DALLAS, Oct. 27 /PRNewswire-FirstCall/ -- SOURCECORP, Incorporated
(Nasdaq: SRCP) today announced that based on information provided by, and the
recommendation of, corporate management, the Company's Audit Committee
concluded on October 25, 2004 that the Company's 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. The Company's Audit Committee and management have
discussed these issues with the Company's independent auditors.
As material adjustments to the Company's financial statements will be
required, investors should not rely on the financial information contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 2003
or in the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2004 and June 30, 2004, or any other financial information
previously furnished by the Company regarding such periods.
The Company, under the guidance of the Audit Committee, has initiated an
investigation of the financial results of one of the Company's operating
subsidiaries in the Information Management Division of the Company's
Information Management and Distribution reportable segment. The operating
subsidiary that is the subject of this investigation represented approximately
8% and 18% of the Company's previously reported 2003 revenues and earnings,
respectively, from continuing operations.
For revenue to be properly recognized in accordance with the Securities
and Exchange Commission's Staff Accounting Bulletin No. 104 "Revenue
Recognition," each of the following conditions must be met: persuasive
evidence of an arrangement must exist, the price must be fixed or
determinable, delivery must occur or services must be rendered and collection
must be reasonably assured. The Company has identified certain instances
where one or more of the aforementioned revenue recognition conditions, as
applied to certain customer contracts, were not met at the operating
subsidiary that is the subject of the Company's investigation.
Based on the Company's current assessment of the information available to
it at this time, the Company has preliminarily identified the following
potential adjustments to revenue and fully diluted earnings per share from
continuing operations for the periods indicated.
Range Of Range Of
Adjustments To Adjustments To
As Reported As Reported
Year-Ended 6 Months Ended
December 31, 2003 June 30, 2004
Results (A) Results (A)(B)
Low High Low High
Increase/(Decrease)
In Revenue (000's) $(5,400) $(5,400) $(2,800) $2,500
% Increase/(Decrease) (1%) (1%) (1%) 1%
Increase/(Decrease) To Fully
Diluted Earnings Per Share
from Continuing Operations $(0.19) $(0.17) $(0.10) $0.06
% Increase/(Decrease) (11%) (10%) (14%) 9%
Footnotes:
(A) The adjustments for 2003 relate to revenue and associated
expenses that were recognized prior to delivering contractually
required output to a certain customer. A portion of the
adjustments for 2004 relate to revenue and associated expenses
that may have been recognized prior to delivering contractually
required output to certain customers. For the revenue in
question for both periods, the Company has determined that
delivery is a consequential step in revenue recognition. This
determination results in the deferral of revenue recognition to
some future period when the contractually required output is
delivered to, and accepted by, the customer. If such delivery
and acceptance do not occur, the revenue will not ever be
recognized.
The Company believes that the noted 2003 adjustments will
primarily impact the fourth quarter of 2003.
(B) A portion of the adjustments for 2004 relate to services which
were performed and delivered to certain customers in excess of
the volume and/or revenue limits set by the contract. The
Company is seeking compensation for those services that have
been performed and delivered, although there is no assurance
when, if ever, said revenue might be recognized. To the extent
that any of such revenue relating to services performed in
excess of such contractual limits is recognizable, there could
be positive adjustments to future periods impacting both revenue
and fully diluted earnings per share in the future periods in
which such revenue is recognized.
The above adjustments are based on currently available information. The
Company intends to review and assess the potential impact that the
aforementioned adjustments may have on the Company's Balance Sheet and
Statement of Cash Flow as well as the potential impact that any other
adjustments related to the Company's investigation may have on its previously
reported financial statements. 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,
will be required for the above noted periods. Furthermore, it is possible
that additional adjustments to financial statements for periods other than
2003 and 2004 may be identified through the Company's investigation.
Also, as a result of the Company's investigation, the Company will not be
able to timely file with the Securities and Exchange Commission its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2004. The Company has
contacted its administrative agent for its Credit Agreement and is pursuing
appropriate waivers relating to covenants impacted by the foregoing.
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
Company News On-Call:
http://www.prnewswire.com/comp/117986.html
CONTACT:
Barry Edwards, EVP & Chief Financial Officer
of SOURCECORP, +1-214-740-6690
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