FISERV INC 10-Q Summary: Quarter Ended September 30, 1996
Business Context and Reporting Period
This Form 10-Q covers the quarterly and nine-month periods ended September 30, 1996, for FISERV, INC., a provider of financial services technology. The financial statements are unaudited but include all normal recurring adjustments necessary for a fair presentation. At the end of the period, 45,233,000 shares of common stock were outstanding.
Key Financial Metrics
| Metric | 3 Months Ended Sep 30, 1996 | 9 Months Ended Sep 30, 1996 |
|---|---|---|
| Revenues | $196.6 million | $587.8 million |
| Net Income | $15.7 million | $45.6 million |
| Diluted EPS | $0.34 | $0.99 |
| Operating Income | $31.0 million | $92.3 million |
| Operating Margin | 15.74% | 15.71% |
| Net Cash from Operations | N/A | $108.2 million |
| Cash and Equivalents | $69.0 million (Sep 30, 1996) | N/A |
| Long-Term Debt | $289.9 million (Sep 30, 1996) | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 11.1% year-over-year for the quarter and 15.8% for the nine-month period. Approximately 65% of the year-to-date growth is attributed to acquired companies, with the remainder driven by new clients, transaction volume growth, and price increases.
- Profitability: Net income rose 20.0% for the quarter and 25.5% for the nine-month period compared to 1995. Operating income increased 8.1% for the quarter and 24.3% for the nine-month period.
- Cost Structure: Cost of revenues increased 11.7% for the quarter and 14.3% for the nine-month period. However, year-to-date cost increases were slightly lower than revenue increases, reflecting improved operating margins.
- Debt Reduction: Interest expense decreased $2.1 million for the quarter and $2.3 million for the nine-month period due to substantial debt reductions and lower effective rates. Long-term debt decreased from $381.4 million at year-end 1995 to $289.9 million at September 30, 1996.
- Cash Flow: Net cash provided by operating activities increased significantly to $108.2 million for the nine months ended September 30, 1996, compared to $62.7 million in the prior year period.
Outlook, Risks, and Management Commentary
- Guidance and Outlook: Management expects the 41% effective income tax rate to apply throughout the current year. The company anticipates that cash flow from operations and available funding sources will be adequate to meet requirements, though significant future acquisitions may necessitate additional borrowings or securities issuance.
- Capital Allocation: The company continues to apply cash flow and stock proceeds toward acquisitions and debt reduction. A $225 million unsecured line of credit and commercial paper facility remains available, with portions maturing between 1998 and 2000.
- Risks and Contingencies: Interim results are not necessarily indicative of full-year results. The company noted charges related to the disposition of a business impacted the current quarter's operating margin. Additionally, the company relies on the ability to raise funds for future acquisitions if internal cash flows are insufficient.
- Unusual Items: The filing references a Form 8-K dated July 25, 1996, regarding a proposal to perform item processing services for Canadian Imperial Bank of Canada.
Investor Verification Checklist
- Verify the sustainability of the 65% revenue contribution from acquired companies versus organic growth.
- Confirm the specific terms and maturity schedule of the $225 million credit facility and senior notes.
- Review the details of the "charges related to the disposition of a business" mentioned in the operating income discussion.
- Assess the impact of the proposed Canadian Imperial Bank of Canada contract on future revenue streams.
- Monitor the company's ability to maintain the 41% effective tax rate as projected by management.