FORM 10-Q
| [X] |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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| For the quarterly period ended March 31, 2003 | ||
| or | ||
| [ ] |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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| For the transition period from to |
Commission File Number: 1-13069
CHOICEPOINT INC.
| Georgia | 58-2309650 | |
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| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| 1000 Alderman Drive, Alpharetta, Georgia | 30005 | |
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| (Address of principal executive offices) | (Zip Code) |
(770) 752-6000
N/A
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at April 30, 2003 | |||
Common Stock, $.10 Par Value |
86,842,859 | |||
CHOICEPOINT INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
INDEX
| Page No. | ||||
Part I. FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Consolidated Statements of Income (unaudited) -
Three Months Ended March 31, 2003 and 2002 |
3 | |||
Consolidated Balance Sheets -
March 31, 2003 (unaudited) and December 31, 2002 |
4 | |||
Consolidated Statement of Shareholders’ Equity (unaudited)-
Three Months Ended March 31, 2003 |
5 | |||
Consolidated Statements of Cash Flows (unaudited) -
Three Months Ended March 31, 2003 and 2002 |
6 | |||
Notes to Consolidated Financial Statements |
7 | |||
Item 2. Management’s Discussion and Analysis
of Results of Operations and Financial Condition |
14 | |||
Item 3. Quantitative and Qualitative Disclosures about Market Risk |
22 | |||
Item 4. Controls and Procedures |
22 | |||
Part II. OTHER INFORMATION |
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Item 1. Legal Proceedings |
23 | |||
Item 2. Changes in Securities and Use of Proceeds |
23 | |||
Item 3. Defaults Upon Senior Securities |
23 | |||
Item 4. Submission of Matters to a Vote of Security Holders |
23 | |||
Item 5. Other Information |
23 | |||
Item 6. Exhibits and Reports on Form 8-K |
23 | |||
Signatures |
25 | |||
Certification of Chairman and Chief Executive Officer |
26 | |||
Certification of Chief Financial Officer |
27 | |||
Exhibit Index |
28 | |||
2
CHOICEPOINT INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| (In thousands, except per share data) | 2003 | 2002 | ||||||||||
Revenue from products and services |
$ | 184,005 | $ | 158,642 | ||||||||
Reimbursable expenses (Note 4) |
10,944 | 10,019 | ||||||||||
Total revenue |
194,949 | 168,661 | ||||||||||
Costs and expenses: |
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Cost of services |
99,786 | 84,014 | ||||||||||
Reimbursable expenses |
10,944 | 10,019 | ||||||||||
Selling, general and administrative |
32,416 | 30,406 | ||||||||||
Total costs and expenses |
143,146 | 124,439 | ||||||||||
Operating income |
51,803 | 44,222 | ||||||||||
Interest expense |
1,006 | 2,286 | ||||||||||
Income from continuing operations before income taxes |
50,797 | 41,936 | ||||||||||
Provision for income taxes |
19,506 | 16,097 | ||||||||||
Income from continuing operations |
31,291 | 25,839 | ||||||||||
Income from discontinued operations, net of tax (Note 9) |
991 | 1,575 | ||||||||||
Gain on sale of discontinued operations, net of tax (Note 9) |
32,893 | — | ||||||||||
Cumulative effect of change in accounting principle, net of tax (Note 10) |
— | (24,416 | ) | |||||||||
Net income |
$ | 65,175 | $ | 2,998 | ||||||||
Earnings per share (Note 5) |
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Basic: |
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Income from continuing operations |
$ | 0.37 | $ | 0.31 | ||||||||
Income from discontinued operations, net |
0.01 | 0.02 | ||||||||||
Gain on sale of discontinued operations, net |
0.38 | — | ||||||||||
Cumulative effect of change in accounting principle, net |
— | (0.29 | ) | |||||||||
Net income |
$ | 0.76 | $ | 0.04 | ||||||||
Weighted average shares — basic |
85,609 | 83,931 | ||||||||||
Diluted: |
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Income from continuing operations |
$ | 0.35 | $ | 0.29 | ||||||||
Income from discontinued operations, net |
0.01 | 0.02 | ||||||||||
Gain on sale of discontinued operations, net |
0.37 | — | ||||||||||
Cumulative effect of change in accounting principle, net |
— | (0.27 | ) | |||||||||
Net income |
$ | 0.73 | $ | 0.03 | ||||||||
Weighted average shares — diluted |
89,374 | 88,969 | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
CHOICEPOINT INC.
CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||||||
| (In thousands, except par values) | 2003 | 2002 | ||||||||||
| (Unaudited) | ||||||||||||
| ASSETS | ||||||||||||
Current assets: |
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Cash and cash equivalents |
$ | 25,553 | $ | 34,359 | ||||||||
Accounts receivable, net of allowance for doubtful accounts
of $5,290 in 2003 and $4,978 in 2002 |
158,798 | 143,610 | ||||||||||
Deferred income tax assets |
6,772 | 6,557 | ||||||||||
Other current assets |
20,961 | 20,809 | ||||||||||
Total current assets |
212,084 | 205,335 | ||||||||||
Property and equipment, net |
67,798 | 66,221 | ||||||||||
Goodwill |
596,645 | 578,608 | ||||||||||
Other acquisition intangible assets |
49,278 | 42,572 | ||||||||||
Deferred income tax assets |
12,822 | 12,672 | ||||||||||
Other |
71,384 | 73,602 | ||||||||||
Total Assets |
$ | 1,010,011 | $ | 979,010 | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities: |
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Short-term debt and current maturities of long-term debt |
$ | 80,257 | $ | 85,387 | ||||||||
Accounts payable |
38,112 | 31,825 | ||||||||||
Accrued salaries and bonuses |
18,059 | 37,801 | ||||||||||
Accrued taxes |
35,665 | — | ||||||||||
Other current liabilities |
57,250 | 47,683 | ||||||||||
Total current liabilities |
229,343 | 202,696 | ||||||||||
Long-term debt, less current maturities |
33,054 | 97,059 | ||||||||||
Postretirement benefit obligations |
35,704 | 37,853 | ||||||||||
Other long-term liabilities |
19,550 | 18,795 | ||||||||||
Total liabilities |
317,651 | 356,403 | ||||||||||
Commitments and contingencies (Note 12) |
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Shareholders’ equity: |
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Preferred stock, $.01 par value; 10,000 shares authorized, no
shares issued or outstanding |
— | — | ||||||||||
Common stock, $.10 par value; shares authorized - 400,000;
issued - 86,887 in 2003 and 86,555 in 2002 |
8,688 | 8,655 | ||||||||||
Paid-in capital |
354,298 | 345,426 | ||||||||||
Retained earnings |
352,962 | 287,787 | ||||||||||
Accumulated other comprehensive loss, net |
(3,109 | ) | (2,881 | ) | ||||||||
Treasury stock, at cost, 1,197 shares in 2003 and 1,065 shares
in 2002 |
(20,479 | ) | (16,380 | ) | ||||||||
Total shareholders’ equity |
692,360 | 622,607 | ||||||||||
Total Liabilities and Shareholders’ Equity |
$ | 1,010,011 | $ | 979,010 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
CHOICEPOINT INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Unaudited)
| Accumulated Other | ||||||||||||||||||||||||||||
| Comprehensive | Common | Paid-in | Retained | Comprehensive | ||||||||||||||||||||||||
| (In thousands) | Income | Stock | Capital | Earnings | Loss, net | Treasury Stock | Total | |||||||||||||||||||||
Balance, December 31, 2002 |
$ | 8,655 | $ | 345,426 | $ | 287,787 | $ | (2,881 | ) | $ | (16,380 | ) | $ | 622,607 | ||||||||||||||
Net Income |
$ | 65,175 | — | — | 65,175 | — | — | 65,175 | ||||||||||||||||||||
Change in fair value of derivatives,
net of deferred taxes of $159 |
(238 | ) | — | — | — | (238 | ) | — | (238 | ) | ||||||||||||||||||
Other |
10 | — | — | — | 10 | — | 10 | |||||||||||||||||||||
Comprehensive income |
$ | 64,947 | ||||||||||||||||||||||||||
Restricted stock plans, net |
2 | 910 | — | — | — | 912 | ||||||||||||||||||||||
Common stock redeemed |
— | — | — | — | (99 | ) | (99 | ) | ||||||||||||||||||||
Stock options exercised |
31 | 4,678 | — | — | — | 4,709 | ||||||||||||||||||||||
Stock purchased by employee benefit trusts |
(4,000 | ) | (4,000 | ) | ||||||||||||||||||||||||
Tax benefit of stock options exercised |
— | 3,284 | — | — | — | 3,284 | ||||||||||||||||||||||
Balance, March 31, 2003 |
$ | 8,688 | $ | 354,298 | $ | 352,962 | $ | (3,109 | ) | $ | (20,479 | ) | $ | 692,360 | ||||||||||||||
The accompanying notes are an integral part of this consolidated financial statement.
5
CHOICEPOINT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| (In thousands) | 2003 | 2002 | ||||||||||
Cash flows from operating activities: |
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Net income |
$ | 65,175 | $ | 2,998 | ||||||||
Cumulative effect of change in accounting principle, net of tax |
— | 24,416 | ||||||||||
Income from discontinued operations, net of tax |
(991 | ) | (1,575 | ) | ||||||||
Gain on sale of discontinued operations, net of tax |
(32,893 | ) | — | |||||||||
Income from continuing operations |
31,291 | 25,839 | ||||||||||
Adjustments to reconcile net cash provided by continuing operations: |
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Depreciation and amortization |
13,391 | 10,583 | ||||||||||
Compensation recognized under employee stock plans, net |
912 | 578 | ||||||||||
Tax benefit of stock options exercised |
3,284 | 4,855 | ||||||||||
Changes in assets and liabilities, excluding effects of acquisitions
and divestitures: |
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Accounts receivable, net |
(20,501 | ) | (11,797 | ) | ||||||||
Other current assets |
2,674 | 1,553 | ||||||||||
Deferred income taxes |
(379 | ) | (2,296 | ) | ||||||||
Current liabilities, excluding debt |
2,285 | (6,500 | ) | |||||||||
Other long-term liabilities, excluding debt |
(1,791 | ) | 758 | |||||||||
Net cash provided by continuing operations |
31,166 | 23,573 | ||||||||||
Net cash (used) provided by discontinued operations |
(8,229 | ) | 636 | |||||||||
Cash flows from investing activities: |
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Acquisitions, net of cash acquired |
(37,608 | ) | (15,000 | ) | ||||||||
Cash proceeds from sale of business |
87,000 | — | ||||||||||
Additions to property and equipment, net |
(8,086 | ) | (4,225 | ) | ||||||||
Additions to other assets, net |
(4,524 | ) | (7,935 | ) | ||||||||
Net cash provided (used) by investing activities |
36,782 | (27,160 | ) | |||||||||
Cash flows from financing activities: |
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Payments on Former Credit Facility |
— | (30,000 | ) | |||||||||
Payments on Credit Facility |
(102,000 | ) | — | |||||||||
Borrowings under Credit Facility |
38,000 | — | ||||||||||
Payments on Receivables Facility |
(5,000 | ) | ||||||||||
Payments of other debt, net |
(135 | ) | (481 | ) | ||||||||
Purchase of stock held by employee benefit trusts |
(4,000 | ) | — | |||||||||
Redemption of common stock |
(99 | ) | (858 | ) | ||||||||
Proceeds from exercise of stock options |
4,709 | 9,845 | ||||||||||
Net cash used by financing activities |
(68,525 | ) | (21,494 | ) | ||||||||