FISERV INC 10-Q Summary: Quarter Ended March 31, 1998
Business Context and Reporting Period
This Form 10-Q covers the three-month period ended March 31, 1998, for Fiserv, Inc., a provider of financial services technology. The financial statements are unaudited but include all normal recurring adjustments. The company reported 53,750,850 shares of common stock outstanding as of the period end.
Key Financial Metrics
| Metric | Q1 1998 | Q1 1997 |
|---|---|---|
| Revenues | $273.8 million | $228.3 million |
| Operating Income | $49.4 million | $41.8 million |
| Net Income | $27.2 million | $22.6 million |
| Diluted EPS | $0.49 | $0.43 |
| Operating Margin | 18.0% | 18.3% |
| Net Cash from Operations | $82.8 million | $20.9 million |
| Cash and Equivalents | $83.1 million | $89.4 million (Dec 1997) |
| Long-Term Debt | $343.6 million | $252.0 million (Dec 1997) |
| Short-Term Borrowings | $53.7 million | $95.0 million (Dec 1997) |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 19.9% year-over-year. Approximately 70% of this growth is attributed to acquired companies, while 30% stems from organic growth (new clients, transaction volume, and price increases).
- Profitability: Net income rose 20.1% to $27.2 million. Operating income increased 18.2% to $49.4 million.
- Cost Structure: Total cost of revenues increased 20.3%. Salaries and related costs rose 21.2%, and other operating expenses increased 26.8%.
- Margin Compression: Operating margins declined slightly from 18.3% to 18.0% due to charges for consolidating product lines and reduced termination fee income.
- Debt Position: Long-term debt increased by approximately $91.5 million during the quarter, while short-term borrowings decreased by $41.3 million.
Outlook, Commentary, and Risks
- Acquisition Strategy: The company continues to utilize cash flow and borrowings to fund acquisitions. Net cash used for business acquisitions in Q1 1998 was $86.2 million.
- Liquidity: Management believes operating cash flows and available credit facilities (a $225 million unsecured line expandable to $375 million) are adequate for funding requirements.
- Corporate Actions:
- A Shareholder Rights Plan was adopted in February 1998.
- A 3-for-2 common stock split was declared, effective May 15, 1998.
- The company repurchased 800,000 shares of common stock in Q1 1998.
- Tax Rate: The effective income tax rate was 41%, which is expected to remain consistent for the year.
Investor Verification Checklist
- Verify the impact of the 3-for-2 stock split on share count and EPS for future reporting periods.
- Confirm the sustainability of the 70% revenue contribution from acquisitions versus organic growth.
- Review the specific details of the "charges related to the planned consolidation of certain product lines" affecting operating margins.
- Monitor the utilization of the $225 million credit facility, which currently holds $201.6 million in advances.
- Assess the integration progress of recent acquisitions, specifically the Hanifen, Imhoff Holdings, Inc. deal referenced in share repurchase activities.