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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
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)
201-812-8600
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
(Title of Class)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.02 PAR VALUE
(Title of Class)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Rule
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. [X]
State the aggregate market value of voting stock held by nonaffiliates of
the Registrant as of September 18, 1996: $925,692,712.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of September 18, 1996: 24,949,731.
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DOCUMENTS INCORPORATED BY REFERENCE: List the following documents if
incorporated by reference and the part of the Form 10-K into which the document
is incorporated: (1) Any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.
FISCAL 1996 ANNUAL REPORT to Shareholders--Part I, II and IV; PROXY STATEMENT
for November 14, 1996 Annual Meeting--Part III
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THE BISYS GROUP, INC.
FORM 10-K
JUNE 30, 1996
PAGE
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Part I
Item 1. Business................................................................................. 1
Item 2. Properties............................................................................... 9
Item 3. Legal Proceedings........................................................................ 9
Item 4. Submission of Matters to a Vote of Security Holders...................................... 9
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................... 10
Item 6. Selected Financial Data.................................................................. 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.... 10
Item 8. Financial Statements and Supplementary Data.............................................. 10
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..... 10
Part III.................................................................................................. 10
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................... 10
PART I
ITEM 1. BUSINESS
The BISYS-Registered Trademark- Group, Inc. and its wholly-owned
subsidiaries ("BISYS" or the "Company") provide information and investment
outsourcing solutions to and through more than 5,000 financial organizations and
corporate clients. BISYS believes that it provides one of the financial services
industry's most technologically advanced family of image and data processing
outsourcing solutions and pricing analysis for account, item and loan
application processing, and competitive product pricing support. BISYS designs,
administers and distributes proprietary mutual funds and provides 401(k)
administration services to some of the nation's leading investment management
companies and provides life insurance services to the financial services
industry.
BISYS seeks to be the single source of all relevant outsourcing solutions
for its clients in order to improve the performance, profitability and
competitive position of all types of financial services organizations. BISYS
also endeavors to expand the scope of its services through focused account
management, emphasizing services with recurring revenues and long-term
contracts. It increases its business base through (i) direct sales to new
clients, (ii) sales of additional products and services to existing clients, and
(iii) acquisitions of businesses that provide complementary outsourcing
solutions to financial organizations.
BISYS was organized in August 1989 to acquire certain banking and thrift
data processing operations of Automatic Data Processing, Inc. ("ADP"). BISYS
traditional business was established in 1966 by United Data Processing, Inc.,
the predecessor of the banking and thrift data processing operations of ADP.
Accordingly, together with its predecessors, BISYS has been providing
outsourcing solutions to the financial services industry for more than 30 years.
BISYS is incorporated under the laws of Delaware and has its principal executive
office at 150 Clove Road, Little Falls, New Jersey 07424 (telephone
201-812-8600).
Since its founding in 1989, BISYS has completed various acquisitions and
mergers. During fiscal years 1994 through 1996, BISYS acquired or merged with
the following businesses:
July 1993--The Barclay Group, Inc., now part of BISYS Plan Services,
provides 401(k) marketing, administrative support and participant
recordkeeping to client companies;
September 1993--Assets and certain liabilities of the Meyer Interest
Rate Survey, now part of BISYS Research Services, gathers specific
information on deposit and loan products offered by banking institutions and
markets such information to clients;
October 1993--The Winsbury Companies, now part of BISYS Fund Services,
creates, markets, and administers proprietary mutual funds, primarily for
banks;
March 1994--SunTrust Data Systems, Inc., now part of BISYS
TOTALPLUS-Registered Trademark- business, provides information services for
correspondent community banks of SunTrust Banks, Inc.;
March 1995--Concord Holding Corporation ("Concord"), now part of BISYS
Fund Services, creates, markets and administers proprietary mutual funds,
primarily for banks;
May 1995--Document Solutions, Inc. ("DSI"), now known as BISYS Document
Solutions, offers check and document imaging solutions to banks;
April 1996--Strategic Solutions Group, Inc. ("SSG"), now known as BISYS
Creative Solutions, designs, develops and provides automated marketing
solutions to financial organizations, including the automated processing of
consumer loan requests and prequalification of home buyers for mortgage
loans (see "Recent Developments"); and
June 1996--T.U.G., Inc. ("TUG"), now part of BISYS Insurance Services,
provides life insurance services to the financial services industry (see
"Recent Developments").
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RECENT DEVELOPMENTS
On April 22, 1996, BISYS acquired SSG through the merger of SSG with and
into a wholly-owned subsidiary of BISYS. The transaction was completed through
the issuance of 520,599 shares of BISYS common stock, $0.02 par value ("Common
Stock"), in exchange for all outstanding shares of SSG common stock.
On June 27, 1996, BISYS and Furman Selz, LLC ("Furman Selz") entered into an
outsourcing alliance agreement pursuant to which BISYS will offer mutual fund
distribution, administration, fund accounting, transfer agency and other support
services to Furman Selz mutual fund clients.
On June 28, 1996, BISYS acquired TUG through the merger of a wholly-owned
subsidiary of BISYS with and into TUG. The transaction was completed through the
issuance of 491,314 shares of Common Stock in exchange for all outstanding
shares of TUG common stock.
Although the acquisitions of SSG and TUG have been accounted for as poolings
of interests, historical financial statements have not been restated, since the
financial statement impact is not material.
COMPANY STRATEGY
Financial organizations today are consistently challenged to compete more
effectively, improve productivity and maximize profits during periods of both
economic growth and decline. Outsourcing providers such as BISYS provide viable
alternatives for automating critical tasks and functions and provide specific
expertise and experience to financial organizations. BISYS outsourcing solutions
deliver to its clients operational and bottom line benefits as well as the
resources to generate incremental revenues. At the same time, BISYS realizes
certain economies of scale in providing client service, operations support and
product development for its diverse client base.
BISYS objectives are to increase its client base and to expand the services
it offers to them. The BISYS mission is to be the premier, full-service
outsourcing business partner and catalyst for growth for the financial services
industry, and to build shareholder value by consistently increasing both
revenues and earnings per share through a combination of internal growth, new
sales and strategic acquisitions. Six key principles have guided BISYS since its
formation and continue to shape its business growth plan:
FOCUS ON SERVING CLIENTS. BISYS seeks to strengthen business
relationships with clients by offering new products and services designed to
be technologically advanced solutions for improving client performance,
growth and competitive position in a changing market.
LEVERAGE TECHNOLOGICAL ADVANCEMENTS. BISYS seeks to maintain its
leadership position in providing competitive, value-added outsourcing
solutions through investment in new technology and the further integration
of BISYS system capabilities.
GROW INTERNALLY AND SELL AGGRESSIVELY. BISYS seeks to grow internally
by aggressively selling services to new clients and cross-selling additional
services to existing clients through focused sales in growth markets. BISYS
also seeks to develop and sell new services to clients that help them retain
existing customers, and attract additional customers from new markets. BISYS
focuses its sales activities to target growing markets.
OPTIMIZE HUMAN RESOURCES. BISYS seeks to attract and retain executives,
technical staff and financial services professionals with the expertise
required to enable BISYS to explore and develop new opportunities that will
sustain its growth and market leadership position.
EXPLOIT BUSINESS AND PRODUCT STRATEGY. BISYS seeks to capitalize on the
synergies among its business units and to acquire complementary companies
that support its client relationships and long-term business objectives.
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MANAGE CONTEMPORARY ACQUISITION STRATEGY. Strategic acquisitions
represent an important growth tool for BISYS. To enhance shareholder value,
BISYS seeks to combine conservative valuation discipline and transition
experience to achieve market synergies and operating leverage.
BISYS provides outsourcing solutions for data processing operations of
banking institutions through an integrated family of services and products
offered under the registered service mark TOTALPLUS. Although the TOTALPLUS
family of services and products are adaptable to financial institutions of any
size, BISYS believes that the target market, based on assets, consists of small
and mid-sized institutions (commercial banks of $50 to $500 million in assets
and thrift institutions of $100 million to $2 billion in assets) and major
institutions (commercial banks of $500 million to $5 billion in assets and
thrift institutions of $2 billion to $15 billion in assets). The potential
revenues available from its target information services market are estimated to
be approximately $2 billion per year.
Using central site and client site solutions, TOTALPLUS supports most
aspects of a banking institution's data automation requirements. TOTALPLUS is a
comprehensive system, integrating innovative applications to provide bank-wide
automation that enables financial institutions to compete with super regionals,
banks serving a national marketplace, and non-bank competitors. The TOTALPLUS
family of products and services provides bank-wide automation, integrating
mainframe-based, central site and PC-based, client site applications. TOTALPLUS
provides diverse financial organizations with the ability to customize each
application to meet unique processing requirements and priorities.
BISYS currently has four major data processing centers located in the
Chicago, IL; Cincinnati, OH; Houston, TX; and Philadelphia, PA metropolitan
areas. These regional service centers are uniformly automated with multi-tasking
IBM (or equivalent) mainframe computer systems on which all TOTALPLUS host
computer functions and client data are resident. BISYS intends to consolidate
into two data processing centers during fiscal 1997. Each client's individual
operating parameters and data are maintained separately, and extensive
precautions are in place to ensure data security and privacy of communications
between the client and the host. Both internal and external backup resources are
maintained and regularly tested for BISYS own disaster recovery purposes.
Additionally, BISYS maintains uniformly automated document processing centers
which utilize IBM based mini-computer and reader/sorter capabilities. Document
processing centers are located in Austin, TX; Boston, MA; Cherry Hill, NJ;
Chicago, IL; Lake Success, NY; Oklahoma City, OK; and Richmond, VA.
BISYS is a leader in providing image-based technology software to financial
institutions. These imaging solutions convert traditional paper-based checks and
other documents into digital images that can be accessed electronically. BISYS
software has been installed in over 300 financial institutions representing
approximately 70% of all bank check imaging systems in the country for the
community bank market. This software product, designed to provide a fully
integrated image environment, uses microcomputer technology and supports the
majority of image processing equipment available today. This product family
includes image capture and archive, image statements, image proof of deposit,
return item/image processing, image signature verification, courtesy amount
recognition, CD-ROM image delivery and customer financial analysis.
BISYS provides low-cost automated marketing solutions to more than 300
financial organizations in an unattended service bureau environment on a seven
day, 24 hour basis, from its offices in Atlanta, Georgia. These services include
Loan Connection-TM-, which processes consumer loan requests, and Mortgage
Connection-TM-, which helps to prequalify home buyers for mortgage loans. To use
these services, borrowers enter numeric information on a touch tone telephone
and, based on this input, BISYS retrieves credit bureau information and applies
the individual financial organization's underwriting parameters and credit
scoring criteria to provide qualifying information to the financial organization
and the prospective borrower.
BISYS gathers information on deposit and loan products offered by more than
4,000 banks, thrifts and credit unions on a daily, weekly, or monthly basis.
BISYS markets and transmits this survey
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information in various formats and frequencies to over 1,250 client
institutions, including 23 of the nation's top 25 commercial banks. This data is
used by both money center and community banks to support their daily pricing
decisions.
BISYS designs, distributes and administers over 40 families of proprietary
mutual funds consisting of more than 400 individual portfolios and provides
401(k) plan marketing support, administration and recordkeeping services to 20
of the nation's leading bank and investment management companies.
BISYS is a leader in distributing and administering proprietary open-end
"mutual funds" registered under the Investment Company Act of 1940 (the
"Investment Company Act"), primarily for the bank managed mutual fund sector, a
rapidly growing sector in the mutual fund industry. BISYS provides distribution
services, including the development of joint and external sales and marketing
programs and administrative services, including responsibility for
administration, transfer agency, shareholder services, compliance and fund
accounting. BISYS provides distribution services through its various
wholly-owned broker/dealer subsidiaries. In order to assist its clients' mutual
fund sales efforts, BISYS maintains a distribution sales force to raise
additional assets for its clients' funds. The banking institution, or a
subsidiary or affiliate thereof, typically acts as investment advisor and
custodian to the fund.
BISYS integrates its banking and mutual fund expertise to provide a wide
array of specialized services. More than a traditional administrator and
distributor, BISYS takes a consultative approach to its client relationships,
offering innovative, fee-generating and cost-effective solutions to expand and
manage the banking institution's mutual fund business. BISYS offers its clients
a complete turnkey outsourcing solution for mutual fund operations which
includes comprehensive marketing, institutional sales, retail sales,
telemarketing, development of new products and markets and institutional and
retail shareholder servicing centers. BISYS designs, plans and implements
strategies to help mutual funds attain critical mass, reach new prospects and
markets and add value in an increasingly competitive market. BISYS services over
40 mutual fund families encompassing more than 400 individual portfolios with a
market value exceeding $100 billion in assets for mutual fund groups, as well as
common and collective bank investment funds.
BISYS provides outsourcing solutions to financial organizations and
corporate clients for marketing and sales support and administration and
participant recordkeeping services for corporate sponsored 401(k) plans. BISYS
maintains partnerships with financial organizations including banks and
investment and insurance companies and provides marketing and proposal support
for their sale of their 401(k) plan investment products. BISYS markets to and
builds systems linkage with these investment manager partners and enables them
to concentrate on selling 401(k) plans while having BISYS provide the
administrative and recordkeeping functions for a sponsoring company. On an
ongoing basis, BISYS performs 401(k) participant recordkeeping and other
services including daily valuation of participant balances, administering 401(k)
loans, discrimination testing, participant statements and participant
communications. BISYS provides marketing and sales support to its 18 financial
organization partners and administrative and participant recordkeeping services
for more than 600,000 eligible participants in over 4,500 sponsoring companies
nationwide.
BISYS outsources life insurance services to the financial services industry.
BISYS is a full-service distributor and administrator of life insurance services
and employs strategic alliances with major insurance companies and national
producer groups to provide outsourcing services for life insurance product
distribution. BISYS services a network of, and markets products and services
through, more than 30,000 insurance agents and brokers nationwide. BISYS offers
a full-service, single source solution to support banks' initiatives to offer
life insurance services to their customer bases. BISYS allows clients to use
their distribution channels to offer life insurance products and services,
ranging from annuities and commodity term products to estate planning products.
In addition to product solutions, BISYS provides clients with the systems
necessary to support their sale of insurance products, including licensing
management, marketing and proposal support, application processing and advanced
underwriting and commission accounting and processing.
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CONTRACTS
Services are provided to BISYS clients, for the most part, on the basis of a
contract which renews for successive terms, unless terminated by either party.
BISYS management has pursued a policy of obtaining renewal terms equal to or
exceeding the original contract terms.
Contracts for distribution services to mutual funds, as required by the
Investment Company Act, provide that such contracts may continue for a period
longer than two years only if such continuance is specifically approved at least
annually by both a majority of the disinterested directors and either the other
members of the board of directors or the holders of a majority of the
outstanding shares of the fund.
BISYS fee structure for data processing clients is based primarily on number
of accounts, loans, participants and/or transactions handled for each service,
in some cases, subject to minimum charges, plus additional charges for special
options, services and features. BISYS fee structure for mutual fund services
clients is based primarily on the average daily net asset value of the fund, in
some cases, subject to minimum charges. BISYS 401(k) fee structure is based upon
the number of eligible participants in a plan subject to certain minimums. BISYS
check imaging software is licensed subject to a one-time fee with recurring
maintenance fees. BISYS telephone loan support services are provided based on a
one-time implementation fee plus a per-transaction fee. Contracts with insurance
carriers providing products for BISYS customers provide for compensation based
on a percentage of premiums paid and transaction charges and are generally
cancelable at the discretion of the parties.
BISYS believes that the contractual nature of its businesses, combined with
its historical renewal experience, provides a high level of recurring revenues.
CLIENT BASE
BISYS clients are located in all 50 states. BISYS provides outsourcing
solutions to commercial banks, mutual savings institutions, thrift
organizations, mutual funds, insurance companies, insurance producer groups,
corporate clients and other financial organizations including investment
counselors and brokerage firms.
DISASTER RECOVERY SYSTEMS
Where appropriate, BISYS has implemented a comprehensive disaster recovery
system. The key restoration services includes off-site storage and rotation of
critical files, availability of a third-party "hot site" and telecommunications
recovery capability. BISYS believes that its single product and consistent
platform approach to data processing and communications and other operating
procedures enable it to achieve greater efficiencies in maintaining and
enhancing its disaster recovery system, the capabilities of which are regularly
tested by BISYS with the cooperation of its clients. BISYS has also developed
and markets a microcomputer-based client site disaster recovery planning product
that is specifically designed to meet the compliance needs of its financial
institution clients.
SALES, MARKETING AND CLIENT SUPPORT
BISYS sells its services directly to potential clients or supports insurance
agents and companies, brokerage firms and other entities in their endeavors to
gain new clients. In addition to direct sales, BISYS utilizes
reseller/distributors to sell its software. BISYS has a number of sales offices
throughout the United States, including California, Florida, Georgia,
Massachusetts, Michigan, New York, Oklahoma, Pennsylvania, Texas and Virginia.
BISYS utilizes an account executive staff which provides client account
management and support. In accordance with BISYS strategy of providing a single
source solution to its clients, the account executive staff also markets and
sells additional services to existing clients and manages the contract renewal
process. Using centralized resources, BISYS provides its direct sales staff and
account executives with marketplace
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data, presentation materials and telemarketing data. BISYS maintains client
support staff at its principal locations, which is responsible for day-to-day
interaction with clients and also markets BISYS products and services to
existing clients.
COMPETITION
BISYS believes the market for its services is highly competitive. BISYS
remains competitive due to several factors, including BISYS overall company
strategy and commitment, product quality, reliability of service, a
comprehensive and integrated product line, timely introduction of new products
and services, and competitive pricing. BISYS believes that, by virtue of its
range of product and service offerings and its overall commitment to client
service and relationships, it competes favorably in these categories. In
addition, BISYS believes that it has a competitive advantage as a result of its
position as an independent vendor, rather than as a cooperative, an affiliate of
a financial institution, a hardware vendor or as a competitor to its clients.
BISYS principal competitors are independent vendors of computer software and
services, in-house departments, affiliates of financial institutions or large
computer hardware manufacturers, processing centers owned and operated as user
cooperatives, insurance companies, third party administration firms, mutual
funds companies and brokerage firms. No single competitor offers the full range
of products and services that are offered by BISYS. Specific competitors include
Fiserv, M&I Data Services, Systematics, Federated Investors and SEI Corporation,
among others.
RESEARCH AND DEVELOPMENT
In order to meet the changing needs of the financial organizations that it
serves, BISYS continually evaluates, develops, maintains and enhances various
application software and other technology used in its business. During fiscal
1994, 1995 and 1996, BISYS spent approximately $8.9 million, $9.4 million and
$10.2 million, respectively, on research and development. Most of BISYS central
site application software has been developed internally, and a majority of the
client site application software is licensed from third parties and integrated
with BISYS existing systems.
PROPRIETARY RIGHTS
BISYS regards its software as proprietary and relies upon trade secret laws,
internal nondisclosure guidelines and contractual provisions for protection.
BISYS does not hold any registered patents or copyrights on its software. BISYS
believes that legal protection of its software is less significant than the
knowledge and experience of BISYS management and personnel and their ability to
develop, enhance and market new products and services. BISYS believes that it
holds all proprietary rights necessary for the conduct of its business.
Application software similar to that licensed by BISYS is generally
available from alternate vendors, and in instances where BISYS believes that
additional protection is required, the applicable license agreement provides
BISYS with the right to obtain the software source code upon the occurrence of
certain events.
GOVERNMENT REGULATION
Certain BISYS subsidiaries are registered as broker/dealers with the
Securities and Exchange Commission (the "SEC"). Much of the federal regulation
of broker/dealers has been delegated to self-regulatory organizations,
principally the National Association of Securities Dealers (the "NASD") and the
national securities exchanges. Broker/dealers are subject to regulation which
covers all aspects of the securities business including sales methods, trading
practices, use and safekeeping of customers' funds and securities, capital
structure, recordkeeping and the conduct of directors, officers and employees.
Additional legislation, changes in rules and regulations promulgated by the SEC,
the Municipal Securities
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Rulemaking Board, the Office of the Comptroller of the Currency ("OCC"), the
Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board (the
"FRB") and the self-regulatory organizations or changes in the interpretation of
enforcement of existing laws, rules and regulations, may directly affect the
mode of operations and profitability of broker/dealers. The SEC, the FRB, the
self-regulatory organizations, state securities law administrators, the OCC and
the FDIC may conduct regulatory proceedings for violations of applicable laws,
rules and regulations. Such violations can result in disciplinary actions (such
as censure, the imposition of fines, the issuance of cease-and-desist orders or
the suspension or revocation of registrations, memberships or licenses of a
broker/dealer or its officers, directors or employees), as well as civil and
criminal penalties. The principal purpose of such regulations generally is the
protection of the investing public and the integrity of securities markets,
rather than protection of securities firms or their creditors or stockholders.
In addition, BISYS broker/dealer subsidiaries are subject to SEC Rule 15c3-1
(commonly known as the "Net Capital Rule"). The Net Capital Rule, which
specifies the minimum amount of net capital required to be maintained by
broker/dealers, is designed to measure the general financial integrity and
liquidity of broker/dealers and requires that a certain part of broker/dealers'
assets be kept in relatively liquid form. Failure to maintain the required
minimum amount of net capital may subject a broker/dealer to suspension or
revocation of licenses, registration or membership with the New York Stock
Exchange, the SEC, the NASD, and various state securities law administrators and
may ultimately require liquidation of the broker/dealer. Under certain
circumstances, the Net Capital Rule also prohibits payment of cash dividends,
redemption or repurchase of stock, distribution of capital and prepayment of
subordinated indebtedness. Thus, compliance with the Net Capital Rule could
restrict BISYS ability to withdraw capital from its broker/dealer subsidiaries
which, in turn, could limit BISYS ability to pay cash dividends. At June 30,
1996, BISYS broker/dealer subsidiaries had net capital of approximately $5.1
million, which exceeded the net capital requirements by approximately $4.2
million.
Under the Investment Company Act, the distribution agreements between each
mutual fund and a BISYS subsidiary terminate automatically upon assignment of
the agreement. In addition, BISYS administration agreements with its bank
clients also terminate upon assignment pursuant to the terms thereof. The term
"assignment" includes direct assignments by BISYS as well as assignments which
may be deemed to occur, under certain circumstances, upon the transfer, directly
or indirectly, of a controlling block of BISYS voting securities. The Investment
Company Act presumes that any transfer of more than 25% of the voting securities
of any person represents a transfer of a controlling block of voting securities.
As a provider of services to banking institutions, BISYS is not directly
subject to federal or state banking regulations. However, BISYS subsidiary,
BISYS, Inc., may be subject to review from time to time by the FDIC, the
National Credit Union Association, the Office of Thrift Supervision, the OCC and
various state regulatory authorities. These regulators make certain
recommendations to BISYS regarding various aspects of its operations. In
addition, BISYS processing operations are reviewed annually by an independent
auditing firm.
Banks and other depository institutions doing business with BISYS are
subject to extensive regulation at the federal and state levels under laws,
regulations and other requirements specifically applicable to regulated
financial institutions, and are subject to extensive examination and oversight
by federal and state regulatory agencies. As a result, the activities of BISYS
client banks are subject to comprehensive regulation and examination, including
those activities specifically relating to the sale by or through them of mutual
funds and other investment products. BISYS is not presently aware of any facts
which would lead it to believe that any of its bank clients are not in
compliance with applicable federal and state laws, regulations and other
requirements concerning the administration and distribution of bank managed
mutual funds.
In this regard, the Glass-Steagall Act has been applied to prohibit banks
from engaging in the organization, sponsorship, underwriting and principal
distribution of mutual funds, but not to prohibit
7
banks from providing investment advisory, administrative, selling and other
related services for, to or with respect to the sale of mutual funds shares to
their customers. Other depository institutions laws, regulations and
requirements do not impose substantive limitations of a material nature on the
activities which BISYS client banks now perform with respect to their
proprietary and other mutual funds, but regulate in various respects the manner
in which such activities may be performed. Nevertheless, future change in the
application or the interpretation of the Glass-Steagall Act or other banking
laws and regulations, or future legislative changes in existing banking laws,
may have a material and adverse impact on the ability of BISYS client banks to
engage in mutual fund activities, and consequently on the business relationships
between BISYS and its client banks. BISYS is not presently aware of any pending
regulatory developments, which, if approved, would adversely affect the ability
of its client banks to engage in mutual fund activities. In addition, future
changes in the Glass-Steagall Act may remove the existing prohibition on banks
engaging in the organization, sponsorship, underwriting and principal
distribution of mutual funds, permitting banks to perform certain functions now
required to be performed by third parties such as BISYS. Any such change could
affect BISYS in its provision of distribution services through clients choosing
to perform distribution functions independently.
Federal regulatory agencies have promulgated guidelines or other
requirements which apply to depository institutions subject to their respective
supervisory jurisdiction with respect to the sale of mutual funds and other
non-FDIC insured investment products to retail customers. These requirements
apply to, among other things, sales of investment products on bank premises by
or through the use of third-party service providers. These requirements
generally require banking institutions which contract to sell investment
products through the use of third-party service providers to implement
appropriate measures to ensure that such activities are being conducted in
accordance with applicable bank and securities regulatory requirements
(including the agencies' retail sales guidelines), and may in some instances
impose certain "due diligence" obligations on regulated depository institutions
with respect to the nature and the quality of services provided by such
third-party service providers. Such regulatory requirements may increase the
extent of oversight which federal regulatory agencies may require BISYS client
banks to exercise over the activities of BISYS.
Federal and state banking laws grant state and federal regulatory agencies
broad authority to take administrative enforcement and other adverse supervisory
actions against banks and other regulated depository institutions where there is
a determination that unsafe and unsound banking practices, violations of laws
and regulations, failures to comply with or breaches of written agreements,
commitments or undertakings entered into by such banks with their regulatory
agencies, or breaches of fiduciary and other duties exist. Banks engaged in,
among other things, mutual fund-related activities may be subject to such
regulatory enforcements and other adverse actions to the extent that such
activities are determined to be unlawful, unsound or otherwise actionable.
Certain operations of BISYS are subject to regulation by the insurance
departments of the states in which BISYS sells insurance products. Certain BISYS
employees are required to be licensed as insurance producers in certain states.
Under current law in most states, banks are prohibited from directly selling
insurance.
EMPLOYEES
As of June 30, 1996, BISYS employed approximately 1,800 employees. None of
its employees is represented by a union and there have been no work stoppages,
strikes or organization attempts. BISYS believes that its relations with its
employees are good.
The service nature of BISYS makes its employees an important corporate
asset. Most employees are not subject to employment agreements; however, certain
BISYS managers have such agreements.
8
ITEM 2. PROPERTIES
The following table provides certain summary information with respect to the
principal properties that BISYS owns or leases:
EXPIRATION
LOCATION FUNCTION TITLE SQ. FEET DATE
- ----------------- ------------------------------- --------- --------- ------------
Little Falls, NJ Corporate headquarters Leased 8,459 2000
Houston, TX Executive offices and data
processing center Leased 58,568 2001
Document processing center Leased 11,890 1996
Cherry Hill, NJ Data processing center Leased 31,350 2000
Lombard, IL Data processing center Leased 25,240 2000
Columbus, OH Mutual fund service center Leased 103,794 2005
Ambler, PA Data processing center Leased 53,605 1998
In addition to the principal facilities listed above, BISYS also leases
certain other office and data processing facilities with leases expiring between
1996 and 2001.
BISYS owns or leases central processors and associated peripheral equipment
used in its data and item processing operations and communications network,
401(k) business and electronic banking business. BISYS believes that its
existing facilities and equipment, together with expansion in the ordinary
course of business, are adequate for its present and foreseeable needs.
ITEM 3. LEGAL PROCEEDINGS
On August 23, 1994 and September 9, 1994, two purchasers of Concord's stock,
Seymour Lazar and Joshua Teitelbaum, on behalf of themselves and all others
similarly situated, filed class action complaints in the United States District
Court for the Northern District of California against Concord, its Board of
Directors and certain officers, Hambrecht & Quist Group, Bank of America, NT&SA
and Montgomery Securities alleging violations of the federal securities laws.
The complaints allege that these individuals and entities misrepresented
Concord's business and future prospects during Concord's initial public offering
and in subsequent statements in order to successfully consummate the offering
and to sustain an artificially inflated price for Concord's common stock.
Accordingly, the plaintiffs seek to recover losses allegedly sustained by a
class who purchased Concord's common stock between February 24, 1994 and June
17, 1994. The complaints do not specify the amount of damages sought. The two
cases have been consolidated. The parties have negotiated terms of a proposed
settlement of the litigation, which settlement would be within the reserves
established by the Company and the Company's insurance coverage. Any such
settlement is subject to the negotiation of a definitive settlement agreement
and to court approval. Regardless of any settlement, the Company's management
believes that the Company has adequate defenses, reserves and/or insurance
coverages against such litigation, and that the outcome of these proceedings
will not have a material effect upon the Company's financial position, results
of operations, or cash flows.
BISYS is involved in litigation arising in the ordinary course of business.
Management believes that BISYS has adequate defenses and/or insurance coverage
deemed probable against such litigation and that the outcome of these
proceedings, individually or in the aggregate, will not have a material adverse
effect upon BISYS financial position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders of the Company during
the fourth quarter of fiscal 1996.
9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required in Item 5 is incorporated herein by reference to
page 32 of the Company's 1996 Annual Report to Shareholders (the "Annual
Report") and Note 4 to the Company's consolidated financial statements included
therein. Portions of the Annual Report incorporated by reference in this report
are included in this report as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
The information requested in Item 6 is incorporated herein by reference to
page 17 of the Annual Report, included in this report as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The information required in Item 7 is incorporated herein by reference to
pages 18 through 20 of the Annual Report, included in this report as Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required in Item 8 is incorporated herein by reference to
pages 21 through 31 of the Annual Report, included in this report as Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS IN ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Pursuant to Instruction G(3) to Form 10-K, the information required in Items
10 through 13 is incorporated by reference from the Company's definitive proxy
statement, which is expected to be filed pursuant to Regulation 14A within 120
days after the end of the Registrant's fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The consolidated financial statements of the Company as of June 30, 1996 and
1995 and for each of the three years in the period ended June 30, 1996, together
with the report of Coopers & Lybrand L.L.P. dated August 16, 1996, are
incorporated herein by reference to pages 17 through 32 of the Annual Report,
included in this report as Exhibit 13.
(a)(2) Financial Statement Schedules
All financial statement schedules are omitted for the reason that they are
either not applicable or not required or because the information required is
contained in the consolidated financial statements or notes thereto.
(a)(3) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1996.
10
(b) Exhibits:
2.1 --Agreement and Plan of Merger dated as of December 9, 1994 among the Registrant,
BICON Acquisition Corp. and Concord Holding Corporation. (Incorporated by reference
to Exhibit 2.1 to the Registrant's Registration Statement No. 33-87474.)
2.2 --Amendment No. 1 to Agreement and Plan of Merger dated as of February 14, 1995 among
the Registrant, BICON Acquisition Corp. and Concord Holding Corporation.
(Incorporated by reference to the Registrant's Registration Statement No.
33-87474.)
2.3 --Agreement and Plan of Merger dated as of May 2, 1995 among the Registrant, BIDOC
Acquisition Corp., Document Solutions, Inc. ("DSI") and shareholders of DSI.
(Incorporated by reference to Exhibit 2.3 to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1995.)
3.1 --Amended and Restated Certificate of Incorporation of The BISYS Group, Inc.
(Incorporated by reference to the Registrant's Registration Statement No.
333-02932.)
3.2 --By-Laws of The BISYS Group, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement No. 33-45417.)
4.1 --Credit Agreement dated as of May 19, 1994 by and among BISYS, Inc., the Signatory
Banks thereto and The Bank of New York, as agent. (Incorporated by reference to
Exhibit 10.1 on Form 10-K for fiscal year ended June 30, 1994.)
4.2 --Security Agreement dated as of May 19, 1994 between BISYS, Inc. and The Bank of New
York, as agent. (Incorporated by reference to Exhibit 10.2 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1994.)
4.3 --BISYS Group Guaranty, Security and Subordination Agreement dated as of May 19, 1994
between the Registrant and The Bank of New York, as agent. (Incorporated by
reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1994.)
4.4 --Affiliate/Subsidiary Guaranty, Security and Subordination Agreement dated as of May
19, 1994 among BISYS Document Processing, Inc., BISYS Loan Services, Inc.,
Tridatatron Software Services, Inc., BISYS Investment Services, Inc., The Winsbury
Corporation, WC Subsidiary Corporation, The Winsbury Service Corporation, BISYS
Survey, Inc., BISYS/ STDS, Inc. and The Bank of New York, as agent. (Incorporated
by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1994.)
10.1 --Letter Agreement dated September 18, 1989 between the Registrant and Lynn J.
Mangum. (Incorporated by reference to Exhibit 10.18 of the Registrant's
Registration Statement No. 33-45417.)
10.2 --Letter Agreement dated October 10, 1989 between the Registrant and Paul Bourke.
(Incorporated by reference to Exhibit 10.19 of the Registrant's Registration
Statement No. 33-45417.)
10.3 --Letter Agreement dated May 12, 1995 between the Registrant and Lynn J. Mangum.
(Incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995.
10.4 --Letter Agreement dated May 12, 1995 between the Registrant and Paul H. Bourke.
(Incorporated by reference to Exhibit 10.19 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995.)
10.5 --Letter Agreement dated May 12, 1995 between the Registrant and Robert J. McMullan.
(Incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995.)
10.6 --The BISYS Group, Inc. Amended and Restated Stock Option and Restricted Stock
Purchase Plan. (Incorporated by reference to Exhibit 10.23 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1994.)
11
10.7 --BISYS 401(k) Savings Plan. (Incorporated by reference to Exhibit 10.23 of the
Registrant's Registration Statement No. 33-45417.)
10.8 --The BISYS Group, Inc. 1995 Employee Stock Purchase Plan. (Incorporated by reference
to Exhibit A to the Registrant's proxy statement for its 1994 annual meeting of
stockholders, filed with the Securities and Exchange Commission on October 6,
1994.)
10.9 --The BISYS Group, Inc. Non-Employee Directors' Stock Option Plan. (Incorporated by
reference to Exhibit B to the Registrant's proxy statement for its 1994 annual
meeting of stockholders, filed with the Securities and Exchange Commission on
October 6, 1994.)
10.10 --Lease of Little Falls, New Jersey facility dated January 9, 1991. (Incorporated by
reference to Exhibit 10.24 of the Registrant's Registration Statement No.
33-45417.)
10.11 --Lease of Cherry Hill, New Jersey facility dated November 29, 1990. (Incorporated by
reference to Exhibit 10.25 of the Registrant's Registration Statement No.
33-45417.)
10.12 --Lease of Lombard, Illinois facility dated May 29, 1990. (Incorporated by reference
to Exhibit 10.27 of the Registrant's Registration Statement No. 33-45417.)
10.13 --Lease of Houston, Texas facility dated June 30, 1986. (Incorporated by reference to
Exhibit 10.28 of the Registrant's Registration Statement No. 33-45417.)
10.14 --Lease of Ambler, Pennsylvania facility dated April 4, 1989. (Incorporated by
reference to Exhibit 10.29 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1993.)
10.15 --Lease of Columbus, Ohio facility dated August 30, 1994 as amended by First
Amendment dated April 14, 1995. (Incorporated by reference to Exhibit 10.36 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1995.)
10.16 --Stock Purchase Agreement dated as of July 31, 1995 between Registrant and Enhance
Financial Services Group, Inc. (Incorporated by reference to Exhibit 10.45 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1995.)
10.17 --Employment Agreement dated as of December 9, 1994 between the Registrant and Dennis
R. Sheehan. (Incorporated by reference to Exhibit 10.47 to the Registrant's
Registration Statement No. 33-87474.)
10.18 --Affiliate Agreement dated as of December 9, 1994 among the Registrant and the
persons listed on Schedule I thereto. (Incorporated by reference to Exhibit 10.49
to the Registrant's Registration Statement No. 33-87474.)
10.19 --Registration Rights Agreement dated March 29, 1995 among the Registrant and the
several persons named on Schedule I thereto. (Incorporated by reference to Exhibit
10.9 to the Registrant's Report on Form 8-K filed on April 12, 1995.)
10.20* --Agreement and Plan of Merger dated April 22, 1996 among the Registrant, BISYS
Acquisition Corp., Strategic Solutions Group, Inc. ("SSG"), and the shareholders of
SSG (exhibits and schedules omitted and will be provided at the request of the
Securities and Exchange Commission.)
10.21* --Registration Rights Agreement dated April 22, 1996 among the Registrant and the
several persons named on Schedule I thereto.
10.22* --Agreement and Plan of Merger dated as of June 28, 1996 among the Registrant, BITUG
Acquisition Corp., T.U.G., Inc. ("TUG") and the shareholders of TUG (exhibits and
schedules omitted and will be provided at the request of the Securities and
Exchange Commission.)
10.23* --Registration Rights Agreement dated June 28, 1996 among the Registrant and the
several persons named on Schedule I thereto.
10.24 --The BISYS Group, Inc. 1995 Stock Option Plan. (Incorporated by reference to Exhibit
A to the Registrant's proxy statement for its 1995 annual meeting of stockholders,
filed with the Securities and Exchange Commission.)
12
10.25 --The BISYS Group, Inc. 1996 Employee Stock Purchase Plan. (Incorporated by reference
to Exhibit B to the Registrant's proxy statement for its 1995 annual meeting of
stockholders, filed with the Securities and Exchange Commission.)
11.1* --Computation of Per Share Earnings.
13* --Pages 17-32 of the Registrant's 1996 Annual Report to Shareholders.
21* --List of subsidiaries of The BISYS Group, Inc.
23.1* --Consent of Coopers & Lybrand L.L.P.
23.2* --Consent of Price Waterhouse LLP.
27* --Financial Data Schedule.
99* --Report of Price Waterhouse LLP.
- ------------------------
* Filed herewith.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE BISYS GROUP, INC.
Date: September 27, 1996 By: /s/ ROBERT J. MCMULLAN
-----------------------------------------
Robert J. McMullan
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 27th day of September 1996.
SIGNATURE TITLE
- ------------------------------ ---------------------------
Director, Chairman of the
/s/ LYNN J. MANGUM Board and Chief Executive
- ------------------------------ Officer (Principal
(Lynn J. Mangum) Executive Officer)
/s/ PAUL H. BOURKE Director, Chief Operating
- ------------------------------ Officer and President
(Paul H. Bourke)
Executive Vice President
/s/ ROBERT J. MCMULLAN and Chief Financial
- ------------------------------ Officer (Principal
(Robert J. McMullan) Financial and Accounting
Officer)
/s/ JAY W. DEDAPPER Director
- ------------------------------
(Jay W. DeDapper)
/s/ JOHN J. LYONS Director
- ------------------------------
(John J. Lyons)
/s/ THOMAS E. MCINERNEY Director
- ------------------------------
(Thomas E. McInerney)
/s/ NEIL P. MARCOUS Director
- ------------------------------
(Neil P. Marcous)
14
INDEX TO EXHIBITS FILED HEREWITH
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
10.20 -- Agreement and Plan of Merger dated April 22, 1996 among the Registrant, BISYS Acquisition Corp.,
Strategic Solutions Group, Inc. ("SSG") and the shareholders of SSG (exhibits and schedules omitted
and will be provided at the request of the Securities and Exchange Commission).
10.21 -- Registration Rights Agreement dated April 22, 1996 among the Registrant and several persons named
on Schedule I thereto.
10.22 -- Agreement and Plan of Merger dated as of June 28, 1996 among the Registrant, BITUG Acquisition
Corp., T.U.G., Inc. ("TUG") and the shareholders of TUG (exhibits and schedules omitted and will be
provided at the request of the Securities and Exchange Commission).
10.23 -- Registration Rights Agreement dated June 28, 1996 among the Registrant and the several persons
named on Schedule 1 thereto.
11.1 -- Computation of Per Share Earnings.
13 -- Pages 17-32 of the Registrant's 1996 Annual Report to Shareholders.
21 -- List of subsidiaries of The BISYS Group, Inc.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Price Waterhouse LLP.
27 -- Financial Data Schedule.
99 -- Report of Price Waterhouse LLP.