SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended March 31, 1996 Commission file number 0-14948 FISERV, INC. _____________________________________________________ (Exact name of Registrant as specified in its charter) WISCONSIN 39-1506125 _______________________________ __________________ (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 255 FISERV DRIVE, BROOKFIELD, WI. 53045 _______________________________________ _________ (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (414) 879 5000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) At March 31, 1996, 44,963,000 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 Month Periods Ended March 31, 1996 and 1995 Three Months Ended March 31, 1996 1995 ___________ ___________ (In thousands except per share amounts) Revenues $194,710 $157,179 ----------- ----------- Cost of revenues: Salaries, commissions and payroll related costs 90,692 75,220 Data processing expenses, rentals and telecommunication costs 24,274 22,617 Other operating expenses 34,409 27,992 Depreciation and amortization of property and equipment 10,309 9,113 Amortization of intangible assets 5,317 2,995 Capitalization of internally generated computer software (796) (1,649) ----------- ----------- Total cost of revenues 164,205 136,288 ----------- ----------- Operating income 30,505 20,891 Interest expense-net 5,655 1,837 ----------- ----------- Income before income taxes 24,850 19,054 Income tax provision 10,189 7,813 ----------- ----------- Net income $14,661 $11,241 =========== =========== Net income per common and common equivalent share $0.32 $0.27 =========== =========== Shares used in computing net income per share 45,919 40,943 =========== =========== See notes to consolidated financial statements. 2 FISERV, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, 1996 1995 ______________ ______________ (In thousands) ASSETS Cash and cash equivalents $48,893 $59,743 Accounts receivable 156,809 154,628 Prepaid expenses and other assets 66,903 63,893 Due on sale of securities 97,446 Trust account investments 1,067,112 834,286 Other investments 54,573 55,748 Deferred income taxes 33,755 39,527 Property and equipment-net 148,236 148,343 Internally generated computer 75,636 73,863 software-net Identifiable intangible assets relating to acquisitions-net 60,963 57,270 Goodwill-net 291,449 300,552 -------------- -------------- Total $2,004,329 $1,885,299 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $38,875 $43,948 Accrued expenses 52,763 59,614 Accrued income taxes 3,626 6,116 Deferred revenues 44,597 40,754 Trust account deposits 1,050,912 917,189 Long-term debt 362,657 381,361 Other long-term obligations 1,650 2,055 -------------- -------------- Total liabilities 1,555,080 1,451,037 -------------- -------------- Stockholders' equity: Common stock outstanding, 44,963,000 and 44,887,000 shares, respectively 450 449 Additional paid-in capital 316,142 315,800 Unrealized gain on investments 15,400 15,268 Accumulated earnings 117,257 102,745 -------------- -------------- Total stockholders' equity 449,249 434,262 -------------- -------------- Total $2,004,329 $1,885,299 ============== ============== See notes to consolidated financial statements. 3 FISERV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the Three-Month Periods Ended March 31, 1996 and 1995 Three Months Ended March 31, 1996 1995 _____________________ (In thousands) Cash flows from operating activities: Net income $14,661 $11,241 Adjustments to reconcile income to net cash provided by operating activities: Deferred income taxes 4,581 4,073 Depreciation and amortization of property and equipment 10,309 9,362 Amortization of intangible assets 5,317 2,746 Capitalization of internally generated computer software-net (796) (1,649) --------- --------- 34,072 25,773 Cash provided (used) by changes in assets and liabilities, net of effects from acquisitions of businesses: Accounts receivable (2,116) 317 Prepaid expenses and other assets (3,114) (7,413) Accounts payable and accrued expenses (12,841) (13,024) Deferred revenue 3,559 834 Income taxes payable (1,338) 1,079 --------- --------- Net cash provided by operating activities 18,222 7,566 --------- --------- Cash flows from investing activities: Capital expenditures (9,525) (42,905) Investments and other assets 1,175 (10,849) Payment for acquisition of businesses (484) (6,699) Trust account investments (135,107) (154,016) --------- --------- Net cash used by investing activities (143,941) (214,469) --------- --------- Cash flows from financing activities: Borrowings and other long-term obligations-net (19,275) 13,122 Issuance of common stock 423 2,448 Trust account deposits 133,721 155,102 --------- --------- Net cash provided by financing activities 114,869 170,672 --------- --------- Change in cash (10,850) (36,231) Beginning balance 59,743 36,349 --------- --------- Ending balance $48,893 $118 ========= ========= See notes to consolidated financial statements. 4 Fiserv, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS 1. Principles of Consolidation The consolidated balance sheet as of March 31, 1996, and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 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 March 31, 1996 1995 ___________________ (In thousands) Weighted average number of common shares outstanding 44,944 40,129 Shares issuable upon exercise of options reduced by the number of shares which could have been purchased with the proceeds of such exercise 975 814 ------- ------- Shares used 45,919 40,943 ------- ------- Income per common and common equivalent share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the periods. 3. Accounting for Income Taxes Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating and tax credit carryforwards. Significant components of the Company's net deferred tax liability as of March 31, 1996 and December 31,1995 are as follows: March, 31 December 31, 1996 1995 ______________ ______________ Allowance for doubtful accounts $2,319,000 $2,319,000 Accrued expenses not currently deductible 6,323,000 7,769,000 Deferred revenue 9,122,000 9,122,000 Other 1,058,000 1,728,000 Net operating loss and credit carryforwards 5,794,000 6,739,000 Purchased incomplete software technology 65,152,000 66,305,000 Deferred costs (9,967,000) (9,143,000) Internally generated capitalized software (31,010,000) (30,283,000) Excess of tax over book depreciation and amortization (4,335,000) (4,419,000) Unrealized gain on investments (10,701,000) (10,610,000) ------------- ------------- Total $33,755,000 $39,527,000 ============= ============= 4. Supplemental Cash Flow Information Quarter Ended March 31, 1996 1995 ____________________ (In thousands) Income taxes paid $6,729 $1,379 Interest paid 4,012 1,690 Liabilities assumed in acquisitions of businesses 1,236 2,639 ____________________ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table sets forth, for the periods indicated, the results of operations as a percentage of revenues represented by certain income and expense items and the percentage change in those items. Three Months Ended March 31, Percentage 1996 1995 Increase ____________________ Percent of Revenues (Decrease) Revenues 100.00% 100.00% 23.88% ------- ------- Salaries and related costs 46.58 47.86 20.57 Data processing costs 12.47 14.39 7.33 Other operating expenses 17.67 17.81 22.92 Depreciation and amortization 5.29 5.80 13.12 Amortization of intangible assets 2.73 1.91 77.53 Capitalization of software-net (0.41) (1.05) (51.73) ------- ------- Total cost of revenues 84.33 86.72 20.48 ------- ------- Operating income 15.67 13.28 46.02 ======= ======= REVENUES Revenues increased 23.9% from $157.2 million in the first quarter of 1995 to $194.7 in the current first quarter. Approximately 70% of this growth resulted from the inclusion of revenues from the date of purchase of acquired companies and approximately 30% 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 20.5% from $136.3 million in the first quarter of 1995 to $164.2 million in the current first quarter. Salaries, data processing, other operating expenses and depreciation and amortization all increased at a rate that was lower than the rate of increase for revenues. Amortization of intangible assets increased at a disproportionate rate due to the intangible assets recorded in the acquisition of Information Technology, Inc. Capitalization of software decreased as a percentage of revenue, a trend which is expected to continue as the amortization of such software begins to approximate the capitalizable portion of software development costs. OPERATING INCOME Operating income increased 46% from $20.9 million in the first quarter of 1995 to $30.5 million in the current first quarter. As a percentage of revenues, operating income improved 2.4% in the first quarter of 1996 as compared to the prior year period. NET INTEREST EXPENSE As a result of acquisitions since the first quarter of 1995, which were partially funded through borrowing, net interest expense increased from $1.8 million in the first quarter of 1995 to $5.7 million in the current first quarter. 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 30% from $11.2 million in the first quarter of 1995 to $14.7 million in the first quarter of 1996, and net income per share increased 19% from $.27 per share in the first quarter of 1995 to $.32 in the corresponding period of 1996. LIQUIDITY AND CAPITAL RESOURCES During the three months ended March 31, 1996, cash and cash equivalents decreased $10.9 million comprising primarily $18.2 million net cash provided from operating activities and $.4 million from the sale of common stock offset by $9.5 million capital expenditures, $.5 million for acquisition of businesses, $1.2 million net increase in investments and $19.3 million net decrease in long- term debt. Long-term obligations amounted to $364.3 million at March 31, 1996. The majority of this debt comprises $126.4 million senior notes due 1996 to 2005 and $223.0 million advanced under a $300 million unsecured line of credit and commercial paper facility expiring May 17, 2000. A facility fee ranging from .175% to .325% per annum is required on the entire bank line regardless of usage. The Company has historically applied a significant portion of its cash flow from operating activities together with proceeds of its common stock offerings and long-term borrowings to acquisitions. 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. 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 None. 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 April 23, 1996 by /S/ EDWARD P. ALBERTS _____________________ EDWARD P. ALBERTS Senior Vice President, Finance and Controller