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, 1996
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, 1997: $1,516,736,302
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of January 31, 1997: 45,360,338
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.
1996 Annual Report to Shareholders - Parts II, IV
Proxy Statement for March 20, 1997 Meeting - Part III
<PAGE>
Fiserv, Inc. and Subsidiaries
Form 10-K
December 31, 1996
PART I Page
Item 1. Business 1
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters 11
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 11
PART III
Item 10. Directors and Executive Officers of the Registrant 11
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial Owners and
Management 11
Item 13. Certain Relationships and Related Transactions 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 11
<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 Canada, 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 institution and community bank
clients and item processing services for all Fiserv clients nationwide. Business
units within the Savings & Community Bank Group include the following:
Savings Institutions Division with business units in New Haven,
Connecticut; Tampa, Florida; Cleveland, Ohio; Pittsburgh, Pennsylvania; San
Antonio, Texas; Seattle, Washington; and Brookfield, Wisconsin.
Banking Division with business units in Los Angeles, California; Miami,
Florida; Atlanta, Georgia; Des Moines, Iowa; Bowling Green, Kentucky; Boston,
Massachusetts; Mendota Heights, Minnesota; Amarillo, Beaumont, Houston and San
Antonio, Texas; and Brookfield, Wisconsin.
Northern Item Processing Region with business units in New Haven,
Connecticut; Chicago, Marion and Pontiac, Illinois; Boston, Massachusetts;
Piscataway, New Jersey; Lake Success, New York; and Milwaukee, Wisconsin.
Southern Item Processing Region with business units in Little Rock,
Arkansas; Jacksonville and Miami, Florida; Atlanta and Macon, Georgia; New
Orleans, Louisiana; and Beaumont, Dallas, Houston and San Antonio, Texas.
Western Item Processing Region with business units in Phoenix, Arizona;
Alameda, Fresno, Fullerton, Sacramento, San Diego, San Leandro, Van Nuys and
Walnut, California; Denver, Colorado; Portland, Oregon; and Seattle, Washington.
Fiserv Canada with item processing sites in Burlington, Calgary,
Edmonton, Halifax, London, Montreal,Ottawa, Regina, St. Catherines, Toronto,
Vancouver, Victoria and Winnipeg, Canada.
The Bank & Credit Union Group provides service bureau processing,
in-house software systems and strategic outsourcing for national and
international bank, mortgage bank and credit union clients. Business units
within the Bank & Credit Union Group include the following:
CBS Worldwide Division with business units in Fresno, California;
Orlando, Florida; Arlington Heights, Illinois; London, England; and Singapore.
Financial Institutions Outsourcing Division with business units in
Covina and Fresno, California; Honolulu, Hawaii; Arlington Heights, Illinois;
Oklahoma City, Oklahoma; and Philadelphia and Pittsburgh,Pennsylvania.
Credit Union Division with business units in Titusville, Florida; Flint
and Troy, Michigan; Minneapolis, Minnesota; and Corvallis, Oregon.
Additional business units within the Bank & Credit Union Group include
BankLink cash management services (New York, New York); Mortgage Products
Division (Fort Lauderdale, Florida and South Bend, Indiana); Outsourced Services
Division (Stamford, Connecticut); and 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 Communications Design
marketing services (Sacramento, California); Fiserv Forms & Graphics (Seattle,
Washington); Fiserv Human Resource Information Services (Melville, New York);
ImageSoft Technologies (Maitland, Florida); NEC Card Services (Indianapolis,
Indiana and Houston, Texas); RECOM network consulting (Tampa, Florida); and
Sendero Corporation asset/liability management and decision support systems
(Scottsdale, Arizona; London, England and Singapore).
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
311,000 retirement plans and custodial accounts with assets valued at more than
$18.12 billion.
Information Technology, Inc. (ITI) is a Fiserv subsidiary company based
in Lincoln, Nebraska, with an additional software development center in
Birmingham, Alabama. 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.
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>
Formed Acquired Business Service
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<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, MA 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
1970 Jan. 1995 Integrated Business Systems, Glendale, CA Specialized forms
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
1983 Jan. 1996 UniFi, Inc., Fort Lauderdale, FL Software & services
1982 Nov. 1996 Bankers Pension Services, Inc., Tustin, CA DP for retirement planning
</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; 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 and savings institutions; the leading item processing
provider for banks and savings institutions combined; the number two data
processing provider for credit unions; and the number two software and service
provider for the mortgage industry.
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 complete PC Windows(TM)-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 45 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.
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 8% to 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 8,590 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 75
cities (59 in the United States): Birmingham, Alabama; Phoenix and Scottsdale,
Arizona; Little Rock, Arkansas; Alameda, Covina, Fresno, Fullerton, Los Angeles,
Sacramento, San Diego, San Leandro, Van Nuys and Walnut, California; Denver,
Colorado; New Haven and Stamford, Connecticut; Fort Lauderdale, 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; Des Moines, Iowa; Bowling Green,
Kentucky; New Orleans, Louisiana; Boston, Massachusetts; Flint and Troy,
Michigan; Mendota Heights and Minneapolis, Minnesota; Lincoln, Nebraska;
Piscataway, New Jersey; Lake Success, Melville and New York, New York;
Cleveland, Ohio; Oklahoma City, Oklahoma; Corvallis and Portland, Oregon;
Philadelphia and Pittsburgh, Pennsylvania; Amarillo (FM), Beaumont, Dallas,
Houston and San Antonio, Texas; Seattle, Washington; and Brookfield and
Milwaukee, Wisconsin. International business centers are located in London,
England; Singapore; and Burlington, Calgary, Edmonton, Halifax, London,
Montreal, Ottawa, Regina, St. Catherines, Toronto, Vancouver, Victoria and
Winnipeg, Canada.
The Company owns facilities in Brookfield, Corvallis, Fresno, Hartford
and Lincoln; all other buildings in which centers are located are subject to
leases expiring through 1998 and beyond. The Company owns or leases 129
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.
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PART II
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Pursuant to Instruction G(2) for Form 10-K, the information required in
Items 5 through 8 is incorporated by reference from the Company's annual report
to shareholders included in this Form 10-K Annual Report as Exhibit 13.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Not applicable.
================================================================================
PART III
================================================================================
Pursuant to Instruction G(3) for 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 17, 1997, and included in the 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, 1996 and 1995 and for each of the three years in the period ending December
31, 1996, together with the report thereon of Deloitte & Touche LLP, dated
January 31, 1997, appear on pages 23 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 1996, the Company filed three reports on Form 8-K, one dated
April 4, 1996, relating to an amendment of its processing contract with Chase
Manhattan Corporation, and two dated July 25, 1996, and December 19, 1996,
relating to an item processing contract with Canadian Imperial Bank of Canada.
(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, as amended, 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 29, 1994, and
incorporated herein by reference.
11. Computation of Shares Used in Computing Earnings per Share.
13. The 1996 Annual Report to Shareholders.
21. List of Subsidiaries of the Registrant.
23. Manually signed Consent of Independent Auditors.
27. Financial Data Schedule
28. The Company's definitive proxy statement for the 1997 annual meeting of
shareholders to be held on March 20, 1997, 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 17, 1997
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 17, 1997.
/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/ 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,
1996 1995 1994
------------------------------------------
Primary:
Weighted Average Shares Outstanding 45,229,000 43,058,000 39,954,000
Common Stock Equivalents 969,000 950,000 781,000
------------------------------------------
Shares Used 46,198,000 44,008,000 40,735,000
==========================================
Fully diluted earnings per share are essentially the same as primary earnings
per share for all periods presented.
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year ended December 31, 1996 1995 1994
REVENUES $798,268 $703,380 $579,839
---------------------------------
COST OF REVENUES:
Salaries, commissions and payroll
related costs ........................... 371,526 330,845 281,651
Data processing expenses, rentals and
telecommunication costs ................. 90,919 95,798 81,320
Other operating expenses .................. 145,230 125,498 109,975
Depreciation and amortization of
property and equipment .................. 42,241 38,480 31,350
Purchased incomplete software
technology Note 2 ....................... 172,970
Amortization of intangible assets ......... 20,983 25,880 10,846
Amortization (capitalization) of internally
generated computer software-net ......... 3,732 (6,382) (9,599)
---------------------------------
TOTAL ..................................... 674,631 783,089 505,543
---------------------------------
OPERATING INCOME (LOSS) ................... 123,637 (79,709) 74,296
Interest expense - net .................... 19,088 18,822 6,951
---------------------------------
INCOME (LOSS) BEFORE INCOME TAXES ......... 104,549 (98,531) 67,345
Income tax provision (credit) Note 4 ...... 42,865 (38,668) 26,938
---------------------------------
NET INCOME (LOSS) ......................... $ 61,684 $ (59,863) $ 40,407
=================================
Net income (loss) per common and
common equivalent share ................. $ 1.34 $ (1.36) $ 0.99
=================================
Shares used in computing net
income per share ........................ 46,198 44,008 40,735
=================================
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, 1996 1995
ASSETS
Cash and cash equivalents Note 1 .............. $ 80,833 $ 59,743
Accounts receivable ........................... 160,747 154,628
Prepaid expenses and other assets Note 1 ...... 54,354 63,893
Due on sale of investments .................... 97,446
Trust account investments Note 1 .............. 970,553 834,286
Other investments Note 1 ...................... 53,556 55,748
Deferred income taxes Note 4 .................. 32,083 39,527
Property and equipment-Net Note 1 ............. 143,661 148,343
Internally generated computer software-Net .... 70,487 73,863
Identifiable intangible assets relating
to acquisitions-Net Note 1 ................... 50,156 57,270
Goodwill-Net Note 1 ........................... 292,089 300,552
-----------------------
TOTAL.......................................... $1,908,519 $1,885,299
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable .............................. $ 43,486 $ 43,948
Accrued expenses .............................. 60,747 59,614
Accrued income taxes .......................... 7,510 6,116
Deferred revenues ............................. 46,089 40,754
Trust account deposits ........................ 970,553 917,189
Long-term debt Note 3 ......................... 271,502 381,361
Other obligations Note 3 ...................... 1,362 2,055
-----------------------
TOTAL LIABILITIES ............................. 1,401,249 1,451,037
COMMITMENTS AND CONTINGENCIES NOTE 6
SHAREHOLDERS' EQUITY:
Common stock outstanding, 45,348,000 and
44,887,000 shares, respectively .............. 453 449
Additional paid-in capital .................... 323,268 315,800
Unrealized gain on investments ................ 18,621 15,268
Accumulated earnings .......................... 164,928 102,745
-----------------------
TOTAL SHAREHOLDERS' EQUITY .................... 507,270 434,262
=======================
TOTAL ......................................... $1,908,519 $1,885,299
=======================
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
Year ended December 31, 1996 1995 1994
SHARES ISSUED-150,000,000 AUTHORIZED:
Balance at beginning of year .......... 44,887 40,038 39,661
Shares issued under stock plans-net ... 327 274 239
Shares issued for acquired companies .. 134 4,575 138
---------------------------------
Balance at end of year ................ 45,348 44,887 40,038
=================================
COMMON STOCK-PAR VALUE $.01 PER SHARE:
Balance at beginning of year .......... $ 449 $ 400 $ 397
Shares issued under stock plans-net ... 3 3 2
Shares issued for acquired companies .. 1 46 1
---------------------------------
Balance at end of year ................ 453 449 400
---------------------------------
CAPITAL IN EXCESS OF PAR VALUE:
Balance at beginning of year .......... 315,800 184,748 181,223
Shares issued under stock plans-net ... 4,893 670 2,660
Income tax reduction arising from the
exercise of employee stock options .. 2,000 2,400 800
Shares issued for acquired companies .. 575 127,982 65
---------------------------------
Balance at end of year ................ 323,268 315,800 184,748
---------------------------------
UNREALIZED GAIN ON INVESTMENTS .......... 18,621 15,268 11,054
---------------------------------
ACCUMULATED EARNINGS:
Balance at beginning of year .......... 102,745 162,520 122,023
Net income (loss) ..................... 61,684 (59,863) 40,407
Foreign currency translation adjustment 499 88 90
---------------------------------
Balance at end of year ................ 164,928 102,745 162,520
---------------------------------
TOTAL SHAREHOLDERS' EQUITY .............. $ 507,270 $ 434,262 $ 358,722
=================================
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands)
Year ended December 31, 1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .............................. $ 61,684 $ (59,863) $ 40,407
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Deferred income taxes ......................... 3,456 (58,952) 12,375
Depreciation and amortization of
property and equipment ....................... 42,241 38,480 31,401
Amortization of intangible assets ............. 20,983 25,880 10,846
Charge for incomplete software technology ..... 172,970
Amortization (capitalization) of internally
generated computer software - net ............ 3,732 (6,382) (9,599)
-----------------------------------
132,096 112,133 85,430
Cash provided (used) by changes in assets
and liabilities, net of effects from
acquisitions of businesses:
Accounts receivable .......................... (4,881) (10,014) (12,194)
Prepaid expenses and other assets ............ 10,080 (23,709) (3,935)
Accounts payable and accrued expenses ........ 2,288 (4,843) (3,954)
Deferred revenues ............................ 5,232 9,283 (123)
Accrued income taxes ......................... 4,085 5,756 2,059
-----------------------------------
Net cash provided by operating activities ...... 148,900 88,606 67,283
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .......................... (36,157) (45,039) (53,193)
Payment for acquisition of businesses,
net of cash acquired ......................... (8,025) (258,237) (20,545)
Investments ................................... (128,394) 227,739 (203,142)
Due on sale of investments .................... 97,446 (97,446)
-----------------------------------
Net cash used by investing activities .......... (75,130) (172,983) (276,880)
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings and other long-term obligations .... 6,000 252,977 39,165
Repayment of borrowings and other long-
term obligations ............................. (116,940) (21,150) (12,720)
Issuance of common stock ...................... 4,896 638 1,918
Trust account deposits ........................ 53,364 (118,028) 174,567
-----------------------------------
Net cash (used) provided by financing activities (52,680) 114,437 202,930
-----------------------------------
Change in cash and cash equivalents ............ 21,090 30,060 (6,667)
Beginning balance .............................. 59,743 29,683 36,350
-----------------------------------
Ending balance ................................. $ 80,833 $ 59,743 $ 29,683
===================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31,1996, 1995 and 1994
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash and investments with original maturities
of 90 days or less.
PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets at December 31, 1996 and 1995 include
$12,013,000 and $17,817,000,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.
FAIR VALUES
The carrying amounts of cash and cash equivalents, accounts receivable and
payable, and long-term borrowings approximated fair value as of December 31,
1996 and 1995.
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 $970,553,000 and $917,189,000 in 1996 and 1995,
respectively. The related investment securities, including amounts representing
Company funds, comprised the following at December 31, 1996 and 1995:
(In thousands) PRINCIPAL CARRYING MARKET
1996 AMOUNT VALUE VALUE
-----------------------------------
U. S. Government and government
agency obligations ...................... $ 684,963 $ 695,955 $ 695,048
Corporate bonds ......................... 31,172 31,337 31,374
Repurchase agreements ................... 41,888 41,888 41,888
Other fixed income obligations .......... 263,878 262,293 261,939
-----------------------------------
TOTAL ................................... $1,021,901 $1,031,473 $1,030,249
-----------------------------------
Less amounts representing Company funds:
Included in cash and cash equivalents 41,888
Included in other investments 19,032
-----------------------------------
Trust account investments ............... $ 970,553
===================================
1995
U. S. Government and government
agency obligations .................... $ 553,384 $ 558,893 $ 559,000
Corporate bonds ........................ 119,100 118,891 118,716
Repurchase agreements .................. 96,671 96,671 96,671
Other fixed income obligations ......... 59,877 59,831 59,831
------------------------------------
TOTAL .................................. $ 829,032 834,286 $ 834,218
====================================
Substantially all of the investments have contractual maturities of one year or
less except for government agency obligations.
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 three to 40 years:
(In thousands)
December 31, 1996 1995
------------------
Data processing equipment .................... $155,147 $149,143
Purchased software ........................... 47,833 39,810
Buildings and leasehold improvements ......... 52,329 51,195
Furniture and equipment ...................... 49,526 38,940
------------------
304,835 279,088
Less accumulated depreciation and amortization 161,174 130,745
------------------
TOTAL ........................................ $143,661 $148,343
==================
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, 1996 and 1995, the unamortized portion of
internally generated computer software costs amounted to $70,487,000 and
$73,863,000, respectively; amortization of such costs charged to expense
amounted to $30,098,000, $19,998,000, and $16,655,000 in 1996, 1995 and 1994,
respectively. During the fourth quarter of 1996, the Company recorded a charge
of $5,443,000 relating to the accelerated amortization of software resulting
from the planned consolidation of certain product lines. 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:
(In thousands) 1996 1995
------------------
Computer software acquired ................... $ 29,326 $30,949
Non-competition agreements ................... 9,139 10,744
Contract rights and other .................... 55,952 48,012
------------------
94,417 89,705
Less accumulated amortization ................ 44,261 32,435
------------------
TOTAL......................................... $ 50,156 $ 57,270
==================
Goodwill ..................................... $317,077 $318,410
Less accumulated amortization ................ 24,988 17,858
------------------
TOTAL......................................... $292,089 $300,552
==================
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-compete 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 40
years. The Company periodically reviews goodwill and other long-lived assets 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 in 1995 of Information Technology, Inc. (ITI) 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.
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 $37,572,000, $35,695,000, and $29,695,000,
net of direct credits to depositors accounts of $24,050,000, $27,561,000, and
$23,217,000 in 1996, 1995 and 1994, 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.
SUPPLEMENTAL CASH FLOW INFORMATION
(In thousands) 1996 1995 1994
-------------------------------
Interest paid............................... $22,942 $21,184 $8,871
Income taxes paid........................... 34,865 11,488 11,417
Liabilities assumed in acquisitions
of businesses.............................. 1,596 49,279 3,416
NOTE 2 ACQUISITIONS AND CAPITAL TRANSACTIONS
ACQUISITIONS
During 1996, 1995 and 1994 the Company completed the following acquisitions:
<TABLE>
<CAPTION>
MONTH
COMPANY ACQUIRED TYPE OF BUSINESS CONSIDERATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1996:
UniFi, Inc. Jan Software and services Cash for stock
Bankers Pension Services, Inc. Nov Retirement plan administrators Stock for stock
1995:
Integrated Business Systems Jan Forms Cash for stock
BankLink, Inc. Feb Cash management Cash for stock
Information Technology, Inc. May Financial processing systems Cash and stock
for stock
Lincoln Holdings, Inc. Aug Retirement plan administrators Stock for stock
SRS, Inc. Sep Data processing Cash for stock
Document Management Services Sep Item processing Cash for assets
Division of ALLTEL Financial Information
Services, Inc.
Financial Information Trust Nov Data processing Cash for stock
Outsource Technology L. C. Nov Data processing Cash for stock
1994:
National Embossing Company, Inc. Apr Automated card services Cash for stock
Boatmen's Information Systems May Data processing Cash for assets
data processing business
Federal Home Loan Bank of Atlanta Aug Item processing Cash for assets
item processing contracts
Cincinnati Bell Information Systems Nov Image and document Cash for assets
banking business management services
RECOM Associates, Inc. Dec Network integration services Stock for stock
</TABLE>
Generally, the acquisitions were accounted for as purchases and, accordingly,
the operations of the acquired companies are included in the consolidated
financial statements since their respective dates of acquisition as set forth
above. Certain of the 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. Certain of the acquisition agreements provide for additional cash
payments contingent upon the attainment of specified revenue goals.
In connection with the acquisition of Bankers Pension Services, Inc. (BPS), the
Company issued approximately 112,000 unregistered shares of its common stock.
The Company relied upon the exemption provided in Section 4(2) of the Securities
Act of 1933 and Rule 505 of Regulation D, based upon the number of shareholders
of BPS and the aggregate value of the transaction. No underwriter was involved
in the transaction and no commission was paid.
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 903,000 shares
of common stock of the Company were issued in the acquisition of LHI. Net income
of the Company for 1995 was 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 in 1995 by $109.6 million, or $2.49 a share,
relating to such charges.
STOCK OPTION PLAN
The Company's 1996 Stock Option Plan provides for the granting to its employees
and directors of either incentive or non-qualified options to purchase shares of
the Company's common stock for a price not less than 100% of the fair value of
the shares at the date of grant. In general, 20% of the shares awarded under the
Plan may be purchased annually and expire, generally, five to 10 years from the
date of the award. Activity under the current and prior plans during 1994, 1995
and 1996 is summarized as follows:
SHARES
-----------------------------
NON- PRICE
INCENTIVE QUALIFIED RANGE
------------------------------------------
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 1.63-27.50
Granted 617,354 26.50-36.75
Forfeited (89,147)
Exercised (18,590) (309,977) 1.63-30.50
-----------------------------
Outstanding, December 31, 1996 1,690 2,601,410 5.77-36.75
=============================
Shares exercisable,
December 31, 1996 1,690 1,757,795
===========================================
Options outstanding include 51,525 and 132,529 shares granted in 1995 and 1996
at $22.00 and $29.88 a share, respectively, under a stock purchase plan
requiring exercise within 30 days after a two-year period beginning on the date
of grant.
At December 31, 1996, options to purchase 4,035,000 shares were available for
grant under the Plan. The Company has accounted for its stock-based compensation
plans in accordance with the provisions of APB Opinion 25. Accordingly, the
Company did not record any compensation expense in the accompanying financial
statements for its stock-based compensation plans. Had compensation expense been
recognized consistent with FASB Statement 123 ("Accounting for Stock-Based
Compensation"), the Company's net income would have been reduced by
approximately $981,000 and $301,000 in 1996 and 1995, respectively. The related
impact on earnings per share was immaterial. The assumptions used to estimate
compensation expense were: expected volatility of 17.8%, risk-free interest rate
of 6.5% and expected option lives of five years.
NOTE 3 LONG-TERM DEBT AND OTHER OBLIGATIONS
The Company has available a $225,000,000 unsecured line of credit and commercial
paper facility with a group of banks, maturing in 2000, of which $141,669,000
was in use at December 31, 1996 at an average rate of 5.86%. 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, 1996. A facility fee ranging from .1% to .2% per annum is required
on the entire bank line regardless of usage. The facility is reduced to
$210,000,000 and $150,000,000, respectively, on May 17, 1998 and 1999 and
expires on May 17, 2000.
Long-term debt and other obligations outstanding at the respective year-ends
comprised the following:
(in thousands)
December 31, 1996 1995
----------------------------
9.45% senior notes payable, due 1997-2000 $17,143 $21,429
9.75% senior notes payable, due 1997-2001 12,500 15,000
8.00% senior notes payable, due 1999-2005 90,000 90,000
Bank notes and commercial paper 151,859 254,932
Other obligations 1,362 2,055
-----------------------------
TOTAL $272,864 $383,416
=============================
Annual principal payments required under the terms of the long-term agreements
were as follows at December 31, 1996:
(In thousands)
Year
- ----------------------------------------------------------------------
1997 $10,075
1998 8,074
1999 21,211
2000 162,424
2001 16,220
Thereafter 54,860
- ----------------------------------------------------------------------
TOTAL $272,864
======================================================================
Interest expense with respect to long-term debt and other obligations amounted
to $22,431,000, $22,006,000 and $9,228,000 in 1996, 1995 and 1994, respectively.
NOTE 4 INCOME TAXES
A reconciliation of recorded income tax expense with income tax computed at the
statutory federal tax rates follows:
(In thousands) 1996 1995 1994
-----------------------------------
Statutory federal tax rate 35% 35% 35%
Tax computed at statutory rate $36,592 $(34,486) $23,571
State income taxes net of federal effect 4,473 (5,113) 2,792
Non-deductible amortization 1,504 1,239 1,157
Other 296 (308) (582)
------------------------------------
TOTAL $42,865 $(38,668) $26,938
====================================
The provision for income taxes consisted of the following:
(In thousands) 1996 1995 1994
----------------------------------
Currently payable $37,409 $17,884 $13,763
Tax reduction credited to capital
in excess of par value 2,000 2,400 800
Deferred 3,456 (58,952) 12,375
----------------------------------
Total $42,865 $(38,668) $26,938
==================================
The approximate tax effects of temporary differences at December 31, 1996 and
1995 were as follows:
(In thousands) 1996 1995
------------------------
Allowance for doubtful acounts $1,529 $2,319
Accrued expenses not currently deductible 5,588 7,769
Deferred revenues 9,815 9,122
Other (232) 1,728
Net operating loss and credit carryforwards 3,871 6,739
Deferred costs (4,963) (9,143)
Internally generated capitalized software (28,900) (30,283)
Excess of tax over book depreciation
and amortization (3,185) (4,419)
Purchased incomplete software technology 61,500 66,305
Unrealized gain on investments (12,940) (10,610)
------------------------
TOTAL $32,083 $39,527
========================
The net operating loss and tax credit carryforwards have expiration dates
ranging from 1997 through 2010.
NOTE 5 EMPLOYEE BENEFIT PROGRAMS
The Company and its subsidiaries have contributory savings plans covering
substantially all employees, under which eligible participants may elect to
contribute a specified percentage of their salaries, subject to certain
limitations. The Company makes matching contributions, subject to certain
limitations, and also makes discretionary contributions based upon the
attainment of certain profit goals. Company contributions vest at the rate of
20% for each year of service. Contributions charged to operations under these
plans approximated $10,074,000, $8,144,000 and $8,900,000 in 1996, 1995 and
1994, respectively.
NOTE 6 LEASES, OTHER COMMITMENTS AND CONTINGENCIES
LEASES
Future minimum rental payments, as of December 31, 1996, on various operating
leases for office facilities and equipment were due as follows:
(In thousands)
Year
- ----------------------------------------------------------------------
1997 $35,030
1998 29,115
1999 19,794
2000 15,581
2001 9,472
Thereafter 18,538
======================================================================
TOTAL $127,530
======================================================================
Rent expense applicable to all operating leases was approximately $48,752,000,
$48,038,000 and $43,065,000 in 1996, 1995 and 1994, respectively.
OTHER COMMITMENTS AND CONTINGENCIES
The Company's trust administration subsidiaries had fiduciary responsibility for
the administration of approximately $18 billion in trust funds as of December
31, 1996. 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>
PERCENTAGE OF REVENUES PERIOD TO PERIOD PERCENTAGE
YEAR ENDED DECEMBER 31, INCREASE (DECREASE)
----------------------------------------------------------------------
<CAPTION>
1996 vs. 1995 vs.
1996 1995 1994 1995 1994
----------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 13.4% 21.3%
-----------------------------------
Cost of revenues:
Salaries, commissions and payroll
related costs 46.5 47.0 48.6 12.3 17.5
Data processing expenses, rentals
and telecommunication costs 11.4 13.6 14.0 (5.1) 17.8
Other operating costs 18.2 17.8 19.0 15.7 14.1
Depreciation and amortization of
equipment and improvements 5.3 5.5 5.4 9.8 22.7
Amortization of intangible assets 2.6 2.3 1.9 31.5 47.2
Amortization (capitalization) of internally
generated software - net 0.5 (0.9) (1.7) (158.5) (33.5)
----------------------------------- ----------------------------
Total cost of revenues 84.5 85.3 87.2 12.4 18.7
====================================
Operating income 15.5% 14.7% 12.8% 19.8 38.9
====================================
Income before income taxes 13.1% 12.0% 11.6% 23.9 25.2
====================================
Net income 7.7% 7.1% 7.0% 23.9 23.2
====================================
</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 $94,888,000 in 1996 and $123,541,000 in 1995. In both years,
approximately 55% of the 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 net addition of new clients,
growth in the transaction volume experienced by existing clients and price
increases.
Cost of revenues increased $74,430,000 in 1996 and $94,658,000 in 1995. As a
percentage of revenues, cost of revenues decreased .8% from 1995 to 1996 and
1.9% from 1994 to 1995. 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 sales of software and related support activities and 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 40 years. Amortization of these costs increased
$5,021,000 from 1995 to 1996 and $5,116,000 from 1994 to 1995. As a percentage
of revenues, these costs also increased in both years.
Capitalization of internally generated computer software is stated net of
amortization and decreased $3,217,000 in 1995 and $10,114,000 in 1996. Net
software capitalized was more than offset by amortization in 1996 due to the
accelerated amortization of software resulting from the planned consolidation of
certain product lines.
Operating income increased $20,458,000 in 1996 and $28,883,000 in 1995. As a
percentage of revenues, operating income increased .8% in 1996 and 1.9% in 1995.
The effective income tax rate was 41% in 1996 and 1995 and 40% in 1994. The
trend to higher income tax rates results from net increases in non-deductible
permanent differences. The effective income tax rate for 1997 is expected to
remain at 41%.
The Company's growth has been largely accomplished through the acquisition of
entities engaged in businesses which are complementary to its operations.
Management believes that a number of acquisition candidates are available which
would further enhance its competitive position and plans to pursue them
vigorously. Management is engaged in an ongoing program to reduce expenses
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.
CONSOLIDATED STATEMENTS OF INCOME SUPPLEMENTAL SCHEDULE
(Unaudited)
(In thousands, except per share data)
Year ended December 31, 1996 1995 1994
REVENUES $798,268 $703,380 $579,839
------------------------------------
COST OF REVENUES:
Salaries, commissions and payroll
related costs 371,526 330,845 281,651
Data processing expenses, rentals and
telecommunication costs 90,919 95,798 81,320
Other operating expenses 145,230 125,498 109,975
Depreciation and amortization of
property and equipment 42,241 38,480 31,350
Amortization of intangible assets 20,983 15,962 10,846
Amortization (capitalization) of internally
generated computer software - net 3,732 (6,382) (9,599)
------------------------------------
TOTAL 674,631 600,201 505,543
------------------------------------
OPERATING INCOME 123,637 103,179 74,296
Interest expense - net 19,088 18,822 6,951
-----------------------------------
INCOME BEFORE INCOME TAXES 104,549 84,357 67,345
Income tax provision 42,865 34,586 26,938
-----------------------------------
NET INCOME $61,684 $49,771 $40,407
===================================
Net income per common and
common equivalent share $1.34 $1.13 $0.99
===================================
Shares used in computing net
income per share 46,198 44,008 40,735
===================================
Note: Supplemental information provided for comparative purposes. 1995
excludes certain charges associated with the acquisition of Information
Technology, Inc.
The following table sets forth certain financial highlights and pro forma
information for 1996, 1995 and 1994.
<TABLE>
<CAPTION>
(In thousands, except per share data)
Year Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $798,268 $703,380 $579,839
Net income (loss) 61,684 (59,863) 40,407
- ----------------------------------------------------------------------------------------------------
Net income (loss) per share $1.34 $(1.36) $0.99
- ----------------------------------------------------------------------------------------------------
Net income as originally reported and before certain charges
related to acquisition of Information Technology, Inc. 61,684 49,771 37,664
- ----------------------------------------------------------------------------------------------------
Net income per share as originally reported and before certain
charges related to acquisition of Information Technology, Inc. $1.34 $1.13 $0.95
- ----------------------------------------------------------------------------------------------------
</TABLE>
The charges related to the acquisition of Information Technology, Inc. (ITI) in
1995 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 the Company's primary sources of funds:
(In thousands)
Year Ended December 31, 1996 1995 1994
--------------------------------------
Cash provided by operating activities $148,900 $88,606 $67,283
Issuance of common stock-net 4,896 638 1,918
Decrease (increase) in investments 22,416 12,265 (28,575)
Increase (decrease) in net borrowings (110,940) 231,827 26,445
--------------------------------------
TOTAL $65,272 $333,336 $67,071
--------------------------------------
The Company has applied a significant portion of its cash flow from operations
and proceeds of its common stock offerings to acquisitions and the reduction of
long-term debt and invests the remainder in short-term obligations until it is
needed for further acquisitions or operating purposes.
The Company believes that its cash flow from operations together with other
available sources of funds will be adequate to meet its funding requirements. In
the event that the Company makes significant future acquisitions, however, it
may raise funds through additional borrowings or issuance of securities.
SELECTED FINANCIAL DATA
The following data, 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>
(In thousands, except per share data)
Year Ended December 31, 1996 1995 1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $798,268 $703,380 $579,839 $467,863 $341,448
Income (loss) before income taxes 104,549 (98,531) 67,345 53,177 39,291
Income taxes (credit) 42,865 (38,668) 26,938 20,464 14,925
Net income (loss) 61,684 (59,863) 40,407 32,713 24,366
Net income (loss) per share $1.34 $(1.36) $0.99 $0.83 $0.69
------------------------------------------------------------------------------
Total assets $1,908,519 $1,885,299 $1,661,345 $1,395,403 $1,097,339
Long-term debt and other long-term obligations 272,864 383,416 150,016 122,417 59,472
Shareholders' equity 507,270 434,262 358,722 312,873 195,630
--------------------------------------------------------------------------------
</TABLE>
Note: The above information has been restated to recognize (1) 3-for-2 stock
splits effective in May 1993 and June 1992 and (2) the acquisition in 1995 of
Lincoln Holdings, Inc. accounted for as a pooling of interests.
QUARTERLY FINANCIAL INFORMATION
(Unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share data) QUARTERS
1996 FIRST SECOND THIRD FOURTH TOTAL
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------
Revenues $194,710 $196,464 $196,585 $210,509 $798,268
---------------------------------------------------------------------
Cost of revenues 164,205 165,612 165,633 179,181 674,631
---------------------------------------------------------------------
Operating income 30,505 30,852 30,952 31,328 123,637
---------------------------------------------------------------------
Income before income taxes 24,850 25,776 26,658 27,265 104,549
---------------------------------------------------------------------
Income taxes 10,189 10,568 10,929 11,179 42,865
---------------------------------------------------------------------
Net income $14,661 $15,208 $15,729 $16,086 $61,684
---------------------------------------------------------------------
Net income per share $0.32 $0.33 $0.34 $0.35 $1.34
=====================================================================
1995
---------------------------------------------------------------------
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 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 (credit) 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)
=====================================================================
</TABLE>
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.
1996 1995
- --------------------------------------------------------------------------------
QUARTER ENDED HIGH LOW HIGH LOW
- --------------------------------------------------------------------------------
March 31 32 25 3/8 27 3/4 21
June 30 33 3/8 28 1/16 28 3/8 25 3/4
September 30 38 11/16 28 5/8 31 25 1/2
December 31 39 5/8 34 30 1/8 25 1/2
At December 31, 1996, the Company's common stock was held by approximately
30,000 shareholders of record or through nominee or street name accounts with
brokers. The closing sale price for the Company's stock on January 17, 1997 was
$37.00 per share.
The Company's present policy is to retain earnings to support future business
opportunities, rather than to pay dividends.
<PAGE>
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, 1996 and 1995 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. 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, 1996 and 1995 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/S/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Milwaukee, Wisconsin
January 31,1997
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
The management of Fiserv, Inc. assumes responsibility for the integrity and
objectivity of the information appearing in the 1996 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
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
State of
Name under which Subsidiary does Business Incorporation
Aspen Investment Alliance, Inc. Colorado
BMS On-Line Services, Inc. Massachusetts
Data Link Systems, LLC Wisconsin
FIserv CIR, Inc. Delaware
FIserv Federal Systems, Inc. Delaware
FIserv Fresno, Inc. California
FIserv Government Services, Inc. Delaware
FIserv Joint Venture, Inc. Delaware
Fiserv Solutions, Inc. Wisconsin
FIserv (Europe) Ltd. United Kingdom
FIserv (ASPAC) Pte., Ltd. Singapore
First Retirement Marketing, Inc. Colorado
First Trust Corporation Colorado
Information Technology, Inc. Nebraska
Lincoln Trust Company Colorado
The Affinity Group, Inc. Colorado
Bankers Pension Services, Inc. California
Fiserv Solutions of Canada Inc. Ontario
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-04417 of Fiserv, Inc. on Form S-8 of our report
dated January 31, 1997, incorporated by reference in the Annual Report on Form
10-K of Fiserv, Inc. for the year ended December 31, 1996.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1996
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-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 80,833
<SECURITIES> 970,553
<RECEIVABLES> 160,747
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,266,487
<PP&E> 304,835
<DEPRECIATION> 161,174
<TOTAL-ASSETS> 1,908,519
<CURRENT-LIABILITIES> 1,128,385
<BONDS> 0
0
0
<COMMON> 453
<OTHER-SE> 506,817
<TOTAL-LIABILITY-AND-EQUITY> 1,908,519
<SALES> 0
<TOTAL-REVENUES> 798,268
<CGS> 0
<TOTAL-COSTS> 649,916
<OTHER-EXPENSES> 24,715
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,088
<INCOME-PRETAX> 104,549
<INCOME-TAX> 42,865
<INCOME-CONTINUING> 61,684
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,684
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.34
</TABLE>
