58 percent from $8.5 million in the prior year due
to lower revenues. Third quarter operating profit margin, as a percentage
of revenue without reimbursable expenses, was 15.8 percent (10.2 percent
of total revenue).
OUTLOOK
Based on recent business trends, ChoicePoint continues to expect full year core
revenue growth to be in the 8 to 10 percent range. Additionally, the Company
expects year-over-year margin expansion of up to 100 basis points based on these
revenue assumptions and lower costs associated with the cost reduction
initiatives taken in the second and third quarters of 2003.
WEBCAST
ChoicePoint's third quarter results will be discussed in more detail on October
21, 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 Nine Months Ended
September 30, September 30,
------------- -------------
(Dollars in thousands, except per share data) 2003 2002 2003 2002
- --------------------------------------------- ---- ---- ---- ----
Core revenue (a) ............................................ $ 189,116 $ 178,832 $ 561,900 $ 509,638
Revenue from divested and discontinued product lines ........ -- -- -- 72
--------- --------- --------- ---------
Revenue from products and services .......................... 189,116 178,832 561,900 509,710
Reimbursable expenses per EITF 01-14 (b) .................... 12,402 10,098 33,816 30,040
--------- --------- --------- ---------
Total revenue ............................................... 201,518 188,930 595,716 539,750
========= ========= ========= =========
Cost of services ............................................ 100,963 93,162 299,736 266,244
Reimbursable expenses ....................................... 12,402 10,098 33,816 30,040
Selling, general and administrative expenses ................ 36,357 35,680 104,085 103,179
Other operating charges (c) ................................. 4,022 -- 23,839 7,342
--------- --------- --------- ---------
Total costs and expenses .................................... 153,744 138,940 461,476 406,805
Operating income ............................................ 47,774 49,990 134,240 132,945
Interest expense ............................................ (608) (2,017) (2,424) (6,672)
--------- --------- --------- ---------
Income from continuing operations before income taxes ....... 47,166 47,973 131,816 126,273
Provision for income taxes .................................. 18,111 18,415 50,617 48,470
--------- --------- --------- ---------
Income from continuing operations ........................... 29,055 29,558 81,199 77,803
Income from discontinued operations, net of taxes (d) ....... -- 1,704 991 4,986
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 .................................................. $ 29,055 $ 31,262 $ 115,083 $ 58,373
========= ========= ========= =========
EPS - diluted:
Income from continuing operations ..................... $ 0.32 $ 0.33 $ 0.91 $ 0.87
Discontinued operations, net of taxes ................. -- 0.02 0.01 0.06
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 ............................................ $ 0.32 $ 0.35 $ 1.28 $ 0.65
========= ========= ========= =========
Weighted average shares - diluted ......................... 89,866 89,612 89,579 89,425
========= ========= ========= =========
EBITDA (f) .................................................. $ 61,141 $ 61,443 $ 174,135 $ 165,419
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CHOICEPOINT INC.
Financial Highlights (continued)
RECONCILIATION TO FINANCIAL INFORMATION EXCLUDING OTHER OPERATING CHARGES (C)
(Unaudited) Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
(Dollars in thousands, except per share data) 2003 2002 2003 2002
---- ---- ---- ----
Operating income ................................................. $ 47,774 $ 49,990 $ 134,240 $ 132,945
Add back other operating charges (c) ............................. 4,022 -- 23,839 7,342
--------- --------- --------- ---------
Operating income before other operating charges .................. 51,796 49,990 158,079 140,287
Interest Expense ................................................. (608) (2,017) (2,424) (6,672)
--------- --------- --------- ---------
Income from continuing operations before income taxes & other .... 51,188 47,973 155,655 133,615
operating charges
Provision for income taxes ....................................... 19,656 18,415 59,771 51,288
--------- --------- --------- ---------
Income from continuing operations before other operating charges . $ 31,532 $ 29,558 $ 95,884 $ 82,327
========= ========= ========= =========
Effective tax rate ............................................... 38.4% 38.4% 38.4% 38.4%
Earnings per share - diluted excluding other operating charges ... $ 0.35 $ 0.33 $ 1.07 $ 0.92
EBITDA excluding other operating charges (f) ..................... $ 65,163 $ 61,443 $ 197,974 $ 172,761
(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. Third quarter pass-through expenses
totaled $148.8 million in 2003 and $131.1 million in 2002. Pass-through
expenses totaled $449.2 million for the nine months ended September 30,
2003 and $366.4 million for the nine months ended September 30, 2002.
(c) During the first nine months of 2003, the Company recorded other operating
charges of $23.8 million ($14.7 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,
down-sizing of our e-mail marketing business and the further consolidation
of some of our public records and drug testing operations. This charge
included asset impairments of $15.5 million primarily related to closed
facilities or abandoned technology in the realignment, $3.7 million in
severance and termination benefits, and $4.6 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 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) Nine Months Ended
September 30,
-------------
(Dollars in thousands) 2003 2002
- ---------------------- ---- ----
CASH FLOW HIGHLIGHTS
Income from continuing operations ........................................ $ 81,199 $ 77,803
Depreciation & amortization .............................................. 39,895 32,474
Changes in assets & liabilities and other ................................ 15,378 (19,991)
--------- ---------
Net cash provided by operating activities of continuing operations ....... $ 136,472 $ 90,286
Net cash (used) provided by activities of discontinued operations ........ $ (35,848) $ 7,448
Acquisitions & investments, net of cash acquired ......................... $ (74,593) $ (45,680)
Cash proceeds from sale of business ...................................... 87,000 --
Capital expenditures ..................................................... (32,217) (35,431)
Other investing activities ............................................... -- --
========= =========
Net cash used by investing activities .................................... $ (19,810) $ (81,111)
Net cash used by financing activities .................................... $(100,776) $ (47,561)
KEY BALANCE SHEET HIGHLIGHTS September 30, 2003
- ---------------------------- ------------------
Debt ..................................................................... $ 72,203
Cash ..................................................................... 14,397
--------
Debt (net of cash) ....................................................... $ 57,806
Shareholders' Equity ..................................................... $756,606
Days sales outstanding (adjusted for pass through expenses) .............. 39 days
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CHOICEPOINT INC.
2003 SEGMENT RESULTS
Q1 2003 Q2 2003 Q3 2003
------- ------- -------
REVENUE
Insurance Services $ 76,134 $ 77,922 $ 78,100
Business & Government Services 80,995 83,792 87,080
Marketing Services 25,573 25,676 22,631
Royalty 1,303 1,389 1,305
--------- --------- ---------
Core Revenue 184,005 188,779 189,116
Divested & Discontinued Product Lines -- -- --
--------- --------- ---------
Revenue from products and services 184,005 188,779 189,116
Reimbursable Expenses per EITF 01-14 10,944 10,470 12,402
--------- --------- ---------
Total Revenue $ 194,949 $ 199,249 $ 201,518
========= ========= =========
OPERATING INCOME
Insurance Services $ 42,436 $ 44,364 $ 43,998
Business & Government Services 15,571 18,585 18,652
Marketing Services 6,908 7,374 3,580
Royalty 646 626 416
Income from Reimbursable Expenses -- -- --
Divested & Discontinued Product Lines -- -- --
Corporate & Shared Expenses (a) (13,758) (16,469) (14,850)
--------- --------- ---------
Operating Income before other charges (b) $ 51,803 $ 54,480 $ 51,796
========= ========= =========
Other operating charges (b) -- (19,817) (4,022)
--------- --------- ---------
Operating Income $ 51,803 $ 34,663 $ 47,774
========= ========= =========
CORE REVENUE (REVENUE W/O REIMBURSABLE
EXPENSES AND DIVESTED & DISCONTINUED PRODUCT
LINES) GROWTH RATE 16.0% 9.6% 5.8%
INTERNAL REVENUE GROWTH RATES
Insurance Services 17.2% 15.0% 10.1%
Business & Government Services 3.9% -2.5% -3.9%
Marketing Services -2.4% -13.6% -21.7%
Continuing operations 8.1% 2.4% -1.2%
OPERATING MARGINS
Insurance Services 55.7% 56.9% 56.3%
Business & Government Services 19.2% 22.2% 21.4%
Marketing Services 27.0% 28.7% 15.8%
Operating income before other operating
charges, percentage of revenue from
products and services (b) 28.2% 28.9% 27.4%
Operating income, as a percentage of
total revenue 26.6% 17.4% 23.7%
(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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