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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 SEPTEMBER 30, 2002
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: 0-19922
THE BISYS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3532663
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
90 PARK AVENUE, NEW YORK, NEW YORK
10016
(Address of principal executive offices)
(Zip Code)
212-907-6000
(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:
AS OF OCTOBER 31, 2002, THERE WERE 120,279,571 SHARES OF COMMON STOCK, PAR VALUE
$0.02 PER SHARE, OF THE REGISTRANT OUTSTANDING.
This document contains 19 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
September 30, 2002 and June 30, 2002 3
Condensed Consolidated Statement of Operations for the
three months ended September 30, 2002 and 2001 4
Condensed Consolidated Statement of Cash Flows for the
three months ended September 30, 2002 and 2001 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 11
Item 4. Controls and Procedures 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
CERTIFICATIONS 18
PART I
ITEM 1. FINANCIAL STATEMENTS
THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
September 30, June 30,
2002 2002
--------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 68,633 $ 78,371
Accounts receivable, net 204,940 196,997
Deferred tax asset 9,466 9,466
Other current assets 35,485 35,401
----------- -----------
Total current assets 318,524 320,235
Property and equipment, net 100,531 94,711
Goodwill 632,255 623,250
Intangible assets, net 163,341 159,391
Other assets 41,932 48,564
----------- -----------
Total assets $ 1,256,583 $ 1,246,151
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 129,000 $ 93,000
Accounts payable 17,728 16,492
Other current liabilities 112,672 125,012
----------- -----------
Total current liabilities 259,400 234,504
Long-term debt 300,000 300,000
Deferred tax liability 17,081 16,670
Other liabilities 3,243 12,359
----------- -----------
Total liabilities 579,724 563,533
----------- -----------
Stockholders' equity:
Common stock, $0.02 par value, 320,000,000 shares
authorized, 120,274,571 and 119,880,003 shares
issued, respectively 2,405 2,398
Additional paid-in capital 377,396 370,854
Retained earnings 336,041 320,790
Notes receivable from stockholders (10,776) (10,776)
Treasury stock at cost, 1,104,000 shares (27,705) -
Employee benefit trust, 346,000 shares (5,705) -
Deferred compensation 5,782 -
Accumulated other comprehensive income (loss) (579) (648)
----------- -----------
Total stockholders' equity 676,859 682,618
----------- -----------
Total liabilities and stockholders' equity $ 1,256,583 $ 1,246,151
=========== ===========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
3
THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
September 30,
--------------------------
2002 2001
-------- --------
Revenues $227,344 $196,531
-------- --------
Operating costs and expenses:
Service and operating 135,549 113,348
Selling, general and
administrative 44,586 40,568
Amortization of intangible assets 4,272 2,896
Restructuring charges 12,079 6,475
-------- --------
196,486 163,287
-------- --------
Operating earnings 30,858 33,244
Interest expense, net 4,012 2,315
-------- --------
Income before income taxes 26,846 30,929
Income taxes 10,067 11,986
-------- --------
Net income $ 16,779 $ 18,943
======== ========
Basic earnings per share $ 0.14 $ 0.16
======== ========
Diluted earnings per share $ 0.14 $ 0.15
======== ========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
4
THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
September 30,
----------------------
2002 2001
-------- ---------
Cash flows from operating activities:
Net income $ 16,779 $ 18,943
Adjustments to reconcile net income to net cash
provided by operating activities:
Restructuring charge 12,079 6,475
Depreciation and amortization 11,922 9,411
Deferred income tax provision -- 198
Change in operating assets and liabilities,
net of effects from acquisitions (23,976) (26,835)
-------- ---------
Net cash provided by operating activities 16,804 8,192
-------- ---------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (9,961) (4,586)
Proceeds from dispositions, net of expenses paid - (521)
Capital expenditures (13,901) (8,389)
Change in other investments (906) (855)
Purchase of intangible assets (7,255) -
-------- ---------
Net cash used in investing activities (32,023) (14,351)
-------- ---------
Cash flows from financing activities:
Repayment of debt - (578)
Proceeds from short-term borrowings 81,000 -
Repayment of short-term borrowings (45,000) -
Proceeds from exercise of stock options 2,891 2,924
Repurchases of common stock (33,410) -
-------- ---------
Net cash provided by financing activities 5,481 2,346
-------- ---------
Net decrease in cash and cash equivalents (9,738) (3,813)
Cash and cash equivalents at beginning of period 78,371 159,399
-------- ---------
Cash and cash equivalents at end of period $ 68,633 $ 155,586
======== =========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
5
THE BISYS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. THE COMPANY
The BISYS Group, Inc. and subsidiaries (the "Company") is a leading national
provider of business process outsourcing solutions for the financial
services sector.
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 2002 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 fairly state 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, goodwill and intangible assets,
restructuring charges, income taxes, and contingencies.
The Company bases its estimates on historical experience and on various
other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments
about the carrying value of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
in the near term.
3. ACCUMULATED OTHER COMPREHENSIVE INCOME
The components of comprehensive income are as follows (in thousands):
Three Months Ended
September 30,
----------------------
2002 2001
------- -------
Net income $16,779 $18,943
Foreign currency translation adjustment 69 120
------- -------
Total comprehensive income $16,848 $19,063
======= =======
6
4. EARNINGS PER SHARE
On January 24, 2002, the Board of Directors of the Company approved a
two-for-one stock split effected in the form of a dividend, payable to
shareholders of record as of February 8, 2002. Accordingly, all historical
weighted average share and per share amounts have been restated to reflect
the stock split.
Basic and diluted EPS computations for the three months ended September 30,
2002 and 2001 are as follows (in thousands, except per share amounts):
Three Months Ended
September 30,
------------------------
2002 2001
-------- --------
BASIC EPS
---------
Net income $ 16,779 $ 18,943
======== ========
Weighted average common shares
outstanding 119,535 117,328
======== ========
Basic earnings per share $ 0.14 $ 0.16
======== ========
DILUTED EPS
-----------
Net income $ 16,779 $ 18,943
======== ========
Weighted average common shares
outstanding 119,535 117,328
Assumed conversion of common shares
issuable under stock option plans 3,112 5,549
-------- --------
Weighted average common and common
equivalent shares outstanding 122,647 122,877
======== ========
Diluted earnings per share $ 0.14 $ 0.15
======== ========
The effect of the assumed conversion of the convertible subordinated notes
into common stock would be antidilutive and therefore is excluded from the
computation of diluted earnings per share.
Certain stock options were not included in the computation of diluted EPS
because the options' exercise prices were greater than the average market
price of common shares during the period, as follows (in thousands, except
per share amounts):
Three Months Ended
September 30,
-----------------------------------
2002 2001
---------------- ----------------
Number of options excluded 5,704 1,906
Option price per share $25.15 to $35.30 $27.93 to $30.50
Average market price of common shares $24.45 $27.82
for the period
7
5. RESTRUCTURING CHARGES
During the first quarter of fiscal 2003, the Company recorded a pre-tax
restructuring charge of $12.1 million in connection with the integration,
consolidation and relocation of certain business operations. The
restructuring and integration activities are primarily due to acquisitions
consummated by the Company in fiscal 2002 and the downsizing of certain
areas in the investment, insurance, education and check imaging businesses.
The restructuring charge includes a provision of $7.2 million for
severance-related costs for approximately 300 employees and $4.9 million for
facility closure and related costs.
A summary of the restructuring charge activity for the three months ended
September 30, 2002 is as follows (in thousands):
Compensation- Facilities-
Related Related Total
------------- ------------ -----
Establishment of initial restructuring $7,161 $4,918 $12,079
charge accrual
Amounts paid or charged against the
accrual 2,888 841 3,729
------ ------ -------
Balance at September 30, 2002 $4,273 $4,077 $ 8,350
====== ====== =======
It is anticipated that all severance-related amounts and a substantial
portion of the facility-related amounts will be expended by the end of the
current fiscal year.
6. INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS
At September 30, 2002, acquired intangible assets were comprised of the
following (in thousands):
Gross Carrying Accumulated Net Book
Amount Amortization Value
-------------- ------------ ---------
Customer related $137,616 $(22,654) $114,962
Noncompete Agreements 39,484 (8,425) 31,059
Other 22,070 (4,750) 17,320
-------- -------- --------
Total $199,170 $(35,829) $163,341
======== ======== ========
All of the Company's acquired intangible assets are subject to amortization.
Amortization expense for acquired intangible assets was $4.3 million for the
three months ended September 30, 2002. Estimated amortization expense for
the current fiscal year and the succeeding four years is as follows:
Fiscal Year Ended
June 30, Amount
----------------- --------
2003 $ 17,300
2004 17,400
2005 16,600
2006 15,500
2007 14,100
8
GOODWILL
The changes in the carrying amount of goodwill by business segment for the
three months ended September 30, 2002 are as follows (in thousands):
Investment Insurance and Information
Services Education Services Services Total
---------- ------------------ ------------ -----
Balance, July 1, 2002 $311,802 $276,058 $35,390 $623,250
Additions 567 8,438 - 9,005
-------- -------- ------- --------
Balance, September 30, 2002 $312,369 $284,496 $35,390 $632,255
======== ======== ======= ========
7. BUSINESS COMBINATIONS
On September 24, 2002, the Company acquired First Northern Financial
Resources, Inc. in a cash for equity transaction. First Northern is a
Minnesota-based insurance brokerage firm specializing in the wholesale
distribution of traditional life insurance and annuities. Pro forma
information has not been presented due to a lack of materiality.
8. SEGMENT INFORMATION
The following table sets forth operating revenue and operating income by
business segment and for corporate operations for the three months ended
September 30, 2002 and 2001. Restructuring charges are excluded from the
operating results of the segment for a better understanding of the
underlying performance of each segment.
(in thousands)
Three Months Ended
September 30,
--------------------------
2002 2001
--------- ---------
Operating revenue:
Investment Services $ 120,944 $ 104,916
Insurance and Education Services 55,699 45,346
Information Services 50,701 46,269
--------- ---------
Total operating revenue $ 227,344 $ 196,531
========= =========
Operating income (loss):
Investment Services $ 16,084 $ 16,153
Insurance and Education Services 19,669 17,350
Information Services 12,405 11,339
Corporate (5,221) (5,123)
--------- ---------
Total operating income $ 42,937 $ 39,719
========= =========
9. DEFERRED COMPENSATION
The Company has a deferred compensation plan (the "Plan") whereby certain
compensation earned by a participant can be deferred and placed in an
employee benefit trust, also known as a "rabbi trust." Under the Plan, the
participant may choose from several investment designations, including
shares of common stock of the Company. During the first quarter of fiscal
2003, the Company amended the Plan to make all participant deferrals that
are designated in common stock of the Company irrevocable and to require
that all future distributions of such designations be settled in shares of
Company common stock. Accordingly, the Company has applied the provisions of
Emerging Issues Task Force (EITF) 97-14, "Accounting for Deferred
Compensation Arrangements Where Amounts Earned are Held in a Rabbi Trust and
Invested." The EITF requires that employer stock held by the rabbi trust be
classified as equity similar to the manner in which treasury stock is
accounted for. Additionally, the EITF requires that the portion of the
deferred compensation obligation that is required to be settled by the
delivery of shares of employer stock be classified in equity. At September
30, 2002, 346,000 shares, valued at $5.7 million, were held by the employee
benefit trust and presented in the accompanying consolidated balance sheet
as a contra-equity account. Additionally, $5.8
9
million has been reclassified from other liabilities to equity in the
accompanying consolidated balance sheet and represents the deferred compensation
obligation under the Plan that is designated in shares of Company common stock.
Under the EITF, subsequent changes in the fair value of both the employer stock
held in the rabbi trust and the deferred compensation obligation, representing
amounts designated in shares of Company common stock, are not recognized.
10
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
September 30,
--------------------
2002 2001
------ ------
Revenues 100.0% 100.0%
------ ------
Operating costs and expenses:
Service and operating 59.6 57.7
Selling, general and administrative 19.6 20.6
Amortization of intangible assets 1.9 1.5
Restructuring charges 5.3 3.3
------ ------
86.4 83.1
------ ------
Operating earnings 13.6 16.9
Interest expense, net 1.8 1.2
------ ------
Income before income taxes 11.8 15.7
Income taxes 4.4 6.1
------ ------
Net income 7.4% 9.6%
===== =====
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2002 WITH THE THREE MONTHS
ENDED SEPTEMBER 30, 2001.
Revenues increased 15.7% from $196.5 million for the three months ended
September 30, 2001 to $227.3 million for the three months ended September
30, 2002. 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. Internal revenue growth
approximated 7% for the three months ended September 30, 2002.
Service and operating expenses increased 19.6% from $113.3 million for the
three months ended September 30, 2001 to $135.5 million for the three months
ended September 30, 2002 and increased as a percentage of revenues from
57.7% to 59.6%. The dollar increase resulted from additional costs
associated with greater revenues.
Selling, general and administrative expenses increased 9.9% from $40.6
million during the three months ended September 30, 2001 to $44.6 million
for the three months ended September 30, 2002 and decreased as a percentage
of revenues from 20.6% to 19.6%. The dollar increase resulted from
additional costs associated with greater revenues.
Amortization of intangible assets increased $1.4 million for the three
months ended September 30, 2002 over the same period last year due to a
higher level of intangible assets associated with recently acquired
businesses.
Interest expense increased $1.7 million for the three months ended September
30, 2002 over the same period last year primarily due to the interest costs
associated with a higher level of outstanding borrowings under the Company's
revolving credit facility.
The income tax provision of $10.1 million for the three months ended
September 30, 2002 decreased from $12.0 million for the three months ended
September 30, 2001 due to lower taxable income and a lower effective tax
rate. The provision represents an effective tax rate of 37.5% and 38.8% for
the periods ended September 30, 2002 and 2001, respectively. The reduced
effective tax rate is attributable to the impact of lower tax rates in
foreign tax jurisdictions for recently acquired businesses.
Operating results, before amortization of intangibles and restructuring
charges, resulted in margins of 20.8% and 21.7% for the three months ended
September 30, 2002 and 2001, respectively. The margin decline was generally
due to the overall economic downturn that adversely impacted the Company's
Investment Services and Education Services businesses.
11
The Company recorded pre-tax restructuring charges of $12.1 million and $6.5
million during the three months ended September 30, 2002 and 2001,
respectively. The restructuring charges relate to the integration,
consolidation and relocation of certain business operations, primarily as a
result of acquisition activity and the downsizing of certain areas in the
investment, insurance, education, and check imaging businesses in fiscal
2003. The restructuring charge in the fiscal first quarter of 2003 includes
a provision of $7.2 million for severance-related costs for approximately
300 employees and $4.9 million for facility closure and related costs. At
September 30, 2002, the remaining accrual amounts to $8.4 million and it is
anticipated that all severance-related amounts and a substantial portion of
the facility-related amounts will be expended by the end of the current
fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, the Company had cash and cash equivalents of $68.6
million and working capital of $59.1 million. At September 30, 2002, the
Company had outstanding borrowings of $129.0 million against its $300
million revolving credit facility. The credit facility bears interest at
LIBOR plus a margin of 0.65%, resulting in a weighted average interest rate
of 2.49% on all outstanding borrowings under the facility at September 30,
2002.
At September 30, 2002, the Company had $2.3 million outstanding in letters
of credit and $300.0 million of outstanding 4% convertible subordinated
notes due March 2006.
Accounts receivable represented 83 and 75 days sales outstanding (DSO) at
September 30, 2002 and June 30, 2002, respectively, based on quarterly
revenues. The increase in DSO is primarily due to a higher DSO associated
with commission receivables in the Insurance Services division due to the
timing of certain commission-related payments from insurance carriers.
Additionally, due to Insurance Services' faster growth, its receivables
represent a greater percentage of outstanding receivables at September 30,
2002 compared to June 30, 2002.
For the three months ended September 30, 2002, operating activities provided
cash of $16.8 million. Investing activities used cash of $32.0 million,
primarily for acquisition-related payments of $10.0 million, capital
expenditures of $13.9 million, and purchases of intangibles of $7.3 million.
Financing activities provided cash of $5.5 million comprised of net proceeds
from short-term borrowings of $36.0 million and net proceeds from the
exercise of stock options of $2.9 million, offset by repurchases of common
stock of $33.4 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.
At its August 15, 2002 meeting, the Board of Directors authorized a new
stock buy-back program of up to $100 million to supersede and replace the
current program effective upon completion of an amendment to the Company's
revolving credit facility modifying certain stock buy-back provisions. The
amendment to the credit facility became effective on September 24, 2002.
Through that date, the Company had purchased a total of approximately 4.25
million shares of its common stock under the prior stock buy-back program
for $70.4 million. Between September 24, 2002 and September 30, 2002, the
Company purchased an additional 0.3 million shares for $4.8 million under
the new stock buy-back program.
SEGMENT INFORMATION
The following table sets forth operating revenue and operating income by
business segment and for corporate operations for the three months ended
September 30, 2002 and 2001. Restructuring charges are excluded from the
operating results of the segment for a better understanding of the
underlying performance of each segment.
12
(in thousands)
Three Months Ended
September 30,
-------------------------
2002 2001
--------- ---------
Operating revenue:
Investment Services $ 120,944 $ 104,916
Insurance and Education Services 55,699 45,346
Information Services 50,701 46,269
--------- ---------
Total operating revenue $ 227,344 $ 196,531
========= =========
Operating income (loss):
Investment Services $ 16,084 $ 16,153
Insurance and Education Services 19,669 17,350
Information Services 12,405 11,339
Corporate (5,221) (5,123)
--------- ---------
Total operating income $ 42,937 $ 39,719
========= =========
Internal revenue growth for Investment Services, Insurance and Education
Services, and Information Services approximated 4%, 10%, and 10%,
respectively, during the three months ended September 30, 2002 over the same
period last year. The Company seeks to achieve an overall internal growth
rate of 10% to 15% annually. A substantial portion of the Company's revenues
are recurring in nature and are derived from long-term customer contracts
with terms that generally average from three to five years. The Company
believes the contractual nature of its business and its historical contract
renewal experience provide a high level of stability and predictability to
the amount and timing of its recurring revenue stream.
Revenue in the Investment Services business segment increased $16.0 million,
or 15.3%, during the three months ended September 30, 2002, over the same
period last year. The revenue increase was due to recent acquisitions and
internal growth. Operating income in the Investment Services business
segment decreased $0.07 million, or 0.4%, during the fiscal first quarter,
resulting in operating margins of 13.3% and 15.4% for the three months ended
September 30, 2002 and 2001, respectively. The margin primarily decreased
due to the adverse impact that the overall market decline had on revenue
derived from equity-based funds under administration in the Fund Services
division.
Revenue in the Insurance and Education Services business segment increased
$10.4 million, or 22.8%, during the three months ended September 30, 2002,
over the same period last year. The revenue increase was due to acquisitions
and internal growth. Operating income in the Insurance and Education
Services business segment increased $2.3 million, or 13.4%, during the
fiscal first quarter, resulting in operating margins of 35.3% and 38.3% for
the three months ended September 30, 2002 and 2001, respectively. Margins
decreased in the fiscal first quarter primarily due to the decline in sales
of high-end products in the Insurance Services division and the adverse
impact of the overall market downturn on sales in the Education Services
division.
Revenue in the Information Services business segment increased $4.4 million,
or 9.6%, during the three months ended September 30, 2002, over the same
period last year. The revenue increase was due to sales to new clients,
existing client growth, and cross sales to existing clients. Operating
income in the Information Services business segment increased $1.1 million,
or 9.4%, during the fiscal first quarter, resulting in operating margins of
24.5% for the three months ended September 30, 2002 and 2001.
Corporate operations represent charges for the Company's human resources,
legal, accounting and finance functions, and various other unallocated
overhead charges.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Results of Operations and
Financial Condition and other sections of this report contain
forward-looking statements that are based on management's current
expectations, estimates, forecasts and assumptions concerning future events.
In addition, other written or oral statements that constitute
forward-looking statements may be made by or on behalf of management. These
statements are subject to numerous known and unknown risks, uncertainties
and assumptions that could cause actual events or results to differ
materially from those projected. Words such as "believes," "anticipates,"
13
"intends," "estimates, "projects," "plans," "targets," and variations of
such words and similar expressions are intended to identify such
forward-looking statements. Except as required under the federal securities
laws and the rules and regulations of the Securities and Exchange Commission
(SEC), the Company does not undertake any obligation to update or revise
publicly any forward-looking statements, whether as a result of new
information, future events, changes in assumptions or otherwise. Although
the Company believes that its plans, intentions, and expectations reflected
in or suggested by the forward-looking statements made in this report are
reasonable, there can be no assurance that such plans, intentions or
expectations will be achieved.
The risks, uncertainties and assumptions include: achieving planned revenue
growth in each of the Company's business units; renewal of material
contracts in the Company's business units consistent with past experience;
successful and timely integration of significant businesses acquired by the
Company and realization of anticipated synergies; increasing price,
products, and services competition by U.S. and non-U.S. competitors,
including new entrants; changes in U.S. and non-U.S. governmental
regulations; the timely implementation of the Company's restructuring
program and financial plans; general U.S. and non-U.S. economic and
political conditions, including the global economic slowdown and interest
rate and currency exchange rate fluctuation; continuing development and
maintenance of appropriate business continuity plans for the Company's
processing systems; absence of consolidation among client financial
institutions or other client groups; attracting and retaining qualified key
employees; no material breech of security of any of the Company's systems;
control of costs and expenses; continued availability of financing, and
financial resources on the terms required to support the Company's future
business endeavors; the mix of products and services; compliance with the
covenants and restrictions of the Company's bank credit facility and
convertible subordinated notes indenture; and the outcome of pending and
future litigation and governmental or regulatory proceedings.
These are representative of the risks, uncertainties and assumptions that
could affect the outcome of the forward-looking statements. In addition,
such statements could be affected by general industry and market conditions
and growth rates and other future events.
14
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's reports, filed
pursuant to the Securities Exchange Act of 1934, is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms, and that such information is accumulated and communicated to the
Company's management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.
Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect the internal controls subsequent to the date the
Company completed its evaluation.
15
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None.
(b) REPORTS ON FORM 8-K
None.
16
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: November 14, 2002 By: /s/ Andrew C. Corbin
----------------- ----------------------------------
Andrew C. Corbin
Executive Vice President and Chief
Financial Officer
(Duly Authorized Officer)
17
CERTIFICATIONS
I, Lynn J. Mangum, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The BISYS Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Lynn J. Mangum
------------------------------------
Lynn J. Mangum
Chairman and Chief Executive Officer
18
CERTIFICATIONS
I, Andrew C. Corbin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The BISYS Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Andrew C. Corbin
---------------------------
Andrew C. Corbin
Executive Vice President
and Chief Financial Officer
19