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, 1996 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, 1996, 45,233,000 shares of common stock of the Registrant were
outstanding.
Exhibit Index appears at page 8.
1
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the Three and Nine-Month Periods Ended September 30, 1996 and 1995
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Revenues $196,585 $176,922 $587,759 $507,571
---------------------------------------------------
Cost of revenues:
Salaries, commissions and payroll
related costs 92,604 84,069 274,280 240,144
Data processing expenses, rentals
and telecommunication costs 20,938 22,829 69,735 69,506
Other operating expenses 36,459 28,731 106,115 89,379
Depreciation and amortization of
property and equipment 10,703 9,731 31,317 28,525
Amortization of intangible assets 5,214 4,805 15,771 11,156
Capitalization of internally generated
computer software-net (285) (1,879) (1,768) (5,411)
---------------------------------------------------
Total cost of revenues 165,633 148,286 495,450 433,299
---------------------------------------------------
Operating income 30,952 28,636 92,309 74,272
Interest expense - net 4,294 6,413 15,025 12,687
---------------------------------------------------
Income before income taxes 26,658 22,223 77,284 61,585
Income tax provision 10,929 9,111 31,686 25,250
===================================================
Net income $15,729 $13,112 $45,598 $36,335
===================================================
Net income per common and
common equivalent share $0.34 $0.29 $0.99 $0.84
===================================================
Shares used in computing
net income per share 46,265 45,864 46,094 43,395
===================================================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
---------- ----------
(In thousands)
ASSETS
Cash and cash equivalents ................ $69,036 $59,743
Accounts receivable ...................... 159,620 154,628
Prepaid expenses and other assets ........ 53,075 63,893
Due on sale of securities ................ 97,446
Trust account investments ................ 911,338 834,286
Other investments ........................ 28,792 55,748
Deferred income taxes .................... 33,098 39,527
Property and equipment-net ............... 145,230 148,343
Internally generated computer software-net 76,368 73,863
Identifiable intangible assets relating
to acquisitions-net ..................... 53,113 57,270
Goodwill-net ............................. 295,198 300,552
========= =========
Total .................................... $1,824,868 $1,885,299
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ......................... $42,504 $43,948
Accrued expenses ......................... 59,427 59,614
Accrued income taxes ..................... 5,553 6,116
Deferred revenues ........................ 48,852 40,754
Trust account deposits ................... 892,511 917,189
Long-term debt ........................... 289,864 381,361
Other long-term obligations .............. 1,501 2,055
--------- ---------
Total liabilities ........................ 1,340,212 1,451,037
--------- ---------
Stockholders' equity:
Common stock outstanding, 45,233,000 and
44,887,000 shares, respectively ........ 452 449
Additional paid-in capital ............... 320,631 315,800
Unrealized gain on investments ........... 15,279 15,268
Accumulated earnings ..................... 148,294 102,745
--------- ---------
Total stockholders' equity ............... 484,656 434,262
========= =========
Total .................................... $1,824,868 $1,885,299
========= =========
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Nine-Month Periods Ended September 30, 1996 and 1995
<CAPTION>
Nine Months Ended
September 30,
1996 1995
--------- --------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $45,598 $36,335
Adjustments to reconcile income to net cash provided by
operating activities:
Deferred income taxes 6,429 13,638
Depreciation and amortization of property and equipment 31,317 28,525
Amortization of intangible assets 15,771 11,156
Capitalization of internally generated computer software-net (1,768) (5,411)
--------- ---------
97,347 84,243
Cash provided (used) by changes in assets and liabilities,
net of effects from acquisitions of businesses:
Accounts receivable (5,117) (1,818)
Prepaid expenses and other assets 10,332 (8,877)
Accounts payable and accrued expenses (1,385) (14,045)
Deferred revenue 8,009 2,225
Income taxes payable (983) 1,012
--------- ---------
Net cash provided by operating activities 108,203 62,740
--------- ---------
Cash flows from investing activities:
Capital expenditures (26,144) (33,563)
Investments and other assets 26,956 19,432
Payment for acquisition of businesses (7,860) (253,082)
Trust account investments 20,464 20,973
---------- ---------
Net cash provided (used) by investing activities 13,416 (246,240)
---------- ---------
Cash flows from financing activities:
Borrowings and other long-term obligations-net (92,459) 225,135
Issuance of common stock 4,834 1,083
Trust account deposits (24,701) 10,253
---------- ---------
Net cash provided (used) by financing activities (112,326) 236,471
---------- ---------
Change in cash 9,293 52,971
Beginning balance 59,743 29,683
========== =========
Ending balance $69,036 $82,654
========== =========
</TABLE>
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, 1996 and the related
consolidated statements of income and cash flows for the three and nine-month
periods ended September 30, 1996 and 1995 are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such financial
statements have been included. Such adjustments consisted only of normal
recurring items. Interim results are not necessarily indicative of results for a
full year. The financial statements and notes are presented as permitted by Form
10-Q, and do not contain certain information included in the annual financial
statements and notes of Fiserv, Inc. and subsidiaries (the Company or the
Registrant).
2. Shares Used in Computing Net Income per Share
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------------------------------------
(In thousands)
Weighted average number of common
shares outstanding ..................... 45,197 44,844 44,765 42,450
Shares issuable upon exercise of options
reduced by the number of shares which
could have been purchased with the
proceeds of such exercise .............. 1,068 1,020 1,329 945
-------------------------------------
Shares used ......... 46,265 45,864 46,094 43,395
=====================================
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.
3. 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
asset as of September 30, 1996 and December 31, 1995 are as follows:
September 30, December 31,
1996 1995
---------------------------
(In thousands)
Allowance for doubtful accounts ........... $1,719 $2,319
Accrued expenses not currently deductible . 5,576 7,769
Deferred revenue .......................... 9,201 9,122
Other ..................................... 1,301 1,728
Net operating loss and credit carryforwards 5,544 6,739
Purchased incomplete software technology .. 62,654 66,305
Deferred costs ............................ (6,332) (9,143)
Internally generated capitalized software . (31,311) (30,283)
Excess of tax over book depreciation and
amortization ............................ (4,635) (4,419)
Unrealized gain on investments ............ (10,619) (10,610)
--------------------------
Total deferred income taxes ............... $33,098 $39,527
===========================
5
<PAGE>
4. Supplemental Cash Flow Information
Nine Months Ended
September 30,
1996 1995
-------------------
(In thousands)
Income taxes paid ........................................ $25,820 $8,424
Interest paid ............................................ 14,960 10,914
Liabilities assumed in acquisitions of
businesses - Trust account deposits 225,893
Other ................................ 1,236 48,784
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.
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
-----------------------------------------
(Percent of Revenues)
Revenues ........................ 100.00% 100.00% 100.00% 100.00%
-----------------------------------------
Salaries and related costs ...... 47.11 47.51 46.67 47.32
Data processing costs ........... 10.65 12.90 11.86 13.69
Other operating expenses ........ 18.55 16.24 18.05 17.61
Depreciation and amortization ... 5.44 5.50 5.33 5.62
Amortization of intangible assets 2.65 2.72 2.68 2.20
Capitalization of software-net .. (0.14) (1.06) (0.30) (1.07)
-----------------------------------------
Total cost of revenues .......... 84.26 83.81 84.29 85.37
-----------------------------------------
Operating income ................ 15.74 16.19 15.71 14.63
=========================================
6
<PAGE>
Revenues
- --------
Revenues increased 11.1% from $176.9 million in the third quarter of 1995 to
$196.6 million in the current third quarter and 15.8% from $507.6 million in the
first nine months of 1995 to $587.8 million in the comparable current period.
Approximately 65% 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 11.7% from $148.3 million in the third quarter of
1995 to $165.6 million in the current third quarter, and 14.3% from $433.3
million in the first nine months of 1995 to $495.5 million in the first nine
months of 1996. Year to date, these increases are slightly less than the
increase in revenue for the periods due to improved operating margins.
Operating Income
- ----------------
Operating income increased 8.1% from $28.6 million in the third quarter of 1995
to $31.0 million in the current third quarter, and 24.3% from $74.3 million in
the first nine months of 1995 to $92.3 million in the first nine months of 1996.
As a percentage of revenues, operating margins were slightly lower during the
current third quarter and improved slightly during the first nine months of 1996
when compared to the comparable prior year periods. The decrease in the current
quarter resulted from charges related to the disposition of a business and the
year to date increase was primarily due to changes in the mix of business,
including the impact of acquisitions.
Interest Expense - Net
- ----------------------
As a result of substantial debt reductions and slightly lower effective rates,
interest expense decreased $2.1 million in the third quarter of 1996 and $2.3
million for the first nine months of 1996 when compared to amounts incurred for
the comparable 1995 periods.
Income Tax Provision
- --------------------
Income taxes were computed at 41% in both 1996 and 1995. The 41% rate is
expected to apply throughout the current year.
Net Income
- ----------
Net income grew 20.0% from $13.1 million in the third quarter of 1995 to $15.7
million in the comparable 1996 quarter and 25.5% from $36.3 million in the first
nine months of 1995 to $45.6 million in the comparable current period. Net
income per share increased $.05 from $.29 in the third quarter of 1995 to $.34
in the current third quarter and $.15 from $.84 in the first nine months of 1995
to $.99 in the first nine months of 1996. The increase in net income per share
over 1995 was consistent with management expectations and historical growth
rates.
Liquidity and Capital Resources
- -------------------------------
During the nine months ended September 30, 1996, cash increased $9.3 million
comprising primarily $108.2 million net cash provided by operating activities,
$22.8 million decrease in investments and $4.8 million from issuance of common
stock, which was partially offset by $7.9 million for the acquisition of
businesses, $92.5 million net repayment of long-term debt and $26.1 million for
capital expenditures. Long-term obligations amounted to $291.4 million at
September 30, 1996. The majority of this debt comprises $112.9 million of senior
notes due 1997 to 2001 and $158.3 million advanced under a $225 million
unsecured line of credit and commercial paper facility which reduces $15 million
in May 1998, $60 million in May 1999 and expires in May 2000. A facility fee of
0.10% to 0.20% per annum is required on the line.
The Company has historically applied a significant portion of its cash flow from
operating activities and proceeds of its common stock offerings to acquisitions
and the reduction of long-term debt and invests the remainder in short-term
obligations until it is needed for further acquisitions or operating purposes.
The Company believes that its cash flow from operating activities together with
other available sources of funds will be adequate to meet its funding
requirements. However, in the event that the Company makes significant future
acquisitions, it may raise funds through additional borrowings or issuance of
securities.
7
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) Exhibits
Index to exhibits
(11) Statement regarding computation of per share earnings (included on
page 5, Part 1).
(b) Reports on Form 8-K
During the quarter ended September 30, 1996, the Registrant filed a report
on Form 8-K, dated July 25, 1996, relating to a proposal to perform item
processing services for Canadian Imperial Bank of Canada.
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 22, 1996 by /S/ EDWARD P. ALBERTS
------------------------
EDWARD P. ALBERTS
Senior Vice President, Finance
and Controller
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 1996 10-Q and is qualified in its entirety by reference to such
information.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 69,036
<SECURITIES> 911,338
<RECEIVABLES> 159,620
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,193,069
<PP&E> 145,230
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,824,868
<CURRENT-LIABILITIES> 1,048,847
<BONDS> 0
0
0
<COMMON> 452
<OTHER-SE> 484,204
<TOTAL-LIABILITY-AND-EQUITY> 1,824,868
<SALES> 0
<TOTAL-REVENUES> 587,759
<CGS> 0
<TOTAL-COSTS> 481,447
<OTHER-EXPENSES> 14,003
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,025
<INCOME-PRETAX> 77,284
<INCOME-TAX> 31,686
<INCOME-CONTINUING> 45,598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,598
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.99
</TABLE>
