Exhibit 99.1
NEWS RELEASE
FOR MORE INFORMATION CONTACT:
David E. Fountain
National Processing, Inc.
Phone: 502.315.3311
Fax: 502.315.3535
e-mail: dfountain@npc.net
Website: www.npc.net
FOR IMMEDIATE RELEASE
NATIONAL PROCESSING REPORTS FOURTH QUARTER AND FULL YEAR 2003 RESULTS
LOUISVILLE, KENTUCKY, JANUARY 15, 2004 - National Processing, Inc. (NYSE: NAP)
today reported financial results for the fourth quarter and year ended December
31, 2003. Revenue for the fourth quarter of 2003 was $135.5 million, up 15% from
2002 fourth quarter revenue of $118.3 million. Net income for the fourth quarter
of 2003 was $14.8 million, or $0.28 per diluted share, up 5% and 3%,
respectively, from comparable 2002 net income of $14.1 million, or $0.27 per
diluted share. For the year ended December 31, 2003 revenue was $ 480.1 million,
up 5% from $455.4 million in 2002. Net income for the year ended December 31,
2003 was $ 48.8 million, or $ 0.93 per diluted share, both down 5%, from
comparable 2002 net income of $51.1 million, or $0.97 per diluted share.
Net income for the year ended December 31, 2003 included after-tax restructuring
charges of $0.8 million related to the consolidation of technology functions and
a loss on the sale of 14 regional sales offices. Net income for the year ended
December 31, 2002 included an after-tax restructuring charge of $2.4 million
related to the closure of the Company's Mexican operations and after-tax
expenses of $2.0 million related to a separation agreement with the former CEO.
Merchant Card Services transaction and dollar volume increased to record levels
for the fourth quarter and year ended December 31, 2003. Merchant Card Services
transactions processed were 1.2 billion for the quarter and 4.3 billion for the
year ended December 31, 2003, representing increases of 16% and 11%,
respectively, over comparable 2002 volume. Merchant Card Services dollar volume
processed was $51.7 billion for the quarter and $177.2 billion for the year
ended December 31, 2003, representing increases of 14% and 5%, respectively,
over comparable 2002 volumes. The dollar volume processed has trailed
transaction growth primarily as a result of the Company's initiative to exit
merchant processing for airlines, which have a large average ticket per
transaction.
Chairman and CEO Jon L. Gorney commented, "The fourth quarter and full year 2003
results were in line with our expectations. We are very pleased with the results
achieved in our regional merchant base as we continue to experience strong sales
momentum and operating results in this channel. As we have previously reported,
our overall results for the quarter and year reflect the impact of national
merchant contracts renewing at current market rates. This was somewhat offset in
the latter part of the year by the favorable impact of rate changes from the
credit card associations. Our results also reflect the exit of merchant
processing for the airlines with two contracts expiring in the second quarter of
2003."
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"We expect these trends to continue into 2004 with solid momentum in the
regional channel offset by the portion of our national contracts that will renew
at current pricing levels. Due primarily to the national pricing impact, we are
holding our 2004 diluted EPS projections flat with our 2003 guidance. Our full
year 2004 diluted EPS is projected to be $0.90 to $0.95, exclusive of
acquisitions. Our current projections are for 2004 revenue to be in the range of
$490 million to $520 million."
The Company's balance sheet remained strong. As of December 31, 2003, the
Company had $247 million of cash and cash equivalents with no debt and total
shareholders' equity of $522 million. Operating cash flow was $92 million for
the year ended December 31, 2003.
CONFERENCE CALL
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A conference call to discuss financial results and business highlights will be
held January 15, 2004 at 9:00 a.m. ET and will be hosted by Jon L. Gorney, chief
executive officer, and David E. Fountain, chief financial officer. The call will
be open to the public with both media and individual investors invited to
participate in a listen-only mode. The conference can be accessed by calling
888.428.4480 (domestic) and 651.291.0900 (international). Participants should
plan to dial in approximately 15 minutes prior to the start of the call.
A replay of the live call will be available starting at 2:15 p.m. ET, January
15, 2004 through Midnight ET on January 17, 2004. The replay may be accessed by
dialing 800.475.6701 (domestic) and 320.365.3844 (international) and entering
access code 701335.
FORWARD-LOOKING STATEMENTS
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This announcement and Mr. Gorney's comments contain forward-looking statements
that involve significant risks and uncertainties, including changes in general
economic and financial market conditions and the Company's ability to execute
its business plans. Forward-looking statements give current expectations or
forecasts of future events and are not guarantees of future performance. Such
forward-looking statements are based on management's expectations that involve a
number of risks and uncertainties, and although management believes the
expectations reflected in such forward-looking statements are reasonable, actual
results may differ materially from such statements. Additional information
concerning factors that could cause actual results to differ materially from
those contained in the forward-looking statements is available in the Company's
Annual Report on Form 10-K for the year ended December 31, 2002, the Company's
Quarterly Report on Form 10-Q for the three months ended September 30, 2003 and
subsequent filings with the Securities and Exchange Commission. These filings
are available at no cost on the Commission's Web Site at www.sec.gov or from
National Processing, Inc.
ABOUT NATIONAL PROCESSING, INC.
- -------------------------------
National Processing, Inc. (NYSE: NAP) through its wholly owned operating
subsidiary, National Processing Company, LLC (NPC(R)), is a leading provider of
merchant credit and debit card processing. National Processing is 84 percent
owned by National City Corporation (NYSE: NCC) (www.nationalcity.com), one of
the nation's largest financial holding companies. NPC and its subsidiaries
support approximately 700,000 merchant locations, representing nearly one out of
every five Visa(R) and MasterCard(R) transactions processed nationally. NPC's
card processing solutions offer superior levels of service and performance and
assist merchants in lowering their total cost of card acceptance through
world-class people, technology, and service. Additional information regarding
National Processing can be obtained at www.npc.net.
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NATIONAL PROCESSING, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
QUARTER ENDED DECEMBER 31,
--------------------------
2003 2002 % CHANGE
---- ---- --------
Revenue $135,533 $118,281 15%
Operating expenses 99,037 85,857 15%
General and administrative expenses 6,633 4,607 44%
Depreciation and amortization 5,592 5,051 11%
Restructuring, divestiture, and impairment charges - - -%
-------- --------
OPERATING PROFIT 24,271 22,766 7%
Net interest income 654 1,116 -41%
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INCOME BEFORE TAXES AND MINORITY INTEREST 24,925 23,882 4%
Provision for income taxes 9,371 9,170 2%
-------- --------
INCOME BEFORE MINORITY INTEREST 15,554 14,712 6%
Minority interest 715 568 26%
-------- --------
NET INCOME $ 14,839 $ 14,144 5%
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NET INCOME PER SHARE - BASIC $ 0.28 $ 0.27 3%
NET INCOME PER SHARE - DILUTED $ 0.28 $ 0.27 3%
WEIGHTED AVERAGE SHARES - BASIC 53,014 52,087
WEIGHTED AVERAGE SHARES - DILUTED 53,171 52,268
SHARES OUTSTANDING AT END OF PERIOD 53,113 52,094
YEAR ENDED DECEMBER 31,
-----------------------
2003 2002 % CHANGE
---- ---- --------
Revenue $480,098 $455,376 5%
Operating expenses 353,915 330,518 7%
General and administrative expenses(2) 22,845 23,142 -1%
Depreciation and amortization 21,256 18,542 15%
Restructuring, divestiture, and impairment charges (1) 1,273 1,650 -23%
-------- --------
OPERATING PROFIT 80,809 81,524 -1%
Net interest income 3,024 4,410 -31%
-------- --------
INCOME BEFORE TAXES AND MINORITY INTEREST 83,833 85,934 -2%
Provision for income taxes 32,321 32,396 0%
-------- --------
INCOME BEFORE MINORITY INTEREST 51,512 53,538 -4%
Minority interest 2,751 2,461 12%
-------- --------
NET INCOME $ 48,761 $ 51,077 -5%
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NET INCOME PER SHARE - BASIC $ 0.93 $ 0.98 -5%
NET INCOME PER SHARE - DILUTED $ 0.93 $ 0.97 -5%
WEIGHTED AVERAGE SHARES - BASIC 52,468 52,008
WEIGHTED AVERAGE SHARES - DILUTED 52,577 52,476
SHARES OUTSTANDING AT END OF PERIOD 53,113 52,094
(1) The year ended December 31, 2003 includes $1,273 ($763 after-tax) of
restructure charges related to the consolidation of technology functions and a
loss on the sale of 14 regional sales offices. The year ended December 31, 2002
includes a $1,650 ($2,350 after-tax) restructure charge for severance costs,
building and equipment write downs, and related items for the closure of the
Company's operation in Juarez, Mexico.
(2) The year ended December 31, 2002 includes $3,389 ($2,033 after-tax) of
expenses related to a separation agreement with the former CEO.
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NATIONAL PROCESSING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, December 31,
2003 2002
---- ----
Cash and cash equivalents $ 246,957 $ 185,513
Accounts receivable - trade 136,346 152,132
Other current assets 10,177 9,400
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Total current assets 393,480 347,045
Property and equipment 107,889 105,369
Accumulated depreciation (57,238) (51,662)
--------- ---------
Net property and equipment 50,651 53,707
Goodwill 115,306 91,227
Other intangible assets 43,312 41,990
Other assets 19,225 16,535
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Total assets $ 621,974 $ 550,504
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Accounts payable - trade $ 26,426 $ 23,006
Other current liabilities 69,048 66,921
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Total current liabilities 95,474 89,927
Minority interest 2,772 2,462
Other liabilities 1,945 1,732
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Total liabilities 100,191 94,121
Total shareholders' equity 521,783 456,383
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Total liabilities and shareholders' equity $ 621,974 $ 550,504
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NATIONAL PROCESSING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
QUARTER ENDED DECEMBER 31,
--------------------------
2003 2002 % Change
---- ---- --------
Net income $ 14,839 $ 14,144 5%
Non-cash and working capital items (25,824) (35,014) -26%
-------- --------
Cash used in operating activities (10,985) (20,870) -47%
Capital expenditures (4,379) (2,765) 58%
Acquisitions, net of cash received - (500) NM
-------- --------
Cash used in investing activities (4,379) (3,265) 34%
Cash proceeds from exercise of stock options 8,245 132 NM
Principal payments under capital leases (68) (32) 113%
-------- --------
Cash provided by financing activities 8,177 100 NM
-------- --------
Net increase in cash and cash equivalents (7,187) (24,035) -70%
Cash and cash equivalents, beginning of period 254,144 209,548 21%
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Cash and cash equivalents, end of period $246,957 $185,513 33%
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YEAR ENDED DECEMBER 31,
-----------------------
2003 2002
-------- --------
Net income $ 48,761 $ 51,077 -5%
Non-cash and working capital items 43,401 49,705 -13%
-------- --------
Cash provided by operating activities 92,162 100,782 -9%
Capital expenditures (9,343) (16,347) -43%
Acquisitions, net of cash received (33,356) (3,200) NM
-------- --------
Cash used in investing activities (42,699) (19,547) 118%
Cash proceeds from exercise of stock options 12,194 3,151 287%
Principal payments under capital leases (213) (130) 64%
-------- --------
Cash provided by financing activities 11,981 3,021 297%
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Net increase in cash and cash equivalents 61,444 84,256 -27%
Cash and cash equivalents, beginning of period 185,513 101,257 83%
-------- --------
Cash and cash equivalents, end of period $246,957 $185,513 33%
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NM - Not meaningful