Diluted EPS of $0.18, or $0.30 Before Charges
ALPHARETTA, Ga., April 24 -- Certegy Inc. (NYSE:CEY) today reported first quarter 2003 diluted earnings per share of $0.18 on revenue of $240.2 million, operating income of $21.0 million and net income of $12.2 million. The operating income decline of 24.6% includes pretax charges of $12.6 million ($7.9 million after-tax, or $0.12 per diluted share) for contract termination, severance and other costs. Excluding these charges, diluted earnings per share was $0.30, operating income was $33.6 million and net income was $20.1 million.
"We are pleased with the solid performance of our U.S. card issuing business, where revenue grew by 13.7% over the prior year quarter. Also, consolidated operating income increased a strong 20.9%, excluding charges, driven by transaction growth, new product sales and actions implemented in the fourth quarter of 2002 to improve operating efficiencies," stated Lee Kennedy, chairman, president and chief executive officer of Certegy.
FIRST QUARTER FINANCIAL HIGHLIGHTS
A reconciliation of actual 2003 first quarter financial results to results excluding the pre-tax charges of $12.6 million is included in Item 5 of the supplemental information attached to this press release and in the "Investor Center" section of the Company`s website. Highlights of the 2003 first quarter results, excluding charges, as compared to 2002, are as follows:
* Revenue increased 2.3% (3.0% in local currency) to $240.2 million.
* Operating income of $33.6 million grew 20.9%.
* Interest expense declined 15.0% to $1.7 million.
* Net income grew by 25.4% to $20.1 million.
* Diluted earnings per share of $0.30 increased by 30.4%.
* Total debt outstanding was $207.0 million at March 31, 2003.
* 500,000 shares of common stock were repurchased at a cost of
$11.8 million.
* The effective tax rate for 2003 of 37.3% declined from 38.3%.
SEGMENT RESULTS
Card Services generated revenue of $157.2 million in the first quarter of 2003, unchanged from the 2002 first quarter. In local currency, Card Services` revenue increased 2.0%. Growth of 13.7% (9.1% excluding acquisition) in North American card issuing revenue was largely offset by a 16.8% decline in merchant processing revenue. International card issuing revenue declined 14.1% primarily due to the net effects of currency and the Banco Real deconversion in Brazil at the beginning of March. In local currency, international card issuing revenue declined 4.0%. Card Services` operating income of $20.0 million declined by $4.7 million, or 19.0%, compared to the 2002 first quarter. Excluding $11.5 million of charges, Card Services` operating income increased $6.8 million, or 27.6% over the prior year quarter.
Check Services generated revenue of $83.0 million in the first quarter of 2003, an increase of $5.4 million, or 6.9% over the 2002 first quarter. In local currency, Check Services revenue increased 4.9%. Revenue growth was impacted by weak retail sales caused by poor weather conditions in some parts of the country, the war in Iraq and soft consumer spending. Check Services` operating income of $6.0 million declined by $1.4 million, or 18.6%, compared to the 2002 first quarter. Excluding $1.0 million of charges, Check Services` operating income declined by $0.3 million, or 4.6% below the 2002 first quarter.
Corporate expense of $5.0 million increased by $0.8 million over the 2002 first quarter due to the timing of certain administrative expenses. Excluding the $0.1 million charge, corporate expense increased by $0.7 million.
BUSINESS HIGHLIGHTS
During the first quarter of 2003, domestic card issuing transaction volumes increased by 10.6%, driven primarily by 22% growth in debit card transactions. Certegy added 0.7 million cards since year-end 2002, excluding the 1.6 million card Banco Real deconversion in Brazil, ending the quarter with a global card base of 45.8 million cards. During the first quarter, Certegy successfully converted Banco Dominicano del Progreso`s American Express card portfolio, which is being serviced by Card Services` North American processing center.
Check Services entered into a multi-year agreement to provide check cashing services to all Safeway Inc. locations in the United States. Also during the quarter, Certegy announced plans to provide check risk management services to Pep Boys and an agreement to offer full-service check processing to National Processing Inc. merchants. Certegy also announced a multi-year extension of its agreement to provide check warranty services for Bed Bath and Beyond.
OUTLOOK
Certegy reiterated its diluted earnings per share guidance. The Company expects full year 2003 diluted earnings per share to range from $1.40 to $1.43, including first quarter charges of $0.12 per diluted share. This is unchanged from previous guidance of $1.52 to $1.55, excluding charges, for full year 2003. Certegy also provided second quarter 2003 diluted earnings per share guidance of $0.33 to $0.35. When commenting on the 2003 expectations, Kennedy stated, "Our earnings per share outlook for 2003 remains within the range of $1.52 to $1.55, excluding charges. Strength in our domestic card issuing business, on-going cost efficiencies and a lowered effective tax rate should offset the effects of soft consumer spending, which could affect our check business."
TELECONFERENCE
Management will host a teleconference to discuss first quarter earnings on Thursday, April 24, 2003, at 9:00 a.m. Eastern Time. The live audio Webcast will be available at www.certegy.com. Please be advised that Microsoft`s Windows Media Player(TM) must be downloaded prior to accessing the presentation. It can be downloaded from www.microsoft.com/windows/mediaplayer. A replay of the Webcast will be available in the Investor Section of the website one hour after the call ends through 10:00 p.m. Eastern time May 1, 2003.
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 2002 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.
Certegy (NYSE:CEY) provides credit and debit card processing, check risk management and check cashing services, and merchant processing to over 6,000 financial institutions, 117,000 retailers and 100 million consumers 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 $1.0 billion in revenue in 2002. For more information on Certegy, please visit www.certegy.com.
CONTACT:
Mary K. Waggoner, Vice President - Investor and Public
Relations
Certegy Inc.
+1-678-867-8004
mary.waggoner@certegy.com
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