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 June 30, 1996 Commission file number 0-14948
FISERV, INC.
------------------------------------------------------
(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, WI. 53045
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(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 June 30, 1996, 45,142,000 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 and Six-Month Periods Ended June 30,1996 and 1995
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(In thousands except per share amounts)
Revenues ............................. $196,464 $173,470 $391,174 $330,649
-------- -------- -------- --------
Cost of revenues:
Salaries, commissions and payroll
related costs ....................... 90,984 80,855 181,676 156,075
Data processing expenses, rentals
and telecommunication costs ......... 24,523 24,060 48,797 46,677
Other operating expenses ............. 35,247 32,656 69,656 60,648
Depreciation and amortization of
property and equipment .............. 10,305 9,432 20,614 18,794
Amortization of intangible assets .... 5,240 3,605 10,557 6,351
Capitalization of internally generated
computer software-net ............... (687) (1,883) (1,483) (3,532)
------ ------ ------ ------
Total cost of revenues ............... 165,612 148,725 329,817 285,013
------- ------- ------- -------
Operating income ..................... 30,852 24,745 61,357 45,636
Interest expense - net ............... 5,076 4,437 10,731 6,274
----- ----- ------ -----
Income before income taxes ........... 25,776 20,308 50,626 39,362
Income tax provision ................. 10,568 8,326 20,757 16,138
====== ===== ====== ======
Net income ........................... $15,208 $11,982 $29,869 $23,224
======= ======= ======= =======
Net income per common and
common equivalent share ............. $0.33 $0.28 $0.65 $0.55
===== ===== ===== =====
Shares used in computing
net income per share ................ 46,096 43,409 46,008 42,157
====== ====== ====== ======
See notes to consolidated financial statements.
2
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
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(In thousands)
ASSETS
Cash and cash equivalents ................ $61,396 $59,743
Accounts receivable ...................... 158,760 154,628
Prepaid expenses and other assets ........ 52,708 63,893
Due on sale of securities ................ 97,446
Trust account investments ................ 971,652 834,286
Other investments ........................ 30,349 55,748
Deferred income taxes .................... 35,844 39,527
Property and equipment-net ............... 146,010 148,343
Internally generated computer software-net 76,018 73,863
Identifiable intangible assets relating
to acquisitions-net ..................... 57,438 57,270
Goodwill-net ............................. 296,395 300,552
========== ==========
Total .................................... $1,886,570 $1,885,299
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ......................... $41,369 $43,948
Accrued expenses ......................... 53,633 59,614
Accrued income taxes ..................... 8,729 6,116
Deferred revenues ........................ 52,745 40,754
Trust account deposits ................... 955,956 917,189
Long-term debt ........................... 304,716 381,361
Other long-term obligations .............. 1,497 2,055
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Total liabilities ........................ 1,418,645 1,451,037
---------- ----------
Stockholders' equity:
Common stock outstanding, 45,142,000 and
44,887,000 shares, respectively ........ 451 449
Additional paid-in capital ............... 319,586 315,800
Unrealized gain on investments ........... 15,334 15,268
Accumulated earnings ..................... 132,554 102,745
---------- ----------
Total stockholders' equity ............... 467,925 434,262
========== ==========
Total .................................... $1,886,570 $1,885,299
========== ==========
See notes to consolidated financial statements.
3
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Six-Month Periods Ended June 30, 1996 and 1995
Six Months Ended
June 30,
1996 1995
--------- ---------
(In thousands)
Cash flows from operating activities:
Net income .................................................. $29,869 $23,224
Adjustments to reconcile income to net cash
provided by operating activities:
Deferred income taxes ...................................... 3,683 7,783
Depreciation and amortization of property and equipment .... 20,614 18,794
Amortization of intangible assets .......................... 10,557 6,351
Capitalization of internally generated computer software-net (1,483) (3,532)
--------- ---------
63,240 52,620
Cash provided (used) by changes in assets and liabilities,
net of effects from acquisitions of businesses:
Accounts receivable ........................................ (4,120) 2,107
Prepaid expenses and other assets .......................... 10,963 (5,221)
Accounts payable and accrued expenses ...................... (8,264) (24,350)
Deferred revenue ........................................... 11,684 4,859
Income taxes payable ....................................... 2,255 325
--------- ---------
Net cash provided by operating activities ................... 75,758 30,340
--------- ---------
Cash flows from investing activities:
Capital expenditures ....................................... (16,995) (22,709)
Investments and other assets ............................... 25,399 2,982
Payment for acquisition of businesses ...................... (7,683) (252,836)
Trust account investments .................................. (39,760) 136,547
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Net cash used by investing activities ....................... (39,039) (136,016)
--------- ---------
Cash flows from financing activities:
Borrowings and other long-term obligations-net ............. (77,619) 247,138
Issuance of common stock ................................... 3,788 590
Trust account deposits ..................................... 38,765 (111,485)
--------- ---------
Net cash provided by financing activities ................... (35,066) 136,243
--------- ---------
Change in cash .............................................. 1,653 30,567
Beginning balance ........................................... 59,743 29,683
========= =========
Ending balance .............................................. $61,396 $60,250
========= =========
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 June 30, 1996 and the related consolidated
statements of income and cash flows for the three and six-month periods ended
June 30, 1996 and 1995 are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such financial statements have
been included. Such adjustments consisted only of normal recurring items.
Interim results are not necessarily indicative of results for a full year. The
financial statements and notes are presented as permitted by Form 10-Q, and do
not contain certain information included in the annual financial statements and
notes of FIserv, Inc. and subsidiaries (the Company or the Registrant).
2. Shares Used in Computing Net Income per Share
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------------------------------------
(In thousands)
Weighted average number of common
shares outstanding ..................... 45,124 42,409 45,035 41,251
Shares issuable upon exercise of options
reduced by the number of shares which
could have been purchased with the
proceeds of such exercise .............. 972 1,000 973 906
-------------------------------------
Shares used ......... 46,096 43,409 46,008 42,157
=====================================
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 June 30, 1996 and December 31, 1995 are as follows:
June 30, December 31,
1996 1995
---------------------------
(In thousands)
Allowance for doubtful accounts ........... $2,319 $2,319
Accrued expenses not currently deductible . 5,966 7,769
Deferred revenue .......................... 9,722 9,122
Other ..................................... 782 1,728
Net operating loss and credit carryforwards 5,594 6,739
Purchased incomplete software technology .. 63,999 66,305
Deferred costs ............................ (6,467) (9,143)
Internally generated capitalized software . (31,167) (30,283)
Excess of tax over book depreciation and
amortization ............................ (4,251) (4,419)
Unrealized gain on investments ............ (10,653) (10,610)
--------------------------
Total deferred income taxes ............... $35,844 $39,527
===========================
5
4. Supplemental Cash Flow Information
Six Months Ended
June 30,
1996 1995
-------------------
(In thousands)
Income taxes paid ........................................ $14,461 $4,802
Interest paid ............................................ 12,394 6,440
Liabilities assumed in acquisitions of
businesses - Trust account deposits 225,893
Other ................................ 1,236 48,784
Value of common shares issued in acquisitions of businesses 135,947
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The following table sets forth, for the periods indicated, the relative
percentage which certain items in the Company's consolidated statements of
income bear to revenues.
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
-----------------------------------------
(Percent of Revenues)
Revenues ........................ 100.00% 100.00% 100.00% 100.00%
-----------------------------------------
Salaries and related costs ...... 46.31 46.61 46.44 47.20
Data processing costs ........... 12.48 13.87 12.47 14.12
Other operating expenses ........ 17.94 18.83 17.81 18.34
Depreciation and amortization ... 5.25 5.44 5.27 5.68
Amortization of intangible assets 2.67 2.08 2.70 1.92
Capitalization of software-net .. (.35) (1.09) (.38) (1.07)
-----------------------------------------
Total cost of revenues .......... 84.30 85.74 84.31 86.19
-----------------------------------------
Operating income ................ 15.70 14.26 15.69 13.81
========================================
6
Revenues
- --------
Revenues increased 13.3% from $173.5 million in the second quarter of 1995 to
$196.5 million in the current second quarter and 18.3% from $330.6 million in
the first six months of 1995 to $391.2 million in the comparable current period.
Approximately 65% of the year-to-date growth in revenue resulted from the
inclusion of revenues from the date of purchase of acquired companies and the
remainder from increases in revenue from the addition of new clients, growth in
the transaction volume experienced by existing clients and price increases.
Cost of Revenues
- ----------------
Cost of revenues increased 11.4% from $148.7 million in the second quarter of
1995 to $165.6 million in the current second quarter, and 15.7% from $285.0
million in the first six months of 1995 to $329.8 million in the first six
months of 1996. These increases are slightly less than the increase in revenue
for the periods due to improved operating margins.
Operating Income
- ----------------
Operating income increased 24.7% from $24.7 million in the second quarter of
1995 to $30.9 million in the current second quarter, and 34.4% from $45.6
million in the first six months of 1995 to $61.4 million in the first six months
of 1996. As a percentage of revenues, operating margins improved during the
second quarter and first six months of 1996 when compared to the comparable
prior year periods due primarily to changes in the mix of business, including
the impact of acquisitions referred to above.
Interest Expense - Net
- ----------------------
As a result of acquisitions since January 1, 1995, which were only partially
funded with common stock, net interest expense increased $0.6 million in the
second quarter and $4.5 million in the first six months of 1996 over amounts
incurred for the comparable 1995 periods.
Income Tax Provision
- --------------------
Income taxes were computed at 41% in both 1996 and 1995. The 41% rate is
expected to apply throughout the current year.
Net Income
- ----------
Net income grew 26.9% from $12.0 million in the second quarter of 1995 to $15.2
million in the comparable 1996 quarter and 28.6% from $23.2 million in the first
six months of 1995 to $29.9 million in the comparable current period. Net income
per share increased $.05 from $.28 in the second quarter of 1995 to $.33 in the
current second quarter and $.10 from $.55 in the first six months of 1995 to
$.65 in the first six months of 1996. The increase in net income per share over
1995 was consistent with management expectations and historical growth rates.
Liquidity and Capital Resources
- -------------------------------
During the six months ended June 30, 1996, cash increased $1.7 million
comprising primarily $75.8 million net cash provided by operating activities,
$24.4 million decrease in investments and $3.8 million from issuance of common
stock, which was partially offset by $7.7 million for the acquisition of
businesses, $77.6 million net repayment of long-term debt and $17.0 million for
capital expenditures. Long-term obligations amounted to $306.2 million at June
30, 1996. The majority of this debt comprises $119.6 million of senior notes due
1997 to 2001 and $173.0 million advanced under a $300 million unsecured line of
credit and commercial paper facility which reduces $45 million in May 1997 and
in May 1998, $60 million in May 1999 and expires in May 2000. A facility fee of
0.10% to 0.20% per annum is required on the line.
The Company has historically applied a significant portion of its cash flow from
operating activities and proceeds of its common stock offerings to acquisitions
and the reduction of long-term debt and invests the remainder in short-term
obligations until it is needed for further acquisitions or operating purposes.
The Company believes that its cash flow from operating activities together with
other available sources of funds will be adequate to meet its funding
requirements. However, in the event that the Company makes significant future
acquisitions, it may raise funds through additional borrowings or issuance of
securities.
7
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 June 30, 1996, the Registrant filed a report on
Form 8-K, dated April 4, 1996, relating to an amendment of its processing
contract with The Chase Manhattan Corporation.
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 23, 1996 by /S/ EDWARD P. ALBERTS
------------------------
EDWARD P. ALBERTS
Senior Vice President, Finance
and Controller
8
5
1000
6-mos
DEC-31-1996
JUN-30-1996
61,396
971,652
158,760
0
0
1,232,185
146,010
0
1,886,570
1,122,324
0
0
0
451
467,474
1,886,570
0
391,174
0
320,743
9,074
0
10,731
50,626
20,757
29,869
0
0
0
29,869
0.65
0.65
