EX-99.1 3 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

PRESS RELEASE

 

Contact: Carole Collins

Investor Relations Director

(770) 248-9600

 

INTERCEPT REPORTS FOURTH QUARTER AND

2003 YEAR END RESULTS

 

ATLANTA, GA (March 16, 2004) – InterCept, Inc. (Nasdaq: ICPT), a leading provider of technology products and services for financial institutions and merchants, today reported financial results for the three months and year ended December 31, 2003.

 

Financial Results

 

Fourth Quarter Ended December 31, 2003

 

Net revenues for the three months ended December 31, 2003 totaled $65.1 million, which was consistent with the $65.1 million reported for the three months ended December 31, 2002. During the three months ended December 31, 2003, revenues from InterCept’s financial institution services segment were $48.3 million, a 17.0% increase compared with $41.3 million for the three months ended December 31, 2002. Revenues from the merchant services division were $13.8 million, a 28.8% decrease compared with $19.4 million for the three months ended December 31, 2002.

 

Net income attributable to common shareholders, excluding unusual items of $108.2 million ($143.0 million on a pre-tax basis) that are described below, totaled $1.0 million, or $0.05 per share, on 21.2 million average shares outstanding for the three months ended December 31, 2003. For the three months ended December 31, 2002, net income available to common shareholders, excluding unusual items of $20.0 million that are described below, totaled $2.8 million, or $0.14 per share, on 20.3 million average shares outstanding. On a GAAP basis, including the unusual items, net loss available to common shareholders totaled $107.2 million, or $5.37 per share, for the three months ended December 31, 2003, versus a loss of $13.2 million, or $0.67 per share, for the three months ended December 31, 2002.

Year Ended December 31, 2003

 

Net revenues for the year ended December 31, 2003 totaled $258.5 million, a 14.0% increase compared with $226.7 million for the year ended December 31, 2002. During the period, revenues from InterCept’s financial institution services segment were $183.0 million, a 15.9% increase compared with $158.0 million for the year ended December 31, 2002. Revenues from the merchant services division were $61.4 million as compared with $54.7 million for the year ended December 31, 2002. Because InterCept completed the acquisitions of EPX and iBill in April and May 2002, those operations contributed revenues for only part of 2002.

 

For the year ended December 31, 2003, net income attributable to common shareholders, excluding unusual items of $111.5 million ($148.2 million on a pre-tax basis) that are described below, totaled $6.5 million, or $0.32 per share, on 19.8 million average shares outstanding for the year ended December 31, 2003, versus $18.3 million, or $0.93 per share, on 19.7 million average shares outstanding for year ended December 31, 2002. On a GAAP basis, including the unusual items, net loss available to common shareholders totaled $105.0 million, or $5.29 per share for the year ended December 31, 2003, versus a loss of $2.3 million, or $0.12 per share, for the year ended December 31, 2002.

 

Unusual Items

 

The following items have been deducted in the previous paragraphs to arrive at net income before unusual items in the fourth quarter of 2003 (numbers in thousands):

 

·

    Impairment charge on merchant services    $ 130,652

·

    Class action settlement      4,217

·

    Settlement of dispute with prior shareholders of EPX      4,279

·

    Legal fees and other      1,392

·

    Trade News legal settlement      800

·

    Merchant fines      600

·

    Writeoff of fixed assets and license fees related to conversion of imaging centers to proprietary imaging software      1,066
         
          $ 143,006
         

 

The following item has been deducted in the previous paragraphs to arrive at net income before unusual items in the fourth quarter of 2002 (number in thousands):

 

·

    Impairment charge on merchant services    $ 20,005

·

    Equity in loss of affiliate – Netzee      5,471
         
          $ 25,476
         

The following additional items have been deducted in the previous paragraphs to arrive at net income before unusual items for the full year 2002 (numbers in thousands):

 

·

    Writeoff of SLM note receivable    $ 3,752

·

    Card association fines      780

·

    Charge related to reduction in staff at merchant services division      685
         
          $ 5,217
         

 

The following additional items have been deducted in the previous paragraphs to arrive at net income before unusual items for the full year 2002 (numbers in thousands):

 

·

    Reserve for WorldCom bankruptcy    $ 2,200

·

    Equity in loss of affiliate – Netzee      2,838

·

    Consolidation charge – item processing centers      400
         
          $ 5,438
         

 

Update on Sale of Merchant Services Division

 

On February 11, 2004, InterCept announced that it had entered into a letter of intent for the sale of its merchant services division, InterCept Payment Solutions. The potential purchaser under that letter of intent was an independent provider of merchant payment services for both traditional and web-based merchants. Although that potential purchaser originally intended to purchase the entire division, InterCept is now negotiating with that potential purchaser and another independent bidder to sell to one of them the merchant division assets other than iBill. InterCept is now negotiating to sell iBill to another independent buyer.

 

InterCept believes that it is close to reaching final agreements with the entity seeking to buy the iBill assets and one of the bidders for the remaining assets. InterCept believes that the aggregate sales price for the entire division is likely to be higher than the $37.4 million announced on February 11. If InterCept closes these sales in the near future as InterCept anticipates, it will disclose the material terms of the sales by press release and by filing a Current Report on Form 8-K with the SEC.

 

New Directors

 

InterCept also announced the addition of another independent director to its board of directors. Mr. Arthur G. (“Buddy”) Weiss, a private investor and the former Chairman of the Board of Medical Resources of America and Equivest, Inc.,

joined InterCept’s board on March 8, 2004. Mr. Weiss joins new directors Dr. James A. Verbrugge, Director of the Center for Strategic Risk Management at the University of Georgia’s Terry College of Business, and Mr. Mark Hawn, founder and Chief Executive Officer of DocuForce, Inc., which performs facilities management and office support services for law firms and financial institutions. Dr. Verbrugge and Mr. Weiss will serve as members of InterCept’s audit committee, along with John D. Schneider, Jr.

 

Conference Call Rescheduled

 

Previously, InterCept announced that it would hold a conference call on March 16, 2004 to discuss this earnings release. In light of the developments with the sale of its merchant services division, InterCept has rescheduled that conference call to 8:30 AM EST on March 23, 2004. InterCept will also provide an online Web simulcast and rebroadcast of the call. Live broadcast of the call will be available online at www.intercept.net. To listen to the live call, please go to the web site at least fifteen minutes early to register, download and install any necessary audio software. An online replay of the call will be available shortly after it ends and will continue to be available through April 23, 2004.

 

About InterCept

 

InterCept, Inc. is a single-source provider of a broad range of technologies, products and services that work together to meet the technology and operating needs of financial institutions and merchants. InterCept’s products and services include core data processing, check processing and imaging, electronic funds transfer, debit and credit card processing, data communications management, and related products and services. For more information about InterCept, go to www.intercept.net or call 770.248.9600.

 

We believe that presentation of non-GAAP financial measures in this press release provides useful information to investors regarding InterCept’s financial condition and results of operations because it permits investors to better understand our core business without the effects of unusual items.

 

This release contains forward-looking statements within the meaning of the securities laws that are based on current expectations, assumptions, estimates, and projections about InterCept and its industry. These forward- looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of InterCept’s control, that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include whether the sale of InterCept’s merchant services division will close in the near future as anticipated or at all. Other risks and factors that may affect InterCept and its share price are discussed in detail in the section in its most recent Annual Report on Form 10-K entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations — Disclosure Regarding Forward-Looking Statements.

 

-END-

InterCept, Inc.

Financial Highlights

(unaudited and in thousands, except per share data)

 

     Three Months Ended
December 31,
    

Year Ended

December 31,

  
     2003
     2002
     2003
     2002
  

Revenues:

                                 

Financial institution services

    $ 48,272     $ 41,258     $ 183,042     $ 157,976  

Merchant services

      13,824       19,417       61,377       54,700  

Customer reimbursements

      3,042       4,453       14,110       14,026  
    
 
 
 

Total revenues

      65,138       65,128       258,529       226,702  

Cost of Services:

                                 

Costs of financial institution services

      24,893       20,438       92,679       73,678  

Costs of merchant services

      5,682       9,456       26,213       25,701  

Customer reimbursements

      3,042       4,453       14,110       14,026  
    
 
 
 

Total cost of services

      33,617       34,347       133,002       113,405  

Selling, general and administrative

      34,964       23,234       106,713       74,768  

Depreciation and amortization

      6,014       4,685       20,846       15,617  

Impairment charge

      130,652       20,005       130,652       20,005  
    
 
 
 

Operating income

      (140,109 )     (17,143 )     (132,684 )     2,907  

Other (expense) income, net

      (992 )     100       (4,791 )     1,860  
    
 
 
 

Income before income taxes, equity in loss of affiliates, and minority interest

      (141,101 )     (17,043 )     (137,475 )     4,767  

Provision for income taxes

      (34,072 )     (9,366 )     (32,651 )     (1,294 )

Equity in loss of affiliates

      —         (5,484 )     (4 )     (8,346 )

Minority interest

      (13 )     (5 )     (55 )     (31 )

Net income before preferred dividends

      (107,042 )     (13,166 )     (104,883 )     (2,316 )
    
 
 
 

Preferred dividends

      (125 )     —         (146 )     —    

Net income attributable to common shareholders

      (107,167 )     (13,166 )     (105,029 )     (2,316 )
    
 
 
 

Income per share:

                                 

Basic

    $ (5.37 )   $ (0.67 )   $ (5.29 )   $ (0.12 )
    
 
 
 

Diluted

    $ (5.37 )   $ (0.67 )   $ (5.29 )   $ (0.12 )
    
 
 
 

Weighted average shares outstanding:

                                 

Basic

      19,940       19,531       19,839       18,789  

Diluted

      19,940       19,531       19,839       18,789  

InterCept, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 

     December 31,
2003
     December 31,
2002
  
     unaudited        

ASSETS

                 

Current assets:

                 

Cash and cash equivalents

    $ 9,747     $ 24,071  

Short term investments

      12       19,239  

Accounts receivable, net

      28,898       29,229  

Advances to SLM

      3,654       7,485  

Deferred tax assets

      5,368       2,536  

Prepaid expenses

      9,525       6,782  

Inventory and other

      8,462       15,537  
    
 

Total current assets

      65,666       104,879  

Property and equipment, net

      57,913       42,324  

Intangible assets, net

      60,770       83,418  

Goodwill, net

      98,195       216,144  

Deferred tax asset

      21,483       —    

Other assets

      20,025       25,849  
    
 

Total assets

    $ 324,052     $ 472,614  
    
 

LIABILITIES AND SHAREHOLDERS’ EQUITY

                 

Current liabilities:

                 

Current maturities of long-term debt

    $ 1,127     $ 23,740  

Accounts payable and accrued expenses

      30,548       19,364  

Client payouts and reserves

      34,546       58,740  

Deferred revenue

      10,961       11,825  
    
 

Total current liabilities

      77,182       113,669  

Long-term debt, net of current portion

      24,000       39,425  

Deferred revenue

      400       376  

Deferred taxes

      —         3,832  
    
 

Total liabilities

      101,582       157,302  

Minority interest

      308       253  

Shareholders’ equity:

                 

Preferred stock

      9,942       —    

Common stock

      303,009       301,152  

Retained earnings

      (90,774 )     14,255  

Unrealized loss on securities

      (15 )     (348 )
    
 

Total shareholders’ equity

      222,162       315,059  
    
 

Total liabilities and shareholders’ equity

    $ 324,052     $ 472,614  
    
 

InterCept, Inc.

Condensed Consolidated Statement of Operations

Three Months Ended December 31, 2003

(unaudited and in thousands except per share data)

Reconciliation of GAAP Amounts to Non-GAAP Financial Measures

 

     GAAP
     Unusual
Items
     Reconciliation to
Non-GAAP
Financial
Measure
  

Revenues:

                         

Financial institution services

    $ 48,272     $ —       $ 48,272  

Merchant services

      13,824     $ —         13,824  

Customer reimbursements

      3,042       —         3,042  
    
 
 

Total Revenues

      65,138       —         65,138  

Cost of Services:

                         

Costs of financial institution services

      24,893       —         24,893  

Costs of merchant services

      5,682       —         5,682  

Customer reimbursements

      3,042       —         3,042  

Selling, general & administrative

      34,964       11,999       22,965  

Depreciation & amortization

      6,014       —         6,014  

Impairment charge

      130,652       130,652       —    
    
 
 

Total Operating Expenses

      205,247       142,651       62,596  

Operating Income

      (140,109 )     (142,651 )     2,542  

Other (Expense) Income, net

      (992 )     (355 )     (637 )
    
 
 

Total Other (Expense) Income, net

      (992 )     (355 )     (637 )

Income Before Income Taxes, Equity in Loss of Affiliates, Preferred Dividends and Minority Interest

      (141,101 )     (143,006 )     1,905  

Provision for Income Taxes

      (34,072 )     34,796       724  

Equity in Loss of Affiliates

      —         —         —    

Minority interest

      (13 )     —         (13 )
    
 
 

Net Income Before Preferred Dividends

    $ (107,042 )   $ (108,210 )   $ 1,168  
    
 
 

Preferred Dividends

      (125 )             (125 )
    
         

Net Income Attributable to Common Shareholders

      (107,167 )             1,043  

Net Income Per Common Share (Diluted)

    $ (5.37 )           $ 0.05  
    
         

Weighted Average Shares Outstanding (Diluted)

      19,940               21,235  

InterCept, Inc.

Condensed Consolidated Statement of Operations

Year Ended December 31, 2003

(unaudited and in thousands except per share data)

Reconciliation of GAAP Amounts to Non-GAAP Financial Measures

 

     GAAP
     Unusual
Items
     Reconciliation
to Non-GAAP
Financial
Measure
  

Revenues:

                         

Financial institution services

    $ 183,042     $ —       $ 183,042  

Merchant services

      61,377     $ —         61,377  

Customer reimbursements

      14,110       —         14,110  
    
 
 

Total Revenues

      258,529       —         258,529  

Cost of Services:

                         

Costs of financial institution services

      92,679               92,679  

Costs of merchant services

      26,213       780       25,433  

Customer reimbursements

      14,110       —         14,110  

Selling, general & administrative

      106,713       12,736       93,977  

Depreciation & amortization

      20,846       —         20,846  

Impairment charge

      130,652       130,652       —    
    
 
 

Total Operating Expenses

      391,213       144,168       247,045  

Operating Income

      (132,684 )     (144,168 )     11,484  

Other (Expense) Income, net

      (4,791 )     (4,055 )     (736 )
    
 
 

Total Other (Expense) Income, net

      (4,791 )     (4,055 )     (736 )

Income Before Income Taxes, Equity in Loss of Affiliates, and Minority Interest

      (137,475 )     (148,223 )     10,748  

Provision for Income Taxes

      (32,651 )     36,735       4,084  

Equity in Loss of Affiliates

      (4 )     —         (4 )

Minority interest

      (55 )     —         (55 )
    
 
 

Net Income Before Preferred Dividends

    $ (104,883 )   $ (111,488 )   $ 6,605  

Preferred Dividends

      (146 )             (146 )
    
         

Net Income Attributable to Common Shareholders

      (105,029 )             6,459  

Net Income Per Common Share (Diluted)

    $ (5.29 )           $ 0.32  
    
         

Weighted Average Shares Outstanding (Diluted)

      19,839               20,751  

InterCept, Inc. and Subsidiaries

Segment Information

(unaudited and in thousands)

 

     Financial Institution Services
    Merchant Services
  
     Three Months Ended
December 31,
   

Year Ended

December 31,

    Three Months Ended
December 31,
    

Year Ended

December 31,

  
     2003
     2002
    2003
    2002
    2003
     2002
     2003
      2002
  
     (unaudited)     (unaudited)    (unaudited)    (unaudited)    (unaudited)     (unaudited)     (unaudited)      (unaudited)  

Revenues:

                                                               

Service fees

    $ 43,961     $ 36,840    $ 164,364    $ 141,095    $ 13,824     $ 19,417     $ 61,377      $ 54,700  

Data communications management

      2,588       2,312      10,115      8,890      —         —         —          —    

Equipment and product sales, services and other

      1,723       2,106      8,563      7,991      —         —         —          —    

Customer reimbursements

      3,042       4,453      14,110      14,026      —         —         —          —    
    
 
  
  
  
 
 
  

Total revenues

      51,314       45,711      197,152      172,002      13,824       19,417       61,377        54,700  

Costs of services:

                                                               

Costs of service fees

      21,714       17,114      78,507      61,675      5,682       9,456       26,213        25,701  

Costs of data communications management

      1,898       1,704      7,465      5,798      —         —         —          —    

Costs of equipment and product sales, services and other

      1,281       1,620      6,707      6,205      —         —         —          —    

Customer reimbursements

      3,042       4,453      14,110      14,026      —         —         —          —    

Selling, general and administrative expenses

      23,283       14,626      72,760      52,421      11,681       8,608       33,953        22,347  

Depreciation and amortization

      4,281       2,808      14,327      10,602      1,733       1,877       6,519        5,015  

Impairment charge

                                   130,652       20,005       130,652        20,005  
    
 
  
  
  
 
 
  

Total operating expenses

      55,499       42,325      193,876      150,727      149,748       39,946       197,337        73,068  

Operating income (loss)

    $ (4,185 )   $ 3,386    $ 3,276    $ 21,275    $ (135,924 )   $ (20,529 )   $ (135,960 )    $ (18,368 )