Fiserv (FI) 8-K Fiserv Reports Record Earnings for Fourth Quarter, Year-end 2003

News Release

For more information contact:

Leslie M. Muma, President and CEO

(262) 879-5000

For immediate release:

January 27, 2004

Fiserv Reports Record Earnings for Fourth Quarter, Year-end 2003

Brookfield, Wisconsin, January 27, 2004 – Fiserv, Inc. (Nasdaq: FISV) announced today record earnings for 2003.

For the three-month period ended December 31, 2003, Fiserv processing and services revenues were $749.5 million, a 30% increase over the $575.3 million for the fourth quarter of 2002. Net income per share-diluted for the fourth quarter of 2003 was $0.42 per share, compared to $0.35 per share for the fourth quarter of 2002.

For the year ended December 31, 2003, Fiserv processing and services revenues were $2,699.6 million, a 22% increase over the $2,205.7 million in 2002. Net income per share-diluted for the year ended December 31, 2003, was $1.61 per share, compared to $1.37 per share for 2002.

“Fiserv finished 2003 with record earnings for the 19^th consecutive year, excluding a one-time charge in 1995 which related to an acquisition. Our free cash flow for 2003 was $455 million, an increase of 22% versus 2002. We also closed an outstanding roster of 12 acquisitions,” said Leslie M. Muma, President and Chief Executive Officer of Fiserv, Inc.

Muma added, “On the acquisition side, we continue to seek out companies that can help drive growth and enhance our portfolio of products and services. The 12 acquisitions closed in 2003 strengthened our position in several key areas and added combined annualized revenues of more than $610 million. As we begin 2004, we are seeing improved strength in our sales pipelines and continued acquisition opportunities across all of our major business lines.

“Our earnings per share target for 2004 is $1.86 to $1.93 per share,” Muma concluded.

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Significant client renewals and new relationships gained in the fourth quarter include the following: Sovereign Bank, a $40 billion bank headquartered in Philadelphia, signed a multi-year renewal agreement for account processing services; Chicago-based Northern Trust Company expanded its longtime relationship with Fiserv to include cash vault processing services; Associated Mortgage Company, based in Green Bay, Wisconsin, will use mortgage servicing software and systems from Fiserv MortgageServ; Community First Bankshares of Fargo, North Dakota, extended its comprehensive relationship with Fiserv to include outsourced check processing for the bank’s operations in 12 states; and Citizens Financial Services, a $1.6 billion banking company in Muncie, Indiana, will process its accounts through the Fiserv ITI service bureau network in an agreement that also includes Internet banking and cash management services. In addition, South Africa’s Standard Bank will use software from Fiserv’s IPS-Sendero unit to implement the first group-wide asset liability management system in Africa, and Bank of Ceylon, the largest bank in Sri Lanka, will implement the Fiserv International Comprehensive Banking System (ICBS) and other Fiserv products at its 300 branches to manage approximately 3 million accounts.

Also, Washington State Health Care Authority expanded its relationship with the Harrington Benefit Services unit of Fiserv Health through a multi-year contract to administer a preferred provider program for state employees and certain retirees.

The 12 acquisitions Fiserv closed in 2003 encompassed nearly all of its major lines of business. Four transactions that expanded the Fiserv portfolio of solutions for the insurance industry were ReliaQuote, Inc., Insurance Management Solutions Group, Inc., Unisure and MI-Assistant Software. The additions of Chase Credit Research/Chase Credit Systems and General American Corporation added capabilities in the lending systems and services area, and the acquisitions of Avidyn, Wausau Benefits and MedPay enhanced the growing presence of Fiserv in the health plan management business. Fiserv also acquired additional resources in the banking and credit union industry with the acquisitions of Precision Computer Services, EDS Credit Union Industry Group and the item processing operations of the Federal Home Loan Bank of

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Indianapolis.

Fiserv, Inc. (Nasdaq: FISV) provides information management systems and services to the financial industry, including transaction processing, business process outsourcing and software and systems solutions. The Company serves more than 15,000 clients, including banks, broker-dealers, credit unions, financial planners and investment advisers, insurance companies and agents, self-funded employers, lenders and savings institutions. Headquartered in Brookfield, Wisconsin, Fiserv also can be found on the Internet at www.fiserv.com.

The disclosure set forth above contains forward-looking statements, specifically Mr. Muma’s statements regarding earnings targets, sales pipelines and acquisition prospects. These statements are covered by the safe harbor included in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to inherent assumptions, risks and uncertainties that may cause actual results to differ materially from those contemplated by such forward-looking statements. The factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include, among others, changes in customers’ demand for the Corporation’s products, pricing and other actions by competitors, and general changes in economic conditions or U.S. financial markets. These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements.

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FISERV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended December 31,						Years Ended December 31,
		2003			2002			2003			2002
Revenues
Processing and services (1)	$	749,503		$	575,266		$	2,699,609		$	2,205,734
Customer reimbursements		87,822			77,738			334,061			291,245
Total Revenues		837,325			653,004			3,033,670			2,496,979
Cost of revenues
Salaries, commissions and payroll related costs		335,857			281,838			1,262,209			1,090,315
Customer reimbursement expenses		87,822			77,738			334,061			291,245
Data processing costs and equipment rentals		57,669			45,235			217,201			165,283
Other operating expenses (1)		166,221			96,115			516,440			363,563
Depreciation and amortization		50,740			37,729			171,791			141,114
Total cost of revenues		698,309			538,655			2,501,702			2,051,520
Operating income		139,016			114,349			531,968			445,459
Interest expense – net		(4,632	)		(2,500	)		(15,555	)		(9,169	)
Income before income taxes		134,384			111,849			516,413			436,290
Income tax provision		52,410			43,621			201,401			170,153
Net income	$	81,974		$	68,228		$	315,012		$	266,137
Net income per share:
Basic	$	0.42		$	0.36		$	1.63		$	1.39
Diluted	$	0.42		$	0.35		$	1.61		$	1.37
Shares used in computing net income per share:
Basic		193,902			191,408			193,240			191,386
Diluted		196,663			194,153			195,937			194,951

(1) See page 7, “Historical Quarterly Financial Information by Segment” Note 1 for the description of a reclassification of revenues and operating expenses.

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FISERV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	December 31,
	2003		2002
ASSETS
Cash and cash equivalents	$	202,768	$	227,239
Accounts receivable		417,521		339,737
Securities processing receivables		1,940,414		1,740,512
Prepaid expenses and other assets		120,168		119,882
Investments		1,904,161		2,115,778
Property and equipment		206,076		223,070
Intangible assets		557,822		342,614
Goodwill		1,865,245		1,329,873
TOTAL	$	7,214,175	$	6,438,705
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	179,184	$	122,266
Securities processing payables		1,786,763		1,666,863
Short-term borrowings		139,000		100,000
Accrued expenses		303,765		280,614
Accrued income taxes		23,313		23,711
Deferred revenues		208,996		181,173
Customer funds held and retirement account deposits		1,582,698		1,707,458
Deferred income taxes		91,532		46,127
Long-term debt		699,116		482,824
TOTAL LIABILITIES		5,014,367		4,611,036
SHAREHOLDERS’ EQUITY
Common stock		1,943		1,924
Additional paid-in capital		637,623		599,700
Accumulated other comprehensive income		17,345		23,882
Accumulated earnings		1,542,897		1,227,885
Treasury stock		—		(25,722	)
TOTAL SHAREHOLDERS’ EQUITY		2,199,808		1,827,669
TOTAL	$	7,214,175	$	6,438,705

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FISERV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

	Years ended December 31,
	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	315,012		$	266,137
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes		36,225			30,805
Depreciation and amortization*		171,791			141,114
Changes in assets and liabilities, net of effects from acquisitions of businesses:
Accounts receivable		17,268			6,022
Prepaid expenses and other assets		7,540			(7,899	)
Accounts payable and accrued expenses		19,298			30,302
Deferred revenues		9,420			10,072
Accrued income taxes		21,549			38,762
Securities processing receivables and payables – net		(80,002	)		63,923
Net cash provided by operating activities		518,101			579,238
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, including capitalization of software costs for external customers*		(143,242	)		(141,880	)
Payment for acquisitions of businesses, net of cash acquired		(735,917	)		(406,578	)
Investments		187,968			(305,642	)
Net cash used in investing activities		(691,191	)		(854,100	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) short-term borrowings – net		39,000			(12,286	)
Proceeds from long-term debt-net		215,794			139,573
Issuance of common stock and treasury stock		18,585			11,420
Purchases of treasury stock		—			(33,578	)
Customer funds held and retirement account deposits		(124,760	)		260,884
Net cash provided by financing activities		148,619			366,013
Change in cash and cash equivalents		(24,471	)		91,151
Beginning balance		227,239			136,088
Ending balance	$	202,768		$	227,239

* Gross software development costs for external customers capitalized for the years ended December 31, 2003 and 2002 were $52.4 million and $44.9 million, respectively, offset by amortization of previously capitalized development costs of $47.8 million and $38.3 million, respectively.

News Release

FISERV, INC. AND SUBSIDIARIES

HISTORICAL QUARTERLY FINANCIAL INFORMATION BY SEGMENT

(In thousands, unaudited)

	Quarters
	First			Second			Third			Fourth		Total
2003
Processing and services revenues:
Financial institution outsourcing, systems and services (1)	$	457,021		$	472,302		$	510,115		$	534,968	$	1,974,406
Health plan management services (1)		69,140			93,157			111,875			124,894		399,066
Securities processing and trust services		55,050			55,135			55,728			58,492		224,405
All other and corporate		23,051			23,294			24,238			31,149		101,732
TOTAL	$	604,262		$	643,888		$	701,956		$	749,503	$	2,699,609
Operating income:
Financial institution outsourcing, systems and services	$	107,456		$	117,397		$	119,360		$	114,670	$	458,883
Health plan management services		12,101			10,898			13,120			13,555		49,674
Securities processing and trust services		7,240			6,519			5,926			8,093		27,778
All other and corporate		(2,200	)		(2,754	)		(2,111	)		2,698		(4,367	)
TOTAL	$	124,597		$	132,060		$	136,295		$	139,016	$	531,968
2002
Processing and services revenues:
Financial institution outsourcing, systems and services (1)	$	412,423		$	415,125		$	408,088		$	430,340	$	1,665,976
Health plan management services		51,745			52,195			53,374			58,831		216,145
Securities processing and trust services		55,678			55,080			59,199			60,664		230,621
All other and corporate		23,358			21,458			22,745			25,431		92,992
TOTAL	$	543,204		$	543,858		$	543,406		$	575,266	$	2,205,734
Operating income:
Financial institution outsourcing, systems and services	$	93,428		$	99,187		$	95,139		$	97,006	$	384,760
Health plan management services		8,361			8,480			8,811			8,412		34,064
Securities processing and trust services		8,481			6,491			8,348			7,939		31,259
All other and corporate		(841	)		(2,726	)		(2,049	)		992		(4,624	)
TOTAL	$	109,429		$	111,432		$	110,249		$	114,349	$	445,459
2001
Processing and services revenues:
Financial institution outsourcing, systems and services (1)	$	354,225		$	367,830		$	383,218		$	393,430	$	1,498,703
Health plan management services		10,688			10,440			11,301			23,181		55,610
Securities processing and trust services		74,215			79,555			54,421			56,650		264,841
All other and corporate		21,046			19,845			20,003			25,483		86,377
TOTAL	$	460,174		$	477,670		$	468,943		$	498,744	$	1,905,531
Operating income:
Financial institution outsourcing, systems and services	$	77,011		$	76,650		$	81,133		$	76,575	$	311,369
Health plan management services		2,851			2,198			2,667			2,988		10,704
Securities processing and trust services		9,943			13,309			8,370			8,575		40,197
All other and corporate		(1,379	)		(2,272	)		(1,955	)		2,437		(3,169	)
TOTAL	$	88,426		$	89,885		$	90,215		$	90,575	$	359,101

(1) Processing and services revenues and other operating expenses were reclassified for the first nine months of 2003, for the full year 2002 and 2001 to reflect the preferred industry methods of reporting flood insurance processing and prescription benefit management revenues. The reclassifications attributable to flood insurance processing reduced processing and services revenues and other operating expenses in the Financial institution outsourcing, systems and services segment by $78 million in the first nine months of 2003, $74 million in 2002 and $27 million in 2001. The reclassification attributable to prescription benefit management services increased processing and services revenues and other operating expenses in the Health plan management services segment by $32 million in the first nine months of 2003. These reclassifications did not impact the Company’s financial position, operating income or net income.

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FISERV, INC. AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL INFORMATION

(Unaudited)

Free Cash Flow

	Years Ended December 31,
	2003			2002			2001
(in thousands)
Net cash provided by operating activities	$	518,101		$	579,238		$	447,539
Changes in securities processing receivables and payables-net		80,002			(63,923	)		(78,396	)
Net cash provided by operating activities before changes in securities processing receivables and payables-net		598,103			515,315			369,143
Capital expenditures, including capitalization of software costs for external customers		(143,242	)		(141,880	)		(104,609	)
Free cash flow	$	454,861		$	373,435		$	264,534

Free cash flow is measured as net cash provided by operating activities before changes in securities processing receivables and payables less capital expenditures including capitalization of software costs for external customers, as reported in the Company’s consolidated statements of cash flows. As the changes in securities processing receivables and payables are generally offset by changes in short-term borrowings and investments, which are included in financing and investing activities, management believes it is more meaningful to analyze changes in operating cash flows before the changes in securities processing receivables and payables. 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.

Internal Revenue Growth Percentages by Segment

	2003 Quarters
	First		Second		Third		Fourth		Total
Financial institution outsourcing, systems and services (“FIS”)	1	%	2	%	4	%	0	%	2	%
Health plan management services	18	%	27	%	37	%	37	%	31	%
Securities processing and trust services	-9	%	-8	%	-12	%	-4	%	-8	%
All other and corporate	-1	%	9	%	7	%	23	%	9	%
TOTAL	2	%	5	%	7	%	5	%	5	%

Internal revenue growth percentages are measured as the increase or decrease in total processing and services revenue for the current period less “acquired revenue from acquisitions” divided by total processing and services revenues from the prior year period plus “acquired revenue from acquisitions.” “Acquired revenue from acquisitions” was $374 million ($271 million in the FIS segment, $89 million in the Health segment and $14 million in the Securities & Trust segment) for the full year and represents pre-acquisition normalized revenue of acquired companies for the comparable prior year period. All internal revenue growth percentages have been adjusted to reflect the reclassification of revenues noted on page 7 (Note 1). The internal growth rate for 2003 in the Health plan management services segment was 31% (18% related to the prescription benefit management business that generates operating margins in the low single digits and 13% related to the remaining businesses in the segment). Internal revenue growth percentage is a non-GAAP financial measure that the Company believes is useful to investors because it provides an alternative to measure revenue growth excluding the impact of acquired revenues.

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