DALLAS, May 10 /PRNewswire-FirstCall/ -- SOURCECORP, Inc. (Nasdaq:
SRCP), a leading provider of business process outsourcing (BPO) and
consulting solutions, today reported revenues from continuing operations
for the first quarter of 2006 of $105.3 million and earnings per share from
continuing operations of $0.29.
First Quarter 2006 Operating Results
Today the Company reported $105.3 million of revenue for the first
quarter of 2006 compared to $105.9 million for the same quarter of the
prior year. During the first quarter of 2005, the Company recognized $4.1
million (pre- tax) of remediation revenue (non-cash event) related to its
restatement and internal investigation within the Information Management
and Distribution segment. The Company's first quarter 2006 revenue includes
$1.5 million of revenue related to a previously anticipated termination
payment/settlement relating to a contract terminated by a customer within
our Information Management and Distribution segment in connection with a
substantial change in such customer's operational plans. After adjusting
for these revenue variances discussed above, the Company achieved revenue
growth of $2.0 million or 1.9% in the first quarter of 2006 (see table
below).
Q1 Revenue Results
From Continuing Operations
(in millions)
2006 2005 % Change
As Reported $105.3 $105.9 (0.6%)
Less: termination payment/settlement ($1.5) --- n/a
Less: remediation revenue --- ($4.1) n/a
As Adjusted $103.8 $101.8 1.9%
The Company's 2006 revenue increase, excluding the remediation revenue
and termination payment/settlement, is largely driven by strong volumes in
our Legal Consulting and Class Action Claims Administration service
offerings that together contributed approximately $4.0 million to this
revenue increase. Increased billing rates and the results of additional
billable hours from new consulting professionals, specifically in the
finance services offerings, contributed to the $2.3 million increase in our
Legal Consulting service offering. Strong small to medium sized projects in
our Class Action Claims Administration service offering contributed to an
increase of $1.7 million or 16.8% over the previous year. Partially
offsetting these revenue increases were lower revenues from our HealthSERVE
service offering of $1.2 million or (4.9%) which was primarily due to lower
demand for medical record coding staffing services and customer attrition
within our Medical Records Release service offering. Additionally, lower
revenue from our Information Management and Distribution segment, which
declined $0.7 million or (1.5%) after adjusting for the variances related
to the termination payment/settlement and the remediation revenue, was
largely the result of lower volumes from our mortgage and healthcare
vertical markets and some discontinuances in our commercial vertical
market.
Earnings
The Company reported earnings before income taxes from continuing
operations of $7.7 million for the three months ended March 31, 2006, a
decline of $4.4 million from the previous year same quarter of $12.1
million. After adjusting for the variances related to the termination
payment/settlement ($1.5 million related to revenue and $1.1 million
related to cost recovery of actual costs incurred) and the remediation
revenue previously discussed, earnings before income taxes from continuing
operations declined $2.8 million year over year. This decline is primarily
attributable to increases in SG&A expense of $4.1 million or 13.5%. The
SG&A increase is largely due to (i) approximately $1.4 million (pre-tax) of
incremental legal and transaction related expenses in the current year
quarter related to the Potential Merger announced by the Company on March
8, 2006 with entities affiliated with Apollo Management, L.P., (ii) $0.5
million higher than expected costs associated with ongoing Sarbanes Oxley
compliance, (iii) $0.8 million for the settlement in principle of certain
legal actions and (iv) $1.1 million of additional compensation for
management and sales resources within our Class Action Claims
Administration and Legal Consulting service offering.
Earnings Per Share
The Company reported earnings per share from continuing operations of
$0.29 for the first quarter of 2006, compared to $0.46 per share in Q1 of
2005. Excluding the impact of the remediation revenue, the termination
payment/settlement, incremental legal and transaction related costs related
to the Potential Merger and one-time restatement and investigation related
charges, earnings per share from continuing operations would have been
$0.25 compared to $0.37 in Q1 of 2005, as shown below.
After-Tax impact on Q1 Earnings and EPS
Of the Above Items
Q1 2005 Q1 2006
After-tax Earnings After-tax Earnings
Earnings per Share Earnings per Share
(in From (in From
thousands) Continuing thousands) Continuing
Operations Operations
As Reported $7,355 $0.46 $4,637 $0.29
Less: remediation revenue ($2,485) ($0.16) $0 $0
Less: termination
payment/settlement $0 $0.00 ($1,540) ($0.10)
Add: incremental merger costs $0 $0.00 $848 $0.05
Add: one-time
restatement/investigation
related charges $1,074 $0.07 $94 $0.01
As Adjusted $5,944 $0.37 $4,039 $0.25
(Earnings per share calculated on a fully diluted basis)
New Business Wins
The Company entered into contracts with new customers, and generated
new business from existing customers and the renewal of existing customers'
contracts during the first quarter of 2006 with an estimated total
undiscounted contract value of approximately $87.5 million.
The total estimated undiscounted value of contracts closed is an
estimate of the total expected revenue to be derived over the term of the
contract measured at the approximate time of contract execution. The
Company has not undertaken, and does not undertake, to update such
estimates over time. Anticipated contract volumes and revenue routinely
increase or decrease from the date the contract is executed causing the
contract value estimated at contract execution to change, in some case by
material amounts. Further, contracts from time to time are subsequently
partially or completely terminated by us or by the customer, and such
contracts may have represented a large portion of the expected revenue
estimated at the time of contract execution. As such, estimates on such
dates may not represent current estimates for such contracts.
Potential Merger
The Company announced that it has set June 1, 2006 as its stockholders
meeting date to vote on the Potential Merger it announced on March 8, 2006
with entities affiliated with Apollo Management, L.P.
As previously disclosed by the Company in its SEC filings, the Company
has entered into a Memorandum of Understanding, dated May 3, 2006, which
reflects the agreement in principle reached with respect to the proposed
settlement of the following litigation: (i) Howard Kubota, Derivatively on
Behalf of Sourcecorp, Incorporated v. Thomas C. Walker, et al. , Cause No.
04-12854, pending in the 14th Judicial District Court of Dallas County,
Texas; (ii) Freeport Partners, LLC, Derivatively on Behalf of Nominal
Defendant Sourcecorp, Inc. v. Ed H. Bowman, et al. , Civil Action No.
3:05-CV- 2085, pending in the United States District Court for the Northern
District of Texas, Dallas Division; (iii) Davidco Investment, on behalf of
itself and all others similarly situated v. Ed H. Bowman, Jr., et al. ,
Civil Action No. 1982-N, pending in the Court of Chancery of the State of
Delaware in and for New Castle County; and (iv) Howard Kubota, Derivatively
on Behalf of Sourcecorp, Incorporated v. Thomas C. Walker, et al. , Cause
No. 06-02446, pending in the 95th Judicial District Court of Dallas County,
Texas. The proposed settlement is subject to court approval and certain
other conditions.
Given the concurrent filing of the 10-Q and Earnings Release, the
Company does not intend to schedule an investor call to discuss the
Company's first quarter results.
About SOURCECORP(R)
SOURCECORP, Incorporated provides business process outsourcing
solutions
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SOURCE SOURCECORP
Related links:
http://www.srcp.com
CONTACT:
Barry Edwards, EVP & Chief Financial Officer
of SOURCECORP, +1-214-740-6690
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