<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-12365
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER:
BA Merchant Services, Inc.
STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION:
Delaware
I.R.S. EMPLOYER IDENTIFICATION NUMBER:
94-3252840
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES:
One South Van Ness Avenue
San Francisco, California 94103
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
415-241-3390
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock, $0.01 par value -- 16,263,882 outstanding on March 31,
1998
Class B Common Stock, $0.01 par value -- 32,400,000 outstanding on March 31,
1998
- -------------------------------------------------------------------------------
This document serves both as an analytical review for analysts, shareholders,
and other interested persons, and as the quarterly report on Form 10-Q of BA
Merchant Services, Inc. to the Securities and Exchange Commission, which has
taken no action to approve or disapprove the report or to pass upon its
accuracy or adequacy. Additionally, this document is to be read in conjunction
with BA Merchant Services, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1997, including the consolidated financial statements and
notes thereto.
<PAGE>
INDEX
BA MERCHANT SERVICES, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheet.................................................... 1
Statement of Operations.......................................... 2
Statement of Cash Flows.......................................... 3
Statement of Changes in Stockholders' Equity..................... 4
Notes to Financial Statements.................................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
Results of Operations............................................ 8
Balance Sheet Review............................................. 8
Liquidity and Capital Resources.................................. 8
NationsBank Corporation Merger................................... 9
Year 2000........................................................ 9
Forward-Looking Statements....................................... 9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form-8-K................................. 10
Signatures....................................................... 11
Exhibit Index.................................................... 12
</TABLE>
i
<PAGE>
PART I
FINANCIAL INFORMATION
BA MERCHANT SERVICES, INC.
BALANCE SHEET
UNAUDITED
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
(DOLLAR AMOUNTS IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents........................... $ 68,874 $ 29,426
Short-term investments.............................. 53,785 64,018
Drafts in transit................................... 107,604 110,445
Accounts receivable................................. 58,061 63,461
Other current assets................................ 7,754 11,533
-------- --------
Total current assets.............................. 296,078 278,883
Property and equipment, net........................... 28,250 27,762
Other assets.......................................... 19,556 25,422
-------- --------
Total assets........................................ $343,884 $332,067
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 277 $ 32
Merchants payable................................... 8,757 8,058
Accrued liabilities................................. 6,969 6,050
Accrued credit card association and interchange
fees............................................... 8,823 9,192
Income taxes payable................................ 7,434 3,459
Other current liabilities........................... 10,786 13,207
-------- --------
Total current liabilities......................... 43,046 39,998
Other liabilities..................................... 858 816
-------- --------
Total liabilities................................... 43,904 40,814
-------- --------
Stockholders' equity:
Class A Common Stock, par value $0.01; authorized
200,000,000 shares; issued and outstanding 16,263,882
shares at March 31, 1998 and 16,253,126 at December
31, 1997............................................. 162 162
Class B Common Stock, par value $0.01; authorized
50,000,000 shares; issued and outstanding 32,400,000
shares............................................... 324 324
Additional paid-in capital............................ 252,576 252,479
Retained earnings..................................... 46,979 38,280
Accumulated foreign currency translation adjustments,
net of income taxes.................................. ( 61) 8
-------- --------
Total stockholders' equity.......................... 299,980 291,253
-------- --------
Total liabilities and stockholders' equity.......... $343,884 $332,067
======== ========
</TABLE>
See Notes to Financial Statements.
1
<PAGE>
BA MERCHANT SERVICES, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
---------------
1998 1997
------- -------
(UNAUDITED)
<S> <C> <C>
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net revenue.................................................... $41,834 $35,969
------- -------
Operating expense:
Salaries and employee benefits............................... 9,451 8,059
Data processing and communications........................... 9,249 7,668
General and administrative................................... 5,667 5,492
Depreciation................................................. 3,549 2,281
Occupancy.................................................... 750 747
Amortization of intangibles.................................. 444 113
------- -------
Total operating expense.................................... 29,110 24,360
------- -------
Income from operations......................................... 12,724 11,609
Net interest income............................................ 2,020 1,524
------- -------
Income before income taxes................................. 14,744 13,133
Provision for income taxes..................................... 6,045 5,428
------- -------
Net income................................................. $ 8,699 $ 7,705
======= =======
Earnings per common share...................................... $ 0.18 $ 0.16
Diluted earnings per common share.............................. $ 0.18 $ 0.16
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
BA MERCHANT SERVICES, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------
1998 1997
------- --------
(UNAUDITED)
<S> <C> <C>
(DOLLAR AMOUNTS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 8,699 $ 7,705
Adjustments to net income to arrive at cash provided by
operating activities:
Depreciation.............................................. 3,549 2,281
Amortization of intangibles............................... 444 113
Benefit from deferred income taxes........................ (832) (342)
Amortization of restricted stock.......................... 94 102
Amortization of loan fees................................. -- 85
Changes in operating assets and liabilities:
Decrease in drafts in transit........................... 2,841 50,588
Decrease in accounts receivable......................... 5,400 1,341
Decrease (increase) in other current assets............. 3,778 (315)
Increase in accounts payable............................ 245 3,119
Increase in current income taxes payable................ 3,975 4,326
Increase in merchants payable........................... 700 242
Increase in accrued liabilities......................... 919 194
(Decrease) increase in accrued credit card association
and interchange fees................................... (369) 1,104
Other, net.............................................. 3,875 (567)
------- --------
Net cash provided by operating activities.............. 33,318 69,976
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.......................... (4,037) (4,278)
Purchase of short-term investments.......................... (1,669) --
Maturities of short-term investments........................ 11,902 --
------- --------
Net cash provided by (used for) investing activities... 6,196 (4,278)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in underwriting expense............................ -- ( 96)
Issuance of common stock.................................... 3 --
BAC's change in funding..................................... -- 7,396
------- --------
Net cash used for financing activities................. 3 7,300
------- --------
EXCHANGE RATE EFFECT ON CASH AND CASH EQUIVALENTS........... (69) --
------- --------
Increase in cash and cash equivalents....................... 39,448 72,998
Cash and cash equivalents at beginning of period............ 29,426 138,413
------- --------
Cash and cash equivalents at end of period.................. $68,874 $211,411
======= ========
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
BA MERCHANT SERVICES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
------------------
1998 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
(DOLLAR AMOUNTS IN THOUSANDS)
CLASS A COMMON STOCK:
Balance at beginning of period.............................. $ 162 $ 162
Issuance of additional stock................................ -- --
-------- --------
Balance at end of period.................................. 162 162
CLASS B COMMON STOCK:
Balance at beginning of period.............................. 324 302
Issuance of additional common stock......................... -- --
-------- --------
Balance at end of period.................................. 324 302
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of period.............................. 252,479 249,622
Amortization of unvested portion of restricted stock........ 94 102
Additional underwriting expenses............................ -- (96)
Issuance of additional common stock......................... 3 --
-------- --------
Balance at end of period.................................. 252,576 249,628
CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT:
Balance at beginning of period.............................. 8 --
Translation adjustments..................................... (69) --
-------- --------
Balance at end of period.................................. (61) --
RETAINED EARNINGS:
Balance at beginning of period.............................. 38,280 2,039
Net income.................................................. 8,699 7,220
-------- --------
Balance at end of period.................................. 46,979 9,259
BAC'S EQUITY INTEREST:
Balance at beginning of period.............................. -- 27,883
Net income.................................................. -- 485
BAC's change in funding..................................... -- 7,396
-------- --------
Balance at end of period.................................. -- 35,764
-------- --------
Total stockholders' equity end of period................ $299,980 $295,115
======== ========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
BA MERCHANT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--DESCRIPTION OF BUSINESS, ORGANIZATION AND BASIS OF PRESENTATION
Description of Business--BA Merchant Services, Inc. ("BAMS" or the
"Company") provides an array of payment processing and related information
products and services to merchants throughout the United States and certain
Asian countries who accept credit, charge and debit cards as payment for goods
and services. BAMS is one of the largest processors of merchant debit and
credit card transactions in the United States.
Organization and Domestic Operations--BAMS was incorporated on October 11,
1996 and commenced operations December 4, 1996, upon the transfer by Bank of
America National Trust & Savings Association (the "Bank") and Bank of America
NW, National Association ("BANW", formerly Seattle-First National Bank) of
their respective United States merchant processing businesses to BAMS in
consideration for 30.2 million shares of Class B Common Stock. Effective
January 1, 1997, BANW was merged into the Bank. The Bank is a wholly owned
subsidiary of BankAmerica Corporation ("BAC"). References to "BAC" in these
financial statements and notes thereto shall be deemed to be references to
BankAmerica Corporation and its subsidiaries and affiliates, including the
Bank and, prior to January 1, 1997, BANW.
During December 1996, BAMS issued 16.1 million shares of Class A Common
Stock in underwritten initial public offerings which generated net cash
proceeds of $232.9 million.
Asian Operations--On June 2, 1997, BAMS acquired BAC's merchant processing
business in Thailand (net assets of approximately $91,000) in consideration
for 150,000 shares of Class B Common Stock. On July 1, 1997, BAMS acquired
BAC's merchant processing business in the Philippines (net assets of
approximately $153,000) in consideration for 550,000 shares of Class B Common
Stock. On September 30, 1997, BAMS acquired BAC's merchant processing business
in Taiwan and merchant processing administrative office in Hong Kong (net
assets of approximately $2.2 million) in consideration for 1,500,000 shares of
Class B Common Stock. The acquisition of these entities will be collectively
referred to as the "Asia Acquisitions". With the issuance by BAMS of
additional shares of Class B Common Stock to BAC in connection with the Asia
Acquisitions, BAC's financial interest in BAMS increased from 65.0% to 66.6%.
NationsBank Corporation Merger--On April 13, 1998, BAC and NationsBank
Corporation ("NBC") announced a definitive agreement to merge in a stock-for-
stock transaction. The merger, which is expected to close in the fourth
quarter of 1998, is subject to shareholder and regulatory approvals and the
satisfaction or waiver of other conditions set forth in the merger agreement.
For further disclosure, see Management's Discussion and Analysis of Financial
Condition and Results of Operations--"NationsBank Corporation Merger" on page
9.
Basis of Presentation--The unaudited financial statements of BAMS are
prepared in conformity with generally accepted accounting principles for
interim financial information, the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. In the opinion of management, all adjustments necessary for a
fair presentation of the financial position and results of operations for the
periods presented have been included. All such adjustments are of a normal
recurring nature. These unaudited financial statements should be read in
conjunction with the audited consolidated financial statements included in
BAMS' Annual Report on Form 10-K for the year ended December 31, 1997. Results
for the interim periods should not be considered indicative of results to be
expected for the full year.
BAC's transfer to BAMS of certain assets and liabilities of its United
States and certain Asian merchant processing businesses (net assets) was
accounted for as a reorganization of entities under common control and,
accordingly, the transfer of these net assets was accounted for at historical
cost in a manner similar to a pooling of interests. Included in the transfer
of net assets was Seafirst Merchant Services, Inc. ("SMSI"), a wholly owned
subsidiary of BANW. SMSI was subsequently dissolved on December 29, 1997. The
accompanying
5
<PAGE>
BA MERCHANT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
financial statements have been prepared as if the Company had operated as a
separate entity for all periods presented. The financial statements include
the combined historical results of operations, assets and liabilities of BAC's
merchant processing businesses in Thailand, the Philippines, Taiwan and the
merchant processing administrative office in Hong Kong for all periods prior
to the Asia Acquisitions.
Prior to the respective dates of the Asia Acquisitions, changes in BAC's
equity interest represented net income of the Company adjusted for net cash
transfers to and from BAC. Additionally, prior to these dates, the financial
statements include allocations of certain assets (primarily property and
equipment) and expenses relating to the merchant processing businesses
transferred from BAC. Management believes these allocations are reasonable.
Certain of the pre-Asia Acquisition expenses in the financial statements are
not necessarily indicative of the costs that would have been incurred if the
Company had performed these functions as a stand-alone entity. Therefore,
prior to the respective dates of the Asia Acquisitions, the financial
statements may not necessarily reflect the Company's results of operations,
changes in equity and cash flows as they would have been had the Company owned
and operated the Asian operations. Subsequent to these dates, the Company
performed these functions using its own resources and purchased services (from
BAC and other companies) and was responsible for the cost and expenses
associated with the management of the Asian operations.
NOTE 2--INCOME TAXES
The following is a summary of the components of income tax expense:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-------------
1998 1997
------ ------
<S> <C> <C>
Provision for income taxes:
Federal..................................................... $4,541 $4,139
State ...................................................... 1,330 1,147
Foreign..................................................... 174 142
------ ------
Total..................................................... $6,045 $5,428
====== ======
</TABLE>
The Company's estimated annual effective income tax rate for the three month
periods ended March 31, 1998 and 1997 was 41.0% and 41.3%, respectively. These
rates are higher than the federal statutory tax rate of 35% due principally to
state income taxes.
NOTE 3--EARNINGS PER COMMON SHARE
Effective December 15, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128). Under the
new requirements, the Company's computation of earnings per common and common
equivalent share is replaced by earnings per common share, which excludes any
dilutive effect of stock options and warrants outstanding during the period.
Earnings per common share is computed by dividing net income applicable to
common stock by the average number of common shares outstanding during the
period.
Also, under SFAS No. 128, the Company's computation of earnings per common
and common equivalent share, assuming full dilution, is replaced with diluted
earnings per common share. Diluted earnings per common share is computed by
dividing net income applicable to common stock by the average number of common
shares
6
<PAGE>
BA MERCHANT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
outstanding during the period including the dilutive effect of stock options
and warrants outstanding during the period. The dilutive effect of stock
options and warrants outstanding during the period is computed using the
average market price of the Company's common stock for the period.
Earnings per share for the three month period ended March 31, 1997 has been
computed by dividing net income by the weighted average number of common
shares outstanding assuming the stock issued in the Asia Acquisitions had been
outstanding since January 1, 1994. The earnings per common share amount for
each period presented is the same as the diluted earnings per common share
amount presented for the respective period.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-------------
1998 1997
------ ------
<S> <C> <C>
(amounts in thousands, except earnings per share data)
Net income.................................................... $8,699 $7,705
Average number of common shares outstanding and common stock
equivalents.................................................. 48,802 N/A
Pro forma average number of common shares and common stock
equivalents outstanding...................................... N/A 48,700
Diluted earnings per common share............................. $ 0.18 $ 0.16
</TABLE>
NOTE 4--RELATED PARTIES
The Company and BAC engage in various intercompany transactions and
arrangements including the provision by BAC of various services to the
Company. Such services are currently provided pursuant to various intercompany
agreements which, among other things, grant to the Company a license to use
the Bank of America name and certain trademarks and service marks in
connection with the Company's business.
Additional services provided under the intercompany agreements include
product distribution, processing, system support, telecommunications,
marketing, regulatory compliance, legal, tax and treasury, accounting and
audit and other miscellaneous support and administrative services.
The Company believes that the cost of services provided under the
intercompany arrangements have not been materially different from the costs
that would have been incurred if the Company was unaffiliated with BAC.
NOTE 5--COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130), which
requires companies to report and display comprehensive income and its
components. The adoption of SFAS No. 130 in the first quarter of 1998 did not
have an impact on the Company's financial position or results of operations.
The following is a summary of the components of total comprehensive income,
net of related income taxes:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
--------------
1998 1997
------ ------
<S> <C> <C>
Net income................................................... $8,699 $7,705
Foreign currency translation adjustments..................... ( 69) --
------ ------
Total comprehensive income................................. $8,630 $7,705
====== ======
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Revenue--For the three month period ended March 31, 1998, net revenue
was $41.8 million, up $5.9 million, or 16 percent over the three month period
ended March 31, 1997. This increase was primarily attributable to a $1.9
billion or 27 percent increase in sales volume processed over the comparable
prior year quarter. Increased sales volume resulted primarily from growth in
the Company's merchant base through continued emphasis on marketing and sales
growth, including expansion into new sales territories. The growth rate in net
revenue was lower than that for sales volume processed primarily as a result
of greater sales volume growth in lower spread business (debit card and high
volume merchants) and to a lesser degree, declining spreads in existing
business consistent with historical competitive trends in the merchant
processing industry.
Operating Expense--Total operating expense was $29.1 million for the first
quarter of 1998, an increase of $4.8 million, or 19 percent over the same
period a year ago. On the same comparative basis, data processing and
communications expense increased $1.6 million or 21 percent due to increased
authorization expense and data processing contract services related to growth
in transaction volume. Salaries and employee benefits increased $1.4 million
or 17 percent, reflecting growth in direct sales staff and related support
personnel. Depreciation expense increased $1.3 million or 56 percent due to
the acquisition of merchant processing terminals required for the Company's
expanded merchant base and the impact of the HostLINKTM transaction processing
system installed during the second quarter of 1997. Amortization of
intangibles increased $331,000 related to amortization of the acquisition of
the portfolio of merchant processing contracts in September 1997.
Net Income--The Company earned net income of $8.7 million for the first
quarter of 1998 compared to net income of $7.7 million for the first quarter
of 1997. Net income from domestic operations for the first quarter of 1998
increased approximately $1.3 million or 18% over the comparable quarter in
1997. This improvement was a result of an increase in domestic net revenue of
$7.0 million or 21 percent over the first quarter of 1997 on an increase in
sales volume processed of $1.9 billion or 28%. First quarter 1998 net income
from the Company's Asian operations decreased 66 percent from first quarter
1997, reflecting both increased competition and the area's economic turmoil.
BALANCE SHEET REVIEW
The Company's assets totaled $343.9 million as of March 31, 1998, up $11.8
million from December 31, 1997. The decreases in accounts receivable ($5.4
million), other current assets ($3.8 million) and other current liabilities
($2.4 million) since December 31, 1997 are a result of lower net revenue and
sales volume processed in the first quarter of 1998 versus the fourth quarter
of 1997 consistent with historical seasonality. Other assets decreased $5.9
million since December 31, 1997 primarily related to a $3.2 million reduction
in the foreign currency translation reserves due to expiration of foreign
exchange contracts and an $815,000 reduction in miscellaneous assets. Income
taxes payable increased $4.0 million since December 31, 1997 relating to the
due dates of payments to be made to taxing authorities.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated net cash from operating activities of $33.3 million
and $70.0 million for the three month periods ended March 31, 1998 and 1997,
respectively. The net cash provided by operating activities for the 1998
period was primarily related to net income adjusted for non-cash depreciation
and amortization of $12.2 million, plus an aggregate of $12.0 million related
to decreases in drafts in transit, accounts receivable and other current
assets and a $4.0 million increase in income taxes payable. Prior to the time
BankAmerica Corporation ("BAC") transferred its merchant processing businesses
to the Company, funds generated by the Company's operations and not used for
investments were remitted to BAC.
Working capital increased by $14.1 million to $253.0 million at March 31,
1998. The Company anticipates that its cash and cash equivalent and short-term
investment balances will be adequate for funding the daily cash
8
<PAGE>
needs of the business as well as for acquisitions, strategic technology
investments and the funding of research and product development.
The Company has a commitment for a $100 million revolving line of credit
with Bank of America expiring December 31, 1998. Borrowings outstanding under
the commitment amounted to $0.3 million as of March 31, 1998.
NATIONSBANK CORPORATION MERGER
On April 13, 1998, BAC and NationsBank Corporation (NBC) announced a
definitive agreement to merge in a stock-for-stock transaction. The merger,
which is expected to close in the fourth quarter of 1998, is subject to
shareholder and regulatory approvals and the satisfaction or waiver of other
conditions set forth in the merger agreement. Under various contractual
arrangements with BAC (described on page 7 of the Company's Annual Report on
Form 10-K under "Relationship with BankAmerica and the Bank"), the Company has
access to BAC's client base, the Bank of America name and trademarks, the
implementation of On-Us transaction processing and marketing, the Bank's
distribution channels, and credit and debit card association and network
sponsorships. The Company is BAC's exclusive provider of merchant processing
services. There have been no decisions concerning the merchant processing
services of the combined business. At this time, the Company can not estimate
the impact that the BAC/NBC merger would have on its financial position or
results of operations.
YEAR 2000
The Company has developed plans to deal with the impact of the year 2000 on
its systems and operations. The Company continues to refine and assess its
plans to deal with the year 2000 issue. Year 2000 related expenses for the
three months ended March 31, 1998 were immaterial and the Company believes
that the expenses to bring its computer systems and software year 2000
compliant will not be material to its results of operations in any one future
reporting period. For more information regarding the year 2000 issue and year
2000 expenses, please see the Company's Annual Report on Form 10-K, p.15,
"Year 2000 Expenses."
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, usually containing the
words "estimate", "project", "expect" or similar expressions. These statements
are subject to uncertainties, including those discussed in this report and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations--"Forward-Looking Statements" in BAMS' Annual Report on Form 10-K
for the year ended December 31, 1997, that could cause actual results to
differ materially. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
9
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the quarterly period
ended March 31, 1998. After the first quarter of 1998, the Company filed a
report on Form 8-K dated April 17, 1998. The April 17 report filed, pursuant
to Item 5 of the report, the definitive agreement between BankAmerica
Corporation (the parent of Bank of America National Trust and Savings
Association, which owns 100% of the Company's Class B Common Stock, or
approximately 66.6% of the Company's outstanding common stock) and NationsBank
Corporation to merge in a stock-for-stock transaction.
10
<PAGE>
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BA MERCHANT SERVICES, INC.
(Registrant)
By Principal Executive Officer and
Duly Authorized Signatory:
/s/ Sharif M. Bayyari
----------------------------------
SHARIF M. BAYYARI
President and Chief Executive
Officer
May 13, 1998
By Principal Financial Officer and
Duly Authorized Signatory:
/s/ James H. Williams
----------------------------------
JAMES H. WILLIAMS
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
May 13, 1998
11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
REFERENCE DESCRIPTION
--------- -----------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 68,874 29,426
<SECURITIES> 53,785 64,018
<RECEIVABLES> 165,665 173,906
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 296,078 278,883
<PP&E> 71,707 68,133
<DEPRECIATION> 43,457 40,371
<TOTAL-ASSETS> 343,884 332,067
<CURRENT-LIABILITIES> 43,046 39,998
<BONDS> 0 0
0 0
0 0
<COMMON> 486 486
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 343,884 332,067
<SALES> 0 0
<TOTAL-REVENUES> 41,834 35,969
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 29,110 24,360
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (2,020) (1,524)
<INCOME-PRETAX> 14,744 13,133
<INCOME-TAX> 6,045 5,428
<INCOME-CONTINUING> 8,699 7,705
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 8,699 7,705
<EPS-PRIMARY> .18 .16
<EPS-DILUTED> .18 .16
</TABLE>
