<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1997
------------------
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 1-12989
SunGard(R) Data Systems Inc.
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(Exact name of registrant as specified in its charter)
Delaware 51-0267091
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1285 Drummers Lane, Wayne, Pennsylvania 19087
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(Address of principal executive offices, including zip code)
(610) 341-8700
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
There were 86,767,199 shares of the registrant's common stock, par value $.01
per share, outstanding at September 30, 1997.
<PAGE>
SunGard Data Systems Inc.
Index
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1997
(unaudited) and December 31, 1996................................ 1
Consolidated Statements of Income for the nine and three months
ended September 30, 1997 and 1996 (unaudited).................... 2
Supplemental Income Statement Information for the nine and three
months ended September 30, 1997 and 1996 (unaudited)............. 2
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and 1996 (unaudited).................... 3
Notes to Consolidated Financial Statements (unaudited)........... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................ 11
Item 2. Changes in Securities............................................ 11
Item 3. Defaults upon Senior Securities.................................. 11
Item 4. Submission of Matters to a Vote of Security Holders.............. 11
Item 5. Other Information................................................ 11
Item 6. Exhibits and Reports on Form 8-K................................. 11
SIGNATURES................................................................ 12
</TABLE>
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
SunGard Data Systems Inc.
Consolidated Balance Sheets
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(Unaudited) 1996
----------- ------------
<S> <C> <C>
Assets
Current:
Cash and equivalents.........................................................................$ 32,841 $ 46,072
Trade receivables, less allowance for doubtful accounts of $17,266 and $10,391............... 153,748 130,404
Earned but unbilled receivables.............................................................. 36,524 27,842
Prepaid expenses and other current assets.................................................... 20,415 18,507
Deferred income taxes........................................................................ 20,628 13,632
----------- -----------
Total current assets..................................................................... 264,156 236,457
Property and equipment, less accumulated depreciation of $192,027 and $158,214 ................. 116,673 109,523
Software products, less accumulated amortization of $82,486 and $68,780 ........................ 79,393 71,917
Goodwill, less accumulated amortization of $29,804 and $23,444 ................................. 159,470 156,796
Other intangible assets, less accumulated amortization of $46,793 and $34,590 .................. 117,649 104,625
----------- -----------
$ 737,341 $ 679,318
=========== ===========
Liabilities and Stockholders' Equity
Current:
Short-term and current portion of long-term debt.............................................$ 20,847 $ 34,932
Accounts payable............................................................................. 12,383 13,531
Accrued compensation and benefits............................................................ 39,428 41,581
Other accrued expenses....................................................................... 26,969 24,004
Accrued income taxes......................................................................... 7,938 5,873
Deferred revenues............................................................................ 100,916 90,345
----------- -----------
Total current liabilities................................................................ 208,481 210,266
----------- -----------
Long-term debt.................................................................................. 3,037 4,414
----------- -----------
Commitments....................................................................................
Stockholders' equity:
Preferred stock, par value $ 01 per share; 5,000 shares authorized........................... - -
Common stock, par value $ 01 per share; 120,000 shares authorized;
86,789 and 42,300 shares issued........................................................... 868 423
Capital in excess of par value............................................................... 181,880 175,937
Notes receivable for common stock............................................................ (96) (559)
Restricted stock plans....................................................................... (1,281) (1,535)
Retained earnings............................................................................ 349,923 292,113
Foreign currency translation adjustment...................................................... (5,381) (266)
----------- -----------
525,913 466,113
Treasury stock, at cost, 22 and 43 shares.................................................... (90) (1,475)
----------- -----------
Total stockholders' equity................................................................. 525,823 464,638
----------- -----------
$ 737,341 $ 679,318
=========== ===========
</TABLE>
See accompanying notes
1
<PAGE>
SunGard Data Systems Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues...................................................................$ 609,557 $ 477,012 $ 214,485 $ 171,646
------- ------- ------- -------
Costs and expenses:
Cost of sales and direct operating....................................... 264,304 211,881 92,250 75,120
Sales, marketing and administration...................................... 118,828 94,672 42,443 33,262
Product development...................................................... 52,985 41,584 16,691 14,727
Depreciation of property and equipment................................... 35,538 26,813 12,514 9,177
Amortization of intangible assets........................................ 33,666 23,781 11,126 9,924
Purchased in-process research and development and other costs............ 9,956 44,032 338 44,032
------- ------- ------- -------
515,277 442,763 175,362 186,242
------- ------- ------- -------
Income from operations..................................................... 94,280 34,249 39,123 (14,596)
Interest income.......................................................... 1,374 4,198 397 518
Interest expense......................................................... (2,015) (675) (694) -
------- ------- ------- -------
Income before income taxes................................................. 93,639 37,772 38,826 (14,078)
Income taxes............................................................. 38,661 17,386 16,057 (3,613)
------- ------- ------- -------
Net income.................................................................$ 54,978 $ 20,386 $ 22,769 $ (10,465)
======= ======= ======= =======
Fully diluted net income (loss) per common share...........................$ 0.62 $ 0.24 $ 0.26 $ (0.12)
======= ======= ======= =======
Shares used to compute fully diluted net income per common share........... 88,620 86,276 88,900 86,460
======= ======= ======= =======
<CAPTION>
============================================================================================================================
SunGard Data Systems Inc.
Supplemental Income Statement Information
(In thousands)
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Investment support systems...............................................$ 393,155 $ 288,904 $ 137,476 $ 103,978
Disaster recovery services............................................... 167,064 141,273 58,334 50,765
Computer services and other.............................................. 49,338 46,835 18,675 16,903
------- ------- ------- -------
$ 609,557 $ 477,012 $ 214,485 $ 171,646
======= ======= ======= =======
Income from operations:
Investment support systems...............................................$ 68,719 $ 47,219 $ 24,537 $ 16,501
Disaster recovery services............................................... 34,307 31,218 13,505 12,207
Computer services and other.............................................. 7,837 5,551 3,540 2,447
Corporate administration................................................. (6,627) (5,707) (2,121) (1,719)
Purchased in-process research and development............................ (9,956) (44,032) (338) (44,032)
------- ------- ------- -------
$ 94,280 $ 34,249 $ 39,123 $ (14,596)
======= ======= ======= =======
Operating margin:
Investment support systems............................................... 17.5% 16.3% 17.8% 15.9%
======= ======= ======= =======
Disaster recovery services............................................... 20.5% 22.1% 23.2% 24.0%
======= ======= ======= =======
Computer services and other.............................................. 15.9% 11.9% 19.0% 14.5%
======= ======= ======= =======
Total.................................................................... 15.5% 7.2% 18.2% -8.5%
======= ======= ======= =======
Total, excluding one-time charges........................................ 17.1% 16.4% 18.4% 17.1%
======= ======= ======= =======
</TABLE>
See accompanying notes
2
<PAGE>
SunGard Data Systems Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flow from operations:
Net income........................................................................... $ 54,978 $ 20,386
Reconciliation of net income to cash flow from operations:
Depreciation and amortization..................................................... 69,204 50,594
Purchased in-process research and development and other costs..................... 9,300 44,032
Other noncash charges............................................................. 3,485 1,933
Deferred income tax benefit....................................................... (11,991) (19,547)
----------- -----------
124,976 97,398
Cash provided by (used for) working capital, net of effect of acquired businesses:
Accounts receivable and other current assets...................................... (24,019) (2,079)
Accounts payable and accrued expenses............................................. (4,891) (11,429)
Deferred revenues................................................................. 3,615 1,014
----------- -----------
Cash flow from operations....................................................... 99,681 84,904
----------- -----------
Financing activities:
Cash received under employee stock plans............................................. 8,138 10,335
Cash paid for treasury stock......................................................... (140) (4,221)
Cash received under revolving line of credit and other borrowings.................... 168,098 -
Repayments of debt................................................................... (186,588) (5,644)
----------- -----------
Total financing activities...................................................... (10,492) 470
----------- -----------
Long-term investment activities:
Cash paid for acquired businesses, net of cash acquired.............................. (57,852) (129,571)
Cash paid for property and equipment................................................. (37,810) (29,615)
Cash paid for software and other long-term assets.................................... (6,758) (4,876)
----------- -----------
Total long-term investment activities........................................... (102,420) (164,062)
----------- -----------
Decrease in cash and equivalents before short-term investment activities............... (13,231) (78,688)
Short-term investment activities:
Purchase of short-term investments................................................... - (2,660)
Maturities of short-term investments................................................. - 38,726
----------- -----------
Decrease in cash and equivalents....................................................... (13,231) (42,622)
Beginning cash and equivalents......................................................... 46,072 79,091
----------- -----------
Ending cash and equivalents............................................................ $ 32,841 $ 36,469
=========== ===========
Supplemental information:
Acquired businesses:
Property and equipment............................................................ 5,643 7,440
Software products................................................................. 16,507 35,233
Purchased in-process research and development..................................... 9,300 37,400
Deferred income taxes............................................................. 1,761 5,722
Goodwill and other intangible assets.............................................. 30,474 59,808
Purchase price obligations and debt assumed....................................... (3,135) (2,840)
Net current liabilities assumed................................................... (103) (13,192)
Common stock issued............................................................... (2,595) -
----------- -----------
Cash paid for acquired businesses, net of cash acquired................................ $ 57,852 $ 129,571
=========== ===========
</TABLE>
See accompanying notes
3
W
<PAGE>
SunGard Data Systems Inc.
Notes To Consolidated Financial Statements (Unaudited)
1. The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine and three month periods ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1996.
2. Acquisitions:
During the first nine months of 1997, the Company completed five business
acquisitions accounted for as purchase transactions. Three 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 $57,125,000, subject to certain adjustments.
In connection with the acquisition of the Global Plus product line and
certain other assets of Premier Solutions Ltd., the Company engaged a
nationally recognized, independent appraisal firm to express an opinion on
the fair market value of the assets acquired to serve as the basis of
allocation of the purchase price to the various classes of assets acquired.
During 1997, the Company recorded a charge of $9,300,000, representing that
portion of the purchase price related to purchased in-process research and
development. This charge represents, as of the date of acquisition, the
value of software products still in development, but not considered to have
reached technological feasibility or to have any alternate future use.
Global Plus is a real-time, multi-currency trust and custody accounting
system.
During the first nine months of 1997, the Company completed two
acquisitions accounted for as poolings-of-interests. In January 1997, the
Company issued 764,655 shares of common stock in connection with the
acquisition of GMI Software, Inc. (GMI), a global provider of application
software supporting exchange-traded futures and options. In July 1997, the
Company issued 121,788 shares of common stock in connection with the
acquisition of Med Data Systems, Inc. (Med Data), a domestic supplier of
software used by hospitals and medical centers to manage patient medical
records. The accompanying consolidated financial statements include the
results of GMI from January 1, 1997, and Med Data from July 1, 1997. Prior
period consolidated financial statements have not been restated because the
effect of such restatement is not material.
4
<PAGE>
SUNGARD DATA SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Except for the charge related to purchased in-process research and
development described above, these acquisitions are not expected to have a
material effect on the Company's financial condition or results of
operations.
3. Subsequent Event:
On October 17, 1997, the Company signed a definitive agreement to merge
with Infinity Financial Technology, Inc. (Infinity) in a stock-for-stock
transaction in which each share of Infinity common stock will be exchanged
for 0.68 of a share of the Company's common stock. Based upon the Company's
closing price of $24 1/16 on October 16, 1997, the shares to be issued by
the Company in the transaction, representing approximately fifteen percent
of its outstanding shares, will have a value of approximately $313 million.
The merger, which is subject to certain conditions including regulatory
approval and approval of the stockholders of Infinity, is expected to close
by the end of 1997 or early in 1998.
Infinity develops, markets and supports enterprise software solutions for
financial trading and risk management. Infinity, which was founded in 1989,
targets global organizations that manage complex financial assets.
The Company expects that the merger will be accounted for as a
pooling-of-interests. The following unaudited pro forma combined condensed
financial data is provided for illustrative purposes only and assumes that
the merger with Infinity had occurred as of the beginning of each of the
periods presented. The following pro forma information should not be relied
upon as necessarily being indicative of the historical results that would
have been obtained if the companies had always been combined, or the
results which may be obtained in the future.
<TABLE>
<CAPTION>
========================================================================
Revenues Operating Income Net income per
common share
------------------------------------------------------------------------
Actual Pro Forma Actual Pro Forma Actual Pro Forma
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nine months ended Sept. 609,557 655,766 94,280 101,614 0.62 0.59
30, 1997
- -----------------------------------------------------------------------------------------------------
Nine months ended Sept. 477,012 505,576 34,249 40,323 0.24 0.24
30, 1996
- -----------------------------------------------------------------------------------------------------
Year ended Dec. 31, 1996 670,309 711,857 59,786 68,285 0.41 0.41
- -----------------------------------------------------------------------------------------------------
Year ended Dec. 31, 1995 532,628 557,366 80,076 85,752 0.61 0.55
- -----------------------------------------------------------------------------------------------------
Year ended Dec. 31, 1994 437,190 449,785 70,326 72,450 0.56 0.50
=====================================================================================================
</TABLE>
5
<PAGE>
SUNGARD DATA SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
4. Fully diluted net income per common share was calculated using the
weighted-average number of common shares and common-equivalent shares
outstanding during the period. Common-equivalent shares are principally
attributable to unexercised stock options. In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (SFAS 128), which specifies a new
methodology for the computation, presentation and disclosure of earnings
per share and makes the U.S. standard for computing earnings per share more
compatible with that of other countries and with the International
Accounting Standards Committee.
SFAS 128 requires a dual presentation of basic and diluted earnings per
share. The new standard is required to be adopted in the fourth quarter of
1997. While early adoption is not permitted, SFAS 128 requires restatement
of all prior period earnings per share data at the time of adoption. The
Company's new earnings per share amounts are not expected to be materially
different from those computed under the present accounting standard for the
nine and three months ended September 30, 1997 and 1996.
5. On August 15, 1997, 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 September 2, 1997, and shares were
issued on September 22, 1997. 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.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Statements about the Company's expectations and all other statements in
this quarterly report on Form 10-Q 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 magnitude 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 most recent Form 10-K, a copy of which may be
obtained from the Company without charge.
On October 17, 1997, the Company signed a definitive agreement to merge
with Infinity Financial Technology, Inc. (Infinity) (See Note 3 of Notes to
Consolidated Financial Statements). The merger, which is subject to certain
conditions including regulatory approval and approval of the stockholders of
Infinity, is expected to close by the end of 1997 or early in 1998. Infinity
derives a significantly larger portion of its revenues from software license
fees than does the Company. Since there are inherent difficulties in predicting
the timing and magnitude of software sales, the potential for fluctuations in
quarterly revenues and income will be higher for the combined operations after
the merger than for the Company alone before the merger.
Income from Operations:
During the nine months ended September 30, 1997, the Company recorded pre-
tax charges to operations of approximately $10.0 million ($0.07 per fully
diluted share). These charges are comprised of $9.3 million for purchased in-
process research and development associated with the acquisition of Global Plus,
a real-time, multi-currency trust and custody accounting system, and merger
costs incurred in connection with two small acquisitions accounted for as
poolings-of-interests. During the nine months ended September 30, 1996, the
Company recorded pre-tax charges to operations of approximately $44.0 million
($0.33 per fully diluted share). These charges are comprised of $37.4 million
for purchased in-process research and development associated with the
acquisition of NCS Financial Systems, Inc., and a charge associated with the
impairment of the remaining intangible assets related to a business acquired
more than ten years ago. The following discussion of income from operations
excludes these charges.
Investment Support Systems (ISS):
The Company's ISS business is comprised of more than thirty operating units
of various size and complexity. 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. 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.
The ISS operating margin was 17.5% and 17.8% for the nine and three month
periods ended September 30, 1997, respectively, as compared with 16.3% and 15.9%
for the comparable periods
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
Income from Operations, continued:
in 1996. The increase in the operating margin is due primarily to an increase in
software license revenues and cost reductions in three ISS businesses, partially
offset by an increase in overall ISS product development expense.
The Company expects that the full-year 1997 ISS operating margin will be
slightly higher than the full-year 1996 ISS operating margin. The most important
factors affecting the ISS operating margin continue to be the timing and
magnitude of software license revenues, the operating margin of recently
acquired businesses, and the level of product development spending.
Disaster Recovery Services (DRS):
The DRS operating margin was 20.5% and 23.2% for the nine and three month
periods ended September 30, 1997, respectively, as compared with 22.1% and 24.0%
for the comparable periods in 1996. The decrease in the operating margin is due
primarily to the expansion of the DRS sales force and costs associated with
additional operating facilities and equipment.
The Company expects that the full-year 1997 DRS operating margin will
approximate the full-year 1996 DRS operating margin. The most important factors
affecting the DRS operating margin continue to be the rate of new contract
signings and contract renewals, the timing and magnitude of equipment and
facilities expenditures, and the performance of recently acquired businesses.
Computer Services and Other (CS):
The CS operating margin was 15.9% and 19.0% for the nine and three month
periods ended September 30, 1997, respectively, as compared with 11.9% and 14.5%
for the comparable periods in 1996. The increase in the operating margin is due
primarily to an increase in remote processing computer services revenues and
cost reductions in the Company's healthcare information systems (HIS)
businesses.
The Company expects that the full-year 1997 CS operating margin will be
higher than the full-year 1996 CS operating margin. The most important factors
affecting the CS operating margin are the timing and magnitude of software
license revenues related to the HIS businesses, and revenue variability in both
remote-access computer processing and automated mailing services.
Revenues:
Total revenues for the nine and three month periods ended September 30,
1997 increased $132.5 million, or 28%, and $42.8 million, or 25%, respectively,
compared to the corresponding periods in 1996. Excluding acquired businesses,
revenues increased approximately 12% and 14%
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
Revenues, continued:
during the nine and three month periods ended September 30, 1997, respectively,
compared to the corresponding periods in 1996. Recurring revenues derived from
remote processing, disaster recovery and software maintenance services were
approximately $464.6 million and $377.5 million during the nine month periods
ended September 30, 1997 and 1996, respectively, representing approximately 76%
and 79% of consolidated revenues. The decline in the percentage of recurring
revenues to consolidated revenues is due primarily to professional services
revenues and software license fees growing at a faster pace than recurring
revenues.
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 for the nine and three month periods ended September 30, 1997
increased $104.2 million, or 36%, and $33.5 million, or 32%, respectively,
compared to the corresponding periods in 1996. The increase in revenues during
these periods is attributable to increases in data processing, software
maintenance and software rental revenues of $58.5 million and $17.5 million,
respectively, and increases in software license, professional services and third
party fees revenues of $45.7 million and $16.0 million, respectively. Excluding
acquired businesses, revenues increased approximately 13% and 16% during the
nine and three month periods ended September 30, 1997, compared to the
corresponding periods in 1996.
Disaster Recovery Services:
DRS revenues for the nine and three month periods ended September 30, 1997
increased $25.8 million, or 18%, and $7.5 million, or 15%, respectively,
compared to the corresponding periods in 1996. Excluding acquired businesses,
revenues increased approximately 14% and 12% during the nine and three month
periods ended September 30, 1997, compared to the corresponding periods in 1996.
The increase is attributable primarily to increases in revenues resulting from
new contract signings and contract renewals, and continued growth in midrange
and open system platforms.
Computer Services and Other:
CS revenues for the nine and three month periods ended September 30, 1997
increased $2.5 million, or 5%, and $1.8 million, or 10%, respectively, compared
to the corresponding periods in 1996. Excluding acquired businesses, revenues
increased approximately 3% and 5% during the nine and three month periods ended
September 30, 1997, compared to the corresponding periods in 1996. The small
increase in the nine and three month periods is due to increased volume in the
Company's
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
Revenues, continued:
remote-access computer processing business, partially offset by a decline in
revenues in the Company's HIS businesses, due primarily to the timing and
magnitude of software license revenues.
Costs and Expenses:
Cost of sales and direct operating expenses for the nine and three month
periods ended September 30, 1997 increased $52.4 million, or 25%, and $17.1
million, or 23%, respectively, compared to the corresponding periods in 1996.
The increase is due primarily to acquired businesses, partially offset by cost
reductions in certain ISS and HIS businesses.
Sales, marketing and administration expenses for the nine and three month
periods ended September 30, 1997 increased $24.2 million, or 26%, and $9.2
million, or 28%, respectively, compared to the corresponding periods in 1996.
The increases are due primarily to acquired businesses and an expansion in the
sales force, particularly in the DRS business, partially offset by cost
reductions in certain ISS and HIS businesses.
Product development expenses for the nine and three month periods ended
September 30, 1997 increased $11.4 million, or 27%, and $2.0 million, or 13%,
respectively, compared to the corresponding periods in 1996. The increases are
due primarily to acquired businesses and an increase in development spending in
connection with various ISS and HIS products. Development costs capitalized were
$2.1 million and $2.6 million for the nine months ended September 30, 1997 and
1996, respectively.
Depreciation of property and equipment for the nine and three month periods
ended September 30, 1997 increased $8.7 million, or 33%, and $3.3 million, or
36%, respectively, compared to the corresponding periods in 1996. The increases
are due primarily to purchases of computer and telecommunications equipment and
acquired businesses.
Amortization of intangible assets for the nine and three month periods
ended September 30, 1997 increased $9.9 million, or 42%, and $1.2 million, or
12%, respectively, compared to the corresponding periods in 1996. The increases
are due to acquired businesses.
Interest income for the nine and three month periods ended September 30,
1997 decreased $2.8 million, or 67%, and $0.1 million, or 23%, respectively,
compared to the corresponding periods in 1996. Interest expense increased $1.3
million and $0.7 million during the nine and three month periods ended September
30, 1997, respectively, compared to the corresponding periods in 1996. These
changes are due to lower average cash and short-term investment balances and an
increase in short-term debt.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
Liquidity and Capital Resources:
At September 30, 1997, cash and equivalents decreased $13.3 million to
$32.8 million from $46.1 million at December 31, 1996. The decrease in cash and
equivalents is net of a $14.1 million decrease in short-term debt. At September
30, 1997, borrowings under the Company's credit agreement totaled $5.0 million.
The Company expects that its existing cash resources and cash generated
from operations will be sufficient to meet its operating requirements,
contingent payments in connection with previously acquired businesses, and
ordinary capital spending needs for at least the next twelve months.
Furthermore, the Company has a $150.0 million credit agreement ($145.0 million
available at September 30, 1997), and believes it has the capacity to secure
additional credit or issue equity to finance additional capital needs.
Part II. Other Information
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults upon Senior Securities: None
Item 4. Submission of Matters to a vote of Security Holders: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits: 27.1 Financial Data Schedule
(b) Reports on Form 8-K: None
11
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Sungard Data Systems Inc.
Date: November 14, 1997 By: /s/ Michael J. Ruane
-------------------------------------------
Michael J. Ruane
Vice President-Finance and Chief
Financial Officer
(Principal Financial Officer)
12
<PAGE>
List of Exhibits
<TABLE>
<CAPTION>
Number Exhibit
- ------ -------
<S> <C>
27.1 Financial Data Schedule.
</TABLE>
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET OF SUNGARD DATA SYSTEMS INC. AS OF
SEPTEMBER 30, 1997 AND THE UNAUDITED CONSOLIDATED STATEMENT OF INCOME FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997, BOTH INCORPORATED BY REFERENCE INTO THE
FORM 10-Q OF SUNGARD DATA SYSTEMS INC. FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 32,841
<SECURITIES> 0
<RECEIVABLES> 207,538
<ALLOWANCES> 17,266
<INVENTORY> 0
<CURRENT-ASSETS> 264,156
<PP&E> 308,700
<DEPRECIATION> 192,027
<TOTAL-ASSETS> 737,341
<CURRENT-LIABILITIES> 208,481
<BONDS> 3,037
0
0
<COMMON> 868
<OTHER-SE> 524,955
<TOTAL-LIABILITY-AND-EQUITY> 737,341
<SALES> 0
<TOTAL-REVENUES> 609,557
<CGS> 0
<TOTAL-COSTS> 386,493<F1>
<OTHER-EXPENSES> 9,956<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,015
<INCOME-PRETAX> 93,639
<INCOME-TAX> 38,661
<INCOME-CONTINUING> 54,978
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,978
<EPS-PRIMARY> 0.62<F3>
<EPS-DILUTED> 0.62<F3>
<FN>
<F1>EXCLUDES SELLING, MARKETING AND ADMINISTRATIVE COSTS, AND PURCHASED
IN-PROCESS RESEARCH AND DEVELOPMENT AND MERGER COSTS.
<F2>PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT COSTS AND MERGER COSTS.
<F3>INCLUDES PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT AND MERGER
COSTS TOTALLING $0.07 PER SHARE. ALSO, REFLECTS SEPTEMBER 1997 TWO-FOR-ONE
STOCK SPLIT.
</FN>
</TABLE>
