EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: John Mongelli
Investor Relations
(770) 752-6171
CHOICEPOINT(R) REPORTS STRONG SECOND QUARTER RESULTS
ALPHARETTA, GA. - JULY 20, 2004 - ChoicePoint Inc. (NYSE: CPS), today reported
16 percent total revenue growth over the second quarter of 2003. 2004 second
quarter total revenue was $231.4 million. Earnings per share ("EPS") for the
second quarter was $0.40 per share compared to $0.23 in 2003, which included a
$0.14 per share dilutive effect of a $19.8 million ($12.2 million after tax)
charge related to the realignment and consolidation of certain of the Company's
operations recorded in the second quarter of 2003.
"We are continuing to see strong operating momentum in our major business
units," commented Derek V. Smith, Chairman and CEO. "I am very pleased that we
have been able to deliver strong financial results while making significant
progress against our key strategic initiatives."
Chief Financial Officer Steven W. Surbaugh added, "I am extremely pleased with
our financial metrics for the first six months of 2004. We continue to
effectively invest in top-line initiatives to drive strong revenue growth while
delivering exceptional cash flows. We are well positioned to have a solid second
half of 2004."
FINANCIAL HIGHLIGHTS - SECOND QUARTER
- Core revenue (total revenue less reimbursable expenses) increased 19
percent to $223.7 million for the quarter ended June 30, 2004 from
$188.8 million for 2003. Excluding the impact of acquisitions,
internal revenue increased 7 percent from 2003, as growth in our
personal lines, background screening and vital records businesses
offset difficult comparisons in our Marketing Services segment.
Second quarter 2004 total revenue increased 16 percent to $231.4
million from $199.2 million in 2003.
- 2004 second quarter operating income was $59.5 million compared to
$34.7 million for 2003. Excluding the realignment charges, operating
income was $54.5 million for the second quarter of 2003.
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- In the second quarter of 2003, the Company recorded a pre-tax charge
of $19.8 million ($12.2 million net of taxes) 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.
- Net free cash flow (net cash provided by operating activities of
continuing operations of $102.1 million less capital expenditures of
$24.4 million) was $77.7 million for the six months ended June 30,
2004, which compares to net free cash flow of $72.4 million for the
first six months of 2003, or an increase of 7 percent.
- Net debt (total debt less cash) for the quarter ended June 30, 2004,
increased by $101.4 million from December 31, 2003, to $130.0
million, as we used cash from operations and borrowings under our
facilities to fund acquisitions. The remaining debt capacity under
our committed financing lines is $295 million.
- During the quarter ended June 30, 2004, the Company acquired certain
assets of Superior Information services, LLC and Service Abstract
Corp., providers of public records information in the Northeast
U.S., Charles Jones, LLC, a leading supplier of title and property
lien searches in New Jersey, ADREM Profiles, Inc., Government
Business Group, LLC and Advance Information Resources Corp., public
records research companies in Florida, and Investigation
Technologies, LLC, d/b/a Rapsheets, an electronic criminal records
provider.
OPERATIONAL HIGHLIGHTS
INSURANCE SERVICES
- - Total revenue increased 13 percent to $88.1 million in the second quarter
of 2004 compared to $77.9 million in the prior year, representing an
internal revenue growth rate of 11.4 percent. This growth was led by
strong growth in personal lines new products and new development revenues
at Insurity.
- - Operating income in Insurance Services was $48.4 million for the second
quarter of 2004, resulting in an operating profit margin of 54.9 percent,
and increased from $44.4 million in the prior year. The increase in
operating income is due primarily to the revenue growth discussed above,
partially offset by higher occupancy and new product initiative expenses.
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BUSINESS SERVICES
- - Total revenue increased 27 percent to $87.5 million in the second quarter
of 2004 compared to $69.0 million in the prior year. Internal revenue
increased 9.2 percent for the second quarter of 2004 over the comparable
period in 2003 driven primarily by strong growth in our WorkPlace
Solutions and Vital Chek business units.
- - Operating income in Business Services was $17.1 million for the second
quarter of 2004 resulting in an operating profit margin of 19.5 percent.
Operating income increased 11 percent from $15.3 million in the prior year
primarily due to the aforementioned revenue growth and cost control
initiatives.
GOVERNMENT SERVICES
- - Total revenue increased 59 percent to $23.5 million in the second quarter
of 2004 compared to $14.8 million in the prior year primarily due to
revenue from the acquisitions of Templar and iMAP in the first quarter of
2004. Internal revenue grew 6.3 percent for the second quarter of 2004
over the same period in 2003 due to improved performance at our Bode DNA
laboratory business and our public records unit.
- - Operating income in Government Services was $7.3 million for the second
quarter of 2004, up from $3.3 million in the prior year, primarily due to
the revenue growth discussed above. Operating profit margin in Government
Services for the second quarter of 2004 was 30.9 percent compared to 22.1
percent in 2003.
MARKETING SERVICES
- - Revenue excluding reimbursable expenses decreased 10 percent from prior
year revenue of $25.7 million to $23.2 million for the second quarter of
2004. Despite this decline from the prior year, as expected, we have seen
revenue stabilize over the past four quarters. Internal revenue also
declined 9.5 percent. Total revenue for the Marketing Services segment
(which includes all of the Company's revenue from reimbursable expenses)
decreased 14 percent from $36.1 million in 2003 to $30.9 million in 2004.
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 $4.4 million for the second
quarter of 2004, down from $7.4 million in the prior year due primarily to
lower revenues. Second quarter operating profit margin, as a percentage of
revenue without reimbursable expenses, was 19.0
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percent (14.3 percent of total revenue) compared to 28.7 percent in
second quarter 2003 (20.4 percent of total revenue). Sequentially,
operating profit margins as a percentage of revenue without
reimbursable expenses continued to improve, posting our fourth
consecutive increase in margins as the cost controls implemented by
the Marketing Services partially mitigate the impact of the revenue
weakness.
OUTLOOK
Based on recent business trends and the impact of acquisitions already closed
this year, ChoicePoint now expects full year core revenue growth in the 15 to 19
percent range. Additionally, the Company expects to see improving operating
margin trends in the second half of this year, with full year 2004 operating
margins in the mid-to-high 27 percent range, comparable with the prior year.
WEBCAST
ChoicePoint's second quarter results will be discussed in more detail on July
20, 2004, at 8:30 a.m. EDT via teleconference. The live audio Webcast of the
call will be available on 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 direct marketing and
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public records markets 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, 2003.
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) 2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenue from products and services (a)........................... $ 223,700 $ 188,779 $ 428,085 $ 372,784
Reimbursable expenses per EITF 01-14 (b)......................... 7,691 10,470 20,551 21,414
------------ ------------ ------------ ------------
Total revenue.................................................... 231,391 199,249 448,636 394,198
============ ============ ============ ============
Cost of services................................................. 116,528 98,987 227,299 198,773
Reimbursable expenses............................................ 7,691 10,470 20,551 21,414
Selling, general and administrative expenses..................... 47,681 35,312 87,024 67,728
Other operating charges (c)...................................... - 19,817 - 19,817
------------ ------------ ------------ ------------
Total costs and expenses......................................... 171,900 164,586 334,874 307,732
------------ ------------ ------------ ------------
Operating income................................................. 59,491 34,663 113,762 86,466
Interest expense................................................. 811 810 1,337 1,816
------------ ------------ ------------ ------------
Income from continuing operations before income taxes............ 58,680 33,853 112,425 84,650
Provision for income taxes....................................... 22,357 13,000 42,840 32,506
------------ ------------ ------------ ------------
Income from continuing operations................................ 36,323 20,853 69,585 52,144
Income from discontinued operations, net of taxes (d)............ - - - 991
Gain on sale of discontinued operations, net of taxes (d)........ - - - 32,893
------------ ------------ ------------ ------------
Net income....................................................... $ 36,323 $ 20,853 $ 69,585 $ 86,028
============ ============ ============ ============
EPS - diluted:
Income from continuing operations........................... $ 0.40 $ 0.23 $ 0.77 $ 0.58
Discontinued operations, net of taxes....................... - - - 0.01
Gain on sale of discontinued operations, net of taxes....... - - - 0.37
------------ ------------ ------------ ------------
Net Income.................................................. $ 0.40 $ 0.23 $ 0.77 $ 0.96
============ ============ ============ ============
Weighted average shares - diluted............................. 91,282 89,354 90,847 89,379
============ ============ ============ ============
Operating Income................................................. $ 59,491 $ 34,663 $ 113,762 $ 86,466
Depreciation and amortization expense............................ 15,626 13,137 29,161 26,528
------------ ------------ ------------ ------------
EBITDA (e)....................................................... $ 75,117 $ 47,800 $ 142,923 $ 112,994
============ ============ ============ ============
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CHOICEPOINT INC.
Financial Highlights (continued)
RECONCILIATION TO FINANCIAL INFORMATION EXCLUDING OTHER OPERATING CHARGES (c)
Three Months Ended Six Months Ended
(Unaudited) June 30, June 30,
(Dollars in thousands, except per share data) 2004 2003 2004 2003
------------ ------------ ------------ ------------
Operating income ................................................. $ 59,491 $ 34,663 $ 113,762 $ 86,466
Add back: other operating charges (c) ............................ - 19,817 - 19,817
------------ ------------ ------------ ------------
Operating income before other operating charges .................. 59,491 54,480 113,762 106,283
Interest Expense ................................................. (811) (810) (1,337) (1,816)
------------ ------------ ------------ ------------
Income from continuing operations before income taxes & other
operating charges ............................................. 58,680 53,670 112,425 104,467
Provision for income taxes ....................................... 22,357 20,609 42,840 40,115
------------ ------------ ------------ ------------
Income from continuing operations before other operating charges.. $ 36,323 $ 33,061 $ 69,585 $ 64,352
============ ============ ============ ============
Effective tax rate ............................................... 38.1% 38.4% 38.1% 38.4%
Earnings per share - diluted excluding other operating charges ... $ 0.40 $ 0.37 $ 0.77 $ 0.72
EBITDA excluding other operating charges (e) ..................... $ 75,117 $ 67,617 $ 142,923 $ 132,811
(a) Revenue from products and services excludes revenue from reimbursable
expenses (see (b) below). The Company uses revenue from products and
services (also referred to as core revenue) 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 their impact in our 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 $160.6 million in
2004 and $150.4 million in 2003. Pass-through expenses for the first six
months of 2004 were $322.9 million compared to $300.3 million in 2003.
(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. 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.
(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) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
and EBITDA before other operating charges (see note c), are not presented
as substitutes for operating income, net income or cash flows from
operating activities. The Company has included EBITDA and EBITDA before
other operating charges (which are not measures of financial performance
under generally accepted accounting principles) because such data is 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.
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CHOICEPOINT INC.
Financial Highlights (continued)
(Unaudited)
Six months ended
June 30,
-----------------------------
(Dollars in thousands) 2004 2003
------------ ------------
CASH FLOW HIGHLIGHTS
Income from continuing operations....................................... $ 69,585 $ 52,144
Depreciation & amortization............................................. 29,161 26,528
Changes in assets & liabilities and other............................... 3,346 15,414
------------ ------------
Net cash provided by operating activities of continuing operations...... $ 102,092 $ 94,086
Net cash used by activities of discontinued operations.................. $ - $ (34,802)
Acquisitions & investments, net of cash acquired........................ $ (194,891) $ (63,383)
Cash proceeds from sale of business..................................... - 87,000
Capital expenditures.................................................... (24,422) (21,671)
------------ ------------
Net cash (used) provided by investing activities........................ $ (219,313) $ 1,946
Net cash provided (used) by financing activities........................ $ 95,833 $ (87,986)
KEY BALANCE SHEET HIGHLIGHTS............................................ 6/30/04
------------
Total Debt.............................................................. $ 132,060
Cash.................................................................... 2,022
------------
Debt (net of cash)...................................................... $ 130,038
Shareholders' Equity.................................................... $ 887,590
Days sales outstanding (adjusted for pass-through expenses)............. 40 days
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CHOICEPOINT INC.
2004 SEGMENT RESULTS
Q1 2004 Q2 2004
------------ ------------
REVENUE
Insurance Services $ 86,727 $ 88,129
Business Services 75,941 87,547
Government Services 17,741 23,530
Marketing Services 22,811 23,224
Royalty 1,165 1,270
------------ ------------
Revenue from products and services 204,385 223,700
Reimbursable Expenses per EITF 01-14 12,860 7,691
------------ ------------
Total Revenue $ 217,245 $ 231,391
============ ============
OPERATING INCOME
Insurance Services $ 47,260 $ 48,401
Business Services 14,357 17,052
Government Services 4,114 7,275
Marketing Services 4,287 4,408
Royalty 204 661
Corporate & Shared Expenses (a) (15,951) (18,306)
------------ ------------
Operating Income $ 54,271 $ 59,491
============ ============
CORE REVENUE GROWTH RATES
Insurance Services 13.9% 13.1%
Business Services 18.9% 26.9%
Government Services 3.5% 59.2%
Marketing Services -10.8% -9.5%
Continuing operations 11.1% 18.5%
INTERNAL REVENUE GROWTH RATES
Insurance Services 12.2% 11.4%
Business Services 13.3% 9.2%
Government Services -12.8% 6.3%
Marketing Services -10.8% -9.5%
Continuing operations 6.9% 7.2%
OPERATING PROFIT MARGINS
Insurance Services 54.5% 54.9%
Business Services 18.9% 19.5%
Government Services 23.2% 30.9%
Marketing Services (b) 18.8% 19.0%
Operating income as a percentage of revenue
from products and services 26.6% 26.6%
Operating income as a percentage of
total revenue 25.0% 25.7%
(a) Corporate and shared expenses represent costs of support functions,
research and development initiatives, incentives and profit sharing that
benefit all segments.
(b) Represents operating income as a percentage of revenue from products and
services. Operating profit margin as a percentage of total revenue was
12.0% for the first quarter and 14.3% for the second quarter of 2004 and
18.9%, 20.4%, 10.2%, and 11.6% for the first, second, third and fourth
quarters of 2003, respectively, and 15.4% for the total year 2003.
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CHOICEPOINT INC.
2003 SEGMENT RESULTS
Q1 2003 Q2 2003 Q3 2003 Q4 2003 Total 2003
---------- ---------- ---------- ---------- ----------
REVENUE
Insurance Services $ 76,134 $ 77,922 $ 78,100 $ 76,968 $ 309,124
Business Services (c) 63,859 69,014 72,069 71,206 276,148
Government Services (c) 17,136 14,778 15,011 16,410 63,335
Marketing Services 25,573 25,676 22,631 22,762 96,642
Royalty 1,303 1,389 1,305 1,105 5,102
---------- ---------- ---------- ---------- ----------
Revenue from products and services 184,005 188,779 189,116 188,451 750,351
Reimbursable Expenses per EITF 01-14 10,944 10,470 12,402 11,579 45,395
---------- ---------- ---------- ---------- ----------
Total Revenue $ 194,949 $ 199,249 $ 201,518 $ 200,030 $ 795,746
========== ========== ========== ========== ==========
OPERATING INCOME
Insurance Services $ 42,436 $ 44,364 $ 43,998 $ 41,720 $ 172,518
Business Services (c) 11,172 15,321 15,694 14,353 56,540
Government Services (c) 4,399 3,264 2,958 3,919 14,540
Marketing Services 6,908 7,374 3,580 3,987 21,849
Royalty 646 626 416 380 2,068
Corporate & Shared Expenses (a) (13,758) (16,469) (14,850) (12,936) (58,013)
---------- ---------- ---------- ---------- ----------
Operating Income before other charges (d) $ 51,803 $ 54,480 $ 51,796 $ 51,423 $ 209,502
========== ========== ========== ========== ==========
Other operating charges (d) - (19,817) (4,022) (7,103) (30,942)
---------- ---------- ---------- ---------- ----------
Operating Income $ 51,803 $ 34,663 $ 47,774 $ 44,320 $ 178,560
========== ========== ========== ========== ==========
CORE REVENUE GROWTH RATES
Insurance Services 18.7% 16.2% 10.8% 12.2% 14.4%
Business Services (c) 11.9% 10.1% 18.9% 20.7% 15.4%
Government Services (c) 42.4% 13.2% -19.6% -36.0% -8.7%
Marketing Services 7.8% -8.1% -17.6% -14.7% -8.7%
Continuing operations 16.0% 9.6% 5.8% 4.1% 8.6%
INTERNAL REVENUE GROWTH RATES
Insurance Services 17.2% 15.0% 10.1% 9.5% 12.8%
Business Services (c) -4.2% -5.8% 0.9% 5.0% -1.1%
Government Services (c) 42.4% 13.2% -19.6% -36.0% -8.7%
Marketing Services -2.4% -13.6% -21.7% -18.7% -14.5%
Continuing operations 8.1% 2.4% -1.2% -2.6% 1.5%
OPERATING PROFIT MARGINS
Insurance Services 55.7% 56.9% 56.3% 54.2% 55.8%
Business Services (c) 17.5% 22.2% 21.8% 20.2% 20.5%
Government Services (c) 25.7% 22.1% 19.7% 23.9% 23.0%
Marketing Services (b) 27.0% 28.7% 15.8% 17.5% 22.6%
Operating income before other operating
charges, percentage of revenue from
products and services (d) 28.2% 28.9% 27.4% 27.3% 27.9%
Operating income as a percentage of
total revenue 26.6% 17.4% 23.7% 22.2% 22.4%
(c) In 2004, the Company reorganized its product lines in the Business &
Government segment into two separate reportable segments. Historical
information has been reclassified to conform with the current
presentation.
(d) 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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