EXHIBIT 99.1
This exhibit contains recast historical unaudited quarterly financial information of Fiserv, Inc. for 2009 and 2008 in connection with the pending sale of its Loan Fulfillment Solutions (LFS) business. The financial results of LFS are reported as discontinued operations for all periods presented in such financial information. Revenues of LFS were $152 million in 2008 and $53 million in the first six months of 2009.
USE OF NON-GAAP FINANCIAL INFORMATION
In this exhibit, we present several non-GAAP measures adjusted revenues, adjusted operating income, adjusted earnings per share from continuing operations, adjusted operating margin, free cash flow, and adjusted internal revenue growth in addition to total revenues, operating income and earnings per share from continuing operations determined in accordance with GAAP. Management believes that adjustments for certain non-cash or unusual revenue or expense items, and the exclusion of certain pass-through revenues and expenses, enhance our shareholders ability to evaluate our performance because such items do not reflect how we manage our operations. Therefore, we exclude these items from GAAP revenue, operating income and earnings per share to calculate these non-GAAP measures. We also exclude the financial results of Fiserv Insurance from these non-GAAP measures because we sold a majority interest in our Insurance segment in 2008 and, accordingly, believe that these results reflect the performance of our remaining primary operations.
Examples of non-cash or unusual items may include, but are not limited to, non-cash deferred revenue adjustments arising from acquisitions, non-cash intangible asset amortization expense associated with acquisitions, severance costs, merger and integration expenses, and loss on sale of businesses. We exclude these items to more clearly focus on the factors we believe are pertinent to the management of our operations. We regularly report our adjusted results to our chief executive officer, who uses this information to allocate resources to our various businesses.
Adjusted internal revenue growth is a non-GAAP financial measure that we believe is useful to investors because it presents internal revenue growth excluding postage reimbursements in our output solutions business and the deferred revenue purchase accounting adjustment. We believe this supplemental information enhances our shareholders ability to evaluate and understand our core business performance.
These non-GAAP measures should be considered in addition to, and not as a substitute for, revenues, operating income and earnings per share or any other amount determined in accordance with GAAP. These non-GAAP measures reflect managements judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.
1
Fiserv, Inc.
Quarterly Financial Information
(in millions, except per share amounts, unaudited)
First Quarter 2008 |
Second Quarter 2008 |
Third Quarter 2008 |
Fourth Quarter 2008 |
Full Year 2008 |
First Quarter 2009 |
Second Quarter 2009 |
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Revenues |
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Processing and services |
$ | 902 | $ | 899 | $ | 832 | $ | 831 | $ | 3,464 | $ | 831 | $ | 828 | ||||||||||||||
Product |
363 | 345 | 206 | 209 | 1,123 | 192 | 172 | |||||||||||||||||||||
Total revenues |
1,265 | 1,244 | 1,038 | 1,040 | 4,587 | 1,023 | 1,000 | |||||||||||||||||||||
Expenses |
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Cost of processing and services |
518 | 511 | 460 | 460 | 1,949 | 458 | 465 | |||||||||||||||||||||
Cost of product |
307 | 296 | 162 | 152 | 917 | 142 | 125 | |||||||||||||||||||||
Selling, general and administrative |
205 | 211 | 199 | 198 | 813 | 198 | 176 | |||||||||||||||||||||
Total expenses |
1,030 | 1,018 | 821 | 810 | 3,679 | 798 | 766 | |||||||||||||||||||||
Operating income |
235 | 226 | 217 | 230 | 908 | 225 | 234 | |||||||||||||||||||||
Interest expense - net |
(69 | ) | (61 | ) | (57 | ) | (60 | ) | (247 | ) | (54 | ) | (55 | ) | ||||||||||||||
(Loss) gain on sale of businesses |
| | 19 | (40 | ) | (21 | ) | | | |||||||||||||||||||
Income from continuing operations before income taxes and income from investment in unconsolidated affiliate |
166 | 165 | 179 | 130 | 640 | 171 | 179 | |||||||||||||||||||||
Income tax provision |
(64 | ) | (64 | ) | (107 | ) | (53 | ) | (288 | ) | (66 | ) | (68 | ) | ||||||||||||||
Income from investment in unconsolidated affiliate - net of income taxes |
| | 3 | 3 | 6 | 1 | 4 | |||||||||||||||||||||
Income from continuing operations |
102 | 101 | 75 | 80 | 358 | 106 | 115 | |||||||||||||||||||||
Income (loss) from discontinued operations - net of income taxes |
227 | (1 | ) | 3 | (18 | ) | 211 | (3 | ) | 25 | ||||||||||||||||||
Net income |
$ | 329 | $ | 100 | $ | 78 | $ | 62 | $ | 569 | $ | 103 | $ | 140 | ||||||||||||||
GAAP earnings (loss) per share - diluted |
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Continuing operations |
$ | 0.62 | $ | 0.62 | $ | 0.46 | $ | 0.50 | $ | 2.20 | $ | 0.68 | $ | 0.74 | ||||||||||||||
Discontinued operations |
1.37 | (0.01 | ) | 0.02 | (0.11 | ) | 1.29 | (0.02 | ) | 0.16 | ||||||||||||||||||
Total |
$ | 1.99 | $ | 0.60 | $ | 0.48 | $ | 0.39 | $ | 3.49 | $ | 0.66 | $ | 0.90 | ||||||||||||||
GAAP earnings per share - continuing operations |
$ | 0.62 | $ | 0.62 | $ | 0.46 | $ | 0.50 | $ | 2.20 | $ | 0.68 | $ | 0.74 | ||||||||||||||
Adjustments - net of income taxes: |
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Merger costs and other adjustments (1) |
0.06 | 0.06 | 0.06 | 0.04 | 0.22 | 0.03 | 0.02 | |||||||||||||||||||||
Severance costs |
| | | | | 0.06 | | |||||||||||||||||||||
Amortization of acquisition-related intangible assets |
0.13 | 0.16 | 0.14 | 0.15 | 0.57 | 0.14 | 0.15 | |||||||||||||||||||||
Loss on sale of businesses |
| | 0.15 | 0.19 | 0.34 | | | |||||||||||||||||||||
Adjusted earnings per share - continuing operations |
$ | 0.81 | $ | 0.83 | $ | 0.81 | $ | 0.89 | $ | 3.33 | $ | 0.90 | $ | 0.90 | ||||||||||||||
Diluted shares used in computing earnings (loss) per share |
165.4 | 164.8 | 163.8 | 158.4 | 163.1 | 156.0 | 155.8 |
(1) Merger costs and other adjustments include integration project management, retention bonuses and other expenses associated with the acquisition of CheckFree and deferred revenue adjustments based on the purchase price allocation for the CheckFree acquisition for which the company estimated the fair value of deferred revenue from license fees and other client payments. The deferred revenue adjustments represent revenue that would have been recognized by CheckFree or companies it acquired consistent with past practices, which the company did not record due to GAAP purchase accounting requirements.
2
Fiserv, Inc.
Quarterly Financial Information by Segment
(in millions, unaudited)
First Quarter 2008 |
Second Quarter 2008 |
Third Quarter 2008 |
Fourth Quarter 2008 |
Full Year 2008 |
First Quarter 2009 |
Second Quarter 2009 |
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Total Company |
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Revenues |
$ | 1,265 | $ | 1,244 | $ | 1,038 | $ | 1,040 | $ | 4,587 | $ | 1,023 | $ | 1,000 | ||||||||||||||
Fiserv Insurance (1) |
(245 | ) | (235 | ) | (33 | ) | | (513 | ) | | | |||||||||||||||||
Output solutions postage reimbursements |
(46 | ) | (48 | ) | (51 | ) | (58 | ) | (203 | ) | (57 | ) | (50 | ) | ||||||||||||||
Deferred revenue adjustment |
9 | 7 | 4 | 2 | 22 | 2 | 1 | |||||||||||||||||||||
Adjusted revenues |
$ | 983 | $ | 968 | $ | 958 | $ | 984 | $ | 3,893 | $ | 968 | $ | 951 | ||||||||||||||
Operating income |
$ | 235 | $ | 226 | $ | 217 | $ | 230 | $ | 908 | $ | 225 | $ | 234 | ||||||||||||||
Fiserv Insurance (1) |
(18 | ) | (23 | ) | (3 | ) | | (44 | ) | | | |||||||||||||||||
Merger costs and other adjustments |
16 | 16 | 16 | 11 | 59 | 7 | 4 | |||||||||||||||||||||
Severance costs |
| | | | | 15 | | |||||||||||||||||||||
Amortization of acquisition-related intangible assets |
35 | 42 | 36 | 37 | 150 | 34 | 37 | |||||||||||||||||||||
Adjusted operating income |
$ | 268 | $ | 261 | $ | 266 | $ | 278 | $ | 1,073 | $ | 281 | $ | 275 | ||||||||||||||
Operating margin |
18.6 | % | 18.2 | % | 20.9 | % | 22.1 | % | 19.8 | % | 22.0 | % | 23.4 | % | ||||||||||||||
Adjusted operating margin |
27.2 | % | 27.0 | % | 27.8 | % | 28.3 | % | 27.6 | % | 29.1 | % | 28.9 | % | ||||||||||||||
Financial Institution Services (Financial) |
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Revenues |
$ | 508 | $ | 510 | $ | 484 | $ | 490 | $ | 1,992 | $ | 488 | $ | 482 | ||||||||||||||
Operating income |
$ | 141 | $ | 140 | $ | 129 | $ | 135 | $ | 545 | $ | 142 | $ | 145 | ||||||||||||||
Operating margin |
27.8 | % | 27.5 | % | 26.5 | % | 27.6 | % | 27.4 | % | 29.3 | % | 29.9 | % | ||||||||||||||
Payments and Industry Products (Payments) |
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Revenues |
$ | 529 | $ | 514 | $ | 529 | $ | 559 | $ | 2,131 | $ | 544 | $ | 525 | ||||||||||||||
Output solutions postage reimbursements |
(46 | ) | (48 | ) | (51 | ) | (58 | ) | (203 | ) | (57 | ) | (50 | ) | ||||||||||||||
Adjusted revenues |
$ | 483 | $ | 466 | $ | 478 | $ | 501 | $ | 1,928 | $ | 487 | $ | 475 | ||||||||||||||
Operating income |
$ | 140 | $ | 134 | $ | 148 | $ | 157 | $ | 579 | $ | 155 | $ | 147 | ||||||||||||||
Operating margin |
26.5 | % | 25.9 | % | 28.1 | % | 28.0 | % | 27.2 | % | 28.5 | % | 28.0 | % | ||||||||||||||
Adjusted operating margin |
29.1 | % | 28.6 | % | 31.0 | % | 31.3 | % | 30.0 | % | 31.9 | % | 31.0 | % | ||||||||||||||
Corporate and Other |
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Revenues |
$ | (17 | ) | $ | (15 | ) | $ | (8 | ) | $ | (9 | ) | $ | (49 | ) | $ | (9 | ) | $ | (7 | ) | |||||||
Deferred revenue adjustment |
9 | 7 | 4 | 2 | 22 | 2 | 1 | |||||||||||||||||||||
Adjusted revenues |
$ | (8 | ) | $ | (8 | ) | $ | (4 | ) | $ | (7 | ) | $ | (27 | ) | $ | (7 | ) | $ | (6 | ) | |||||||
Operating loss |
$ | (64 | ) | $ | (71 | ) | $ | (63 | ) | $ | (62 | ) | $ | (260 | ) | $ | (72 | ) | $ | (58 | ) | |||||||
Merger costs and other adjustments |
16 | 16 | 16 | 11 | 59 | 7 | 4 | |||||||||||||||||||||
Severance costs |
| | | | | 15 | | |||||||||||||||||||||
Amortization of acquisition-related intangible assets |
35 | 42 | 36 | 37 | 150 | 34 | 37 | |||||||||||||||||||||
Adjusted operating loss |
$ | (13 | ) | $ | (13 | ) | $ | (11 | ) | $ | (14 | ) | $ | (51 | ) | $ | (16 | ) | $ | (17 | ) | |||||||
(1) In July 2008, the company completed the sale of a 51% interest in Fiserv Insurance.
NOTE: Operating margin percentages are calculated using actual, unrounded amounts.
3
Fiserv, Inc.
Free Cash Flow
(in millions, unaudited)
First Quarter 2008 |
Second Quarter 2008 |
Third Quarter 2008 |
Fourth Quarter 2008 |
Full Year 2008 |
First Quarter 2009 |
Second Quarter 2009 |
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Net cash provided by operating activities from continuing operations |
$ | 222 | $ | 169 | $ | 186 | $ | 189 | $ | 766 | $ | 231 | $ | 164 | ||||||||||||||
Capital expenditures |
(50 | ) | (41 | ) | (47 | ) | (60 | ) | (198 | ) | (45 | ) | (53 | ) | ||||||||||||||
Non-recurring items (1) |
5 | 6 | 14 | 10 | 35 | 10 | 3 | |||||||||||||||||||||
Free cash flow |
$ | 177 | $ | 134 | $ | 153 | $ | 139 | $ | 603 | $ | 196 | $ | 114 | ||||||||||||||
(1) Free cash flow has been adjusted for payments related to after-tax merger and severance costs and one-time liabilities assumed on the opening balance sheets of acquired companies. Management believes it is appropriate to exclude these payments from the calculation of free cash flow because they may not be indicative of the future free cash flow of the company.
Adjusted Internal Revenue Growth (2)
First Quarter 2008 |
Second Quarter 2008 |
Third Quarter 2008 |
Fourth Quarter 2008 |
Full Year 2008 |
First Quarter 2009 |
Second Quarter 2009 |
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Financial Segment |
4 | % | 4 | % | 0 | % | (1 | )% | 2 | % | (5 | )% | (7 | )% | |||||||
Payments Segment |
8 | % | 2 | % | 3 | % | 3 | % | 4 | % | 1 | % | 2 | % | |||||||
Total Company |
6 | % | 3 | % | 1 | % | 1 | % | 3 | % | (2 | )% | (2 | )% | |||||||
(2) Adjusted internal revenue growth percentages are measured as the change in adjusted revenues for the current period less acquired revenue from acquisitions divided by adjusted revenues from the prior year period plus acquired revenue from acquisitions. Acquired revenue from acquisitions represents pre-acquisition adjusted revenue of acquired companies for the comparable prior year period and were as follows (in millions):
First Quarter 2008 |
Second Quarter 2008 |
Third Quarter 2008 |
Fourth Quarter 2008 |
Full Year 2008 |
First Quarter 2009 |
Second Quarter 2009 | |||||||||||||||
Financial Segment |
$ | 33 | $ | 36 | $ | 39 | $ | 24 | $ | 132 | $ | 6 | $ | 5 | |||||||
Payments Segment |
239 | 259 | 259 | 184 | 941 | 1 | 1 | ||||||||||||||
Total Company |
$ | 272 | $ | 295 | $ | 298 | $ | 208 | $ | 1,073 | $ | 7 | $ | 6 | |||||||
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