10-QPeriod: Q2 FY2001

Fidelity National Information Services, Inc. Quarterly Report for Q2 Ended Jun 30, 2001

Filed August 14, 2001For Securities:FIS

Summary

Fidelity National Information Services, Inc. (FIS), operating as the Equifax Payment Services Division (to be reorganized as Certegy Inc.), reported revenues of $205.4 million for the three months ended June 30, 2001, an increase of 6.4% compared to the prior year period. Net income for the quarter was $21.3 million, a decrease of 5.3% from $22.5 million in the prior year. For the six months ended June 30, 2001, revenues grew 8.0% to $400.4 million, while net income decreased by 2.2% to $36.5 million from $37.3 million in the comparable 2000 period. The company is undergoing a spin-off from Equifax Inc. into a separate publicly traded company, Certegy Inc., which was accomplished on July 7, 2001. This transition, along with the associated debt financing and pro forma adjustments, is a key factor in understanding the financial performance. While revenue growth is positive, the decline in net income, particularly in the second quarter, is influenced by factors such as increased operating expenses, higher check guarantee loss rates in the Check Services segment, and the impact of foreign exchange rates. The company has also completed the acquisition of full ownership of Unnisa Ltda., a Brazilian card processing business.

Key Highlights

  • 1Revenues increased by 6.4% year-over-year for the three months ended June 30, 2001, reaching $205.4 million.
  • 2Net income for the three months ended June 30, 2001, was $21.3 million, a 5.3% decrease compared to $22.5 million in the prior year.
  • 3For the six months ended June 30, 2001, revenues grew 8.0% to $400.4 million, while net income saw a 2.2% decrease to $36.5 million.
  • 4The company completed its spin-off from Equifax Inc. into Certegy Inc. on July 7, 2001.
  • 5Operating income for the Card Services segment increased by 11.0% for the first six months of 2001, while Check Services operating income decreased by 14.3% due to higher guarantee loss rates.
  • 6The company acquired full ownership of Unnisa Ltda., a Brazilian card processing business, in May 2001 for $55.5 million.
  • 7As of June 30, 2001, the company had $47.4 million in cash and cash equivalents and secured $400 million in unsecured credit facilities.

Frequently Asked Questions

The spin-off, completed on July 7, 2001, creates a standalone publicly traded company, Certegy Inc. This allows for a clearer focus on the payment services business, potentially leading to a more accurate market valuation and enabling independent strategic decisions. Investors should review the pro forma financial statements to understand the historical performance as if Certegy had always been independent.

Revenue growth is primarily driven by increased transaction volumes in both the Card Services and Check Services segments. The decrease in net income is attributed to several factors including increased operating expenses, a shift towards lower-margin merchant processing revenues within Card Services, higher check guarantee loss rates in the Check Services segment, and the negative impact of foreign currency exchange rate fluctuations on international revenues.

The acquisition of full ownership of Unnisa Ltda. in May 2001 for $55.5 million expanded the company's Brazilian operations. While not material to the overall results for the period, it represents a strategic expansion. Foreign currency fluctuations, particularly the strengthening U.S. dollar against the Brazilian real and British pound, negatively impacted reported U.S. dollar revenues, reducing growth by approximately $5.9 million in Q2 2001 and $10.2 million for the first six months of 2001.

As of June 30, 2001, the company had $47.4 million in cash and cash equivalents. In July 2001, it secured $400 million in unsecured credit facilities, which was partly used to fund a $275 million cash payment to Equifax in conjunction with the spin-off. Management believes that current cash, operating cash flows, and the remaining credit facility are sufficient to meet operational and planned requirements.