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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 DECEMBER 31, 1999
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 January 26, 2000
- -------------------------------------- --------------------------------------
Common Stock, par value $.02 per share 27,597,343
This document contains 16 pages.
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THE BISYS GROUP, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of December 31, 1999
and June 30, 1999 3
Condensed Consolidated Statement of Operations for the three and six months
ended December 31, 1999 and 1998 4
Condensed Consolidated Statement of Cash Flows for the six months
ended December 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of Operations and 8
Financial Condition
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
EXHIBIT INDEX 15
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PART I
ITEM 1. FINANCIAL STATEMENTS
THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
December 31, June 30,
1999 1999
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 53,745 $ 49,589
Accounts receivable, net 93,782 104,608
Deferred tax asset 7,127 9,241
Other current assets 16,060 14,243
--------- ---------
Total current assets 170,714 177,681
Property and equipment, net 58,551 54,855
Intangible assets, net 196,278 194,852
Other assets 31,397 32,273
--------- ---------
Total assets $ 456,940 $ 459,661
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 46,000 $ 52,000
Accounts payable 10,513 21,303
Other current liabilities 75,734 82,294
--------- ---------
Total current liabilities 132,247 155,597
Deferred tax liability 11,647 9,774
Other liabilities 6,529 5,784
--------- ---------
Total liabilities 150,423 171,155
--------- ---------
Stockholders' equity:
Common stock, $.02 par value, 80,000,000 shares authorized,
27,470,169 and 27,091,270 shares issued, respectively 549 542
Additional paid-in capital 207,359 193,500
Retained earnings 110,005 94,550
Less notes receivable from stockholders (11,347) --
Less treasury stock at cost, 1,154 and 1,575 shares, respectively (49) (86)
--------- ---------
Total stockholders' equity 306,517 288,506
--------- ---------
Total liabilities and stockholders' equity $ 456,940 $ 459,661
========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
--------- --------- --------- ---------
Revenues $ 138,044 $ 111,958 $ 270,357 $ 213,882
--------- --------- --------- ---------
Operating costs and expenses:
Service and operating 81,121 63,895 161,119 123,767
General and administrative 19,217 16,989 38,754 33,374
Selling and conversion 6,841 6,079 13,258 11,118
Research and development 2,879 2,935 5,869 6,116
Amortization of intangible assets 2,984 1,952 5,634 3,460
Merger expenses and other charges -- -- -- 400
Acquired in-process research and development -- -- -- 19,000
--------- --------- --------- ---------
Operating earnings 25,002 20,108 45,723 16,647
Interest income (expense), net (497) 243 (747) 1,040
--------- --------- --------- ---------
Income before income taxes 24,505 20,351 44,976 17,687
Income taxes 9,579 8,142 17,767 14,677
--------- --------- --------- ---------
Net income $ 14,926 $ 12,209 $ 27,209 $ 3,010
========= ========= ========= =========
Basic earnings per share $ 0.55 $ 0.46 $ 1.00 $ 0.11
========= ========= ========= =========
Diluted earnings per share $ 0.53 $ 0.44 $ 0.96 $ 0.11
========= ========= ========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Six Months Ended
December 31,
-----------------------
1999 1998
-------- --------
Cash flows from operating activities:
Net income $ 27,209 $ 3,010
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14,889 10,601
Write-off of acquired in-process research and development -- 19,000
Deferred income tax provision 2,571 778
Change in operating assets and liabilities, net of effects from acquisitions (9,200) (32,226)
-------- --------
Net cash provided by operating activities 35,469 1,163
-------- --------
Cash flows from investing activities:
Acquisition of businesses -- (20,340)
Net cash acquired in acquisitions -- 4,554
Capital expenditures, net (13,749) (13,710)
Purchase of investments (2,600) (2,899)
Sale of investments 6,066 --
Purchase of intangible assets (4,908) (187)
Other 62 264
-------- --------
Net cash used in investing activities (15,129) (32,318)
-------- --------
Cash flows from financing activities:
Proceeds from short-term borrowings 69,000 20,000
Repayment of short-term borrowings (75,000) --
Repayment of debt -- (275)
Proceeds from exercise of stock options 7,967 5,938
Repurchases of common stock (18,151) (50,968)
-------- --------
Net cash used in financing activities (16,184) (25,305)
-------- --------
Net increase (decrease) in cash and cash equivalents 4,156 (56,460)
Cash and cash equivalents at beginning of period 49,589 93,403
-------- --------
Cash and cash equivalents at end of period $ 53,745 $ 36,943
======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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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 six months ended
December 31, 1999 and 1998 are as follows (in thousands, except per
share amounts):
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- --------------------
1999 1998 1999 1998
------- ------- ------- -------
Basic EPS
- ---------
Net income $14,926 $12,209 $27,209 $ 3,010
======= ======= ======= =======
Weighted average common shares outstanding 27,355 26,643 27,218 26,497
======= ======= ======= =======
Basic earnings per share $ 0.55 $ 0.46 $ 1.00 $ 0.11
======= ======= ======= =======
Diluted EPS
- -----------
Net income $14,926 $12,209 $27,209 $ 3,010
======= ======= ======= =======
Weighted average common shares outstanding 27,355 26,643 27,218 26,497
Assumed conversion of common shares issuable
under stock option plans 946 1,218 1,020 1,078
------- ------- ------- -------
Weighted average common and common equivalent
shares outstanding 28,301 27,861 28,238 27,575
======= ======= ======= =======
Diluted earnings per share $ 0.53 $ 0.44 $ 0.96 $ 0.11
======= ======= ======= =======
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):
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Three Months Ended Six Months Ended
December 31, December 31,
---------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
Number of options excluded 443 91 453 532
Option price per share $54.50 to $58.9375 $48.00 $52.17 to $58.9375 $44.50 to $48.00
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 December 31, 1999.
5. SUBSEQUENT EVENT
In January 2000, the Company entered into an agreement to sell the
retail third party marketing business of the Brokerage Services
division to a third party marketer of financial products and services.
It is anticipated that the transaction will be consummated by the end
of the third fiscal quarter and have an immaterial impact on the
Company's consolidated results of operations
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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:
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Operating costs and expenses:
Service and operating 58.7 57.1 59.6 57.9
General and administrative 13.9 15.2 14.3 15.6
Selling and conversion 5.0 5.4 4.9 5.2
Research and development 2.1 2.6 2.2 2.8
Amortization of intangible assets 2.2 1.7 2.1 1.6
Merger expenses and other charges -- -- -- 0.2
Acquired in-process research and development -- -- -- 8.9
---- ---- ---- ----
Operating earnings 18.1 18.0 16.9 7.8
Interest income (expense), net (0.4) 0.2 (0.3) 0.5
---- ---- ---- ----
Income before income taxes 17.7 18.2 16.6 8.3
Income taxes 6.9 7.3 6.5 6.9
---- ---- ---- ----
Net income 10.8% 10.9% 10.1% 1.4%
==== ==== ==== ====
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1999 WITH THE THREE MONTHS
ENDED DECEMBER 31, 1998.
Revenues increased 23.3% from $112.0 million for the three months ended
December 31, 1998 to $138.0 million for the three months ended December
31, 1999. 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 27.0% from $63.9 million
during the three months ended December 31, 1998 to $81.1 million for
the three months ended December 31, 1999, and increased as a percentage
of revenues from 57.1% to 58.7%. The increases resulted from additional
costs associated with greater revenues.
General and administrative expenses increased 13.1% from $17.0 million
during the three months ended December 31, 1998, to $19.2 million for
the three months ended December 31, 1999, and decreased as a percentage
of revenues from 15.2% 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.
Amortization of intangible assets increased $1.0 million for the three
months ended December 31, 1999, over the same three months last year
due to a higher level of intangible assets associated with
acquisitions.
Net interest expense was $0.5 million for the three months ended
December 31, 1999 compared to net interest income of $0.2 million for
the same period last year due to the lower levels of invested cash and
cash equivalents and higher interest expense associated with short-term
borrowings.
The income tax provision of $9.6 million for the three months ended
December 31, 1999 increased from $8.1 million for the three months
ended December 31, 1998 due to higher taxable income. The provision
represents an effective tax rate of 39% and 40% for the periods ended
December 31, 1999 and 1998, respectively. The lower effective tax rate
in the current quarter is attributable to recently completed tax
planning initiatives.
COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 1999 WITH THE SIX MONTHS ENDED
DECEMBER 31, 1998.
Revenues increased 26.4% from $213.9 million for the six months ended
December 31, 1998 to $270.4 million for the six months ended December
31, 1999. This growth was derived from sales to new clients, existing
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client growth, cross sales to existing clients and revenues from
acquired businesses, partially offset by lost business.
Service and operating expenses increased 30.2% from $123.8 million
during the six months ended December 31, 1998 to $161.1 million for the
six months ended December 31, 1999, and increased as a percentage of
revenues from 57.9% to 59.6%. The increases resulted from additional
costs associated with greater revenues.
General and administrative expenses increased 16.1% from $33.4 million
during the six months ended December 31, 1998, to $38.8 million for the
six months ended December 31, 1999, and decreased as a percentage of
revenues from 15.6% to 14.3%. 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.
During the six months ended December 31, 1998, the Company wrote off
$19.0 million of acquired in-process research and development
associated with the acquisition of Greenway and incurred $0.4 million
of merger-related expenses.
The income tax provision of $17.8 million for the six months ended
December 31, 1999 increased from $14.7 million for the six months ended
December 31, 1998 primarily due to higher taxable income. The provision
represents an effective tax rate of 39.5% and 40% for the six months
ended December 31, 1999 and 1998, respectively, excluding the
nonrecurring nondeductible charge of $19.0 million related to acquired
in-process research and development incurred during the six months
ended December 31, 1998. The lower effective tax rate in the current
fiscal six months is attributable to recently completed tax planning
initiatives.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had cash and cash equivalents of
$53.7 million and working capital of $38.5 million. At December 31,
1999, the Company had outstanding borrowings of $46.0 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 December
31, 1999 was 6.85%. At December 31, 1999, 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 six months ended December 31, 1999, operating activities
provided cash of $35.5 million. Investing activities used cash of $15.1
million, primarily for the acquisition of intangibles of $4.9 million
and capital expenditures of $13.7 million, offset by $3.5 million of
net investment activity. Financing activities used cash of $16.2
million, primarily for the repurchase of common stock of $18.2 million
and net repayments on borrowings of $6.0 million, offset by proceeds
from the exercise of stock options of $8.0 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.
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 six
months ended December 31, 1999 and 1998. For the six months ended
December 31, 1998, 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.
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(in Thousands)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Operating Revenue:
Information Services $ 43,276 $ 44,799 $ 84,160 $ 84,505
Investment Services 72,766 54,331 145,581 107,421
Insurance and Education Services 22,002 12,828 40,616 21,956
--------- --------- --------- ---------
Total Operating Revenue $ 138,044 $ 111,958 $ 270,357 $ 213,882
========= ========= ========= =========
Operating Income:
Information Services $ 9,877 $ 10,350 $ 17,455 $ 17,101
Investment Services 10,961 8,127 22,224 17,821
Insurance and Education Services 7,605 4,626 12,321 6,494
Corporate (3,441) (2,995) (6,277) (5,369)
--------- --------- --------- ---------
Total Operating Income $ 25,002 $ 20,108 $ 45,723 $ 36,047
========= ========= ========= =========
Revenue in the Information Services business segment decreased $1.5
million, or 3.4%, during the three months ended December 31, 1999,
compared to the same period last year. For the six months ended
December 31, 1999, revenues decreased $0.3 million, or 0.4%, compared
to the same period last year. The revenue decrease was primarily due to
the June 1999 sale of the Marketing Solutions business and softness in
Document Solutions software sales due to Year 2000-related delays in
software purchases. Operating income in the Information Services
business segment decreased $0.5 million, or 4.6%, during the fiscal
second quarter, resulting in operating margins of 22.8% and 23.1% for
the three months ended December 31, 1999 and 1998, respectively.
Margins declined slightly in the fiscal second quarter primarily due to
the revenue decline within the Document Solutions division. Software
sales for this division are expected to increase in the second half of
the fiscal year as Year 2000 concerns by customers are no longer a
factor in purchasing decisions. Operating income increased $0.4 million
for the six months ended December 31, 1999, resulting in operating
margins of 20.7% and 20.2% for the six months ended December 31, 1999
and 1998, respectively. Margins improved in the six months ended
December 31, 1999, 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 $18.4
million, or 33.9%, during the three months ended December 31, 1999,
compared to the same period last year. For the six months ended
December 31, 1999, revenues increased $38.2 million, or 35.5%, 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
$2.8 million, or 34.9%, during the fiscal second quarter, resulting in
operating margins of 15.1% and 15.0% for the three months ended
December 31, 1999 and 1998, respectively. Operating income increased
$4.4 million for the six months ended December 31, 1999, resulting in
operating margins of 15.3% and 16.6% for the six months ended December
31, 1999 and 1998, respectively. Margins declined in the six months
ended December 31, 1999, 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 $9.2 million, or 72%, during the three months ended December
31, 1999, compared to the same period last year. For the six months
ended December 31, 1999, revenues increased $18.7 million, or 85.0%,
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 increased $3.0
million, or 64.4%, during the fiscal second quarter, resulting in
operating margins of 34.6% and 36.1% for the three months ended
December 31, 1999 and 1998, respectively. Margins declined slightly in
the fiscal second quarter due to lower margins associated with the
newly formed Education Services division. Operating income increased
$5.8 million for the six months ended December 31, 1999, resulting in
operating margins of 30.3% and 29.6% for the six months ended December
31, 1999 and 1998, respectively. Margins improved in the six months
ended December 31, 1999, primarily due to strong internal growth and
reduced integration costs.
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Corporate operations represent charges for the Company's human
resources, legal, accounting and finance functions, and various other
unallocated overhead charges. Increased expenses of $0.4 million and
$0.9 million in the three and six months ended December 31, 1999,
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 uses third party provided software and systems in certain
of its businesses for such tasks as account and information statement
processing, fund accounting, and 401(k) plan record keeping. If third
parties upon which the Company depends, including telecommunications
and electrical power providers, were unable to address their Year 2000
issues in a timely manner, it could have resulted in a material adverse
financial risk to the Company. In order to minimize this risk, the
Company devoted resources necessary to develop appropriate business
continuity plans. These completed contingency plans include alternative
systems and vendors, disaster recovery hot sites, alternative power
sources, and manual processes.
The Company's Year 2000 status and contingency plans have been and will
continue to be the subject of independent verification and validation
by the Company's Internal Audit function. Internal Audit reports on
Year 2000 readiness are reviewed by senior management and the Company's
Board of Directors.
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 has incurred expenditures for Year 2000
related matters testing and remediation of approximately $0.7 million
and $1.3 million for the six months ended December 31, 1999 and 1998,
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
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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.
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.
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PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of the Company, held on
November 12, 1999, the Stockholders approved the following
matters:
1. Re-election of the seven Directors named below to
hold office until the next Annual Meeting of
Stockholders and until their successors have been
duly elected and qualified:
Number of
Name of Director Votes in Favor
---------------- --------------
Robert J. Casale 24,349,325
Thomas A. Cooper 24,356,087
Jay W. DeDapper 24,352,240
John J. Lyons 24,355,887
Lynn J. Mangum 24,356,087
Thomas E. McInerney 24,356,087
Joseph J. Melone 24,354,712
For Against Abstain
--- ------- -------
2. 2000 Employee Stock
Purchase Plan 24,270,297 100,246 12,425
For Against Abstain
--- ------- -------
3. 1999 Equity Participation
Plan 16,574,519 7,786,225 22,224
For Against Abstain
--- ------- -------
4. Executive Officer Annual
Incentive Plan 24,156,655 182,999 43,314
For Against Abstain
--- ------- -------
5. Appointment of PricewaterhouseCoopers LLP
as independent accountants for fiscal year 2000 24,370,194 8,768 4,006
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None.
(b) REPORTS ON FORM 8-K
None.
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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: February 11, 2000 By: /s/ Dennis R. Sheehan
-------------------------------- -----------------------------
Dennis R. Sheehan
Executive Vice President and Chief
Financial Officer
(Duly Authorized Officer)
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THE BISYS GROUP, INC.
EXHIBIT INDEX
EXHIBIT NO. PAGE
(27) Financial Data Schedule........................(electronic only)
15