EXHIBIT 13
1999 ANNUAL REPORT
FISERV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Year ended December 31, 1999 1998 1997
-----------------------------------------------------
REVENUES $1,407,545 $1,233,670 $974,432
-----------------------------------------------------
COST OF REVENUES:
Salaries, commissions and payroll
related costs 677,226 573,187 454,850
Data processing expenses, rentals and
telecommunication costs 111,163 119,205 100,601
Other operating expenses 272,616 259,126 189,982
Depreciation and amortization of
property and equipment 63,713 60,697 49,119
Amortization of intangible assets 22,600 15,754 14,067
Amortization (capitalization) of internally
generated computer software-net 7,142 (3,938) 36
-----------------------------------------------------
TOTAL COST OF REVENUES 1,154,460 1,024,031 808,655
-----------------------------------------------------
OPERATING INCOME 253,085 209,639 165,777
Interest expense - net 19,410 15,955 11,878
-----------------------------------------------------
INCOME BEFORE INCOME TAXES 233,675 193,684 153,899
Income tax provision 95,807 79,410 63,099
-----------------------------------------------------
NET INCOME $ 137,868 $ 114,274 $ 90,800
=====================================================
NET INCOME PER SHARE:
Basic $1.12 $0.93 $0.78
=====================================================
Diluted $1.09 $0.90 $0.75
=====================================================
SHARES USED IN COMPUTING NET INCOME
PER SHARE:
Basic 123,143 122,873 117,021
=====================================================
Diluted 126,679 127,154 120,438
=====================================================
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, 1999 1998
----------------- -----------------
ASSETS
Cash and cash equivalents $ 80,554 $ 71,558
Accounts receivable - net 235,350 246,851
Securities processing receivables 2,196,068 1,402,650
Prepaid expenses and other assets 89,378 83,453
Trust account investments 1,298,120 1,098,773
Other investments 335,573 180,099
Deferred income taxes - 14,545
Property and equipment-net 195,333 179,434
Internally generated computer software-net 75,263 85,821
Intangible assets-net 802,071 595,154
----------------- -----------------
TOTAL $5,307,710 $3,958,338
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 66,400 $ 65,385
Securities processing payables 1,764,382 1,207,838
Short-term borrowings 234,350 38,350
Accrued expenses 176,443 150,519
Accrued income taxes 12,736 14,768
Deferred revenues 131,476 107,286
Trust account deposits 1,298,120 1,098,773
Deferred income taxes 59,963 -
Long-term debt 472,824 389,622
----------------- -----------------
TOTAL LIABILITIES 4,216,694 3,072,541
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock issued, 125,387,700 and
124,879,500 shares, respectively 1,254 1,249
Additional paid-in capital 458,550 448,461
Accumulated other comprehensive income 125,026 39,875
Accumulated earnings 576,510 438,642
Treasury stock, at cost, 2,804,400 and 1,800,000
shares, respectively (70,324) (42,430)
----------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 1,091,016 885,797
----------------- -----------------
TOTAL $5,307,710 $3,958,338
================= =================
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
Year ended December 31, 1999 1998 1997
---------------------- --------------------- --------------------
SHARES ISSUED-300,000,000 AUTHORIZED:
Balance at beginning of year 83,253 53,925 51,032
Shares issued under stock plans-net 394 495 585
Shares issued for acquired companies - 1,132 2,308
Three-for-two stock split 41,741 27,701 -
---------- -------- --------
Balance at end of year 125,388 83,253 53,925
========== ======== ========
COMMON STOCK-PAR VALUE $.01 PER SHARE:
Balance at beginning of year $ 833 $ 539 $ 510
Shares issued under stock plans-net 4 5 6
Shares issued for acquired companies - 11 23
Three-for-two stock split 417 278 -
---------- -------- --------
Balance at end of year 1,254 833 539
---------- -------- --------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year 448,877 427,785 352,916
Shares issued under stock plans-net 5,090 5,036 10,034
Income tax reduction arising from the
exercise of employee stock options 5,000 8,000 5,000
Shares issued for acquired - 8,334 59,835
Three-for-two stock split (417) (278) -
---------- -------- --------
Balance at end of year 458,550 448,877 427,785
---------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance at beginning of year 39,875 16,563 18,904
Unrealized gain (loss) on investments 85,496 $ 85,496 23,492 $ 23,492 (2,179) $(2,179)
Foreign currency translation adjustment (345) (345) (180) (180) (162) (162)
---------- -------- --------
Balance at end of year 125,026 39,875 16,563
---------- -------- --------
ACCUMULATED EARNINGS:
Balance at beginning of year 438,642 324,368 233,568
Net income 137,868 137,868 114,274 114,274 90,800 90,800
---------- -------- -------- -------- -------- -------
Balance at end of year 576,510 438,642 324,368
---------- -------- --------
TREASURY STOCK-AT COST:
Balance at beginning of year (42,430) -
Purchase of treasury stock (28,713) (42,430)
Shares issued under stock plans-net 819 -
---------- --------
Balance at end of year (70,324) (42,430)
---------- --------
TOTAL COMPREHENSIVE INCOME $223,019 $137,586 $88,459
======== ======== =======
TOTAL SHAREHOLDERS' EQUITY $1,091,016 $885,797 $769,255
========== ======== ========
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended December 31, 1999 1998 1997
--------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 137,868 $ 114,274 $ 90,800
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes 14,183 2,463 4,234
Depreciation and amortization of
property and equipment 63,713 60,697 49,119
Amortization of intangible assets 22,600 15,754 14,067
Amortization of internally
generated computer software 33,194 26,641 25,047
--------------------------------------------------------
271,558 219,829 183,267
Changes in assets and liabilities, net of effects from
acquisitions of businesses:
Accounts receivable 18,853 (22,860) (19,191)
Prepaid expenses and other assets (3,299) 9,618 (7,073)
Accounts payable and accrued expenses 14,394 32,422 23,681
Deferred revenues 17,210 21,197 17,313
Accrued income taxes (1) 13,109 2,520
Securities processing receivables and payables - net (140,878) 7,080 (5,948)
--------------------------------------------------------
Net cash provided by operating activities 177,837 280,395 194,569
--------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (69,697) (77,542) (39,765)
Capitalization of internally generated computer software (26,052) (30,579) (25,011)
Payment for acquisition of businesses,
net of cash acquired (210,587) (217,792) (65,017)
Investments (209,011) (30,779) (167,812)
--------------------------------------------------------
Net cash used in investing activities (515,347) (356,692) (297,605)
--------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) short-term obligations-net 119,226 (56,625) (7,900)
Proceeds from borrowings on long-term obligations 103,523 143,245 18,120
Repayment of long-term obligations (52,790) (6,785) (41,316)
Issuance of common stock 5,913 5,041 10,040
Purchases of treasury stock (28,713) (42,430)
Trust account deposits 199,347 16,032 112,187
--------------------------------------------------------
Net cash provided by financing activities 346,506 58,478 91,131
--------------------------------------------------------
Change in cash and cash equivalents 8,996 (17,819) (11,905)
Beginning balance 71,558 89,377 101,282
--------------------------------------------------------
Ending balance $ 80,554 $ 71,558 $ 89,377
========================================================
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999, 1998 and 1997
1. Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Fiserv, Inc. and
subsidiaries (the "Company"). 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUES
The carrying amounts of cash and cash equivalents, accounts receivable and
payable, securities processing receivables and payables, short and long-term
borrowings, and derivative instruments approximated fair value as of December
31, 1999 and 1998.
DERIVATIVE INSTRUMENTS
Interest rate hedge transactions are utilized to manage interest rate exposure.
The interest differential on interest rate swap contracts used to hedge
underlying debt obligations is reflected as an adjustment to interest expense
over the life of the contracts.
SECURITIES PROCESSING RECEIVABLES AND PAYABLES
The Company's securities processing subsidiaries had receivables from and
payables to brokers or dealers and clearing organizations related to the
following at December 31:
(In thousands) 1999 1998
--------------------------------
RECEIVABLES:
Securities failed to deliver $ 41,554 $ 33,918
Securities borrowed 829,573 586,210
Receivables from customers 1,283,326 758,669
Other 41,615 23,853
--------------------------------
TOTAL $2,196,068 $1,402,650
================================
PAYABLES:
Securities failed to receive $ 45,255 $ 20,935
Securities loaned 1,076,235 703,164
Payables to customers 523,275 389,372
Other 119,617 94,367
--------------------------------
TOTAL $1,764,382 $1,207,838
================================
Securities borrowed and loaned represent deposits made to or received from other
broker-dealers. Receivables from and payables to customers represent amounts due
on cash and margin transactions.
SHORT-TERM BORROWINGS
The Company's securities processing subsidiaries had short-term bank loans
payable of $234,350,000 and $38,350,000 as of December 31, 1999 and 1998,
respectively, which bear interest at the respective banks' call rate (4.9% as of
December 31, 1999) and were collateralized by customers' margin account
securities.
TRUST ACCOUNT INVESTMENTS AND DEPOSITS
The Company's trust administration subsidiaries accept money market deposits
from trust customers and invest the funds in securities. Such amounts due trust
depositors represent the primary source of funds for the Company's investment
securities and amounted to $1,298,120,000 and $1,098,773,000 as of December 31,
1999 and 1998, respectively. The related investment securities, including
amounts representing Company funds, comprised the following at December 31:
(In thousands) Principal Carrying Market
1999 Amount Value Value
-----------------------------------------------------------
U. S. Government and government
agency obligations $ 609,304 $ 614,855 $ 606,113
Money market mutual funds 201,600 201,600 201,600
Other fixed income obligations 563,382 562,560 550,931
-----------------------------------------------------------
TOTAL $1,374,286 1,379,015 $1,358,644
-----------------------------------------------------------
Less amounts representing Company funds:
Included in cash and cash equivalents 3,329
Included in other investments 77,566
---------------------
Trust account investments $1,298,120
=====================
1998
U. S. Government and government
agency obligations $ 756,928 $ 765,152 $ 766,708
Corporate bonds 5,492 5,494 5,501
Repurchase agreements 41,370 41,370 41,370
Money market mutual funds 21,220 21,220 21,220
Other fixed income obligations 336,010 337,490 339,276
-----------------------------------------------------------
TOTAL $1,161,020 1,170,726 $1,174,075
-----------------------------------------------------------
Less amounts representing Company funds:
Included in cash and cash equivalents 756
Included in other investments 71,197
---------------------
Trust account investments $1,098,773
=====================
Substantially all trust account investments at December 31, 1999 have
contractual maturities of one year or less, except for government agency and
certain fixed income obligations which have an average duration of approximately
two years and six months. These investments are held to maturity and stated at
cost as the Company has the ability and intent to hold these investments to
maturity. Unrealized gains and losses at December 31, 1999 and 1998 were not
significant.
OTHER INVESTMENTS
The Company determines the appropriate classification of investments in
securities at the time of the purchase. Marketable securities available-for-sale
are carried at market, based upon quoted market prices. Unrealized gains or
losses on available-for-sale securities are accumulated as an adjustment to
shareholders' equity, net of related deferred income taxes. Realized gains or
losses are computed based on specific identification of the securities sold. The
Company owns 3,404,930 shares of Knight/Trimark Group, Inc. and 900,000 shares
of The BISYS Group, Inc. Common stock of both companies trade on
the NASDAQ National Market System.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
computed primarily using the straight-line method over the estimated useful
lives of the assets, ranging from three to 40 years. Property and equipment
consist of the following at December 31:
(In thousands) 1999 1998
----------------------------------
Data processing equipment $ 227,292 $ 227,346
Purchased software 81,239 73,446
Buildings and leasehold improvements 84,763 75,158
Furniture and equipment 99,637 88,915
----------------------------------
492,931 464,865
Less accumulated depreciation and amortization 297,598 285,431
----------------------------------
TOTAL $ 195,333 $ 179,434
==================================
INTERNALLY GENERATED COMPUTER SOFTWARE
The Company capitalizes certain costs incurred to develop new software and
enhance existing software in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed." Amortization of capitalized costs is
computed on a straight-line basis over the expected useful life of the product,
generally five years. Activity during the three years ended December 31, 1999 is
as follows:
(In thousands) 1999 1998 1997
-----------------------------------------------------
Beginning balance $ 85,821 $ 73,163 $70,487
Capitalized costs 26,052 30,579 25,011
Acquisitions and reclassifications (3,416) 8,720 2,712
-----------------------------------------------------
108,457 112,462 98,210
Less amortization 33,194 26,641 25,047
-----------------------------------------------------
TOTAL $ 75,263 $ 85,821 $73,163
=====================================================
Routine maintenance of software products, design costs and development costs
incurred prior to establishment of a product's technological feasibility are
expensed as incurred. In addition, Year 2000 costs were expensed as incurred.
INTANGIBLE ASSETS
Intangible assets relate to acquisitions and consist of the following at
December 31:
(In thousands) 1999 1998
---------------------------------
Goodwill $ 793,908 $ 590,684
Other 128,107 96,571
---------------------------------
922,015 687,255
Less accumulated amortization 119,944 92,101
---------------------------------
TOTAL $ 802,071 $ 595,154
=================================
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
generally being amortized over 40 years using the straight-line method. Other
intangible assets comprise primarily computer software, contract rights,
customer bases and trademarks applicable to business acquisitions. These assets
are being amortized using the straight-line method over their estimated useful
lives, ranging from three to 35 years.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically assesses the likelihood of recovering the cost of long-
lived assets based on current and projected operating results and cash flows of
the related business operations using undiscounted cash flow analyses. These
factors, along with management's plans with respect to the operations, are
considered in assessing the recoverability of property, equipment and intangible
assets. Long-lived assets determined to be impaired are written down to fair
value.
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 from the sale of data processing services are recognized as the related
services are provided. Revenues from securities processing and trust services
include net investment income of $88,458,000, $77,457,000 and $63,620,000, net
of direct credits to customer accounts of $63,519,000, $50,180,000 and
$46,006,000 in 1999, 1998 and 1997, respectively. Revenues from the sales of
software are recognized in accordance with the AICPA's Statement of Position No.
97-2, "Software Revenue Recognition." Maintenance fee revenue is recognized
ratably over the term of the related support period, generally 12 months.
Consulting revenue is recognized as the related services are provided. Deferred
revenues consist primarily of advance billings for services and are recognized
as revenue when the services are provided.
NET INCOME PER SHARE
Basic net income per share is computed using the weighted average number of
common shares outstanding during the periods. Diluted net income per share is
computed using the weighted average number of common and dilutive common
equivalent shares outstanding during the periods. Common equivalent shares
consist of stock options and are computed using the treasury stock method. Net
income per share for prior years has been restated to reflect three-for-two
stock splits effective in April 1999 and May 1998.
Amounts utilized in net income per share computations are as follows at
December 31:
(In thousands)
1999 1998 1997
-----------------------------------------------------------
Weighted average common shares outstanding - basic 123,143 122,873 117,021
Assumed conversion of common shares issuable
under stock option plan 3,536 4,281 3,417
-----------------------------------------------------------
Weighted average common and common equivalent
shares outstanding - diluted 126,679 127,154 120,438
===========================================================
SUPPLEMENTAL CASH FLOW INFORMATION
(In thousands) 1999 1998 1997
-----------------------------------------------------------
Interest paid $ 26,075 $ 21,111 $ 17,358
Income taxes paid 81,499 66,066 58,643
Liabilities assumed in acquisitions
of businesses 246,120 39,816 197,235
ACCOUNTING STANDARDS TO BE ADOPTED
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company is
currently evaluating the impact of this statement and does not anticipate that
the adoption of this statement will have a material impact on the consolidated
financial statements. This statement is required to be adopted in 2001.
2. Acquisitions
During 1999, 1998 and 1997 the Company completed the following acquisitions:
Month
Company Acquired Service Consideration
- -----------------------------------------------------------------------------------------------------------------------
1999:
QuestPoint Jan. Item processing Cash for assets
Eldridge & Associates Feb. PC-based financial systems Cash for assets
RF/Spectrum Decision Science Corp. Feb. Software and services Cash for stock
FIPSCO, Inc. Mar. Insurance marketing systems Cash for stock
Progressive Data Solutions, Inc./ Apr. Insurance software systems Cash for stock
Infinity Software Systems, Inc.
JWGenesis Clearing Corporation Jun. Securities services Cash for stock
Alliance ADS Jun. Imaging technology Cash for assets
Envision Financial Technologies, Inc. Aug. Software and services Cash for stock
Pinehurst Analytics, Inc. Oct. PC-based financial systems Cash for assets
Humanic Design Corporation Dec. Software and services Cash for stock
1998:
Automated Financial Technology, Inc. Jan. Data processing Stock for stock
PSI Group (laser printing and Feb. Laser printing Cash for assets
custom packing operations)
The LeMans Group Feb. Automobile leasing software Cash for stock
Network Data Processing Corporation Apr. Insurance data processing Stock for stock
CUSA Technologies, Inc. Apr. Software and services Stock for stock
Specialty Insurance Service May Insurance data processing Cash for stock
Deluxe Card Services, a division of Aug. Automated card services Cash for assets
Deluxe Corporation
Federal Home Loan Bank of Topeka Oct. Item processing Cash for assets
(item processing contracts)
Life Instructors, Inc. Oct. Insurance and securities training Cash for stock
FICATS Oct. Item processing Cash for assets
ASI Financial Services, Inc. Nov. PC-based financial systems Cash for stock
The FREEDOM Group, Inc. Dec. Insurance data processing Cash for stock
1997:
AdminaStar Communications Apr. Laser print and mailing services Cash for stock
Interactive Planning Systems May PC-based financial systems Stock for stock
BHC Financial, Inc. May Securities services Stock for stock
Florida Infomanagement Services,
Inc. (FIS, Inc.) Sep. Data processing and software sales Cash for stock
Stephens Inc. (clearing brokerage
operations) Sep. Securities services Cash for assets
Emerald Publications Oct. Financial seminars and training Stock for stock
Central Service Corp. Oct. Data processing Cash for stock
Savoy Discount Brokerage Oct. Securities services Cash for stock
Hanifen, Imhoff Holdings, Inc. Dec. Securities services Cash and 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. Net cash paid in connection with these acquisitions was $210,587,000,
$217,792,000, and $65,017,000 in 1999, 1998 and 1997, respectively, subject to
certain adjustments. Pro forma information for acquisitions accounted for as
purchases is not presented as the impact was not material. Certain of the
acquisitions in 1998 and 1997 were accounted for as poolings of interests, and
except for the 1997 acquisition of BHC Financial, Inc., prior year consolidated
financial statements were not restated because the aggregate effect was not
material.
3. Long-term debt
The Company has available a $500,000,000 unsecured line of credit and commercial
paper facility with a group of banks, of which $314,000,000 was in use at
December 31, 1999 at an average rate of 6.10%. The credit facilities, which
expire in May 2004, are comprised of a $250,000,000 five-year revolving credit
facility and a $250,000,000 364-day revolving credit facility which is renewable
annually through 2004. 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, 1999. In 1998, the Company entered
into interest rate swap agreements to fix the interest rate on certain floating
rate debt at an average rate approximating 5.90% (based on current bank fees and
spreads) for a principal amount of $200,000,000 with remaining lives of four to
six years.
Long-term debt outstanding comprised the following at December 31:
(In thousands) 1999 1998
---------------------------------
9.45% senior notes payable, due 2000 $ 4,286 $ 8,571
9.75% senior notes payable, due 2000-2001 5,000 7,500
8.00% senior notes payable, due 2000-2005 77,143 90,000
Bank notes and commercial paper, at short-term rates 386,395 283,551
---------------------------------
TOTAL $ 472,824 $ 389,622
=================================
Annual principal payments required under the terms of the long-term agreements
were as follows at December 31, 1999:
(In thousands)
Year
2000 $ 147,084
2001 17,978
2002 14,714
2003 14,714
2004 264,620
Thereafter 13,714
--------------
TOTAL $ 472,824
==============
Interest expense with respect to long-term debt amounted to $25,111,000,
$21,330,000 and $16,964,000 in 1999, 1998 and 1997, respectively.
4. Income taxes
A reconciliation of recorded income tax expense with income tax computed at the
statutory federal tax rates for the three years ended December 31, 1999 is as
follows:
(In thousands) 1999 1998 1997
---------------------------------------------------
Statutory federal tax rate 35% 35% 35%
Tax computed at statutory rate $ 81,786 $ 67,789 $ 53,865
State income taxes-net of federal effect 9,375 7,601 5,995
Non-deductible amortization 3,161 2,737 1,408
Other 1,485 1,283 1,831
---------------------------------------------------
TOTAL $ 95,807 $ 79,410 $ 63,099
===================================================
The provision for income taxes consisted of the following:
(In thousands) 1999 1998 1997
---------------------------------------------------
Currently payable $ 76,624 $ 68,947 $ 53,865
Tax reduction credited to additional
paid-in capital 5,000 8,000 5,000
Deferred 14,183 2,463 4,234
---------------------------------------------------
TOTAL $ 95,807 $ 79,410 $ 63,099
===================================================
Significant components of the Company's net deferred tax (liability) asset
consisted of the following at December 31:
(In thousands) 1999 1998
-------------------------------
Purchased incomplete software technology $ 47,663 $ 52,276
Accrued expenses not currently deductible 25,407 25,329
Deferred revenues 13,693 14,558
Internally generated capitalized software (30,858) (35,188)
Excess of tax over book depreciation
and amortization (19,438) (9,167)
Unrealized gains on investments (87,162) (27,751)
Other (9,268) (5,512)
-------------------------------
TOTAL $ (59,963) $ 14,545
===============================
5. Employee Benefit Plans
STOCK OPTION PLAN
The Company's Stock Option Plan provides for the granting to its employees and
directors of either incentive or non-qualified options to purchase shares of the
Company's common stock for a price not less than 100% of the fair value of the
shares at the date of grant. In general, 20% of the shares awarded under the
Plan may be purchased annually and expire 10 years from the date of the award.
Changes in stock options outstanding are as follows:
Weighted
Number of Price Average
Shares Range Exercise Price
----------------------------------------------
Outstanding, December 31, 1996 5,853,173 $2.57 - $16.33 $ 8.84
Assumed from BHC 1,265,139 3.25 - 14.00 7.89
Granted 1,551,156 16.00 - 21.78 16.88
Forfeited (114,827) 2.76 - 16.00 12.78
Exercised (1,440,820) 2.57 - 16.00 8.70
----------------------------------------------
Outstanding, December 31, 1997 7,113,821 2.76 - 21.78 10.38
Granted 2,677,205 21.83 - 31.59 24.15
Forfeited (147,030) 4.51 - 24.00 19.48
Exercised (1,187,123) 2.76 - 24.00 8.43
----------------------------------------------
Outstanding, December 31, 1998 8,456,873 2.76 - 31.59 14.57
Granted 1,535,269 28.81 - 39.50 30.94
Forfeited (350,093) 16.00 - 34.29 27.42
Exercised (579,098) 3.25 - 33.02 12.48
----------------------------------------------
Outstanding, December 31, 1999 9,062,951 $2.76 - $39.50 $ 16.89
==============================================
The following summarizes information about the Company's stock options
outstanding and exercisable at December 31, 1999:
Options Outstanding
Options Outstanding and Exercisable
---------------------------------------------------------- -------------------------------
Range of Weighted Weighted Average Weighted
Exercise Number of Average Remaining Number of Average
Prices Shares Exercise Price Contractual Life Shares Exercise Price
- -------------------------------------------------------------------------------------------------------
$ 2.76-$8.00 1,374,353 $ 5.23 1.8 1,304,090 $ 5.51
8.01-10.00 2,050,185 8.91 4.3 2,029,146 8.91
10.01-22.00 2,593,697 16.97 6.2 1,539,671 16.50
22.01-39.50 3,044,716 27.45 8.3 807,648 26.07
- -------------------------------------------------------------------------------------------------------
$2.76-$39.50 9,062,951 $ 16.89 5.8 5,680,555 $ 12.63
=======================================================================================================
At December 31, 1999, options to purchase 2,667,755 shares were available for
grant under the Plan. The Company has accounted for its stock-based compensation
plans in accordance with the provisions of Accounting Principles Board Opinion
25. Accordingly, the Company did not record any compensation expense in the
accompanying consolidated financial statements for its stock-based compensation
plans. Had compensation expense been recognized consistent with SFAS No.123,
"Accounting for Stock-Based Compensation", the Company's net income and net
income per share - diluted would have been changed to the pro forma amounts
indicated below:
(In thousands, except per share amounts)
1999 1998 1997
------------- ----------- ------------
Net income:
As reported $137,868 $114,274 $90,800
Pro forma 131,868 110,574 88,600
Net income per share-diluted:
As reported $ 1.09 $ 0.90 $ 0.75
Pro forma 1.04 0.87 0.74
The fair value of each stock option grant is estimated on the date of grant
using the Black-Scholes pricing model with the following assumptions for grants
in 1999: 1) expected dividend yield of 0%, 2) risk-free interest rate of 6%, 3)
expected volatility of 41.8%, and 4) expected option life of five years.
EMPLOYEE STOCK PURCHASE PLAN
Effective January 1, 2000, the Company adopted an employee stock purchase plan,
subject to shareholder approval, under which 500,000 shares of common stock
would be available for issuance in 2000. Eligible employees may purchase a
limited number of shares of common stock each quarter through payroll
deductions, at a purchase price equal to 85% of the closing price of the
Company's common stock on the last business day of each calendar quarter.
EMPLOYEE SAVINGS PLAN
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 makes discretionary contributions based upon the attainment of
certain profit goals. Company contributions vest ratably at 20% for each year of
service. Contributions charged to operations under these plans approximated
$23,969,000, $16,948,000 and $14,383,000 in 1999, 1998 and 1997, respectively.
6. Shareholders' Equity
SHAREHOLDER RIGHTS PLAN
On February 23, 1998, the Company adopted a Shareholder Rights Plan. Under this
plan, the shareholders of record as of March 9, 1998 were granted a dividend of
one preferred stock purchase right for each outstanding share of Company common
stock. The stock purchase rights are not exercisable until certain events occur.
The Company filed a Form 8-K with the Securities and Exchange Commission on
February 24, 1998 which provides a full description of the Plan.
COMPREHENSIVE INCOME
Total comprehensive income was $223,019,000 and $137,586,000 in 1999 and 1998,
respectively. The increase in comprehensive income was primarily due to
unrealized gains on other investments as of December 31, 1999.
7. Leases, other commitments and contingencies
LEASES
Future minimum rental payments on various operating leases for office facilities
and equipment were due as follows as of December 31, 1999:
(In thousands)
Year
2000 $ 64,931
2001 56,812
2002 47,248
2003 37,318
2004 29,342
Thereafter 41,447
--------------
TOTAL $ 277,098
==============
Rent expense applicable to all operating leases was approximately $78,620,000,
$72,172,000 and $55,515,000 in 1999, 1998 and 1997, respectively.
OTHER COMMITMENTS AND CONTINGENCIES
The Company's trust administration subsidiaries had fiduciary responsibility for
the administration of approximately $24 billion in trust funds as of December
31, 1999. With the exception of the trust account investments discussed in Note
1, such amounts are not included in the accompanying consolidated balance
sheets.
The Company's securities processing subsidiaries are subject to the Uniform Net
Capital Rule of the Securities and Exchange Commission. At December 31, 1999,
the aggregate net capital of such subsidiaries was $161,943,000, exceeding the
net capital requirement by $133,611,000.
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.
8. Business Segment Information
The Company is a leading independent provider of data processing systems and
related information management services and products to financial institutions
and other financial intermediaries. In accordance with SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information," the
Company's operations have been classified into three business segments:
Financial institution outsourcing, systems and services; Securities processing
and trust services; and "All other and corporate." The financial institution
outsourcing, systems and services segment provides account and transaction
processing solutions and services to financial institutions and other financial
intermediaries. The securities processing and trust services segment provides
securities processing solutions and retirement plan administration services to
brokerage firms, financial planners and financial institutions. The "All other
and corporate" segment provides plastic card services and document solutions,
and includes general corporate expenses.
Summarized financial information by business segment for each of the three years
ended December 31, 1999 is as follows:
(In thousands) 1999 1998 1997
------------------------------------------------
Revenues:
Financial institution outsourcing, systems and services $ 1,066,514 $ 951,010 $ 753,209
Securities processing and trust services 276,215 234,699 179,217
All other and corporate 64,816 47,961 42,006
------------------------------------------------
Total $ 1,407,545 $1,233,670 $ 974,432
------------------------------------------------
Operating income:
Financial institution outsourcing, systems and services $ 175,194 $ 148,774 $ 117,467
Securities processing and trust services 80,125 70,074 51,770
All other and corporate (2,234) (9,209) (3,460)
------------------------------------------------
Total $ 253,085 $ 209,639 $ 165,777
------------------------------------------------
Identifiable assets:
Financial institution outsourcing, systems and services $ 1,169,666 $1,018,541 $ 759,437
Securities processing and trust services 3,832,868 2,783,818 2,753,523
All other and corporate 305,176 155,979 123,531
------------------------------------------------
Total $ 5,307,710 $3,958,338 $3,636,491
------------------------------------------------
Depreciation expense:
Financial institution outsourcing, systems and services $ 48,407 $ 46,880 $ 38,098
Securities processing and trust services 9,510 8,631 7,285
All other and corporate 5,796 5,186 3,736
------------------------------------------------
Total $ 63,713 $ 60,697 $ 49,119
------------------------------------------------
Capital expenditures:
Financial institution outsourcing, systems and services $ 52,724 $ 60,075 $ 28,627
Securities processing and trust services 12,119 11,255 6,667
All other and corporate 4,854 6,212 4,471
------------------------------------------------
Total $ 69,697 $ 77,542 $ 39,765
------------------------------------------------
The revenues of each segment are principally domestic, and no single customer
accounted for 10% or more of the consolidated revenues for the years ended
December 31, 1999, 1998 and 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the relative
percentage which certain items in the Company's consolidated statements of
income bear to revenues and the percentage change in those items from period to
period.
Percentage of Revenues Period to Period Percentage
Year Ended December 31, Increase (Decrease)
1999 vs. 1998 vs.
1999 1998 1997 1998 1997
---------------------------------------------- ---------------------------------
Revenues 100.0% 100.0% 100.0% 14.1% 26.6%
----------------------------------------------
Cost of revenues:
Salaries, commissions and payroll
related costs 48.1 46.4 46.7 18.2 26.0
Data processing expenses, rentals
and telecommunication costs 7.9 9.7 10.3 (6.7) 18.5
Other operating expenses 19.4 21.0 19.5 5.2 36.4
Depreciation and amortization of
property and equipment 4.5 4.9 5.0 5.0 23.6
Amortization of intangible assets 1.6 1.3 1.5 43.5 12.0
Amortization (capitalization) of internally
generated computer software-net 0.5 (0.3)
----------------------------------------------
Total cost of revenues 82.0 83.0 83.0 12.7 26.6
----------------------------------------------
Operating income 18.0% 17.0% 17.0% 20.7 26.5
==============================================
Income before income taxes 16.6% 15.7% 15.8% 20.6 25.9
==============================================
Net income 9.8% 9.3% 9.3% 20.6 25.9
==============================================
Revenues increased $173,875,000 in 1999 and $259,238,000 in 1998. Revenue growth
in 1999 and 1998 was derived from sales to new clients, cross-sales to existing
clients, growth in the transaction volume experienced by existing clients, price
increases and revenues from acquired businesses. Revenues from acquired
businesses approximated 45% and 60% of total revenue growth in 1999 and 1998,
respectively.
Cost of revenues increased $130,429,000 in 1999 and $215,376,000 in 1998. The
make up of cost of revenues has been affected in all years by business
acquisitions and changes in the mix of the Company's business.
Amortization of internally generated computer software is stated net of
capitalization and increased as a percent of revenues from 1998 to 1999. The
increase in 1999 was due to reduced capitalization resulting from Year 2000
activities and accelerated amortization due to the write-down of certain
ancillary software products to net realizable value.
Operating income increased $43,446,000 in 1999 and $43,862,000 in 1998. The
Company's operating margins increased by 1% from 1998 to 1999 and remained
unchanged from 1997 to 1998.
The effective income tax rate was 41% in all three years, and the effective
income tax rate for 2000 is expected to remain at 41%.
The Company's growth has been accomplished, to a significant degree, through the
acquisition of 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 related to
acquisitions 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 and the potential loss of clients due to
this program.
SEGMENT INFORMATION
The following table sets forth revenue and operating income by business segment
for the years ended December 31:
(In thousands) 1999 1998 1997
--------------- ---------------- -------------
Revenues:
Financial institution outsourcing, systems
and services $ 1,066,514 $ 951,010 $ 753,209
Securities processing and trust services 276,215 234,699 179,217
All other and corporate 64,816 47,961 42,006
--------------- --------------- -------------
Total $ 1,407,545 $ 1,233,670 $ 974,432
--------------- --------------- -------------
Operating income:
Financial institution outsourcing, systems
and services $ 175,194 $ 148,774 $ 117,467
Securities processing and trust services 80,125 70,074 51,770
All other and corporate (2,234) (9,209) (3,460)
--------------- ---------------- -------------
Total $ 253,085 $ 209,639 $ 165,777
--------------- ---------------- -------------
Revenues in the financial institution outsourcing, systems and services business
segment increased $115,504,000 in 1999 and $197,801,000 in 1998. Revenue growth
in 1999 and 1998 was derived from sales to new clients, cross-sales to existing
clients, growth in the transaction volume experienced by existing clients, price
increases and revenues from acquired businesses. Operating income in the
financial institution outsourcing, systems and services business segment
increased $26,420,000 and $31,307,000 in 1999 and 1998, respectively, while
operating margins were consistent year to year.
Revenues in the securities processing and trust services business segment
increased $41,516,000 in 1999 and $55,482,000 in 1998. Revenue growth in 1999
and 1998 was derived primarily from sales to new clients, increased transaction
volume from existing clients and revenues from acquired businesses. Operating
income in the securities processing and trust services business segment
increased $10,051,000 and $18,304,000 in 1999 and 1998, respectively, while
operating margins were relatively consistent year to year.
Revenues in the "All other and corporate" segment increased $16,855,000 in 1999
and $5,955,000 in 1998. The increase in revenues in 1999 over 1998 resulted
primarily from sales to new clients and the full year 1999 impact of an
acquisition which was completed in August 1998. Operating income in this
business segment increased $6,975,000 in 1999 and decreased $5,749,000 in 1998.
The increase in operating income in 1999 over 1998 was due to an acquisition and
increased profitability in the Company's plastic card operations.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes the Company's primary sources of funds for the
years ended December 31:
(In thousands) 1999 1998 1997
------------ ------------- -------------
Cash provided by operating activities before changes in
securities processing receivables and payables-net $ 318,715 $ 273,315 $ 200,517
Securities processing receivables and payables-net (140,878) 7,080 (5,948)
------------ ------------- ------------
Cash provided by operating activities 177,837 280,395 194,569
Increase (decrease) in net borrowings 169,959 79,835 (31,096)
------------ ------------- ------------
TOTAL $ 347,796 $ 360,230 $ 163,473
------------ ------------- ------------
The Company has used a significant portion of its cash flow from operations for
acquisitions and capital expenditures with any remainder used to reduce long-
term debt.
The Company believes that its cash flow from operations together with other
available sources of funds will be adequate to meet its funding requirements. In
the event that the Company makes significant future acquisitions, however, it
may raise funds through additional borrowings or issuance of securities.
STOCK BUYBACK PLAN
During 1999, the Company's Board of Directors authorized the repurchase of up to
3,250,000 shares of the Company's common stock. Shares purchased under the
authorization will be made through open market transactions that may occur from
time to time as market conditions warrant. Shares acquired will be held for
issuance in connection with acquisitions and/or in conjunction with employee
stock option plans.
YEAR 2000 SYSTEMS EVALUATION
The Company provides data processing and other related services to financial
institutions of all kinds. The Company has completed the Year 2000 renovation of
its systems. The Company has met its Year 2000 compliance commitments using
existing resources, without incurring significant incremental expenses. Although
the Company does not maintain accounting records that separately identify all of
the associated costs with its Year 2000 activities, it has estimated that
commencing with 1996, such costs have approximated $15 million annually. The
Company does not expect to incur any significant costs in 2000 related to Year
2000 activities.
MARKET RISK FACTORS
Market risk refers to the risk that a change in the level of one or more market
prices, interest rates, indices, correlations or other market factors, such as
liquidity, will result in losses for a certain financial instrument or group of
financial instruments. The Company is exposed primarily to interest rate risk on
investments and borrowings. The Company actively monitors these risks through a
variety of control procedures involving senior management.
The Company's trust administration subsidiaries accept money market account
deposits from trust customers and invest those funds in marketable securities.
Substantially all of the investments are rated within the highest investment
grade categories for securities. The Company's trust administration subsidiaries
utilize simulation models for measuring and monitoring interest rate risk and
market value of portfolio equities. A formal Asset Liability Committee of the
Company meets quarterly to review interest rate risks, capital ratios, liquidity
levels, portfolio diversification, credit risk ratings and adherence to
investment policies and guidelines. Substantially all of the investments at
December 31, 1999 have contractual maturities of one year or less except for
government agency and certain fixed income mortgage backed obligations, which
have an average duration of approximately two years and six months.
The Company manages its debt structure and interest rate risk through the use of
fixed- and floating-rate debt and through the use of derivatives. The Company
uses interest rate swaps to hedge its exposure to interest rate changes, and to
lower its financing costs. Generally, under these swaps, the Company agrees with
a counterparty to exchange the difference between fixed-rate and floating-rate
interest amounts based on an agreed principal amount. As of December 31, 1999,
unrealized gains related to interest rate swap agreements are not material.
Based on the controls in place, management believes the risk associated with
these instruments at December 31, 1999 will not have a material effect on the
Company's consolidated financial position or results of operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters discussed in
this annual report are forward-looking statements which involve risks and
uncertainties, including but not limited to economic, competitive, governmental
and technological factors affecting the Company's operations, markets, services
and related products, prices and other factors discussed in the Company's prior
filings with the Securities and Exchange Commission. Although the Company
believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate.
Therefore, there can be no assurance that the forward-looking statements
included in this annual report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
Selected Financial Data
The following 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.
(In thousands, except per share data)
Year ended December 31, 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------
Revenues $1,407,545 $1,233,670 $ 974,432 $ 879,449 $ 769,104
Income (loss) before income taxes 233,675 193,684 153,899 134,462 (76,146)
Income taxes (credit) 95,807 79,410 63,099 54,754 (30,220)
Net income (loss) 137,868 114,274 90,800 79,708 (45,926)
Net income (loss) per share:
Basic $ 1.12 $ 0.93 $ 0.78 $ 0.69 ($0.41)
--------------------------------------------------------------------------------
Diluted $ 1.09 $ 0.90 $ 0.75 $ 0.68 ($0.41)
--------------------------------------------------------------------------------
As originally reported-diluted $ 1.09 $ 0.90 $ 0.75 $ 0.59 $ 0.50
--------------------------------------------------------------------------------
Total assets $5,307,710 $3,958,338 $3,636,491 $2,698,979 $2,514,597
Long-term debt 472,824 389,622 252,031 272,864 383,416
Shareholders' equity 1,091,016 885,797 769,255 605,898 514,866
Note: The above information has been restated to recognize (1) three-for-two
stock splits effective in April 1999 and May 1998 and (2) the acquisition of BHC
Financial, Inc. (BHC) in 1997, accounted for as a pooling of interest. The net
income (loss) per share as originally reported - diluted is before the
restatement due to the BHC pooling of interest and excludes the one-time
after-tax charges of $1.11 per share related to the acquisition of Information
Technology, Inc. in 1995.
QUARTERLY FINANCIAL INFORMATION (Unaudited)
(In thousands, except per share data)
Quarters
------------------------------------------
First Second Third Fourth Total
1999
Revenues $ 337,129 $ 343,252 $ 352,663 $ 374,501 $1,407,545
Cost of revenues 276,506 280,738 288,094 309,122 1,154,460
------------------------------------------------------
Operating income 60,623 62,514 64,569 65,379 253,085
------------------------------------------------------
Income before income taxes 56,638 58,199 59,656 59,182 233,675
Income taxes 23,222 23,861 24,459 24,265 95,807
------------------------------------------------------
Net income $ 33,416 $ 34,338 $ 35,197 $ 34,917 $ 137,868
------------------------------------------------------
Net income per share:
Basic $ 0.27 $ 0.28 $ 0.29 $ 0.28 $ 1.12
======================================================
Diluted $ 0.26 $ 0.27 $ 0.28 $ 0.28 $ 1.09
======================================================
1998
Revenues $ 273,829 $ 311,220 $ 309,543 $ 339,078 $1,233,670
Cost of revenues 224,445 258,398 256,609 284,579 1,024,031
------------------------------------------------------
Operating income 49,384 52,822 52,934 54,499 209,639
------------------------------------------------------
Income before income taxes 46,017 48,594 48,936 50,137 193,684
Income taxes 18,867 19,924 20,063 20,556 79,410
------------------------------------------------------
Net income $ 27,150 $ 28,670 $ 28,873 $ 29,581 $ 114,274
------------------------------------------------------
Net income per share:
Basic $ 0.22 $ 0.23 $ 0.23 $ 0.24 $ 0.93
======================================================
Diluted $ 0.22 $ 0.22 $ 0.23 $ 0.23 $ 0.90
======================================================
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 NASDAQ National Market tier of the
NASDAQ Stock Market under the symbol FISV. Information for all periods has been
adjusted (to the nearest 1/32) to recognize the three-for-two stock splits
effective April 1999 and May 1998.
1999 1998
- ------------------------------------------------------------------------------------
Quarter Ended High Low High Low
- ------------------------------------------------------------------------------------
March 31 37 19/32 30 28 5/32 20 21/32
June 30 40 31 5/16 30 25 11/32
September 30 34 1/8 27 1/4 32 21/32 26
December 31 39 3/16 24 3/4 35 13/32 25 1/2
At December 31, 1999, the Company's common stock was held by 2,590 shareholders
of record. It is estimated that an additional 38,000 shareholders own the
Company's stock through nominee or street name accounts with brokers. The
closing sale price for the Company's stock on January 20, 2000 was $36.75 per
share.
The Company's present policy is to retain earnings to support future business
opportunities, rather than to pay dividends.
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
The management of Fiserv, Inc. assumes responsibility for the integrity and
objectivity of the information appearing in the 1999 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.
/s/ Leslie M. Muma
LESLIE M. MUMA
Vice Chairman and Chief Executive Officer
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, 1999 and 1998 and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1999. 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, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Milwaukee, Wisconsin
January 28, 2000