<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 June 30, 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
------------------- -----------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1285 Drummers Lane, Wayne, Pennsylvania 19087
---------------------------------------------
(Address of principal executive offices, including zip code)
(610) 341-8700
---------------------------------------------
(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 18,907,417 shares (not adjusted for the two-for-one stock split-See
Note 4 of Notes to Consolidated Financial Statements) of the registrant's common
stock, par value $.01 per share, outstanding at June 30, 1995.
<PAGE>
SunGard Data Systems Inc.
And Subsidiaries
Index
Page
----
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1995
(unaudited) and December 31, 1994.............................. 1
Consolidated Statements of Income for the six and three months
ended June 30, 1995 and 1994 (unaudited)....................... 2
Supplemental Income Statement Information for the six and three
months ended June 30, 1995 and 1994 (unaudited)................ 2
Consolidated Statements of Cash Flows for the six months
ended June 30, 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.............................................. 8
Item 2. Changes in Securities.......................................... 8
Item 3. Defaults upon Senior Securities................................ 8
Item 4. Submission of Matters to a Vote of Security Holders............ 8
Item 5. Other Information.............................................. 9
Item 6. Exhibits and Reports on Form 8-K............................... 9
Signatures.............................................................. 10
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
----------------------------
SunGard Data Systems Inc.
Consolidated Balance Sheets
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30,
1995 Dec. 31,
(Unaudited) 1994
----------- ------------
<S> <C> <C>
Assets
Current:
Cash and equivalents................................................................. $ 58,456 $ 68,491
Short-term investments, at cost, which approximates market........................... 51,310 34,107
Trade receivables, less allowance for doubtful accounts of $7,325 and $7,276......... 80,991 85,339
Earned but unbilled receivables...................................................... 18,488 13,488
Prepaid expenses and other current assets............................................ 15,542 14,380
Deferred income taxes................................................................ 6,366 6,490
----------- ------------
Total current assets............................................................. 231,153 222,295
Property and equipment, less accumulated depreciation of $117,068 and $105,036.......... 89,531 90,436
Software products, less accumulated amortization of $50,790 and $46,943................. 23,762 23,964
Goodwill, less accumulated amortization of $17,171 and $15,035.......................... 95,798 95,822
Other intangible assets, less accumulated amortization of $21,917 and $20,452........... 50,101 53,223
----------- ------------
$ 490,345 $ 485,740
=========== ============
Liabilities and Stockholders' Equity
Current:
Short-term and current portion of long-term debt..................................... $ 3,555 $ 5,673
Accounts payable..................................................................... 7,328 7,628
Accrued compensation and benefits.................................................... 18,376 22,354
Other accrued expenses............................................................... 13,015 14,214
Accrued income taxes................................................................. 2,413 6,049
Deferred revenues.................................................................... 51,802 57,492
----------- ------------
Total current liabilities........................................................ 96,489 113,410
----------- ------------
Long-term debt.......................................................................... 3,027 4,894
----------- ------------
Deferred income taxes................................................................... 6,434 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 18,807 shares issued................................................... 189 189
Capital in excess of par value....................................................... 162,636 162,235
Restricted stock plans............................................................... (312) (858)
Retained earnings.................................................................... 226,795 205,121
Foreign currency translation adjustment.............................................. (876) (2,366)
----------- ------------
388,432 364,321
Treasury stock, at cost, 101 and 131 shares.......................................... (4,037) (5,029)
----------- ------------
Total stockholders' equity......................................................... 384,395 359,292
----------- ------------
$ 490,345 $ 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>
Six Months Ended Three Months Ended
June 30, June 30,
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues................................................................... $ 246,609 $ 206,744 $ 125,119 $ 104,592
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales and direct operating....................................... 111,772 93,736 56,066 47,838
Sales, marketing and administration...................................... 51,354 41,678 25,844 20,510
Product development...................................................... 21,437 17,443 11,146 8,248
Depreciation of property and equipment................................... 14,481 11,358 7,398 5,789
Amortization of intangible assets........................................ 10,601 9,828 5,305 5,017
---------- ---------- ---------- ----------
209,645 174,043 105,759 87,402
---------- ---------- ---------- ----------
Income from operations..................................................... 36,964 32,701 19,360 17,190
Investment income, net................................................... 2,593 928 1,347 467
---------- ---------- ---------- ----------
Income before income taxes................................................. 39,557 33,629 20,707 17,657
Income taxes............................................................. 16,218 13,788 8,489 7,239
---------- ---------- ---------- ----------
Net income................................................................. $ 23,339 $ 19,841 $ 12,218 $ 10,418
========== ========== ========== ==========
Fully diluted net income per common share (1).............................. $ 0.61 $ 0.51 $ 0.32 $ 0.27
========== ========== ========== ==========
Shares used to compute fully diluted net income per common share (1)....... 38,348 38,534 38,392 38,508
========== ========== ========== ==========
</TABLE>
================================================================================
SunGard Data Systems Inc.
Supplemental Income Statement Information
(In thousands)
Unaudited
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Investment support systems............................................... $ 154,516 $ 129,172 $ 77,476 $ 64,604
Disaster recovery services............................................... 77,352 64,470 40,235 33,265
Computer services........................................................ 14,741 13,102 7,408 6,723
---------- ---------- ---------- ----------
$ 246,609 $ 206,744 $ 125,119 $ 104,592
========== ========== ========== ==========
Income from operations:
Investment support systems............................................... $ 25,352 $ 21,449 $ 11,720 $ 10,791
Disaster recovery services............................................... 12,941 12,874 7,864 7,027
Computer services........................................................ 2,345 2,117 1,263 1,140
Corporate administration................................................. (3,674) (3,739) (1,487) (1,768)
---------- ---------- ---------- ----------
$ 36,964 $ 32,701 $ 19,360 $ 17,190
========== ========== ========== ==========
Operating margin:
Investment support systems............................................... 16.4% 16.6% 15.1% 16.7%
========== ========== ========== ==========
Disaster recovery services............................................... 16.7% 20.0% 19.5% 21.1%
========== ========== ========== ==========
Computer services ....................................................... 15.9% 16.2% 17.0% 17.0%
========== ========== ========== ==========
Total.................................................................... 15.0% 15.8% 15.5% 16.4%
========== ========== ========== ==========
</TABLE>
(1) Adjusted to reflect two-for-one stock split which occurred in July 1995.
See accompanying notes
2
<PAGE>
SunGard Data Systems Inc.
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash flow from operations:
Net income................................................................. $ 23,339 $ 19,841
Reconciliation of net income to cash flow from operations:
Depreciation and amortization........................................... 25,082 21,186
Charges for incentive stock plans....................................... 1,012 725
Other noncash charges (credits)......................................... 98 116
Deferred income taxes................................................... (1,586) (1,610)
---------- ----------
47,945 40,258
Cash provided by (used for) working capital, net of effect of acquired
businesses:
Accounts receivable and other current assets............................ (553) (946)
Accounts payable and accrued expenses................................... (8,786) (4,522)
Deferred revenues....................................................... (6,561) (115)
---------- ----------
Cash flow from operations............................................. 32,045 34,675
---------- ----------
Financing activities:
Cash received from employee stock plans.................................... 2,878 618
Cash paid for treasury stock............................................... (3,608) -
Repayments of debt......................................................... (4,379) (199)
---------- ----------
Total financing activities............................................ (5,109) 419
---------- ----------
Long-term investment activities:
Cash paid for acquired businesses.......................................... (3,512) (8,277)
Cash paid for property and equipment....................................... (13,861) (14,733)
Cash paid for software and other assets.................................... (2,395) (2,120)
---------- ----------
Total long-term investment activities................................. (19,768) (25,130)
---------- ----------
Increase in cash and equivalents before short-term investment activities..... 7,168 9,964
Short-term investment activities:
Purchase of short-term investments......................................... (42,722) (30,627)
Maturities of short-term investments....................................... 25,519 24,418
---------- ----------
Increase in cash and equivalents............................................. (10,035) 3,755
Beginning cash and equivalents............................................... 68,491 51,955
---------- ----------
Ending cash and equivalents.................................................. $ 58,456 $ 55,710
========== ==========
Supplemental information:
Acquired businesses:
Property and equipment.................................................. 60 -
Software products....................................................... 1,237 -
Goodwill and other intangible assets.................................... 3,307 8,759
Net current assets acquired (liabilities assumed)....................... (852) (482)
Purchase price obligations and debt assumed............................. (240) -
---------- ----------
Cash paid for acquired businesses............................................ $ 3,512 $ 8,277
========== ==========
</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 six and three month periods ended June 30, 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 six month period ended June 30, 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. 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 principally attributable
to unexercised stock options.
4. On June 2, 1995, the Company's Board of Directors authorized a two-for-one
stock split on all shares of its common stock. The stock split was
effective for stockholders of record on June 15, 1995. Certificates for the
additional shares were issued on July 7, 1995. The number of shares used
for purposes of calculating net income per common share have been adjusted
for all periods presented to reflect this stock split.
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 declined during the six and three month periods
ended June 30, 1995, compared to the corresponding periods in 1994, due
primarily to costs associated with development spending, partially offset by
higher 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 six and three month periods
ended June 30, 1995, compared to the corresponding periods in 1994, due
primarily to computer equipment upgrades and facility improvements. The Company
expects that the DRS operating margin will continue to improve over the balance
of the year and will approach 20% for the full year 1995.
Computer Services and Other (CS):
While the CS operating margin was unchanged in the three month period ended
June 30, 1995 compared to the corresponding period in 1994, the six month
operating margin was slightly lower in 1995 compared to 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 six and three month periods ended June 30, 1995
increased $39.9 million, or 19%, and $20.5 million, or 20%, compared to the
corresponding periods in 1994. Excluding acquired businesses, revenues increased
$31.2 million, or 15%, and $16.0 million, or 15%, during the six and three month
periods compared to the corresponding periods in 1994. Recurring revenues
derived from remote processing services, disaster recovery services and software
maintenance are approximately $204.6 million and $176.0 million for the six
month periods ended June 30, 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 six and three month periods ended June 30, 1995
increased $25.3 million, or 20%, and $12.9 million, or 20%, compared to the
corresponding periods in 1994. Excluding acquired businesses, revenues increased
$18.6 million, or 14%, and $8.9 million, or 14%, during the six and three month
periods compared to the corresponding periods in 1994. In the six month period,
the increase is attributable to increases in data processing and software
maintenance revenues of $9.5 million and software license and professional
services revenues of $9.1 million. In the three month period, the increase is
attributable to increases in data processing and software maintenance revenues
of $5.2 million and software license and professional services revenues of $3.7
million.
Disaster Recovery Services:
DRS revenues for the six and three month periods ended June 30, 1995
increased $12.9 million, or 20%, and $7.0 million, or 21%, compared to the
corresponding periods in 1994. Excluding acquired businesses, revenues increased
$11.0 million, or 17%, and $6.4 million, or 19%, during the six and three month
periods compared to the corresponding periods in 1994. The increases 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 for businesses acquired in 1994.
Computer Services and Other:
CS revenues for the six and three month periods ended June 30, 1995
increased $1.6 million, or 13%, and $0.7 million, or 10%, compared to the
corresponding periods in 1994. The increases are 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 for the full year 1995 compared to 1994.
Costs and Expenses:
Cost of sales and direct operating expenses for the six and three month
periods ended June 30, 1995 increased $18.0 million and $8.2 million, or 19% and
17%, respectively, compared to corresponding periods 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.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Continued)
Costs and Expenses:
(Continued)
While sales, marketing and administration expenses for the six and three
month periods ended June 30, 1995 increased $9.7 million and $5.3 million, or
23% and 26%, respectively, compared to the corresponding periods in 1994, as a
percentage of revenues, sales, marketing and administrative expenses were
relatively stable at 21% in 1995 compared to 20% in 1994.
Product development expenses for the six and three month periods ended June
30, 1995 increased $4.0 million and $2.9 million, or 23% and 35%, respectively,
compared to the corresponding periods in 1994. The increases are due primarily
to an increase in development spending in connection with certain investment
support products.
Depreciation of property and equipment for the six and three month periods
ended June 30, 1995 increased $3.1 million and $1.6 million, or 27% and 28%,
respectively, compared to the corresponding periods in 1994. The increase is
due primarily to facility improvements and equipment additions principally in
the DRS business and acquired businesses.
Investment income for the six and three month periods ended June 30, 1995
increased $1.7 million and $0.9 million compared to the corresponding periods in
1994 due primarily to a change in mix between taxable and tax exempt
instruments, an increase in cash and investment balances, and, to a lesser
extent, an overall increase in interest rates.
Liquidity and Capital Resources:
At June 30, 1995, cash and short-term investments increased $7.2 million to
$109.8 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 six month period ended June 30, 1995, as adjusted for the two-
for-one stock split, the Company purchased 180,000 shares of its common stock
under a stock repurchase plan announced on November 16, 1994, permitting the
Company to purchase up to 2,000,000 shares of its common stock by December 31,
1995. During the period November 16, 1994 through June 30, 1995, the Company
has purchased an aggregate of 480,000 shares of its common stock, of which
202,000 shares are held in treasury at June 30, 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.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Continued)
Liquidity and Capital Resources:
(Continued)
The Company believes that its 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:
(a) The 1995 Annual Meeting of Stockholders of the registrant
was held on May 8, 1995.
(b) At the 1995 Annual Meeting, the following were elected as
directors:
For Withheld
Gregory S. Bentley 14,961,544 98,888
Michael C. Brooks 15,033,344 27,088
Albert A. Eisenstat 15,032,164 28,268
Bernard Goldstein 14,960,464 99,968
James L. Mann 14,961,109 99,322
Michael Roth 14,961,452 98,980
Malcolm I. Ruddock 15,033,064 27,368
Larry Schoenberg 15,033,164 27,268
8
<PAGE>
Part II. Other Information
(Continued)
Item 4. Submission of Matters to a Vote of Security Holders:
(Continued)
(c) (i) Approval of an Amendment to the Company's 1986
Stock Option Plan extending the term of the Plan.
14,779,010 votes in favor
169,267 votes against
60,601 votes abstaining
51,554 broker non-votes
(ii) Ratification of the appointment of Coopers &
Lybrand L.L.P. as the registrant's independent
accountants for 1995.
15,025,597 votes in favor
12,411 votes against
22,422 votes abstaining
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
9
<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: August 14, 1995 By: /s/ Michael J. Ruane
---------------------------------
Michael J. Ruane
Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
10
<PAGE>
List of Exhibits
Number Exhibit
------ -------
27.1 Financial Data Schedule.
11
<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 June 30,
1995 and the unaudited consolidated statement of income for the six month period
ended June 30, 1995, included in the Form 10-Q of SunGard Data Systems Inc. for
the quarterly period ended June 30, 1995, and is qualified in its entirety by
reference to such financial statements. The number of shares used in calculating
earnings per share have been adjusted to reflect the two-for-one stock split
which occurred on July 7, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 58,456
<SECURITIES> 51,310
<RECEIVABLES> 99,479
<ALLOWANCES> 7,325
<INVENTORY> 0
<CURRENT-ASSETS> 231,153
<PP&E> 206,599
<DEPRECIATION> 117,068
<TOTAL-ASSETS> 490,345
<CURRENT-LIABILITIES> 96,489
<BONDS> 3,027
<COMMON> 189
0
0
<OTHER-SE> 383,906
<TOTAL-LIABILITY-AND-EQUITY> 490,345
<SALES> 0
<TOTAL-REVENUES> 246,609
<CGS> 0
<TOTAL-COSTS> 209,645
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,557
<INCOME-TAX> 16,218
<INCOME-CONTINUING> 23,339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,339
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
</TABLE>
