-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Ozwdlu8McHfq1jjOeUuOWaGkRLjbj+iJnGu4eu0Ytge4VcLb5Fovu9C+yaX3iP+A 6yUXsAf9YiQj5Q08OnOAHQ== 0000798354-95-000007.txt : 19950612 0000798354-95-000007.hdr.sgml : 19950612 ACCESSION NUMBER: 0000798354-95-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950228 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FISERV INC CENTRAL INDEX KEY: 0000798354 STANDARD INDUSTRIAL CLASSIFICATION: 7374 IRS NUMBER: 391506125 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14948 FILM NUMBER: 95515995 BUSINESS ADDRESS: STREET 1: 255 FISERV DR STREET 2: PO BOX 979 CITY: BROOKFIELD STATE: WI ZIP: 53045 BUSINESS PHONE: 4148795000 MAIL ADDRESS: STREET 1: 255 FISERV DRIVE CITY: BROOKFIELD STATE: WI ZIP: 53045 10-K 1 FISERV, INC. AND SUBSIDIARIES 1994 10-K 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, 1994 COMMISSION FILE NO. 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, WISCONSIN 53045 - - - - - ---------------------------------------- ---------- (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 ---------------- (Title of Class) SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $.01 PAR VALUE ---------------------------- (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, 1995: $842,257,834 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of January 31, 1995: 39,174,783 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. 1994 Annual Report to Shareholders - Parts II, IV Proxy Statement for March 30, 1995 Meeting - Part III FISERV, INC. AND SUBSIDIARIES FORM 10-K DECEMBER 31, 1994 PART I Page Item 1. Business 1 Item 2. Properties 10 Item 3. Legal Proceedings 11 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 12 ------------------------------ PART I ------------------------------ ITEM 1. BUSINESS FIserv was formed on July 31, 1984, through the combination of two major regional data processing firms located in Milwaukee, Wis., and Tampa, Fla. These firms-- FIserv Milwaukee and FIserv 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 their 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 operates centers nationwide for full-service 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 London, England, and Singapore. The FIserv organization, headquartered in Brookfield, Wis., is aligned 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 for savings institutions and community bank clients, and item processing services for all FIserv clients nationwide. Business units within the Savings & Community Bank Group are aligned by regional markets as follows: Western Region locations: Phoenix, Ariz.; Fullerton, Los Angeles, San Diego and San Francisco, Calif.; Seattle, Wash. Southwest Region locations: Little Rock, Ark.; Denver, Colo.; Bowling Green, Ky.; New Orleans, La.; Beaumont, Dallas, Houston and San Antonio, Texas. Midwest Region locations: Minneapolis and St. Paul, Minn.; Fargo, N.D.; Sioux Falls, S.D. Central Region locations: Chicago, Marion and Pontiac, Ill.; Davenport and Des Moines, Iowa; Brookfield and Milwaukee, Wis. Eastern Region locations: Jacksonville, Miami and Tampa, Fla.; Atlanta and Macon, Ga.; Pittsburgh, Pa.; Memphis and Nashville, Tenn. Northeast Region locations: New Haven, Conn.; Boston and Somerville, Mass.; New York, N.Y.; Cleveland, Ohio. The BANK & CREDIT UNION GROUP includes FIserv sectors and business units that provide service bureau processing, in-house software systems and strategic outsourcing for national and international bank, mortgage bank and credit union clients. The Bank & Credit Union Group includes the following: Bank Services Sector with business units in Covina and Fresno, Calif.; Orlando, Fla.; Honolulu, Hawaii; Pittsburgh, Pa.; Spokane, Wash.; and international business locations in London, England, and Singapore. Computer Services Sector with business units in Arlington Heights, Ill.; Oklahoma City, Okla.; and a major computer utility in Philadelphia, Pa. Credit Union Sector with business units in Titusville, Fla.; Chicago, Ill.; Flint and Troy, Mich.; Minneapolis, Minn.; and Corvallis, Ore. Additional business units within the Bank & Credit Union Group include Data-Link Systems, serving mortgage banks; Government Services & Specialized Outsourcing; and FIserv EFT (electronic funds transfer services). The INDUSTRY PRODUCTS & SERVICES GROUP includes all FIserv products 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 Cadre, Inc. disaster recovery services (Hartford, Conn.); Communications Design marketing services (Sacramento, Calif.); DataPro Card Services (Indianapolis, Ind.); FIserv Forms & Graphics (Seattle, Wash.); FIserv Human Resource Information Services (Melville, N.Y.); FIserv Image Integration Technology (Maitland, Fla.); National Embossing Company card services (Houston, Texas); RECOM Associates, Inc. network consulting (Tampa, Fla.); and Sendero Corporation asset/liability management and decision support systems (Scottsdale, Ariz.). FIRST TRUST CORPORATION, a FIserv subsidiary company based in Denver, Colo., provides specialized account processing, administration and trusteeship of self-directed IRAs, business retirement plans and custodial accounts. Founded in 1962, the First Trust organization administers more than 290,000 self-directed retirement plans, with an asset value of over $12.56 billion. 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; the distinctions among financial services traditionally offered by savings and loan associations, banks and credit unions are narrowing; and financial institutions continue to diversify and to consolidate, some under the auspices of the Resolution Trust Corporation (RTC), the Federal Deposit Insurance Corporation (FDIC) and the Credit Union National Association (CUNA). Management believes that although federally-mandated consolidations 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. Additionally, there are new entrants to the once limited financial services industry, which open new markets for FIserv services. To stay competitive in this changing marketplace, financial institutions are finding they must 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 of transactions and types of accounts has 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 within the United States. Moreover, FIserv expects that the industry will continue to require significant commitments of capital and human resources to the data processing function, to require application of more specialized computer 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 maintained their own data processing ability have outsourced their data processing requirements by contracting with third-party processors, such as FIserv, to reduce costs and enhance their products and services. Outsourcing can involve the utilization of service bureaus, facilities management or resource management. 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 strategic acquisitions. ACQUISITION HISTORY
Founded Acquired Business Service - - - - - ------- -------- -------- ------- 1964 July 1984 First Data Processing, Milwaukee, Wis. Data processing 1971 July 1984 Sunshine State Systems, Tampa, Fla. Data processing 1966 Nov. 1984 Central Processing Corp., San Antonio, Texas Data processing 1982 Oct. 1985 Sendero Corporation, Scottsdale, Ariz. Asset/liability management 1962 Oct. 1985 First Trust Corporation, Denver, Colo. DP for retirement planning 1962 Oct. 1985 First Retirement Marketing, Denver Retirement planning services 1973 Jan. 1986 On-Line, Inc., Seattle, Wash. Data processing, forms 1966 May 1986 First City Financial Systems, Inc., Beaumont, Texas Data processing 1962 Feb. 1987 Pamico, Inc., Milwaukee, Wis. Specialized forms 1975 Apr. 1987 Midwest Commerce Data Corp., Elkhart, Ind. Data processing 1969 Apr. 1987 Fidelity Financial Services, Inc., Spokane, Wash. Data processing 1965 Oct. 1987 Capbanc Computer Corporation, Baton Rouge, La. Data processing 1971 Feb. 1988 Minnesota On-Line Inc., Minneapolis, Minn. Data processing 1965 May 1988 Citizens Financial Corporation, Cleveland, Ohio Data processing 1980 May 1988 ZFC Electronic Data Services, Inc., Bowling Green, Ky. Data processing 1969 June 1988 GESCO Corporation, Fresno, Calif. Data processing 1967 Nov. 1988 Valley Federal Data Services, Los Angeles, Calif. Data processing 1982 May 1989 Triad Software Network, Ltd., Chicago, Ill. Data processing 1969 Aug. 1989 Northeast Datacom, Inc., New Haven, Conn. Data processing 1978 Feb. 1990 Financial Accounting Services Inc., Pittsburgh, Pa. Data processing 1974 June 1990 Accurate Data On Line, Inc., Titusville, Fla. Data processing 1982 June 1990 GTE EFT Services Money Network, Fresno, Calif. EFT networks 1968 July 1990 First Interstate Management, Milwaukee, Wis. Data processing 1982 Oct. 1990 GTE ATM Networks, Fresno, Calif. EFT networks 1867 Nov. 1990 Boston Safe Deposit & Trust Co. IP Services, Boston Item processing 1968 Dec. 1990 First Bank, N.A. IP Services, Milwaukee, Wis. Item processing 1979 Apr. 1991 Citicorp Information Resources, Inc., Stamford, Conn. Data processing 1980 Apr. 1991 BMS Processing, Inc., Randolph, Mass. Item processing 1979 May 1991 FHLB of Dallas IP Services, Dallas, Texas Item processing 1980 Nov. 1991 FHLB of Chicago IP Services, Chicago, Ill. Item processing 1977 Feb. 1992 Data Holdings, Inc., Indianapolis, Ind. Automated card services 1980 Feb. 1992 BMS On-Line Services, Inc. (assets), Randolph, Mass. Data processing 1982 Mar. 1992 First American Information Services, St. Paul, Minn. Data processing 1981 July 1992 Cadre, Inc., Avon, Conn. Disaster recovery 1992 July 1992 Performance Analysis, Inc., Cincinnati, Ohio Asset/liability management 1986 Oct. 1992 Chase Manhattan Bank, REALM Software, New York Asset/liability management 1984 Dec. 1992 Dakota Data Processing, Inc., Fargo, N.D. Data processing 1983 Dec. 1992 Banking Group Services, Inc., Somerville, Mass. Item processing 1968 Feb. 1993 Basis Information Technologies, Atlanta, Ga. Data processing, EFT 1986 Mar. 1993 IPC Services Corporation (assets), Denver, Colo. Item processing 1973 May 1993 EDS Item Processing Contracts, Seattle, Wash. Item processing 1982 June 1993 Datatronix Financial Services, San Diego, Calif. Item processing 1966 July 1993 Data Line Service, Covina, Calif. Data processing 1978 Nov. 1993 Financial Processors, Inc., Miami, Fla. Data processing 1974 Nov. 1993 Financial Data Systems, Jacksonville, Fla. Item processing 1961 Nov. 1993 Financial Institutions Outsourcing, Pittsburgh, Penn. Data processing 1972 Nov. 1993 Data-Link Systems, South Bend, Ind. Data processing 1985 Apr. 1994 National Embossing Company, Inc., Houston, Texas 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, Fla. Imaging technology 1987 Dec. 1994 RECOM Associates, Inc., Tampa, Fla. Network integration
DATA PROCESSING SERVICES FIserv provides clients with the opportunity to select among integrated software systems for account, item and financial transaction processing and record keeping as a service bureau, an in-house solution or a resource/facilities management alternative. These systems include: management, customer and regulatory reporting; integrated executive information systems and related data base management products for business operations, analysis, marketing and accounting; specialized item processing; and electronic funds transfer services. FIserv provides clients with a variety of additional industry-related products and services through its subsidiary organizations. These include account processing, administration and trusteeship of self-directed individual and business retirement plans; educational services and micro computer solutions for measuring and managing interest rate risks; marketing communications and graphic design services; design, inventory and delivery of a wide range of industry specific business forms; plastic card products and services; and disaster recovery services. The Company's ongoing data processing support products and services for client institutions include: Relationship Banking Capabilities Customized Database Extracts and Reports Loan and Deposit Products Remote Printing and Optical Disk System Multi-branch and Multi-company ATM, Point of Sale and ACH Financial Financial Accounting Accounting Transaction Processing Item Processing and Image Integration Management Information System Installation Services Platform and Teller Automation Ongoing Client Services Customer Profitability Research and Development Mortgage Banking Disaster Recovery Services and Accounts Payable Contingency Planning Asset/Liability Management Regulatory Compliance Investment Accounting and Analysis Multiple Terminal Support Safe Deposit Box Accounting Plastic Card Products and Services FIserv data processing services are designed specifically for the various international, national, regional or local business and marketing environments of banks, credit unions, savings institutions and other financial intermediaries. COMPREHENSIVE SERVICE DIMENSION FIserv focuses on providing financial data processing systems and related information management services and products to banks, credit unions, mortgage firms, savings institutions and other financial intermediaries. This emphasis allows the Company to concentrate its advanced technology, industry experience, research and development on creating and supporting solutions uniquely designed for financial institutions and other clients. Based on 1993 market surveys of total clients served, FIserv is the nation's leading independent data processing provider for banks, savings institutions and credit unions with assets over $25 million. FIserv data processing solutions are delivered based on the client's preferred operating environment: data center service bureau systems and support; in-house software systems development and support; facilities and resource management services; and strategic alliances with specialized technology providers. Complementary products and services offered include: item processing and imaging technology services; backroom automation software systems; electronic funds transfer services; plastic cards and related card management services; rate risk management systems; self- directed retirement plan processing; network installation and integration services; human resource outsourcing; disaster recovery; design and production of business forms and marketing literature; and delivery and support of leading third-party software and hardware products. FIserv provides traditional service bureau capabilities on multiple hardware platforms, offering clients the flexibility of online systems compatible with their preferred equipment and hardware. Through cooperative regional and national R&D efforts among FIserv centers, the Company continually enhances its existing products and offers innovative new services to help clients respond to the unique requirements of their customers. For those clients desiring an in-house solution, FIserv has multiple, advanced in-house software systems. The proprietary software is easy to use, and gives institutions the flexibility to design and implement their own products, services and reporting systems--depending on their specific needs. Additional full-service solutions include facilities management (managing all data processing functions with FIserv personnel at the client's site), resource management (operating a client's data processing software at a FIserv data center) and government services (specialized joint ventures and servicing operations for the Resolution Trust Corporation and other government agencies). Worldwide, FIserv offers a comprehensive software system designed for both international and domestic financial institutions. This fully integrated, in- house retail banking system features multi-currency and multi-lingual capabilities. FIserv is a leading provider of data processing services for mortgage banks, ranking second in the industry. These mortgage software systems offer online, real-time loan origination servicing and secondary marketing solutions that can be tailored to meet an organization's specific goals. FIserv is a leading provider of item processing services and check imaging technology, with the nation's largest check processing client base. The Company offers a full line of item processing services, including inclearing, bulk filing, account reconciliation, transit and lockbox services. For institutions seeking check imaging services, FIserv offers image and document management systems that provide business solutions for the acquisition, management, storage and presentation of check and document images. FIserv offers financial institutions PC-based productivity tools that deliver software, service and support to meet their backroom automation and customer service needs. These systems are designed to streamline backroom operations by reducing time, keystrokes and labor. FIserv is among the nation's leading third-party providers of electronic funds transfer (EFT) services. The Company offers transaction authorization, automated teller machine (ATM) driving, ATM and point-of-sale (POS) network gateway access. In conjunction with these EFT services, FIserv supports a full line of ATM, POS, debit and credit card programs. Included are design, embossing and encoding of plastic cards and forms, card personalization, data processing for file creation and maintenance, and card/forms processing. A leader in asset/liability management, FIserv is a worldwide provider of integrated decision-support systems for financial managers. These solutions include software for data management, profitability measurement, funds transfer pricing and executive information. Consulting services further enhance and expedite the total financial management process. FIserv also provides office automation and communications network integration services to the financial industry and other clients. These services include hardware and software installation, maintenance, on-site education and support for financial institution clients, as well as clients of other leading information technology providers. FIserv offers a full range of human resource, payroll and benefit services to the financial industry and large national and international organizations. Through a specialized computer facility in Connecticut, FIserv provides a complete range of business back-up and disaster recovery services. FIserv offers business forms design, production and distribution services, combining expertise in business forms, printing and print design with an in- depth knowledge of the financial industry's requirements. Other services include print communications needs analysis and concept development, design, project management and print production for annual reports, company literature and other business communications. First Trust Corporation, a specialized provider of account processing, administration and trusteeship of self-directed individual and business retirement plans, is the largest provider of its kind in the nation. Based in Denver, Colo., this FIserv company specifically assists financial representatives and other financial service intermediaries in managing information through its 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- up 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 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, AT&T Global Information Solutions, ISSC(IBM) 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 data 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 competes 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 a trust company under Colorado law, First Trust is subject to the regulations of the Colorado Division of Banking. First Trust historically has complied with such regulations and, although no assurance can be given, the Company believes First 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 6,195 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 62 cities: Phoenix and Scottsdale, Arizona; Little Rock, Arkansas; Concord, Covina, Fresno, Fullerton, Los Angeles, Sacramento, San Diego and San Francisco, California; Denver, Colorado; Stamford, Hartford and New Haven, Connecticut; Jacksonville, Orlando, Maitland, Miami, Tampa and Titusville, Florida; Atlanta and Macon, Georgia; Honolulu, Hawaii; Arlington Heights, Chicago, Marion and Pontiac, Illinois; Indianapolis and South Bend, Indiana; Davenport and Des Moines, Iowa; Bowling Green, Kentucky; New Orleans, Louisiana; Boston and Somerville, Massachusetts; Flint and Troy, Michigan; Minneapolis and St. Paul, Minnesota; Melville and New York, New York; Fargo, North Dakota; Cleveland, Ohio; Oklahoma City, Oklahoma; Corvallis and Portland, Oregon; Philadelphia and Pittsburgh, Pennsylvania; Sioux Falls, South Dakota; Memphis and Nashville, Tennessee; Beaumont, Dallas, Houston and San Antonio, Texas; Seattle and Spokane, Washington; Brookfield and Milwaukee, Wisconsin. International business centers are located in London, England, and Singapore. The Company owns facilities in Fresno, Hartford, Brookfield, Spokane and Titusville; all other buildings in which centers are located are subject to leases expiring through 1998 and beyond. The Company owns or leases 123 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. ------------------------------ PART II ------------------------------ 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) to 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 28, 1995, and included in this 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, 1994 and 1993 and for each of the three years in the period ending December 31, 1994, together with the report thereon of Deloitte & Touche LLP, dated January 30, 1995, appear on pages 26 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 1994, the Company did not file any reports on Form 8-K. (c) Exhibits: 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 September 30, 1994, 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.) 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. 11. Computation of Shares Used in Computing Earnings per Share. 13. The 1994 Annual Report to Shareholders. 21. List of Subsidiaries of the Registrant. 23. Manually signed Auditors' Report and Consent of Independent Auditors. 28. The Company's definitive proxy statement for the 1995 annual meeting of shareholders to be held on March 30, 1995, to be filed pursuant to Regulation 14A under the Securities and Exchange Act of 1934. 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 28, 1995 FISERV, INC. /S/ GEORGE D. DALTON By ------------------------------- 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 28, 1995. SIGNATURE CAPACITY /S/ GEORGE D. DALTON - - - - - -------------------------------------------- George D. Dalton Chairman of the Board Chief Executive Officer /S/ LESLIE M. MUMA - - - - - -------------------------------------------- Leslie M. Muma President and Director Chief Operating Officer /S/ KENNETH R. JENSEN - - - - - -------------------------------------------- Kenneth R. Jensen Senior Executive Vice President Chief Financial Officer Treasurer and Director /S/ BRUCE K. ANDERSON - - - - - -------------------------------------------- Bruce K. Anderson 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 EX-11 2 COMPUTATION OF SHARES USED IN COMPUTING EPS EXHIBIT 11 COMPUTATION OF SHARES USED IN COMPUTING EARNINGS PER SHARE Year Ended December 31, 1994 1993 1992 ---------------------------------- Primary: Weighted Average Shares Outstanding 39,073,000 37,707,000 33,768,000 Common Stock Equivalents 781,000 867,000 771,000 ---------------------------------- Shares Used 39,854,000 38,574,000 34,539,000 ================================== Fully diluted earnings per share are essentially the same as primary earnings per share for all periods presented. EX-13.1 3 FISERV, INC. AND SUBS STATEMENTS OF INCOME FISERV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1994 1993 1992 REVENUES $563,590,000 $454,692,000 $332,090,000 --------------------------------------- COST OF REVENUES: Salaries, commissions and payroll related costs 275,382,000 217,831,000 166,269,000 Data processing expenses, rentals and telecommunication costs 80,533,000 71,851,000 44,383,000 Other operating expenses 107,234,000 87,813,000 66,288,000 Depreciation and amortization of property and equipment 29,987,000 21,542,000 16,081,000 Amortization of intangible assets 10,846,000 9,098,000 6,589,000 Capitalization of internally generated computer software-net (9,599,000) (7,185,000) (6,757,000) --------------------------------------- Total 494,383,000 400,950,000 292,853,000 --------------------------------------- OPERATING INCOME 69,207,000 53,742,000 39,237,000 Interest expense - net 6,433,000 3,716,000 2,158,000 --------------------------------------- INCOME BEFORE INCOME TAXES 62,774,000 50,026,000 37,079,000 Income tax provision Note 4 25,110,000 19,333,000 14,090,000 --------------------------------------- NET INCOME $37,664,000 $30,693,000 $22,989,000 ======================================= Net income per common and common equivalent share $0.95 $0.80 $0.67 ======================================= Shares used in computing net income per share Note 1 39,854,000 38,574,000 34,539,000 ======================================= See notes to consolidated financial statements. EX-13.2 4 FISERV, INC. AND SUBS BALANCE SHEETS FISERV, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 1993 ASSETS Cash and cash equivalents Note 1 $28,294,000 $35,934,000 Accounts receivable 120,033,000 104,730,000 Prepaid expenses and other assets Note 1 34,391,000 29,838,000 Investment securities Note 1 807,819,000 661,309,000 Other investments 64,777,000 34,831,000 Property and equipment-Net Note 1 113,448,000 96,645,000 Internally generated computer software-Net Note 1 67,820,000 58,020,000 Identifiable intangible assets relating to acquisitions-Net Note 1 34,090,000 33,291,000 Goodwill-Net 147,686,000 127,845,000 -------------------------------- TOTAL $1,418,358,000 $1,182,443,000 ================================ LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $21,440,000 $20,671,000 Accrued expenses 59,126,000 1,468,000 Accrued income taxes 1,851,000 909,000 Deferred revenues 10,836,000 9,466,000 Trust account deposits 809,324,000 663,426,000 Long-term debt Note 3 139,864,000 111,099,000 Other obligations Note 3 2,314,000 2,308,000 Deferred income taxes Note 4 22,800,000 15,400,000 -------------------------------- TOTAL LIABILITIES 1,067,555,000 874,747,000 COMMITMENTS AND CONTINGENCIES NOTE 6 SHAREHOLDERS' EQUITY: Common stock outstanding, 39,157,000 and 38,780,000 shares, respectively 392,000 388,000 Additional paid-in capital 184,574,000 181,049,000 Unrealized gain on investments 11,054,000 9,230,000 Accumulated earnings 154,783,000 117,029,000 -------------------------------- TOTAL SHAREHOLDERS' EQUITY 350,803,000 307,696,000 -------------------------------- TOTAL $1,418,358,000 $1,182,443,000 ================================ See notes to consolidated financial statements. EX-13.3 5 FISERV, INC. AND SUBS STATEMENTS OF CASH FLOWS FISERV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994 1993 1992 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $37,664,000 $30,693,000 $22,989,000 Adjustments to reconcile income to net cash provided by operating activities: Deferred income taxes 12,373,000 11,793,000 5,400,000 Depreciation and amortization of property and equipment 29,987,000 21,542,000 16,081,000 Amortization of intangible assets 10,846,000 9,098,000 6,589,000 Capitalization of internally generated computer software - net (9,599,000) (7,185,000) (6,757,000) ------------------------------------------ 81,271,000 65,941,000 44,302,000 Cash provided (used) by changes in assets and liabilities, net of effects from acquisitions of businesses: Accounts receivable (11,686,000) (13,377,000) (4,693,000) Prepaid expenses and other assets (3,999,000) (8,316,000) (3,159,000) Accounts payable and accrued expenses (4,046,000) (6,599,000) 2,428,000 Deferred revenue (123,000) (54,000) (2,352,000) Accrued income taxes 1,626,000 1,009,000 (476,000) ------------------------------------------ Net cash provided by operating activities 63,043,000 38,604,000 36,050,000 ------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (52,797,000) (28,544,000) (19,130,000) Investments and other assets (26,545,000) (2,002,000) 20,757,000 Payment for acquisition of businesses, net of cash acquired (20,545,000) (113,268,000) (6,162,000) Investment securities (146,635,000) (71,607,000) (126,634,000) ------------------------------------------ Net cash used by investing activities (246,522,000) (215,421,000) (131,169,000) ------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings and other long-term obligations 39,165,000 59,100,000 1,308,000 Repayment of borrowings and other long- term obligations (11,142,000) (1,667,000) (2,513,000) Issuance of common stock 1,918,000 24,036,000 2,807,000 Trust account deposits 145,898,000 73,648,000 126,710,000 ------------------------------------------ Net cash provided by financing activities 175,839,000 155,117,000 128,312,000 ------------------------------------------ Change in cash and cash equivalents (7,640,000) (21,700,000) 33,193,000 Beginning balance 35,934,000 57,634,000 24,441,000 ------------------------------------------ Ending balance $28,294,000 $35,934,000 $57,634,000 ==========================================
See notes to consolidated financial statements. EX-13.4 6 FISERV, INC. AND SUBS STMT OF CHANGES IN EQUITY FISERV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 1994 1993 1992 SHARES ISSUED - 75,000,000 AUTHORIZED: Balance at beginning of year 38,779,770 22,621,946 15,010,304 Sale of common stock 1,403,911 Shares issued under stock plans-net 238,838 201,706 101,862 Shares issued for acquired companies 138,276 2,354,540 Stock split - 3-for-2 12,197,667 7,509,780 -------------------------------------- Balance at end of year 39,156,884 38,779,770 22,621,946 -------------------------------------- COMMON STOCK - PAR VALUE $.01 PER SHARE: Balance at beginning of year $388,000 $226,000 $150,000 Sale of common stock 14,000 Shares issued under stock plans-net 3,000 2,000 1,000 Shares issued for acquired companies 1,000 24,000 Stock split -- 3-for-2 122,000 75,000 -------------------------------------- Balance at end of year 392,000 388,000 226,000 -------------------------------------- CAPITAL IN EXCESS OF PAR VALUE: Balance at beginning of year 181,049,000 105,842,000 103,288,000 Sale of common stock 23,712,000 Shares issued under stock plans-net 2,660,000 324,000 929,000 Income tax reduction arising from the exercise of employee stock options 800,000 1,300,000 1,700,000 Shares issued for acquired companies 65,000 49,993,000 Stock split -- 3-for-2 (122,000) (75,000) -------------------------------------- Balance at end of year 184,574,000 181,049,000 105,842,000 -------------------------------------- UNREALIZED GAIN ON INVESTMENTS 11,054,000 9,230,000 -------------------------------------- ACCUMULATED EARNINGS: Balance at beginning of year 117,029,000 86,405,000 63,648,000 Net income 37,664,000 30,693,000 22,989,000 Cumulative translation adjustment 90,000 (69,000) (232,000) -------------------------------------- Balance at end of year 154,783,000 117,029,000 86,405,000 -------------------------------------- TOTAL SHAREHOLDERS' EQUITY $350,803,000 $307,696,000 $192,473,000 ====================================== See notes to consolidated financial statements. EX-13.5 7 FISERV, INC. AND SUBS NOTES TO FINANCIAL STMTS FISERV, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the years ended December 31, 1994, 1993 and 1992 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 and includes approximately $13,500,000 held by a consolidated subsidiary pursuant to regulatory requirements. PREPAID EXPENSES AND OTHER ASSETS Prepaid expenses and other assets at December 31, 1994 and 1993 include $7,723,000 and $4,597,000, respectively, relating to long-term contracts, the profit from which is being recognized ratably over the periods to be benefited. TRUST ACCOUNT DEPOSITS AND INVESTMENT SECURITIES The Company's trust administration subsidiary accepts money market deposits from its trust customers and invests the funds in securities. Such amounts due trust depositors represent the primary source of funds for the Company's investment securities and amounted to $809,324,000 and $663,426,000 in 1994 and 1993, respectively. The related investment securities comprised the following at December 31, 1994 and 1993: Principal Carrying Amount Value Market Value ---------------------------------------- 1994 U. S. Government and government agency obligations $478,711,000 $478,572,000 $460,452,000 Corporate bonds 51,840,000 51,836,000 51,373,000 Repurchase agreements 226,581,000 226,581,000 226,581,000 Other fixed income obligations 53,050,000 50,830,000 50,590,000 ---------------------------------------- Total $810,182,000 $807,819,000 $788,996,000 ======================================== 1993 U. S. Government and government agency obligations $357,975,000 $363,406,000 $364,778,000 Corporate bonds 36,975,000 37,390,000 37,253,000 Repurchase agreements 179,942,000 179,942,000 179,942,000 Other fixed income obligations 116,225,000 116,118,000 116,420,000 Premium amortization, etc. (863,000) 33,000 ---------------------------------------- Total $691,117,000 695,993,000 $698,426,000 ============= ============== Included in: Cash and cash equivalents 20,904,000 Other investments 13,780,000 ------------- Trust account investments $661,309,000 ============= Substantially all of the investments have contractual maturities of one year or less except for government agency obligations which generally contain provisions for interest rate resets. 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 3 to 40 years: December 31, 1994 1993 -------------------------- Data processing equipment $119,197,000 $92,266,000 Purchased software 31,522,000 20,509,000 Buildings and leasehold improvements 35,326,000 32,635,000 Furniture and equipment 30,494,000 23,357,000 -------------------------- 216,539,000 168,767,000 Less accumulated depreciation and amortization 103,091,000 72,122,000 -------------------------- Total $113,448,000 $96,645,000 ========================== 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, 1994 and 1993, the unamortized portion of internally generated computer software costs amounted to $67,820,000 and $58,020,000, respectively; amortization of such costs charged to expense amounted to $16,655,000, $13,995,000, and $10,487,000 in 1994, 1993 and 1992, respectively. 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: 1994 1993 -------------------------- Computer software acquired $5,565,000 $5,561,000 Non-competition agreements 19,370,000 25,841,000 Contract rights and other 30,150,000 22,880,000 -------------------------- 55,085,000 54,282,000 Less accumulated amortization 20,995,000 20,991,000 -------------------------- $34,090,000 $33,291,000 ========================== Goodwill $157,830,000 $133,963,000 Less accumulated amortization 10,144,000 6,118,000 -------------------------- $147,686,000 $127,845,000 ========================== 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-competition 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 its estimated useful life of 40 years. 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 $21,216,000, $12,286,000, and $10,308,000, net of direct credits to depositors accounts of $17,446,000, $13,216,000, and $16,576,000 in 1994, 1993 and 1992, 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, after giving effect to stock splits. SUPPLEMENTAL CASH FLOW INFORMATION 1994 1993 1992 ----------------------------------- Interest paid $ 8,387,000 $ 5,412,000 $5,003,000 Income taxes paid 10,073,000 6,544,000 7,466,000 Liabilities assumed in acquisitions of businesses 3,416,000 47,000,000 2,243,000 NOTE 2. ACQUISITIONS AND CAPITAL TRANSACTIONS ACQUISITIONS During 1994, 1993 and 1992 the Company completed the following acquisitions:
Date Company Acquired Type of Business Consideration - - - - - ----------------------------------------------------------------------------------------------- 1994: National Embossing Company, Inc. Apr. 19 Automated card services Cash for stock Boatmen's Information Systems May 2 Data processing Cash for assets data processing business Federal Home Loan Bank of Atlanta Aug. 19 Item processing Cash for assets item processing contracts Cincinnati Bell Information Systems Nov. 30 Image and document Cash for assets banking business management services RECOM Associates, Inc. Dec. 30 Network integration services Stock for stock 1993: Tomahawk Holding, Inc. and Feb. 10 Data processing for banks, Cash and stock its wholly-owned subsidiary thrifts and credit unions for stock Basis Information Technologies, Inc. IPC Service Corporation Mar. 2 Item processing Cash for assets EDS item processing May 17 Item processing Cash for assets contracts Datatronix Financial Services Jun. 25 Item processing Stock for stock Data Line Service Company Jul. 13 Data processing for thrifts Cash for stock Financial Processors, Inc. Nov. 8 Data processing for banks Cash for stock and Financial Data Systems Item processing Cash for assets Financial Institution Outsourcing Nov. 30 Data processing for banks Cash for assets and Data-Link Systems, Inc. Mortgage banking services Cash for stock 1992: Data Holdings, Inc. Feb. 10 Automated card services Cash for stock BMS On-Line Services, Inc., Feb. 28 Data processing Cash for assets selected assets First American Information Mar. 2 Data processing and item Cash for stock Services, Inc. processing Cadre, Inc. Jul. 1 Disaster recovery services Cash for stock Performance Analysis, Inc. Jul. 1 Software for banks Cash for stock Chase Manhattan Bank, Oct. 22 Software for banks Cash for assets REALM Software Dakota Data Processing, Inc. Dec. 1 Data processing Cash for stock Banking Group Services, Inc. Dec. 31 Item processing Stock for stock
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 acquisition agreements provide for additional cash payments contingent upon the attainment of specified revenue goals. STOCK PURCHASE AND STOCK OPTION PLANS The Company has a Restricted Stock Purchase Plan, a qualified Incentive Stock Option Plan and a Non- Qualified Stock Option Plan, each of which provide for grants of common stock to employees for a price not less than 100% of the fair value of the shares at the date of grant. There has been no recent activity in the Restricted Stock Purchase Plan. In general, 20% of the option shares awarded under the Incentive and Non-Qualified Stock Option Plans may be purchased annually and expire, generally, five to ten years from the date of the award. Plan activity during 1992, 1993 and 1994, adjusted for 3-for-2 splits effective in May 1993 and June 1992, is summarized as follows: Shares -------------------- Non- Price Incentive Qualified Range -------------------- Outstanding, December 31, 1991 1,750,887 5.04-12.45 Granted 751,747 15.22-16.00 Forfeited (85,392) Exercised (537,126) 5.04-10.37 -------------------- Outstanding, December 31, 1992 1,880,116 5.56-16.00 Granted 589,850 18.50-20.17 Assumed from Datatronix 76,895 66,415 1.63-7.10 Forfeited (32,550) Exercised (23,590) (277,027) 1.63-15.56 -------------------- 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 ==================== Shares exercisable, December 31, 1994 6,253 1,184,876 ==================== Options outstanding include 76,370 and 188,918 shares granted in 1993 and 1994 at $20.17 and $20.00 a share, respectively, under a stock purchase plan requiring exercise within 30 days after a two-year period beginning on the date of grant. NOTE 3. LONG-TERM DEBT AND OTHER OBLIGATIONS The Company has available a $125,000,000 unsecured line of credit and commercial paper facility with a group of banks maturing in 1999 of which $85,568,000 was in use at December 31, 1994 at an average rate of 6.17%. 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, 1994. A facility fee ranging from .175% to .325% per annum is required on the entire bank line regardless of usage. The facility is reduced to $112,500,000 on September 30, 1997 and to $100,000,000 on September 30, 1998. Long-term debt and other obligations outstanding at the respective year-ends comprised the following: December 31, 1994 1993 -------------------------- 9.45% senior notes payable, due 1995-2000 $25,714,000 $30,000,000 9.75% senior notes payable, due 1995-2001 17,500,000 20,000,000 Bank notes and commercial paper 96,650,000 61,099,000 Other obligations 2,314,000 2,308,000 -------------------------- $142,178,000 $113,407,000 ========================== Other obligations relate to balances due under capital leases. Annual principal payments required under the terms of the long-term agreements were as follows at December 31, 1994: Year - - - - - ---------------------- 1995 $10,671,000 1996 9,992,000 1997 8,916,000 1998 7,302,000 1999 95,878,000 Thereafter 9,419,000 ------------ $142,178,000 ============ Interest expense with respect to long-term debt and other obligations amounted to $8,710,000, $5,737,000 and $5,018,000 in 1994, 1993 and 1992, respectively. NOTE 4. INCOME TAXES A reconciliation of recorded income tax expense with income tax computed at the statutory federal tax rates follows: 1994 1993 1992 ------------------------------------ Statutory federal tax rate 35% 35% 34% Tax computed at statutory rate $21,971,000 $17,509,000 $12,607,000 State income taxes net of federal effect 2,600,000 2,489,000 1,483,000 Tax exempt income (470,000) (326,000) (311,000) Other 1,009,000 (339,000) 311,000 ------------------------------------ Recorded income tax expense $25,110,000 $19,333,000 $14,090,000 ==================================== The provision for income taxes consisted of the following: 1994 1993 1992 ------------------------------------ Currently payable $11,937,000 $6,240,000 $6,990,000 Tax reduction credited to capital in excess of par value 800,000 1,300,000 1,700,000 Deferred 12,373,000 11,793,000 5,400,000 ------------------------------------ Total $25,110,000 $19,333,000 $14,090,000 ==================================== The approximate tax effects of temporary differences at December 31, 1994 and 1993 were as follows: 1994 1993 ---------------------------- Allowance for doubtful accounts $ 1,571,000 $ 595,000 Accrued expenses not currently deductible 11,392,000 10,362,000 Other 1,931,000 2,958,000 Net operating loss and tax credit carryforwards 5,901,000 4,597,000 Deferred costs (4,911,000) (2,762,000) Internally generated capitalized software (27,120,000) (22,064,000) Excess of tax over book depreciation and amortization (4,069,000) (2,933,000) Unrealized gain on investments (7,495,000) (6,153,000) ---------------------------- Total $(22,800,000) $(15,400,000) ============================ The net operating loss and tax credit carryforwards have expiration dates ranging from 1995 through 2009. 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 $8,900,000, $6,346,000 and $5,381,000 in 1994, 1993 and 1992, respectively. NOTE 6. LEASES, OTHER COMMITMENTS AND CONTINGENCIES LEASES Future minimum rental payments, as of December 31, 1994, on various operating leases for office facilities and equipment were due as follows: 1995 $34,779,000 1996 29,138,000 1997 22,351,000 1998 17,402,000 1999 11,043,000 Thereafter 14,990,000 ------------ Total minimum payments $129,703,000 ============ Rent expense applicable to all operating leases was approximately $42,586,000, $45,224,000 and $33,859,000 in 1994, 1993 and 1992, respectively. OTHER COMMITMENTS AND CONTINGENCIES The Company's trust administration subsidiary had fiduciary responsibility for the administration of approximately $12.6 billion in trust funds as of December 31, 1994. 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. EX-13.6 8 FISERV, INC. AND SUBS MD&A 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.
Percentage of Revenues Period to Period Percentage Year Ended December 31, Increase (Decrease) 1994 1993 1992 1994 VS. 1993 1993 vs. 1992 ------------------------------------------------------ Revenues 100.0% 100.0% 100.0% 23.9% 36.9% ------------------------ Cost of revenues: Salaries, commissions and payroll related costs 48.9 47.9 50.0 26.4 31.0 Data processing expenses, rentals and telecommunications costs 14.3 15.8 13.4 12.1 61.9 Other operating expenses 19.0 19.3 20.0 22.1 32.5 Depreciation and amortization of property and equipment 5.3 4.8 4.8 39.2 34.0 Amortization of intangible assets 1.9 2.0 2.0 19.2 38.1 Capitalization of internally generated computer software - net (1.7) (1.6) (2.0) 33.6 6.3 ------------------------ Total cost of revenues 87.7 88.2 88.2 23.3 36.9 ------------------------ Operating income 12.3% 11.8% 11.8% 28.8 37.0 ======================== Income before income taxes 11.1% 11.0% 11.2% 25.5 34.9 ======================== Net income 6.7% 6.8% 6.9% 22.7 33.5 ========================
Revenues increased $108,898,000 in 1994 and $122,602,000 in 1993. Approximately 80% of the 1994 growth and 90% of the 1993 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 addition of new clients, growth in the transaction volume experienced by existing clients and price increases. As a percentage of revenues, cost of revenues decreased .5% from 1993 to 1994 and remained relatively constant in 1993. 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 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 forty years. Amortization of these costs increased $1,748,000 from 1993 to 1994 and $2,509 ,000 from 1992 to 1993. As a percentage of revenues, these costs have remained relatively constant from 1992 to 1994. Capitalization of internally generated computer software is stated net of amortization and increased in amount in both 1993 and 1994 but decreased as a percentage of revenues in 1993 and increased slightly in 1994. The 1994 increase resulted from special software development projects which are expected to be substantially completed by mid-1995. Operating income increased $15,465,000 in 1994 and $14,505,000 in 1993. As a percentage of revenues, operating income increased .5% in 1994 and remained constant in 1993. The effective income tax rate was 40% in 1994, 39% in 1993 and 38% in 1992. The trend to higher income tax rates results from net increases in non-deductible permanent differences and an increase in 1993 in the federal income tax rate. The effective income tax rate for 1995 is expected to be 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 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, while reducing the potential loss of clients due to this program. LIQUIDITY AND CAPITAL RESOURCES The following table summarizes (in thousands of dollars) the Company's primary sources of funds: Year Ended December 31, 1994 1993 1992 --------------------------- Cash provided by operating activities $ 63,043 $38,604 $36,050 Issuance of common stock-net 1,918 24,036 2,807 Decrease (increase) in other investments (26,545) (2,002) 20,757 Increase (decrease) in net borrowings 28,023 57,433 (1,205) --------------------------- $ 66,439 $118,071 $58,409 --------------------------- 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 1994 increase in capital expenditures was abnormally high because of the need to provide a new facility and equipment for Financial Institution Outsourcing, acquired in November 1993. 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. EX-13.7 9 FISERV, INC. AND SUBS SELECTED FINANCIAL DATA SELECTED FINANCIAL DATA The following data (in thousands, except per share 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. Year Ended December 31, 1994 1993 1992 1991 1990 ---------------------------------------------------- Total assets $1,418,358 $1,182,443 $898,230 $740,107 $565,191 Long-term debt and other long-term obligations 142,178 113,407 53,240 53,114 37,974 Revenues 563,590 454,692 332,090 281,333 183,180 Operating income 69,207 53,742 39,237 31,651 23,402 Income before income taxes 62,774 50,026 37,079 28,651 21,491 Income taxes 25,110 19,333 14,090 10,314 7,737 Net income 37,664 30,693 22,989 18,337 13,754 ---------------------------------------------------- Net income per share - Note $0.95 $0.80 $0.67 $0.56 $0.47 ==================================================== Note: Net income per share has been restated to recognize 3-for-2 stock splits effective in May 1993, June 1992 and July 1991. EX-13.8 10 FISERV, INC. AND SUBS QUARTERLY FINANCIAL INFORMAT QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (Amounts in thousands, except per share data) Quarters 1994 First Second Third Fourth Total ----------------------------------------------- REVENUES $135,896 $135,793 $139,431 $152,470 $563,590 ----------------------------------------------- COST OF REVENUES 119,970 118,676 121,845 133,892 494,383 ----------------------------------------------- OPERATING INCOME 15,926 17,117 17,586 18,578 69,207 ----------------------------------------------- INCOME BEFORE INCOME TAXES 14,480 15,615 15,903 16,776 62,774 ----------------------------------------------- INCOME TAXES 5,792 6,246 6,361 6,711 25,110 ----------------------------------------------- NET INCOME $8,688 $9,369 $9,542 $10,065 $37,664 ----------------------------------------------- NET INCOME PER SHARE $0.22 $0.24 $0.24 $0.25 $0.95 =============================================== 1993 Revenues $99,723 $111,180 $116,439 $127,350 $454,692 ----------------------------------------------- Cost of revenues 88,232 97,848 102,364 112,506 400,950 ----------------------------------------------- Operating income 11,491 13,332 14,075 14,844 53,742 ----------------------------------------------- Income before income taxes 10,624 12,356 13,230 13,816 50,026 ----------------------------------------------- Income taxes 3,834 4,695 5,292 5,512 19,333 ----------------------------------------------- Net income $6,790 $7,661 $7,938 $8,304 $30,693 ----------------------------------------------- Net income per share $0.19 $0.20 $0.20 $0.21 $0.80 =============================================== 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. 1994 1993 - - - - - ---------------------------------------------------------- Quarter Ended HIGH LOW High Low - - - - - ---------------------------------------------------------- March 31 23 1/2 18 1/2 21 3/8 17 5/8 June 30 22 1/4 20 20 1/8 17 3/8 September 30 22 3/4 18 3/4 21 3/4 19 December 31 23 1/2 19 1/4 23 3/4 19 1/4 At December 31, 1994, the Company's common stock was held by approximately 12,000 shareholders of record or through nominee or street name accounts with brokers. The closing sale price for the Company's stock on January 27, 1995 was $21.75 per share. The Company's present policy is to retain earnings to support future business opportunities, rather than to pay dividends. EX-13.9 11 FISERV, INC. AND SUBS MGT'S STMT OF RESPONSIBILITY MANAGEMENT'S STATEMENT OF RESPONSIBILITY The management of FIserv, Inc. assumes responsibility for the integrity and objectivity of the information appearing in the 1994 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. GEORGE D. DALTON Chairman and Chief Executive Officer EX-21 12 FISERV, INC. AND SUBS LIST OF SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT STATE OF NAME UNDER WHICH SUBSIDIARY DOES BUSINESS INCORPORATION Accurate Data On-line Corp. Florida Aspen Investment Alliance, Inc. Colorado Cadre, Inc. Connecticut Data Link Systems, Inc. Indiana FIserv Atlanta, Inc. Georgia FIserv Basis, Inc. Georgia FIserv Boston, Inc. Massachusetts FIserv CIR, Inc. Delaware Citizens Financial Corporation Ohio d/b/a FIserv Cleveland, Inc. FIserv Data Pro Card Services, Inc. Indiana FIserv Dayton, Inc. Delaware FIserv Des Moines, Inc. Iowa American Data Services, Inc. Oregon d/b/a FIserv EFT, Inc. FIserv Financial Systems, Inc. Texas FIserv Financial Systems of Florida, Inc. Florida FIserv Fresno, Inc. California FIserv Government Services, Inc. Delaware FIserv Joint Venture, Inc. Delaware FIserv Minneapolis, Inc. Minnesota FIserv New Haven, Inc. Connecticut FIserv Pittsburgh, Inc. Pennsylvania FIserv St. Paul, Inc. Minnesota FIserv San Diego, Inc. California FIserv Seattle, Inc. Washington FIserv Spokane, Inc. Washington FIserv Tampa, Inc. Florida FIserv (UK), Ltd. United Kingdom FIserv (ASPAC) Pte., Ltd. Singapore First Retirement Marketing, Inc. Colorado First Trust Corporation Colorado Performance Analysis, Inc. Ohio National Embossing Company Texas Sendero Corporation Arizona Sendero (ASPAC) Pte., Ltd. Singapore Summit Information Systems Corp. Oregon The Affinity Group, Inc. Colorado EX-23.1 13 FISERV, INC. AND SUBS INDEPENDENT AUDITORS' REPORT 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, 1994 and 1993 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1994. 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, 1994 and 1993 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Deloitte & Touche LLP Milwaukee, Wisconsin January 30,1995 EX-23.2 14 FISERV, INC. AND SUBS INDEPENDNT AUDITORS' CONSENT INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 33-61342 and No. 33-62870 of FIserv, Inc. on Forms S-8 of our report dated January 30, 1995, incorporated by reference in the Annual Report on Form 10-K of FIserv, Inc. and subsidiaries for the year ended December 31, 1994. DELOITTE & TOUCHE LLP Milwaukee, Wisconsin February 28, 1995 EX-27 15 FISERV, INC AND SUBS 1994 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1994 DEC-31-1994 28,294 807,819 120,033 0 0 990,537 216,539 103,091 1,418,358 902,577 0 392 0 0 350,411 1,418,358 0 563,590 0 493,136 1,247 0 6,433 62,774 25,110 37,664 0 0 0 37,664 .95 .95
-----END PRIVACY-ENHANCED MESSAGE-----