Fiserv Reports Fourth Quarter and Full Year 2011 Results
Adjusted internal revenue growth of 4 percent and adjusted EPS growth of
20 percent in the quarter;
Adjusted EPS increases 13 percent to a
record
Company expects adjusted revenue
growth of 4 to 6 percent and adjusted EPS growth of 10 to 14 percent in
2012
GAAP revenue in the fourth quarter was
GAAP earnings per share from continuing operations for the fourth
quarter was
Adjusted earnings per share from continuing operations in the fourth
quarter increased 20 percent to
"Revenue growth in the quarter was at its highest level in more than
three years leading to our 26th consecutive year of
double-digit adjusted EPS growth," said
Fourth Quarter and Full Year 2011
- Adjusted revenue growth was 6 percent in the quarter and 4 percent for the full year.
- Adjusted internal revenue growth was 4 percent in the quarter and 3 percent for the full year.
- Adjusted operating margin increased 30 basis points in the quarter to 30.0 percent compared with the prior year period. For the full year, adjusted operating margin decreased 20 basis points to 29.2 percent compared with 2010.
-
Adjusted earnings per share increased 20 percent to
$1.27 in the fourth quarter compared with$1.06 in the prior year period and increased 13 percent to$4.58 for the full year compared with$4.05 in 2010. -
Free cash flow for the year was
$734 million compared with$735 million in 2010. -
The company repurchased 8.8 million shares for
$533 million in 2011, which included 1.0 million shares in the fourth quarter. The company had approximately 4.7 million shares remaining under its existing share repurchase authorization at year-end. - The company signed 114 electronic bill payment clients and 54 debit clients in the quarter and 435 bill payment clients and 196 debit clients for the full year.
-
The company signed 219 person-to-person payments clients in the
quarter and more than 580 in the full year. As of
December 31, 2011 , nearly 1,400 financial institutions have agreed to offer person-to-person payments fromFiserv . -
A number of new and expanded client relationships occurred in the
quarter including:
-
Capital Bank, NA , based inMaryland with$335 million in assets, selected Premier® fromFiserv as its account processing platform. The Bank also agreed to implement Consumer and Commercial Credit Full Service for credit card management, Retail Online™ and Business Online™ for online banking, Mobiliti™ for mobile banking, AccountCreateSM for online account opening,CheckFree ® RXP® for retail and business bill payment, and ZashPay® for person-to-person payments. -
Capitol
Federal Savings Bank , a$9 billion bank based inTopeka, Kan. , expanded its relationship withFiserv . Capitol Federal will upgrade to the latest version ofCorillian Online® and add integrated personal financial management capabilities via Personal Money Manager™ as well as integrated marketing capabilities via Campaign Manager. The bank also selected Mobiliti fromFiserv to deliver mobile banking via all three major access modes, and will add cross-channel money movement capabilities including person-to-person payments and the CheckFree RXP suite for bill payment, same day payments and account-to-account transfers. -
First Interstate BancSystem, Inc., a multi-state,
$7.3 billion banking organization headquartered in Billings, Mon., selected Popmoney® for person-to-person payments and TransferNow® for account-to-account payments. An existingFiserv client with an integrated suite of solutions,First Interstate Bank also uses the Premier account processing platform, check image processing, eStatements, Business Analytics, Asset Liability Manager, Prime™, CheckFree RXP for bill payment, CheckFree Small Business and Branch Source Capture™. -
IBERIABANK Corporation, an
$11.6 billion bank headquartered inLouisiana , selected PEP+®, an online, real-time solution for quick and efficient origination and receipt of payments through the automated clearing house (ACH). The bank also uses Source Capture Solutions® fromFiserv , theFiserv Clearing Network and a full suite ofFiserv debit solutions including debit processing and enhanced chargebacks, Premier Analytics™, CardVisionSM, ATM Device Driving and Monitoring, theACCEL /Exchange® PIN-debit network and UChoose Rewards®. -
Lincoln Financial Group , a financial services firm headquartered inPennsylvania with$153 billion in assets, agreed to implement Retirement Illustrator Manager fromFiserv .Fiserv partnered closely with Lincoln Financial to develop this innovative new solution that helps its customers with retirement forecasting and planning. -
Members Credit Union , a$232 million institution serving more than 50,000 members inWinston-Salem, N.C. , selected the XP2® account processing platform fromFiserv . The credit union also chose Integrated DesktopSM with debit processing, LynxGate® for switch gateway processing and ConvergeIT®: IVR for audio response fromFiserv . -
Navigant Credit Union ofSmithfield, R.I. with$1.2 billion in assets, chose the Acumen® account processing platform fromFiserv as well as several integrated solutions including theACCEL /Exchange PIN-debit network, ATM Device Driving and Monitoring, WireXchange® for wire transfer processing, EnFact® network services for fraud detection, Nautilus® for document imaging, Prism Analytics™ for member relationship management, the Prologue™ accounting suite, and solutions for check and debit processing. -
Navy Federal Credit Union , the world's largest credit union with$47 billion in assets and 3.9 million members worldwide, expanded its relationship withFiserv by selectingCorillian Online to transform its internet banking experience, Campaign Manager, Fraud Detection SystemSM and Personal Money Manager fromFiserv . The credit union currently uses numerousFiserv solutions, including CheckFree RXP for bill payment, Nautilus for enterprise content management for mortgage lending, Secure Lending™ and UniFi® Pro Mortgage for loan origination capabilities. -
Pinnacle National Bank , a member of Pinnacle Financial Partners, Inc., the second largest bank-holding company headquartered inTennessee with$4.9 billion in assets, agreed to implement theACCEL /Exchange PIN-debit network, as well as Member Advantage, ATM Device Driving and Monitoring, Risk OfficeSM and debit processing services fromFiserv . -
PSB Bank N.V. inCuracao , with 25,000 customers and$160 million in assets, selected the Signature® bank platform fromFiserv for account processing. The bank will also use Teller™ and Aperio™ branch platform for Signature, AML Manager and Fraud Risk Manager™ fromFiserv . -
Regions Bank , a$127 billion institution headquartered inBirmingham, Ala. and operating in 16 states, expanded its relationship withFiserv . An existing client of Corillian Online for retail online banking, the bank will implementCorillian ® Business Online for small business banking. Regions will also expand itsFiserv -supported money movement options by adding interbank account-to-account transfer capabilities. The bank already offers a person-to-person payment option supported byFiserv . -
Suncoast Schools Federal Credit Union , located inTampa, Fla. and the 13th largest credit union inthe United States with$5 billion in assets, selected the Acumen account processing platform from Fiserv. Suncoast will also use Teller Source Capture™ and card production and statement services fromFiserv .
-
Outlook for 2012
"Two consecutive years of strong sales along with the introduction of new, highly valued solutions, have us well positioned to deliver additional client value and enhance growth," said Yabuki.
Earnings Conference Call
The company will discuss its fourth quarter and full year 2011 results
on a conference call and webcast at
About
Use of Non-GAAP Financial Measures
We supplement our reporting of revenue, operating income, income from continuing operations and earnings per share information determined in accordance with GAAP by using "adjusted revenue," "adjusted operating income," "adjusted income from continuing operations," "adjusted earnings per share," "adjusted operating margin," "free cash flow" and "adjusted internal revenue growth" in this earnings release. Management believes that adjustments for certain non-cash or other expenses and the exclusion of certain pass-through revenue 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, income from continuing operations and earnings per share to calculate these non-GAAP measures.
Examples of non-cash or other items may include, but are not limited to, non-cash intangible asset amortization expense associated with acquisitions, severance costs, charges associated with early debt extinguishment, merger costs, certain integration expenses related to acquisitions and certain costs associated with the achievement of the company's operational effectiveness objectives. We exclude these items to more clearly focus on the factors we believe are pertinent to the management of our operations, and we use this information to allocate resources to our various businesses.
Free cash flow and adjusted internal revenue growth are non-GAAP financial measures and are described on page 12. We believe free cash flow is useful to measure the funds generated in a given period that are available for strategic capital decisions. We believe adjusted internal revenue growth is useful because it presents revenue growth excluding all acquired revenue and postage reimbursements in our Output Solutions business. 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, revenue, operating income, income from continuing operations and earnings per share or any other amount determined in accordance with GAAP. These non-GAAP measures reflect management's judgment of particular items and may not be comparable to similarly titled measures reported by other companies.
Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements regarding anticipated adjusted earnings per share,
adjusted revenue growth and adjusted internal revenue growth. Statements
can generally be identified as forward-looking because they include
words such as "believes," "anticipates," "expects," "could," "should" or
words of similar meaning. Statements that describe the company's future
plans, objectives or goals are also forward-looking statements.
Forward-looking statements are subject to assumptions, risks and
uncertainties that may cause actual results to differ materially from
those contemplated by such forward-looking statements. The factors that
may affect the company's results include, among others: the impact on
the company's business of the current state of the economy, including
the risk of reduction in revenue resulting from decreased spending on
the products and services that the company offers or from the
elimination of existing or potential clients due to consolidation or
financial failures in the financial services industry; legislative and
regulatory actions in
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Condensed Consolidated Statements of Income | ||||||||||||||||
(In millions, except per share amounts, unaudited) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
|
December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue | ||||||||||||||||
Processing and services | $ | 915 | $ | 870 | $ | 3,543 | $ | 3,415 | ||||||||
Product | 246 | 208 | 794 | 718 | ||||||||||||
Total revenue | 1,161 | 1,078 | 4,337 | 4,133 | ||||||||||||
Expenses | ||||||||||||||||
Cost of processing and services | 498 | 473 | 1,941 | 1,853 | ||||||||||||
Cost of product | 165 | 140 | 601 | 533 | ||||||||||||
Selling, general and administrative | 217 | 198 | 799 | 740 | ||||||||||||
Total expenses | 880 | 811 | 3,341 | 3,126 | ||||||||||||
Operating income | 281 | 267 | 996 | 1,007 | ||||||||||||
Interest expense - net | (44 | ) | (48 | ) | (182 | ) | (188 | ) | ||||||||
Loss on early debt extinguishment (1) | - | (26 | ) | (85 | ) | (26 | ) | |||||||||
Income from continuing operations before income taxes | ||||||||||||||||
and income from investment in unconsolidated affiliate | 237 | 193 | 729 | 793 | ||||||||||||
Income tax provision | (88 | ) | (77 | ) | (256 | ) | (301 | ) | ||||||||
Income from investment in unconsolidated affiliate | 4 | 3 | 18 | 14 | ||||||||||||
Income from continuing operations | 153 | 119 | 491 | 506 | ||||||||||||
Loss from discontinued operations | (10 | ) | (3 | ) | (19 | ) | (10 | ) | ||||||||
Net income | $ | 143 | $ | 116 | $ | 472 | $ | 496 | ||||||||
GAAP earnings (loss) per share - diluted: | ||||||||||||||||
Continuing operations | $ | 1.07 | $ | 0.80 | $ | 3.40 | $ | 3.34 | ||||||||
Discontinued operations | (0.07 | ) | (0.02 | ) | (0.13 | ) | (0.07 | ) | ||||||||
Total | $ | 1.01 | $ | 0.78 | $ | 3.28 | $ | 3.27 | ||||||||
Diluted shares used in computing earnings (loss) per share | 142.3 | 149.8 | 144.2 | 151.7 | ||||||||||||
(1) In 2011 and 2010, the company issued
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Reconciliation of GAAP to Adjusted Income and | ||||||||||||||||
Earnings Per Share from Continuing Operations | ||||||||||||||||
(In millions, except per share amounts, unaudited) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
|
December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
GAAP income from continuing operations | $ | 153 | $ | 119 | $ | 491 | $ | 506 | ||||||||
Adjustments: | ||||||||||||||||
Merger and integration costs | 2 | - | 17 | - | ||||||||||||
Severance costs | - | - | 18 | - | ||||||||||||
Amortization of acquisition-related intangible assets | 42 | 38 | 157 | 148 | ||||||||||||
Loss on early debt extinguishment (1) | - | 26 | 85 | 26 | ||||||||||||
Tax impact of adjustments | (16 | ) | (24 | ) | (101 | ) | (66 | ) | ||||||||
Tax benefit (2) | - | - | (3 | ) | - | |||||||||||
Gain on sale of business by unconsolidated affiliate (3) | - | - | (3 | ) | - | |||||||||||
Adjusted income from continuing operations | $ | 181 | $ | 159 | $ | 661 | $ | 614 | ||||||||
GAAP earnings per share - continuing operations | $ | 1.07 | $ | 0.80 | $ | 3.40 | $ | 3.34 | ||||||||
Adjustments - net of income taxes: | ||||||||||||||||
Merger and integration costs | 0.01 | - | 0.07 | - | ||||||||||||
Severance costs | - | - | 0.08 | - | ||||||||||||
Amortization of acquisition-related intangible assets | 0.19 | 0.15 | 0.69 | 0.60 | ||||||||||||
Loss on early debt extinguishment (1) | - | 0.11 | 0.37 | 0.11 | ||||||||||||
Tax benefit (2) | - | - | (0.02 | ) | - | |||||||||||
Gain on sale of business by unconsolidated affiliate (3) | - | - | (0.02 | ) | - | |||||||||||
Adjusted earnings per share | $ | 1.27 | $ | 1.06 | $ | 4.58 | $ | 4.05 | ||||||||
(1) See footnote on page 7.
(2) Adjustment for a GAAP income tax benefit recognized in the third quarter of 2011 in connection with the resolution of a purchase accounting income tax reserve.
(3) Adjustment for the ratable share of a gain on sale of a
business recognized in the third quarter of 2011 by
See page 5 for disclosures related to the use of non-GAAP financial information. Earnings per share is calculated using actual, unrounded amounts.
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Financial Results by Segment | ||||||||||||||||
(In millions, unaudited) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
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December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
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Revenue | $ | 1,161 | $ | 1,078 | $ | 4,337 | $ | 4,133 | ||||||||
Output Solutions postage reimbursements | (77 | ) | (51 | ) | (266 | ) | (204 | ) | ||||||||
Adjusted revenue | $ | 1,084 | $ | 1,027 | $ | 4,071 | $ | 3,929 | ||||||||
Operating income | $ | 281 | $ | 267 | $ | 996 | $ | 1,007 | ||||||||
Merger and integration costs | 2 | - | 17 | - | ||||||||||||
Severance costs | - | - | 18 | - | ||||||||||||
Amortization of acquisition-related intangible assets | 42 | 38 | 157 | 148 | ||||||||||||
Adjusted operating income | $ | 325 | $ | 305 | $ | 1,188 | $ | 1,155 | ||||||||
Operating margin | 24.3 | % | 24.8 | % | 23.0 | % | 24.4 | % | ||||||||
Adjusted operating margin | 30.0 | % | 29.7 | % | 29.2 | % | 29.4 | % | ||||||||
Payments and Industry Products ("Payments") | ||||||||||||||||
Revenue | $ | 635 | $ | 581 | $ | 2,381 | $ | 2,208 | ||||||||
Output Solutions postage reimbursements | (77 | ) | (51 | ) | (266 | ) | (204 | ) | ||||||||
Adjusted revenue | $ | 558 | $ | 530 | $ | 2,115 | $ | 2,004 | ||||||||
Operating income | $ | 174 | $ | 167 | $ | 656 | $ | 625 | ||||||||
Operating margin | 27.4 | % | 28.7 | % | 27.5 | % | 28.3 | % | ||||||||
Adjusted operating margin | 31.2 | % | 31.5 | % | 31.0 | % | 31.2 | % | ||||||||
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Revenue | $ | 540 | $ | 506 | $ | 2,004 | $ | 1,951 | ||||||||
Operating income | $ | 178 | $ | 161 | $ | 613 | $ | 591 | ||||||||
Operating margin | 33.1 | % | 31.7 | % | 30.6 | % | 30.3 | % | ||||||||
Corporate and Other | ||||||||||||||||
Revenue | $ | (14 | ) | $ | (9 | ) | $ | (48 | ) | $ | (26 | ) | ||||
Operating loss | $ | (71 | ) | $ | (61 | ) | $ | (273 | ) | $ | (209 | ) | ||||
Merger and integration costs | 2 | - | 17 | - | ||||||||||||
Severance costs | - | - | 18 | - | ||||||||||||
Amortization of acquisition-related intangible assets | 42 | 38 | 157 | 148 | ||||||||||||
Adjusted operating loss | $ | (27 | ) | $ | (23 | ) | $ | (81 | ) | $ | (61 | ) | ||||
See page 5 for disclosures related to the use of non-GAAP financial information. Operating margin percentages are calculated using actual, unrounded amounts.
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Condensed Consolidated Statements of Cash Flows - Continuing Operations | ||||||||||
(In millions, unaudited) | ||||||||||
Years Ended | ||||||||||
December 31, | ||||||||||
2011 | 2010 | |||||||||
Cash flows from operating activities | ||||||||||
Net income | $ | 472 | $ | 496 | ||||||
Adjustment for discontinued operations | 19 | 10 | ||||||||
Adjustments to reconcile net income to net cash | ||||||||||
provided by operating activities: | ||||||||||
Depreciation and other amortization | 192 | 191 | ||||||||
Amortization of acquisition-related intangible assets | 157 | 148 | ||||||||
Share-based compensation | 39 | 39 | ||||||||
Deferred income taxes | 29 | 37 | ||||||||
Loss on early debt extinguishment | 85 | 26 | ||||||||
Dividends from unconsolidated affiliate | 12 | 40 | ||||||||
Settlement of interest rate hedge contracts | (6 | ) | - | |||||||
Other non-cash items | (26 | ) | (21 | ) | ||||||
Changes in assets and liabilities, net of effects from acquisitions: | ||||||||||
Trade accounts receivable | (83 | ) | (12 | ) | ||||||
Prepaid expenses and other assets | (25 | ) | 4 | |||||||
Accounts payable and other liabilities | 78 | (26 | ) | |||||||
Deferred revenue | 10 | 26 | ||||||||
Net cash provided by operating activities | 953 | 958 | ||||||||
Cash flows from investing activities | ||||||||||
Capital expenditures, including capitalization of software costs | (192 | ) | (175 | ) | ||||||
Payments for acquisitions of businesses, net of cash acquired | (511 | ) | (9 | ) | ||||||
Dividends and loan repayments from unconsolidated affiliate | 42 | 49 | ||||||||
Other investing activities | (4 | ) | 19 | |||||||
Net cash used in investing activities | (665 | ) | (116 | ) | ||||||
Cash flows from financing activities | ||||||||||
Proceeds from long-term debt | 1,189 | 748 | ||||||||
Repayments of long-term debt, including premium and costs | (1,226 | ) | (1,060 | ) | ||||||
Issuance of common stock and treasury stock | 73 | 62 | ||||||||
Purchases of treasury stock | (533 | ) | (413 | ) | ||||||
Other financing activities | (1 | ) | (8 | ) | ||||||
Net cash used in financing activities | (498 | ) | (671 | ) | ||||||
Change in cash and cash equivalents | (210 | ) | 171 | |||||||
Net cash flows from discontinued operations | (16 | ) | 29 | |||||||
Beginning balance | 563 | 363 | ||||||||
Ending balance | $ | 337 | $ | 563 |
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Condensed Consolidated Balance Sheets | ||||||
(In millions, unaudited) | ||||||
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December 31, | |||||
2011 | 2010 | |||||
Assets | ||||||
Cash and cash equivalents | $ | 337 | $ | 563 | ||
Trade accounts receivable — net | 666 | 572 | ||||
Deferred income taxes | 44 | 37 | ||||
Prepaid expenses and other current assets | 309 | 245 | ||||
Total current assets | 1,356 | 1,417 | ||||
Property and equipment — net | 258 | 267 | ||||
Intangible assets — net | 1,881 | 1,879 | ||||
Goodwill | 4,720 | 4,377 | ||||
Other long-term assets | 333 | 341 | ||||
Total assets | $ | 8,548 | $ | 8,281 | ||
Liabilities and Shareholders' Equity | ||||||
Accounts payable and accrued expenses | $ | 836 | $ | 537 | ||
Current maturities of long-term debt | 179 | 3 | ||||
Deferred revenue | 369 | 351 | ||||
Total current liabilities | 1,384 | 891 | ||||
Long-term debt | 3,216 | 3,353 | ||||
Deferred income taxes | 617 | 627 | ||||
Other long-term liabilities | 73 | 181 | ||||
Total liabilities | 5,290 | 5,052 | ||||
Shareholders' equity | 3,258 | 3,229 | ||||
Total liabilities and shareholders' equity | $ | 8,548 | $ | 8,281 |
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Selected Non-GAAP Financial Measures |
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(In millions, unaudited) |
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Adjusted Internal Revenue Growth (1) | |||||
Three Months Ended |
Year Ended |
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Payments Segment | 2% | 4% | |||
Financial Segment | 6% | 3% | |||
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4% | 3% | |||
(1) Adjusted internal revenue growth is measured as the
increase in adjusted revenue (see page 9), excluding all acquired
revenue, for the current period divided by adjusted revenue from the
prior year period. Acquired revenue was
Free |
Years Ended |
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2011 | 2010 | |||||||||||
Net cash provided by operating activities |
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Capital expenditures | (192 | ) | (175 | ) | ||||||||
Dividend from unconsolidated affiliate (3) | (12 | ) | (40 | ) | ||||||||
Other adjustments (4) | (15 | ) | (8 | ) | ||||||||
Free cash flow |
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(2) Free cash flow is calculated as net cash provided by operating activities less capital expenditures, and excludes items which management believes may not be indicative of the future free cash flow of the company.
(3) In 2011 and 2010, the company received cash dividends
from
(4) Free cash flow excludes the net change in settlement assets and obligations, tax-effected severance, merger and integration payments, tax benefits on early debt extinguishment, and payments for the settlement of interest rate hedge contracts.
See page 5 for disclosures related to the use of non-GAAP financial information.
FISV-E
Media Relations:
Vice President
Communications
678-375-1595
judy.wicks@fiserv.com
or
Investor
Relations:
Vice President Investor Relations
262-879-5055
peter.holbrook@fiserv.com
Source:
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