<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2000
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from_______________________to________________
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 offices) (Zip Code)
(262) 879 5000
--------------
(Registrant's telephone number, including area code)
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 ( )
As of April 14, 2000, there were 122,830,000 shares of common stock, $.01 par
value, of the Registrant outstanding.
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
-----------------------------
<S> <C> <C>
Revenues $396,402 $337,129
-----------------------------
Cost of revenues:
Salaries, commissions and payroll
related costs 189,572 159,546
Data processing expenses, rentals
and telecommunication costs 28,112 30,620
Other operating expenses 75,227 63,973
Depreciation and amortization of
property and equipment 16,749 14,768
Amortization of intangible assets 7,176 4,548
Amortization of internally
generated computer software-net 612 3,051
-----------------------------
Total cost of revenues 317,448 276,506
-----------------------------
Operating income 78,954 60,623
Interest expense - net 5,806 3,985
-----------------------------
Income before income taxes 73,148 56,638
Income tax provision 29,991 23,222
-----------------------------
Net income $ 43,157 $ 33,416
=============================
Net income per share:
Basic $ 0.35 $ 0.27
=============================
Diluted $ 0.34 $ 0.26
=============================
Shares used in computing net income per share:
Basic 122,622 123,230
=============================
Diluted 125,543 127,880
=============================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 74,655 $ 80,554
Accounts receivable - net 244,991 235,350
Securities processing receivables 3,131,694 2,196,068
Prepaid expenses and other assets 94,136 89,378
Trust account investments 1,286,458 1,298,120
Other investments 349,577 335,573
Property and equipment-net 203,863 195,333
Internally generated computer software-net 74,651 75,263
Intangible assets-net 798,900 802,071
------------------------------------
Total $6,258,925 $5,307,710
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 68,680 $ 66,400
Securities processing payables 2,476,735 1,764,382
Short-term borrowings 449,025 234,350
Accrued expenses 151,917 176,443
Accrued income taxes 17,036 12,736
Deferred revenues 139,912 131,476
Trust account deposits 1,285,232 1,298,120
Deferred income taxes 85,006 59,963
Long-term debt 434,376 472,824
------------------------------------
Total liabilities 5,107,919 4,216,694
------------------------------------
Shareholders' equity:
Common stock issued, 125,387,700 and
125,387,700 shares, respectively 1,254 1,254
Additional paid-in capital 459,306 458,550
Accumulated other comprehensive income 135,474 125,026
Accumulated earnings 619,667 576,510
Treasury stock, at cost, 2,594,300 and
2,804,400 shares, respectively (64,695) (70,324)
------------------------------------
Total shareholders' equity 1,151,006 1,091,016
------------------------------------
Total $6,258,925 $5,307,710
====================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 43,157 $ 33,416
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income taxes 17,605 7,138
Depreciation and amortization of property and equipment 16,749 14,768
Amortization of intangible assets 7,176 4,548
Amortization of internally generated computer software 10,253 10,936
------------------------------
94,940 70,806
Changes in assets and liabilities, net of effects from acquisitions of
businesses:
Accounts receivable (8,802) (1,964)
Prepaid expenses and other assets (4,292) (200)
Accounts payable and accrued expenses (23,151) 2,521
Deferred revenues 8,118 11,736
Accrued income taxes 7,300 4,974
Securities processing receivables and payables - net (223,273) (43,097)
------------------------------
Net cash (used in) provided by operating activities (149,160) 44,776
------------------------------
Cash flows from investing activities:
Capital expenditures (22,094) (19,736)
Capitalization of internally generated computer software (9,641) (7,885)
Payment for acquisitions of businesses, net of cash acquired (6,515) (19,888)
Investments 15,808 (142,813)
------------------------------
Net cash used in investing activities (22,442) (190,322)
------------------------------
Cash flows from financing activities:
Proceeds from short-term obligations - net 214,671 100,450
Repayments of long-term obligations - net (39,463) (33,990)
Issuance of common stock 13,269 3,254
Purchases of treasury stock (9,884) -
Trust account deposits (12,890) 85,750
------------------------------
Net cash provided by financing activities 165,703 155,464
------------------------------
Change in cash and cash equivalents (5,899) 9,918
Beginning balance 80,554 71,558
------------------------------
Ending balance $ 74,655 $ 81,476
==============================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
FISERV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Principles of Consolidation
The consolidated financial statements for the three month periods ended March
31, 2000 and 1999 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).
2. Shares Used in Computing Net Income per Share
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
----------------------------------
(In thousands)
<S> <C> <C>
Weighted average number of common shares outstanding - basic 122,622 123,230
Assumed conversion of common shares issuable
under stock option plan 2,921 4,650
----------------------------------
Weighted average number of common and common equivalent
shares outstanding - diluted 125,543 127,880
==================================
</TABLE>
Basic net income per share is computed using the weighted average number of
common shares outstanding during the periods. Diluted net income per share is
computed using the weighted average number of common and dilutive common
equivalent shares outstanding during the periods. Common equivalent shares
consist of stock options and are computed using the treasury stock method.
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
liability consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------------------------
(In thousands)
<S> <C> <C>
Unrealized gains on investments $ 94,601 $ 87,162
Internally generated capitalized software 31,342 30,858
Excess of tax over book depreciation and
amortization 21,072 19,438
Other 23,854 9,268
Purchased incomplete software technology (46,510) (47,663)
Accrued expenses not currently deductible (25,046) (25,407)
Deferred revenues (14,307) (13,693)
----------------------------------
Total $ 85,006 $ 59,963
=================================
</TABLE>
4. Supplemental Cash Flow Information
Three Months Ended
March 31,
2000 1999
------------------------
(In thousands)
Interest paid $5,663 $ 3,968
Income taxes paid 5,959 12,344
Liabilities assumed in acquisitions
of businesses 1,549 1,455
5
<PAGE>
ITEM 2. 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 and the percentage change in these items.
<TABLE>
<CAPTION>
Three Months Ended Percentage
March 31, Increase
2000 1999 (Decrease)
--------------------------------- --------------
<S> <C> <C> <C>
(Percent of Revenues)
Revenues 100.0 100.0 17.6
---------------------------------
Salaries and related costs 47.8 47.3 18.8
Data processing costs 7.1 9.1 -8.2
Other operating expenses 19.0 19.0 17.6
Depreciation and amortization 4.2 4.4 13.4
Amortization of intangible assets 1.8 1.3 N/A
Amortization of software-net 0.2 0.9 N/A
--------------------------------- -------------
Total cost of revenues 80.1 82.0 14.8
--------------------------------- -------------
Operating income 19.9 18.0 30.2
================================= =============
</TABLE>
Revenues
Revenues increased 17.6% from $337.1 million in the first quarter of 1999 to
$396.4 million in the current first quarter. Revenue growth was derived from
sales to new clients, cross-sales to existing clients, growth in transaction
volume experienced by existing clients, price increases and revenues from
acquired businesses. Revenues from acquired businesses approximated 45% of total
revenue growth in the first quarter of 2000.
Cost of Revenues
Cost of revenues increased 14.8% from $276.5 million in the first quarter of
1999 to $317.4 million in the current first quarter. The make up of cost of
revenues has been affected by business acquisitions and changes in the mix of
the Company's business.
Operating Income
Operating income increased 30.2% from $60.6 million in the first quarter of 1999
to $79.0 million in the current first quarter. The Company's operating margin
increased from 18.0% in the first quarter of 1999 to 19.9% in the first quarter
of 2000. The increase in operating margin was driven primarily by strong
operating results in the Company's securities processing and trust services
business segment.
Income Tax Provision
The effective income tax rate was 41% in both years and the effective income tax
rate is expected to remain at 41% for the remainder of the current year.
Net Income
Net income for the first quarter increased 29.2% from $33.4 million in 1999 to
$43.2 million in 2000. Net income per share-diluted increased $0.08 from $0.26
in the first quarter of 1999 to $0.34 in the first quarter of 2000.
6
<PAGE>
Business Segment Information
The Company is a leading independent provider of data processing systems and
related information management services and products to financial institutions
and other financial intermediaries. The Company's operations have been
classified into three business segments: Financial institution outsourcing,
systems and services; Securities processing and trust services; and "All other
and corporate." Summarized financial information by business segment is as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
---------------------------
(In thousands)
<S> <C> <C>
Revenues:
Financial institution outsourcing, systems
and services $293,088 $260,386
Securities processing and trust services 86,447 61,262
All other and corporate 16,867 15,481
------------ ---------
Total $396,402 $337,129
------------ ---------
Operating income:
Financial institution outsourcing, systems
and services $ 49,336 $44,271
Securities processing and trust services 29,947 17,376
All other and corporate (329) (1,024)
------------ ---------
Total $ 78,954 $ 60,623
------------ ---------
</TABLE>
Revenues in the financial institution outsourcing, systems and services business
segment increased from $260.4 million in the first quarter of 1999 to $293.1
million in the current first quarter. Operating income in the financial
institution outsourcing, systems and services business segment increased from
$44.3 million in the first quarter of 1999 to $49.3 million in the current first
quarter, while operating margins were consistent in the first quarter of 1999
and 2000.
Revenues in the securities processing and trust services business segment
increased from $61.3 million in the first quarter of 1999 to $86.4 million in
the current first quarter. Revenue growth was primarily derived from increased
transaction volumes from existing clients and from JW Genesis Clearing
Corporation, which was acquired in June of 1999. Overall growth in transaction
volumes in the securities processing and trust services business segment during
the first quarter of 2000 reflected the high level of trading volumes in the
United States financial markets. Operating income in this business segment
increased from $17.4 million in the first quarter of 1999 to $29.9 million in
the current first quarter. The increases in operating income and margin were the
result of strong transaction-based revenues and the associated economies of
scale.
7
<PAGE>
Liquidity and Capital Resources
The following table summarizes the Company's primary sources (uses) of funds for
the three months ended March 31:
<TABLE>
<CAPTION>
2000 1999
----------------------------------
(In thousands)
<S> <C> <C>
Cash provided by operating activities before changes
in securities processing receivables and payables - net $ 74,113 $ 87,873
Securities processing receivables and payables - net (223,273) (43,097)
----------------------------------
Cash (used in) provided by operating activities (149,160) 44,776
Increase in short-term borrowings 214,671 100,450
Repayments of long-term borrowings (39,463) (33,990)
Decrease (increase) in investments 2,918 (57,063)
----------------------------------
TOTAL $ 28,966 $ 54,173
==================================
</TABLE>
The increase in securities processing receivables and payables-net of $223.3
million in the first quarter of 2000 was funded primarily by the increase in
short-term borrowings of $214.7 million. Long-term obligations amounted to
$434.4 million at March 31, 2000 and included $290.6 million advanced under an
aggregate of $500.0 million in revolving credit facilities.
The Company has used a significant portion of its cash flow from operations for
acquisitions and capital expenditures with any remainder used to reduce
long-term debt. 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
issuances of securities.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Except for the historical information contained herein, the matters discussed in
this Form 10-Q are forward-looking statements that involve risks and
uncertainties, including but not limited to economic, competitive, governmental
and technological factors affecting the Company's operations, markets, services
and related products, prices and other factors discussed in the Company's prior
filings with the Securities and Exchange Commission. Although the Company
believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate.
Therefore, there can be no assurance that the forward-looking statements
included in this Form 10-Q will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
8
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's Annual Meeting of Shareholders held on March 30, 2000, the
Company's Shareholders approved the following matters:
For Withheld
----------- --------
1. ELECTION OF THREE DIRECTORS TO SERVE
FOR A THREE-YEAR TERM EXPIRING IN 2003:
George D. Dalton 109,843,403 903,255
Daniel P. Kearney 109,781,049 965,609
L. William Seidman 110,088,801 657,857
The other directors of the Company whose terms in office continued after the
2000 Annual Meeting of Shareholders are as follows: terms expiring at the 2001
Annual Meeting - Kenneth R. Jensen and Thekla R. Shackelford; and terms expiring
at the 2002 Annual Meeting - Donald F. Dillon, Gerald J. Levy and
Leslie M. Muma.
<TABLE>
<CAPTION>
For Against Abstain Non-Vote
---------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
2. APPROVAL OF AN AMENDMENT TO THE
FISERV, INC. STOCK OPTION PLAN 73,859,625 19,660,822 453,737 16,772,474
3. APPROVAL OF THE FISERV, INC. EMPLOYEE
STOCK PURCHASE PLAN 91,617,007 1,967,182 389,995 16,772,474
4. REAPPOINTMENT OF DELOITTE & TOUCHE LLP
AS INDEPENDENT AUDITORS FOR 2000 110,476,815 132,488 137,355 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The exhibits listed in the accompanying exhibit index are filed as part
of this Quarterly Report on Form 10-Q.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
2000.
SIGNATURE
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 April 24, 2000 by /s/ Kenneth R. Jensen
-------------- --------------------------------------
KENNETH R. JENSEN
Senior Executive Vice President, Chief
Financial Officer, Treasurer and
Assistant Secretary
9
<PAGE>
FISERV, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period ended March 31, 2000
(4) First Amendment to the Rights Agreement, dated December 1, 1999,
appointing EquiServe as successor Rights Agent [Incorporated by
reference to Exhibit 4.3 to the Company's Form S-8 Registration
Statement (Registration No. 333-34310)]
(10) Fiserv, Inc. Stock Option Plan, as amended [Incorporated by reference to
Exhibit 4.1 to the Company's Form S-8 Registration Statement
(Registration No. 333-34310)]
(11) Statement regarding computation of per share earnings (included in
Part 1, page 5).
(27) Financial data schedule.
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 74,655
<SECURITIES> 1,636,035
<RECEIVABLES> 244,941
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,831,934
<PP&E> 203,863
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,258,925
<CURRENT-LIABILITIES> 4,700,715
<BONDS> 0
0
0
<COMMON> 1,254
<OTHER-SE> 1,149,752
<TOTAL-LIABILITY-AND-EQUITY> 6,258,925
<SALES> 0
<TOTAL-REVENUES> 396,402
<CGS> 0
<TOTAL-COSTS> 309,660
<OTHER-EXPENSES> 7,788
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,806
<INCOME-PRETAX> 73,148
<INCOME-TAX> 29,991
<INCOME-CONTINUING> 43,157
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,157
<EPS-BASIC> 0.35
<EPS-DILUTED> 0.34
</TABLE>
