Fiserv Reports Record Earnings for Fourth Quarter, Year-end 2003
BROOKFIELD, Wis.--(BUSINESS WIRE)--Jan. 27, 2004--Fiserv, Inc.
(Nasdaq: FISV) announced today record earnings for 2003.
For the three-month period ended December 31, 2003, Fiserv
processing and services revenues were $749.5 million, a 30% increase
over the $575.3 million for the fourth quarter of 2002. Net income per
share-diluted for the fourth quarter of 2003 was $0.42 per share,
compared to $0.35 per share for the fourth quarter of 2002.
For the year ended December 31, 2003, Fiserv processing and services revenues were $2,699.6 million, a 22% increase over the $2,205.7 million in 2002. Net income per share-diluted for the year ended December 31, 2003, was $1.61 per share, compared to $1.37 per share for 2002.
"Fiserv finished 2003 with record earnings for the 19th consecutive year, excluding a one-time charge in 1995 which related to an acquisition. Our free cash flow for 2003 was $455 million, an increase of 22% versus 2002. We also closed an outstanding roster of 12 acquisitions," said Leslie M. Muma, President and Chief Executive Officer of Fiserv, Inc.
Muma added, "On the acquisition side, we continue to seek out companies that can help drive growth and enhance our portfolio of products and services. The 12 acquisitions closed in 2003 strengthened our position in several key areas and added combined annualized revenues of more than $610 million. As we begin 2004, we are seeing improved strength in our sales pipelines and continued acquisition opportunities across all of our major business lines.
"Our earnings per share target for 2004 is $1.86 to $1.93 per share," Muma concluded.
Significant client renewals and new relationships gained in the fourth quarter include the following: Sovereign Bank, a $40 billion bank headquartered in Philadelphia, signed a multi-year renewal agreement for account processing services; Chicago-based Northern Trust Company expanded its longtime relationship with Fiserv to include cash vault processing services; Associated Mortgage Company, based in Green Bay, Wisconsin, will use mortgage servicing software and systems from Fiserv MortgageServ; Community First Bankshares of Fargo, North Dakota, extended its comprehensive relationship with Fiserv to include outsourced check processing for the bank's operations in 12 states; and Citizens Financial Services, a $1.6 billion banking company in Muncie, Indiana, will process its accounts through the Fiserv ITI service bureau network in an agreement that also includes Internet banking and cash management services. In addition, South Africa's Standard Bank will use software from Fiserv's IPS-Sendero unit to implement the first group-wide asset liability management system in Africa, and Bank of Ceylon, the largest bank in Sri Lanka, will implement the Fiserv International Comprehensive Banking System (ICBS) and other Fiserv products at its 300 branches to manage approximately 3 million accounts.
Also, Washington State Health Care Authority expanded its relationship with the Harrington Benefit Services unit of Fiserv Health through a multi-year contract to administer a preferred provider program for state employees and certain retirees.
The 12 acquisitions Fiserv closed in 2003 encompassed nearly all of its major lines of business. Four transactions that expanded the Fiserv portfolio of solutions for the insurance industry were ReliaQuote, Inc., Insurance Management Solutions Group, Inc., Unisure and MI-Assistant Software. The additions of Chase Credit Research/Chase Credit Systems and General American Corporation added capabilities in the lending systems and services area, and the acquisitions of Avidyn, Wausau Benefits and MedPay enhanced the growing presence of Fiserv in the health plan management business. Fiserv also acquired additional resources in the banking and credit union industry with the acquisitions of Precision Computer Services, EDS Credit Union Industry Group and the item processing operations of the Federal Home Loan Bank of Indianapolis.
Fiserv, Inc. (Nasdaq: FISV) provides information management systems and services to the financial industry, including transaction processing, business process outsourcing and software and systems solutions. The Company serves more than 15,000 clients, including banks, broker-dealers, credit unions, financial planners and investment advisers, insurance companies and agents, self-funded employers, lenders and savings institutions. Headquartered in Brookfield, Wisconsin, Fiserv also can be found on the Internet at www.fiserv.com.
The disclosure set forth above contains forward-looking statements, specifically Mr. Muma's statements regarding earnings targets, 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 or U.S. financial markets. 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
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
2003 2002 2003 2002
--------- --------- ----------- -----------
Revenues
Processing and services
(1) $749,503 $575,266 $2,699,609 $2,205,734
Customer reimbursements 87,822 77,738 334,061 291,245
--------- --------- ----------- -----------
Total Revenues 837,325 653,004 3,033,670 2,496,979
--------- --------- ----------- -----------
Cost of revenues
Salaries, commissions and
payroll related costs 335,857 281,838 1,262,209 1,090,315
Customer reimbursement
expenses 87,822 77,738 334,061 291,245
Data processing costs and
equipment rentals 57,669 45,235 217,201 165,283
Other operating expenses
(1) 166,221 96,115 516,440 363,563
Depreciation and
amortization 50,740 37,729 171,791 141,114
--------- --------- ----------- -----------
Total cost of revenues 698,309 538,655 2,501,702 2,051,520
--------- --------- ----------- -----------
Operating income 139,016 114,349 531,968 445,459
Interest expense - net (4,632) (2,500) (15,555) (9,169)
--------- --------- ----------- -----------
Income before income taxes 134,384 111,849 516,413 436,290
Income tax provision 52,410 43,621 201,401 170,153
--------- --------- ----------- -----------
Net income $81,974 $68,228 $315,012 $266,137
========= ========= =========== ===========
Net income per share:
Basic $0.42 $0.36 $1.63 $1.39
Diluted $0.42 $0.35 $1.61 $1.37
Shares used in computing
net income per share:
Basic 193,902 191,408 193,240 191,386
Diluted 196,663 194,153 195,937 194,951
(1) See page 7, "Historical Quarterly Financial Information by
Segment" Note 1 for the description of a reclassification of
revenues and operating expenses.
FISERV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31,
2003 2002
----------- -----------
ASSETS
Cash and cash equivalents $202,768 $227,239
Accounts receivable 417,521 339,737
Securities processing receivables 1,940,414 1,740,512
Prepaid expenses and other assets 120,168 119,882
Investments 1,904,161 2,115,778
Property and equipment 206,076 223,070
Intangible assets 557,822 342,614
Goodwill 1,865,245 1,329,873
----------- -----------
TOTAL $7,214,175 $6,438,705
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $179,184 $122,266
Securities processing payables 1,786,763 1,666,863
Short-term borrowings 139,000 100,000
Accrued expenses 303,765 280,614
Accrued income taxes 23,313 23,711
Deferred revenues 208,996 181,173
Customer funds held and retirement account
deposits 1,582,698 1,707,458
Deferred income taxes 91,532 46,127
Long-term debt 699,116 482,824
----------- -----------
TOTAL LIABILITIES 5,014,367 4,611,036
SHAREHOLDERS' EQUITY
Common stock 1,943 1,924
Additional paid-in capital 637,623 599,700
Accumulated other comprehensive income 17,345 23,882
Accumulated earnings 1,542,897 1,227,885
Treasury stock -- (25,722)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 2,199,808 1,827,669
----------- -----------
TOTAL $7,214,175 $6,438,705
=========== ===========
FISERV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Years ended December 31,
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $315,012 $266,137
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income taxes 36,225 30,805
Depreciation and amortization (a) 171,791 141,114
Changes in assets and liabilities, net of
effects from acquisitions of businesses:
Accounts receivable 17,268 6,022
Prepaid expenses and other assets 7,540 (7,899)
Accounts payable and accrued expenses 19,298 30,302
Deferred revenues 9,420 10,072
Accrued income taxes 21,549 38,762
Securities processing receivables and
payables - net (80,002) 63,923
----------- -----------
Net cash provided by operating activities 518,101 579,238
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, including
capitalization of software costs
for external customers (a) (143,242) (141,880)
Payment for acquisitions of businesses,
net of cash acquired (735,917) (406,578)
Investments 187,968 (305,642)
----------- -----------
Net cash used in investing activities (691,191) (854,100)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) short-term
borrowings - net 39,000 (12,286)
Proceeds from long-term debt-net 215,794 139,573
Issuance of common stock and treasury stock 18,585 11,420
Purchases of treasury stock -- (33,578)
Customer funds held and retirement account
deposits (124,760) 260,884
----------- -----------
Net cash provided by financing activities 148,619 366,013
----------- -----------
Change in cash and cash equivalents (24,471) 91,151
Beginning balance 227,239 136,088
----------- -----------
Ending balance $202,768 $227,239
=========== ===========
(a) Gross software development costs for external customers
capitalized for the years ended December 31, 2003 and 2002 were
$52.4 million and $44.9 million, respectively, offset by
amortization of previously capitalized development costs of $47.8
million and $38.3 million, respectively.
FISERV, INC. AND SUBSIDIARIES
HISTORICAL QUARTERLY FINANCIAL INFORMATION BY SEGMENT
(In thousands, unaudited)
Quarters
------------------------------------
2003 First Second Third Fourth Total
Processing and -----------------------------------------------
services revenues:
Financial institution
outsourcing, systems
and services (1) $457,021 $472,302 $510,115 $534,968 $1,974,406
Health plan management
services (1) 69,140 93,157 111,875 124,894 399,066
Securities processing
and trust services 55,050 55,135 55,728 58,492 224,405
All other and corporate 23,051 23,294 24,238 31,149 101,732
-----------------------------------------------
TOTAL $604,262 $643,888 $701,956 $749,503 $2,699,609
===============================================
Operating income:
Financial institution
outsourcing, systems
and services $107,456 $117,397 $119,360 $114,670 $458,883
Health plan management
services 12,101 10,898 13,120 13,555 49,674
Securities processing
and trust services 7,240 6,519 5,926 8,093 27,778
All other and corporate (2,200) (2,754) (2,111) 2,698 (4,367)
-----------------------------------------------
TOTAL $124,597 $132,060 $136,295 $139,016 $531,968
===============================================
2002
Processing and services
revenues:
Financial institution
outsourcing, systems
and services (1) $412,423 $415,125 $408,088 $430,340 $1,665,976
Health plan management
services 51,745 52,195 53,374 58,831 216,145
Securities processing
and trust services 55,678 55,080 59,199 60,664 230,621
All other and corporate 23,358 21,458 22,745 25,431 92,992
-----------------------------------------------
TOTAL $543,204 $543,858 $543,406 $575,266 $2,205,734
===============================================
Operating income:
Financial institution
outsourcing, systems
and services $93,428 $99,187 $95,139 $97,006 $384,760
Health plan management
services 8,361 8,480 8,811 8,412 34,064
Securities processing
and trust services 8,481 6,491 8,348 7,939 31,259
All other and corporate (841) (2,726) (2,049) 992 (4,624)
-----------------------------------------------
TOTAL $109,429 $111,432 $110,249 $114,349 $445,459
===============================================
2001
Processing and services
revenues:
Financial institution
outsourcing, systems
and services (1) $354,225 $367,830 $383,218 $393,430 $1,498,703
Health plan management
services 10,688 10,440 11,301 23,181 55,610
Securities processing
and trust services 74,215 79,555 54,421 56,650 264,841
All other and corporate 21,046 19,845 20,003 25,483 86,377
-----------------------------------------------
TOTAL $460,174 $477,670 $468,943 $498,744 $1,905,531
-----------------------------------------------
Operating income:
Financial institution
outsourcing, systems
and services $77,011 $76,650 $81,133 $76,575 $311,369
Health plan management
services 2,851 2,198 2,667 2,988 10,704
Securities processing
and trust services 9,943 13,309 8,370 8,575 40,197
All other and corporate (1,379) (2,272) (1,955) 2,437 (3,169)
-----------------------------------------------
TOTAL $88,426 $89,885 $90,215 $90,575 $359,101
===============================================
(1) Processing and services revenues and other operating expenses were
reclassified for the first nine months of 2003, for the full year
2002 and 2001 to reflect the preferred industry methods of
reporting flood insurance processing and prescription benefit
management revenues. The reclassifications attributable to flood
insurance processing reduced processing and services revenues and
other operating expenses in the Financial institution outsourcing,
systems and services segment by $78 million in the first nine
months of 2003, $74 million in 2002 and $27 million in 2001. The
reclassification attributable to prescription benefit management
services increased processing and services revenues and other
operating expenses in the Health plan management services segment
by $32 million in the first nine months of 2003. These
reclassifications did not impact the Company's financial position,
operating income or net income.
FISERV, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Free Cash Flow
Years Ended December 31,
------------------------------
2003 2002 2001
(in thousands) ------------------------------
Net cash provided by operating
activities $518,101 $579,238 $447,539
Changes in securities processing
receivables and payables-net 80,002 (63,923) (78,396)
------------------------------
Net cash provided by operating
activities before changes in
securities processing receivables
and payables-net 598,103 515,315 369,143
Capital expenditures, including
capitalization of software
costs for external customers (143,242) (141,880) (104,609)
------------------------------
Free cash flow $454,861 $373,435 $264,534
==============================
Free cash flow is measured as net cash provided by operating
activities before changes in securities processing receivables and
payables less capital expenditures including capitalization of
software costs for external customers, as reported in the Company's
consolidated statements of cash flows. As the changes in securities
processing receivables and payables are generally offset by changes in
short-term borrowings and investments, which are included in financing
and investing activities, management believes it is more meaningful to
analyze changes in operating cash flows before the changes in
securities processing receivables and payables. 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
2003 Quarters
----------------------------
First Second Third Fourth Total
-----------------------------------
Financial institution outsourcing,
systems and services ("FIS") 1% 2% 4% 0% 2%
Health plan management services 18% 27% 37% 37% 31%
Securities processing and trust
services -9% -8% -12% -4% -8%
All other and corporate -1% 9% 7% 23% 9%
-----------------------------------
TOTAL 2% 5% 7% 5% 5%
===================================
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 $374 million ($271 million in the FIS segment, $89
million in the Health segment and $14 million in the Securities &
Trust segment) for the full year and represents pre-acquisition
normalized revenue of acquired companies for the comparable prior year
period. All internal revenue growth percentages have been adjusted to
reflect the reclassification of revenues noted on page 7 (Note 1). The
internal growth rate for 2003 in the Health plan management services
segment was 31% (18% related to the prescription benefit management
business that generates operating margins in the low single digits and
13% related to the remaining businesses in the segment). Internal
revenue growth percentage is a non-GAAP financial measure that the
Company believes is useful to investors because it provides an
alternative to measure revenue growth excluding the impact of acquired
revenues.
Contact:
Fiserv, Inc.
Leslie M. Muma, 262-879-5000
www.fiserv.com
Source:
Fiserv, Inc.