Fiserv Reports Record Results for 2005; Strong Fourth Quarter Results Lead to Record Revenues and Earnings
Fiserv Reports Record Results for 2005; Strong Fourth Quarter Results Lead to Record Revenues and Earnings
January 30, 2006
BROOKFIELD, Wis.--Jan. 30, 2006--Fiserv, Inc. (Nasdaq:FISV) today reported record revenues and earnings for 2005.
Processing and services revenues for the full year increased 11% to $3.71 billion compared to $3.35 billion in 2004. Full-year earnings per share were $2.70 and earnings per share from continuing operations were $2.68. Full-year adjusted earnings per share from continuing operations were $2.30 (which excludes $0.29 per share related to realized gains from sale of investments and $0.09 per share for receipt of a large contract termination fee) versus $2.00 in 2004.
Revenues for the quarter increased 14% to $987.7 million (which includes a large contract termination fee received of $26.3 million) compared to $866.1 million in the fourth quarter of 2004. Earnings per share for the fourth quarter of 2005 were $0.81 and earnings per share from continuing operations were $0.80. Adjusted earnings per share from continuing operations were $0.56 (excluding $0.15 per share related to a realized gain from sale of investment and $0.09 per share for the large contract termination fee), compared to $0.50 for the fourth quarter of 2004.
"I am pleased with our strong fourth quarter, which led to record results for the full year. Each of our business segments delivered revenue growth led by strong organic growth in our financial institutions area," said Jeff Yabuki, president and chief executive officer of Fiserv. "In addition to delivering strong results in 2005, we continued to make investments that will enhance the long-term strength of the Company."
"We broadened our capabilities and reach in the electronic bill payments space through our acquisition of BillMatrix; increased our global presence by establishing Fiserv Global Services; solidified our technology leadership in the lending business through a unique, end-to-end, electronic mortgage processing solution; and introduced the Fiserv Clearing Network, which allows members the ability to clear checks electronically, and more efficiently, under Check 21. In 2006, we announced the acquisition of CareGain, which provides us with a differentiated healthcare technology solution to support the strong growth occurring in consumer-driven health plans through a focus on health savings and health reimbursement accounts," Yabuki said.
Fiserv repurchased 4.4 million shares of its common stock in the fourth quarter of 2005 and a total of 15.2 million shares in 2005. The Company had 3.1 million shares authorized for repurchase at December 31, 2005 under the current stock buy back plan.
OUTLOOK FOR 2006
For 2006, Fiserv expects full-year earnings to be within a range of $2.46 to $2.53 per share (which includes the effect of incremental share-based compensation expense which is estimated to be $0.09 to $0.11 per share). The 2005 pro forma effect of incremental share-based compensation expense would have reduced adjusted earnings per share from continuing operations by $0.11 per share from $2.30 to $2.19 per share. The incremental share-based compensation expense is a result of the Company adopting Statement of Financial Accounting Standards ("SFAS") No. 123R on January 1, 2006. We project internal revenue growth rates in 2006 to be in the mid-single digits for the Financial and Investment segments and low double digits in the Health segment.
FINANCIAL SEGMENT SALES HIGHLIGHTS
Fiserv enjoyed a strong fourth quarter for new-client signings. Fiserv's CBS Worldwide unit signed core-processing agreements with several banks, including 1st Source Bank, $4.5 billion in assets, South Bend, Ind.; First National Bank of Long Island, $1 billion in assets, Long Island, N.Y.; Riverview Community Bank, $864 million in assets, Vancouver, Wash.; and Pulaski Bank, $750 million in assets, St. Louis, Mo. Also in the quarter, Fiserv's Information Technology, Inc. (ITI) unit logged core-processing agreements with four Montana banks with total assets of $837 million: Heritage Bank, First National Bank of Montana, Valley Bank of Kalispell and Three Rivers Bank of Montana. In addition, Coastal Federal Bank, $1.5 billion in assets, Myrtle Beach, S.C., expanded its already significant relationship with Fiserv to include ATM/debit processing; and Standard Bank of South Africa, a $105 billion asset bank based in Johannesburg, chose Fiserv's IPS-Sendero unit for a package of risk management software.
EARNINGS CONFERENCE CALL
Fiserv will discuss the fourth quarter and full-year results on a conference call and Webcast at 9 a.m. Central on Tuesday, Jan. 31. Call information is available at the investor section of Fiserv's Website at www.fiserv.com.
USE OF NON-GAAP FINANCIAL INFORMATION
The Company reports its financial results in accordance with GAAP. However, the Company uses certain non-GAAP performance measures, including free cash flow, internal revenue growth, adjusted operating margin and adjusted earnings per share, to provide investors a more complete understanding of the Company's underlying operational results. These non-GAAP measures are indicators management uses to provide additional meaningful comparisons between current results and prior reported results, and as a basis for planning and forecasting for future periods. As an example, the Company uses adjusted earnings per share to present the impact of certain transactions or events that management expects to be infrequently occurring, such as the realized gain on sale of investment occurring in the fourth quarter of 2005. The Company believes this adjusted measure is more indicative of the Company's operating performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for comparable metrics prepared in accordance with GAAP in the United States.
ABOUT FISERV
Fiserv, Inc. (Nasdaq:FISV) provides information management systems and services to the financial and health benefits industries, including transaction processing, outsourcing, business process outsourcing, 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.
Fiserv was ranked the largest provider of information technology services to the U.S. financial services industry in the 2005 and 2004 FinTech 100 surveys by the American Banker newspaper and the Financial Insights research firm. Headquartered in Brookfield, Wis., Fiserv can be found on the Internet at www.fiserv.com.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the estimated earnings per share and internal revenue growth rates for the full year 2006. Such 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 adversely the Corporation's results include, among others, changes in customers' demand for the Corporation's products, pricing and other actions by competitors and general changes in economic conditions and other factors included in the Corporation's filings with the SEC. The Corporation assumes no obligation to update any forward-looking statements, which speak only as of the date of this press release.
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,
2005 2004 2005 2004
----------- ----------- ----------- -----------
Revenues:
Processing and services $987,746 $866,102 $3,708,447 $3,350,595
Customer reimbursements 90,547 100,302 351,031 379,151
----------- ----------- ----------- -----------
Total revenues 1,078,293 966,404 4,059,478 3,729,746
----------- ----------- ----------- -----------
Cost of revenues:
Salaries, commissions
and payroll related
costs 372,769 338,510 1,421,160 1,320,760
Customer reimbursement
expenses 90,547 100,302 351,031 379,151
Data processing costs
and equipment rentals 61,615 56,765 219,101 212,052
Prescription costs 145,701 120,271 540,007 439,576
Other operating
expenses 162,318 139,871 603,604 533,284
Depreciation and
amortization 46,727 48,073 179,179 185,363
----------- ----------- ----------- -----------
Total cost of revenues 879,677 803,792 3,314,082 3,070,186
----------- ----------- ----------- -----------
Operating income 198,616 162,612 745,396 659,560
Interest expense - net (5,896) (4,581) (14,267) (18,194)
Realized gain from sale
of investments(1) 43,370 - 86,822 -
----------- ----------- ----------- -----------
Income from continuing
operations, before
income taxes 236,090 158,031 817,951 641,366
Income tax provision 87,714 59,232 306,594 246,468
----------- ----------- ----------- -----------
Income from continuing
operations 148,376 98,799 511,357 394,898
Income (loss) from
discontinued
operations, net of tax 2,100 (1,346) 5,081 (17,256)
----------- ----------- ----------- -----------
Net income $150,476 $97,453 $516,438 $377,642
=========== =========== =========== ===========
Earnings per share:
Continuing
operations $0.80 $0.50 $2.68 $2.00
Discontinued
operations 0.01 (0.01) 0.03 (0.09)
----------- ----------- ----------- -----------
Total $0.81 $0.49 $2.70 $1.91
=========== =========== =========== ===========
Adjusted earnings per
share - continuing
operations:
Continuing
operations $0.80 $0.50 $2.68 $2.00
Less: Realized gain
from sale of
investments(1) 0.15 - 0.29 -
Less: Contract
termination fee(2) 0.09 - 0.09 -
----------- ----------- ----------- -----------
Adjusted earnings
per share -
continuing
operations $0.56 $0.50 $2.30 $2.00
=========== =========== ----------- -----------
Less: Pro forma
share-based
compensation -
SFAS 123R(3) 0.11 0.09
----------- -----------
Total $2.19 $1.91
=========== ===========
Diluted shares used in
computing earnings per
share 185,470 197,234 190,967 197,287
(1) Represents the sale of the Company's investment in INTRIA Items,
Inc. in the fourth quarter of 2005 and the sale of the Company's
remaining 3.2 million shares of Bisys Group, Inc. common stock in
the first quarter of 2005.
(2) Represents a large contract termination fee of $26.3 million
recognized in the fourth quarter of 2005.
(3) Represents pro forma impact in 2005 and 2004 of the incremental
share-based compensation expense as a result of adopting SFAS No.
123R on January 1, 2006.
FISERV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
December 31, December 31,
2005 2004
------------ ------------
ASSETS
Cash and cash equivalents $184,471 $516,127
Accounts receivable - net 553,402 437,764
Prepaid expenses and other assets 105,782 100,810
Investments 2,126,538 1,984,536
Property and equipment - net 226,013 200,709
Intangible assets - net 593,808 532,539
Goodwill - net 2,249,502 1,859,347
Assets of discontinued operations held for
sale - 2,751,517
------------ ------------
TOTAL $6,039,516 $8,383,349
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $241,751 $202,616
Short-term borrowings - 100,000
Accrued expenses 365,651 363,513
Accrued income taxes 4,266 44,955
Deferred revenues 240,105 226,080
Customer funds held and retirement account
deposits 1,960,626 1,829,639
Deferred income taxes 165,992 134,330
Long-term debt 595,385 505,327
Liabilities of discontinued operations held
for sale - 2,412,467
------------ ------------
TOTAL LIABILITIES 3,573,776 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;
197,507,892 and 195,940,360 shares issued 1,975 1,959
Additional paid-in capital 693,715 679,573
Accumulated other comprehensive income 1,321 26,695
Accumulated earnings 2,436,977 1,920,539
Treasury stock, at cost, 15,753,675 and
1,691,500 shares (668,248) (64,344)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 2,465,740 2,564,422
------------ ------------
TOTAL $6,039,516 $8,383,349
============ ============
FISERV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Years ended December 31,
2005 2004
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $516,438 $377,642
Adjustment for discontinued operations (5,081) 17,256
Adjustments to reconcile net income to net
cash provided by operating activities:
Realized gain from sale of investments (86,822) -
Deferred income taxes 19,183 23,022
Depreciation and amortization 179,179 185,363
Changes in assets and liabilities, net of
effects from acquisitions and
dispositions of businesses:
Accounts receivable (83,367) (19,177)
Prepaid expenses and other assets (7,085) (4,518)
Accounts payable and accrued expenses 52,676 54,445
Deferred revenues 14,389 17,826
Accrued income taxes (2,388) 46,524
------------ ------------
Net cash provided by operating activities 597,122 698,383
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, including
capitalization of software costs for
external customers (164,951) (161,093)
Payment for acquisitions of businesses, net
of cash acquired (509,630) (64,896)
Proceeds from sale of businesses, net of
expenses paid 282,236 -
Cash distribution received from discontinued
operations prior to sale 68,000 -
Investments (104,810) (139,258)
------------ ------------
Net cash used in investing activities (429,155) (365,247)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term debt (100,000) -
Proceeds from (repayments of) long-term debt
- net 89,836 (192,940)
Issuance of common stock and treasury stock 32,129 30,666
Purchases of treasury stock (652,575) (64,344)
Customer funds held and retirement account
deposits 130,987 246,941
------------ ------------
Net cash (used in) provided by financing
activities (499,623) 20,323
------------ ------------
Change in cash and cash equivalents (331,656) 353,459
Beginning balance 516,127 162,668
------------ ------------
Ending balance $184,471 $516,127
============ ============
FISERV, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND SEGMENT INFORMATION(1)
(In thousands, unaudited)
Free Cash Flow Years Ended December 31,
2005 2004
------------ ------------
Net cash provided by operating activities $597,122 $698,383
Capital expenditures, including
capitalization of software costs for
external customers (164,951) (161,093)
------------ ------------
Free cash flow $432,171 $537,290
============ ============
Free cash flow is measured as net cash provided by operating
activities 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.
Three Months Ended Years Ended
December 31, December 31,
Segment 2005 2004 2005 2004
------- ----------- ----------- ----------- -----------
Processing and services
revenues:
Financial institution
outsourcing, systems
and services
("Financial")(2) $688,152 $596,743 $2,562,805 $2,339,143
Health plan management
services ("Health") 265,359 236,999 1,011,234 885,916
Investment support
services
("Investment") 34,235 32,360 134,408 125,536
----------- ----------- ----------- -----------
Total $987,746 $866,102 $3,708,447 $3,350,595
=========== =========== =========== ===========
Operating income:
Financial(2) $173,778 $137,415 $639,927