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Fidelity National Information Services I Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 5, 2009 04:21PM

Fidelity National Information Services I (FIS) filed Quarterly Report for the period ended 2009-09-30. Certegy Inc. provides credit debit and merchant card processing e-banking check risk management and check cashing services to financial institutions and merchants worldwide. Fidelity National Information Services I has a market cap of $4.2 billion; its shares were traded at around $21.9 with a P/E ratio of 13.1 and P/S ratio of 1.2. The dividend yield of Fidelity National Information Services I stocks is 0.9%. Fidelity National Information Services I had an annual average earning growth of 9.2% over the past 5 years.

Highlight of Business Operations:

Cost of revenues totaled $600.5 million and $661.8 million for the three-month periods and $1,800.4 million and $1,984.5 million for the nine-month periods ended September 30, 2009 and 2008, respectively, resulting in gross profit of $250.2 million and $222.2 million for the three-month periods and $682.9 million and $599.5 million for the nine-month periods ended September 30, 2009 and 2008, respectively. Gross profit as a percentage of revenues (“gross margin”) was 29.4% and 25.1% in the three-month periods and 27.5% and 23.2% in the nine-month periods ended September 30, 2009 and 2008, respectively. The decrease in cost of revenues of $61.3 million in the three-month period and $184.1 million in the nine-month period ended September 30, 2009, as compared to the 2008 periods is primarily attributable to foreign currency adjustments resulting from a strengthening of the U.S. dollar and the decrease in revenue across our three operating segments. The increase in gross margin of 430 basis points in the three-month and nine-month periods ended September 30, 2009 over the 2008 periods was primarily driven by cost reduction activities and improved operating efficiency.

Selling, general and administrative expenses totaled $92.2 million and $79.9 million for the three-month periods and $281.5 million and $308.9 million for the nine-month periods ended September 30, 2009 and 2008, respectively. The increase of $12.3 million in the three-month period as compared to 2008 is primarily due to merger related costs associated with the Metavante acquisition. The decrease of $27.4 million in the nine-month period ended September 30, 2009, as compared to 2008 is primarily due to merger related costs incurred in the prior year related to integration of the 2007 eFunds acquisition and restructuring activities related to the LPS spin-off. The 2008 nine-month period included stock-based compensation charges of $14.1 million related to the accelerated vesting of all stock awards held by eFunds employees assumed in the eFunds acquisition and $2.6 million of acceleration charges related to terminations. In addition to the acceleration of stock compensation, the nine-month period ended September 30, 2008 included $13.6 million in other integration and restructuring costs and $18.0 million for administrative costs associated with LPS that did not qualify for discontinued operations treatment. These amounts are partially offset by costs of $14.8 million incurred in the 2009 period related to the Metavante Merger.

Interest expense totaled $33.2 million and $47.7 million for the three-month periods and $97.0 million and $130.1 million for the nine-month periods ended September 30, 2009 and 2008, respectively. The decrease of $14.5 million in the three-month period ended September 30, 2009 is related to the 2008 write-off of $12.4 million in capitalized debt issue costs associated with the Term Loan B retired in conjunction with the spin-off of LPS, a reduction in our overall debt balance and a lower interest rate on the floating portion of our debt. The $33.1 million reduction in the nine-month period ended September 30, 2009 results from a reduction in our overall debt balance combined with a $9.3 million make-whole premium in 2008 on the redemption of the eFunds Notes, the $12.4 million write-off of debt issue costs, a reduction in our overall debt balance and lower interest rate on floating portion of our debt.

Net earnings from continuing operations attributable to FIS common stockholders totaled $67.6 million and $43.2 million for the three-month periods ended September 30, 2009 and 2008, respectively, or $0.35 and $0.23 per diluted share, respectively, due to the factors described above. Net earnings from continuing operations attributable to FIS common stockholders totaled $161.5 million and $67.4 million for the nine-month periods ended September 30, 2009 and 2008, respectively, or $0.84 and $0.35 per diluted share, respectively, due to the factors described above.

Revenues for the International Solutions segment totaled $203.5 million and $195.4 million for the three-month periods and $544.2 million and $579.1 million for the nine-month periods ended September 30, 2009 and 2008, respectively. The overall segment increase of $8.1 million in the three-month period ended September 30, 2009 as compared to the 2008 period primarily related to an increase in core processing revenue driven by strong services revenue and volumes in the Asia Pacific and EMEA regions and payments revenue driven by organic growth across all regions, partially offset by unfavorable currency effects of $16.8 million. The overall decrease of $34.9 million in the nine-month period ended September 30, 2009, as compared to the 2008 period resulted primarily from unfavorable currency effects of $82.9 million. Excluding the impact of unfavorable foreign currency, total International Solutions segment revenue increased 8.3% for the nine-month period ended September 30, 2009, driven by growth in core processing in the Asia Pacific and EMEA regions and payments revenue growth across all regions.

The Corporate and Other segment results consist of selling, general and administrative expenses and depreciation and intangible asset amortization not otherwise allocated to the reportable segments. Corporate and Other expenses were $87.2 million and $86.7 million for the three-month periods and $255.8 million and $303.2 million for the nine-month periods ended September 30, 2009 and 2008, respectively. The overall Corporate and Other decrease of $47.4 million for the nine-month period ended September 30, 2009, as compared to the 2008 period is primarily due to merger related costs incurred in the prior year related to integration of the 2007 eFunds acquisition and restructuring activities related to the LPS spin-off. The 2008 nine-month period also included stock-based compensation charges of $14.1 million related to the accelerated vesting of all stock awards held by eFunds employees assumed in the eFunds acquisition and $2.6 million of acceleration charges related to terminations. In addition to the acceleration of stock compensation, the nine-month period ended September 30, 2008 included $13.6 million in other integration and restructuring costs and $18.0 million for administrative costs associated with LPS that did not qualify for discontinued operations treatment. These amounts are partially offset by costs of $14.8 million incurred in the 2009 period related to the Metavante Merger.

Read the The complete Report

FIS is in the portfolios of Ronald Muhlenkamp of Muhlenkamp Fund, John Keeley of Keeley Fund Management, George Soros of Soros Fund Management LLC, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.


Stocks Discussed: FIS,
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