EX-99.1 3 dex991.htm PRESS RELEASE Press Release

 

Exhibit 99.1

 

Press Release

 

Contact:  Scott Meyerhoff

Chief Financial Officer

(770) 248-9600

 

INTERCEPT ANNOUNCES 2002 FOURTH QUARTER AND

YEAR-END FINANCIAL RESULTS

 

ATLANTA, GA (March 5, 2003)—InterCept, Inc. (Nasdaq: ICPT), a leading provider of banking technology products and services for financial institutions and merchants, today reported financial results for the three months and year ended December 31, 2002.

 

Financial Results

 

Net revenues for the three months ended December 31, 2002 totaled $65.1 million, a 59.0% increase compared with $41.0 million for the three months ended December 31, 2001. Net income available to common shareholders, excluding (a) net losses generated from InterCept’s 28% ownership of Netzee, Inc. and one-time charges from the sale of Netzee and the resulting loss on the note receivable, and (b) asset impairment charges of $20.0 million related to certain intangible assets from the acquisitions of Internet Billing Company and Electronic Payment Exchange, totaled $2.8 million or $0.14 per share (diluted), on 20.3 million average shares outstanding for the three months ended December 31, 2002, versus $4.9 million or $0.26 per share (diluted), on 19.0 million shares outstanding for the three months ended December 31, 2001. Net loss available to common shareholders including these net losses and impairment charges was $12.0 million or $0.61 per share (diluted) for the three months ended December 31, 2002 versus net income of $3.6 million or $0.19 per share (diluted) for the three months ended December 31, 2001.

 

Net revenues for the year ended December 31, 2002 totaled $226.7 million, a 61.7% increase compared with $140.2 million for the year ended December 31, 2001. Net income available to common shareholders for the year ended December 31, 2002, excluding (a) net losses related to Netzee, (b) the $20.0 million impairment of intangible assets, (c) a $2.2 million non-recurring charge to establish a reserve related to the WorldCom bankruptcy, and (d) a $0.4 million one-time charge related to the consolidation of two of InterCept’s item processing centers, was $18.3 million or $0.93 per share (diluted) on 19.7 million shares outstanding, versus $14.8 million or $0.90 per share (diluted) on 16.4 million average shares outstanding for the year ended December 31, 2001. Net loss available to common shareholders, including the net losses and one-time charges detailed

 

 

above, was $1.1 million or $0.06 per share for the year ended December 31, 2002 versus net income of $4.4 million or $0.27 per share (diluted) for the year ended December 31, 2001.

 

In accordance with generally accepted accounting principles, InterCept performs an analysis of its long lived assets on an annual basis. Based on its review, InterCept determined that intangible assets of iBill and EPX were impaired. Accordingly, InterCept recorded an impairment charge of $20.0 million in the fourth quarter of 2002.

 

On December 31, 2002, Netzee sold substantially all of its assets to Certegy, Inc. Before the sale, InterCept owned 28% of Netzee’s common stock and, jointly with John H. Harland Company, provided Netzee with a line of credit. As part of the sale, InterCept received $472,000 for its common stock of Netzee, which InterCept had previously valued at zero on its balance sheet. InterCept also received approximately $2.3 million in cash for its note receivable from Netzee, which InterCept had previously recorded at $8.3 million on its balance sheet. The transaction resulted in a loss of $5.5 million, which was less than the estimated loss of $6.0 to $6.5 million InterCept previously disclosed in its December 9, 2002 press release. InterCept recorded this $5.5 million loss in the fourth quarter.

 

John Collins, InterCept’s Chairman and CEO, stated “We have reviewed our merchant processing operations and have made several key steps towards positioning the unit for future growth. With the new organizational structure we announced earlier this week, we will now operate all of our merchant units as a single business known as InterCept Payment Solutions under the leadership of John Perry. This business, while not as successful as we had initially anticipated, remains cash flow positive today and with John’s leadership we believe will become a more valuable franchise.”

 

“In our financial institutions division,” Collins continued, “the lower transaction volumes we experienced in the fourth quarter hindered our financial performance. One-time sales continued to be sluggish in the fourth quarter, and our non-recurring revenues suffered as a result. Despite the slow finish to 2002, our financial institutions business unit remains strong, and we look forward to continuing our growth in 2003. We continue to work closely with Sovereign Bank’s team on the conversion of its item processing operations, and currently anticipate the initial conversion to occur in July 2003.

 

2003 Guidance

 

As previously announced, InterCept anticipates that 2003 earnings per share will be in the range of $0.80 to $0.90 per share, excluding any one-time charges that the company may incur. This estimate reflects a higher level of capital expenditures and other costs in the first half of the year related to the commencement of item processing services for Sovereign Bank. InterCept expects most of the quarter-over-quarter revenue increase from the Sovereign contract to occur in the fourth quarter of 2003.

 

 

Conference Call and Webcast Information

 

InterCept has scheduled a conference call to discuss the earnings release at 5:00 PM EST on March 5, 2003. 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 5, 2003.

 

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. 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.

 

This release contains, and the remarks by our management on the conference call may contain, forward-looking statements within the meaning of the securities laws that are based on current expectations, assumptions, estimates, and projections about InterCept and our 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 forward-looking statements. These risks and uncertainties include whether we can: continue to sustain our current internal growth rate or our total growth rate; successfully close and integrate acquisitions of assets, and businesses and other operations; continue to provide enhanced and new products and services that appeal to our financial institution and merchant customers; access the debt and equity capital we need to sustain our growth; and achieve our sales objectives. Other risks include the possibility that credit card companies may fine us for excessive credit card charge-backs or other issues arising out of our merchant services operations; the possibility that the termination of customers or other changes in our merchant services business could adversely affect its value and result in the impairment of that asset or other intangible assets which would require us to record an additional impairment charge in our statement of operations; and the stock price volatility associated with “small-cap” companies. These and various other factors are discussed in detail in the section in our most recent Quarterly Report on Form 10-Q entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations – Disclosure Regarding Forward-Looking Statements.

 

 

 

InterCept, Inc.

Condensed Consolidated Statement of Operations

(unaudited and in thousands, except per share data)

 

    

Three Months Ended

December 31,

     

Year Ended

December 31,

  
    

2002

     

2001

     

2002

     

2001

  

Revenues:

                                    

Financial institution services

   

$

41,258

 

   

$

38,023

 

   

$

157,976

 

   

$

128,600

 

Merchant services

   

 

19,417

 

   

 

494

 

   

 

54,700

 

   

 

2,172

 

Customer reimbursements (1)

   

 

4,453

 

   

 

2,452

 

   

 

14,026

 

   

 

9,452

 

    
  
  
  

Total revenues

   

 

65,128

 

   

 

40,969

 

   

 

226,702

 

   

 

140,224

 

Cost of Services:

                                    

Costs of financial institution services

   

 

20,438

 

   

 

16,651

 

   

 

73,678

 

   

 

54,938

 

Costs of merchant services

   

 

7,552

 

   

 

19

 

   

 

23,797

 

   

 

59

 

Customer reimbursements

   

 

4,453

 

   

 

2,452

 

   

 

14,026

 

   

 

9,452

 

    
  
  
  

Total cost of services

   

 

32,443

 

   

 

19,122

 

   

 

111,501

 

   

 

64,449

 

Selling, general and administrative

   

 

23,234

 

   

 

11,966

 

   

 

74,768

 

   

 

42,504

 

Depreciation and amortization

   

 

4,685

 

   

 

3,108

 

   

 

15,617

 

   

 

11,483

 

Impairment charge

   

 

20,005

 

   

 

—  

 

   

 

20,005

 

   

 

—  

 

    
  
  
  

Operating (loss) income

   

 

(15,239

)

   

 

6,773

 

   

 

4,811

 

   

 

21,788

 

Other income, net

   

 

100

 

   

 

1,021

 

   

 

1,860

 

   

 

2,667

 

    
  
  
  

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

                                    
  

 

(15,139

)

   

 

7,794

 

   

 

6,671

 

   

 

24,455

 

(Benefit) provision for income taxes

   

 

(8,656

)

   

 

2,141

 

   

 

(584

)

   

 

3,144

 

Equity in loss of affiliates

   

 

(5,484

)

   

 

(2,092

)

   

 

(8,346

)

   

 

(16,848

)

Minority interest

   

 

(5

)

   

 

(5

)

   

 

(31

)

   

 

(19

)

    
  
  
  

Net (loss) income

   

$

(11,972

)

   

$

3,556

 

   

$

(1,122

)

   

$

4,444

 

    
  
  
  

(Loss) income per share:

                                    

Basic

   

$

(0.61

)

   

$

0.20

 

   

$

(0.06

)

   

$

0.29

 

    
  
  
  

Diluted

   

$

(0.61

)

   

$

0.19

 

   

$

(0.06

)

   

$

0.27

 

    
  
  
  

Weighted average shares outstanding:

                                    

Basic

   

 

19,531

 

   

 

17,890

 

   

 

18,789

 

   

 

15,434

 

Diluted

   

 

19,531

 

   

 

18,965

 

   

 

18,789

 

   

 

16,397

 

 

(1)   Effective January 1, 2002, the company adopted Emerging Issues Task Force Issue No. 01-14, "Income Statement Characterization of Reimbursements Received for `Out of Pocket' Expenses Incurred," which requires that customer reimbursements received for direct costs paid to third parties and related expenses be characterized as revenue. Comparative financial statements for 2001 have been reclassified to provide consistent presentation. Customer reimbursements represent direct costs paid to third parties primarily for postage and travel expenses. The adoption of Issue No. 01-14 did not impact the company's financial position, operating income or net income.

 

 

InterCept, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

unaudited

 

    

December 31,

     

December 31,

  
    

2002

     

2001

  

ASSETS

                  

Current assets:

                  

Cash and cash equivalents

   

$

24,348

 

   

$

24,917

 

Short term investments

   

 

19,239

 

   

 

50,289

 

Accounts receivable, net

   

 

29,072

 

   

 

20,271

 

Advances to SLM

   

 

7,485

 

   

 

7,025

 

Deferred tax assets

   

 

2,536

 

   

 

1,470

 

Inventory, prepaid expenses and other

   

 

21,539

 

   

 

8,973

 

    
  

Total current assets

   

 

104,219

 

   

 

112,945

 

Property and equipment, net

   

 

42,324

 

   

 

28,108

 

Intangible assets, net

   

 

296,451

 

   

 

128,204

 

Advances to Netzee

   

 

—  

 

   

 

10,118

 

Investment in affiliates

   

 

15

 

   

 

1,462

 

Other assets

   

 

23,724

 

   

 

2,431

 

    
  

Total assets

   

$

466,733

 

   

$

283,268

 

    
  

LIABILITIES AND SHAREHOLDERS’ EQUITY

                  

Current liabilities:

                  

Current maturities of long-term debt

   

$

24,022

 

   

$

—

 

Accounts payable and accrued expenses

   

 

14,191

 

   

 

10,143

 

Client payouts

   

 

58,740

 

   

 

—  

 

Deferred revenue

   

 

11,825

 

   

 

9,315

 

    
  

Total current liabilities

   

 

108,778

 

   

 

19,458

 

Long-term debt, net of current portion

   

 

39,350

 

   

 

465

 

Deferred revenue

   

 

376

 

   

 

445

 

Deferred taxes

   

 

5,750

 

   

 

2,867

 

    
  

Total liabilities

   

 

154,254

 

   

 

23,235

 

Minority interest

   

 

253

 

   

 

222

 

Shareholders’ equity:

                  

Common stock

   

 

297,125

 

   

 

243,293

 

Retained earnings

   

 

15,449

 

   

 

16,571

 

Unrealized loss on securities

   

 

(348

)

   

 

(53

)

    
  

Total shareholders' equity

   

 

312,226

 

   

 

259,811

 

    
  

Total liabilities and shareholders’ equity

   

$

466,733

 

   

$

283,268

 

    
  

 

 

 

InterCept, Inc.

Condensed Consolidated Statement of Operations

Three Months Ended December 31, 2002

(unaudited and in thousands except per share data)

 

    

Unadjusted

     

Netzee

     

Unusual

Items (2)

     

Adjusted

  

Revenues:

                                    

Financial institution services

   

$

41,258

 

   

$

—  

 

   

$

—  

 

   

$

41,258

 

Merchant services

   

 

19,417

 

   

 

—  

 

   

 

—  

 

   

 

19,417

 

Customer reimbursements

   

 

4,453

 

   

 

—  

 

   

 

—  

 

   

 

4,453

 

    
  
  
  

Total Revenues

   

 

65,128

 

   

 

—  

 

   

 

—  

 

   

 

65,128

 

Cost of Services:

                                    

Costs of financial institution services

   

 

20,438

 

   

 

—  

 

            

 

20,438

 

Costs of merchant services

   

 

7,552

 

   

 

—  

 

   

 

(288

)

   

 

7,840

 

Customer reimbursements

   

 

4,453

 

   

 

—  

 

   

 

—  

 

   

 

4,453

 

Selling, general & administrative

   

 

23,234

 

   

 

—  

 

            

 

23,234

 

Depreciation & amortization

   

 

4,685

 

   

 

—  

 

   

 

—  

 

   

 

4,685

 

Non-recurring impairment charge

   

 

20,005

 

   

 

—  

 

   

 

20,005

 

   

 

—  

 

    
  
  
  

Total Operating Expenses

   

 

80,367

 

   

 

—  

 

   

 

19,717

 

   

 

60,650

 

Operating (loss) income

   

 

(15,239

)

   

 

—  

 

   

 

(19,717

)

   

 

4,478

 

EBITDA (1)

   

 

(10,554

)

   

 

—  

 

   

 

(19,717

)

   

 

9,163

 

Other Income, net

                                    

Interest income, net

   

 

100

 

            

 

—  

 

   

 

100

 

    
  
  
  

Total Other Income, net

   

 

100

 

   

 

—  

 

   

 

—  

 

   

 

100

 

                                     

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

   

 

(15,139

)

   

 

—  

 

   

 

(19,717

)

   

 

4,578

 

(Benefit) Provision for Income Taxes

   

 

(8,656

)

   

 

(2,722

)

   

 

(7,674

)

   

 

1,740

 

Equity in Loss of Affiliates

   

 

(5,484

)

   

 

(5,471

)

   

 

—  

 

   

 

(13

)

Minority interest

   

 

(5

)

   

 

—  

 

   

 

—  

 

   

 

(5

)

    
  
  
  

Net (Loss) Income Attributable To Common Shareholders

   

$

(11,972

)

   

$

(2,749

)

   

$

(12,043

)

   

$

2,820

 

    
  
  
  

Net (Loss) Income Per Common Share

   

$

(0.61

)

                     

$

0.14

 

    
  
  
  

Weighted Average Shares Outstanding

   

 

19,531

 

                     

 

20,339

 

 

(1)   EBITDA is equal to operating income plus depreciation and amortization. EBITDA should not be considered as an alternative to net income (loss) or any other measure of operating performance calculated in accordance with accounting principles generally accepted in the United States.

 

(2)   Includes a pre-tax one-time recovery of $288,000 related to WorldCom and an impairment charge of $20.0 million related to Merchant Services.

 

InterCept, Inc.

Condensed Consolidated Statement of Operations

Year Ended December 31, 2002

(unaudited and in thousands except per share data)

 

    

Unusual

  
    

Unadjusted

     

Netzee

     

Items (2)

     

Adjusted

  

Revenues:

                                    

Financial institution services

   

$

157,976

 

   

$

—  

 

   

$

—

 

   

$

157,976

 

Merchant services

   

 

54,700

 

   

 

—  

 

            

 

54,700

 

Customer reimbursements

   

 

14,026

 

                     

 

14,026

 

    
  
  
  

Total Revenues

   

 

226,702

 

   

 

—  

 

   

 

—  

 

   

 

226,702

 

Cost of Services:

                                    

Costs of financial institution services

   

 

73,678

 

   

 

—  

 

   

 

70

 

   

 

73,608

 

Costs of merchant services

   

 

23,797

 

   

 

—  

 

   

 

2,113

 

   

 

21,684

 

Customer reimbursements

   

 

14,026

 

   

 

—  

 

   

 

—  

 

   

 

14,026

 

Selling, general & administrative

   

 

74,768

 

   

 

—  

 

   

 

402

 

   

 

74,366

 

Depreciation & amortization

   

 

15,617

 

   

 

—  

 

   

 

—  

 

   

 

15,617

 

Non-recurring impairment charge

   

 

20,005

 

   

 

—  

 

   

 

20,005

 

   

 

—  

 

    
  
  
  

Total Operating Expenses

   

 

221,891

 

   

 

—  

 

   

 

22,590

 

   

 

199,301

 

Operating Income

   

 

4,811

 

   

 

—  

 

   

 

(22,590

)

   

 

27,401

 

EBITDA (1)

   

 

20,428

 

   

 

—  

 

   

 

(22,590

)

   

 

43,018

 

Other Income, net

                                    

Interest income, net

   

 

1,835

 

   

 

—  

 

   

 

—  

 

   

 

1,835

 

Gain in Netzee ownership

   

 

25

 

   

 

25

 

   

 

—  

 

   

 

—  

 

    
  
  
  

Total Other Income, net

   

 

1,860

 

   

 

25

 

   

 

—  

 

   

 

1,835

 

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

   

 

6,671

 

   

 

25

 

   

 

(22,590

)

   

 

29,236

 

(Benefit) Provision for Income Taxes

   

 

(584

)

   

 

(2,712

)

   

 

(8,737

)

   

 

10,865

 

Equity in Loss of Affiliates

   

 

(8,346

)

   

 

(8,309

)

   

 

—  

 

   

 

(37

)

Minority interest

   

 

(31

)

   

 

—  

 

   

 

—  

 

   

 

(31

)

    
  
  
  

Net (Loss) Income Attributable To Common Shareholders

   

$

(1,122

)

   

$

(5,572

)

   

$

(13,853

)

   

$

18,303

 

    
  
  
  

Net (Loss) Income Per Common Share

   

$

(0.06

)

                     

$

0.93

 

    
                    

Weighted Average Shares Outstanding

   

 

18,789

 

                     

 

19,725

 

 

(1)   EBITDA is equal to operating income plus depreciation and amortization. EBITDA should not be considered as an alternative to net income (loss) or any other measure of operating performance calculated in accordance with accounting principles generally accepted in the United States.

 

(2)   Includes a pre-tax one-time charge related to WorldCom of $2.2 million, a pre-tax one-time restructuring charge of $0.4 million related to two of the company's processing centers and an impairment charge of $20.0 million related to Merchant Services.

 

 

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,

    

2002

   

2001

   

2002

   

2001

   

2002

   

2001

   

2002

   

2001

Revenues:

                                                        

Service fees

   

$

36,840

   

$

33,614

   

$

141,095

   

$

112,418

   

$

19,417

   

$

494

   

$

54,700

   

$

2,172

Data communications management

   

 

2,312

   

 

1,842

   

 

8,890

   

 

7,424

                            

Equipment and product sales, services and other

   

 

2,106

   

 

2,567

   

 

7,991

   

 

8,758

                            

Customer reimbursements

   

 

4,453

   

 

2,452

   

 

14,026

   

 

9,452

                            
    
  
  
  
  
  
  
  

Total revenues

   

 

45,711

   

 

40,475

   

 

172,002

   

 

138,052

   

 

19,417

   

 

494

   

 

54,700

   

 

2,172

Costs of services:

                                                        

Costs of service fees

   

 

17,114

   

 

13,412

   

 

61,605

   

 

42,686

   

 

7,840

   

 

19

   

 

21,684

   

 

59

Costs of data communications management

   

 

1,704

   

 

1,194

   

 

5,798

   

 

5,528

                            

Costs of equipment and product sales, services and other

   

 

1,620

   

 

2,045

   

 

6,205

   

 

6,724

                            

Customer reimbursements

   

 

4,453

   

 

2,452

   

 

14,026

   

 

9,452

                            

Selling, general and administrative expenses

   

 

14,626

   

 

11,725

   

 

52,019

   

 

41,631

   

 

8,608

   

 

241

   

 

22,347

   

 

873

Depreciation and amortization

   

 

2,808

   

 

3,104

   

 

10,602

   

 

11,463

   

 

1,877

   

 

4

   

 

5,015

   

 

20

    
  
  
  
  
  
  
  

Total operating expenses

   

 

42,325

   

 

33,932

   

 

150,255

   

 

117,484

   

 

18,325

   

 

264

   

 

49,046

   

 

952

Operating income (loss)

   

$

3,386

   

$

6,543

   

$

21,747

   

$

20,568

   

$

1,092

   

$

230

   

$

5,654

   

$

1,220

    
  
  
  
  
  
  
  

 

*   For the three and twelve months ended December 31, 2001, merchant portfolio processing has been reclassified from the Financial Institution Services segment to the Merchant Services segment.

 

*   Excludes losses for the twelve months ended December 31, 2002 resulting from a one time pre-tax charge of $2.2 million related to WorldCom.

 

*   Excludes losses for the twelve months ended December 31, 2002 resulting from a restructuring charges of $0.4 million related to two of the company's check processing centers.

 

*   In accordance with Emerging Issues Task Force No. 01-14 InterCept has recorded customer reimbursements as revenue. Customer reimbursements represent direct costs paid to third parties primarily for travel and postage.

 

*   Excludes $20.0 million impairment charge related to Merchant Services for the three and twelve months ended December 31, 2002.