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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950131-01-001283.txt : 20010228
<SEC-HEADER>0000950131-01-001283.hdr.sgml : 20010228
ACCESSION NUMBER: 0000950131-01-001283
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 5
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010227
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FISERV INC
CENTRAL INDEX KEY: 0000798354
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374]
IRS NUMBER: 391506125
STATE OF INCORPORATION: WI
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 000-14948
FILM NUMBER: 1555175
BUSINESS ADDRESS:
STREET 1: 255 FISERV DR
STREET 2: PO BOX 979
CITY: BROOKFIELD
STATE: WI
ZIP: 53045
BUSINESS PHONE: 4148795000
MAIL ADDRESS:
STREET 1: 255 FISERV DRIVE
CITY: BROOKFIELD
STATE: WI
ZIP: 53045
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-K (DATED DECEMBER 31, 2000)
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
COMMISSION FILE NO. 0-14948
FISERV, INC.
------------
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1506125
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 FISERV DRIVE, BROOKFIELD, WISCONSIN 53045
- --------------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (262) 879-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
----
(Title of Class)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $0.01 Par Value
-----------------------------
(Title of Class)
Preferred Stock Purchase Rights
-------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant as of January 31, 2001: $6,427,897,972
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of January 31, 2001: 124,060,757
DOCUMENTS INCORPORATED BY REFERENCE:
2000 Annual Report to Shareholders - Parts II, IV
Proxy Statement for March 29, 2001, Annual Meeting of Shareholders - Part III
<PAGE>
FISERV, INC. AND SUBSIDIARIES
FORM 10-K
December 31, 2000
<TABLE>
<CAPTION>
PART I Page
- ------ ----
<S> <C>
Item 1. Business 1
Item 2. Properties 8
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Executive Officers of the Registrant 9
PART II
- --------
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters 10
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 7a. Quantitative and Qualitative Disclosure about Market Risk 10
Item 8. Financial Statements and Supplementary Data 10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 10
PART III
- --------
Item 10. Directors and Executive Officers of the Registrant 10
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial Owners and Management 10
Item 13. Certain Relationships and Related Transactions 10
PART IV
- -------
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 11
</TABLE>
<PAGE>
================================================================================
PART I
================================================================================
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Annual Report on Form 10-K are "forward-
looking statements" intended to qualify for the safe harbors from liability
established by the Private Securities Litigation Reform Act of 1995. These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as "believes," "anticipates" or
"expects," or words of similar import. Similarly, statements that describe
future plans, objectives or goals of Fiserv, Inc. ("Fiserv" or the "Company")
are also forward-looking statements. Such forward-looking statements are subject
to certain risks and uncertainties which could cause actual results to differ
materially from those currently anticipated. Factors that could affect results
include, among others, 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. Shareholders, potential investors and
other readers are urged to consider these factors carefully in evaluating the
forward-looking statements and are cautioned not to place undue reliance on such
forward-looking statements.
Item 1. Business
Fiserv is a leading technology resource for information management systems
used by the financial industry. The Company was formed on July 31, 1984, through
the combination of two major regional data processing firms located in
Milwaukee, Wisconsin, and Tampa, Florida. These firms--First Data Processing of
Milwaukee and Sunshine State Systems of Tampa--began their operations in 1964
and 1971, respectively, as the data processing operations of their parent
financial institutions. Historically, operations were expanded by developing a
range of services for these parent organizations as well as other financial
institutions. Since its organization in 1984, Fiserv has grown through the
continuing development of highly specialized services and product enhancements,
the addition of new clients and the acquisition of firms complementing the
Fiserv organization.
Headquartered in Brookfield, Wisconsin, Fiserv provides information
management technology and related services to banks, broker-dealers, credit
unions, financial planners and investment advisers, insurance companies, leasing
companies, mortgage lenders and savings institutions. The Company operates
centers nationwide for full-service financial data processing, software system
development, item processing and check imaging, technology support and related
product businesses. In addition, the Company has business support centers in
Australia, Colombia, Indonesia, the Philippines, Poland, Singapore and the
United Kingdom.
Business Strategy
- -----------------
The market for products and services offered by financial institutions
continues to undergo change. New alternative lending and investment products are
being introduced and implemented by the financial industry with great frequency;
the distinctions among financial services traditionally offered by banking and
thrift organizations as well as by securities and insurance firms continue to
narrow; and financial institutions diversify and consolidate on an ongoing basis
in response to market pressures, as well as under the auspices of regulatory
agencies.
Although such market changes have led to consolidations that have reduced
the number of financial institutions in the United States, such consolidations
have not resulted in a material reduction of the number of customers or
financial accounts serviced by the financial industry as a whole. New
organizations entering the once limited financial services industry have opened
new markets for Fiserv services.
1
<PAGE>
To stay competitive in this changing marketplace, financial institutions
are finding they must aggressively meet the growing needs of their customers for
a broad variety of new products and services that are typically transaction-
oriented and fee-based. The growing volume and types of transactions and
accounts have increased the data processing requirements of these institutions.
As a consequence, Fiserv management believes that the financial services
industry is one of the largest users of data processing products and services.
Moreover, Fiserv expects that the industry will continue to require
significant commitments of capital and human resources to the information
systems requirements, to require application of more specialized systems and to
require development, maintenance and enhancement of applications software.
Fiserv believes that economies of scale in data processing operations are
essential to justify the required level of expenditures and commitment of human
resources.
In response to these market dynamics, the means by which financial
institutions obtain data processing services have changed. Many smaller, local
and regional third-party data processors are leaving the business or
consolidating with larger providers. A number of large financial institutions
previously providing third-party processing services for other institutions have
withdrawn from the business to concentrate on their primary, core businesses.
Similarly, an increasing number of financial institutions that previously
developed their own software systems and maintained their own data processing
operations have outsourced their data processing requirements by licensing their
software from a third party or by contracting with third-party processors to
reduce costs and enhance their products and services. Outsourcing can involve
simply the licensing of software, thereby eliminating the costly technical
expertise within the financial institution, or the utilization of service
bureaus, facilities management or resource management capabilities. Fiserv
provides all of these options to the financial industry.
To capitalize on these industry trends and to become the premier provider
of data processing products and related services, Fiserv has implemented a
strategy of continuing to develop new products, improving the cost effectiveness
of services provided to clients, aggressively soliciting new clients, and making
both opportunistic and strategic acquisitions.
<TABLE>
<CAPTION>
Acquisition History
- -------------------
Formed Acquired Company Service
=========================================================================================================
<S> <C> <C> <C>
1964 July 1984 First Data Processing, Milwaukee, WI Data processing
1971 July 1984 Sunshine State Systems, Tampa, FL Data processing
1966 Nov. 1984 San Antonio, Inc., San Antonio, TX Data processing
1982 Oct. 1985 Sendero Corporation, Scottsdale, AZ Asset/liability management
1962 Oct. 1985 First Trust Corporation, Denver, CO DP for retirement planning
1962 Oct. 1985 First Retirement Marketing, Denver, CO Retirement planning services
1973 Jan. 1986 On-Line, Inc., Seattle, WA Data processing, forms
1966 May 1986 First City Financial Systems, Inc., Beaumont, TX Data processing
1962 Feb. 1987 Pamico, Inc., Milwaukee, WI Specialized forms
1975 Apr. 1987 Midwest Commerce Data Corp., Elkhart, IN Data processing
1969 Apr. 1987 Fidelity Financial Services, Inc., Spokane, WA Data processing
1965 Oct. 1987 Capbanc Computer Corp., Baton Rouge, LA (sold 1991) Data processing
1971 Feb. 1988 Minnesota On-Line Inc., Minneapolis, MN Data processing
1965 May 1988 Citizens Financial Corporation, Cleveland, OH Data processing
1980 May 1988 ZFC Electronic Data Services, Inc., Bowling Green, KY Data processing
1969 June 1988 GESCO Corporation, Fresno, CA Data processing
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Formed Acquired Company Service
==============================================================================================
<S> <C> <C> <C>
1967 Nov. 1988 Valley Federal Data Services, Los Angeles, CA Data processing
1984 Dec. 1988 Northeast Savings Data Services, Hartford, CT Data processing
1982 May 1989 Triad Software Network, Ltd., Chicago, IL (sold 1996) Data processing
1969 Aug. 1989 Northeast Datacom, Inc., New Haven, CT Data processing
1978 Feb. 1990 Financial Accounting Services Inc., Pittsburgh, PA Data processing
1974 June 1990 Accurate Data On Line, Inc., Titusville, FL Data processing
1982 June 1990 GTE EFT Services Money Network, Fresno, CA EFT networks
1968 July 1990 First Interstate Management, Milwaukee, WI Data processing
1982 Oct. 1990 GTE ATM Networks, Fresno, CA EFT networks
1867 Nov. 1990 Boston Safe Deposit & Trust Co. IP Services, MA Item processing
1968 Dec. 1990 First Bank, N.A. IP Services, Milwaukee, WI Item processing
1979 Apr. 1991 Citicorp Information Resources, Inc., Stamford, CT Data processing
1980 Apr. 1991 BMS Processing, Inc., Randolph, MA Item processing
1979 May 1991 FHLB of Dallas IP Services, Dallas, TX Item processing
1980 Nov. 1991 FHLB of Chicago IP Services, Chicago, IL Item processing
1977 Feb. 1992 Data Holdings, Inc., Indianapolis, IN Automated card services
1980 Feb. 1992 BMS On-Line Services, Inc. (assets), Randolph, MA Data processing
1982 Mar. 1992 First American Information Services, St. Paul, MN Data processing
1981 July 1992 Cadre, Inc., Avon, CT (sold 1996) Disaster recovery
1992 July 1992 Performance Analysis, Inc., Cincinnati, OH Asset/liability management
1986 Oct. 1992 Chase Manhattan Bank, REALM Software, NY Asset/liability management
1984 Dec. 1992 Dakota Data Processing, Inc., Fargo, ND Data processing
1983 Dec. 1992 Banking Group Services, Inc., Somerville, MA Item processing
1968 Feb. 1993 Basis Information Technologies, Atlanta, GA Data processing, EFT
1986 Mar. 1993 IPC Service Corporation (assets), Denver, CO Item processing
1973 May 1993 EDS' FHLB Seattle (assets), Seattle, WA Item processing
1982 June 1993 Datatronix Financial Services, San Diego, CA Item processing
1966 July 1993 Data Line Service, Covina, CA Data processing
1978 Nov. 1993 Financial Processors, Inc., Miami, FL Data processing
1974 Nov. 1993 Financial Data Systems, Jacksonville, FL Item processing
1961 Nov. 1993 Financial Institutions Outsourcing, Pittsburgh, PA Data processing
1972 Nov. 1993 Data-Link Systems, South Bend, IN Mortgage banking services
1985 Apr. 1994 National Embossing Company, Inc., Houston, TX Automated card services
1962 May 1994 Boatmen's Information Systems of Iowa, Des Moines Data processing
1981 Aug. 1994 FHLB of Atlanta IP Services, Atlanta, GA Item processing
1989 Nov. 1994 CBIS Imaging Technology Banking Unit, Maitland, FL Imaging technology
1987 Dec. 1994 RECOM Associates, Inc., Tampa, FL (sold 1998) Network integration
1970 Jan. 1995 Integrated Business Systems, Glendale, CA Specialized forms
1977 Feb. 1995 BankLink, Inc., New York, NY Cash management
1976 May 1995 Information Technology, Inc., Lincoln, NE Software & services
1957 Aug. 1995 Lincoln Holdings, Inc., Denver, CO DP for retirement planning
1993 Sept. 1995 SRS, Inc., Austin, TX Data processing
1992 Sept. 1995 ALLTEL's Document Management Services, CA, NJ Item processing
1978 Nov. 1995 Financial Information Trust, Des Moines, IA Data processing
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Formed Acquired Company Service
===============================================================================================================
<C> <S> <C> <C>
1983 Jan. 1996 UniFi, Inc., Fort Lauderdale, FL Software & services
1982 Nov. 1996 Bankers Pension Services, Inc., Tustin, CA DP for retirement planning
1992 Apr. 1997 AdminaStar Communications, Indianapolis, IN Laser print/mailing services
1982 May 1997 Interactive Planning Systems, Atlanta, GA PC-based financial systems
1983 May 1997 BHC Financial, Inc., Philadelphia, PA Securities services
1968 Sept. 1997 FIS, Inc., Orlando, FL, and Baton Rouge, LA Data processing
n/a Sept. 1997 Stephens Inc. clearing business, Little Rock, AR Securities services
1986 Oct. 1997 Emerald Publications, San Diego, CA Financial seminars & training
1968 Oct. 1997 Central Service Corp., Greensboro, NC Data & item processing
1993 Oct. 1997 Savoy Discount Brokerage, Seattle, WA Securities services
1990 Dec. 1997 Hanifen, Imhoff Holdings, Inc., Denver, CO Securities services
1980 Jan. 1998 Automated Financial Technology, Inc., Malvern, PA Data processing
1981 Feb. 1998 The LeMans Group, King of Prussia, PA Automobile leasing software
n/a Feb. 1998 PSI Group, Seattle, WA Laser printing
1956 Apr. 1998 Network Data Processing Corporation, Cedar Rapids, IA Insurance data processing
1977 Apr. 1998 CUSA Technologies, Inc., Salt Lake City, UT Software & services
1982 May 1998 Specialty Insurance Service, Orange, CA Insurance data processing
1985 Aug. 1998 Deluxe Card Services, St. Paul, MN Automated card services
1981 Oct. 1998 FHLB of Topeka IP Services, Topeka, KS Item processing
n/a Oct. 1998 FiCATS, Norristown, PA Item processing
1984 Oct. 1998 Life Instructors, Inc., New Providence, NJ Insurance/securities training
1994 Nov. 1998 ASI Financial, Inc., New Jersey and New York PC-based financial systems
1986 Dec. 1998 The FREEDOM Group, Inc., Cedar Rapids, IA Insurance data processing
1994 Jan. 1999 QuestPoint, Philadelphia, PA Item processing
1981 Feb. 1999 Eldridge & Associates, Lafayette, CA PC-based financial systems
1984 Feb. 1999 RF/Spectrum Decision Science Corporation, Oakland, CA Software & services
1978 Mar. 1999 FIPSCO, Inc., Des Plaines, IL Insurance marketing systems
1987 Apr. 1999 Progressive Data Solutions, Inc./Infinity Software Insurance software systems
Systems, Inc., Orlando, FL
1973 June 1999 JWGenesis Clearing Corporation, Boca Raton, FL Securities services
1987 June 1999 Alliance ADS, Redwood Shores, CA Imaging technology
1962 Aug. 1999 Envision Financial Technologies, Inc., Chicago, IL Data processing
1995 Oct. 1999 Pinehurst Analytics, Inc., Chapel Hill, NC PC-based financial systems
1982 Dec. 1999 Humanic Design Corporation, Mahwah, NJ Software & services
1983 Jan. 2000 Patterson Press, Inc., Nashville, TN Card services
1982 May 2000 Resources Trust Company, Denver, CO DP for retirement planning
1986 Sept. 2000 National Flood Services, Inc., Kalispell, MT Insurance data processing
</TABLE>
Information Technology Services
- -------------------------------
Fiserv is a technology company focused on helping financial services
providers meet the challenges and opportunities of today's dynamic financial
marketplace. The Company's core business is serving the needs of banking,
lending, insurance, financial planners and securities providers. With its wide
array of industry-specific products, Fiserv clients can satisfy their customers'
growing desire for anywhere, anytime financial services. 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
4
<PAGE>
business segment provides account and transaction processing solutions and
services to financial institutions and other financial intermediaries. The
Securities processing and trust services business segment provides securities
processing solutions and retirement plan administration services to brokerage
firms, financial planners and financial institutions. The All other and
corporate business segment provides plastic card services and document
solutions, and includes general corporate expenses. The following discussion
covers the two major operating segments:
Financial Institution Outsourcing, Systems and Services. Account processing
--------------------------------------------------------
is a core requirement of every financial institution. It's also vital to the
operations of brokerage firms and insurance companies. No matter how the
industry may consolidate and evolve, Fiserv expects that there will always
remain the need for account processing. That's where Fiserv is positioned--as a
leader in financial information management.
Fiserv provides comprehensive solutions designed to meet the information
processing requirements of financial institutions, including account and
transaction processing services, item processing, loan servicing and lending
systems. The Company offers its clients service bureau and in-house processing
systems, e-commerce solutions and complementary products. In essence, Fiserv
provides all the technology a bank, credit union, mortgage lender, savings or
financing institution needs to run its operations--from deposit accounts to
loans to general ledger to check processing.
Fiserv products, services and software solutions are available through
multiple delivery channels to financial institutions in the United States, and
many of its systems have applications designed for the unique requirements of
financial institutions operating outside of North America. Fiserv international
teams develop, sell, install and support core banking and delivery channel
integration solutions for a wide range of international banks and financial
services companies located in over 60 countries.
All Fiserv core systems can be complemented with a number of other products
that allow clients to create a total servicing solution, depending on their
requirements. These complementary products and back-office solutions include
treasury and investment management, decision support and performance measurement
solutions, electronic funds transfer services, imaging systems, human resource
information systems, call center systems, loan origination and tracking, auto
leasing software, data warehousing/data mining and credit services.
The insurance industry, like banking, has requirements for basic
administration services and information processing systems. Fiserv brings
expertise in information management technology and related administration
processing services to the insurance and banking industries. The products and
solutions offered by the Company automate the full range of insurance services
and support the growing convergence between banking and insurance.
Fiserv insurance solutions include administration services and software for
life, annuity, health insurance, property/casualty, flood and workers
compensation; award-winning claims workstation software; comprehensive financial
accounting systems; computer-based training for insurance and securities; and
electronic sales platforms that can be delivered over the Internet.
Securities Processing and Trust Services. The securities business is about
-----------------------------------------
transactions and volume; advanced technology that makes executing and clearing
trades faster, easier and more economical; and service excellence and customer
satisfaction. Fiserv has accumulated the technology resources and industry
knowledge required to meet the needs of brokerage firms and financial
institutions that are expanding into this business.
The Company provides comprehensive clearing, execution and brokerage
services. With Fiserv, brokerage firms and financial institutions gain a
technology resource with the volumes, management expertise, products and service
necessary to help satisfy customer needs.
The administration of self-directed retirement plans is also a highly
specialized business that benefits, as do all financial services applications,
from technology. Fiserv has built a trusted reputation in this field by applying
its expertise to technology for administration of business and self-directed
retirement plans and related services.
As a leading provider of retirement plan administration and processing
services to financial planners, Fiserv provides a full range of services
including trustee services, proprietary software for registered investment
advisors, financial seminars and related marketing materials.
5
<PAGE>
Financial information concerning the Company's industry segments is
included in Note 8 to the Consolidated Financial Statements contained in the
Company's Annual Report to Shareholders included in this Annual Report on Form
10-K as Exhibit 13 and such information is incorporated herein by reference.
Servicing the Market
- --------------------
The market for Fiserv account and transaction processing services and
products has specific needs and requirements, with strong emphasis placed by
clients on software flexibility, product quality, reliability of service,
comprehensiveness and integration of product lines, timely introduction of new
products and features, cost effectiveness and demand for service excellence.
Through its multiple product offerings, the Company successfully services these
market needs for clients ranging in size from start-ups to some of the largest
financial services providers worldwide.
Fiserv believes that the position it holds as an independent, growth-
oriented company dedicated to its business is an advantage to its clients. The
Company differs from many of the account and transaction processing resources
currently available since it isn't a regional or local cooperatively owned
organization, nor a data processing subsidiary, an affiliate of a financial
institution or a hardware vendor. Due to the economies of scale gained through
its broad market presence, Fiserv offers clients a selection of information
management and data processing solutions designed to meet the specific needs of
the ever-changing financial industry.
The Company believes this independence and primary focus on the financial
industry helps its business development and related client service and product
support teams remain responsive to the technology needs of its market, now and
for the future.
"The Client Comes First" is one of the Company's founding principles. It is
a belief backed by a dedication to providing ongoing client service and
support--no matter the client size.
The Company believes its commitment of substantial resources to training
and technical support helps retain Fiserv clients. Fiserv conducts the majority
of its new and ongoing client training in its technology centers, where the
Company maintains fully equipped demonstration and training facilities
containing equipment used in the delivery of Fiserv services. Fiserv also
provides local and on-site training services.
Fiserv has been an international company since 1986, when its retail
banking products were first launched throughout Europe, Asia and Latin America.
Since then, the Company has grown an impressive infrastructure for supporting
clients in international markets. Fiserv currently maintains international
support staffs in Australia, Colombia, Indonesia, the Philippines, Poland,
Singapore and the United Kingdom.
Product Development
- -------------------
In order to meet the changing technology needs of the clients served by
Fiserv, the Company continually develops, maintains and enhances its systems.
Resources applied to product development and maintenance are believed to be
approximately 8% to 10% of Company revenues, about half of which is dedicated to
software development.
The Fiserv network of development and financial information technology
centers applies the shared expertise of multiple Fiserv teams to design, develop
and maintain specialized processing systems around the leading technology
platforms. The applications of its account processing systems meet the
preferences and diverse requirements of the various international, national,
regional or local market-specific financial service environments of the
Company's many clients.
Though multiple Fiserv centers share the Company's variety of nationally
developed and supported software, each center has specialized capabilities that
enable it to offer system application features and functions unique to its
client base. Where the client's requirements warrant, Fiserv purchases software
programs from third parties that are interfaced with existing Fiserv systems. In
developing its products, Fiserv stresses interaction with and responsiveness to
the needs of its clients.
6
<PAGE>
Fiserv provides a dedicated solution designed, developed, maintained and
enhanced according to each client's goals for service quality, business
development, asset/liability mix, local market positioning and other user-
defined parameters.
Fiserv regards its software as proprietary and utilizes a combination of
trade secrecy laws, internal security practices and employee non-disclosure
agreements for protection. The Company believes that legal protection of its
software, while important, is less significant than the knowledge and experience
of the Company's management and personnel and their ability to develop, enhance
and market new products and services. The Company believes that it holds all
proprietary rights necessary for the conduct of its business.
Competition
- -----------
The market for information technology products and services within the
financial industry is highly competitive. The Company's principal competitors
include internal data processing departments, data processing affiliates of
large companies or large computer hardware manufacturers, independent computer
service firms and processing centers owned and operated as user cooperatives.
Certain competitors possess substantially greater financial, sales and marketing
resources than the Company. Competition for in-house data processing and
software departments is intensified by the efforts of computer hardware vendors
who encourage the growth of internal data centers.
Competitive factors for processing services include product quality,
reliability of service, comprehensiveness and integration of product lines,
timely introduction of new products and features, and price. The Company
believes that it competes favorably in each of these categories. In addition,
the Company believes that its position as an independent vendor, rather than as
a cooperative, an affiliate of a larger corporation or a hardware vendor, is a
competitive advantage.
Government Regulation
- ---------------------
The Company's data processing subsidiaries are not themselves directly
subject to federal or state regulations specifically applicable to financial
institutions such as banks, thrifts and credit unions. As a provider of services
to these entities, however, the data processing operations are observed from
time to time by the Federal Deposit Insurance Corporation, the National Credit
Union Association, the Office of Thrift Supervision, the Office of the
Comptroller of the Currency and various state regulatory authorities. In
addition, several of the Company's operations are reviewed annually by
independent auditors to provide internal control evaluations for its clients'
auditors and regulators.
As trust companies under Colorado law, First Trust, Lincoln Trust and
Resources Trust are subject to the regulations of the Colorado Division of
Banking. First Trust, Lincoln Trust and Resources Trust historically have
complied with such regulations and although no assurance can be given, the
Company believes First Trust, Lincoln Trust and Resources Trust will continue to
be able to comply with such regulations. Commencing in 1991, First Trust
received approval of its application for Federal Deposit Insurance Corporation
coverage of its customer deposits.
The Company's securities businesses, Fiserv Securities, Inc. (formerly BHC
Financial, Inc.) and affiliates and Fiserv Correspondent Services, Inc.
(formerly Hanifen, Imhoff Clearing Corporation and JWGenesis Clearing
Corporation), are subject to the broker-dealer rules of the Securities and
Exchange Commission and the New York Stock Exchange, as well as the National
Association of Securities Dealers and other stock exchanges of which they are
members.
Employees
- ---------
Fiserv employs approximately 14,000 specialists worldwide in its
information management centers and related product and service companies. This
service support network includes employees with backgrounds in computer science
and the financial industry, often complemented by management
7
<PAGE>
and other direct experience in banks, credit unions, mortgage firms, savings and
other financial services business environments.
Fiserv employees provide expertise in sales and marketing; account management
and client services; computer operations, network control and technical support;
programming, software development, modification and maintenance; conversions and
client training; financial planning and related support services.
In supporting international markets, Fiserv works closely with its clients to
help ensure their continued success. Fiserv employees speak the same language
as their clients, they also understand the differences in the style of doing
business, as well as the financial products requirements and regulations unique
to each client and its specific market.
Fiserv employees are not represented by a union, and there have been no work
stoppages, strikes or organizational attempts. The service nature of the Fiserv
business makes its employees an important corporate asset, and while the market
for qualified personnel is competitive, the Company does not experience
significant difficulty with hiring or retaining its staff of top industry
professionals. In assessing companies to acquire, the quality and stability of
the prospective company's staff are emphasized.
Management attributes its ability to attract and keep quality employees to,
among other things, the Company's growth and dedication to state-of-the-art
software development tools and hardware technologies.
Item 2. Properties
Fiserv currently operates full-service data centers, software system
development centers and item processing and back-office support centers in 121
cities (113 in the United States): Birmingham, Alabama; Little Rock, Arkansas;
Phoenix and Scottsdale, Arizona; Diamond Bar, Fresno, Lafayette, Moorpark,
Oakland, Ontario, Orange, Redwood City, Sacramento, San Diego, San Leandro, Van
Nuys and Walnut, California; Denver and Englewood, Colorado; Wallingford and
Windsor, Connecticut; Boca Raton, Heathrow, Jacksonville, Lake Mary, Lake Wales,
Maitland, Miami, Orlando, Plantation, Tampa and Titusville, Florida; Atlanta,
Duluth, Macon, Marietta and Norcross, Georgia; Honolulu, Hawaii; Cedar Rapids
and West Des Moines, Iowa; Arlington Heights, Chicago, Des Plaines, Marion and
Rock Island, Illinois; Indianapolis and South Bend, Indiana; Topeka, Kansas;
Bowling Green and Louisville, Kentucky; Baton Rouge and Kenner, Louisiana;
Gaithersburg, Maryland; Braintree, Mansfield and Somerville, Massachusetts;
Flint, Northville and Troy, Michigan; Eagan, Edina, Mendota Heights and
Shoreview, Minnesota; Kansas City, Missouri; Kalispell, Montana; Lincoln and
Omaha, Nebraska; Mahwah, New Providence and South Plainfield, New Jersey; Santa
Fe, New Mexico; Fayetteville, Melville, New Hartford and New York, New York;
Chapel Hill and Greensboro, North Carolina; Fargo, North Dakota; Cincinnati and
Cleveland, Ohio; Oklahoma City, Oklahoma; Corvallis and Portland, Oregon; Bryn
Mawr, Erie, King of Prussia, Malvern, Norristown, Philadelphia, Pittsburgh,
Valley Forge and Williamsport, Pennsylvania; Newberry, South Carolina;
Nashville, Tennessee; Addison, Austin, Beaumont, Dallas, Denton, Houston, San
Antonio, Southlake and Stafford, Texas; Salt Lake City and Taylorsville, Utah;
Williamsburg, Virginia; Bellevue, Kent and Seattle, Washington; and Brookfield,
Milwaukee, New Berlin and Sheboygan, Wisconsin. International business centers
are located in North Sydney, New South Wales, Australia; Bogota, Colombia;
London and Uxbridge, Middlesex, England; Jakarta, Indonesia; Manila,
Philippines; Warsaw, Poland; and Singapore, Singapore.
The Company owns facilities in Brookfield, Corvallis, Greensboro, Kalispell,
Lincoln, Marion, Moorpark, South Bend and Valley Forge; all other buildings in
which centers are located are subject to leases expiring through 2002 and
beyond. The Company owns or leases approximately 160 mainframe computers (Data
General, Hewlett Packard, IBM, NCR, Tandem and Unisys). In addition, the
Company maintains its own national data communication network consisting of
communications processors and leased lines.
8
<PAGE>
Fiserv believes its facilities and equipment are generally well maintained and
are in good operating condition. The Company believes that the computer
equipment it owns and its various facilities are adequate for its present and
foreseeable business. Fiserv periodically upgrades its mainframe capability as
needed. Fiserv contracts with multiple sites to provide processing backup in
the event of a disaster and maintains duplicate tapes of data collected and
software used in its business in locations away from the Company's facilities.
Item 3. Legal Proceedings
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.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year covered by this report, no matter
was submitted to a vote of security holders of the Company.
Executive Officers of the Registrant
- ------------------------------------
The executive officers and other officers of the Company as of February 27,
2001, together with their ages, positions and business experience are described
below:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Leslie M. Muma 56 President and Chief Executive Officer
Donald F. Dillon 60 Chairman of the Board and Chairman of
Information Technology, Inc.
Kenneth R. Jensen 57 Senior Executive Vice President, Chief
Financial Officer and Treasurer
Howard F. Arner 60 President, Insurance Solutions Group
Norman J. Balthasar 54 President and Chief Operating Officer, Financial
Institution Group
Robert H. Beriault 49 President and Chief Operating Officer,
Securities Group
Thomas A. Neill 51 President and Chief Operating Officer, Credit
Union and Industry Products Group
Gordon G. Rockafellow 64 President and Chief Operating Officer, Trust
Services Group
Dean C. Schmelzer 50 Executive Vice President - Marketing & Sales
Charles W. Sprague 51 Executive Vice President, General Counsel,
Chief Administrative Officer and Secretary
</TABLE>
Mr. Muma has been a Director of the Company since it was established in 1984.
He has served as President and Chief Operating Officer of the Company from 1984
to 1999, when he was named President and Chief Executive Officer.
Mr. Dillon was named Chairman of the Board of Directors in July 2000. He
served as Vice Chairman from 1995 to 2000. From 1976 to 1995, Mr. Dillon was
co-founder and President of Information Technology, Inc. (ITI), a software and
services organization that was acquired by the Company in 1995. Mr. Dillon also
serves as Chairman of ITI.
9
<PAGE>
Mr. Jensen has been Executive Vice President, Chief Financial Officer,
Treasurer, Assistant Secretary and a Director of the Company since it was
established in 1984. He was named Senior Executive Vice President in 1986.
Mr. Arner has been Corporate Executive Vice President and President of the
Fiserv Insurance Solutions Group since 1998. Mr. Arner was Chief Executive
Officer of Network Data Processing from 1994 to 1998, when it was acquired by
the Company.
Mr. Balthasar was named President and Chief Operating Officer of the Fiserv
Financial Institution Group in 2000. He served as Corporate Executive Vice
President and President-Savings and Community Bank Group from 1996 to 1999, when
he was named President and Chief Operating Officer of the Fiserv Financial
Institution Outsourcing Group. Mr. Balthasar has been with Fiserv and its
predecessor company since 1974.
Mr. Beriault was named President and Chief Operating Officer of the Fiserv
Securities Group in 1999. He served as Corporate Executive Vice President and
President-Securities Processing Group from 1998 to 1999. Mr. Beriault was
President of Lincoln Trust Company from 1986 to 1995, when it was acquired by
the Company.
Mr. Neill was named President and Chief Operating Officer of the Fiserv Credit
Union and Industry Products Group in 2000. Mr. Neill served as President and
Chief Executive Officer of Basis Information Technologies, Inc. prior to its
acquisition by Fiserv in 1993.
Mr. Rockafellow was named President and Chief Operating Officer of the Fiserv
Trust Services Group in 1999. He has served as Corporate Executive Vice
President and President-Trust Group since 1996. Mr. Rockafellow was the
President and CEO of First Trust Company from 1982 to 1985, when it was acquired
by the Company, and served in that capacity until 1999.
Mr. Schmelzer was named Corporate Executive Vice President, Marketing & Sales
for the Company in 1992. Prior to joining Fiserv, he was Director of Commercial
Analysis for IBM.
Mr. Sprague has been Corporate Executive Vice President, General Counsel and
Secretary since 1994, and Chief Administrative Officer of the Company since
1999. He has been involved with the Company's corporate and legal concerns
since it was formed in 1984.
================================================================================
PART II
================================================================================
Pursuant to Instruction G(2) for Form 10-K, the information required in Items
5 through 8 are incorporated by reference from the Company's Annual Report to
Shareholders included in this Form 10-K Annual Report as Exhibit 13.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
================================================================================
PART III
================================================================================
Pursuant to Instruction G(3) for Form 10-K, the information required in Items
10 through 13 is incorporated by reference from the Company's definitive Proxy
Statement, which is expected to be filed pursuant to Regulation 14A on or before
February 27, 2001.
10
<PAGE>
================================================================================
PART IV
================================================================================
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements:
The consolidated financial statements of the Company as of December 31,
2000 and 1999 and for each of the three years in the period ended December 31,
2000, together with the report thereon of Deloitte & Touche LLP, dated January
26, 2001, appear on pages 23 through 44 of the Company's Annual Report to
Shareholders, Exhibit 13 to this Form 10-K Annual Report, and are incorporated
herein by reference.
(a) (2) Financial Statement Schedule:
The following financial statement schedule of the Company and related
documents are included in this Report on Form 10-K:
Page
----
Independent Auditors' Report 13
Schedule II-Valuation and Qualifying Accounts 13
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended December 31,
2000.
(c) Exhibits:
The exhibits listed in the accompanying exhibit index are filed as
part of this Annual Report on Form 10-K.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: February 27, 2001
FISERV, INC.
By /s/ Leslie M. Muma
----------------------------------------
Leslie M. Muma
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following person on behalf of the
registrant and in the capacities indicated on February 27, 2001.
Signature Capacity
/s/ Leslie M. Muma
- ----------------------------------
Leslie M. Muma Director, President and Chief Executive
Officer
/s/ Donald F. Dillon
- ----------------------------------
Donald F. Dillon Chairman of the Board,
Chairman-Information Technology, Inc.
/s/ Kenneth R. Jensen
- ----------------------------------
Kenneth R. Jensen Director, Senior Executive Vice
President, Chief Financial Officer,
Treasurer
/s/ George D. Dalton
- -----------------------------------
George D. Dalton Director
/s/ Daniel P. Kearney
- -----------------------------------
Daniel P. Kearney Director
/s/ Gerald J. Levy
- -----------------------------------
Gerald J. Levy Director
/s/ L. William Seidman
- -----------------------------------
L. William Seidman Director
/s/ Thekla R. Shackelford
- -----------------------------------
Thekla R. Shackelford Director
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
Shareholders and Directors of Fiserv, Inc.:
We have audited the consolidated financial statements of Fiserv, Inc. and
subsidiaries as of December 31, 2000 and 1999, and for each of the three years
in the period ended December 31, 2000, and have issued our report thereon dated
January 26, 2001; such consolidated financial statements and report are included
in your 2000 Annual Report to Shareholders and are incorporated herein by
reference. Our audits also included the consolidated financial statement
schedule of Fiserv, Inc., listed in Item 14. This consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
- --------------------------------------------
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
January 26, 2001
SCHEDULE II
Valuation and Qualifying Accounts
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
Year Ended Beginning Charged
December 31, Balance to Expense Write-offs Balance
- ----------- ----------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
2000 $11,606,000 $6,803,000 ($2,408,000) $16,001,000
1999 8,041,000 7,028,000 (3,463,000) 11,606,000
1998 6,903,000 6,262,000 (5,124,000) 8,041,000
</TABLE>
13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------ -------------------
3.1 Restated Articles of Incorporation, as amended (filed as Exhibit 3.1 to
the Company's Annual Report on Form 10-K dated February 28, 2000 and
incorporated herein by reference (File No. 0-14948)).
3.2 By-laws, as amended (filed as Exhibit 3.2 to the Company's Current Report
on Form 8-K dated March 25, 1999 and incorporated herein by reference
(File No. 0-14948.))
4.1 Credit Agreements dated as of May 17, 1999, by and among Fiserv, Inc., the
Lenders Party Hereto, and The Bank of New York, as Administrative Agent.
(Not being filed herewith, but will be provided to the Commission upon its
request, pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K.)
4.2 Note Purchase Agreement dated as of March 15, 1991, as amended, among
Fiserv, Inc., Aid Association for Lutherans, Northwestern National Life
Insurance Company, Northern Life Insurance Company and The North Atlantic
Life Insurance Company of America. (Not being filed herewith, but will be
provided to the Commission upon its request, pursuant to Item 601(b) (4)
(iii) (A) of Regulation S-K.)
4.3 Note Purchase Agreement dated as of May 17, 1995, as amended, among
Fiserv, Inc., Teachers Insurance and Annuity Association of America,
Massachusetts Mutual Life Insurance Company, Aid Association for
Lutherans, Northern Life Insurance Company and Northwestern National Life
Insurance Company. (Not being filed herewith, but will be provided to the
Commission upon its request, pursuant to Item 601(b) (4) (iii) (A) of
Regulation S-K.)
4.4 Shareholder Rights Agreement (filed as Exhibit 4 to the Company's Current
Report on Form 8-K dated February 24, 1998, and incorporated herein by
reference (File No. 0-14948.))
4.5 First Amendment to the Shareholder Rights Agreement (filed as Exhibit 4.3
to the Company's Form S-8 dated April 7, 2000, and incorporated herein by
reference (File No. 333-34310.))
4.6 Second Amendment to the Shareholder Rights Agreement.
10.1 Fiserv, Inc. Stock Option Plan, as amended (filed as Exhibit 4.1 to the
Company's Form S-8 Registration Statement dated April 7, 2000, and
incorporated herein by reference (File No. 333-34310.))
10.2 Fiserv, Inc. Executive Incentive Compensation Plan (filed as Exhibit A to
the Company's Proxy Statement for the 2001 Annual Meeting of
Shareholders.)
13 2000 Annual Report to Shareholders (to the extent incorporated by
reference herein).
21 List of Subsidiaries of the Registrant.
23 Independent Auditors' Consent.
14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.6
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>SECOND AMND TO SHAREHOLDER RIGHTS AGREE
<TEXT>
<PAGE>
EXHIBIT 4.6
SECOND AMENDMENT
TO THE
SHAREHOLDER RIGHTS AGREEMENT
THIS AMENDMENT (this "Amendment") is made and entered into as of the 1/st/
---------
day of September, 2000 by and between Fiserv, Inc., a Wisconsin corporation (the
"Company"), and EquiServe Limited Partnership, a division of First Chicago Trust
-------
Company of New York (the "Rights Agent").
------------
W I T N E S S E T H:
--------------------
WHEREAS, the Company and the Rights Agent are parties to that Shareholders
Rights Agreement dated as of February 23, 1998 and amended as of December 1,
1999 (the "Agreement");
---------
WHEREAS, pursuant to the provisions of Section 5.9 of the Agreement the
Company may amend any term, provision or condition of the Agreement prior to the
"Distribution Date" (as such term is defined in the Agreement);
WHEREAS, the Board of Directors of the Company has determined that it is in
the best interests of the Company and its shareholders to provide the Board of
Directors of the Company with the authority granted to "Disinterested Directors"
by the Agreement and to delete all references to "Disinterested Directors";
WHEREAS, pursuant to the provisions of Section 5.9 of the Agreement, an
appropriate officer of the Company has delivered a Certificate of Amendment
(attached as Exhibit A hereto), to the Rights Agent stating that the terms of
this Amendment are in compliance with the terms of Section 5.9 of the Agreement;
and
WHEREAS, pursuant to the provisions of Section 5.9, the Rights Agent is
required to execute this Amendment upon receipt of the Certificate of Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows.
A G R E E M E N T:
-----------------
1. Amendments to the Agreement.
---------------------------
a. Section 1.1(h) of the Agreement is hereby deleted in its entirety
and replaced with the following:
"(h) [Reserved]."
<PAGE>
b. Section 1.1(l) of the Agreement is hereby deleted in its entirety
and replaced with the following:
"(l) "Permitted Offer" shall mean any tender or exchange offer for
---------------
all of the outstanding shares of Common Stock of the Company at a price and on
terms determined, prior to the purchase of shares under such tender or exchange
offer, by at least a majority of the members of the Board who are not officers
of the Company to be appropriate (taking into account all factors which such
Board members deem relevant, including, without limitation, prices reasonably
obtainable if the Company or its assets were sold on an orderly basis designed
to realize maximum value) and otherwise in the best interests of the Company and
its shareholders (other than the Person or any Affiliate or Associate thereof on
whose behalf or for whose benefit such tender or exchange offer is being made)."
c. Section 1.1(s) of the Agreement is hereby deleted in its entirety
and replaced with the following:
"(s) "Share Acquisition Date" shall mean the first date on which
----------------------
there shall be, as determined by a majority of members of the Board in their
sole discretion, a public announcement (which shall include, without limitation,
any press release or publicly available filing with the Securities and Exchange
Commission or any other federal or state governmental authority or agency) by
the Company or any Person that such Person has become an Acquiring Person."
d. Section 3.1 of the Agreement is hereby deleted in its entirety
and replaced with the following:
"3.1 Flip-In.
-------
(a) For purposes of this Article III, the "Product" shall be defined
-------
as the product of the then current Exercise Price and the number of one one-
hundredths of a Preferred Share for which such Right was exercisable prior to
such occurrence.
(b) Subject to Section 3.2, promptly upon the occurrence of an event
described in (i), (ii) or (iii) below (where each event shall be referred to
herein as a "Flip-In Event") proper provision shall be made so that the
-------------
registered holder of each Right, except as otherwise provided in Section 2.5(c),
shall thereafter have the right to receive, upon exercise thereof and payment of
the Product, in accordance with this Agreement, in lieu of Preferred Shares, the
number of shares of Common Stock determined dividing the Product by 50% of the
Fair Market Value of one share of Common Stock on the date of such occurrence:
(i) The occurrence of a Share Acquisition Date;
(ii) The commencement by any Person (other than an Exempt
Person) of, or the first public announcement of the intention of any Person
(other than an Exempt Person) to commence, a tender or exchange offer if,
upon the consummation thereof, such Person would be the Beneficial Owner of
15% or more of the shares of Common Stock of the Company then outstanding;
provided, however, that if any such tender or exchange offer is
2
<PAGE>
cancelled, terminated or otherwise withdrawn prior to the Distribution Date
without the purchase of any Common Stock pursuant thereto, such offer shall
be deemed never to have been commenced or publicly announced; or
(iii) At least a majority of the members of the Board who are
not officers of the Company shall declare that any Person is an "Adverse
-------
Person." A Person may be declared as an Adverse Person if it is determined
------
by at least a majority of the members of the Board who are not officers of
the Company after reasonable inquiry and investigation (including such
consultation, if any, with such Person as such members of the Board shall
deem appropriate) that a Person, either alone or with its Affiliates and
Associates, has become the Beneficial Owner of 10% or more of the
outstanding shares of Common Stock of the Company and that:
(A) such Beneficial Ownership by such Person is
intended to cause, is reasonably likely to cause
or will cause the Company to repurchase the shares
of Common Stock Beneficially Owned by such Person
(and/or its Affiliates and Associates) or the
Company to take other action or enter into one or
a series of related transactions which would
provide such Person (and/or its Affiliates and
Associates) with short-term financial gain under
circumstances which would not be, in the judgment
of such members of the Board, in the best long-
term interests of the Company and its
shareholders, or
(B) such Beneficial Ownership is having or reasonably
likely to have a material adverse effect
(including, but not limited to, impairment of the
Company's relationships with customers or its
ability to maintain its competitive position) on
the business or prospects of the Company
(provided, however, that such members of the Board
may determine not to declare a Person to be an
Adverse Person if, prior to the time that such
Person acquired 10% or more of the then
outstanding shares of Common Stock of the Company,
such Person provides a written statement of its
purposes and intentions in connection with its
proposed acquisition of such shares of Common
Stock, together with any other information
reasonably requested of such Person by such
members of the Board, and such members of the
Board, based on such written statement and
information and such further inquiry and
investigation as such members of the Board shall
deem necessary or appropriate, notify such Person
in writing that such Person will not then be
declared to be an Adverse Person.
The members of the Board may expressly condition in any manner their
determination not to declare a Person to be an Adverse Person in such respects
as they deem appropriate, including,
3
<PAGE>
without limitation, such Person's not acquiring more than a specified amount or
percentage of the Company's then outstanding capital stock or other securities
and/or such Person's not taking actions inconsistent with the purposes and
intentions disclosed in its written statement provided to the Board.
(c) No delay or failure by at least a majority of the members of the
Board who are not officers of the Company to declare any Person to be an Adverse
Person shall in any way waive or otherwise affect the power of such members of
the Board thereafter to declare such Person to be an Adverse Person. In the
event that at least a majority of such members of the Board should at any time
determine, after reasonable inquiry and investigation, including such
consultation, if any, with such Person as such members of the Board shall deem
necessary or appropriate, that such Person has not met or complied with any
condition specified by such members of the Board, such members of the Board may
at any time thereafter declare such Person to be an Adverse Person.
(d) In the event that there shall not be sufficient authorized and
unissued or treasury shares of Common Stock to permit the exercise in full of
the Rights in accordance with Section 3.1(b), the Company shall take all
necessary action to authorize and reserve for issuance such number of additional
shares of Common Stock as may from time to time be required to be issued upon
the exercise in full of all outstanding Rights and, if necessary, shall use its
best efforts to obtain shareholder approval thereof. Notwithstanding the
preceding sentence, if at least a majority of the members of the Board shall
determine that such action is necessary or appropriate and is not contrary to
the best interests of the holders of the Rights or if a sufficient number of
shares of Common Stock cannot be issued for such purpose in accordance with the
provisions hereof, the Board may cause the Company, in lieu of issuing shares of
Common Stock to distribute, upon the exercise of each Right, cash, debt
securities, shares of preferred stock of the Company, other property or any
combination thereof, having an aggregate Fair Market Value equal to the Fair
Market Value of the number of shares of Common Stock which otherwise would have
been issuable. Any such decision by a majority of the Board must be made and
publicly announced within 45 days after the occurrence of any Flip-In Event."
e. Section 5.1(a) of the Agreement is hereby deleted in its
entirety and replaced with the following:
"(a) The Board may, at its option, at any time prior to the earliest
of the (i) Distribution Date, and (ii) the Final Expiration Date (where such
date at which Rights are redeemed pursuant to this Section shall be referred to
herein as the "Redemption Date"), redeem all, but not less than all, of the then
---------------
outstanding Rights at a redemption price of $.01 per Right, as may be adjusted
as provided in Section 5.1(f) (the "Redemption Price")."
----------------
f. Section 5.1(c) of the Agreement is hereby deleted in its
entirety and replaced with the following:
"(c) In considering whether to redeem the Rights, the Board may
consider the best long and short term interests of the Company and its
shareholders, including, without limitation, the effects of the redemption of
the Rights upon employees, creditors, suppliers and customers of the Company or
of its Subsidiaries and upon the communities in which offices or other
4
<PAGE>
establishments of the Company and such Subsidiaries are located and all other
pertinent factors. The redemption of the Rights by the Board may be made
effective at such time, on such basis and with such conditions as the Board, in
its sole discretion, may establish."
g. Section 5.9 of the Agreement is hereby deleted in its entirety
and replaced with the following:
"5.9 Supplements and Amendments. Prior to the Distribution Date, but
--------------------------
subject to the last sentence of this Section, the Company and the Rights Agent,
if so directed in writing by the Company may supplement or amend any term,
provision or condition of this Agreement, without the approval of the registered
holders of the stock certificates representing the Common Stock and the Rights.
From and after the Distribution Date, but subject to the last sentence of this
Section, the Company and the Rights Agent, if so directed in writing by the
Company may supplement or amend this Agreement, without the approval of the
registered holders of the Rights (however represented), in order to: (i) cure
any ambiguity; (ii) correct or supplement any term, provision or condition of
this Agreement which may be defective or inconsistent with any other term,
provision or condition hereof; (iii) shorten or lengthen any time period
specified herein; or (iv) change or supplement one or more of the terms,
provisions or conditions hereof, other than as described in (iii) above, in any
manner which the Company may deem necessary or desirable and which shall not
materially adversely affect, as determined by the Board, the interests of the
holders (other than a Restricted Person or the transferees thereof specified in
Section 2.5(c)) of the Rights (however represented); provided, however, that
this Agreement may not be supplemented or amended pursuant to clause (iii) of
this sentence (A) to lengthen any time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders (other than a Restricted Person or the transferees
thereof specified in Section 2.5(c)) of the Rights, or (B) to lengthen any time
period relating to when the Rights may be redeemed if at such time the Rights
are not then redeemable. Upon the delivery of a certificate from an appropriate
officer of the Company stating that the proposed supplement or amendment is in
compliance with the terms of this Section, the Rights Agent shall execute such
supplement or amendment; provided, however, that the Rights Agent shall not be
required to execute any supplement or amendment which affects any of the Rights
Agent's rights, powers, obligations, duties or immunities under this Agreement
without its consent. On and after the Distribution Date, no supplement or
amendment shall be made which changes the Exercise Price, the number of one one-
hundredths of a Preferred Share for which a Right is exercisable, the Redemption
Price or the Final Expiration Date. Prior to the Distribution Date, the
interests of the holders of the Rights shall be deemed coincident with the
interests of the holders of the Common Stock of the Company."
h. Section 5.11 of the Agreement is hereby deleted in its entirety
and replaced with the following:
"5.11 Certain Determinations and Actions by the Board. For all purposes of
-----------------------------------------------
this Agreement, any calculation of the number of shares of Common Stock
outstanding at any particular time, including the determination of the
percentage of such outstanding shares of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-
3(d)(1)(i), as in effect on the date hereof, under the Exchange Act. The Board
shall have the exclusive power and authority to interpret this Agreement and to
exercise all rights and powers specifically granted
5
<PAGE>
to the Board or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to make all determinations deemed necessary or advisable for such
administration, including, without limitation, a determination to redeem or not
to redeem the Rights, to exchange or not to exchange the Rights, to declare a
Person to be an Adverse Person or to supplement or amend this Agreement. All
such calculations, determinations, interpretations and exercises (including, for
purposes of clause (ii) below, all omissions with respect to the foregoing)
which are done or made by the Board in good faith shall (i) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Rights and all
other Persons and (ii) not subject any director to any liability to the holders
of the Rights or to any other Person.
i. Section 5.13 of the Agreement is hereby deleted in its entirety
and replaced with the following:
"5.13 Severability. If any term, provision or condition of this Agreement
------------
shall be held by a court of competent jurisdiction or other lawful authority to
be invalid, void or unenforceable, the remaining terms, provisions, and
conditions of this Agreement shall remain in full force and effect and in no way
shall be affected, impaired or invalidated; provided, however, that if any such
term, provision or condition is held by such court or authority to be invalid,
void or unenforceable and the Board shall determine in good faith that severing
the same from this Agreement would adversely affect the purposes or effect of
this Agreement, the right of redemption set forth herein shall be reinstated and
shall not expire until the Close of Business on the tenth day following the date
of such determination by the Board."
2. Remaining Provisions Effective. Except as amended hereby, the
------------------------------
provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed by their officers duly authorized so to do on the dates indicated.
FISERV, INC.
By: /s/ Leslie M. Muma
-------------------------------------------
Its: President and Chief Executive Officer
----------------------------------------
EQUISERV LIMITED PARTNERSHIP
By: /s/ John H. Ruocco
------------------------------------------
Its: Account Manager
------------------------------------------
6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>2000 ANNUAL REPORT
<TEXT>
<PAGE>
EXHIBIT 13
2000 ANNUAL REPORT
FISERV, INC. AND SUBSIDIARIES
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In thousands, except per share data)
Years ended December 31, 2000 1999 1998
-------------------------------------------
<S> <C> <C> <C>
REVENUES $1,653,606 $1,407,545 $1,233,670
-------------------------------------------
COST OF REVENUES:
Salaries, commissions and payroll
related costs 792,799 677,226 573,187
Data processing expenses, rentals and
telecommunication costs 115,029 111,163 119,205
Other operating expenses 316,638 272,616 259,126
Depreciation and amortization of
property and equipment 70,147 63,713 60,697
Amortization of intangible assets 42,812 22,600 15,754
Amortization (capitalization) of internally
generated computer software-net 1,875 7,142 (3,938)
-------------------------------------------
TOTAL COST OF REVENUES 1,339,300 1,154,460 1,024,031
-------------------------------------------
OPERATING INCOME 314,306 253,085 209,639
Interest expense - net (22,089) (19,410) (15,955)
Realized gain from sale of investment 7,818 - -
-------------------------------------------
INCOME BEFORE INCOME TAXES 300,035 233,675 193,684
Income tax provision 123,014 95,807 79,410
-------------------------------------------
NET INCOME $ 177,021 $ 137,868 $ 114,274
===========================================
NET INCOME PER SHARE:
Basic $ 1.44 $ 1.12 $ 0.93
===========================================
Diluted $ 1.40 $ 1.09 $ 0.90
===========================================
SHARES USED IN COMPUTING NET INCOME
PER SHARE:
Basic 123,192 123,143 122,873
===========================================
Diluted 126,536 126,679 127,154
===========================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, 2000 1999
---------- ----------
ASSETS
Cash and cash equivalents $ 98,856 $ 80,554
Accounts receivable-net 265,640 235,350
Securities processing receivables 2,193,291 2,196,068
Prepaid expenses and other assets 91,077 89,378
Trust account investments 1,514,643 1,298,120
Other investments 282,256 335,573
Property and equipment-net 205,555 195,333
Internally generated computer software-net 88,263 90,138
Intangible assets-net 846,739 787,196
---------- ----------
TOTAL $5,586,320 $5,307,710
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 80,633 $ 66,400
Securities processing payables 1,977,323 1,764,382
Short-term borrowings 19,725 234,350
Accrued expenses 182,090 176,443
Accrued income taxes 22,207 12,736
Deferred revenues 156,668 131,476
Trust account deposits 1,525,652 1,298,120
Deferred income taxes 34,992 59,963
Long-term debt 334,958 472,824
---------- ----------
TOTAL LIABILITIES 4,334,248 4,216,694
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock issued, 125,387,700 shares 1,254 1,254
Additional paid-in capital 455,444 458,550
Accumulated other comprehensive income 78,869 125,026
Accumulated earnings 753,531 576,510
Treasury stock, at cost, 1,581,900 and 2,804,400
shares, respectively (37,026) (70,324)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 1,252,072 1,091,016
---------- ----------
TOTAL $5,586,320 $5,307,710
========== ==========
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(In thousands)
Years ended December 31, 2000 1999 1998
--------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
SHARES ISSUED-300,000 AUTHORIZED:
Balance at beginning of year 125,388 83,253 53,925
Shares issued under stock plans-net - 394 495
Shares issued for acquired companies - - 1,132
Three-for-two stock split - 41,741 27,701
---------- ---------- --------
Balance at end of year 125,388 125,388 83,253
========== ========== ========
COMMON STOCK-PAR VALUE $0.01 PER SHARE:
Balance at beginning of year $ 1,254 $ 833 $ 539
Shares issued under stock plans-net - 4 5
Shares issued for acquired companies - - 11
Three-for-two stock split - 417 278
---------- ---------- --------
Balance at end of year 1,254 1,254 833
---------- ---------- --------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year 458,550 448,877 427,785
Shares issued under stock plans-net of
income tax benefit (3,106) 10,090 13,036
Shares issued for acquired companies - - 8,334
Three-for-two stock split - (417) (278)
---------- ---------- --------
Balance at end of year 455,444 458,550 448,877
---------- ---------- --------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance at beginning of year 125,026 39,875 16,563
Unrealized (losses) gains on investments -
net of tax (39,765) $(39,765) 85,496 $85,496 23,492 $23,492
Reclassification adjustment for realized gains
included in net income (5,082) (5,082) - - - -
Foreign currency translation adjustment (1,310) (1,310) (345) (345) (180) (180)
---------- ---------- --------
Balance at end of year 78,869 125,026 39,875
---------- ---------- --------
ACCUMULATED EARNINGS:
Balance at beginning of year 576,510 438,642 324,368
Net income 177,021 177,021 137,868 137,868 114,274 114,274
---------- -------- ---------- -------- -------- --------
Balance at end of year 753,531 576,510 438,642
---------- ---------- --------
TREASURY STOCK, AT COST:
Balance at beginning of year (70,324) (42,430) -
Purchase of treasury stock (9,884) (28,713) (42,430)
Shares issued under stock plans-net 43,182 819 -
---------- ---------- --------
Balance at end of year (37,026) (70,324) (42,430)
---------- ---------- --------
TOTAL COMPREHENSIVE INCOME $130,864 $223,019 $137,586
======== ======== ========
TOTAL SHAREHOLDERS' EQUITY $1,252,072 $1,091,016 $885,797
========== ========== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands)
Years ended December 31, 2000 1999 1998
--------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 177,021 $ 137,868 $ 114,274
Adjustments to reconcile net income to net cash
provided by operating activities:
Realized gain from sale of investment (7,818) - -
Deferred income taxes 4,813 14,183 2,463
Depreciation and amortization of
property and equipment 70,147 63,713 60,697
Amortization of intangible assets 42,812 22,600 15,754
Amortization of internally generated computer software 35,883 33,194 26,641
------------------------------------------------
322,858 271,558 219,829
Changes in assets and liabilities, net of effects from
acquisitions of businesses:
Accounts receivable (21,153) 18,853 (22,860)
Prepaid expenses and other assets (179) (3,299) 9,618
Accounts payable and accrued expenses 9,706 14,394 32,422
Deferred revenues 24,844 17,210 21,197
Accrued income taxes 32,674 (1) 13,109
Securities processing receivables and payables - net 215,718 (140,878) 7,080
------------------------------------------------
Net cash provided by operating activities 584,468 177,837 280,395
------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (72,979) (69,697) (77,542)
Capitalization of internally generated computer software (34,008) (26,052) (30,579)
Payment for acquisitions of businesses,
net of cash acquired (88,764) (210,587) (217,792)
Investments 136,726 (209,011) (30,779)
------------------------------------------------
Net cash used in investing activities (59,025) (515,347) (356,692)
------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) short-term borrowings-net (214,625) 119,226 (56,625)
Proceeds from borrowings on long-term debt 5,004 103,523 143,245
Repayment of long-term debt (143,899) (52,790) (6,785)
Issuance of common stock 20,576 5,913 5,041
Purchases of treasury stock (9,884) (28,713) (42,430)
Trust account deposits (164,313) 199,347 16,032
------------------------------------------------
Net cash (used in) provided by financing activities (507,141) 346,506 58,478
------------------------------------------------
Change in cash and cash equivalents 18,302 8,996 (17,819)
Beginning balance 80,554 71,558 89,377
------------------------------------------------
Ending balance $ 98,856 $ 80,554 $ 71,558
================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2000, 1999 and 1998
1. Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Fiserv, Inc. and
all majority owned subsidiaries (the "Company"). All significant intercompany
transactions and balances have been eliminated in consolidation. Certain amounts
reported in 1999 have been reclassified to conform to the 2000 presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and investments with original
maturities of 90 days or less.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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, accrued expenses, trust
account deposits, short- and long-term borrowings, and derivative instruments
approximated fair value as of December 31, 2000 and 1999.
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) 2000 1999
--------------------------------
RECEIVABLES:
Securities failed to deliver $ 17,974 $ 41,554
Securities borrowed 1,101,261 829,573
Receivables from customers 1,036,114 1,283,326
Other 37,942 41,615
--------------------------------
TOTAL $2,193,291 $2,196,068
================================
PAYABLES:
Securities failed to receive $ 19,558 $ 45,255
Securities loaned 1,405,107 1,076,235
Payables to customers 462,485 523,275
Other 90,173 119,617
--------------------------------
TOTAL $1,977,323 $1,764,382
================================
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 $19,725,000 and $234,350,000 as of December 31, 2000 and 1999,
respectively, which bear interest at the respective banks' call rate (6.0% as of
December 31, 2000) and were collateralized by customers' margin account
securities.
<PAGE>
INVESTMENTS
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 $1,525,652,000 and $1,298,120,000 as of December 31,
2000 and 1999, respectively. Trust account investments in government agency and
certain fixed income obligations have an average duration of approximately two
years and six months at December 31, 2000. These investments are held to
maturity and carried at amortized cost as the Company has the ability and intent
to hold these investments to maturity.
Available for sale equity investments are carried at market, based upon quoted
market prices. Unrealized gains or losses on available for sale equity
investments are accumulated in shareholders' equity as other comprehensive
income, net of related deferred income taxes. Related gross unrealized gains
were $134,270,000 and $212,476,000 as of December 31, 2000 and 1999,
respectively. Realized gains or losses are computed based on specific
identification of the equity investments sold.
The following tables summarize the Company's investments in securities:
<TABLE>
<CAPTION>
2000 1999
------------------------ ------------------------
(In thousands) Carrying Fair Carrying Fair
2000 Value Value Value Value
------------------------ ------------------------
<S> <C> <C> <C> <C>
U.S. Government and government
agency obligations $ 737,291 $ 741,699 $ 625,374 $ 616,823
Other fixed income obligations 760,824 766,278 562,560 550,931
------------------------ ------------------------
Total held to maturity investments 1,498,115 1,507,977 1,187,934 1,167,754
Available for sale equity investments 137,100 137,100 215,352 215,352
Money market mutual funds 142,467 142,467 202,503 202,503
------------------------ ------------------------
TOTAL $1,777,682 $1,787,544 $1,605,789 $1,585,609
======================== ========================
These investments are included in the following captions on the balance sheets
as of December 31:
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Trust account investments $1,514,643 $1,298,120
Other investments 263,039 307,669
---------- ----------
TOTAL $1,777,682 $1,605,789
========== ==========
</TABLE>
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:
<TABLE>
<CAPTION>
(In thousands) 2000 1999
-------------------------------
<S> <C> <C>
Data processing equipment $ 232,597 $ 227,292
Purchased software 98,033 81,239
Buildings and leasehold improvements 89,799 84,763
Furniture and equipment 111,615 99,637
-------------------------------
532,044 492,931
Less accumulated depreciation and amortization 326,489 297,598
-------------------------------
TOTAL $ 205,555 $ 195,333
===============================
</TABLE>
INTERNALLY GENERATED COMPUTER SOFTWARE
The Company capitalizes certain costs incurred to develop new software or
enhance existing software which is marketed externally or utilized by the
Company to process customer transactions. Costs are capitalized commencing when
the technological feasibility of the software has been established. Amortization
of capitalized costs is computed on a straight-line basis over the expected
useful life of the product, generally three to five years. 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.
<PAGE>
INTANGIBLE ASSETS
Intangible assets relating to acquisitions consist of the following at December
31:
(In thousands) 2000 1999
-----------------------------
Goodwill $832,134 $793,908
Other 162,823 111,663
-----------------------------
994,957 905,571
Less accumulated amortization 148,218 118,375
-----------------------------
TOTAL $846,739 $787,196
=============================
The excess of the purchase price over the estimated fair value of tangible and
identifiable intangible assets acquired is recorded as goodwill and is generally
amortized over 40 years using the straight-line method. Other intangible assets
consist primarily of computer software, contract rights, customer bases and
trademarks applicable to acquired businesses. These assets are generally
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. Measurement of any impairment loss is based on discounted operating cash
flows. During 2000, the Company recorded a charge of $11,000,000 for impairment
of goodwill associated with the consolidation of certain ancillary product lines
in the Company's software businesses.
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 $124,338,000, $88,458,000 and $77,457,000, net
of direct credits to customer accounts of $94,133,000, $63,519,000 and
$50,180,000 in 2000, 1999 and 1998, respectively. Revenues from the sales of
software are recognized in accordance with the AICPA's Statement of Position No.
97-2, "Software Revenue Recognition" and other authoritative literature.
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.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101 summarizes certain of the staff's views in applying accounting principles
generally accepted in the United States of America to revenue recognition in
financial statements. The Company adopted SAB 101 in the fourth quarter of 2000.
Adoption of this standard did not have a material impact on the Company's
financial statements.
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.
SUPPLEMENTAL CASH FLOW INFORMATION
(In thousands) 2000 1999 1998
------------------------------
Interest paid $29,346 $26,075 $21,111
Income taxes paid 87,633 81,499 66,066
Liabilities assumed in acquisitions
of businesses 401,129 246,120 39,816
ACCOUNTING STANDARDS TO BE ADOPTED
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended, is required to be adopted on January 1, 2001. The Company evaluated the
impact of this statement and has concluded that the adoption of this statement
will not have a material impact on the consolidated financial statements.
<PAGE>
2. Acquisitions
During 2000, 1999 and 1998 the Company completed the following acquisitions:
<TABLE>
<CAPTION>
Month
Company Acquired Service Consideration
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000:
Patterson Press, Inc. Jan Card services Cash for stock
Resources Trust Company May Data processing for retirement Cash for assets
planning
National Flood Services, Inc. Sep Insurance data processing Cash for stock
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 Data processing software and Cash for stock
services
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
</TABLE>
Generally, the acquisitions were accounted for as purchases and, accordingly,
the operations of the acquired companies were 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 $88,764,000,
$210,587,000, and $217,792,000 in 2000, 1999 and 1998, respectively, subject to
certain adjustments. The Company does not anticipate any significant adjustments
to the purchase price allocations. Pro forma information for acquisitions
accounted for as purchases is not presented as the impact was not material.
<PAGE>
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 $229,000,000 was in use at
December 31, 2000, at an average rate of 7.0%. 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 with which the Company was in
compliance at December 31, 2000. As of December 31, 2000, the Company had
interest rate swap agreements to fix the interest rates on certain floating rate
debt at an average rate approximating 6.75% (based on current bank fees and
spreads) for a principal amount of $200,000,000 until 2005.
Long-term debt consisted of the following at December 31:
(In thousands) 2000 1999
------------------------
9.75% senior notes payable, due 2001 $ 2,500 $ 5,000
8.00% senior notes payable, due 2001-2005 64,286 77,143
Bank notes and commercial paper, at
short-term rates 268,172 390,681
------------------------
TOTAL $334,958 $472,824
========================
Annual principal payments required under the terms of the long-term agreements
were as follows at December 31, 2000:
(In thousands)
Year
2001 $ 37,959
2002 14,714
2003 14,714
2004 253,857
2005 13,714
--------
TOTAL $334,958
========
Interest expense with respect to long-term debt amounted to $28,823,000,
$25,111,000 and $21,330,000 in 2000, 1999 and 1998, 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, 2000, is as
follows:
(In thousands) 2000 1999 1998
--------------------------------
Statutory federal tax rate 35% 35% 35%
Tax computed at statutory rate $105,012 $81,786 $67,789
State income taxes-net of federal effect 11,156 9,375 7,601
Non-deductible amortization 3,887 3,161 2,737
Other 2,959 1,485 1,283
--------------------------------
TOTAL $123,014 $95,807 $79,410
================================
The provision for income taxes consisted of the following:
(In thousands) 2000 1999 1998
--------------------------------
Current:
Federal $101,906 $69,250 $64,992
State 16,295 12,374 11,955
--------------------------------
118,201 81,624 76,947
--------------------------------
Deferred:
Federal 4,425 11,833 2,364
State 388 2,350 99
--------------------------------
4,813 14,183 2,463
--------------------------------
TOTAL $123,014 $95,807 $79,410
================================
<PAGE>
Significant components of the Company's net deferred tax (liability) asset
consisted of the following at December 31:
(In thousands) 2000 1999
------------------------
Purchased incomplete software technology $43,051 $47,663
Accrued expenses not currently deductible 27,380 25,407
Deferred revenues 15,494 13,693
Internally generated capitalized software (35,306) (30,858)
Excess of tax over book depreciation
and amortization (20,480) (19,438)
Unrealized gains on investments (53,722) (87,162)
Other (11,409) (9,268)
------------------------
TOTAL $(34,992) $(59,963)
========================
Tax benefits associated with the exercise of non-qualified employee stock
options were credited directly to additional paid-in capital and amounted to
$19,500,000, $5,000,000 and $8,000,000 in 2000, 1999 and 1998, respectively.
5. Employee Benefit Plans
STOCK OPTION PLAN
The Company's Stock Option Plan (the "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:
Number of Weighted Average
Shares Price Range Exercise Price
----------------------------------------------
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
Granted 1,194,654 32.00 - 59.88 32.22
Forfeited (416,824) 13.98 - 34.29 28.77
Exercised (1,535,744) 3.25 - 34.29 13.27
----------------------------------------------
Outstanding, December 31, 2000 8,305,037 $ 2.76 - $59.88 $19.14
==============================================
The following summarizes information about the Company's stock options
outstanding and exercisable at December 31, 2000:
<TABLE>
<CAPTION>
Options Outstanding
Options Outstanding and Exercisable
---------------------------------------------------------- -------------------------------------
Weighted Weighted Average Weighted
Range of Number of Average Remaining Number of Average
Exercise Prices Shares Exercise Price Contractual Life Shares Exercise Price
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.76-$10.00 2,574,473 $8.14 2.7 2,574,473 $8.14
10.01-22.00 2,147,016 16.34 6.0 1,547,273 15.46
22.01-59.88 3,583,548 28.73 8.0 1,353,854 27.10
- -----------------------------------------------------------------------------------------------------------------
$2.76-$59.88 8,305,037 $19.14 5.9 5,475,600 $14.90
=================================================================================================================
</TABLE>
<PAGE>
At December 31, 2000, options to purchase 7,889,925 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 data)
2000 1999 1998
-------- -------- --------
Net income:
As reported $177,021 $137,868 $114,274
Pro forma 167,321 131,868 110,574
Net income per share-diluted:
As reported $1.40 $1.09 $0.90
Pro forma 1.32 1.04 0.87
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 2000: 1) expected dividend yield of 0%, 2) risk-free interest rate of 5.0%,
3) expected volatility of 48.6% and 4) expected option life of five years. The
weighted-average estimated fair value of stock options granted during 2000 was
$16.08 per share.
EMPLOYEE STOCK PURCHASE PLAN
Effective January 1, 2000, the Company adopted an employee stock purchase plan
under which 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. As of January 1, 2001, there were 576,669 shares
available for grant under this plan.
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
$30,400,000, $24,000,000 and $16,900,000 in 2000, 1999 and 1998, respectively.
6. Shareholders' Equity
SHAREHOLDER RIGHTS PLAN
The Company has 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.
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 employee stock option and purchase
plans. As of December 31, 2000, approximately 1,850,000 shares remained
available under the repurchase authorization.
<PAGE>
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, 2000:
(In thousands)
Year
2001 $ 69,300
2002 59,400
2003 48,500
2004 38,000
2005 26,800
Thereafter 32,200
--------
TOTAL $274,200
--------
Rent expense applicable to all operating leases was approximately $83,100,000,
$78,600,000 and $72,200,000 in 2000, 1999 and 1998, respectively.
OTHER COMMITMENTS AND CONTINGENCIES
The Company's trust administration subsidiaries had fiduciary responsibility for
the administration of approximately $32 billion in trust funds as of December
31, 2000. 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, 2000,
the aggregate net capital of such subsidiaries was $198,947,000, exceeding the
net capital requirement by $176,251,000.
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 consolidated financial statements of the Company.
<PAGE>
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. The Company has 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, 2000, is as follows:
<TABLE>
<CAPTION>
(In thousands) 2000 1999 1998
--------------------------------------------------
<S> <C> <C> <C>
Revenues:
Financial institution outsourcing, systems and services $1,243,509 $1,066,514 $ 951,010
Securities processing and trust services 341,155 276,215 234,699
All other and corporate 68,942 64,816 47,961
--------------------------------------------------
Total $1,653,606 $1,407,545 $1,233,670
--------------------------------------------------
Operating income:
Financial institution outsourcing, systems and services $ 218,935 $ 175,194 $ 148,774
Securities processing and trust services 97,125 80,125 70,074
All other and corporate (1,754) (2,234) (9,209)
--------------------------------------------------
Total $ 314,306 $ 253,085 $ 209,639
--------------------------------------------------
Identifiable assets:
Financial institution outsourcing, systems and services $1,185,819 $1,169,666 $1,018,541
Securities processing and trust services 4,160,939 3,832,868 2,783,818
All other and corporate 239,562 305,176 155,979
--------------------------------------------------
Total $5,586,320 $5,307,710 $3,958,338
--------------------------------------------------
Depreciation expense:
Financial institution outsourcing, systems and services $ 52,191 $ 48,407 $ 46,880
Securities processing and trust services 11,395 9,510 8,631
All other and corporate 6,561 5,796 5,186
--------------------------------------------------
Total $ 70,147 $ 63,713 $ 60,697
--------------------------------------------------
Amortization of intangible assets:
Financial institution outsourcing, systems and services $ 32,847 $ 18,843 $ 12,577
Securities processing and trust services 9,104 3,040 2,651
All other and corporate 861 717 526
--------------------------------------------------
Total $ 42,812 $ 22,600 $ 15,754
--------------------------------------------------
Capital expenditures:
Financial institution outsourcing, systems and services $ 54,750 $ 52,724 $ 60,075
Securities processing and trust services 12,836 12,119 11,255
All other and corporate 5,393 4,854 6,212
--------------------------------------------------
Total $ 72,979 $ 69,697 $ 77,542
--------------------------------------------------
</TABLE>
The revenues of each segment are principally domestic, and no single customer
accounted for 10% or more of consolidated revenues during the years ended
December 31, 2000, 1999 and 1998.
<PAGE>
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.
<TABLE>
<CAPTION>
Percentage of Revenues Period to Period Percentage
Years Ended December 31, Increase (Decrease)
2000 vs. 1999 vs.
2000 1999 1998 1999 1998
--------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 17% 14%
---------------------------------
Cost of revenues:
Salaries, commissions and payroll
related costs 48.0 48.1 46.4 17 18
Data processing expenses, rentals
and telecommunication costs 7.0 7.9 9.7 3 (7)
Other operating expenses 19.1 19.4 21.0 16 5
Depreciation and amortization of
property and equipment 4.2 4.5 4.9 10 5
Amortization of intangible assets 2.6 1.6 1.3 89 43
Amortization (capitalization) of internally
generated computer software-net 0.1 0.5 (0.3)
---------------------------------
Total cost of revenues 81.0 82.0 83.0 16 13
---------------------------------
Operating income 19.0% 18.0% 17.0% 24% 21%
=================================
Income before income taxes 18.1% 16.6% 15.7% 28% 21%
=================================
Net income 10.7% 9.8% 9.3% 28% 21%
=================================
</TABLE>
Revenues increased $246,061,000 in 2000 and $173,875,000 in 1999. Revenue growth
in 2000 and 1999 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 40% and 45% of total revenue growth in 2000 and 1999,
respectively.
Cost of revenues increased $184,840,000 in 2000 and $130,429,000 in 1999. The
make up of cost of revenues has been affected in all years by business
acquisitions, changes in the mix of the Company's business and operational
efficiencies.
Amortization of intangible assets increased $20,212,000 in 2000 and $6,846,000
in 1999. The increase in 2000 over 1999 was due to amortization associated with
acquisitions and a goodwill impairment charge.
Amortization of internally generated computer software is stated net of
capitalization and decreased $5,267,000 in 2000 and increased $11,080,000 in
1999. The increase in 1999 was due to reduced capitalization resulting from Year
2000 activities and accelerated amortization of certain ancillary software
products.
Operating income increased $61,221,000 in 2000 and $43,446,000 in 1999. The
Company's operating margins increased by 1% in 2000 and 1999 over prior periods
primarily due to continued revenue growth, operational efficiencies and
increased operating leverage of existing operations.
The effective income tax rate was 41% in all three years, and the effective
income tax rate for 2001 is expected to be 40%.
Net income per share - diluted in 2000 was $1.36, before recognizing a $0.04 per
share realized gain from sale of investment, compared to $1.09 in 1999.
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.
<PAGE>
SEGMENT INFORMATION
The following table sets forth revenue and operating income by business segment
for the years ended December 31:
<TABLE>
<CAPTION>
(In thousands) 2000 1999 1998
----------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Financial institution outsourcing, systems
and services $1,243,509 $1,066,514 $ 951,010
Securities processing and trust services 341,155 276,215 234,699
All other and corporate 68,942 64,816 47,961
---------- ---------- ----------
Total $1,653,606 $1,407,545 $1,233,670
---------- ---------- ----------
Operating income:
Financial institution outsourcing, systems
and services $ 218,935 $ 175,194 $ 148,774
Securities processing and trust services 97,125 80,125 70,074
All other and corporate (1,754) (2,234) (9,209)
---------- ---------- ----------
Total $ 314,306 $ 253,085 $ 209,639
---------- ---------- ----------
</TABLE>
Revenues in the Financial institution outsourcing, systems and services business
segment increased $176,995,000 in 2000 and $115,504,000 in 1999. Revenue growth
in 2000 and 1999 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 $43,741,000 and $26,420,000 in 2000 and 1999, respectively. Operating
income and margin increases in 2000 and 1999 over prior periods were primarily
due to continued revenue growth, operational efficiencies, increased operating
leverage of existing operations and the impact of certain acquisitions.
Revenues in the Securities processing and trust services business segment
increased $64,940,000 in 2000 and $41,516,000 in 1999. Revenue growth in 2000
and 1999 was derived primarily from increased transaction volumes from existing
clients, sales to new clients and revenues from acquired businesses. Operating
income in the Securities processing and trust services business segment
increased $17,000,000 and $10,051,000 in 2000 and 1999, respectively. Operating
margins in 2000 and 1999 decreased slightly when compared to prior years
primarily due to changes in the mix of revenues in this business segment.
Revenues in the All other and corporate business segment increased $4,126,000 in
2000 and $16,855,000 in 1999. Operating income in this business segment
increased $480,000 and $6,975,000 in 2000 and 1999, respectively. 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 (uses) of funds
during the years ended December 31:
<TABLE>
<CAPTION>
(In thousands) 2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Cash provided by operating activities before changes in
securities processing receivables and payables-net $ 368,750 $ 318,715 $ 273,315
Securities processing receivables and payables-net 215,718 (140,878) 7,080
---------- ---------- ----------
Cash provided by operating activities 584,468 177,837 280,395
Increase (decrease) in net borrowings (353,520) 169,959 79,835
---------- ---------- ----------
TOTAL $ 230,948 $ 347,796 $ 360,230
---------- ---------- ----------
</TABLE>
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 issuances of securities.
<PAGE>
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.
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, 2000,
the carrying amount of interest rate swap agreements approximated fair value.
Based on the controls in place, management believes the risk associated with
these instruments at December 31, 2000, 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.
<PAGE>
Selected Financial Data
The following data, which has been affected by acquisitions, should be read in
conjunction with the consolidated financial statements and related notes thereto
included elsewhere in this Annual Report.
<TABLE>
<CAPTION>
(In thousands, except per share data)
Years ended December 31, 2000 1999 1998 1997 1996
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $1,653,606 $1,407,545 $1,233,670 $ 974,432 $ 879,449
Income before income taxes 300,035 233,675 193,684 153,899 134,462
Income tax provision 123,014 95,807 79,410 63,099 54,754
Net income 177,021 137,868 114,274 90,800 79,708
Net income per share:
Basic $ 1.44 $ 1.12 $ 0.93 $ 0.78 $ 0.69
----------------------------------------------------------------------------------
Diluted $ 1.40 $ 1.09 $ 0.90 $ 0.75 $ 0.68
----------------------------------------------------------------------------------
As originally reported-diluted $ 1.36 $ 1.09 $ 0.90 $ 0.75 $ 0.59
----------------------------------------------------------------------------------
Total assets $5,586,320 $5,307,710 $3,958,338 $3,636,491 $2,698,979
Long-term debt 334,958 472,824 389,622 252,031 272,864
Shareholders' equity 1,252,072 1,091,016 885,797 769,255 605,898
</TABLE>
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 interests. The
net income per share as originally reported-diluted is before the realized gain
from sale of investment in 2000 and the restatement in 1996 due to the BHC
pooling of interests.
<PAGE>
QUARTERLY FINANCIAL INFORMATION (Unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share data) Quarters
-----------------------------------------------
2000 First Second Third Fourth Total
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $396,402 $ 416,434 $ 406,189 $434,581 $1,653,606
Cost of revenues 317,448 337,046 327,966 356,840 1,339,300
-------------------------------------------------------------
Operating income 78,954 79,388 78,223 77,741 314,306
Interest expense - net (5,806) (6,000) (5,295) (4,988) (22,089)
Realized gain from sale of investment - 2,928 2,907 1,983 7,818
-------------------------------------------------------------
Income before income taxes 73,148 76,316 75,835 74,736 300,035
Income tax provision 29,991 31,289 31,093 30,641 123,014
-------------------------------------------------------------
Net income $ 43,157 $ 45,027 $ 44,742 $ 44,095 $ 177,021
-------------------------------------------------------------
Net income per share:
Basic $ 0.35 $ 0.37 $ 0.36 $ 0.36 $ 1.44
=============================================================
Diluted $ 0.34 $ 0.36 $ 0.35 $ 0.35 $ 1.40
=============================================================
Diluted (before realized gain from sale of investment) $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 1.36
=============================================================
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
Interest expense - net (3,985) (4,315) (4,913) (6,197) (19,410)
-------------------------------------------------------------
Income before income taxes 56,638 58,199 59,656 59,182 233,675
Income tax provision 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
=============================================================
</TABLE>
Market Price Information
The following information relates to the closing price of the Company's $0.01
par value common stock, which is traded on the NASDAQ Stock Market under the
symbol FISV. Information has been adjusted (to the nearest 1/32) to recognize
the three-for-two stock split effective April 1999.
<TABLE>
<CAPTION>
2000 1999
- -----------------------------------------------------------------------------------------------------
Quarter Ended High Low High Low
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31 38 1/2 24 5/16 37 19/32 30
June 30 50 3/8 33 11/16 40 31 5/16
September 30 64 1/8 42 11/16 34 1/8 27 1/4
December 31 62 5/8 43 7/16 39 3/16 24 3/4
</TABLE>
At December 31, 2000, the Company's common stock was held by 2,859 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 23, 2001, was $52.19 per
share.
The Company's present policy is to retain earnings to support future business
opportunities, rather than to pay dividends.
<PAGE>
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
The management of Fiserv, Inc. assumes responsibility for the integrity and
objectivity of the information appearing in the 2000 Annual Report. This
information was prepared in conformity with accounting principles generally
accepted in the United States of America 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.
The control environment is complemented by the Company's internal audit
function, which evaluates the adequacy of the controls, policies and procedures
in place, as well as adherence to them, and recommends improvements for
implementation when applicable. In addition, Deloitte & Touche LLP, certified
public accountants, audits the financial statements of the Company in accordance
with auditing standards generally accepted in the United States of America.
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
President and Chief Executive Officer
<PAGE>
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, 2000 and 1999, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2000. 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 auditing standards generally accepted
in the United States of America. 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, 2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Milwaukee, Wisconsin
January 26, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
State (Country) of
Name under which Subsidiary does Business Incorporation
The Affinity Group, Inc. Colorado
Agio Insurance Agency, Inc. Montana
Aspen Investment Alliance, Inc. Colorado
BHC Investments, Inc. Delaware
BHC Trading Corporation Delaware
BHCM Insurance Agency, Inc. Delaware
Data-Link Systems, LLC Wisconsin
F.T. Agency, Inc. Ohio
FCS Funding, Inc. Colorado
First Trust Corporation Colorado
Fiserv (ASPAC) Pte. Ltd. Singapore
Fiserv (Europe) Ltd. England
Fiserv Australia Pty. Limited Australia
Fiserv BP, Inc. Wisconsin
Fiserv BPI, Inc. Texas
FIserv CIR, Inc. Delaware
Fiserv Clearing, Inc. Delaware
Fiserv Correspondent Services, Inc. Colorado
FIserv Federal Systems, Inc. Delaware
FIserv Fresno, Inc. California
Fiserv Insurance Agency of Alabama, Inc. Alabama
Fiserv Investor Services, Inc. Delaware
Fiserv International (Barbados) Limited Barbados
Fiserv LeMans, Inc. Pennsylvania
Fiserv Mercosur, Inc. Delaware
Fiserv Polska Sp. z o.o Poland
Fiserv Securities, Inc. Delaware
Fiserv Solutions of Canada Inc. Ontario
Fiserv Solutions, Inc. Wisconsin
The Freedom Group, Inc. Iowa
Humanic Design Corporation New Jersey
Information Technology, Inc. Nebraska
Investment Consulting Group, Inc. Colorado
ITI of Nebraska, Inc. Nebraska
Life Instructors, Inc. New Jersey
Lincoln Trust Company Colorado
National Flood Services, Inc. Montana
Patterson Press, Inc. Tennessee
Precision Direct, Inc. Washington
PT Fiserv Indonesia Indonesia
Specialty Insurance Software California
Specialty Software Service, Inc. California
<PAGE>
State (Country) of
Name under which Subsidiary does Business Incorporation
Tower Agency, Inc. Ohio
TradeStar Investments, Inc. Delaware
Trust Industrial Bank Colorado
USERS Incorporated Maryland
WUB2 Management Company Colorado
WUB3 Capital Management, Inc. Colorado
XP Systems Corporation Minnesota
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>INDEPENDENT AUDITORS' CONSENT
<TEXT>
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-64353, 333-04417, 333-28121, 333-34310, 333-34396 and 333-89957 on Form S-8;
Registration Statement Nos. 333-44935 and 333-47199 on Form S-4; and
Registration Statement Nos. 333-55909, 333-49615, 333-45841, 333-00913,
333-23581 and 333-31465 on Form S-3 of Fiserv, Inc. of our reports dated January
26, 2001, appearing in and incorporated by reference in this Annual Report on
Form 10-K of Fiserv, Inc. for the year ended December 31, 2000.
/s/ Deloitte & Touche LLP
- -----------------------------
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 27, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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