<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 1, 2000 (Date of earliest event reported):
THE BISYS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19922 13-3532663
(State or other jurisdiction of (Commission File (IRS Employer
of incorporation) Number) Identification No.)
150 CLOVE ROAD, LITTLE FALLS, NEW JERSEY 07424
(Address of principal executive offices)
(973) 812-8600
(Registrant's telephone number, including area code)
<PAGE> 2
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Business Acquired
Audited financial statements of Pictorial Holdings,
Inc. for the year ended December 31, 1999.
Unaudited financial statements of Pictorial Holdings,
Inc. for the six months ended June 30, 2000 and 1999.
(b) Pro Forma Financial Information
Pro forma consolidated balance sheet of the
registrant at June 30, 2000 and pro forma consolidated
statement of operations of the registrant for the fiscal year
ended June 30, 2000.
The registrant hereby amends its Current Report on Form 8-K
dated July 1, 2000 to file on the following pages the
financial statements and pro forma financial information
required by this item.
(c) Exhibits
*2.1 Stock Purchase Agreement dated as of May 26, 2000 between
PRIMEDIA Inc. and The BISYS Group, Inc.
23 Consent of PricewaterhouseCoopers LLP
*99.1 Press release of The BISYS Group, Inc. dated June 1, 2000.
*99.2 Press release of The BISYS Group, Inc. dated July 5, 2000.
--------------------
*Previously Filed
2
<PAGE> 3
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.
(Registrant)
By: /s/ Lynn J. Mangum
-------------------------------------------
Lynn J. Mangum
Chairman and Chief Executive Officer
Dated: September 15, 2000
3
<PAGE> 4
PICTORIAL HOLDINGS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder
of Pictorial Holdings, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
statements of operations and of cash flows present fairly, in all material
respects, the financial position of Pictorial Holdings, Inc. at December 31,
1999 and the results of its operations and its cash flows for the year ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States. 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 of these
statements in accordance with auditing standards generally accepted in the
United States which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
August 15, 2000
<PAGE> 6
PICTORIAL HOLDINGS, INC.
BALANCE SHEET
DECEMBER 31, 1999 AND JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 2000
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 30,000 $ 218,000
Restricted cash 646,000 719,000
Accounts receivable, net 4,781,000 4,443,000
Inventory 737,000 810,000
Deferred tax asset 1,036,000 912,000
Prepaid expenses and other current assets 362,000 558,000
------------ ------------
Total current assets 7,592,000 7,660,000
Property and equipment, net 1,144,000 1,904,000
Intangible assets, net 82,257,000 78,831,000
Deferred tax assets -- 119,000
Other assets 186,000 142,000
------------ ------------
Total assets $ 91,179,000 $ 88,656,000
------------ ------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 757,000 $ 607,000
Cash overdraft -- 883,000
Accrued liabilities 2,883,000 1,507,000
Deferred revenue 8,103,000 7,494,000
------------ ------------
Total current liabilities 11,743,000 10,491,000
------------ ------------
Deferred tax liability 264,000 --
Commitments (Note 5)
Shareholder's equity:
Investment by parent 84,587,000 84,680,000
Accumulated deficit (5,415,000) (6,515,000)
------------ ------------
Total shareholder's equity 79,172,000 78,165,000
------------ ------------
Total liabilities and shareholder's equity $ 91,179,000 $ 88,656,000
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE> 7
PICTORIAL HOLDINGS, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
----------------------------
1999 2000 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Net sales $ 24,496,000 $ 13,519,000 $ 12,280,000
Cost of sales 1,610,000 924,000 888,000
------------ ------------ ------------
Gross profit 22,886,000 12,595,000 11,392,000
------------ ------------ ------------
OPERATING EXPENSES:
Selling, general and administrative 14,362,000 7,304,000 7,384,000
Depreciation and amortization 8,492,000 3,690,000 4,232,000
------------ ------------ ------------
Total operating expenses 22,854,000 10,994,000 11,616,000
------------ ------------ ------------
Income (loss) from operations 32,000 1,601,000 (224,000)
Intercompany interest expense 6,246,000 2,939,000 3,311,000
Other income, net (3,000) 22,000 --
------------ ------------ ------------
Loss before taxes (6,211,000) (1,360,000) (3,535,000)
Income tax benefit 606,000 259,000 303,000
------------ ------------ ------------
Net loss $ (5,605,000) $ (1,101,000) $ (3,232,000)
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE> 8
PICTORIAL HOLDINGS, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999 AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------------------
1999 2000 1999
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(5,605,000) $(1,101,000) $(3,232,000)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization expense 8,144,000 3,524,000 4,075,000
Depreciation expense 348,000 166,000 157,000
Gain on disposal of property and equipment (3,000) -- --
Deferred tax benefit (606,000) (259,000) (303,000)
Changes in current assets and liabilities:
Restricted cash (11,000) (73,000) (253,000)
Accounts receivable (1,209,000) 338,000 811,000
Inventory (73,000) (73,000) 21,000
Prepaid expenses and other current assets (260,000) (196,000) (138,000)
Accounts payable 574,000 (150,000) 81,000
Cash overdraft -- 883,000 --
Accrued liabilities (1,463,000) (1,375,000) (929,000)
Deferred revenue 930,000 (609,000) (904,000)
Changes in other assets (74,000) 44,000 134,000
----------- ----------- -----------
Net cash provided by (used in) operating activities 692,000 1,119,000 (480,000)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (234,000) (973,000) (154,000)
Proceeds from the sale of property and equipment 1,143,000 --
Capitalized software development costs (364,000) (51,000) (300,000)
----------- ----------- -----------
Net cash provided by (used in) investing activities 545,000 (1,024,000) (454,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in investment by parent, net (1,306,000) 93,000 964,000
----------- ----------- -----------
Net cash provided by (used in) financing activities (1,306,000) 93,000 964,000
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (69,000) 188,000 30,000
Cash and cash equivalents at beginning of period 99,000 30,000 99,000
----------- ----------- -----------
Cash and cash equivalents at end of period $ 30,000 $ 218,000 $ 129,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 4 -
<PAGE> 9
PICTORIAL HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999 AND SIX MONTHS ENDED JUNE 30, 2000 (INFORMATION AS
OF AND FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 IS UNAUDITED)
--------------------------------------------------------------------------------
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Pictorial Holdings, Inc. (the "Company") provides training programs as
well as licensing and compliance products for the financial services
industry, primarily insurance companies located in the United States.
BASIS OF PRESENTATION
On July 1, 2000 the Company, a wholly-owned subsidiary of Primedia,
Inc. (Primedia), was acquired by The BISYS Group, Inc. As of December
31, 1999 and prior to the acquisition date, several wholly-owned
subsidiaries of Primedia were held by the Company, including an
operating subsidiary named Pictorial, Inc. Prior to the acquisition
date, the assets and liabilities of all subsidiaries of the Company
were distributed to other entities within Primedia with the exception
of Pictorial, Inc. These financial statements present the financial
position, operations and cash flows of the Company as of and for the
year ended December 31, 1999 and as of and for the six months ended
June 30, 2000 in the form the Company existed on the acquisition date.
Management of the Company believes this presentation is more reflective
of the entity acquired since Pictorial, Inc. was in a dissimilar
business from the other subsidiaries, was managed and financed as if it
were autonomous, had no more than incidental common facilities and
costs, and does not have material financial commitments, guarantees, or
contingent liabilities to the other entities after the acquisition.
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 reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
REVENUE RECOGNITION
Software license revenue is generally recognized ratably over the
contract period, which ranges from one to five years, provided that no
significant vendor obligations remain and collection is considered
probable. Training services revenue is generally recognized as the
services are performed or when the product is shipped.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The
Company deposits cash and cash equivalents with high credit quality
financial institutions.
RESTRICTED CASH
The Company is required to place certain funds received from customers
in an escrow account until the required services have been performed.
These funds are treated as restricted cash.
- 5 -
<PAGE> 10
PICTORIAL HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999 AND SIX MONTHS ENDED JUNE 30, 2000 (INFORMATION AS
OF AND FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 IS UNAUDITED)
--------------------------------------------------------------------------------
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and
accounts receivable. The Company's accounts receivable are derived from
revenue earned from customers located in the United States. The Company
performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers.
The Company maintains an allowance for doubtful accounts receivable
based upon the expected collectibility of accounts receivable. The
allowance for doubtful accounts was $42,000 and $71,000 at December 31,
1999 and June 30, 2000, respectively.
INVENTORY
Inventories primarily include training materials and are stated at the
lower of cost or market, cost being determined using the last-in,
first-out method.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
All costs incurred to establish the technological feasibility of
software to be sold, leased or otherwise marketed are expensed as
research and development costs. Costs incurred subsequent to the
establishment of technological feasibility, and prior to the general
availability of the product to the public are capitalized. The Company
defines technological feasibility as the establishment of a working
model which typically occurs when the Beta testing commences.
Costs incurred to develop software to be used for internal use are
accounted for in accordance with Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use". Accordingly, costs other than reengineering are
expensed or capitalized depending on whether they are incurred in the
preliminary project stage, application development stage, or the
post-implementation/operation stage. Reengineering costs are expensed
as incurred.
The Company's policy is to amortize the capitalized software costs
using the straight-line method over the remaining estimated economic
life of the product or program at the beginning of the period, which is
generally three years. Capitalized software development costs as of
December 31, 1999 and June 30, 2000 are as follows:
DECEMBER 31, JUNE 30,
1999 2000
--------- ---------
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, NET:
Capitalized software development costs $ 669,000 $ 720,000
Less: Accumulated amortization (135,000) (233,000)
--------- ---------
$ 534,000 $ 487,000
--------- ---------
Amortization expense of capitalized software development costs was
$101,000 for the year ended December 31, 1999 and $98,000 for the six
months ended June 30, 2000.
- 6 -
<PAGE> 11
PICTORIAL HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999 AND SIX MONTHS ENDED JUNE 30, 2000 (INFORMATION AS
OF AND FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 IS UNAUDITED)
--------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets, generally 3 to 20 years, or the lease term of the respective
assets. When properties are retired or otherwise disposed of, the cost
of the asset and the related accumulated depreciation are removed from
the accounts with the resulting gain or loss being reflected in results
of operations.
GOODWILL AND INTANGIBLE ASSETS
Goodwill arising from business acquisitions is amortized over its
useful life not to exceed forty years, on a straight-line basis.
Intangible assets primarily include trademarks, customer lists,
purchased software, training programs and non-compete agreements which
are valued at acquisition through independent appraisals. Trademarks
are amortized over their expected useful life not to exceed forty
years, on a straight-line basis. Other intangible assets are amortized
over the expected useful life of the asset, which range from two to
five years, on a straight-line basis.
LONG-LIVED ASSETS
The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires recognition
of impairment of long-lived assets in the event the net book value of
such assets exceeds the future undiscounted cash flows attributable to
such assets.
SEGMENT INFORMATION
The Company has adopted SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information." Management has determined that the
Company has a single reportable segment consisting of the development,
sale and support of training products supporting the financial services
industry. Management uses one measurement of profitability and does not
disaggregate its business for internal reporting. International
operations in all periods presented have not been material to revenue
or net income.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 31, 1999, the SEC issued SAB 101, "Revenue Recognition in
Financial Statements," which provides guidance on the recognition,
presentation, and disclosure of revenue in financial statements filed
with the SEC. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to
revenue recognition policies. Management believes that the impact of
SAB 101 will not have a material effect on the financial position or
results of operations of the Company.
INCOME TAXES
Income taxes are allocated to the Company using the top-down approach.
Under this method, consolidated current and deferred taxes of Primedia
are allocated among the members of the consolidated group based on the
income (losses) generated by each of the members of the consolidated
group.
- 7 -
<PAGE> 12
PICTORIAL HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999 AND SIX MONTHS ENDED JUNE 30, 2000 (INFORMATION AS
OF AND FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 IS UNAUDITED)
--------------------------------------------------------------------------------
2. BALANCE SHEET COMPONENTS
DECEMBER 31, JUNE 30,
1999 2000
------------- -------------
INTANGIBLE ASSETS
Goodwill $ 76,357,000 $ 76,357,000
Customer lists 11,580,000 11,580,000
Training programs, trademarks and other 12,300,000 12,300,000
------------- -------------
100,237,000 100,237,000
Less: Accumulated amortization (17,980,000) (21,406,000)
------------- -------------
$ 82,257,000 $ 78,831,000
------------- -------------
PROPERTY AND EQUIPMENT, NET:
Computer equipment $ 695,000 $ 764,000
Computer software 669,000 720,000
Furniture and fixtures 193,000 711,000
Leasehold improvements 338,000 724,000
------------- -------------
1,895,000 2,919,000
Less: Accumulated depreciation (751,000) (1,015,000)
------------- -------------
$ 1,144,000 $ 1,904,000
------------- -------------
3. TRANSACTIONS WITH PARENT
During the year ended December 31, 1999, and six months ended June 30,
2000 Primedia allocated costs of $1,600,000 and $214,000, respectively,
to the Company representing services performed by corporate, which
costs are included in general and administrative expenses in the
accompanying Statement of Operations. These services included executive
management, accounting, information systems and other administrative
services incurred by Primedia. These costs were allocated to
subsidiaries of Primedia, including the Company based on a percentage
of revenue basis. Management believes this methodology is reasonable in
reflecting the operations of the Company on a stand-alone basis.
An allocation of debt incurred by Primedia was also pushed down to the
Company based on a percentage of the purchase price of acquired
entities. For the year ended December 31, 1999 and the six months ended
June 30, 2000 interest expense of $6,246,000 and $2,939,000,
respectively, associated with this debt was also pushed down to the
Company using the same allocation method and is reflected in the
accompanying Statement of Operations.
- 8 -
<PAGE> 13
PICTORIAL HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999 AND SIX MONTHS ENDED JUNE 30, 2000 (INFORMATION AS
OF AND FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 IS UNAUDITED)
--------------------------------------------------------------------------------
The investment in parent account consists of the following:
DECEMBER 31, JUNE 30,
1999 2000
------------ ------------
Allocation of debt $ 92,911,000 $ 92,802,000
Intercompany receivable, net (8,324,000) (8,122,000)
------------ ------------
$ 84,587,000 $ 84,680,000
------------ ------------
4. INCOME TAXES
The provision for income taxes for the year ended December 31, 1999 and
for the six months ended June 30, 2000 consists of the following:
DECEMBER 31, JUNE 30,
1999 2000
------------ --------
DEFERRED:
U.S. federal $(515,000) $(220,000)
State and local (91,000) (39,000)
--------- ---------
$(606,000) $(259,000)
--------- ---------
Deferred tax assets and liabilities at December 31, 1999 and June 30,
2000 consist of the following:
DECEMBER 31, JUNE 30,
1999 2000
------------ ----------
DEFERRED TAX ASSETS:
Net operating loss carryforwards $1,099,000 $1,099,000
Accruals and reserves 1,036,000 911,000
Depreciation 263,000 286,000
---------- ----------
2,398,000 2,296,000
---------- ----------
DEFERRED TAX LIABILITIES:
Amortization of intangible assets $1,626,000 $1,265,000
---------- ----------
Net deferred tax assets $ 772,000 $1,031,000
---------- ----------
- 9 -
<PAGE> 14
PICTORIAL HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999 AND SIX MONTHS ENDED JUNE 30, 2000 (INFORMATION AS
OF AND FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 IS UNAUDITED)
--------------------------------------------------------------------------------
At December 31, 1999 and June 30, 2000, the Company had approximately
$691,000 of federal and $408,000 of state net operating loss
carryforwards available to offset future taxable income which expire in
varying amounts beginning in 2017. Management does not believe a
valuation allowance is necessary as management believes the deferred
tax assets will be utilized in the Parent's consolidated tax return.
The difference between the Company's effective tax rate and the federal
statutory rate is primarily due to losses incurred by the Company being
partially utilized in Primedia's consolidated return and state and
local income taxes.
5. COMMITMENTS
The Company leases office space and equipment under noncancelable
operating with various expiration dates through 2010. Rent expense for
the year ended December 31, 1999 was $241,000. The terms of the
facility lease provide for rental payments on a graduated scale. The
Company recognizes rent expense on a straight-line basis over the lease
period, and accrues for rent expense incurred but not paid.
Future minimum lease payments under noncancelable operating leases are
as follows:
YEAR ENDING
DECEMBER 31,
2000 $ 1,080,000
2001 1,241,000
2002 1,242,000
2003 1,254,000
2004 1,036,000
Thereafter 4,480,000
----------------
$ 10,333,000
----------------
-10-
<PAGE> 15
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements give effect to the
acquisition by The BISYS Group, Inc. of Pictorial Holdings, Inc. under the
purchase method of accounting. The unaudited pro forma balance sheet is based on
the individual balance sheets of The BISYS Group, Inc. and Pictorial Holdings,
Inc. and has been prepared to reflect the acquisition by The BISYS Group, Inc.
of Pictorial Holdings, Inc. as of June 30, 2000. The unaudited pro forma
statement of income is based on the individual statements of income of The BISYS
Group, Inc. and Pictorial Holdings, Inc. and combines the results of operations
of The BISYS Group, Inc. and of Pictorial Holdings, Inc. (acquired by The BISYS
Group, Inc. as of July 1, 2000) for the year ended June 30, 2000 as if the
acquisition occurred on July 1, 1999.
The accompanying pro forma information is presented for illustrative purposes
and is not necessarily indicative of the financial position or results of
operations which would actually have been reported had the above transaction
been in effect during the periods presented or which may be reported in the
future.
<PAGE> 16
The BISYS Group, Inc. and Pictorial Holdings, Inc.
Unaudited Pro Forma Combined Condensed Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
BISYS PICTORIAL PRO FORMA PRO FORMA
JUNE 30, 2000 JUNE 30, 2000 ADJUSTMENTS COMBINED
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 70,177 $ 218 $ (10,100)(1) $ 60,295
Restricted cash -- 719 -- 719
Accounts receivable, net 108,579 4,443 -- 113,022
Deferred tax asset 8,808 912 8,835 (2) 18,555
Other current assets 131,734 1,368 (115,000)(1) 18,102
--------------- --------------- --------------- -------------
Total current assets 319,298 7,660 (116,265) 210,693
Property and equipment, net 61,211 1,904 -- 63,115
Intangible assets, net 188,349 78,831 38,100 (3) 305,280
Deferred tax asset -- 119 (119)(2) --
Other assets 32,193 142 -- 32,335
--------------- --------------- --------------- -------------
Total assets $ 601,051 $ 88,656 $ (78,284) $ 611,423
=============== =============== =============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 115,000 $ -- $ -- $ 115,000
Accounts payable 15,110 607 -- 15,717
Cash overdraft -- 883 -- 883
Accrued liabilities 89,590 9,001 -- 98,591
--------------- --------------- --------------- -------------
Total current liabilities 219,700 10,491 -- 230,191
Deferred tax liability 13,452 -- (119)(2) 13,333
Other liabilities 6,258 -- -- 6,258
--------------- --------------- --------------- -------------
Total liabilities 239,410 10,491 (119) 249,782
--------------- --------------- --------------- -------------
Stockholders' equity:
Common stock 556 -- -- 556
Additional paid-in capital 220,558 -- -- 220,558
Investment by parent -- 84,680 (84,680)(4) --
Retained earnings 151,874 (6,515) 6,515 (4) 151,874
Less notes receivable from stockholders (11,347) -- -- (11,347)
--------------- --------------- --------------- -------------
Total stockholders' equity 361,641 78,165 (78,165) 361,641
--------------- --------------- --------------- -------------
Total liabilities & stockholders' equity $ 601,051 $ 88,656 $ (78,284) $ 611,423
=============== =============== =============== =============
</TABLE>
<PAGE> 17
The BISYS Group, Inc. and Pictorial Holdings, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
(in thousands)
<TABLE>
<CAPTION>
BISYS PICTORIAL
YEAR ENDED YEAR ENDED PRO FORMA PRO FORMA
JUNE 30, 2000 JUNE 30, 2000 ADJUSTMENTS COMBINED
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 571,401 $ 25,735 $ -- $ 597,136
------------- ------------- ----------- ---------
Operating costs and expenses:
Service and operating 326,315 13,366 -- 339,681
General and administrative 78,719 2,843 -- 81,562
Selling and conversion 26,949 227 -- 27,176
Research and development 12,504 -- -- 12,504
Amortization of intangibles 11,444 7,461 (2,023)(5) 16,882
Business divestitures, merger expenses and other charges, net (520) -- -- (520)
------------- ------------- ----------- ---------
Operating earnings 115,990 1,838 2,023 119,851
Interest income (expense), net 49 (5,874) (3,251)(6) (9,076)
------------- ------------- ----------- ---------
Income (loss) before income tax provision 116,039 (4,036) (1,228) 110,775
Income tax provision (benefit) 45,835 (562) (1,517)(7) 43,756
------------- ------------- ----------- ---------
Net income (loss) $ 70,204 $ (3,474) $ 289 $ 67,019
============= ============= =========== =========
Basic earnings per share $ 2.56 na na $ 2.44
============= ============= =========== =========
Diluted earnings per share $ 2.46 na na $ 2.35
============= ============= =========== =========
</TABLE>
<PAGE> 18
THE BISYS GROUP, INC. AND PICTORIAL HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
(1) Represents cash proceeds required for Pictorial acquisition of $129 million, net of estimated working capital
adjustment of $3.9 million and net of $115 million that was advanced to seller on June 30, 2000.
(2) Represents net adjustment to recognize deferred taxes associated with
acquired net operating loss carryforwards.
(3) Represents net adjustment to goodwill and other intangibles as a result
of the Pictorial acquisition as follows(in thousands):
Net amount of purchase price allocated to goodwill and other intangibles $116,931
Goodwill and other intangibles included in historical Pictorial balance sheet 78,831
------------
$ 38,100
============
(4) Represents adjustments to eliminate historical equity of Pictorial.
(5) Represents an estimated adjustment to amortization of goodwill and other
intangibles resulting from an allocation of the purchase price of Pictorial.
(6) Represents additional interest costs on borrowings of $125 million from
revolving credit facility based on an assumed average interest rate of 7.30%.
(7) Represents adjustment to income tax provision for effect of Pictorial transaction.
</TABLE>
