<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 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
(State of incorporation) (I.R.S. Employer Identification No.)
1285 Drummers Lane, Wayne, Pennsylvania 19087
(Address of principal executive offices, including zip code)
(610) 341-8700
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
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 .
--- ---
The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant as of March 15, 1996 was $1,431,072,000.(1) There
were 42,000,220 shares of the registrant's Common Stock outstanding as of March
15, 1996.
Parts II and IV of this Form 10-K incorporate by reference certain information
from the registrant's annual report to stockholders for the fiscal year ended
December 31, 1995, and Part III of this Form 10-K incorporates by reference
certain information from the registrant's definitive proxy statement, for its
1996 annual meeting of stockholders, filed with the Securities and Exchange
Commission not later than 120 days after the end of the registrant's fiscal year
covered by this report.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in the definitive proxy statement
incorporated by reference into Part III of this Form 10-K. [x]
(1) This equals the number of outstanding shares of the registrant's Common
Stock, reduced by the number of shares that may be deemed beneficially owned
by the registrant's directors, nominees and officers, multiplied by the last
sale price for the registrant's Common Stock reported on March 15, 1996.
This information is provided solely for record keeping purposes of the
Securities and Exchange Commission and shall not be construed as an
admission that any of the registrant's directors, nominees or officers is an
affiliate of the registrant or is the beneficial owner of any such shares.
Any such inference is hereby disclaimed.
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<PAGE>
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business...................................................... 1
Overview................................................... 1
Investment Considerations.................................. 2
Investment Support Systems................................. 3
Disaster Recovery Services................................. 8
Computer Services and Other................................ 11
Product Development........................................ 11
Acquisitions and Offerings................................. 12
Competition................................................ 13
Marketing.................................................. 14
Employees.................................................. 14
Proprietary Protection..................................... 14
Item 2. Properties.................................................... 15
Item 3. Legal Proceedings............................................. 16
Item 4. Submission of Matters to a Vote of Security Holders........... 16
Item 4.1 Certain Executive Officers of the Registrant.................. 17
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters..................................................... 19
Item 6. Selected Financial Data....................................... 19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 19
Item 8. Financial Statements and Supplementary Data................... 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 19
PART III
Item 10. Directors and Executive Officers of the Registrant............ 20
Item 11. Executive Compensation........................................ 20
Item 12. Security Ownership of Certain Beneficial Owners and Management 20
Item 13. Certain Relationships and Related Transactions................ 20
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................... 21
Signatures.................................................... 23
List of Exhibits.............................................. 24
Consent of Independent Accountants............................ 26
Report of Independent Accountants on
Financial Statement Schedule................................. 26
Financial Statement Schedule.................................. 27
<PAGE>
PART I
Item 1. Business
Overview
SunGard Data Systems Inc. (the "Company") is a computer services and software
company that specializes in proprietary investment support systems,
comprehensive computer disaster recovery services and proprietary healthcare
information systems. The Company believes that it is the only large specialized
provider of investment support systems to the financial services industry, as
well as the pioneer and a leading provider of comprehensive computer disaster
recovery services. The Company's business approach is to focus on markets in
which it has opportunities to develop or acquire leading products and
advantageous market positions.
The Company seeks to maximize recurring revenues by selling most of its
computer services under fixed-term contracts and by emphasizing customer support
and product quality in order to establish long-term relationships with
customers. The Company's recurring revenues are derived primarily under
contracts for remote processing services, disaster recovery services and
software maintenance services, which together accounted for approximately 82% of
the Company's total revenues during the last three years (80% in 1995). Of the
total number of the Company's remote processing and disaster recovery services
contracts that were scheduled to expire during the last three years,
approximately 80% were renewed or replaced with new contracts (77% in 1995).
While there can be no assurance that this renewal rate will not decline, the
Company believes that it will continue to renew a high percentage of these
contracts. None of the Company's customers individually accounted for more than
two percent of the Company's revenues in 1995.
The Company's operations are decentralized, and its management philosophy is
one of "controlled entrepreneurship." The Company's services are provided
through separate business units, which are organized into six groups of related
businesses, as follows:
Investment Support Systems:
SunGard Financial Systems Group: Portfolio management and securities trading
-------------------------------
and accounting systems for financial institutions, broker/dealers, insurance
companies, governments and corporations. Business units: SunGard Brokerage
Systems, SunGard Global Systems, SunGard Government Systems, SunGard Insurance
Systems and SunGard Securities Systems.
SunGard Trading Systems Group (formerly known as the SunGard Capital Markets
-----------------------------
Group): Trading, risk management and accounting systems for derivative
instruments, securities and foreign exchange for international financial
institutions, brokerage firms and corporations. Business units: Front Capital
Systems, Prosoftia, Renaissance Software, SunGard Capital Markets and SunGard
Futures Systems.
SunGard Trust and Shareholder Systems Group: Trust and investment accounting,
-------------------------------------------
portfolio management and administration, securities trading, custody and
employee benefit plan systems for financial institutions, stockbrokers and
corporations; mutual fund, stock and bond accounting systems for mutual funds,
transfer agents and corporations; accounting systems for nonprofit
organizations. Business units: All Solutions, Bi-Tech Software, Portfolio
Administration Limited, Shaw Data Services, SunGard Asset Management Systems,
SunGard/DML, SunGard Employee Benefit Systems, SunGard Investment Systems,
SunGard Shareholder Systems, SunGard Trust Systems and Worrall Miller &
Associates.
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Disaster Recovery Services:
SunGard Recovery Services Group: Comprehensive business recovery services for
-------------------------------
mainframe and midrange computer platforms; work-group, mobile and quick-ship
recovery services; recovery planning software, and related consulting and
educational services. Business units: SunGard Planning Solutions and SunGard
Recovery Services.
Computer Services and Other:
SunGard Computer Services Group: Remote-access computer processing and
-------------------------------
outsourcing, and automated mailing services. Business units: SunGard Computer
Services and SunGard Mailing Services.
SunGard Healthcare Information Systems Group: Work-flow management and
--------------------------------------------
document-imaging systems for healthcare and financial institutions. Business
units: Intelus Corporation and MACESS Corporation.
Each business is directed by its own management team and has its own sales,
marketing, product development, operations and customer support personnel.
Overall corporate control and coordination are achieved through centralized
budgeting, financial and legal reporting, cash management and strategic
planning. The Company believes that this approach has facilitated more focused
marketing, specialized product development, responsive customer service and
highly motivated management.
The Company is a Delaware corporation that was organized in 1982. The
Company's principal executive offices are located at 1285 Drummers Lane, Suite
300, Wayne, Pennsylvania, 19087, and its telephone number is (610) 341-8700.
Investment Considerations
Statements about the Company's expectations and all other statements in this
Report and other Company communications other than historical facts are forward-
looking statements. Since these statements involve risks and uncertainties and
are subject to change at any time, the Company's actual results could differ
materially from expected results. The Company derives most of its forward-
looking statements from its operating budgets and forecasts, which are based
upon many detailed assumptions. While the Company believes that its assumptions
are reasonable, it cautions that there are inherent difficulties in predicting
certain important factors, especially the timing and magnitude of software
sales, the timing and scope of technological advances, the performance of
recently acquired businesses, the prospects for future acquisitions, and the
overall condition of the financial services industry. Certain of these factors
are further discussed below and should be considered in evaluating the Company's
forward-looking statements and any investment in the Company's common stock.
Acquisitions. The Company seeks to grow both internally and by acquisition.
The Company's growth depends, in part, upon its ability to identify suitable
acquisition candidates, negotiate acceptable acquisition terms and consummate
acquisitions of successful, complementary businesses. Increased competition for
acquisitions, whether from other acquirors or the public equities market, could
adversely affect the terms of future acquisitions. Continued acquisitions,
especially of larger companies, may require the Company to use debt or equity
financing. Furthermore, there can be no assurance that acquired businesses will
perform as expected. Poor performance by an acquired business could adversely
affect the Company's results and cause an impairment of part of the Company's
goodwill.
Technological Changes. The Company's success depends, in part, upon its
ability to continue adapting its proprietary software and recovery services to
new computer and telecommunications technology on a timely and cost effective
basis. Rapid or unpredictable technological developments, in particular, could
have a material adverse effect on the Company's business and prospects.
2
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Product Development. The Company must continually enhance and evolve its
proprietary software to keep pace with developments in the financial services
and healthcare industries. There can be no assurance that the Company will not
experience unforeseen delays in updating its software or developing new systems,
or that newly developed products will be successfully marketed and sold.
Financial Services Industry. The Company sells most of its computer services
and software to the financial services industry and is generally dependent upon
the continued vitality of that industry. A material adverse change in the
condition of the financial services industry, such as a significant decline in
securities or derivatives trading activities or in the number or value of
managed portfolios, could have a material adverse effect on the Company's
business and prospects.
New Business Line. In 1995, the Company established its new Healthcare
Information Systems Group by acquiring two providers of work-flow management and
document-imaging systems to the healthcare industry (see Computer Services and
Other). Although the Company has experience managing software businesses, the
Company has no prior experience in the healthcare information systems market.
In addition, a number of the Company's competitors in this market have
substantially greater financial, technological and marketing resources than the
Company.
Investment Support Systems
The Company designs, markets and maintains a comprehensive family of
proprietary investment support systems for the financial services industry. The
fundamental purpose of these systems is to automate the complex accounting
calculations, record keeping and reporting associated with investment
operations. The Company markets its investment support systems throughout the
United States, and many are marketed internationally as well.
The Company delivers its investment support systems primarily as remote
processing services using the Company's computers and also through software
licenses for use on customers' computers. The Company provides investment
support remote processing services primarily from its computer centers in
Birmingham (Alabama), Boston, Charlotte, Fairfield (New Jersey), London (two
centers), Los Angeles, Minneapolis, Sydney (Australia) and Voorhees (New Jersey)
(see Properties). As of December 31, 1995, the Company had approximately 1,740
remote processing contracts in force. These contracts generally have initial
terms of one or more years and then continue for successive, one-year renewal
terms, although some allow the customer to terminate on relatively short notice.
The Company's investment support systems business has continued to increase in
both size and scope, due primarily to acquisitions (see Acquisitions and
Offerings). During 1995, the Company continued its product unification and
enhancement efforts to provide customers with access to multiple systems and
data through common graphical interfaces and shared databases. The Company also
continued evolving its mainframe computer systems by converting some systems to
client-server technology and by developing sophisticated personal computer and
workstation front-end products for others. Also during 1995, the Company
continued to add multi-currency functionality to its systems and pursue
opportunities to market more of its systems internationally.
Investment Accounting and Portfolio Management Systems. The Company's
investment accounting and portfolio management systems maintain the books of
record for all types of large investment portfolios such as those managed by
banks, mutual funds, employee retirement plans and insurance companies. The
primary functions of these systems are to accept investment transactions, value
portfolios using transmissions of security prices received from various
worldwide sources, perform complex accounting calculations and general ledger
postings, and generate a variety of accounting, audit, tax and regulatory
reports. In addition, some of these products are used by investment advisers
and other portfolio managers to manage large investment portfolios. These
systems track investment activities such as purchases and sales, combine these
activities with outside market data such as security prices and quality ratings,
and provide analytical models to assist with investment strategy and
3
<PAGE>
management decisions. The Company's principal investment accounting and
portfolio management systems, some of which have multi-currency capabilities,
are described in the following table:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
System Platform Mode of Delivery Primary Markets
================================================================================
<S> <C> <C> <C>
INVEST ONE(R) IBM mainframe remote processing international
service and software banks, large
license bank trust
------------------------------------------ departments,
UNIX workstation software license mutual funds,
insurance
companies and
other financial
institutions
- --------------------------------------------------------------------------------
ON-LINE(TM) Bull mainframe remote processing institutional
service and retail
- ------------------------------------------------------------- investment
ON-SITE(TM) UNIX workstation software license advisers and
- ------------------------------------------------------------- other portfolio
ON-CORE(TM) microcomputer software license managers
- --------------------------------------------------------------------------------
MONEYMAX(R)/ UNIX workstation remote processing government
SERIES 2(TM) service treasurers and
financial
institutions
- --------------------------------------------------------------------------------
PAL(TM) IBM midrange remote processing United Kingdom
service stockbroking
firms and fund
managers
- --------------------------------------------------------------------------------
PMS(TM)/APS(TM) microcomputer software license small banks,
thrifts and
other financial
institutions
- --------------------------------------------------------------------------------
PAR EX(R) microcomputer software license and insurance
remote processing companies
service
- -------------------------------------------------------------
PRISM(TM) IBM mainframe software license
- -------------------------------------------------------------
SDIM(TM) microcomputer software license
- -------------------------------------------------------------
SERIES 1(TM) microcomputer software license
- --------------------------------------------------------------------------------
</TABLE>
A new module to INVEST ONE that was introduced during 1995 added the
capability to process unit trust accounts in the United Kingdom. In August
1995, the Company expanded its investment accounting systems product line for
insurance companies with the addition of the PAR EX and SDIM products. This
resulted from the acquisition of the business of Market Investment Solutions,
Inc., a provider of microcomputer investment management, accounting and
reporting systems for the insurance industry (see Acquisitions and Offerings).
The Company also provides certain general ledger accounting systems to
insurance companies and nonprofit organizations, which are markets where the
Company has opportunities to cross-sell its investment accounting systems. The
Company's general ledger accounting products include ABC(TM) (Accounting Budget
and Cost System), CDS(TM) (Cash Disbursement System) and EAS(TM) (Enterprise
Accounting System) for insurance companies, and IFAS(TM) (Interactive Fund
Accounting System) for educational institutions, state and local governments and
other nonprofit organizations. The IFAS product was added in July 1995 when the
Company acquired the business of Bi-Tech Software, Inc. (see Acquisitions and
Offerings).
Securities Trading and Accounting Systems. The Company's securities trading
and accounting systems are used primarily by the so-called "sell side" of the
investment business. The users of these products generally are traders or
dealers of securities (including those trading for their own accounts) and their
back-office operations. In addition to performing many investment accounting
functions, the Company's securities trading and accounting systems maintain
inventories of unsold securities, process trade activities and assist users in
monitoring compliance with audit limits, trading limits and government
regulations. The Company's principal software products in this category are:
4
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
System Platform Mode of Primary Markets
Delivery
================================================================================
<S> <C> <C> <C>
BOLT(R) 1 & BOLT(R) 2 IBM mainframe remote capital markets
processing departments of
service domestic banks,
- ------------------------------------------------------------ broker/dealers
GSM GLOBAL SECURITIES DEC VAX software and other
MANAGER(R) UNIX license financial
workstation institutions
- ------------------------------------------------------------
INTRADER(R) UNIX software
workstation license
- ------------------------------------------------------------
MONEYMARKET II(R) DEC VAX remote
processing
service and
software
license
- ------------------------------------------------------------
OMNI SA(TM) IBM mainframe remote
IBM AS 400 processing
IBM RS 6000 service and
software
license
- ------------------------------------------------------------
PHASE3(R) Tandem remote
processing
service and
software
license
- --------------------------------------------------------------------------------
</TABLE>
During 1995, the Company began development of foreign securities functionality
for its PHASE3 System. Also during 1995, the Company introduced the SUNGARD
SOLUTIONS NETWORK(SM) which, through strategic alliances, provides customers
with third-party services such as securities descriptions, pricing, analytics
and clearing.
Derivatives Trading Systems. The Company provides software applications
encompassing most aspects of risk management, trading and processing for capital
markets globally. The Company's derivatives trading systems are used primarily
by the so-called "sell side" of the investment business, although "buy side"
demand for these systems is growing. Generally, these products are used by
traders and market-makers of over-the-counter and exchange-traded derivative
instruments, securities and foreign exchange contracts, and their middle- and
back-office operations. These systems provide trading support, risk management,
trade processing and accounting functions, and assist users in determining
hedging strategies and monitoring compliance with capital requirements, trading
limits and government regulations. The Company's principal software products in
this category are:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
System Platform Mode of Primary Markets
Delivery
================================================================================
<S> <C> <C> <C>
DEVON DERIVATIVES SYSTEM(TM) Windows NT software trading rooms
UNIX workstation license and capital
- ------------------------------------------------------------ markets
DEVON FOREX SYSTEM(TM) UNIX workstation software departments of
license international
- ------------------------------------------------------------ banks, and
PANORAMA(TM) Windows NT software trading rooms
license of other
- ------------------------------------------------------------ financial
DEVON SECURITIES SYSTEM(TM) Windows NT software institutions
license
- ------------------------------------------------------------
INTAS(R) UNIX workstation software
OPTAS(R) DEC workstation license
- ------------------------------------------------------------
OPUS(R) UNIX workstation software
license
- ------------------------------------------------------------
TRADENET(TM) Windows/Windows NT software
UNIX workstation license
- --------------------------------------------------------------------------------
OCTAGON(TM) FUTURES SYSTEM UNIX workstation software international
DEC workstation license and banks and
remote brokerage firms
processing active in the
service futures markets
for principal
and customer
business
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
The PANORAMA product, which is a Windows NT-based module that provides
integrated firm-wide financial risk management across the fixed income, foreign
exchange and equity and money markets, including related derivative instruments,
was introduced by the Company during 1995.
The OPUS product was added to the Company's derivatives trading systems
product line with the acquisition of Renaissance Software Inc. in November, 1995
(see Acquisitions and Offerings). OPUS is a family of risk management and
interest rate derivatives applications that are marketed principally to large
banks and other large market-makers. OPUS applications provide a front- to
back-office trading and support system for valuing, hedging, analyzing and
processing interest rate derivatives and the hedging instruments used by a
derivatives desk.
Trust, Global Custody and Securities Lending Systems. The Company's trust
systems automate the investment, administrative and operations areas unique to
the bank trust business, including cash management, management and investment of
assets, preparation of tax returns for taxable trusts, payment of trust
expenses, payment of benefits to retirees, beneficiary distributions, customer
statement production, and other customer service duties. The Company's global
custody systems automate the functions associated with the worldwide custody and
safekeeping of investment assets, such as trade settlement, investment income
collection, preparation of client statements, tax reclamation, foreign exchange,
and reconciliation of depository and sub-custodian positions. The Company's
securities lending systems automate the functions associated with worldwide
securities lending activities. The Company's principal trust, global custody
and securities lending systems are:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
System Platform Mode of Primary Markets
Delivery
================================================================================
<S> <C> <C> <C>
AUTOTRUST(R) IBM mainframe remote small and medium
processing size bank trust
service departments
- --------------------------------------------------------------------------------
OMNI ES(TM) IBM mainframe software large and medium
license and size bank trust,
remote custody and
processing securities
service departments
- --------------------------------------------------------------------------------
OMNI IC(TM) scalable, software bank global
multiplatform license custody
departments
- --------------------------------------------------------------------------------
OMNILEND(TM) IBM mainframe software banks,
UNIX workstation license and broker/dealers
remote and other
processing financial
service institutions
- --------------------------------------------------------------
OMNI IFS(TM) microcomputer software
UNIX workstation license
- --------------------------------------------------------------------------------
MICROTRUST(R) microcomputer software small bank trust
license departments
- --------------------------------------------------------------------------------
</TABLE>
The Company offers specialized trust asset custody services to its AUTOTRUST
customers and other banks and trust companies. These services are provided
under a master contract with The Bank of New York (the "Bank"). The Bank holds
the customers' trust assets, and the Company handles account record keeping and
customer communications. The Company is liable to the Bank for any unpaid
obligations of the Company's custody services customers that exceed the value of
their assets held in the Bank's custody.
During 1995, the Company completed the first major phase of development of a
Windows version of AUTOTRUST known as the CHARLOTTE(TM) system. Also during
1995, the Company consolidated its single-currency large bank trust department
product, OMNITRUST(R), and its multi-currency global custody product, OMNI
GS(R), into a single comprehensive product, OMNI ES.
6
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The Company's principal securities lending product, OMNILEND, was acquired in
February 1995 when the Company purchased the business of DML, a provider of
securities lending and brokerage accounting systems (see Acquisitions and
Offerings).
The Company also markets EXPEDITER(TM) to its trust accounting systems
customers. EXPEDITER is a product that facilitates the automated entry of mutual
fund transactions. Since its introduction in 1993, EXPEDITER has continued to
expand its selection of mutual funds and to gain market acceptance. During 1995,
EXPEDITER was upgraded to automate manual trading activities including pricing,
confirmations and dividend rates, and to provide balance tracking and billing
reports. EXPEDITER is marketed not only to users of the Company's trust
accounting systems, but also to users of the Company's securities trading
systems and participant accounting systems.
Participant Accounting Systems. The Company's participant accounting systems
automate the investment operations associated with defined contribution
retirement plans such as 401(k) plans. These systems maintain the books of
record for each participant's share of the cash and securities in the plan,
monitor compliance with government regulations and plan restrictions, process
payments of benefits to retirees, and produce tax reports for plan sponsors and
participants. The Company's principal participant accounting systems are:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
System Platform Mode of Delivery Primary Markets
================================================================================
<S> <C> <C> <C>
OMNIPLAN(R) IBM mainframe remote corporate,
OMNIPAY(R) processing bank and other
OMNIDBEN(TM) service, retirement
software plan managers
license and
full service
bureau
processing
-----------------------------------
UNIX workstation software license
-----------------------------------
IBM AS/400 software license
-----------------------------------
microcomputer software license
- --------------------------------------------------------------------------------
MPR(TM) microcomputer software license small and
medium size
banks
- --------------------------------------------------------------------------------
</TABLE>
During 1995, the Company continued development of OMNIPLUS(TM), which will
succeed OMNIPLAN and be the Company's next generation participant accounting
system. OMNIPLUS will support all types of defined contribution plans. In 1995,
the Company introduced OMNIDBEN, a defined benefit administration system,
OMNIIMPORT(TM), a microcomputer data conversion system, OMNIREMOTE(TM), a remote
data entry system for plan sponsors, and Windows NT versions of many products.
As an expanded offering of services, during late 1995 and early 1996, the
Company entered into two facilities management agreements to manage customers'
retirement plan processing operations using the OMNIPLAN product line.
The Company expanded its activities in the Pacific Rim with the September 1995
acquisition of the business of All Solutions Financial Systems, a provider of
fund and asset administration systems primarily in Australia, and the January
1996 acquisition of the business of Worrall Miller & Associates, a provider of
pension plan administration software in Australia (see Acquisitions and
Offerings).
Investment Reporting and Analysis Systems. The Company's investment reporting
and analysis systems accept accounting data from other investment support
systems and perform special analyses for fund managers and customers. These
systems analyze the performance of portfolios, perform other types of investment
measurement and analysis, and produce regulatory reports for retirement plan
sponsors and participants. The Company's principal software products in this
category are:
7
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
System Platform Mode of Delivery Primary Markets
================================================================================
<S> <C> <C> <C>
DATAPREP(TM) IBM mainframe remote corporate,
EMBERS(R) processing bank and other
service and retirement
software license plan managers
- ----------------------------------------------------------------
SUPERF4(R) IBM mainframe remote
processing
service and
software license
- --------------------------------------------------------------------------------
OMNISTATION(TM) UNIX workstation software license large and
medium size
banks
- --------------------------------------------------------------------------------
</TABLE>
During 1995, the Company introduced a new system, GLOBAL CLIENT REPORTING(TM),
which provides comprehensive investment reporting of all assets and liabilities
for both master trust and global custody accounts. Currently, this is sold with
INVEST ONE.
Shareholder Accounting Systems. The Company's shareholder accounting systems
automate the transfer agent process for stock, bond and mutual fund issues.
These systems maintain shareholder and bondholder positions, process dividend
and interest distributions, generate proxy materials, tabulate votes, and
produce tax reports and periodic shareholder statements. The Company's
principal software products in this category are:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
System Platform Mode of Delivery Primary Markets
================================================================================
<S> <C> <C> <C>
INVESTAR(R) IBM mainframe remote large mutual
processing fund managers
service and transfer
agents
- --------------------------------------------------------------------------------
SUNSTAR(R) IBM mainframe remote large bank,
processing corporate and
service and utility stock
software license and bond
----------------- transfer agents
UNIX workstation
- --------------------------------------------------------------------------------
</TABLE>
During 1995, the Company signed a SUNSTAR contract with The National Registry
Company in Russia to provide shareholder record keeping services for the Russian
securities market. Also during 1995, the Company began offering, as either a
complementary product to SUNSTAR or as a stand-alone product, CORPORATE TRUST
MANAGEMENT SYSTEM(TM), which extends corporate trust functionality to the front
office.
The Company also markets a work-flow management and document-imaging software
system to users of its shareholder accounting systems. Known as PowerImage(R),
this product uses electronic document-imaging to improve work flow and to
enhance levels of service and efficiency.
Disaster Recovery Services
Many businesses depend upon computers to perform critical tasks and use
communications networks to transmit data between a centralized computer facility
and distant offices. If a natural disaster, fire, power failure or other
emergency disrupts a company's computer operations or interrupts communications
between its data processing center and remote locations, its ability to stay in
business may be jeopardized. To address this problem, the Company maintains
alternate data processing sites for use by customers whenever they are unable to
operate or communicate with their own computer systems.
The primary alternate sites provided by the Company are fully equipped and
operational computer centers known as "hotsites," where customers may restore
their critical applications using the Company's installed computer equipment.
The Company also provides environmentally prepared computer centers known as
"coldsites," in which customers may install and operate their own computer
equipment, and remote operations centers for using the Company's alternate sites
from long distance.
8
<PAGE>
In addition, the Company provides mobile recovery resources that may be
delivered or shipped directly to customer-specified locations.
The Company also provides general office space equipped with office equipment,
which customers may use alone or in conjunction with the use of a hotsite or
coldsite. This service offering, known as Work Group Recovery(SM), also includes
MegaVoice(R), a centralized voice communications recovery service that backs up
customers' automated telephone call distribution systems. During 1995, the
Company introduced Program Management Services(SM), which encompasses the
design, coordination and management of all aspects of customers' disaster
recovery programs.
Most of the Company's larger disaster recovery customers purchase a basic
package of services that includes use of a hotsite for six weeks to recover from
any computer center failure, use of a coldsite for six months if recovery
operations must continue for more than six weeks, use of a hotsite to regularly
test disaster recovery procedures, use of general office space during recovery
operations and tests, technical assistance when conducting recovery operations
and tests, and technical assistance with designing and implementing a backup
communications network.
The Company provides disaster recovery services to users of IBM (and
compatible) mainframe computers and also to users of DEC, Hewlett Packard, IBM
midrange (AS/400, RS/6000 and Systems/3X), NCR, Prime, Sequent, Stratus, Sun
Microsystems, Tandem and Unisys computers. These services are marketed,
directly and through representatives, primarily to IBM (and compatible), DEC,
Hewlett Packard and Unisys mainframe and various midrange computer installations
in North America.
In December 1995, the Company expanded the customer base of its Unisys
platform offerings through the acquisition of the disaster recovery business of
the Newtrend Division of Electronic Data Systems Corporation (see Acquisitions
and Offerings). In 1995, the Company continued to expand its disaster recovery
offerings to users of midrange computers and further enlarged its midrange sales
force. Also in 1995, the Company continued to expand its marketing partner
program by establishing alliances with hardware providers and others and by
signing certain agreements with third parties to expand and enhance its recovery
services and capabilities.
As of December 31, 1995, the Company had approximately 6,300 disaster recovery
contracts in force. These contracts generally require the payment of monthly
fees and range in duration from one to five years. The amount of the monthly
fees depends upon the type of facilities and services selected, contract
duration and competitive factors.
During 1995, for the tenth consecutive year, the Company successfully
supported all customers who experienced computer center failures.
Disaster Recovery Facilities. The Company believes that it conceived and
first implemented the concept of the MegaCenter(R), a multiple hotsite and
coldsite facility that customers may use directly or remotely. The Company
operates five MegaCenters, located in Atlanta, Chicago, Philadelphia, Scottsdale
(Arizona) and Warminster (Pennsylvania) (see Properties). The Company believes
that its Philadelphia MegaCenter, which houses DEC, Hewlett Packard, IBM
mainframe, Sequent, Stratus and Tandem hotsites, and mobile Hewlett Packard, IBM
midrange, NCR and Sun Microsystems computer systems, is the largest commercial
disaster recovery facility in the world.
The Company also operates MetroCenter(R) facilities in strategic locations
throughout North America to provide Work Group Recovery services, enhanced
remote operations capabilities, and recovery operations and testing support for
mobile computer systems. MetroCenters are located in Boston, Beechwood (Ohio),
Dallas, Herndon (Virginia), Jersey City (New Jersey), Los Angeles, Northvale
(Michigan), St. Louis, St. Paul and Toronto. The St. Paul and Toronto
MetroCenters also have coldsites that can be used in conjunction with the remote
operations capability.
9
<PAGE>
The Company periodically opens new facilities or expands existing facilities
to accommodate both the growth in its customer base and the addition of
different types of computer systems and service offerings. Also, the Company
regularly upgrades its systems to offer the most advanced computer equipment
generally used by its customers. During 1995, the Company opened two new
MetroCenters in Beechwood (Ohio) and Northvale (Michigan), upgraded the central
processing units in its Philadelphia, Chicago and Warminster MegaCenters and
upgraded many mobile midrange systems at various facilities. During 1995, the
Company installed an IBM ES9000 962 central processing unit (H5 technology) in
the Chicago MegaCenter, IBM's largest AS/400 midrange computer and a Sequent
computer in the Philadelphia MegaCenter, and new Unisys processors in the
Warminster MegaCenter. The Philadelphia MegaCenter also opened a local area
network (LAN) server center, which the Company believes is one of the largest
LAN recovery centers in the disaster recovery industry. The disk access, tape
cartridge and other peripheral equipment at all facilities were upgraded or
augmented, and the capability of storage and retrieval systems were increased.
During late 1995 and early 1996, the Company began offering IBM's Parallel
Sysplex Configuration that links multiple mainframes to expand greatly the
amount of processing power the Company can provide.
The Company believes that, by operating a relatively small number of large
facilities linked by a comprehensive communications network, it can provide
superior disaster recovery services in the most effective manner. All
MegaCenters and MetroCenters, as well as other remote operations centers, are
linked by a communications network that is capable of handling a full range of
digital and analog data transmission methods, including satellite and fiber-
optic applications. The Company regularly upgrades this network to offer the
communications technology generally used by its customers. During 1995, the
Company continued expanding its matrix switching capabilities to allow for more
efficient and reliable communications during customer tests and recovery
operations. The Company also is implementing a synchronous optical network
(SONET) in the New York, northern New Jersey and Philadelphia markets to provide
a high-speed, fiber-optic connection into its backup systems. This SONET
network will be operational in early 1996.
The Company markets its comprehensive disaster recovery facilities and
services on a component pricing basis, allowing each customer to select the
specific items of equipment and other recovery services needed to satisfy its
individual disaster recovery requirements. The Company's disaster recovery
equipment is covered by maintenance contracts to assure that it is properly
functioning at all times.
Planning Services. The Company provides professional consulting and
educational services for disaster recovery and business resumption planning, not
only for computer operations, but also for company-wide purposes encompassing
all important business operations. This includes the development of customized
disaster recovery and business resumption plans for customers. The Company also
performs risk analyses to determine customers' exposure to the disruption or
loss of critical operations and resources, audits customers' disaster recovery
and business resumption procedures, and recommends improvements. In addition,
the Company conducts regular seminars on disaster recovery, business resumption
and related topics.
The Company also markets a Windows-based microcomputer software product,
CBR(TM) Comprehensive Business Recovery, which automates the preparation and
maintenance of disaster recovery and business resumption plans, including
comprehensive company-wide planning capabilities. The Company released a new
version of CBR during 1995 that provided several enhancements and reporting
improvements. The Company also continues to support its DOS-based microcomputer
disaster recovery planning software product known as DP/90 PLUS(R). In March
1995, the Company acquired the disaster recovery planning software business of
CHI/COR Information Management, Inc. (see Acquisitions and Offerings).
10
<PAGE>
Computer Services and Other
Computer Services. The Company provides remote-access computer services
primarily to software developers and government agencies and also provides
outsourcing services. In addition, the Company provides direct marketing
computer services and automated mass mailing and printing services. These
activities are supported at the Company's computer centers in Voorhees and
Birmingham (see Properties), which also are used to provide remote processing
services for several of the Company's investment support systems business units.
In 1995, the Company expanded its services to encompass client-server
environments, upgraded its IBM ES9000 model computer and added a new IBM 3090-
400J model computer at its Voorhees facility, and added UNIX capabilities and
the support of wide-area-network access.
Healthcare Information Systems. The Company's recently formed Healthcare
Information Systems Group provides work-flow management and document-imaging
systems primarily to healthcare institutions and health insurance companies. In
addition, the Company provides such systems to financial institutions,
corporations and government agencies, and the Company believes that there will
be additional market opportunities for these products. The Healthcare
Information Systems Group is comprised of Intelus Corporation, acquired by the
Company in August 1995, and MACESS Corporation, acquired by the Company in
October 1995 (see Acquisitions and Offerings). Through the use of electronic
data files that are typically created by scanning procedures, the Company's
healthcare information systems replace manual, paper-based systems to facilitate
the integration of broad databases of patient, customer and claims records,
while enhancing efficiencies and maintaining strict control of operations. The
Company's principal systems of this type are:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
System Platform Mode of Delivery Primary Markets
================================================================================
<S> <C> <C> <C>
I-MAX(TM) microcomputer software health insurance
license companies
- --------------------------------------------------------------------------------
ChartFlo(R) 2000 UNIX workstation software hospitals,
AccountFlo(TM) microcomputer license healthcare
institutions and
medical clinics
- --------------------------------------------------------------------------------
ProcessFlo(R) UNIX workstation software banks and other
microcomputer license financial
institutions, and
government
agencies
- --------------------------------------------------------------------------------
</TABLE>
Product Development
The investment support systems needs of the financial services industry are
complex and substantial, and continually evolve as a result of changes in laws,
introductions of new types of investment vehicles and technology and increased
competition. For these reasons, the Company believes that it is important to
continually maintain, enhance and evolve its proprietary investment support
systems. The Company funds most of its routine ongoing software maintenance and
support activities through the software maintenance fees paid by its investment
support systems license customers and a portion of the monthly fees paid by its
investment support systems remote processing customers. As of December 31,
1995, the Company had in force approximately 4,500 remote processing and
software maintenance contracts for its investment support systems.
The Company's expenditures for software development during 1995, 1994 and
1993, including amounts that were capitalized, totalled approximately
$53,908,000, $38,684,000 and $37,581,000, respectively. These amounts do not
include routine software maintenance and support costs that are included in cost
of sales, nor do they include costs incurred in performing certain custom
development projects for individual customers in the ordinary course of
business.
11
<PAGE>
During 1996, the Company expects to develop Windows versions of several
products including ON-SITE, to continue development of the Windows-based
CHARLOTTE system, and to complete development of a client-server version of
IFAS. Also during 1996, the Company plans to add an optional relational data
base module and evolve to the next generation of Windows compatible front- and
back-end components of INVEST ONE. These developments are examples of the
Company's strategy of using the established functionality of its existing
systems to develop state-of-the-art systems for new technological environments.
Also in 1996, the Company expects to complete development of OMNIPLUS, its
next generation participant accounting system for employee benefit plans, and to
continue developing enhanced functionality for its derivatives trading, foreign
exchange and consolidated risk management systems. In 1996, the Company plans
to continue to expand the application of EXPEDITER, which facilitates the
automated entry of mutual fund transactions for users of AUTOTRUST, OMNI ES,
OMNIPLAN, BOLT and eventually other investment support systems, and to enhance
its functionality. With respect to the PHASE3 system, the Company expects to
complete new foreign securities functionality during early 1996, and to continue
developing enhancements to better support retail brokerage functionality
throughout 1996. In 1996, the Company also will continue the development of EAS
(Enterprise Accounting System), a client-server general accounting system that
is being developed in conjunction with four insurance industry partners.
Continual software upgrading and enhancement also are important in the
Company's healthcare information systems business. Development plans for 1996
in this business encompass enhanced document output capability, document capture
capability and document searches and viewing for ChartFlo and AccountFlo, plus a
Windows version of ChartFlo. The Company's 1996 plans for ProcessFlo include
developing Novell- and Windows NT-based servers and porting to additional
relational databases.
The Company expands its disaster recovery services by adding new hotsites at
existing facilities, upgrading its computer equipment, developing new services
and opening new facilities. In 1996, the Company plans to expand its midrange
product lines and customer office space in the Philadelphia MegaCenter and to
open new MetroCenters in Northbrook (Illinois) and northern California. The
Company plans to complete the implementation of its new Sequoia recovery
services offering by mid-1996. Also during 1996, the Company plans to continue
to expand its electronic vaulting product offerings, to continue upgrading its
disk storage, tape cartridge and other peripheral hotsite equipment and to
continue opening new MetroCenters where the demand exists.
The Company expands its disaster recovery communications network by upgrading
its communications equipment, adding new communications capabilities and
establishing additional remote operations centers where the demand exists.
Acquisitions and Offerings
The Company seeks to grow through internal development, the acquisition of
businesses that broaden or complement its existing product lines, and, more
recently, the acquisitions of businesses with new product and business lines.
Since its initial public offering in 1986, the Company has acquired twenty-one
investment support systems businesses, fourteen disaster recovery businesses,
two computer services businesses and two healthcare information systems
businesses. Also during this period, the Company completed two additional
public offerings, a common stock offering in 1987 and a convertible debenture
offering in 1990. The debentures were converted into common stock in 1993.
During 1995, the Company spent approximately $23,962,000 in cash, net of cash
acquired, to acquire four investment support systems businesses and two disaster
recovery services businesses. In addition, the Company issued during 1995 a
total of 4,253,000 shares of its common stock to
12
<PAGE>
acquire one investment support systems business and two healthcare information
systems businesses in transactions that were accounted for as poolings-of-
interests.
The Financial Systems Group purchased the business of Market Investment
Solutions, Inc., a Colorado-based provider of microcomputer investment
management, accounting and reporting systems for the insurance industry, in
August 1995.
The Trading Systems Group expanded in November 1995 by acquiring Renaissance
Software Inc., headquartered in Los Altos, California, a provider of trading,
risk management and accounting systems to large banks and other market-makers
that trade over-the-counter interest rate derivatives.
The Trust and Shareholder Systems Group also grew by acquisition. In February
1995, the Company acquired the business of DML, a New York-based provider of
securities lending and brokerage accounting software systems, and, in July 1995,
the Company purchased the business of Bi-Tech Software, Inc., a California-based
provider of accounting systems to nonprofit organizations. In addition, the
Trust and Shareholder Systems Group significantly expanded its international
operations by acquiring the business of All Solutions Financial Systems, a
provider of fund and asset administration systems in Australia and New Zealand,
in September 1995, and the business of Worrall Miller & Associates Pty. Ltd., a
provider of pension plan administration software in Australia, in January 1996.
The Recovery Services Group acquired, in March 1995, the disaster recovery
software business of CHI/COR Information Management, Inc. and, in December 1995,
the disaster recovery business of the Newtrend Division of Electronic Data
Systems Corporation, which consists primarily of recovery services for users of
Unisys and Unisys-compatible mainframe computers.
The Healthcare Information Systems Group was formed during 1995 as a result of
the acquisitions of Intelus Corporation in August and MACESS Corporation in
October. Both Intelus and MACESS provide work-flow management and document-
imaging systems to the healthcare industry.
In July 1995, the Company's common stock split two-for-one.
Competition
Since most of the Company's computer services and software are specialized and
technical in nature, the various markets in which the Company competes have a
relatively small number of significant competitors. Some of the Company's
existing competitors and some potential competitors have substantially greater
financial, technological and marketing resources than the Company. The Company
believes that, for most of its businesses, service, quality and reliability are
more important competitive factors than price.
In its investment support systems business, the Company competes with numerous
other data processing and financial software vendors, which may be broadly
categorized into two groups. One group is comprised of specialized investment
support systems companies, most of which are much smaller than the Company. The
other group is comprised of large computer services companies whose principal
businesses are not in the investment support systems area, such as Automatic
Data Processing, Inc. and First Data Corporation, both of whom are also active
acquirors. The Company also faces competition from the internal processing and
development capabilities of its customers and prospects.
The key competitive factors in marketing investment support systems are the
accuracy and timeliness of processed information provided to customers, features
and adaptability of the software, level and quality of customer support, level
of software development expertise and overall net cost. The Company believes
that it competes effectively as to each of these factors and that its reputation
and experience in these markets are important competitive advantages.
13
<PAGE>
The computer disaster recovery business remains highly competitive. The
Company's principal competitors in this business are Comdisco Disaster Recovery
Services, Inc. and IBM Corporation, each of which have substantially greater
financial and other resources than the Company. The Company also faces
potential competition from major companies that have computer facilities that
could be made available for disaster recovery use. The Company believes that it
competes effectively as to the key competitive factors in this market, namely
quality of facilities, scope and quality of services, level and quality of
customer support, level of technical expertise and price. The Company also
believes that its experience and reputation as the innovator in this business
are important competitive advantages.
The Company's healthcare information systems business competes primarily with
larger companies who provide imaging systems to multiple industries. Some of
these vendors sell directly into the healthcare industry, and some are
represented in that industry by smaller, specialized resellers. The Company
believes that it competes effectively as to the key competitive factors in
marketing work-flow management and document-imaging systems to healthcare and
financial institutions. These factors include features and adaptability of the
software, level and quality of customer support, level of software development
expertise and overall net cost.
Marketing
All of the Company's specialized computer services and software are marketed
throughout the United States, and many are marketed internationally as well.
The Company's export sales during 1995, 1994 and 1993 totalled approximately
$51,273,000, $33,505,000 and $29,061,000, respectively. In addition, the
Company's foreign subsidiaries had sales that for those years totalled
approximately $43,612,000 $26,652,000 and $18,437,000, respectively. Export and
foreign sales during 1995 totalled $95 million and increased by 58% over 1994
export and foreign sales. As a percentage of total revenues, export and foreign
sales have grown from 12% in 1993 to 18% in 1995, and the Company expects this
percentage to continue growing.
The Company develops and maintains proprietary marketing information by
identifying prospective customers through a variety of data bases and other
sources, and then canvassing the prospects by direct mail, telephone calls and
personal visits. The Company also attempts to identify and attract customers by
conducting seminars and participating in industry conferences. Customer
references have been an important aid in obtaining new business.
Employees
At December 31, 1995, the Company had approximately 2,900 full-time employees.
The Company believes that its success depends, in part, on its continuing
ability to attract and retain skilled technical, marketing and management
personnel. While data processing professionals and software developers are in
high demand, the Company believes that, to date, it has been able to attract and
retain highly qualified personnel. None of the Company's employees is covered
by a collective bargaining contract. The Company believes that its employee
relations are excellent.
Proprietary Protection
The Company owns registered marks for the SunGard name and owns or has applied
for registration for many of its service and software names. The Company has
few registrations of its copyrights and has no patents. The Company believes
that registered copyrights and patents are of less significance in its business
than software development skills, technological expertise and marketing
capabilities, although the Company intends to consider the advisability of
software patents in view of ongoing developments in that area. The Company
relies primarily on contractual restrictions and trade secret laws for the
protection of its proprietary services and software. The Company also has
established policies requiring its personnel to maintain the confidentiality of
the Company's proprietary property.
14
<PAGE>
Item 2. Properties
The following table indicates the location, purpose and size of the Company's
principal offices, principal computer facilities, business unit headquarters and
disaster recovery MegaCenters.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Location Purpose Square Feet
================================================================================
<S> <C> <C>
Wayne, PA Executive offices of SunGard Data 44,500
(near Philadelphia) Systems Inc., and headquarters for
SunGard Recovery Services and SunGard
Planning Solutions.
- --------------------------------------------------------------------------------
Atlanta, GA Offices of SunGard Insurance Systems. 26,000
- --------------------------------------------------------------------------------
Aurora, CO Headquarters for SunGard Insurance 17,900
(near Denver) Systems.
- --------------------------------------------------------------------------------
Birmingham, AL Headquarters for SunGard Asset 85,000
Management Systems, SunGard Employee
Benefit Systems and SunGard Mailing
Services, and related computer center
with one IBM-compatible mainframe
computer.
- --------------------------------------------------------------------------------
Birmingham, AL Headquarters for MACESS Corporation. 26,600
- --------------------------------------------------------------------------------
Canoga Park, CA Headquarters for SunGard Government 12,000
(near Los Angeles) Systems and related computer center
with one Prime computer and seven
UNIX servers.
- --------------------------------------------------------------------------------
Carshalton, England Headquarters for Portfolio 10,000
(near London) Administration Limited and related
computer centers with eight IBM
midrange computers.
- --------------------------------------------------------------------------------
Charlotte, NC Headquarters for SunGard Trust 36,100
Systems and related computer center
with one IBM-compatible mainframe
computer.
- --------------------------------------------------------------------------------
Chico, CA Headquarters for Bi-Tech Software. 12,000
- --------------------------------------------------------------------------------
Chicago, IL Headquarters for SunGard Futures 7,000
Systems.
- --------------------------------------------------------------------------------
Fairfield, NJ Computer center for Shaw Data 22,000
(near New York) Services with four Bull mainframe,
four Hewlett Packard and one Sun
Microsystems computers.
- --------------------------------------------------------------------------------
Hinsdale, IL Headquarters for SunGard Investment 24,900
(near Chicago) Systems.
- --------------------------------------------------------------------------------
Hopkins, MN Headquarters for SunGard Securities 46,200
(near Minneapolis) Systems and related computer center
with two IBM or IBM-compatible
mainframe computers.
- --------------------------------------------------------------------------------
London, England European offices of SunGard Capital 14,500
Markets and SunGard Futures Systems
and related computer center with one
DEC VAX computer.
- --------------------------------------------------------------------------------
Los Altos, CA Headquarters for Renaissance Software. 11,000
- --------------------------------------------------------------------------------
New York, NY Headquarters for Shaw Data Services. 16,000
- --------------------------------------------------------------------------------
New York, NY Headquarters for SunGard Capital 12,500
Markets.
- --------------------------------------------------------------------------------
Northbrook, IL SunGard Recovery Services MegaCenter 84,000
(near Chicago) with two IBM mainframe and two Tandem
computers, and three Hewlett Packard,
five IBM midrange, four Sun
Microsystems and one Unisys mobile
computers.
- --------------------------------------------------------------------------------
Philadelphia, PA SunGard Recovery Services MegaCenter 213,500
with five DEC, seven Hewlett Packard,
four IBM or IBM-compatible mainframe,
one Sequent, four Stratus and two
Tandem computers, and nine Hewlett
Packard, ten IBM midrange, one NCR
and six Sun Microsystems mobile
computers.
- --------------------------------------------------------------------------------
Rockville, MD Headquarters for Intelus Corporation. 20,600
- --------------------------------------------------------------------------------
Roswell, GA SunGard Recovery Services MegaCenter 37,800
(near Atlanta) with ten DEC computers, and four DEC,
one Hewlett Packard, nine IBM
midrange and one Sun Microsystems
mobile computers.
- --------------------------------------------------------------------------------
San Mateo, CA Headquarters for SunGard Shareholder 18,200
Systems.
- --------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Location Purpose Square Feet
================================================================================
<S> <C> <C>
Scottsdale, AZ SunGard Recovery Services MegaCenter 13,800
with five Prime and five Unisys
computers, and one Unisys mobile
computer.
- --------------------------------------------------------------------------------
Stockholm, Sweden Headquarters for Front Capital 40,000
Systems and Prosoftia.
- --------------------------------------------------------------------------------
Sydney, Australia Australian offices of SunGard Capital 6,700
Markets, SunGard Futures Systems and
the SunGard Trust and Shareholder
Systems Group, and related computer
center with one DEC VAX computer.
- --------------------------------------------------------------------------------
Voorhees, NJ Headquarters for SunGard Computer 51,000
(near Philadelphia) Services and related computer center
with four IBM or IBM-compatible
mainframe computers.
- --------------------------------------------------------------------------------
Waltham, MA Headquarters for SunGard Brokerage 31,300
(near Boston) Systems and related computer center
with five Tandem computers.
- --------------------------------------------------------------------------------
Waltham, MA Headquarters for SunGard Global 16,400
(near Boston) Systems and related computer center
with thirteen DEC computers and two
IBM RS-6000 workstations.
- --------------------------------------------------------------------------------
Warminster, PA SunGard Recovery Services MegaCenter 20,000
(near Philadelphia) with six Unisys computers.
- --------------------------------------------------------------------------------
</TABLE>
The Company leases all of the offices and facilities listed in the preceding
table, with the exception of its 85,000 square-foot Birmingham facility and its
Voorhees and Warminster facilities, which are owned, and its Hopkins facility,
which consists of two connected buildings, one leased and the other owned. The
Company also owns its MetroCenters in St. Paul, Minnesota and Northbrook,
Illinois. The Company also leases space, primarily for sales offices, customer
support offices, MetroCenters and remote operations centers, in many locations
in the United States and internationally. The Company believes that its leased
and owned facilities are adequate for the Company's present operations.
Item 3. Legal Proceedings
The Company is presently a party to certain lawsuits arising in the ordinary
course of its business. The Company believes that none of its current legal
proceedings will be material to its business or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
None.
16
<PAGE>
Item 4.1 Certain Executive Officers of the Registrant
The executive officers of the Company who are not also directors are listed
below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Age Principal Positions with the Company
================================================================================
<S> <C> <C>
Kenneth R. Adams 60 Chief Executive Officer, SunGard Healthcare
Information Systems Group
- --------------------------------------------------------------------------------
Bruce H. Battjer 45 Chief Executive Officer, SunGard Computer
Services Group
- --------------------------------------------------------------------------------
Andrew P. Bronstein 37 Vice President and Controller, SunGard Data
Systems Inc.
- --------------------------------------------------------------------------------
Cristobal I. Conde 35 Chief Executive Officer, SunGard Trading
Systems Group
- --------------------------------------------------------------------------------
Philip L. Dowd 54 Chief Executive Officer, SunGard Trust and
Shareholder Systems Group
- --------------------------------------------------------------------------------
Lawrence A. Gross 43 Vice President and General Counsel, SunGard
Data Systems Inc.
- --------------------------------------------------------------------------------
Michael F. Mulholland 46 Chief Executive Officer, SunGard Recovery
Services Group
- --------------------------------------------------------------------------------
Michael K. Muratore 49 Chief Executive Officer, SunGard Financial
Systems Group
- --------------------------------------------------------------------------------
Donna J. Pedrick 46 Vice President-Human Resources, SunGard Data
Systems Inc.
- --------------------------------------------------------------------------------
Michael J. Ruane 42 Chief Financial Officer and Vice
President-Finance, SunGard Data Systems Inc.
- --------------------------------------------------------------------------------
Richard C. Tarbox 43 Vice President-Corporate Development, SunGard
Data Systems Inc.
- --------------------------------------------------------------------------------
</TABLE>
Mr. Adams has been Chairman and Chief Executive Officer of Intelus Corporation
since September 1995 and of MACESS Corporation since October 1995. Before that,
he was Chairman and Chief Executive Officer of SunGard Recovery Services Inc.
since 1988 and was its President from 1990 to 1992. From 1983 to 1988, Mr.
Adams was President and a director of SunGard Trust Systems Inc.
Mr. Battjer has been Chief Executive Officer and a director of SunGard
Computer Services Inc. since October 1995. Before that, Mr. Battjer served in
various executive positions in SunGard's Recovery Services Group, most recently
as President of Planning Solutions.
Mr. Bronstein has been Vice President and Controller of the Company since
February 1994. Before that, he was Corporate Controller since 1992. From 1985
to 1992, he was a manager with Coopers & Lybrand L.L.P., Philadelphia, where he
served as senior manager on the Company's account and as director of the firm's
Philadelphia high technology group. Mr. Bronstein is a director and officer of
most of the Company's domestic subsidiaries.
Mr. Conde has been Chief Executive Officer and a director of SunGard Systems
International Inc. (formerly named SunGard Capital Markets Inc.) since 1991. He
was one of the founders of that company in 1983 and was its Executive Vice
President from 1983 to 1991. Before it was acquired by the Company in 1987,
SunGard Systems International Inc., originally named Devon Systems
International, Inc., was an independent software company. Mr. Conde is a
director and/or officer of some of the Company's domestic subsidiaries and many
of its foreign subsidiaries.
Mr. Dowd has been Chief Executive Officer of SunGard Investment Systems Inc.
since 1990 and one of its directors since 1982. He was President of SunGard
Investment Systems Inc. from 1982 to 1990. Mr. Dowd is a director and/or officer
of many of the Company's investment support systems subsidiaries.
Mr. Gross has been Vice President and General Counsel of the Company since
1986 and Secretary of the Company since 1987. From 1979 to 1986, he was a
lawyer with Blank, Rome, Comisky &
17
<PAGE>
McCauley, Philadelphia, and he has represented the Company since 1983.
Mr. Gross is a director and officer of most of the Company's domestic
subsidiaries and some of its foreign subsidiaries.
Mr. Mulholland has been Chairman and Chief Executive Officer of SunGard
Recovery Services Inc. since October 1995 and was its President and Chief
Operating Officer since 1992. From 1987 to 1992, Mr. Mulholland served in
various executive capacities in the Company and the Recovery Services Group.
Mr. Muratore has been Chief Executive Officer and a director of SunGard
Financial Systems Inc. since October 1995. Before that, he was Chief Executive
Officer and a director of SunGard Computer Services Inc. since 1989 and
President-Processing Divisions of SunGard Business Systems Inc. since 1990.
From 1985 to 1988, Mr. Muratore was President of the Company's Central Computer
Facility, which was consolidated with SunGard Computer Services Inc. at the end
of 1988.
Ms. Pedrick has been Vice President-Human Resources of the Company since 1988.
From 1983 to 1988, she was Director-Human Resources of the Company.
Mr. Ruane has been Chief Financial Officer, Vice President-Finance and
Treasurer of the Company since 1994. From 1992 until 1994, Mr. Ruane was Chief
Financial Officer and Vice President-Finance of SunGard Systems International
Inc. (formerly named SunGard Capital Markets Inc.) Before that, he was Vice
President-Controller of the Company from 1990 through 1992, and Corporate
Controller of the Company from 1985 to 1990. Mr. Ruane is a director and
officer of most of the Company's domestic and foreign subsidiaries.
Mr. Tarbox has been Vice President-Corporate Development of the Company since
1987. He is an officer of several of the Company's domestic subsidiaries.
18
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
This information is incorporated by reference to the section entitled Stock
Information in the Company's 1995 Annual Report to Stockholders (included in
Exhibit 13.1 to this Report on Form 10-K).
Item 6. Selected Financial Data
This information is incorporated by reference to the section entitled Selected
Financial Information in the Company's 1995 Annual Report to Stockholders
(included in Exhibit 13.1 to this Report on Form 10-K).
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This information is incorporated by reference to the section entitled
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's 1995 Annual Report to Stockholders (included in
Exhibit 13.1 to this Report on Form 10-K).
Item 8. Financial Statements and Supplementary Data
The financial statements of the Company, financial statement schedule of the
Company, supplementary data and related documents that are included in this
Report on Form 10-K are listed in Item 14(a), Part IV, of this Report.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
19
<PAGE>
PART III
This Part incorporates certain information from the Company's definitive proxy
statement for its 1996 Annual Meeting of Stockholders ("1996 Proxy Statement")
to be filed with the Securities and Exchange Commission not later than 120 days
after the end of the Company's fiscal year covered by this Report on Form 10-K.
Notwithstanding such incorporation, the sections of the Company's 1996 Proxy
Statement entitled Compensation Committee Report and Performance Graph shall not
be deemed to be "filed" as part of this Report.
Item 10. Directors and Executive Officers of the Registrant
Information concerning the directors of the Company is incorporated by
reference to the Company's 1996 Proxy Statement including but not necessarily
limited to the section of such proxy statement entitled Election of Directors.
Information concerning executive officers of the Company who are not also
directors is included in Item 4.1, Part I, of this Report on Form 10-K.
Item 11. Executive Compensation
This information is incorporated by reference to the Company's 1996 Proxy
Statement including but not necessarily limited to the section of such proxy
statement entitled Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is incorporated by reference to the Company's 1996 Proxy
Statement including but not necessarily limited to the section of such proxy
statement entitled Beneficial Ownership of Common Stock.
Item 13. Certain Relationships and Related Transactions
This information is incorporated by reference to the Company's 1996 Proxy
Statement including but not necessarily limited to the sections of such proxy
statement entitled Executive Compensation, Beneficial Ownership of Common Stock
and Election of Directors.
20
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements
The following financial statements of the Company, supplementary data and
related documents are incorporated by reference to the Company's 1995 Annual
Report to Stockholders (included in Exhibit 13.1 to this Report on Form 10-K):
Report of Independent Accountants on Financial Statements, dated February 8,
1996
Consolidated Statements of Income for each of the years ended December 31,
1995, 1994 and 1993
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Cash Flows for each of the years ended December 31,
1995, 1994 and 1993
Consolidated Statement of Stockholders' Equity for each of the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Quarterly Financial Information (unaudited)
(a)(2) Financial Statement Schedule
The following financial statement schedule of the Company and related
documents are included in this Report on Form 10-K:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants on Financial Statement Schedule, dated
February 8, 1996......................................................... 26
Schedule II--Valuation and Qualifying Accounts........................... 27
</TABLE>
(a)(3) Exhibits
The Exhibits that are incorporated by reference in this Report on Form 10-K,
or are filed with this Report, are listed in the List of Exhibits beginning on
page 24 of this Report. Exhibits 10.10 through 10.19 are the management
contracts and compensatory plans and arrangements that are required to be filed
as Exhibits to this Report.
(b) Reports on Form 8-K
The following Current Reports on Form 8-K were filed by the Company with the
Securities and Exchange Commission during the last quarter of 1995:
Form 8-K (dated September 29, 1995) filed on October 6, 1995 relating to the
Company's entering into a definitive agreement to acquire MACESS Corporation
("MACESS"). That Report included
21
<PAGE>
audited financial statements of MACESS, Renaissance Software Inc.
("Renaissance") and Intelus Corporation ("Intelus") and unaudited pro forma
combined condensed income statement data of the Company, MACESS, Renaissance
and Intelus.
Form 8-K (dated September 30, 1995) filed on October 20, 1995 relating to the
Company's third quarter results, recent acquisitions and management changes.
Form 8-K (dated October 31, 1995) filed on November 1, 1995 relating to the
consummation of the Company's acquisition by merger of MACESS.
22
<PAGE>
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.
SunGard Data Systems Inc.
Date: March 29, 1996 By: /s/ James L. Mann
----------------------------------
James L. Mann,
Chairman, President and Chief Executive 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 and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ James L. Mann Chief Executive Officer, March 29, 1996
- -------------------------------- President, and Chairman
James L. Mann of the Board of Directors
(principal executive officer)
/s/ Michael J. Ruane Chief Financial Officer and March 29, 1996
- -------------------------------- Vice President-Finance
Michael J. Ruane (principal financial officer)
/s/ Andrew P. Bronstein Vice President and Controller March 29, 1996
- -------------------------------- (principal accounting officer)
Andrew P. Bronstein
/s/ Gregory S. Bentley Director March 29, 1996
- --------------------------------
Gregory S. Bentley
/s/ Michael C. Brooks Director March 29, 1996
- --------------------------------
Michael C. Brooks
/s/ Albert A. Eisenstat Director March 29, 1996
- --------------------------------
Albert A. Eisenstat
/s/ Bernard Goldstein Director March 29, 1996
- --------------------------------
Bernard Goldstein
/s/ Michael Roth Director March 29, 1996
- --------------------------------
Michael Roth
/s/ Malcolm I. Ruddock Director March 29, 1996
- --------------------------------
Malcolm I. Ruddock
/s/ Lawrence J. Schoenberg Director March 29, 1996
- --------------------------------
Lawrence J. Schoenberg
23
<PAGE>
LIST OF EXHIBITS
Number Document
- ------ ----------------------------------------------------------------------
3.1/1/ Amended and Restated Certificate of Incorporation of the Company.
3.2/2/ Amended and Restated Bylaws of the Company.
4.1/2/ Specimen Common Stock Certificate of the Company.
10.1/2/ Lease, dated June 18, 1981, between the Company and American National
Bank and Trust Company of Chicago, relating to the Company's facility
in Northbrook, Illinois ("First Northbrook Lease").
10.2/3/ Amendment to the First Northbrook Lease, dated September 16, 1986.
10.3/4/ Amendment to the First Northbrook Lease, dated October 14, 1987.
10.4/5/ Amendment to the First Northbrook Lease, dated October 1, 1988.
10.5/5/ Lease, dated October 1, 1988, between the Company and American
National Bank and Trust Company of Chicago, relating to the Company's
facility in Northbrook, Illinois ("Second Northbrook Lease").
10.6/6/ Amendment to the Second Northbrook Lease, dated September 15, 1989.
10.7/7/ Lease, dated April 12, 1984, between the Company and Broad and Noble
Associates, Inc., relating to the Company's facility at 401 North
Broad Street, Philadelphia, Pennsylvania, and Amendments thereto,
dated October 18, 1989, September 30, 1991 and November 19, 1992 ("401
Lease").
10.8 Amendment to 401 Lease, dated October 9, 1995 (filed with this
Report).
10.9/1/ Lease, dated May 19, 1989, between the Company and Northmeadow
Associates, relating to the Company's facility in Roswell, Georgia,
Amendment thereto, dated June 1989, and Assignment and Assumption
thereof, dated December 31, 1990.
10.10/1/ The Company's 1982 Incentive Stock Option Plan and Amendments thereto,
dated January 1, 1987 and November 8, 1991./11/
10.11/8/ The Company's 1986 Stock Option Plan, Amendments thereto, dated
January 1, 1987, November 1, 1988, February 6, 1990, November 8, 1991,
February 16, 1993 and February 13, 1995, and United Kingdom Addendum
thereto, dated February 12, 1991./11/
10.12/1/ The Company's 1988 Nonqualified Stock Option Plan and Amendment
thereto, dated October 30, 1990./11/
10.13/6/ The Company's 1990 Amended and Restated Restricted Stock Incentive
Plan./11/
10.14/9/ The Company's Restricted Stock Award Plan for Outside Directors./11/
10.15/10/ The Company's 1994 Equity Incentive Plan./11/
10.16 The Company's 1996 Equity Incentive Plan (filed with this Report)./11/
24
<PAGE>
NUMBER DOCUMENT
- ------ ---------------------------------------------------------------------
10.17/10/ Summary Description of the Company's Annual Executive Incentive
Compensation Program./11/
10.18 Summary Description of the Company's Long-Term Executive Incentive
Compensation Plan (filed with this Report)./11/
10.19/1/ Form of Indemnification Agreement entered into by the Company with
its directors and officers./11/
11.1 Statement Re Computation of Per Share Earnings (filed with this
Report).
13.1 Portions of the Company's Annual Report to Stockholders for the
fiscal year ended December 31, 1995 expressly incorporated herein by
reference (filed with this Report).
21.1 Subsidiaries of the Registrant (filed with this Report).
23.1 Consent of Independent Accountants, regarding the Company's
consolidated financial statements and financial statement schedule
(included at page 26 of this Report).
27.1 Financial Data Schedule for the year ended December 31, 1995 (filed
with this Report).
- ---------------
(1) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1991 (Commission
File No. 0-14232).
(2) Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-1 and Amendments No. 1, No. 2, and No. 3
thereto (Registration No. 33-3181).
(3) Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-1 and Amendment No. 1 thereto
(Registration No. 33-12536).
(4) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987 (Commission
File No. 0-14232).
(5) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1988 (Commission
File No. 0-14232).
(6) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989 (Commission
File No. 0-14232).
(7) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992 (Commission
File No. 0-14232).
(8) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 (Commission
File No. 0-14232).
(9) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission
File No. 0-14232).
(10) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 (Commission
File No. 0-14232).
(11) Management contract or compensatory plan or arrangement.
25
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference into the Company's Registration
Statements on Form S-8 (Registration Nos. 33-6425, 33-14984, 33-33602, 33-42345,
33-69650 and 33-64901) of our reports dated February 8, 1996 on our audits of
the consolidated financial statements and consolidated financial statement
schedule of SunGard Data Systems Inc. and subsidiaries as of December 31, 1995
and 1994, and for each of the years in the three-year period ended December 31,
1995, which report on the consolidated financial statements is incorporated by
reference in this Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 27, 1996
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders
SunGard Data Systems Inc.
Our report on the consolidated financial statements of SunGard Data Systems
Inc. and subsidiaries is incorporated by reference in this Report on Form 10-K
from page 56 of the 1995 Annual Report to Stockholders of SunGard Data Systems
Inc. In connection with our audit of such consolidated financial statements, we
also have audited the related consolidated financial statement schedule listed
in Item 14(a)(2), Part IV, of this Report on Form 10-K.
In our opinion, the consolidated financial statement schedule referred to
above, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 8, 1996
26
<PAGE>
SunGard Data Systems Inc. and Subsidiaries
Financial Statement Schedule
- --------------------------------------------------------------------------------
SCHEDULE II
Valuation and Qualifying Accounts
Allowance for Doubtful Accounts
-------------------------------
<TABLE>
<CAPTION>
Year Ended Beginning Charged Ending
December 31, Balance to Expense Other/(1)/ Write-offs Balance
- -------------- ---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1995.......... $7,276,000 $1,705,000 $565,000 ($3,120,000) $6,426,000
1994.......... 6,969,000 4,014,000 71,000 ( 3,778,000) 7,276,000
1993.......... 4,491,000 4,963,000 (21,000) ( 2,464,000) 6,969,000
</TABLE>
(1) Net impact of acquired companies, foreign currency translation, and, in
1993, the sale of a product line.
27
<PAGE>
INDEX OF EXHIBITS FILED WITH THIS REPORT
Number Document
- ------ ------------------------------------------------------------------------
10.8 Amendment to 401 Lease, dated October 9, 1995.
10.16 The Company's 1996 Equity Incentive Plan./(1)/
10.18 Summary Description of the Company's Long-Term Executive Incentive
Compensation Plan./(1)/
11.1 Statement Re Computation of Per Share Earnings.
13.1 Portions of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1995 expressly incorporated herein by reference.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants, regarding the Company's consolidated
financial statements and financial statement schedule (included at page
26 of this Report).
27.1 Financial Data Schedule for the year ended December 31, 1995.
_______________
(1) Management contract or compensatory plan or arrangement.
<PAGE>
EXHIBIT 10.8
SUNGARD DATA SYSTEMS INC.
AMENDMENT TO 401 LEASE DATED OCTOBER 9, 1995
Broad & Noble Associates
401 North Broad Street
Philadelphia
Pennsylvania 19108
215/922/3110
FAX 215/922/0937
October 9, 1995
Mr. John C. Herley
SunGard Recovery Services Inc.
1285 Drummers Lane
Wayne, PA 19087-1586
Dear Mr. Herley:
As you are aware, under Amendment to Lease dated November 19, 1992 between Broad
and Noble Associates, Inc. and Sungard Services Company, Sungard will take under
Lease the balance of the seventh floor, comprised of 15,053 square feet, here at
401 North Broad Street, Philadelphia, Pennsylvania, by January 1, 1996 (the
"Lease"). To accommodate Sungard, the Lease shall become effective October 10,
1995. For the period October 10, 1995 through December 31, 1995, Sungard shall
not be obligated to Broad and Noble Associates for any base rent or additional
rent, including but not limited to any taxes or operating expenses, nor shall
any base rent or additional rent accrue for the period October 10, 1995 through
December 31, 1995. All other terms and conditions of the Lease will be in
effect as of October 10, 1995.
We believe this letter may serve as an agreement between Broad and Noble
Associates and Sungard for the purpose of accelerating the start date of the
lease for the aforementioned 15,053 square feet of space.
If this meets with your approval, please acknowledge your acceptance in the
space provided below and return one copy to us for our records. Thank you for
your time and attention in this matter.
Sincerely,
Broad and Noble Associates
/s/ Barbara K. Dertouzos
Barbara K. Dertouzos
Accepted for Sungard: /s/ William J. Flounders
-------------------------------------------
Dated: 10/9/95
----------------------------
<PAGE>
Exhibit 10.16
SunGard Data Systems Inc.
1996 Equity Incentive Plan
- --------------------------------------------------------------------------------
1. Purpose
The purpose of the SunGard Data Systems Inc. 1996 Equity Incentive Plan
(the "Plan") is to promote the long-term retention of key employees of SunGard
Data Systems Inc., ("SunGard") and its current and future subsidiaries
(collectively, the "Company") who are in a position to make significant
contributions to the success of the Company, to further reward these employees
for their contributions to the Company's success, to provide additional
incentive to these employees to continue to make similar contributions in the
future, and to further align the interests of these employees with those of
SunGard's stockholders. These purposes will be achieved by granting to such
employees, in accordance with the provisions of this Plan, Options, Restricted
Stock or Unrestricted Stock Awards or Performance Awards, for shares of
SunGard's common stock, $0.01 par value per share ("Common Stock"), or Loans or
Supplemental Grants, or combinations thereof ("Awards").
2. Aggregate Number of Shares
2.1 The aggregate number of shares of Common Stock for which Awards may be
granted under the Plan will be 1,750,000 shares, with an individual limit of
200,000 shares per Participant (as defined in Section 3.1 below) per year.
Notwithstanding the foregoing, if there is any change in the capitalization of
SunGard, such as by stock dividend, stock split, combination of shares, exchange
of securities, recapitalization or other event which the Compensation Committee
(the "Committee") of the Board of Directors (the "Board") of SunGard deems, in
its sole discretion, to be similar circumstances, the aggregate number and/or
kind of shares for which Awards may be granted under the Plan shall be
appropriately adjusted in a manner determined by the Committee. No fractional
shares of Common Stock will be delivered under the Plan.
2.2 Treasury shares, reacquired shares and unissued shares of Common Stock
may be used for purposes of the Plan, at SunGard's sole discretion.
2.3 Shares of Common Stock that were issuable pursuant to an Award that
has terminated but with respect to which such Award had not been exercised,
shares of Common Stock that are issued pursuant to an Award but that are
subsequently forfeited, and shares of Common Stock that were issuable pursuant
to an Award that was payable in Common Stock or cash but that was satisfied in
cash, shall be available for future Awards under the Plan.
3. Eligible Employees and Participants
3.1 All current and future key employees of the Company, including
officers and directors who are employed by the Company ("Employees"), shall be
eligible to receive Awards under the Plan. Neither members of the Committee nor
any other directors who are not Employees shall be eligible to receive Awards.
No eligible Employee (a "Participant") shall have any right to receive an Award
except as expressly provided in the Plan.
<PAGE>
3.2 The Participants who shall actually receive Awards under the Plan shall
be determined by the Committee in its sole discretion. In making such
determinations, the Committee shall consider the positions and responsibilities
of eligible employees, their past performance and contributions to the Company's
growth and expansion, the value of their services to the Company, the difficulty
of finding qualified replacements, and such other factors as the Committee deems
pertinent in its sole discretion.
4. Administration
4.1 The Plan shall be administered by the Committee. Each member of the
Committee shall be a "disinterested person" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "1934 Act"). The
Committee may delegate all or any portion of its authority hereunder to a
subcommittee consisting of at least two Committee members. In addition to its
other authority and subject to the provisions of the Plan, the Committee shall
have the authority to determine, in its sole discretion, the Participants who
shall be eligible to receive Awards, the Participants who shall actually receive
Awards, the size of each Award, including the number of shares of Common Stock
subject to the Award, the type or types of each Award, the date on which each
Award shall be granted, the terms and conditions of each Award, whether to waive
compliance by a Participant with any obligations to be performed by the
Participant under an Award or waive any term or condition of an Award, whether
to amend or cancel an existing Award in whole or in part (except that the
Committee may not, without the consent of the holder of an Award or unless
specifically authorized by the terms of an Award, take any action under this
clause with respect to such Award if such action would adversely affect the
rights of such holder), and the form or forms of instruments that are required
or deemed appropriate under the Plan, including any written notices and
elections required of Participants.
4.2 The Committee may adopt such rules for the administration of the Plan
as it deems necessary or advisable, in its sole discretion. For all purposes of
the Plan, a majority of the members of the Committee shall constitute a quorum,
and the vote or written consent of a majority of the members of the Committee on
a particular matter shall constitute the act of the Committee on that matter.
The Committee shall have the exclusive right to construe the Plan and any Award,
to settle all controversies regarding the Plan or any Award, to correct defects
and omissions in the Plan and in any Award, and to take such further actions as
the Committee deems necessary or advisable, in its sole discretion, to carry out
the purpose and intent of the Plan. Such actions shall be final, binding and
conclusive upon all parties concerned.
4.3 No member of the Committee or the Board shall be liable for any act or
omission (whether or not negligent) taken or omitted in good faith, or for the
good faith exercise of any authority or discretion granted in the Plan to the
Committee or the Board, or for any act or omission of any other member of the
Committee or the Board.
4.4 All costs incurred in connection with the administration and operation
of the Plan shall be paid by the Company. Except for the express obligations of
the Company under the Plan and under Awards granted in accordance with the
provisions of the Plan, the Company shall have no liability with respect to any
Award, or to any Participant or any transferee of shares of Common Stock from
any Participant, including, but not limited to, any tax liabilities, capital
losses, or other costs or losses incurred by any Participant or any such
transferee.
2
<PAGE>
5. Types of Awards
5.1 Options.
(a) An Option is an Award entitling the recipient on exercise thereof
to purchase Common Stock at a specified exercise price. Both "incentive stock
options," as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") (any Option intended to qualify as an incentive stock
option being hereinafter referred to as an "ISO"), and Options that are not
incentive stock options ("non-ISO"), may be granted under the Plan.
(b) The exercise price of an Option will be determined by the
Committee subject to the following:
(1) The exercise price of an ISO shall not be less than 100% (110%
in the case of an ISO granted to a ten percent shareholder) of the fair market
value (as defined in Section 11.9) of the Common Stock subject to the ISO,
determined as of the time the ISO is granted. A "ten-percent shareholder" is any
person who at the time of grant owns, directly or indirectly, or is deemed to
own by reason of the attribution rules of Section 424(d) of the Code, stock
possessing more than 10% of the total combined voting power of all classes of
stock of SunGard or of any of its subsidiaries.
(2) The exercise price of a non-ISO shall not be less than 100% of
the fair market value of the Common Stock subject to the non-ISO, determined as
of the time the non-ISO is granted, except that:
(A) the exercise price of a non-ISO may be equal to or greater
than 85% of the fair market value of the Common Stock subject to the non-ISO, if
the discount is granted in lieu of a reasonable amount of cash compensation; or
(B) the exercise price of a non-ISO granted pursuant to a
Performance Award may be (i) 100% of the fair market value of the Common Stock
subject to the non-ISO, determined either as of the time the Performance Award
is granted or as of the time the non-ISO is granted pursuant to the Performance
Award; or (ii) an amount less than such fair market value if the discount is
granted in lieu of a reasonable amount of cash compensation as consideration for
exceeding the goal(s) set forth in the Performance Award.
(3) In no case may the exercise price paid for Common Stock which
is part of an original issue of authorized Common Stock be less than the par
value per share of the Common Stock.
(c) The period during which an Option may be exercised will be
determined by the Committee, except that the period during which an ISO may be
exercised will not exceed ten years (five years, in the case of an ISO granted
to a ten-percent shareholder) from the day immediately preceding the date the
Option was granted.
(d) An Option will become exercisable at such time or times, and on
such terms and conditions, as the Committee may determine. The Committee may at
any time accelerate the time at which all or any part of the Option may be
exercised. Any exercise of an Option must be in writing, signed by the proper
person and delivered or mailed to the
3
<PAGE>
Company, accompanied by (1) any documents required by the Committee and (2)
payment in full in accordance with Section 5.1(e) below for the number of shares
for which the Option is exercised.
(e) Stock purchased on exercise of an Option must be paid for as
follows: (1) in cash or by check (acceptable to SunGard in accordance with
guidelines established for this purpose), bank draft or money order payable to
the order of SunGard or (2) if so permitted by the instrument evidencing the
Option (or in the case of an Option which is not an ISO, by the Committee at or
after grant of the Option), (i) through the delivery of shares of Common Stock
which have been outstanding for at least six months (unless the Committee
expressly approves a shorter period) and which have a fair market value on the
last business day preceding the date of exercise equal to the exercise price, or
(ii) by delivery of a promissory note of the Option holder to SunGard, payable
on such terms and conditions as the Committee may determine, or (iii) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to SunGard sufficient funds to pay the exercise price, or (iv) by any
combination of the permissible forms of payment; provided, that if the Common
Stock delivered upon exercise of the Option is an original issue of authorized
Common Stock, at least so much of the exercise price as represents the par value
of such Common Stock must be paid other than by the Option holder's promissory
note.
(f) If the market price of shares of Common Stock subject to an Option
exceeds the exercise price of the Option at the time of its exercise, the
Committee may cancel the Option and cause SunGard to pay in cash or in shares of
Common Stock (at a price per share equal to the fair market value per share) to
the person exercising the Option an amount equal to the difference between the
fair market value of the Common Stock which would have been purchased pursuant
to the exercise (determined on the date the Option is canceled) and the
aggregate exercise price which would have been paid. The Committee may exercise
its discretion to take such action only if it has received a written request
from the person exercising the Option, but such a request will not be binding on
the Committee.
5.2 Restricted and Unrestricted Stock.
(a) A Restricted Stock Award entitles the recipient to acquire, for a
purchase price not less than the par value, shares of Common Stock subject to
the restrictions described in Section 5.2(d) below ("Restricted Stock").
(b) A Participant who is granted a Restricted Stock Award shall have
no rights with respect to such Award unless the Participant accepts the Award by
written instrument delivered or mailed to SunGard accompanied by payment in full
of the specified purchase price, if any, of the shares covered by the Award.
Payment may be by certified or bank check or other instrument acceptable to the
Committee.
(c) A Participant who receives Restricted Stock shall have all the
rights of a stockholder with respect to such stock, including voting and
dividend rights, subject to the restrictions described in paragraph (d) below
and any other conditions imposed by the Committee at the time of grant. Unless
the Committee otherwise determines, certificates evidencing shares of Restricted
Stock will remain in the possession of the Company until such shares are free of
all restrictions under the Plan.
4
<PAGE>
(d) Except as otherwise specifically provided by the Plan or the
Award, Restricted Stock may not be sold, assigned, exchanged, pledged, gifted or
otherwise disposed of, or transferred, and if a Participant suffers a Status
Change (as defined in Section 6.1 below) for any reason, must be offered to
SunGard for purchase for the amount of cash paid for the such stock, or
forfeited to the Company if no cash was paid. These restrictions will lapse and
the shares will become unrestricted ("Unrestricted Stock") at such time or
times, and on such terms and conditions, as the Committee may determine;
provided, however, that these restrictions will apply ratably for a minimum
period of three years, unless the Restricted Stock is subject to a Performance
Award, in which case these restrictions will apply for a minimum period of one
year. The Committee may at any time accelerate the time at which the
restrictions on all or any part of the shares will lapse.
(e) Any Participant making, or required by an Award to make, an
election under Section 83(b) of the Code with respect to Restricted Stock shall
deliver to SunGard, within 10 days of the filing of such election with the
Internal Revenue Service, a copy of such election.
(f) The Committee may, at the time any Award described in this Section
5 is granted, provide that any or all the Common Stock delivered pursuant to the
Award will be Restricted Stock.
(g) The Committee may, in its sole discretion, approve the sale to any
Participant of shares of Common Stock free of restrictions under the Plan for a
price which is not less than the par value of the Common Stock, provided that
the value of such Award, which equals the difference between the price and the
fair market value of such shares on the date of grant, is in lieu of a
reasonable amount of cash compensation.
5.3 Performance Awards. A Performance Award entitles the recipient to
receive, without payment, an Award or Awards described in this Section 5
following the attainment of such performance goals, during such measurement
period or periods, and on such other terms and conditions, all as the Committee
may determine. Performance goals may be related to overall corporate
performance, operating group or business unit performance, personal performance
or such other category of performance as the Committee may determine. Financial
performance may be measured by revenue, operating income, net income, earnings
per share, number of days sales outstanding in accounts receivable,
productivity, return on equity, common stock price, price-earnings multiple, or
such other financial factors as the Committee may determine.
5.4 Loans and Supplemental Grants.
(a) The Company may make a loan to a Participant ("Loan"), either in
connection with the purchase of Common Stock under the Award or the payment of
any Federal, state and local income tax with respect to income recognized as a
result of the Award. The Committee shall have the authority, in its sole
discretion, to determine whether to make a Loan, the amount, terms and
conditions of the Loan, including the interest rate (which may be zero), whether
the Loan is to be secured or unsecured or with or without recourse against the
borrower, the terms on which the Loan is to be repaid and the terms and
conditions, if any, under which the Loan may be forgiven. In no event shall any
Loan have a term (including extensions) in excess of ten years.
5
<PAGE>
(b) In connection with any Award, the Committee may grant a cash award
to the Participant ("Supplemental Grant") not to exceed an amount equal to (1)
the amount of any Federal, state and local income tax on ordinary income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate, plus (2) an additional amount on
a grossed-up basis intended to make the Participant whole on an after-tax basis
after discharging all the Participant's income tax liabilities arising from all
payments under this Section 5. Any payments under this Section 5(b) shall be
made at the time the Participant incurs Federal income tax liability with
respect to the Award.
6. Events Affecting Outstanding Awards
6.1 Termination of Service by Death or Disability. If a Participant
ceases to be an Employee (such termination of employment being hereinafter
referred to as a "Status Change") by reason of death or permanent disability (as
determined by the Committee), the following rules shall apply, unless otherwise
determined by the Committee:
(a) All Options held by the Participant at the time of such Status
Change, to the extent then exercisable, will continue to be exercisable by the
Participant's heirs, executor, administrator or other legal representative, for
a period of one year after the Participant's Status Change. After the
expiration of such one-year period, all such Options shall terminate. In no
event, however, shall an Option remain exercisable beyond the latest date on
which it could have been exercised without regard to this Section 6. All
Options held by a Participant at the time of such Status Change that are not
then exercisable shall terminate upon such Status Change.
(b) All Restricted Stock held by the Participant at the time of such
Status Change shall immediately become free of all restrictions and conditions.
(c) Any payment or benefit under a Performance Award or Supplemental
Grant to which the Participant was not irrevocably entitled at the time of such
Status Change shall be forfeited and the Award canceled as of the time of such
Status Change.
6.2 Termination of Service Other Than by Death or Disability. If a
Participant suffers a Status Change other than by reason of death or permanent
disability (as determined by the Committee), the following rules shall apply,
unless otherwise determined by the Committee at the time of grant of an Award:
(a) All Options held by the Participant at the time of such Status
Change, to the extent then exercisable, will continue to be exercisable by the
Participant for a period of three months after the Participant's Status Change.
After the expiration of such three-month period, all such Options shall
terminate. In no event, however, shall an Option remain exercisable beyond the
latest date on which it could have been exercised without regard to this Section
6. All Options held by a Participant at the time of such Status Change that are
not then exercisable shall terminate upon such Status Change.
(b) All Restricted Stock held by the Participant at the time of such
Status Change shall immediately become free of all restrictions and conditions,
unless such Status Change results from a voluntary resignation or termination
for Cause (as defined in Section 6.2(d)), in which event all Restricted Stock
held by the Participant at the time of the Status Change shall be transferred to
the Company (and, in the event the certificates representing
6
<PAGE>
such Restricted Stock are held by the Company, such Restricted Stock shall be so
transferred without any further action by the Participant) in accordance with
Section 5.2 above.
(c) Any payment or benefit under a Performance Award or Supplemental
Grant to which the Participant was not irrevocably entitled at the time of such
Status Change shall be forfeited and the Award canceled as of the date of such
Status Change.
(d) A termination by the Company of a Participant's employment with or
service to the Company shall be for "Cause" only if: (1) at least 75% of the
members of the Board determined that the Participant (i) was guilty of gross
negligence or willful misconduct in the performance of his or her duties for the
Company, or (ii) breached or violated, in a material respect, any agreement
between the Participant and the Company or any of the Company's policy
statements regarding conflicts-of-interest, insider trading or confidentiality,
or (iii) committed a material act of dishonesty or breach of trust; (2) such
determination was made at a duly convened meeting of the Board with respect to
which the Participant received at least 10 days prior written notice, had a
reasonable opportunity to make a statement and answer the allegations against
him or her; and (3) either (i) the Participant was given a reasonable
opportunity to take remedial action but failed or refused to do so, or (ii) at
least 75% of the members of the Board also determined, at such meeting, that an
opportunity to take remedial action would not have been meaningful under the
circumstances.
(e) For all purposes of this Section 6.2 and Section 6.3, (1) if a
Participant is an Employee of a subsidiary of SunGard and such subsidiary ceases
to be a subsidiary of SunGard, then the Participant's employment with the
Company will be deemed to have been terminated by the Company without Cause,
unless the Participant is transferred to SunGard or another subsidiary of
SunGard; (2) the employment with the Company of a Participant will not be deemed
to have been terminated if the Participant is transferred from SunGard to a
subsidiary of SunGard, or vice versa, or from one subsidiary of SunGard to
another; and (3) if a Participant terminates his or her employment with the
Company following a reduction in his or her rate of compensation, then the
Participant's employment with the Company will be deemed to have been terminated
by the Company without Cause.
6.3 Change in Control
(a) In the event of a Change in Control (as defined in Section
6.3(b)), the following rules will apply, unless otherwise expressly provided by
the Committee at the time of the grant of an Award or unless otherwise
determined by the Board in accordance with Section 6.3(c):
(1) Each outstanding Option shall automatically become exercisable
in full six months after the occurrence of such Change in Control or, if sooner,
upon a termination by the Company of the Participant's employment with or
service to the Company for any reason other than for Cause (as defined in
Section 6.2(d)). This provision shall not prevent an Option from becoming
exercisable sooner as to Common Stock or cash that would otherwise have become
available under such Option or Right during such period.
(2) Each outstanding share of Restricted Stock shall automatically
become free of all restrictions and conditions six months after the occurrence
of such Change in Control or, if sooner, upon a termination by the Company of
the Participant's employment with or service to the Company for any reason other
than for Cause (as defined in Section
7
<PAGE>
6.2(d)). This provision shall not prevent the earlier lapse of any restrictions
or conditions on Restricted Stock that would otherwise have lapsed during such
period.
(3) Conditions on Performance Awards and Supplemental Grants
which relate only to the passage of time and continued employment shall
automatically terminate six months after the occurrence of such Change in
Control or, if sooner, upon a termination by the Company of the Participant's
employment with or service to the Company for any reason other than for Cause
(as defined in Section 6.2(d)). This provision shall not prevent the earlier
lapse of any conditions relating to the passage of time and continued employment
that would otherwise have lapsed during such period. Performance or other
conditions (other than conditions relating only to the passage of time and
continued employment) shall continue to apply unless otherwise provided in the
instrument evidencing the Awards or in any other agreement between the
Participant and the Company or unless otherwise agreed to by the Committee.
(b) A "Change in Control" means: (i) the occurrence of an event that
would, if known to SunGard's management, be required to be reported by SunGard
under Item 1(a) of Form 8-K pursuant to the 1934 Act; or (ii) the acquisition or
receipt, in any manner, by any person (as defined for purposes of the 1934 Act)
or any group of persons acting in concert, of direct or indirect beneficial
ownership (as defined for purposes of the 1934 Act) of 20% or more of the
combined voting securities ordinarily having the right to vote for the election
of directors of SunGard; or (iii) a change in the constituency of the Board with
the result that individuals (the "Incumbent Directors") who are members of the
Board on the Effective Date (as specified in Section 9) cease for any reason to
constitute at least a majority of the Board, provided that any individual who is
elected to the Board after the Effective Date and whose nomination for election
was unanimously approved by the Incumbent Directors shall be considered an
Incumbent Director beginning on the date of his or her election to the Board; or
(iv) the sale, exchange or other disposition of all or a significant portion of
the Company's business or assets, or the execution by the Company of a binding
agreement providing for such a transaction.
(c) The provisions of Section 6.3(a) shall not apply to the extent
expressly determined by at least 75% of the Incumbent Directors at a duly
convened meeting of the Board held before the occurrence of a Change in Control.
7. Grant and Acceptance of Awards
7.1 The Committee's approval of a grant of an Award under the Plan,
including the names of Participants and the size of the Award, including the
number of shares of Common Stock subject to the Award, shall be reflected in
minutes of meetings held by the Committee or the Board or in written consents
signed by members of the Committee or the Board. Once approved by the
Committee, each Award shall be evidenced by such written instrument, containing
such terms as are required by the Plan and such other terms, consistent with the
provisions of the Plan, as may be approved from time to time by the Committee.
7.2 Each instrument may be in the form of agreements to be executed by
both the Participant and the Company, or certificates, letters or similar
instruments, which need not be executed by the Participant but acceptance of
which shall evidence agreement to the terms thereof. The receipt of an Award
shall not impose any obligation on the Participant to accept the Award.
8
<PAGE>
7.3 Except as specifically provided by the Plan or the instrument
evidencing an Award, a Participant shall not become a stockholder of SunGard
until (i) the Participant makes any required payments in respect of the Common
Stock issued or issuable pursuant to the Award, (ii) the Participant furnishes
SunGard with any required agreements, certificates, letters or other
instruments, and (iii) the Participant actually receives the shares of Common
Stock. Subject to any terms and conditions imposed by the Plan or the
instrument evidencing an Award, upon the occurrence of all of the conditions set
forth in the immediately preceding sentence, a Participant shall have all rights
of a stockholder with respect to shares of Common Stock, including, but not
limited to, the right to vote such shares and to receive dividends and other
distributions paid with respect to such shares. The Committee may, upon such
conditions as it deems appropriate, provide that a Participant will receive a
benefit in lieu of cash dividends that would have been payable on any and all
Common Stock subject to the Participant's Award, had such Common Stock been
outstanding. Without limitation, the Committee may provide for payment to the
Participant of amounts representing such dividends, either currently or in the
future, or for the investment of such amounts on behalf of the Participant.
7.4 Notwithstanding any other provision of the Plan, the Company shall not
be obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove any restriction from shares of Common Stock previously delivered under
the Plan (a) until all conditions to the Award have been satisfied or removed,
(b) until, in the opinion of SunGard's General Counsel, all applicable Federal
and state laws and regulations have been complied with, (c) if the outstanding
Common Stock is at the time listed on any stock exchange or included for
quotation on an inter-dealer system, until the shares to be delivered have been
listed or included or authorized to be listed or included on such exchange or
system upon official notice of notice of issuance, (d) if it might cause SunGard
to issue or sell more shares of Common Stock than SunGard is then legally
entitled to issue or sell, and (e) until all other legal matters in connection
with the issuance and delivery of such shares have been approved by SunGard's
General Counsel. If the sale of Common Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of an Award, such representations or agreements as SunGard's General
Counsel may consider appropriate to avoid violation of such Act and may require
that the certificates evidencing such Common Stock bear an appropriate legend
restricting transfer. If an Award is exercised by the Participant's legal
representative, the Company shall be under no obligation to deliver Common Stock
pursuant to such exercise until the Company is satisfied as to the authority of
such representative.
8. Tax Withholding
The Company shall withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all Federal, state and local withholding tax
requirements (the "withholding requirements"). In the case of an Award pursuant
to which Common Stock may be delivered, the Committee shall have the right to
require that the Participant or other appropriate person remit to the Company an
amount sufficient to satisfy the withholding requirements, or make other
arrangements satisfactory to the Committee with regard to such requirements,
prior to the delivery of any Common Stock. If and to the extent that such
withholding is required, the Committee may permit a Participant to elect at such
time and in such manner as the Committee may determine to have the Company hold
back from the shares of Common Stock to be delivered, or to deliver to the
Company, Common Stock having a value calculated to satisfy the withholding
requirement. If at the time an ISO is exercised,
9
<PAGE>
the Committee determines that the Company could be liable for withholding
requirements with respect to a disposition of the Common Stock received upon
exercise, the Committee may require as a condition of exercise that the person
exercising the ISO agree (a) to inform the Company promptly of any disposition
(within the meaning of Section 424(c) of the Code) of Common Stock received upon
exercise, and (b) to give such security as the Committee deems adequate to meet
the potential liability of the Company for the withholding requirements and to
augment such security from time to time in any amount reasonably deemed
necessary by the Committee to preserve the adequacy of such security.
9. Stockholder Approval, Effective Date and Term of Plan
The Plan was adopted by the Board on February 12, 1996, subject to the
approval of SunGard's stockholders. The Plan shall be submitted to SunGard's
stockholders for approval at SunGard's 1996 annual meeting of stockholders. If
such approval is not obtained at such meeting (or at any subsequent meeting at
which such approval is sought), then, at the discretion of the Board, this Plan
may be re-submitted to SunGard's stockholders for approval at any subsequent
annual meeting of stockholders or at any special meeting of stockholders
(including a special meeting that may be called solely for that purpose). The
Plan shall not become effective unless and until it is approved by the
affirmative vote of the holders of a majority of the outstanding shares of
SunGard's Common Stock represented and entitled to vote at a duly convened
meeting of SunGard's stockholders. If this Plan is so approved by SunGard's
stockholders, then the date of such approval shall be the effective date of this
Plan ("Effective Date"). No Award shall be granted more than ten years after
the Effective Date.
10. Effect, Amendment, Suspension and Termination
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Common Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Common Stock may
be issued to Employees or other persons or entities. The Board reserves the
right, at any time and from time to time, to amend the Plan in any way, or to
suspend or terminate the Plan, effective as of the date specified by the Board
when it takes such action, which date may be before or after the date the Board
takes such action; provided that any such action shall not affect any Awards
granted before the actual date on which such action is taken by the Board; and
further provided that the approval of SunGard's stockholders shall be required
whenever necessary for the Plan to continue to satisfy the conditions of Rule
16b-3 under the 1934 Act, Section 422 of the Code with respect to the award of
ISO (unless the Board determines that ISO shall no longer be granted under
the Plan), any bylaw, rule or regulation of the primary market system or stock
exchange on which SunGard's Common Stock is then listed or admitted to trading,
or any other applicable law, rule or regulation.
11. Other Provisions
11.1 Nothing contained in the Plan or any Award shall confer upon any
Employee or other Participant the right to continue in the employ of, or to
continue to provide service to, the Company or any affiliated corporation, or
interfere in any way with the right of the Company or any affiliated corporation
to terminate the employment or service of any Employee or other Participant for
any reason.
10
<PAGE>
11.2 Corporate action constituting an offer by SunGard of Common Stock to
any Participant under the terms of an Award shall be deemed completed as of the
date of grant of the Award, regardless of when the instrument, certificate, or
letter evidencing the Award is actually received or accepted by the Participant.
11.3 None of a Participant's rights under any Award or under the Plan may
be assigned or transferred in any manner other than by will or under the laws of
descent and distribution. The foregoing shall not, however, restrict a
Participant's rights with respect to Unrestricted Stock or the outright transfer
of cash, nor shall it restrict the ability of a Participant's heirs, estate,
beneficiaries, or personal or legal representatives to enforce the terms of the
Plan with respect to Awards granted to the Participant.
11.4 The Plan, and all Awards granted hereunder, shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania. The
headings of the Sections of the Plan are for convenience of reference only and
shall not affect the interpretation of the Plan. All pronouns and similar
references in the Plan shall be construed to be of such number and gender as the
context requires or permits. If any provision of the Plan is determined to be
unenforceable for any reason, then that provision shall be deemed to have been
deleted or modified to the extent necessary to make it enforceable, and the
remaining provisions of the Plan shall be affected.
11.5 All notices with respect to the Plan shall be in writing and shall be
hand delivered or sent by certified mail or reputable overnight delivery
service, expenses prepaid. Notices to the Company or the Committee shall be
delivered or sent to SunGard's headquarters to the attention of its General
Counsel. Notices to any Participant or holder of shares of Common Stock issued
pursuant to an Award shall be sufficient if delivered or sent to such person's
address as it appears in the regular records of the Company or SunGard's
transfer agent.
11.6 If there is any change in the capitalization of SunGard, such as by
stock dividend, stock split, combination of shares, exchange of securities,
recapitalization or other event which the Committee deems, in its sole
discretion, to be similar circumstances, the Committee may make such adjustments
to the number and/or kind of shares of stock or securities subject to Awards
then outstanding or subsequently granted, any exercise prices relating to such
Awards and any other provision of such Awards affected by such change, as the
Committee may determine in its sole discretion. The Committee may also make
such adjustments to take into account material changes in law or in accounting
practices or principles, mergers, consolidations, acquisitions, dispositions or
similar corporate transactions, or any other event, as the Committee may
determine in its sole discretion.
11.7 The Committee may agree at any time, upon request of a Participant, to
defer the date on which any payment under an Award shall be made.
11.8 In any case that a Participant purchases Common Stock under an Award
for a price equal to the par value of the Common Stock, the Committee may
determine, in its sole discretion, that such price has been satisfied by past
services rendered by the Participant.
11.9 For the purposes of the Plan and any Award granted hereunder, unless
otherwise determined by the Committee, the term "fair market value" of Common
Stock on or as of a specified date shall mean either (i) in the case of an
Option not granted under a Performance Award, the last sale price (as defined
below in this Section) for one share of Common Stock
11
<PAGE>
on the last trading day on or before the specified date, or, if the foregoing
does not apply, the market value determined by the Committee; or (ii) in the
case of an Option granted under a Performance Award, the average of the last
sale prices during the first ten trading days beginning on or after the
specified date, or the average of the last sale prices during such other period
of time beginning on or after the specified date as is determined by the
Committee, or, if the foregoing does not apply, the market value determined by
the Committee. "Last sale price" means the last sale price reported on The
Nasdaq Stock Market or on such other primary market system or stock exchange on
which SunGard's Common Stock is then listed or admitted to trading.
THE UNDERSIGNED CERTIFIES THAT THIS PLAN WAS DULY APPROVED BY THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS OF SUNGARD DATA SYSTEMS INC., AND WAS DULY
ADOPTED BY THE BOARD OF DIRECTORS OF SUNGARD DATA SYSTEMS INC., AT MEETINGS DULY
HELD ON THE TWELFTH DAY OF FEBRUARY, 1996.
/s/ Lawrence A. Gross
----------------------------
LAWRENCE A. GROSS, SECRETARY
OF SUNGARD DATA SYSTEMS INC.
12
<PAGE>
EXHIBIT 10.18
SUNGARD DATA SYSTEMS INC.
SUMMARY DESCRIPTION OF THE COMPANY'S
LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN
In 1994, SunGard Data Systems Inc. established a long-term incentive
compensation plan for the chief executive officers of its operating business
groups. The principal purposes of this plan are to further align the interests
of the group chief executive officers with those of the Company's stockholders
and to further reward successful performance.
The plan involves the grant of long-term executive incentive compensation awards
that will allow each group chief executive officer to earn options to purchase
shares of the Company's common stock, based upon the cumulative growth in his
group's operating income over three years. Stock options earned under the
awards will be nonqualified options (i.e., will not qualify as incentive stock
options for tax purposes), will be granted as of the first trading day after the
end of the three-year incentive period, will have a term of ten years beginning
on the date of grant, will be fully vested beginning on the date of grant, and
will be fully exercisable no later than six months after the date of grant.
The number of stock options that may be earned under each award will depend upon
whether the cumulative operating income growth during the three-year incentive
period reaches certain minimum or goal targets. If the minimum target is not
achieved, then no options will be earned. If actual results are between the
minimum and goal targets, then the number of option shares will be determined by
interpolation, and the exercise price will equal the average of the last
reported sale prices of the Company's common stock on the first ten trading days
of the incentive period. If the goal target is exceeded, then the number of
option shares will be the goal amount, and, in lieu of additional cash
compensation, the exercise price will be reduced depending upon the amount by
which the goal target was exceeded, subject to a minimum price.
Effective for 1996, this long-term incentive compensation plan was extended, on
very similar terms, to also cover corporate officers (excluding the Chief
Executive Officer), business unit presidents and certain other key employees.
The Company currently plans, but will have no legal obligation or commitment, to
continue granting similar long-term executive incentive compensation awards to
the group chief executive officers, corporate officers (excluding the Chief
Executive Officer), business unit presidents and certain other key employees on
an annual basis, subject to approval or discontinuation by the Compensation
Committee of the Company's Board of Directors.
<PAGE>
Exhibit 11.1
SunGard Data Systems Inc.
Statement Re Computation of Per Share Earnings/(1)/
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
PRIMARY:
Average common shares outstanding... 38,812 37,670 34,988
Dilutive stock options, net
of treasury shares............... 824 828 928
------- ------- -------
Adjusted common shares outstanding.. 39,636 38,498 35,916
======= ======= =======
Net income.......................... $48,672 $43,087 $38,474
======= ======= =======
Net income per common share......... $ 1.23 $ 1.12 $ 1.07
======= ======= =======
FULLY DILUTED:
Average common shares outstanding... 38,812 37,670 34,988
Assumed conversion of 8 1/4%
subordinated debentures.......... -- -- 2,412
Dilutive stock options, net
of treasury shares............... 856 832 952
------- ------- -------
Adjusted common shares outstanding.. 39,668 38,502 38,352
======= ======= =======
Net income.......................... $48,672 $43,087 $38,474
Assumed interest expense savings
on subordinated debentures,
net of related income taxes...... -- -- 1,565
------- ------- -------
Adjusted net income................. $48,672 $43,087 $40,039
======= ======= =======
Net income per common share......... $ 1.23 $ 1.12 $ 1.04
======= ======= =======
</TABLE>
(1) All shares and per share amounts have been adjusted for a July 1995 two-
for-one stock split.
<PAGE>
EXHIBIT 13.1
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL INFORMATION
- ------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts) 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA /(1)/
- ------------------------------------------------------------------------------------------------------------------------
Revenues $283,550 $324,570 $381,372 $437,190 $532,628
- ------------------------------------------------------------------------------------------------------------------------
Income from operations 42,491 50,336 59,645 70,326 80,076
- ------------------------------------------------------------------------------------------------------------------------
Net income 21,467 25,808 38,474 43,087 48,672
- ------------------------------------------------------------------------------------------------------------------------
Net income per share: /(2)/
- ------------------------------------------------------------------------------------------------------------------------
Primary .70 .82 1.07 1.12 1.23
- ------------------------------------------------------------------------------------------------------------------------
Fully diluted .68 .79 1.04 1.12 1.23
- ------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
- ------------------------------------------------------------------------------------------------------------------------
Total assets $313,459 $365,580 $418,135 $485,740 $579,734
- ------------------------------------------------------------------------------------------------------------------------
Total short-term and long-term debt 87,820 89,790 6,523 10,567 10,002
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 162,998 189,899 316,960 359,292 422,292
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 1993 includes after-tax gain on sale of product line of $3,371, or $0.09
per share on a fully diluted basis. 1995 includes merger costs of $4,238,
or $0.10 per share on a fully diluted basis. See Note 2 of Notes to
Consolidated Financial Statements.
(2) All per share amounts have been adjusted for a July 1995 two-for-one stock
split. See Note 10 of Notes to Consolidated Financial Statements.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Quarterly Financial Information p. 40
- --------------------------------------------------------------------------------
Stock Information p. 40
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and
Results of Operations p. 41
- --------------------------------------------------------------------------------
Consolidated Statements of Income p. 45
- --------------------------------------------------------------------------------
Consolidated Balance Sheets p. 46
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows p. 47
- --------------------------------------------------------------------------------
Consolidated Statement of Stockholders' Equity p. 48
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements p. 50
- --------------------------------------------------------------------------------
Report of Independent Accountants p. 56
- --------------------------------------------------------------------------------
- --
39 1995 Annual Report
- --
<PAGE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share amounts) First Second Third Fourth
Quarter Quarter Quarter Quarter
------------------------------------------
<S> <C> <C> <C> <C>
1995 /(1)/
Revenues....................................... $121,490 $125,119 $132,114 $153,905
Income before income taxes..................... 18,850 20,707 21,292 24,263
Net income..................................... 11,121 12,218 12,008 13,325
Net income per common share: /(2)/
Primary...................................... .29 .32 .31 .31
Fully diluted................................ .29 .32 .31 .31
1994
Revenues....................................... $102,152 $104,592 $109,908 $120,538
Income before income taxes..................... 15,972 17,657 18,210 20,689
Net income..................................... 9,423 10,418 10,744 12,502
Net income per common share: /(2)/
Primary...................................... .24 .27 .28 .33
Fully diluted................................ .24 .27 .28 .32
</TABLE>
(1) 1995 includes third-quarter merger costs of $1,351, or $0.03 per share on
a fully diluted basis, and fourth-quarter merger costs of $2,887, or
$0.07 per share on a fully diluted basis. See Note 2 of Notes to
Consolidated Financial Statements.
(2) All per share amounts have been adjusted for a July 1995 two-for-one
stock split. See Note 10 of Notes to Consolidated Financial Statements.
STOCK INFORMATION
The common stock of SunGard Data Systems Inc. trades on the National Market of
The Nasdaq Stock Market and the London Stock Exchange under the symbol SNDT. At
March 8, 1996, the Company had approximately 2,600 stockholders of record. No
dividends have ever been paid on the Company's common stock. The Company's
policy is to retain earnings for use in its business.
The following table indicates high and low sales prices per share of the
Company's common stock, as reported on Nasdaq. All prices reflect the Company's
July 1995 two-for-one stock split.
<TABLE>
<S> <C> <C>
Calendar Year 1994
First Quarter.................. $20 1/2 $17 1/4
Second Quarter................. 20 3/8 15 3/4
Third Quarter.................. 19 3/8 16 3/8
Fourth Quarter................. 20 1/8 16 7/8
Calendar Year 1995
First Quarter.................. $24 3/8 $17 3/4
Second Quarter................. 26 3/4 21 5/8
Third Quarter.................. 31 3/4 26 1/8
Fourth Quarter................. 32 1/2 25 1/4
</TABLE>
The last sale price of the Company's common stock on March 8, 1996, as reported
on Nasdaq, was $34 3/4 per share.
- --
40 SunGard Data Systems Inc.
- --
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Statements about the Company's expectations and all other statements in this
Annual Report other than historical facts are forward-looking statements. Since
these statements involve risks and uncertainties and are subject to change at
any time, the Company's actual results could differ materially from expected
results. The Company derives most of its forward-looking statements from its
operating budgets and forecasts, which are based upon many detailed assumptions.
While the Company believes that its assumptions are reasonable, it cautions that
there are inherent difficulties in predicting certain important factors,
especially the timing and magnitude of software sales, the timing and scope of
technological advances, the performance of recently acquired businesses, the
prospects for future acquisitions, and the overall condition of the financial
services industry. These factors, as and when applicable, are discussed in the
Company's filings with the Securities and Exchange Commission, including its
Form 10-K for the year ended December 31, 1995, a copy of which may be obtained
from the Company without charge.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain amounts
included in the Consolidated Statements of Income of SunGard Data Systems Inc.,
the relative percentage that those amounts represent to consolidated revenues
(unless otherwise indicated), and the percentage change in those amounts from
period to period.
<TABLE>
<CAPTION>
Year Ended December 31, Percent of Revenues /(1)/ Percent
(in millions) Year Ended December 31, Increase (Decrease) /(1)/
----------------------- ----------------------- -----------------------------
1995 1994 1993 1995 1994 1993 1995 vs. 1994 1994 vs. 1993
----------------------- ----------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Investment support systems............. $330.6 $271.1 $243.0 62% 62% 64% 22% 12%
Disaster recovery services............. 162.3 138.7 113.2 31 32 30 17 23
Computer services and other............ 39.7 27.4 25.2 7 6 6 45 9
------------------------- -----------------------
$532.6 $437.2 $381.4 100% 100% 100% 22 15
========================= =======================
Costs and Expenses
Cost of sales and direct operating..... $234.0 $194.8 $173.1 44% 45% 46% 20% 13%
Sales, marketing and
administration...................... 109.2 89.6 76.9 21 20 20 22 16
Product development.................... 50.4 36.8 35.1 9 8 9 37 5
Depreciation........................... 30.8 24.3 20.4 6 6 5 27 19
Amortization........................... 23.9 21.4 16.2 4 5 4 12 32
Merger costs........................... 4.2 -- -- 1 -- -- -- --
------------------------- -----------------------
$452.5 $366.9 $321.7 85% 84% 84% 23 14
========================= =======================
Operating Income
Investment support systems /(2)/....... $ 51.7 $ 43.9 $ 38.5 16% 16% 16% 18% 14%
Disaster recovery services /(2)/....... 34.9 29.2 25.0 22 21 22 20 17
Computer services and other /(2)/...... 5.1 4.8 3.2 13 18 13 6 50
Corporate administration............... (7.4) (7.6) (7.1) (1) (2) (2) (3) 6
Merger costs........................... (4.2) -- -- (1) -- -- -- --
-------------------------
$ 80.1 $ 70.3 $ 59.6 15 16 16 14 18
=========================
</TABLE>
(1) All percentages are calculated using actual amounts rounded to the nearest
$1,000.
(2) Percent of revenues is calculated as a percent of investment support
systems, disaster recovery services, and computer services and other revenues,
respectively.
- --
41 1995 Annual Report
- --
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS CONTINUED
INCOME FROM OPERATIONS
Investment Support Systems (ISS)
The Company's ISS business is comprised of more than twenty operating units of
various sizes and complexities. Historically, most operating units have met or
exceeded expectations, while some have not, yielding overall results for the
entire business at approximately the levels expected.
The ISS operating margin was 16% for the years 1993 through 1995. The Company
expects that the full-year 1996 ISS operating margin will remain approximately
16%. The most important factors affecting the ISS operating margin continue to
be the timing and magnitude of software license revenues, the performance of
recently acquired businesses and the level of spending on product development.
Since overall ISS results reflect the sum of the diverse results of
individual operating units, there could be an adverse impact on ISS revenues and
margins if too many individual units are unable to meet expectations.
Disaster Recovery Services (DRS)
The small increase in the DRS operating margin in 1995 compared to 1994 is
attributable primarily to an increase in revenues resulting from new contract
signings, contract renewals and the results of cost-containment efforts related
to selling, marketing and administrative costs. The increase is net of the
impact of an increase in operating costs due to equipment and facilities
improvements. The small decline in the DRS operating margin in 1994 compared to
1993 is attributable primarily to increased spending on computer system upgrades
and new marketing programs. The decline is net of the positive impacts of
acquired businesses, new contract signings and contract renewals. The absence of
higher disaster fees earned in 1993, primarily in connection with the World
Trade Center bombing in February 1993, also contributed to the decline in the
1994 DRS operating margin compared to 1993.
The Company expects that the full-year 1996 DRS operating margin will remain
the same as in 1995. The most important factors affecting the DRS operating
margin continue to be the rate of new contract signings, contract renewals and
the timing and magnitude of equipment and facilities expenditures.
Computer Services and Other (CS)
The decline in the CS operating margin in 1995 compared to 1994 is due to the
initial effect of acquired businesses. Excluding acquired businesses, which were
accounted for as poolings-of-interests, the 1995 CS operating margin was 18%.
The improvement in the CS operating margin in 1994 compared to 1993 is due
primarily to an increase in revenues. The improvement is net of the impact of
lower royalties associated with certain product rights. Additionally, the 1993
operating margin was affected negatively by costs associated with a relocation
of the principal CS data center to a new facility in Voorhees, New Jersey.
The Company expects that the CS operating margin will improve for the full-
year 1996 compared to 1995. The most important factors affecting the CS
operating margin are the performance of acquired businesses, which are primarily
dependent upon the timing and magnitude of software license revenues, and
revenue growth in remote-access computer processing and automated mailing
services.
REVENUES
Total revenues increased $95.4 million and $55.8 million in 1995 and 1994,
respectively. Excluding acquired businesses, revenues increased $62.6 million
and $36.6 million, or 15% and 10%, in 1995 and 1994, respectively. Recurring
revenues derived from remote processing, disaster recovery and software
maintenance services are approximately $425.6 million, $367.3 million and $321.0
million in 1995, 1994 and 1993, respectively, representing 80% of consolidated
revenues in 1995 and 84% of consolidated revenues in 1994 and 1993. The decline
in the percentage of recurring revenues during 1995 compared to 1994 and 1993 is
due to an increase in the percentage of software license revenues, which
increased to 12% of total revenues in 1995 from 8% of total revenues in 1994.
This increase was due primarily to strong growth in software license revenues
from both the Trading Systems Group's products and acquired businesses.
The Company expects total revenues to increase in 1996 due primarily to an
expected increase in software license revenues, although at a lower rate than in
1995, a full year of operations from acquired businesses, and continued growth
in DRS revenues, especially from midrange platforms, although also at a lower
rate than in 1995.
- --
42 SunGard Data Systems Inc.
- --
<PAGE>
The Company sells a significant portion of its products and services to the
financial services industry and could be directly affected by the overall
condition of that industry. The Company expects that the consolidation trend in
the financial services industry will continue, but it is unable to predict what
effect, if any, this trend may have.
Investment Support Systems
ISS revenues increased $59.5 million and $28.1 million in 1995 and 1994,
respectively. Excluding acquired businesses, revenues increased $39.7 million
and $18.3 million, or 15% and 8%, in 1995 and 1994, respectively. The 1995
increase is attributable to a $23.6 million, or 37%, increase in software
license and professional services revenues and a $16.1 million, or 8%, increase
in remote processing and software maintenance revenues. The 1994 increase is
attributable to a $12.8 million increase in remote processing and software
maintenance revenues and a $5.5 million increase in software license and
professional services revenues.
Disaster Recovery Services
DRS revenues increased $23.6 million and $25.5 million in 1995 and 1994,
respectively. Excluding acquired businesses, revenues increased $20.3 million
and $15.1 million, or 15% and 14%, in 1995 and 1994, respectively. The increases
in 1995 and 1994 are due to $18.7 million and $13.3 million respective increases
in revenues primarily from new contract signings and contract renewals, a
significant portion of which were in the Company's midrange platforms, and $1.6
million and $1.8 million respective increases in software license and
professional services revenues.
Computer Services and Other
CS revenues increased $12.3 million and $2.2 million in 1995 and 1994,
respectively. Excluding acquired businesses, 1995 revenues increased $2.5
million, or 9%, compared to 1994. Excluding 1993 revenues attributable to a
product line sold in February 1993, 1994 revenues increased $3.3 million, or
14%. The 1995 and 1994 increases are due to increased volume in the Company's
remote-access computer services business and, to a lesser extent, increased
revenues in the Company's mailing services business.
COSTS AND EXPENSES
Cost of sales and direct operating expenses increased $39.2 million and $21.7
million in 1995 and 1994, respectively. The increases are due primarily to
acquired businesses and computer and facilities improvements. The 1995 decrease
in cost of sales and direct operating expenses as a percentage of revenues is
due primarily to increased product development spending. The 1994 decrease is
due primarily to the 1993 purchase of the CS data center and the fact that in
1994 leased equipment represented a lower percentage of total capital
requirements for midrange DRS offerings. These factors caused depreciation
expense to increase at a faster rate than cost of sales and direct operating
expenses during 1994.
Sales, marketing and administration expenses increased $19.6 million and
$12.6 million in 1995 and 1994, respectively. The 1995 increase is due
primarily to acquired businesses and increased sales activity, particularly in
the Trading Systems Group. The 1994 increase is due primarily to acquired
businesses and increased sales activity in the DRS business.
Product development expenses increased $13.6 million and $1.7 million in 1995
and 1994, respectively. The 1995 increase is due primarily to acquired
businesses and increased development spending in connection with various ISS
products. The 1994 increase is due primarily to development spending in
connection with various ISS products. In addition, development costs capitalized
were $3.6 million and $1.9 million in 1995 and 1994, respectively.
Depreciation of property and equipment increased $6.5 million and $3.9
million in 1995 and 1994, respectively. The 1995 increase is due to acquired
businesses and purchases of disaster recovery computer and telecommunications
equipment. The 1994 increase is due to purchases of disaster recovery
telecommunications and midrange computer equipment, the new CS data center and
acquired businesses.
Merger costs of $4.2 million ($0.10 per fully diluted share) were incurred
during the third and fourth quarters of 1995 in connection with three
acquisitions accounted for as poolings-of-interests (see Note 2 of Notes to
Consolidated Financial Statements). These costs consist primarily of investment
banking, legal and accounting fees that are not deductible for income tax
purposes.
- --
43 1995 Annual Report
- --
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS CONTINUED
Net interest income increased $2.8 million and $2.7 million in 1995 and 1994,
respectively. The 1995 increase is due primarily to a change in mix between
taxable and tax-exempt instruments and an increase in average cash and
investment balances. The 1994 increase is due primarily to the conversion of the
Company's subordinated debentures on May 12, 1993.
The Company's effective income tax rate was 42.8% and 40.6% in 1995 and 1994,
respectively. The 1995 effective income tax rate was higher than in 1994 due to
nondeductible merger costs associated with 1995 acquisitions accounted for as
poolings-of-interests (see Note 2 of Notes to Consolidated Financial
Statements). Excluding merger costs, the 1995 effective income tax rate
approximates the 1994 effective income tax rate. The 1993 effective income tax
rate was lower than in 1994 due primarily to the sale of a product line.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments as of December 31, 1995 increased $12.6 million
from December 31, 1994, to $115.2 million. Cash flow from operations increased
slightly in 1995 compared to 1994. The increase in accounts receivable and other
current assets is due primarily to an increase in software license sales in
December 1995 and acquired businesses. The Company expects that capital spending
for property and equipment during 1996 will increase from $31.7 million in 1995
to approximately $37.0 million due to businesses acquired in 1995 and
anticipated equipment and facilities improvements.
During the year ended December 31, 1995, as adjusted for a two-for-one stock
split (see Note 10 of Notes to Consolidated Financial Statements), the Company
paid $10.0 million for 400,000 shares of its common stock, which were
repurchased under a previously announced stock repurchase plan. During 1996, the
Company expects to continue its systematic pattern of stock repurchases in order
to satisfy the needs of its employee stock purchase, equity incentive and other
stock award plans.
The Company has two revolving credit agreements for an aggregate of $25.0
million. In order to remain eligible for borrowing under the agreements, the
Company must, among other requirements, maintain a defined minimum tangible net
worth and limit its total debt. There had been no borrowing under these
agreements through December 31, 1995.
At December 31, 1995, the Company's remaining commitments consist primarily of
operating leases for computer equipment and facilities aggregating $144.4
million, of which $45.0 million will be paid in 1996. The Company expects that
its existing cash resources and cash generated from operations will be
sufficient for the foreseeable future to meet its operating requirements,
contingent payments in connection with business acquisitions, and ordinary
capital spending needs. Furthermore, the Company believes that it has the
capacity to borrow funds and issue equity to finance additional capital needs.
- --
44 SunGard Data Systems Inc.
- --
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In thousands, except per share amounts) Year Ended December 31,
----------------------------------------------------
1995 1994 1993
----------------------------------------------------
<S> <C> <C> <C>
Revenues......................................................... $532,628 $437,190 $381,372
----------------------------------------------------
Costs and expenses:
Cost of sales and direct operating.......................... 234,011 194,838 173,111
Sales, marketing and administration......................... 109,226 89,579 76,968
Product development......................................... 50,338 36,741 35,071
Depreciation of property and equipment...................... 30,807 24,268 20,383
Amortization of intangible assets........................... 23,932 21,438 16,194
Merger costs................................................ 4,238 -- --
----------------------------------------------------
452,552 366,864 321,727
----------------------------------------------------
Income from operations........................................... 80,076 70,326 59,645
Gain on sale of product line................................ -- -- 4,071
Interest income (expense), net.............................. 5,036 2,202 (525)
----------------------------------------------------
Income before income taxes....................................... 85,112 72,528 63,191
Income taxes................................................ 36,440 29,441 24,717
----------------------------------------------------
Net income....................................................... $ 48,672 $ 43,087 $ 38,474
====================================================
Net income per common share:
Primary..................................................... $1.23 $1.12 $1.07
====================================================
Fully diluted............................................... $1.23 $1.12 $1.04
====================================================
Shares used to compute net income per common share:
Primary..................................................... 39,636 38,498 35,916
====================================================
Fully diluted............................................... 39,668 38,502 38,352
====================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------
45 1995 Annual Report
- ------
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except per share amounts) December 31,
--------------------------------------
1995 1994
--------------------------------------
<S> <C> <C>
Assets
Current:
Cash and equivalents..................................................... $ 79,091 $ 68,491
Short-term investments, at cost, which approximates market............... 36,066 34,107
Trade receivables, less allowance for
doubtful accounts of $6,426 and $7,276................................ 118,169 85,339
Earned but unbilled receivables.......................................... 25,090 13,488
Prepaid expenses and other current assets................................ 16,020 14,380
Deferred income taxes.................................................... 6,727 6,490
--------------------------------------
Total current assets.................................................. 281,163 222,295
Property and equipment, less accumulated depreciation
of $126,580 and $105,036................................................. 95,745 90,436
Software products, less accumulated amortization
of $59,033 and $46,943................................................... 35,375 23,964
Goodwill, less accumulated amortization of $19,658 and $15,035................ 116,455 95,822
Other intangible assets, less accumulated amortization
of $27,015 and $20,452................................................... 50,996 53,223
--------------------------------------
$579,734 $485,740
======================================
Liabilities and Stockholders' Equity
Current:
Short-term and current portion of long-term debt......................... $ 6,761 $ 5,673
Accounts payable......................................................... 12,428 7,628
Accrued compensation and benefits........................................ 29,330 22,354
Other accrued expenses................................................... 15,773 14,214
Accrued income taxes..................................................... 10,639 6,049
Deferred revenues........................................................ 72,642 57,492
--------------------------------------
Total current liabilities............................................. 147,573 113,410
--------------------------------------
Long-term debt................................................................ 3,241 4,894
--------------------------------------
Deferred income taxes......................................................... 6,628 8,144
--------------------------------------
Commitments
Stockholders' equity:
Preferred stock, par value $.01 per share; 5,000 shares authorized....... -- --
Common stock, par value $.01 per share; 60,000 shares authorized;
42,111 and 18,898 shares issued....................................... 421 189
Capital in excess of par value........................................... 171,558 162,235
Notes receivable for common stock........................................ (2,817) --
Restricted stock plans................................................... (220) (858)
Retained earnings........................................................ 260,172 205,121
Foreign currency translation adjustment.................................. (1,279) (2,366)
--------------------------------------
427,835 364,321
Treasury stock, at cost, 189 and 131 shares.............................. (5,543) (5,029)
--------------------------------------
Total stockholders' equity............................................ 422,292 359,292
--------------------------------------
$579,734 $485,740
======================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------
46 SunGard Data Systems Inc.
- ------
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) Year Ended December 31,
---------------------------------------------
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Cash Flow From Operations
Net income........................................................ $ 48,672 $ 43,087 $ 38,474
Reconciliation of net income to cash flow from operations:
Depreciation and amortization................................... 54,739 45,706 36,577
Charges for stock option and award plans........................ 1,886 1,462 1,432
Net gain on sale of product line
and other noncash credits...................................... -- (176) (3,643)
Deferred income tax provision (benefit)......................... (1,374) (3,668) 710
--------------------------------------------
103,923 86,411 73,550
Cash provided by (used for) working capital, net of effect of
acquired businesses and sale of product line:
Accounts receivable and other current assets................... (30,650) (11,536) (19,574)
Accounts payable and accrued expenses.......................... 9,729 4,594 (190)
Deferred revenues.............................................. 7,007 10,300 6,590
--------------------------------------------
Cash flow from operations.................................... 90,009 89,769 60,376
--------------------------------------------
Financing Activities
Cash received under employee stock plans....................... 5,999 3,687 4,034
Cash paid for treasury stock................................... (10,029) (7,979) (2,406)
Repayments of debt............................................. (8,594) (2,121) (2,530)
--------------------------------------------
Total financing activities................................... (12,624) (6,413) (902)
--------------------------------------------
Long-Term Investment Activities
Cash paid for acquired businesses, net of cash acquired........ (27,294) (28,061) (30,808)
Cash paid for property and equipment........................... (31,652) (34,286) (35,079)
Cash paid for software and other assets........................ (5,879) (3,191) (4,139)
Cash received from sale of assets.............................. -- -- 11,923
---------------------------------------------
Total long-term investment activities....................... (64,825) (65,538) (58,103)
---------------------------------------------
Increase in cash and equivalents before short-term
investment activities........................................... 12,560 17,818 1,371
Short-Term Investment Activities
Purchase of short-term investments.............................. (56,188) (48,775) (31,140)
Maturities of short-term investments............................ 54,228 47,493 21,627
---------------------------------------------
Increase (decrease) in cash and equivalents......................... 10,600 16,536 (8,142)
Beginning cash and equivalents...................................... 68,491 51,955 60,097
---------------------------------------------
Ending cash and equivalents......................................... $ 79,091 $ 68,491 $ 51,955
==============================================
Noncash Activities
Reduction of long-term debt, net of debt issuance costs,
resulting from conversion of subordinated debentures
into common stock.......................................... $ -- $ -- $ (83,993)
==============================================
Supplemental Information
Interest paid.................................................. $ 919 $ 703 $ 4,369
==============================================
Income taxes paid.............................................. $ 33,556 $ 30,405 $ 24,431
==============================================
Acquired businesses:
Property and equipment....................................... $ 4,719 $ 2,250 $ 4,843
Software products............................................ 14,597 2,620 4,872
Goodwill and other intangible assets......................... 31,933 38,274 30,596
Purchase price obligations and debt assumed.................. (7,796) (5,184) (2,963)
Deferred income taxes........................................ 379 (3,234) --
Net current liabilities assumed.............................. (1,117) (6,665) (6,540)
Common stock issued.......................................... (15,421) -- --
----------------------------------------------
Cash paid for acquired businesses, net of cash acquired of
$8,077 and $12,777 in 1995 and 1994, respectively...... $ 27,294 $ 28,061 $ 30,808
==============================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ------
47 1995 Annual Report
- ------
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(In thousands) Common Stock
---------------------------- Capital in
Number of Par Excess of
Shares Value Par Value
------------------------------------------------------------------
<S> <C> <C> <C>
Balances, December 31, 1992................................ 15,264 $153 $ 72,345
Net income.............................................. -- -- --
Shares issued upon conversion of subordinated
debentures............................................ 3,310 33 84,167
Purchase of common stock................................ -- -- --
Shares issued under restricted stock plans.............. 5 -- 145
Shares issued under stock purchase, option
and award plans....................................... 222 2 3,310
Compensation expense related to restricted
stock plans........................................... -- -- --
Income tax benefit arising from transactions in
common stock options.................................. -- -- 1,182
Foreign currency translation adjustment................. -- -- --
------------------------------------------------------------------
Balances, December 31, 1993................................ 18,801 188 161,149
Net income.............................................. -- -- --
Purchase of common stock................................ -- -- --
Shares issued under restricted stock plans, net......... 5 -- 164
Shares issued under stock purchase, option
and award plans....................................... 92 1 522
Compensation expense related to restricted
stock plans........................................... -- -- --
Income tax benefit arising from transactions
in common stock options............................... -- -- 400
Foreign currency translation adjustment................. -- -- --
------------------------------------------------------------------
Balances, December 31, 1994................................ 18,898 189 162,235
Poolings-of-interests................................... 4,253 43 8,878
Net income.............................................. -- -- --
Two-for-one common stock split.......................... 18,898 189 (189)
Purchase of common stock................................ -- -- --
Note repayments......................................... -- -- --
Shares issued under stock purchase, option
and award plans....................................... 62 -- 84
Compensation expense related to restricted
stock plans........................................... -- -- --
Income tax benefit arising from transactions
in common stock options............................... -- -- 550
Foreign currency translation adjustment................. -- -- --
------------------------------------------------------------------
Balances, December 31, 1995................................ 42,111 $421 $171,558
===================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
- ----
48 SunGard Data Systems Inc.
- ----
<PAGE>
<TABLE>
<CAPTION>
Foreign Treasury Stock
Notes Restricted Currency --------------------------
Receivable for Stock Retained Translation Number of
Common Stock Plans Earnings Adjustment Shares Cost Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ -- $(3,443) $123,560 $(2,714) (1) $ (2) $189,899
-- -- 38,474 -- -- -- 38,474
-- -- -- -- -- -- 84,200
-- -- -- -- (69) (2,406) (2,406)
-- (145) -- -- -- -- --
-- -- -- -- 64 2,194 5,506
-- 1,432 -- -- -- -- 1,432
-- -- -- -- -- -- 1,182
-- -- -- (1,327) -- -- (1,327)
- -----------------------------------------------------------------------------------------------------------------------------------
-- (2,156) 162,034 (4,041) (6) (214) 316,960
-- -- 43,087 -- -- -- 43,087
-- -- -- -- (212) (7,979) (7,979)
-- (164) -- -- -- -- --
-- -- -- -- 87 3,164 3,687
-- 1,462 -- -- -- -- 1,462
-- -- -- -- -- -- 400
-- -- -- 1,675 -- -- 1,675
- -----------------------------------------------------------------------------------------------------------------------------------
-- (858) 205,121 (2,366) (131) (5,029) 359,292
(3,332) -- 9,800 32 -- -- 15,421
-- -- 48,672 -- -- -- 48,672
-- -- -- -- (91) -- --
-- -- -- -- (400) (10,029) (10,029)
515 -- -- -- -- -- 515
-- -- (3,421) -- 433 9,515 6,178
-- 638 -- -- -- -- 638
-- -- -- -- -- -- 550
-- -- -- 1,055 -- -- 1,055
- -----------------------------------------------------------------------------------------------------------------------------------
$(2,817) $ (220) $260,172 $(1,279) (189) $ (5,543) $422,292
===================================================================================================================================
</TABLE>
- ----
49 1995 Annual Report
- ----
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation
SunGard Data Systems Inc. (the Company), through its wholly owned subsidiaries,
operates in a single industry segment, principally in the United States,
providing computer services, principally proprietary processing services and
software to the financial services industry, computer disaster recovery services
and healthcare information systems. The consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant
intercompany transactions and accounts have been eliminated.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Future events
could cause actual results to differ from those estimates.
The Company amortizes intangible assets, including software product costs,
over periods that it believes approximate the related useful lives of those
assets based upon estimated future operating results and cash flows of the
underlying business operations. It is possible that the Company's estimates of
those lives could change based upon changes in numerous factors, including
product demand, market conditions, technological developments, economic
conditions and competitor activities.
Revenue Recognition
Revenues from remote processing, disaster recovery and software maintenance
services are recognized over the terms of the related contracts or as the
related service is provided. License-fee revenues from proprietary products are
generally recognized upon the signing of a contract and delivery of the product,
except in those instances where the Company provides training, installation and
other significant post-delivery services. In those instances, a portion of the
contract price is deferred and recognized as the related services are provided.
Revenues from fixed-fee contracts requiring a significant amount of program
modification or customization, installation, systems integration and/or related
services are recognized based upon the estimated percentage of completion.
Changes in estimated costs during the course of a contract are reflected in the
period in which the facts become known.
Cash Equivalents and Short-Term Investments
Cash in excess of daily requirements is invested primarily in institutional
money-market funds, commercial paper, time deposits, certificates of deposit and
short-term bonds. Investments purchased with a maturity of three months or less
at the date of purchase are considered to be cash equivalents; those with
maturities greater than three months are considered to be short-term
investments.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist of temporary cash and short-term investments and
receivables. By policy the Company places its temporary cash and short-term
investments with institutions of high credit-quality and limits the amount of
credit exposure to any one issuer. The Company sells a significant portion of
its products and services to the financial services industry and could be
directly affected by the overall condition of that industry. The Company
believes that any credit risk associated with receivables is substantially
mitigated by a relatively large number of customer accounts and reasonably short
collection terms. Receivables are stated at estimated net realizable value,
which approximates fair value.
Property and Equipment
Property and equipment are recorded at cost, and depreciation is provided on the
straight-line method over the estimated useful lives of the related assets (two
to eight years for equipment and ten to forty years for buildings and
improvements). Leasehold improvements are amortized ratably over their remaining
lease term or useful life, if shorter.
- ----
50 SunGard Data Systems Inc.
- ----
<PAGE>
Foreign Currency Translation
The functional currency of each of the Company's foreign operations is the local
currency of the country in which the operation is headquartered. Accordingly,
all assets and liabilities are translated into U.S. dollars using exchange rates
in effect at the balance sheet date. Revenues and expenses are translated using
average exchange rates during the period. Increases and decreases in net assets
resulting from foreign currency translation are accumulated as a separate
component of stockholders' equity.
Software Development and Product Costs
Product development costs are expensed as incurred and consist primarily of
design and development costs of new products and significant enhancements
incurred prior to the establishment of technological feasibility.
Costs associated with purchased software, software obtained through business
acquisitions, and new products and enhancements to existing products that meet
technological feasibility and recoverability tests are capitalized and amortized
over the estimated useful lives of the related products, generally five to ten
years, using the straight-line method or the ratio of current revenues to
current and anticipated revenues from such software, whichever provides the
greater amortization. Amortization of all software products aggregated
$9,601,000, $9,778,000 and $8,564,000 during 1995, 1994 and 1993, respectively.
Goodwill
Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized using the straight-line method over periods ranging
from twenty to forty years. The recoverability of goodwill is periodically
reviewed by the Company. In assessing recoverability, many factors are
considered, including operating results and cash flows of the acquired
businesses, as well as benefits that the acquired businesses contribute to
existing and related products, services and markets. The Company believes that
no impairment of goodwill existed at December 31, 1995.
Other Intangible Assets
Other intangible assets consist primarily of contract rights, customer bases and
noncompetition agreements obtained in business acquisitions. Contract rights and
customer bases are amortized using the straight-line method over their estimated
useful lives, ranging from five to thirty years. Noncompetition agreements are
amortized using the straight-line method over the term of such agreements,
ranging from three to seven years.
Income Taxes
The Company recognizes deferred tax assets and liabilities based upon the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Deferred tax assets and liabilities are
calculated based on the difference between the financial and tax bases of assets
and liabilities using the currently enacted tax rates in effect during the years
in which the differences are expected to reverse.
Net Income Per Common Share
Primary and fully diluted net income per common share are calculated using the
weighted-average number of common and common-equivalent shares outstanding
during the year. Common-equivalent shares are attributable to unexercised stock
options. Prior to May 12, 1993, fully diluted net income per common share was
calculated based on the assumption that all of the Company's convertible
subordinated debentures (Debentures) were converted into common stock on the
date of issue. For purposes of calculating fully diluted net income per common
share, net income was increased by the assumed incremental after-tax interest
savings, and the weighted-average number of shares outstanding was increased by
the additional common shares assumed to be issued, upon conversion of the
Debentures.
- ------
51 1995 Annual Report
- ------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
2. Acquisitions and Dispositions
Pooling-of-Interests Transactions
During 1995, the Company issued a total of 4,253,000 shares of common stock in
connection with three business combinations accounted for as poolings-of-
interests. Two of the combinations form the nucleus of a new business that
provides work-flow management and document-imaging systems primarily to the
healthcare industry. The remaining combination was in the Company's investment
support systems business and provides trading, risk management and accounting
systems primarily to the financial services industry.
During 1995, the Company recorded merger costs of $4,238,000 ($0.10 per fully
diluted share) in connection with these transactions. These costs consist
primarily of investment banking, legal and accounting fees that are not
deductible for income tax purposes. In addition, the Company acquired $3.3
million of notes receivable for common stock in connection with these
transactions.
The consolidated results of operations for the year ended December 31, 1995
include the operations of each of these businesses from the beginning of the
quarter in which each business combination was completed. The consolidated
financial statements for prior periods have not been restated since the impact
of such restatement would not be material.
Purchase Transactions and Product-Line Sale
During 1995, the Company completed six business acquisitions accounted for as
purchase transactions. Four acquisitions were in the Company's investment
support systems business and two were in its disaster recovery services
business.
Total cash paid in connection with these acquisitions was approximately
$23,962,000, subject to certain adjustments. Goodwill recorded in connection
with these acquisitions was approximately $13,838,000. In addition, contingent
payments of up to $10,500,000 may be paid in connection with two of these
acquisitions, depending upon each business achieving certain financial results
during the three-year period subsequent to the date of acquisition.
Also during 1995, the Company paid $11,179,000 as the contingent portion of a
purchase price in connection with a 1992 acquisition. Goodwill was increased by
the amount of the payment.
During 1994, the Company completed four business acquisitions. Two
acquisitions were in the Company's investment support systems business and two
were in its disaster recovery services business. Total cash paid in connection
with these acquisitions was approximately $28,157,000, subject to certain
adjustments. Goodwill recorded in connection with these acquisitions was
approximately $12,806,000.
During 1993, the Company completed eight business acquisitions. Four
acquisitions were in the Company's investment support systems business and four
were in its disaster recovery services business. Total cash paid in connection
with these acquisitions was approximately $32,258,000, subject to certain
adjustments. Goodwill recorded in connection with these acquisitions was
approximately $13,284,000.
On February 5, 1993, the Company sold its automotive dealership-systems
product line, resulting in an after-tax gain of $3,371,000 ($0.09 per fully
diluted share).
In connection with a 1992 acquisition, the Company could pay up to an
additional 50,000,000 Swedish Kronor (approximately $7,475,000 at December 31,
1995) depending upon the business achieving certain financial results during the
forty-two-month period ending April 30, 1996.
The results of operations of these acquired businesses have been included in
the accompanying Consolidated Statements of Income from the date of acquisition.
Pro forma combined results of operations are not presented since the results of
operations as reported in the accompanying Consolidated Statements of Income
would not be materially different.
3. Property and Equipment
Property and equipment consist of the following at
December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994
---------------------
<S> <C> <C>
Computer and telecommunications
equipment.................................... $ 142,387 $ 121,691
Leasehold improvements.......................... 32,082 28,302
Office furniture and equipment.................. 27,156 22,413
Buildings and improvements...................... 15,797 15,672
Land............................................ 2,491 2,491
Construction in progress........................ 2,412 4,903
---------------------
222,325 195,472
Accumulated depreciation and
amortization................................. (126,580) (105,036)
---------------------
$ 95,745 $ 90,436
=====================
</TABLE>
- ------
52 SunGard Data Systems Inc.
- ------
<PAGE>
4. Long-Term Debt
Long-term debt consists of the following at December 31
(in thousands):
<TABLE>
<CAPTION>
1995 1994
---------------------
<S> <C> <C>
Purchase price obligations due former
owners of acquired businesses................ $ 6,610 $ 7,944
Other, primarily capital lease
obligations for computer equipment
and buildings................................ 3,392 2,623
---------------------
10,002 10,567
Less current maturities......................... (6,761) (5,673)
---------------------
$3,241 $ 4,894
=====================
</TABLE>
The Company has two unsecured revolving credit agreements (Credit Agreements)
that provide for up to an aggregate $25,000,000 of revolving credit for a three-
year period, renewable on an annual basis at the lenders' option, at an interest
rate based upon LIBOR plus 0.75%, the CD rate plus 0.875%, or the Prime rate, at
the Company's option. In order to remain eligible to borrow under the Credit
Agreements, the Company must, among other requirements, maintain a defined
minimum tangible net worth and limit its total debt. There had been no borrowing
under the Credit Agreements through December 31, 1995.
Annual maturities of long-term debt during the next five years are as
follows: 1996-$6,761,000; 1997-$797,000; 1998-$426,000; 1999-$429,000; and
2000-$85,000.
5. Stock Option and Award Plans
Employee Stock Purchase Plan
Under the Company's Employee Stock Purchase Plan, a maximum of 1,200,000 shares
of common stock may be issued to substantially all full-time employees. Eligible
employees may purchase a limited number of shares of common stock each quarter
through payroll deductions, at a purchase price equal to 85% of the closing
price of the Company's common stock on the last business day of each calendar
quarter. During 1995, 1994 and 1993, employees purchased 156,000, 173,000 and
128,000 shares, respectively, at average purchase prices of $22.49, $15.49 and
$15.03 per share, respectively. At December 31, 1995, 208,000 shares of common
stock were reserved for issuance under this plan.
Equity Incentive Plans
Under the Company's 1994 Equity Incentive Plan, awards or options to purchase up
to 1,000,000 shares of common stock may be granted to key employees of the
Company, with an individual limit of 200,000 shares per participant per year.
Options may be either incentive stock options or nonqualified stock options, and
the option price generally must be at least equal to the fair value of the
Company's common stock on the date of award or grant. Generally, options are
granted for a ten-year term and become fully exercisable one year from the date
of grant, subject to a four- or five-year vesting schedule.
During 1995 and 1994, long-term incentive awards (LTIP awards) were granted
to group chief executive officers for future options of up to an aggregate of
88,000 and 84,000 shares, respectively. The actual number of shares and the
exercise price per share are contingent upon achieving certain cumulative
financial results over a three-year period, beginning on January 1 of the year
of each LTIP award. If and when the option shares are earned, the exercise price
per share will be $19.05 and $19.33, respectively, but could be reduced to a
minimum of $12.09 and $12.37, respectively, if actual operating results during
the three-year period exceed targeted operating results. Compensation expense,
if any, is estimated initially at the time the achievement of the cumulative
financial results becomes probable and is recorded over the remaining three-year
period of each LTIP award, based upon the difference between the market value
and exercise price of the shares earned. During the year ended December 31,
1995, compensation expense of $631,000 was recorded in connection with certain
1994 LTIP awards. No compensation expense has been recorded for the 1995 LTIP
awards.
Under the Company's 1986 and 1982 Stock Option Plans, options to purchase up
to 4,094,000 shares of the Company's common stock may be issued to officers and
key employees. These options may be either incentive stock options or
nonqualified stock options, and the option price must be at least equal to the
fair value of the Company's common stock on the date of grant. Generally,
options are granted for a ten-year term and become fully exercisable one year
from the date of grant, subject to a four- or five-year vesting schedule.
- ------
53 1995 Annual Report
- ------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
The table below summarizes transactions under these stock option plans. All
share and per share amounts have been restated to reflect a July 1995 two-for-
one stock split (see Note 10).
Other Stock Awards
On April 30, 1991, the stockholders approved the Company's Restricted Stock
Award Plan for Outside Directors (RSAP). The RSAP provides for awards of up to
200,000 shares of the Company's common stock. Each outside director
automatically receives an initial award of 10,000 shares of the Company's common
stock upon election to the Company's Board of Directors and, upon reelection as
an outside director every fifth year thereafter, automatically receives another
10,000 shares. Shares awarded under the RSAP are subject to certain transfer and
forfeiture restrictions that lapse over a five-year vesting period. RSAP awards
for 10,000 shares were granted during 1994 and 1993 at market values of $17.31
and $14.50 per share, respectively. There were no awards during 1995. At
December 31, 1995, 121,000 shares of common stock were reserved for issuance
under this plan.
On May 1, 1990, the stockholders approved the Company's Restricted Stock
Incentive Plan (RSIP). The RSIP provides for awards of up to 800,000 shares of
the Company's common stock to key management employees. Shares awarded under the
RSIP are subject to certain transfer and forfeiture restrictions that lapse over
a five-year vesting period. There have been no awards granted since 1991. At
December 31, 1995, 107,000 shares of common stock were reserved for issuance
under this plan.
Unearned compensation expense related to the restricted stock plans is
reported as a reduction of stockholders' equity in the accompanying consolidated
financial statements. For accounting purposes, compensation expense is recorded
ratably over the five-year period during which the shares are subject to
transfer and forfeiture restrictions and is based on the market value on the
award date less the par value of the shares awarded. Compensation expense
related to these plans aggregated $638,000, $1,462,000 and $1,432,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
<TABLE>
<CAPTION>
Shares
-----------------------------------
Under
Available Award or Option
------------------------------------
<S> <C> <C>
Balances at December 31, 1992 ($0.35 - $14.19 per share)....................... 104,000 1,564,000
Authorized.................................................................. 500,000 --
Canceled ($5.00 - $14.50 per share)......................................... 80,000 (80,000)
Granted ($14.50 - $19.50 per share)......................................... (130,000) 130,000
Exercised ($0.35 - $11.69 per share)........................................ -- (246,000)
------------------------------------
Balances at December 31, 1993 ($2.50 - $19.50 per share)....................... 554,000 1,368,000
Authorized.................................................................. 1,000,000 --
LTIP awards ($12.37 - $19.33 per share)..................................... (84,000) 84,000
Canceled ($7.00 - $11.69 per share)......................................... 10,000 (10,000)
Granted ($19.25 - $19.38 per share)......................................... (102,000) 102,000
Exercised ($2.50 - $11.69 per share)........................................ -- (184,000)
------------------------------------
Balances at December 31, 1994 ($2.50 - $19.50 per share)....................... 1,378,000 1,360,000
Poolings-of-interests ($0.38 - $8.21 per share)............................. -- 89,000
LTIP awards ($12.09 - $19.05 per share)..................................... (88,000) 88,000
Canceled ($7.00 - $19.50 per share)......................................... 56,000 (56,000)
Granted ($20.63 - $30.75 per share)......................................... (729,000) 729,000
Exercised ($2.50 - $19.50 per share)........................................ -- (339,000)
------------------------------------
Balances at December 31, 1995 ($0.38 - $30.75 per share)....................... 617,000 1,871,000
====================================
Options exercisable at December 31, 1995 878,000
=========
</TABLE>
- ------
54 SunGard Data Systems Inc.
- ------
<PAGE>
6. Savings Plans
The Company and its subsidiaries maintain savings plans that cover substantially
all employees. These plans generally provide that the Company will contribute a
certain percentage of employee compensation or contributions up to a specified
level. Company contributions charged to income under these plans aggregated
$5,338,000, $3,800,000 and $3,092,000 for the years ended December 31, 1995,
1994 and 1993, respectively.
7. Income Taxes
The provisions for income taxes for the years ended December 31, 1995, 1994 and
1993 consist of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------
<S> <C> <C> <C>
Current:
Federal............................ $26,112 $22,251 $17,013
State.............................. 6,708 6,810 5,415
Foreign............................ 4,994 4,048 1,579
---------------------------
37,814 33,109 24,007
---------------------------
Deferred:
Federal............................ (1,376) (2,579) 432
State.............................. (216) (603) 231
Foreign............................ 218 (486) 47
---------------------------
(1,374) (3,668) 710
---------------------------
$36,440 $29,441 $24,717
===========================
</TABLE>
Differences between income tax expense at the United States federal statutory
income tax rate and the Company's effective income tax rate for the years ended
December 31, 1995, 1994 and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------
<S> <C> <C> <C>
Tax at federal statutory rate........ $29,789 $25,385 $22,117
State income taxes, net of
federal benefit................... 4,393 4,034 3,670
Nondeductible amortization........... 1,039 1,142 1,009
Merger costs......................... 1,524 -- --
Tax-exempt interest income........... (648) (859) (817)
Foreign taxes........................ (120) 196 210
Product-line sale.................... -- -- (1,013)
Other, net........................... 463 (457) (459)
---------------------------
$36,440 $29,441 $24,717
===========================
Effective income tax rate............ 42.8% 40.6% 39.1%
===========================
</TABLE>
Deferred taxes are recorded based upon differences between financial statement
and tax bases of assets and liabilities. The following deferred taxes were
recorded as of December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
-----------------
<S> <C> <C>
Current:
Accounts receivable.................. $ 2,483 $ 2,868
Accrued compensation and benefits.... 2,810 2,632
Other accrued expenses............... 1,434 1,361
Deferred compensation................ -- (371)
-----------------
$ 6,727 $ 6,490
-----------------
Long-Term:
Property and equipment............... $ 1,759 $ (77)
Intangible assets.................... (8,662) (8,067)
Deferred compensation................ 275 --
-----------------
$(6,628) $(8,144)
=================
</TABLE>
8. Export Sales
The Company's domestic operations recorded revenues primarily from international
software licenses and maintenance and professional services of approximately
$51,273,000, $33,505,000 and $29,061,000 for the years ended December 31, 1995,
1994 and 1993, respectively.
9. Commitments
The Company leases a substantial portion of its computer equipment and
facilities under operating leases. Future minimum rentals under operating leases
with initial or remaining noncancelable lease terms in excess of one year as of
December 31, 1995 follow (in thousands):
<TABLE>
<S> <C>
1996 ................. $ 45,016
1997 ................. 37,828
1998 ................. 27,581
1999 ................. 12,312
2000 ................. 3,929
Thereafter ........... 17,719
--------
$144,385
========
</TABLE>
Rent expense aggregated $52,359,000, $45,923,000 and $40,914,000 for the years
ended December 31, 1995, 1994 and 1993, respectively.
- ------
55 1995 Annual Report
- ------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
10. Stockholders' Equity
Common Stock Split:
On June 2, 1995, the Company's Board of Directors authorized a two-for-one stock
split of the Company's common stock. The stock split was effective for
stockholders of record on June 15, 1995, and shares were issued on July 7, 1995.
The number of shares used for purposes of calculating net income per common
share and all per share data have been adjusted for all periods presented to
reflect this stock split.
Common Stock Repurchases:
In November 1994, the Company's Board of Directors authorized a stock repurchase
plan permitting the Company to repurchase up to 2,000,000 shares of its common
stock by December 31, 1995. Under that plan, the Company repurchased shares of
its common stock in a systematic pattern in order to satisfy the needs arising
from activity in its employee stock purchase, equity incentive and other stock
award plans. In 1995, the Company repurchased 400,000 shares of its common stock
at a cost of $10,029,000.
In November 1995, the Company's Board of Directors extended the common
stock repurchase program in order to permit the Company to continue its
systematic pattern of stock repurchases to satisfy the needs arising from
activity in its employee stock purchase, equity incentive and other stock award
plans.
When treasury stock is reissued, any excess of the acquisition cost of the
stock over the proceeds from reissuance is charged to retained earnings.
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Stockholders
SunGard Data Systems Inc.
We have audited the accompanying consolidated balance sheets of SunGard Data
Systems Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
SunGard Data Systems Inc. and subsidiaries as of December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 8, 1996
- ------
56 SunGard Data Systems Inc.
- ------
<PAGE>
Exhibit 21.1
SunGard Data Systems Inc.
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name of Subsidiary Jurisdiction of Incorporation
- --------------------------------------------------------------------------------
<S> <C>
Bi-Tech Software Inc./(1)/ Delaware
- --------------------------------------------------------------------------------
FPH, Front & Prosoftia Holdings AB/(2)(3)/ Sweden
- --------------------------------------------------------------------------------
Intelus Corporation/(1)/ Delaware
- --------------------------------------------------------------------------------
MACESS Corporation/(1)/ Alabama
- --------------------------------------------------------------------------------
Portfolio Administration Limited/(1)(4)/ England
- --------------------------------------------------------------------------------
Renaissance Software Inc./(1)(3)/ California
- --------------------------------------------------------------------------------
Shaw Data Securities, Inc./(1)/ New York
- --------------------------------------------------------------------------------
Shaw Data Services, Inc./(1)(5)/ New York
- --------------------------------------------------------------------------------
SunGard Business Systems Inc./(1)(6)/ Delaware
- --------------------------------------------------------------------------------
SunGard Computer Services Inc./(7)/ Pennsylvania
- --------------------------------------------------------------------------------
SunGard/DML Inc./(1)/ Delaware
- --------------------------------------------------------------------------------
SunGard Financial Systems Inc./(1)(8)/ Delaware
- --------------------------------------------------------------------------------
SunGard Investment Products Inc./(1)/ Delaware
- --------------------------------------------------------------------------------
SunGard Investment Systems Inc./(1)(9)/ Delaware
- --------------------------------------------------------------------------------
SunGard Investment Ventures, Inc./(10)(11)/ Delaware
- --------------------------------------------------------------------------------
SunGard Management Inc./(1)(11)/ Delaware
- --------------------------------------------------------------------------------
SunGard MIS Inc./(1)(12)/ Delaware
- --------------------------------------------------------------------------------
SunGard Recovery Services Inc./(1)(13)/ Pennsylvania
- --------------------------------------------------------------------------------
SunGard Shareholder Systems Inc./(1)/ Delaware
- --------------------------------------------------------------------------------
SunGard Systems International Inc./(1)(14)/ Pennsylvania
- --------------------------------------------------------------------------------
SunGard Systems Limited/(2)/ England
- --------------------------------------------------------------------------------
SunGard Systems Pty. Limited/(2)/ Australia
- --------------------------------------------------------------------------------
SunGard Trust Systems Inc./(1)/ North Carolina
- --------------------------------------------------------------------------------
</TABLE>
(1) Wholly owned subsidiary of SunGard Investment Ventures, Inc.
(2) Wholly owned subsidiary of SunGard Systems International Inc.
(3) Conducts certain operations through three wholly owned foreign
subsidiaries.
(4) Conducts certain operations through two wholly owned foreign subsidiaries.
<PAGE>
(5) Conducts certain operations through two wholly owned domestic subsidiaries,
one wholly owned foreign subsidiary and SunGard Systems Limited.
(6) Organized into, and conducts business under the names of, three operating
divisions--SunGard Asset Management Systems ("SAMS"), SunGard Employee
Benefit Systems ("SEBS") and SunGard Mailing Services. SAMS conducts
certain operations through SunGard Systems Limited, and SEBS conducts
certain operations through a domestic sister corporation and through
SunGard Systems Limited and SunGard Systems Pty. Limited.
(7) Wholly owned subsidiary of SunGard Management Inc.
(8) Organized into, and conducts business under the names of, four operating
divisions-- SunGard Brokerage Systems, SunGard Global Systems, SunGard
Government Systems and SunGard Securities Systems. Sometimes conducts
business under the names Money Management Systems, Phase3 Systems, SunGard
Digital Solutions Inc., Warrington Financial Systems and Wismer Associates.
(9) Conducts certain operations through SunGard Systems Limited and SunGard
Systems Pty. Limited.
(10) Wholly owned subsidiary of SunGard Data Systems Inc.
(11) Not an operating company.
(12) Conducts business primarily under the name SunGard Insurance Systems.
Conducts certain operations through one wholly owned domestic subsidiary of
SunGard Financial Systems Inc., which subsidiary conducts business under
the names SunGard Insurance Systems, Information Systems of America and
ISA.
(13) Organized into, and conducts business under the names of, two operating
divisions--SunGard Recovery Services and SunGard Planning Solutions.
Conducts certain operations through one wholly owned foreign subsidiary.
(14) Organized into, and conducts business under the names of, two operating
divisions--SunGard Capital Markets and SunGard Futures Systems. Conducts
certain operations through three wholly owned domestic subsidiaries and
nine wholly owned foreign subsidiaries including SunGard Systems Limited
and SunGard Systems Pty. Limited.
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of SunGard Data Systems Inc. as of December 31, 1995
and the consolidated statement of income for the year ended December 31, 1995,
both incorporated by reference into the Form 10-K of SunGard Data Systems Inc.
for the year ended December 31, 1995, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 79,091
<SECURITIES> 36,066
<RECEIVABLES> 149,685
<ALLOWANCES> 6,426
<INVENTORY> 0
<CURRENT-ASSETS> 281,163
<PP&E> 222,325
<DEPRECIATION> 126,580
<TOTAL-ASSETS> 579,734
<CURRENT-LIABILITIES> 147,573
<BONDS> 3,241
0
0
<COMMON> 421
<OTHER-SE> 421,871
<TOTAL-LIABILITY-AND-EQUITY> 579,734
<SALES> 0
<TOTAL-REVENUES> 532,628
<CGS> 0
<TOTAL-COSTS> 339,088
<OTHER-EXPENSES> 4,238<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 85,112
<INCOME-TAX> 36,440
<INCOME-CONTINUING> 48,672
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,672
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
<FN>
<F1>Merger costs associated with poolings-of-interests
</FN>
</TABLE>
