<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ___________
COMMISSION FILE NUMBER: 33-45417
THE BISYS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3532663
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 CLOVE ROAD, LITTLE FALLS, NEW JERSEY
07424
(Address of principal executive offices)
(Zip Code)
973-812-8600
(Registrant's telephone number, including area code)
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 REPORT(S), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
----- -----
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
Class Shares Outstanding at April 30, 2000
- -------------------------------------- ------------------------------------
Common Stock, par value $.02 per share 27,758,457
This document contains 16 pages.
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<TABLE>
THE BISYS GROUP, INC.
INDEX TO FORM 10-Q
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of March 31, 2000
and June 30, 1999 3
Condensed Consolidated Statement of Operations for the three and nine months
ended March 31, 2000 and 1999 4
Condensed Consolidated Statement of Cash Flows for the nine months
ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
EXHIBIT INDEX 15
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
March 31, June 30,
2000 1999
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 52,667 $ 49,589
Accounts receivable, net 106,280 104,608
Deferred tax asset 5,686 9,241
Other current assets 15,266 14,243
-------- --------
Total current assets 179,899 177,681
Property and equipment, net 60,633 54,855
Intangible assets, net 192,447 194,852
Other assets 32,898 32,273
-------- --------
Total assets $465,877 $459,661
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 9,000 $ 52,000
Accounts payable 14,188 21,303
Other current liabilities 90,184 82,294
-------- --------
Total current liabilities 113,372 155,597
Deferred tax liability 10,976 9,774
Other liabilities 6,847 5,784
-------- --------
Total liabilities 131,195 171,155
-------- --------
Stockholders' equity:
Common stock, $.02 par value, 80,000,000 shares authorized,
27,708,854 and 27,091,270 shares issued, respectively 554 542
Additional paid-in capital 216,252 193,500
Retained earnings 129,223 94,550
Less notes receivable from stockholders (11,347) --
Less treasury stock at cost, 1,575 shares -- (86)
-------- --------
Total stockholders' equity 334,682 288,506
-------- --------
Total liabilities and stockholders' equity $465,877 $459,661
======== ========
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
3
<PAGE> 4
<TABLE>
THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $145,657 $121,302 $416,014 $335,184
-------- -------- -------- --------
Operating costs and expenses:
Service and operating 80,313 67,170 241,432 190,937
General and administrative 19,147 17,105 57,901 50,479
Selling and conversion 7,145 5,562 20,403 16,680
Research and development 3,318 2,516 9,187 8,632
Amortization of intangible assets 2,886 1,935 8,520 5,395
Merger expenses and other charges -- -- -- 400
Acquired in-process research and development -- -- -- 19,000
-------- -------- -------- --------
Operating earnings 32,848 27,014 78,571 43,661
Interest income (expense), net 185 317 (562) 1,357
-------- -------- -------- --------
Income before income taxes 33,033 27,331 78,009 45,018
Income taxes 13,046 10,931 30,813 25,608
-------- -------- -------- --------
Net income $ 19,987 $ 16,400 $ 47,196 $ 19,410
======== ======== ======== ========
Basic earnings per share $ 0.72 $ 0.61 $ 1.73 $ 0.73
======== ======== ======== ========
Diluted earnings per share $ 0.70 $ 0.58 $ 1.66 $ 0.70
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
4
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<TABLE>
THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
Nine Months Ended
March 31,
-------------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 47,196 $ 19,410
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 22,702 16,585
Write-off of acquired in-process research and development -- 19,000
Deferred income tax provision 3,341 3,945
Change in operating assets and liabilities, net of effects from acquisitions (9,108) (32,466)
-------- --------
Net cash provided by operating activities 64,131 26,474
-------- --------
Cash flows from investing activities:
Acquisitions, net of cash acquired -- (15,786)
Proceeds from dispositions, net of expenses paid 5,442 --
Capital expenditures, net (20,466) (21,775)
Change in other investments 2,768 (2,952)
Purchase of intangible assets (5,242) (290)
Other 2,927 232
-------- --------
Net cash used in investing activities (14,571) (40,571)
-------- --------
Cash flows from financing activities:
Short-term borrowings, net (43,000) 5,000
Repayment of debt -- (1,051)
Issuance of common stock 2,235 1,691
Proceeds from exercise of stock options 12,434 10,040
Repurchases of common stock (18,151) (56,208)
-------- --------
Net cash used in financing activities (46,482) (40,528)
-------- --------
Net increase (decrease) in cash and cash equivalents 3,078 (54,625)
Cash and cash equivalents at beginning of period 49,589 93,403
-------- --------
Cash and cash equivalents at end of period $ 52,667 $ 38,778
======== ========
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
5
<PAGE> 6
THE BISYS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. THE COMPANY
The BISYS(R) Group, Inc. and subsidiaries (the "Company") is a leading
national provider of outsourcing solutions to and through financial
organizations.
The condensed consolidated financial statements include the accounts of
The BISYS Group, Inc. and its subsidiaries and have been prepared
consistent with the accounting policies reflected in the 1999 Annual
Report on Form 10-K filed with the Securities and Exchange Commission
and should be read in conjunction therewith. The condensed consolidated
financial statements include all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management,
necessary to present fairly this information.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
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
revenue and expenses during the reporting period. The most significant
estimates are related to the allowance for doubtful accounts,
intangible assets, acquired in-process research and development, income
taxes and contingencies. Actual results could differ from these
estimates in the near term.
3. EARNINGS PER SHARE
Basic and diluted EPS computations for the three and nine months ended
March 31, 2000 and 1999 are as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------- ----------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic EPS
---------
Net income $19,987 $16,400 $47,196 $19,410
======= ======= ======= =======
Weighted average common shares outstanding 27,641 26,841 27,356 26,610
======= ======= ======= =======
Basic earnings per share $ 0.72 $ 0.61 $ 1.73 $ 0.73
======= ======= ======= =======
Diluted EPS
-----------
Net income $19,987 $16,400 $47,196 $19,410
======= ======= ======= =======
Weighted average common shares outstanding 27,641 26,841 27,356 26,610
Assumed conversion of common shares issuable
under stock option plans 1,030 1,406 1,028 1,172
------- ------- ------- -------
Weighted average common and common equivalent
shares outstanding 28,671 28,247 28,384 27,782
======= ======= ======= =======
Diluted earnings per share $ 0.70 $ 0.58 $ 1.66 $ 0.70
======= ======= ======= =======
</TABLE>
Certain stock options were not included in the computation of diluted
EPS because the options' exercise price was greater than the average
market price of common shares during the period, as follows (in
thousands, except per share amounts):
6
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<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------- ---------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Number of options excluded 16 0 488 81
Option price per share $68.625 NA $54.50 to $68.625 $48.00
</TABLE>
4. NOTES RECEIVABLE FROM STOCKHOLDERS
The Board of Directors has approved and the Company has made loans to
certain executive officers to assist them in exercising non-qualified
stock options, retaining the underlying shares and paying the
applicable taxes resulting from such exercises. These loans bear
interest at rates ranging from 5.98% to 6.25%, are full recourse, and
are secured by shares of the Company's Common Stock acquired pursuant
to the exercise of the options representing up to 120% of the principal
amount of the loan. The principal is repayable the later of five years
from the date of the loan or the expiration date of the options
exercised using such loan proceeds. The principal is also repayable
within one year of the employee's death or termination of employment
due to disability and within 30 days of voluntary resignation. Interest
is payable annually on the anniversary date of each loan.
The notes receivable of $11.3 million are reflected on the accompanying
condensed consolidated balance sheet as a reduction in stockholders'
equity at March 31, 2000.
5. DISPOSITION
In February 2000, the Company sold the retail third-party bank
marketing component of its Brokerage Services division to a financial
services company. The sale had no material impact on the Company's
financial position or results of operations for the three months ended
March 31, 2000.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Company provides outsourcing solutions to and through financial
organizations. The following table presents the percentage of revenues
represented by each item in the Company's condensed consolidated statement of
operations for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------- --------------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Operating costs and expenses:
Service and operating 55.1 55.4 58.0 57.0
General and administrative 13.1 14.1 13.9 15.1
Selling and conversion 4.9 4.6 4.9 5.0
Research and development 2.3 2.1 2.2 2.6
Amortization of intangible assets 2.0 1.6 2.1 1.6
Merger expenses and other charges -- -- -- 0.1
Acquired in-process research and development -- -- -- 5.6
----- ----- ----- -----
Operating earnings 22.6 22.2 18.9 13.0
Interest income (expense), net 0.1 0.3 (0.1) 0.4
----- ----- ----- -----
Income before income taxes 22.7 22.5 18.8 13.4
Income taxes 9.0 9.0 7.4 7.6
----- ----- ----- -----
Net income 13.7% 13.5% 11.4% 5.8%
===== ===== ===== =====
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 WITH THE THREE MONTHS ENDED
MARCH 31, 1999.
Revenues increased 20.1% from $121.3 million for the three months ended
March 31, 1999 to $145.7 million for the three months ended March 31,
2000. This growth was derived from sales to new clients, existing
client growth, cross sales to existing clients and revenues from
acquired businesses, partially offset by lost business.
Service and operating expenses increased 19.6% from $67.2 million for
the three months ended March 31, 1999 to $80.3 million for the three
months ended March 31, 2000, and decreased as a percentage of revenues
from 55.4% to 55.1%. The dollar increase resulted from additional costs
associated with greater revenues.
General and administrative expenses increased 11.9% from $17.1 million
during the three months ended March 31, 1999, to $19.1 million for the
three months ended March 31, 2000, and decreased as a percentage of
revenues from 14.1% to 13.1%. The decrease as a percentage of revenues
resulted from further utilization of existing general and
administrative support resources.
Selling and conversion expenses increased 28.5% from $5.6 million for
the three months ended March 31, 1999, to $7.1 million for the three
months ended March 31, 2000, and increased as a percentage of revenues
from 4.6% to 4.9%. The increases resulted from added costs associated
with higher selling and conversion activities.
Research and development expenses increased 31.9% from $2.5 million for
the three months ended March 31, 1999 to $3.3 million for the three
months ended March 31, 2000, and increased as a percentage of revenues
from 2.1% to 2.3%. The increases resulted from increased expenses to
support additional research and development activities.
Amortization of intangible assets increased $1.0 million for the three
months ended March 31, 2000, over the same period last year due to a
higher level of intangible assets associated with acquisitions.
The income tax provision of $13.0 million for the three months ended
March 31, 2000 increased from $10.9 million for the three months ended
March 31, 1999 due to higher taxable income. The provision represents
an effective tax rate of 39.5% and 40.0% for the periods ended March
31, 2000 and 1999, respectively. The lower effective tax rate in the
current quarter is attributable to recently completed tax planning
initiatives.
8
<PAGE> 9
COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 2000 WITH THE NINE MONTHS ENDED
MARCH 31, 1999.
Revenues increased 24.1% from $335.2 million for the nine months ended
March 31, 1999 to $416.0 million for the nine months ended March 31,
2000. This growth was derived from sales to new clients, existing
client growth, cross sales to existing clients and revenues from
acquired businesses, partially offset by lost business.
Service and operating expenses increased 26.4% from $190.9 million
during the nine months ended March 31, 1999 to $241.4 million for the
nine months ended March 31, 2000, and increased as a percentage of
revenues from 57.0% to 58.0%. The increases resulted from additional
costs associated with greater revenues.
General and administrative expenses increased 14.7% from $50.5 million
during the nine months ended March 31, 1999, to $57.9 million for the
nine months ended March 31, 2000, and decreased as a percentage of
revenues from 15.1% to 13.9%. The dollar increase primarily resulted
from additional costs associated with greater revenues. The decrease as
a percentage of revenues resulted from further utilization of existing
general and administrative support resources.
Selling and conversion expenses increased 22.3% from $16.7 million for
the nine months ended March 31, 1999 to $20.4 million for the nine
months ended March 31, 2000, and decreased as a percentage of revenues
from 5.0% to 4.9%.
Amortization of intangible assets increased 57.9% for the nine months
ended March 31, 2000, over the same period last year due to a higher
level of intangible assets related to acquisitions.
During the nine months ended March 31, 1999, the Company wrote off
$19.0 million of acquired in-process research and development
associated with the acquisition of Greenway Corporation and incurred
$0.4 million of merger-related expenses.
The income tax provision of $30.8 million for the nine months ended
March 31, 2000 increased from $25.6 million for the nine months ended
March 31, 1999 primarily due to higher taxable income. The provision
represents an effective tax rate of 39.5% and 40.0% for the nine months
ended March 31, 2000 and 1999, respectively, excluding the nonrecurring
nondeductible charge of $19.0 million related to acquired in-process
research and development incurred during the nine months ended March
31, 1999. The lower effective tax rate in the current fiscal nine
months is attributable to recently completed tax planning initiatives.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had cash and cash equivalents of $52.7
million and working capital of $66.5 million. At March 31, 2000, the
Company had outstanding borrowings of $9.0 million against its
revolving credit facility to support working capital requirements. The
credit facility bears interest at LIBOR plus a margin of 0.55%. The
weighted average interest rate on outstanding borrowings at March 31,
2000 was 6.64%. At March 31, 2000, the Company had $0.7 million
outstanding in letters of credit.
Other current assets included in the accompanying balance sheet consist
primarily of prepaid expenses, inventory, and customer funds required
to be segregated that are held by the Company's Brokerage Services
division. Customer funds required to be segregated may vary
significantly from period to period.
For the nine months ended March 31, 2000, operating activities provided
cash of $64.1 million. Investing activities used cash of $14.6 million,
primarily for the acquisition of intangibles of $5.2 million and
capital expenditures of $20.5 million, offset by $5.4 million of net
proceeds from dispositions and $2.8 million of net investment activity.
Financing activities used cash of $46.5 million, primarily for the
repurchase of common stock of $18.2 million and net repayments on
borrowings of $43.0 million, offset by proceeds from the exercise of
stock options of $12.4 million and issuance of stock of $2.2 million.
In January 1999, the Company's Board of Directors authorized a stock
buy-back program of up to $100 million of its outstanding common stock.
Purchases have occurred and are expected to continue to occur from
time-to-time in the open market to offset the possible dilutive effect
of shares issued under employee benefit plans, for possible use in
future acquisitions and for general and other corporate purposes.
9
<PAGE> 10
Since January 1999, the Company has purchased 721,000 shares of its
common stock under the stock buy-back program for approximately $37.6
million in order to effect the acquisitions of EXAMCO, Inc. and Dover
International and for the issuance of stock in connection with the
exercise of stock options.
SEGMENT INFORMATION
The following table sets forth operating revenue and operating income
by business segment and for corporate operations for the three and nine
months ended March 31, 2000 and 1999. For the nine months ended March
31, 1999, merger expenses and other charges of $0.4 million and
acquired in-process research and development of $19.0 million are
excluded from the operating results for a better understanding of the
underlying performance of each segment.
<TABLE>
<CAPTION>
(in Thousands)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating Revenue:
Information Services $ 46,332 $ 45,368 $130,492 $129,873
Investment Services 76,142 61,790 221,723 169,211
Insurance and Education Services 23,183 14,144 63,799 36,100
-------- -------- -------- --------
Total Operating Revenue $145,657 $121,302 $416,014 $335,184
======== ======== ======== ========
Operating Income:
Information Services $ 12,610 $ 12,211 $ 30,065 $ 29,312
Investment Services 14,846 11,764 37,070 29,585
Insurance and Education Services 8,742 5,906 21,063 12,400
Corporate (3,350) (2,867) (9,627) (8,236)
-------- -------- -------- --------
Total Operating Income $ 32,848 $ 27,014 $ 78,571 $ 63,061
======== ======== ======== ========
</TABLE>
Revenue in the Information Services business segment increased $1.0
million, or 2.1%, during the three months ended March 31, 2000,
compared to the same period last year. For the nine months ended March
31, 2000, revenues increased $0.6 million, or 0.5%, compared to the
same period last year. The below normal revenue increase was primarily
due to the June 1999 sale of the Marketing Solutions business and
softness in Document Solutions software sales due to the residual Year
2000-related impact. Operating income in the Information Services
business segment increased $0.4 million, or 3.3%, during the fiscal
third quarter, resulting in operating margins of 27.2% and 26.9% for
the three months ended March 31, 2000 and 1999, respectively. Margins
increased slightly in the fiscal third quarter primarily due to the
continued strong performance within the Information Solutions division.
Operating income increased $0.8 million for the nine months ended March
31, 2000, resulting in operating margins of 23.0% and 22.6% for the
nine months ended March 31, 2000 and 1999, respectively. Margins
improved in the nine months ended March 31, 2000, primarily due to
accelerated growth within the Information Solutions division and the
sale of the Marketing Solutions business.
Revenue in the Investment Services business segment increased $14.4
million, or 23.2%, during the three months ended March 31, 2000,
compared to the same period last year. For the nine months ended March
31, 2000, revenues increased $52.5 million, or 31.0%, compared to the
same period last year. The revenue increase was due to strong internal
growth, including the acquisition of several new clients. Operating
income in the Investment Services business segment increased $3.1
million, or 26.2%, during the fiscal third quarter, resulting in
operating margins of 19.5% and 19.0% for the three months ended March
31, 2000 and 1999, respectively. Operating income increased $7.5
million for the nine months ended March 31, 2000, resulting in
operating margins of 16.7% and 17.5% for the nine months ended March
31, 2000 and 1999, respectively. Margins declined in the nine months
ended March 31, 2000, primarily due to conversion activities associated
with a significant new client in the Brokerage Services division, costs
incurred in the Fund Services division for the international expansion
of outsourcing services, and expansion of the business development
sales force.
Revenue in the Insurance and Education Services business segment
increased $9.0 million, or 63.9%, during the three months ended March
31, 2000, compared to the same period last year. For the nine months
ended March 31, 2000, revenues increased $27.7 million, or 76.7%,
compared to the same period last year. The revenue increase was due to
strong internal growth and the acquisitions of EXAMCO, Inc., Poage
Insurance Services, and Dover International. Operating income in the
Insurance and Education Services business segment
10
<PAGE> 11
increased $2.8 million, or 48.0%, during the fiscal third quarter,
resulting in operating margins of 37.7% and 41.8% for the three months
ended March 31, 2000 and 1999, respectively. Operating income increased
$8.7 million, or 69.9%, for the nine months ended March 31, 2000,
resulting in operating margins of 33.0% and 34.4% for the nine months
ended March 31, 2000 and 1999, respectively. Margins declined in the
fiscal third quarter and for the nine months ended March 31, 2000 due
to the inclusion of the Education Services division that was acquired
in the fourth quarter of fiscal 1999 and whose margins are lower than
the Insurance Services division.
Corporate operations represent charges for the Company's human
resources, legal, accounting and finance functions, and various other
unallocated overhead charges. Increased expenses of $0.5 million and
$1.4 million in the three and nine months ended March 31, 2000,
respectively, were in line with the Company's overall growth.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
In September 1998, the Company acquired Greenway Corporation through
the issuance of common stock valued at approximately $43.8 million. Of
the total purchase price, $19.0 million was allocated to acquired
in-process research and development, which was charged to operations at
the time of acquisition.
The amount allocated to acquired in-process research and development
was based on an independent appraisal, employing a discounted cash flow
approach, and relates to the development of enhanced check imaging
software. At the acquisition date, the products were estimated to be
between 50% and 75% complete and were determined to have no future
alternative uses.
Significant assumptions used in the valuation of the acquired
in-process research and development were as follows:
Estimated costs to complete $2.1 million
Anticipated completion date January 2000
Projected annual revenues $30 million
Discount rate 20%
Discount period 9 years
Technological feasibility was attained in the third quarter of fiscal
1999. Development efforts were substantially completed in the first
quarter of fiscal 2000, and sales of the enhanced check imaging
software began in the second quarter of fiscal 2000.
YEAR 2000
The Company has addressed the Year 2000 issues associated with its
existing computer systems and software applications utilizing both
internal and external resources to identify and remediate these matters
throughout the organization. The Company completed its risk assessment
and testing plans for internal mission critical information systems and
tested all of its mission critical information systems in a timely
manner.
The Company believes it developed an effective plan to address the Year
2000 issues and that, based on available information, its Year 2000
transition had no material effect on its business, operations, or
financial results. The Company incurred expenditures for Year 2000
testing and remediation of approximately $0.8 million and $1.8 million
for the nine months ended March 31, 2000 and 1999, respectively.
RECENT LEGISLATION
The recent adoption of the Financial Services Modernization Act of 1999
lifts many restrictions limiting banks from the underwriting and
distribution of securities. The Company expects that some of its bank
customers with proprietary mutual funds may, over time, internalize
certain distribution functions currently provided by the Company. At
the same time, the Company believes this change may result in
additional demand for its outsourcing services as financial
institutions provide new services to their customers. The near-term and
long-term impact of this legislative change on the Company's business
and results of operations are uncertain. Although there can be no
assurance, at this time the Company does not expect a material adverse
impact on its business or results of operations.
11
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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters
discussed in this quarterly 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 quarterly 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.
12
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PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None.
(b) REPORTS ON FORM 8-K
None.
13
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SIGNATURES
Pursuant to the requirements 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.
THE BISYS GROUP, INC.
Date: May 12, 2000 By: /s/ Dennis R. Sheehan
--------------- ----------------------------------------------
Dennis R. Sheehan
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer)
14
<PAGE> 15
THE BISYS GROUP, INC.
EXHIBIT INDEX
EXHIBIT NO. PAGE
(27) Financial Data Schedule........................(electronic only)
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE BISYS GROUP, INC. AND SUBSIDIARIES FOR
THE NINE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 52,667
<SECURITIES> 0
<RECEIVABLES> 109,248
<ALLOWANCES> 2,968
<INVENTORY> 0
<CURRENT-ASSETS> 179,899
<PP&E> 117,820
<DEPRECIATION> 57,187
<TOTAL-ASSETS> 465,877
<CURRENT-LIABILITIES> 113,372
<BONDS> 0
0
0
<COMMON> 554
<OTHER-SE> 334,128
<TOTAL-LIABILITY-AND-EQUITY> 465,877
<SALES> 0
<TOTAL-REVENUES> 416,014
<CGS> 0
<TOTAL-COSTS> 241,432
<OTHER-EXPENSES> 29,590
<LOSS-PROVISION> 1,063
<INTEREST-EXPENSE> 2,821
<INCOME-PRETAX> 78,009
<INCOME-TAX> 30,813
<INCOME-CONTINUING> 47,196
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,196
<EPS-BASIC> 1.73
<EPS-DILUTED> 1.66
</TABLE>
