10-QPeriod: Q3 FY2003

FISERV INC Quarterly Report for Q3 Ended Sep 30, 2003

Filed October 22, 2003For Securities:FISV

Summary

Fiserv Inc.'s (FISV) third-quarter and year-to-date 2003 report shows robust revenue growth, driven primarily by its Financial Institution Outsourcing, Systems and Services (FIS) segment, which saw a 26% increase in the third quarter and an 18% increase year-to-date. The Health Plan Management Services segment also demonstrated impressive growth, up 70% and 54% respectively. This top-line expansion contributed to a significant increase in operating income, up 24% for the quarter and 19% year-to-date. Net income also saw a healthy rise of 22% in the third quarter and 18% for the nine-month period, with diluted EPS growing to $0.41 from $0.34 year-over-year for the quarter. Financially, Fiserv has been actively pursuing a growth strategy through acquisitions, investing approximately $582.7 million in acquired businesses during the first nine months of 2003. This has led to a substantial increase in goodwill and intangible assets on the balance sheet. The company also raised $250 million in long-term debt to fund these acquisitions and general corporate purposes. Despite the increased investment and debt, the company maintains a strong liquidity position, with over $2.1 billion in shareholders' equity and compliance with all debt covenants, indicating financial stability to support ongoing operations and strategic initiatives.

Key Highlights

  • 1Total revenues increased 26% to $796.1 million in Q3 2003 compared to $636.1 million in Q3 2002.
  • 2Net income rose 22% to $80.4 million in Q3 2003 from $66.2 million in Q3 2002.
  • 3Diluted earnings per share (EPS) increased to $0.41 in Q3 2003 from $0.34 in Q3 2002.
  • 4The Financial Institution Outsourcing segment revenue grew 26% in Q3 2003 and 17% year-to-date, showcasing strong core business performance.
  • 5The Health Plan Management Services segment experienced substantial growth, with revenues up 70% in Q3 2003.
  • 6Fiserv completed nine acquisitions for $549.6 million in cash and stock during the first nine months of 2003, significantly expanding its business.
  • 7The company issued $250 million in five-year notes during Q2 2003 to fund acquisitions and general corporate purposes.

Frequently Asked Questions

The primary driver of Fiserv's revenue growth is its Financial Institution Outsourcing, Systems and Services (FIS) segment, which saw a 26% increase in processing and services revenues during the third quarter of 2003 compared to the prior year. The Health Plan Management Services segment also contributed significantly with a 70% revenue increase.

Fiserv has actively pursued acquisitions, completing nine in the first nine months of 2003 for approximately $550 million. This has led to a substantial increase in goodwill and intangible assets on the balance sheet and contributed significantly to revenue growth. The company also raised $250 million in long-term debt to help finance these activities.

Fiserv's management believes that its cash flow from operations, combined with other available funding sources, is adequate to meet its operating requirements, debt repayments, contingent acquisition payments, and capital spending needs. The company also had $133.6 million available under its credit facility as of September 30, 2003, and maintained compliance with all debt covenants.

Fiserv accounted for stock-based compensation using the intrinsic value method, resulting in no compensation expense recorded in its condensed consolidated financial statements. However, the company provided pro forma disclosures indicating that if compensation expense were recognized consistent with SFAS No. 123, net income would have been lower, with pro forma diluted EPS for Q3 2003 being $0.39 compared to the reported $0.41.