FIS (NYSE:FIS), the world's largest provider of banking and payments technology, today reported financial results for the quarter and full year ended December 31, 2011.
Fourth Quarter 2011
Revenue from continuing operations increased 7.0% to $1.5 billion in the fourth quarter of 2011, compared to $1.4 billion in the fourth quarter of 2010 and increased 4.9% on an organic basis. GAAP net earnings from continuing operations attributable to common stockholders totaled $123.0 million, or $0.41 per diluted share, compared to $121.3 million, or $0.40 per diluted share, in the prior year quarter.
Adjusted EBITDA increased 5.7% to $470.0 million in the fourth quarter of 2011, compared to adjusted EBITDA of $444.6 million in the 2010 quarter. The adjusted EBITDA margin was 31.5% compared to 31.8% in the fourth quarter of 2010. Adjusted net earnings from continuing operations increased to $199.3 million, or $0.66 per diluted share, compared to $196.9 million, or $0.64 per diluted share in the prior year quarter. Free cash flow totaled $293.9 million in the fourth quarter of 2011, compared to adjusted free cash flow of $221.6 million in the 2010 quarter.
Fourth quarter results exclude a $13.2 million, or $0.05 per share, net benefit related to adjustments from the Capco acquisition; debt extinguishment and refinancing costs of $38.8 million, or $0.09 per share; a $34.0 million, or $0.08 per share, non-cash charge related to an other than temporary decline in the market value of a non-strategic investment; and $62.1 million, or $0.14 per share, of acquisition related amortization as outlined in Exhibit E of the press release schedules.
Approximately $16.3 million, or $0.04 per share, of integration, severance and merger and acquisition costs are included in the current quarter results
Definitions of non-GAAP financial measures and reconciliations of non-GAAP measures to related GAAP measures are provided in subsequent sections of the press release narrative and supplemental schedules.
Full Year 2011
GAAP revenue for the full year 2011 totaled $5.7 billion compared to $5.3 billion for full year 2010.
GAAP net earnings from continuing operations attributable to common stockholders totaled $493.8 million, or $1.61 per diluted share, compared to $447.6 million, or $1.27 per diluted share, in the prior year.
Full year revenue increased 10.4% to $5.7 billion in 2011, compared to adjusted revenue of $5.2 billion in 2010, and increased 5.2% organically. Adjusted EBITDA increased 3.9% to $1.7 billion, compared to adjusted EBITDA of $1.6 billion in the prior year. The adjusted EBITDA margin was 29.4% for full year 2011, compared to 31.3% in 2010. Adjusted net earnings from continuing operations totaled $697.5 million, or $2.27 per diluted share, which is a 12.4% increase compared to $2.02 per diluted share in 2010. Free cash flow increased to $871.2 million for the full year 2011 compared to $790.8 million in 2010.
Excluded from the 2011 results is a $13.2 million, or $0.05 per share, net benefit related to adjustments from the Capco acquisition; debt extinguishment and refinancing costs of $38.8 million, or $0.09 per share; a non-cash charge of $34.0 million, or $0.08 per share, related to an other than temporary decline in the market value of a non-strategic investment; and $251.0 million, or $0.55 per share, of acquisition related amortization as outlined in Exhibit E of the press release schedules.
The full year 2011 results include approximately $38.4 million, or $0.09 per share, of integration, severance and merger and acquisition costs.
Definitions of non-GAAP financial measures and reconciliations of non-GAAP measures to related GAAP measures are provided in subsequent sections of the press release narrative and supplemental schedules.
"It was a solid quarter and another successful year for FIS. Organic revenue growth improved to 5.2% for the year, and adjusted earnings per share grew by 12.4%," stated Frank Martire, president and chief executive officer. "We continue to build scale and finished 2011 with more than $5.7 billion in revenue and $1.2 billion of operating cash flow. We are very pleased with the continued solid execution by our management team and employees around the world."
Segment Information
The following is a discussion of fourth quarter and full year results by segment:
- Financial Solutions:
Fourth quarter 2011 Financial Solutions revenue increased 5.9% to $533.4 million compared to $503.5 million in the 2010 quarter, driven by the addition of Capco's North American operations, growth in account processing and higher services revenue. Financial Solutions revenue increased 2.1% on an organic basis compared to the fourth quarter of 2010.
Financial Solutions EBITDA was $213.7 million, including approximately $9.1 million in integration and severance costs, compared to EBITDA of $219.9 million in the fourth quarter of 2010. The EBITDA margin was 40.1% compared to 43.7% in the prior year quarter, reflecting the addition of Capco, lower license revenue, growth in lower margin services revenue and integration and severance costs in the current year quarter.
For the full year 2011, Financial Solutions revenue increased 9.8% to $2.1 billion compared to $1.9 billion in 2010 and increased 3.6% on an organic basis. Full year 2011 EBITDA increased 1.6% to $841.1 million compared to $827.5 million in 2010. Approximately $12.4 million of integration and severance costs are included in the full year 2011 results.
- Payment Solutions:
Fourth quarter 2011 Payment Solutions revenue increased 2.2% to $642.0 million compared to $628.1 million in the 2010 quarter. Payment Solutions revenue increased 3.6% excluding the check-related businesses, which decreased $4.2 million to $117.1 million in the fourth quarter of 2011. Payment Solutions EBITDA increased 7.2% to $257.1 million in the fourth quarter of 2011 compared to $239.8 million in the fourth quarter of 2010. Integration and severance and merger and acquisition costs of approximately $3.2 million are included in the current year quarter. The EBITDA margin expanded 180 basis points to 40.0% compared to 38.2% in the prior year quarter.
For the full year 2011, Payment Solutions revenue totaled $2.5 billion which was comparable to 2010. Payment Solutions revenue increased 3.5% excluding the check related businesses which declined to $463.7 million in 2011 compared to $483.6 million in 2010, and excluding a $34.4 million gross-to-net accounting change for certain merchant interchange fees, which impacted comparisons in the first half of 2011. Full year 2011 EBITDA, which included integration and severance costs of approximately $13.6 million, increased 1.3% to $944.9 million compared to $932.4 million in 2010.
- International Solutions:
Fourth quarter International Solutions revenue increased 18.9% to $318.8 million compared to $268.2 million in the 2010 quarter, and increased 14.9% on an organic basis. The strong performance was driven primarily by continued growth in all regions including within Brazil card processing and Capco's European business. International Solutions EBITDA increased 14.1% to $92.8 million compared to $81.3 million in the fourth quarter of 2010. Integration and severance costs of approximately $1.5 million are included in the current year quarter. The EBITDA margin was 29.1% compared to 30.3% in the prior year quarter, reflecting the addition of Capco and lower license sales.
For the full year 2011, International Solutions revenue increased $343.9 million, or 41.2%, to a record $1.2 billion compared to $0.8 billion in 2010, and increased 21.7% on an organic basis. Full year 2011 EBITDA increased 32.2% to $269.9 million compared to $204.1 million in 2010. Approximately $2.9 million in integration and severance costs are included in the 2011 results.
- Corporate/Other:
Corporate costs, as adjusted, totaled $93.6 million in the fourth quarter 2011, excluding a $13.2 million net benefit related to adjustments from the Capco acquisition. This compares to corporate costs of $96.4 million in the prior year quarter. Included in the 2011 quarter were approximately $2.5 million of severance and merger and acquisition costs. Corporate costs, as adjusted, were $365.1 million for full year 2011 compared to $336.2 million in 2010, including approximately $9.5 million of severance and merger and integration costs in 2011.
Interest expense, net of interest income, was $64.5 million in the fourth quarter of 2011 which is comparable to the prior year quarter. Full year interest expense, net of interest income, increased to $258.8 million in 2011 compared to $172.9 million in 2010. The increase in interest expense for full year 2011 was due primarily to the recapitalization completed in the third quarter of 2010.
Other income, which totaled $6.7 million for the fourth quarter of 2011 and $9.1 million for full year 2011, excludes $38.8 million of debt refinancing costs and a $34.0 million non-cash charge related to an other than temporary decline in the market value of a non-strategic investment.
The effective tax rate was 33.8% in the fourth quarter of 2011 compared to 30.6% in the prior year quarter. The effective tax rate for full year 2011 was 32.8% compared to 35.2% in 2010.
Balance Sheet
Cash and cash equivalents totaled $415.5 million as of December 31, 2011. Debt outstanding totaled approximately $4.8 billion as of December 31, 2011. Capital expenditures totaled $78.5 million in the fourth quarter of 2011, compared to $86.7 million in the prior year quarter. Full year capital expenditures declined to $300.3 million or 5.2% of revenue in 2011 compared to $314.0 million or 6.0% of revenue in 2010.
FIS repurchased 8.5 million shares of its common stock in the fourth quarter of 2011 at a total cost of approximately $218.2 million, bringing the total number of shares repurchased to 15 million for the year at a total cost of approximately $399.2 million.