<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, 1996 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 17, 1997 was $1,866,914,210./(1)/
There were 43,068,568 shares of the registrant's Common Stock outstanding as of
March 17, 1997.
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, 1996, and Part III of this Form 10-K incorporates by reference
certain information from the registrant's definitive proxy statement, for its
1997 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 17, 1997.
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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TABLE OF CONTENTS
Page
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PART I
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Item 1. Business........................................... 1
Overview....................................... 1
Investment Considerations...................... 2
Investment Support Systems..................... 3
Disaster Recovery Services..................... 8
Computer Services and Other.................... 11
Product Development............................ 12
Acquisitions and Offerings..................... 13
Competition.................................... 13
Marketing...................................... 14
Employees...................................... 14
Proprietary Protection......................... 15
Item 2. Properties......................................... 15
Item 3. Legal Proceedings.................................. 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 4.1 Certain Executive Officers of the Registrant....... 17
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PART II
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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
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PART III
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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
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PART IV
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Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K................................ 21
Signatures......................................... 22
List of Exhibits................................... 23
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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 and
the pioneer and a leading provider of comprehensive computer disaster recovery
services. The Company's business approach is to focus on market niches 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 from contracts
for remote processing, disaster recovery and software maintenance services,
which together accounted for approximately 80% of the Company's total revenues
during the last three years (77% in 1996). 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 78% were renewed or
replaced with new contracts (75% in 1996). While there can be no assurance that
the rate of contract renewals will remain at this level, 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 1996.
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. 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's business units
are organized 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 Dealing Systems, SunGard Global Systems, SunGard
Government Systems, SunGard Insurance Systems and SunGard Securities Systems.
SunGard Trading Systems 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, 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, Corbel,
Corporate Services (BondMaster), CSS, Portfolio Administration Limited, Series
7, Series 11, Shaw Data, SunGard Asset Management Systems,
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SunGard/DML, SunGard Employee Benefit Systems, SunGard Investment Systems,
SunGard Investment Systems SA (Geneva), SunGard Investment Administration
Services, SunGard Shareholder Systems, SunGard Trust Systems and Worrall Miller.
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 companies and institutions. Business
units: Intelus Corporation and MACESS Corporation.
The Company, a Delaware corporation, 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 through the
acquisition of complementary businesses. The Company's growth, in part, depends
upon the availability of suitable acquisition candidates and whether
acquisitions can be completed on acceptable terms. Competition from other
acquirors and the alternative of a public equity offering may adversely affect
both the availability and terms of future acquisitions. Further acquisitions by
the Company may require the use of debt or equity financing. There can be no
assurance that any acquired business will perform as expected. Poor performance
by an acquired business could adversely affect the Company's results and cause
impairment of part of the Company's goodwill.
Technological Changes. The Company's success, in part, depends upon
continued adaptation of its proprietary software and recovery services to new
computer and telecommunications technology on a timely and cost effective basis.
In particular, rapid technological developments, which cannot be predicted,
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 be
able to update its software or develop new systems without experiencing
unforeseen delays or that newly developed products will be successfully marketed
and sold. (See Product Development.)
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 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 systems also are marketed internationally.
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, 1996, the Company had approximately 1,840
remote processing contracts in force. These contracts generally have initial
terms of one or more years and then continue for successive, one-year or longer
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 1996, 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 1996, the Company
continued to add multicurrency 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
3
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market data such as security prices and quality ratings, and provide analytical
models to assist with investment strategy and management decisions. The
Company's principal investment accounting and portfolio management systems, some
of which have multicurrency capabilities, are described in the following table:
<TABLE>
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Mode of
System Platform Delivery Primary Markets
================================================================================
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APSYS III(TM) IBM mainframe software private banks in
Digital license Luxembourg and
Switzerland
- --------------------------------------------------------------------------------
INVEST ONE(R) IBM mainframe remote international
processing banks, large
service bank trust
and software departments,
license mutual funds,
------------------------------------ insurance
UNIX workstation software companies and
license other financial
institutions
- --------------------------------------------------------------------------------
ON-LINE(TM) Bull mainframe remote institutional
processing and retail
service investment
- ------------------------------------------------------------- advisers and
ON-SITE(TM) UNIX workstation software other portfolio
license managers
- -------------------------------------------------------------
SHAW ASPIRE(TM) microcomputer software
license
- --------------------------------------------------------------------------------
MONEYMAX(R)/ UNIX workstation remote government
SERIES 2(TM) processing treasurers and
service financial
institutions
- --------------------------------------------------------------------------------
PAL(TM) IBM midrange remote United Kingdom
processing stockbroking
service firms and fund
managers
- --------------------------------------------------------------------------------
PMS(TM)/APS(TM) microcomputer software small banks,
license thrifts and
other financial
institutions
- --------------------------------------------------------------------------------
PAR EX(R) microcomputer software insurance
license and companies
remote
processing
service
- -------------------------------------------------------------
PRISM(TM) IBM mainframe software
license
- -------------------------------------------------------------
SDIM(TM) microcomputer software
license
- --------------------------------------------------------------------------------
</TABLE>
During 1996, the Company introduced the Enterprise Data Warehouse module,
which provides access to INVEST ONE data in Sybase or Microsoft Access
relational databases, and APS 2, which is a PC-based Windows 95/NT product that
will be the eventual successor to PMS, APS and SERIES 2. Also in 1996, ON-LINE
was converted from batch processing to real-time processing. The Company added
APSYS III, an investment accounting and portfolio management system for private
banks in Luxembourg and Switzerland, to its product offerings with the
acquisition of NCS Financial Systems, Inc. in July 1996 (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. During 1996, the Company introduced IFASNET, a
module that allows publication of reports via the Internet or Intranet, and
INSIGHT, a GUI front-end product.
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
4
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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:
<TABLE>
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Mode of
System Platform Delivery Primary Markets
================================================================================
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BOLT(R) 2 IBM mainframe remote capital markets
processing departments of
service domestic banks,
- ----------------------------------------------------------- broker/dealers
GSM GLOBAL SECUR- Digital Vax software and other
ITIES MANAGER(R) UNIX license financial
workstation institutions
- -----------------------------------------------------------
INTRADER(R) UNIX software
workstation license
- -----------------------------------------------------------
MONEYMARKET II(R) Digital 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
- --------------------------------------------------------------------------------
MATRIX(TM) IBM AS 400 software capital markets
license departments of
- ----------------------------------------------------------- international
DYNAMIX(TM) Windows NT software banks and other
license financial
institutions
- --------------------------------------------------------------------------------
</TABLE>
The Company expanded its international activities with the August 1996
acquisition of SunGard Dealing Systems Pty Limited, a business based in Sydney,
Australia that provides multicurrency front- and back-office systems for
portfolio management, deal capture and analytics to banks and brokerages located
primarily in the Pacific Rim (see Acquisitions and Offerings). With respect to
the PHASE3 system, the Company completed development of new foreign securities
functionality, fixed-income trading functionality and other enhancements to
better support retail brokerage functionality. In addition during 1996, the
Company continued to expand its offerings by signing a PHASE3 facilities
management agreement with a large investment banking firm.
Derivatives Trading and Related Systems. The Company provides software
applications encompassing most aspects of risk management, trading and
processing for capital markets globally. The Company's 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 by their middle- and
back-office operations. These systems provide trading support, risk management,
trade processing and accounting functions, and also 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>
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Mode of
System Platform Delivery Primary Markets
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DEVON DERIVATIVES Windows NT software trading rooms
SYSTEM(TM) UNIX workstation license and capital
DEVON FOREX markets
SYSTEM (TM) departments of
PANORAMA(TM) international
- ----------------------------------------------------------- banks, and
INTAS (TM) Windows NT software trading rooms of
OPTAS (TM) UNIX workstation license other financial
TRADENET (TM) institutions
- --------------------------------------------------------------------------------
</TABLE>
5
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<TABLE>
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Mode of
System Platform Delivery Primary Markets
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OPUS(R) UNIX workstation software trading rooms
license and capital
markets
departments of
international
banks, and
trading rooms of
other financial
institutions
- --------------------------------------------------------------------------------
OCTAGON(TM) FUTURES UNIX workstation software international
SYSTEM license and banks and
remote brokerage firms
processing active in the
service futures markets
for principal
and customer
business
- ----------------------------------------------
GMI SYSTEM(TM) IBM AS 400
- --------------------------------------------------------------------------------
</TABLE>
In January 1997, the Company acquired GMI Software, Inc., a provider of
software and services to financial institutions for the processing of exchange-
traded futures and options and other securities, which has become part of
SunGard Futures Systems (see Acquisitions and Offerings).
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>
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System Platform Mode of Primary Markets
Delivery
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AUTOTRUST(R) IBM mainframe remote small and medium
processing size bank trust
CHARLOTTE(TM) Windows NT 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(R) 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
- --------------------------------------------------------------------------------
TRUSTWARE(R) Digital Vax software medium size bank
SERIES 7 Digital Alpha license and trust departments
remote
processing
service
- --------------------------------------------------------------------------------
TRUSTWARE(R) Digital Vax software large and medium
SERIES 11 Digital Alpha license and size bank trust,
remote custody and
processing securities
service departments and
investment
management firms
- --------------------------------------------------------------------------------
</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
6
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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.
With the acquisition of NCS Financial Systems, Inc. in July 1996, the
Company expanded its trust management and corporate trust systems business by
adding the TRUSTWARE SERIES 7 and SERIES 11 products (see Acquisitions and
Offerings). During 1996, TRUSTWARE SERIES 7 was enhanced to operate on a Digital
Alpha platform and to provide larger volume processing. Also during 1996, the
Company completed the development of a new Windows front-end to AUTOTRUST known
as the CHARLOTTE system, which added new functionality, including SQL
capability.
The Company also markets EXPEDITER(R) 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. 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. In addition during 1996, the Company began marketing EXPEDITER for use
with other vendors' software products.
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>
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Mode of
System Platform Delivery Primary Markets
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OMNIPLUS(TM) IBM mainframe remote corporate, bank
OMNIPLAN(R) processing and other
OMNIPAY(R) service, retirement plan
OMNIDBEN(TM) software managers
license and
full service
bureau
processing
-----------------------------------
UNIX workstation software
license
-----------------------------------
IBM AS 400 software
license
-----------------------------------
microcomputer software
license
- --------------------------------------------------------------------------------
MPR(TM) microcomputer software small and medium
license size banks
- --------------------------------------------------------------------------------
QUANTECH(TM) microcomputer software retirement
license administration
firms and
institutions
- --------------------------------------------------------------------------------
</TABLE>
During 1996, the Company completed 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 1996,
the Company introduced OMNIWEB(TM), which allows plan participants access to
data via the Internet.
The Company expanded its activities in the Pacific Rim with the January
1996 acquisition of the business of Worrall Miller & Associates, a provider of
pension plan administration software in Australia (see Acquisitions and
Offerings). In November 1996, the Company acquired Corbel & Co., whose products
include QUANTECH, a retirement plan administration and reporting system, and
AUTODOC(R), an authoring and document-generation system for the creation of
retirement plan documents and forms and other complex documents (see
Acquisitions and Offerings).
7
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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:
<TABLE>
<CAPTION>
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Mode of
System Platform Delivery Primary Markets
================================================================================
<S> <C> <C> <C>
DATAPREP(TM) IBM mainframe remote corporate, bank
EMBERS(R) processing and other
service and retirement plan
software managers
license
- ------------------------------------------------------------
SUPERF4(R) IBM mainframe remote
processing
service and
software
license
- --------------------------------------------------------------------------------
OMNIVEST(TM) UNIX workstation software investment
license management
departments of
banks and other
financial
institutions
- --------------------------------------------------------------------------------
</TABLE>
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>
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Mode of
System Platform Delivery Primary Markets
================================================================================
<S> <C> <C> <C>
INVESTAR(R) IBM mainframe remote large mutual
INVESTAR ONE(TM) UNIX processing fund managers
service and transfer
agents
- --------------------------------------------------------------------------------
SUNSTAR(R) IBM mainframe remote large
UNIX workstation processing commercial
service and bond and
software license equity
transfer agents
- --------------------------------------------------------------------------------
BONDMASTER(R) Digital Vax remote large bank,
Digital Alpha processing corporate and
service and municipal bond
software license transfer agents
- --------------------------------------------------------------------------------
CSSII(R) IBM mainframe software license corporate and
utility stock
transfer agents
- --------------------------------------------------------------------------------
</TABLE>
The Company added BONDMASTER and CSSII to its shareholder accounting
systems product line with the July 1996 acquisition of NCS Financial Systems,
Inc. and the October 1996 acquisition of the securities products business of
Checkfree Corporation, respectively (see Acquisitions and Offerings). During
1996, INVESTAR ONE, an advanced mutual fund shareholder record keeping system
that combines mainframe and client-server architectures and provides real-time
operations, completed a beta test and went into production.
The Company also markets a work-flow management and document-imaging
software system named PowerImage(R) to users of its shareholder accounting
systems. 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
8
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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. 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. The Company also
offers 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, a coldsite for six months if recovery operations
must continue for more than six weeks, a hotsite to regularly test disaster
recovery procedures, and general office space during recovery operations and
tests. Technical assistance when conducting recovery operations and tests and
with designing and implementing a backup communications network are also
provided.
The Company provides disaster recovery services to users of IBM (and
compatible) mainframe computers and also to users of Data General, Digital,
Filenet, Hewlett Packard, IBM midrange (AS/400, RS/6000 and Systems/3X), NCR,
Netframe, Prime, Pyramid, Sequent, Sequoia, Silicon Graphics, Stratus, Sun
Microsystems, Tandem and Unisys computers. These services are marketed directly
and through representatives primarily to IBM (and compatible), Digital, Hewlett
Packard and Unisys mainframe and various midrange computer installations in
North America.
The Company expanded the customer base of its Unisys platform offerings during
1996 through two acquisitions of disaster recovery businesses (see Acquisitions
and Offerings). In 1996, the Company continued to expand its disaster recovery
offerings to users of midrange computers and further enlarged its midrange sales
force. This effort was enhanced by acquisitions in 1996 and early 1997 that
increased the number of customer contracts for midrange computer facilities and
the types of midrange offerings (see Acquisitions and Offerings). Also in 1996,
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.
The Company also introduced several new programs during 1996. The SAP
Technology Practice, which is devoted to the specialized disaster recovery needs
of SAP software users, was formed during 1996. In late 1996, the Company
announced SunGard Secure 2000 to assist customers in addressing Year 2000
issues. The Company also began offering automated tape operations in a disaster
recovery environment, which became possible with the implementation of new
technology from Storage Technology Corporation.
As of December 31, 1996, the Company had approximately 8,300 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.
9
<PAGE>
During 1996, for the eleventh 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 Digital, Filenet, Hewlett
Packard, Netframe, IBM mainframe, Pyramid, Sequent, Stratus and Tandem hotsites,
and mobile Hewlett Packard, IBM midrange, NCR, Sequoia, Silicon Graphics 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),
Chicago, Dallas, Denver, Herndon (Virginia), Jersey City (New Jersey), Los
Angeles, Northvale (Michigan), St. Louis, St. Paul, San Ramon (California) and
Toronto. The St. Paul and Toronto MetroCenters also have coldsites that can be
used in conjunction with the remote operations capability.
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 1996, the Company opened two new
MetroCenters in Chicago and San Ramon (California) and in 1997 added a Denver
MetroCenter as part of the Company's acquisition of Data Assurance Corporation
(see Acquisitions and Offerings). The Chicago MegaCenter expanded in size
during 1996 and added two new large system command centers. In addition, during
1996, the Company expanded its large system recovery capabilities at the
Philadelphia MegaCenter, which included upgrading large mainframe processors,
adding an S/390 Parallel Enterprise Server, creating a Parallel Sysplex
environment and installing an EMC Raid-S DASD. The Philadelphia MegaCenter also
nearly doubled its Tandem capacity and added two new RS/6000 R30 systems. The
Company believes that these additions make the Philadelphia MegaCenter the
largest facility dedicated to disaster recovery for RS/6000 users. The Company
continued during 1996 to expand its midrange system product offerings at various
facilities and, in addition, expanded its electronic vaulting operations, which
include remote journaling, hot storage, shadowing and customer support services.
The disk access, tape cartridge and other peripheral equipment at all facilities
were upgraded or augmented, and the capabilities of storage and retrieval
systems were increased.
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 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 1996, the Company continued expanding its matrix-
switching capabilities to allow for more efficient and reliable communications
during customer tests and recovery operations.
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.
10
<PAGE>
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 named
CBR(R) Comprehensive Business Recovery, which automates the preparation and
maintenance of disaster recovery and business resumption plans, including
comprehensive company-wide planning capabilities. During 1996, the Company
released an enhanced version of CBR that includes additional project plans,
screen customizations and general reporting enhancements. The Company also
continues to support its DOS-based microcomputer disaster recovery planning
software product known as DP/90 PLUS(R).
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 1996, the Company continued to expand its services for open systems
environments, introduced a development service for performing analysis, testing
and remediation for Year 2000 projects, and upgraded mainframes to CMOS and
parallel Sysplex technology.
Healthcare Information Systems. Certain of the Company's healthcare
information systems focus on hospital electronic medical records, patient
financial systems and clinical data management. Other healthcare information
systems assist health maintenance organizations (HMO's) and other companies with
high volume claims processing in reducing costs and improving service to their
customers. The Company's healthcare information systems use proprietary work-
flow management and document-imaging to increase efficiency and flexibility for
its users. 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 license HMO's and health insurance companies
- ----------------------------------------------------------------------------------------------
ChartFlo(R) 2000 UNIX server software license hospitals, healthcare institutions
AccountFlo(TM) microcomputer and medical clinics
- ---------------------------------------------------------
CDM(TM) UNIX server software license
microcomputer
- ----------------------------------------------------------------------------------------------
Enterprise 2000(TM) UNIX server software license hospitals, healthcare institutions
ProcessFlo(R) microcomputer and medical clinics; banks and
other financial institutions and
government entities
- ----------------------------------------------------------------------------------------------
RSS/4/(TM) microcomputer software license state pension administration
agencies
- ----------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
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,
1996, the Company had in force approximately 7,400 remote processing and
software maintenance contracts for its investment support systems.
The Company's expenditures for software development during 1996, 1995 and
1994, including amounts that were capitalized, totalled approximately
$65,101,000, $53,908,000 and $38,684,000, 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.
The Company has initiated a program to evaluate whether its systems are Year
2000 compliant (meaning that they can properly handle dates in the year 2000 and
beyond). The Company believes that certain of its products are already Year 2000
compliant and will continue to evaluate its other products and, where
appropriate, make necessary modifications. The Company currently anticipates
that these efforts will not cause a significant increase in development
spending.
During 1997, the Company expects to develop Windows NT and UNIX versions of
many products. 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 1997, development plans for INVEST ONE include enhancements to
increase the speed of executions and to add processing features to support the
master/feeder portfolio structures. The Company is also continuing development
of XAMIN/TM/, a client server performance measurement and analysis system, and
TradeMaster, a new trading module to ON-LINE and ON-SITE. The Company plans
during 1997 to continue to enhance the functionality of EXPEDITER and expand its
application for users of Company and third party products. Developments to
PHASE3 will include enhanced data distribution to provide real-time updates, SQL
capabilities and Internet access. The Company will continue developing enhanced
functionality for its derivatives trading, foreign exchange and consolidated
risk management systems.
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 1997, the Company plans to install in the
Philadelphia MegaCenter a third large system mainframe processor, expand its
midrange product lines, increase marketing efforts in Mexico and open new
MetroCenters in Seattle (Washington) and Mexico City. Also during 1997, the
Company plans to continue expanding its electronic vaulting product offerings,
upgrading its disk storage, tape cartridge and other peripheral hotsite
equipment, and 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. The
Company also plans during 1997 to introduce the SunGard National Network, a
nationwide managed recovery network utilizing synchronous optical (SONET)
technology that provides communications between subscriber locations and the
Company's facilities.
12
<PAGE>
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 acquisition of new business lines. Since its initial public
offering in 1986, the Company has acquired twenty-eight investment support
systems businesses, eighteen 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 1996, the Company spent approximately $158,080,000 in cash, net of cash
acquired, to acquire five investment support systems businesses and three
disaster recovery services businesses.
The Financial Systems Group expanded in August 1996 by acquiring SunGard
Dealing Systems Pty Limited, a business based in Sydney, Australia that provides
multicurrency front- and back-office systems for portfolio management, deal
capture and analytics to banks and brokerages located primarily in the Pacific
Rim.
The Trading Systems Group expanded its SunGard Futures Systems business unit
in January 1997 by acquiring GMI Software, Inc., a provider of software and
services to financial institutions worldwide for the processing of exchange-
traded futures and options and other securities.
The Trust and Shareholder Systems Group also grew by acquisition. The Trust
and Shareholder Systems Group expanded its international operations by acquiring
in January 1996 the business of Worrall Miller & Associates Pty Ltd., a
provider of pension plan administration software in Australia, and the related
service bureau business of State Street Bank Australia in February 1996. In
July 1996, the Company acquired NCS Financial Systems, Inc., which provides
turnkey trust accounting and corporate trust systems to banks and other
financial institutions. The securities products business of Checkfree
Corporation was acquired in October 1996. In November 1996, the Company
purchased Corbel & Co., a provider of retirement plan document preparation
software and services and retirement plan administration software.
The Recovery Services Group acquired several disaster recovery businesses
during 1996. The Company purchased the North American disaster recovery
services businesses of Digital Equipment Corporation in April 1996 and the
Unisys disaster recovery services businesses of FIS, Inc. in July 1996 and
Fiserv, Inc. in December 1996. In addition, the Recovery Services Group
acquired in early 1997 the business of Data Assurance Corporation, which
provides, among other offerings, recovery services to the credit union industry
operating on Data General platforms.
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
13
<PAGE>
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.
The computer disaster recovery business remains highly competitive. The
Company's principal competitors in this business are Comdisco, 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
companies that provide imaging systems through vertical market resellers that
focus on hospitals and HMO's. The Company believes that it competes effectively
as to the key competitive factors in marketing work-flow management and
document-imaging systems to healthcare institutions. These factors include
features and adaptability of the software for specific market segments,
knowledge of the healthcare industry, level and quality of customer support,
level of software development expertise and overall net cost.
Marketing
Most 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 1996, 1995 and 1994 totalled approximately
$58,019,000, $51,273,000 and $33,505,000, respectively. In addition, the
Company's foreign subsidiaries had sales for those years totalling approximately
$57,457,000, $43,612,000 and $26,652,000, respectively. Export and foreign
sales during 1996 totalled $115 million and increased by 22% over 1995 export
and foreign sales. As a percentage of total revenues, export and foreign sales
have grown from 12% in 1993 to 17% in 1996.
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, 1996, the Company had approximately 3,700 full-time employees.
The Company believes that its success, in part, depends 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.
14
<PAGE>
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.
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 16,300
(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 two IBM-compatible mainframe
computers.
- --------------------------------------------------------------------------------
Birmingham, AL Headquarters for MACESS Corporation. 27,200
- --------------------------------------------------------------------------------
Canoga Park, CA Headquarters for SunGard Government 12,000
(near Los Angeles) Systems.
- --------------------------------------------------------------------------------
Carshalton, England Headquarters for Portfolio 10,000
(near London) Administration Limited and related
computer centers with five 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. 25,000
- --------------------------------------------------------------------------------
Chicago, IL Headquarters for SunGard Futures 7,000
Systems.
- --------------------------------------------------------------------------------
Fairfield, NJ Computer center for Shaw Data Inc. 22,000
(near New York) with four Bull mainframe, four
Hewlett Packard and one Sun
Microsystems computers.
- --------------------------------------------------------------------------------
Geneva, Switzerland Headquarters for SunGard Investment 5,000
Systems SA.
- --------------------------------------------------------------------------------
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 four Digital and two IBM or
IBM-compatible mainframe computers
and five UNIX servers.
- --------------------------------------------------------------------------------
Jacksonville, FL Headquarters for Corbel & Co. 45,300
- --------------------------------------------------------------------------------
London, England European offices of SunGard Capital 14,500
Markets and SunGard Futures Systems
and related computer center with one
Digital Vax computer.
- --------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Location Purpose Square Feet
================================================================================
<S> <C> <C>
Los Altos, CA Headquarters for Renaissance Software. 11,000
- --------------------------------------------------------------------------------
New York, NY Headquarters for Shaw Data Inc. 16,000
- --------------------------------------------------------------------------------
New York, NY Headquarters for SunGard Capital 14,300
Markets.
- --------------------------------------------------------------------------------
Northbrook, IL SunGard Recovery Services MegaCenter 84,000
(near Chicago) with eleven Digital, two IBM
mainframe and two Tandem computers,
and three Hewlett Packard, seven IBM
midrange, four Sun Microsystems and
two Unisys mobile computers.
- --------------------------------------------------------------------------------
Philadelphia, PA SunGard Recovery Services MegaCenter 230,000
with nine Digital, twelve Hewlett
Packard, six IBM or IBM-compatible
mainframe, three Stratus and three
Tandem computers, and 16 Digital,
nine Hewlett Packard, nineteen IBM
midrange, three NCR, three Sequent,
one Sequoia, one Silicon Graphics and
three Sun Microsystems mobile
computers.
- --------------------------------------------------------------------------------
Rockville, MD Headquarters for Intelus Corporation. 21,600
- --------------------------------------------------------------------------------
Roswell, GA SunGard Recovery Services MegaCenter 37,800
(near Atlanta) with twenty-five Digital computers,
and three Digital, one Hewlett
Packard, nine IBM midrange and one
Sun Microsystems mobile computers.
- --------------------------------------------------------------------------------
San Mateo, CA Headquarters for SunGard Shareholder 18,200
Systems.
- --------------------------------------------------------------------------------
Scottsdale, AZ SunGard Recovery Services MegaCenter 13,800
with two Digital, four Prime and five
Unisys computers, and one IBM
midrange and one Unisys mobile
computers.
- --------------------------------------------------------------------------------
Stockholm, Sweden Headquarters for Front Capital 40,000
Systems.
- --------------------------------------------------------------------------------
Sydney, Australia Australian offices of SunGard Capital 8,800
Markets, SunGard Dealing Systems,
SunGard Futures Systems and the
SunGard Trust and Shareholder Systems
Group, and related computer center
with one Digital Vax computer and one
IBM midrange 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 six Tandem computers.
- --------------------------------------------------------------------------------
Waltham, MA Headquarters for SunGard Global 10,600
(near Boston) Systems and related computer center
with two Digital computers.
- --------------------------------------------------------------------------------
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.
16
<PAGE>
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.
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 61 Chief Executive Officer, SunGard Healthcare
Information Systems Group
- --------------------------------------------------------------------------------
Bruce H. Battjer 46 Chief Executive Officer, SunGard Computer
Services Group
- --------------------------------------------------------------------------------
Andrew P. Bronstein 38 Vice President and Controller, SunGard Data
Systems Inc.
- --------------------------------------------------------------------------------
Cristobal I. Conde 36 Chief Executive Officer, SunGard Trading
Systems Group
- --------------------------------------------------------------------------------
Philip L. Dowd 55 Chief Executive Officer, SunGard Trust and
Shareholder Systems Group
- --------------------------------------------------------------------------------
Lawrence A. Gross 44 Vice President and General Counsel, SunGard
Data Systems Inc.
- --------------------------------------------------------------------------------
Michael F. Mulholland 47 Chief Executive Officer, SunGard Recovery
Services Group
- --------------------------------------------------------------------------------
Michael K. Muratore 50 Chief Executive Officer, SunGard Financial
Systems Group
- --------------------------------------------------------------------------------
Donna J. Pedrick 47 Vice President-Human Resources, SunGard Data
Systems Inc.
- --------------------------------------------------------------------------------
Michael J. Ruane 43 Chief Financial Officer and Vice
President-Finance, SunGard Data Systems Inc.
- --------------------------------------------------------------------------------
Richard C. Tarbox 44 Vice President-Corporate Development, SunGard
Data Systems Inc.
- --------------------------------------------------------------------------------
</TABLE>
Mr. Adams has been Chairman and Chief Executive Officer of Intelus Corporation
and of MACESS Corporation since 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 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
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.
17
<PAGE>
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 & 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 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 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's Trading Systems Group.
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.
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 1996 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 1996 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 1996 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, 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 1997 Annual Meeting of Stockholders ("1997 Proxy Statement")
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 1997 Proxy
Statement entitled Report of the Compensation Committee and Equity Award
Subcommittee 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 1997 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 1997 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 1997 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 1997 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 1996 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 13,
1997
Consolidated Statements of Income for each of the years ended December 31,
1996, 1995 and 1994
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Cash Flows for each of the years ended December 31,
1996, 1995 and 1994
Consolidated Statement of Stockholders' Equity for each of the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Quarterly Financial Information (unaudited)
(a)(2) Financial Statement Schedules
None.
(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 23 of this Report. Exhibits 10.12 through 10.22 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
None.
21
<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 27, 1997 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.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ James L. Mann Chief Executive Officer, March 27, 1997
- --------------------------------
James L. Mann President, and Chairman
of the Board of Directors
(principal executive officer)
/s/ Michael J. Ruane Chief Financial Officer and March 27, 1997
- -------------------------------- Vice President-Finance
Michael J. Ruane (principal financial officer)
/s/ Andrew P. Bronstein Vice President and Controller March 27, 1997
- -------------------------------- (principal accounting officer)
Andrew P. Bronstein
/s/ Gregory S. Bentley Director March 27, 1997
- --------------------------------
Gregory S. Bentley
/s/ Michael C. Brooks Director March 27, 1997
- --------------------------------
Michael C. Brooks
/s/ Albert A. Eisenstat Director March 27, 1997
- --------------------------------
Albert A. Eisenstat
/s/ Bernard Goldstein Director March 27, 1997
- --------------------------------
Bernard Goldstein
/s/ Michael Roth Director March 27, 1997
- --------------------------------
Michael Roth
/s/ Malcolm I. Ruddock Director March 27, 1997
- --------------------------------
Malcolm I. Ruddock
/s/ Lawrence J. Schoenberg Director March 27, 1997
- --------------------------------
Lawrence J. Schoenberg
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
LIST OF EXHIBITS
Number Document
- ------ ------------------------------------------------------------------
<S> <C>
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/(8)/ Amendment to 401 Lease, dated October 9, 1995.
10.9 Amendment to 401 Lease, dated December 23, 1996 (filed with this
Report).
10.10/(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.
10.11/(9)/ Credit Agreement, dated August 29, 1996, among the Company, certain
banks and other financial institutions and PNC Bank, National
Association, as Agent.
10.12/(1)/ The Company's 1982 Incentive Stock Option Plan and Amendments
thereto, dated January 1, 1987 and November 8, 1991./(13)/
10.13/(10)/ 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./(13)/
10.14/(1)/ The Company's 1988 Nonqualified Stock Option Plan and Amendment
thereto, dated October 30, 1990./(13)/
10.15/(6)/ The Company's 1990 Amended and Restated Restricted Stock Incentive
Plan./(13)/
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Number Document
- ------ -------------------------------------------------------------------
<S> <C>
10.16/(11)/ The Company's Restricted Stock Award Plan for Outside
Directors./(13)/
10.17/(12)/ The Company's 1994 Equity Incentive Plan./(13)/
10.18/(8)/ The Company's 1996 Equity Incentive Plan./(13)/
10.19 The United Kingdom Addendum to the Company's 1996 Equity Incentive
Plan (filed with this Report)./(13)/
10.20 Summary Description of the Company's Annual Executive Incentive
Compensation Program (filed with this Report)./(13)/
10.21/(8)/ Summary Description of the Company's Long-Term Executive Incentive
Compensation Plan./(13)/
10.22/(1)/ Form of Indemnification Agreement entered into by the Company with
its directors and officers./(13)/
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, 1996 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.
27.1 Financial Data Schedule for the year ended December 31, 1996 (filed
with this Report).
- ------------
</TABLE>
(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).
24
<PAGE>
(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, 1995 (Commission
File No. 0-14232).
(9) Incorporated by reference to the Exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30,
1996 (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, 1994 (Commission
File No. 0-14232).
(11) 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).
(12) 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).
(13) Management contract or compensatory plan or arrangement.
25
<PAGE>
INDEX OF EXHIBITS FILED WITH THIS REPORT
<TABLE>
<CAPTION>
Number Document
- --------------------------------------------------------------------------------
<S> <C>
10.9 Amendment to 401 Lease, dated December 23, 1996.
10.19 The United Kingdom Addendum to the Company's 1996 Equity Incentive
Plan.(1)
10.20 Summary Description of the Company's Annual Executive Incentive
Compensation Program.(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, 1996 expressly incorporated herein by reference.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants regarding the Company's consolidated
financial statements.
27.1 Financial Data Schedule for the year ended December 31, 1996.
- ---------------
(1) Management contract or compensatory plan or arrangement.
</TABLE>
<PAGE>
Exhibit 10.9
401 NORTH BROAD STREET
PHILADELPHIA, PENNSYLVANIA
AMENDMENT TO LEASE
AMENDMENT TO LEASE made as of this _______ day of December, 1996, by
and between BROAD AND NOBLE ASSOCIATES, INC. having its principal office at 401
North Broad Street, Philadelphia, Pennsylvania 19108 ("Landlord") and SUNGARD
SERVICES COMPANY, having its principal office at 1285 Drummers Lane, Wayne,
Pennsylvania 19087 ("Tenant").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, reference is made to the Agreement of Lease, dated September
1, 1986 for a certain space on the Mezzanine (the "Mezzanine"), and the
Agreement of Lease, dated April 12, 1984 for certain space on the sixth (6th)
floor (the "Sixth Floor"), and the Amendment to Lease, dated November 18, 1992,
for certain other space on the seventh (7th) floor (the "Seventh Floor Second
Expansion Space", and "All Remaining Seventh Floor Space"), and the Amendment to
Lease dated November 22, 1995 for certain space on the eighth (8th) floor (the
"Suite 816"), with the respective Riders attached thereto (hereinafter
collectively referred to as the "Leases"), demising certain in the building
known as 401 North Broad Street, Philadelphia, Pennsylvania (the "Building");
and
WHEREAS, the extended term of the Leases expires on December 31, 1999;
and
WHEREAS, Tenant finds the present space inadequate for its needs and
Landlord is willing to accommodate expansion requirements of Tenant on the
eighth floor of the Building; and
WHEREAS, Landlord and Tenant desire to extend the Leases through
December 31, 2004 on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Expansion Spaces.
----------------
(a) Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord 50,000 square feet of space located on the eighth floor of 401 North
Broad Street, Philadelphia, Pennsylvania (the "First Expansion Space"), as shown
on the Eighth Floor plan attached hereto and made a part hereof as Exhibit "A",
for a term of eight (8) years commencing January 1, 1997 and ending December 31,
2004; and (b) Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the remaining 45,786 square feet of space located on the eighth floor
of 401 North Broad Street, Philadelphia, Pennsylvania (the "Second Expansion
Space") as shown on the Eighth Floor plan attached hereto and made a part hereof
as Exhibit "A", for a term of seven (7) years commencing January 1, 1998 and
ending December 31, 2004, all on the same terms and conditions as are in
existence for the Sixth Floor, Mezzanine, Seventh Floor, and Suite 816 Leases
except as modified by and as specifically set forth in this Amendment. Landlord
hereby covenants to deliver to Tenant possession of the First Expansion Space
and the Second Expansion Space, free and clear of any tenancies, commencing
January 1, 1997 and January 1, 1998, respectively. Tenant will be responsible
for obtaining permits and approvals for all construction which will be done in
the Expansion Space to conduct Tenant's business thereon.
<PAGE>
2. Extension of Term; Basic Rent.
-----------------------------
(a) Extension of Term. The term of the Leases covering the Sixth
-----------------
Floor, Mezzanine, Seventh Floor, and Suite 816, shall be extended for an
additional five (5) years (the "Second Extended Term"). The Second Extended
Term for the Leases shall commence on January 1, 2000 and expire on December 31,
2004.
(i) Basic Rent. The basic rent during the balance of the current
----------
term and Second Extended Term shall be as follows:
A. Mezzanine
---------
1) For the period commending as of the date hereof and
ending December 31, 1999, Tenant shall pay the same amount as basic rent
for the Mezzanine as Tenant is currently paying in accordance with the
Leases except that there shall be no cost of living increase in such basic
rent during the years 1997, 1998 and 1999.
2) For the period commencing January 1, 2000 and ending
December 31, 2004, Tenant shall pay for the Mezzanine the sum of
$214,744.00 annually, payable in equal monthly installments, in advance, of
$17,895.33 each.
B) Sixth Floor
-----------
1) For the period commencing as of the date hereof and
ending December 31, 1999, Tenant shall pay the same amount as basic rent
for the Sixth Floor as Tenant is currently paying in accordance with the
Leases except that there shall be no cost of living increase in such basic
rent during the years 1997, 1998 and 1999.
2) For the period commencing January 1, 2000 and ending
December 31, 2004, Tenant shall pay for the Sixth Floor the sum of
$626,951.00 annually, payable in equal monthly installments, in advance, of
$52,245.92 each.
C) Seventh Floor
-------------
1) For the period commencing as of the date hereof and
ending December 31, 1999, Tenant shall pay the same amount as basic rent
for the Seventh Floor as Tenant is currently paying in accordance with the
Lease except that there shall be no cost of living increase in such basic
rent during the years 1997, 1998 and 1999.
2) For the period commencing January 1, 2000 and ending
December 31, 2004, Tenant shall pay for the Seventh Floor the Sum of
$631,930.00 annually, payable in equal monthly installments, in advance, of
$52,660.83 each.
D) First Expansion Space; Second Expansion Space.
---------------------------------------------
1) For the First Expansion Space, for the period
commencing January 1, 1997 and ending December 31, 2004. Tenant shall pay
for the First Expansion Space the sum of $237,500 annually, payable in
equal monthly installments, in advance, of $19,791.67 each.
-2-
<PAGE>
2) For the Second Expansion Space, for the period
commencing January 1, 1998 and ending December 31, 2004, Tenant shall pay
for the Second Expansion Space the sum of $217,484 annually, payable in
equal monthly installments, in advance, of $18,123.67 each.
E) Suite 816
---------
1) For the period commencing as of the date hereof and
ending December 31, 1999, Tenant shall pay the same amount as basic rent
for Suite 816 as Tenant is currently paying in accordance with the Leases
except that there shall be no cost of living increase in such basic rent
during the years 1997, 1998 and 1999. Commencing January 1, 2000 and
ending December 31, 2004, Tenant shall pay the sum of $6,812.00 annually,
payable in monthly installments, in advance, of $567.67 each.
(b) Each monthly payment of basic rent will be made on the first day
of each and every calendar month during the Second Extended Term. Tenant will
pay said rent to the Landlord, at the office of Landlord as indicated above or
to such other part or to such other address as Landlord may designate from time
to time by written notice to Tenant.
3. Repairs and Improvements.
------------------------
(a) Landlord, at Landlord's sole cost and expense, shall be
responsible for and shall perform the following repairs, replacements,
construction, work and maintenance at the Building and the Leased Premises all
in accordance with the following terms and conditions (collectively "Repairs and
Improvements").
(i) Within thirty (30) days of the date of this Amendment,
Landlord, at Landlord's sole cost and expense, shall prepare or cause to be
prepared and submitted to Tenant for Tenant's approval, by a reputable asbestos
contractor, approved in writing by Tenant, a comprehensive plan, approved in
writing as to scope of work for the removal of all asbestos in the Building.
Within thirty (30) days of the date such plan for asbestos removal is delivered
to and approved by Tenant, Landlord shall let such work out for bid by
contractors approved by Tenant and/or Tenant's consulting engineer. Tenant shall
have final approval of all final plans, specifications and materials of such
asbestos removal and such removal shall be completed by Landlord, at Landlord's
sole cost and expense, as soon as practicable but in no event later than
December 31, 1997.
(ii) Within ninety (90) days of the date of this Amendment,
Landlord, at Landlord's sole cost and expense, shall prepare or cause to be
prepared and submitted to Tenant for Tenant's written approval, by a reputable
smoke detection company, a comprehensive early warning smoke detection system
program, compliant with NFPA, the National Electric Code and all other federal,
state and local bodies having jurisdiction over the Building with respect to
fire, smoke and safety systems, for all floors currently tenant occupied in the
Building and for the installation of said system as and when floors not
currently occupied are occupied in the future. Such system shall contain fully
programmable panels installed both in the Building and the Leased Premises and
such smoke detection system shall be monitored twenty-four (24) hours a day,
three hundred sixty-five (365) days a year by a professional, reputable offsite
security agency. All spaces in the Building which are not leased or occupied as
of the date hereof (whether or not such space or spaces have previously been
leased, occupied or built out) shall either be fully alarmed in accordance with
the program approved by Tenant or shall be gutted, cleared and maintained in
broom clean condition. Within thirty (30) days such plan is delivered to and
approved in writing by Tenant, Landlord shall let such work out for bid by
contractors approved by Tenant and/or
-3-
<PAGE>
Tenant's consulting engineer and Tenant shall have final approval of all final
plans, specifications, materials and scope of such work. All work to be
performed under this Paragraph shall be completed by Landlord, at Landlord's
sole cost and expense, as soon as practicable but in no event later than
December 31, 1997.
(iii) Within thirty (30) days of the date of this Amendment,
Landlord, at Landlord's sole cost and expense, shall prepare or cause to be
prepared and submitted to Tenant for Tenant's written approval, by a reputable
roofing company approved by Tenant, a comprehensive plan to replace the roof of
the Building. The scope of the work, the contractor, materials and phasing of
the work shall be approved by Tenant in writing. The roof, when completed,
shall contain a full ten (10) year warranty as to materials and labor and a
maintenance program shall be put into place by Landlord and approved in writing
by Tenant so that the roof will be maintained free of leaks throughout the term
of the Leases. The roof shall be completely replaced, at Landlord's sole cost
and expense, as soon as practicable but in no event later than December 31,
1997.
(iv) Within thirty (30) days of the date of this Amendment,
Landlord shall prepare or cause to be prepared and submit to Tenant for Tenant's
prior written approval, by a reputable elevator company, a plan for the
replacement of the entire elevator systems in the shaft location of SunGard's
choice not including rooftop machinery or the steel railing system, unless the
railing system or parts thereof require repair or replacement, as determined by
the approved elevator company. For every 100,000 square feet of space in the
Building leased by Landlord after the date hereof, whether or not such leased
space is contiguous, excluding the Eighth Floor, Landlord shall also replace an
additional elevator system until all lobby elevator systems have been replaced
in full. Tenant shall approve in writing, the plans and specifications of the
work, the scope of the work, contractor, phasing of the work and all materials
to be used in replacing the elevator systems as described herein. Tenant, at
Tenant's sole cost, will refurbish the interior cab of each elevator as each
elevator system is replaced. The initial elevator system of SunGard's choice to
be replaced by Landlord pursuant to this Paragraph shall be completed by
Landlord, at Landlord's sole cost and expense, as soon as practicable but in no
event later than December 31, 1997.
(b) Landlord shall prepare and submit for Tenant's approval a plan to
maintain all systems, items repaired and replaced pursuant to the foregoing
Paragraphs. All work to be performed by Landlord or Landlord's contractors
hereunder shall be performed in a good and workmanlike manner, all contracts for
the work shall be approved in writing by Tenant and Tenant and Tenant's agents
and consultants shall have the right to inspect all work as it progresses and to
approve or disapprove same.
4. Financing of Repairs and Improvements.
-------------------------------------
(a) Tenant agrees to finance for Landlord an amount up to the sum of
Two Million Four Hundred Thousand Dollars ($2,400,000) for the sole purposes of
paying the actual costs of performing and installing the Repairs and
Improvements to the Premises and Building. Tenants shall lend to Landlord such
costs by paying the contractors, suppliers or consultants designated by
Landlord, from time to time during the progress of the Repairs and Improvements
(but not more than once per month) within thirty (30) days after receipt from
Landlord of:
(i) supporting documentation thereof approved by Tenant,
accompanied by a certification of the architect, contractor or other consultant
supervising the work, stating that the portion of the work for which Landlord is
applying for payment has been completed substantially in accordance with the
plans and specifications approved by Tenant;
-4-
<PAGE>
(ii) itemized bills for labor and materials constituting
portions of the Repairs and Improvements submitted by the contractors, suppliers
or consultants of the services or materials rendered, such bills shall have been
marked "paid" by the contractor, supplier or consultant;
(iii) waivers of liens evidencing the payment of any prior work
performed and materials supplied for which Landlord previously applied for
payment, executed and acknowledged by the contractors, suppliers and consultants
which are entitled by statute to file mechanics' liens; and
(iv) with respect to the final request for payment, "as-built"
plans and specifications for such Repairs and Improvements.
(b) Interest shall accrue on the outstanding principal balance
advanced by Tenant to Landlord hereunder at the "prime rate" or "prime lending
rate" as those terms are hereinafter defined. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and shall be payable monthly
in arrears on the first day of each month, based on the actual number of days
elapsed at the per annum rate specified above. The term "prime rate" or "prime
lending rate" shall be the rate of interest announced in The Wall Street Journal
on December 31 of each year. Changes in the interest rate, hereunder, shall be
effective on January 1, of each year amounts advanced by Tenant to Landlord are
outstanding.
(c) Landlord shall only be permitted to draw advance from Tenant from
January 1, 1997 through December 31, 1997 up to a maximum amount of Two Million
Four Hundred Thousand Dollars ($2,400,000).
(d) Advances made by Tenant to Landlord shall be repaid monthly
commencing January 1, 1998 and thereafter through December 31, 2004 based upon a
seven year amortization schedule.
(e) Commencing January 1, 1998 and monthly thereafter through December
31, 2004, Tenant shall receive and be entitled to set-off against basic rent,
the monthly amount of principal and interest due from Landlord hereunder until
said amount is paid in full.
5. Right of First Refusal to Purchase Building. If, during the term of
-------------------------------------------
this Lease, Landlord shall receive a bona fide offer acceptable to it for the
purchase of the Building, Tenant shall have a continuing right to purchase the
same upon the terms and conditions as are contained in the said offer, such
right to be exercised in the manner provided for herein. Landlord shall notify
Tenant in writing of the receipt of such offer and terms thereof, the notice to
be accompanied by an agreement of sale embodying the terms of the offer, and
within ten (10) business days after the receipt of such notice (such time to be
of the essence) Tenant shall, if it desires to purchase the Building, deliver to
Landlord Tenant's written agreement legally binding Tenant to make such purchase
on such terms, and shall further deliver to Landlord the payment, if any, on
account of the sale in the amount specified in such offer. Tenant's failure to
make and deliver such agreement and payment within such ten (10) business days
shall result in the termination of this Right of First Refusal and Landlord may
consummate the transaction in accordance with the terms of the bona fide offer
submitted to Tenant. However, if settlement under the bona fide offer is not
completed within three (3) months from the date such offer is submitted to
Tenant, Landlord shall be obligated to follow the procedures and provisions of
this Paragraph 5 with respect to any subsequent bona fide offers to purchase the
Building acceptable to Landlord.
6. Renewal Options. Provided Tenant is not in default hereunder, Tenant,
---------------
upon not less than twelve (12) months prior written notice in each instance,
shall have the option to renew the Leases for
-5-
<PAGE>
three (3) additional terms (the "Additional Terms") of five (5) years each. The
terms and conditions of each Additional Term shall remain unchanged except for
the basic rent which shall be determined as follows:
(i) Commencing January 1, 2005 and commencing on the first day
of each Additional Term thereafter, Tenant shall pay adjusted basic rent
("Adjusted Basic Rent") for the Leased Premises in the amounts determined in
accordance with the following provisions.
1) Within three hundred (300) and two hundred fifty-five
(255) days prior to January 1, 2005 (or the completion of ten (10) and fifteen
(15) years after the commencement of the Second Extended Term), Landlord and
Tenant shall agree on a new monthly basic rent for the Leased Premises, using,
as a guide, rental values for comparable buildings within a radius of one mile
of 401 North Broad Street, which basic rent, if agreement is reached, shall be
the new basic rent for the period following December 31, 2004, or the subheading
of five (5) years of the Additional Term. If the parties are unable to agree on
a basic rent within three hundred (300) and two hundred fifty-five (255) days
prior to the beginning of the basic rent for the period for which rent is then
being determined, the parties agree to submit this issue of basic rent to
appraisal by Landlord's and Tenant's appraisers holding MAI designations, as
follows, Landlord and Tenant shall each appoint an MAI appraiser to appraise the
basic rent of the Leased Premises for the relevant period. The appraisers shall
consult with each other and attempt to produce an agreed, joint written
appraisal. If the appraisers determine that they are unable to agree on the
basic rent of the Leased Premises, they shall render separate written appraisals
and then jointly select a third appraiser who holds an MAI designation who shall
be charged with rendering a final, binding written appraisal of the basic rent;
provided, however, that the value established by the third appraiser shall not
be less than the lower of the two prior appraisals or higher than the higher of
the prior two appraisals. In the case of appraisals rendered for any Additional
Term, the appraisers shall complete all appraisals no later than one hundred
eighty-five (185) days before the expiration of the then current term. The
appraisers shall be guided by the basic rent of "comparable buildings",
"Comparable buildings" is intended to mean those buildings similar in quality,
character, age and nature to the present building containing the Leased Premises
located within one mile radius of the Building, containing approximately the
same space as the Leased Premises with typical truck access and loading docks,
high quality but in all respects standard features such as HVAC, electric,
plumbing, telephone and office area finishes. The appraisers shall not consider
the value of Tenant's over-improvements and specialized business build-out and
finishes in their appraisals. The joint, agreed decision of the original
appraisers or, if there is no agreed appraisal, the decision of the third
appraiser, shall be final and binding upon the parties. In no event shall the
basic rent for January 1, 2005, through the end of the fifth (5th) year of any
five (5) year Additional Term be lower than the highest basic rent for any
period. Should the appraisal process for any rental period after January 1,
2005, of the term result in a decision which comes after the beginning of a new
rental period, an increase, if any, in the monthly basic rent shall be
retroactive to the month in which the new period began. During the pendency of
appraisal, Tenant shall continue to make monthly payments and shall make up any
difference resulting from an increase in basic rent within ten (10) days of
Landlord's written request. Should the appraisal decision regarding any
Additional Term basic rent be delayed because of Landlord fault to a date less
than one hundred eighty-five (185) days before the expiration of the then
current term or Additional Term, Tenant shall have the right to exercise its
renewal options as described in this Paragraph on the then current terms and
conditions, including, without limitation, the then current basic rent and the
further right to rescind such election by written notice to Landlord within five
(5) business days of receipt of the final appraisal decision.
7. Operating Expenses. With respect to the Eighth Floor only, Paragraphs
------------------
3(b) and 3(c) of the Leases are hereby amended to provide that the Base Real
Estate Taxes and Base Operating Charges
-6-
<PAGE>
for (a) the First Expansion Space shall each be based on the calendar year 1997;
and (b) the Second Expansion Space shall each be based on the calendar year
1998. The percentage of increases allocable to the First Expansion Space will
be 3.87% and the percentage of increase is allocable to the Second Expansion
Space will be 3.54%. The method of computation will be the same as stated in
Paragraphs 3(b) and 3(c) of the Leases.
8. Captions. The captions contained herein are not a part of this
--------
Amendment and are included solely for the convenience of the parties hereto.
9. No Other Charges. Except as herein expressly modified,all of the
----------------
terms, covenants and conditions of the Leases shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment to
Lease as of the day and year first above written.
BROAD AND NOBLE ASSOCIATES, INC. a
---------------------------- corporation
By: /s/ Allan Stillman
-------------------------------------
Title: Pres.
Attest: /s/ Phyllis Docket
---------------------------------
Title: Comptroller
[CORPORATE SEAL]
SUNGARD SERVICES COMPANY
By: /s/ William J. Flounders
-------------------------------------
Title: SVP
Attest: /s/ Debra Stehman
---------------------------------
Title: VP-Controller
[CORPORATE SEAL]
-7-
<PAGE>
EXHIBIT 10.19
Addendum
to
SunGard Data Systems Inc.
1996 Equity Incentive Plan
Rules for UK employees
In pursuance of its powers under the 1996 Equity Incentive Plan ("the Plan")
the Compensation Committee ("the Committee") of the Board of Directors of
SunGard Data Systems Inc. ("the Company") had adopted these rules for the
purposes of operating the Plan with regard to such options to which these rules
are expressed to extend at the time when the option is granted. Unless the
context requires otherwise, all expressions used in the rules have the same
meaning as in the Plan. The Plan, as supplemented by these rules, is referred to
hereinafter as "this Sub-Plan". For the avoidance of doubt, the terms of the
Plan (insofar as they have not been disapplied by Rule 13 or these rules) shall
form part of the Sub-Plan.
1. The Common Shares over which options may be granted under the Sub-Plan form
part of the ordinary share capital (as defined in section 832(1) Income and
Corporation Taxes Act 1988) ("ICTA 1988") of the Company and must at all
times, (including the time of grant and the time of exercise) comply with
the terms of the Plan and comply with the requirements of paragraphs 10 to
14 Schedule 9 ICTA 1988.
2. The companies participating in this Sub-Plan are the Company and all
companies controlled by the Company within the meaning of section 840 ICTA
1988 ("Subsidiaries") and which have been nominated by the Committee to
participate for the time being in this Sub-Plan.
3. The Common Shares are reported by NASDAQ.
4. The Common Shares to be acquired on exercise of the option in accordance
with the terms of the Plan will:
a) be fully paid up;
b) be not redeemable;
c) not be subject to any restrictions other than restrictions which attach
to all shares of stock of the same class. For the purpose of this
clause, the term restrictions includes restrictions which are deemed to
attach to the shares under any contract, agreement, arrangement of
condition as referred to in paragraph 13 Schedule 9 ICTA 1988. Provided
that such restrictions:
i) be objective, specified at the date of grant and set out in full in,
or details given with, the Award; and
ii) be such that rights to exercise such Option after the fulfillment or
attainment of any conditions and limitations so specified shall not
be dependent upon the further discretion of any person; and
<PAGE>
(iii) not be capable of amendment, variation or waiver unless
an event occurs which causes the Committee to consider
that a waived, varied or amended condition would be a
fairer measure of performance and would be no more
difficult to satisfy.
5. The Company has only one class of Common shares.
6. No option will be granted to any employee or director under this Sub-
Plan, or where an option has previously been granted no option shall be
exercised by an option-holder if at that time he has, or any time within
the preceding 12 months has had, a material interest for the purposes of
Schedule 9 ICTA 1988 in either the Company being a close company (within
the meaning of Chapter I of Part XI of ICTA 1988) or in a company being
a close company which has control (with the meaning of section 840 ICTA
1988) of the Company or in a company being a close company and a member
of a consortium (as defined in section 187(7) ICTA 1988) which owns the
Company. In determining whether a company is a close company for this
purpose section 414(1)(a) ICTA 1988 (exclusion of companies not resident
in the United Kingdom) and section 415 ICTA 1988 (exclusion of certain
companies with listed shares) shall be disregarded.
7. No option will be granted to an employee or director under this Sub-Plan
in relation to which exercise price is manifestly less than the fair
market value (as defined in Section 187(2) ICTA 1988) of the Company's
Common Shares on the date of grant of the option and the exercise price
shall be stated at the date of grant of the option and determined in
accordance with Section 11.9 of the Plan (provided that this method of
determination is acceptable to the Shares Valuation Division of the
Inland Revenue) or otherwise determined in advance with the agreement of
the Shares Valuation Division.
8. (a) Any alteration of amendment of this Sub-Plan shall not have
effect unless approved by the Board of Inland Revenue. The
Company undertakes to provide details thereof to the Board of
Inland Revenue without delay for this purpose.
(b) For the purposes of this Sub-Plan no adjustment pursuant to any
of the provisions of the Plan shall be made to any option which
has been granted under the Sub-Plan unless such adjustment would
be permitted under the Plan and under Paragraph 29 Schedule 9
ICTA 1988 and where so permitted no such adjustment shall take
effect unless the approval of the Board of Inland Revenue shall
have been obtained thereto.
9. For the avoidance of doubt it is stated that the Company is the grantor
as defined in paragraph 1(1) Schedule 9 ICTA 1988.
10. Any option granted to an employee or director under this Sub-Plan shall
be limited to take effect so that immediately following such grant the
aggregate market value of shares (determined at the time prescribed by
paragraph 28 Schedule 9 ICTA 1988 and calculated in accordance with the
provisions of the said Schedule 9) wich he can acquire under this Sub-
Plan and any other scheme or schemes, not being a savings-related share
option scheme, approved under this said Schedule 9 and established by
the grantor or by any associated company (as defined in section 416 ICTA
1988) of the grantor (and not exercised) shall not exceed (Pounds)30,000
or such other limit as may be prescribed from time to time provided
always that the extent that any grant of
<PAGE>
any option exceeds the limit prescribed in this Rule 10, it shall be deemed
to comprise such number of shares as may when aggregated with any other
shares remaining issuable or transferable as provided in this Rule 10 in
respect of options granted to that employee or director be equal to, but
not exceed, such limit, provided always that this limit shall not exceed
the limitations set out in the Plan.
11. An option will be granted under this Sub-Plan to an employee (other than
one who is a director) or a full-time director of the Company or a company
participating in this Sub-Plan. For this purpose, a full-time director is
one who is required to work at least 25 hours a week excluding meal-times
in the business of the Company or its subsidiaries.
12. The Company shall not later than 30 days upon actual receipt of the written
notice of exercise of an option given in accordance with the provisions of
the Plan together with the payment of the aggregate exercise price in
respect of Common Shares to be issued pursuant to the exercise of an
option, allot and issue credited as fully paid to the Optionee and cause to
be registered in his name the number of Common Shares specified in the
written notice.
13. For the purposes of the Sub-Plan, the following parts of the Plan shall be
disregarded:
(a) the second sentence of Section 5.1 (d);
(b) all words after "of SunGard" in line three of Section 5.1(e);
(c) Section 5.1(f);
(d) Section 5.2;
(e) Section 5.3;
(f) Section 5.4;
(g) Section 6.1(b) and (c);
(h) Section 6.2(b), (c), (d) and (e);
(i) Section 6.3(a)(2) and (3);
(j) the last two sentences of Section 7.3; and
(k) Section 11.8
The undersigned certifies that this addendum was duly adopted by the
Compensation Committee of the Board of Directors of SunGard Data Systems Inc.
on the 14th day of February 1997.
-------------------------------------
Lawrence A. Gross, Secretary of
SunGard Data Systems Inc.
<PAGE>
Exhibit 10.20
Sungard Data Systems Inc.
Summary Description of The Company's
Annual Executive Incentive Compensation Program
SunGard Data Systems Inc. has an annual executive incentive compensation ("EIC")
program for its executive officers and other key management employees. The
principal purpose of this program is to link a significant portion of annual
cash compensation to financial results and other goals, so as to reward
successful performance.
Each participant's EIC program contains certain financial and/or business goals
as targets. These targets are established at the beginning of each year and
take into account the Company's overall financial and business goals for the
year. Before 1996, the EIC program for corporate officers generally had been
based upon targeted rates of increase in the Company's net income over the
previous year and, sometimes, additional performance goals specific to the
officer's function. Beginning in 1996, however, the performance criterion for
corporate officers was changed to growth in earnings per share rather than
growth in net income. For the chief executive officers of the Company's
operating business groups, the EIC program targets generally are based upon
budgeted operating income and average number of days sales outstanding in
accounts receivable of the business units managed by the group chief executive
officers. For other key management employees, the EIC program targets are based
upon financial and/or business goals related to the business units they manage
and, sometimes, additional performance goals specific to their individual
functions.
Generally, the EIC programs contain an incentive compensation amount related to
each target. If the target is achieved, then the related incentive compensation
amount is earned. For most financial goals, there are three to four designated
targets. If the actual result is less than the minimum target, then no
incentive amount is earned. If the actual result is between two targets, then
the incentive amount earned is calculated by interpolation. If the actual
result is more than the maximum target, then the incentive amount earned is
equal to the amount related to the maximum target plus, in some cases, an
additional incentive amount based upon the extent to which the maximum target
was exceeded.
<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,
------------------------------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
PRIMARY:
Average common shares outstanding ...................... 42,088 38,812 37,670
Dilutive stock options, net
of treasury shares .................................. 920 824 828
------ ------- -------
Adjusted common shares outstanding ..................... 43,008 39,636 38,498
====== ======= =======
Net income ............................................. $34,901 $48,672 $43,087
======= ======= =======
Net income per common share ............................ $ 0.81 $ 1.23 $ 1.12
======= ======= =======
FULLY DILUTED:
Average common shares outstanding ...................... 42,088 38,812 37,670
Dilutive stock options, net
of treasury shares .................................. 973 856 832
------ ------- -------
Adjusted common shares outstanding ..................... 43,061 39,668 38,502
====== ======= =======
Net income ............................................. 34,901 $48,672 $43,087
====== ======= =======
Net income per common share ............................ $ 0.81 $ 1.23 $ 1.12
======= ======= =======
</TABLE>
(1) All shares and per share amounts have been adjusted for a July 1995
two-for-one stock split.
<PAGE>
EXHIBIT 13.1
Portions of the Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1996
[BAR GRAPHS APPEAR HERE]
<TABLE>
<CAPTION>
Revenues in Millions of Dollars
<S> <C>
92 ............. 325
93 ............. 381
94 ............. 437
95 ............. 533
96 ............. 670
<CAPTION>
Pro Forma Net Income in Millions of Dollars/(1)/
<S> <C>
92 ............. 25.8
93 ............. 35.1
94 ............. 43.1
95 ............. 52.9
96 ............. 68.4
<CAPTION>
Pro Forma Fully Diluted Net Income per Share in Dollars/(1)/
<S> <C>
92 ............. .79
93 ............. .95
94 ............. 1.12
95 ............. 1.33
96 ............. 1.59
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Selected financial information
(In thousands, except per share amounts) 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA /(2)(3)/
Revenues $ 324,570 $ 381,372 $ 437,190 $ 532,628 $ 670,309
Income from operations 50,336 59,645 70,326 80,076 59,786
Net income 25,808 38,474 43,087 48,672 34,901
Fully diluted net income per share .79 1.04 1.12 1.23 0.81
Pro forma net income /(1)/ 25,808 35,103 43,087 52,910 68,369
Pro forma fully diluted net income per share /(1)/ .79 .95 1.12 1.33 1.59
BALANCE SHEET DATA
Total assets $ 365,580 $ 418,135 $ 485,740 $ 579,734 $ 679,318
Total short-term and long-term debt 89,790 6,523 10,567 10,002 39,346
Stockholders' equity 189,899 316,960 359,292 422,292 464,638
</TABLE>
(1) Excludes all items described in footnote 2.
(2) 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. 1996 includes
charges for purchased in-process research and development and other
charges of $51,083 ($33,468 after tax), or $0.78 per share on a fully
diluted basis. See Note 2 of Notes to Consolidated Financial
Statements.
(3) 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>
FINANCIAL TABLE OF CONTENTS
26 Quarterly Financial Information
26 Stock Information
27 Management's Discussion and Analysis of Financial Condition and
Results of Operations
31 Consolidated Statements of Income
32 Consolidated Balance Sheets
33 Consolidated Statements of Cash Flows
34 Consolidated Statement of Stockholders' Equity
36 Notes to Consolidated Financial Statements
42 Report of Independent Accountants
25.
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(In thousands, except per share amounts) First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996: (1)
Revenues...................................$149,798 $155,568 $171,646 $193,297
Income (loss) before income taxes.......... 24,592 27,258 (14,078) 25,797
Net income (loss).......................... 14,632 16,219 (10,465) 14,515
Fully diluted net income (loss)
per common share(3)..................... .34 .38 (.24) .34
1995: (2)
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
Fully diluted net income
per common share(3)..................... .29 .32 .31 .31
</TABLE>
(1) Includes third-quarter charges for purchased in-process research and
development and other charges of $44,032 ($28,287 after tax), or $0.66 per share
on a fully diluted basis, and fourth-quarter charges for purchased in-process
research and development of $7,051 ($5,181 after tax), or $0.12 per share on a
fully diluted basis.
(2) 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.
(3) All per share amounts have been adjusted for a July 1995 two-for-one stock
split.
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 3, 1997, 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>
<CAPTION>
Calendar Year 1996
<S> <C> <C>
First Quarter .................. $38 $27-1/2
Second Quarter ................. 41 31-1/4
Third Quarter .................. 46-3/4 35-3/8
Fourth Quarter ................. 47-1/2 38-1/4
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 3, 1997, as reported
on Nasdaq, was $48-1/4 per share.
26.
<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, 1996, 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 Increase
(in millions) Year Ended December 31, (Decrease) /(1)/
1996 1995
1996 1995 1994 1996 1995 1994 vs.1995 vs.1994
-----------------------------------------------------------------------------------
Revenues
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment support systems ....... $412.3 $330.6 $271.1 61% 62% 62% 25% 22%
Disaster recovery services ....... 193.8 162.3 138.7 29 31 32 19 17
Computer services and other....... 64.2 39.7 27.4 10 7 6 62 45
----------------------------------------------------------
$670.3 $532.6 $437.2 100% 100% 100% 26 22
==========================================================
Costs and Expenses
Cost of sales and
direct operating .............. $291.6 $234.0 $194.8 43% 44% 45% 25% 20%
Sales, marketing and
administration ................ 135.4 109.2 89.6 20 21 20 24 22
Product development .............. 61.5 50.4 36.8 9 9 8 22 37
Depreciation ..................... 37.3 30.8 24.3 6 6 6 21 27
Amortization ..................... 33.6 23.9 21.4 5 4 5 41 12
Purchased in-process research
and development and
other charges ................. 51.1 4.2 -- 8 1 -- -- --
----------------------------------------------------------
$610.5 $452.5 $366.9 91% 85% 84% 35 23
==========================================================
Operating Income
Investment support
systems/(2)/ .................. $ 68.1 $ 51.7 $ 43.9 17% 16% 16% 32% 18%
Disaster recovery services/(2)/... 42.6 34.9 29.2 22 22 21 22 20
Computer services
and other/(2)/ ................ 9.5 5.1 4.8 15 13 18 86 6
Corporate administration ......... (9.3) (7.4) (7.6) (1) (1) (2) 26 (3)
----------------------------
110.9 84.3 70.3 17 16 16 32 20
Purchased in-process research
and development and
other charges ................. (51.1) (4.2) -- (8) (1) -- -- --
----------------------------
$ 59.8 $ 80.1 $ 70.3 9 15 16 (25) 14
============================
</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.
27.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS continued
INCOME FROM OPERATIONS
During 1996, the Company recorded $44.5 million of charges to operations ($0.64
per fully diluted share) for purchased in-process research and development
associated with the acquisitions of NCS Financial Systems, Inc. and two small
investment support systems businesses. The Company recorded $6.6 million of
other charges ($0.14 per fully diluted share) primarily associated with the
impairment of the remaining intangible assets related to a business acquired
more than ten years ago, the principal markets of which were state and municipal
governments and thrift institutions. The following discussion of income from
operations excludes these charges, as well as merger costs of $4.2 million
recorded during 1995.
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.
The ISS operating margin was 17% in 1996 and 16% in both 1995 and 1994. The
Company expects that the full-year 1997 ISS operating margin will increase
slightly. 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.
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 DRS operating margin was 22% in both 1996 and 1995, compared to 21% in 1994.
The improved margin in 1995 is primarily attributable to an increase in revenues
resulting from new contract signings and contract renewals and the results of
cost-containment efforts related to selling, marketing and administrative costs.
The Company expects the full-year 1997 DRS operating margin to continue the
pattern of modest improvement experienced over the past three years. 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 increase in the CS operating margin in 1996 compared to 1995 is due
primarily to an increase in remote-access computer processing revenues and
improved performance by the Company's healthcare information systems (HIS)
businesses. The decline in the CS operating margin in 1995 compared to 1994 is
due to the poor performance of an HIS business that was acquired in 1995.
The Company expects that the CS operating margin will continue to improve for
the full year 1997. 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 increased $137.7 million and $95.4 million in 1996 and 1995,
respectively. Excluding acquired businesses, revenues increased $52.1 million
and $62.6 million, or 10% and 15%, in 1996 and 1995, respectively. Recurring
revenues derived from remote processing, disaster recovery, and software
maintenance and rentals are approximately $516.5 million, $425.6 million and
$367.3 million in 1996, 1995 and 1994, respectively, representing 77%, 80% and
84% of consolidated revenues, respectively, for those years. The declining
percentage of recurring revenues for the three years 1994 through 1996 is due
primarily to businesses acquired during that period having a larger percentage
of software license and professional services revenues. Accordingly, the
percentage of software license revenues to total revenues increased to 13% in
1996, compared to 12% and 8% in 1995 and 1994,
28.
<PAGE>
respectively, and professional services revenues increased to 10% of total
revenues in 1996, compared to 8% in both 1995 and 1994. The Company expects that
the percentage of recurring revenues for the full year 1997 will not change
significantly from 1996.
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 $81.7 million and $59.5 million in 1996 and 1995,
respectively. Excluding acquired businesses, revenues increased $24.0 million
and $39.7 million, or 7% and 15%, in 1996 and 1995, respectively. The 1996
increase is attributable to an $11.2 million, or 12%, increase in software
license and professional services revenues and a $12.8 million, or 5%, increase
in remote processing and software maintenance revenues. 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.
Disaster Recovery Services
DRS revenues increased $31.5 million and $23.6 million in 1996 and 1995,
respectively. Excluding acquired businesses, revenues increased $24.3 million
and $20.3 million, or 15% each, in 1996 and 1995, respectively. The increases in
1996 and 1995 are due to $23.7 million and $18.7 million respective increases in
revenues primarily from new contract signings and contract renewals, continued
growth in midrange platforms, and $0.6 million and $1.6 million respective
increases in software license and professional services revenues.
Computer Services and Other
CS revenues increased $24.5 million and $12.3 million in 1996 and 1995,
respectively. Excluding acquired businesses, 1996 and 1995 revenues increased
$3.8 and $2.5 million, or 10% and 9%, compared to 1995 and 1994, respectively.
The 1996 and 1995 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 HIS and mailing services businesses.
COSTS AND EXPENSES
Cost of sales and direct operating expenses increased $57.6 million and $39.2
million in 1996 and 1995, respectively. The increases are due primarily to
acquired businesses and computer and facilities improvements. The decrease in
cost of sales and direct operating expenses as a percentage of revenues from 45%
in 1994 to 44% and 43% in 1995 and 1996, respectively, is due primarily to
increased product development spending associated with the ISS and HIS
businesses.
Sales, marketing and administration expenses increased $26.2 million and
$19.6 million in 1996 and 1995, respectively. The increases are due primarily to
acquired businesses and increased sales activity, particularly in DRS in 1996
and in the Company's trading systems business in 1995.
Product development expenses increased $11.1 million and $13.6 million in
1996 and 1995, respectively. The increases are due primarily to acquired
businesses and increased development spending in connection with various ISS
products. Development costs capitalized were $3.6 million in both 1996 and 1995
and $1.9 million in 1994.
Depreciation of property and equipment increased $6.5 million in both 1996
and 1995. The increases are due primarily to purchases of computer and
telecommunications equipment and acquired businesses.
Amortization of intangible assets increased $9.7 million and $2.5 million in
1996 and 1995, respectively, due to acquired businesses.
As explained above, purchased in-process research and development and other
charges of $51.1 million ($0.78 per fully diluted share) were incurred in 1996.
During 1995, merger costs of $4.2 million ($0.10 per fully diluted share) were
incurred in connection with three acquisitions accounted for as poolings-of-
interests (see Notes 1 and 2 of Notes to Consolidated Financial Statements).
29.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS continued
Net interest income decreased $1.3 million in 1996 compared to 1995 due to
lower cash and short-term investment balances. Net interest income increased
$2.8 million in 1995 compared to 1994 due primarily to a change in mix between
taxable and tax-exempt instruments and an increase in average cash and
investment balances.
The Company's effective income tax rate was 45.1% and 42.8% in 1996 and 1995,
respectively. The higher rate in 1996 than in 1995 is due to nondeductible costs
associated with a portion of purchased in-process research and development and
other costs. The increase in the 1995 effective income tax rate compared to 1994
is due to merger costs associated with 1995 acquisitions accounted for as
poolings-of-interests. Excluding these charges, the 1996, 1995 and 1994
effective income tax rates were 40.4%, 40.8% and 40.6%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments as of December 31, 1996 decreased $69.1 million
from December 31, 1995, to $46.1 million. An increase in accounts receivable and
other current assets is due primarily to an increase in software license sales
in December 1996 and to acquired businesses. The Company expects that capital
spending for property and equipment during 1997 will approximate 1996 capital
spending.
At December 31, 1996, the Company's remaining commitments consist primarily
of operating leases for computer equipment and facilities aggregating $160.3
million, of which $51.2 million will be paid in 1997. 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 has a $150.0 million credit
agreement and believes that it has the capacity to secure additional credit or
issue equity to finance additional capital needs.
30.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In thousands, except per share amounts) Year Ended December 31,
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Revenues .......................................... $670,309 $532,628 $437,190
-----------------------------------
Costs and expenses:
Cost of sales and direct operating .............. 291,580 234,011 194,838
Sales, marketing and administration ............. 135,403 109,226 89,579
Product development ............................. 61,474 50,338 36,741
Depreciation of property and equipment .......... 37,356 30,807 24,268
Amortization of intangible assets ............... 33,627 23,932 21,438
Purchased in-process research and development
and other costs................................ 51,083 4,238 --
-----------------------------------
610,523 452,552 366,864
-----------------------------------
Income from operations ............................ 59,786 80,076 70,326
Interest income, net ............................ 3,783 5,036 2,202
-----------------------------------
Income before income taxes ........................ 63,569 85,112 72,528
Income taxes .................................... 28,668 36,440 29,441
-----------------------------------
Net income ........................................ $ 34,901 $ 48,672 $ 43,087
-----------------------------------
Fully diluted net income per common share ......... $ 0.81 $ 1.23 $ 1.12
-----------------------------------
Shares used to compute fully diluted net income
per common share ................................ 43,061 39,668 38,502
-----------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
31.
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except per share amounts) December 31,
1996 1995
----------------------------
<S> <C> <C>
ASSETS
Current:
Cash and equivalents ................................................... $ 46,072 $ 79,091
Short-term investments, at cost, which approximates market ............. -- 36,066
Trade receivables, less allowance for doubtful
accounts of $10,391 and $6,426 ....................................... 130,404 118,169
Earned but unbilled receivables ........................................ 27,842 25,090
Prepaid expenses and other current assets .............................. 18,507 16,020
Deferred income taxes .................................................. 13,632 6,727
----------------------------
Total current assets ................................................. 236,457 281,163
Property and equipment, less accumulated
depreciation of $158,214 and $126,580 .................................. 109,523 95,745
Software products, less accumulated
amortization of $68,780 and $59,033 .................................... 71,917 35,375
Goodwill, less accumulated amortization of $23,444 and $19,658 ........... 156,796 116,455
Other intangible assets, less accumulated
amortization of $34,590 and $27,015 .................................... 104,625 50,996
----------------------------
$ 679,318 $ 579,734
----------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Short-term and current portion of long-term debt ....................... $ 34,932 $ 6,761
Accounts payable ....................................................... 13,531 12,428
Accrued compensation and benefits ...................................... 41,581 29,330
Other accrued expenses ................................................. 24,004 15,773
Accrued income taxes ................................................... 5,873 10,639
Deferred revenues ...................................................... 90,345 72,642
----------------------------
Total current liabilities ............................................ 210,266 147,573
----------------------------
Long-term debt ........................................................... 4,414 3,241
----------------------------
Deferred income taxes .................................................... -- 6,628
----------------------------
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;
42,300 and 42,111 shares issued ...................................... 423 421
Capital in excess of par value ......................................... 175,937 171,558
Notes receivable for common stock ...................................... (559) (2,817)
Restricted stock plans ................................................. (1,535) (220)
Retained earnings ...................................................... 292,113 260,172
Foreign currency translation adjustment ................................ (266) (1,279)
----------------------------
466,113 427,835
Treasury stock, at cost, 43 and 189 shares ............................. (1,475) (5,543)
----------------------------
Total stockholders' equity ............................................ 464,638 422,292
----------------------------
$ 679,318 $ 579,734
----------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
32.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) Year Ended December 31,
1996 1995 1994
----------------------------------------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATIONS
Net income ............................................... $ 34,901 $ 48,672 $ 43,087
Reconciliation of net income to cash flow from operations:
Depreciation and amortization .......................... 70,983 54,739 45,706
Purchased in-process research and development
and other charges .................................... 51,083 -- --
Other noncash charges .................................. 2,529 1,886 1,286
Deferred income tax benefit ............................ (21,921) (1,374) (3,668)
----------------------------------------------
137,575 103,923 86,411
Cash provided by (used for) working capital, net of effect
of acquired businesses:
Accounts receivable and other current assets ............. (9,669) (30,650) (11,536)
Accounts payable and accrued expenses..................... 863 9,729 4,594
Deferred revenues ........................................ 5,396 7,007 10,300
----------------------------------------------
Cash flow from operations .............................. 134,165 90,009 89,769
----------------------------------------------
FINANCING ACTIVITIES
Cash received under employee stock plans ................. 12,246 5,999 3,687
Cash paid for treasury stock ............................. (4,221) (10,029) (7,979)
Borrowings under line of credit .......................... 18,000 -- --
Repayments of debt ....................................... (9,274) (8,594) (2,121)
----------------------------------------------
Total financing activities ............................. 16,751 (12,624) (6,413)
----------------------------------------------
LONG-TERM INVESTMENT ACTIVITIES
Cash paid for acquired businesses, net of cash acquired .. (165,682) (27,294) (28,061)
Cash paid for property and equipment ..................... (41,347) (31,652) (34,286)
Cash paid for software and other assets .................. (12,972) (5,879) (3,191)
----------------------------------------------
Total long-term investment activities .................. (220,001) (64,825) (65,538)
----------------------------------------------
Increase (decrease) in cash and equivalents
before short-term investment activities .................. (69,085) 12,560 17,818
SHORT-TERM INVESTMENT ACTIVITIES
Purchase of short-term investments ....................... (2,660) (56,188) (48,775)
Maturities of short-term investments ..................... 38,726 54,228 47,493
----------------------------------------------
Increase (decrease) in cash and equivalents ................. (33,019) 10,600 16,536
Beginning cash and equivalents .............................. 79,091 68,491 51,955
----------------------------------------------
Ending cash and equivalents ................................. $ 46,072 $ 79,091 $ 68,491
----------------------------------------------
SUPPLEMENTAL INFORMATION
Interest paid ............................................ $ 1,213 $ 919 $ 703
----------------------------------------------
Income taxes paid ........................................ $ 50,140 $ 33,556 $ 30,405
----------------------------------------------
Acquired businesses:
Property and equipment ................................. $ 11,690 $ 4,719 $ 2,250
Software products ...................................... 42,110 14,597 2,620
Purchased in-process research and development .......... 44,451 -- --
Goodwill and other intangible assets ................... 98,320 31,933 38,274
Deferred income taxes .................................. 9,447 379 (3,234)
Purchase price obligations and debt assumed ............ (20,217) (7,796) (5,184)
Net current liabilities assumed ........................ (20,119) (1,117) (6,665)
Common stock issued .................................... -- (15,421) --
----------------------------------------------
Cash paid for acquired businesses, net of cash
acquired of $132, $8,077 and $12,777 in
1996, 1995 and 1994, respectively .............. $ 165,682 $ 27,294 $ 28,061
----------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
33.
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Common Stock Capital in
Number of Par Excess of
Shares Value Par Value
------------------------------------
<S> <C> <C> <C>
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-interest .................................................. 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
Net income ............................................................ - - -
Purchase of common stock .............................................. - - -
Note repayments ....................................................... - - -
Shares issued under restricted stock plans ............................ 50 - 1,687
Shares issued under stock purchase, option and award plans ............ 139 2 1,520
Compensation expense related to restricted stock plans ................ - - -
Income tax benefit arising from transactions in common stock options... - - 1,172
Foreign currency translation adjustment ............................... - - -
---------------------------------
Balances, December 31, 1996 ............................................... 42,300 $423 $175,937
---------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
34.
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY continued
(In thousands)
<TABLE>
<CAPTION>
Foreign
Notes Restricted Currency
Receivable for Stock Retained Translation
Common Stock Plans Earnings Adjustment
--------------------------------------------------------
<S> <C> <C> <C> <C>
Balances, December 31, 1993 ............................................. $ - $(2,156) $162,034 $(4,041)
Net income .......................................................... - - 43,087 -
Purchase of common stock ............................................ - - - -
Shares issued under restricted stock plans, net ..................... - (164) - -
Shares issued under stock purchase, option and award plans .......... - - - -
Compensation expense related to restricted stock plans .............. - 1,462 - -
Income tax benefit arising from transactions in common stock options. - - - -
Foreign currency translation adjustment ............................. - - - 1,675
--------------------------------------------------------
Balances, December 31, 1994 ............................................. - (858) 205,121 (2,366)
Poolings-of-interest ................................................ (3,332) - 9,800 32
Net income .......................................................... - - 48,672 -
Two-for-one common stock split ...................................... - - - -
Purchase of common stock ............................................ - - - -
Note repayments ..................................................... 515 - - -
Shares issued under stock purchase, option and award plans .......... - - (3,421) -
Compensation expense related to restricted stock plans .............. - 638 - -
Income tax benefit arising from transactions in common stock options. - - - -
Foreign currency translation adjustment ............................. - - - 1,055
--------------------------------------------------------
Balances, December 31, 1995 ............................................. (2,817) (220) 260,172 (1,279)
Net income .......................................................... - - 34,901 -
Purchase of common stock ............................................ - - - -
Note repayments ..................................................... 2,258 - - -
Shares issued under restricted stock plans .......................... - (1,687) - -
Shares issued under stock purchase, option and award plans .......... - - (2,960) -
Compensation expense related to restricted stock plans .............. - 372 - -
Income tax benefit arising from transactions in common stock options. - - - -
Foreign currency translation adjustment ............................. - - - 1,013
--------------------------------------------------------
Balances, December 31, 1996 ............................................. $ (559) $(1,535) $292,113 $ (266)
--------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY continued
(In thousands)
<TABLE>
<CAPTION>
Treasury Stock
Number of
Shares Cost Total
-----------------------------------------
<S> <C> <C> <C>
Balances, December 31, 1993 ............................................. (6) $ (214) $316,960
Net income .......................................................... - - 43,087
Purchase of common stock ............................................ (212) (7,979) (7,979)
Shares issued under restricted stock plans, net ..................... - - -
Shares issued under stock purchase, option and award plans .......... 87 3,164 3,687
Compensation expense related to restricted stock plans .............. - - 1,462
Income tax benefit arising from transactions in common stock options. - - 400
Foreign currency translation adjustment ............................. - - 1,675
-----------------------------------------
Balances, December 31, 1994 ............................................. (131) (5,029) 359,292
Poolings-of-interest ................................................ - - 15,421
Net income .......................................................... - - 48,672
Two-for-one common stock split ...................................... (91) - -
Purchase of common stock ............................................ (400) (10,029) (10,029)
Note repayments ..................................................... - - 515
Shares issued under stock purchase, option and award plans .......... 433 9,515 6,178
Compensation expense related to restricted stock plans .............. - - 638
Income tax benefit arising from transactions in common stock options. - - 550
Foreign currency translation adjustment ............................. - - 1,055
-----------------------------------------
Balances, December 31, 1995 ............................................. (189) (5,543) 422,292
Net income .......................................................... - - 34,901
Purchase of common stock ............................................ (131) (4,221) (4,221)
Note repayments ..................................................... - - 2,258
Shares issued under restricted stock plans .......................... - - -
Shares issued under stock purchase, option and award plans .......... 277 8,289 6,851
Compensation expense related to restricted stock plans .............. - - 372
Income tax benefit arising from transactions in common stock options. - - 1,172
Foreign currency translation adjustment ............................. - - 1,013
-----------------------------------------
Balances, December 31, 1996 ............................................. (43) $ (1,475) $464,638
-----------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
35.
<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.
License-fee revenues from proprietary products that are paid for over an
extended period of time and are bundled together with computer equipment and
other post-delivery services, and for which significant credit, technology or
service risks exist, are recorded ratably over the contract period. 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.
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
36.
<PAGE>
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
$15,358,000, $9,601,000 and $9,778,000 during 1996, 1995 and 1994, 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 twelve 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. After consideration of
these factors during 1996, the Company shortened the remaining life of goodwill
related to one acquisition and concluded that goodwill related to another
business that was acquired more than ten years ago, the principal markets of
which were state and municipal governments and thrift institutions, was
impaired. Therefore, during 1996, the Company wrote off the remaining amount of
goodwill associated with this acquisition, which totaled $5,157,000. The Company
believes that no further impairment of goodwill existed at December 31, 1996.
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.
Fully Diluted Net Income Per Common Share
Fully diluted net income per common share is 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.
Primary net income per common share approximates fully diluted net income per
common share.
2. ACQUISITIONS
Purchase Transactions
During 1996, the Company completed eight business acquisitions accounted for as
purchase transactions. Five acquisitions were in the Company's investment
support systems business and three were in its disaster recovery services
business.
Total cash paid in connection with these acquisitions was $158,080,000,
subject to certain adjustments. Goodwill recorded in connection with these
acquisitions was approximately $42,681,000. In addition, contingent payments of
up to $11,000,000 (including 9,500,000 Australian dollars, or approximately
$7,500,000 at December 31, 1996) may be paid in connection with three of these
acquisitions, depending upon each business achieving certain future financial
results.
During 1996, the Company recorded a charge of $44,451,000 ($0.64 per fully
diluted share) for purchased in-process research and development associated with
the acquisitions of NCS Financial Systems, Inc.(NCS) and two small investment
support systems businesses.
In connection with the acquisition of NCS, 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. While the allocation of the
purchase price is still preliminary (primarily since both the Company and
National
37.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Computer Systems, Inc., previously the parent company of NCS, have not yet
finalized the allocation of the purchase price for tax purposes), the Company
has recorded a charge against earnings for 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.
Also during 1996, the Company paid an additional 50,000,000 Swedish Kronor
(approximately $7,452,000) as the contingent portion of the purchase price
related to a 1992 acquisition. Goodwill was increased by the amount of that
payment.
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 future financial
results.
Also during 1995, the Company paid $11,179,000 as the contingent portion of
the purchase price in connection with a 1992 acquisition. Goodwill was increased
during 1995 by the amount of that 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 $28,307,000. Goodwill recorded in
connection with these acquisitions was approximately $12,956,000.
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.
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 operating group
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.
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 the 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.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
-----------------------
<S> <C> <C>
Computer and
telecommunications
equipment................ $ 166,934 $ 142,387
Leasehold improvements..... 38,403 32,082
Office furniture
and equipment............ 38,292 27,156
Buildings and
improvements............. 18,490 16,059
Land....................... 2,285 2,229
Construction in progress... 3,333 2,412
-----------------------
267,737 222,325
Accumulated depreciation
and amortization......... (158,214) (126,580)
-----------------------
$ 109,523 $ 95,745
-----------------------
</TABLE>
38.
<PAGE>
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
----------------------
<S> <C> <C>
Bank credit agreement
(5.7% interest rate).......... $ 15,000 $ --
Other bank debt
(8% interest rate)............ 16,813 --
Purchase price obligations
due former owners of
acquired businesses........... 5,302 6,610
Other, primarily capital lease
obligations for computer
equipment and buildings....... 2,231 3,392
----------------------
39,346 10,002
Less current maturities......... (34,932) (6,761)
----------------------
$ 4,414 $ 3,241
----------------------
</TABLE>
The Company has an unsecured revolving credit agreement (Credit Agreement)
that provides for up to $150,000,000 of borrowings for an initial period ending
August 2001. Thereafter, the Credit Agreement may be extended for one year, on
an annual basis, at the lender's option. The Company may borrow at LIBOR plus a
margin, depending upon certain financial ratios at the time of the borrowing, or
a base rate, generally the Prime rate, at the Company's option. In order to
remain eligible to borrow under the Credit Agreement, the Company must, among
other requirements, maintain a defined minimum net worth, maintain a defined
minimum fixed-charge coverage ratio, and limit its total debt. Borrowings under
the Credit Agreement at December 31, 1996 were $15,000,000.
Annual maturities of long-term debt during the next five years are as
follows: 1997- $34,932,000; 1998-$2,309,000; 1999-$491,000; 2000-$111,000; and
2001-$91,000.
5. STOCK OPTION AND AWARD PLANS
Employee Stock Purchase Plans
Under the Company's Employee Stock Purchase Plans, a maximum of 2,200,000 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 1996, 1995 and 1994, employees purchased 152,000, 156,000 and
173,000 shares, respectively, at average purchase prices of $33.50, $22.49 and
$15.49 per share, respectively. At December 31, 1996, 1,057,000 shares of common
stock were reserved for issuance under these plans.
Equity Incentive Plans
Under the Company's 1994 and 1996 Equity Incentive Plans, awards or options to
purchase up to 2,750,000 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 under each plan. 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 1996, 1995 and 1994, long-term incentive awards (LTIP awards) were
granted for future options of up to an aggregate of 294,000, 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 $28.54,
$19.05 and $19.33, respectively, but could be reduced to a minimum of $16.48,
$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 years ended December 31, 1996 and 1995,
compensation expense of $1,875,000 and $631,000, respectively, was recorded in
connection with certain 1995 and 1994 LTIP awards. No compensation expense has
been recorded for the 1996 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
39.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
year from the date of grant, subject to a four-or five-year vesting schedule.
The table on page 41 summarizes transactions under these equity incentive and
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).
At December 31, 1996, 4,061,000 shares of common stock were reserved for
issuance under the Company's equity incentive and stock option plans.
Restricted Stock Plans
The Company's Restricted Stock Award Plan for Outside Directors (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 re-election 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 50,000 shares were granted during 1996, and
an RSAP award for 10,000 shares was granted during 1994, at market values of
$33.75 and $17.31 per share, respectively. There were no awards during 1995. At
December 31, 1996, 71,000 shares of common stock were reserved for issuance
under this plan.
The Company's Restricted Stock Incentive Plan (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, 1996, 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 the RSAP and RSIP aggregated $372,000, $638,000 and $1,462,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.
Pro Forma Information
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," in accounting for its stock option and award plans. Accordingly,
compensation expense has been recorded for its LTIP, RSAP and RSIP awards, and
no expense has been recorded for its other stock-based plans. FASB Statement No.
123, "Accounting for Stock-Based Compensation" (SFAS 123), changes the method
for recognition of cost on stock option and award plans that are similar to
those of the Company. Adoption of the cost recognition requirements under SFAS
123 is optional; however, pro forma information is presented in the following
paragraph.
Had compensation cost for the Company's stock option and award plans been
determined based upon the fair value at the date of grant, as prescribed under
SFAS 123, the Company's net income and earnings per share would have been
reduced by approximately $5,110,000 and $1,185,000, or $0.12 and $0.03 per
share, in 1996 and 1995, respectively. The fair value of the options granted
during 1996 and 1995 is estimated to be $16.72 and $12.11 per share,
respectively, on the date of grant using the Black-Scholes pricing model with
the following assumptions: volatility of 37%; expected term of six years; risk-
free interest rate of 6.5%; and no dividend yield. The effects of applying SFAS
123 in this pro forma disclosure are not necessarily indicative of the impact on
future years, since SFAS 123 does not apply to grants and awards made prior to
1995 and the Company's options and awards generally vest over five years. The
Company also anticipates that additional options and awards will be made in
future years.
40.
<PAGE>
<TABLE>
<CAPTION>
Shares
------------------------------------------
Weighted
Under LTIP Average
Available Award or Option Price
------------------------------------------
<S> <C> <C> <C>
Balances at December 31, 1993 ($2.50-$19.50 per share)....... 636,000 1,394,000 $ 7.18
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) 8.49
Granted ($19.25-$19.38 per share)........................ (102,000) 102,000 19.31
Exercised ($2.50-$11.69 per share)....................... -- (184,000) 6.04
-----------------------------
Balances at December 31, 1994 ($2.50-$19.50 per share)....... 1,460,000 1,386,000 8.36
Poolings-of-interests ($0.38-$8.21 per share)............ -- 89,000 5.40
LTIP awards ($12.09-$19.05 per share).................... (88,000) 88,000 --
Canceled ($7.00-$19.50 per share)........................ 56,000 (56,000) 10.75
Granted ($20.63-$30.75 per share)........................ (729,000) 729,000 24.98
Exercised ($2.50-$19.50 per share)....................... -- (339,000) 5.58
-----------------------------
Balances at December 31, 1995 ($0.38-$30.75 per share)....... 699,000 1,897,000 15.58
Authorized............................................... 1,750,000 -- --
LTIP awards ($16.48-$28.54 per share).................... (294,000) 294,000 --
Canceled ($2.19-$40.87 per share)........................ 153,000 (175,000) 26.56
Granted ($29.00-$41.25 per share)........................ (1,554,000) 1,554,000 35.20
Exercised ($0.38-$20.63 per share)....................... -- (263,000) 11.92
-----------------------------
Balances at December 31, 1996 ($0.38-$41.25 per share)....... 754,000 3,307,000 26.21
-----------------------------
</TABLE>
The following table summarizes information concerning outstanding and
exercisable options as of December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ---------------------------------------------------------------------------- ------------------------------------------
Weighted average
Range of Exercise Number of Options Remaining Number of Options Weighted average
Prices and LTIP Awards Life (years) Exercise Price and LTIP Awards Exercise Price
- ---------------------------------------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.38 to $10.00 488,000 3.9 $ 6.12 482,000 $ 6.11
$10.00 to $20.00 223,000 6.4 15.32 223,000 15.32
$20.00 to $30.00 747,000 8.7 25.21 607,000 24.33
$30.00 to $40.00 1,102,000 9.1 34.23 72,000 30.75
Over $40.00 281,000 9.7 40.96 -- --
</TABLE>
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
$6,125,000, $5,338,000 and $3,800,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
7. INCOME TAXES
The provisions for income taxes for the years ended December 31, 1996, 1995 and
1994 consist of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------
Current:
<S> <C> <C> <C>
Federal......... $ 37,460 $ 26,112 $ 22,251
State........... 8,973 6,708 6,810
Foreign......... 4,156 4,994 4,048
-------------------------------
50,589 37,814 33,109
-------------------------------
Deferred:
Federal......... (19,639) (1,376) (2,579)
State........... (2,680) (216) (603)
Foreign......... 398 218 (486)
-------------------------------
(21,921) (1,374) (3,668)
-------------------------------
$ 28,668 $ 36,440 $ 29,441
-------------------------------
</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, 1996, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Tax at federal
statutory rate....... $ 22,249 $ 29,789 $ 25,385
State income taxes,
net of federal
benefit.............. 4,090 4,393 4,034
Purchased in-process
research and
development and
other costs.......... 2,656 -- --
Merger costs........... -- 1,524 --
Intangible
amortization......... 1,365 1,039 1,142
Tax-exempt interest
income............... (234) (648) (859)
Foreign taxes.......... (444) (120) 196
Other, net............. (1,014) 463 (457)
--------------------------------------
$ 28,668 $ 36,440 $ 29,441
--------------------------------------
Effective income
tax rate.............. 45.1% 42.8% 40.6%
--------------------------------------
</TABLE>
Deferred taxes are recorded based upon differences between financial
statement and tax bases of assets and liabilities. The following deferred taxes
41.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
were recorded as of December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------------------------
Current:
<S> <C> <C>
Accounts receivable............... $ 3,799 $ 2,483
Accrued compensation
and benefits.................... 5,692 2,810
Other accrued expenses............ 2,554 1,434
Deferred revenues................. 1,587 --
-------------------------
$ 13,632 $ 6,727
-------------------------
Long-Term:*
Property and equipment............ $ 1,334 $ 1,759
Intangible assets................. (9,807) (8,387)
Purchased in-process research
and development and other
acquisition-related items....... 23,360 --
-------------------------
$ 14,887 $ (6,628)
-------------------------
</TABLE>
* Included in other intangible assets.
8. EXPORT SALES
The Company's domestic operations recorded revenues primarily from international
software licenses and maintenance and professional services of approximately
$58,019,000, $51,273,000 and $33,505,000 for the years ended December 31, 1996,
1995 and 1994, 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, 1996 follow (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997................. $ 51,225
1998................. 45,389
1999................. 25,074
2000................. 14,990
2001................. 8,623
Thereafter........... 15,013
--------
$160,314
--------
</TABLE>
Rent expense aggregated $56,451,000, $52,359,000 and $45,923,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.
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.
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, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 13, 1997
42.
<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
- --------------------------------------------------------------------------------
Corbel & Co./(1)//(2)/ Florida
- --------------------------------------------------------------------------------
FPH, Front & Prosoftia Holding AB/(3)//(4)/ Sweden
- --------------------------------------------------------------------------------
Intelus Corporation/(1)/ Delaware
- --------------------------------------------------------------------------------
IPB Holdings Inc./(1)//(5)/ Delaware
- --------------------------------------------------------------------------------
MACESS Corporation/(1)/ Alabama
- --------------------------------------------------------------------------------
Portfolio Administration Limited/(6)//(7)/ United Kingdom
- --------------------------------------------------------------------------------
Renaissance Software Inc./(1)//(4)/ California
- --------------------------------------------------------------------------------
SFS Inc./(8)/ Delaware
- --------------------------------------------------------------------------------
Shaw Data Inc./(1)//(9)/ Delaware
- --------------------------------------------------------------------------------
SSI 2 Inc./(1)//(5)/ Delaware
- --------------------------------------------------------------------------------
SunGard Business Systems Inc./(1)//(10)/ Delaware
- --------------------------------------------------------------------------------
SunGard Computer Services Inc./(1)/ Pennsylvania
- --------------------------------------------------------------------------------
SunGard CSS Inc./(1)/ Delaware
- --------------------------------------------------------------------------------
SunGard/DML Inc./(1)/ Delaware
- --------------------------------------------------------------------------------
SunGard Dealing Systems Pty Limited/(11)//(12)/ Australia
- --------------------------------------------------------------------------------
SunGard DIS Inc./(1)//(5)/ Delaware
- --------------------------------------------------------------------------------
SunGard Financial Systems Inc./(1)//(13)/ Delaware
- --------------------------------------------------------------------------------
SunGard Holdings Limited/(5)//(14)/ United Kingdom
- --------------------------------------------------------------------------------
SunGard Institutional Brokerage Inc./(1)/ New York
- --------------------------------------------------------------------------------
SunGard Investment Products Inc./(1)/ Delaware
- --------------------------------------------------------------------------------
SunGard Investment Systems Inc./(1)//(15)/ Delaware
- --------------------------------------------------------------------------------
SunGard Investment Ventures, Inc./(5)//(16)/ Delaware
- --------------------------------------------------------------------------------
SunGard MIS Inc./(1)//(17)/ Delaware
- --------------------------------------------------------------------------------
SunGard Recovery Services Inc./(1)//(7)//(18)/ Pennsylvania
- --------------------------------------------------------------------------------
SunGard Shareholder Systems Inc./(1)/ Delaware
- --------------------------------------------------------------------------------
SunGard Software Inc./(3)//(5)/ Delaware
- --------------------------------------------------------------------------------
SunGard Systems International Inc./(1)//(19)/ Pennsylvania
- --------------------------------------------------------------------------------
SunGard Systems Limited/(3)/ United Kingdom
- --------------------------------------------------------------------------------
SunGard Systems Pty Limited/(3)//(20)/ Australia
- --------------------------------------------------------------------------------
SunGard Trust Systems Inc./(1)/ North Carolina
- --------------------------------------------------------------------------------
</TABLE>
(1) Wholly owned subsidiary of SunGard Investment Ventures, Inc.
(2) Conducts certain operations through one wholly owned domestic subsidiary.
<PAGE>
(3) Wholly owned subsidiary of SunGard Systems International Inc.
(4) Conducts certain operations through three wholly owned foreign
subsidiaries.
(5) Not an operating company.
(6) Wholly owned subsidiary of SunGard Holdings Limited.
(7) Conducts certain operations through two wholly owned foreign subsidiaries.
(8) Wholly owned subsidiary of SunGard Financial Systems Inc. that conducts
business under the names SunGard Insurance Systems, Information Systems of
America and ISA.
(9) Conducts certain operations through two wholly owned foreign subsidiaries
and SunGard Systems Limited.
(10) Organized into, and conducts business under the names of, three operating
divisions -- SunGard Asset Managemnt 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 SunGard Systems Limited and SunGard Systems Pty
Limited.
(11) Wholly owned subsidiary of SunGard DIS Inc.
(12) Conducts certain operations through three foreign sister corporations, all
of which are wholly owned subsidiaries of SunGard DIS Inc.
(13) Organized into, and conducts business under the names of, five operating
divisions -- SunGard Brokerage Systems, SunGard Global Systems, SunGard
Government Systems, SunGard Insurance Systems and SunGard Securities
Systems. Sometimes conducts business under the names Money Management
Systems, Phase3 Systems, Warrington Financial Systems and Wismer
Associates.
(14) Owned by SunGard Investment Ventures, Inc. and SunGard Systems
International Inc.
(15) Conducts certain operations through SunGard Systems Limited and SunGard
Systems Pty Limited.
(16) Wholly owned subsidiary of SunGard Data Systems Inc.
(17) Conducts business primarily under the name SunGard Insurance Systems.
Conducts certain operations through SFS Inc.
(18) Organized into, and conducts business under the names of, two operating
divisions -- SunGard Recovery Services and SunGard Planning Solutions.
(19) Organized into, and conducts business under the names of, two operating
divisions -- SunGard Capital Markets and SunGard Futures Systems. Conducts
certain operations through two wholly owned domestic subsidiaries that have
foreign branches and eight wholly owned foreign subsidiaries including FPH,
Front & Prosoftia Holding AB, SunGard Systems Limited and SunGard Systems
Pty Limited.
(20) Conducts certain operations through one wholly owned foreign subsidiary.
2
<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, 33-64901 and 33-15641) of our report dated February 13, 1997 on our
audits of the consolidated financial statements of SunGard Data Systems Inc. and
subsidiaries as of December 31, 1996 and 1995, and for each of the years in the
three-year period ended December 31, 1996, 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, 1997
<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, 1996
AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996,
BOTH INCORPORATED BY REFERENCE INTO THE FORM 10-K OF SUNGARD DATA SYSTEMS INC.
FOR THE YEAR ENDED DECEMBER 31, 1996 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-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 46,072
<SECURITIES> 0
<RECEIVABLES> 168,637
<ALLOWANCES> 10,391
<INVENTORY> 0
<CURRENT-ASSETS> 236,457
<PP&E> 267,737
<DEPRECIATION> 158,214
<TOTAL-ASSETS> 679,318
<CURRENT-LIABILITIES> 210,266
<BONDS> 4,414
0
0
<COMMON> 423
<OTHER-SE> 464,215
<TOTAL-LIABILITY-AND-EQUITY> 679,318
<SALES> 0
<TOTAL-REVENUES> 670,309
<CGS> 0
<TOTAL-COSTS> 424,037<F1>
<OTHER-EXPENSES> 51,083<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 63,569
<INCOME-TAX> 28,668
<INCOME-CONTINUING> 34,901
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,901
<EPS-PRIMARY> 0.81<F3>
<EPS-DILUTED> 0.81<F3>
<FN>
<F1>EXCLUDES SELLING, MARKETING AND ADMINISTRATIVE COSTS, AND PURCHASED IN-PROCESS
RESEARCH AND DEVELOPMENT AND OTHER COSTS.
<F2>PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT AND OTHER COSTS.
<F3>INCLUDES PURCHASED IN-PROCESS RESEARCH AND DEVLOPMENT AND OTHER COSTS TOTALLING
$0.78 PER SHARE.
</FN>
</TABLE>
