<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 June 30, 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
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FISERV, INC.
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(Exact name of Registrant as specified in its charter)
WISCONSIN 39-1506125
----------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 FISERV DRIVE, BROOKFIELD, WI 53045
----------------------------------------- ------------
(Address of principal executive office) (Zip Code)
(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 July 14, 2000, there were 123,224,000 shares of common stock, $.01 par
value, of the Registrant outstanding.
1
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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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-------------------- --------------------
Revenues $416,434 $343,252 $812,836 $680,381
-------------------- --------------------
<S> <C> <C> <C> <C>
Cost of revenues:
Salaries, commissions and payroll
related costs 198,029 163,619 387,601 323,165
Data processing expenses, rentals
and telecommunication costs 28,457 26,904 56,569 57,524
Other operating expenses 78,371 69,510 153,598 133,483
Depreciation and amortization of
property and equipment 17,419 14,891 34,168 29,659
Amortization of intangible assets 15,626 4,825 22,802 9,373
Amortization (capitalization) of
internally generated computer
software-net (856) 989 (244) 4,040
-------------------- --------------------
Total cost of revenues 337,046 280,738 654,494 557,244
-------------------- --------------------
Operating income 79,388 62,514 158,342 123,137
Interest expense - net (6,000) (4,315) (11,806) (8,300)
Realized gain from sale of
investment 2,928 - 2,928 -
-------------------- --------------------
Income before income taxes 76,316 58,199 149,464 114,837
Income tax provision 31,289 23,861 61,280 47,083
-------------------- --------------------
Net income $45,027 $34,338 $88,184 $67,754
==================== ====================
Net income per share:
Basic $0.37 $0.28 $0.72 $0.55
==================== ====================
Diluted $0.36 $0.27 $0.70 $0.53
==================== ====================
Shares used in computing net income per share:
Basic 122,991 123,498 122,807 123,364
==================== ====================
Diluted 126,401 127,302 125,972 127,591
==================== ====================
</TABLE>
See notes to consolidated financial statements.
2
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FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
2000 1999
---------------------------
(Unaudited)
ASSETS
Cash and cash equivalents $72,513 $80,554
Accounts receivable-net 242,540 235,350
Securities processing receivables 2,744,627 2,196,068
Prepaid expenses and other assets 98,747 89,378
Trust account investments 1,418,519 1,298,120
Other investments 291,987 335,573
Property and equipment-net 209,943 195,333
Internally generated computer software-net 76,416 75,263
Intangible assets-net 838,677 802,071
---------------------------
Total $5,993,969 $5,307,710
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $66,987 $66,400
Securities processing payables 2,236,447 1,764,382
Short-term borrowings 271,300 234,350
Accrued expenses 167,092 176,443
Accrued income taxes 28,434 12,736
Deferred revenues 134,919 131,476
Trust account deposits 1,431,019 1,298,120
Deferred income taxes 42,963 59,963
Long-term debt 457,249 472,824
---------------------------
Total liabilities 4,836,410 4,216,694
---------------------------
Shareholders' equity:
Common stock issued, 125,387,700 shares 1,254 1,254
Additional paid-in capital 456,493 458,550
Accumulated other comprehensive income 87,805 125,026
Accumulated earnings 664,694 576,510
Treasury stock, at cost, 2,167,900 and
2,804,400 shares, respectively (52,687) (70,324)
---------------------------
Total shareholders' equity 1,157,559 1,091,016
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Total $5,993,969 $5,307,710
===========================
See notes to consolidated financial statements.
3
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FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
June 30,
2000 1999
---------------------
Cash flows from operating activities:
Net income $88,184 $67,754
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income taxes 8,209 6,111
Depreciation and amortization of property and equipment 34,168 29,659
Amortization of intangible assets 22,802 9,373
Amortization of internally generated computer software 19,085 19,256
---------------------
172,448 132,153
Changes in assets and liabilities, net of effects from
acquisitions of businesses:
Accounts receivable 2,533 22,937
Prepaid expenses and other assets (8,826) 8,620
Accounts payable and accrued expenses (14,531) (11,499)
Deferred revenues 3,114 717
Accrued income taxes 24,698 4,632
Securities processing receivables and payables - net (76,494) (36,201)
---------------------
Net cash provided by operating activities 102,942 121,359
---------------------
Cash flows from investing activities:
Capital expenditures (43,563) (35,808)
Capitalization of internally generated computer
software (19,329) (15,216)
Payment for acquisitions of businesses, net of cash
acquired (48,691) (87,250)
Investments 232,615 (188,811)
---------------------
Net cash provided by (used in) investing activities 121,032 (327,085)
---------------------
Cash flows from financing activities:
Proceeds from short-term obligations - net 36,950 40,240
Proceeds from (repayments of) long-term
obligations - net (16,598) 2,679
Issuance of common stock 16,463 5,113
Purchases of treasury stock (9,884) -
Trust account deposits (258,946) 148,575
---------------------
Net cash (used in) provided by financing activities (232,015) 196,607
---------------------
Change in cash and cash equivalents (8,041) (9,119)
Beginning balance 80,554 71,558
---------------------
Ending balance $72,513 $62,439
=====================
See notes to consolidated financial statements.
4
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FISERV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Principles of Consolidation
The consolidated financial statements for the three and six month periods ended
June 30, 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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average number of common (In thousands)
shares outstanding-basic 122,991 123,498 122,807 123,364
Common stock equivalents 3,410 3,804 3,165 4,227
Weighted average number of common and -------------------------------------------------
common equivalent shares outstanding-diluted 126,401 127,302 125,972 127,591
=================================================
</TABLE>
Basic income per share is computed using the weighted average number of common
shares outstanding during the periods. Diluted 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:
June 30, December 31,
2000 1999
------------------------
(In thousands)
Unrealized gain on investments $61,937 $87,162
Internally generated capitalized software 31,331 30,858
Excess of tax over book depreciation and
amortization 19,212 19,438
Other 17,094 9,268
Purchased incomplete software technology (45,357) (47,663)
Accrued expenses not currently deductible (27,218) (25,407)
Deferred revenues (14,036) (13,693)
------------------------
Total $42,963 $59,963
========================
4. Supplemental Cash Flow Information
Six Months Ended
June 30,
2000 1999
----------------------
(In thousands)
Interest paid $15,130 $11,828
Income taxes paid 29,402 38,002
Liabilities assumed in acquisitions of
businesses 397,313 199,878
5
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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.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
--------------------------------------------
(Percent of Revenues)
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
--------------------------------------------
Salaries and related costs 47.6 47.7 47.7 47.5
Data processing costs 6.8 7.8 6.9 8.4
Other operating expenses 18.8 20.3 18.9 19.6
Depreciation and amortization 4.2 4.3 4.2 4.4
Amortization of intangible assets 3.7 1.4 2.8 1.4
Amortization (capitalization) of software--net (0.2) 0.3 (0.0) 0.6
---------------- ----------------
Total cost of revenues 80.9 81.8 80.5 81.9
---------------- ----------------
Operating income 19.1 18.2 19.5 18.1
================ ================
</TABLE>
Revenues
Revenues increased 21.3% from $343.3 million in the second quarter of 1999 to
$416.4 million in the current second quarter, and 19.5% from $680.4 million in
the first six months of 1999 to $812.8 million in the comparable current period.
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 six months of
2000.
Cost of Revenues
Cost of revenues increased 20.1% from $280.7 million in the second quarter of
1999 to $337.0 million in the current second quarter, and 17.5% from $557.2
million in the first six months of 1999 to $654.5 million in the first six
months of 2000. The make up of cost of revenues has been affected by business
acquisitions, changes in the mix of the Company's business and operational
efficiencies.
Amortization of Intangible Assets
Amortization of intangible assets increased from $4.8 million in the second
quarter of 1999 to $15.6 million in the current second quarter, and from $9.4
million in the first six months of 1999 to $22.8 million in the first six months
of 2000. During the second quarter of 2000, the Company recorded a charge of
$8.0 million for impairment of goodwill associated with consolidation of certain
ancillary product lines in the Company's software businesses.
Operating Income
Operating income increased 27.0% from $62.5 million in the second quarter of
1999 to $79.4 million in the current second quarter, and increased 28.6% from
$123.1 million in the first six months of 1999 to $158.3 million in the first
six months of 2000. As a percentage of revenues, operating margins were higher
during both the second quarter and first six months of 2000 when compared to the
prior year periods due primarily to increased operating leverage of existing
operations and higher operating margins associated with certain acquisitions.
Realized Gain from Sale of Investment
During the second quarter of 2000, the Company sold 100,000 shares of Knight
Trading Group, Inc. resulting in a realized gain of $2.9 million. As of June 30,
2000, the Company owns 3,304,930 shares of Knight Trading Group, Inc.
Income Tax Provision
Income taxes were computed at 41% in both 2000 and 1999. The 41% rate is
expected to apply throughout the current year.
Net Income
Net income for the second quarter increased 31.1% from $34.3 million in 1999 to
$45.0 million in 2000. Net income for the first six months increased 30.2% from
$67.8 million in 1999 to $88.2 million in 2000. Net income per share--diluted
for the second quarter was $.34 in 2000, before recognizing $.02 per share from
the realized gain on sale of investment, compared to $.27 in 1999. Net income
per share--diluted for the first six months of 2000 was $.68, before recognizing
$.02 per share from the realized gain on sale of investment, compared to $.53 in
the comparable 1999 period.
6
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Business Segment Information
The Company is a leading independent provider of financial 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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---------------------- -----------------------
(In thousands)
<S> <C> <C> <C> <C>
Revenues:
Financial institution outsourcing, systems
and services $313,092 $262,423 $606,180 $522,809
Securities processing and trust services 87,727 65,868 174,174 127,130
All other and corporate 15,615 14,961 32,482 30,442
-------- -------- -------- --------
Total $416,434 $343,252 $812,836 $680,381
-------- -------- -------- --------
Operating income:
Financial institution outsourcing, systems
and services $60,519 $45,144 $109,855 $89,415
Securities processing and trust services 20,449 18,624 50,396 36,000
All other and corporate (1,580) (1,254) (1,909) (2,278)
-------- -------- -------- --------
Total $79,388 $62,514 $158,342 $123,137
-------- -------- -------- --------
</TABLE>
Revenues in the financial institution outsourcing, systems and services business
segment increased from $262.4 million in the second quarter of 1999 to $313.1
million in the current second quarter, and increased from $522.8 million in the
first six months of 1999 to $606.2 million in the comparable current period.
Operating income in the financial institution outsourcing, systems and services
business segment increased from $45.1 million in the second quarter of 1999 to
$60.5 million in the current second quarter, and increased from $89.4 million in
the first six months of 1999 to $109.9 million in the first six months of 2000.
Operating income and margin increases over prior periods were primarily due to
continued revenue growth, increased operating leverage of existing operations
and the impact of certain acquisitions.
Revenues in the securities processing and trust services business segment
increased from $65.9 million in the second quarter of 1999 to $87.7 million in
the current second quarter, and increased from $127.1 million in the first six
months of 1999 to $174.2 million in the comparable current period. Year-to-date
revenue growth was primarily derived from increased transaction volumes from
existing clients and from the acquisitions of JWGenesis Clearing Corporation
acquired in June 1999 and Resources Trust Company acquired in May 2000.
Operating income in this business segment increased from $18.6 million in the
second quarter of 1999 to $20.4 million in the current second quarter, and
increased from $36.0 million in the first six months of 1999 to $50.4 million in
the first six months of 2000. Operating margins in the second quarter were lower
than the prior period due to several factors including stronger trust services
revenue which generates a lower margin than securities processing services and
an increase in reserves for customer receivables. Year-to-date operating margins
were consistent with the comparable prior period.
7
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Liquidity and Capital Resources
The following table summarizes the Company's primary sources (uses) of funds for
the six months ended June 30, 2000 and 1999:
2000 1999
----------------------
(In thousands)
Cash provided by operating activities before changes
in securities processing receivables and payables--net $179,436 $157,560
Securities processing receivables and payables--net (76,494) (36,201)
----------------------
Cash provided by operating activities 102,942 121,359
Proceeds from short-term obligations--net 36,950 40,240
Proceeds from (repayments of) long-term obligations--net (16,598) 2,679
Increase in investments (26,331) (40,236)
----------------------
TOTAL $96,963 $124,042
======================
Long-term obligations amounted to $457.2 million at June 30, 2000 and included
$343.6 million advanced under an aggregate of $575 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
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PART II. OTHER INFORMATION
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 June 30, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Fiserv, Inc.
-----------------
(Registrant)
Date July 24, 2000 by /s/ Kenneth R. Jensen
------------- ---------------------------------------------
KENNETH R. JENSEN
Senior Executive Vice President, Chief
Financial Officer, Treasurer and
Assistant Secretary
9
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FISERV, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period ended June 30, 2000
(11) Statement regarding computation of per share earnings (included in Part 1,
page 5).
(27) Financial data schedule.
10
