01—Abstract
Summary
Summary of the 10-Q filed August 14, 2001. Cited figures are marked; the original filing is the authoritative source.
Fidelity National Information Services, Inc. (FIS), operating as the Equifax Payment Services Division (to be reorganized as Certegy Inc.), reported revenues of $205.4 milliona 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 millionb, 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.
02—Key points
Key Highlights
- Revenues increased by 6.4% year-over-year for the three months ended June 30, 2001, reaching $205.4 million.
- Net 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.
- For 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.
- The company completed its spin-off from Equifax Inc. into Certegy Inc. on July 7, 2001.
- Operating 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.
- The company acquired full ownership of Unnisa Ltda., a Brazilian card processing business, in May 2001 for $55.5 million.
- As of June 30, 2001, the company had $47.4 million in cash and cash equivalents and secured $400 million in unsecured credit facilities.
03—Questions
Frequently Asked Questions
What is the significance of the spin-off from Equifax into Certegy Inc. for investors?
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.
What are the main drivers of the revenue growth and the decrease in net income?
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.
What is the impact of the Unnisa acquisition and foreign currency fluctuations on the company's performance?
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.
What is the company's liquidity position and future funding outlook?
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.
04—Continue