Cass Information Systems, Inc. Ends 2003 With 9% Increase in 4th Quarter Earnings
The solid growth in earnings over the period was largely the result of a 9% increase in overall processing fees driven by a 7% rise in freight invoice volume and a 39% rise in utility transactions.
2003 Summary
For the year ending Dec. 31, 2003, Cass posted earnings of $2.34 per fully diluted share, an 8% increase over the $2.16 per fully diluted share it earned in 2002. Net income was $7,902,000 in 2003, an 8% increase over the $7,312,000 earned in 2002.
Cass achieved higher earnings despite a difficult economic environment. Low interest rates significantly reduced the company's net investment income, while anemic national freight activity, especially in the first half of 2003, adversely impacted processing volumes from existing customers.
Cass was able to offset these declines by expanding its customer base and product offerings to drive a 16% increase in overall processing revenues. It grew freight transaction volume by 8% and utility processing volume by 34%.
Total revenue increased $9,385,000, largely as a result of consolidating the operating results of a software subsidiary, Government e-Management Solutions (GEMS). GEMS, which markets integrated financial, property and human resource management systems to the public sector, generated revenues of $7,696,000 in 2003.
While net investment income decreased $2,652,000 due to lower interest rates, the impact was partially offset by an increase in earning assets, changes in the mix of the company's investments and gains on the sale of investments.
"I am delighted with the 34% growth in transaction volume our utility invoice processing operations achieved and with our ability to increase freight transaction processing volumes by 8% despite an adverse level of economic activity," said Lawrence A. Collett, Cass chief executive officer and chairman of the board. "Undeniably, the $2,652,000 drop in net investment income, attributable to lower interest rates, was a major burden on company-wide earnings," he continued. "Our focus in 2004 will be to continue to expand our information processing activities with the hope of seeing an improvement in the yields from our lending and investment portfolios."
Operating expenses increased 18% in 2003, attributable mainly to the GEMS' consolidation. Prior to Dec. 31, 2002, GEMS was accounted for as an asset held for sale and its operating results were not consolidated with those of the company. Statement of Financial Accounting Standards No.144, adopted by the company in 2002, now requires that GEMS be reclassified as an asset held and used. Consequently, Cass reclassified the entity's net assets and consolidated its operations with the parent company on Jan.1, 2003. Excluding the effect of that consolidation, operating expenses were 2% higher than those reported in 2002. For the fourth quarter, the 11% increase in operating expenses was also primarily related to the GEMS' consolidation. Excluding GEMS, operating expenses decreased 4% and total revenues decreased 1% compared to the fourth quarter of 2002.
Selected Consolidated Financial Data
The following table presents selected unaudited consolidated financial data (in thousands, except share and per share data) for the periods ended December 31, 2003 and 2002.
Quarter Quarter Year Year
Ended Ended Ended Ended
12/31/03 12/31/02 12/31/03 12/31/02
---------- ---------- ---------- ----------
Transportation Invoice
Volume 6,001 5,629 23,359 21,549
Transportation Dollar
Volume $2,256,947 $2,083,125 $8,673,993 $7,715,588
Utility Transaction
Volume 1,251 903 4,618 3,435
Utility Dollar Volume $ 847,302 $ 696,591 $3,340,375 $2,634,269
Payment and Processing
Fees $ 7,293 $ 6,670 $ 28,440 $ 24,622
Software Revenue 1,825 -- 7,696 --
Net Investment Income 6,604 6,938 26,192 28,844
Gain on Sale of Debt
Securities -- 535 1,454 1,477
Other 642 563 2,477 1,931
---------- ---------- ---------- ----------
Total Revenues $ 16,364 $ 14,706 $ 66,259 $ 56,874
Salaries and Benefits $ 9,126 $ 8,055 $ 37,152 $ 31,405
Occupancy 442 385 1,782 1,500
Equipment 1,128 1,069 4,478 4,310
Other 2,660 2,536 11,492 9,360
---------- ---------- ---------- ----------
Total Operating
Expenses $ 13,356 $ 12,045 $ 54,904 $ 46,575
Income before Income
Taxes $ 3,008 $ 2,661 $ 11,355 $ 10,299
Provision for Income
Taxes $ 885 $ 700 $ 3,453 $ 2,987
Net Income $ 2,123 $ 1,961 $ 7,902 $ 7,312
Average Earning Assets $ 606,189 $ 553,121 $ 563,071 $ 544,011
Net Interest Margin 4.57% 5.29% 4.85% 5.60%
Allowance for Loan
Losses to Loans 1.17% 1.22% 1.17% 1.22%
Non-performing Loans
to Total Loans .94% 2.12% .94% 2.12%
Net Loan Charge-offs
to Loans -- .01% -- .03%
Provision for Loan
Losses $ 100 $ 140 $ 190 $ 500
Non-performing Loans $ 4,394 $ 9,194 $ 4,394 $ 9,194
Basic Earnings per
Share $ .63 $ .58 $ 2.36 $ 2.18
Diluted Earnings per
Share $ .63 $ .58 $ 2.34 $ 2.16
About Cass Information Systems
Cass has been a leading provider of payables services and information support systems to companies throughout North America since 1956. The company pays over $12 billion annually in freight and utility invoices on behalf of its customers from processing centers in St. Louis, Mo., Columbus, Ohio and Boston, Mass. The support of its bank subsidiary, Cass Commercial Bank, founded in 1906, makes the company unique in the industry.
Note to Investors
Certain matters set forth in this news release may contain
forward-looking statements that are provided to assist in the
understanding of anticipated future financial performance. However,
such performance involves risks and uncertainties that may cause
actual results to differ materially from those in such statements. For
a discussion of certain factors that may cause such forward-looking
statements to differ materially from the company's actual results, see
the company's annual report on Form 10-K for the year ended December
31, 2002.
Contact:
Cass Information Systems Inc.
Eric H. Brunngraber, 314-506-5502
www.cassinfo.com
or
Casey Communications Inc.
Kenn Entringer, 314-962-0944
