DALLAS, Feb. 15 /PRNewswire-FirstCall/ -- SOURCECORP, Incorporated
(Nasdaq: SRCPE) today announced that it is providing an update on its NASDAQ
listing exception, updating its previously reported restatement adjustments
related to its ongoing internal investigation, which is focused on one of its
operating subsidiaries in the Information Management Division of the Company's
Information Management and Distribution reportable segment, and updating its
2004 guidance.
NASDAQ Update
On January 18, 2005, the Company announced that the NASDAQ Listing
Qualification Panel had granted the Company a listing requirements exception
through February 15, 2005, subject to certain conditions. One of those
conditions was the submission to the Panel of certain requested information by
January 25, 2005; the Company made, and the Panel has acknowledged receipt of,
the Company's submission by such required date.
On January 21, 2005, the Company indicated that it intended to request a
modification to the Panel's exception that would contemplate the Company
filing its third quarter 2004 Quarterly Report on Form 10-Q and certain prior
period financial information by February 15, 2005 and the filing of its 2004
Annual Report on Form 10-K by March 16, 2005, which the Company believes would
be the last filing to complete its restatement. By letter dated February 7,
2005, the Panel formally granted such requested modification.
While the Company believes that its previously reported internal
investigation into one of its operating subsidiaries, as overseen by its Audit
Committee, is nearing completion, until the investigation is complete, the
Company has determined that it is unable to file its Form 10-Q for the quarter
ending September 30, 2004, and certain prior period financial information, by
the February 15, 2005, date contemplated by the Company's current NASDAQ Panel
exception. As such, the Company is requesting a further modification to the
exception to contemplate making all such filings by March 16, 2005. If the
request is not granted, the Company's Common Stock would be delisted from
trading on the NASDAQ Stock Market. The Company cannot predict with certainty
whether the Panel will grant such modified exception or whether the
requirement of such modified exception will be met.
Updated Restatement Adjustments for 2004
On October 27, 2004, the Company announced that its previously issued
financial statements and related independent auditors' report for the year
ended December 31, 2003, as well as its previously issued financial statements
for the 2004 quarterly periods ended March 31, 2004 and June 30, 2004 should
no longer be relied upon. Additionally, on January 21, 2005, the Company
announced that its previously issued financial statements and related
independent auditors' reports for the years ended December 31, 2001 and 2002
should also no longer be relied upon. In these announcements, the Company
gave a preliminary indication, based on the Company's then current assessment
of the information available to it at that time, of certain potential
adjustments associated with revenue recognition issues related to certain
contracts, required expense adjustments and a requirement to expense a portion
of the goodwill associated with payments related to the Company's acquisition
of the subsidiary currently under investigation.
The Company disclosed on January 21, 2005 that certain write-downs of
goodwill would be required for 2001, 2002, 2003 and the first six months of
2004. These goodwill write-downs relate to the overpayment of earn-out
payments under the provisions of the acquisition related earn-out agreement.
These earn-out payments were originally reported as a use of cash from
investing activities, but now should be characterized as a use of cash from
operating activities.
As reported by the Company on January 21, 2005, the Company originally
expected to write-down between $10.0 million and $10.5 million of goodwill
relating to acquisition payments in respect of the Company's subsidiary
currently under investigation during the first six months of 2004. The
Company is updating its estimated restatement adjustments for the first six
months of 2004. The Company has determined that the second half of 2004 is
the appropriate period to write-down this goodwill, instead of the first half
of 2004, which results in a movement of this write-down expense from the first
half of 2004 to the second half of 2004 (specifically a movement from Q2 2004
to Q3 2004).
The following table summarizes the anticipated goodwill write-down timing
adjustments to the previously reported operating results for the six-months
ended June 30, 2004:
Six-Months
Ended June 30, 2004
Earnings per Share from continuing operations
Low High
As originally reported $0.72 $0.72
Adjustments to as reported 2004 results
including the goodwill write-down
as announced January 21, 2005(1) (0.61) (0.42)
Effect of elimination of estimated
goodwill write-down from period due
to timing(1)(2) 0.39 0.36
Range of estimated adjusted EPS from
continuing operations 0.50 0.66
(1) As a result of the structure of the acquisition of the operating
subsidiary that is the subject of this investigation, the former
owners of such subsidiary had the opportunity to earn additional sale
proceeds for the twelve-month periods ended February 28, 2002,
February 28, 2003 and February 29, 2004 based on earnings before
interest and taxes of such operating subsidiary (in excess of
designated thresholds) calculated in accordance with Generally
Accepted Accounting Principles for each respective period. Based on
the preliminary findings of the Company's investigation, earnings
before interest and taxes attributable to such subsidiary were
overstated during the earn-out periods resulting in payments made by
the Company under the provisions of the earn-out that otherwise would
not have been made. The Company's current assessment is that the
goodwill resulting from such payments should be written down. The
Company may record a gain in future periods to the extent, if any,
that such erroneous earn-out payments are ultimately recovered by the
Company.
(2) The goodwill write-down expense for 2004 will be recognized during
the six months ended December 31, 2004 (see our updated 2004 guidance
discussion below for the impact of this expense on our guidance for
such period).
The Company anticipates that it will be in a position to provide a more
narrow range to its anticipated full restatement impact in the near future.
The Company's investigation is not complete. Until the Company's
investigation is complete, the impact on previously reported financial
statements cannot be finally determined. It is possible that further
adjustments, which may be material, may be required for the above noted
periods. Because the subsidiary that is the subject of the investigation was
acquired during 2001, the Company does not expect that results prior to year
2001 will be affected.
Updated Guidance for 2004
As noted above, the Company has determined that the goodwill write-down
expense that the Company expected to recognize during the first six months of
2004 (expected to range from $10.0 million to $10.5 million) should instead be
recognized during the second six months of 2004. This would have the effect
of reducing the Company's estimated earnings per share from continuing
operations for the period by an amount ranging from $.36 to $.39 per share.
As a result, the Company is revising its previously disclosed guidance (press
release dated January 21, 2005) for earnings per share from continuing
operations for the second six-months of 2004, and providing full-year 2004
guidance reflecting these adjustments and the adjustments to the estimated
restated results for the first six-months of 2004 set forth above as follows:
Range of
Earnings per Share from
Continuing Operations
Low High
Second Six Months 2004:
Guidance for six months ended December 31,
2004 previously disclosed in January 21,
2005 Release $0.43 $0.46
Effect of good will-write down in six
months ended December 31, 2004 $(0.39) $(0.36)
Updated guidance for six months ended
December 31, 2004 $0.04 $0.10
First Six Months 2004:
Updated guidance for six months ended
June 30, 2004 after restatement,
as disclosed above $0.50 $0.66
Full Year 2004:
Updated guidance for full year 2004 $0.54 $0.76
The movement of such goodwill write-down does not impact the Company's
revenue guidance, but as noted above will impact the Company's cash flow
guidance as a result of the Company's determination that the earn-out payments
that were originally reported as a use of cash from investing activities and
are now deemed to have been overpayments should be characterized as a use of
cash from operating activities. As a result, the Company's 2004 operating
cash flow guidance for the six months ended December 31, 2004 of $33 million
to $35 million should be reduced to $22.5 million to $25 million as a result
of such characterization. The use of operating cash flow associated with the
earn-out overpayment is of a non-recurring nature.
Factors that may cause actual results to deviate from such estimates
include results of the completion of the Company's internal investigation and
related restatement of prior period financial results. Further, until the
Company's investigation is complete, the impact on previously reported
financial statements cannot be finally determined. It is possible that further
adjustments, which may be material, may be required that impact the above
noted periods.
About SOURCECORP(R)
SOURCECORP, Incorporated provides business process outsourcing solutions
and specialized high value consulting services to clients throughout the
U.S. SOURCECORP focuses on business processes in information-intensive
industries including healthcare, legal, financial services, government and
transportation & logistics. Headquartered in Dallas, the Company serves
clients throughout the United States through a network of locations in the
U.S., Mexico and India. SOURCECORP is a component of both the S&P SmallCap
600 Index and the Russell 2000 Index.
For more information about SOURCECORP's solutions visit the SOURCECORP
website at http://www.srcp.com. The statements in this press release that are
not historical fact are forward-looking statements that involve risks and
uncertainties, which could cause actual results to differ materially from such
forward-looking statements. These forward-looking statements include, but are
not limited to, the statements relating to the anticipated impact of
adjustments to our restated financial statements and our ongoing
investigation, any financial estimates, projections, and estimates of
future contract values included in this press release. The aforementioned
risks and uncertainties include, without limitation, the uncertainty of
completing our investigation in a timely manner and the actual costs and
results of such investigation, the effect of our investigation and financial
statement restatement on the trading price of our stock, the risks of
integrating our operating companies, of the timing and magnitude of
technological advances, of the occurrences of a diminution in our existing
customers' needs for our services, of a change in the amount companies
outsource business processes, of the impact to margins resulting from a change
in revenue mix as well as the risks detailed in SOURCECORP's filings with the
Securities and Exchange Commission, including without limitation, those
detailed under the heading "Risk Factors" in the Company's most recent annual
report on Form 10-K. SOURCECORP disclaims any intention or obligation to
revise any forward-looking statements, including financial estimates, whether
as a result of new information, future events, or otherwise, except as
required by law.
SOURCE SOURCECORP
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Related links:
http://www.srcp.com
CONTACT:
Barry Edwards, EVP & Chief Financial Officer,
SOURCECORP, +1-214-740-6690
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