EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: John Mongelli
Investor Relations
(770) 752-6171
CHOICEPOINT(R) REPORTS RECORD 3RD QUARTER REVENUE AND EPS WITH STRONG
INTERNAL REVENUE GROWTH OF 10 PERCENT
ALPHARETTA, Ga. - October 19, 2004 - ChoicePoint Inc. (NYSE: CPS), today
reported strong 18 percent total revenue growth over the third quarter of 2003.
Third quarter total revenue for 2004 was $237.6 million. Earnings per share
("EPS") for the third quarter was $0.43 per share compared to $0.32 in 2003,
which included a $0.03 per share dilutive effect due to a $4.0 million ($2.5
million after tax) charge related to the realignment and consolidation of
certain of the Company's operations recorded in the third quarter of 2003. Total
EPS growth for the quarter was 32 percent.
"I am extremely proud of this quarter's record financial performance," commented
Derek V. Smith, Chairman and CEO. "We are continuing to see strong operating
trends in our major business, led by our Insurance Services Segment which
delivered outstanding revenue growth this quarter. Given these trends and our
unique ability to use the positive power of information for the good of our
customers and society, we are well positioned to have another strong year."
Chief Financial Officer Steven W. Surbaugh added, "I am very pleased with our
operating results this quarter. We continue to capitalize on investment
opportunities and focus on our major business lines to drive strong revenue
growth while delivering consistently high operating margins and exceptional cash
flows."
FINANCIAL HIGHLIGHTS - THIRD QUARTER
- Core revenue (total revenue less reimbursable expenses)
increased 22 percent to $231.5 million for the quarter ended
September 30, 2004 from $189.1 million for the same period of
2003. Excluding the impact of acquisitions, internal revenue
increased 9.7 percent over 2003, driven primarily by growth
across our Insurance Services segment, and strong performances
in our background screening and vital records businesses in
our
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Business Services Segment. Third quarter total revenue
increased 18 percent to $237.6 million in 2004 from $201.5
million in 2003.
- Operating income for the third quarter of 2004 was $64.0
million compared to $47.8 million for 2003. Third quarter 2004
operating income includes a $3.5 million gain on the sale of
our minority investment in a start-up company offset by
revisions to litigation accruals on an outstanding legal
action and the closure of certain operating facilities during
the quarter. Excluding the realignment charges discussed
below, operating income was $51.8 million for the third
quarter of 2003.
- In the third quarter of 2003, the Company recorded a pre-tax
charge of $4.0 million ($2.5 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 $177.1 million less capital
expenditures of $38.7 million) was $138.4 million for the nine
months ended September 30, 2004, which compares to net free
cash flow of $104.3 million for the first nine months of 2003,
or an increase of approximately 33 percent.
- Net debt (total debt less cash) for the quarter ended
September 30, 2004, increased by $41.4 million from December
31, 2003, to $70.0 million, as we used cash from operations
and borrowings under our facilities to fund our eight
acquisitions totaling approximately $200 million in 2004. The
remaining debt capacity under our committed financing lines is
$355 million.
OPERATIONAL HIGHLIGHTS
INSURANCE SERVICES
- - Total revenue increased 16 percent to $90.9 million in the third
quarter of 2004 compared to $78.1 million in the prior year,
representing a very strong internal revenue growth rate of 14.8
percent. This growth continues to be led by unit growth in personal
lines and new development revenues at Insurity.
- - Operating income in Insurance Services was $50.7 million for the third
quarter of 2004, resulting in an operating profit margin of 55.8
percent, and an increase from $44.0 million in the third quarter of
2003. The increase in operating income is due primarily to the revenue
growth discussed above, partially offset by higher labor and technology
costs.
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BUSINESS SERVICES
- - Third quarter total revenue increased 30 percent to $94.0 million in
2004 compared to $72.1 million in the prior year, primarily due to
growth from our six acquisitions during the first nine months of 2004
and last quarter of 2003. Internal revenue increased 8.1 percent for
the third quarter of 2004 over the comparable period in 2003, driven
primarily by increases in product usage and market share gains in our
backgrounds screening and vital records businesses.
- - Operating income in Business Services was $21.1 million for the third
quarter of 2004 resulting in an operating profit margin of 22.4 percent
and a 34 percent increase from $15.7 million in the same period of the
prior year. This increase was primarily due to the aforementioned
revenue growth and cost control initiatives.
GOVERNMENT SERVICES
- - Total revenue increased 44 percent to $21.6 million in the third
quarter of 2004 compared to $15.0 million in the third quarter of 2003,
primarily due to revenue from the acquisitions of Templar and iMap in
the first quarter of 2004. Internal revenue declined one percent for
the third quarter of 2004 over the same period in 2003, due primarily
to the timing of governmental contracts at our Bode DNA laboratories.
- - Operating income in Government Services was $4.7 million for the third
quarter of 2004, up from $3.0 million in the prior year, primarily due
to the revenue growth discussed above offset partially by investments
in new product development. Operating profit margin in Government
Services for the third quarter was 21.9 percent in 2004 compared to
19.7 percent in 2003.
MARKETING SERVICES
- - Revenue excluding reimbursable expenses for the third quarter increased
4 percent from prior year revenue of $22.6 million to $23.6 million for
2004, with internal revenue growth representing the entire increase. As
expected, this is our first quarter of positive growth after six
consecutive negative growth quarters. Total revenue for the Marketing
Services segment (which includes all of the Company's revenue from
reimbursable expenses) decreased 15 percent from $35.0 million in 2003
to $29.7 million in 2004 solely due to the decrease in reimbursables
revenue. The Company excludes the revenue from reimbursable expenses in
its operational analyses because these items are fully reimbursed by
our customers without
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markup and have no impact on operating income, net income, EPS, cash
flows or the balance sheet.
- - Operating income in Marketing Services was $4.6 million for the third
quarter of 2004, a 28 percent increase over $3.6 million in the prior
year due primarily to cost control initiatives implemented in prior
quarters and a change in product mix. Third quarter operating profit
margin, as a percentage of revenue without reimbursable expenses, was
19.4 percent (15.4 percent of total revenue) compared to 15.8 percent
in third quarter of 2003 (10.2 percent of total revenue).
OUTLOOK
Based on recent business trends and the impact of acquisitions already closed
this year, ChoicePoint now expects full year 2004 core revenue growth in the 17
to 18 percent range. Additionally, the Company expects to see full year 2004
operating margins in the mid-27 percent range.
WEBCAST
ChoicePoint's third quarter results will be discussed in more detail on October
19, 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
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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 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 Nine Months Ended
September 30, September 30,
---------------------- ----------------------
(Dollars in thousands, except per share data) 2004 2003 2004 2003
-------- -------- -------- --------
Service revenue (a) ....................................... $231,466 $189,116 $659,551 $561,900
Reimbursable expenses per EITF 01-14(b) ................... 6,149 12,402 26,700 33,816
-------- -------- -------- --------
Total revenue ............................................. 237,615 201,518 686,251 595,716
======== ======== ======== ========
Cost of revenue ........................................... 118,750 100,963 346,049 299,736
Reimbursable expenses ..................................... 6,149 12,402 26,700 33,816
Selling, general and administrative expenses .............. 48,680 36,357 135,704 104,085
Other operating charges (d) ............................... -- 4,022 -- 23,839
-------- -------- -------- --------
Total costs and expenses .................................. 173,579 153,744 508,453 461,476
-------- -------- -------- --------
Operating income (c) ...................................... 64,036 47,774 177,798 134,240
Interest expense 885 608 2,222 2,424
-------- -------- -------- --------
Income from continuing operations before income taxes ..... 63,151 47,166 175,576 131,816
Provision for income taxes ................................ 23,998 18,111 66,838 50,617
-------- -------- -------- --------
Income from continuing operations ......................... 39,153 29,055 108,738 81,199
Income from discontinued operations, net of taxes (e) ..... -- -- -- 991
Gain on sale of discontinued operations, net of taxes (e).. -- -- -- 32,893
-------- -------- -------- --------
Net income ................................................ $ 39,153 $ 29,055 $108,738 $115,083
======== ======== ======== ========
EPS - diluted:
Income from continuing operations ....................... $ 0.43 $ 0.32 $ 1.19 $ 0.91
Discontinued operations, net of taxes ................... -- -- -- 0.01
Gain on sale of discontinued operations, net of taxes.... -- -- -- 0.37
-------- -------- -------- --------
Net Income .............................................. $ 0.43 $ 0.32 $ 1.19 $ 1.28
======== ======== ======== ========
Weighted average shares - diluted ......................... 91,542 89,866 91,100 89,579
======== ======== ======== ========
Operating Income .......................................... $ 64,036 $ 47,774 $177,798 $134,240
Depreciation and amortization expense ..................... 16,572 13,367 45,733 39,895
-------- -------- -------- --------
EBITDA (f) ................................................ $ 80,608 $ 61,141 $223,531 $174,135
======== ======== ======== ========
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CHOICEPOINT INC.
Financial Highlights (continued)
RECONCILIATION TO FINANCIAL INFORMATION EXCLUDING OTHER OPERATING CHARGES (D)
Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,
-------------------------- --------------------------
(Dollars in thousands, except per share data) 2004 2003 2004 2003
--------- --------- --------- ---------
Operating income (c) .............................................. $ 64,036 $ 47,774 $ 177,798 $ 134,240
Add back: other operating charges (d) ............................. -- 4,022 -- 23,839
--------- --------- --------- ---------
Operating income before other operating charges ................... 64,036 51,796 177,798 158,079
Interest Expense .................................................. (885) (608) (2,222) (2,424)
--------- --------- --------- ---------
Income from continuing operations before income taxes & other
operating charges ............................................... 63,151 51,188 175,576 155,655
Provision for income taxes ........................................ 23,998 19,656 66,838 59,771
--------- --------- --------- ---------
Income from continuing operations before other operating charges .. $ 39,153 $ 31,532 $ 108,738 $ 95,884
========= ========= ========= =========
Effective tax rate ................................................ 38.0% 38.4% 38.1% 38.4%
Earnings per share - diluted excluding other operating charges .... $ 0.43 $ 0.35 $ 1.19 $ 1.07
EBITDA excluding other operating charges (f) ...................... $ 80,608 $ 65,163 $ 223,531 $ 197,974
(a) Service revenue excludes revenue from reimbursable expenses (see (b)
below). The Company uses service revenue (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. Third quarter pass-through
expenses totaled $164.1 million in 2004 and $148.8 million in 2003.
Pass-through expenses for the first nine months of 2004 were $487.0
million compared to $449.2 million in 2003.
(c) Third quarter 2004 operating income includes a $3.5 million gain on the
sale of our minority investment in a start-up company offset by
revisions to litigation accruals on an outstanding legal action and the
closure of certain operating facilities during the quarter.
(d) The Company recorded other operating charges of $4.0 million in the
third quarter of 2003 and $23.8 million for the first nine months of
2003 ($2.5 million and $14.7 million net of taxes, respectively) 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 nine month
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. 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.
(e) 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.
(f) 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) Nine months ended
September 30,
-------------------------
(Dollars in thousands) 2004 2003
--------- ---------
CASH FLOW HIGHLIGHTS
Income from continuing operations ................................... $ 108,738 $ 81,199
Depreciation & amortization ......................................... 45,733 39,895
Changes in assets & liabilities and other ........................... 22,636 15,378
--------- ---------
Net cash provided by operating activities of continuing operations .. $ 177,107 $ 136,472
Net cash used by activities of discontinued operations .............. $ -- $ (35,848)
Acquisitions & investments, net of cash acquired .................... $(197,274) $ (74,593)
Cash proceeds from sale of business ................................. -- 87,000
Capital expenditures ................................................ (38,698) (32,217)
--------- ---------
Net cash (used) provided by investing activities .................... $(235,972) $ (19,810)
Net cash provided (used) by financing activities .................... $ 37,454 $(100,776)
KEY BALANCE SHEET HIGHLIGHTS 9/30/04
---------
Total Debt .......................................................... $ 72,034
Cash ................................................................ 1,999
---------
Debt (net of cash) .................................................. $ 70,035
Shareholders' Equity ................................................ $ 929,284
Days sales outstanding (adjusted for pass-through expenses) ......... 41 days
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CHOICEPOINT INC.
2004 SEGMENT RESULTS
Q1 2004 Q2 2004 Q3 2004
--------- --------- ---------
REVENUE
Insurance Services $ 86,727 $ 88,129 $ 90,880
Business Services 75,941 87,547 94,041
Government Services 17,741 23,530 21,590
Marketing Services 22,811 23,224 23,585
Royalty 1,165 1,270 1,370
--------- --------- ---------
Service Revenue 204,385 223,700 231,466
Reimbursable Expenses per EITF 01-14 12,860 7,691 6,149
--------- --------- ---------
Total Revenue $ 217,245 $ 231,391 $ 237,615
========= ========= =========
OPERATING INCOME
Insurance Services $ 47,260 $ 48,401 $ 50,714
Business Services 14,357 17,052 21,084
Government Services 4,114 7,275 4,726
Marketing Services 4,287 4,408 4,583
Royalty 204 661 798
Corporate & Shared Expenses (a) (15,951) (18,306) (17,869)
--------- --------- ---------
Operating Income $ 54,271 $ 59,491 $ 64,036
========= ========= =========
CORE REVENUE GROWTH RATES
Insurance Services 13.9% 13.1% 16.4%
Business Services 18.9% 26.9% 30.5%
Government Services 3.5% 59.2% 43.8%
Marketing Services -10.8% -9.5% 4.2%
Continuing operations 11.1% 18.5% 22.4%
INTERNAL REVENUE GROWTH RATES
Insurance Services 12.2% 11.4% 14.8%
Business Services 13.3% 9.2% 8.1%
Government Services -12.8% 6.3% -0.8%
Marketing Services -10.8% -9.5% 4.2%
Continuing operations 6.9% 7.2% 9.7%
OPERATING PROFIT MARGINS
Insurance Services 54.5% 54.9% 55.8%
Business Services 18.9% 19.5% 22.4%
Government Services 23.2% 30.9% 21.9%
Marketing Services (b) 18.8% 19.0% 19.4%
Operating income as a percentage of service revenue 26.6% 26.6% 27.7%
Operating income as a percentage of total revenue 25.0% 25.7% 26.9%
(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 service revenue.
Operating profit margin as a percentage of total revenue was 12.0% for
the first quarter, 14.3% for the second quarter and 15.4% for the third
quarter of 2004 and 18.9%, 20.4%, 10.2%, and 11.6% for the first,
third, 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
--------- --------- --------- --------- ---------
Service Revenue 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 service revenue (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.