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 September 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 September 30, 1995, 44,858,000 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 Nine-Month Periods Ended September 30, 1995 and 1994
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(In thousands except per share amounts)
Revenues $176,922 $143,661 $507,571 $423,314
________ ________ ________ ________
Cost of revenues:
Salaries, commissions and payroll
related costs 84,069 69,277 240,144 205,278
Data processing expenses, rentals
and telecommunication costs 22,829 19,360 69,506 61,096
Other operating expenses 28,731 27,573 89,379 78,494
Depreciation and amortization of
property and equipment 9,731 7,975 28,525 22,893
Amortization of intangible assets 4,805 2,649 11,156 8,056
Capitalization of internally generated
computer software-net (1,879) (2,140) (5,411) (7,093)
________ ________ ________ ________
Total cost of revenues 148,286 124,694 433,299 368,724
________ ________ ________ ________
Operating income 28,636 18,967 74,272 54,590
Interest expense - net 6,413 1,813 12,687 5,019
________ ________ ________ ________
Income before income taxes 22,223 17,154 61,585 49,571
Income tax provision 9,111 6,861 25,250 19,828
________ ________ ________ ________
Net income $13,112 $10,293 $36,335 $29,743
======== ======== ======== ========
Net income per common and
common equivalent share $0.29 $0.25 $0.84 $0.73
======== ======== ======== ========
Shares used in computing
net income per share 45,864 40,640 43,395 40,564
======== ======== ======== ========
See notes to consolidated financial statements.
2
<PAGE>
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
__________ __________
(In thousands)
ASSETS
Cash and cash equivalents $82,654 $29,683
Accounts receivable 142,790 122,984
Prepaid expenses and other assets 47,450 34,760
Trust account investments 1,020,825 1,041,474
Other investments 50,841 64,777
Property and equipment-net 131,623 114,966
Internally generated computer software-net 72,890 67,820
Identifiable intangible assets relating
to acquisitions-net 35,705 36,487
Goodwill-net 515,789 148,394
__________ __________
Total $2,100,567 $1,661,345
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $33,539 $22,060
Accrued expenses 53,064 59,742
Accrued income taxes 2,879 1,952
Deferred revenues 33,661 10,836
Trust account deposits 1,045,469 1,035,217
Long-term debt 372,885 143,864
Other long-term obligations 2,265 6,152
Deferred income taxes 31,800 22,800
__________ __________
Total liabilities 1,575,562 1,302,623
__________ __________
Stockholders' equity:
Common stock outstanding, 44,858,000 and
39,997,000 shares, respectively 449 400
Additional paid-in capital 313,847 184,748
Unrealized gain on investments 11,756 11,054
Accumulated earnings 198,953 162,520
__________ __________
Total stockholders' equity 525,005 358,722
__________ __________
Total $2,100,567 $1,661,345
========== ==========
See notes to consolidated financial statements.
3
<PAGE>
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Nine-Month Periods Ended September 30, 1995 and 1994
Nine Months Ended
September 30,
1995 1994
_________ _________
(In thousands)
Cash flows from operating activities:
Net income $36,335 $29,743
Adjustments to reconcile income to net cash provided
by operating activities:
Deferred income taxes 13,638 10,456
Depreciation and amortization of property and
equipment 28,525 22,893
Amortization of intangible assets 11,156 8,056
Capitalization of internally generated computer
software-net (5,411) (7,093)
_________ _________
84,243 64,055
Cash provided (used) by changes in assets and
liabilities,
net of effects from acquisitions of businesses:
Accounts receivable (1,818) 317
Prepaid expenses and other assets (8,877) (7,413)
Accounts payable and accrued expenses (14,045) (13,024)
Deferred revenue 2,225 834
Income taxes payable 1,012 1,079
_________ _________
Net cash provided by operating activities 62,740 45,848
_________ _________
Cash flows from investing activities:
Capital expenditures (33,563) (42,905)
Investments and other assets 19,432 (10,849)
Payment for acquisition of businesses (253,082) (6,699)
Trust account investments 20,973 (154,016)
_________ _________
Net cash used by investing activities (246,240) (214,469)
_________ _________
Cash flows from financing activities:
Borrowings and other long-term obligations-net 225,135 13,122
Issuance of common stock 1,083 2,448
Trust account deposits 10,253 155,102
_________ _________
Net cash provided by financing activities 236,471 170,672
_________ _________
Change in cash 52,971 2,051
Beginning balance 29,683 36,349
_________ _________
Ending balance $82,654 $38,400
========= =========
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 September 30, 1995 and the related
consolidated statements of income and cash flows for the three and nine-month
periods ended September 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. lnterim 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 Lincoln Holdings, Inc. on August 1,
1995 in a transaction accounted for as a pooling of interests. Accordingly,
the accompanying financial statements include the accounts of LHI for all
periods presented. The results of operations of Information Technology, Inc.
are also included from the date of acquisition, May 17, 1995. The following
summary compares restated results of operations for 1995 to results as
originally presented for 1994.
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
______________________________________
(In thousands)
Revenues $176,922 $139,431 $507,571 $411,120
______________________________________
Income before taxes 22,223 15,903 61,585 45,998
______________________________________
Net income $13,112 $9,542 $36,335 $27,599
======================================
Net income per share $0.29 $0.24 $0.84 $0.70
======================================
Shares used in computing net
income per share 45,864 39,762 43,395 39,686
3. Shares Used in Computing Net Income per Share
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
______________________________________
(In thousands)
Weighted average number of common
shares outstanding 44,844 39,855 42,450 39,786
Shares issuable upon exercise of options
reduced by the number of shares which
could have been purchased with the
proceeds of such exercise 1,020 785 945 778
________ ________ ________ ________
Shares used 45,864 40,640 43,395 40,564
======== ======== ======== ========
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.
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 September 30, 1995 and December 31, 1994 are as follows:
September 30, December 31,
1995 1994
_____________ _____________
Allowance for doubtful accounts $1,420,000 $1,571,000
Accrued expenses not currently deductible 6,816,000 11,392,000
Other 6,727,000 1,931,000
Net operating loss and credit carryforwards 6,339,000 5,901,000
Deferred costs (7,931,000) (4,911,000)
Internally generated capitalized software (29,878,000) (27,120,000)
Excess of tax over book depreciation and
amortization (7,123,000) (4,069,000)
Unrealized gain on investments (8,170,000) (7,495,000)
_____________ _____________
Total ($31,800,000) ($22,800,000)
============= =============
5. Supplemental Cash Flow Information
Nine Months Ended
September 30,
1995 1994
(In thousands)
Income taxes paid $8,424 $7,840
Interest paid 10,914 6,027
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 Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
________ ________ ________ ________
(Percent of Revenues)
Revenues 100.00% 100.00% 100.00% 100.00%
________ ________ ________ ________
Salaries and related costs 47.51 48.22 47.32 48.49
Data processing costs 12.90 13.48 13.69 14.43
Other operating expenses 16.24 19.19 17.61 18.54
Depreciation and amortization 5.50 5.55 5.62 5.41
Amortization of intangible assets 2.72 1.85 2.20 1.90
Capitalization of software-net (1.06) (1.49) (1.07) (1.67)
________ ________ ________ ________
Total cost of revenues 83.81 86.80 85.37 87.10
________ ________ ________ ________
Operating income 16.19 13.20 14.63 12.90
======== ======== ======== ========
Revenues
Revenues increased 23.2% from $143.7 million in the third quarter of 1994 to
$176.9 million in the current third quarter and 19.9% from $423.3 million in the
first nine months of 1994 to $507.6 million in the comparable current period.
Approximately 60% 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 18.9% from $124.7 million in the third quarter of
1994 to $148.3 million in the current third quarter, and 17.5% from $368.7
million in the first nine months of 1994 to $433.3 million in the first nine
months of 1995.
Operating Income
Operating income increased 51.0% from $19.0 million in the third quarter of 1994
to $28.6 million in the current third quarter, and 36.1% from $54.6 million in
the first nine months of 1994 to $74.3 million in the first nine months of 1995.
As a percentage of revenues, operating margins improved during the third quarter
and first nine months of 1995 when compared to the comparable prior year periods
due primarily 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 $4.6 million in the
third quarter and $7.7 million in the first nine 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 27% from $10.3 million in the third quarter of 1994 to $13.1
million in the comparable 1995 quarter and 22% from $29.7 million in the first
nine months of 1994 to $36.3 million in the comparable current period. Net
income per share increased $.04 from $.25 in the third quarter of 1994 to $.29
in the current third quarter and $.11 from $.73 in the first nine months of 1994
to $.84 in the first nine months of 1995. Net income per share increased $.05
and $.14, respectively, in the third quarter and first nine 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 nine months ended September 30, 1995, cash increased $53.0 million
comprising primarily $62.7 million net cash provided by operating activities,
$225.1 million net borrowings, $50.7 million decrease in investments and $1.1
million from issuance of common stock, which was partially offset by $253.1
million for the acquisition of businesses and $33.5 million for capital
expenditures. Long-term obligations amounted to $375.2 million at September 30,
1995. The majority of this debt comprises $126.4 million of senior notes due
1995 to 2001 and $240.5 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
0.25% 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.
<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 September 30, 1995, the Registrant filed a report
on Form 8-K, dated August 11, 1995, relating to the acquisition of Lincoln
Holdings, 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 October 24, 1995 by /S/EDWARD P. ALBERTS
____________________
EDWARD P. ALBERTS
Senior Vice President, Finance
and Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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