UNITED STATES
| [ X ] | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2003
or
| [ ] | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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 | (I.R.S. Employer | |
| or organization) | Identification No.) |
| 1000 Alderman Drive, Alpharetta, Georgia | 30005 | |||
| (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 October 31, 2003 | |||
Common Stock, $.10 Par Value |
87,413,671 | |||
CHOICEPOINT INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 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 September 30, 2003 and 2002 and Nine Months Ended September 30, 2003 and 2002 |
3 | |||
Consolidated Balance Sheets (unaudited)-
September 30, 2003 and December 31, 2002 |
4 | |||
Consolidated Statement of Shareholders’ Equity (unaudited)-
Nine Months Ended September 30, 2003 |
5 | |||
Consolidated Statements of Cash Flows (unaudited)-
Nine Months Ended September 30, 2003 and 2002 |
6 | |||
Notes to Consolidated Financial Statements |
7 | |||
Item 2. Management’s Discussion and Analysis
of Results of Operations and Financial Condition |
16 | |||
Item 3. Quantitative and Qualitative Disclosures about Market Risk |
24 | |||
Item 4. Controls and Procedures |
25 | |||
Part II. OTHER INFORMATION |
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Item 1. Legal Proceedings |
26 | |||
Item 2. Changes in Securities and Use of Proceeds |
26 | |||
Item 3. Defaults Upon Senior Securities |
26 | |||
Item 4. Submission of Matters to a Vote of Security Holders |
26 | |||
Item 5. Other Information |
26 | |||
Item 6. Exhibits and Reports on Form 8-K |
27 | |||
Signatures |
28 | |||
Exhibit Index |
29 | |||
CHOICEPOINT INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| (In thousands, except per share data) | 2003 | 2002 | 2003 | 2002 | ||||||||||||||
Revenue from products and services |
$ | 189,116 | $ | 178,832 | $ | 561,900 | $ | 509,710 | ||||||||||
Reimbursable expenses (Note 4) |
12,402 | 10,098 | 33,816 | 30,040 | ||||||||||||||
Total revenue |
201,518 | 188,930 | 595,716 | 539,750 | ||||||||||||||
Costs and expenses: |
||||||||||||||||||
Cost of services |
100,963 | 93,162 | 299,736 | 266,244 | ||||||||||||||
Reimbursable expenses |
12,402 | 10,098 | 33,816 | 30,040 | ||||||||||||||
Selling, general and administrative |
36,357 | 35,680 | 104,085 | 103,179 | ||||||||||||||
Other operating charges (Note 5) |
4,022 | — | 23,839 | 7,342 | ||||||||||||||
Total costs and expenses |
153,744 | 138,940 | 461,476 | 406,805 | ||||||||||||||
Operating income |
47,774 | 49,990 | 134,240 | 132,945 | ||||||||||||||
Interest expense |
608 | 2,017 | 2,424 | 6,672 | ||||||||||||||
Income from continuing operations before income taxes |
47,166 | 47,973 | 131,816 | 126,273 | ||||||||||||||
Provision for income taxes |
18,111 | 18,415 | 50,617 | 48,470 | ||||||||||||||
Income from continuing operations |
29,055 | 29,558 | 81,199 | 77,803 | ||||||||||||||
Income from discontinued operations, net of tax (Note 10) |
— | 1,704 | 991 | 4,986 | ||||||||||||||
Gain on sale of discontinued operations, net of tax (Note 10) |
— | — | 32,893 | — | ||||||||||||||
Cumulative effect of change in accounting principle, net
of tax (Note 11) |
— | — | — | (24,416 | ) | |||||||||||||
Net income |
$ | 29,055 | $ | 31,262 | $ | 115,083 | $ | 58,373 | ||||||||||
Earnings per share (Note 6) |
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Basic: |
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Income from continuing operations |
$ | 0.34 | $ | 0.35 | $ | 0.95 | $ | 0.92 | ||||||||||
Income from discontinued operations, net |
— | 0.02 | 0.01 | 0.06 | ||||||||||||||
Gain on sale of discontinued operations, net |
— | — | 0.38 | — | ||||||||||||||
Cumulative effect of change in accounting principle, net |
— | — | — | (0.29 | ) | |||||||||||||
Net income |
$ | 0.34 | $ | 0.37 | $ | 1.34 | $ | 0.69 | ||||||||||
Weighted average shares – basic |
86,129 | 84,813 | 85,846 | 84,407 | ||||||||||||||
Diluted: |
||||||||||||||||||
Income from continuing operations |
$ | 0.32 | $ | 0.33 | $ | 0.91 | $ | 0.87 | ||||||||||
Income from discontinued operations, net |
— | 0.02 | 0.01 | 0.06 | ||||||||||||||
Gain on sale of discontinued operations, net |
— | — | 0.37 | — | ||||||||||||||
Cumulative effect of change in accounting principle, net |
— | — | — | (0.28 | ) | |||||||||||||
Net income |
$ | 0.32 | $ | 0.35 | $ | 1.28 | $ | 0.65 | ||||||||||
Weighted average shares – diluted |
89,866 | 89,612 | 89,579 | 89,425 | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
CHOICEPOINT INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, | December 31, | |||||||||
| (In thousands, except par values) | 2003 | 2002 | ||||||||
ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | 14,397 | $ | 34,359 | ||||||
Accounts receivable, net of allowance for doubtful accounts
of $4,899 in 2003 and $4,978 in 2002 |
154,624 | 143,610 | ||||||||
Deferred income tax assets |
7,204 | 6,557 | ||||||||
Other current assets |
17,669 | 20,809 | ||||||||
Total current assets |
193,894 | 205,335 | ||||||||
Property and equipment, net |
60,086 | 66,221 | ||||||||
Goodwill |
637,200 | 578,608 | ||||||||
Other acquisition intangible assets |
52,695 | 42,572 | ||||||||
Deferred income tax assets |
12,528 | 12,672 | ||||||||
Other |
81,030 | 73,602 | ||||||||
Total Assets |
$ | 1,037,433 | $ | 979,010 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Short-term debt and current maturities of long-term debt |
$ | 70,204 | $ | 85,387 | ||||||
Accounts payable |
32,035 | 31,825 | ||||||||
Accrued salaries and bonuses |
29,089 | 37,801 | ||||||||
Other current liabilities |
74,599 | 47,683 | ||||||||
Total current liabilities |
205,927 | 202,696 | ||||||||
Long-term debt, less current maturities |
1,999 | 97,059 | ||||||||
Postretirement benefit obligations |
32,961 | 37,853 | ||||||||
Other long-term liabilities |
39,940 | 18,795 | ||||||||
Total liabilities |
280,827 | 356,403 | ||||||||
Commitments and contingencies (Note 13)
|
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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 - 87,452 in 2003 and 86,555 in 2002 |
8,745 | 8,655 | ||||||||
Paid-in capital |
368,609 | 345,426 | ||||||||
Retained earnings |
402,870 | 287,787 | ||||||||
Accumulated other comprehensive loss, net |
(3,219 | ) | (2,881 | ) | ||||||
Treasury stock, at cost, 1,193 shares in 2003 and 1,065 shares
in 2002 |
(20,399 | ) | (16,380 | ) | ||||||
Total shareholders’ equity |
756,606 | 622,607 | ||||||||
Total Liabilities and Shareholders’ Equity |
$ | 1,037,433 | $ | 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 |
$ | 115,083 | — | — | 115,083 | — | — | 115,083 | ||||||||||||||||||||
Change
in fair value of derivatives, net of deferred
taxes of $245 |
(367 | ) | — | — | — | (367 | ) | — | (367 | ) | ||||||||||||||||||
Other |
29 | — | — | — | 29 | — | 29 | |||||||||||||||||||||
Comprehensive income |
$ | 114,745 | ||||||||||||||||||||||||||
Restricted stock plans, net |
4 | 2,607 | — | — | — | 2,611 | ||||||||||||||||||||||
Common stock redeemed |
— | — | — | — | (99 | ) | (99 | ) | ||||||||||||||||||||
Stock options exercised |
86 | 13,387 | — | — | — | 13,473 | ||||||||||||||||||||||
Stock purchased by employee benefit trusts, net |
— | 22 | — | — | (3,920 | ) | (3,898 | ) | ||||||||||||||||||||
Tax benefit of stock options exercised |
— | 7,167 | — | — | — | 7,167 | ||||||||||||||||||||||
Balance, September 30, 2003 |
$ | 8,745 | $ | 368,609 | $ | 402,870 | $ | (3,219 | ) | $ | (20,399 | ) | $ | 756,606 | ||||||||||||||
The accompanying notes are an integral part of this consolidated financial statement.
5
CHOICEPOINT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended | ||||||||||
| September 30, | ||||||||||
| (In thousands) | 2003 | 2002 | ||||||||
Cash flows from operating activities: |
||||||||||
Net income |
$ | 115,083 | $ | 58,373 | ||||||
Cumulative effect of change in accounting principle, net of tax |
— | 24,416 | ||||||||
Income from discontinued operations, net of tax |
(991 | ) | (4,986 | ) | ||||||
Gain on sale of discontinued operations, net of tax |
(32,893 | ) | — | |||||||
Income from continuing operations |
81,199 | 77,803 | ||||||||
Adjustments to reconcile net cash provided by continuing operations: |
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Depreciation and amortization |
39,895 | 32,474 | ||||||||
Provision for other operating charges |
15,505 | 5,405 | ||||||||
Compensation recognized under employee stock plans, net |
2,611 | 2,045 | ||||||||
Tax benefit of stock options exercised |
7,167 | 11,543 | ||||||||
Changes in assets and liabilities, excluding effects of acquisitions
and divestitures: |
||||||||||
Accounts receivable, net |
(15,630 | ) | (23,140 | ) | ||||||
Other current assets |
3,977 | 1,911 | ||||||||
Deferred income taxes |
(431 | ) | 406 | |||||||
Current liabilities, excluding debt |
7,638 | (13,801 | ) | |||||||
Other long-term liabilities, excluding debt |
(5,459 | ) | (4,360 | ) | ||||||
Net cash provided by continuing operations |
136,472 | 90,286 | ||||||||
Net cash (used) provided by discontinued operations |
(35,848 | ) | 7,448 | |||||||
Cash flows from investing activities: |
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Acquisitions, net of cash acquired, and equity investment |
(74,593 | ) | (45,680 | ) | ||||||
Cash proceeds from sale of business |
87,000 | — | ||||||||
Additions to property and equipment, net |
(16,522 | ) | (15,644 | ) | ||||||
Additions to other assets, net |
(15,695 | ) | (19,787 | ) | ||||||
N | ||||||||||