10-QPeriod: Q3 FY2005

FISERV INC Quarterly Report for Q3 Ended Sep 30, 2005

Filed October 28, 2005For Securities:FISV

Summary

Fiserv Inc. (FISV) reported solid financial results for the nine months ended September 30, 2005. Total revenues grew by 10% year-over-year to $2.98 billion, driven by strong performance in the Financial and Health segments. Net income increased by 30.6% to $365.96 million, or $1.90 per diluted share, up from $280.19 million, or $1.42 per diluted share, in the prior year period. This growth was bolstered by a significant realized gain from the sale of an investment and improved operational efficiencies. The company successfully divested its securities clearing businesses, which were classified as discontinued operations. This strategic move, alongside disciplined capital allocation including significant share repurchases and acquisitions, has positioned Fiserv for future growth. Despite a slight decrease in free cash flow due to timing of tax payments and increased accounts receivable, the company maintains a strong liquidity position with a robust credit facility and compliance with all debt covenants. Management is confident in the company's ability to meet its financial obligations and fund its ongoing operations and strategic initiatives.

Key Highlights

  • 1Total revenues increased 10% to $2.98 billion for the nine months ended September 30, 2005.
  • 2Net income rose 30.6% to $365.96 million for the nine months ended September 30, 2005.
  • 3Diluted EPS grew to $1.90 from $1.42 in the comparable prior year period.
  • 4The company completed the sale of its securities clearing businesses, reclassifying them as discontinued operations.
  • 5Seven acquisitions were completed for $428.0 million in the first nine months of 2005.
  • 6Fiserv repurchased $458.5 million of its common stock during the nine months ended September 30, 2005.
  • 7Despite a decrease in free cash flow, the company maintained compliance with all debt covenants and has ample liquidity.

Frequently Asked Questions

Total processing and services revenues increased by 10% to $2.72 billion, driven by growth in the Financial segment (8%) and Health segment (15%). This growth was primarily attributed to sales to new clients, cross-sales to existing clients, and increases in transaction volumes.

The sale of the securities clearing businesses was reported as discontinued operations. Fiserv received $344.9 million in cash and a $68.0 million distribution prior to the sale. The sale resulted in a net loss of $0.4 million, after a significant tax expense related to the lower tax basis of the assets sold. These businesses are excluded from reported revenues and operating cash flows for all periods presented.

Fiserv actively pursued acquisitions, completing seven for a net cash consideration of $428.0 million in the first nine months of 2005. The company also significantly engaged in share repurchases, buying back $458.5 million of its common stock during the same period, indicating a strategy focused on both inorganic growth and returning value to shareholders.

Free cash flow decreased by $124.9 million primarily due to changes in accrued income taxes, resulting from higher required estimated tax payments. Additionally, an increase in accounts receivable of $48.2 million also negatively impacted free cash flow.