-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IoECDNAUBCR1yLo5spscYAgEmRqzSpGNFNkMStpSthkzDU7NRrHiCrfTDu1Acagj 9ylHNULEV3gF0vZagt22/A== 0000950131-00-001477.txt : 20000229 0000950131-00-001477.hdr.sgml : 20000229 ACCESSION NUMBER: 0000950131-00-001477 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000228 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-K405 SEC ACT: SEC FILE NUMBER: 000-14948 FILM NUMBER: 555698 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 10-K405 1 FORM 10-K405 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, 1999 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, $.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. [X] State the aggregate market value of the voting and nonvoting common equity held by non-affiliates of the registrant as of January 31, 2000: $3,934,477,511 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of January 31, 2000: 122,617,706 DOCUMENTS INCORPORATED BY REFERENCE: List the following documents if incorporated by reference and the part of the Form 10-K into which the document is incorporated: (1) Any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. 1999 Annual Report to Shareholders - Parts II, IV Proxy Statement for March 30, 2000, Meeting - Part III Fiserv, Inc. and Subsidiaries Form 10-K December 31, 1999
PART I Page - ------ ---- 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 11 Item 6. Selected Financial Data 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 7a. Quantitative and Qualitative Disclosure about Market Risk 11 Item 8. Financial Statements and Supplementary Data 11 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 11 PART III - -------- Item 10. Directors and Executive Officers of the Registrant 11 Item 11. Executive Compensation 11 Item 12. Security Ownership of Certain Beneficial Owners and Management 11 Item 13. Certain Relationships and Related Transactions 11 PART IV - ------- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 11
================================================================================ 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, Canada, Indonesia, 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 1 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. 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.
Acquisition History - ------------------- Formed Acquired Company Service ===================================================================================================== 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
2
Formed Acquired Company Service ===================================================================================================== 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 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
3
Formed Acquired Company Service ============================================================================================================= 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 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
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 4 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 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. The following discussion covers the two major operating segments. Financial Institution Outsourcing, Systems & 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, 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 50 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 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. 5 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. 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's a belief backed by a dedication to providing ongoing client service and support--no matter the client size. The Company's commitment of substantial resources to training and technical support helps keep Fiserv clients first. 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; Canada; Orlando, Florida; 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. 6 The unique 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. 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 law, 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 and Lincoln Trust are subject to the 7 regulations of the Colorado Division of Banking. First Trust and Lincoln Trust historically have complied with such regulations and although no assurance can be given, the Company believes First Trust and Lincoln 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 13,500 specialists throughout the United States and 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 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 137 cities (125 in the United States): Birmingham, Alabama; Little Rock, Arkansas; Phoenix and Scottsdale, Arizona; Atherton, Fresno, Glendale, Irvine, Lafayette, Moorpark, Oakland, Ontario, Orange, Redwood City, Sacramento, San Diego, San Leandro, Van Nuys and Walnut, California; Denver and Englewood, Colorado; Wallingford, Connecticut; Boca Raton, Jacksonville, Lake Mary, Lake Wales, Lakeland, 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; Rockville, Maryland; Braintree, Mansfield, and Somerville, Massachusetts; Flint, Northville and 8 Troy, Michigan; Mendota Heights and Shoreview, Minnesota; Kansas City and Springfield, Missouri; Lincoln and Omaha, Nebraska; Mahwah, New Providence and South Plainfield, New Jersey; Santa Fe, New Mexico; Fayetteville, Great Neck, Melville, New York, Syracuse and Utica, New York; Chapel Hill, Greensboro and Raleigh, North Carolina; Fargo, North Dakota; Cincinnati and Cleveland, Ohio; Oklahoma City, Oklahoma; Corvallis and Portland, Oregon; Bensalem, Bryn Mawr, Erie, King of Prussia, Malvern, Norristown, Philadelphia, Pittsburgh, Valley Forge and Williamsport, Pennsylvania; Newberry, South Carolina; Memphis, Tennessee; Addison, Austin, Beaumont, Dallas, Denton, Houston, San Antonio, Southlake and Stafford, Texas; Salt Lake City, Utah; Williamsburg, Virginia; Bellevue, Kent, Seattle and Yakima, Washington; and Brookfield, Milwaukee and New Berlin, Wisconsin. International business centers are located in Adelaide, South Australia, New South Wales and Sydney, Australia; Bogota, Colombia; London, Uxbridge, and Middlesex, England; Jakarta, Indonesia; Manila, Philippines; Warsaw, Poland; and Singapore. The Company owns facilities in Brookfield, Corvallis, Greensboro, Lincoln, Marion, Moorpark, South Bend and Valley Forge; all other buildings in which centers are located are subject to leases expiring through 2001 and beyond. The Company owns or leases 149 mainframe computers (Data General, Digital, 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. 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 14, 2000, together with their ages, positions and business experience are described below: Name Age Position Leslie M. Muma 55 Vice-Chairman of the Board, President and Chief Executive Officer Donald F. Dillon 59 Vice-Chairman of the Board and Chairman of Information Technology, Inc. 9 Kenneth R. Jensen 56 Senior Executive Vice President, Chief Financial Officer and Treasurer Howard F. Arner 59 President and Chief Operating Officer, Insurance Solutions Group Norman J. Balthasar 53 President and Chief Operating Officer, Financial Institution Outsourcing Group Robert H. Beriault 48 President and Chief Operating Officer, Securities Group Frank R. Martire 52 President and Chief Operating Officer, Financial Institution Systems and Services Group Gordon G. Rockafellow 63 President and Chief Operating Officer, Trust Services Group Dean C. Schmelzer 49 Executive Vice President - Marketing & Sales Charles W. Sprague 50 Executive Vice President, General Counsel, Chief Administrative Officer and Secretary Mr. Muma has been a Director of the Company since it was established in 1984; he was named Vice Chairman of the Board of Directors in 1995 and Chief Executive Officer in 1999. Mr. Muma served as President and Chief Operating Officer of the Company from 1984 to 1999. Mr. Dillon was named Vice Chairman of the Board of Directors of the Company in 1995. From 1976 to 1995, Mr. Dillon was co-founder and President of Information Technology, Inc. ("ITI"), a software and services company that was acquired by the Company in 1995 and Mr. Dillon currently serves as Chairman of ITI. 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 was named President and Chief Operating Officer of the Fiserv Insurance Solutions Group in 1999. He served as Corporate Executive Vice President and President-Insurance Solutions Group from 1998 to 1999. 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 Outsourcing Group in 1999. He served as Corporate Executive Vice President and President-Savings and Community Bank Group from 1996 to 1999. 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. Martire was named President and Chief Operating Officer of the Fiserv Financial Institution Systems and Services Group in 1999. He served as Corporate Executive Vice President and President-Bank & Credit Union Group from 1996 to 1999. Mr. Martire was with Citicorp Information Resources from 1969 to 1991. He was the President and CEO of Citicorp Information Resources in 1991, when it was acquired by the Company. Mr. Rockafellow was named President and Chief Operating Officer of the Fiserv Trust Services Group in 1999. He served as Corporate Executive Vice President and President-Trust 10 Group from 1996 to 1999. Mr. Rockafellow was the President and CEO of First Trust Company from 1982 to 1985, when it was acquired by the Company. Mr. Schmelzer was named 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 Executive Vice President and Chief Administrative Officer of the Company since 1999. He served as Corporate Executive Vice President, General Counsel and Secretary from 1994 to 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 28, 2000. ================================================================================ 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, 1999 and 1998 and for each of the three years in the period ended December 31, 1999, together with the report thereon of Deloitte & Touche LLP, dated January 28, 2000, 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 14 Schedule II--Valuation and Qualifying Accounts 14 11 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, 1999. (c) Exhibits: The exhibits listed in the accompanying exhibit index are filed as part of this Annual Report on Form 10-K. 12 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 28, 2000 FISERV, INC. By /s/ Leslie M. Muma -------------------------------- Leslie M. Muma (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 28, 2000. Signature Capacity /s/ Leslie M. Muma - ---------------------------------- Leslie M. Muma Vice Chairman of the Board, President, Chief Executive Officer /s/ Donald F. Dillon - ---------------------------------- Donald F. Dillon Vice 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 Chairman of the Board /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 13 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, 1999 and 1998, and for each of the three years in the period ended December 31, 1999, and have issued our report thereon dated January 28, 2000; such consolidated financial statements and report are included in your 1999 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 28, 2000 SCHEDULE II Valuation and Qualifying Accounts
Allowance for Doubtful Accounts Year Ended Beginning Charged December 31, Balance to Expense Write-offs Balance ------------------- --------------- --------------- ---------------- --------------- 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 1997 3,796,000 3,483,000 (376,000) 6,903,000
14 EXHIBIT INDEX Exhibit Number Exhibit Description - ------ ------------------- 2.1 Stock Purchase Agreement, dated as of April 6, 1995, by and between Fiserv, Inc. and Information Technology, Inc. (filed as Exhibit 2.1 to the Company's Registration Statement on Form S-3, File No. 33-58709, and incorporated herein by reference). 3.1 Restated Articles of Incorporation, as amended. 3.2 By-laws, as amended. 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 April 30, 1990, as amended, among Fiserv, Inc. and Teachers Insurance and Annuity Association 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.) 4.4 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.) 4.5 Shareholder Rights Plan (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.)) 13. The 1999 Annual Report to Shareholders (to the extent incorporated by reference herein). 21. List of Subsidiaries of the Registrant. 23. Independent Auditors' Consent. 27. Financial Data Schedule (EDGAR version only). 15 EX-3.1 2 RESTATED ARTICLES OF INCORPORATION EXHIBIT 3.1 RESTATED ARTICLES OF INCORPORATION OF FISERV, INC. The following Restated Articles of Incorporation of Fiserv, Inc. duly adopted pursuant to the authority and provisions of Chapter 180 of the Wisconsin Statutes, supercede and take the place of the existing Restated Articles of Incorporation and any amendments thereto: ARTICLE I --------- The name of the corporation is Fiserv, Inc. ARTICLE II ---------- The Corporation is incorporated under the provisions of Chapter 180 of the Wisconsin Statutes. ARTICLE III ----------- The total number of shares of stock which the Corporation shall have authority to issue is 325,000,000 shares, of which 300,000,000 shares shall be designated Common Stock, having a par value of $.01 per share; and 25,000,000 shares shall be designated as Preferred Stock, having no par value per share. Authority is hereby vested in the Board of Directors from time to time to issue the Preferred Stock as Preferred Stock in one or more series of any number of shares and, in connection with the creation of such series, to fix, by resolution providing for the use of shares thereof, the voting rights, if any; the designations, preferences, limitations and relative rights of such series in respect to the rate of dividend, the price, the terms and conditions of redemption; the amounts payable upon such series in the event of voluntary or involuntary liquidation; sinking fund provisions for the redemption or purchase of such series of shares; and, if the shares of any series are issued with the privilege of conversation, the terms and conditions on which such series of shares may be converted. In addition to the foregoing, to the full extent now or hereafter permitted by Wisconsin law, in connection with each issue thereof, the Board of Directors may at its discretion assign to any series of the Preferred Stock such other terms, conditions, restrictions, limitations, rights and privileges as it may deem appropriate. The aggregate number of preferred shares issued and not cancelled of any and all preferred series shall not exceed the total number of shares of Preferred Stock hereinabove authorized. Each series of Preferred Stock shall be distinctively designated by letter or descriptive words or both. Section 1. Designation of Series A Junior Participating Preferred --------- ------------------------------------------------------ Stock: Number of Shares. There is designated a series of Preferred Stock ----------------------- titled as "Series A Junior Participating Preferred Stock," no par value per share (the "Series A Preferred Stock"), and the authorized number of shares constituting the Series A Preferred Stock shall be 3,000,000. Such number of authorized shares may be increased or decreased, from time to time, by resolution of the Board, provided, however, that no such decrease shall reduce the number of authorized shares of the Series A Preferred Stock then outstanding, plus the number of such shares then reserved for issuance upon the exercise of any outstanding options, warrants or rights or the exercise of any conversion or exchange privilege contained in any outstanding security issued by the Corporation. Section 2. Dividends and Distributions --------- --------------------------- (A) Subject to the rights of the holders of shares of any other series of Preferred Stock (or shares of any other class of capital stock of the Corporation) ranking senior to the Series A Preferred Stock with respect to dividends, the holders of shares of the Series A Preferred Stock, in preference to the holders of shares of Common Stock and of any other class of capital stock of the Corporation ranking junior to the Series A Preferred Stock with respect to dividends, shall be entitled to receive, when, as and if declared by the Board out of funds legally available therefor, such dividends, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non cash dividends or other distributions other than a dividend payable in shares of Common Stock or subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock. In the event the Company shall at any time after February 23, 1998 (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares Common Stock that were outstanding immediately prior to such event. (B) The Board shall declare, out of funds legally available therefor, a dividend or distribution on the Series A Preferred Stock, as provided in paragraph (A) of the Section 2, immediately after it has declared a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock). 2 Section 3. Voting Rights. In addition to any other voting rights --------- ------------- required by applicable law, the holders of shares of the Series A Preferred Stock shall have the following voting rights: (A) Each share of the Series A Preferred stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the shareholders of the Corporation. The multiple of 100 (the "Voting Multiple") set forth in the preceding sentence shall be adjusted from time to time as hereinafter provided in this paragraph (A). In the event that the Corporation shall at any time after the effective date of this Resolution of the Board ("Resolution) (i) declare or pay any dividend on Common Stock payable in shares of Common Stock, or (ii) effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then, in each case, the Voting Multiple thereafter applicable to the determination of the number of votes per share to which the holders of shares of the Series A Preferred Stock shall be entitled shall be the Voting Multiple in effect immediately prior to such event multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided in the Resolution, in any other resolution establishing another series of Preferred Stock (or any series of any other class of capital stock of the Corporation) or by applicable law, the holders of the Series A Preferred Stock, the holders of the Common Stock and the holders of any class of capital stock of the Corporation having general voting rights shall vote together as a single class on all matters submitted to a vote of the shareholders of the Corporation. (C) Except as otherwise provided in the Resolution or by applicable law, the holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent provided in paragraph (B) of the Section 3 for the taking of any corporate action. Section 4. Certain Restrictions --------- -------------------- (A) Whenever dividends or other distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, 3 whether or not declared, on outstanding shares of the Series A Preferred Stock shall have been paid in full, the Corporation shall not: (i) Declare or pay dividends or make any other distributions on any shares of any class of capital stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up of the Corporation) to the Series A Preferred Stock; (ii) Declare or pay dividends, or make any other distributions, on any shares of any class of capital stock of the Corporation ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up of the Corporation) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are accrued and unpaid in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) Redeem, purchase or otherwise acquire for consideration any shares of any class of capital stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up of the Corporation) to the Series A Preferred Stock, except that the Corporation may at any time redeem, purchase or otherwise acquire any shares of such junior stock in exchange for other shares of any class of capital stock of the Corporation ranking junior (both as to dividends and upon dissolution, liquidation or winding up of the Corporation) to the Series A Preferred Stock; or (iv) Purchase or otherwise acquire for consideration any shares of the Series A Preferred Stock or any shares of any class of capital stock of the Corporation ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up of the Corporation) with the Series A Preferred Stock, or redeem any shares of such parity stock, except in accordance with a purchase offer made in writing or by publication to the holders of all such shares upon such terms and conditions as the Board, after taking into consideration the respective annual dividend rates and the other relative powers, preferences and rights of the respective series and classes of such shares, shall determine in good faith will result in fair and equitable treatment among the respective holders of shares of all such series and classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of any class of capital stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 4 Section 5. Required Shares. Any shares of the Series A Preferred --------- --------------- Stock purchased of otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after such purchase or acquisition. All such cancelled shares shall thereupon become authorized and unissued shares Preferred Stock and may be reissued as part of any new series of Preferred Stock, subject to the conditions and restrictions on issuance set forth in the Articles of Incorporation of the Corporation, from time to time, in any other resolution establishing another series of Preferred Stock (or any series of any other class of capital stock of the Corporation) or in any applicable law. Section 6. Liquidation, Dissolution or Winding Up. Upon any --------- -------------------------------------- liquidation (whether voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made (a) to the holders of shares of any class of capital stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up of the Corporation) to the Series A Preferred Stock unless, prior thereto, the holder of each outstanding share of the Series A Preferred Stock shall have received an amount equal to the accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (i) $1.00, and (ii) an aggregate amount, subject to adjustment as hereinafter provided in this Section 6, equal to 100 times the aggregate per share amount to be distributed to the holders of Common Stock, or (b) to the holders of shares of any class of capital stock of the Corporation ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up of the Corporation) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event that the Corporation shall at any time after the effective date of this Resolution (a) declare or pay any dividend on Common Stock payable in shares of Common Stock, or (b) effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then, in each such case, the aggregate amount per share to which the holders of shares of the Series A Preferred Stock would have been entitled to receive immediately prior to such event pursuant to clause (a)(ii) of the preceding sentence shall be adjusted by multiplying such aggregate per share amount by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock that were outstanding immediately prior to such event. 5 Section 7. Consolidation, Merger, etc. In the event that the --------- -------------------------- Corporation shall be a party to any consolidation, merger, combination or other transaction in which the outstanding shares of Common Stock are converted or changed into or exchanged for other capital stock, securities, cash or other property, or any combination thereof, then, in each such case, each share of the Series A Preferred Stock shall at the same time be similarly converted or changed into or exchanged for an aggregate amount, subject to adjustment as hereinafter provided in this Section 7, equal to 100 times the aggregate amount of capital stock, securities, cash and/or other property (payable in kind), as the case may be, into which or for which each share of Common Stock is being converted or changed or exchanged. In the event that the Corporation shall at any time after the effective date of this Resolution declare or pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then, in each such case, the aggregate amount per share to which the holders of shares of the Series A Preferred Stock would have been entitled to receive immediately prior to such event pursuant to the preceding sentence shall be adjusted by multiplying such aggregate per share amount by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of the Series A Preferred Stock --------- ------------- shall not be redeemable at any time. Section 9. Rank. Unless otherwise provided in the resolution --------- ---- establishing another series of Preferred Stock after the effective date of this Resolution, the Series A Preferred Stock shall rank, as to the payment of dividends and the making of any other distribution of assets of the Corporation, senior to the Common Stock, but junior to all other series of the Preferred Stock. Section 10. Amendments. The Restated Articles of Incorporation of the ---------- ---------- Corporation shall not be amended in any manner which would materially alter or change the powers, preferences and rights of the Series A Preferred Stock so as to adversely affect any thereof without the affirmative vote of the holders of at least two-thirds of the outstanding shares of the Series A Preferred Stock, voting separately as a single class. Section 11. Fractional Shares. Fractional shares of the Series A ---------- ----------------- Preferred Stock may be issued, but, unless the Board shall otherwise determine, only in multiples of one one-hundredth of a share. The holder 6 of any fractional share of the Series A Preferred Stock shall be entitled to receive dividends, participate in distributions, exercise voting rights and have the benefit of all other powers, preferences and rights relating to the Series A Preferred Stock in the same proportion as such fractional share bears to a whole share. ARTICLE IV ---------- The street address of the Corporation's registered office is Fiserv, Inc., 255 Fiserv Drive, Brookfield, Wisconsin 53045. The name of the Corporation's registered agent at that office is Charles W. Sprague. ARTICLE V --------- The purpose of the Corporation is to engage in any lawful business for which corporations may be organized under the Wisconsin Business Corporation Law. ARTICLE VI ---------- In furtherance and not in limitation of the powers conferred by the laws of the State of Wisconsin, the Board of Directors of the Corporation is expressly authorized and empowered to make, alter or repeal the By-laws of the Corporation, subject to the power of the shareholders of the Corporation to alter or repeal any By-law made by the Board of Directors. ARTICLE VII ----------- The terms of the Board of Directors shall be staggered by dividing the total number of directors into three groups, in accordance with Section 180.0806 of the Wisconsin Business Corporation Law. ARTICLES VIII ------------- Any action required to be taken at any annual or special meeting of shareholders or any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting, without prior notice and without vote, if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those shareholders who have not consented in writing. 7 CERTIFICATE ----------- This is to certify that the foregoing Restated Articles of Incorporation does not contain any amendments requiring shareholder approval, and were adopted on February 16, 2000 by the Board of Directors. FISERV, INC. by: /s/ Charles W. Sprague ------------------------------- Charles W. Sprague, Secretary This document drafted by: Charles W. Sprague WI Bar # 01022314 Fiserv, Inc. 255 Fiserv Drive Brookfield, WI 53045 8 EX-3.2 3 BY-LAWS Exhibit 3.2 BY-LAWS OF FISERV, INC. __________ Incorporated under the Laws of the State of Wisconsin __________ Adopted as of December 31, 1992 Amended and Restated as of March 25, 1999 Amended as of February 16, 2000 TABLE OF CONTENTS
Page ---- ARTICLE I OFFICES 1 ARTICLE II MEETINGS OF SHAREHOLDERS 1 Section 1 Place of Meetings 1 Section 2 Annual Meeting 1 Section 3 Special Meetings 1 Section 4 Notice of Meetings 2 Section 5 Proper Business or Purposes of Shareholder Meetings 2 Section 6 Fixing of Record Date 3 Section 7 List of Shareholders 4 Section 8 Quorum 4 Section 9 Voting 4 Section 10 Proxies 5 Section 11 Action without a Meeting 5 Section 12 Acceptance of Instruments Showing Shareholder Action 5 ARTICLE III BOARD OF DIRECTORS 6 Section 1 Powers 6 Section 2 Election and Term 6 Section 3 Number 7 Section 4 Tenure and Qualifications 7 Section 5 Nominations for Election to the Board of Directors 7 Section 6 Quorum and Manner of Acting 7 Section 7 Organization Meeting 8 Section 8 Regular Meetings 8 Section 9 Special Meetings; Notice 8 Section 10 Resignations 8 Section 11 Vacancies 9 Section 12 Committees 9 Section 13 Compensation of Directors 9 Section 14 Action without a Meeting 9 Section 15 Telephonic Participation in Meetings 10
i ARTICLE IV OFFICERS 10 Section 1 Principal Officers 10 Section 2 Election and Term of Office 10 Section 3 Other Officers 10 Section 4 Removal 10 Section 5 Resignations 10 Section 6 Vacancies 10 Section 7 Chairman of the Board 11 Section 8 President 11 Section 9 Vice President 11 Section 10 Treasurer 11 Section 11 Secretary 11 Section 12 Salaries 12 ARTICLE V INDEMNIFICATION 12 ARTICLE VI SHARES AND THEIR TRANSFER 12 Section 1 Certificate for Stock 12 Section 2 Stock Certificate Signature 13 Section 3 Stock Ledger 13 Section 4 Cancellation 13 Section 5 Registrations of Transfers of Stock 13 Section 6 Regulations 13 Section 7 Lost, Stolen, Destroyed or Mutilated Certificates 14 Section 8 Record Dates 14 ARTICLE VII MISCELLANEOUS PROVISIONS 14 Section 1 Corporate Seal 14 Section 2 Voting of Stocks Owned by the Corporation 14 Section 3 Dividends 14 ARTICLE VIII AMENDMENTS 15
ii BY-LAWS OF FISERV, INC. (a Wisconsin Corporation) __________ ARTICLE I OFFICES ------- The registered office of the Corporation in the State of Wisconsin shall be located in the City of Brookfield, County of Waukesha. The Corporation may establish or discontinue, from time to time, such other offices within or without the State of Wisconsin as may be deemed proper for the conduct of the Corporation's business. ARTICLE II MEETINGS OF SHAREHOLDERS ------------------------ Section 1. Place of Meetings. All meetings of shareholders shall be --------- ----------------- held at such place or places, within or without the State of Wisconsin, as may from time to time be fixed by the Board of Directors, or as shall be specified in the respective notices, or waivers of notice, thereof. Section 2. Annual Meeting. The annual meeting of shareholders for --------- -------------- the election of Directors and the transaction of other business shall be held on such date and at such place as may be designated by the Board of Directors. At each annual meeting the shareholders entitled to vote shall elect a Board of Directors and may transact such other proper business as may come before the meeting. Section 3. Special Meetings. A special meeting of the shareholders, --------- ---------------- or of any class thereof entitled to vote, for any purpose or purposes, may be called at any time by the Chairman of the Board, if any, or the President or by order of the Board of Directors and shall be called by the President or the Secretary upon the written request of shareholders holding of record at least ten percent (10%) of all the votes entitled to be cast on any issue proposed to be considered at such meeting. Such written request 1 shall state the purpose or purposes for which such meeting is to be called. The Corporation shall give notice of such a meeting within thirty days after the date that the demand for such meeting is properly delivered to the Corporation. Section 4. Notice of Meetings. Except as otherwise provided by law, --------- ------------------ written notice of each meeting of shareholders, whether annual or special, stating the place, date and hour of the meeting shall be given not less than ten days or more than sixty days before the date on which the meeting is to be held to each shareholder of record entitled to vote thereat by delivering a notice thereof to him personally or by mailing such notice in a postage prepaid envelope directed to him at his address as it appears on the records of the Corporation, unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be directed to another address, in which case such notice shall be directed to him at the address designated in such request. Notice shall not be required to be given to any shareholder who shall waive such notice in writing, whether prior to or after such meeting, or who shall attend such meeting in person or by proxy unless such attendance is for the express purpose of objecting, at the beginning of such meeting, or promptly upon arrival, to holding the meeting or transacting business at the meeting. Every notice of a special meeting of the shareholders, besides the time and place of the meeting, shall state briefly the objects or purposes thereof. Section 5. Proper Business or Purposes of Shareholder Meetings. To --------- --------------------------------------------------- be properly brought before a meeting of shareholders, business must be (a) specified in the notice of the meeting (or any supplement thereto) given by or at the discretion of the Board of Directors or otherwise as provided in Section 3 of Article II above; (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors; or (c) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before a meeting by a shareholder, the shareholder must have given written notification thereof, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation, and, in the case of an annual meeting, such notification must be given not later than thirty days in advance of the Originally Scheduled Date of such meeting; provided, however, that if the Originally Scheduled Date of such annual meeting is earlier than the date specified in these By-laws as the date of the annual meeting and if the Board of Directors does not determine otherwise, or in the case of a special meeting of shareholders, such written notice may be so given and received not later than the close of business on the fifteenth day following the date of the first public disclosure, which may include any public filing with the Securities and Exchange Commission, of the Originally Scheduled Date of such meeting. Any such notification shall set forth as to each matter the shareholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting and, in the event that such business includes a proposal to amend either the Articles of Incorporation or By-laws of the Corporation, the exact language of the 2 proposed amendment; (ii) the name and address of the shareholder proposing such business; (iii) a representation that the shareholder is a holder of record of stock of the Corporation entitled vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business; and (iv) any material interest of the shareholder in such business. No business shall be conduct at a meeting of shareholders except in accordance with this Section, and the Chairman of any meeting of shareholders may refuse to permit any business to be brought before such meeting without compliance with the foregoing procedures. For purposes of these By-laws, the "Originally Scheduled Date" of any meeting of shareholders shall be the date such meeting is scheduled to occur as specified in the notice of such meeting first generally given to shareholders regardless of whether any subsequent notice is given for such meeting or the record date of such meeting is changed. Nothing contained in this Section shall be construed to limit the rights of a shareholder to submit proposals to the Corporation which comply with the proxy rules of the Securities and Exchange Commission for inclusion in the Corporation's proxy statement for consideration at shareholder meetings. Section 6. Fixing of Record Date. The Board of Directors may fix in --------- --------------------- advance a date as the record date for the purpose of determining shareholders entitled to notice of and to vote at any meeting of shareholders, shareholders entitled to demand a special meeting as contemplated by Section 3 of Article II hereof, shareholders entitled to take any other action, or shareholders for any other purpose. Such record date shall not be more than seventy days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If no record date is fixed by the Board of Directors or by the Wisconsin Business Corporation Law for the determination of shareholders entitled to notice of and to vote at a meeting of shareholders, the record date shall be the close of business on the day before the first notice is given to shareholders. If no record date is fixed by the Board of Directors or the Wisconsin Business Corporation Law for the determination of shareholders entitled to demand a special meeting as contemplated in Section 3 of Article II hereof, the record date shall be the date that the first shareholder signs the demand. Except as provided by the Wisconsin Business Corporation Law for a court ordered adjournment, a meeting of shareholders is effective for any adjournment o such meeting unless the Board of Directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than one hundred twenty days after the date fixed for the original meeting. The record date for determining shareholders entitled to a distribution (other than a distribution involving a purchase, redemption or other acquisition of the Corporation's shares) or a share dividend is the date on which the Board of Directors authorized the distribution or share dividend, as the case may be, unless the Board of Directors fixes a different record date. Section 7. List of Shareholders. It shall be the duty of the --------- -------------------- Secretary or other officer of the Corporation who shall have charge of the stock ledger to prepare 3 and make, at least ten days before every meeting of the shareholders, a complete list of the shareholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in his name. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period beginning two business days after notice of the meeting is given for which the list was prepared and continuing to the date of the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall be kept and produced at the time and place of the meeting during the whole time thereof and subject to the inspection of any shareholders who may be present. The original or duplicate ledger shall be the only evidence as to who are the shareholders entitled to examine such list or the books of the Corporation or to vote in person or by proxy at such meeting. Section 8. Quorum. At each meeting of the share-holders, the holders --------- ------ of record of a majority of the issued and outstanding stock of the Corporation entitled to vote at such meeting, present in person or by proxy, shall constitute a quo-rum for the transaction of business, except where otherwise provided by law, the Articles of Incorporation or these Bylaws. In the absence of a quorum, any officer entitled to preside at, or act as Secretary of, such meeting shall have the power to adjourn the meeting from time to time until a quorum shall be constituted. Section 9. Voting. Every shareholder of record who is entitled to --------- ------ vote shall at every meeting of the shareholders be entitled to one vote for each share of stock held by him on the record date; except, however, that shares of its own stock be-longing to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held by the Corporation, shall neither be entitled to vote nor counted for quorum purposes. Nothing in this Section shall be construed as limiting the right of the Corporation to vote its own stock held by it in a fiduciary capacity. At all meetings of the shareholders, a quorum being present, all matters shall be decided by majority vote of the shares of stock entitled to vote held by shareholders present in person or by proxy, except as otherwise required by law or the Articles of Incorporation. Unless demanded by a shareholder of the Corporation present in person or by proxy at any meeting of the shareholders and entitled to vote thereat or so directed by the chairman of the meeting or required by law, the vote thereat on any question need not be by written ballot. On a vote by written ballot, each ballot shall be signed by the shareholder voting, or in his name by his proxy, if there be such proxy, and shall state the number of shares voted by him and the number of votes to which each share is entitled. Section 10. Proxies. Each shareholder entitled to vote at a meeting ---------- ------- of shareholders or to express consent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy. A proxy acting for any 4 shareholder shall be duly appointed by an instrument in writing subscribed by such shareholder. No proxy shall be valid after the expiration of eleven months from the date thereof unless the proxy provides for a longer period. Section 11. Action without a Meeting. Any action required to be ---------- ------------------------ taken at any annual or special meeting of share-holders or any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those shareholders who have not consented in writing. Section 12. Acceptance of Instruments Showing Shareholder Action. If ---------- ---------------------------------------------------- the name signed on a vote, consent, waiver or proxy appointment corresponds to the name of a shareholder, the Corporation, acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of a shareholder. If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the name of a shareholder, the Corporation, acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder if any of the following apply: (a) The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity. (b) The name purports to be that of a personal representative, administrator, executor, guardian or conservator representing the shareholder and, if the Corporation requests, evidence of fiduciary status acceptable to the Corporation is presented with respect to the vote, consent, waiver or proxy appointment. (c) The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the Corporation requests, evidence of this status acceptable to the Corporation is presented with respect to the vote, consent, waiver or proxy appointment. (d) The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the Corporation requests, evidence acceptable to the Corporation of the signatory's authority to sign for the shareholder is presented with respect to the vote, consent, waiver or proxy appointment. 5 (e) Two or more persons are the shareholders as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners. The Corporation may reject a vote, consent, waiver or proxy appointment if the Secretary or other officer or agent of the Corporation who is authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. ARTICLE III BOARD OF DIRECTORS ------------------ Section 1. Powers. The business and affairs of the Corporation shall --------- ------ be managed under the direction of the Board of Directors. Section 2. Election and Term. The Board of Directors shall be --------- ----------------- divided into three groups, which are hereby designated as Group One, Group Two and Group Three. The term of office of the initial Group One Directors shall expire at the next annual meeting of shareholders; the term of office of the initial Group Two Directors shall expire at the second succeeding annual meeting of shareholders; and the term of office of the initial Group Three Directors shall expire at the third succeeding annual meeting of shareholders. At each annual shareholders meeting held thereafter, Directors to replace those whose terms expire at such annual meeting shall be elected to hold office until the third succeeding annual meeting and until their successors are elected and qualify, or until they sooner die, resign or are removed. At each annual meeting of shareholders at which a quorum is present, the persons receiving a plurality of the votes cast shall be the Directors. Acceptance of the office of Director may be expressed orally or in writing, and attendance at the organization meeting shall constitute such acceptance. Section 3. Number. The number of Directors shall be such number as --------- ------ shall be determined from time to time by the Board of Directors but shall not be less than three nor more than nine. Section 4. Tenure and Qualifications. Each Director shall hold --------- ------------------------- office until the next annual meeting of shareholders in the year in which such Director's term expires and until his successor shall have been elected, or until his prior death, resignation or removal for cause only. A Director may be removed from office for cause only by affirmative vote of eighty percent (80%) of the outstanding shares entitled to vote for the election of such Director, taken at an annual meeting or a special meeting 6 of shareholders called for that purpose, and any vacancy so created may be filled by the affirmative vote of eighty percent (80%) of such shares. Directors need not be residents of the State of Wisconsin or shareholders of the Corporation. Section 5. Nominations for Election to the Board of Directors. --------- -------------------------------------------------- Nominations for elections to the Board of Directors may be made by the Board of Directors or by any shareholder of any outstanding class of capital stock of the Corporation entitled to vote for election of Directors. Nominations, other than those made by or on behalf of the existing management of the Corporation, shall be made in writing and shall be delivered or mailed to the Chairman of the Board and/or the President of the Corporation not less than fourteen days nor more than sixty days prior to any meeting of shareholders called for the election of Directors; provided, however, that if less than fourteen days' notice of the -------- ------- meeting is given to shareholders, such nomination shall be mailed or delivered to the Chairman of the Board an/or the President of the Corporation not later than the close of business on the fourth day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the nominating shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the name and residence address of the nominating shareholder; and (d) the number of shares of capital stock of the Corporation owned by the nominating shareholder. Nominations not made in accordance herewith may be disregarded by the Chairman of the meeting, in his or her discretion, and upon his or her instructions, the vote tellers may disregard all votes cast for each such nominee. Section 6. Quorum and Manner of Acting. Unless other-wise provided --------- --------------------------- by law, the presence of fifty-one percent (51%) of the whole Board of Directors shall be necessary to constitute a quorum for the transaction of business. In the absence of a quorum, a majority of the Directors present may adjourn the meeting from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. At all meetings of Directors, a quorum being present, all matters shall be decided by the affirmative vote of the majority of the Directors present, except as otherwise required by law. The Board of Directors may hold its meetings at such place or places within or without the State of Wisconsin as the Board of Directors may from time to time determine or as shall be specified in the respective notices, or waivers of notice, thereof. Section 7. Organization Meeting. Immediately after each annual --------- -------------------- meeting of shareholders for the election of Directors the Board of Directors shall meet at the place of the annual meeting of shareholders for the purpose of organization, the election of officers and the transaction of other business. Notice of such meeting need not be given. If such meeting is held at any other time or place, notice thereof must be given as hereinafter provided for special meetings of the Board of Directors, subject to a waiver of such notice, in the manner set forth in Section 180.0823 of the Wisconsin Business Corporation Law, by all Directors who may not have received such notice. 7 Section 8. Regular Meetings. Regular meetings of the Board of --------- ---------------- Directors may be held at such time and place, within or without the State of Wisconsin, as shall from time to time be determined by the Board of Directors. After there has been such determination, and notice thereof has been once given to each member of the Board of Directors as hereinafter provided for special meetings, regular meetings may be held without further notice being given. Section 9. Special Meetings; Notice. Special meetings of the Board --------- ------------------------ of Directors shall be held whenever called by the Chairman of the Board, if any, the President or by a majority of the Directors. Notice of each such meeting shall be mailed to each Director, addressed to him at his residence or usual place of business, at least five days before the date on which the meeting is to be held, or shall be sent to him at such place by telegraph, cable, radio or wireless, or be delivered personally or by telephone, not later than the day before the day on which such meeting is to be held. Each such notice shall state the time and place of the meeting and, as may be required, the purposes thereof. Notice of any meeting of the Board of Directors need not be given to any Director if he shall sign a written waiver thereof either before or after the time stated therein for such meeting, or if he shall be present at the meeting. Unless limited by law, the Articles of Incorporation, these By-laws or the terms of the notice thereof, any and all business may be transacted at any meeting without the notice thereof having specifically identified the matters to be acted upon. Section 10. Resignations. Any Director of the Corporation may resign ---------- ------------ at any time by giving written notice to the Chairman of the Board, if any, the President or the Secretary of the Corporation. The resignation of any Director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 11. Vacancies. Any newly created directorships and vacancies ---------- --------- occurring in the Board by reason of death, resignation, retirement or disqualification may be filled by (a) a majority of the Directors then in office or (b) the action of the holders of record of the majority of the issued and outstanding stock of the Corporation (i) present in person or by proxy at a meeting of holders of such stock and entitled to vote thereon or (ii) by a consent in writing in the manner contemplated in Section 11 of Article II. The Director so chosen, whether selected to fill a vacancy or elected to a new directorship, shall hold office until the next meeting of shareholders at which the election of directors is in the regular order of business, and until his successor has been elected and qualifies, or until he sooner dies, resigns or is removed. Section 12. Committees. There may be an Executive Committee. There ---------- ---------- shall be an Audit Committee composed of independent directors. There shall be a 8 Compensation Committee composed of independent directors. The Board of Directors by resolution adopted by the affirmative vote of a majority of the number of directors then in office may create one or more additional committees. Each committee shall have two or more members who shall, unless otherwise provided by the Board of Directors, serve at the pleasure of the Board of Directors. Except as otherwise provided by law, each committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise such power and authority as the Board of Directors shall specify. Section 13. Compensation of Directors. Directors, as such, shall not ---------- ------------------------- receive any stated salary for their services, but, by resolution of the Board, a specific sum fixed by the Board plus expenses may be allowed for attendance at each regular or special meeting of the Board; provided, however, that nothing herein contained shall be construed to preclude any Director from serving the Corporation or any parent or subsidiary corporation thereof in any other capacity and receiving compensation therefor. Section 14. Action without a Meeting. Any action required or ---------- ------------------------ permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if a written consent thereto is signed by all members of the Board, and such written consent is filed with the minutes or proceedings of the Board. Section 15. Telephonic Participation in Meetings. Members of the ---------- ------------------------------------ Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in persons at such meeting. ARTICLE IV OFFICERS -------- Section 1. Principal Officers. The Board of Directors shall elect a --------- ------------------ President, a Secretary and a Treasurer, and may in addition elect a Chairman of the Board, one or more Vice Presidents and such other officers as it deems fit; the President, the Secretary, the Treasurer, the Chairman of the Board, if any, and the Vice Presidents, if any, being the principal officers of the Corporation. One person may hold, and perform the duties of, any two or more of said offices. Section 2. Election and Term of Office. The principal officers of --------- --------------------------- the Corporation shall be elected annually by the Board of Directors at the organization meeting thereof. Each such officer shall hold office until his successor shall have been 9 elected and shall qualify, or until his earlier death, resignation or removal. Section 3. Other Officers. In addition, the Board may elect, or the --------- -------------- Chairman of the Board, if any, or the President may appoint, such other officers as they deem fit. Any such other officers so chosen shall be subordinate officers and shall hold office for such period, have such authority and perform such duties as the Board of Directors, the Chairman of the Board, if any, or the President may from time to time determine. Section 4. Removal. Any officer may be removed, either with or --------- ------- without cause, at any time, by resolution adopted by the Board of Directors at any regular meeting of the Board, or at any special meeting of the Board called for that purpose, at which a quorum is present. Section 5. Resignations. Any officer may resign at any time by --------- ------------ giving written notice to the Chairman of the Board, if any, the President, the Secretary or the Board of Directors. Any such resignation shall take effect upon receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 6. Vacancies. A vacancy in any office may be filled for the --------- --------- unexpired portion of the term in the manner pre-scribed in these By-laws for election or appointment to such office for such term. Section 7. Chairman of the Board. The Chairman of the Board of --------- --------------------- Directors, if one be elected, shall preside, if present, at all meetings of the shareholders and the Board of Directors, and shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors. Section 8. President. The President shall have the general powers --------- --------- and duties of supervision and management usually vested in the office of President of a corporation. In the absence or non-election of the Chairman of the Board of Directors, if present thereat, he shall preside at all meetings of the shareholders and at all meetings of the Board of Directors. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages, and other contracts on behalf of the Corporation, and shall cause the seal to be affixed to any instrument requiring it and when so affixed the seal shall be attested by the signature of the Secretary or the Treasurer. Section 9. Vice President. Each Vice President shall have such --------- -------------- powers and shall performs such duties as shall be assigned to him by the directors. Section 10. Treasurer. The Treasurer shall have charge and custody ---------- --------- of, 10 and be responsible for, all funds and securities of the Corporation. He shall exhibit at all reasonable times his books of account and records to any of the Directors of the Corporation upon application during business hours at the office of the Corporation where such books and records shall be kept; when requested by the Board of Directors, he shall render a statement of the condition of the finances of the Corporation at any meeting of the Board or at the annual meeting of shareholders; he shall receive, and give receipt for, moneys due and payable to the Corporation from any source whatsoever; in general, he shall perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Chairman of the Board of Directors, the President or the Board of Directors. The Treasurer shall give such bond, if any, for the faithful discharge of his duties as the Board of Directors may require. Section 11. Secretary. The Secretary, if present, shall act as ---------- --------- secretary at all meetings of the Board of Directors and of the shareholders and keep the minutes thereof in a book or books to be provide for that purpose; he shall see that all notices required to be given by the Corporation are duly given and served; he shall have charge of the stock records of the Corporation; he shall see that all reports, statements and other documents required by law are properly kept and filed; and in general he shall perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Chairman of the Board of Directors, the President or the Board of Directors. Section 12. Salaries. The salaries of the principal officers shall ---------- -------- be fixed from time to time by the Board of Directors, and the salaries of any other officers may be fixed by the Chairman of the Board of Directors or, if no Chairman of the Board shall have been elected, the President. ARTICLE V INDEMNIFICATION --------------- The Corporation shall to the fullest extent permitted or required by the Wisconsin Business Corporation Law, including any amendments thereto (but in the case of any such amendment, only to the extent such amendment permits or requires the Corporation to provide broader indemnification rights than prior to such amendment), indemnify its Directors and officers against any and all liabilities, and advance any and all reasonable expenses, incurred thereby in any proceedings to which any such Director or officer is a Party because he or she is or was a Director or officer of the Corporation. The Corporation shall also indemnify an employee who is not a Director or officer to the same extent as provided by the Corporation to its Directors and officers. The rights to indemnification granted hereunder shall not be deemed 11 exclusive of any other rights to indemnification against liabilities or the advancement of expenses which a Director, officer or employee may be entitled to under any written agreement, Board of Directors resolution, vote of shareholders, the Wisconsin Business Corporation Law or otherwise. All capitalized terms used in this Article V and not otherwise defined shall have the meaning set forth in Section 180.0850 of the Wisconsin Business Corporation Law. ARTICLE VI SHARES AND THEIR TRANSFER ------------------------- Section 1. Certificate for Stock. Every shareholder of the --------- --------------------- Corporation shall be entitled to a certificate or certificates, to be in such form as the Board of Directors shall prescribe, certifying the number of shares of the capital stock of the Corporation owned by him. No certificate shall be issued for partly paid shares. Section 2. Stock Certificate Signature. The certificates for such --------- --------------------------- stock shall be numbered in the order in which they shall be issued and shall be signed by the Chairman of the Board, if any, or the President and the Secretary or Treasurer of the Corporation and its seal shall be affixed thereto. If such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or (2) by a registrar other than the Corporation or its employee, the signatures of such officers of the Corporation may be facsimiles. In case any officer of the Corporation who has signed, or whose facsimile signature has been placed upon, any such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of issue. Section 3. Stock Ledger. A record shall be kept by the Secretary or --------- ------------ by any other officer, employee or agent designated by the Board of Directors of the name of each person, firm or corporation holding capital stock of the Corporation, the number of shares represented by, and the respective dates of, each certificate for such capital stock, and in case of cancellation of any such certificate, the respective dates of cancellation. Section 4. Cancellation. Every certificate surrendered to the --------- ------------ Corporation for exchange or registration of transfer shall be cancelled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so cancelled, except, subject to Section 7 of this Article VI, in cases provided for by applicable law. Section 5. Registrations of Transfers of Stock. Registrations of --------- ----------------------------------- transfers of shares of the capital stock of the Corporation shall be made on the books of the 12 Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation or with a transfer clerk or a transfer agent appointed as in Section 6 of this Article VI provided, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Section 6. Regulations. The Board of Directors may make such rules --------- ----------- and regulations as it may deem expedient, not inconsistent with the Articles of Incorporation or these By-laws, concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation. It may appoint, or authorize any principal officer or officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates of stock to bear the signature or signatures of any of them. Section 7. Lost, Stolen, Destroyed or Mutilated Certificates. Before --------- ------------------------------------------------- any certificates for stock of the Corporation shall be issued in exchange for certificates which shall become mutilated or shall be lost, stolen or destroyed, proper evidence of such loss, theft, mutilation or destruction shall be procured for the Board of Directors, if it so requires. Section 8. Record Dates. For the purpose of determining the --------- ------------ shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a date as a record date for any such determination of shareholders. Such record date shall not be more than sixty or less than ten days before the date of such meeting, or more than sixty days prior to any other action. ARTICLE VII MISCELLANEOUS PROVISIONS ------------------------ Section 1. Corporate Seal. The Board of Directors shall provide a --------- -------------- corporate seal, which shall be in the form of a circle and shall bear the name of the Corporation and words and figures showing that it was incorporated in the State of Wisconsin in the year 1992. The Secretary shall be the custodian of the seal. The Board of Directors may authorize a duplicate seal to be kept and used by any other officer. 13 Section 2. Voting of Stocks Owned by the Corporation. The Board of --------- ----------------------------------------- Directors may authorize any person on behalf of the Corporation to attend, vote and grant proxies to be used at any meeting of shareholders of any corporation (except the Corporation) in which the Corporation may hold stock. Section 3. Dividends. Subject to the provisions of the Wisconsin --------- --------- Business Corporation Law and the Articles of Incorporation, the Board of Directors may, out of funds legally avail-able therefor, at any regular or special meeting declare dividends upon the capital stock of the Corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds of the Corporation available for dividends such sum or sums as the Directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the Board of Directors shall deem conducive to the interests of the Corporation. ARTICLE VIII AMENDMENTS ---------- These By-laws of the Corporation may be altered, amended or repealed by the Board of Directors at any regular or special meeting of the Board of Directors or by the affirmative vote of the holders of record of eighty percent (80%) of the issued and outstanding stock of the Corporation (a) present in person or by proxy at a meeting of holders of such stock and entitled to vote thereon or (b) by a consent in writing in the manner contemplated in Section 11 of Article II, provided, however, that notice of the proposed alteration, amendment or repeal is contained in the notice of such meeting. By-laws, whether made or altered by the shareholders or by the Board of Directors, shall be subject to alteration or repeal by the shareholders as in this Article VIII. 14 The following amendment to the second sentence of Section 10 of the By-laws was as approved by the Board of Directors on February 16, 2000: A proxy acting for any shareholder shall be duly appointed by an instrument in writing or electronically, whichever method is subscribed to by such shareholder. 15 EX-13 4 1999 ANNUAL REPORT EXHIBIT 13 1999 ANNUAL REPORT FISERV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) Year ended December 31, 1999 1998 1997 ----------------------------------------------------- REVENUES $1,407,545 $1,233,670 $974,432 ----------------------------------------------------- COST OF REVENUES: Salaries, commissions and payroll related costs 677,226 573,187 454,850 Data processing expenses, rentals and telecommunication costs 111,163 119,205 100,601 Other operating expenses 272,616 259,126 189,982 Depreciation and amortization of property and equipment 63,713 60,697 49,119 Amortization of intangible assets 22,600 15,754 14,067 Amortization (capitalization) of internally generated computer software-net 7,142 (3,938) 36 ----------------------------------------------------- TOTAL COST OF REVENUES 1,154,460 1,024,031 808,655 ----------------------------------------------------- OPERATING INCOME 253,085 209,639 165,777 Interest expense - net 19,410 15,955 11,878 ----------------------------------------------------- INCOME BEFORE INCOME TAXES 233,675 193,684 153,899 Income tax provision 95,807 79,410 63,099 ----------------------------------------------------- NET INCOME $ 137,868 $ 114,274 $ 90,800 ===================================================== NET INCOME PER SHARE: Basic $1.12 $0.93 $0.78 ===================================================== Diluted $1.09 $0.90 $0.75 ===================================================== SHARES USED IN COMPUTING NET INCOME PER SHARE: Basic 123,143 122,873 117,021 ===================================================== Diluted 126,679 127,154 120,438 =====================================================
See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) December 31, 1999 1998 ----------------- ----------------- ASSETS Cash and cash equivalents $ 80,554 $ 71,558 Accounts receivable - net 235,350 246,851 Securities processing receivables 2,196,068 1,402,650 Prepaid expenses and other assets 89,378 83,453 Trust account investments 1,298,120 1,098,773 Other investments 335,573 180,099 Deferred income taxes - 14,545 Property and equipment-net 195,333 179,434 Internally generated computer software-net 75,263 85,821 Intangible assets-net 802,071 595,154 ----------------- ----------------- TOTAL $5,307,710 $3,958,338 ================= ================= LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $ 66,400 $ 65,385 Securities processing payables 1,764,382 1,207,838 Short-term borrowings 234,350 38,350 Accrued expenses 176,443 150,519 Accrued income taxes 12,736 14,768 Deferred revenues 131,476 107,286 Trust account deposits 1,298,120 1,098,773 Deferred income taxes 59,963 - Long-term debt 472,824 389,622 ----------------- ----------------- TOTAL LIABILITIES 4,216,694 3,072,541 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock issued, 125,387,700 and 124,879,500 shares, respectively 1,254 1,249 Additional paid-in capital 458,550 448,461 Accumulated other comprehensive income 125,026 39,875 Accumulated earnings 576,510 438,642 Treasury stock, at cost, 2,804,400 and 1,800,000 shares, respectively (70,324) (42,430) ----------------- ----------------- TOTAL SHAREHOLDERS' EQUITY 1,091,016 885,797 ----------------- ----------------- TOTAL $5,307,710 $3,958,338 ================= =================
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands) Year ended December 31, 1999 1998 1997 ---------------------- --------------------- -------------------- SHARES ISSUED-300,000,000 AUTHORIZED: Balance at beginning of year 83,253 53,925 51,032 Shares issued under stock plans-net 394 495 585 Shares issued for acquired companies - 1,132 2,308 Three-for-two stock split 41,741 27,701 - ---------- -------- -------- Balance at end of year 125,388 83,253 53,925 ========== ======== ======== COMMON STOCK-PAR VALUE $.01 PER SHARE: Balance at beginning of year $ 833 $ 539 $ 510 Shares issued under stock plans-net 4 5 6 Shares issued for acquired companies - 11 23 Three-for-two stock split 417 278 - ---------- -------- -------- Balance at end of year 1,254 833 539 ---------- -------- -------- ADDITIONAL PAID-IN CAPITAL: Balance at beginning of year 448,877 427,785 352,916 Shares issued under stock plans-net 5,090 5,036 10,034 Income tax reduction arising from the exercise of employee stock options 5,000 8,000 5,000 Shares issued for acquired - 8,334 59,835 Three-for-two stock split (417) (278) - ---------- -------- -------- Balance at end of year 458,550 448,877 427,785 ---------- -------- -------- ACCUMULATED OTHER COMPREHENSIVE INCOME: Balance at beginning of year 39,875 16,563 18,904 Unrealized gain (loss) on investments 85,496 $ 85,496 23,492 $ 23,492 (2,179) $(2,179) Foreign currency translation adjustment (345) (345) (180) (180) (162) (162) ---------- -------- -------- Balance at end of year 125,026 39,875 16,563 ---------- -------- -------- ACCUMULATED EARNINGS: Balance at beginning of year 438,642 324,368 233,568 Net income 137,868 137,868 114,274 114,274 90,800 90,800 ---------- -------- -------- -------- -------- ------- Balance at end of year 576,510 438,642 324,368 ---------- -------- -------- TREASURY STOCK-AT COST: Balance at beginning of year (42,430) - Purchase of treasury stock (28,713) (42,430) Shares issued under stock plans-net 819 - ---------- -------- Balance at end of year (70,324) (42,430) ---------- -------- TOTAL COMPREHENSIVE INCOME $223,019 $137,586 $88,459 ======== ======== ======= TOTAL SHAREHOLDERS' EQUITY $1,091,016 $885,797 $769,255 ========== ======== ========
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) Year ended December 31, 1999 1998 1997 -------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 137,868 $ 114,274 $ 90,800 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes 14,183 2,463 4,234 Depreciation and amortization of property and equipment 63,713 60,697 49,119 Amortization of intangible assets 22,600 15,754 14,067 Amortization of internally generated computer software 33,194 26,641 25,047 -------------------------------------------------------- 271,558 219,829 183,267 Changes in assets and liabilities, net of effects from acquisitions of businesses: Accounts receivable 18,853 (22,860) (19,191) Prepaid expenses and other assets (3,299) 9,618 (7,073) Accounts payable and accrued expenses 14,394 32,422 23,681 Deferred revenues 17,210 21,197 17,313 Accrued income taxes (1) 13,109 2,520 Securities processing receivables and payables - net (140,878) 7,080 (5,948) -------------------------------------------------------- Net cash provided by operating activities 177,837 280,395 194,569 -------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (69,697) (77,542) (39,765) Capitalization of internally generated computer software (26,052) (30,579) (25,011) Payment for acquisition of businesses, net of cash acquired (210,587) (217,792) (65,017) Investments (209,011) (30,779) (167,812) -------------------------------------------------------- Net cash used in investing activities (515,347) (356,692) (297,605) -------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (repayments of) short-term obligations-net 119,226 (56,625) (7,900) Proceeds from borrowings on long-term obligations 103,523 143,245 18,120 Repayment of long-term obligations (52,790) (6,785) (41,316) Issuance of common stock 5,913 5,041 10,040 Purchases of treasury stock (28,713) (42,430) Trust account deposits 199,347 16,032 112,187 -------------------------------------------------------- Net cash provided by financing activities 346,506 58,478 91,131 -------------------------------------------------------- Change in cash and cash equivalents 8,996 (17,819) (11,905) Beginning balance 71,558 89,377 101,282 -------------------------------------------------------- Ending balance $ 80,554 $ 71,558 $ 89,377 ========================================================
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 1999, 1998 and 1997 1. Summary of Significant Accounting Policies PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Fiserv, Inc. and subsidiaries (the "Company"). All significant intercompany transactions and balances have been eliminated in consolidation. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash and investments with original maturities of 90 days or less. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles 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, short and long-term borrowings, and derivative instruments approximated fair value as of December 31, 1999 and 1998. 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) 1999 1998 -------------------------------- RECEIVABLES: Securities failed to deliver $ 41,554 $ 33,918 Securities borrowed 829,573 586,210 Receivables from customers 1,283,326 758,669 Other 41,615 23,853 -------------------------------- TOTAL $2,196,068 $1,402,650 ================================ PAYABLES: Securities failed to receive $ 45,255 $ 20,935 Securities loaned 1,076,235 703,164 Payables to customers 523,275 389,372 Other 119,617 94,367 -------------------------------- TOTAL $1,764,382 $1,207,838 ================================ 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 $234,350,000 and $38,350,000 as of December 31, 1999 and 1998, respectively, which bear interest at the respective banks' call rate (4.9% as of December 31, 1999) and were collateralized by customers' margin account securities. TRUST ACCOUNT INVESTMENTS AND DEPOSITS 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 $1,298,120,000 and $1,098,773,000 as of December 31, 1999 and 1998, respectively. The related investment securities, including amounts representing Company funds, comprised the following at December 31:
(In thousands) Principal Carrying Market 1999 Amount Value Value ----------------------------------------------------------- U. S. Government and government agency obligations $ 609,304 $ 614,855 $ 606,113 Money market mutual funds 201,600 201,600 201,600 Other fixed income obligations 563,382 562,560 550,931 ----------------------------------------------------------- TOTAL $1,374,286 1,379,015 $1,358,644 ----------------------------------------------------------- Less amounts representing Company funds: Included in cash and cash equivalents 3,329 Included in other investments 77,566 --------------------- Trust account investments $1,298,120 ===================== 1998 U. S. Government and government agency obligations $ 756,928 $ 765,152 $ 766,708 Corporate bonds 5,492 5,494 5,501 Repurchase agreements 41,370 41,370 41,370 Money market mutual funds 21,220 21,220 21,220 Other fixed income obligations 336,010 337,490 339,276 ----------------------------------------------------------- TOTAL $1,161,020 1,170,726 $1,174,075 ----------------------------------------------------------- Less amounts representing Company funds: Included in cash and cash equivalents 756 Included in other investments 71,197 --------------------- Trust account investments $1,098,773 =====================
Substantially all trust account investments at December 31, 1999 have contractual maturities of one year or less, except for government agency and certain fixed income obligations which have an average duration of approximately two years and six months. These investments are held to maturity and stated at cost as the Company has the ability and intent to hold these investments to maturity. Unrealized gains and losses at December 31, 1999 and 1998 were not significant. OTHER INVESTMENTS The Company determines the appropriate classification of investments in securities at the time of the purchase. Marketable securities available-for-sale are carried at market, based upon quoted market prices. Unrealized gains or losses on available-for-sale securities are accumulated as an adjustment to shareholders' equity, net of related deferred income taxes. Realized gains or losses are computed based on specific identification of the securities sold. The Company owns 3,404,930 shares of Knight/Trimark Group, Inc. and 900,000 shares of The BISYS Group, Inc. Common stock of both companies trade on the NASDAQ National Market System. 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: (In thousands) 1999 1998 ---------------------------------- Data processing equipment $ 227,292 $ 227,346 Purchased software 81,239 73,446 Buildings and leasehold improvements 84,763 75,158 Furniture and equipment 99,637 88,915 ---------------------------------- 492,931 464,865 Less accumulated depreciation and amortization 297,598 285,431 ---------------------------------- TOTAL $ 195,333 $ 179,434 ================================== INTERNALLY GENERATED COMPUTER SOFTWARE The Company capitalizes certain costs incurred to develop new software and enhance existing software in accordance with Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." Amortization of capitalized costs is computed on a straight-line basis over the expected useful life of the product, generally five years. Activity during the three years ended December 31, 1999 is as follows:
(In thousands) 1999 1998 1997 ----------------------------------------------------- Beginning balance $ 85,821 $ 73,163 $70,487 Capitalized costs 26,052 30,579 25,011 Acquisitions and reclassifications (3,416) 8,720 2,712 ----------------------------------------------------- 108,457 112,462 98,210 Less amortization 33,194 26,641 25,047 ----------------------------------------------------- TOTAL $ 75,263 $ 85,821 $73,163 =====================================================
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. INTANGIBLE ASSETS Intangible assets relate to acquisitions and consist of the following at December 31: (In thousands) 1999 1998 --------------------------------- Goodwill $ 793,908 $ 590,684 Other 128,107 96,571 --------------------------------- 922,015 687,255 Less accumulated amortization 119,944 92,101 --------------------------------- TOTAL $ 802,071 $ 595,154 ================================= The excess of the purchase price over the estimated fair value of tangible and identifiable intangible assets acquired has been recorded as goodwill and is generally being amortized over 40 years using the straight-line method. Other intangible assets comprise primarily computer software, contract rights, customer bases and trademarks applicable to business acquisitions. These assets are being 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. Long-lived assets determined to be impaired are written down to fair value. 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 $88,458,000, $77,457,000 and $63,620,000, net of direct credits to customer accounts of $63,519,000, $50,180,000 and $46,006,000 in 1999, 1998 and 1997, respectively. Revenues from the sales of software are recognized in accordance with the AICPA's Statement of Position No. 97-2, "Software Revenue Recognition." 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. Deferred revenues consist primarily of advance billings for services and are recognized as revenue when the services are provided. 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. Net income per share for prior years has been restated to reflect three-for-two stock splits effective in April 1999 and May 1998. Amounts utilized in net income per share computations are as follows at December 31:
(In thousands) 1999 1998 1997 ----------------------------------------------------------- Weighted average common shares outstanding - basic 123,143 122,873 117,021 Assumed conversion of common shares issuable under stock option plan 3,536 4,281 3,417 ----------------------------------------------------------- Weighted average common and common equivalent shares outstanding - diluted 126,679 127,154 120,438 =========================================================== SUPPLEMENTAL CASH FLOW INFORMATION (In thousands) 1999 1998 1997 ----------------------------------------------------------- Interest paid $ 26,075 $ 21,111 $ 17,358 Income taxes paid 81,499 66,066 58,643 Liabilities assumed in acquisitions of businesses 246,120 39,816 197,235
ACCOUNTING STANDARDS TO BE ADOPTED In 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Company is currently evaluating the impact of this statement and does not anticipate that the adoption of this statement will have a material impact on the consolidated financial statements. This statement is required to be adopted in 2001. 2. Acquisitions During 1999, 1998 and 1997 the Company completed the following acquisitions:
Month Company Acquired Service Consideration - ----------------------------------------------------------------------------------------------------------------------- 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. Software and services Cash for stock 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 1997: AdminaStar Communications Apr. Laser print and mailing services Cash for stock Interactive Planning Systems May PC-based financial systems Stock for stock BHC Financial, Inc. May Securities services Stock for stock Florida Infomanagement Services, Inc. (FIS, Inc.) Sep. Data processing and software sales Cash for stock Stephens Inc. (clearing brokerage operations) Sep. Securities services Cash for assets Emerald Publications Oct. Financial seminars and training Stock for stock Central Service Corp. Oct. Data processing Cash for stock Savoy Discount Brokerage Oct. Securities services Cash for stock Hanifen, Imhoff Holdings, Inc. Dec. Securities services Cash and stock for stock
Generally, the acquisitions were accounted for as purchases and, accordingly, the operations of the acquired companies are 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 $210,587,000, $217,792,000, and $65,017,000 in 1999, 1998 and 1997, respectively, subject to certain adjustments. Pro forma information for acquisitions accounted for as purchases is not presented as the impact was not material. Certain of the acquisitions in 1998 and 1997 were accounted for as poolings of interests, and except for the 1997 acquisition of BHC Financial, Inc., prior year consolidated financial statements were not restated because the aggregate effect was not material. 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 $314,000,000 was in use at December 31, 1999 at an average rate of 6.10%. 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 including, among other things, the maintenance of minimum net worth and various operating ratios with which the Company was in compliance at December 31, 1999. In 1998, the Company entered into interest rate swap agreements to fix the interest rate on certain floating rate debt at an average rate approximating 5.90% (based on current bank fees and spreads) for a principal amount of $200,000,000 with remaining lives of four to six years.
Long-term debt outstanding comprised the following at December 31: (In thousands) 1999 1998 --------------------------------- 9.45% senior notes payable, due 2000 $ 4,286 $ 8,571 9.75% senior notes payable, due 2000-2001 5,000 7,500 8.00% senior notes payable, due 2000-2005 77,143 90,000 Bank notes and commercial paper, at short-term rates 386,395 283,551 --------------------------------- TOTAL $ 472,824 $ 389,622 =================================
Annual principal payments required under the terms of the long-term agreements were as follows at December 31, 1999: (In thousands) Year 2000 $ 147,084 2001 17,978 2002 14,714 2003 14,714 2004 264,620 Thereafter 13,714 -------------- TOTAL $ 472,824 ============== Interest expense with respect to long-term debt amounted to $25,111,000, $21,330,000 and $16,964,000 in 1999, 1998 and 1997, 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, 1999 is as follows:
(In thousands) 1999 1998 1997 --------------------------------------------------- Statutory federal tax rate 35% 35% 35% Tax computed at statutory rate $ 81,786 $ 67,789 $ 53,865 State income taxes-net of federal effect 9,375 7,601 5,995 Non-deductible amortization 3,161 2,737 1,408 Other 1,485 1,283 1,831 --------------------------------------------------- TOTAL $ 95,807 $ 79,410 $ 63,099 =================================================== The provision for income taxes consisted of the following: (In thousands) 1999 1998 1997 --------------------------------------------------- Currently payable $ 76,624 $ 68,947 $ 53,865 Tax reduction credited to additional paid-in capital 5,000 8,000 5,000 Deferred 14,183 2,463 4,234 --------------------------------------------------- TOTAL $ 95,807 $ 79,410 $ 63,099 ===================================================
Significant components of the Company's net deferred tax (liability) asset consisted of the following at December 31:
(In thousands) 1999 1998 ------------------------------- Purchased incomplete software technology $ 47,663 $ 52,276 Accrued expenses not currently deductible 25,407 25,329 Deferred revenues 13,693 14,558 Internally generated capitalized software (30,858) (35,188) Excess of tax over book depreciation and amortization (19,438) (9,167) Unrealized gains on investments (87,162) (27,751) Other (9,268) (5,512) ------------------------------- TOTAL $ (59,963) $ 14,545 ===============================
5. Employee Benefit Plans STOCK OPTION PLAN The Company's Stock Option 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:
Weighted Number of Price Average Shares Range Exercise Price ---------------------------------------------- Outstanding, December 31, 1996 5,853,173 $2.57 - $16.33 $ 8.84 Assumed from BHC 1,265,139 3.25 - 14.00 7.89 Granted 1,551,156 16.00 - 21.78 16.88 Forfeited (114,827) 2.76 - 16.00 12.78 Exercised (1,440,820) 2.57 - 16.00 8.70 ---------------------------------------------- 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 ==============================================
The following summarizes information about the Company's stock options outstanding and exercisable at December 31, 1999:
Options Outstanding Options Outstanding and Exercisable ---------------------------------------------------------- ------------------------------- Range of Weighted Weighted Average Weighted Exercise Number of Average Remaining Number of Average Prices Shares Exercise Price Contractual Life Shares Exercise Price - ------------------------------------------------------------------------------------------------------- $ 2.76-$8.00 1,374,353 $ 5.23 1.8 1,304,090 $ 5.51 8.01-10.00 2,050,185 8.91 4.3 2,029,146 8.91 10.01-22.00 2,593,697 16.97 6.2 1,539,671 16.50 22.01-39.50 3,044,716 27.45 8.3 807,648 26.07 - ------------------------------------------------------------------------------------------------------- $2.76-$39.50 9,062,951 $ 16.89 5.8 5,680,555 $ 12.63 =======================================================================================================
At December 31, 1999, options to purchase 2,667,755 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 amounts) 1999 1998 1997 ------------- ----------- ------------ Net income: As reported $137,868 $114,274 $90,800 Pro forma 131,868 110,574 88,600 Net income per share-diluted: As reported $ 1.09 $ 0.90 $ 0.75 Pro forma 1.04 0.87 0.74 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 1999: 1) expected dividend yield of 0%, 2) risk-free interest rate of 6%, 3) expected volatility of 41.8%, and 4) expected option life of five years. EMPLOYEE STOCK PURCHASE PLAN Effective January 1, 2000, the Company adopted an employee stock purchase plan, subject to shareholder approval, under which 500,000 shares of common stock would be available for issuance in 2000. 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. 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 $23,969,000, $16,948,000 and $14,383,000 in 1999, 1998 and 1997, respectively. 6. Shareholders' Equity SHAREHOLDER RIGHTS PLAN On February 23, 1998, the Company adopted 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. The Company filed a Form 8-K with the Securities and Exchange Commission on February 24, 1998 which provides a full description of the Plan. COMPREHENSIVE INCOME Total comprehensive income was $223,019,000 and $137,586,000 in 1999 and 1998, respectively. The increase in comprehensive income was primarily due to unrealized gains on other investments as of December 31, 1999. 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, 1999: (In thousands) Year 2000 $ 64,931 2001 56,812 2002 47,248 2003 37,318 2004 29,342 Thereafter 41,447 -------------- TOTAL $ 277,098 ============== Rent expense applicable to all operating leases was approximately $78,620,000, $72,172,000 and $55,515,000 in 1999, 1998 and 1997, respectively. OTHER COMMITMENTS AND CONTINGENCIES The Company's trust administration subsidiaries had fiduciary responsibility for the administration of approximately $24 billion in trust funds as of December 31, 1999. 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, 1999, the aggregate net capital of such subsidiaries was $161,943,000, exceeding the net capital requirement by $133,611,000. 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 financial statements of the Company. 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. In accordance with SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," 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 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, 1999 is as follows:
(In thousands) 1999 1998 1997 ------------------------------------------------ Revenues: Financial institution outsourcing, systems and services $ 1,066,514 $ 951,010 $ 753,209 Securities processing and trust services 276,215 234,699 179,217 All other and corporate 64,816 47,961 42,006 ------------------------------------------------ Total $ 1,407,545 $1,233,670 $ 974,432 ------------------------------------------------ Operating income: Financial institution outsourcing, systems and services $ 175,194 $ 148,774 $ 117,467 Securities processing and trust services 80,125 70,074 51,770 All other and corporate (2,234) (9,209) (3,460) ------------------------------------------------ Total $ 253,085 $ 209,639 $ 165,777 ------------------------------------------------ Identifiable assets: Financial institution outsourcing, systems and services $ 1,169,666 $1,018,541 $ 759,437 Securities processing and trust services 3,832,868 2,783,818 2,753,523 All other and corporate 305,176 155,979 123,531 ------------------------------------------------ Total $ 5,307,710 $3,958,338 $3,636,491 ------------------------------------------------ Depreciation expense: Financial institution outsourcing, systems and services $ 48,407 $ 46,880 $ 38,098 Securities processing and trust services 9,510 8,631 7,285 All other and corporate 5,796 5,186 3,736 ------------------------------------------------ Total $ 63,713 $ 60,697 $ 49,119 ------------------------------------------------ Capital expenditures: Financial institution outsourcing, systems and services $ 52,724 $ 60,075 $ 28,627 Securities processing and trust services 12,119 11,255 6,667 All other and corporate 4,854 6,212 4,471 ------------------------------------------------ Total $ 69,697 $ 77,542 $ 39,765 ------------------------------------------------
The revenues of each segment are principally domestic, and no single customer accounted for 10% or more of the consolidated revenues for the years ended December 31, 1999, 1998 and 1997. 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.
Percentage of Revenues Period to Period Percentage Year Ended December 31, Increase (Decrease) 1999 vs. 1998 vs. 1999 1998 1997 1998 1997 ---------------------------------------------- --------------------------------- Revenues 100.0% 100.0% 100.0% 14.1% 26.6% ---------------------------------------------- Cost of revenues: Salaries, commissions and payroll related costs 48.1 46.4 46.7 18.2 26.0 Data processing expenses, rentals and telecommunication costs 7.9 9.7 10.3 (6.7) 18.5 Other operating expenses 19.4 21.0 19.5 5.2 36.4 Depreciation and amortization of property and equipment 4.5 4.9 5.0 5.0 23.6 Amortization of intangible assets 1.6 1.3 1.5 43.5 12.0 Amortization (capitalization) of internally generated computer software-net 0.5 (0.3) ---------------------------------------------- Total cost of revenues 82.0 83.0 83.0 12.7 26.6 ---------------------------------------------- Operating income 18.0% 17.0% 17.0% 20.7 26.5 ============================================== Income before income taxes 16.6% 15.7% 15.8% 20.6 25.9 ============================================== Net income 9.8% 9.3% 9.3% 20.6 25.9 ==============================================
Revenues increased $173,875,000 in 1999 and $259,238,000 in 1998. Revenue growth in 1999 and 1998 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 45% and 60% of total revenue growth in 1999 and 1998, respectively. Cost of revenues increased $130,429,000 in 1999 and $215,376,000 in 1998. The make up of cost of revenues has been affected in all years by business acquisitions and changes in the mix of the Company's business. Amortization of internally generated computer software is stated net of capitalization and increased as a percent of revenues from 1998 to 1999. The increase in 1999 was due to reduced capitalization resulting from Year 2000 activities and accelerated amortization due to the write-down of certain ancillary software products to net realizable value. Operating income increased $43,446,000 in 1999 and $43,862,000 in 1998. The Company's operating margins increased by 1% from 1998 to 1999 and remained unchanged from 1997 to 1998. The effective income tax rate was 41% in all three years, and the effective income tax rate for 2000 is expected to remain at 41%. 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. SEGMENT INFORMATION The following table sets forth revenue and operating income by business segment for the years ended December 31:
(In thousands) 1999 1998 1997 --------------- ---------------- ------------- Revenues: Financial institution outsourcing, systems and services $ 1,066,514 $ 951,010 $ 753,209 Securities processing and trust services 276,215 234,699 179,217 All other and corporate 64,816 47,961 42,006 --------------- --------------- ------------- Total $ 1,407,545 $ 1,233,670 $ 974,432 --------------- --------------- ------------- Operating income: Financial institution outsourcing, systems and services $ 175,194 $ 148,774 $ 117,467 Securities processing and trust services 80,125 70,074 51,770 All other and corporate (2,234) (9,209) (3,460) --------------- ---------------- ------------- Total $ 253,085 $ 209,639 $ 165,777 --------------- ---------------- -------------
Revenues in the financial institution outsourcing, systems and services business segment increased $115,504,000 in 1999 and $197,801,000 in 1998. Revenue growth in 1999 and 1998 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 $26,420,000 and $31,307,000 in 1999 and 1998, respectively, while operating margins were consistent year to year. Revenues in the securities processing and trust services business segment increased $41,516,000 in 1999 and $55,482,000 in 1998. Revenue growth in 1999 and 1998 was derived primarily from sales to new clients, increased transaction volume from existing clients and revenues from acquired businesses. Operating income in the securities processing and trust services business segment increased $10,051,000 and $18,304,000 in 1999 and 1998, respectively, while operating margins were relatively consistent year to year. Revenues in the "All other and corporate" segment increased $16,855,000 in 1999 and $5,955,000 in 1998. The increase in revenues in 1999 over 1998 resulted primarily from sales to new clients and the full year 1999 impact of an acquisition which was completed in August 1998. Operating income in this business segment increased $6,975,000 in 1999 and decreased $5,749,000 in 1998. 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 of funds for the years ended December 31:
(In thousands) 1999 1998 1997 ------------ ------------- ------------- Cash provided by operating activities before changes in securities processing receivables and payables-net $ 318,715 $ 273,315 $ 200,517 Securities processing receivables and payables-net (140,878) 7,080 (5,948) ------------ ------------- ------------ Cash provided by operating activities 177,837 280,395 194,569 Increase (decrease) in net borrowings 169,959 79,835 (31,096) ------------ ------------- ------------ TOTAL $ 347,796 $ 360,230 $ 163,473 ------------ ------------- ------------
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 issuance of securities. 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/or in conjunction with employee stock option plans. YEAR 2000 SYSTEMS EVALUATION The Company provides data processing and other related services to financial institutions of all kinds. The Company has completed the Year 2000 renovation of its systems. The Company has met its Year 2000 compliance commitments using existing resources, without incurring significant incremental expenses. Although the Company does not maintain accounting records that separately identify all of the associated costs with its Year 2000 activities, it has estimated that commencing with 1996, such costs have approximated $15 million annually. The Company does not expect to incur any significant costs in 2000 related to Year 2000 activities. 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. Substantially all of the investments at December 31, 1999 have contractual maturities of one year or less except for government agency and certain fixed income mortgage backed obligations, which have an average duration of approximately two years and six months. 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, 1999, unrealized gains related to interest rate swap agreements are not material. Based on the controls in place, management believes the risk associated with these instruments at December 31, 1999 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. Selected Financial Data The following data, which has been materially affected by acquisitions, should be read in conjunction with the financial statements and related notes thereto included elsewhere in this Annual Report.
(In thousands, except per share data) Year ended December 31, 1999 1998 1997 1996 1995 -------------------------------------------------------------------------------- Revenues $1,407,545 $1,233,670 $ 974,432 $ 879,449 $ 769,104 Income (loss) before income taxes 233,675 193,684 153,899 134,462 (76,146) Income taxes (credit) 95,807 79,410 63,099 54,754 (30,220) Net income (loss) 137,868 114,274 90,800 79,708 (45,926) Net income (loss) per share: Basic $ 1.12 $ 0.93 $ 0.78 $ 0.69 ($0.41) -------------------------------------------------------------------------------- Diluted $ 1.09 $ 0.90 $ 0.75 $ 0.68 ($0.41) -------------------------------------------------------------------------------- As originally reported-diluted $ 1.09 $ 0.90 $ 0.75 $ 0.59 $ 0.50 -------------------------------------------------------------------------------- Total assets $5,307,710 $3,958,338 $3,636,491 $2,698,979 $2,514,597 Long-term debt 472,824 389,622 252,031 272,864 383,416 Shareholders' equity 1,091,016 885,797 769,255 605,898 514,866
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 interest. The net income (loss) per share as originally reported - diluted is before the restatement due to the BHC pooling of interest and excludes the one-time after-tax charges of $1.11 per share related to the acquisition of Information Technology, Inc. in 1995. QUARTERLY FINANCIAL INFORMATION (Unaudited)
(In thousands, except per share data) Quarters ------------------------------------------ First Second Third Fourth Total 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 ------------------------------------------------------ Income before income taxes 56,638 58,199 59,656 59,182 233,675 Income taxes 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 ====================================================== 1998 Revenues $ 273,829 $ 311,220 $ 309,543 $ 339,078 $1,233,670 Cost of revenues 224,445 258,398 256,609 284,579 1,024,031 ------------------------------------------------------ Operating income 49,384 52,822 52,934 54,499 209,639 ------------------------------------------------------ Income before income taxes 46,017 48,594 48,936 50,137 193,684 Income taxes 18,867 19,924 20,063 20,556 79,410 ------------------------------------------------------ Net income $ 27,150 $ 28,670 $ 28,873 $ 29,581 $ 114,274 ------------------------------------------------------ Net income per share: Basic $ 0.22 $ 0.23 $ 0.23 $ 0.24 $ 0.93 ====================================================== Diluted $ 0.22 $ 0.22 $ 0.23 $ 0.23 $ 0.90 ======================================================
Market Price Information The following information relates to the closing price of the Company's $.01 par value common stock, which is traded on the NASDAQ National Market tier of the NASDAQ Stock Market under the symbol FISV. Information for all periods has been adjusted (to the nearest 1/32) to recognize the three-for-two stock splits effective April 1999 and May 1998.
1999 1998 - ------------------------------------------------------------------------------------ Quarter Ended High Low High Low - ------------------------------------------------------------------------------------ March 31 37 19/32 30 28 5/32 20 21/32 June 30 40 31 5/16 30 25 11/32 September 30 34 1/8 27 1/4 32 21/32 26 December 31 39 3/16 24 3/4 35 13/32 25 1/2
At December 31, 1999, the Company's common stock was held by 2,590 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 20, 2000 was $36.75 per share. The Company's present policy is to retain earnings to support future business opportunities, rather than to pay dividends. MANAGEMENT'S STATEMENT OF RESPONSIBILITY The management of Fiserv, Inc. assumes responsibility for the integrity and objectivity of the information appearing in the 1999 Annual Report. This information was prepared in conformity with generally accepted accounting principles 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. Deloitte & Touche LLP, certified public accountants, audit the financial statements of the Company in accordance with generally accepted auditing standards. 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 Vice Chairman and Chief Executive Officer 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, 1999 and 1998 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1999. 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 generally accepted auditing standards. 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, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Milwaukee, Wisconsin January 28, 2000 EX-21 5 SUBSIDIARY OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT State (Country) of Name under which Subsidiary does Business Incorporation Aspen Investment Alliance, Inc. Colorado Data-Link Systems, LLC Wisconsin FIserv CIR, Inc. Delaware FIserv Federal Systems, Inc. Delaware FIserv Fresno, Inc. California FIserv Joint Venture, Inc. Delaware Fiserv Solutions, Inc. Wisconsin FIserv (Europe) Ltd. United Kingdom FIserv (ASPAC) Pte., Ltd. Singapore Fiserv Australia Pty Limited Australia Pt Fiserv Indonesia Indonesia First Trust Corporation Colorado Information Technology, Inc. Nebraska Lincoln Trust Company Colorado The Affinity Group, Inc. Colorado Fiserv Solutions of Canada Inc. Ontario Fiserv Clearing, Inc. Delaware BHC Investments, Inc. Delaware BHC Trading Corp. Delaware Fiserv Securities, Inc. Delaware TradeStar Investments, Inc. Delaware Fiserv Investor Services, Inc. Delaware BHCM Insurance Agency, Inc. Delaware F.T. Agency, Inc. Ohio Tower Agency, Inc. Ohio Fiserv Insurance Agency of Alabama, Inc. Alabama Fiserv Correspondent Services, Inc. Colorado Investment Consulting Group, Inc. Colorado FCS Funding, Inc. Colorado WUB2 Management Company Colorado WUB3 Capital Management, Inc. Colorado WUB4 Capital Partners, LLP Colorado Life Instructors, Inc. New Jersey Fiserv LeMans, Inc. Pennsylvania Specialty Insurance Service California The Freedom Group, Inc. Iowa Specialty Software Service, Inc. California Fiserv Mercosur, Inc. Delaware 17 State (Country) of Name under which Subsidiary does Business Incorporation Fiserv International (Barbados) Limited Barbados Fiserv Envision Financial Technologies, Inc. Maryland XP Systems Corporation Minnesota Precision Direct, Inc. Washington Fiserv Domestic and Global Clearing & Execution, Inc. Delaware Fiserv Chicago Clearing and Execution Delaware Fiserv e-Finet, Inc. Wisconsin ITI of Nebraska, Inc. Nebraska WUB5 Mezzanine Fund, L.P. Colorado DSS/Spectrum Services Corp. Florida RF/Spectrum Decision Science Corporation Florida 18 EX-23 6 INDEPENDENT AUDITORS' CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 333- 64353, 333-04417, 333-28113, 333-28115, 333-28117, 333-28119, 333-28121 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 28, 2000, appearing in and incorporated by reference in this Annual Report on Form 10-K of Fiserv, Inc. for the year ended December 31, 1999. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Milwaukee, Wisconsin February 25, 2000 19 EX-27 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1999 ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 80,554 1,298,120 235,350 0 0 3,899,470 492,931 297,598 5,307,710 3,765,605 0 0 0 1,254 1,089,762 5,307,710 0 1,407,545 0 1,124,718 29,742 0 19,410 233,675 95,807 137,868 0 0 0 137,868 1.12 1.09
-----END PRIVACY-ENHANCED MESSAGE-----