ATLANTA, Oct. 25 /PRNewswire-FirstCall/ -- CheckFree Corporation
(NASDAQ:CKFR) today announced first quarter underlying revenue of
$296.5 million, a 30 percent increase over the same period last
year, and GAAP (Generally Accepted Accounting Principles) revenues
of $284.7 million, a 25 percent increase over the same period last
year. The Company's GAAP net income for the quarter was $29.8
million, or $0.33 per share, and underlying net income was $49.5
million, or $0.55 per share. Free cash flow was $33.9 million for
the first quarter as outlined in Attachment A. GAAP Results: Net
income for the first quarter of fiscal 2008 was $29.8 million,
compared to net income of $31.2 million for the same quarter last
year. Earnings per share were $0.33 for the first quarter of fiscal
2008, compared to earnings per share of $0.34 for the first quarter
of last year. Net cash provided by operating activities was $39.0
million for the first quarter of fiscal 2008, compared to $47.6
million for the same period last year. Underlying Results:
Underlying net income for the first quarter was $49.5 million,
compared to $38.4 million for the same quarter of last year.
Underlying earnings per share were $0.55 for the first quarter of
fiscal 2008, compared to $0.41 per share for the first quarter of
last year. Underlying revenue includes $11.8 million of revenue
excluded from GAAP revenue related to a deferred revenue adjustment
arising from purchase accounting for acquisitions we completed in
the fourth quarter of fiscal 2007. Underlying net income and
earnings per share for the first quarter of fiscal 2008 include the
deferred revenue adjustment and exclude the amortization of
acquisition-related intangible assets, acquisition and integration
costs, the SFAS 123( R ) impact of stock options issued prior to
July 1, 2004, and the related combined tax effects. A
reconciliation of CheckFree's quarterly underlying results to its
GAAP results is included in Attachment A. "Our first quarter
results reflect solid execution across our business units," said
Pete Kight, CheckFree Chairman and Chief Executive Officer. "We
continue to integrate our three recent acquisitions into our
businesses and are pleased with the progress we have made to date."
First Quarter Highlights For the first quarter of fiscal 2008, the
Company reported that the Electronic Commerce Division processed
351.6 million transactions, and delivered 63.9 million electronic
bills. CheckFree Investment Services reported about 2.8 million
portfolios under management, and the Software Division reported
solid sales results. Refer to Attachment B for details on the
financial performance of CheckFree's divisions in the first quarter
of fiscal 2008, and Attachment C for electronic billing and payment
metrics. Company Outlook for the Second Quarter Given CheckFree's
pending merger with Fiserv, Inc., the Company will not provide
forward-looking financial expectations and will not be hosting an
earnings conference call. About CheckFree
(http://www.checkfreecorp.com/) Founded in 1981, CheckFree
Corporation (NASDAQ:CKFR) provides financial electronic commerce
services and products to organizations around the world. CheckFree
Electronic Commerce solutions enable financial services providers
to offer the convenience of online banking, and along with billers,
to offer the convenience of receiving and paying household bills
online, via phone or in person through retail outlets. CheckFree
Investment Services provides a broad range of investment management
solutions and outsourced services to hundreds of financial services
organizations, which manage about $1.8 trillion in assets.
CheckFree Software develops, markets and supports software
applications that are used by financial institutions to process
more than 75 percent of the nearly 16 billion Automated Clearing
House transactions in the United States. The division also provides
financial institutions and other organizations with payment
processing and consulting, reconciliation and exception management,
fraud and risk management, cash and logistics management, and
compliance software and services. Certain of the Company's
statements in this press release are not purely historical, and as
such are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These include
statements regarding management's intentions, plans, beliefs,
expectations or projections of the future. Forward-looking
statements involve risks and uncertainties, including without
limitation, the various risks inherent in the Company's business,
and other risks and uncertainties detailed from time to time in the
Company's periodic reports filed with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K for
the year ended June 30, 2007 (filed August 24, 2007). One or more
of these factors have affected, and could in the future affect the
Company's business and financial results in future periods, and
could cause actual results to differ materially from plans and
projections. There can be no assurance that the forward-looking
statements made in this press release will prove to be accurate,
and issuance of such forward-looking statements should not be
regarded as a representation by the Company, or any other person,
that the objectives and plans of the Company will be achieved. All
forward-looking statements made in this press release are based on
information presently available to management, and the Company
assumes no obligation to update any forward-looking statements.
CHECKFREE CORPORATION AND SUBSIDIARIES Consolidated Condensed
Statements of Operations (Unaudited) (In thousands, except per
share data) Three Months Ended September 30, 2007 2006 Revenues:
Processing and servicing $218,114 $195,478 License fees 15,412
9,074 Maintenance fees 21,988 11,530 Professional fees 29,150
12,537 Total revenues 284,664 228,619 Expenses: Cost of processing,
servicing and support 118,237 92,849 Research and development
31,975 26,738 Sales and marketing 27,869 21,275 General and
administrative 30,710 17,749 Depreciation and amortization 26,868
21,805 Total expenses 235,659 180,416 Income from operations 49,005
48,203 Equity in net loss of joint venture (423) (458) Interest
income (expense), net (674) 3,294 Income before income taxes 47,908
51,039 Income tax expense 18,061 19,822 Net income $29,847 $31,217
Basic income per share: Total basic income per share $0.34 $0.35
Weighted average number of shares 88,231 89,962 Diluted income per
share: Total diluted income per share $0.33 $0.34 Weighted average
number of shares 89,956 92,599 CHECKFREE CORPORATION AND
SUBSIDIARIES Consolidated Condensed Balance Sheets (Unaudited) (In
thousands) September 30, June 30, 2007 2007 Current assets: Cash,
cash equivalents and investments $168,766 $195,127 Settlement
assets 141,182 127,661 Accounts receivable, net 220,891 221,320
Prepaid expenses and other assets 45,972 42,759 Deferred income
taxes 10,189 10,189 Total current assets 587,000 597,056 Property
and equipment, net 143,635 156,113 Capitalized software and
intangible assets, net 1,241,148 1,253,047 Investments 44,750
47,390 Other noncurrent assets 12,149 11,426 Deferred income taxes
69,596 66,246 Total assets $2,098,278 $2,131,278 Current
liabilities: Accounts payable, accrued liabilities and other
$105,230 $136,812 Settlement obligations 137,772 123,302 Current
portion of long-term obligations 123,915 206,022 Deferred revenue
78,252 79,391 Total current liabilities 445,169 545,527 Long-term
liabilities 38,812 4,663 Deferred income taxes 2,284 2,284 Deferred
revenue 4,277 3,281 Capital leases and long-term obligations, less
current portion 75,300 68,021 Total stockholders' equity 1,532,436
1,507,502 Total liabilities and stockholders' equity $2,098,278
$2,131,278 Attachment A Calculation of Free Cash Flow (Unaudited)
(In thousands) Three Months Ended September 30, 2007 2006 Net cash
provided by operating activities $39,048 $47,564 Excluding: Net
change in settlement accounts (949) 1,074 Less: Capital
expenditures (16,828) (12,099) Plus: Data center reimbursements
7,813 526 Impact of operating account conversion 4,816 - Free cash
flow $33,900 $37,065 Additional Information: Cash provided by
investing activities $71,388 $58,583 Cash (used in) financing
activities $(64,252) $(97,047) Use of Non-GAAP Financial
Information We supplement our reporting of cash flow information
determined in accordance with Generally Accepted Accounting
Principles in the United States of America ("GAAP") by using "free
cash flow" in this earnings release as a measure to evaluate our
liquidity. We define free cash flow as net cash provided by
operating activities, exclusive of the net change in settlement
accounts and less capital expenditures, plus data center
reimbursements and the impact of the operating account conversion.
We believe free cash flow provides useful information to management
and investors in understanding our financial results and assessing
our prospects for future performance. We also use free cash flow as
a factor in determining long-term incentive compensation for senior
management. We exclude the net change in settlement accounts from
free cash flow because we believe this facilitates management's and
investors' ability to analyze operating cash flow trends. In
connection with our walk-in payment business, our consolidated
balance sheet reflects settlement assets and settlement
obligations. The settlement assets represent payment receipts in
transit to us from agents, and the settlement obligations represent
scheduled but unpaid payments due to billers. Balances in
settlement accounts fluctuate daily based on deposit timing and
payment transaction volume. These timing differences are not
reflective of our liquidity, and thus, we exclude the net change in
settlement accounts from free cash flow. As a technology company,
we make significant capital expenditures in order to update our
technology and to remain competitive. Our free cash flow reflects
the amount of cash we generated that remains, after we have met
those operational needs, for the evaluation and execution of
strategic initiatives such as acquisitions, stock and/or debt
repurchases and other investing and financing activities, including
servicing additional debt obligations. During the fourth quarter of
fiscal 2006, we entered into a credit facility to finance the
construction of data centers. Amounts we spend to construct these
data centers are included in our capital expenditures, but will be
fully reimbursed by the credit facility. The reimbursements from
the credit facility are added to our free cash flow measure because
these expenditures do not impact our overall liquidity. The data
center reimbursements line represents a change to our definition of
free cash flow as of the quarter ended June 30, 2006. We added back
the impact of an ongoing conversion of an operating bank account.
Previously, we deducted $9,443 in outstanding checks on the account
at June 30, 2007 from free cash flow. As these checks clear we add
the cash back to free cash flow. During the three months ended
September 30, 2007, $4,816 cleared the account. We do not believe
the processing and subsequent clearing of these checks should be
included in the determination of free cash flow for the periods
presented. We are funding these checks as they clear from other
sources of operating cash. We expect the account will be closed in
the next 90 days. Free cash flow does not solely represent residual
cash flow available for discretionary expenditures, as certain of
our non-discretionary obligations are also funded out of free cash
flow. These consist primarily of payments on capital leases and
other long-term commitments, if any, as reflected in the table
entitled "Contractual Obligations" in the "Liquidity and Capital
Resources" section of "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in our
Annual Report on Form 10-K for the fiscal year ended June 30, 2007,
which we filed with the Securities and Exchange Commission on
August 24, 2007. The Company's free cash flow should be considered
in addition to, and not as a substitute for, net cash provided by
operating activities or any other amount determined in accordance
with GAAP. Further, CheckFree's measure of free cash flow may not
be comparable to similarly titled measures reported by other
companies. Attachment A (continued) Reconciliation of GAAP Revenues
and Net Income to Underlying Revenues, Net Income and Earnings Per
Share (Unaudited) (In thousands, except per share data) Three
Months Ended September 30, 2007 2006 Total revenues - GAAP $284,664
$228,619 Deferred revenue adjustments arising from acquisitions(1)
11,786 - Total revenues - underlying $296,450 $228,619 Net income
per GAAP $29,847 $31,217 Deferred revenue adjustments arising from
acquisitions(1) 11,786 - Amortization of acquisition-related
intangible assets 13,727 10,967 SFAS 123( R ) - Stock options
issued before July 1, 2004 137 704 Acquisition and integration
costs 5,343 - Tax effect of underlying adjustments (11,369) (4,478)
Underlying net income $49,471 $38,410 GAAP and underlying basic
weighted average shares outstanding 88,231 89,962 GAAP and
underlying impact of dilutive options and warrants 1,725 2,814 GAAP
and underlying diluted weighted average shares outstanding 89,956
92,599 GAAP basic earnings per share $0.34 $0.35 GAAP diluted
earnings per share $0.33 $0.34 Underlying basic earnings per share
$0.56 $0.43 Underlying diluted earnings per share $0.55 $0.41 Use
of Non-GAAP Financial Information We supplement our reporting of
total revenues, income from operations, net income and earnings per
share information determined in accordance with GAAP by using
"underlying revenue," "underlying income from operations,"
"underlying net income " and "underlying earnings per share" in
this earnings release. Management believes that certain non-cash
adjustments to revenues or expenses enhance our evaluation of our
performance, and are not pertinent to day-to-day operational
decision making in the business. Therefore, we exclude these items
from GAAP revenue, income from operations, net income and earnings
per share in calculating underlying revenue, underlying income from
operations, underlying net income and underlying earnings per
share. Examples of such non-cash charges may include, but not be
limited to deferred revenue adjustments arising from acquisitions,
intangible asset amortization expense and in-process research and
development costs associated with acquisitions, integration costs
associated with acquisitions, charges associated with the
impairment of intangible assets, the impact of discontinued
operations, charges resulting from warrants issued to third parties
and charges associated with reorganization activities, all offset
by the cumulative tax impact of these charges. We exclude these
items in order to more clearly focus on the factors we believe are
pertinent to the daily management of our operations, and our
management uses underlying results to evaluate the impact of
operational business decisions. We regularly report underlying
results to our Chairman and Chief Executive Officer and our Chief
Operating Officer, our chief operating decision makers, who use
this information in allocating resources to our various business
units. Additionally, as we reward our management for their
decisions that increase revenues and decrease controllable costs,
we use underlying earnings per share as a factor in determining
long-term incentive compensation for management. Because we utilize
underlying financial results in the management of our business and
to determine incentive compensation for management, we believe this
supplemental information is useful to investors for their
independent evaluation and understanding of the performance of our
management and our core business performance. Our underlying
revenues, underlying income from operations, underlying net income
and underlying earnings per share should be considered in addition
to, and not as a substitute for, revenues, income from operations,
net income and earnings per share or any other amount determined in
accordance with GAAP. Our measures of underlying revenues,
underlying income from operations, underlying net income and
underlying earnings per share reflect management's judgment of
particular items, and may not be comparable to similarly titled
measures reported by other companies. (1)See Page 9, footnote 2.
Attachment A (continued) CHECKFREE CORPORATION AND SUBSIDIARIES
Supplemental Underlying Consolidated Condensed Statements of
Operations (Unaudited) (In thousands, except per share data) Three
Months Ended September 30, 2007 2006 Revenues: Processing and
servicing $218,114 $195,478 License fees 17,911 9,074 Maintenance
fees 25,318 11,530 Other 35,107 12,537 Total revenues 296,450
228,619 Expenses: Cost of processing, servicing and support 118,444
92,849 Research and development 32,041 26,738 Sales and marketing
27,875 21,275 General and administrative 24,951 17,045 Depreciation
and amortization 13,141 10,838 Total expenses 216,452 168,745
Income from operations 79,998 59,874 Equity in net loss of joint
venture (423) (458) Interest income, net (674) 3,294 Income before
income taxes 78,901 62,710 Income tax expense 29,430 24,300 Net
income $49,471 $38,410 Basic income per share: Net income $0.56
$0.43 Weighted average number of shares 88,231 89,962 Diluted
income per share: Net income $0.55 $0.41 Weighted average number of
shares 89,956 92,599 Attachment B Reconciliation of GAAP Results to
Underlying Results by Segment (Unaudited) (In thousands) Three
Months Ended September 30, 2007 2006 Electronic Commerce: Total
revenues - GAAP $206,791 $171,029 Deferred revenue adjustments
arising from acquisitions(2) 7,425 - Total revenues - underlying
$214,216 $171,029 Operating income - GAAP $55,895 $49,541 Deferred
revenue adjustments arising from acquisitions(2) 7,425 -
Amortization of acquisition-related intangible assets 10,608 9,627
SFAS 123( R ) - Stock options issued before July 1, 2004(1) 100 512
Acquisition and integration costs 25 - Underlying operating income
$74,053 $59,680 Investment Services: Total revenues - GAAP $34,667
$29,622 Deferred revenue adjustments arising from acquisitions(2) -
- Total revenues - underlying $34,667 $29,622 Operating income -
GAAP $9,188 $4,972 Deferred revenue adjustments arising from
acquisitions(2) - - Amortization of acquisition-related intangible
assets 700 484 SFAS 123( R ) - Stock options issued before July 1,
2004(1) 14 72 Acquisition and integration costs 28 - Underlying
operating income $9,930 $5,528 Software: Total revenues - GAAP
$43,206 $27,968 Deferred revenue adjustments arising from
acquisitions(2) 4,361 - Total revenues - underlying $47,567 $27,968
Operating income - GAAP $(671) $5,467 Deferred revenue adjustments
arising from acquisitions(2) 4,361 - Amortization of
acquisition-related intangible assets 2,419 856 SFAS 123( R ) -
Stock options issued before July 1, 2004(1) 6 31 Acquisition and
integration costs (127) - Underlying operating income $5,988 $6,354
Corporate: Operating loss - GAAP $(15,407) $(11,777) SFAS 123( R )
- Stock options issued before July 1, 2004(1) 17 89 Acquisition and
integration costs 5,417 - Underlying operating loss $(9,973)
$(11,688) (1) At the beginning of fiscal 2005, we implemented a new
long-term incentive compensation philosophy, which significantly
reduced overall participation and focused on restricted stock with
limited stock options. As a result, we recorded the cost of
restricted stock throughout fiscal 2005 in both underlying and GAAP
results. In fiscal 2006, we have adopted SFAS 123( R ), and are
consequently recording all long-term incentive grants, both
restricted stock and options, as an expense to both underlying and
GAAP results. The adjustment from GAAP to underlying operating
results in the table above reflects the SFAS 123( R ) charge
associated with options granted prior to July 1, 2004 under our
previous compensation philosophy, which were originally accounted
for utilizing APB 25. (2) In connection with our purchase price
allocations, we estimated the fair value of certain deferred
revenue from license fees, support obligations and other customer
payments assumed in connection with business acquisitions made
during the three months ended June 30, 2007. Software licenses,
license updates and product support revenue related to
installations and support contracts assumed in those business
acquisitions in the amount of $11,786, that would have been
otherwise recorded by the acquired entities, was not recognized as
revenue by CheckFree during the three months ended September 30,
2007. As customers renew support contracts over the next year, we
will recognize revenue for the full contract value over the support
period. Attachment C Electronic Billing and Payment Metrics (in
millions, except revenue/transaction and percentages) Quarter Ended
09/30/2007 06/30/2007 03/31/2007 12/31/2006 9/30/2006 Transactions
CSP: Revenue(1) $125.3 $123.8 $122.5 $116.8 $114.2 Revenue /
Transaction $0.44 $0.45 $0.45 $0.46 $0.48 Transactions 282.4 275.3
269.6 251.5 235.7 Sequential Quarterly Growth 3 % 2 % 7 % 7 % 4 %
Non-CSP: Revenue $38.6 $38.6 $39.6 $38.3 $36.2 Revenue /
Transaction $0.56 $0.57 $0.56 $0.54 $0.48 Transactions 69.2 68.3
71.2 70.5 76.0 Sequential Quarterly Growth 1 % -4 % 1 % -7 % 2 %
Total: Revenue $163.9 $162.4 $162.1 $155.1 $150.4 Transactions
351.6 343.6 340.9 322.0 311.7 Sequential Quarterly Growth 2 % 1 % 6
% 3 % 3 % e-Bill Delivery Revenue $10.8 $10.4 $9.8 $8.7 $8.5
Revenue / e-Bill $0.17 $0.17 $0.17 $0.16 $0.16 e-Bills Delivered
63.9 60.5 58.6 54.9 51.8 Sequential Quarterly Growth 6 % 3 % 7 % 6
% 3 % Other EC Revenue(2) $39.5 $31.8 $12.8 $12.6 $12.1 (1) CSP
Revenue excludes the impact of warrants issued to a customer. (2)
Other revenue includes Health and Fitness, Professional Services,
Stored Value Products and Electronic Banking Software and
Professional Services, excluding any purchase accounting deferred
revenue adjustments. DATASOURCE: CheckFree Corporation CONTACT:
Media, Judy DeRango Wicks, +1-678-375-1595, , or Investors, Tina
Moore, +1-678-375-1278, , both of CheckFree Corporation Web site:
http://www.checkfreecorp.com/
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