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TABLE OF CONTENTS
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 0-27444

SOURCECORP, Incorporated
(Exact name of Registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)

(Former name or former address if changed since last report)

        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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý    No o

        The aggregate market value of voting stock held by non-affiliates of the Registrant as of June 28, 2002 (the last business day of the Company's most recently completed second fiscal quarter) was $458,568,561 based on the last sale price of $26.50 of the Registrant's Common Stock, $.01 par value per share, on the Nasdaq National Market on June 28, 2002.

        As of March 24, 2003, 16,600,684 shares of the Registrant's Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

        Portions of the Proxy Statement for the 2003 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year ended December 31, 2002 are incorporated by reference into Part III of this Form 10-K.

SOURCECORP, Incorporated
2002 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

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PART I

        This Report contains certain forward-looking statements such as our intentions, beliefs, expectations, strategies, predictions or any other variation thereof or comparable phraseology of our future activities or other future events or conditions within the meaning of Section 27A of the Securities Act of 1993, as amended (the "Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including, without limitation, the risk of integrating our operating companies, of the timing and magnitude of technological advances, of the occurrences of future events that could diminish our customers' needs for our services, of a change in the degree to which companies continue to outsource business processes, as well as such other risks set forth under the heading Risk Factors included in this report. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and, therefore, there can be no assurance that the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.

ITEM 1. Business

General

        SOURCECORP, Incorporated is a national provider of business process outsourcing solutions specializing in document management and information management. We offer clients in information-intensive industries—such as financial services, government, legal, healthcare and transportation—the solutions to manage their information and document intensive business processes, enabling these organizations to concentrate on their core competencies.

        As a national business process outsourcing provider, we operate approximately 123 facilities in 24 states, Washington, D.C. and Mexico, with over 8,400 employees.

        We serve a diverse client base, including customers in the financial services, health insurance, health provider, legal and transportation/logistics industries as well as public sector agencies and non-profit organizations. Organizations can outsource many of their information management, distribution and specific information-intensive processes to us due to the breadth of our outsourcing capabilities.

        We believe that the business process outsourcing solutions market is growing due to several factors, including: (i) government regulations that require lengthy document retention periods and rapid accessibility for many types of records; (ii) continuing advancements in computer, networking, facsimile, printing and other technologies that have greatly facilitated the production and wide distribution of documents; (iii) the increasing litigiousness of society, necessitating access to relevant documents and records for extended periods of time; and (iv) increased customer expectations of low cost access to records on short notice.

        Our customer profile includes enterprises, both commercial and public-sector, which have information-intensive business processes involving large volumes of documents, forms, case files and other types of information that require specialized processing and storage, with frequent access and distribution. We believe that these clients will continue to increase their outsourcing of document and information management needs in order to further focus on their core operating competencies and revenue generating activities; reduce fixed costs, including labor and equipment costs; and gain access to new technologies without incurring the investments and risks of obsolescence associated with the technologies required to effectively meet these needs.

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Business Strategy

        Our goal is to become a leading provider in the U.S. of business process outsourcing solutions with information and document intensive services, including financial services, government, legal, healthcare and transportation. This will involve extending our involvement in key business processes that we serve today with additional processing services. In order to achieve this goal, we have implemented the following focused business strategy, which we believe will attract and retain clients:

        Economies and Efficiencies.    We intend to deliver better, faster and more cost effective services than our customers can provide for themselves.

        Scope and Scale.    We plan to continue to establish a range of business processing outsourcing operations to meet the diverse needs of customers by expanding existing businesses and making selected strategic acquisitions. We intend to continue to handle large volume engagements associated with information-intensive processes.

        Flexible Service Delivery.    We intend to continue to provide outsourced service facilities, on-site facility management and dedicated customer operations.

        Information and Technology Lifecycles.    We intend to continue to be involved during the stages of the information lifecycle from data capture, conversion and storage to analysis and output processing. In addition, we intend to further develop processing capabilities and expect to continue to be involved in the technology lifecycles from paper to electronic, making use of web-based and other technologies.

        Increase National Account Selling Resources.    We intend to expand investments in sales and sales support personnel and resources to expand our pursuit of large enterprises within our key markets. We intend to increase the number of large accounts we can pursue at a given time and, through additional reference-able client relationships over time, increase our win rates.

        Emphasize Account Penetration.    We intend to emphasize account penetration in two primary ways. First, we intend to continue to sell our existing clients additional business process outsourcing solutions provided by our other businesses. Second, we intend to use our knowledge with respect to specific industry segments to sell such services to new clients.

        Increase Investments in Technology.    We intend to increase our investments in technology in order to facilitate the integration of our service platforms, reduce labor costs relative to our growth, and provide our services in more efficient ways. These investments include the acquisition of new-generation high speed scanning equipment, optical character recognition software and systems, communication systems and other infrastructure related to our service platforms.

        Achieve Cost Savings through Consolidation and Economies of Scale.    We believe that we will continue to achieve savings by continuing to combine a number of general and administrative functions at the corporate level, such as accounting, tax, human resources and legal, by reducing or eliminating redundant functions and facilities, and by implementing national purchasing programs.

        Internet.    We intend to continue to utilize web-based technologies. Our plans include business-to-business e-commerce enabler products to provide critical back office functions. Our e-business strategy revolves around three areas: (i) order entry and status; (ii) web conversion services; and (iii) web storage and retrieval.

        Operate With Business Segments and Local Management.    We have placed all of our operations into two reportable segments. These segments are comprised of operating units, each of which is focused on providing common services to common customer bases and achieving synergies. At the same time, we have made and are continuing to make, a significant effort toward integrating our operating units into a national operating company platform that has the capability of penetrating larger accounts.

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We believe that the experienced local management teams of our operating units have a valuable understanding of their respective markets and businesses and can capitalize on existing client relationships. Multiple operating units are led by Division Presidents, each of which has broad based management experience.

Acquisition and Divestiture Strategy

        We have transitioned to an operating company supported by a strategic acquisition program. Since our inception, we have acquired 72 companies and divested 17 operating units as of December 31, 2002. Of these acquisitions, 85% were completed in the first four years following our initial public offering, in January 1996, as we established a geographic footprint to enable us to provide services nationally. Periodically, we evaluate candidates for acquisition, as well as our operating units for possible divestiture, as a part of our strategic plan. Accordingly, we screen companies in conjunction with our operating management team in order to acquire those candidates that meet certain strategic requirements. These criteria include service expansion to broaden service offerings, additional technology, added management strength, industry expertise, expansion of our customer base and geographic need.

        We believe that we will continue to be a successful acquirer of other business process outsourcing solution companies, nevertheless, there are numerous risks associated with our acquisition program. See "Risk Factors."

        During the second and third quarters of 2001, we completed a strategic realignment plan to better position the Company to pursue business process outsourcing. As part of this plan, we identified certain non-strategic service offerings for divestiture or closure, and accordingly, developed and committed to a divestiture plan. The non-strategic service offerings were evaluated based on criteria such as market growth potential, current operating performance, revenue and earnings growth potential, and expected sources and uses of capital. Pursuant to this plan, we completed the sale or closure of 15 operating units during 2001. These units related to the following services: (i) automated litigation support services; (ii) high-speed, multiple-set reproduction of documents; (iii) records acquisition in the form of subpoena of business documents and service of process; (iv) commercial system integration services; and (v) investor services. These divested units collectively accounted for approximately 22% of 2000 revenues and 4% of 2000 operating income.

Services Offered

        We provide a variety of business process outsourcing solutions and draw upon our available services to develop solutions for our clients based on their specific needs. As a result of the 2001 strategic realignment plan discussed above, we realigned our operating units into the following segments: Information Management and Distribution; and Healthcare, Regulatory and Legal Compliance. See Note 16, Segment Reporting, of Notes to Consolidated Financial Statements of SOURCECORP, Incorporated and subsidiaries for the last three years' financial results under these segments.

        Information Management and Distribution.    We offer business process solutions including electronic conversion services, analog services, data capture and database management services, internet repository services, print and mail services, including statement processing, direct mail, fulfillment services and in-bound mail room services.

        Electronic Conversion Services involve the conversion of paper or microfilm documents into digitized information through optical scanners. Information can be stored as a digitized image or converted to code through optical character recognition (OCR). Conversion to code provides additional processing capabilities, such as manipulation of data. In both cases, the digitized information can be stored on magnetic medium, such as a computer diskette, optical laser discs, or compact discs.

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Electronic imaging is generally used because of the storage media's high speed of retrieval, its multiple indexing and text search formatting capabilities and its ability to be used to distribute output to multiple locations. Additionally, images may be stored and accessed via web-based repositories. Electronic conversion services are typically billed on a job-by-job basis, based on the number of images and complexity of the storage retrieval applications.

        Data Capture and Database Management Services involve data capture (manually or through scanning or other electronic media), data consolidation and elimination, storage, maintenance, formatting and report creation. Data capture includes the conversion of text and handwritten paper media as well as images into digital files. An advantage of digital files is the ability to manipulate large amounts of data quickly and efficiently. In some cases, database services include statistical analysis of data. Additionally, services are offered to governmental agencies to generate digital images of medical record information and facilitate image processing for several state and local government agencies.

        Internet Repository Services adds electronic object storage and internet-based retrieval capabilities to complement our document capture and conversion services. Through this combination of technology and services, customers can look to us for secure and timely access to digital documents.

        Full-Service Printing and Statement Processing Services provide customers with rapid, reliable and cost-effective methods for making large-scale distributions of items such as corporate advertising, political campaign literature, consumer notices, bills, statements and annual reports for its customers. Our service also includes the ability to deliver efficient postal routing to fulfill consumer requests for specific information. In addition, we have the ability to send blast e-mail services, including high-level graphics and sound, to supplement our existing services.

        Healthcare, Regulatory and Legal Compliance.    Our services include medical records release, off-site active storage of a healthcare institutions' medical records, online delivery of images of selected medical records, temporary staffing services, providing managed care compliance reviews, legal claims administration, and professional economic research and litigation services.

        Our services include medical records release services (i.e., processing a request for a patient's medical records from a physician, insurance company, attorney, healthcare institution or individual). The medical records release service provider initially verifies that the release is properly authorized, coordinates the retrieval of the record, determines the relevant parts of the record to be copied and delivers the copied records (or portions thereof) to the requesting party. Medical records release services are provided on-site and off-site pursuant to contracts with hospitals, other large healthcare institutions and insurance companies. The medical records release service provider bills the recipient directly and sometimes pays a fee to the hospital.

        Additional services include archival records storage and management, document and data conversion, archiving and imaging services to hospital radiology departments, imaging and electronic storage of medical records for hosptials, temporary staffing services for hospital information management departments, coding and abstracting of medical records, and managed care payment compliance reviews.

        Our record management services consist primarily of active or open shelf storage. Active or open shelf storage services involve the storage, processing (i.e., indexing and formatting), retrieval, delivery and return to storage of documents in a rapid time frame. Many of these services are provided electronically. Service fees generally include a monthly fee based on activity levels and volumes stored, with extra billing for specialized requests. To a smaller extent, we store inactive documents.

        Legal Claims Administration Services provide turn-key services to administer legal settlements. Services include compiling and managing claims databases, conducting mail campaigns for settlement communications and providing communications support for settlements through our in-bound call centers. We identify and notify members of class action lawsuits or other groups, answer questions,

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track and record contact with class action or other group members, process claims and distribute settlement funds.

        Professional Economic Research and Litigation Services include high level consulting services ranging from fair lending, labor discrimination and forensic analysis to trial support for law firms and corporations.

Sales and Marketing

        We have a broad customer base. No customer accounted for more than 5% of revenue or 7% of gross profit for the year ended December 31, 2002. Historically, our sales efforts have been implemented on a location-by-location basis and typically have been coordinated through sales personnel as part of the local management's responsibilities. Our existing local sales efforts are carried out through local sales representatives. We continue to strive to increase our client base by attracting clients away from small, single business operators as a result of our ability to offer a broader range of solutions for our clients' needs. In addition, we intend to continue to focus on increasing revenue from our existing clients by selling additional services and broadening our product offerings. We will continue to augment local sales and marketing efforts through the continued implementation of a regional and national sales/account program.

Competition

        The business process outsourcing solution markets in which we compete and expect to compete are highly competitive. A significant source of competition is the in-house document handling capability of our target client base. There can be no assurance that these businesses will outsource more of their document management needs or that they will not bring in-house, services that they currently outsource. In addition, certain of our competitors are larger businesses and have greater financial resources than we do. Certain of these competitors operate in broader geographic areas than we do, and others may choose to enter our areas of operation in the future. We intend to continue to enter new geographic areas through internal growth and potentially through acquisitions and expect to encounter significant competition from established competitors in each of such areas. As a result of this highly competitive environment, we may lose clients or have difficulty in acquiring new customers and new companies and our results of operations may be adversely affected.

        We believe that the principal competitive factors in business process outsourcing solution services include accuracy, reliability and security of service, client segment specific knowledge and price. We compete primarily on the basis of quality of service and client segment specific knowledge as well as our ability to handle large volumes and projects, and believe that we compete favorably with respect to these factors. We continue to consolidate and integrate our service-delivery capabilities to increase our operational efficiencies. We are also increasing our use of offshore personnel and technology to provide our services, where applicable, in order to increase our pricing competitiveness.

Employees

        As of December 31, 2002, we had over 6,500 full-time and over 1,900 part-time employees. As of such date, we had 97 employees represented by labor unions. We consider our relations with our employees to be good.

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Our Executive Officers

        The following table sets forth certain information concerning each of our executive officers as of March 24, 2003:

        Thomas C. Walker has been our Chairman of the Board since our inception in September 1994 and has been our Chief Development Officer since November 1995. From September 1994 until November 1995, Mr. Walker held the positions of President and Chief Executive Officer. From August 1991 to December 1994, Mr. Walker was Vice President, Corporate Development, of Laidlaw Waste Systems, Inc., a subsidiary of Laidlaw, Inc., a waste management company, where he was responsible for its acquisition and divestiture program in the United States and Mexico. Mr. Walker has been responsible for the acquisition or divestiture of several hundred businesses over a 30-year period. Mr. Walker holds a B.S. degree in Industrial Engineering from Lafayette College.

        Ed H. Bowman, Jr. has been our President and Chief Executive Officer and a Director since November 1995. From 1993 to 1995, Mr. Bowman was Executive Vice President and Chief Operating Officer of the Health Systems Group for First Data Corporation, a financial services company. Mr. Bowman was responsible for the day-to-day operations of research and development, marketing and customer service. From 1983 to 1993, Mr. Bowman served in a number of executive positions with a leading healthcare information systems company; responsibilities included VP—International, VP—Marketing, Senior VP—Customer Services, Group Senior VP—Research and Development, and last serving as Executive Vice President and Chief Operating Officer with responsibility for domestic operations. Prior to 1983, Mr. Bowman was with Andersen Consulting (currently known as Accenture), where he was elected a Partner. Mr. Bowman became a C.P.A. in 1973 and holds an M.S. degree from Georgia Institute of Technology and a B.B.A. from Georgia State University. Mr. Bowman is an investor and former board member of several early-stage, privately held high technology companies and has served on the Board of the Advanced Technology Development Center at Georgia Tech. Mr. Bowman currently serves on the Advisory Board to the President of Georgia Tech and on the Advisory Board of the Robinson School of Business at Georgia State University.

        Barry L. Edwards has been an Executive Vice President and our Chief Financial Officer since August 2000. From November 1994 to March 2000, Mr. Edwards was Executive Vice President and Chief Financial Officer for AMRESCO, a nationwide financial services company. From December 1978 to November 1994, Mr. Edwards was Vice President and Treasurer of Liberty Corporation, an insurance and broadcasting holding company. Mr. Edwards received a B.S. degree in Finance and

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Economics from Lehigh University in 1969, and an M.B.A degree from the University of Virginia Darden School of Business in 1972. Mr. Edwards is a board member for Ryan's Family Steakhouses and Robert Harris Homes.

        Joe A. Rose has been our Chief Operating Officer since January 2000 and a Director since March 2000. From August 1999 through December 1999, Mr. Rose was an Executive Vice President. From June 1997 through August 1999, Mr. Rose was a Senior Vice President. From May 1995 through January 1997, Mr. Rose was President and CEO of FormMaker Software, Inc., a document technology company which merged with Image Sciences Corp. to form DocuCorp International. From May 1993 through May 1995, Mr. Rose was Corporate Vice President of John H. Harland Company, a financial services company, and President and CEO of its subsidiary, Formation Technology, Inc. From July 1988 through May 1993, Mr. Rose served as Executive Vice President of National Data Corporation, where he was responsible for the credit card and cash management divisions. Mr. Rose began his information services career at EDS in sales. Mr. Rose holds a B.A. degree from Texas Tech University.

        Charles S. Gilbert has been a Senior Vice President, Secretary and General Counsel since January 2001, a Vice President, Secretary and General Counsel since August 2000, our Secretary and acting General Counsel since July 2000 and corporate counsel since April 2000. From 1991 until joining us he practiced law in the corporate securities section of Jackson Walker LLP, Dallas, where he was elected partner. Mr. Gilbert holds a B.S. degree in Physics from The University of Texas and a J.D. from The University of Texas School of Law.

        Michael S. Rupe has been a Division President since September 2000. From March 1998 through August 2000, Mr. Rupe served as President and Chief Executive Officer of Solomon Software, Inc., an accounting and business software company that was sold to Great Plains Software in June 2000. From March 1997 to February 1998, Mr. Rupe served as Executive Vice President and Chief Financial Officer of Solomon Software, Inc. From August 1995 through February 1997, Mr. Rupe was Senior Vice President of Finance and Administration at FormMaker Software, Inc., a document technology company, which merged with Image Sciences Corp. to form DocuCorp International. Mr. Rupe holds a B.S. degree in Accounting from the University of Kentucky.

        Kerry Walbridge has been a Division President since March 2001. From April 2000 to December 2000, Mr. Walbridge was President and CEO of eMake Corporation, a first-to-market provider of web hosted ERP software solutions and electronic supply chain services to the manufacturing market. From August 1998 to April 2000, Mr. Walbridge was Senior Vice President Sales and Marketing for Outsourcing Solutions, Inc. the nations largest provider of accounts receivable management services. From November 1991 to June 1993 and from June 1996 to August 1998, Mr. Walbridge was a Division Vice President for EDS and from April 1988 to November 1991 Mr. Walbridge was a Division Vice President for McDonnell Douglas Systems Integration. Mr. Walbridge holds a B.S. degree in Business from St. Louis University.

        Ronald Zazworsky has been a Division President since November 2000. From October 1997 until November 2000, Mr. Zazworsky was our Senior Vice President—HealthSERVE. From February 1994 until July 1997, Mr. Zazworsky was Senior Vice President at Medaphis Corporation, an outsourcer of financial and business management services for hospitals and physician groups. From April 1992 to February 1994, Mr. Zazworsky was President and CEO at Habersham Banking Solutions, Inc., a private check imaging software firm, where he also served on its board of directors. Prior to 1992, Mr. Zazworsky was employed at HBOC, a healthcare systems and services organization, as Regional Vice President for eight years. Previously, Mr. Zazworsky held various sales, marketing, and management positions at IBM. Mr. Zazworsky holds a B.A. degree from Gettysburg College and a M.B.A. degree from Emory University.

        W. Bryan Hill has been a Vice President and our Chief Accounting Officer since November 2001. From August 2000 to October 2001, Mr. Hill served with us as a Director of Accounting. From

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July 1996 until joining us, Mr. Hill was Senior Vice President of Accounting and Finance with FirstPlus Consumer Finance. Previously, Mr. Hill held various accounting and finance positions with Associates First Capital for over seven years with Director of Corporate Finance being his last position. Mr. Hill holds a B.B.A. degree in Accounting from Texas Christian University and has been a C.P.A and a C.M.A from 1996 and 2000, respectively.

RISK FACTORS

        YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE MAKING AN INVESTMENT DECISION. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE HURT, THE PRICE OF OUR SECURITIES COULD DECLINE, WE MAY NOT BE ABLE TO REPAY OUR DEBT SECURITIES, IF ANY, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT. YOU SHOULD ALSO REFER TO THE OTHER INFORMATION CONTAINED IN THIS REPORT AND INCORPORATED IN THIS REPORT BY REFERENCE, INCLUDING OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES.

We may not be able to continue to effectively integrate all of our operating companies

        Our growth and future financial performance depend on our ability to continue to integrate our operating companies. A number of our operating companies offer different services, use different capabilities, technologies and information systems and target different geographic markets and client segments. These differences increase the risk in successfully completing the integration of our operating companies. Any difficulties we encounter in the integration process could adversely affect us and we can not assure you that our operating results will match or exceed the combined individual operating results achieved by our operating companies prior to their acquisition.

Any future acquisitions will require financing

        We currently intend to finance any future acquisitions by using cash and in some cases our common stock for all or a portion of the consideration to be paid. In the event that our common stock is not at a sufficient value at the time of an acquisition, or potential acquisition candidates are unwilling to accept our common stock as consideration for the sale of their businesses, we may be required to use more cash, if available, in order to consummate acquisitions. If we do not have sufficient cash, our growth through acquisitions could be limited unless we are able to obtain capital through additional debt or equity financings. Under our line of credit with a group of banks led by Bank of America, SunTrust and Wells Fargo, we and our subsidiaries could borrow, on a revolving credit basis, loans in an aggregate outstanding principal amount of $297.5 million for working capital, general corporate purposes and acquisitions, subject to certain restrictions in our line of credit. As of December 31, 2002, the availability under the line of credit was approximately $62.1 million. We cannot assure you, however, that funds available under our line of credit will be sufficient for our needs.

The price of our common stock may be volatile

        The price of our common stock may be volatile. Our quarterly results of operations may vary materially as a result of the gain or loss of material client relationships and variations in the prices charged by us for our services. In addition, since a significant portion of our revenue is generated on a project-by-project basis, the timing or completion of material projects could result in fluctuations in our results of operations for particular quarterly periods. Fluctuations in operating results may adversely affect the market price of our common stock. The market price for our common stock may also fluctuate in response to material announcements by us or our significant clients or competitors, changes in economic or other conditions impacting our targeted client segments or changes in general economic conditions. Further, the securities markets have experienced significant price and volume fluctuations

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from time to time that have often been unrelated or disproportionate to the operating performance of particular companies. These broad fluctuations may adversely affect the market price of our common stock.

We depend on certain client industries

        We derive our revenue primarily from document and information intensive industries. Fundamental changes in the business practices of any of these client industries, whether due to regulatory, technological, the internet or other developments, could cause a material reduction in demand by our clients for the services offered by us. Any reduction in demand could have a material adverse effect on our results of operations. The business process outsourcing service industry is characterized by technological change, evolving client needs and emerging technical standards. Although we believe that we will be able to continue to offer services based on new technologies, we cannot assure you that we will be able to obtain any of these technologies, that we will be able to effectively implement these technologies on a cost-effective or timely basis or that such technologies will not render obsolete our role as a third party provider of business process outsourcing services.

        Our success depends substantially upon retaining our significant clients. Generally, we may lose clients due to a merger or acquisition, business failure, contract expiration, conversion to a competitor or conversion to an in-house system. We cannot guarantee that we will be able to retain long-term relationships or secure renewals of short-term relationships with our significant clients in the future.

        We incur a high level of fixed costs related to certain of our business process outsourcing clients. These fixed costs result from significant investments, including computer hardware platforms, computer software, facilities, and client service infrastructure. The loss of any one of our significant clients could leave us with a significantly higher level of fixed costs than is necessary to serve our remaining clients, thereby reducing our profitability.

We face intense competition

        The business process outsourcing services industry is highly competitive. We cannot guarantee that we will be able to compete successfully in the future. A significant source of competition is the in-house document handling capability of our targeted client base. We cannot assure you that these businesses will outsource more of their document and information management needs or that such businesses will not bring in-house, services that they currently outsource. In addition, certain of our competitors are larger businesses and have greater financial resources than we do. Certain of these competitors operate in broader geographic areas than we do, and others may choose to enter our areas of operation in the future. In addition, we intend to enter new geographic areas through internal growth and acquisitions and expect to encounter significant competition from established competitors in each new area. Some of our competitors have a greater international presence than us and offer a broader range of services in certain segments. In such an increasingly competitive environment, we may lose clients or have difficulty in acquiring new clients and new companies, and our results of operations may be adversely affected. In addition, we may be forced to lower our pricing, or, if demand for our services decreases our business, financial condition and results of operations could be materially and adversely affected.

We have significant investments in some client contracts, which expose us to the risk of these clients' financial conditions

        We must make capital investments in order to attract and retain large outsourcing agreements. We sometimes must purchase assets such as computing equipment and software, assume financial obligations such as computer lease and software maintenance obligations or property leases, incur capital expenditures or incur expenses necessary to provide outsourcing services to a client. If any of

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these agreements were to terminate, we might not be able to realize a return on the assets and investments acquired or financial obligations assumed.

Meeting changes in technology could be costly and, if we do not keep up with these changes, we could lose existing clients and be unable to attract new clients

        The markets for our business process outsourcing services are subject to rapid technological changes and rapid changes in client requirements. To compete, we commit substantial resources to operating multiple hardware platforms, to customizing third-party software programs and to training client personnel and our personnel in the use of new technologies. Future hardware, software and other products may be able to manipulate large amounts of documents and information more cost effectively than existing products that we use. Information processing is shifting toward client-server and web-based systems, in which individual computers or groups of personal computers and mid-range systems replace older systems. This trend could adversely affect our business and financial results and result in us losing clients and being unable to attract new clients. We have committed substantial resources to developing outsourcing solutions for these distributed computing environments. We cannot guarantee that we will be successful in customizing products and services that incorporate new technology on a timely basis. We also cannot guarantee that we will continue to be able to deliver the services and products demanded by the marketplace. Technology costs have also dropped significantly in recent years due in large part to hardware technology advances.

Intellectual property infringement claims could require us to incur substantial costs to defend the claims, change our services, purchase new licenses or redesign our use of challenged technology

        We do not own the majority of the software that we use to run our business; instead we license this software from a number of vendors. If these vendors assert claims that we or our clients are infringing on their software or related intellectual property, we could incur substantial costs to defend these claims. In addition, if any vendors' infringement claims are ultimately successful, our vendors could require us: (i) to cease selling or using products or services that incorporate the challenged software or technology; (ii) to obtain a license or additional licenses from our vendors; or (iii) to redesign our products and services which rely on the challenged software or technology. We are not currently involved in any material intellectual property litigation, but could be in the future to protect our trade secrets, trademarks or know-how, or to defend ourselves or our clients against alleged infringement claims.

We depend on our personnel

        Our operations depend on the continued efforts of our executive officers and on senior management of our operating companies. Also, we will likely depend on the senior management of businesses acquired in the future. If any of these people are unable or unwilling to continue in their present role, or if we are unable to attract and retain additional managers and skilled employees, our business could be adversely affected. We do not currently have key person life insurance covering any of our executive officers.

        Our success depends, to a significant extent, upon our ability to attract, retain and motivate highly skilled and qualified personnel. If we fail to attract, train, and retain sufficient numbers of these technically-skilled people, our business, financial condition, and results of operations could be materially and adversely affected. Competition for personnel is intense in the document and information services industry, and recruiting and training personnel require substantial resources. We must continue to grow internally by hiring and training technically-skilled people in order to perform services under our existing and future contracts. Our business also experiences significant turnover of technically-skilled people.

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We may be liable for breach of confidentiality

        A substantial portion of our business involves the handling of documents containing confidential and other sensitive information. Although we have established procedures intended to prevent any unauthorized disclosure of confidential information and, in some cases, have contractually limited our potential liability for unauthorized disclosure of such information, we cannot assure you that unauthorized disclosures will not result in material liability to us.

We may have business interruptions

        Certain of our operations are performed at a single location and are dependent on continuous computer, electrical, and telephone service. As a result, any disruption of our day-to-day operations could have a material adverse effect upon us. We cannot assure you that a fire, flood, earthquake, terrorist activities, power loss, telephone service loss, problems caused by computer or technology issues or other events affecting one or more of our facilities would not disable these services. Any significant damage to any facility or other failure that causes significant interruptions in our operations may not be covered by insurance. Any uninsured or underinsured loss could have a material adverse effect on our business, financial condition or results of operations.

Government regulations may hinder our ability to change prices

        In our medical records release of information business, there is state legislation from time to time aimed at fixing the price that can be charged for copying and distributing medical records information. Depending on the severity of such pricing legislation, there can be significant pressure on the profit margins associated with providing medical records release services. Today, some form of pricing legislation exists in many states in the United States. Further, such pricing legislation from time to time results in putative class action lawsuits alleging that the charge for reproducing certain medical records is not in conformity with such plaintiffs' reading of the applicable regulated charge. The defense of such suits can exert further pressure on related profit margins.

Revenue mix may impact margins

        Project revenue includes one-time projects in which the customer relationship is not expected to continue after project completion. Conversely, recurring revenue is characterized by customer relationships that are generally for one year and may continue for longer. Recurring revenue is typically based on transaction volumes sent to us by our customers and these volumes are typically not contractual or otherwise guaranteed. Project revenue margins are usually higher than our average margins and the workload can be highly volatile. Recurring revenue typically has lower margins than project revenue but is usually more predictable. To the extent our business mix shifts from project-oriented to recurring service offerings, our gross margins may decline.

Our clients' ability to terminate contracts creates an uncertain revenue stream and could decrease our revenues and profitability

        Some of our government and other clients can terminate their contracts for any reason, provided the notification procedures stated in the contract are followed, even though our performance is consistent with the service levels specified in the contract. In addition, public sector contracts are subject to detailed regulatory requirements and public policies, as well as to funding priorities. Some of our contracts with clients permit termination in the event our performance is not consistent with the service levels specified in those contracts. If we fail to achieve specific contract standards, many of our document and information outsourcing contracts provide for credits for our clients or, in some cases, re-pricing provisions that can result in reductions of our fees for performing our services. In these situations, we could incur unforeseen costs or financial penalties in performing the contract.

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HIPAA regulations

        As a result of statutory authority granted pursuant to the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), the United States Department of Health and Human Services has recently issued regulations regarding the use and disclosure of personal health information by health care providers, health plans, and certain other "covered entities" operating in the health care industry. The HIPAA regulations require covered entities to take steps to maintain the privacy and security of personal health information. While we are not a "covered entity" directly governed by these regulations (though in some cases the Company's group health plans may be "covered entities"), many of our customers are covered entities under the HIPAA regulations, and these customers are required to adjust their business arrangements to comply with HIPAA. These customers will be required to enter into "business associate arrangements" with us that conform to the requirements of HIPAA. The requirements of HIPAA, and the costs of complying with HIPAA, may adversely affect the business operations of these customers, which could have a negative impact on our business operations. Furthermore, the requirements of the "business associate arrangements," and the changes we will have to make in our operations to comply with such agreements, will increase our costs of operations. To the extent we are unable to comply with the provisions of such agreements, we could lose the business generated by those clients or could be subject to damages for violation of its "business associate agreements" with those clients.

We may have future goodwill impairments

        Due to the adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets, goodwill and other intangible assets that have indefinite useful lives are not amortized but rather are tested at least annually for impairment. The impairment test consists of determining the fair value of goodwill and other intangible assets and comparing the fair value to current book values. The impairment test includes our estimates and assumptions regarding business trends and growth. If economic events occur that cause us to revise our estimates and assumptions used in determining the fair value of our goodwill and other intangible assets, such revisions could result in an impairment charge that could have a material adverse impact on our financial statements during the period incurred. As of December 31, 2002, there was no impairment of goodwill and no events existed that required evaluation of impairment for other intangible assets.

Our financial covenants become more restrictive in the future

        Under our line of credit agreement, we are subject to certain reporting requirements and financial covenants, including requirements that we maintain minimum levels of net worth, a maximum ratio of funded debt to EBITDA and other financial ratios. Certain of these covenants become more restrictive over time. While we are currently in compliance with such covenants, an erosion of our business could place the Company out of compliance in the future. Potential remedies for the lenders include declaring all outstanding amounts immediately payable, terminating commitments and enforcing any liens; however, in the event of any future noncompliance the Company may seek a waiver from such lenders. See Note 8, Long-term Obligations and Credit Facilities, of Notes to Consolidated Financial Statements.

Future sales of our shares may adversely affect our stock price

        The market price of our common stock could be adversely affected by the sale of substantial amounts of our common stock in the public market. In addition, many shares are subject to contractual restrictions on resale over some period of time. If a significant number of shares of our common stock become freely tradable at approximately the same time and a large number of shares are sold by stockholders in the market as soon as their shares became freely transferable, the price of our common stock could be adversely affected.

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We may have environmental liabilities in the future

        We are subject to regulations and ordinances that govern activities or operations that may have adverse environmental effects, such as discharges to air and water in connection with some of our facilities. We are not aware of any environmental conditions relating to present or past waste generation at or from these facilities that would be likely to have a material adverse effect on our business, financial condition or results of operations. However, we cannot assure you that environmental liabilities in the future will not have a material adverse effect on our business, financial condition or results of operations.

Our Board of Directors may be able to delay or prevent takeovers

        Our Board of Directors is empowered to issue preferred stock without stockholder action. The existence of this "blank-check" preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a tender offer, merger, proxy contest or otherwise.

Other risks, unknown or immaterial today, may become known or material in the future

        We have attempted to identify certain material risk factors currently affecting us. However, additional risks that we do not yet know of, that are not described herein, or that we currently think are immaterial, may occur or become material. These risks could impair our business operations or adversely affect our results of operations.

ITEM 2. Properties

        As of December 31, 2002, we operated approximately 123 facilities in 24 states. Except for the three facilities we own, (which are located in Maryland, Florida and Alabama) all of these facilities were leased and were principally used for operations and general administrative functions. As of December 31, 2002, such leased facilities consisted of approximately 1.9 million square feet. In addition, our employees are in numerous client locations where we neither own nor lease the occupied space, primarily in connection with our Healthcare, Regulatory and Legal Compliance segment. See Note 9, Lease Commitments, of Notes to Consolidated Financial Statements for further information relating to leases.

        In order to secure our obligations under our current line of credit, we granted to Bank of America, SunTrust Bank and Wells Fargo Bank, as co-agents for our lenders, a security interest in the capital stock of our material subsidiaries and, in the event we exceed a designated leverage ratio, a lien on substantially all of our properties and other assets. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources." See Note 8, Long-term Obligations and Credit Facilities, of the Notes to the Consolidated Financial Statements.

        We believe that our properties are generally well maintained, in good condition and adequate for our present needs. Furthermore, we believe that suitable additional or replacement space will be available when required.

ITEM 3. Legal Proceedings

        We are, from time to time, a party to litigation arising in the normal course of business. The following is a brief description of five of the legal matters that we are involved in. We do not believe these actions, nor any of the actions that we are a party to, will have a material adverse effect on our business or financial condition, however in the event of an adverse outcome in one or more of our legal proceedings, operating results for a given quarter may be negatively impacted.

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DeBari Litigation

        In March 1999, we filed a lawsuit styled DeBari Associates Acquisition Corp. v. Robert Burnham, Mark Walch, Nortec, LLC, Spencer McElhannon and Peng Lin in the Supreme Court of the State of New York ("Nortec Action"). In the Nortec Action, we were seeking a declaratory judgment that Robert Burnham, Mark Walch, Nortec, LLC, Spencer McElhannon and Peng Lin (the "Nortec Defendants") have no interest in Net Data, Inc., a subsidiary of a company acquired by us in February 1998. We divested the operating assets of Net Data, Inc. as part of our 2001 strategic realignment plan. The Nortec Defendants counterclaimed alleging breach of contract, fraud, breach of fiduciary duty as a joint venturer and unjust enrichment. The trial for the above matter concluded mid-October 2002, with the jury finding in our favor (i.e. that the Nortec Defendants did not have a right to any part of Net Data, Inc. or any portion of the proceeds from its purchase). On February 7, 2003, the judge entered its order, reflecting the jury's finding in our favor. The Nortec Defendants deadline for filing a notice of appeal is 90 days from such order, being May 8, 2003; if such a notice of appeal is filed, the Nortec Defendants would have an extended period of time in which to file an appeal.

Roy Weatherford, et al vs. Franklin Bank and Franklin Bank vs. MAVRICC Management Systems, Inc.

        On February 24, 1992, MAVRICC Management Systems, Inc. (one of our wholly-owned subsidiaries, the operating assets of which were divested by us as part of our 2001 strategic realignment plan) ("MAVRICC") entered into an agreement with Franklin Bank, N.A. whereby MAVRICC agreed to maintain records for individual IRAs and Keogh Plans and to perform certain activities (specifically described in the contract) necessary to assist Franklin Bank, N.A. in serving as a custodian for specific IRAs. On August 6, 2001, Plaintiffs Roy Weatherford, Lois Weatherford, James L. Loper and Alma D. Owen initiated a class action lawsuit against Franklin Bank, N.A. in Tennessee's Sumner County Circuit Court, Chancellory Division, alleging breach of fiduciary duty, breach of contract, negligence and violation of the Consumer Protection Act. The Weatherford complaint seeks compensatory and punitive damages from Franklin Bank, N.A. On September 28, 2001, Franklin Bank, N.A. filed its Third-Party Complaint against MAVRICC for indemnification, alleging that MAVRICC breached the agreement. A hearing on whether a class should be certified has not been set. On February 27, 2003, the parties to this action filed an agreed order of dismissal without prejudice, which, upon entry by the court, would dismiss both the complaint against Franklin Bank and Franklin Bank's Third Party Complaint against MAVRICC; however, as the complaints will be dismissed without prejudice, it is possible for such parties to later reassert such claims. We believe that if such claims were reasserted, we would have meritorious defenses and would vigorously defend any such claims made against us in this matter.

Healthcare Marketing Associates, Inc. vs. Managed Care Professionals, Inc.

        On February 9, 1995, prior to the acquisition by the Company, Managed Care Professionals, Inc. (one of our wholly-owned subsidiaries) ("MCP") entered into an "Exclusive Marketing Agreement" with Healthcare Marketing Associates, Inc. ("HMA") whereby MCP granted to HMA the exclusive right to market, and HMA agreed to market exclusively for MCP, the MCP products and services to health care providers in the United States for which MCP agreed to pay HMA a percentage (30%) of gross revenues paid to MCP by the provider (customer). The duration of the Agreement was for a period of five (5) years and expired on February 9, 2000 ("Termination Date"). On April 27, 2001, HMA filed a lawsuit against MCP in the Circuit Court of the County of St. Louis, State of Missouri, alleging entitlement to commissions on revenues generated from providers after the Termination Date who were initially brought to MCP prior to the Termination Date. On August 26, 2002, our motion for summary judgment was denied. In March 2003, this lawsuit was tried before a judge and at the conclusion of the trial, the judge ruled in the plaintiff's favor in the amount of $1.782 million plus prejudgment interest, which equates to approximately $2.2 million in total as of March 5, 2003. The judgment amount plus prejudgment interest costs have been included in our 2002 results. We intend to

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appeal this ruling. We believe we have meritorious points of error for appeal and intend to continue to vigorously defend the claims made against us in this matter. See Note 15, Commitments and Contingencies, of the Notes to the Consolidated Financial Statements.

Various ROI Copy Charge Matters

        From time to time, various of our subsidiaries that perform release of information ("ROI") services become defendants to putative class action lawsuits generally alleging that the charge for reproducing certain medical records is not in conformity with such plaintiffs' reading of the applicable regulated charge. Such suits typically include multiple ROI companies and hospitals as defendants and demand reimbursement for prior charges as well as for prospective pricing adjustments. We are currently a party to several such suits in various stages of development. We believe we have meritorious defenses and intend to continue to vigorously defend any claims made against us in these matters.

Mattel v. SOURCECORP

        On February 18, 2003, Mattel, Inc. filed suit against the Company in the Los Angeles County California Superior Court. In the suit, the plaintiff alleges that one of our subsidiaries is liable for the loss of various products and prototypes allegedly stored at one of our subsidiary's box storage facilities under theories of breach of contract, breach of fiduciary duty, negligence, breach of implied covenants of good faith and fair dealing and/or conversion. The plaintiff has not stated their damages, but alleges they are in excess of $2.5 million. The Company has not included any significant amounts related to this matter in its result of operations for 2002. We believe we have meritorious defenses and intend to vigorously defend any claims made against us in this matter.

Spohr. et. al. v. F.Y.I. Incorporated, et. al.

        In June 2000, the Company filed an action styled F.Y.I. Incorporated v. Spohr, et. al. in Dallas, Texas, in which we asserted claims for breach of contract, fraud, and negligent misrepresentation against the sellers of two related companies that we acquired in December 1998 (the "Texas Action"). The Texas Action was later removed to federal court and ultimately dismissed on jurisdictional grounds. We reasserted these claims in two actions that were later consolidated; one styled F.Y.I. Incorporated v. Spohr, et. al. in Superior Court of the State of California in the County of Sacramento, Case No. 01-AS-00721 (the "Sacramento Action") and one styled Spohr, et. al. v. F.Y.I. Incorporated, et. al. in the Superior Court of the State of California in the County of San Francisco, Case No. 318703 (the "San Francisco Action"). In the consolidated action, we additionally filed claims against the sellers' accountants and the two sellers filed claims against us. Specifically, the sellers allege that our former subsidiary wrongfully failed and refused to execute and deliver a requested estoppel certificate, and that the failure to provide such estoppel certificate harmed the landlord in that they were allegedly denied favorable terms on a refinancing of the property and were allegedly prevented from completing a timely sale of the property. Sellers' allege damages of approximately $1.5 million. We have asserted damages in excess of $8 million. We believe we have meritorious defenses to sellers' claims and intend to vigorously defend any claims made against us in this matter.

ITEM 4. Submission of Matters to a Vote of Security Holders

        During the fourth quarter of the year ended December 31, 2002, no matters were submitted to a vote of the security holders.

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PART II

ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters

Market Information

        Our common stock trades on The Nasdaq Stock Market under the symbol "SRCP" (formerly "FYII"). The following table sets forth, for our fiscal periods indicated, the range of high and low reported sale prices for our common stock.

Holders

        On March 24, 2003, the last reported sale price of our common stock on the Nasdaq Stock Market was $13.89 per share. At March 24, 2003, there were 85 holders of record of our common stock and 16,600,684 shares outstanding.

Dividends

        We have not declared any cash dividends on our common stock. We do not anticipate paying any cash dividends on our common stock in the foreseeable future and intend to retain our earnings, if any, to finance the expansion of our business and for general corporate purposes. Further, our credit facility prohibits payment of cash and similar dividends. Any payment of future dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions and other factors that our Board of Directors deems relevant.

ITEM 6. Selected Financial Data

Selected Financial Data

        We were founded in September 1994, and we effectively began our operations on January 26, 1996, following the completion of our initial public offering ("IPO"). We acquired, simultaneously with and as a condition to the closing of the IPO, seven Founding Companies.

        Since the IPO, and through December 31, 2002, we acquired nine companies in transactions that were accounted for as poolings-of-interests: (i) The Rust Consulting Group, Inc. ("Rust") in December 1996; (ii) MAVRICC Management Systems, Inc. and a related company, MMS Escrow and Transfer Agency, Inc. (collectively, "MAVRICC") in March 1997; (iii) Input of Texas, Inc. ("Input") in March 1997; (iv) Micro Publishing Systems ("MPS") in December 1997; (v) Lifo Systems, Inc. ("Lifo") in February 1998; (vi) Creative Mailings, Inc. ("CMI") in September 1998; (vii) Economic Research Services, Inc. ("ERS") in October 1998; (viii) TCH Mailhouse, Inc. and G&W Enterprise, Inc. (collectively, "TCH") in December 1998; and (ix) Advanced Digital Graphics, Inc. ("ADG") in December 1998 (collectively, the "Pooled Companies"). Our consolidated financial statements for all

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periods presented have been restated to include the accounts of MAVRICC, Input, CMI, and ERS. Our consolidated financial statements were not restated for the Rust, MPS, Lifo, TCH and ADG acquisitions for the periods prior to January 1, 1998 due to their individual financial immateriality. We and the Pooled Companies were not under common control or management during the periods prior to their respective mergers. Our results of operations for the periods presented may not be indicative of the results in the future because of (i) the impact of acquisitions recorded as purchases, whose results are only included subsequent to the purchase date; (ii) the impact of acquisitions recorded as poolings-of-interests, whose predecessor companies were not under common control or management; and (iii) the impact of divestitures.

        Subsequent to the IPO and through December 31, 2002, we acquired 56 additional companies in transactions accounted for as purchases and have divested 17 operating units by sale or closure. Our results of operations include the results of these acquisitions from the date of their respective acquisitions and the results of the divestitures up to the effective date.

        Our Selected Financial Data have been derived from our consolidated financial statements. Arthur Andersen LLP audited our 1998, 1999, 2000, and 2001 consolidated financial statements. Deloitte & Touche LLP audited our 2002 consolidated financial statements.

        Our Selected Financial Data provided below should be read in conjunction with our consolidated financial statements and the related notes thereto and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" that appear elsewhere in this Report.

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Selected Financial Data
(In thousands, except per share data)