Fiserv Reports Record Earnings for First Quarter of 2005
BROOKFIELD, Wis.--April 21, 2005--Fiserv, Inc. (Nasdaq:FISV) announced today record earnings for the first quarter of 2005.
For the three-month period ended March 31, 2005, Fiserv processing and services revenues were $882.3 million, a 9% increase over the $811.6 million for the first quarter of 2004. Net income per share-diluted from continuing operations (excluding realized gain from sale of investment of $0.14 per share) for the first quarter of 2005 was $0.58 per share, compared to $0.49 per share for the first quarter of 2004.
"We are pleased with our first quarter results which included strong operating earnings and margins across our businesses. We were also pleased to see our financial segment internal revenue growth rate at 5%, as our largest operating segment continues to demonstrate improvement over the prior year. We are projecting 2005 full-year diluted earnings per share (excluding realized gain from sale of investment) of $2.19 to $2.23 per share and for the second quarter $0.53 to $0.55 per share," said Leslie M. Muma, president and chief executive officer of Fiserv.
In the first quarter, Fiserv repurchased $106.7 million of its common stock, acquiring 2.8 million shares. This leaves a total of 5.5 million shares available for repurchase under a November 2004 board authorization.
"Our management team also completed two significant transactions in the quarter, the signing of a 12-year check processing and image archive agreement with three Australian banks and the completion of our previously announced sale of our securities clearing businesses," said Muma.
Fiserv signed a 12-year agreement to provide check processing and image archive services for Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corp. Based on estimated volumes, the agreement will generate projected revenue of $460 million. The transaction will be mildly dilutive to Fiserv's earnings in 2005 by $0.01 to $0.02 per share due to transition expenses and is expected to contribute to earnings in 2006 and beyond. Fiserv began managing operations in six Australian cities on April 18, 2005 for two of the banks, and will begin processing for the third bank in the second half of 2005.
On March 24, 2005, Fiserv completed the sale of its securities clearing businesses to Fidelity Global Brokerage Group, Inc. The sales price, paid in cash, was $345 million, which is subject to certain post-closing adjustments. The agreement also provides for a contingent payment of up to $15 million to be paid after the first anniversary of the closing date based on achievement of certain revenue targets. The financial results of Fiserv's securities clearing businesses are reported as discontinued operations for all periods presented and are excluded from reported revenues, cost of revenues and operating cash flows.
In addition, this quarter Fiserv completed the acquisition of Del Mar Database, a provider of solutions to automate the back office of mortgage brokers and lenders, as part of its strategy to provide an end-to-end solution to the mortgage industry.
Significant client renewals and other new relationships gained in the first quarter include the following: DaimlerChrysler Services North America LLC significantly expanded its relationship with Fiserv's LeMans unit for automotive finance products and services; HomeBanc Mortgage Corp., a mortgage banking company that focuses on originating purchase money residential mortgage loans in the Southeast United States, has contracted to use the MortgageServ loan servicing platform for life-of-loan management; and Baltimore County Savings Bank, a $765 million financial institution in Baltimore, Md., chose Fiserv for a comprehensive package of financial technology that includes Fiserv VISION for core processing, check processing, document imaging, Fiserv EFT for electronic funds transfer, IPS-Sendero for risk management and the VISION Data Warehouse.
The Company plans to file its first quarter Form 10-Q on April 29, 2005.
Fiserv, Inc. (Nasdaq:FISV) provides information management systems and services to the financial and health benefits industries, including transaction processing, outsourcing, business process outsourcing and software and systems solutions. The company serves more than 16,000 clients worldwide, including banks, credit unions, financial planners/investment advisers, insurance companies and agents, self-insured employers, lenders and savings institutions. Headquartered in Brookfield, Wis., Fiserv reported $3.4 billion in processing and services revenues for 2004.
Fiserv was ranked the largest provider of information technology services to the U.S. financial services industry in the 2004 FinTech 100 survey by the American Banker newspaper and the Financial Insights research firm. Fiserv can be found on the Internet at www.fiserv.com.
The disclosure set forth above contains forward-looking statements, specifically Mr. Muma's and other statements regarding the sale of Fiserv's securities clearing businesses, estimated revenues and earnings from Fiserv's transaction with the Australian banks, earnings targets for 2005, future revenues, sales pipelines and acquisition prospects. These statements are covered by the safe harbor included in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to inherent assumptions, risks and uncertainties that may cause actual results to differ materially from those contemplated by such forward-looking statements. The factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include, among others, changes in customers' demand for the Corporation's products, pricing and other actions by competitors, and general changes in economic conditions. These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements.
FISERV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (1)
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
2005 2004
--------- ---------
Revenues:
Processing and services $882,319 $811,556
Customer reimbursements 90,795 97,321
--------- ---------
Total revenues 973,114 908,877
--------- ---------
Cost of revenues:
Salaries, commissions and payroll related costs 343,484 329,586
Customer reimbursement expenses 90,795 97,321
Data processing costs and equipment rentals 51,378 52,105
Prescription costs 124,096 95,578
Other operating expenses 132,322 127,037
Depreciation and amortization 43,023 45,912
--------- ---------
Total cost of revenues 785,098 747,539
--------- ---------
Operating income 188,016 161,338
Interest expense - net (3,662) (4,732)
Realized gain from sale of investment (2) 43,452 -
--------- ---------
Income from continuing operations,
before income taxes 227,806 156,606
Income tax provision 88,161 60,897
--------- ---------
Income from continuing operations 139,645 95,709
Loss from discontinued operations, net of tax (619) (2,911)
--------- ---------
Net income $139,026 $92,798
========= =========
Diluted net income (loss) per share:
Continuing operations (excluding realized gain
from sale of investment) $0.58 $0.49
Discontinued operations - (0.01)
--------- ---------
Total (excluding realized gain from sale of
investment) 0.57 0.47
Realized gain from sale of investment 0.14 -
--------- ---------
Total $0.71 $0.47
========= =========
Diluted shares used in computing net income (loss)
per share 195,495 197,063
(1) The securities clearing businesses' revenues and cost of revenues
are excluded above from "Revenues" and "Cost of revenues" and are
included above in "Loss from discontinued operations, net of tax"
for all periods presented.
(2) Represents the sale of the Company's remaining 3.2 million shares
of Bisys Group, Inc. common stock.
FISERV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
March 31, December 31,
2005 2004
------------- -------------
ASSETS
Cash and cash equivalents $719,728 $516,127
Accounts receivable - net 466,464 437,764
Prepaid expenses and other assets 98,425 100,810
Investments 2,589,898 1,984,536
Property and equipment 196,336 200,709
Intangible assets - net 533,371 532,539
Goodwill - net 1,884,526 1,859,347
Assets of discontinued operations held for
sale - 2,751,517
------------- -------------
TOTAL $6,488,748 $8,383,349
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $205,816 $202,616
Short-term borrowings 100,000 100,000
Accrued expenses 278,835 363,513
Accrued income taxes 138,033 44,955
Deferred revenues 225,831 226,080
Customer funds held and retirement account
deposits 2,328,715 1,829,639
Deferred income taxes 129,915 134,330
Long-term debt 498,812 505,327
Liabilities of discontinued operations held
for sale - 2,412,467
------------- -------------
TOTAL LIABILITIES 3,905,957 5,818,927
SHAREHOLDERS' EQUITY
Preferred stock, no par value:
25,000,000 shares authorized; none issued - -
Common stock, $0.01 par value:
450,000,000 shares authorized;
196,506,575 and 195,940,360 shares issued 1,965 1,959
Additional paid-in capital 695,063 679,573
Accumulated other comprehensive income (2,777) 26,695
Accumulated earnings 2,059,565 1,920,539
Treasury stock, at cost, 4,460,800 and
1,691,500 shares (171,025) (64,344)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 2,582,791 2,564,422
------------- -------------
TOTAL $6,488,748 $8,383,349
============= =============
FISERV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months
ended March 31,
2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $139,026 $92,798
Adjustment for discontinued operations 619 2,911
Adjustments to reconcile net income to net cash
provided by operating activities from continuing
operations:
Realized gain from sale of investment (43,452) -
Deferred income taxes 12,068 28,395
Depreciation and amortization 43,023 45,912
Changes in assets and liabilities, net of effects
from acquisitions and dispositions of businesses:
Accounts receivable (25,774) 7,584
Prepaid expenses and other assets 3,874 (8,568)
Accounts payable and accrued expenses (46,278) (40,095)
Deferred revenues (2,723) 5,710
Accrued income taxes 53,802 26,720
--------- ---------
Net cash provided by operating activities from
continuing operations 134,185 161,367
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, including capitalization of
software costs for external customers (31,772) (31,021)
Payment for acquisitions of businesses, net of cash
acquired (96,003) (29,775)
Proceeds from sale of businesses, net of expenses
paid 344,920 -
Cash distribution received from discontinued
operations prior to sale 68,000 -
Investments (611,463) (351,274)
--------- ---------
Net cash used in investing activities from
continuing operations (326,318) (412,070)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (7,156) (106,971)
Issuance of common stock 10,495 11,662
Purchases of treasury stock (106,681) -
Customer funds held and retirement account deposits 499,076 356,073
--------- ---------
Net cash provided by financing activities from
continuing operations 395,734 260,764
--------- ---------
Change in cash and cash equivalents 203,601 10,061
Beginning balance 516,127 162,668
--------- ---------
Ending balance $719,728 $172,729
========= =========
FISERV, INC. AND SUBSIDIARIES
SELECTED SEGMENT INFORMATION (1)
(In thousands, unaudited)
Three Months Ended
March 31,
2005 2004
--------- ---------
Processing and services revenues:
Financial institution outsourcing, systems
and services ("Financial") (2) $608,487 $574,505
Health plan management services
("Health") 241,085 206,591
Investment support services
("Investment Services") 32,747 30,460
--------- ---------
Total $882,319 $811,556
========= =========
Operating income:
Financial (2) $160,148 $138,547
Health 22,266 18,650
Investment Services 5,602 4,141
--------- ---------
Total $188,016 $161,338
========= =========
(1) The securities clearing businesses are reported under discontinued
operations and are not included in the segment information above.
(2) Included in the Financial segment information above are early
contract termination fees of $14.9 million for the first quarter
of 2005, primarily from 6 customers that were acquired by other
financial institutions, compared to $14.3 million for the first
quarter of 2004 primarily from 2 customers that were acquired by
other financial institutions. The Company's Financial segment
includes over 6,000 core financial institution processing
customers. This segment's businesses generally enter into three to
five-year contracts with its customers that contain early contract
termination fees. These fees can vary significantly from period to
period based on the number of terminated contracts and how early
in the contract term a contract is terminated. The annual segment
revenue loss resulting from these terminated contracts is not
material. The Financial segment's total early contract termination
and assignment fees were $5.1 million, $12.3 million and $4.6
million in the second, third and fourth quarters of 2004,
respectively.
FISERV, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Three Months Ended
Free Cash Flow March 31,
(In thousands) 2005 2004
--------- ---------
Net cash provided by operating activities from
continuing operations $134,185 $161,367
Capital expenditures, including capitalization of
software costs for external customers (31,772) (31,021)
--------- ---------
Free cash flow $102,413 $130,346
========= =========
Free cash flow is measured as net cash provided by operating
activities from continuing operations less capital expenditures
including capitalization of software costs for external customers, as
reported in the Company's condensed consolidated statements of cash
flows. Free cash flow is a non-GAAP financial measure that the Company
believes is useful to investors because it provides another measure of
available cash flow after the Company has satisfied the capital
requirements of its operations.
Internal Revenue Growth Percentages by Segment (1)
Three months ended
March 31,
-------------------
2005 2004
-------------------
Financial 5% 2%
Health 14% 41%
Investment Services 8% (2)%
-------------------
TOTAL 7% 10%
-------------------
Pro forma (2)
Three months ended
March 31,
-------------------
2005 2004
-------------------
Financial 5% 2%
Health (2) 4% 10%
Investment Services 8% (2)%
-------------------
TOTAL (2) 5% 3%
===================
(1) Internal revenue growth percentages are measured as the increase
or decrease in total processing and services revenue for the
current period less "acquired revenue from acquisitions" divided
by total processing and services revenues from the prior year
period plus "acquired revenue from acquisitions." "Acquired
revenue from acquisitions" was $10 million ($5 million in the
Financial segment and $5 million in the Health segment) in the
first quarter of 2005 and represents pre-acquisition normalized
revenue of acquired companies, less dispositions, for the
comparable prior year period. The securities clearing businesses
are reported under discontinued operations and are not included in
the internal revenue growth percentages by segment information
above.
(2) The pro forma internal revenue growth percentages exclude the
positive impact of the prescription cost which is included in
revenues and cost of revenues in the Health segment.
Actual and pro forma internal revenue growth percentages are
non-GAAP financial measures that the Company believes are useful
to investors because they provide a breakdown of internal and
acquisition-related revenue growth including and excluding
prescription costs in revenue.