PADUCAH, Ky., Sept. 29 /PRNewswire-FirstCall/ -- Computer Services, Inc. (CSI) (Pink Sheets: CSVI) today reported record revenues and net income for the second quarter and six months ended August 31, 2009.

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Second quarter revenues rose 2.2% to $37.2 million in fiscal 2010 compared with $36.4 million in the second quarter of fiscal 2009. Net income rose 17.0% to $5.2 million, and net income per diluted share increased 25.5% to $0.69 compared with the prior year's second quarter.

"This was CSI's 22nd consecutive quarter of improved revenues and net income," stated President and Chief Executive Officer Steven A. Powless. "Our continued growth in revenue and net income is primarily due to growth in electronic payments transactions, cross-sales across the company's broadened suite of products and services to the financial services industry, and good expense controls."

Second Quarter Results

Second quarter consolidated revenues rose 2.2% to $37.2 million compared with $36.4 million in the second quarter ended August 31, 2008. Processing revenues increased to $26.9 million and accounted for approximately 72.3% of total revenues compared with $26.4 million, or 72.6% of total revenues, in the second quarter of last year. The growth is processing revenues benefitted from higher transaction revenue, including card services, offset partially by revenue lost from customers that were acquired and moved off the CSI platform and lower fees from check imaging services as customers migrated to remote check image capture, including those sold by CSI. Other revenues rose 3.2% to $10.3 million in the second quarter of fiscal 2010 compared with $10.0 million in the second quarter of fiscal 2009. Other revenue increased in the second quarter due to higher telecommunications revenues and network monitoring and eBusiness services.

"CSI's revenue base has benefitted from the long-term nature of our contracts and the high retention rates of our accounts," continued Mr. Powless. "These factors have insulated CSI somewhat from the soft economy over the past year.

"The soft economy has had a more direct impact on IT spending, particularly in the financial services sector. Although our core bank customers have been less affected by the problems reported by the larger money center banks, they have cut back on capital purchases and signing new contracts for services while their industry remains under pressure. Our outlook for the remainder of fiscal 2010 is cautious, but we expect our sales to improve as the economy strengthens."

Second quarter operating income rose 16.5% to $8.6 million compared with $7.4 million in the second quarter of the prior year. Operating margin for the second quarter increased to 23.0% compared with 20.2% in the second quarter of fiscal 2009. The growth in CSI's operating margin was due to higher sales, improved product mix and lower operating expenses. Total operating expenses declined 1.4% to $28.7 million, or 77.0% of revenues, compared with $29.1 million, or 79.8% of revenues in the second quarter of last year.

"Our reduced operating expenses highlight our continued focus on cost controls throughout CSI. In particular, we have been able to trim expenses by consolidating data center operations as our customers migrate to branch and remote capture technology. We have also experienced lower cost of goods sold due to lower equipment and maintenance sales during the second quarter."

Net income rose 17.0% to a record $5.2 million compared with $4.4 million in the prior-year period. Net income per fully diluted share was up 25.5% to $0.69 compared with $0.55 in the same quarter last year. Weighted average shares outstanding were down 5.8% to 7.6 million since last year primarily due to shares repurchased through CSI's stock repurchase program.

"CSI's financial condition remains strong due to our excellent cash flow and balance sheet management," reported Mr. Powless. "In the first two quarters of this fiscal year, our cash position has grown by $4.7 million, we paid down debt of $2 million, and we repurchased $1.8 million of CSI stock," concluded Mr. Powless.

Six Month Results

Consolidated revenues for the first six months of fiscal 2010 rose 2.7% to a record $74.0 million compared with $72.1 million for the same period in fiscal 2009. CSI's growth in revenues benefited from higher processing revenues and higher other revenues.

Operating income rose 13.6% to $16.8 million for the first six months of fiscal 2010 compared with $14.8 million for the same period last year. Operating margin rose to 22.7% in the first six months of fiscal 2010 compared with 20.5% in the same period of fiscal 2009 due to higher sales, improved product mix and lower operating expenses. Total operating expenses were down slightly from last year to $57.3 million due to good expense controls.

Net income for the first six months of fiscal 2010 rose 14.1% to $10.2 million compared with $8.9 million in the first six months of fiscal 2009. Net income per diluted share increased 22.7% to $1.35 for the latest six month period compared with $1.10 for the same period last year. The fiscal 2009 results include a minority interest of $12,000 related to a net loss in Heartland. There was no comparable minority interest in fiscal 2010 since the remaining minority interest in Heartland was purchased by CSI effective June 1, 2008.

About Computer Services, Inc.

Computer Services, Inc. (CSI) delivers core banking, payments processing, Internet, card services, risk assessment, fraud prevention, network management, and regulatory compliance solutions to over 4,600 financial institutions and corporate entities. Technology planning, local account managers and world-class customer service explain why CSI has come to be known as one of the nation's premier providers of banking solutions. CSI's stock is traded on the OTCQX under the symbol CSVI. For more information about CSI, visit www.csiweb.com.

Forward-Looking Statements

This news release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. All statements except historical statements contained herein constitute "forward-looking statements." Forward-looking statements are inherently uncertain and are based only on current expectations and assumptions that are subject to future developments that may cause results to differ materially. Readers should carefully consider: (i) economic, competitive, technological and governmental factors affecting CSI's operations, customers, markets, services, products and prices; and (ii) other factors discussed in CSI's Information and Disclosure Statements and other documents posted from time to time on the OTCQX website, including without limitation, the description of the nature of CSI's business and its management discussion and analysis of financial condition and results of operations for reported periods. CSI undertakes no obligation to update, and is not responsible for updating, the information contained in this release beyond the publication date, whether as a result of new information or future events, or to conform the statement to actual results or changes in CSI's expectations, or otherwise or for changes made to this document by wire services or Internet services.

                             COMPUTER SERVICES, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                                 (Unaudited)
                     (in thousands, except per share data)

                                     Three Months Ended   Six Months Ended
                                     Aug. 31,  Aug. 31,  Aug. 31,  Aug. 31,
                                       2009      2008      2009      2008
                                     -------   -------   -------   -------
    Revenues                         $37,207   $36,411   $74,036   $72,109
    Expenses                          28,633    29,051    57,265    57,348
                                     -------   -------   -------   -------
    Income before other income
     (expense)                         8,574     7,360    16,771    14,761
    Other income (expense), net          (39)      (65)      (80)     (159)
                                     -------   -------   -------   -------
    Income before taxes and minority
     interest                          8,535     7,295    16,691    14,602
    Provision for income taxes         3,329     2,845     6,510     5,694
                                     -------   -------   -------   -------
    Net income before minority
     interest                          5,206     4,450    10,181     8,908
    Minority interest                      -         -         -        12
                                     -------   -------   -------   -------
    Net income                        $5,206    $4,450   $10,181    $8,920
                                     =======   =======   =======   =======
    Earnings per share, assuming
     dilution                          $0.69     $0.55     $1.35     $1.10
                                     =======   =======   =======   =======
    Weighted average common shares
     outstanding, assuming dilution    7,558     8,020     7,566     8,106



                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                                    8/31/2009     2/28/2009
                                                    Unaudited      Audited
                                                    ---------     ---------
    ASSETS
      Cash and cash equivalents                        $5,983        $1,320
      Other current assets                             21,465        23,206
      Property and equipment, net                      28,080        28,357
      Software and software licenses, net              14,369        14,905
      Goodwill and other intangible assets             37,792        38,002
      Other assets                                      2,774         2,895
                                                    ---------     ---------
        Total assets                                 $110,463      $108,685
                                                    =========     =========

    LIABILITIES & SHAREHOLDERS' EQUITY
      Current liabilities                             $15,648       $15,365
      Other liabilities                                 4,021         4,087
      Notes payable, long-term                          3,000         5,000
                                                    ---------     ---------
      Total liabilities                                22,669        24,452
      Shareholders' equity                             87,794        84,233
                                                    ---------     ---------
        Total liabilities and shareholders' equity   $110,463      $108,685
                                                    =========     =========

SOURCE Computer Services, Inc.