<PAGE>
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 March 31, 1995 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 0-14232
SunGard/(R)/ Data Systems Inc.
---------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0267091
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1285 Drummers Lane, Wayne, Pennsylvania 19087
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(Address of principal executive offices, including zip code)
(610) 341-8700
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(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 reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
There were 18,788,960 shares of the registrant's common stock, par value $.01
per share, outstanding at March 31, 1995.
<PAGE>
SunGard Data Systems Inc.
And Subsidiaries
Index Page
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Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1995
(unaudited) and December 31, 1994............................... 1
Consolidated Statements of Income for the three months
ended March 31, 1995 and 1994 (unaudited)....................... 2
Supplemental Income Statement Information for the three
months ended March 31, 1995 and 1994 (unaudited)................ 2
Consolidated Statements of Cash Flows for the three months
ended March 31, 1995 and 1994 (unaudited)....................... 3
Notes to Consolidated Financial Statements (unaudited).......... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation........................................ 5
Part II. Other Information
Item 1. Legal Proceedings............................................... 7
Item 2. Changes in Securities........................................... 7
Item 3. Defaults upon Senior Securities................................. 7
Item 4. Submission of Matters to a Vote of Security Holders............. 7
Item 5. Other Information............................................... 8
Item 6. Exhibits and Reports on Form 8-K................................ 8
Signatures............................................................... 9
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
SunGard Data Systems Inc.
Consolidated Balance Sheets
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31,
1995 Dec. 31,
(Unaudited) 1994
------------ ----------
<S> <C> <C>
Assets
Current:
Cash and equivalents..................................................................... $ 60,722 $ 68,491
Short-term investments, at cost, which approximates market............................... 54,636 34,107
Trade receivables, less allowance for doubtful accounts of $7,928 and $7,276............. 79,498 85,339
Earned but unbilled receivables.......................................................... 14,179 13,488
Prepaid expenses and other current assets................................................ 15,623 14,380
Deferred income taxes.................................................................... 6,673 6,490
------------ ----------
Total current assets................................................................. 231,331 222,295
Property and equipment, less accumulated depreciation of $111,259 and $105,036.............. 89,195 90,436
Software products, less accumulated amortization of $48,830 and $46,943..................... 24,110 23,964
Goodwill, less accumulated amortization of $16,105 and $15,035.............................. 97,054 95,822
Other intangible assets, less accumulated amortization of $19,936 and $20,452............... 52,353 53,223
------------ ----------
$ 494,043 $ 485,740
============ ==========
Liabilities and Stockholders' Equity
Current:
Short-term and current portion of long-term debt......................................... $ 6,048 $ 5,673
Accounts payable......................................................................... 8,106 7,628
Accrued compensation and benefits........................................................ 15,715 22,354
Other accrued expenses................................................................... 13,682 14,214
Accrued income taxes..................................................................... 12,690 6,049
Deferred revenues........................................................................ 53,745 57,492
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Total current liabilities............................................................ 109,986 113,410
------------ ----------
Long-term debt.............................................................................. 4,900 4,894
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Deferred income taxes....................................................................... 6,590 8,144
------------ ----------
Committments................................................................................
Stockholders' equity:
Preferred stock, par value $.01 per share; 5,000 shares authorized....................... - -
Common stock, par value $.01 per share; 60,000 shares authorized;
18,907 and 18,898 shares issued....................................................... 189 189
Capital in excess of par value........................................................... 162,651 162,235
Restricted stock plans................................................................... (468) (858)
Retained earnings........................................................................ 215,264 205,121
Foreign currency translation adjustment.................................................. (620) (2,366)
------------ ----------
377,016 364,321
Treasury stock, at cost, 118 and 131 shares.............................................. (4,449) (5,029)
------------ ----------
Total stockholders' equity............................................................. 372,567 359,292
------------ ----------
$ 494,043 $ 485,740
============ ==========
</TABLE>
See accompanying notes
1
<PAGE>
SunGard Data Systems Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1995 1994
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<S> <C> <C>
Revenues.................................................................. $ 121,490 $ 102,152
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Costs and expenses:
Cost of sales and direct operating...................................... 55,706 45,898
Sales, marketing and administration..................................... 25,510 21,168
Product development..................................................... 10,291 9,195
Depreciation of property and equipment.................................. 7,083 5,569
Amortization of intangible assets....................................... 5,296 4,811
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103,886 86,641
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Income from operations.................................................... 17,604 15,511
Investment income, net.................................................. 1,246 461
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Income before income taxes................................................ 18,850 15,972
Income taxes............................................................ 7,729 6,549
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Net income................................................................ $ 11,121 $ 9,423
=========== ==========
Fully diluted net income per common share................................. $ 0.58 $ 0.49
=========== ==========
Shares used to compute fully diluted net income per common share.......... 19,151 19,262
=========== ==========
</TABLE>
================================================================================
SunGard Data Systems Inc.
Supplemental Income Statement Information
(In thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
Revenues: 1995 1994
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<S> <C> <C>
Investment support systems.............................................. $ 77,040 $ 64,568
Disaster recovery services.............................................. 37,117 31,205
Computer services....................................................... 7,333 6,379
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$ 121,490 $ 102,152
=========== ==========
Income from operations:
Investment support systems.............................................. $ 13,632 $ 10,658
Disaster recovery services.............................................. 5,077 5,847
Computer services....................................................... 1,082 977
Corporate administration................................................ (2,187) (1,971)
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$ 17,604 $ 15,511
=========== ==========
Operating margin:
Investment support systems.............................................. 17.7% 16.5%
=========== ==========
Disaster recovery services.............................................. 13.7% 18.7%
=========== ==========
Computer services ...................................................... 14.8% 15.3%
=========== ==========
Total................................................................... 14.5% 15.2%
=========== ==========
</TABLE>
See accompanying notes
2
<PAGE>
SunGard Data Systems Inc.
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1995 1994
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<S> <C> <C>
Cash flow from operations:
Net income..................................................................... $ 11,121 $ 9,423
Reconciliation of net income to cash flow from operations:
Depreciation and amortization............................................... 12,379 10,380
Charges for incentive stock plans........................................... 690 361
Other noncash charges (credits)............................................. (121) 89
Deferred income tax benefit................................................. (1,737) (503)
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22,332 19,750
Cash provided by (used for) working capital, net of effect of acquired
businesses:
Accounts receivable and other current assets................................ 4,464 553
Accounts payable and accrued expenses....................................... 404 (270)
Deferred revenues........................................................... (4,618) 885
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Cash flow from operations................................................. 22,582 20,918
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Financing activities:
Cash received from employee stock plans........................................ 1,604 433
Cash paid for treasury stock................................................... (1,995) -
Repayments of debt............................................................. (90) (169)
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Total financing activities................................................ (481) 264
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Long-term investment activities:
Cash paid for acquired businesses.............................................. (3,324) -
Cash paid for property and equipment........................................... (5,486) (8,153)
Cash paid for software and other assets........................................ (531) (795)
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Total long-term investment activities..................................... (9,341) (8,948)
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Increase in cash and equivalents before short-term investment activities......... 12,760 12,234
Short-term investment activities:
Purchase of short-term investments............................................. (39,797) (19,819)
Maturities of short-term investments........................................... 19,268 12,940
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Increase in cash and equivalents................................................. (7,769) 5,355
Beginning cash and equivalents................................................... 68,491 51,955
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Ending cash and equivalents...................................................... $ 60,722 $ 57,310
========== =========
Supplemental information:
Acquired businesses:
Property and equipment...................................................... 60 -
Software products........................................................... 1,237 -
Goodwill and other intangible assets........................................ 3,119 184
Net current assets acquired (liabilities assumed)........................... (852) (184)
Purchase price obligations and debt assumed................................. (240) -
---------- ---------
Cash paid for acquired businesses................................................ $ 3,324 $ -
========== =========
</TABLE>
See accompanying notes
3
<PAGE>
SunGard Data Systems Inc.
Notes to Consolidated Financial Statements (Unaudited)
1. The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three month period ended March 31, 1995 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1995.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1994.
2. During the three month period ended March 31, 1995, the Company completed
two business acquisitions. One acquisition was in the Company's investment
support systems business and the other in the Company's disaster recovery
services business. Total cash paid in connection with these acquisitions
was approximately $3,324,000, subject to certain adjustments. The
acquisitions are not expected to have a material effect on the Company's
financial condition or results of operations.
3. Fully diluted net income per share was calculated using the weighted-
average number of common shares and common-equivalent shares outstanding
during the period. Common-equivalent shares are attributable to unexercised
stock options.
4
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Income from Operations:
Investment Support Systems (ISS):
The ISS operating margin increased during the three month period ended
March 31, 1995, compared to the corresponding period in 1994, due primarily to
an increase in software license revenues. The Company expects that the full-year
1995 ISS operating margin will increase modestly compared to 1994.
Disaster Recovery Services (DRS):
The DRS operating margin decreased during the first three months of 1995,
compared to the corresponding period in 1994, due primarily to computer
equipment upgrades and facility improvements which occurred between April 1994
and March 1995. The Company expects that the DRS operating margin will improve
over the balance of the year and will approach 20% for the full year 1995.
Computer Services (CS):
The CS operating margin decreased slightly during the three month period
ended March 31, 1995, compared to the corresponding period in 1994, due
primarily to computer system upgrades which occurred during the second quarter
of 1994. The Company expects that the CS operating margin will be slightly
lower for the full year 1995 compared to 1994.
The Company believes that its business is not seasonal; nevertheless, the
timing and magnitude of software sales, commitments for equipment and
facilities, product development efforts and disaster recovery activities may
cause profitability to fluctuate from one quarter to another.
Revenues:
Total revenues for the three month period ended March 31, 1995 increased
$19.3 million, or 19%, compared to the corresponding period in 1994. Excluding
acquired businesses, revenues increased $15.3 million, or 15%. Recurring
revenues derived from remote processing services, disaster recovery services and
software maintenance are approximately $100.3 million and $87.2 million for the
three month periods ended March 31, 1995 and 1994, respectively, representing
83% and 85% of consolidated revenues, respectively.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
Revenues:
(Continued)
Investment Support Systems:
ISS revenues for the three month period ended March 31, 1995 increased
$12.5 million, or 19%, compared to the corresponding period in 1994. Excluding
acquired businesses, revenues increased $9.7 million, or 15%, consisting of
increases in software license and professional services revenues of $5.4 million
and in data processing and software maintenance revenues of $4.3 million. The
Company expects that ISS revenues will continue to be higher in 1995 compared to
1994.
Disaster Recovery Services:
DRS revenues for the three month period ended March 31, 1995 increased
$5.9 million, or 19%, compared to the corresponding period in 1994. Excluding
acquired businesses, revenues increased $4.6 million, or 15%, and are
attributable primarily to increases in revenues resulting from new contract
signings and contract renewals. The Company expects that DRS revenues will
continue to be higher in 1995 compared to 1994 due primarily to new contract
signings and contract renewals and, to a lesser extent, a full year of
operations of businesses acquired in 1994.
Computer Services:
CS revenues for the three month period ended March 31, 1995 increased
$1.0 million, or 15%, compared to the corresponding period in 1994, due
primarily to increased volume in both the Company's remote-access computer
services and mailing services businesses. The Company expects that CS revenues
will be slightly higher in 1995 compared to 1994.
Costs and Expenses:
Cost of sales and direct operating expenses for the three month period
ended March 31, 1995 increased $9.8 million, or 21%, compared to the
corresponding period in 1994. The increase is due primarily to upgrades of
leased computer equipment in the Company's DRS and CS businesses, and, to a
lesser extent, acquired businesses.
Sales, marketing and administration expenses for the three month period
ended March 31, 1995 increased $4.3 million, or 21%, compared to the
corresponding period in 1994. As a percentage of revenues, sales, marketing and
administrative expenses remained relatively constant at 21% of revenues. The
dollar increase is attributable primarily to costs associated with the increase
in revenues in the Company's three principal business lines and, to a lesser
extent, acquired businesses.
Product development expenses for the three month period ended
March 31, 1995 increased $1.1. million, or 12%, compared to the corresponding
period in 1994. The increase is due primarily to an increase in development
spending in connection with certain trust and shareholder systems and capital
markets systems, and, to a lesser extent, a decrease in development costs
capitalized.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
Costs and Expenses:
(Continued)
Depreciation of property and equipment for the three month period ended
March 31, 1995 increased $1.5 million, or 27%, compared to the corresponding
period in 1994. The increase is due primarily to facility improvements and
equipment additions principally in the Company's disaster recovery services
business and acquired businesses.
Investment income for the three month period ended March 31, 1995 increased
$0.8 million compared to the corresponding period in 1994 due primarily to an
increase in cash and investment balances, a change in mix of investments between
taxable and tax-free instruments, and an overall increase in interest rates.
Liquidity and Capital Resources:
At March 31, 1995, cash and short-term investments increased $12.8 million
to $115.4 million from $102.6 million at December 31, 1994. Cash equivalents and
short-term investments are invested primarily in institutional money-market
funds, short-term municipal bonds, and highly rated, investment-grade corporate
bonds. By policy, the Company places its investments with institutions of high
credit-quality and limits the amount of credit exposure to any one issuer.
During the three month period ended March 31, 1995, the Company purchased
55,000 shares of its common stock under a stock repurchase plan announced on
November 16, 1994, permitting the Company to purchase up to 1,000,000 shares of
its common stock by December 31, 1995. During the period November 16, 1994
through March 31, 1995, the Company has purchased an aggregate of 205,000 shares
of its common stock, of which 118,000 shares are held in treasury at
March 31, 1995. Shares purchased under the plan will continue to be used for the
Company's stock option and award plans and other general corporate purposes.
The Company believes that existing cash resources and cash generated from
operations will be sufficient to meet its operating requirements and ordinary
capital spending needs for the foreseeable future. Furthermore, the Company
believes that it has the capacity to borrow funds and use equity to finance
additional capital needs.
Part II. Other Information
Item 1. Legal Proceedings: None, other than as previously described
in Item 3 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: None
7
<PAGE>
Part II. Other Information
(Continued)
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K: None
8
<PAGE>
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.
SunGard Data Systems Inc.
Date: May 12, 1995 By: /s/ Michael J. Ruane
---------------------------------
Michael J. Ruane
Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
9
<PAGE>
LIST OF EXHIBITS
NUMBER EXHIBIT
- ------ -------
27.1 Financial Data Schedule.
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated balance sheet of SunGard Data Systems Inc. as of
March 31, 1995 and the unaudited consolidated statement of income for the three
months ended March 31, 1995, included in the Form 10-Q of SunGard Data Systems
Inc. for the quarterly period ended March 31, 1995, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 60,722
<SECURITIES> 54,636
<RECEIVABLES> 93,677
<ALLOWANCES> 7,928
<INVENTORY> 0
<CURRENT-ASSETS> 231,331
<PP&E> 200,454
<DEPRECIATION> 111,259
<TOTAL-ASSETS> 494,043
<CURRENT-LIABILITIES> 109,986
<BONDS> 4,900
<COMMON> 189
0
0
<OTHER-SE> 372,378
<TOTAL-LIABILITY-AND-EQUITY> 494,043
<SALES> 0
<TOTAL-REVENUES> 121,490
<CGS> 0
<TOTAL-COSTS> 103,886
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 18,850
<INCOME-TAX> 7,729
<INCOME-CONTINUING> 11,121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,121
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
</TABLE>
