SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED JUNE 30, 1995 COMMISSION FILE NUMBER 0-14948
FISERV, INC.
(Exact name of Registrant as specified in its charter)
WISCONSIN 39-1506125
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
255 FISERV DRIVE, BROOKFIELD, WI 53045
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (414) 879 5000
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 ( )
At June 30, 1995, 44,776,000 shares of common stock of the Registrant were
outstanding.
Exhibit Index appears at page 8.
1
<PAGE>
PART I. FINANCIAL INFORMATION
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the Three and Six-Month Periods Ended June 30, 1995 and 1994
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(In thousands except per share amounts)
Revenues $173,470 $139,801 $330,649 $279,653
--------- --------- --------- ---------
Cost of revenues:
Salaries, commissions and payroll
related costs 80,855 67,763 156,075 136,001
Data processing expenses, rentals
and telecommunication costs 24,060 20,504 46,677 41,736
Other operating expenses 32,656 25,065 60,648 50,921
Depreciation and amortization of
property and equipment 9,432 8,146 18,794 14,918
Amortization of intangible assets 3,605 2,742 6,351 5,407
Capitalization of internally
generated
computer software-net (1,883) (2,841) (3,532) (4,953)
--------- --------- --------- ---------
Total cost of revenues 148,725 121,379 285,013 244,030
--------- --------- --------- ---------
Operating income 24,745 18,422 45,636 35,623
Interest expense - net 4,437 1,632 6,274 3,206
--------- --------- --------- ---------
Income before income taxes 20,308 16,790 39,362 32,417
Income tax provision 8,326 6,716 16,138 12,967
--------- --------- --------- ---------
Net income $11,982 $10,074 $23,224 $19,450
========= ========= ========= =========
Net income per common and
common equivalent share $0.28 $0.25 $0.55 $0.48
========= ========= ========= =========
Shares used in computing
net income per share 43,409 40,532 42,157 40,489
========= ========= ========= =========
See notes to consolidated financial statements.
2
<PAGE>
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1995 1994
------------ ------------
(In thousands)
ASSETS
Cash and cash equivalents $60,250 $29,683
Accounts receivable 138,491 122,984
Prepaid expenses and other assets 43,645 34,760
Trust account investments 905,113 1,041,474
Other investments 67,292 64,777
Property and equipment-net 129,925 114,966
Internally generated computer software-net 71,128 67,820
Identifiable intangible assets relating
to acquisitions-net 37,650 36,487
Goodwill-net 519,807 148,394
---------- ----------
Total $1,973,301 $1,661,345
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $25,019 $22,060
Accrued expenses 50,271 59,742
Accrued income taxes 2,289 1,952
Deferred revenues 36,309 10,836
Trust account deposits 923,732 1,035,217
Long-term debt 391,761 143,864
Other long-term obligations 7,112 6,152
Deferred income taxes 25,275 22,800
---------- ----------
Total liabilities 1,461,768 1,302,623
---------- ----------
Stockholders' equity:
Common stock outstanding, 44,776,000 and
39,997,000 shares, respectively 448 400
Additional paid-in capital 313,372 184,748
Unrealized gain on investments 11,674 11,054
Accumulated earnings 186,039 162,520
---------- ----------
Total stockholders' equity 511,533 358,722
---------- ----------
Total $1,973,301 $1,661,345
========== ==========
See notes to consolidated financial statements.
3
<PAGE>
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Six-Month Periods Ended June 30, 1995 and 1994
Six Months Ended
June 30,
1995 1994
------------------------
(In thousands)
Cash flows from operating activities:
Net income $23,224 $19,450
Adjustments to reconcile income to net cash provided
by operating activities:
Deferred income taxes 7,783 7,648
Depreciation and amortization of property and
equipment 18,794 14,918
Amortization of intangible assets 6,351 5,407
Capitalization of internally generated computer
software-net (3,532) (4,953)
--------- ---------
52,620 42,470
Cash provided (used) by changes in assets and
liabilities, net of effects from acquisitions
of businesses:
Accounts receivable 2,107 8,180
Prepaid expenses and other assets (5,221) (1,025)
Accounts payable and accrued expenses (24,350) (12,804)
Deferred revenue 4,859 1,572
Income taxes payable 325 (41)
--------- ---------
Net cash provided by operating activities 30,340 38,352
--------- ---------
Cash flows from investing activities:
Capital expenditures (22,709) (32,062)
Investments and other assets 2,982 (11,868)
Payment for acquisition of businesses (252,836) (4,684)
Trust account investments 136,547 (118,608)
--------- ---------
Net cash used by investing activities (136,016) (167,222)
--------- ---------
Cash flows from financing activities:
Borrowings and other long-term obligations-net 247,138 7,594
Issuance of common stock 590 2,081
Trust account deposits (111,485) 118,137
--------- ---------
Net cash provided by financing activities 136,243 127,812
--------- ---------
Change in cash 30,567 (1,058)
Beginning balance 29,683 36,349
--------- ---------
Ending balance $60,250 $35,291
========= =========
See notes to consolidated financial statements.
4
<PAGE>
FISERV, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet as of June 30, 1995 and the related consolidated
statements of income and cash flows for the three and six-month periods ended
June 30, 1995 and 1994 are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such financial statements have
been included. Such adjustments consisted only of normal recurring items.
Interim results are not necessarily indicative of results for a full year. The
financial statements and notes are presented as permitted by Form 10-Q, and do
not contain certain information included in the annual financial statements and
notes of FIserv, Inc. and subsidiaries (the Company or the Registrant).
2. ACQUISITIONS
The Company completed the acquisition of Information Technology, Inc. (ITI) on
May 17, 1995. The transaction was accomplished through the payment of cash and
the issuance of 4,574,000 shares of Common Stock of the Company and has been
accounted for as a purchase. Accordingly, the accompanying financial statements
include the results of operations of ITI from the date of acquisition. The
Company has also agreed to acquire Lincoln Holdings, Inc. (LHI) for
approximately 840,000 shares of Common Stock of the Company in a transaction
being accounted for as a pooling of interests. The acquisition is subject to
FDIC approval, which is expected to be forthcoming. Accordingly, the
accompanying financial statements include the accounts of LHI for all periods
presented. The following summary compares restated results of operations for
1995 to results as originally presented for 1994.
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
----------------------------------------------
(In thousands)
Revenues $173,470 $135,793 $330,649 $271,689
----------------------------------------------
Income before taxes 20,308 15,615 39,362 30,095
----------------------------------------------
Net income $11,982 $9,369 $23,224 $18,057
==============================================
Net income per share $0.28 $0.24 $0.55 $0.46
==============================================
Shares used in computing net
income per share 43,409 39,692 42,157 39,649
3. SHARES USED IN COMPUTING NET INCOME PER SHARE
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
--------------------------------------
(In thousands)
Weighted average number of common
shares outstanding 42,409 39,757 41,251 39,716
Shares issuable upon exercise of options
reduced by the number of shares which
could have been purchased with the
proceeds of such exercise 1,000 775 906 773
------------------------------------
Shares used 43,409 40,532 42,157 40,489
====================================
Income per common and common equivalent share is computed using the weighted
average number of common and dilutive common equivalent shares outstanding
during the periods, after restatement for shares issued in the acquisition of
Lincoln Holdings, Inc. accounted for as a pooling of interests.
5
<PAGE>
4. ACCOUNTING FOR INCOME TAXES
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) operating and tax
credit carryforwards. Significant components of the Company's net deferred tax
liability as of June 30, 1995 and December 31, 1994 are as follows:
June 30, December 31,
1995 1994
------------- -------------
Allowance for doubtful accounts $1,610,000 $1,571,000
Accrued expenses not currently deductible 7,522,000 11,392,000
Other 7,456,000 1,931,000
Net operating loss and credit carryforwards 7,539,000 5,901,000
Deferred costs (6,809,000) (4,911,000)
Internally generated capitalized software (29,158,000) (27,120,000)
Excess of tax over book depreciation and
amortization (5,372,000) (4,069,000)
Unrealized gain on investments (8,063,000) (7,495,000)
------------- -------------
Total ($25,275,000) ($22,800,000)
============= =============
5. SUPPLEMENTAL CASH FLOW INFORMATION
Six Months Ended
June 30,
1995 1994
----------------
(In thousands)
Income taxes paid $4,802 $4,595
Interest paid 6,440 3,960
Liabilities assumed in acquisitions of
businesses - Trust account deposits 225,893
Other 48,784 1,638
Value of common shares issued in acquisitions of businesses 135,947
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the relative
percentage which certain items in the Company's consolidated statements of
income bear to revenues. This data has been restated for all periods commencing
prior to April 1, 1995 to give effect to the acquisition of Lincoln Holdings,
Inc., accounted for as a pooling of interests.
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
--------------------------------------
(Percent of Revenues)
Revenues 100.00% 100.00% 100.00% 100.00%
--------------------------------------
Salaries and related costs 46.61 48.47 47.20 48.63
Data processing costs 13.87 14.67 14.12 14.92
Other operating expenses 18.83 17.93 18.34 18.21
Depreciation and amortization 5.44 5.83 5.68 5.21
Amortization of intangible assets 2.08 1.96 1.92 2.06
Capitalization of software-net (1.09) (2.03) (1.07) (1.77)
--------------------------------------
Total cost of revenues 85.74 86.83 86.19 87.26
--------------------------------------
Operating income 14.26 13.17 13.81 12.74
======================================
6
<PAGE>
REVENUES
Revenues increased 24.1% from $139.8 million in the second quarter of 1994 to
$173.5 million in the current second quarter and 18.2% from $279.7 million in
the first six months of 1994 to $330.6 million in the comparable current period.
Approximately 45% of the year-to-date growth in revenue resulted from the
inclusion of revenues from the date of purchase of acquired companies and the
remainder from increases in revenue from the addition of new clients, growth in
the transaction volume experienced by existing clients and price increases.
COST OF REVENUES
Cost of revenues increased 22.5% from $121.4 million in the second quarter of
1994 to $148.7 million in the current second quarter, and 16.8% from $244.0
million in the first six months of 1994 to $285.0 million in the first six
months of 1995.
OPERATING INCOME
Operating income increased 34.3% from $18.4 million in the second quarter of
1994 to $24.7 million in the current second quarter, and 28.1% from $35.6
million in the first six months of 1994 to $45.6 million in the first six months
of 1995. As a percentage of revenues, operating margins improved during the
second quarter and first six months of 1995 when compared to the comparable
prior year periods due to changes in the mix of business, including the impact
of acquisitions referred to in Note 2, above.
INTEREST EXPENSE - NET
As a result of acquisitions in the last twelve months, which were only partially
funded with common stock, net interest expense increased $2.8 million in the
second quarter and $3.1 million in the first six months of 1995 over amounts
incurred for the comparable 1994 periods.
INCOME TAX PROVISION
Income taxes were computed at 41% in 1995 and 40% in 1994. The 41% rate is
expected to apply throughout the current year.
NET INCOME
Net income grew 19% from $10.1 million in the second quarter of 1994 to $12.0
million in the comparable 1995 quarter and 19% from $19.5 million in the first
six months of 1994 to $23.2 million in the comparable current period. Net income
per share increased $.03 from $.25 in the second quarter of 1994 to $.28 in the
current second quarter and $.07 from $.48 in the first six months of 1994 to
$.55 in the first six months of 1995. Net income per share increased $.04 and
$.09, respectively, in the second quarter and first six months of 1995 when
compared with net income per share as originally presented for the comparable
1994 periods. The increase in net income per share over 1994 as originally
presented was consistent with management expectations and historical growth
rates.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1995, cash increased $30.6 million
comprising primarily $30.3 million net cash provided by operating activities,
$247.1 million net borrowings, $28.0 million decrease in investments and $.6
million from issuance of common stock, which was partially offset by $252.8
million for the acquisition of businesses and $22.7 million for capital
expenditures. Long-term obligations amounted to $398.9 million at June 30,
1995. The majority of this debt comprises $126.4 million of senior notes due
1995 to 2001 and $254.3 million advanced under a $300 million unsecured line of
credit and commercial paper facility which reduces $45 million in May 1997 and
in May 1998, $60 million in May 1999 and expires in May 2000. A facility fee of
0.2% per annum is required on the line.
The Company has historically applied a significant portion of its cash flow from
operating activities and proceeds of its common stock offerings to acquisitions
and the reduction of long-term debt and invests the remainder in short-term
obligations until it is needed for further acquisitions or operating purposes.
The Company believes that its cash flow from operating activities together with
other available sources of funds will be adequate to meet its funding
requirements. However, in the event that the Company makes significant future
acquisitions, it may raise funds through additional borrowings or issuance of
securities.
7
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Index to exhibits
(11) Statement regarding computation of per share earnings (included on
page 5, Part 1).
(b) Reports on Form 8-K
During the quarter ended June 30, 1995, the Registrant filed a report on
Form 8-K, dated May 17, 1995, relating to the acquisition of Information
Technology, Inc.
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.
FIserv, Inc.
-------------
(Registrant)
Date July 24, 1995 by /s/ EDWARD P. ALBERTS
---------------- ---------------------------------
EDWARD P. ALBERTS
Senior Vice President, Finance
and Controller
8
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
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