SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
COMMISSION FILE NO. 0-14948
FISERV, INC.
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(Exact name of Registrant as specified in its charter)
WISCONSIN 39-1506125
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 FISERV DRIVE, BROOKFIELD, WISCONSIN 53045
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (414) 879-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
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(Title of Class)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
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(Title of Class)
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( )
<PAGE>
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of January 31, 1995: $842,257,834
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of January 31, 1995: 39,174,783
DOCUMENTS INCORPORATED BY REFERENCE: List the following documents if
incorporated by reference and the part of the Form 10-K into which the document
is incorporated: (1) Any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.
1994 Annual Report to Shareholders - Parts II, IV
Proxy Statement for March 30, 1995 Meeting - Part III
FISERV, INC. AND SUBSIDIARIES
FORM 10-K
DECEMBER 31, 1994
PART I Page
Item 1. Business 1
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for the Registrant's Common Equity and
Related Shareholder Matters 11
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure 11
PART III
Item 10. Directors and Executive Officers of the Registrant 11
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial Owners
and Management 11
Item 13. Certain Relationships and Related Transactions 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 12
<PAGE>
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PART I
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ITEM 1. BUSINESS
FIserv was formed on July 31, 1984, through the combination of two major
regional data processing firms located in Milwaukee, Wis., and Tampa,
Fla. These firms-- FIserv Milwaukee and FIserv Tampa--began their
operations in 1964 and 1971, respectively, as the data processing operations of
their parent financial institutions. Historically, operations were expanded by
developing a range of services for their parent organizations as well as other
financial institutions.
Since its organization in 1984, the Company has grown through the
continuing development of highly-specialized services and product enhancements,
the addition of new clients and the acquisition of firms complementing the
FIserv organization.
BUSINESS RESOURCES
FIserv operates centers nationwide for full-service financial data
processing, software system development, item processing and check imaging,
multiple technology support and related product businesses. In addition, the
Company has business support centers in London, England, and Singapore. The
FIserv organization, headquartered in Brookfield, Wis., is aligned to meet the
variety of information technology and related product and service needs of the
financial industry.
The SAVINGS & COMMUNITY BANK GROUP provides service bureau processing for
savings institutions and community bank clients, and item processing services
for all FIserv clients nationwide. Business units within the Savings &
Community Bank Group are aligned by regional markets as follows:
Western Region locations: Phoenix, Ariz.; Fullerton, Los Angeles, San
Diego and San Francisco, Calif.; Seattle, Wash.
Southwest Region locations: Little Rock, Ark.; Denver, Colo.; Bowling
Green, Ky.; New Orleans, La.; Beaumont, Dallas, Houston and San Antonio,
Texas.
Midwest Region locations: Minneapolis and St. Paul, Minn.; Fargo, N.D.;
Sioux Falls, S.D.
Central Region locations: Chicago, Marion and Pontiac, Ill.; Davenport and
Des Moines, Iowa; Brookfield and Milwaukee, Wis.
Eastern Region locations: Jacksonville, Miami and Tampa, Fla.; Atlanta and
Macon, Ga.; Pittsburgh, Pa.; Memphis and Nashville, Tenn.
Northeast Region locations: New Haven, Conn.; Boston and Somerville,
Mass.; New York, N.Y.; Cleveland, Ohio.
The BANK & CREDIT UNION GROUP includes FIserv sectors and business units
that provide service bureau processing, in-house software systems and strategic
outsourcing for national and international bank, mortgage bank and credit union
clients. The Bank & Credit Union Group includes the following:
Bank Services Sector with business units in Covina and Fresno, Calif.;
Orlando, Fla.; Honolulu, Hawaii; Pittsburgh, Pa.; Spokane, Wash.; and
international business locations in London, England, and Singapore.
Computer Services Sector with business units in Arlington Heights, Ill.;
Oklahoma City, Okla.; and a major computer utility in Philadelphia, Pa.
Credit Union Sector with business units in Titusville, Fla.; Chicago, Ill.;
Flint and Troy, Mich.; Minneapolis, Minn.; and Corvallis, Ore.
<PAGE>
Additional business units within the Bank & Credit Union Group include
Data-Link Systems, serving mortgage banks; Government Services & Specialized
Outsourcing; and FIserv EFT (electronic funds transfer services).
The INDUSTRY PRODUCTS & SERVICES GROUP includes all FIserv products and
service company businesses marketing to clients within the FIserv Corporate
Groups, as well as marketing direct to clients within the financial, healthcare,
insurance, retail, telecommunications and related industries.
The Industry Products & Services Group includes Cadre, Inc. disaster
recovery services (Hartford, Conn.); Communications Design marketing services
(Sacramento, Calif.); DataPro Card Services (Indianapolis, Ind.); FIserv Forms &
Graphics (Seattle, Wash.); FIserv Human Resource Information Services (Melville,
N.Y.); FIserv Image Integration Technology (Maitland, Fla.); National Embossing
Company card services (Houston, Texas); RECOM Associates, Inc. network
consulting (Tampa, Fla.); and Sendero Corporation asset/liability management and
decision support systems (Scottsdale, Ariz.).
FIRST TRUST CORPORATION, a FIserv subsidiary company based in Denver,
Colo., provides specialized account processing, administration and trusteeship
of self-directed IRAs, business retirement plans and custodial accounts.
Founded in 1962, the First Trust organization administers more than 290,000
self-directed retirement plans, with an asset value of over $12.56 billion.
BUSINESS STRATEGY
The market for products and services offered by financial institutions
continues to undergo change. New alternative lending and investment products
are being introduced and implemented by the industry; the distinctions among
financial services traditionally offered by savings and loan associations, banks
and credit unions are narrowing; and financial institutions continue to
diversify and to consolidate, some under the auspices of the Resolution Trust
Corporation (RTC), the Federal Deposit Insurance Corporation (FDIC) and the
Credit Union National Association (CUNA).
Management believes that although federally-mandated consolidations have
reduced the number of financial institutions in the United States, such
consolidations have not resulted in a material reduction of the number of
customer accounts serviced by the financial industry as a whole. Additionally,
there are new entrants to the once limited financial services industry, which
open new markets for FIserv services.
To stay competitive in this changing marketplace, financial institutions
are finding they must meet the growing needs of their customers for a broad
variety of new products and services that are typically transaction-oriented and
fee-based. The growing volume of transactions and types of accounts has
increased the data processing requirements of these institutions. As a
consequence, FIserv management believes that the financial services industry has
become one of the largest users of data processing products and services within
the United States.
Moreover, FIserv expects that the industry will continue to require
significant commitments of capital and human resources to the data processing
function, to require application of more specialized computer systems, and to
require development, maintenance and enhancement of applications software.
FIserv believes that economies of scale in data processing operations are
essential to justify the required level of expenditures and commitment of human
resources.
<PAGE>
In response to these market dynamics, the means by which financial
institutions obtain data processing services has changed. Many smaller, local
and regional third-party data processors are leaving the business or
consolidating with larger providers. A number of large financial institutions
previously providing third-party processing services for other institutions have
withdrawn from the business to concentrate on their primary, core businesses.
Similarly, an increasing number of financial institutions that previously
maintained their own data processing ability have outsourced their data
processing requirements by contracting with third-party processors, such as
FIserv, to reduce costs and enhance their products and services. Outsourcing
can involve the utilization of service bureaus, facilities management or
resource management.
To capitalize on these industry trends and to become the premier national
provider of data processing products and services, FIserv has implemented a
strategy of continuing to develop new products, improving the cost effectiveness
of services provided to clients, aggressively soliciting new clients and making
strategic acquisitions.
ACQUISITION HISTORY
<TABLE>
<CAPTION>
Founded Acquired Business Service
- - - - - ------- -------- -------- -------
<S> <C> <C> <C>
1964 July 1984 First Data Processing, Milwaukee, Wis. Data processing
1971 July 1984 Sunshine State Systems, Tampa, Fla. Data processing
1966 Nov. 1984 Central Processing Corp., San Antonio, Texas Data processing
1982 Oct. 1985 Sendero Corporation, Scottsdale, Ariz. Asset/liability management
1962 Oct. 1985 First Trust Corporation, Denver, Colo. DP for retirement planning
1962 Oct. 1985 First Retirement Marketing, Denver Retirement planning services
1973 Jan. 1986 On-Line, Inc., Seattle, Wash. Data processing, forms
1966 May 1986 First City Financial Systems, Inc., Beaumont, Texas Data processing
1962 Feb. 1987 Pamico, Inc., Milwaukee, Wis. Specialized forms
1975 Apr. 1987 Midwest Commerce Data Corp., Elkhart, Ind. Data processing
1969 Apr. 1987 Fidelity Financial Services, Inc., Spokane, Wash. Data processing
1965 Oct. 1987 Capbanc Computer Corporation, Baton Rouge, La. Data processing
1971 Feb. 1988 Minnesota On-Line Inc., Minneapolis, Minn. Data processing
1965 May 1988 Citizens Financial Corporation, Cleveland, Ohio Data processing
1980 May 1988 ZFC Electronic Data Services, Inc., Bowling Green, Ky. Data processing
1969 June 1988 GESCO Corporation, Fresno, Calif. Data processing
1967 Nov. 1988 Valley Federal Data Services, Los Angeles, Calif. Data processing
1982 May 1989 Triad Software Network, Ltd., Chicago, Ill. Data processing
1969 Aug. 1989 Northeast Datacom, Inc., New Haven, Conn. Data processing
1978 Feb. 1990 Financial Accounting Services Inc., Pittsburgh, Pa. Data processing
1974 June 1990 Accurate Data On Line, Inc., Titusville, Fla. Data processing
1982 June 1990 GTE EFT Services Money Network, Fresno, Calif. EFT networks
1968 July 1990 First Interstate Management, Milwaukee, Wis. Data processing
1982 Oct. 1990 GTE ATM Networks, Fresno, Calif. EFT networks
1867 Nov. 1990 Boston Safe Deposit & Trust Co. IP Services, Boston Item processing
1968 Dec. 1990 First Bank, N.A. IP Services, Milwaukee, Wis. Item processing
<PAGE>
1979 Apr. 1991 Citicorp Information Resources, Inc., Stamford, Conn. Data processing
1980 Apr. 1991 BMS Processing, Inc., Randolph, Mass. Item processing
1979 May 1991 FHLB of Dallas IP Services, Dallas, Texas Item processing
1980 Nov. 1991 FHLB of Chicago IP Services, Chicago, Ill. Item processing
1977 Feb. 1992 Data Holdings, Inc., Indianapolis, Ind. Automated card services
1980 Feb. 1992 BMS On-Line Services, Inc. (assets), Randolph, Mass. Data processing
1982 Mar. 1992 First American Information Services, St. Paul, Minn. Data processing
1981 July 1992 Cadre, Inc., Avon, Conn. Disaster recovery
1992 July 1992 Performance Analysis, Inc., Cincinnati, Ohio Asset/liability management
1986 Oct. 1992 Chase Manhattan Bank, REALM Software, New York Asset/liability management
1984 Dec. 1992 Dakota Data Processing, Inc., Fargo, N.D. Data processing
1983 Dec. 1992 Banking Group Services, Inc., Somerville, Mass. Item processing
1968 Feb. 1993 Basis Information Technologies, Atlanta, Ga. Data processing, EFT
1986 Mar. 1993 IPC Services Corporation (assets), Denver, Colo. Item processing
1973 May 1993 EDS Item Processing Contracts, Seattle, Wash. Item processing
1982 June 1993 Datatronix Financial Services, San Diego, Calif. Item processing
1966 July 1993 Data Line Service, Covina, Calif. Data processing
1978 Nov. 1993 Financial Processors, Inc., Miami, Fla. Data processing
1974 Nov. 1993 Financial Data Systems, Jacksonville, Fla. Item processing
1961 Nov. 1993 Financial Institutions Outsourcing, Pittsburgh, Penn. Data processing
1972 Nov. 1993 Data-Link Systems, South Bend, Ind. Data processing
1985 Apr. 1994 National Embossing Company, Inc., Houston, Texas Automated card services
1962 May 1994 Boatmen's Information Systems of Iowa, Des Moines Data processing
1981 Aug. 1994 FHLB of Atlanta IP Services, Atlanta, Ga. Item processing
1989 Nov. 1994 CBIS Imaging Technology Banking Unit, Maitland, Fla. Imaging technology
1987 Dec. 1994 RECOM Associates, Inc., Tampa, Fla. Network integration
</TABLE>
DATA PROCESSING SERVICES
FIserv provides clients with the opportunity to select among integrated
software systems for account, item and financial transaction processing and
record keeping as a service bureau, an in-house solution or a
resource/facilities management alternative. These systems include:
management, customer and regulatory reporting; integrated executive information
systems and related data base management products for business operations,
analysis, marketing and accounting; specialized item processing; and electronic
funds transfer services.
FIserv provides clients with a variety of additional industry-related
products and services through its subsidiary organizations. These include
account processing, administration and trusteeship of self-directed individual
and business retirement plans; educational services and micro computer solutions
for measuring and managing interest rate risks; marketing communications and
graphic design services; design, inventory and delivery of a wide range of
industry specific business forms; plastic card products and services; and
disaster recovery services.
<PAGE>
The Company's ongoing data processing support products and services for
client institutions include:
Relationship Banking Capabilities Customized Database Extracts and Reports
Loan and Deposit Products Remote Printing and Optical Disk System
Multi-branch and Multi-company ATM, Point of Sale and ACH Financial
Financial Accounting Accounting
Transaction Processing Item Processing and Image Integration
Management Information System Installation Services
Platform and Teller Automation Ongoing Client Services
Customer Profitability Research and Development
Mortgage Banking Disaster Recovery Services and
Accounts Payable Contingency Planning
Asset/Liability Management Regulatory Compliance
Investment Accounting and Analysis Multiple Terminal Support
Safe Deposit Box Accounting Plastic Card Products and Services
FIserv data processing services are designed specifically for the various
international, national, regional or local business and marketing environments
of banks, credit unions, savings institutions and other financial
intermediaries.
COMPREHENSIVE SERVICE DIMENSION
FIserv focuses on providing financial data processing systems and related
information management services and products to banks, credit unions, mortgage
firms, savings institutions and other financial intermediaries. This emphasis
allows the Company to concentrate its advanced technology, industry experience,
research and development on creating and supporting solutions uniquely designed
for financial institutions and other clients. Based on 1993 market surveys of
total clients served, FIserv is the nation's leading independent data processing
provider for banks, savings institutions and credit unions with assets over $25
million.
FIserv data processing solutions are delivered based on the client's
preferred operating environment: data center service bureau systems and
support; in-house software systems development and support; facilities and
resource management services; and strategic alliances with specialized
technology providers.
Complementary products and services offered include: item processing and
imaging technology services; backroom automation software systems; electronic
funds transfer services; plastic cards and related card management services;
rate risk management systems; self- directed retirement plan processing; network
installation and integration services; human resource outsourcing; disaster
recovery; design and production of business forms and marketing literature; and
delivery and support of leading third-party software and hardware products.
FIserv provides traditional service bureau capabilities on multiple
hardware platforms, offering clients the flexibility of online systems
compatible with their preferred equipment and hardware. Through cooperative
regional and national R&D efforts among FIserv centers, the Company continually
enhances its existing products and offers innovative new services to help
clients respond to the unique requirements of their customers.
For those clients desiring an in-house solution, FIserv has multiple,
advanced in-house software systems. The proprietary software is easy to use,
and gives institutions the flexibility to design and implement their own
products, services and reporting systems--depending on their specific needs.
<PAGE>
Additional full-service solutions include facilities management (managing
all data processing functions with FIserv personnel at the client's site),
resource management (operating a client's data processing software at a FIserv
data center) and government services (specialized joint ventures and servicing
operations for the Resolution Trust Corporation and other government agencies).
Worldwide, FIserv offers a comprehensive software system designed for both
international and domestic financial institutions. This fully integrated, in-
house retail banking system features multi-currency and multi-lingual
capabilities.
FIserv is a leading provider of data processing services for mortgage
banks, ranking second in the industry. These mortgage software systems offer
online, real-time loan origination servicing and secondary marketing solutions
that can be tailored to meet an organization's specific goals.
FIserv is a leading provider of item processing services and check imaging
technology, with the nation's largest check processing client base. The Company
offers a full line of item processing services, including inclearing, bulk
filing, account reconciliation, transit and lockbox services. For institutions
seeking check imaging services, FIserv offers image and document management
systems that provide business solutions for the acquisition, management, storage
and presentation of check and document images.
FIserv offers financial institutions PC-based productivity tools that
deliver software, service and support to meet their backroom automation and
customer service needs. These systems are designed to streamline backroom
operations by reducing time, keystrokes and labor.
FIserv is among the nation's leading third-party providers of electronic
funds transfer (EFT) services. The Company offers transaction authorization,
automated teller machine (ATM) driving, ATM and point-of-sale (POS) network
gateway access.
In conjunction with these EFT services, FIserv supports a full line of ATM,
POS, debit and credit card programs. Included are design, embossing and
encoding of plastic cards and forms, card personalization, data processing for
file creation and maintenance, and card/forms processing.
A leader in asset/liability management, FIserv is a worldwide provider of
integrated decision-support systems for financial managers. These solutions
include software for data management, profitability measurement, funds transfer
pricing and executive information. Consulting services further enhance and
expedite the total financial management process.
FIserv also provides office automation and communications network
integration services to the financial industry and other clients. These
services include hardware and software installation, maintenance, on-site
education and support for financial institution clients, as well as clients of
other leading information technology providers.
FIserv offers a full range of human resource, payroll and benefit services
to the financial industry and large national and international organizations.
Through a specialized computer facility in Connecticut, FIserv provides a
complete range of business back-up and disaster recovery services.
FIserv offers business forms design, production and distribution services,
combining expertise in business forms, printing and print design with an in-
depth knowledge of the financial industry's requirements. Other services
include print communications needs analysis and concept development, design,
project management and print production for annual reports, company literature
and other business communications.
First Trust Corporation, a specialized provider of account processing,
administration and trusteeship of self-directed individual and business
retirement plans, is the largest provider of its kind in the nation. Based in
Denver, Colo., this FIserv company specifically assists financial
representatives and other financial service intermediaries in managing
information through its proprietary data base technology.
<PAGE>
SERVICING THE MARKET
The market for FIserv data processing services and products has specific
needs and requirements, with strong emphasis placed by clients on software
flexibility, product quality, reliability of service, comprehensiveness and
integration of product line, timely introduction of new products and features,
and cost value. Through its multiple product offerings, the Company
successfully services these market needs for clients ranging in size from start-
up to some of the largest institutions worldwide.
FIserv believes that the position it holds as an independent, growth-
oriented company dedicated to its business is an advantage to its clients. The
Company differs from many of the data processing resources currently available
since it isn't a regional or local cooperatively- owned organization, nor a data
processing subsidiary, an affiliate of a financial institution or a hardware
vendor. Due to the economies of scale gained through its broad market presence,
FIserv offers clients a selection of data processing solutions designed to meet
the specific needs of financial institutions.
The Company believes this independence and primary focus on the financial
industry helps its business development and related Client Service and Product
Support teams remain responsive to the data processing needs of its market, now
and for the future.
"The Client Comes First" is one of the Company's founding principles. It's
a belief backed by a dedication to providing ongoing client service and support-
- - - - - -no matter the institution size. The FIserv Client Support and Account
Management staff is responsible for the day-to-day interface with the operations
of clients.
The Company's commitment of substantial resources to training and technical
support helps keep FIserv clients first. FIserv conducts the majority of its
new and ongoing client training in its data centers, where the Company maintains
fully-equipped demonstration and training facilities containing equipment used
in the delivery of FIserv services. FIserv also provides local and on-site
training services.
PRODUCT DEVELOPMENT
In order to meet the changing data processing needs of the financial
institutions served by FIserv, the Company continually develops, maintains and
enhances its systems. Resources applied to product development and maintenance
are believed to be approximately 10% of company revenues, about half of which is
dedicated to software development.
Unique to FIserv, its network of development and data processing centers
applies the shared expertise of multiple FIserv teams to design, develop and
maintain specialized processing systems around the leading technology platforms.
The applications of its account processing systems meet the preferences and
diverse requirements of the various international, national, regional or local
market-specific financial service environments of the Company's many clients.
Though all FIserv centers rely on the Company's nationally developed and
supported software, each center has specialized capabilities that enable them to
offer system application features and functions unique to their client base.
Where the client's requirements warrant, FIserv purchases software programs from
third parties which are interfaced with existing FIserv systems. In developing
its products, FIserv stresses responsiveness to the needs of its clients through
close client contact.
FIserv provides a dedicated system designed, developed, maintained and
enhanced according to each client's goals for service quality, business
development, asset/liability mix, local-market positioning and other user-
defined parameters.
<PAGE>
COMPETITION
The market for data processing services to banks, credit unions and savings
institutions is highly competitive. The Company's principal competitors include
internal data processing departments, data processing affiliates of financial
institutions or large computer hardware manufacturers, independent computer
service firms and processing centers owned and operated as user cooperatives.
FIserv competitors include EDS, M&I, AT&T Global Information Solutions,
ISSC(IBM) and various regional firms. Certain of these competitors possess
substantially greater financial, sales and marketing resources than the Company.
Competition from in-house data processing and software departments is
intensified by the efforts of computer hardware vendors who encourage the growth
of internal data centers.
Competitive factors for data processing services include product quality,
reliability of service, comprehensiveness and integration of product line,
timely introduction of new products and features, and price. The Company
believes that it competes favorably in each of these categories. In addition,
the Company believes that its position as an independent vendor, rather than as
a cooperative, an affiliate of a financial institution or a hardware vendor, is
a competitive advantage.
First Trust competes with a number of large and small providers of
retirement plan administration services.
GOVERNMENT REGULATION
The Company's data processing subsidiaries are not themselves directly
subject to federal or state regulations specifically applicable to financial
institutions such as banks, thrifts and credit unions. As a provider of
services to these entities, however, the data processing operations are observed
from time to time by the Federal Deposit Insurance Corporation, the National
Credit Union Association, the Office of Thrift Supervision, the Office of the
Comptroller of the Currency and various state regulatory authorities. These
regulators make certain recommendations to the Company regarding various aspects
of its data processing operations. Such recommendations are generally
implemented by the Company. In addition, the Company's operations are reviewed
annually by an independent auditor to provide required internal control
evaluations for its clients' auditors and regulators.
As a trust company under Colorado law, First Trust is subject to the
regulations of the Colorado Division of Banking. First Trust historically has
complied with such regulations and, although no assurance can be given, the
Company believes First Trust will continue to be able to comply with such
regulations. Commencing in 1991, First Trust received approval of its
application for Federal Deposit Insurance Corporation coverage of its customer
deposits.
EMPLOYEES
FIserv employs 6,195 specialists throughout the United States and worldwide
in its information management centers and related product and service companies.
This service support network includes employees with backgrounds in computer
science and the financial industry, often complemented by management and other
direct experience in banks, credit unions, mortgage firms, savings and other
financial institution business environments.
FIserv employees provide expertise in sales and marketing; account
management and client services; computer operations, network control and
technical support; programming, software development, modification and
maintenance; conversions and client training; and related support services.
<PAGE>
FIserv employees are not represented by a union, and there have been no
work stoppages, strikes or organizational attempts. The service nature of the
FIserv business makes its employees an important corporate asset, and while the
market for qualified personnel is competitive, the Company does not experience
difficulty with hiring or retaining its staff of top industry professionals. In
assessing companies to acquire, the quality and stability of the prospective
Company's staff are emphasized.
Management attributes its ability to attract and keep quality employees to,
among other things, the Company's growth and dedication to state-of-the-art
software development tools and hardware technologies.
ITEM 2. PROPERTIES
FIserv currently operates full-service data centers, software system
development centers, and item processing and back-office support centers in 62
cities: Phoenix and Scottsdale, Arizona; Little Rock, Arkansas; Concord,
Covina, Fresno, Fullerton, Los Angeles, Sacramento, San Diego and San Francisco,
California; Denver, Colorado; Stamford, Hartford and New Haven, Connecticut;
Jacksonville, Orlando, Maitland, Miami, Tampa and Titusville, Florida; Atlanta
and Macon, Georgia; Honolulu, Hawaii; Arlington Heights, Chicago, Marion and
Pontiac, Illinois; Indianapolis and South Bend, Indiana; Davenport and Des
Moines, Iowa; Bowling Green, Kentucky; New Orleans, Louisiana; Boston and
Somerville, Massachusetts; Flint and Troy, Michigan; Minneapolis and St. Paul,
Minnesota; Melville and New York, New York; Fargo, North Dakota; Cleveland,
Ohio; Oklahoma City, Oklahoma; Corvallis and Portland, Oregon; Philadelphia and
Pittsburgh, Pennsylvania; Sioux Falls, South Dakota; Memphis and Nashville,
Tennessee; Beaumont, Dallas, Houston and San Antonio, Texas; Seattle and
Spokane, Washington; Brookfield and Milwaukee, Wisconsin. International
business centers are located in London, England, and Singapore. The Company
owns facilities in Fresno, Hartford, Brookfield, Spokane and Titusville; all
other buildings in which centers are located are subject to leases expiring
through 1998 and beyond. The Company owns or leases 123 mainframe computers
(Data General, Digital, Hewlett Packard, IBM, NCR and Unisys). In addition, the
Company maintains its own national data communication network consisting of
communications processors and leased lines.
FIserv believes its facilities and equipment are generally well maintained
and are in good operating condition. The Company believes that the computer
equipment it owns and its various facilities are adequate for its present and
foreseeable business. FIserv periodically upgrades its mainframe capability as
needed. FIserv contracts with multiple sites to provide processing backup in
the event of a disaster and maintains duplicate tapes of data collected and
software used in its business in locations away from the Company's facilities.
FIserv regards its software as proprietary and utilizes a combination of
trade secrecy law, internal security practices and employee non-disclosure
agreements for protection. The Company has not patented or registered the
copyrights on its software. The Company believes that legal protection of its
software, while important, is less significant than the knowledge and experience
of the Company's management and personnel and their ability to develop, enhance
and market new products and services. The Company believes that it holds all
proprietary rights necessary for the conduct of its business.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company and its subsidiaries are named as
defendants in various lawsuits in which claims are asserted against the Company.
In the opinion of management, the liabilities, if any, which may ultimately
result from such lawsuits are not expected to have a material adverse effect on
the financial statements of the Company.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no matter
was submitted to a vote of security holders of the Company.
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PART II
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Pursuant to Instruction G(2) for Form 10-K, the information required in ITEMS 5
THROUGH 8 is incorporated by reference from the Company's annual report to
shareholders, included in this Form 10-K - Annual Report as Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
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Pursuant to Instruction G(3) to Form 10-K, the information required in ITEMS 10
THROUGH 13 is incorporated by reference from the Company's definitive proxy
statement which is expected to be filed pursuant to Regulation 14A on or before
February 28, 1995, and included in this Form 10-K Annual Report as Exhibit 28.
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PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements:
The consolidated financial statements of the companies as of December 31, 1994
and 1993 and for each of the three years in the period ending December 31, 1994,
together with the report thereon of Deloitte & Touche LLP, dated January 30,
1995, appear on pages 26 through 38 of the Company's annual report to
shareholders, Exhibit 13 to this Form 10-K - Annual Report, and are incorporated
herein by reference.
(a) (2) Financial Statement Schedules
All financial statement schedules are omitted for the reason that they are
either not applicable or not required or because the information required is
contained in the consolidated financial statements or notes thereto.
(b) Reports on Form 8-K:
<PAGE>
During 1994, the Company did not file any reports on Form 8-K.
(c) Exhibits:
3.1 Articles of Incorporation, as amended (filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-4, File No. 33-62870, and
incorporated herein by reference).
3.2 By-laws, (filed as Exhibit 3.2 to the Company's Registration Statement on
Form S-4, File No. 33-62870, and incorporated herein by reference).
4.1 Credit Agreement dated as of September 30, 1994, by and among FIserv,
Inc., the Lenders Party Hereto, First Bank National Association, as
Co-Agent and The Bank of New York, as Agent. (Not being filed herewith,
but will be provided to the Commission upon its request, pursuant to Item
601(b) (4) (iii) (A) of Regulation S-K.)
4.2 Note Purchase Agreement dated as of March 15, 1991, as amended, among
FIserv, Inc., Aid Association for Lutherans, Northwestern National Life
Insurance Company, Northern Life Insurance Company and The North Atlantic
Life Insurance Company of America. (Not being filed herewith, but will
be provided to the Commission upon its request, pursuant to Item 601(b)
(4) (iii) (A) of Regulation S-K.)
4.3 Note Purchase Agreement dated as of April 30, 1990, as amended, among
FIserv, Inc. and Teachers Insurance and Annuity Association of America.
(Not being filed herewith, but will be provided to the Commission upon
its request, pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K.)
10. Material contracts.
10.1 Stock Purchase Agreement, dated as of December 31, 1992, by and between
FIserv, Inc. and First Financial Management Corporation, as amended by
Amendment dated as of February 10, 1993, included in the Company's Current
Report on Form 8-K, dated February 10, 1993, and incorporated herein by
reference.
10.2 Stock and Asset Purchase Agreement, dated as of July 30, 1993, as amended,
by and between Mellon Bank Corporation, Mellon Bank, N.A., Mellon
Financial Services Corporation #1 and Vertical Technologies, Inc., as
Sellers, and FIserv, Inc., as Purchaser.
11. Computation of Shares Used in Computing Earnings per Share.
13. The 1994 Annual Report to Shareholders.
21. List of Subsidiaries of the Registrant.
23. Manually signed Auditors' Report and Consent of Independent Auditors.
28. The Company's definitive proxy statement for the 1995 annual meeting of
shareholders to be held on March 30, 1995, to be filed pursuant to
Regulation 14A under the Securities and Exchange Act of 1934.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: February 28, 1995
FISERV, INC.
/S/ GEORGE D. DALTON
By -------------------------------
George D. Dalton
(Chairman of the Board)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following person on behalf of the registrant
and in the capacities indicated on February 28, 1995.
SIGNATURE CAPACITY
/S/ GEORGE D. DALTON
- - - - - --------------------------------------------
George D. Dalton Chairman of the Board
Chief Executive Officer
/S/ LESLIE M. MUMA
- - - - - --------------------------------------------
Leslie M. Muma President and Director
Chief Operating Officer
/S/ KENNETH R. JENSEN
- - - - - --------------------------------------------
Kenneth R. Jensen Senior Executive Vice President
Chief Financial Officer
Treasurer and Director
/S/ BRUCE K. ANDERSON
- - - - - --------------------------------------------
Bruce K. Anderson Director
/S/ GERALD J. LEVY
- - - - - --------------------------------------------
Gerald J. Levy Director
/S/ L. WILLIAM SEIDMAN
- - - - - --------------------------------------------
L. William Seidman Director
/S/ THEKLA R. SHACKELFORD
- - - - - --------------------------------------------
Thekla R. Shackelford Director
/S/ ROLAND D. SULLIVAN
- - - - - --------------------------------------------
Roland D. Sullivan Director
EXHIBIT 11
COMPUTATION OF SHARES USED IN COMPUTING EARNINGS PER SHARE
Year Ended December 31,
1994 1993 1992
----------------------------------
Primary:
Weighted Average Shares Outstanding 39,073,000 37,707,000 33,768,000
Common Stock Equivalents 781,000 867,000 771,000
----------------------------------
Shares Used 39,854,000 38,574,000 34,539,000
==================================
Fully diluted earnings per share are essentially the same as primary earnings
per share for all periods presented.
FISERV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994 1993 1992
REVENUES $563,590,000 $454,692,000 $332,090,000
---------------------------------------
COST OF REVENUES:
Salaries, commissions and payroll
related costs 275,382,000 217,831,000 166,269,000
Data processing expenses, rentals and
telecommunication costs 80,533,000 71,851,000 44,383,000
Other operating expenses 107,234,000 87,813,000 66,288,000
Depreciation and amortization of
property and equipment 29,987,000 21,542,000 16,081,000
Amortization of intangible assets 10,846,000 9,098,000 6,589,000
Capitalization of internally generated
computer software-net (9,599,000) (7,185,000) (6,757,000)
---------------------------------------
Total 494,383,000 400,950,000 292,853,000
---------------------------------------
OPERATING INCOME 69,207,000 53,742,000 39,237,000
Interest expense - net 6,433,000 3,716,000 2,158,000
---------------------------------------
INCOME BEFORE INCOME TAXES 62,774,000 50,026,000 37,079,000
Income tax provision Note 4 25,110,000 19,333,000 14,090,000
---------------------------------------
NET INCOME $37,664,000 $30,693,000 $22,989,000
=======================================
Net income per common and
common equivalent share $0.95 $0.80 $0.67
=======================================
Shares used in computing net
income per share Note 1 39,854,000 38,574,000 34,539,000
=======================================
See notes to consolidated financial statements.
FISERV, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 1993
ASSETS
Cash and cash equivalents Note 1 $28,294,000 $35,934,000
Accounts receivable 120,033,000 104,730,000
Prepaid expenses and other assets Note 1 34,391,000 29,838,000
Investment securities Note 1 807,819,000 661,309,000
Other investments 64,777,000 34,831,000
Property and equipment-Net Note 1 113,448,000 96,645,000
Internally generated computer software-Net
Note 1 67,820,000 58,020,000
Identifiable intangible assets relating
to acquisitions-Net Note 1 34,090,000 33,291,000
Goodwill-Net 147,686,000 127,845,000
--------------------------------
TOTAL $1,418,358,000 $1,182,443,000
================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $21,440,000 $20,671,000
Accrued expenses 59,126,000 1,468,000
Accrued income taxes 1,851,000 909,000
Deferred revenues 10,836,000 9,466,000
Trust account deposits 809,324,000 663,426,000
Long-term debt Note 3 139,864,000 111,099,000
Other obligations Note 3 2,314,000 2,308,000
Deferred income taxes Note 4 22,800,000 15,400,000
--------------------------------
TOTAL LIABILITIES 1,067,555,000 874,747,000
COMMITMENTS AND CONTINGENCIES NOTE 6
SHAREHOLDERS' EQUITY:
Common stock outstanding, 39,157,000 and
38,780,000 shares, respectively 392,000 388,000
Additional paid-in capital 184,574,000 181,049,000
Unrealized gain on investments 11,054,000 9,230,000
Accumulated earnings 154,783,000 117,029,000
--------------------------------
TOTAL SHAREHOLDERS' EQUITY 350,803,000 307,696,000
--------------------------------
TOTAL $1,418,358,000 $1,182,443,000
================================
See notes to consolidated financial statements.
<TABLE>
FISERV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $37,664,000 $30,693,000 $22,989,000
Adjustments to reconcile income to net
cash provided by operating activities:
Deferred income taxes 12,373,000 11,793,000 5,400,000
Depreciation and amortization of
property and equipment 29,987,000 21,542,000 16,081,000
Amortization of intangible assets 10,846,000 9,098,000 6,589,000
Capitalization of internally generated
computer software - net (9,599,000) (7,185,000) (6,757,000)
------------------------------------------
81,271,000 65,941,000 44,302,000
Cash provided (used) by changes in assets
and liabilities, net of effects from
acquisitions of businesses:
Accounts receivable (11,686,000) (13,377,000) (4,693,000)
Prepaid expenses and other assets (3,999,000) (8,316,000) (3,159,000)
Accounts payable and accrued expenses (4,046,000) (6,599,000) 2,428,000
Deferred revenue (123,000) (54,000) (2,352,000)
Accrued income taxes 1,626,000 1,009,000 (476,000)
------------------------------------------
Net cash provided by operating activities 63,043,000 38,604,000 36,050,000
------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (52,797,000) (28,544,000) (19,130,000)
Investments and other assets (26,545,000) (2,002,000) 20,757,000
Payment for acquisition of businesses,
net of cash acquired (20,545,000) (113,268,000) (6,162,000)
Investment securities (146,635,000) (71,607,000) (126,634,000)
------------------------------------------
Net cash used by investing activities (246,522,000) (215,421,000) (131,169,000)
------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings and other long-term obligations 39,165,000 59,100,000 1,308,000
Repayment of borrowings and other long-
term obligations (11,142,000) (1,667,000) (2,513,000)
Issuance of common stock 1,918,000 24,036,000 2,807,000
Trust account deposits 145,898,000 73,648,000 126,710,000
------------------------------------------
Net cash provided by financing activities 175,839,000 155,117,000 128,312,000
------------------------------------------
Change in cash and cash equivalents (7,640,000) (21,700,000) 33,193,000
Beginning balance 35,934,000 57,634,000 24,441,000
------------------------------------------
Ending balance $28,294,000 $35,934,000 $57,634,000
==========================================
</TABLE>
See notes to consolidated financial statements.
FISERV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1994 1993 1992
SHARES ISSUED - 75,000,000 AUTHORIZED:
Balance at beginning of year 38,779,770 22,621,946 15,010,304
Sale of common stock 1,403,911
Shares issued under stock plans-net 238,838 201,706 101,862
Shares issued for acquired companies 138,276 2,354,540
Stock split - 3-for-2 12,197,667 7,509,780
--------------------------------------
Balance at end of year 39,156,884 38,779,770 22,621,946
--------------------------------------
COMMON STOCK - PAR VALUE $.01 PER SHARE:
Balance at beginning of year $388,000 $226,000 $150,000
Sale of common stock 14,000
Shares issued under stock plans-net 3,000 2,000 1,000
Shares issued for acquired companies 1,000 24,000
Stock split -- 3-for-2 122,000 75,000
--------------------------------------
Balance at end of year 392,000 388,000 226,000
--------------------------------------
CAPITAL IN EXCESS OF PAR VALUE:
Balance at beginning of year 181,049,000 105,842,000 103,288,000
Sale of common stock 23,712,000
Shares issued under stock plans-net 2,660,000 324,000 929,000
Income tax reduction arising from the
exercise of employee stock options 800,000 1,300,000 1,700,000
Shares issued for acquired companies 65,000 49,993,000
Stock split -- 3-for-2 (122,000) (75,000)
--------------------------------------
Balance at end of year 184,574,000 181,049,000 105,842,000
--------------------------------------
UNREALIZED GAIN ON INVESTMENTS 11,054,000 9,230,000
--------------------------------------
ACCUMULATED EARNINGS:
Balance at beginning of year 117,029,000 86,405,000 63,648,000
Net income 37,664,000 30,693,000 22,989,000
Cumulative translation adjustment 90,000 (69,000) (232,000)
--------------------------------------
Balance at end of year 154,783,000 117,029,000 86,405,000
--------------------------------------
TOTAL SHAREHOLDERS' EQUITY $350,803,000 $307,696,000 $192,473,000
======================================
See notes to consolidated financial statements.
FISERV, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1994, 1993 and 1992
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash and investments with original maturities
of 90 days or less and includes approximately $13,500,000 held by a
consolidated subsidiary pursuant to regulatory requirements.
PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets at December 31, 1994 and 1993 include
$7,723,000 and $4,597,000, respectively, relating to long-term contracts, the
profit from which is being recognized ratably over the periods to be benefited.
TRUST ACCOUNT DEPOSITS AND INVESTMENT SECURITIES
The Company's trust administration subsidiary accepts money market deposits from
its trust customers and invests the funds in securities. Such amounts due trust
depositors represent the primary source of funds for the Company's investment
securities and amounted to $809,324,000 and $663,426,000 in 1994 and 1993,
respectively. The related investment securities comprised the following at
December 31, 1994 and 1993:
Principal Carrying
Amount Value Market Value
----------------------------------------
1994
U. S. Government and government
agency obligations $478,711,000 $478,572,000 $460,452,000
Corporate bonds 51,840,000 51,836,000 51,373,000
Repurchase agreements 226,581,000 226,581,000 226,581,000
Other fixed income obligations 53,050,000 50,830,000 50,590,000
----------------------------------------
Total $810,182,000 $807,819,000 $788,996,000
========================================
1993
U. S. Government and government
agency obligations $357,975,000 $363,406,000 $364,778,000
Corporate bonds 36,975,000 37,390,000 37,253,000
Repurchase agreements 179,942,000 179,942,000 179,942,000
Other fixed income obligations 116,225,000 116,118,000 116,420,000
Premium amortization, etc. (863,000) 33,000
----------------------------------------
Total $691,117,000 695,993,000 $698,426,000
============= ==============
Included in: Cash and cash equivalents 20,904,000
Other investments 13,780,000
-------------
Trust account investments $661,309,000
=============
<PAGE>
Substantially all of the investments have contractual maturities of one year or
less except for government agency obligations which generally contain provisions
for interest rate resets.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
computed using primarily the straight-line method over the estimated useful
lives of the assets, ranging from 3 to 40 years:
December 31,
1994 1993
--------------------------
Data processing equipment $119,197,000 $92,266,000
Purchased software 31,522,000 20,509,000
Buildings and leasehold improvements 35,326,000 32,635,000
Furniture and equipment 30,494,000 23,357,000
--------------------------
216,539,000 168,767,000
Less accumulated depreciation and amortization 103,091,000 72,122,000
--------------------------
Total $113,448,000 $96,645,000
==========================
INTERNALLY GENERATED COMPUTER SOFTWARE
Certain costs incurred to develop new software and enhance existing software are
capitalized and amortized over the expected useful life of the product,
generally five years. At December 31, 1994 and 1993, the unamortized portion of
internally generated computer software costs amounted to $67,820,000 and
$58,020,000, respectively; amortization of such costs charged to expense
amounted to $16,655,000, $13,995,000, and $10,487,000 in 1994, 1993 and 1992,
respectively. Routine maintenance of software products, design costs and
development costs incurred prior to establishment of a product's technological
feasibility are expensed as incurred.
INTANGIBLE ASSETS
Intangible assets relate to acquisitions and consist of the following at
December 31:
1994 1993
--------------------------
Computer software acquired $5,565,000 $5,561,000
Non-competition agreements 19,370,000 25,841,000
Contract rights and other 30,150,000 22,880,000
--------------------------
55,085,000 54,282,000
Less accumulated amortization 20,995,000 20,991,000
--------------------------
$34,090,000 $33,291,000
==========================
Goodwill $157,830,000 $133,963,000
Less accumulated amortization 10,144,000 6,118,000
--------------------------
$147,686,000 $127,845,000
==========================
<PAGE>
The cost allocated to computer software acquired in corporate acquisitions is
being amortized on a straight-line basis over its expected useful life
(generally five years or less). In connection with certain acquisitions, the
Company has entered into non-competition agreements with the sellers. The
values assigned are being amortized on the straight-line method over the periods
covered by the agreements (generally five years or less). Costs allocated to
various customer data processing contracts at the dates of acquisition are being
amortized on a straight-line basis over the remaining terms of the contracts
(generally six years or less). The excess of the purchase price over the
estimated fair value of tangible and identifiable intangible assets acquired has
been recorded as goodwill and is being amortized over its estimated useful life
of 40 years.
INCOME TAXES
The consolidated financial statements are prepared on the accrual method of
accounting. Deferred income taxes are provided for temporary differences
between the Company's income for accounting and tax purposes.
REVENUE RECOGNITION
Revenues result primarily from the sale of data processing services to financial
institutions, software sales, and administration of self-directed retirement
plans. Such revenues are recognized as the related services are provided.
Revenues include investment income of $21,216,000, $12,286,000, and $10,308,000,
net of direct credits to depositors accounts of $17,446,000, $13,216,000, and
$16,576,000 in 1994, 1993 and 1992, respectively. Deferred revenues consist
primarily of advance billings for services and are recognized as revenue when
the services are provided.
INCOME PER SHARE
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 giving effect to stock splits.
SUPPLEMENTAL CASH FLOW INFORMATION
1994 1993 1992
-----------------------------------
Interest paid $ 8,387,000 $ 5,412,000 $5,003,000
Income taxes paid 10,073,000 6,544,000 7,466,000
Liabilities assumed in acquisitions
of businesses 3,416,000 47,000,000 2,243,000
NOTE 2. ACQUISITIONS AND CAPITAL TRANSACTIONS
ACQUISITIONS
During 1994, 1993 and 1992 the Company completed the following acquisitions:
<TABLE>
<CAPTION>
Date
Company Acquired Type of Business Consideration
- - - - - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994:
National Embossing Company, Inc. Apr. 19 Automated card services Cash for stock
Boatmen's Information Systems May 2 Data processing Cash for assets
data processing business
Federal Home Loan Bank of Atlanta Aug. 19 Item processing Cash for assets
item processing contracts
Cincinnati Bell Information Systems Nov. 30 Image and document Cash for assets
banking business management services
RECOM Associates, Inc. Dec. 30 Network integration services Stock for stock
<PAGE>
1993:
Tomahawk Holding, Inc. and Feb. 10 Data processing for banks, Cash and stock
its wholly-owned subsidiary thrifts and credit unions for stock
Basis Information
Technologies, Inc.
IPC Service Corporation Mar. 2 Item processing Cash for assets
EDS item processing May 17 Item processing Cash for assets
contracts
Datatronix Financial Services Jun. 25 Item processing Stock for stock
Data Line Service Company Jul. 13 Data processing for thrifts Cash for stock
Financial Processors, Inc. Nov. 8 Data processing for banks Cash for stock
and Financial Data Systems Item processing Cash for assets
Financial Institution Outsourcing Nov. 30 Data processing for banks Cash for assets
and Data-Link Systems, Inc. Mortgage banking services Cash for stock
1992:
Data Holdings, Inc. Feb. 10 Automated card services Cash for stock
BMS On-Line Services, Inc., Feb. 28 Data processing Cash for assets
selected assets
First American Information Mar. 2 Data processing and item Cash for stock
Services, Inc. processing
Cadre, Inc. Jul. 1 Disaster recovery services Cash for stock
Performance Analysis, Inc. Jul. 1 Software for banks Cash for stock
Chase Manhattan Bank, Oct. 22 Software for banks Cash for assets
REALM Software
Dakota Data Processing, Inc. Dec. 1 Data processing Cash for stock
Banking Group Services, Inc. Dec. 31 Item processing Stock for stock
</TABLE>
Generally, the acquisitions were accounted for as purchases and, accordingly,
the operations of the acquired companies are included in the consolidated
financial statements since their respective dates of acquisition as set forth
above. Certain of the acquisition agreements provide for additional cash
payments contingent upon the attainment of specified revenue goals.
STOCK PURCHASE AND STOCK OPTION PLANS
The Company has a Restricted Stock Purchase Plan, a qualified Incentive Stock
Option Plan and a Non- Qualified Stock Option Plan, each of which provide for
grants of common stock to employees for a price not less than 100% of the fair
value of the shares at the date of grant. There has been no recent activity in
the Restricted Stock Purchase Plan. In general, 20% of the option shares
awarded under the Incentive and Non-Qualified Stock Option Plans may be
purchased annually and expire, generally, five to ten years from the date of the
award. Plan activity during 1992, 1993 and 1994, adjusted for 3-for-2 splits
effective in May 1993 and June 1992, is summarized as follows:
<PAGE>
Shares
--------------------
Non- Price
Incentive Qualified Range
--------------------
Outstanding, December 31, 1991 1,750,887 5.04-12.45
Granted 751,747 15.22-16.00
Forfeited (85,392)
Exercised (537,126) 5.04-10.37
--------------------
Outstanding, December 31, 1992 1,880,116 5.56-16.00
Granted 589,850 18.50-20.17
Assumed from Datatronix 76,895 66,415 1.63-7.10
Forfeited (32,550)
Exercised (23,590) (277,027) 1.63-15.56
--------------------
Outstanding, December 31, 1993 53,305 2,226,804 1.63-20.17
Granted 559,497 20.00-22.50
Forfeited (3,380) (102,945)
Exercised (19,505) (211,529) 1.63-18.50
--------------------
Outstanding, December 31, 1994 30,420 2,471,827 1.63-22.50
====================
Shares exercisable,
December 31, 1994 6,253 1,184,876
====================
Options outstanding include 76,370 and 188,918 shares granted in 1993 and 1994
at $20.17 and $20.00 a share, respectively, under a stock purchase plan
requiring exercise within 30 days after a two-year period beginning on the date
of grant.
NOTE 3. LONG-TERM DEBT AND OTHER OBLIGATIONS
The Company has available a $125,000,000 unsecured line of credit and commercial
paper facility with a group of banks maturing in 1999 of which $85,568,000 was
in use at December 31, 1994 at an average rate of 6.17%. The loan agreements
covering the Company's long-term borrowings contain certain restrictive
covenants including, among other things, the maintenance of minimum net worth
and various operating ratios with which the Company was in compliance at
December 31, 1994. A facility fee ranging from .175% to .325% per annum is
required on the entire bank line regardless of usage. The facility is reduced to
$112,500,000 on September 30, 1997 and to $100,000,000 on September 30, 1998.
Long-term debt and other obligations outstanding at the respective year-ends
comprised the following:
December 31,
1994 1993
--------------------------
9.45% senior notes payable, due 1995-2000 $25,714,000 $30,000,000
9.75% senior notes payable, due 1995-2001 17,500,000 20,000,000
Bank notes and commercial paper 96,650,000 61,099,000
Other obligations 2,314,000 2,308,000
--------------------------
$142,178,000 $113,407,000
==========================
<PAGE>
Other obligations relate to balances due under capital leases. Annual principal
payments required under the terms of the long-term agreements were as follows at
December 31, 1994:
Year
- - - - - ----------------------
1995 $10,671,000
1996 9,992,000
1997 8,916,000
1998 7,302,000
1999 95,878,000
Thereafter 9,419,000
------------
$142,178,000
============
Interest expense with respect to long-term debt and other obligations amounted
to $8,710,000, $5,737,000 and $5,018,000 in 1994, 1993 and 1992, respectively.
NOTE 4. INCOME TAXES
A reconciliation of recorded income tax expense with income tax computed at the
statutory federal tax rates follows:
1994 1993 1992
------------------------------------
Statutory federal tax rate 35% 35% 34%
Tax computed at statutory rate $21,971,000 $17,509,000 $12,607,000
State income taxes net of federal effect 2,600,000 2,489,000 1,483,000
Tax exempt income (470,000) (326,000) (311,000)
Other 1,009,000 (339,000) 311,000
------------------------------------
Recorded income tax expense $25,110,000 $19,333,000 $14,090,000
====================================
The provision for income taxes consisted of the following:
1994 1993 1992
------------------------------------
Currently payable $11,937,000 $6,240,000 $6,990,000
Tax reduction credited to capital
in excess of par value 800,000 1,300,000 1,700,000
Deferred 12,373,000 11,793,000 5,400,000
------------------------------------
Total $25,110,000 $19,333,000 $14,090,000
====================================
<PAGE>
The approximate tax effects of temporary differences at December 31, 1994 and
1993 were as follows:
1994 1993
----------------------------
Allowance for doubtful accounts $ 1,571,000 $ 595,000
Accrued expenses not currently deductible 11,392,000 10,362,000
Other 1,931,000 2,958,000
Net operating loss and tax credit carryforwards 5,901,000 4,597,000
Deferred costs (4,911,000) (2,762,000)
Internally generated capitalized software (27,120,000) (22,064,000)
Excess of tax over book depreciation
and amortization (4,069,000) (2,933,000)
Unrealized gain on investments (7,495,000) (6,153,000)
----------------------------
Total $(22,800,000) $(15,400,000)
============================
The net operating loss and tax credit carryforwards have expiration dates
ranging from 1995 through 2009.
NOTE 5. EMPLOYEE BENEFIT PROGRAMS
The Company and its subsidiaries have contributory savings plans covering
substantially all employees, under which eligible participants may elect to
contribute a specified percentage of their salaries, subject to certain
limitations. The Company makes matching contributions, subject to certain
limitations, and also makes discretionary contributions based upon the
attainment of certain profit goals. Company contributions vest at the rate of
20% for each year of service. Contributions charged to operations under these
plans approximated $8,900,000, $6,346,000 and $5,381,000 in 1994, 1993 and 1992,
respectively.
NOTE 6. LEASES, OTHER COMMITMENTS AND CONTINGENCIES
LEASES
Future minimum rental payments, as of December 31, 1994, on various operating
leases for office facilities
and equipment were due as follows:
1995 $34,779,000
1996 29,138,000
1997 22,351,000
1998 17,402,000
1999 11,043,000
Thereafter 14,990,000
------------
Total minimum payments $129,703,000
============
Rent expense applicable to all operating leases was approximately $42,586,000,
$45,224,000 and $33,859,000 in 1994, 1993 and 1992, respectively.
OTHER COMMITMENTS AND CONTINGENCIES
The Company's trust administration subsidiary had fiduciary responsibility for
the administration of approximately $12.6 billion in trust funds as of December
31, 1994. With the exception of the trust account investments discussed in Note
1, such amounts are not included in the accompanying balance sheets.
In the normal course of business, the Company and its subsidiaries are named as
defendants in various lawsuits in which claims are asserted against the Company.
In the opinion of management, the liabilities, if any, which may ultimately
result from such lawsuits are not expected to have a material adverse effect on
the financial statements of the Company.
MANAGEMENT'S DISCUSSION & 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 and the percentage change in those items from period to
period.
<TABLE>
<CAPTION>
Percentage of Revenues Period to Period Percentage
Year Ended December 31, Increase (Decrease)
1994 1993 1992 1994 VS. 1993 1993 vs. 1992
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 23.9% 36.9%
------------------------
Cost of revenues:
Salaries, commissions and payroll
related costs 48.9 47.9 50.0 26.4 31.0
Data processing expenses, rentals
and telecommunications costs 14.3 15.8 13.4 12.1 61.9
Other operating expenses 19.0 19.3 20.0 22.1 32.5
Depreciation and amortization of
property and equipment 5.3 4.8 4.8 39.2 34.0
Amortization of intangible assets 1.9 2.0 2.0 19.2 38.1
Capitalization of internally generated
computer software - net (1.7) (1.6) (2.0) 33.6 6.3
------------------------
Total cost of revenues 87.7 88.2 88.2 23.3 36.9
------------------------
Operating income 12.3% 11.8% 11.8% 28.8 37.0
========================
Income before income taxes 11.1% 11.0% 11.2% 25.5 34.9
========================
Net income 6.7% 6.8% 6.9% 22.7 33.5
========================
</TABLE>
Revenues increased $108,898,000 in 1994 and $122,602,000 in 1993. Approximately
80% of the 1994 growth and 90% of the 1993 growth resulted from the inclusion of
revenues from the date of purchase of acquired businesses as set forth in Note 2
to the financial statements and the balance in each year from the addition of
new clients, growth in the transaction volume experienced by existing clients
and price increases.
As a percentage of revenues, cost of revenues decreased .5% from 1993 to 1994
and remained relatively constant in 1993. The make up of cost of revenues has
been significantly affected in both years by business acquisitions and by
changes in the mix of the Company's business as item processing and electronic
funds transfer operations have enjoyed an increasing percentage of total
revenues.
<PAGE>
A significant portion of the purchase price of the Company's acquisitions has
been allocated to intangible assets, such as client contracts, computer
software, non-competition agreements and goodwill, which are being amortized
over time, generally three to forty years. Amortization of these costs
increased $1,748,000 from 1993 to 1994 and $2,509 ,000 from 1992 to 1993. As a
percentage of revenues, these costs have remained relatively constant from 1992
to 1994.
Capitalization of internally generated computer software is stated net of
amortization and increased in amount in both 1993 and 1994 but decreased as a
percentage of revenues in 1993 and increased slightly in 1994. The 1994
increase resulted from special software development projects which are expected
to be substantially completed by mid-1995.
Operating income increased $15,465,000 in 1994 and $14,505,000 in 1993. As a
percentage of revenues, operating income increased .5% in 1994 and remained
constant in 1993.
The effective income tax rate was 40% in 1994, 39% in 1993 and 38% in 1992. The
trend to higher income tax rates results from net increases in non-deductible
permanent differences and an increase in 1993 in the federal income tax rate.
The effective income tax rate for 1995 is expected to be 41%.
The Company's growth has been largely accomplished through the acquisition of
entities engaged in businesses which are complementary to its operations.
Management believes that a number of acquisition candidates are available which
would further enhance its competitive position and plans to pursue them
vigorously. Management is engaged in an ongoing program to reduce expenses by
eliminating operating redundancies. The Company's approach has been to move
slowly in achieving this goal in order to minimize the amount of disruption
experienced by its clients, while reducing the potential loss of clients due to
this program.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes (in thousands of dollars) the Company's primary
sources of funds:
Year Ended December 31,
1994 1993 1992
---------------------------
Cash provided by operating activities $ 63,043 $38,604 $36,050
Issuance of common stock-net 1,918 24,036 2,807
Decrease (increase) in other investments (26,545) (2,002) 20,757
Increase (decrease) in net borrowings 28,023 57,433 (1,205)
---------------------------
$ 66,439 $118,071 $58,409
---------------------------
The Company has applied a significant portion of its cash flow from operations
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 1994 increase in capital expenditures was abnormally high because of the
need to provide a new facility and equipment for Financial Institution
Outsourcing, acquired in November 1993.
<PAGE>
The Company believes that its cash flow from operations together with other
available sources of funds will be adequate to meet its funding requirements.
In the event that the Company makes significant future acquisitions, however, it
may raise funds through additional borrowings or issuance of securities.
SELECTED FINANCIAL DATA
The following data (in thousands, except per share data), which has been
materially affected by acquisitions, should be read in conjunction with the
financial statements and related notes thereto included elsewhere in this Annual
Report.
Year Ended December 31, 1994 1993 1992 1991 1990
----------------------------------------------------
Total assets $1,418,358 $1,182,443 $898,230 $740,107 $565,191
Long-term debt and other
long-term obligations 142,178 113,407 53,240 53,114 37,974
Revenues 563,590 454,692 332,090 281,333 183,180
Operating income 69,207 53,742 39,237 31,651 23,402
Income before income taxes 62,774 50,026 37,079 28,651 21,491
Income taxes 25,110 19,333 14,090 10,314 7,737
Net income 37,664 30,693 22,989 18,337 13,754
----------------------------------------------------
Net income per share - Note $0.95 $0.80 $0.67 $0.56 $0.47
====================================================
Note: Net income per share has been restated to recognize 3-for-2 stock splits
effective in May 1993, June 1992 and July 1991.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands, except per share data)
Quarters
1994 First Second Third Fourth Total
-----------------------------------------------
REVENUES $135,896 $135,793 $139,431 $152,470 $563,590
-----------------------------------------------
COST OF REVENUES 119,970 118,676 121,845 133,892 494,383
-----------------------------------------------
OPERATING INCOME 15,926 17,117 17,586 18,578 69,207
-----------------------------------------------
INCOME BEFORE INCOME TAXES 14,480 15,615 15,903 16,776 62,774
-----------------------------------------------
INCOME TAXES 5,792 6,246 6,361 6,711 25,110
-----------------------------------------------
NET INCOME $8,688 $9,369 $9,542 $10,065 $37,664
-----------------------------------------------
NET INCOME PER SHARE $0.22 $0.24 $0.24 $0.25 $0.95
===============================================
1993
Revenues $99,723 $111,180 $116,439 $127,350 $454,692
-----------------------------------------------
Cost of revenues 88,232 97,848 102,364 112,506 400,950
-----------------------------------------------
Operating income 11,491 13,332 14,075 14,844 53,742
-----------------------------------------------
Income before income taxes 10,624 12,356 13,230 13,816 50,026
-----------------------------------------------
Income taxes 3,834 4,695 5,292 5,512 19,333
-----------------------------------------------
Net income $6,790 $7,661 $7,938 $8,304 $30,693
-----------------------------------------------
Net income per share $0.19 $0.20 $0.20 $0.21 $0.80
===============================================
MARKET PRICE INFORMATION
The following information relates to the closing price of the Company's $.01 par
value common stock, which is traded on the over-the-counter market and is quoted
on the NASDAQ National Market System under the symbol FISV.
1994 1993
- - - - - ----------------------------------------------------------
Quarter Ended HIGH LOW High Low
- - - - - ----------------------------------------------------------
March 31 23 1/2 18 1/2 21 3/8 17 5/8
June 30 22 1/4 20 20 1/8 17 3/8
September 30 22 3/4 18 3/4 21 3/4 19
December 31 23 1/2 19 1/4 23 3/4 19 1/4
<PAGE>
At December 31, 1994, the Company's common stock was held by approximately
12,000 shareholders of record or through nominee or street name accounts with
brokers. The closing sale price for the Company's stock on January 27, 1995 was
$21.75 per share.
The Company's present policy is to retain earnings to support future business
opportunities, rather than to pay dividends.
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
The management of FIserv, Inc. assumes responsibility for the integrity and
objectivity of the information appearing in the 1994 Annual Report. This
information was prepared in conformity with generally accepted accounting
principles and necessarily reflects the best estimates and judgment of
management. To provide reasonable assurance that transactions authorized by
management are recorded and reported properly and that assets are safeguarded,
the Company maintains a system of internal controls. The concept of reasonable
assurance implies that the cost of such a system is weighed against the benefits
to be derived therefrom.
Deloitte & Touche LLP, certified public accountants, audit the financial
statements of the Company in accordance with generally accepted auditing
standards. Their audit includes a review of the internal control system, and
improvements are made to the system based upon their recommendations.
The Audit Committee ensures that management and the independent auditors are
properly discharging their financial reporting responsibilities. In performing
this function, the Committee meets with management and the independent auditors
throughout the year. Additional access to the Committee is provided to
Deloitte & Touche LLP on an unrestricted basis, allowing discussion of audit
results and opinions on the adequacy of internal accounting controls and the
quality of financial reporting.
GEORGE D. DALTON
Chairman and Chief Executive Officer
EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT
STATE OF
NAME UNDER WHICH SUBSIDIARY DOES BUSINESS INCORPORATION
Accurate Data On-line Corp. Florida
Aspen Investment Alliance, Inc. Colorado
Cadre, Inc. Connecticut
Data Link Systems, Inc. Indiana
FIserv Atlanta, Inc. Georgia
FIserv Basis, Inc. Georgia
FIserv Boston, Inc. Massachusetts
FIserv CIR, Inc. Delaware
Citizens Financial Corporation Ohio
d/b/a FIserv Cleveland, Inc.
FIserv Data Pro Card Services, Inc. Indiana
FIserv Dayton, Inc. Delaware
FIserv Des Moines, Inc. Iowa
American Data Services, Inc. Oregon
d/b/a FIserv EFT, Inc.
FIserv Financial Systems, Inc. Texas
FIserv Financial Systems of Florida, Inc. Florida
FIserv Fresno, Inc. California
FIserv Government Services, Inc. Delaware
FIserv Joint Venture, Inc. Delaware
FIserv Minneapolis, Inc. Minnesota
FIserv New Haven, Inc. Connecticut
FIserv Pittsburgh, Inc. Pennsylvania
FIserv St. Paul, Inc. Minnesota
FIserv San Diego, Inc. California
FIserv Seattle, Inc. Washington
FIserv Spokane, Inc. Washington
FIserv Tampa, Inc. Florida
FIserv (UK), Ltd. United Kingdom
FIserv (ASPAC) Pte., Ltd. Singapore
First Retirement Marketing, Inc. Colorado
First Trust Corporation Colorado
Performance Analysis, Inc. Ohio
National Embossing Company Texas
Sendero Corporation Arizona
Sendero (ASPAC) Pte., Ltd. Singapore
Summit Information Systems Corp. Oregon
The Affinity Group, Inc. Colorado
INDEPENDENT AUDITORS' REPORT
Shareholders and Directors of FIserv, Inc.:
We have audited the accompanying consolidated balance sheets of FIserv, Inc. and
subsidiaries as of December 31, 1994 and 1993 and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of FIserv, Inc. and subsidiaries at
December 31, 1994 and 1993 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Milwaukee, Wisconsin
January 30,1995
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
No. 33-61342 and No. 33-62870 of FIserv, Inc. on Forms S-8 of our report
dated January 30, 1995, incorporated by reference in the Annual Report on
Form 10-K of FIserv, Inc. and subsidiaries for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 28,294
<SECURITIES> 807,819
<RECEIVABLES> 120,033
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 990,537
<PP&E> 216,539
<DEPRECIATION> 103,091
<TOTAL-ASSETS> 1,418,358
<CURRENT-LIABILITIES> 902,577
<BONDS> 0
<COMMON> 392
0
0
<OTHER-SE> 350,411
<TOTAL-LIABILITY-AND-EQUITY> 1,418,358
<SALES> 0
<TOTAL-REVENUES> 563,590
<CGS> 0
<TOTAL-COSTS> 493,136
<OTHER-EXPENSES> 1,247
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,433
<INCOME-PRETAX> 62,774
<INCOME-TAX> 25,110
<INCOME-CONTINUING> 37,664
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,664
<EPS-PRIMARY> .95
<EPS-DILUTED> .95
</TABLE>
