FISERV INC 10-Q Summary: Period Ended June 30, 2001
Business Context and Reporting Period
This is an unaudited quarterly report (Form 10-Q) for FISERV, INC., a leading independent provider of financial data processing systems and information management services. The report covers the three and six-month periods ended June 30, 2001. The Company operates through three segments: Financial institution outsourcing, systems and services; Securities processing and trust services; and All other and corporate.
Key Financial Metrics
| Metric (Six Months Ended June 30) | 2001 (in thousands) | 2000 (in thousands) |
|---|---|---|
| Revenues | $926,558 | $812,836 |
| Operating Income | $174,984 | $158,342 |
| Net Income | $102,754 | $88,184 |
| Diluted EPS | $0.81 | $0.70 |
| Operating Cash Flow | $187,103 | $100,014 |
| Cash and Equivalents (Ending) | $77,963 | $72,513 |
| Long-term Debt | $310,186 | $334,958 |
| Short-term Borrowings | $36,125 | $19,725 |
Margins (Six Months 2001): Operating margin was 18.9% (down from 19.5% in 2000). The effective income tax rate was 40%.
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 14.0% year-over-year for the six-month period, driven primarily by the Financial institution outsourcing segment (+21.2%) and acquisitions (approx. 55% of growth).
- Segment Divergence: While the outsourcing segment grew, the Securities processing and trust services segment declined 9.5% due to lower transaction volumes in the U.S. retail financial markets.
- Profitability: Net income increased 16.5% to $102.8 million. Operating income rose 10.5% despite a $12.3 million pre-tax restructuring charge in Q2 2001.
- Amortization: Amortization of intangible assets decreased significantly (from $22.8M to $17.7M for six months) due to an impairment charge recorded in the prior year.
- Acquisitions: The Company completed four acquisitions for approximately $93.1 million in cash and issued 220,000 shares of common stock.
Guidance, Outlook, and Risks
- Outlook: Management expects the effective income tax rate to remain at 40% for the remainder of the year. The Company believes cash flow from operations and available credit facilities ($572M aggregate revolving credit) are adequate for funding requirements.
- Restructuring: A $12.3 million charge was recorded in Q2 2001 to consolidate securities processing operations and eliminate duplicate functions. This included severance, lease obligations, and asset write-downs.
- Risks: Forward-looking statements are subject to risks including economic factors, competitive pressures, and technological changes. The Securities processing segment remains sensitive to volatility in U.S. retail financial markets.
- Accounting Changes: The Company adopted SFAS 133 (Derivative Instruments) effective Jan 1, 2001, resulting in a $2.7 million after-tax reduction to accumulated other comprehensive income.
Investor Verification Checklist
- Verify the sustainability of revenue growth in the Financial institution outsourcing segment versus the decline in Securities processing volumes.
- Confirm the impact of the $12.3 million restructuring charge on future operating costs and efficiency gains.
- Review the $93.1 million acquisition spend and the integration status of the four new businesses.
- Monitor the $216.4 million utilized against the $572 million revolving credit facility and future debt repayment schedules.
- Assess the sensitivity of the Securities processing segment to continued weakness in U.S. retail financial markets.