SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED MARCH 31, 1995 COMMISSION FILE NUMBER 0-14948
FISERV, INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
WISCONSIN 39-1506125
--------------------------------- --------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
255 FISERV DRIVE, BROOKFIELD, WI. 53045
- -------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code:(414) 879 5000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
At March 31, 1995, 39,325,842 shares of common stock of the Registrant were
outstanding.
Exhibit Index appears at page 8.
1
PART I. FINANCIAL INFORMATION
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the Three Month Periods Ended March 31, 1995 and 1994
Three Months Ended
March 31,
1995 1994
--------- ---------
(In thousands except
per share amounts)
REVENUES $152,605 $135,896
--------- ---------
COST OF REVENUES:
Salaries, commissions and payroll related costs 73,430 66,777
Data processing expenses, rentals
and telecommunication costs 22,388 21,048
Other operating expenses 27,287 25,146
Depreciation and amortization
of property and equipment 8,961 6,446
Amortization of intangible assets 2,746 2,665
Capitalization of internally
generated computer software (1,649) (2,112)
--------- ---------
Total cost of revenues 133,163 119,970
--------- ---------
OPERATING INCOME 19,442 15,926
Interest expense-net 1,731 1,446
--------- ---------
INCOME BEFORE INCOME TAXES 17,711 14,480
--------- ---------
Income tax provision 7,262 5,792
--------- ---------
NET INCOME $10,449 $8,688
========= =========
Net income per common and
common equivalent share $0.26 $0.22
========= =========
Shares used in computing
net income per share 40,065 39,605
========= =========
See notes to consolidated financial statements.
2
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, December 31,
1995 1994
---------- ----------
(In thousands)
ASSETS
Cash and cash equivalents $30,626 $28,294
Accounts receivable 117,837 120,033
Prepaid expenses and other assets 35,851 34,391
Trust account investments 714,641 807,819
Other investments 62,965 64,777
Property and equipment-net 121,004 113,448
Internally generated computer software-net 69,388 67,820
Identifiable intangible assets relating
to acquisitions-net 32,401 34,090
Goodwill-net 152,532 147,686
---------- ----------
TOTAL $1,337,245 $1,418,358
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $22,054 $21,440
Accrued expenses 45,807 59,126
Accrued income taxes 3,075 1,851
Deferred revenues 22,881 10,836
Trust account deposits 714,796 809,324
Long-term debt 136,458 139,864
Other long-term obligations 2,578 2,314
Deferred income taxes 27,266 22,800
---------- ----------
TOTAL LIABILITIES 974,915 1,067,555
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock outstanding, 39,326,000 and
39,157,000 shares, respectively 393 392
Additional paid-in capital 184,811 184,574
Unrealized gain on investments 11,623 11,054
Accumulated earnings 165,503 154,783
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 362,330 350,803
---------- ----------
TOTAL $1,337,245 $1,418,358
========== ==========
See notes to consolidated financial statements.
3
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Three-Month Periods Ended March 31, 1995 and 1994
Three Months Ended
March 31,
1995 1994
--------------------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $10,449 $8,688
Adjustments to reconcile income to net cash
provided by operating activities:
Deferred income taxes 4,073 4,500
Depreciation and amortization of property and
equipment 8,961 6,446
Amortization of intangible assets 2,746 2,665
Capitalization of internally generated computer
software-net (1,649) (2,112)
--------- --------
24,580 20,187
Cash provided (used) by changes in assets and
liabilities, net of effects from acquisitions
of businesses:
Accounts receivable 2,521 7,884
Prepaid expenses and other assets (1,047) 726
Accounts payable and accrued expenses (13,424) (10,936)
Deferred revenue 10,484 3,565
Income taxes payable 1,224 711
--------- --------
Net cash provided by operating activities 24,338 22,137
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (15,589) (16,642)
Investments and other assets 2,674 (2,252)
Payment for acquisition of businesses (4,934) 2,677
Trust account investments 93,278 (182,682)
--------- --------
Net cash provided (used) by investing activities 75,429 (198,899)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings and other long-term obligations-net (3,140) 4,573
Issuance of common stock 233 (5)
Trust account deposits (94,528) 180,655
--------- --------
Net cash provided (used) by financing activities (97,435) 185,223
--------- --------
Change in cash 2,332 8,461
Beginning balance 28,294 35,934
--------- --------
Ending balance $30,626 $44,395
========= ========
See notes to consolidated financial statements.
4
FISERV, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet as of March 31, 1995, and the related
consolidated statements of income and cash flows for the three-month periods
ended March 31, 1995 and 1994 are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such financial statements have
been included. Such adjustments consisted only of normal recurring items.
Interim results are not necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form 10-Q, and
do not contain certain information included in the annual financial statements
and notes of FIserv, Inc. and subsidiaries (the Company or the Registrant).
2. SHARES USED IN COMPUTING NET INCOME PER SHARE
Three Months Ended
March 31,
1995 1994
-----------------
(In thousands)
Weighted average number of common shares
outstanding 39,251 38,834
Shares issuable upon exercise of options reduced by
the number of shares which could have been
purchased with the proceeds of such exercise 814 771
------ ------
Shares used 40,065 39,605
------ ------
Income per common and common equivalent share is computed using the weighted
average number of common and dilutive common equivalent shares outstanding
during the periods.
3. ACCOUNTING FOR INCOME TAXES
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) operating and tax
credit carryforwards. Significant components of the Company's net deferred tax
liability as of March 31, 1995 and December 31,1994 are as follows:
MARCH, 31 December 31,
1995 1994
------------ ----------------
Allowance for doubtful accounts $1,610,000 $1,571,000
Accrued expenses not currently deductible 8,995,000 11,392,000
Other 2,134,000 1,931,000
Net operating loss and credit carryforwards 6,850,000 5,901,000
Deferred costs (5,638,000) (4,911,000)
Internally generated capitalized software (28,443,000) (27,120,000)
Excess of tax over book depreciation and
amortization (4,697,000) (4,069,000)
Unrealized gain on investments (8,077,000) (7,495,000)
------------ --------------
Total ($27,266,000) ($22,800,000)
============ ==============
4. SUPPLEMENTAL CASH FLOW INFORMATION
Quarter Ended March 31,
1995 1994
----------------
(In thousands)
Income taxes paid $1,379 $745
Interest paid 1,690 619
Liabilities assumed in acquisitions of businesses 2,639
----------------
5
5. SUBSEQUENT EVENT
Subsequent to March 31, 1995, the Company announced an agreement to acquire
Information Technology, Inc., a privately held company, in a transaction to be
accounted for as a purchase. The purchase price of $373 million will be paid
two-thirds in cash and one-third in shares of FIserv stock. The transaction is
expected to close in the second quarter of 1995.
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 results of
operations as a percentage of revenues represented by certain income and expense
items and the percentage change in those items.
Three Months Ended
March 31, Percentage
1995 1994 Increase
----------------- (Decrease)
Percent of Revenues
Revenues 100.00% 100.00% 12.30%
Salaries and related costs 48.12 49.14 9.96
Data processing costs 14.67 15.49 6.37
Other operating expenses 17.88 18.50 8.51
Depreciation and amortization 5.87 4.74 39.02
Amortization of intangible assets 1.80 1.96 3.04
Capitalization of software-net (1.08) (1.55) (21.92)
------- -------
Total cost of revenues 87.26 88.28 11.00
------- -------
Operating income 12.74 11.72 22.08
======= =======
REVENUES
Revenues increased 12.3% from $135.9 million in the first quarter of 1994 to
$152.6 in the current first quarter. Approximately 30% of this growth resulted
from the inclusion of revenues from the date of purchase of acquired companies
and approximately 70% from increases in revenue from the addition of new
clients, growth in the transaction volume experienced by existing clients and
price increases.
COST OF REVENUES
Cost of revenues increased 11.0% from $120.0 million in the first quarter of
1994 to $133.2 million in the current first quarter. Salaries, data processing
and other operating expenses all increased at a rate that was lower than the
rate of increase for revenues. Depreciation and amortization increased at a
higher rate than revenues due to substantial capital expenditures incurred in
1994. Capitalization of software decreased as a percentage of revenue, a trend
which is expected to continue.
OPERATING INCOME
Operating income increased 22.1% from $15.9 million in the first quarter of 1994
to $19.4 million in the current first quarter. As a percentage of revenues,
operating income improved 1.0% in the first quarter of 1995 as compared to the
prior year period.
6
NET INTEREST EXPENSE
As a result of acquisitions since the first quarter of 1994, which were funded
through borrowing, net interest expense increased from $1.4 million in the first
quarter of 1994 to $1.7 million in the current first quarter.
INCOME TAX PROVISION
Income taxes were computed at 41% in 1995 and 40% in 1994. The 41% rate is
expected to apply throughout the current year.
NET INCOME
Net income grew 20% from $8.7 million in the first quarter of 1994 to $10.4
million in the first quarter of 1995, and net income per share increased 18%
from $.22 per share in the first quarter of 1994 to $.26 in the corresponding
period of 1995.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1995, cash and cash equivalents
increased $2.3 million comprising primarily $24.3 million net cash provided from
operating activities, $.2 million sale of common stock and $1.4 million net
decrease in investments, offset by $15.6 million capital expenditures, $4.9
million for acquisition of businesses and $3.1 million net decrease in long-term
debt.
Long-term obligations amounted to $139.0 million at March 31, 1995. The
majority of this debt comprises $43.2 million senior notes due 1994 to 2001 and
$86.2 million advanced under a $125 million unsecured line of credit and
commercial paper facility expiring March 31, 1997. A facility fee ranging from
.175% to .325% per annum is required on the entire bank line regardless of
usage. The Company has historically applied a significant portion of its cash
flow from operating activities and proceeds of its common stock offerings to
acquisitions and the reduction of long-term debt and invests the remainder in
short-term obligations until it is needed for further acquisitions or operating
purposes.
The Company believes that its cash flow from operating activities together with
other available sources of funds will be adequate to meet its funding
requirements. In connection with the pending acquisition referred to in Note 5
above, the Company proposes to borrow additional funds and issue shares of its
common stock as stated therein.
7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Index to exhibits
(11) Statement regarding computation of per share earnings (included on
page 5, Part 1).
(b) Reports on Form 8-K
During the quarter ended March 31, 1995, the Registrant did not file any
reports on Form 8-K.
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.
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(Registrant)
Date April 25, 1995 by K.R. JENSEN
---------------- -------------------------------
KENNETH R. JENSEN
Senior Executive Vice President
and Chief Financial Officer
8
5
1,000
3-MOS
DEC-31-1995
MAR-31-1995
30,626
714,641
117,837
0
0
898,955
121,004
0
1,337,245
808,613
0
393
0
0
361,937
1,337,245
0
152,605
0
132,066
1,097
0
1,731
17,711
7,262
10,449
0
0
0
10,449
.26
.26
