EX-99.1 3 dex991.htm PRESS RELEASE DATED NOVEMBER 4, 2002 Press Release dated November 4, 2002
Exhibit 99.1
 
PRESS RELEASE
Contact:  Carole Collins
Investor Relations Director
(770) 248-9600
 
INTERCEPT REPORTS OUTSTANDING THIRD QUARTER RESULTS
 
ATLANTA, GA (November 4, 2002) – 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 ended September 30, 2002.
 
Record Financial Results
 
Net revenues for the three months ended September 30, 2002 totaled $66.3 million, a 76.7% increase compared with $37.5 million for the three months ended September 30, 2001. Net income available to common shareholders, excluding net losses generated from InterCept’s ownership of Netzee, Inc. and a non-recurring charge to establish a reserve related to the WorldCom bankruptcy, totaled $5.7 million, or $0.29 per share (diluted), on 19.9 million average shares outstanding for the three months ended September 30, 2002, versus $4.0 million, or $0.24 per share (diluted), on 17.0 million average shares outstanding for the three months ended September 30, 2001.
 
During the third quarter, InterCept recorded non-cash losses from its ownership in Netzee of $1.4 million, which reduced the value of the note receivable from Netzee to $9.0 million. InterCept will continue to reduce the value of this note receivable to reflect its share of Netzee’s losses. In addition, InterCept incurred a non-recurring charge of approximately $1.6 million, net of taxes, that resulted from the non-payment of amounts related to its WEB 900 service offering, which utilizes WorldCom as its carrier and is subject to WorldCom’s bankruptcy. InterCept has fully reserved for this account receivable and is seeking to recover the amounts owed.
 
Including the losses related to Netzee and the non-recurring charge, net income available to common shareholders was $2.8 million or $0.14 per share (diluted) for the three months ended September 30, 2002, compared with $188,000 or $0.01 per share (diluted) for the three months ended September 30, 2001.

 
Operating Highlights
 
“We are very excited that our strong financial performance continued in the third quarter of 2002,” stated John W. Collins, InterCept Chairman and CEO. “We achieved record revenues and strong profits despite a difficult economic environment and signed a number of significant customers in both our financial institutions group and our merchant services group.”
 
Other recent highlights include the following:
 
 
•
 
Signed a letter of intent with Sovereign Bancorp for its item processing.
 
 
•
 
Signed a merchant processing contract with 1st Source Bank, a $3 billion financial institution located in South Bend, Indiana.
 
 
•
 
Announced changes to management, including the appointment of Boone Knox to Vice Chairman of the Board of Directors and the promotion of Lynn Boggs to Chief Operating Officer.
 
 
•
 
Signed contracts with several notable merchants, including Apple Vacations, TIME.com, Terra.com, Matchlive, and Spring Street Networks.
 
 
•
 
Opened an item processing center in Los Angeles, California
 
“We continue to see strong demand from financial institutions for our suite of outsourced products and services. This momentum has continued as we have signed 22 core processing customers in the last 120 days. However, we continue to see financial institutions deferring decisions in the purchase of in-house software and hardware products. Although the non-recurring components of our business comprise only about 10% of our revenues, they represent a greater percentage of net income due to their higher margins. We expect the weakness in sales of in-house products and services to continue for the remainder of 2002 and into next year.”
 
Fourth Quarter and 2003 Outlook
 
“We expect to achieve earnings per share of $1.11 - $1.15 for 2002 and $1.28 - $1.32 for the full year 2003,” continued Mr. Collins. “These estimates include capital expenditures and start up costs related to the conversion of Sovereign’s item processing to InterCept, as well as the issuance of 375,000 shares of our common stock to

 
Sovereign on October 1, 2002. We do not expect Sovereign to contribute significantly to our earnings until the fourth quarter of 2003.”
 
Conference Call and Webcast Information
 
InterCept has scheduled a conference call to discuss this earnings release at 10:30 AM EST on November 4, 2002. 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 December 4, 2002.
 
About InterCept
 
InterCept is a single-source provider of a broad range of technologies, products and services that work together to meet the technological and operating needs of financial institutions and merchants. InterCept’s products and services include core data processing, check processing and imaging, ATM and debit card processing, merchant 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 the 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 recent acquisitions of assets and businesses and other operations we may acquire; continue to provide enhanced and new products and services that appeal to our financial institution and merchant customers; continue to have access to the debt and equity capital we need to sustain our growth; and achieve our sales objectives. Other risks include the possibility that Netzee may be unable to repay our loan; 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; 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.
 
-END-

 
InterCept, Inc.
Financial Highlights
(unaudited and in thousands, except per share data)
 
    
Three Months Ended September 30,
     
Nine Months Ended September 30,
  
    
2002
     
2001
     
2002
     
2001
  
Revenues:
                                    
Financial institution services
   
$
41,512
 
   
$
34,075
 
   
$
116,718
 
   
$
90,577
 
Merchant services
   
 
20,423
 
   
 
753
 
   
 
35,283
 
   
 
1,678
 
Customer reimbursements (1)
   
 
4,360
 
   
 
2,694
 
   
 
9,573
 
   
 
7,000
 
    
  
  
  
Total revenues
   
 
66,295
 
   
 
37,522
 
   
 
161,574
 
   
 
99,255
 
Cost of Services:
                                    
Costs of financial institution services
   
 
19,145
 
   
 
14,860
 
   
 
53,240
 
   
 
38,287
 
Costs of merchant services
   
 
10,346
 
   
 
22
 
   
 
16,245
 
   
 
40
 
Customer reimbursements
   
 
4,360
 
   
 
2,694
 
   
 
9,573
 
   
 
7,000
 
    
  
  
  
Total cost of services
   
 
33,851
 
   
 
17,576
 
   
 
79,058
 
   
 
45,327
 
Selling, general and administrative
   
 
21,200
 
   
 
10,936
 
   
 
51,534
 
   
 
30,538
 
Depreciation and amortization
   
 
4,625
 
   
 
2,981
 
   
 
10,932
 
   
 
8,375
 
    
  
  
  
Operating income
   
 
6,619
 
   
 
6,029
 
   
 
20,050
 
   
 
15,015
 
Other income, net
   
 
9
 
   
 
604
 
   
 
1,760
 
   
 
1,646
 
    
  
  
  
Income before income taxes, equity in loss of affiliates, and minority interest
   
 
6,628
 
   
 
6,633
 
   
 
21,810
 
   
 
16,661
 
Provision for income taxes
   
 
2,466
 
   
 
206
 
   
 
8,072
 
   
 
1,003
 
Equity in loss of affiliates
   
 
(1,375
)
   
 
(6,235
)
   
 
(2,862
)
   
 
(14,756
)
Minority interest
   
 
(10
)
   
 
(4
)
   
 
(26
)
   
 
(14
)
    
  
  
  
Net income
   
 
2,777
 
   
 
188
 
   
 
10,850
 
   
 
888
 
    
  
  
  
Income per share:
                                    
Basic
   
$
0.15
 
   
$
0.01
 
   
$
0.59
 
   
$
0.06
 
    
  
  
  
Diluted
   
$
0.14
 
   
$
0.01
 
   
$
0.56
 
   
$
0.06
 
    
  
  
  
Weighted average shares outstanding:
                                    
Basic
   
 
19,132
 
   
 
15,711
 
   
 
18,539
 
   
 
14,467
 
Diluted
   
 
19,947
 
   
 
16,993
 
   
 
19,402
 
   
 
15,632
 
 
(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.

5

 
InterCept, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
 
    
September 30,
     
December 31,
  
    
2002
     
2001
  
    
unaudited
         
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
15,692
 
   
$
24,917
 
Short term investments
   
 
19,017
 
   
 
50,289
 
Accounts receivable, net
   
 
30,426
 
   
 
20,271
 
Advances to SLM
   
 
7,362
 
   
 
7,025
 
Advances to Netzee
   
 
9,030
 
   
 
—  
 
Deferred tax assets
   
 
2,752
 
   
 
1,470
 
Inventory, prepaid expenses and other
   
 
17,563
 
   
 
8,973
 
    
  
Total current assets
   
 
101,842
 
   
 
112,945
 
Property and equipment, net
   
 
40,374
 
   
 
28,108
 
Intangible assets, net
   
 
318,561
 
   
 
128,204
 
Advances to Netzee
   
 
—  
 
   
 
10,118
 
Investment in affiliate
   
 
—  
 
   
 
1,462
 
Other assets
   
 
18,622
 
   
 
2,431
 
    
  
Total assets
   
$
479,399
 
   
$
283,268
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current liabilities:
                  
Current maturities of long-term debt
   
$
28,911
 
   
$
—  
 
Accounts payable and accrued expenses
   
 
14,830
 
   
 
10,143
 
Client payouts
   
 
51,659
 
   
 
—  
 
Deferred revenue
   
 
9,560
 
   
 
9,315
 
    
  
Total current liabilities
   
 
104,960
 
   
 
19,458
 
Long-term debt, net of current portion
   
 
39,770
 
   
 
465
 
Deferred revenue
   
 
341
 
   
 
445
 
Deferred taxes
   
 
9,902
 
   
 
2,867
 
    
  
Total liabilities
   
 
154,973
 
   
 
23,235
 
Minority interest
   
 
248
 
   
 
222
 
Shareholders’ equity:
                  
Common stock
   
 
296,808
 
   
 
243,293
 
Retained earnings
   
 
27,421
 
   
 
16,571
 
Unrealized gain on securities
   
 
(51
)
   
 
(53
)
    
  
Total shareholders’ equity
   
 
324,178
 
   
 
259,811
 
    
  
Total liabilities and shareholders’ equity
   
$
479,399
 
   
$
283,268
 
    
  

6

InterCept, Inc.
Condensed Consolidated Statement of Operations
Three Months Ended September 30, 2002
(unaudited and in thousands except per share data)
 
    
Unadjusted
     
Netzee
     
Unusual Items (2)
     
Adjusted
  
Revenues:
                                    
Financial institution services
   
$
41,512
 
   
$
—  
 
   
$
—  
 
   
$
41,512
 
Merchant services
   
 
20,423
 
   
 
—  
 
   
$
—  
 
   
 
20,423
 
Customer reimbursements
   
 
4,360
 
   
 
—  
 
   
 
—  
 
   
 
4,360
 
    
  
  
  
Total Revenues
   
 
66,295
 
   
 
—  
 
   
 
—  
 
   
 
66,295
 
Cost of Services:
                                    
Costs of financial institution services
   
 
19,145
 
   
 
—  
 
   
 
70
 
   
 
19,075
 
Costs of merchant services
   
 
10,346
 
   
 
—  
 
   
 
2,401
 
   
 
7,945
 
Customer reimbursements
   
 
4,360
 
   
 
—  
 
   
 
—  
 
   
 
4,360
 
Selling, general & administrative
   
 
21,200
 
   
 
—  
 
            
 
21,200
 
Depreciation & amortization
   
 
4,625
 
   
 
—  
 
   
 
—  
 
   
 
4,625
 
    
  
  
  
Total Operating Expenses
   
 
59,676
 
   
 
—  
 
   
 
2,471
 
   
 
57,205
 
Operating Income
   
 
6,619
 
   
 
—  
 
   
 
(2,471
)
   
 
9,090
 
EBITDA (1)
   
 
11,244
 
   
 
—  
 
   
 
(2,471
)
   
 
13,715
 
Other Income, net
                                    
Interest income, net
   
 
9
 
   
 
—  
 
   
 
—  
 
   
 
9
 
    
  
  
  
Total Other Income, net
   
 
9
 
   
 
—  
 
   
 
—  
 
   
 
9
 
Income Before Income Taxes, Equity in Loss of Affiliates, and Minority Interest
   
 
6,628
 
   
 
—  
 
   
 
(2,471
)
   
 
9,099
 
Provision for Income Taxes
   
 
2,466
 
            
 
(914
)
   
 
3,380
 
Equity in Loss of Affiliates
   
 
(1,375
)
   
 
(1,351
)
   
 
—  
 
   
 
(24
)
Minority interest
   
 
(10
)
   
 
—  
 
   
 
—  
 
   
 
(10
)
    
  
  
  
Net Income Attributable To Common Shareholders
   
$
2,777
 
   
$
(1,351
)
   
$
(1,557
)
   
$
5,685
 
    
  
  
  
Net Income Per Common Share (Diluted)
   
$
0.14
 
                     
$
0.29
 
    
                    
Weighted Average Shares Outstanding (Diluted)
   
 
19,947
 
                     
 
19,947
 
 
(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.

7

 
InterCept, Inc.
Condensed Consolidated Statement of Operations
Nine Months Ended September 30, 2002
(unaudited and in thousands except per share data)
 
    
Unadjusted
     
Netzee
     
Unusual Items (2)
     
Adjusted
  
Revenues:
                                    
Financial institution services
   
$
116,718
 
   
$
—  
 
   
$
—  
 
   
$
116,718
 
Merchant services
   
 
35,283
 
   
 
—  
 
            
 
35,283
 
Customer reimbursements
   
 
9,573
 
                     
 
9,573
 
    
  
  
  
Total Revenues
   
 
161,574
 
   
 
—  
 
   
 
—  
 
   
 
161,574
 
Cost of Services:
                                    
Costs of financial institution services
   
 
53,240
 
   
 
—  
 
   
 
70
 
   
 
53,170
 
Costs of merchant services
   
 
16,245
 
   
 
—  
 
   
 
2,401
 
   
 
13,844
 
Customer reimbursements
   
 
9,573
 
   
 
—  
 
   
 
—  
 
   
 
9,573
 
Selling, general & administrative
   
 
51,534
 
   
 
—  
 
   
 
403
 
   
 
51,131
 
Depreciation & amortization
   
 
10,932
 
   
 
—  
 
   
 
—  
 
   
 
10,932
 
    
  
  
  
Total Operating Expenses
   
 
141,524
 
   
 
—  
 
   
 
2,874
 
   
 
138,650
 
Operating Income
   
 
20,050
 
   
 
—  
 
   
 
(2,874
)
   
 
22,924
 
EBITDA (1)
   
 
30,982
 
   
 
—  
 
   
 
(2,874
)
   
 
33,856
 
Other Income, net
                                    
Interest income, net
   
 
1,760
 
   
 
—  
 
   
 
—  
 
   
 
1,760
 
Gain in Netzee ownership
            
 
25
 
   
 
—  
 
   
 
(25
)
    
  
  
  
Total Other Income, net
   
 
1,760
 
   
 
25
 
   
 
—  
 
   
 
1,735
 
Income Before Income Taxes, Equity in Loss of Affiliates, and Minority Interest
   
 
21,810
 
   
 
25
 
   
 
(2,874
)
   
 
24,659
 
Provision for Income Taxes
   
 
8,072
 
   
 
10
 
   
 
(765
)
   
 
8,827
 
Equity in Loss of Affiliates
   
 
(2,862
)
   
 
(2,838
)
   
 
—  
 
   
 
(24
)
Minority interest
   
 
(26
)
   
 
—  
 
   
 
—  
 
   
 
(26
)
    
  
  
  
Net Income Attributable To Common Shareholders
   
$
10,850
 
   
$
(2,823
)
   
$
(2,109
)
   
$
15,782
 
    
  
  
  
Net Income Per Common Share (Diluted)
   
$
0.56
 
                     
 
0.813
 
    
                    
Weighted Average Shares Outstanding (Diluted)
   
 
19,402
 
                     
 
19,402
 
 
(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 $2.5 million and a pre-tax one-time restructuring charge of $0.4 million related to two of the company's processing centers.

8

 
InterCept, Inc. and Subsidiaries
Segment Information
(unaudited and in thousands)
 
    
Financial Institution Services
   
Merchant Services
    
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
    
2002
   
2001
   
2002
   
2001
   
2002
   
2001
   
2002
   
2001
    
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
Revenues:
                                                        
Service fees
   
$
37,028
   
$
28,901
   
$
104,255
   
$
78,804
   
$
20,423
   
$
753
   
$
35,283
   
$
1,678
Data communications management
   
 
2,342
   
 
2,016
   
 
6,578
   
 
5,582
                            
Equipment and product sales, services and other
   
 
2,142
   
 
3,158
   
 
5,885
   
 
6,191
                            
Customer reimbursements
   
 
4,360
   
 
2,694
   
 
9,573
   
 
7,000
                            
    
  
  
  
  
  
  
  
Total revenues
   
 
45,872
   
 
36,769
   
 
126,291
   
 
97,577
   
 
20,423
   
 
753
   
 
35,283
   
 
1,678
Costs of services:
                                                        
Costs of service fees
   
 
16,058
   
 
10,977
   
 
44,491
   
 
29,274
   
 
7,945
   
 
22
   
 
13,844
   
 
40
Costs of data communications management
   
 
1,382
   
 
1,538
   
 
4,094
   
 
4,334
                            
Costs of equipment and product sales, services and other
   
 
1,635
   
 
2,345
   
 
4,585
   
 
4,679
                            
Customer reimbursements
   
 
4,360
   
 
2,694
   
 
9,573
   
 
7,000
                            
Selling, general and administrative expenses
   
 
13,370
   
 
10,709
   
 
37,355
   
 
29,906
   
 
7,830
   
 
227
   
 
13,776
   
 
632
Depreciation and amortization
   
 
2,879
   
 
2,976
   
 
7,794
   
 
8,359
   
 
1,746
   
 
5
   
 
3,138
   
 
16
    
  
  
  
  
  
  
  
Total operating expenses
   
 
39,684
   
 
31,239
   
 
107,892
   
 
83,552
   
 
17,521
   
 
254
   
 
30,758
   
 
688
Operating income
   
$
6,188
   
$
5,530
   
$
18,399
   
$
14,025
   
$
2,902
   
$
499
   
$
4,525
   
$
990
    
  
  
  
  
  
  
  
 
*
 
For the three and nine months ended September 30, 2001, merchant portfolio processing has been reclassified from the Financial Institution Services segment to the Merchant Services segment.
 
*
 
Excludes losses for the three months ended September 30, 2002 resulting from a one time pre-tax charge of $2.5 million related to WorldCom.
 
*
 
Excludes losses for the three and nine months ended September 30, 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.