Contact: Mary Waggoner
VP - Investor Relations
678-867-8004
mary.waggoner@certegy.com
EPS GROWTH OF 21.1 PERCENT OVER 2001 COMPARABLE PRO FORMA RESULTS
Alpharetta, GA, April 23, 2002 -- Certegy Inc. (NYSE:CEY) today reported first quarter 2002 diluted earnings per share of $0.23 on revenue of $234.8 million, operating income of $27.8 million and net income of $16.0 million.
FIRST QUARTER FINANCIAL HIGHLIGHTS
Certegy was established as a separate public company through a tax-free distribution to Equifax Inc. shareholders on July 7, 2001. For comparative purposes, the pro forma financial results for the first quarter of 2001 include adjustments to reflect $4.6 million of interest expense and $1.6 million of corporate expenses that would have been incurred had the spin-off occurred at the beginning of 2001.
Statement of Financial Accounting Standards (“SFAS”) No. 142 modifies accounting for business combinations, goodwill and identifiable intangible assets. As of January 1, 2002, all goodwill amortization ceased. In the first quarter of 2001, Certegy’s operating income included $2.0 million of goodwill amortization, or approximately $0.025 per diluted share. For comparative purposes, the pro forma financial results for the first quarter of 2001 include adjustments to reflect this accounting change, as if it had been effective January 1, 2001.
In January 2002, the Company adopted Emerging Issues Task Force Issue No. 01-14 (“EITF 01-14”), “Income Statement Characterization of Reimbursements Received for ‘Out-of-Pocket’ Expenses Incurred,” which requires that reimbursements received for out-of-pocket expenses be reclassified as revenues. Historically, the Company has netted such reimbursements against its costs in the consolidated statements of income. As a result of this required adoption and certain similar reclassifications, actual revenues reported for the first quarters of 2002 and 2001 have increased by $20.9 million and $20.7 million, respectively, for reimbursed out-of-pocket expenses that include postage, delivery, telecommunication and other costs. These reclassifications have no impact upon operating income or net income.
Highlights of the 2002 first quarter financial results, compared to 2001 comparable pro forma results, are as follows:
Revenue grew 8.9 percent to $234.8 million, compared with $215.7 million in the first quarter of 2001. On a local currency basis, revenue increased 10.4 percent.
Prior to the revenue reclassifications, revenue grew 9.8 percent, or 11.2 percent on a local currency basis.
Operating income of $27.8 million increased 3.3 percent, or 4.2 percent on a local currency basis.
Interest expense declined by $2.8 million, due to lower interest rates and reductions in total debt outstanding.
Total debt outstanding as of March 31, 2002 was $205.0 million, and has been further reduced in April 2002, to an outstanding balance of $195.0 million.
Net income increased 21.8 percent.
Diluted earnings per share increased by 21.1 percent.
We are pleased to report another quarter of strong revenue and bottom line growth,” said Lee Kennedy, Chairman, President and Chief Executive Officer. “Our management team remains focused on increasing core market share and developing new products, markets and industries throughout the world. In the first quarter we continued to develop significant new opportunities, investing $0.7 million in our check cashing business and an incremental $0.5 million in our international card business.”
Card Services generated revenue of $157.2 million in the first quarter of 2002, an increase of $8.2 million, or 5.5 percent, over the first quarter of 2001. Card Services’ operating income grew by 1.1 percent to $24.6 million over the pro forma first quarter of 2001. On a local currency basis, Card Services’ first quarter revenue and operating income rose by 7.5 percent and 1.9 percent, respectively.
Check Services generated revenue of $77.6 million in the first quarter of 2002, an increase of $10.9 million, or 16.4 percent, over the first quarter of 2001. Check Services’ operating income grew 15.8 percent to $7.3 million over the pro forma first quarter of 2001.
BUSINESS HIGHLIGHTS
Certegy continues to gain scale in its international card processing business. The Company added 1.5 million cards globally during the quarter, increasing its global card base to 43.2 million and its international card base to 21.3 million.
Check volumes increased by approximately 15 percent over the first quarter of 2001, the result of record new customer sales in 2001. The Company continues to gain market share in its traditional check authorization business. New customer signings include national retailers such as AT&T, PETsMART, Oriental Trading and divisions of Saks, as well as a significant number of leading regional merchants.
We have also made significant progress in expanding our market leadership position in the telephone order and Internet check payment market,” Kennedy said. “During the quarter, we added Apple Computer and MCI to our growing customer base. We also continue to make progress in generating improved operating efficiencies. In the first quarter, core check net losses improved versus prior year, while at the same time check approval rates exceeded 98%. This places us in a strong position relative to our competitors.”
OUTLOOK
The Company reiterated its earlier revenue and earnings guidance for 2002. Compared to pro forma 2001 results:
Revenue of $936 million in 2001 is expected to increase 10 to 12 percent. This is equivalent to 11 to 13 percent growth under prior revenue reporting standards.
Operating income of $148.2 million in 2001 is expected to increase 14 to 16 percent, or 8 to 10 percent on a comparable pro forma basis.
Net income of $80.0 million in 2001 is expected to increase 24 to 25 percent, or 15 to 16 percent on a comparable pro forma basis.
Diluted earnings per share of $1.16 in 2001 is expected to increase by 23 to 24 percent, or 14 to 15 percent on a comparable pro forma basis.
TELECONFERENCE
Management will host a teleconference to discuss first quarter earnings on Tuesday, April 23, 2002 at 9:00 a.m. Eastern Time. The live audio Webcast and replay of the speakers’ presentations will be available at www.certegy.com. Please be advised that Microsoft’s Windows Media PlayerTM must be downloaded prior to accessing the presentation. It can be downloaded from www.microsoft.com/windows/mediaplayer.
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Certegy Inc. (NYSE:CEY) provides credit, debit and merchant card processing, e-banking, check risk management and check cashing services to over 6,000 financial institutions, 117,000 retailers and 140 million customers worldwide. Headquartered in Alpharetta, Georgia, Certegy maintains a strong global presence with operations in the United States, Canada, United Kingdom, Ireland, France, Chile, Brazil, Australia and New Zealand. As a leading payment services provider, Certegy offers a comprehensive range of transaction processing services, check risk management solutions and integrated customer support programs that facilitate the exchange of business and consumer payments. Certegy generated $936 million in revenue in 2001. For more information on Certegy, please visit www. certegy.com.
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The statements in this release include forward-looking statements that are based on current expectations, assumptions, estimates, and projections about Certegy and our industry. They are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Certegy’s control, that may cause actual results to differ significantly from what is expressed in those statements. The factors that could, either individually or in the aggregate, affect our performance include the following, which are described in greater detail in the section entitled "Certain Factors Affecting Forward-Looking Statements" in our 2001 Annual Report on Form 10-K filed with the SEC: Our ability to maintain or improve our competitive positions against current and potential competitors; the level of economic growth or other factors affecting demand for our products and services; loss of key customer contracts or strategic relationships; changes in regulation or industry standards applicable to our businesses or those of our customers; risks associated with investments and operations in foreign countries, including exchange rate fluctuations and local political, social, and economic factors, and those other risks listed in the above-referenced section of our Form 10-K.
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