FISERV INC. 10-Q Summary: Quarter Ended September 30, 1997
Business Context and Reporting Period
This Form 10-Q covers the quarterly and nine-month periods ended September 30, 1997, for FISERV, Inc., a provider of financial services technology and processing solutions. The financial statements are unaudited but include all normal recurring adjustments. A material event during this period was the acquisition of BHC Financial, Inc. on May 30, 1997, accounted for as a pooling of interests, which required restatement of prior year comparative figures.
Key Financial Metrics
| Metric | 3 Months Ended Sep 30, 1997 | 9 Months Ended Sep 30, 1997 |
|---|---|---|
| Revenues | $238.3 million | $705.0 million |
| Net Income | $23.2 million | $66.6 million |
| Diluted EPS | $0.43 | $1.25 |
| Operating Income | $42.0 million | $122.4 million |
| Operating Margin | 17.6% | 17.4% |
| Cash from Operations | N/A | $157.5 million |
| Cash and Equivalents | $72.2 million (as of Sep 30, 1997) | |
| Long-Term Debt | $221.3 million (as of Sep 30, 1997) | |
| Short-Term Borrowings | $23.2 million (as of Sep 30, 1997) |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 10.6% year-over-year for the quarter and 8.8% for the nine-month period. Approximately 30% of year-to-date growth is attributed to the BHC acquisition, with the remainder driven by new clients, transaction volume growth, and price increases.
- Profitability: Net income rose 19% for the quarter and 12% for the nine-month period compared to 1996. Operating income increased 13.2% for the quarter.
- Cost Structure: Cost of revenues increased 10.1% for the quarter. The nine-month increase was disproportionate to revenue growth due to $3.6 million in severance payments related to a Chase Manhattan Bank contract restructuring and $3.7 million in merger-related expenses for the BHC acquisition.
- Interest Expense: Net interest expense decreased significantly ($1.6 million for the quarter; $5.5 million for nine months) due to substantial debt reductions and lower effective rates.
- Liquidity: Cash and cash equivalents decreased from $101.3 million at year-end 1996 to $72.2 million at September 30, 1997, primarily due to investing activities including capital expenditures and acquisitions.
Guidance, Outlook, and Risks
- Outlook: Management expects the effective income tax rate to remain at 41% for the current year. The company believes cash flow from operations and existing credit facilities (including a $225 million unsecured line) are adequate to meet funding requirements, though future acquisitions may necessitate additional borrowings or equity issuance.
- Unusual Items: Results were impacted by one-time charges, including $3.1 million in acquisition costs for BHC and restructuring charges. Amortization of intangible assets decreased due to the completion of amortization for assets acquired from Information Technology, Inc.
- Risks/Contingencies: The filing notes that interim results are not necessarily indicative of full-year results. The company relies on a joint venture with Canadian Imperial Bank of Commerce for Canadian item processing; if gross revenues from this activity were recognized, reported revenues would be significantly higher (approx. 27% increase for the quarter).
Investor Verification Checklist
- Verify the impact of the BHC Financial, Inc. acquisition on restated 1996 comparative figures.
- Confirm the specific details of the $3.6 million severance payment related to the Chase Manhattan Bank contract restructuring.
- Review the terms and utilization of the $225 million unsecured line of credit and commercial paper facility.
- Assess the sustainability of the 41% effective tax rate for the remainder of the fiscal year.
- Understand the accounting treatment of the Canadian joint venture revenues (fee basis vs. gross revenue recognition).