News Release
For more information contact:
Leslie M. Muma, President and CEO
(262) 879-5000
For immediate release:
January 27, 2004
Fiserv Reports Record Earnings for Fourth Quarter, Year-end 2003
Brookfield, Wisconsin, January 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.
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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
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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.
# # #
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FISERV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended December 31, |
Years Ended 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. |
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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 | |||
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FISERV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT 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* |
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* |
(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 | ||||
| * | 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. |
News Release
FISERV, INC. AND SUBSIDIARIES
HISTORICAL QUARTERLY FINANCIAL INFORMATION BY SEGMENT
(In thousands, unaudited)
| Quarters |
|||||||||||||||||||
| First |
Second |
Third |
Fourth |
Total |
|||||||||||||||
| 2003 |
|||||||||||||||||||
| 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. |
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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.
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