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, 1995
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
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of January 31, 1996: $1,212,102,441
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of January 31, 1996: 44,892,683
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.
1995 Annual Report to Shareholders - Parts II, IV
Proxy Statement for March 21, 1996 Meeting - Part III
<PAGE>
FISERV, INC. AND SUBSIDIARIES
FORM 10-K
December 31, 1995
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 12
Item 11. Executive Compensation 12
Item 12. Security Ownership of Certain Beneficial Owners
and Management 12
Item 13. Certain Relationships and Related Transactions 12
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, Wisconsin, and Tampa,
Florida. These firms--First Data Processing of Milwaukee and Sunshine State
Systems of 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
these 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 conducts the following operations nationwide: 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, Wisconsin, is prepared 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 and
resource management services 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 arranged by regional markets as
follows:
Western Region locations: Phoenix, Arizona; Alameda, Fresno, Fullerton,
Sacramento, San Diego, San Leandro and Walnut, California; Seattle, Washington.
Southwest Region locations: Little Rock, Arkansas; Los Angeles,
California; Denver, Colorado; Bowling Green, Kentucky; New Orleans, Louisiana;
Amarillo (Facilities Management site), Beaumont, Dallas, Houston and San
Antonio, Texas.
Midwest Region locations: Minneapolis and St. Paul, Minnesota; Fargo, North
Dakota.
Central Region locations: Chicago, Marion and Pontiac, Illinois; Davenport
and Des Moines, Iowa; Brookfield and Milwaukee, Wisconsin.
Eastern Region locations: Jacksonville, Miami and Tampa, Florida; Atlanta
and Macon, Georgia; Pittsburgh, Pennsylvania; Memphis, Tennessee.
Northeast Region locations: New Haven, Connecticut; Boston and Somerville,
Massachusetts; Piscataway and Princeton, New Jersey; Lake Success, New York;
Cleveland, Ohio.
New York Chase alliance locations: Brooklyn, Rochester and Syracuse, New
York.
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:
CBS Worldwide Sector with business units in Fresno, California; Orlando,
Florida; Arlington Heights, Illinois; London, England; Singapore.
Financial Institutions Outsourcing Sector with business units in Covina and
Fresno, California; Honolulu, Hawaii; Arlington Heights, Illinois; Oklahoma
City, Oklahoma; Philadelphia and Pittsburgh, Pennsylvania.
Credit Union Sector with business units in Titusville, Florida; Chicago,
Illinois; Flint and Troy, Michigan; Minneapolis, Minnesota; Corvallis, Oregon.
Additional business units within the Bank & Credit Union Group include
BankLink cash management services (New York, New York); Data-Link Systems
mortgage banking services (South Bend, Indiana); Outsourcing & Government
Services; Fiserv EFT electronic funds transfer services (Portland, Oregon).
The INDUSTRY PRODUCTS & SERVICES GROUP includes all Fiserv product 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, Connecticut); Communications Design marketing
services (Sacramento, California); DataPro Card Services (Indianapolis,
Indiana); Fiserv Forms & Graphics (Seattle, Washington); Fiserv Human Resource
Information Services (Melville, New York); ImageSoft Technologies (Maitland,
Florida); National Embossing Company card services (Houston, Texas); RECOM
network consulting (Tampa, Florida); Sendero Corporation asset/liability
management and decision support systems (Scottsdale, Arizona).
Fiserv is active in the servicing, administration and record keeping for
Individual Retirement Accounts (IRAs) and business retirement plans. Three
subsidiary companies provide retirement plan processing services--FIRST TRUST
CORPORATION, LINCOLN TRUST COMPANY and THE AFFINITY GROUP, all headquartered in
Denver, Colorado. The Affinity Group also does business in Florida as
Retirement Accounts, Inc. Cumulatively, these Fiserv subsidiaries service
approximately 331,900 retirement plans and custodial accounts with assets valued
at more than $16.8 billion.
INFORMATION TECHNOLOGY, INC. (ITI) is a Fiserv subsidiary company based in
Lincoln, Nebraska. ITI is a nationwide leader in the design, development,
delivery, installation and support of the ITI Premier banking software and
related services. The ITI product serves financial institutions directly
through in-house software licenses, and indirectly through outsourcing providers
using ITI software.
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 with great frequency; the
distinctions among financial services traditionally offered by savings and loan
associations, banks and credit unions continue to narrow; and financial
institutions diversify and consolidate on an ongoing basis in response to market
pressures, as well as under the auspices of the Federal Deposit Insurance
Corporation (FDIC) and the Credit Union National Association (CUNA).
Although such market changes have led to consolidations which 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. New entrants to the once limited
financial services industry have opened new markets for Fiserv services.
To stay competitive in this changing marketplace, financial institutions
are finding they must aggressively 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 and types of transactions and
accounts have 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 information
systems requirements, to require application of more specialized 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.
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
developed their own software systems and maintained their own data processing
operations have outsourced their data processing requirements by licensing their
software from a third party or by contracting with third-party processors to
reduce costs and enhance their products and services. Outsourcing can involve
simply the licensing of software, thereby eliminating the costly technical
expertise within the financial institution, or the utilization of service
bureaus, facilities management or resource management capability. Fiserv
provides all of these options to the financial industry.
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
both opportunistic and strategic acquisitions.
<TABLE>
ACQUISITION HISTORY
<CAPTION>
Founded Acquired Business Service
- ------- -------- -------- -------
<S> <C> <C> <C>
1964 July 1984 First Data Processing, Milwaukee, WI Data processing
1971 July 1984 Sunshine State Systems, Tampa, FL Data processing
1966 Nov. 1984 San Antonio, Inc., San Antonio, TX Data processing
1982 Oct. 1985 Sendero Corporation, Scottsdale, AZ Asset/liability management
1962 Oct. 1985 First Trust Corporation, Denver, CO DP for retirement planning
1962 Oct. 1985 First Retirement Marketing, Denver, CO Retirement planning services
1973 Jan. 1986 On-Line, Inc., Seattle, WA Data processing, forms
1966 May 1986 First City Financial Systems, Inc., Beaumont, TX Data processing
1962 Feb. 1987 Pamico, Inc., Milwaukee, WI Specialized forms
1975 Apr. 1987 Midwest Commerce Data Corp., Elkhart, IN Data processing
1969 Apr. 1987 Fidelity Financial Services, Inc., Spokane, WA Data processing
1965 Oct. 1987 Capbanc Computer Corporation, Baton Rouge, LA Data processing
1971 Feb. 1988 Minnesota On-Line Inc., Minneapolis, MN Data processing
1965 May 1988 Citizens Financial Corporation, Cleveland, OH Data processing
1980 May 1988 ZFC Electronic Data Services, Inc., Bowling Green, KY Data processing
1969 June 1988 GESCO Corporation, Fresno, CA Data processing
1967 Nov. 1988 Valley Federal Data Services, Los Angeles, CA Data processing
1984 Dec. 1988 Northeast Savings Data Services, Hartford, CT Data processing
1982 May 1989 Triad Software Network, Ltd., Chicago, IL Data processing
1969 Aug. 1989 Northeast Datacom, Inc., New Haven, CT Data processing
1978 Feb. 1990 Financial Accounting Services Inc., Pittsburgh, PA Data processing
1974 June 1990 Accurate Data On Line, Inc., Titusville, FL Data processing
1982 June 1990 GTE EFT Services Money Network, Fresno, CA EFT networks
1968 July 1990 First Interstate Management, Milwaukee, WI Data processing
1982 Oct. 1990 GTE ATM Networks, Fresno, CA 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, WI Item processing
1979 Apr. 1991 Citicorp Information Resources, Inc., Stamford, CT Data processing
1980 Apr. 1991 BMS Processing, Inc., Randolph, MA Item processing
1979 May 1991 FHLB of Dallas IP Services, Dallas, TX Item processing
1980 Nov. 1991 FHLB of Chicago IP Services, Chicago, IL Item processing
1977 Feb. 1992 Data Holdings, Inc., Indianapolis, IN Automated card services
1980 Feb. 1992 BMS On-Line Services, Inc. (assets), Randolph, MA Data processing
1982 Mar. 1992 First American Information Services, St. Paul, MN Data processing
1981 July 1992 Cadre, Inc., Avon, CT Disaster recovery
1992 July 1992 Performance Analysis, Inc., Cincinnati, OH Asset/liability management
1986 Oct. 1992 Chase Manhattan Bank, REALM Software, NY Asset/liability management
1984 Dec. 1992 Dakota Data Processing, Inc., Fargo, ND Data processing
1983 Dec. 1992 Banking Group Services, Inc., Somerville, MA Item processing
1968 Feb. 1993 Basis Information Technologies, Atlanta, GA Data processing, EFT
1986 Mar. 1993 IPC Service Corporation (assets), Denver, CO Item processing
1973 May 1993 EDS' FHLB Seattle (assets), Seattle, WA Item processing
1982 June 1993 Datatronix Financial Services, San Diego, CA Item processing
1966 July 1993 Data Line Service, Covina, CA Data processing
1978 Nov. 1993 Financial Processors, Inc., Miami, FL Data processing
1974 Nov. 1993 Financial Data Systems, Jacksonville, FL Item processing
1961 Nov. 1993 Financial Institutions Outsourcing, Pittsburgh, PA Data processing
1972 Nov. 1993 Data-Link Systems, South Bend, IN Mortgage banking services
1985 Apr. 1994 National Embossing Company, Inc., Houston, TX 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, FL Imaging technology
1987 Dec. 1994 RECOM Associates, Inc., Tampa, FL Network integration
1977 Feb. 1995 BankLink, Inc., New York, NY Cash management
1976 May 1995 Information Technology, Inc., Lincoln, NE Software & Services
1957 Aug. 1995 Lincoln Holdings, Inc., Denver, CO DP for retirement planning
1993 Sept. 1995 SRS, Inc., Austin, TX Data processing
1992 Sept. 1995 ALLTEL's Document Management Services, CA, NJ Item processing
1978 Nov. 1995 Financial Information Trust, Des Moines, IA Data processing
</TABLE>
SYSTEMS, SERVICES AND PRODUCTS
No matter what a financial institution requires, Fiserv offers a business-
specific solution to satisfy its needs--from data processing to specialized in-
house processing systems to customized outsourcing. Within this dynamic
relationship, Fiserv brings the resources, expertise and technical
specialization that gives an institution the security to focus its efforts on
reaching its strategic business goals.
All Fiserv products and services are designed to help clients meet their
ultimate goal: giving their customers the best possible service quickly,
accurately and completely. Through their relationship with Fiserv, financial
institutions gain the tools to enhance and expand their customer service:
advanced technology, dependable and responsive support, product and system
flexibility, and value for their money.
As a technology partner, Fiserv offers data processing solutions based on
the financial institution's requirements. This broad base of offerings results
in delivery options including service bureau capabilities; in-house software
systems; and strategic technology alliances including facilities and resource
management services. A host of financial information technology products and
services complement these delivery methods: item processing and imaging
technology services; backroom automation software systems; electronic funds
transfer services; plastic cards and other related card management services;
rate risk management systems; self-directed retirement plan processing; network
installation and integration services; human resources outsourcing; disaster
recovery; design and production of business forms and marketing literature; and
delivery and support of leading third-party software and hardware products.
COMPREHENSIVE SERVICE DIMENSION
Fiserv focuses on providing financial data processing systems and related
information management services and products to banks, credit unions, mortgage
banks, savings institutions and other financial intermediaries. This focus
allows the Company to concentrate its advanced technology, industry experience,
research and development on creating and supporting solutions uniquely designed
for the financial industry. Based on 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.
Many financial institutions, including banks, credit unions, mortgage banks
and savings institutions, rely on Fiserv data center service bureau solutions
for their information processing needs. These solutions offer clients a choice
of online systems compatible with their existing equipment. Fiserv data centers
focus on the financial institution's needs within its local business climate,
helping to better serve the customer base and provide quality service at all
points of customer contact.
In-house software systems give clients a service delivery method that
enables them to process their own work. These solutions offer clients a broad
array of service capabilities to respond to emerging market opportunities.
Specific to this Fiserv solution is the option of migrating between in-house or
service bureau delivery approaches without new software conversion. The end
result: a business alliance designed to help financial institutions respond to
their customers while enabling each institution to select its preferred
operating environment.
Strategic technology alliances offer financial institutions the option of
full data processing management by Fiserv personnel on-site; or management of
their systems at a Fiserv data center. Facilities Management brings Fiserv
personnel to the client's site, while Resource Management brings the client's
operations to one of the many Fiserv data processing or computer service centers
throughout the United States. Both solutions are designed to meet the unique
requirements of the client by partnering to minimize operating costs while
allowing each client to maintain control of its software applications.
For institutions seeking to expand or enhance their mortgage banking
capabilities, Fiserv offers a specialized line of mortgage products and
services. The benefits of completely PC WindowsTM-based origination and
secondary marketing solutions and online, real-time loan servicing solutions are
available to help clients effectively meet their mortgage banking needs.
Offering comprehensive item processing (IP) services to more financial
institutions than any other external provider, Fiserv maintains a network of
specialized, regional processing centers in more than 30 cities. In a field
where efficiencies are gained through volume, Fiserv is well positioned to
leverage its resources and technological expertise for the benefit of IP
services clients nationwide. Other item processing services include: proof of
deposit, inclearing, statement rendering, bulkfile, lockbox, item research,
overdraft processing, qualified returns and return items, cash letter deposit,
fine sorting, account reconcilement and adjustments.
A growing trend in check operations is the use of imaging technology.
Fiserv offers a full range of image integration products and services. Included
are image and document management systems for management, storage and
presentation of check and document images.
Fiserv is among the nation's leading third-party providers of electronic
funds transfer (EFT) services, providing transaction authorization,
comprehensive Automated Teller Machine / Point of Sale (ATM / POS) processing
and card management services. Product flexibility and current technology,
coupled with access to all major EFT services networks, helps to keep Fiserv
clients competitive.
As a leading systems integrator, Fiserv creates joint ventures that combine
core competencies in hardware, software, functional application systems,
networks, data management and end-user computing, along with dedicated human
resources. In addition, Fiserv complements its service offerings through
numerous strategic alliances with specialized third-party technology providers.
As a worldwide provider of financial decision-support systems, Fiserv
offers asset/liability management, data warehousing and performance measurement
solutions. Consulting services help to analyze, enhance and expedite the total
financial management process.
Office automation and communication network integration services are
designed to meet specialized information technology needs. Included are
hardware and software installation, maintenance, on-site education and support
for financial institutions.
For cash management services, Fiserv offers a variety of software products
that take into account an institution's particular needs. This portfolio of
cash management solutions includes electronic banking information, reporting and
transaction initiation services.
Fiserv backroom automation systems provide PC-based productivity tools that
deliver the software, service and support necessary to meet the customer service
challenges facing the financial industry. The systems are designed to
streamline backroom operations by reducing time, keystrokes and labor.
A full range of human resource, benefit and payroll information services
are available through Fiserv to help large organizations enhance their personnel
management tasks. Marketing communications and a comprehensive financial
business forms service, including communications needs analysis and complete
project management, provide assistance at all levels of planning and
implementation. Concept, development and design of printed pieces, ranging from
direct mail and collateral material to annual reports, assist clients in
communicating with their customer base. To meet the requirements of examining
agencies, business back-up and disaster recovery planning and services are
important elements in continuous customer service.
First Trust Corporation and Lincoln Trust Company, specialized providers of
account processing, administration and trusteeship of self-directed individual
and business retirement plans, are together the largest provider of their kind
in the nation. Based in Denver, Colorado, these Fiserv companies specifically
assist financial representatives and other financial service intermediaries in
managing information through their proprietary data base technology.
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-
ups 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.
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, Bisys, ALLTEL, ISSC (IBM), Symitar 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 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 and Lincoln Trust compete 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 trust companies under Colorado law, First Trust and Lincoln Trust are
subject to the regulations of the Colorado Division of Banking. First Trust and
Lincoln Trust historically have complied with such regulations and, although no
assurance can be given, the Company believes First Trust and Lincoln 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 8,222 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.
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 66
cities (64 in the United States): Phoenix and Scottsdale, Arizona; Little Rock,
Arkansas; Alameda, Covina, Fresno, Fullerton, Los Angeles, Sacramento, San
Leandro, San Diego and Walnut, California; Denver, Colorado; Hartford, New Haven
and Stamford, Connecticut; Jacksonville, Maitland, Miami, Orlando, 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; Fargo, North Dakota; Piscataway and
Princeton, New Jersey; Brooklyn, Long Island (Lake Success), Melville, Rochester
and Syracuse, New York; Lincoln, Nebraska; Cleveland, Ohio; Oklahoma City,
Oklahoma; Corvallis and Portland, Oregon; Philadelphia and Pittsburgh,
Pennsylvania; Memphis, Tennessee; Dallas, Beaumont, Houston and San Antonio,
Texas; Seattle, Washington; and Brookfield and Milwaukee, Wisconsin.
International business centers are located in London, England, and Singapore.
The Company owns facilities in Brookfield, Corvallis, Fresno, Hartford, Lincoln
and Titusville; all other buildings in which centers are located are subject to
leases expiring through 1998 and beyond. The Company owns or leases 128
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.
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.
==============================
PART II
==============================
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.
==============================
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 27, 1996, and included in this Form 10-K Annual Report as
Exhibit 28.
==============================
PART IV
==============================
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,
1995 and 1994 and for each of the three years in the period ending December 31,
1995, together with the report thereon of Deloitte & Touche LLP, dated February
2, 1996, 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:
During 1995, the Company filed two reports on Form 8-K, one dated May 17,
1995, relating to the acquisition of Information Technology, Inc. and the other
dated August 11, 1995, relating to the acquisition of Lincoln Holdings, Inc.
(c) Exhibits:
2.1 Stock Purchase Agreement, dated as of April 6, 1995, by and between
FIserv, Inc. and Information Technology, Inc. (filed as Exhibit 2.1
to the Company's Registration Statement on Form S-3, File No. 33-
58709, and incorporated herein by reference).
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 May 17, 1995, 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.)
4.4 Note Purchase Agreement dated as of May 17, 1995, as amended, among
FIserv, Inc., Teachers Insurance and Annuity Association of America,
Massachusetts Mutual Life Insurance Company, Aid Association for
Lutherans, Northern Life Insurance Company and Northwestern National
Life Insurance Company. (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, included in the
Company's Annual Report on Form 10-K, dated February 28, 1994, and
incorporated herein by reference.
11. Computation of Shares Used in Computing Earnings per Share.
13. The 1995 Annual Report to Shareholders.
21. List of Subsidiaries of the Registrant.
23. Manually signed Consent of Independent Auditors.
28. The Company's definitive proxy statement for the 1996 annual meeting
of shareholders to be held on March 21, 1996, 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 27, 1996
FISERV, INC.
By /S/ GEORGE D. DALTON
------------------------
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 27, 1996.
SIGNATURE CAPACITY
/S/ George D. Dalton
- ------------------------
George D. Dalton Chairman of the Board, Chief Executive Officer
/S/ Leslie M. Muma
- ------------------------
Leslie M. Muma Vice Chairman of the Board, President,
Chief Operating Officer
/S/ Donald F. Dillon
- ------------------------
Donald F. Dillon Vice Chairman of the Board,
President - Information Technology, Inc.
/S/ Kenneth R. Jensen
- ------------------------
Kenneth R. Jensen Senior Executive Vice President, Chief Financial
Officer, Treasurer, 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,
1995 1994 1993
---------- ---------- ----------
Primary:
Weighted Average Shares Outstanding 43,058,000 39,954,000 38,588,000
Common Stock Equivalents 950,000 781,000 867,000
---------- ---------- ----------
Shares Used 44,008,000 40,735,000 39,455,000
========== ========== ==========
Weighted average shares outstanding include for all periods approximately
881,000 shares issued in 1995 in connection with the acquisition of Lincoln
Holdings, Inc., accounted for as a pooling of interests.
Fully diluted earnings per share are essentially the same as primary earnings
per share for all periods presented.
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
BMS On-Line Services, Inc. Maine
BMS Management Services, Inc. Maine
BankLink, Inc. New York
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 d/b/a
FIserv Cleveland, Inc. Ohio
FIserv Data Pro Card Services, Inc. Indiana
FIserv Des Moines, Inc. Iowa
FIserv EFT, Inc. Oregon
FIserv Federal Systems, Inc. Delaware
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 Solutions, Inc. Wisconsin
FIserv Spokane, Inc. Washington
FIserv Tampa, Inc. Florida
FIserv (Europe) Ltd. United Kingdom
FIserv (ASPAC) Pte., Ltd. Singapore
First Retirement Marketing, Inc. Colorado
First Trust Corporation Colorado
Information Technology, Inc. Nebraska
Integrated Business Systems California
Lincoln Trust Company Colorado
Lincoln Retirement Services, Inc. California
LT Securities Colorado
National Embossing Company Texas
NewFit Co. Iowa
Sendero Corporation Arizona
Sendero (ASPAC) Pte. Ltd. Singapore
SRS, Inc. Texas
Summit Information Systems Corp. Oregon
The Affinity Group, Inc. Colorado
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-42088 of FIserv, Inc. on Form S-8 of our report
dated February 2, 1996, incorporated by reference in the Annual Report on
Form 10-K of FIserv, Inc. and subsidiaries for the year ended December 31, 1995.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1995
ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH INFORMATION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 59,743
<SECURITIES> 834,286
<RECEIVABLES> 154,628
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,209,996
<PP&E> 279,088
<DEPRECIATION> 130,745
<TOTAL-ASSETS> 1,885,299
<CURRENT-LIABILITIES> 1,067,621
<BONDS> 0
0
0
<COMMON> 449
<OTHER-SE> 433,813
<TOTAL-LIABILITY-AND-EQUITY> 1,885,299
<SALES> 0
<TOTAL-REVENUES> 703,380
<CGS> 0
<TOTAL-COSTS> 590,621
<OTHER-EXPENSES> 192,468
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,822
<INCOME-PRETAX> (98,531)
<INCOME-TAX> (38,668)
<INCOME-CONTINUING> (59,863)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (59,863)
<EPS-PRIMARY> (1.36)
<EPS-DILUTED> (1.36)
</TABLE>
FISERV, INC. and Subsidiaries
Consolidated statements of operations
Year ended December 31, 1995 1994 1993
REVENUES $703,380,000 $579,839,000 $467,863,000
------------ ------------ ------------
COST OF REVENUES:
Salaries, commissions and payroll
related costs 330,845,000 281,651,000 223,271,000
Data processing expenses, rentals and
telecommunication costs 95,798,000 81,320,000 72,524,000
Other operating expenses 125,498,000 109,975,000 90,162,000
Depreciation and amortization of
property and equipment 38,480,000 31,350,000 22,450,000
Purchased incomplete software
technology Note 2 172,970,000
Amortization of intangible assets 25,880,000 10,846,000 9,098,000
Capitalization of internally generated
computer software-net (6,382,000) (9,599,000) (7,185,000)
------------ ------------ ------------
Total 783,089,000 505,543,000 410,320,000
------------ ------------ ------------
OPERATING INCOME (LOSS) (79,709,000) 74,296,000 57,543,000
Interest expense - net 18,822,000 6,951,000 4,366,000
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (98,531,000) 67,345,000 53,177,000
Income tax provision (credit) Note 4 (38,668,000) 26,938,000 20,464,000
------------ ------------ ------------
NET INCOME (LOSS) $(59,863,000) $ 40,407,000 $ 32,713,000
============ ============ ============
Net income (loss) per common and
common equivalent share $(1.36) $0.99 $0.83
============ ============ ============
Shares used in computing net
income per share 44,008,000 40,735,000 39,455,000
============ ============ ============
See notes to consolidated financial statements.
<PAGE>
FISERV, INC. and Subsidiaries
Consolidated balance sheets
December 31, 1995 1994
ASSETS
Cash and cash equivalents Note 1 $ 59,743,000 $ 29,683,000
Accounts receivable 154,628,000 122,984,000
Prepaid expenses and other assets Note 1 63,893,000 34,760,000
Due on sale of securities 97,446,000
Investment securities Note 1 834,286,000 1,041,474,000
Other investments Note 1 55,748,000 64,777,000
Deferred income taxes Note 4 39,527,000
Property and equipment-net Note 1 148,343,000 114,966,000
Internally generated computer software-net 73,863,000 67,820,000
Identifiable intangible assets relating
to acquisitions-net Note 1 57,270,000 36,487,000
Goodwill-net 300,552,000 148,394,000
-------------- --------------
TOTAL $1,885,299,000 $1,661,345,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 43,948,000 $ 22,060,000
Accrued expenses 59,614,000 59,742,000
Accrued income taxes 6,116,000 1,952,000
Deferred revenues 40,754,000 10,836,000
Trust account deposits 917,189,000 1,035,217,000
Long-term debt Note 3 381,361,000 143,864,000
Other obligations Note 3 2,055,000 6,152,000
Deferred income taxes Note 4 22,800,000
-------------- --------------
TOTAL LIABILITIES 1,451,037,000 1,302,623,000
COMMITMENTS AND CONTINGENCIES Note 6
SHAREHOLDERS' EQUITY:
Common stock outstanding, 44,887,000 and
40,038,000 shares, respectively 449,000 400,000
Additional paid-in capital 315,800,000 184,748,000
Unrealized gain on investments 15,268,000 11,054,000
Accumulated earnings 102,745,000 162,520,000
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 434,262,000 358,722,000
-------------- --------------
TOTAL $1,885,299,000 $1,661,345,000
============== ==============
See notes to consolidated financial statements.
<PAGE>
FISERV, INC. and Subsidiaries
Consolidated statements of changes in shareholders' equity
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
<S> <C> <C> <C>
SHARES ISSUED-75,000,000 AUTHORIZED:
Balance at beginning of year 40,037,854 39,660,740 22,621,946
Shares issued in pooling of Lincoln Holdings, Inc. 880,970
Sale of common stock 1,403,911
Shares issued under stock plans-net 274,615 238,838 201,706
Shares issued for acquired companies 4,574,659 138,276 2,354,540
Stock split -- 3-for-2 12,197,667
------------ ------------ ------------
Balance at end of year 44,887,128 40,037,854 39,660,740
============ ============ ============
COMMON STOCK-PAR VALUE $.01 PER SHARE:
Balance at beginning of year $ 400,000 $ 397,000 $ 226,000
Shares issued in pooling of Lincoln Holdings, Inc. 9,000
Sale of common stock 14,000
Shares issued under stock plans-net 3,000 2,000 2,000
Shares issued for acquired companies 46,000 1,000 24,000
Stock split -- 3-for-2 122,000
------------ ------------ ------------
Balance at end of year 449,000 400,000 397,000
============ ============ ============
CAPITAL IN EXCESS OF PAR VALUE:
Balance at beginning of year 184,748,000 181,223,000 105,842,000
Acquired in pooling of Lincoln Holdings, Inc. 174,000
Sale of common stock 23,712,000
Shares issued under stock plans-net 670,000 2,660,000 324,000
Income tax reduction arising from the
exercise of employee stock options 2,400,000 800,000 1,300,000
Shares issued for acquired companies 127,982,000 65,000 49,993,000
Stock split -- 3-for-2 (122,000)
------------ ------------ ------------
Balance at end of year 315,800,000 184,748,000 181,223,000
============ ============ ============
UNREALIZED GAIN ON INVESTMENTS 15,268,000 11,054,000 9,230,000
============ ============ ============
ACCUMULATED EARNINGS:
Balance at beginning of year 162,520,000 122,023,000 86,405,000
Acquired in pooling of Lincoln Holdings, Inc. 2,974,000
Net income (loss) (59,863,000) 40,407,000 32,713,000
Foreign currency translation adjustment 88,000 90,000 (69,000)
------------ ------------ ------------
Balance at end of year 102,745,000 162,520,000 122,023,000
============ ============ ============
TOTAL SHAREHOLDERS' EQUITY $434,262,000 $358,722,000 $312,873,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FISERV, INC. and Subsidiaries
Consolidated statements of cash flows
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (59,863,000) $ 40,407,000 $ 32,713,000
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Deferred income taxes (58,952,000) 12,375,000 11,883,000
Depreciation and amortization of
property and equipment 38,480,000 31,401,000 22,449,000
Amortization of intangible assets 25,880,000 10,846,000 9,098,000
Charge for incomplete software technology 172,970,000
Capitalization of internally generated
computer software - net (6,382,000) (9,599,000) (7,185,000)
------------- ------------- -------------
112,133,000 85,430,000 68,958,000
Cash provided (used) by changes in assets
and liabilities, net of effects from
acquisitions of businesses:
Accounts receivable (10,014,000) (12,194,000) (13,672,000)
Prepaid expenses and other assets (23,709,000) (3,935,000) (10,482,000)
Accounts payable and accrued expenses (4,843,000) (3,954,000) (6,411,000)
Deferred revenue 9,283,000 (123,000) (54,000)
Accrued income taxes 5,756,000 2,059,000 285,000
------------- ------------- -------------
Net cash provided by operating activities 88,606,000 67,283,000 38,624,000
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (45,039,000) (53,193,000) (29,613,000)
Investments and other assets 20,136,000 (26,545,000) (2,002,000)
Payment for acquisition of businesses,
net of cash acquired (258,237,000) (20,545,000) (113,268,000)
Investment securities 207,603,000 (176,597,000) (90,216,000)
Due on sale of securities (97,446,000)
------------- ------------- -------------
Net cash used by investing activities (172,983,000) (276,880,000) (235,099,000)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings and other long-term obligations 252,977,000 39,165,000 63,000,000
Repayment of borrowings and other long-
term obligations (21,150,000) (12,720,000) (3,441,000)
Issuance of common stock 638,000 1,918,000 24,036,000
Trust account deposits (118,028,000) 174,567,000 82,803,000
------------- ------------- -------------
Net cash provided by financing activities 114,437,000 202,930,000 166,398,000
------------- ------------- -------------
Change in cash and cash equivalents 30,060,000 (6,667,000) (30,077,000)
Beginning balance 29,683,000 36,350,000 66,427,000
------------- ------------- -------------
Ending balance $ 59,743,000 $ 29,683,000 $ 36,350,000
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FIserv, Inc. and Subsidiaries Notes to consolidated financial statements
for the years ended December 31, 1995, 1994 and 1993
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.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets at December 31, 1995 and 1994 include
$17,817,000 and $7,723,000, respectively, relating to long-term contracts, the
profit from which is being recognized ratably over the periods to be benefited.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Trust Account Deposits and Investment Securities
The Company's trust administration subsidiaries accept money market deposits
from trust customers and invest the funds in securities. Such amounts due trust
depositors represent the primary source of funds for the Company's investment
securities and amounted to $917,189,000 and $1,035,217,000 in 1995 and 1994,
respectively. The related investment securities comprised the following at
December 31, 1995 and 1994:
Principal Carrying
1995 Amount Value Market Value
- -------------------------------- ------------- ------------- -------------
U. S. Government and government
agency obligations $553,384,000 $558,893,000 $559,000,000
Corporate bonds 119,100,000 118,891,000 118,716,000
Repurchase agreements 96,671,000 96,671,000 96,671,000
Other fixed income obligations 59,877,000 59,831,000 59,831,000
------------- ------------- -------------
Total $829,032,000 $834,286,000 $834,218,000
============= ============= =============
1994
- --------------------------------
U. S. Government and government
agency obligations $ 693,711,000 $ 696,665,000 $ 663,504,000
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 68,050,000 66,392,000 65,079,000
------------- ------------- -------------
Total $1,040,182,000 $1,041,474,000 $1,006,537,000
============= ============= =============
Substantially all of the investments have contractual maturities of one year or
less except for government agency obligations.
<PAGE>
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, 1995 1994
- ------------------------------------ ------------- -------------
Data processing equipment $149,143,000 $121,844,000
Purchased software 39,810,000 31,522,000
Buildings and leasehold improvements 51,195,000 35,407,000
Furniture and equipment 38,940,000 31,409,000
------------ -------------
279,088,000 220,182,000
Less accumulated depreciation and
amortization 130,745,000 105,216,000
------------ -------------
Total $148,343,000 $114,966,000
============= =============
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, 1995 and 1994, the unamortized portion of
internally generated computer software costs amounted to $73,863,000 and
$67,820,000, respectively; amortization of such costs charged to expense
amounted to $19,998,000, $16,655,000, and $13,995,000 in 1995, 1994 and 1993,
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:
1995 1994
------------- ------------
Computer software acquired $ 30,949,000 $ 5,565,000
Non-competition agreements 10,744,000 19,370,000
Contract rights and other 48,012,000 33,818,000
------------- ------------
89,705,000 58,753,000
Less accumulated amortization 32,435,000 22,266,000
------------- ------------
$ 57,270,000 $ 36,487,000
============= ============
Goodwill $318,410,000 $158,679,000
Less accumulated amortization 17,858,000 10,285,000
------------- ------------
$300,552,000 $148,394,000
============= ============
Except as noted below, 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 forty
years. The Company periodically reviews goodwill to assess recoverability, and
impairments would be recognized in operating results if a permanent diminution
in value were to occur.
In connection with the acquisition of Information Technology, Inc. referred to
in Note 2 below, the allocation of the purchase price to the various classes of
assets was determined on the basis of an opinion expressed by a nationally
recognized independent appraisal firm. Values determined for incomplete
software have been expensed and values for completed software are being
amortized utilizing accelerated methods.
<PAGE>
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 $35,695,000, $29,695,000, and $18,911,000,
net of direct credits to depositors accounts of $27,561,000, $23,217,000, and
$18,015,000 in 1995, 1994 and 1993, 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
1995 1994 1993
----------- ---------- ----------
Interest paid $21,184,000 $ 8,871,000 $ 5,945,000
Income taxes paid 11,488,000 11,417,000 8,309,000
Liabilities assumed in acquisitions
of businesses 49,279,000 3,416,000 47,000,000
2. ACQUISITIONS AND CAPITAL TRANSACTIONS
Acquisitions
During 1995, 1994 and 1993 the Company completed the following acquisitions:
<TABLE>
<CAPTION>
Date
Company Acquired Type of Business Consideration
- -------------------------------------- -------- ------------------------------ ------------------
<S> <C> <C> <C>
1995
BankLink, Inc. Feb. 10 Cash management Cash for stock
Information Technology, Inc. May 17 Financial processing systems Cash and stock
for stock
Lincoln Holdings, Inc. Aug. 1 Retirement plan administrators Stock for stock
SRS, Inc. Sep. 29 Data processing Cash for stock
Document Management Services Sep. 30 Item processing Cash for assets
Division of ALLTEL Financial Information Services, Inc.
Financial Information Trust Nov. 1 Data processing Cash for stock
Outsource Technology L. C. Nov. 1 Data processing Cash for stock
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
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. and Nov. 8 Data processing for banks Cash for stock
Financial Data Systems Item processing Cash for assets
Financial Institution Outsourcing and Nov. 30 Data processing for banks Cash for assets
Data-Link Systems, Inc. Mortgage banking services Cash for stock
</TABLE>
<PAGE>
Certain of the acquisition agreements provide for additional cash payments
contingent upon the attainment of specified revenue goals. 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
acquisitions were accounted for as poolings of interests. However, except for
the acquisition of Lincoln Holdings, Inc. (LHI), prior year financial statements
were not restated due to immateriality. Results of operations of LHI have been
included with those of the Company for all periods presented. Combined and
separate results of the Company and LHI during the periods preceding the quarter
ended June 30, 1995 and pro forma combined results, including preacquisition
results of Information Technology, Inc. (ITI) for the years ended December 31,
1995 and 1994 (in thousands of dollars) were as follows:
<TABLE>
<CAPTION>
Pro forma
Company LHI Combined ITI combined
------------------ ---------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Quarter ended March 31, 1995 (unaudited)
Revenues $152,605 $4,574 $157,179
Net income 10,449 792 11,241
Year ended December 31, 1995
Revenues 685,582 17,798 703,380 $25,435 $728,815
Net income (63,018) 3,155 (59,863) 2,811 (57,052)
Year ended December 31, 1994
Revenues 563,590 16,249 579,839 60,868 640,707
Net income 37,664 2,743 40,407 5,885 46,292
Year ended December 31, 1993
Revenues 454,692 13,171 467,863
Net income 30,693 2,020 32,713
</TABLE>
The acquisition of ITI was consummated for a consideration of approximately $377
million comprising approximately 4,574,000 shares of common stock of the Company
and $249 million cash, including acquisition costs. Approximately 880,000
shares of common stock of the Company were issued in the acquisition of LHI.
Net income of the Company has been determined after a pretax charge of $182.9
million relating to the writeoff of incomplete software technology and
accelerated amortization of completed software relating to the acquisition of
ITI. Accordingly, net income was reduced by $109.6 million, or $2.49 a share
relating to such charges.
<PAGE>
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 1993, 1994 and 1995, adjusted for a 3-for-2 split
effective in May 1993, is summarized as follows:
Shares
-----------------------
Non- Price
Incentive Qualified Range
------------ ----------- -------------
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
Granted 440,434 21.50-27.50
Forfeited (115,493)
Exercised (10,140) (413,588) 1.63-21.81
------------ -----------
OUTSTANDING, DECEMBER 31, 1995 20,280 2,383,180 5.56-27.50
============ ===========
SHARES EXERCISABLE,
DECEMBER 31, 1995 7,774 1,300,455
============ ===========
Options outstanding include 158,819 and 63,686 shares granted in 1994 and 1995
at $20.00 and $22.00 a share, respectively, under a stock purchase plan
requiring exercise within 30 days after a two-year period beginning on the date
of grant.
3. LONG-TERM DEBT AND OTHER OBLIGATIONS
The Company has available a $300,000,000 unsecured line of credit and commercial
paper facility with a group of banks maturing in 2000 of which $247,712,000 was
in use at December 31, 1995 at an average rate of 6.25%. 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, 1995. 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
$255,000,000, $210,000,000 and $150,000,000, respectively, on May 17, 1997, 1998
and 1999 and expires on May 17, 2000.
Long-term debt and other obligations outstanding at the respective year-ends
comprised the following:
December 31, 1995 1994
- ----------------------------------------- ------------ ------------
9.45% senior notes payable, due 1996-2000 $ 21,429,000 $ 25,714,000
9.75% senior notes payable, due 1996-2001 15,000,000 17,500,000
8.00% senior notes payable, due 1999-2005 90,000,000
Bank notes and commercial paper 254,932,000 100,650,000
Other obligations 2,055,000 6,152,000
------------ ------------
$383,416,000 $150,016,000
============ ============
<PAGE>
Annual principal payments required under the terms of the long-term agreements
were as follows at December 31, 1995:
Year
- ------------------------------------------------
1996 $ 9,781,000
1997 10,712,000
1998 45,780,000
1999 80,371,000
2000 169,877,000
Thereafter 66,895,000
------------
$383,416,000
============
Interest expense with respect to long-term debt and other obligations amounted
to $22,006,000, $9,228,000 and $6,374,000 in 1995, 1994 and 1993, respectively.
4. INCOME TAXES
A reconciliation of recorded income tax expense with income tax computed at the
statutory federal tax rates follows:
1995 1994 1993
------------- ----------- ------------
Statutory federal tax rate 35% 35% 35%
Tax computed at statutory rate $(34,486,000) $23,571,000 $18,612,000
State income taxes net of
federal effect (5,113,000) 2,792,000 2,647,000
Tax exempt income (688,000) (470,000) (326,000)
Other 1,619,000 1,045,000 (469,000)
------------- ----------- -----------
Recorded income tax expense $(38,668,000) $26,938,000 $20,464,000
============= =========== ============
The provision for income taxes consisted of the following:
1995 1994 1993
------------- ----------- -----------
Currently Payable $ 17,884,000 $13,763,000 $ 7,280,000
Tax reduction credited to capital
in excess of par value 2,400,000 800,000 1,300,000
Deferred (58,952,000) 12,375,000 11,884,000
------------- ----------- -----------
Total $(38,668,000) $26,938,000 $20,464,000
============= =========== ===========
The approximate tax effects of temporary differences at December 31, 1995 and
1994 were as follows:
1995 1994
----------- ------------
Allowance for doubtful accounts $ 2,319,000 $ 1,571,000
Accrued expenses not currently deductible 7,769,000 11,392,000
Deferred revenue 9,122,000 857,000
Other 1,728,000 1,074,000
Net operating loss and
tax credit carryforwards 6,739,000 5,901,000
Deferred costs (9,143,000) (4,911,000)
Internally generated capitalized software (30,283,000) (27,120,000)
Excess of tax over book depreciation
and amortization (4,419,000) (4,069,000)
Purchased incomplete software technology 66,305,000
Unrealized gain on investments (10,610,000) (7,495,000)
------------------------
Total deferred income taxes $ 39,527,000 $(22,800,000)
========== =============
The net operating loss and tax credit carryforwards have expiration dates
ranging from 1996 through 2010.
<PAGE>
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 $8,144,000, $8,900,000 and $6,346,000 in 1995, 1994 and 1993,
respectively.
6. LEASES, OTHER COMMITMENTS AND CONTINGENCIES
Leases
Future minimum rental payments, as of December 31, 1995, on various operating
leases for office facilities and equipment were due as follows:
1996 $ 32,937,000
1997 25,833,000
1998 19,469,000
1999 11,879,000
2000 6,495,000
Thereafter 10,493,000
------------
Total minimum payments $107,106,000
============
Rent expense applicable to all operating leases was approximately $48,038,000,
$43,065,000 and $45,658,000 in 1995, 1994 and 1993, respectively.
Other Commitments and Contingencies
The Company's trust administration subsidiaries had fiduciary responsibility for
the administration of approximately $17 billion in trust funds as of December
31, 1995. 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.
<PAGE>
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. The table is based upon the accompanying supplemental schedule which
excludes certain charges to 1995 operations associated with the acquisition of
Information Technology, Inc.
<TABLE>
<CAPTION> Percentage of Revenues
Year Ended December 31, Increase (Decrease)
1995 1994 1993 1995 vs. 1994 1994 vs. 1993
<S> <C> <C> <C> <C> <C>
------- ------- -------- ------------- ---------
Revenues 100.0% 100.0% 100.0% 21.3% 23.9%
------- ------- --------
Cost of revenues:
Salaries, commissions and payroll
related costs 47.0 48.6 47.7 17.5 26.1
Data processing expenses, rentals
and telecommunication costs 13.6 14.0 15.5 17.8 12.1
Other operating expenses 17.8 19.0 19.3 14.1 22.0
Depreciation and amortization of
equipment and improvements 5.5 5.4 4.8 22.7 39.6
Amortization of intangible assets 2.3 1.9 1.9 47.2 19.2
Capitalization of internally generated
computer software - net (0.9) (1.7) (1.5) (33.5) 33.6
------- ------- --------
Total cost of revenues 85.3 87.2 87.7 18.7 23.2
------- ------- --------
Operating income 14.7% 12.8% 12.3% 38.9 29.1
======= ======= =======
Income before income taxes 12.0% 11.6% 11.4% 25.2 26.6
======= ======= =======
Net income 7.1% 7.0% 7.0% 23.2 23.5
======= ======= =======
</TABLE>
The following discussion is based upon the accompanying supplemental schedule
which excludes certain charges to 1995 operations associated with the
acquisition of Information Technology, Inc. aggregating $182.9 million.
Revenues increased $123,541,000 in 1995 and $111,976,000 in 1994. Approximately
55% of the 1995 growth and 80% of the 1994 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 1.9% from 1994 to 1995
and .5% from 1993 to 1994. 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.
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 $5,116,000 from 1994 to 1995 and $1,748,000 from 1993 to 1994. As a
percentage of revenues, these costs have remained relatively constant from 1993
to 1994 and increased in 1995.
Capitalization of internally generated computer software is stated net of
amortization and increased $2,414,000 in 1994 and decreased $3,217,000 in 1995.
As a percentage of revenues, net capitalized software remained relatively
constant in 1994 but decreased .8% from 1994 to 1995. This trend is likely to
continue.
Operating income increased $28,883,000 in 1995 and $16,753,000 in 1994. As a
percentage of revenues, operating income increased 1.9% in 1995 and .5% in 1994.
<PAGE>
The effective income tax rate was 41% in 1995, 40% in 1994, and 39% in 1993.
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 1996 is expected to remain at 41%.
The Company's growth has been accomplished largely 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
related to acquisitions 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 and the potential loss of
clients due to this program.
The following table sets forth (in thousands, except per share data) certain
financial highlights and pro forma information for 1995, 1994 and 1993.
Year Ended December 31, 1995 1994 1993
- ----------------------- --------- --------- --------
Revenues $703,380 $579,839 $467,863
Net income (loss) (59,863) 40,407 32,713
--------- -------- --------
Net income (loss) per share $(1.36) $0.99 $0.83
--------- -------- --------
Net income as originally reported and
before certain charges related to
acquisition of Information
Technology, Inc. 49,771 37,664 30,693
--------- -------- --------
Net income per share as originally reported
and before certain charges related to
acquisition of Information
Technology, Inc. $1.13 $0.95 $0.80
--------- -------- --------
The charges related to acquisition of Information Technology, Inc. (ITI) are a
pre-tax special, one-time, non-cash charge of $173 million to expense the
purchased ITI Premier II research and development and a pre-tax charge of $9.9
million for the accelerated amortization of the completed ITI Premier I
software. The combined after-tax charge was $109.6 million ($2.49 per share).
Liquidity and Capital Resources
The following table summarizes (in thousands of dollars) the Company's primary
sources of funds:
Year Ended December 31, 1995 1994 1993
--------- -------- --------
Cash provided by operating activities $ 88,606 $ 67,283 $ 38,624
Issuance of common stock-net 638 1,918 24,036
Decrease (increase) in other investments 12,265 (28,575) (9,415)
Increase in net borrowings 231,827 26,445 59,559
--------- -------- --------
$333,336 $ 67,071 $112,804
========= ======== ========
The Company has applied a significant portion of its cash flow from operations
and proceeds of its common stock offerings and additional borrowings to
acquisitions.
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.
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.
<PAGE>
Consolidated Statements of Income Supplemental Schedule
(unaudited)
Year ended December 31, 1995 1994 1993
- ----------------------- ------------ ------------ ------------
Revenues $703,380,000 $579,839,000 $467,863,000
------------ ------------ ------------
Cost of revenues:
Salaries, commissions and payroll
related costs 330,845,000 281,651,000 223,271,000
Data processing expenses, rentals and
telecommunication costs 95,798,000 81,320,000 72,524,000
Other expenses 125,498,000 109,975,000 90,162,000
Depreciation and amortization of
property and equipment 38,480,000 31,350,000 22,450,000
Amortization of intangible assets 15,962,000 10,846,000 9,098,000
Capitalization of internally generated
computer software-net (6,382,000) (9,599,000) (7,185,000)
------------ ------------ ------------
Total 600,201,000 505,543,000 410,320,000
------------ ------------ ------------
Operating income 103,179,000 74,296,000 57,543,000
Interest expense - net 18,822,000 6,951,000 4,366,000
------------ ------------ ------------
Income before income taxes 84,357,000 67,345,000 53,177,000
Income tax provision 34,586,000 26,938,000 20,464,000
------------ ------------ ------------
Net income $ 49,771,000 $ 40,407,000 $ 32,713,000
Net income per common and
common equivalent share $1.13 $0.99 $0.83
============ ============ ============
Net income per common and common
equivalent share as originally $1.13 $0.95 $0.80
reported ============ ============ ============
Shares used in computing net
income per share 44,008,000 40,735,000 39,455,000
============ ============ ============
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.
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Revenues $ 703,380 $ 579,839 $ 467,863 $ 341,448 $288,450
Income (loss) before income taxes (98,531) 67,345 53,177 39,291 29,703
Income taxes (credit) (38,668) 26,938 20,464 14,925 10,686
Net income (loss) (59,863) 40,407 32,713 24,366 19,017
Net income (loss) per share $(1.36) $0.99 $0.83 $0.69 $0.57
---------- ---------- ---------- ---------- --------
Total Assets $1,885,299 $1,661,345 $1,395,403 $1,097,339 $863,499
Long-term debt and other long-
term obligations 383,416 150,016 122,417 59,472 57,768
Shareholders' equity 434,262 358,722 312,873 195,630 168,683
---------- ---------- ---------- ---------- --------
</TABLE>
Note: The above information has been restated to recognize (1) 3-for-2 stock
splits effective in May 1993, June 1992 and July 1991 and (2) the acquisition in
1995 of Lincoln Holdings, Inc. accounted for as a pooling of interests.
<PAGE>
QUARTERLY FINANCIAL INFORMATION
for the years ended December 31, 1995 and 1994
(Unaudited)
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Quarters
1995 First Second Third Fourth Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues $157,179 $173,470 $176,922 $195,809 $703,380
-------- -------- -------- -------- --------
Cost of revenues 136,288 148,725 148,286 349,790 783,089
-------- -------- -------- -------- --------
Operating income (loss) 20,891 24,745 28,636 (153,981) (79,709)
-------- -------- -------- -------- --------
Income (loss) before
income taxes 19,054 20,308 22,223 (160,116) (98,531)
-------- -------- -------- -------- --------
Income taxes 7,813 8,326 9,111 (63,918) (38,668)
-------- -------- -------- -------- --------
Net income (loss) $ 11,241 $ 11,982 $ 13,112 $(96,198) $(59,863)
-------- -------- -------- -------- --------
Net income (loss) per share $0.27 $0.28 $0.29 $(2.10) $(1.36)
-------- -------- -------- -------- --------
1994
Revenues $139,852 $139,801 $143,661 $156,525 $579,839
-------- -------- -------- -------- --------
Cost of revenues 122,651 121,379 124,694 136,819 505,543
-------- -------- -------- -------- --------
Operating income 17,201 18,422 18,967 19,706 74,296
-------- -------- -------- -------- --------
Income before income taxes 15,627 16,790 17,154 17,774 67,345
-------- -------- -------- -------- --------
Income taxes 6,251 6,716 6,861 7,110 26,938
-------- -------- -------- -------- --------
Net income $ 9,376 $ 10,074 $ 10,293 $ 10,664 $ 40,407
-------- -------- -------- -------- --------
Net income per share $0.23 $0.25 $0.25 $0.26 $0.99
-------- -------- -------- -------- --------
</TABLE>
The above information has been restated to recognize the acquisition in 1995 of
Lincoln Holdings, Inc. accounted for on a pooling of interests basis.
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.
1995 1994
Quarter Ended High Low High Low
March 31 27.75 21 23.5 18.5
June 30 28.375 25.75 22.25 20
September 30 31 25.5 22.75 18.75
December 31 30.125 25.5 23.5 19.25
At December 31, 1995, the Company's common stock was held by approximately
20,000 shareholders of record or through nominee or street name accounts with
brokers. The closing sale price for the Company's stock on January 26, 1996 was
$26.25 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 1995 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.
/S/ GEORGE D. DALTON
GEORGE D. DALTON
Chairman and Chief Executive Officer
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, 1995 and 1994 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. 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, 1995 and 1994 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/S/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Milwaukee, Wisconsin
February 2,1996
