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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, 1998 or
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[_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _____________ to _____________
COMMISSION FILE NUMBER ............................................... 1-12989
SUNGARD(R) DATA SYSTEMS INC.
(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:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 .
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The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant as of March 17, 1999 was $4,687,638,776.(1) There
were 114,941,238 shares of the registrant's Common Stock outstanding as of March
17, 1999.
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, 1998, and Part III of this Form 10-K incorporates by reference
certain information from the registrant's definitive proxy statement, for its
1999 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
closing price of the registrant's Common Stock reported on March 17, 1999.
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
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PART I
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ITEM 1. BUSINESS .............................................................. 1
Overview ........................................................... 1
Investment Considerations .......................................... 1
Investment Support Systems ......................................... 4
Disaster Recovery Services ......................................... 7
Computer Services and Other ........................................ 8
Product Development ................................................ 9
Acquisitions and Offerings ......................................... 9
Competition ........................................................ 11
Marketing .......................................................... 11
Employees .......................................................... 11
Proprietary Protection ............................................. 12
ITEM 2. PROPERTIES ............................................................ 12
ITEM 3. LEGAL PROCEEDINGS...................................................... 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ................... 13
ITEM 4.1 CERTAIN EXECUTIVE OFFICERS OF THE REGISTRANT........................... 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS . 15
ITEM 6. SELECTED FINANCIAL DATA ............................................... 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ...................................................... 15
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ............ 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................ 15
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES ................................................. 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .................... 16
ITEM 11. EXECUTIVE COMPENSATION ................................................ 16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ........ 16
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ........................ 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ...... 17
SIGNATURES ............................................................ 18
LIST OF EXHIBITS ...................................................... 19
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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 and
comprehensive computer disaster recovery services. 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.
The Company seeks to maximize recurring revenues by selling most of its
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 accounted for approximately 80% of the
Company's total revenues during the last three years (81% in 1998). The
Company's recurring revenues are derived primarily from contracts for computer
processing, disaster recovery fees, professional services, software maintenance
and software and hardware rentals (see INVESTMENT CONSIDERATIONS). 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 75% were renewed or replaced with new contracts (74% in 1998).
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 1998.
The Company's operations are decentralized, and its management philosophy is
one of "managed 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, a Delaware corporation, was organized in 1982. The Company's
executive offices are located at 1285 Drummers Lane, Wayne, Pennsylvania 19087,
and its telephone number is (610) 341-8700.
INVESTMENT CONSIDERATIONS
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE.
This Report and other Company communications contain forward-looking
statements made by the Company that are subject to risks and uncertainties and
that may change at any time and differ from actual results. Forward-looking
statements include information about possible or assumed future financial
results of the Company and usually contain words such as "believes," "expects,"
"anticipates" or similar expressions. 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 such as:
. the timing and magnitude of software sales;
. the effect of year 2000 issues on software and services buying decisions;
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. the timing and scope of technological advances and year 2000 compliance;
. the integration and performance of acquired businesses;
. the prospects for future acquisitions; and
. the overall condition of the financial services industry.
Certain of these factors are further discussed below. These factors and those
discussed below should be considered in evaluating the Company's forward-looking
statements and any investment in the Company's common stock.
RISK FACTORS.
THE COMPANY'S GROWTH STRATEGY DEPENDS IN PART ON ACQUISITIONS. IF THE COMPANY
IS UNABLE TO ACQUIRE BUSINESSES ON FAVORABLE TERMS OR SUCCESSFULLY INTEGRATE AND
MANAGE THE BUSINESSES ACQUIRED, THE COMPANY'S BUSINESS AND FINANCIAL RESULTS MAY
SUFFER.
The Company intends to grow by expanding its existing businesses and by
acquiring similar or complementary businesses, including acquisitions that are
intended to qualify for pooling-of-interests accounting treatment. This growth
strategy is subject to a number of risks which could adversely affect the
Company's business and financial results, including:
. the Company may not be able to find suitable businesses to acquire on
affordable terms;
. competition from other acquirors and stock market fluctuations may make it
more difficult for the Company to find and complete acquisitions;
. the Company may have to raise money in the debt or equity markets to
finance future acquisitions;
. one or more acquisitions may not qualify for pooling-of-interests
accounting treatment; and
. at any given time, a large number of shares of the Company's common stock
issued to acquire businesses may become freely tradeable in the market.
The businesses acquired by the Company may perform worse than expected or may
be more difficult to integrate and manage than expected. If that happens, the
Company may suffer a number of adverse consequences, including:
. the Company may have to devote unanticipated financial and management
resources to the acquired businesses;
. the Company may not be able to realize expected operating efficiencies; and
. the Company may have to write off goodwill or other intangible assets if
the acquisition was accounted for as a purchase.
THE COMPANY'S SUCCESS DEPENDS IN PART ON ADAPTING ITS COMPUTER SERVICES AND
SOFTWARE TO CHANGES IN TECHNOLOGY AND CHANGES IN ITS CUSTOMERS' BUSINESSES. IF
THE COMPANY DOES NOT SUCCESSFULLY UPDATE ITS SERVICES AND SOFTWARE, OR IF ITS
NEW PRODUCTS OR SERVICES ARE NOT TIMELY DELIVERED OR WELL RECEIVED BY CUSTOMERS,
THE COMPANY'S BUSINESS AND FINANCIAL RESULTS MAY SUFFER.
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The Company's ability to successfully update its services and software and
timely develop and deliver new products and services required by its customers
is subject to a number of risks which could adversely affect the Company's
business and financial results, including:
. the Company may find it difficult to update its services and software and
timely develop and deliver its new products and services in a cost-
effective manner, especially when faced with rapid technological changes
that are hard to predict; and
. the Company may find it difficult to update its services and software to
keep pace with business, regulatory and other developments in the
financial services industry in which most of the Company's customers
operate.
THE COMPANY'S BUSINESS IS DEPENDENT LARGELY ON THE FINANCIAL SERVICES
INDUSTRY. IF THAT INDUSTRY DOES POORLY, THE COMPANY'S BUSINESS AND FINANCIAL
RESULTS MAY SUFFER.
The Company sells most of its computer services and software to banks,
mutual funds, brokers, insurance companies and other financial services firms.
If the financial services industry or the Company's customers in the financial
services industry experience problems, the Company's business and financial
results could be adversely affected. For example, the Company may suffer if
securities trading activity declines, the number or value of managed portfolios
decreases, or there is continued consolidation among firms in the financial
services industry.
THE ADVENT OF YEAR 2000, INCLUDING ANY FAILURE BY THE COMPANY TO MAKE ITS
PRODUCTS YEAR 2000 COMPLIANT OR TO FULFILL YEAR 2000 COMMITMENTS TO CUSTOMERS,
MAY ADVERSELY EFFECT THE COMPANY'S BUSINESS AND FINANCIAL RESULTS.
The Company has made many of its products year 2000 compliant so that they can
handle dates in the year 2000 and beyond. However, the Company is still working
on making some of its important products year 2000 compliant. In addition, the
Company has made commitments to some customers that need to convert off non-year
2000 compliant systems, and as a result, the Company must meet significant
development obligations and complete conversions before the end of 1999. The
Company's year 2000 compliance efforts are subject to a number of risks which
could adversely affect the Company's business and financial results, including:
. the Company may not be able to make all of its important products year 2000
compliant;
. the Company may not be able to timely meet its year 2000 commitments to
customers;
. the Company may have to add personnel and buy new software and hardware
earlier than planned to complete its year 2000 compliance efforts, which
could cause an unexpected increase in expenses; and
. the Company's expenses may increase faster than expected because year 2000
issues are causing a shortage in the availability of experienced
programmers; and
. the Company may encounter unanticipated year 2000 problems, like a problem
with another company's software or hardware that interacts with the
Company's products or that is used by the Company.
The Company believes that year 2000 compliance issues have caused some
acceleration of software buying and conversion activity. As a result, the
Company's rate of internal growth may decline in the second half of 1999 or in
the year 2000, which could adversely affect the Company's business and financial
results.
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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 as remote processing
services using the Company's computers and through software licenses for use on
customers' computers. The Company provides investment support remote processing
services primarily from its computer centers in Birmingham (Alabama), Charlotte
(North Carolina), Fairfield (New Jersey), Hopkins (Minnesota), Voorhees (New
Jersey), Waltham (Massachusetts) and Weehawken (New Jersey) (see PROPERTIES). As
of December 31, 1998, the Company had approximately 8,900 remote processing and
software maintenance contracts in force for its investment support systems.
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 to internal growth and acquisitions (see ACQUISITIONS
AND OFFERINGS). During 1998, the Company continued its product enhancement
efforts to provide customers with additional functionality, connectivity and
productivity. Also during 1998, the Company continued to introduce Internet
technologies to its systems and pursue opportunities to market more of its
systems outside of the United States. In addition, many of the Company's systems
were made Euro-compliant during 1998 in advance of the January 1, 1999
conversion to the new single currency.
BROKERAGE SYSTEMS. The Company's brokerage systems provide comprehensive
processing of securities and exchange-traded futures and options for the banking
and brokerage industry. These systems manage all important facets of processing
transactions, including customer management, order routing, execution,
clearance, position keeping, regulatory reporting and accounting. The Company
also provides comprehensive options analysis and risk management systems for
professional option traders, large banks and financial institutions. In
addition, the Company provides systems that collect, consolidate and report tax
information on securities transactions on behalf of fiduciaries for financial
services firms.
The Company expanded its brokerage systems with several recent acquisitions
(see ACQUISITIONS AND OFFERINGS). During 1998, the Company acquired Plaid
Brothers Software, Inc., a provider of software used by retail brokers in
tracking customer contacts, managing portfolios and measuring performance, and
also acquired a futures and options accounting product from the Board of Trade
Clearing Corporation. In February 1999, the Company acquired Sterling Wentworth
Corporation, a provider of software designed for prospecting, client profiling,
needs analysis and cross-selling for use by insurance, banking and brokerage
companies. In March 1999, the Company acquired Automated Securities Clearance,
Ltd., whose products include an automated order-routing and execution system for
use by broker/dealers, an electronic communications network for trading over-
the-counter stocks and a wireless communication system for straight-through
processing of securities listed on the New York Stock Exchange.
E-COMMERCE. The Company's Expediter product facilitates the automated entry of
mutual fund transactions. Expediter is marketed to users of the Company's trust
accounting, securities trading and participant accounting systems, and for use
with other vendors' software products. In addition, the Company has entered into
an arrangement with a securities lending agent who is offering securities
lending services to the Company's asset management customers.
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EMPLOYEE BENEFIT 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
benefits payments to retirees, and produce tax reports for plan sponsors and
participants. As a complement to the Company's participant accounting systems,
the Company offers document generation systems for the creation of retirement
plan documents and forms and other complex documents. In July 1998, the Company
expanded its document generation business by acquiring the business of Pension
Publications of Denver, Inc. (see ACQUISITIONS AND OFFERINGS).
ENERGY SYSTEMS. In December 1998, the Company acquired the business of Primo
Systems, Inc., a provider of risk management systems to the oil, natural gas,
electric power and coal industries (see ACQUISITIONS AND OFFERINGS). With this
acquisition, the Company started a new product line, which it intends to expand
through acquisition, to provide systems that permit energy companies and power
trading firms to control physical and financial trading and provide trading
support, market and credit risk management, trade processing, power scheduling
and accounting functions.
INVESTMENT AND SHAREHOLDER SYSTEMS. The Company's investment accounting and
portfolio management systems maintain the books of record for all types of large
investment portfolios, such as those managed by banks, mutual funds, employee
retirement plans and insurance companies. The primary functions of these
systems are to accept investment transactions, value portfolios using
transmissions of security prices received from various worldwide sources,
perform complex accounting calculations and general ledger postings, and
generate a variety of accounting, audit, tax and regulatory reports. In
addition, some of these products are used by investment advisers and other
portfolio managers to manage large investment portfolios. These systems track
investment activities such as purchases and sales, combine these activities with
outside market data such as security prices and quality ratings, and provide
analytical models to assist with investment strategy and management decisions.
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 investment reporting and analysis systems accept data from other
investment support systems or outside sources and perform special reporting or
analyses for fund managers and customers. Some of 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 also provides general ledger accounting systems to insurance
companies. These systems provide general ledger, budget performance and
responsibility reporting, cost accounting and profitability analysis. The
Company aquired an additional insurance accounting and reporting product in
February 1999 (see ACQUISITIONS AND OFFERINGS).
NON-PROFIT ERP SYSTEMS. The Company provides a fund accounting system for the
accounting and management requirements of educational institutions, state and
local governments and other nonprofit organizations.
SECURITIES AND TREASURY SYSTEMS. The Company's securities trading and
accounting systems are used primarily by the "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 integrating front- and back-office operations
and performing many investment accounting functions, the Company's securities
systems maintain inventories of unsold securities, process trade activities and
assist users in monitoring compliance with audit limits, trading limits and
government regulations.
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The Company also provides a front-office trading support system for
institutional traders in the foreign exchange, fixed income, derivative and
international money markets. In addition, the Company provides pricing,
analysis, risk management and administration systems for equities, derivatives
and interest rate instruments.
The Company's global treasury and risk management systems are used by the
treasury departments of Fortune 2000 companies and governmental entities. These
products enable the efficient management of an organization's cash, debt and
investment portfolios. The Company expanded its treasury systems product
offerings by acquiring Multinational Computer Models, Inc. in July 1998 and the
business of ICMS International, Inc. in September 1998 (see ACQUISITIONS AND
OFFERINGS).
TRADING AND RISK MANAGEMENT SYSTEMS. The Company provides software
applications and software development platforms that are used to handle most
aspects of risk management, trading and operations for capital markets globally.
The Company's trading systems are used by both the "sell side" and the "buy
side" of the investment business. Generally, these products are used by traders
and market-makers of over-the-counter derivative instruments, securities and
foreign exchange contracts and by their middle- and back-office operations.
These front-to-back office 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.
On January 2, 1998, the Company acquired Infinity Financial Technology, Inc.
("IFT"), a derivatives trading and risk management company, which represented
the largest acquisition in the Company's history (see ACQUISITIONS AND
OFFERINGS). During 1998, the Company merged IFT and its existing related
businesses, Renaissance Software and SunGard Capital Markets, to form a new
operating group named Infinity, A SunGard Company. During 1998, this operating
group launched a global professional services division to focus on application
implementation and integration consulting around the Company's products. The
acquisition in December 1998 of Jaeger & Partner, a Swiss consulting business,
further expanded the Company's professional services offerings (see ACQUISITIONS
AND OFFERINGS).
The Company also provides asset and liability management software with
comprehensive risk management and performance measurement functionality to
financial institutions. This product offering was expanded with the Company's
acquisition of DollarMark Solutions, Inc. in February 1999 (see ACQUISITIONS AND
OFFERINGS).
TRUST AND CUSTODY SYSTEMS. The Company's trust systems automate the
investment, administrative and operations areas unique to the bank trust
businesses, 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 system automates the functions associated
with worldwide securities lending activities.
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WHOLESALE BANKING SYSTEMS. In March 1999, the Company acquired Tiger Systems,
Inc., a provider of international electronic banking systems (see ACQUISITIONS
AND OFFERINGS). Tiger Systems' products are used for international funds
transfer, trade services and cash management by corporate and correspondent
banks via the Internet or private networks, often under a bank's private label.
The Company also provides a multicurrency front- and back-office system used by
banks for portfolio management, deal capture and analytics.
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 sites for use by customers whenever they are unable to operate or
communicate with their own computer systems.
The primary alternate sites provided by the Company are fully equipped and
operational computer centers known as "hotsites," where customers may restore
their critical applications using the Company's installed computer equipment.
The Company also provides environmentally prepared computer centers known as
"coldsites," in which customers may install and operate their own computer
equipment, and general office space equipped with workstations and office
equipment. In addition, the Company provides mobile recovery resources that may
be delivered or shipped directly to customer-specified locations and electronic
vaulting operations that include remote journaling, hot storage, shadowing and
customer support services.
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 and RS/6000), 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 mainframe and various midrange computer
installations in North America.
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. As of December 31, 1998, the Company had approximately 13,000 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 is based upon component pricing and depends upon the type of
facilities and services selected, contract duration and competitive factors.
Many customers have multiple contracts covering different types of facilities
and services.
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During 1998, for the thirteenth consecutive year, the Company successfully
supported all customers who experienced computer-related failures.
DISASTER RECOVERY FACILITIES. The Company believes that it conceived and first
implemented the concept of the MegaCenter, 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). During 1998, the Company completed a
major expansion of its Philadelphia MegaCenter, which the Company believes is
the world's largest commercial facility dedicated to disaster recovery. The
Philadelphia MegaCenter houses Digital, Filenet, Hewlett Packard, Hitachi,
Netframe, IBM mainframe, Pyramid, Sequent, Stratus and Tandem hotsites, and
mobile Hewlett Packard, IBM midrange, NCR, Sequoia, Silicon Graphics and Sun
Microsystems computer systems.
The Company also operates MetroCenter 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 Beachwood (Ohio), Bellevue
(Washington), Boston, Chicago, Dallas, Denver, Herndon (Virginia), Jersey City
(New Jersey), Los Angeles, Northville (Michigan), St. Louis, St. Paul, San Ramon
(California) and Toronto. The Denver, St. Paul and Toronto MetroCenters
also have coldsites that can be used in conjunction with the remote operations
capability.
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. The SunGard
National Network, a dedicated network linking all of the Company's MegaCenters
and MetroCenters and many customer locations, provides customers with a
nationwide managed recovery network utilizing synchronous optical technology
(SONET).
PLANNING SERVICES. The Company provides planning software and professional
consulting and educational services to develop comprehensive, business-wide
continuity plans. The Company's contingency planning software integrates
business analysis and testing tools with automated plan development and
reporting features and offers Internet capabilities. The services performed by
the Company include risk analyses and audits to determine exposure to the
disruption of critical operations, business and application impact analyses to
prioritize recovery strategies, and the development of enterprise recovery
plans. The Company also designs testing and maintenance programs to verify that
customers' plans reflect the most current operational conditions. In January
1998, the Company aquired a contingency planning services business (see
ACQUISITIONS AND OFFERINGS).
COMPUTER SERVICES AND OTHER
The Company provides remote-access computer services primarily to software
developers, financial institutions 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.
The Company's healthcare information systems assist health maintenance
organizations (HMOs), workers compensation administrators and other companies
with high-volume claims processing in reducing costs and improving service to
their customers. These systems use proprietary work-flow management and
document-imaging to increase efficiency and flexibility for users. See
AQUISITIONS AND OFFERINGS - 1999 TRANSACTIONS.
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PRODUCT DEVELOPMENT
The Company continually upgrades, enhances and expands its proprietary
products and services to meet the needs of its customers and to utilize advances
in technology (see INVESTMENT CONSIDERATIONS).
For a discussion of the Company's comprehensive program to evaluate and
address the impact of the year 2000 on its software systems, computer processing
and disaster recovery operations, see MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS in the Company's 1998 Annual
Report to Stockholders (included in Exhibit 13.1 to this Report). See also
INVESTMENT CONSIDERATIONS.
The investment support systems needs of the financial services industry are
complex and substantial, and continually evolve as a result of increased trading
volume, complexity of financial instruments, changes in laws, introductions of
new types of investment vehicles and technology and increased competition. For
these reasons, the Company continually maintains, enhances and evolves its
proprietary investment support systems. The Company expects to continue to
develop enhanced and new functionality for its products, provide greater
Internet capabilities and develop Windows NT and UNIX versions of many products.
The Company's product development strategy depends in part on the introduction
of new technology into the established functionality of its existing systems.
The Company funds most of its routine ongoing software maintenance and support
activities through the software maintenance and related upgrade fees paid by its
investment support systems license customers and a portion of the monthly fees
paid by its remote processing customers. The Company's expenditures for software
development during 1998, 1997 and 1996, including amounts that were capitalized,
totalled approximately $116,393,000, $92,785,000 and $73,858,000, 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 expands its disaster recovery and computer processing services by
adding new service offerings and by opening new facilities or expanding 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 and communications networks to offer the most
advanced computer equipment and communications technology generally used by its
customers.
ACQUISITIONS AND OFFERINGS
The Company seeks to grow through internal development and the acquisition of
businesses that broaden or complement its existing product lines (see INVESTMENT
CONSIDERATIONS). Since its initial public offering in 1986, the Company has
acquired 48 investment support systems businesses, 20 disaster recovery
businesses and five computer services 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 1998, the Company spent approximately $16,890,000 in cash, net of cash
acquired, to acquire four investment support systems businesses and one disaster
recovery services business. In addition, the Company issued during 1998 a total
of 14,566,000 shares of its common stock to acquire three investment support
systems businesses in transactions that were accounted for as poolings of
interests.
9
<PAGE>
In January 1998, the Company acquired Infinity Financial Technology, Inc.
("IFT"), a provider of enterprise software solutions for financial trading and
risk management. IFT was a public company that, before being acquired by the
Company, traded on The Nasdaq Stock Market. IFT and the Company's existing
related businesses, Renaissance Software and SunGard Capital Markets, were
merged during 1998 to create a new operating group named Infinity, A SunGard
Company.
Also in January 1998, the Company acquired the business of Raymond
Professional Management, Inc., a provider of disaster recovery planning services
to the healthcare and telecommunications industries.
The Company expanded its brokerage systems product offerings by acquiring, in
May 1998, Plaid Brothers Software, Inc., a provider of contact and stock
portfolio management software for retail securities brokerage houses, and, in
July 1998, certain back-office accounting software for futures and options from
the Board of Trade Clearing Corporation.
In July 1998, the Company acquired the business of Pension Publications of
Denver, Inc., a provider of retirement plan documents, publications and
educational programs.
In July and September 1998, the Company acquired, respectively, Multinational
Computer Models, Inc. and the business of ICMS International, Inc., both
providers of treasury and risk management software systems to corporations.
In December 1998, the Company acquired the business of Primo Systems, Inc., a
provider of risk management software systems for the energy industry. Also in
December 1998, the Company acquired Jaeger & Partner AG, a Swiss-based company
that provides asset and liability management software and related risk
management consulting services.
1999 TRANSACTIONS. During the first quarter of 1999, the Company completed
five acquisitions and entered into definitive agreements to acquire two
companies.
In January 1999, the Company entered into a definitive agreement to acquire
FDP Corp., a provider of software systems for the sales, marketing and
administration functions of life insurance companies and employee benefit
administrators.
In February 1999, the Company acquired Sterling Wentworth Corporation, a
provider of rule-based selling, analysis and advisory software tools for the
financial services industry. Also in February 1999, the Company acquired
DollarMark Solutions, Inc., a provider of asset and liability management
software and services for thrifts, banks and other financial institutions. In
addition, in February 1999, the Company added an investment accounting and
reporting software product to its insurance systems business unit by acquiring
the business of Annual Statement Automated Products, Inc.
In March 1999, the Company acquired Automated Securities Clearance, Ltd., a
provider of an equity order management software system for brokerage firms,
electronic communications networks for trading over-the-counter stocks and
wireless communication systems for trading exchange listed securities. Also in
March 1999, the Company acquired Tiger Systems, Inc., a provider of electronic
banking automation software systems and products.
In March 1999, the Company entered into a definitive agreement to acquire
Oshap Technologies Ltd., an Israel-based group of technology software firms
whose principal holdings are a 98% ownership interest in MINT Technologies Ltd.,
a provider of solutions in the field of enterprise application integration, and
a 77% ownership interest in Decalog NV, a provider of management and decision-
support applications for asset managers.
In addition, in March 1999, the Company sold two healthcare information
systems businesses, Intelus Corporation and Med Data Systems, Inc.
10
<PAGE>
COMPETITION
Since most of the Company's computer services and software are specialized and
technical in nature, the various market niches 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., First Data Corporation, Reuters Group PLC, and The
Thomson Corporation, and all of whom are also active acquirors. The Company also
faces competition from the internal processing and development capabilities of
its customers and prospects.
The key competitive factors in marketing investment support systems are the
accuracy and timeliness of processed information provided to customers, features
and adaptability of the software, level and quality of customer support, level
of software development expertise and overall net cost. The Company believes
that it competes effectively as to each of these factors and that its reputation
and experience in these markets are important competitive advantages.
The computer disaster recovery business is 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.
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 international sales during 1998, 1997 and 1996 totalled
approximately $269,676,000, $215,258,000 and $158,280,000, respectively.
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, 1998, the Company had approximately 5,300 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.
11
<PAGE>
PROPRIETARY PROTECTION
The Company owns registered marks for the SUNGARD name and owns or has applied
for trademark registration for many of its products and services. The Company
has few registrations of its copyrights and has no patents. The Company
believes that patents and the registration of its copyrights 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 copyright
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 and size of the Company's principal
computer facilities and disaster recovery MegaCenters.
<TABLE>
<CAPTION>
LOCATION PURPOSE SQUARE FEET
=================================================================================================
<S> <C> <C>
Birmingham, AL SunGard Asset Management Systems, SunGard Employee 86,000
Benefit Systems and SunGard Mailing Services computer center.
Charlotte, NC SunGard Trust Systems computer center. 36,100
Fairfield, NJ SunGard Portfolio Solutions computer center. 22,000
(near New York)
Hopkins, MN SunGard Securities Systems computer center. 46,200
(near Minneapolis)
Northbrook, IL SunGard Recovery Services MegaCenter. 84,000
(near Chicago)
Philadelphia, PA SunGard Recovery Services MegaCenter. 339,830
Roswell, GA SunGard Recovery Services MegaCenter. 37,800
(near Atlanta)
Scottsdale, AZ SunGard Recovery Services MegaCenter. 15,300
Voorhees, NJ SunGard Computer Services computer center. 51,000
(near Philadelphia)
Waltham, MA SunGard Brokerage Systems computer center. 31,300
(near Boston)
Warminster, PA SunGard Recovery Services MegaCenter. 20,000
(near Philadelphia)
Weehawken, NJ Automated Securities Clearance computer center. 7,500
(near New York)
- -------------------------------------------------------------------------------------------------
</TABLE>
The Company leases all of its offices and facilities, with the exception of
its Voorhees, Warminster and Weehawken 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 and certain offices in Birmingham, Alabama. In addition,
the Company 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.
12
<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 SUNGARD DATA SYSTEMS INC.
==============================================================================
<S> <C> <C>
Andrew P. Bronstein 40 Vice President and Controller
Cristobal I. Conde 38 Executive Vice President
Philip L. Dowd 57 Senior Vice President
Lawrence A. Gross 46 Vice President and General Counsel
Michael K. Muratore 52 Senior Vice President
Donna J. Pedrick 49 Vice President-Human Resources
Michael J. Ruane 45 Chief Financial Officer and Vice President-Finance
Richard C. Tarbox 46 Vice President-Corporate Development
- ------------------------------------------------------------------------------
</TABLE>
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.
Mr. Conde has been Executive Vice President of the Company since October 1998.
From 1991 to October 1998, Mr. Conde was Chief Executive Officer of the SunGard
Trading Systems Group. He was one of the founders of Devon Systems
International, Inc., an independent software company, before it was acquired by
the Company in 1987. 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 Senior Vice President of the Company since October 1998.
From 1990 to October 1998, Mr. Dowd was Chief Executive Officer of the SunGard
Trust and Shareholder Systems Group. 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. Muratore has been Senior Vice President of the Company since October 1998.
From 1995 to October 1998, Mr. Muratore was Chief Executive Officer of the
SunGard Financial Systems Group, and
13
<PAGE>
from 1990 to 1995, he was Chief Executive Officer of the SunGard Computer
Services Group. From 1985 to 1989, Mr. Muratore held various senior executive
positions with the Company. Mr. Muratore is a director and/or officer of many of
the Company's investment support systems subsidiaries.
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.
14
<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 1998 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 1998 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 1998 Annual Report to Stockholders (included in
Exhibit 13.1 to this Report on Form 10-K).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not use derivative financial instruments to manage market
risk exposures or for trading or speculative purposes. The Company invests
available cash in short-term, highly-liquid financial instruments, with a
substantial portion of such investments having initial maturities of three
months or less. While changes in interest rates could decrease the Company's
interest income, the Company does not consider the interest rate risk for these
investments to be material.
While 23% of the Company's 1998 revenues came from sales to customers located
outside of the United States, more than half of these sales were U.S.-dollar
denominated sales by the Company's U.S.-based operations. For the Company's
foreign operations, the Company generally matches local currency revenues with
local currency costs. For these reasons, the Company does not believe that it
has a material exposure to changes in foreign currency exchange rates.
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.
15
<PAGE>
PART III
This Part incorporates certain information from the Company's definitive proxy
statement for its 1999 Annual Meeting of Stockholders ("1999 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 1999 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 1999 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 1999 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 1999 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 1999 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.
16
<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 1998 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 11,
1999, except as to subsequent events, for which the date is March 1, 1999
Consolidated Statements of Income for each of the years ended December 31,
1998, 1997 and 1996
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Cash Flows for each of the years ended December 31,
1998, 1997 and 1996
Consolidated Statement of Stockholders' Equity for each of the years ended
December 31, 1998, 1997 and 1996
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 19 of this Report. Exhibits 10.15 through 10.25 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.
17
<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 30, 1999 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 30, 1999
- --------------------------------------
JAMES L. MANN President, and Chairman
of the Board of Directors
(principal executive officer)
/s/ Michael J. Ruane Chief Financial Officer and March 30, 1999
- -------------------------------------- Vice President-Finance
MICHAEL J. RUANE (principal financial officer)
/s/ Andrew P. Bronstein Vice President and Controller March 30, 1999
- -------------------------------------- (principal accounting officer)
ANDREW P. BRONSTEIN
/s/ Gregory S. Bentley Director March 30, 1999
- ---------------------------------------
GREGORY S. BENTLEY
/s/ Michael C. Brooks Director March 30, 1999
- ---------------------------------------
MICHAEL C. BROOKS
/s/ Albert A. Eisenstat Director March 30, 1999
- ---------------------------------------
ALBERT A. EISENSTAT
/s/ Bernard Goldstein Director March 30, 1999
- ---------------------------------------
BERNARD GOLDSTEIN
/s/ Michael Roth Director March 30, 1999
- ---------------------------------------
MICHAEL ROTH
/s/ Malcolm I. Ruddock Director March 30, 1999
- ---------------------------------------
MALCOLM I. RUDDOCK
/s/ Lawrence J. Schoenberg Director March 30, 1999
- ---------------------------------------
LAWRENCE J. SCHOENBERG
</TABLE>
18
<PAGE>
LIST OF EXHIBITS
NUMBER DOCUMENT
- ------ --------
3.1 Restated Certificate of Incorporation of the Company (filed with
this Report).
3.2 Amended and Restated Bylaws of the Company (filed with this Report).
4.1/1/ Specimen Common Stock Certificate of the Company.
10.1/1/ 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").
10.2/2/ Amendment to the First Northbrook Lease, dated September 16, 1986.
10.3/3/ Amendment to the First Northbrook Lease, dated October 14, 1987.
10.4/4/ Amendment to the First Northbrook Lease, dated October 1, 1988.
10.5 Amendment to the First Northbrook Lease, dated September 29, 1998
(filed with this Report).
10.6/4/ 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").
10.7/5/ Amendment to the Second Northbrook Lease, dated September 15, 1989.
10.8/6/ 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").
10.9/7/ Amendment to 401 Lease, dated October 9, 1995.
10.10/8/ Amendment to 401 Lease, dated December 23, 1996.
10.11/9/ Amendment to 401 Lease, dated March 1997.
10.12/9/ Amendment to 401 Lease, dated December 18, 1997.
10.13/10/ 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.
10.14/11/ Credit Agreement, dated August 29, 1996, among the Company, certain
banks and other financial institutions and PNC Bank, National
Association, as Agent.
10.15/12/ 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./16/
19
<PAGE>
10.16/10/ The Company's 1988 Nonqualified Stock Option Plan and Amendment
thereto, dated October 30, 1990./16/
10.17/5/ The Company's 1990 Amended and Restated Restricted Stock Incentive
Plan./16/
10.18/13/ The Company's Restricted Stock Award Plan for Outside Directors./16/
10.19/14/ The Company's 1994 Equity Incentive Plan./16/
10.20/7/ The Company's 1996 Equity Incentive Plan./16/
10.21/8/ The United Kingdom Addendum to the Company's 1996 Equity Incentive
Plan./16/
10.22/9/ The Company's 1998 Equity Incentive Plan./16/
10.23 Summary Description of the Company's Annual Executive Incentive
Compensation Program (filed with this Report)./16/
10.24 Summary Description of the Company's Long-Term Executive Incentive
Compensation Plan (filed with this Report)./16/
10.25/10/ Form of Indemnification Agreement entered into by the Company with
its directors and officers./16/
10.26/15/ Agreement and Plan of Merger and Reorganization entered into by and
among the Company, Information Data Inc. and Infinity Financial
Technology, Inc., dated October 17, 1997.
13.1 Portions of the Company's Annual Report to Stockholders for the
fiscal year ended December 31, 1998 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 (filed with this Report).
27.1 Financial Data Schedule for the year ended December 31, 1998 (filed
with this Report).
____________
(1) 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).
(2) 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).
(3) 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).
(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, 1988 (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, 1989 (Commission
File No. 0-14232).
20
<PAGE>
(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, 1992 (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, 1995 (Commission
File No. 0-14232).
(8) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 (Commission
File No. 0-14232).
(9) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 (Commission
File No. 1-12989).
(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, 1991 (Commission
File No. 0-14232).
(11) 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).
(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, 1994 (Commission
File No. 0-14232).
(13) 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).
(14) 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).
(15) Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-4 and Amendment No. 1 thereto
(Registration No. 333-40053).
(16) Management contract or compensatory plan or arrangement.
21
<PAGE>
INDEX OF EXHIBITS FILED WITH THIS REPORT
NUMBER DOCUMENT
- ------ --------
3.1 Restated Certificate of Incorporation of the Company.
3.2 Amended and Restated Bylaws of the Company.
10.5 Amendment to the First Northbrook Lease, dated September 29, 1998
10.23 Summary Description of the Company's Annual Executive Incentive
Compensation Program/(1)/
10.24 Summary Description of the Company's Long-Term Executive Incentive
Compensation Plan/(1)/
13.1 Portions of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1998 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, 1998.
_______________
(1) Management contract or compensatory plan or arrangement.
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
SUNGARD/R/ DATA SYSTEMS INC.
SunGard Data Systems Inc., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies that:
1. The present name of the Corporation is SunGard Data Systems Inc. The name
under which the Corporation was originally incorporated is SIS CORPORATION,
and the date of filing of its original certificate of incorporation with the
Secretary of State of the State of Delaware is June 29, 1982.
2. The only amendment effected by this Restated Certificate of Incorporation is
an amendment to the first sentence of ARTICLE FOURTH, increasing the number
of authorized shares of the Corporation's Common Stock by 200,000,000 shares.
Such amendment was duly adopted in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware.
3. Other than such amendment, this Restated Certificate of Incorporation only
restates and integrates and does not further amend the provisions of the
Corporation's certificate of incorporation as heretofore amended or
supplemented, and there is no discrepancy between those provisions and the
provisions of this Restated Certificate of Incorporation. This Restated
Certificate of Incorporation was duly adopted in accordance with the
provisions of Section 245 of the General Corporation Law of the State of
Delaware.
4. The Corporation's certificate of incorporation is hereby restated in its
entirety as follows:
FIRST: The name of the corporation is SunGard Data Systems Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the State
of Delaware is No. 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of the Corporation's registered agent at such address
is The Corporation Trust Company.
THIRD: The purposes for which the Corporation was formed are to engage in
any lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 325,000,000 shares, consisting
of 5,000,000 shares of Preferred Stock, par value $0.01 per share, as more
fully described in Section A. below (the "Preferred Stock"), and 320,000,000
shares of Common Stock, par value $0.01 per share, as more fully described in
Section B. below (the "Common Stock").
A. PREFERRED STOCK. The shares of Preferred Stock may be divided and
---------------
issued from time to time in one or more series as may be designated by the
Board of Directors of the Corporation, each such series to be distinctly
titled and to consist of the number of shares designated by the Board of
Directors. All shares of any one series of Preferred Stock so
<PAGE>
designated by the Board of Directors shall be alike in every particular,
except that shares of any one series issued at different times may differ as
to the dates from which dividends thereon (if any) shall accrue or be
cumulative (or both). The designations, preferences and relative,
participating, optional or other special rights (if any), and the
qualifications, limitations or restrictions thereof (if any), of any series
of Preferred Stock may differ from those of any and all other series at any
time outstanding. The Board of Directors of the Corporation is hereby
expressly vested with authority to fix by resolution the powers,
designations, preferences and relative, participating, optional or other
special rights (if any), and the qualifications, limitations or restrictions
thereof (if any), of the Preferred Stock and each series thereof which may be
designated by the Board of Directors, including, but without limiting the
generality of the foregoing, the following:
(1) The voting rights and powers (if any) of the Preferred Stock and
each series thereof;
(2) The rates and times at which, and the terms and conditions on
which, dividends (if any) on the Preferred Stock, and each series thereof,
will be paid and any dividend preferences or rights of cumulation;
(3) The rights (if any) of holders of the Preferred Stock, and each
series thereof, to convert the same into, or exchange the same for, shares of
other classes (or series of classes) of capital stock of the Corporation and
the terms and conditions for such conversion or exchange, including
provisions for adjustment of conversion or exchange prices or rates in such
events as the Board of Directors shall determine;
(4) The redemption rights (if any) of the Corporation and of the
holders of the Preferred Stock, and each series thereof, and the times at
which, and the terms and conditions on which, the Preferred Stock, and each
series thereof, may be redeemed; and
(5) The rights and preferences (if any) of the holders of the
Preferred Stock, and each series thereof, upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
B. COMMON STOCK. All shares of Common Stock shall be identical and shall
------------
entitle the holders thereof to the same rights and privileges.
(1) DIVIDENDS. When and as dividends are declared upon the Common
---------
Stock, whether payable in cash, in property or in shares of stock of the
Corporation, the holders of Common Stock shall be entitled to share equally,
share for share, in such dividends.
(2) VOTING RIGHTS. Each holder of Common Stock shall be entitled to
-------------
one vote per share.
(3) LIQUIDATION. In the event of any liquidation, dissolution or
-----------
winding up of the Corporation, whether voluntary or involuntary, after
payment shall have been made to holders of the Preferred Stock of the full
amounts to which they shall be entitled as stated and expressed herein or as
may be stated and expressed pursuant hereto, the holders of Common Stock
shall be entitled, to the exclusion of the holders of the Preferred Stock, to
share ratably according to the number of shares of the Common Stock held by
them in all remaining assets of the Corporation available for distribution to
its stockholders.
-2-
<PAGE>
C. OTHER PROVISIONS. No holder of any of the shares of any class or
----------------
series of stock or of options, warrants or other rights to purchase shares of
any class or series of stock or of other securities of the Corporation shall
have any preemptive right to purchase or subscribe for any unissued stock of
any class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock of
the Corporation of any class or series, or carrying any right to purchase
stock of any class or series, but any such unissued stock, additional
authorized shares of any class or series of stock or securities convertible
into or exchangeable for stock, or carrying any right to purchase stock, may
be issued and disposed of pursuant to resolution of the Board of Directors to
such persons, firms, corporations or associations, whether any such persons,
firms, corporations or associations are holders or others, and upon such
terms as may be deemed advisable by the Board of Directors in exercise of its
sole discretion.
FIFTH: In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors of the Corporation is
expressly authorized and empowered to make, alter or repeal the By-laws of
the Corporation, subject to the power of the stockholders of the Corporation
to alter or repeal any By-law made by the Board of Directors.
SIXTH: The Corporation reserves the right at any time and from time to time
to amend, alter, change or repeal any provisions contained in this
Certificate of Incorporation; and other provisions authorized by the laws of
the State of Delaware at the time in force may be added or inserted, in the
manner now or hereafter prescribed by law; and all rights, preferences and
privileges of whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Certificate of Incorporation
in its present form or as hereafter amended are granted subject to the right
reserved in this Article.
SEVENTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director of
this Corporation shall not be liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director.
IN WITNESS WHEREOF, SunGard Data Systems Inc. has caused its corporate seal
to be hereunto affixed and this Restated Certificate of Incorporation to be
signed by its President and attested by its Secretary this 11TH day of MAY,
1998.
SUNGARD DATA SYSTEMS INC.
By: s/ James L. Mann
---------------------------------
JAMES L. MANN, PRESIDENT
[SEAL]
Attest: s/ Lawrence A. Gross
-------------------------------
LAWRENCE A. GROSS, SECRETARY
-3-
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
SUNGARD DATA SYSTEMS INC.
(a Delaware Corporation)
ARTICLE I
OFFICES
The registered office of the Corporation in the State of Delaware shall be
located in the City of Wilmington, County of New Castle. The Corporation may
establish or discontinue, from time to time, such other offices, within or
without the State of Delaware, as the Board of Directors may designate.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of the Meetings. All meetings of stockholders shall be
held at such place or places, within or without the State of Delaware, as may
from time to time be fixed by the Board of Directors, or as shall be specified
in the respective notices, or waivers of notice, thereof.
Section 2. Annual Meeting. The annual meeting of Stockholders for the
election of Directors and the transaction of other business shall be held on
such date and at such place as may be designated by the Board of Directors. At
each annual meeting, the stockholders entitled to vote shall elect a Board of
Directors and may transact such other proper business as may come before the
meeting, irrespective of whether the notice of said meeting contains any
reference thereto, except as otherwise provided by applicable law.
Section 3. Special Meetings. A special meeting of the stockholders, or
of any class thereof entitled to vote, for any other purpose or purposes, may be
called at any time by the Board of Directors, the Chairman of the Board or the
President and shall be called by the Chairman of the Board, the President or the
Secretary upon the written request of stockholders holding of record at least
50% of the outstanding shares of stock of the Corporation entitled to vote at
such meeting. Such written request shall state the purpose or purposes for which
such meeting is to be called.
Section 4. Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of stockholders, whether annual or special,
stating the place, date and hour of the meeting, shall be given not less than
ten days nor more than sixty days before the date on which the meeting is to be
held to each stockholder of recorded entitled to vote thereat by delivering a
notice thereof to him personally or by mailing such notice in a postage prepaid
envelope directed to him at his address as it appears on the records of the
Corporation, unless he shall have filed with the Secretary of the Corporation a
written request that notices intended for him be directed to another address, in
which case such notice shall be directed to him at the address designated in
such request. Notice shall not be required to be given to any stockholder who
shall waive such notice in writing, whether prior to or after such meeting, or
who shall attend such meeting in person or by proxy unless such attendance is
for the express purpose of objecting, at the beginning of such meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Every notice of a special meeting of the stockholders shall state, in
addition to the place, date and hour of the meeting, the purpose or purposes
thereof.
<PAGE>
Section 5. List of Stockholders. It shall be the duty of the Secretary
or other officer of the Corporation who shall have charge of the stock ledger
to prepare and make, at least ten days before every meeting of the stockholders,
a complete list of the stockholders entitled to vote thereat, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in his name. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting or, if not so specified, at the place
where the meeting is to be held. The list shall be kept and produced at the time
and place of the meeting during the whole time thereof and subject to inspection
of any stockholder who may be present. The original or duplicate ledger shall be
the only evidence as to who are the stockholders entitled to examine such list
or books of the Corporation or to vote in person or by proxy at such meeting.
Section 6. Quorum. At each meeting of the stockholders, the holders of
record of a majority of the issued and outstanding stock of the Corporation
entitled to vote at such meeting, present in person or by proxy, shall
constitute a quorum for the transaction of business, except where otherwise
provided by law, the Certificate of Incorporation or these By-laws. In the
absence of a quorum, any officer entitled to preside at, or act as secretary of,
such meeting shall have the power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
constituted, and thereupon, any business may be transacted at the adjourned
meeting that might have been transacted at the meeting as originally called.
Section 7. Conduct of the Meetings. The Chairman of the Board shall
preside at all meetings. In the absence of the Chairman of the Board, the
President shall preside or, in his absence, any officer designated by the Board
of Directors. The officer presiding over the meeting of stockholders may
establish such rules and regulations for the conduct of the meeting as he may
deem to be reasonably necessary or desirable for the orderly and expeditious
conduct of the meeting.
Section 8. Voting. Every stockholder of record who is entitled to vote
shall at every meeting of the stockholders be entitled to one vote for each
share of stock held by him on the record date; except, however, that shares of
its own stock belonging to the Corporation or to another corporation, if a
majority of the shares entitled to vote in the election of the directors of such
other corporation is held by the Corporation, shall neither be entitled to vote
nor counted for the quorum purposes. Nothing in this Section shall be construed
as limiting the right of the Corporation to vote its own stock held by it in a
fiduciary capacity. At all meetings of the stockholders at which a quorum is
present, all matters shall be decided by majority vote of the shares of the
stock present in person or by proxy and entitled to vote thereon, except as
otherwise required by law or the Certificate of Incorporation. The vote on all
elections of Directors shall be by written ballot, and upon demand of any
stockholder, the vote on any other question before the meeting shall be by
ballot or otherwise as determined by the chairman of the meeting. On a vote by
written ballot, each ballot shall be signed by the stockholder voting, or in
his name by his proxy, if there be such proxy, and shall state the number of
shares voted by him and the number of votes to which each share is entitled.
Section 9. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent to corporate action in writing without a
meeting shall have the right to do so either in person or by an agent or agents
authorized by a proxy granted in accordance with Delaware law. An agent so
appointed need not be a stockholder. No proxy shall be valid after the
expiration of three years from the date thereof unless the proxy provides for a
longer period.
<PAGE>
Section 10. Action without a Meeting. Any action required to be taken
at any annual or special meeting of stockholders or any action which may be
taken at any annual or special meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing
setting forth the action so taken shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. Powers. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors.
Section 2. Nomination. Beginning with the annual meeting of the
stockholders to be held in 1987, nominations for directors to be elected at an
annual meeting of the stockholders must be submitted to the Secretary of the
Corporation in writing not later than the close of business on the thirtieth
calendar day immediately preceding the date of the meeting. All late nominations
shall be rejected. Notwithstanding the forgoing, at any time prior to the
election of directors at a meeting of stockholders, the Board of Directors may
designate a substitute nominee to replace any bona fide nominee who was
nominated as set forth above and who, for any reason, becomes unavailable for
election as a director.
Section 3. Election and Term. Except as otherwise provided by law,
Directors shall be elected at the annual meeting of stockholders and shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualify, or until they sooner die, resign or are removed. At
each annual meeting of stockholders at which a quorum is present, the persons
receiving a plurality of the votes cast shall be the Directors.
Section 4. Number. The number of Directors shall be such number as
shall be determined from time to time by the Board of Directors but shall not be
less than two nor more than eight.
Section 5. Quorum and Manner of Acting. Unless otherwise provided by
law, the presence of 50% of the whole Board of Directors shall be necessary to
constitute a quorum for the transaction of business. In the absence of a quorum,
a majority of the Directors present may adjourn the meeting from time to time
until the quorum shall be present. Notice of any adjourned meeting need not be
given. At all meetings of Directors at which a quorum is present, all matters
shall be decided by the affirmative vote of the majority of the Directors
present, except as otherwise required by law. The Board of Directors may hold
its meetings at such place or places within or without the State of Delaware as
the Board of Directors may from time to time determine or as shall be specified
in the respective notices, or waivers of notice, thereof.
Section 6. Organization Meeting. Immediately after each annual meeting
of stockholders for the election of the Directors, the Board of Directors shall
meet at the place of the annual meeting of the stockholders for the purpose of
organization, the election of officers and the transaction of other business.
Notice of such meeting need not be given. If such meeting is held at any other
time or place, notice thereof must be given as hereinafter provided for special
meetings of the Board of Directors, subject to the execution of a waiver of the
notice thereof signed by, or the attendance at such meeting of, all Directors
who may not have received such notice.
Section 7. Regular Meetings. Regular meetings of the Board of Directors
may be held, without notice, at such time and place, within or without the State
of Delaware, as shall from time to time be determined by resolution of the Board
of Directors. At such meetings, the Board of Directors may transact such
business as may be brought before the meeting.
<PAGE>
Section 8. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board or the President or
by a majority of the Directors. Notice of each such meeting should be mailed to
each Director, addressed to him at his residence or usual place of business, at
least five days before the date on which the meeting is to be held, or shall be
sent to him at such place by telegraph, cable, radio or wireless, or be
delivered personally or by telephone, not later than the day before the day on
which such meeting is to be held. Each such notice shall state the time and
place of the meeting and, as may be required, the purposes thereof. Notice of
any meeting of the Board of Directors need not be given to any Director if he
shall sign a written waiver thereof either before or after the time stated
therein for such meeting, or if he shall be present at the meeting. Unless
limited by law, the Certificate of Incorporation, these By-laws or terms of the
notice thereof, any and all business may be transacted at any meeting even
though no notice shall have been given.
Section 9. Removal of Directors. Any Director or the entire Board of
Directors may be removed, with or without cause, at any time, by action of the
holders f record of the majority of the issued and outstanding stock of the
Corporation entitled to vote at an election of the directors (a) present in
person or by proxy at a meeting of the holder of such stock, or (b) by a consent
in writing in the manner contemplated in Section 10 of Article II, and the
vacancy or vacancies in the Board of Directors caused by any such removal may be
filled by action of such a majority at such meeting or at any subsequent meeting
or by consent.
Section 10. Resignations. Any Director of the Corporation may resign at
any time by giving notice to the Chairman of the Board, the President or the
Secretary of the Corporation. The resignation of any Director shall take effect
upon receipt of notice thereof or at such later time as shall be specified in
such notice, and acceptance of such resignation shall not be necessary to make
it effective.
Section 11. Vacancies. Any newly created directorships or vacancies
occurring in the Board by reason of death, resignation, retirement,
disqualification or removal, with or without cause, may be filled by a majority
of the directors then in office though less than a quorum. Any Director so
chosen, whether selected to fill a vacancy or elected to a new directorship,
shall hold office until the next meeting of stockholders at which an election of
directors is in the regular order of business, and until his successor has been
elected and qualifies, or until he sooner dies, resigns or is removed.
Section 12. Compensation of Directors. No Director shall be entitled to
any salary as such, but the Board of Directors may fix, from time to time, a
reasonable annual fee for acting as a director and a reasonable fee to be paid
each Director for his services in attending meetings of the Board. Directors may
also be reimbursed by the Corporation for all reasonable expenses incurred in
travelling to and from meetings of the Board.
Section 13. Action without a Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if written consent thereto is signed by all member of the Board, and
such written consent is filed with the minutes or proceedings of the Board.
Section 14. Telephonic Participation in Meetings. Members of the Board
of Directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meetings.
<PAGE>
ARTICLE IV
COMMITTEES
----------
Section 1. Committees. The Bard of Directors may, by resolution passed
by a majority of the entire Board, designate one or more committees, each
committee to consist of one or more of the Directors of the Corporation, which,
to the extent provided in the resolution and permitted by law, shall have and
may exercise the powers of the Board of Directors in the management of the
business and the affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require it. The Board of
Directors may designate one or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Such committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required.
Section 2. Appointment of Additional Members to Committees. In the
absence or disqualification of any member of such committee or committees, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another Director to act at the meeting in the place of any such absent or
disqualified members.
ARTICLE V
OFFICERS
--------
Section 1. Principal Officers. The Board of Directors shall elect a
Chairman of the Board, a President, a Secretary and a Treasurer, and may in
addition elect one or more Vice Presidents and such other officers as it deems
fit; The Chairman of the Board, the President, the Secretary, the Treasurer, the
Vice Presidents, if any, being the principal officers of the Corporation. One
person may hold, and perform the duties of, any two or more of the said offices.
Section 2. Election and Term of Office. The principal officers of the
Corporation shall be elected annually by the Board of Directors at the
organization meeting thereof. Each such officer shall hold office until his
successor shall have been elected and shall qualify, or until his earlier death,
resignation or removal.
Section 3. Other Officers. In addition, the Board may elect, or the
Chairman of the Board or President may appoint, such other officers as they deem
fit. Any such other officers chosen by the Board of Directors shall be
subordinate officers and shall hold office for such period, have such authority
and perform such duties as the Board of Directors, the Chairman of the Board or
the President may from time to time determine.
Section 4. Removal. Any officer may be removed, either with or without
cause, at any time, by resolution adopted by the Board of Directors at any
regular meeting of the Board, or at any special meeting of the Board called for
that purpose, at which a quorum is present.
Section 5. Resignations. Any officer may resign at any time by giving
written notice to the Chairman of the Board, the President, the Secretary or the
Board of Directors. Any such resignation shall take effect upon receipt of such
notice or at any later time specified therein, and the acceptance of such
resignation shall not be necessary to make it effective.
Section 6. Vacancies. A vacancy in any office may be filled for the
unexpired portion of the term in the manner prescribed in these By-laws for
election or appointment to such office for such term.
<PAGE>
Section 7. Chairman of the Board. The Chairman of the Board shall have
general powers and duties of supervision and management usually vested in the
office of the chairmen of the board of a corporation. The Chairman of the Board
of Directors shall preside, if present, at all meetings of the Board of
Directors and at all meetings of the stockholders. He shall have and perform
such other duties as from time to time may be assigned to him by the Board of
Directors.
Section 8. President. The President shall be the chief executive
officer of the Corporation and shall have the general powers and duties vested
in the office of chief executive officer of a corporation. He shall have
general supervision, direction and control of the business of the corporation.
He shall, in the absence of the Chairman, preside at all meetings of the
shareholders and the Board of Directors.
Section 9. Vice President. Each Vice President shall have such powers
and shall perform such duties as shall be assigned to him by the Board of
Directors.
Section 10. Treasurer. The Treasurer shall have charge and custody of,
and be responsible for, all funds and securities of the Corporation. He shall
exhibit at all reasonable times his books of account and records to any of the
Directors of the Corporation upon application during business hours at the
office of the Corporation where such books and records shall be kept; when
requested by the Board of Directors, he shall render a statement of the
condition of the finances of the Corporation at any meeting of the Board or at
the annual meeting of stockholders; he shall receive, and give receipt for,
moneys due and payable to the Corporation from any source whatsoever; in
general, he shall perform all the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him by the Chairman of
the Board, the President or the Board of Directors. The Treasurer shall give
such bond, if any, for the faithful discharge of his duties as the Board of
Directors may require.
Section 11. Secretary. The Secretary, if present, shall act as
secretary at all meetings of the Board of Directors and of the stockholders and
keep the minutes thereof in a book or books to be provided for that purpose; he
shall see that all notices required to be given by the Corporation are duly
given and served; he shall have charge of the stock records of the corporation,
he shall see that all reports, statements and other documents required by law
are properly kept and filed; and in general he shall perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the Chairman of the Board, the President or the Board
of Directors.
Section 12. Salaries. The salaries of the principal officers shall be
fixed from time to time by the Board of Directors, and the salaries of any other
officers may be fixed by the Chairman.
ARTICLE VI
INDEMNIFICATION
---------------
Section 1. Mandatory Indemnification. The Corporation shall, to the
full extent permitted by Section 145 of the Delaware General Corporation Law, as
amended from time to time, indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director, officer or employee of the
Corporation or of any of its subsidiaries.
Section 2. Optional Indemnification. In all situations in which
indemnification is not mandatory under Section 1 of this Article VI, the
Corporation may, to the full extent permitted by Section 145 of the Delaware
General Corporation Law, as amended from time to time, indemnify all persons
whom it is empowered to indemnify pursuant thereto.
ARTICLE VII
SHARES AND THEIR TRANSFER
-------------------------
<PAGE>
Section 1. Certificate for Stock. Every stockholder of the Corporation
shall be entitled to a certificate or certificates, to be in such form as the
Board of Directors shall prescribe, certifying the number of shares of the
capital stock of the Corporation owned by him. No certificates shall be issued
for partly paid shares.
Section 2. Stock Certificate Signature. The certificates for such stock
shall be numbered in the order in which they shall be issued and shall be signed
by the Chairman of the Board or the President and the Secretary or Treasurer of
the Corporation and its seal shall be affixed thereto. If such certificate is
countersigned (1) by a transfer agent other than the Corporation or its
employee, or (2) by a registrar other than the Corporation or its employee, the
signatures of such officers of the Corporation may be facsimiles. In case any
officer of the Corporation who has signed, or whose facsimile signature has
been placed upon, any such certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer at the date of issue.
Section 3. Stock Ledger. A record shall be kept by the Secretary or by
any other officer, employee or agent designated by the Board of Director of the
name of each person, firm or corporation holding capital stock of the
Corporation, the number of shares represented by, and the respective dates of,
each certificate for such capital stock, and in case of cancellation of any such
certificate, the respective dates of cancellation.
Section 4. Registrations of Transfers of Stock. Registrations of
transfers of shares of the capital stock of the Corporation shall be made on the
books of the Corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary of the Corporation or with a transfer clerk or a transfer agent
appointed as provided in Section 5 of this Article VII, and on surrender of the
certificate or certificates for such shares properly endorsed, with such proof
of authenticity of the signature as the Corporation or its agents may reasonably
require, and the payment of all taxes thereon. The person in whose name shares
of stock stand on the books of the Corporation shall be deemed the owner thereof
for all purposes as regards the Corporation; provided, however, that whenever
any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer, both the transferor
and the transferee request the Corporation to do so.
Section 5. Regulations. The Board of Directors may make such rules and
regulations as it may deem expedient, not inconsistent with the Certificate of
the Incorporation or these By-laws, concerning the issue, transfer and
registration of certificates for shares of the stock of the Corporation. It may
appoint, or authorize any principal officer or officers to appoint, one or more
transfer clerks or one or more transfer agents and one or more registrars, and
may require all certificates of stock to bear the signature or signatures of any
of them.
Section 6. Lost, Stolen, Destroyed or Mutilated Certificates. Before
any certificates for stock of the Corporation shall be issued in exchange for
certificates which shall become mutilated or shall be lost, stolen, or
destroyed, proper evidence of such loss, theft, mutilation or destruction shall
be furnished to the Corporation, and if required by the Board of Directors, the
owner of the lost, stolen or destroyed certificate, or his legal
representatives, shall be required to give the Corporation a bond sufficient to
indemnify the Corporation against any claim made against it on account of the
alleged loss, theft or destruction of any such certificate.
Section 7. Record Dates. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect to any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a date as a
record date for any such determination of stockholders. Such record date shall
not be more than sixty nor less than ten days before the date of such meeting,
nor shall it be more than sixty days prior to any other action.
<PAGE>
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
Section 1. Corporate Seal. The Board of Directors shall provide a
corporate seal, which shall be in the form of a circle and shall bear the name
of the Corporation and words and figures showing that it was incorporated in the
State of Delaware in the year 1982. The Secretary shall be the custodian of the
seal. The Board of Directors may authorize a duplicate seal to be kept and used
by any other officer.
Section 2. Voting of Stock Owned by the Corporation. The Board of
Directors may authorize any person on behalf of the Corporation to attend, vote
and grant proxies to be used at any meeting of stockholders of any corporation
(except the Corporation) in which the Corporation may hold stock.
Section 3. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor, at any regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when they deem expedient. Before declaring any
dividend, there may be set apart out of any funds of the Corporation available
for dividends such sum or sums as the Directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
Board of Directors shall deem conducive to the interests of the Corporation.
Section 4. Emergency By-laws. In the event of any emergency resulting
from a nuclear attack or similar disaster, and during the continuance of such
emergency, the following By-law provisions shall be in effect, notwithstanding
any other provisions of these By-laws:
(a) A meeting of the Board of Directors or of any committee
thereof may be called by any officer or director upon
one hour's notice to all persons entitled to notice
whom, in the sole judgment of the notifier, it is
feasible to notify;
(b) The director or directors in attendance at the meeting
of the Board of Directors or of any committee thereof
shall constitute a quorum; and
(c) These By-laws may be amended or repealed, in whole or in
part, by a majority vote of the directors attending
any meeting of the Board of Directors, provided such
amendment or repeal shall only be effective for the
duration of such emergency.
Section 5. Severability. If any provision of these By-laws is illegal
or unenforceable as such, such illegality or unenforceability shall not affect
any other provision of these By-laws and such other provisions shall continue in
full force and effect.
ARTICLE IX
AMENDMENTS OR REPEAL
--------------------
Section 1. Amendments or Repeal. These By-laws of the Corporation may
be altered, amended or repealed, in whole or in part, by the Board of Directors
at any regular or special meeting of the Board of Directors or by the
affirmative vote of the holders of record of a majority of the issued and
outstanding stock of the Corporation (a)present in person or by proxy at a
meeting of holders of such stock and entitled to vote thereon, or (b) by a
consent in writing in the manner contemplated in Section 10 of Article II;
provided, however, that notice of the proposed alteration, amendment or repeal
is contained in the notice of such meeting. By-laws, whether made or altered by
the stockholders or by the Board of Directors, shall be subject to alteration or
repeal by the stockholders as provided in this Section 1 of Article IX.
<PAGE>
Section 2. Recording Amendments and Repeals. The text of all amendments
and repeals to these By-laws shall be attached to the By-laws with a notation of
the date of each such amendment or repeal and a notation of whether such
amendment or repeal was adopted by the Board of Directors or the stockholders.
ARTICLE X
APPROVAL OF AMENDED BYLAWS AND
RECORD OF AMENDMENTS AND REPEALS
--------------------------------
Section 1. Approval and Effective Date. These By-laws have been
approved as the By-laws of the Corporation this 31st day of January, 1986 and
shall be effective as of said date.
Section 2. Amendments or Repeals.
Date Amended or
Section Involved Repealed Approved By
- ---------------- -------- -----------
Article II, Section 9 March 30, 1999 Board of Directors
<PAGE>
EXHIBIT 10.5
THIRD AMENDMENT TO INDUSTRIAL LEASE
-----------------------------------
THIS THIRD AMENDMENT TO LEASE (this "Third Amendment") is made and entered
into as of this 29th day of September, 1998, by and between ARNOLD LANE L.L.C.,
an Illinois limited liability company (the "Lessor") and SUNGARD RECOVERY
SERVICES, INC., a Pennsylvania corporation formerly known as Sun Information
Services Company (the "Lessee").
ARTICLE I
RECITALS
1.1 Lessor's predecessor-in-interest, American National Bank and Trust
Company of Chicago, as Trustee under Trust No. 77563 (the "Original Lessor") and
Lessee previously entered into that certain Industrial Lease, dated June 18,
1981 (the "1981 Lease"), granting Lessee leasehold rights in that certain real
property commonly known as 3200 Arnold Lane, Northbrook, Illinois and legally
described on Exhibit "A" attached hereto and made a part hereof (the
"Property"), together with all improvements then located thereon (collectively,
the "Original Leased Premises").
1.2 As of October 1, 1988, Original Lessor and Lessee entered into: (i)
that certain Industrial Lease (the "1988 Lease") incorporating all of the terms,
conditions and covenants of the 1981 Lease, except as modified by the 1988
Lease, and granting to Lessee leasehold rights to a building of approximately
45,277 rentable square feet (the "Additional Space") to be constructed by Lessor
on the vacant portion of the Property (the Original Leased Premises and
Additional Space being hereinafter collectively referred to as the "Leased
Premises"); and (ii) that certain Amendment to Industrial Lease (the "First
Amendment") amending: (a) the term of the 1981 Lease and the options to extend
the 1981 Lease so that they conformed to the term of the 1988 Lease and the
options to extend the 1988 Lease; and (b) the Annual Rent due Lessor for the
Leased Premises. As of September 6, 1996, Original Lessor and Lessee entered
into that certain Second Amendment to Industrial Lease (the "Second Amendment")
granting to Lessee as the owner of certain real property (the "SunGard
Property") adjacent to and east of the Property which is commonly known as 3100
Arnold Lane, Northbrook, Illinois and is legally described on Exhibit "B"
attached hereto and made a part hereof the right to construct an enclosed,
ground level corridor structure (the "Connector"), connecting its building on
the SunGard Property with the building on the Property comprising a portion of
the Leased Premises (the 1981 Lease, as amended by the 1988 Lease, the First
Amendment and the Second Amendment being hereinafter referred to as the "Lease).
1.3 Lessor and Lessee desire to further amend the Lease to: (i) extend
the term thereof; (ii) amend the Annual Rent due Lessor; and (iii) extend the
time for Lessee to commence construction of the Connector.
<PAGE>
1.4 In consideration of the mutual covenants and agreements contained
herein, Lessor and Lessee hereby amend the Lease as set forth below.
ARTICLE II
THE CONNECTOR
Section 2.1 of the Second Amendment is hereby amended to extend the
outside date for Lessee's commencement of the Work (as such term is defined in
the Second Amendment) from June 30, 1997 to December 31, 1999. Thereafter,
pursuant to the terms of said Section 2.1, in the event Lessee has not commenced
the Work by December 31, 1999, the terms of the Second Amendment shall expire
and be of no further force or effect and Lessee shall no longer have the right
to construct the Connector.
ARTICLE III
AMENDMENT OF TERM
The term of the Lease for the Leased Premises is hereby extended five
(5) years for a period commencing October 1, 1998 and ending on September 30,
2003, unless sooner terminated as set forth in other provisions of the Lease
(the "Extended Term").
ARTICLE IV
AMENDMENT OF RENT
Commencing October 1, 1998 and continuing through the Extended Term,
Lessee shall pay as provided in the Lease annual rent for the Leased Premises of
Six Hundred Forty-One Thousand Five Hundred Eighty-Four and 28/100 Dollars
($641,584.28) in equal monthly installments of Fifty-Three Thousand Four Hundred
Sixty-Five and 36/100 Dollars ($53,465.36).
ARTICLE V
RATIFICATION
Except as expressly modified by this Third Amendment To Industrial
Lease, all of the terms, covenants and conditions of the Lease, and all of the
rights and obligations of the Lessor and Lessee thereunder are hereby ratified
and confirmed and the same shall remain in full force and effect and are not
otherwise revised, amended, altered or changed, except that Lessee shall only
have the option to renew the Lease for one (1) additional term of five (5) years
on the terms and conditions set forth in the First Amendment. In the event such
option is properly exercised, said renewal term shall commence October 1, 2003
and end September 30, 2008. In the event of any ambiguities or inconsistencies
between the Lease and this Third
-2-
<PAGE>
Amendment To Industrial Lease, the terms, covenants and conditions of this Third
Amendment To Industrial Lease shall govern and control in all respects.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Third Amendment To
Industrial Lease on the day and year first above written.
LESSOR: LESSEE:
ARNOLD LANE L.L.C. SUNGARD RECOVERY SERVICES, INC.
By: /s/ Jack Miller
--------------------------
Jack Miller, Manager By: /s/ William Flounder
----------------------------------
- and - ATTEST:
By: /s/ Harvey L. Miller /s/ Paul Loveland
-------------------------- --------------------------------------
Harvey L. Miller, Manager
-3-
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PROPERTY
---------------------------------
LOT 2 IN BLOCK 2 IN FIRST RESUBDIVISION OF SKY HARBOR INDUSTRIAL PARK UNIT
NUMBER 1 IN THE SOUTH 1/2 OF SECTION 5, TOWNSHIP 42 NORTH, RANGE 12 EAST OF THE
THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
P.I.N. No.: 04-05-313-002
Property Address: 3200 Arnold Lane, Northbrook, IL
<PAGE>
EXHIBIT "B"
SUNGARD PROPERTY
----------------
ALL OF LOT 3 AND THE SOUTH 10 FEET OF LOT 4 IN BLOCK 2 IN FIRST RESUBDIVISION OF
SKY HARBOR INDUSTRIAL PARK, UNIT NUMBER 1 IN THE SOUTH 1/2 OF SECTION 5,
TOWNSHIP 42 NORTH, RANGE 12 EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK
COUNTY, ILLINOIS.
P.I.N. NOs: 04-05-313-003-0000
04-05-313-009-0000
Property Address: 3100-3170 Arnold Lane, Northbrook, IL 60062
<PAGE>
EXHIBIT 10.23
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.
The EIC program for corporate officers is based upon targeted rates of increase
in the Company's earnings per share over the previous year or budgeted operating
income and average number of days sales outstanding in accounts receivable of
the business units that report to the officer. Sometimes, there are additional
performance goals specific to the officer's function. 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 10.24
SUNGARD DATA SYSTEMS INC.
SUMMARY DESCRIPTION OF THE COMPANY'S
LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN
SunGard Data Systems Inc. has a long-term incentive compensation plan for its
executive officers and other key management employees. The principal purposes of
this plan are to further align the interests of the executives and key employees
with those of the Company's stockholders and to further reward successful
performance.
The plan currently involves the grant of performance accelerated stock options
("PASOs") to purchase shares of the Company's common stock. PASOs are
nonqualified options (i.e., will not qualify as incentive stock options for tax
purposes) that are granted annually at the beginning of a three-year performance
period and have a term of ten years beginning on the date of grant. Shares vest
under PASOs nine and one-half years after the date of grant, except that vesting
may be accelerated in part or in full at the end of the three-year performance
period to the extent that certain financial performance goals are met. In
addition, if performance goals for the three-year performance period are
exceeded, the recipient will receive additional cash compensation at the time
the PASO is exercised.
The number of option shares granted to each participant under a PASO is
determined on the basis of an analysis of competitive equity compensation
programs, and is subject to subjective adjustments based upon individual
factors. The financial performance goals for each PASO are based upon the
cumulative growth, during the three-year period covered by the PASO, in the
operating income of the business unit(s) managed by the participant, with the
growth targets for all PASOs, taken together, being consistent with the
Company's overall growth objectives.
The Company currently plans, but will have no legal obligation or commitment, to
continue granting such PASOs (or comparable awards) on an annual basis, subject
to approval by the Equity Award Subcommittee of the Compensation Committee of
the Company's Board of Directors.
<PAGE>
Exhibit 13.1
Portions of the Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1998
[CHART APPEARS HERE]
1994 450
1995 557
1996 712
1997 925
1998 1,160
Revenues in Millions of Dollars(1)
[CHART APPEARS HERE]
1994 44.7
1995 55.1
1996 73.8
1997 93.5
1998 128.6
Pro Forma Net Income in Millions of Dollars (1)(4)
[CHART APPEARS HERE]
1994 0.50
1995 0.61
1996 0.74
1997 0.90
1998 1.19
Pro Forma Diluted Net Income per Share in Dollars (1)(3)(4)
Financial Highlights
Selected Financial Information(1)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts) 1994 1995 1996 1997 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data(2)(3)
Revenues $449,785 $557,366 $711,857 $925,030 $1,159,748
Income from operations 72,450 85,753 68,284 142,644 202,846
Net income 44,728 50,845 40,306 83,975 118,933
Basic net income per share 0.54 0.59 0.43 0.84 1.14
Diluted net income per share 0.50 0.55 0.41 0.81 1.10
Pro forma net income(4) 44,728 55,083 73,774 93,521 128,565
Pro forma diluted net income per share(4) 0.50 0.61 0.74 0.90 1.19
Balance Sheet Data
Total assets $494,625 $592,582 $739,622 $856,948 $1,075,321
Total short-term and long-term debt 10,783 10,518 40,267 20,076 12,046
Stockholders' equity 362,406 428,058 505,063 610,221 760,891
</TABLE>
(1) All periods before 1998 are restated for the January 2, 1998 pooling of
interests with Infinity Financial Technology, Inc.
(2) 1995 includes merger costs of $4,238 ($0.05 per diluted share) and preferred
stock redemption of $1,276 ($0.01 per diluted share). 1996 includes charges
for purchased in-process research and development and merger costs of
$51,083 ($33,468 after tax; $0.33 per diluted share). 1997 includes charges
for purchased in-process research and development and merger costs of
$13,669 ($9,546 after tax; $0.09 per diluted share). 1998 includes merger
and restructuring costs of $11,847 ($9,632 after tax; $0.09 per diluted
share). See Note 2 of Notes to Consolidated Financial Statements.
(3) All per-share amounts are adjusted for July 1995 and September 1997
two-for-one stock splits.
(4) Excludes all items described in footnote 2.
<PAGE>
$1.16 Billion
and other numbers
32 Quarterly Financial Information
32 Stock Information
33 Management's Discussion and Analysis of Financial Condition and
Results of Operations
37 Consolidated Statements of Income
38 Consolidated Balance Sheets
39 Consolidated Statements of Cash Flows
40 Consolidated Statement of Stockholders' Equity
42 Notes to Consolidated Financial Statements
50 Report of Independent Accountants
<PAGE>
Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
(in thousands, except per-share amounts) first second third fourth
quarter quarter quarter quarter
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 (1)
Revenues $264,553 $282,347 $291,982 $320,866
Income before income taxes 37,123 50,531 53,723 66,851
Net income 19,796 29,722 31,187 38,228
Diluted net income
per common share 0.19 0.28 0.29 0.35
- --------------------------------------------------------------------------------------
1997 (2)(3)
Revenues $201,039 $223,087 $231,640 $269,264
Income before income taxes 33,219 26,578 42,240 41,713
Net income 19,889 15,510 24,954 23,622
Diluted net income
per common share(4) 0.19 0.15 0.24 0.22
</TABLE>
(1) Includes merger and restructuring costs in connection with poolings of
interests of $8,147, $600, and $3,100 during the first, second and third
quarters, respectively ($0.06, less than $0.01 and $0.02 per diluted share,
respectively). See Note 2 of Notes to Consolidated Financial Statements.
(2) Includes purchased in-process research and development and merger costs in
connection with poolings of interests of $10,479, $338 and $2,852 during
the second, third and fourth quarters, respectively ($0.06, less than $0.01
and $0.03 per diluted share, respectively). See Note 2 of Notes to
Consolidated Financial Statements.
(3) Restated for the January 2, 1998 pooling of interests with Infinity
Financial Technology, Inc.
(4) All per-share amounts have been adjusted for a September 1997 two-for-one
stock split.
Stock Information
The common stock of SunGard Data Systems Inc. is listed on the New York Stock
Exchange under the symbol SDS. At March 9, 1999, the Company had approximately
4,200 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 the New York Stock Exchange since June 4,
1997 and on the Nasdaq National Market before June 4, 1997. All prices reflect
the Company's September 1997 two-for-one stock split.
Calendar Year 1998
First Quarter $37 3/8 $28 1/16
Second Quarter 40 31 7/16
Third Quarter 40 31 1/4
Fourth Quarter 39 11/16 21 11/16
Calendar Year 1997
First Quarter $25 3/8 $18 1/2
Second Quarter 24 3/4 20 3/4
Third Quarter 27 1/8 23
Fourth Quarter 31 7/16 22 1/2
The closing price of the Company's common stock on March 9, 1999, as reported
on the New York Stock Exchange, was $39 15/16 per share.
32
<PAGE>
SunGard Data Systems Inc. 1998 AR
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Statements about the Company's outlook 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 effect of year 2000
issues on software and services buying decisions, the timing and scope of
technological advances and year 2000 compliance, the integration and performance
of 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,
1998, 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 (2) percent
(in millions) (1) year ended december 31, increase (decrease) (2)
1998 1997 1996 1998 1997 1996 1998 1997
vs.1997 vs.1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Investment support systems $ 804.9 $ 629.0 $ 453.8 69% 68% 64% 28% 39%
Disaster recovery services 275.3 228.2 193.8 24 25 27 21 18
Computer services and other 79.5 67.8 64.3 7 7 9 17 5
-----------------------------------------------------------
$ 1,159.7 $ 925.0 $ 711.9 100% 100% 100% 25 30
============================================================
Costs and Expenses
Cost of sales and
direct operating $ 475.4 $ 377.4 $ 296.9 41% 41% 42% 26% 27%
Sales, marketing and
administration 248.0 203.4 153.5 21 22 21 22 32
Product development 113.8 91.5 70.2 10 10 10 24 30
Depreciation 55.7 50.0 38.2 5 5 5 11 31
Amortization 52.1 46.4 33.7 5 5 5 12 38
Purchased in-process
research and development
and merger costs 11.8 13.7 51.1 1 2 7 -- --
-----------------------------------------------------------
$ 956.8 $ 782.4 $ 643.6 83% 85% 90% 22 22
============================================================
Operating Income
Investment support
systems (3) $ 151.2 $ 110.3 $ 76.6 19% 18% 17% 37% 44%
Disaster recovery
services (3) 64.9 49.2 42.6 24 22 22 32 16
Computer services and
other (3) 12.5 10.3 9.5 16 15 15 21 9
Corporate administration (13.9) (13.5) (9.3) (1) (1) (1) 3 45
-----------------------------------
214.7 156.3 119.4 18 17 17 37 31
Purchased in-process
research and development
and merger costs (11.8) (13.7) (51.1) (1) (2) (7) -- --
-----------------------------------
$ 202.9 $ 142.6 $ 68.3 17 15 10 42 109
===================================
</TABLE>
(1) All periods prior to 1998 are restated for the January 2, 1998 pooling of
interests with Infinity Financial Technology, Inc.
(2) All percentages are calculated using actual amounts rounded to the nearest
$1,000.
(3) Percent of revenues is calculated as a percent of investment support
systems, disaster recovery services, and computer services and other
revenues, respectively.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations continued
Income From Operations
During 1998, the Company recorded $11.8 million ($0.09 per diluted share) for
merger and restructuring costs. Merger costs, which generally are not tax
deductible, are associated with poolings of interests and consist principally of
investment banking, legal, accounting and printing fees. Restructuring costs
associated with the merger with Infinity Financial Technology, Inc. (Infinity)
are $2.7 million. These costs are primarily severance costs associated with the
elimination of duplicate development and administrative functions and costs for
the closing of duplicate office facilities.
During 1997 and 1996, the Company recorded $13.7 million ($0.09 per diluted
share) and $51.1 million ($0.33 per diluted share), respectively, for purchased
in-process research and development, merger and other costs. Purchased
in-process research and development costs are associated with the 1997
acquisition of certain assets of Premier Solutions Ltd. and the 1996 acquisition
of NCS Financial Systems, Inc. (See Note 2 of Notes to Consolidated Financial
Statements). Merger costs are associated with poolings of interests. Other
charges recorded in 1996 are primarily associated with impairment of the
remaining intangible assets of a business acquired more than ten years ago.
The following discussion of income from operations excludes all charges to
operations described in the preceding two paragraphs.
On January 2, 1998, the Company issued approximately 13.2 million shares of
its common stock in exchange for all of the outstanding shares of common stock
of Infinity (See Note 2 of Notes to Consolidated Financial Statements). The
merger was accounted for as a pooling of interests and, accordingly, financial
information for all periods before 1998 has been restated to include Infinity's
historical financial results. Infinity derives a significantly larger portion of
its revenues from software license sales than did the Company before the merger.
Since there are inherent difficulties in predicting the timing and magnitude of
software license sales, especially in 1999 due to possible year 2000 issues, the
potential for fluctuations in quarterly revenues and income is expected to be
greater than it was before the merger.
Investment Support Systems (ISS)
The Company's ISS business is comprised of more than forty operating units of
various size and complexity. Historically, most operating units have met or
exceeded expectations, while some have not, yielding overall results for the
entire business at approximately the levels expected. Since overall ISS results
reflect the sum of the diverse results of individual operating units, there
could be an adverse impact on ISS revenues and margins if too many individual
units are unable to meet expectations.
The ISS operating margin is 19% in 1998, compared with 18% in 1997 and 17%
in 1996. The increasing operating margins are due primarily to increases in
software license revenues and in sales of third-party hardware and software, as
well as to reductions in costs in three ISS businesses.
The Company expects that the full-year 1999 ISS operating margin will
increase slightly from the full-year 1998 operating margin. The most important
factors affecting the ISS operating margin continue to be the timing and
magnitude of software license sales, the operating margin of recently acquired
businesses and the level of product development spending.
Disaster Recovery Services (DRS)
The DRS operating margin is 24% in 1998, compared with 22% in both 1997 and
1996. The increase in the operating margin in 1998 is due primarily to an
increase in revenues, especially in connection with midrange platforms, work-
group recovery, network services and, to a lesser extent, the sale of additional
recovery test time. The increase is partially offset by expenses resulting from
a 28% expansion (adding 64,000 square feet) of the Philadelphia MegaCenter,
equipment additions and upgrades, and an increase in commission expenses
resulting from new contract signings.
The Company expects that the full-year 1999 DRS operating margin will
decline slightly from the full-year 1998 operating margin. The most important
factors affecting the DRS operating margin continue to be the rate of new
contract signings and contract renewals and the timing and magnitude of
equipment and facilities expenditures.
Computer Services and Other (CS)
The CS operating margin is 16% in 1998, compared with 15% in both 1997 and 1996.
The increase in the operating margin in 1998 is due to an increase in revenues
in the Company's healthcare information systems business (HIS) that was
partially offset by an increase in operating costs associated with equipment
upgrades in the Company's remote-access computer processing business. The 1997
operating margin reflects an increase in remote processing computer services
revenues and cost reductions in the Company's HIS businesses that were offset by
higher operating costs due to computer services equipment upgrades and, to a
lesser extent, a decline in HIS revenues.
The Company expects that the full-year 1999 CS operating margin will be
approximately the same as the full-year 1998 operating margin. The most
important factors affecting the CS operating margin are the timing and magnitude
of software license sales related to the HIS businesses and revenue variability
and timing of computer upgrades in both remote-access computer processing and
automated mailing services.
Revenues
Total revenues increased $234.7 million and $213.1 million in 1998 and 1997,
respectively. Excluding acquired businesses, total revenues increased
approximately 18% and 13% in 1998 and 1997, respectively, primarily because of a
50% increase in professional services revenues. The Company believes that the
increase in its internal revenue growth rate in 1998 is, in part, related to
year 2000 issues. The Company is unable to predict the effect of year 2000
issues on its revenue growth rate in 1999 or beyond.
Recurring revenues derived from computer processing, disaster recovery
fees, professional services, software maintenance, and software and hardware
rentals are
34
<PAGE>
SunGard Data Systems Inc. 1998 AR
$937.8 million, $743.4 million and $566.9 million in 1998, 1997 and 1996,
respectively, representing 81%, 80% and 80% of consolidated revenues,
respectively, for those years. Professional services revenues are $187.5 million
in 1998, compared to $114.2 million and $66.4 million in 1997 and 1996,
respectively. The increase in professional services revenues is due primarily to
large installations and conversions of trust, shareholder and nonprofit
accounting systems.
Nonrecurring revenues derived from software licenses and sales of
third-party software and hardware are $221.9 million in 1998, compared to $181.6
million and $145.0 million in 1997 and 1996, respectively. Software license
revenues are $185.9 million, $161.0 million and $125.6 million in 1998, 1997 and
1996, respectively.
The Company sells a significant portion of its products and services to the
financial services industry and could be affected directly 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 on the Company.
Investment Support Systems
ISS revenues increased $175.9 million, or 28%, and $175.2 million, or 39%, in
1998 and 1997, respectively. The respective increases in revenues during 1998
and 1997 are comprised of increases in recurring revenues of $139.8 million and
$135.2 million and increases in nonrecurring revenues of $36.1 million and $40.0
million. Excluding acquired businesses, ISS revenues increased approximately 18%
and 14% in 1998 and 1997, respectively.
Disaster Recovery Services
DRS revenues increased $47.1 million, or 21%, and $34.4 million, or 18%, in 1998
and 1997, respectively. Excluding acquired businesses, revenues increased
approximately 19% and 14% in 1998 and 1997, respectively. The increases are
attributable primarily to new contract signings and contract renewals and to
continued growth in demand for midrange platforms, work-group recovery and
network services.
Computer Services and Other
CS revenues increased $11.7 million, or 17%, and $3.5 million, or 5%, in 1998
and 1997, respectively. Excluding acquired businesses, 1998 and 1997 revenues
increased approximately 15% and 3%, respectively. The 1998 increase is
attributable to the Company's HIS businesses. The 1997 increase is attributable
to the Company's remote-access computer processing business. The 1997 increase
is net of a decline in revenues in the Company's HIS businesses that is due
primarily to the timing and magnitude of software license sales.
Costs and Expenses
Cost of sales and direct operating expenses increased $98.0 million and $80.5
million in 1998 and 1997, respectively. The increases are due primarily to
acquired businesses, DRS facility expansion, and equipment additions and
upgrades. The decrease in the percentage of cost of sales and direct operating
expenses to total revenues from 42% in 1996 to 41% in 1997 and 1998 is due
primarily to an increase in higher-margin software license revenues and cost
reductions in certain ISS and HIS businesses.
Sales, marketing and administration expenses increased $44.6 million and
$49.9 million in 1998 and 1997, respectively. The increases are due primarily to
acquired businesses, an expansion in the sales force, particularly in DRS, an
increase in noncash expenses associated with the Company's long-term incentive
plan, and in 1997 an increase in commissions associated with ISS software
license sales.
Product development expenses increased $22.3 million and $21.3 million in
1998 and 1997, respectively. The increases are due primarily to acquired
businesses and increased development spending for various ISS products.
Development costs capitalized are $2.6 million and $1.3 million in 1998 and
1997, respectively.
Depreciation of property and equipment increased $5.7 million and $11.8
million in 1998 and 1997, respectively. The increases are due primarily to
purchases of computer and telecommunications equipment, DRS facility expansion
and acquired businesses.
Amortization of intangible assets increased $5.7 million and $12.7 million
in 1998 and 1997, respectively. The increases are due to acquired businesses.
As explained above, the Company recorded merger and restructuring costs of
$11.8 million ($0.09 per diluted share) in 1998, and purchased in-process
research and development, merger and other costs of $13.7 million ($0.09 per
diluted share) and $51.1 million ($0.33 per diluted share) in 1997 and 1996,
respectively (See Notes 1 and 2 of Notes to Consolidated Financial Statements).
Net interest income increased $4.3 million in 1998 and decreased $2.9
million in 1997. The increase in 1998 is due to higher cash and short-term
investment balances as well as to lower debt balances. The decrease in 1997 is
due to lower cash and short-term investment balances and higher borrowings under
the Company's line of credit. By the end of 1997, the Company had fully paid its
balance under the line of credit. There were no borrowings during 1998.
The Company's effective income tax rates are 42.9%, 41.6% and 44.2% in
1998, 1997 and 1996, respectively. The increase in the rate in 1998 compared to
1997 is due to higher nondeductible costs associated with intangible assets and
merger costs. The decrease in the rate in 1997 from 1996 is due to lower
nondeductible purchased in-process research and development and other costs.
Excluding these nondeductible costs, the Company's 1998, 1997 and 1996 effective
income tax rates are 40.7%, 40.6% and 40.2%, respectively.
Liquidity and Capital Resources
Cash and short-term investments as of December 31, 1998 are $258.0 million, an
increase of $151.9 million from December 31, 1997. Short- and long-term debt
declined from $20.1 million at December 31, 1997 to $12.0 million at December
31, 1998.
At December 31, 1998, the Company's remaining commitments consist primarily
of operating leases for computer
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations continued
equipment and facilities aggregating $222.4 million, of which $69.5 million will
be paid in 1999. The Company expects that its existing cash resources and cash
generated from operations will be sufficient to meet its operating requirements,
contingent payments in connection with business acquisitions, and ordinary
capital spending needs for the foreseeable future. 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.
Year 2000 Systems Evaluation
The Company has a comprehensive program to evaluate and address the impact of
the year 2000 on its software systems, processing services and disaster recovery
operations. As part of this program, each of the Company's operating units is
required to identify each item that must be modified or replaced, establish a
plan to complete and test all required modifications and replacements, and then
implement that plan. This program encompasses the Company's products that are
sold to its customers, as well as third-party products that are resold to
customers or are used internally by the Company. The Company is closely
monitoring the progress of each of its operating units with their year 2000
compliance plans. The Company believes that it will successfully complete its
year 2000 compliance program on a timely basis, without significant disruption
to its customers or operations.
Many of the Company's software and other products already are year 2000
compliant, so that they can handle dates in the year 2000 and beyond. The
Company, however, is still working on year 2000 compliance projects for some of
its important products. The Company estimates that modification and testing for
approximately 90% of its software products were substantially completed at the
end of 1998. The Company's goal is to complete modification and testing for all
of its software products by June 30, 1999. Nevertheless, the Company anticipates
that year 2000 compliance testing will continue throughout 1999 for many of its
products, which may uncover the need for additional modifications. In addition
to its internal testing, the Company is participating in industry-wide year 2000
compliance tests such as those being conducted by the Securities Industry
Association.
The Company will carefully monitor its year 2000 compliance projects
throughout 1999 and will continue to develop and refine contingency plans for
these projects as testing results are analyzed. If the Company fails to make any
of its significant products year 2000 compliant, or fails to meet its
commitments to customers to complete major conversions to year 2000 compliant
systems during 1999, then its business and financial results may be materially
and adversely affected. The Company believes that year 2000 compliance issues
have caused some acceleration of software buying and conversion activity and,
therefore, the Company's rate of internal revenue growth may decline in the
second half of 1999 or in the year 2000.
Many third-party hardware, software and other products interact with the
Company's products and services or are used by the Company as an integral part
of its operations. The Company continues to evaluate these third-party products
for year 2000 compliance, so that noncompliant products may be modified or
replaced in a timely manner. In doing so, the Company is working with, and must
rely upon, its outside vendors to meet year 2000 requirements. If any of the
Company's important vendors fails to meet its year 2000 requirements, then the
Company will switch to another vendor as soon as possible, which may have a
material and adverse impact on the Company's business and financial results.
Although the Company believes that all of its important vendors eventually will
meet their year 2000 requirements, the Company cannot determine at this time
whether or when year 2000 related problems will arise with its third-party
products or whether any problems that do arise will have a material and adverse
impact on the Company's business or financial results.
The Company's overall year 2000 compliance program is on schedule, and the
Company has paid and believes that it will continue to pay expenses of this
program using existing product development and support resources, without
incurring significant incremental development expense, and using budgeted
capital expenditures. Nevertheless, in order to complete this program, the
Company may have to add personnel and buy new third-party software, hardware and
other products earlier than planned, and personnel expenses may increase faster
than expected because year 2000 issues are causing a shortage in the
availability of experienced programmers. Furthermore, year 2000 modification and
testing activities have required the deferral of lower priority development
projects.
The Company does not maintain detailed accounting records that separately
identify all of the costs associated with its year 2000 activities. In response
to new disclosure requirements regarding year 2000 matters, the Company has
reviewed its accounting and product development records for the period beginning
January 1, 1996 in an effort to estimate the costs of its year 2000 compliance
program. The Company currently estimates that the total costs of its year 2000
compliance program since January 1, 1996 will be approximately $24.0 million in
direct labor and benefit costs for modification and testing activities, plus
approximately $12.0 million in capital expenditures. Through December 31, 1998,
the Company has spent approximately $16.0 million in direct labor and benefit
costs for modification and testing, plus approximately $2.0 million in capital
expenditures. The remaining estimated direct labor and benefit costs for
modification and testing activities of approximately $8.0 million include, in
part, rough estimates to cover unanticipated modification work that may arise as
a result of continued testing activity throughout 1999. The remaining estimated
capital expenditures of approximately $10.0 million are to replace noncompliant
computer and communications equipment, principally in the Company's DRS
business.
36
<PAGE>
SunGard Data Systems Inc. 1998 AR
Consolidated Statements of Income(1)
<TABLE>
<CAPTION>
year ended december 31,
(in thousands, except per-share amounts) 1998 1997 1996
--------------------------------------------------
<S> <C> <C> <C>
Revenues $ 1,159,748 $ 925,030 $ 711,857
--------------------------------------------------
Costs and expenses:
Cost of sales and direct operating 475,422 377,379 296,861
Sales, marketing and administration 248,026 203,394 153,534
Product development 113,811 91,518 70,231
Depreciation of property and equipment 55,665 50,061 38,147
Amortization of intangible assets 52,131 46,365 33,717
Purchased in-process research and development
and merger costs 11,847 13,669 51,083
--------------------------------------------------
956,902 782,386 643,573
--------------------------------------------------
Income from operations 202,846 142,644 68,284
Interest income 7,123 3,690 5,225
Interest expense (1,741) (2,584) (1,224)
--------------------------------------------------
Income before income taxes 208,228 143,750 72,285
Income taxes 89,295 59,775 31,979
--------------------------------------------------
Net income $ 118,933 $ 83,975 $ 40,306
==================================================
Basic net income per common share $ 1.14 $ 0.84 $ 0.43
==================================================
Shares used to compute basic net income
per common share 104,167 99,555 94,549
==================================================
Diluted net income per common share $ 1.10 $ 0.81 $ 0.41
==================================================
Shares used to compute diluted net income
per common share 108,073 103,596 99,433
==================================================
</TABLE>
(1) All periods before 1998 are restated for the January 2, 1998 pooling of
interests with Infinity Financial Technology, Inc.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Consolidated Balance Sheets(1)
december 31,
(in thousands, except per-share amounts) 1998 1997
-----------------------------------
Assets
Current:
Cash and equivalents $ 240,469 $ 81,185
Short-term investments, at cost, which
approximates market 17,566 24,970
Trade receivables, less allowance for
doubtful accounts of $26,657 and
$19,702 238,563 183,757
Earned but unbilled receivables 38,348 40,951
Prepaid expenses and other current assets 28,074 24,269
Deferred income taxes 21,296 21,163
-----------------------------------
Total current assets 584,316 376,295
Property and equipment, less accumulated
depreciation of $249,814 and $202,336 132,509 123,261
Software products, less accumulated
amortization of $109,118 and $89,022 72,122 75,634
Goodwill, less accumulated amortization
of $46,007 and $32,660 155,836 160,109
Deferred income taxes and other intangible
assets, less accumulated amortization
of $60,814 and $45,451 130,538 121,649
-----------------------------------
$ 1,075,321 $ 856,948
===================================
Liabilities and Stockholders' Equity
Current:
Short-term and current portion of long-
term debt $ 9,230 $ 16,996
Accounts payable 14,931 19,105
Accrued compensation and benefits 83,486 58,592
Other accrued expenses 45,454 30,552
Accrued income taxes 22,295 6,736
Deferred revenues 136,218 111,666
-----------------------------------
Total current liabilities 311,614 243,647
-----------------------------------
Long-term debt 2,816 3,080
-----------------------------------
Commitments
Stockholders' equity:
Preferred stock, par value $.01 per
share; 5,000 shares authorized -- --
Common stock, par value $.01 per
share; 320,000 shares authorized;
105,712 and 102,083 shares issued 1,057 1,021
Capital in excess of par value 271,036 228,333
Notes receivable for common stock -- (500)
Restricted stock plans (1,591) (1,532)
Retained earnings 497,322 389,545
Accumulated other comprehensive loss (6,933) (6,646)
-----------------------------------
Total stockholders' equity 760,891 610,221
-----------------------------------
$ 1,075,321 $ 856,948
===================================
(1) 1997 is restated for the January 2, 1998 pooling of interests with Infinity
Financial Technology, Inc.
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
SunGard Data Systems Inc. 1998 AR
Consolidated Statements of Cash Flows(1)
<TABLE>
<CAPTION>
year ended december 31,
(in thousands) 1998 1997 1996
-------------------------------------------
<S> <C> <C> <C>
Cash Flow From Operations
Net income $ 118,933 $ 83,975 $ 40,306
Reconciliation of net income to
cash flow from operations:
Depreciation and amortization 107,796 96,426 71,864
Purchased in-process research
and development and other costs -- 10,161 51,083
Other noncash charges 19,077 8,527 2,646
Deferred income tax benefit (13,657) (15,794) (22,239)
Accounts receivable and other
current assets (61,373) (39,896) (21,926)
Accounts payable and accrued
expenses 40,235 13,575 5,817
Deferred revenues 16,220 (172) 12,989
-------------------------------------------
Cash flow from operations 227,231 156,802 140,540
-------------------------------------------
Financing Activities
Cash received under employee
stock plans 25,968 10,707 12,505
Cash paid for treasury stock -- -- (4,221)
Proceeds from issuance of common stock -- 2,241 28,899
Borrowings under line of credit -- 168,122 18,000
Repayments of debt (10,882) (194,650) (9,637)
-------------------------------------------
Total financing activities 15,086 (13,580) 45,546
-------------------------------------------
Investment Activities
Cash paid for acquired businesses,
net of cash acquired (20,318) (55,299) (165,682)
Cash paid for property and equipment (63,574) (56,507) (43,082)
Cash paid for software and other assets (6,548) (8,283) (12,972)
Purchase of short-term investments (12,721) (66,156) (2,660)
Sales and maturities of short-term
investments 20,128 41,184 38,726
-------------------------------------------
Total investment activities (83,033) (145,061) (185,670)
Increase (decrease) in cash and
equivalents 159,284 (1,839) 416
Beginning cash and equivalents 81,185 83,024 82,608
-------------------------------------------
Ending cash and equivalents $ 240,469 $ 81,185 $ 83,024
===========================================
Supplemental Information
Interest paid $ 1,789 $ 2,695 $ 1,282
===========================================
Income taxes paid $ 77,548 $ 70,495 $ 52,965
===========================================
Acquired businesses:
Property and equipment $ 1,256 $ 5,681 $ 11,690
Software products 5,648 17,765 42,110
Purchased in-process research
and development -- 10,161 44,451
Goodwill and other intangible
assets 21,935 33,735 98,320
Deferred income taxes 184 1,738 9,447
Purchase price obligations and
debt assumed (3,021) (6,406) (20,217)
Net current liabilities assumed (12,691) (954) (20,119)
Common stock issued and net
equity acquired in poolings
of interests 7,007 (6,421) --
-------------------------------------------
Cash paid for acquired businesses,
net of cash acquired of $1,578,
$4,606 and $132 in 1998, 1997 and
1996, respectively $ 20,318 $ 55,299 $ 165,682
===========================================
</TABLE>
(1) All periods before 1998 are restated for the January 2, 1998 pooling of
interests with Infinity Financial Technology, Inc.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Consolidated Statement of Stockholders' Equity(1)
<TABLE>
<CAPTION>
preferred stock common stock capital in notes restricted
number of par number of par excess of receivable for stock
shares value shares value par value common stock plans
--------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995,
as previously reported -- $ -- 42,111 $ 421 $ 171,558 $ (2,817) $ (220)
Adjustments in connection
with pooling of interests 3,083 1,053 4,245 43 1,527 (1,025) --
--------------------------------------------------------------------------------------------
Balances, December 31, 1995,
as restated 3,083 1,053 46,356 464 173,085 (3,842) (220)
Net income -- -- -- -- -- -- --
Shares issued pursuant to
common stock offering,
net of issuance costs
of $3,370 (3,083) (1,053) 1,731 17 29,766 -- --
Purchase of common stock -- -- -- -- -- -- --
Note repayments -- -- -- -- -- 2,517 --
Shares issued under stock
plans -- -- 386 4 4,059 (60) (2,312)
Compensation expense related
to restricted stock plans -- -- -- -- -- -- 489
Income tax benefit arising
from employee stock options -- -- -- -- 1,172 -- --
Other comprehensive income -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------
Balances, December 31, 1996 -- -- 48,473 485 208,082 (1,385) (2,043)
Poolings of interests -- -- 2,796 28 2,574 -- --
Net income -- -- -- -- -- -- --
Two-for-one common stock split -- -- 49,528 495 (495) -- --
Note repayments -- -- -- -- -- 885 --
Shares issued under stock plans -- -- 1,286 13 10,889 -- --
Compensation expense related
to restricted stock plans -- -- -- -- -- -- 511
Options earned under long-term
incentive plan -- -- -- -- 4,230 -- --
Income tax benefit arising from
employee stock options -- -- -- -- 3,053 -- --
Other comprehensive loss -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------
Balances, December 31, 1997 -- -- 102,083 1,021 228,333 (500) (1,532)
Poolings of interests -- -- 1,343 13 4,357 -- --
Net income -- -- -- -- -- -- --
Note repayments -- -- -- -- -- 500 --
Shares issued under stock plans -- -- 2,286 23 26,136 -- (688)
Compensation expense related to
restricted stock plans -- -- -- -- -- -- 629
Income tax benefit arising from
employee stock options -- -- -- -- 12,210 -- --
Other comprehensive loss -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------
Balances, December 31, 1998 -- $ -- 105,712 $ 1,057 $ 271,036 $ -- $ (1,591)
============================================================================================
</TABLE>
(1) All periods before 1998 are restated for the January 2, 1998 pooling of
interests with Infinity Financial Technology, Inc.
The accompanying notes are an integral part of these financial statements.
<PAGE>
SunGard Data Systems Inc. 1998 AR
<TABLE>
<CAPTION>
accumulated
other treasury stock
retained comprehensive number of
earnings loss shares cost total
-------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1995,
as previously reported $260,172 $(1,279) (189) $(5,543) $422,292
Adjustments in connection
with pooling of interests 4,168 -- -- -- 5,766
-------------------------------------------------------------------
Balances, December 31, 1995,
as restated 264,340 (1,279) (189) (5,543) 428,058
Net income 40,306 -- -- -- 40,306
Shares issued pursuant to
common stock offering,
net of issuance costs
of $3,370 -- -- -- -- 28,730
Purchase of common stock -- -- (131) (4,221) (4,221)
Note repayments -- -- -- -- 2,517
Shares issued under stock
plans (2,960) -- 277 8,289 7,020
Compensation expense related
to restricted stock plans -- -- -- -- 489
Income tax benefit arising
from employee stock options -- -- -- -- 1,172
Other comprehensive income -- 992 -- -- 992
-------------------------------------------------------------------
Balances, December 31, 1996 301,686 (287) (43) (1,475) 505,063
Poolings of interests 3,884 (65) -- -- 6,421
Net income 83,975 -- -- -- 83,975
Two-for-one common stock split -- -- (11) -- --
Note repayments -- -- -- -- 885
Shares issued under stock plans -- -- 54 1,475 12,377
Compensation expense related
to restricted stock plans -- -- -- -- 511
Options earned under long-term
incentive plan -- -- -- -- 4,230
Income tax benefit arising from
employee stock options -- -- -- -- 3,053
Other comprehensive loss -- (6,294) -- -- (6,294)
-------------------------------------------------------------------
Balances, December 31, 1997 389,545 (6,646) -- -- 610,221
Poolings of interests (11,156) (221) -- -- (7,007)
Net income 118,933 -- -- -- 118,933
Note repayments -- -- -- -- 500
Shares issued under stock plans -- -- -- -- 25,471
Compensation expense related to
restricted stock plans -- -- -- -- 629
Income tax benefit arising from
employee stock options -- -- -- -- 12,210
Other comprehensive loss -- (66) -- -- (66)
-------------------------------------------------------------------
Balances, December 31, 1998 $497,322 $(6,933) -- $ -- $760,891
===================================================================
</TABLE>
(1) All periods before 1998 are restated for the January 2, 1998 pooling of
interests with Infinity Financial Technology, Inc.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation
SunGard Data Systems Inc., through its wholly owned subsidiaries, provides
computer services, principally proprietary processing services and software to
the financial services industry, and computer disaster recovery services. 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. The Company closely monitors estimates of those
lives. Those estimates could change due to 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 postdelivery 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 postdelivery 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
affected directly 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. All assets and
liabilities are translated into U.S. dollars using exchange rates in effect at
the balance sheet date. Revenues and expenses are translated using average
exchange rates during the period. Increases and decreases in net assets
resulting from foreign currency translation are reflected in stockholders'
equity as a component of accumulated other comprehensive loss.
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 $20,068,000, $21,217,000 and $15,448,000 during 1998, 1997 and 1996,
respectively.
42
<PAGE>
SunGard Data Systems Inc. 1998 AR
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 five to thirty 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, the Company determines whether a reduction in amortizable life or
charge for impairment is appropriate.
In 1998, the Company recorded a charge of $6,467,000 for both the partial
impairment of goodwill associated with a United Kingdom-based investment support
systems processing business and the write-off of the remaining goodwill
associated with an Australia-based investment support systems business. The
Company believes that no further impairment of goodwill existed at December 31,
1998.
In 1997, the Company recorded a charge of $1,467,000 for the impairment of
the remaining goodwill associated with another Australia-based investment
support systems business. In 1996, the Company recorded a charge of $5,157,000
for the impairment of the remaining goodwill associated with a United
States-based investment support systems business. Also in 1997 and 1996, the
Company reduced the remaining amortizable life of goodwill associated with two
other acquired investment support systems businesses.
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 four to seventeen years. Noncompetition agreements
are amortized using the straight-line method over the term of such agreements,
ranging from two 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.
2. Acquisitions and Subsequent Events
Purchase Transactions
During 1998, the Company completed six business acquisitions accounted for as
purchase transactions. Five acquisitions were in the Company's investment
support systems business and one was in its disaster recovery services business.
Total cash paid in connection with these acquisitions was $16,890,000, subject
to certain adjustments. Goodwill recorded in connection with these acquisitions
was approximately $6,718,000. During 1998, the Company also paid a total of
$5,006,000 as the contingent portions of the purchase prices related to
businesses previously acquired.
During 1997, the Company completed five business acquisitions accounted for
as purchase transactions. Three acquisitions were in the Company's investment
support systems business and two were in its disaster recovery services
business. Total cash paid in connection with the 1997 acquisitions was
$57,586,000, subject to certain adjustments. Goodwill recorded in connection
with these acquisitions was approximately $13,853,000. In addition, contingent
payments of up to $4,111,000 may be paid in connection with two 1997
acquisitions, depending upon the achievement of certain future financial
results. During 1997, the Company also paid $727,000 as the contingent portion
of the purchase price related to a business previously acquired.
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 the 1996 acquisitions was
$163,684,000, subject to certain adjustments. Goodwill recorded in connection
with these acquisitions was approximately $47,738,000. In addition, a contingent
payment of up to $4,729,000 (7,500,000 Australian dollars) may be paid in
connection with one acquisition depending upon the achievement of certain future
financial results.
During 1997 and 1996, the Company recorded charges of $10,161,000 and
$44,451,000 ($0.06 and $0.28 per diluted share), respectively, for purchased
in-process research and development primarily associated with the acquisitions
of certain assets of Premier Solutions Ltd. (Premier) in 1997 and of NCS
Financial Systems, Inc. (NCS) in 1996. These charges represent, as of the date
of each acquisition, the value of software products still in development, but
not considered to have reached technological feasibility or to have any
alternative future use.
In connection with the acquisitions of Premier and 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.
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 business previously acquired. Goodwill was increased by the amount
of that payment.
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.
<PAGE>
Notes to Consolidated Financial Statements continued
Pooling-of-Interests Transactions
On January 2, 1998, the Company issued 13,223,000 shares of common stock in
connection with a merger with Infinity Financial Technology, Inc. (Infinity).
Infinity provides enterprise software solutions for financial trading and risk
management. The merger has been accounted for as a pooling of interests.
Therefore, in accordance with generally accepted accounting principles, all
historical financial information of the Company has been restated to include the
historical financial information of Infinity. A reconciliation of revenues, net
income and net income per common share for each of the years ended December 31,
1997 and 1996 from the amounts originally reported to the amounts as restated
follows:
1997 1996
-------------------------
Revenues (in thousands):
As originally reported $862,151 $670,309
Infinity 62,879 41,548
-------------------------
Combined $925,030 $711,857
-------------------------
Net income (in thousands):
As originally reported $ 77,546 $ 34,901
Infinity 6,429 5,405
-------------------------
Combined $ 83,975 $ 40,306
-------------------------
Basic net income per common share:
As originally reported $ 0.89 $ 0.41
-------------------------
Combined $ 0.84 $ 0.43
-------------------------
Diluted net income per common share:
As originally reported $ 0.87 $ 0.41
-------------------------
Combined $ 0.81 $ 0.41
-------------------------
During 1998, the Company recorded $2,700,000 ($0.01 per diluted share) for
restructuring costs associated with the merger with Infinity. Approximately
$1,500,000 of these costs are severance payments associated with twenty-seven
employees in duplicate software development and administrative functions, and
approximately $1,200,000 of these costs are associated with the closing of
duplicate office facilities. Twenty-four employees were terminated through
December 31, 1998, and the remaining three employees were terminated in early
1999.
During 1998, the Company issued a total of 1,343,000 shares of common stock
in connection with two other business combinations accounted for as poolings of
interests. Both of these business combinations were in the Company's investment
support systems business.
During 1997, the Company issued a total of 3,682,000 shares of common stock
(adjusted for the September 1997 two-for-one stock split) in connection with six
business combinations accounted for as poolings of interests. Five of the
business combinations were in the Company's investment support systems business
and one was in the Company's healthcare information systems business.
During 1998 and 1997, the Company recorded merger costs of $7,831,000 and
$3,508,000 ($0.07 and $0.03 per diluted share), respectively, in connection with
these transactions. These costs consist primarily of investment banking, legal
and accounting fees that generally are not deductible for income tax purposes.
During 1998, the Company also recorded costs of $1,316,000 (less than $0.01
per diluted share) associated with the Company's expired offer to acquire Rolfe
& Nolan Plc.
Except with respect to Infinity, the consolidated results of operations for
the years ended December 31, 1998 and 1997 include the operations of each of
these combined businesses from the beginning of the quarter in which the
business combination was completed, and the consolidated financial statements
for prior periods have not been restated since the impact of such restatement
would not be material.
Subsequent Events
On March 1, 1999, the Company completed the acquisition of Automated Securities
Clearance, Ltd. (ASC) by exchanging shares of common stock of the Company for
all of the shares of common stock of ASC. ASC is a provider of an automated
order-routing and trade-execution system used by broker/ dealers, an electronic
communications network that provides direct access to the Nasdaq marketplace,
and wireless technology for straight-through processing of trades on the New
York Stock Exchange. Under terms of a pre-existing employment agreement with ASC
relating to a change of control, a member of ASC's executive management team
received approximately 25% of the SunGard common stock issued in the
acquisition. The fair value of those shares on the date of the acquisition
(approximately $70,000,000) will be recorded as a one-time noncash compensation
expense during the first quarter of 1999. ASC was an "S" corporation prior to
the acquisition; therefore, all income passed through directly to and all income
taxes were paid directly by the previous shareholder of ASC.
On February 18, 1999, the Company completed the acquisition of Sterling
Wentworth Corporation (SWC) by exchanging shares of common stock of the Company
for all of the shares of common stock of SWC. SWC provides enterprise sales
productivity solutions for the financial services industry.
On January 15, 1999, the Company signed a definitive agreement to acquire
FDP Corporation (FDP) by exchanging shares of common stock of the Company for
all of the shares of common stock of FDP. FDP is a publicly held company that
provides a variety of sales, marketing and administrative software systems for
life insurance companies and employee benefit administrators. The acquisition is
expected to be completed during the second quarter of 1999.
The three acquisitions described above each will be accounted for as a
pooling of interests, which requires all historical financial information to be
restated. Furthermore, because ASC was an "S" corporation prior to acquisition,
pro forma income taxes will be computed on ASC's historical earnings as if ASC
had been a "C" corporation and will be reflected in the Company's restated
income statement.
A total of approximately 10,300,000 shares of the Company's common stock
were or will be issued in connection with these acquisitions, and all issued and
outstanding options to buy common stock will be converted into options to buy
approximately 1,800,000 shares of SunGard
44
<PAGE>
SunGard Data Systems Inc. 1998 AR
common stock. Estimated merger costs in connection with these acquisitions,
excluding the compensation expense described above, are approximately
$10,000,000.
The following estimated pro forma combined results of operations (in
thousands, except for per-share amounts) is provided for illustrative purposes
only and assumes that the mergers described above had occurred as of the
beginning of each of the periods presented. All merger costs, including the
one-time noncash compensation expense described above, are excluded from the
estimated pro forma information. The following estimated pro forma information
should not be relied upon as necessarily being indicative of the historical
results that would have been obtained if the companies had been combined during
those periods or the results that may be obtained in the future.
1998 1997 1996
---------------------------------------------
Revenues:
As reported $ 1,159,748 $ 925,030 $ 711,857
Combined (pro forma) 1,253,265 996,277 765,979
Net income:
As reported 118,933 83,975 40,306
Combined (pro forma) 128,337 91,651 47,803
Basic earnings per share:
As reported 1.14 0.84 0.43
Combined (pro forma) 1.12 0.84 0.46
Diluted earnings per share:
As reported 1.10 0.81 0.41
Combined (pro forma) 1.07 0.80 0.43
3. Net Income Per Common Share
The computation of the number of shares used in computing basic and diluted net
income per common share for each of the years ended December 31 follows
(in thousands):
1998 1997 1996
--------------------------------------
Weighted-average
common shares
outstanding 104,145 99,534 94,549
Contingent shares 22 21 --
--------------------------------------
Total shares used
for calculation of
basic net income
per common share 104,167 99,555 94,549
Employee stock options 3,736 3,981 3,292
Convertible preferred
stock -- -- 1,573
Contingent stock
options 170 60 19
--------------------------------------
Total shares used for
calculation of diluted
net income per common share 108,073 103,596 99,433
======================================
Common Stock Split
On August 14, 1997, the Company's Board of Directors authorized a two-for-one
stock split of the Company's common stock. The stock split was effective for
stockholders of record on September 2, 1997 and shares were issued on September
22, 1997. The number of shares used for purposes of calculating net income per
common share and all per-share data has been adjusted for all periods presented
to reflect the stock split.
4. Comprehensive Income
Comprehensive income consists of net income, adjusted for other increases and
decreases affecting stockholders' equity that, under generally accepted
accounting principles, are excluded from the determination of net income.
The calculation of comprehensive income for each of the years ended
December 31 follows (in thousands):
1998 1997 1996
----------------------------------------
Net income $ 118,933 $ 83,975 $ 40,306
Foreign currency translation gains
(losses) (66) (6,294) 992
Estimated income tax benefit
(expense) 27 2,555 (399)
----------------------------------------
Comprehensive income $ 118,894 $ 80,236 $ 40,899
========================================
5. Property and Equipment
Property and equipment consist of the following at December 31 (in thousands):
1998 1997
------------------------------
Computer and
telecommunications
equipment $ 261,960 $ 212,681
Leasehold improvements 56,343 42,951
Office furniture
and equipment 45,686 39,911
Buildings and
improvements 14,331 19,335
Land 1,740 2,547
Construction in progress 2,263 8,172
------------------------------
382,323 325,597
Accumulated depreciation
and amortization (249,814) (202,336)
------------------------------
$ 132,509 $ 123,261
==============================
<PAGE>
Notes to Consolidated Financial Statements continued
6. Long-Term Debt
Long-term debt consists of the following at December 31 (in thousands):
1998 1997
---------------------------
Bank debt
(8.0% interest rate) $ 6,075 $10,204
Purchase price obligations
due former owners
of acquired businesses 3,475 6,523
Other, primarily capital
lease obligations for
computer equipment
and buildings 2,496 3,349
---------------------------
12,046 20,076
Less current maturities (9,230) (16,996)
---------------------------
$ 2,816 $ 3,080
===========================
The Company has an unsecured revolving credit agreement (Credit Agreement)
that provides for up to $150,000,000 of borrowings for the period ending August
2003, which may be extended for one year, on an annual basis, with the lender's
approval. 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 and fixed-charge coverage ratio and limit its total
debt. There were no borrowings under the Credit Agreement during 1998.
Annual maturities of long-term debt during the next five years are as
follows: 1999--$9,230,000; 2000--$629,000; 2001--$774,000; 2002--$103,000; and
2003--$113,000.
7. Stock Option and Award Plans
Employee Stock Purchase Plans
Under the Company's Employee Stock Purchase Plans, a maximum of 4,400,000 shares
of common stock may be issued to substantially all 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.
Beginning January 1, 1999, the purchase price will be 85% of the lower of the
closing price of the Company's common stock on the first business day or the
last business day of each calendar quarter. During 1998, 1997 and 1996,
employees purchased 368,000, 422,000 and 304,000 shares, respectively, at
average purchase prices of $30.95, $20.02 and $16.75 per share, respectively. At
December 31, 1998, 1,401,000 shares of common stock were reserved for issuance
under these plans.
Equity Incentive Plans
The Infinity stock options outstanding and exercisable at the date of merger
were converted to SunGard stock options using the exchange ratio of 0.68 SunGard
common stock to one share of Infinity common stock. The stock option activity
for all periods prior to the date of merger, as presented in the table on page
47, has been restated to include the Infinity stock option activity using the
same exchange ratio.
Under the Company's 1994, 1996 and 1998 Equity Incentive Plans, awards or
options to purchase up to 8,500,000 shares of common stock may be granted to key
employees of the Company, with an individual limit of up to 400,000 shares per
participant per year. Options may be either incentive stock options or
nonqualified stock options, and the option price generally must be at least
equal to the fair value of the Company's common stock on the date of award or
grant. Generally, options are granted for a ten-year term and become fully
exercisable one year from the date of grant, subject to a four- or five-year
vesting schedule.
During 1998, performance accelerated stock options (PASOs) were awarded for
an aggregate of 814,000 shares. PASOs are nonqualified options that are granted
annually near the beginning of a three-year performance period at an exercise
price equal to the fair value of the Company's common stock on the date of
grant, with a term of ten years beginning on the date of grant. Shares vest
under PASOs nine and one-half years after the date of grant except that vesting
may be accelerated in full at the end of the third year if certain financial
performance goals are met over the three-year period. If the goals are
surpassed, then cash bonuses will become payable upon exercise of the PASOs.
During 1997 and 1996, long-term incentive awards (LTIP awards) were granted
for future options of up to an aggregate of 415,000 and 588,000 shares,
respectively. The actual number of shares and the exercise price per share are
contingent upon achieving certain cumulative financial results over a three-year
period, beginning on January 1 of the year of each LTIP award. If and when the
option shares are earned, the exercise price per share will be $19.88 and
$14.27, respectively, but could be reduced to a minimum of $0.99 and $8.24,
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, 1998, 1997 and 1996, compensation
expense of $13,720,000, $5,805,000 and $1,875,000, respectively, was recorded in
connection with 1997 and 1996 LTIP awards. During 1998, 112,000 option shares
were issued under the 1995 LTIP awards, at exercise prices ranging from $6.04 to
$8.76 per share.
Under the Company's 1986 Stock Option Plan, options to purchase up to
3,955,000 shares of the Company's common stock were issued to officers and key
employees. These options were either incentive stock options or nonqualified
stock options, and the option price was equal to the fair value of the Company's
common stock on the date of grant. Generally, options were granted for a
ten-year term and became fully exercisable one year from the date of grant,
subject to a four- or five-year vesting schedule.
The table on page 47 summarizes transactions under these equity incentive
and stock option plans. All share and per-share amounts have been restated to
reflect the September 1997 two-for-one stock split (see Note 3).
At December 31, 1998, 11,426,000 shares of common stock were reserved for
issuance under the Company's equity incentive and stock option plans. The number
of shares available under the 1998 Equity Incentive Plan will
46
<PAGE>
SunGard Data Systems Inc. 1998 AR
increase each year by the number of option shares exercised during the previous
year under all of the Company's equity plans, subject to a maximum increase of
2% of outstanding shares as of the end of the previous year.
Restricted Stock Plans
The Company's Restricted Stock Award Plan for Outside Directors (RSAP) provides
for awards of up to 400,000 shares of the Company's common stock. Each outside
director automatically receives an initial award of 20,000 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 20,000 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 20,000 and 100,000 shares were granted
during 1998 and 1996, respectively, at a fair value of $34.44 and $16.87 per
share, respectively. There were no awards during 1997. At December 31, 1998,
122,000 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 1,600,000 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, 1998, 214,000 shares of
common stock were reserved for issuance under this plan.
Unearned compensation expense related to the restricted stock plans is
reported as a reduction of stockholders' equity in the accompanying consolidated
financial statements. For accounting purposes, compensation expense is recorded
ratably over the five-year period during which the shares are subject to
transfer and forfeiture restrictions and is based on the market value on the
award date less the par value of the shares awarded. Compensation expense
related to these plans aggregated $473,000, $355,000 and $372,000 for the years
ended December 31, 1998, 1997 and 1996, 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. 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 or award, as
prescribed under SFAS 123, the Company's net income and diluted net income per
share would have been reduced by approximately $2,376,000, $3,614,000 and
$5,297,000 ($0.02, $0.03 and $0.05 per diluted share) in 1998, 1997 and 1996,
respectively. The fair value of the options granted during 1998, 1997 and 1996
is estimated to be $16.34, $10.84 and $8.36 per share, respectively, on the date
of grant using the Black-Scholes pricing model with the following assumptions:
volatility of 38%, 36% and 37% in 1998, 1997 and 1996, respectively; expected
term of six years; risk-free interest rate of 5.00%, 5.75% and 6.50% in 1998,
1997 and 1996, respectively; 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.
<TABLE>
<CAPTION>
shares (in thousands)
------------------------------------------
under weighted
available under option LTIP award average price
------------------------------------------ ----------------
<S> <C> <C> <C> <C>
Balances at December 31, 1995, as previously reported 1,398 3,450 344 $ 7.79
Adjustments in connection with pooling of interests 756 2,000 -- 0.72
------------------------------------------
Balances at December 31, 1995, as restated 2,154 5,450 344 5.20
Authorized 4,214 -- -- --
LTIP award (588) -- 588 --
Canceled 534 (578) -- 8.81
Granted (4,190) 4,190 -- 15.33
Exercised -- (920) -- 3.65
------------------------------------------
Balances at December 31, 1996 2,124 8,142 932 10.33
Poolings of interests -- 674 -- 3.90
LTIP award (415) -- 415 --
LTIP maturity 66 102 (168) 7.32
Canceled 446 (481) (50) 12.31
Granted (1,013) 1,013 -- 22.96
Exercised -- (1,152) -- 3.38
------------------------------------------
Balances at December 31, 1997 1,208 8,298 1,129 12.16
Pooling of interests -- 36 -- 1.28
Authorized 3,000 -- -- --
LTIP maturity 135 112 (247) 7.10
Canceled (389) (419) -- 19.71
Granted (2,482) 2,482 -- 33.59
Exercised -- (1,898) -- 7.48
------------------------------------------
Balances at December 31, 1998 1,472 8,611 882 18.89
==========================================
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements continued
The following table summarizes information concerning outstanding and
exercisable options (in thousands) at December 31, 1998:
<TABLE>
<CAPTION>
options outstanding options exercisable
------------------------------------------------------------- ---------------------------------------
weighted average
range of exercise remaining number of weighted average
prices number of options life (years) exercise price options exercise price
- -------------------------- ------------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C>
$0.12 to $5.00 1,235 3.7 $ 2.03 1,188 $ 2.74
$5.01 to $10.00 798 6.5 6.54 654 7.21
$10.01 to $20.00 2,976 7.0 15.95 2,857 15.42
$20.01 to $30.00 1,185 8.1 23.70 1,114 22.37
over $30.00 2,417 9.4 33.57 -- --
</TABLE>
8. Savings Plans
The Company and its subsidiaries maintain savings plans that cover substantially
all employees. These plans generally provide that the Company will match
employee contributions up to 4% of employee compensation, subject to certain
limitations. Company contributions charged to income under these plans
aggregated $10,998,000, $8,445,000 and $6,125,000 for the years ended December
31, 1998, 1997 and 1996, respectively.
9. Income Taxes
The provisions for income taxes for each of the years ended December 31 consist
of the following (in thousands):
1998 1997 1996
------------------------------------------------
Current
Federal $ 76,250 $ 55,080 $ 40,171
State 18,583 12,839 9,461
Foreign 8,119 7,650 4,586
------------------------------------------------
102,952 75,569 54,218
------------------------------------------------
Deferred
Federal (11,608) (13,489) (19,921)
State (2,049) (1,860) (2,716)
Foreign -- (445) 398
------------------------------------------------
(13,657) (15,794) (22,239)
------------------------------------------------
$ 89,295 $ 59,775 $ 31,979
================================================
Differences between income tax expense at the United States federal
statutory income tax rate and the Company's effective income tax rate for each
of the years ended December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Tax at federal
statutory rate $ 72,880 $ 50,312 $ 25,300
State income
taxes, net of
federal benefit 10,100 6,558 4,419
Merger and
other costs 2,267 1,234 2,656
Intangible
amortization 3,941 1,819 1,365
Tax-exempt interest
income (491) (235) (234)
Foreign taxes (244) (664) (532)
Other, net 842 751 (995)
-----------------------------------------
$ 89,295 $ 59,775 $ 31,979
=========================================
Effective income
tax rate 42.9% 41.6% 44.2%
=========================================
</TABLE>
Deferred income taxes are recorded based upon differences between financial
statement and tax bases of assets and liabilities. The following deferred income
taxes were recorded at December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
Current:
Accounts receivable $ 9,013 $ 7,194
Accrued compensation
and benefits 5,428 5,081
Other accrued expenses 3,466 2,350
Deferred revenues and
acquisition-related items 3,389 6,538
---------------------------
$ 21,296 $ 21,163
===========================
Long-Term:
Accounts receivable $ (2,607) $ --
Property and equipment 9,444 6,213
Intangible assets 8,266 (502)
Long-term incentive plan 8,428 2,952
Purchased in-process
research and development
and other acquisition-
related items 17,075 18,237
---------------------------
$ 40,606 $ 26,900
===========================
</TABLE>
48
<PAGE>
SunGard Data Systems Inc. 1998 AR
10. Operating Segments and Geographic Information
For accounting purposes, the Company has three operating segments: investment
support systems (ISS), disaster recovery services (DRS), and computer services
and other (CS and other). The Company's operating segments are groups of
businesses that offer similar products and services. They are managed separately
because each business requires different technology and marketing strategies.
ISS designs, markets and maintains a comprehensive family of proprietary
software systems. The fundamental purpose of these systems is to automate the
complex accounting calculations, analysis, recordkeeping and reporting
associated with investment operations. DRS provides customers with alternate
data processing options, including alternate sites, for use by customers
whenever they are unable to operate or communicate with their own computer
systems. CS and other is comprised of businesses that provide remote-access
computer services primarily to software developers and government agencies,
outsourcing services, and work-flow management and document-imaging systems that
increase efficiency and flexibility in managing healthcare organizations.
The 1998, 1997 and 1996 operating results and certain asset information for each
operating segment follow (in thousands):
<TABLE>
<CAPTION>
total corporate
CS and operating and other consolidated
1998 ISS DRS other segments items total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 804,875 $ 275,282 $ 79,591 $1,159,748 $ -- $1,159,748
Depreciation and
amortization 60,970 40,779 5,663 107,412 384 107,796
Operating income 151,191 64,854 12,506 228,551 (25,705)(1) 202,846
Total assets 737,829 175,549 34,937 948,315 127,006 (2) 1,075,321
Cash paid for property
and equipment 18,962 37,935 4,605 61,502 2,072 63,574
<CAPTION>
total corporate
CS and operating and other consolidated
1997 ISS DRS other segments items total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 628,992 $ 228,259 $ 67,779 $ 925,030 $ -- $ 925,030
Depreciation and
amortization 56,688 34,704 4,767 96,159 267 96,426
Operating income 110,263 49,183 10,351 169,797 (27,153)(1) 142,644
Total assets 632,796 152,099 29,011 813,906 43,042 (2) 856,948
Cash paid for property
and equipment 16,728 35,213 4,406 56,347 160 56,507
<CAPTION>
total corporate
CS and operating and other consolidated
1996 ISS DRS other segments items total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 453,804 $ 193,806 $ 64,247 $ 711,857 $ -- $ 711,857
Depreciation and
amortization 40,182 27,684 3,750 71,616 248 71,864
Operating income 76,615 42,554 9,491 128,660 (60,376)(1) 68,284
Total assets 559,562 144,897 36,107 740,566 (2,279)(2) 738,287
Cash paid for property
and equipment 14,214 25,827 2,820 42,861 221 43,082
</TABLE>
(1) Includes corporate administrative expenses, purchased in-process research
and development and merger costs associated with poolings of interests.
(2) The Company does not allocate deferred income taxes. Also, amount is net of
investments in subsidiaries, which are eliminated in consolidation.
<PAGE>
Notes to Consolidated
Financial Statements continued
The Company's revenues by customer location for each of the years ended
December 31 follow (in thousands):
1998 1997 1996
--------------------------------------------------
United States $ 890,072 $ 709,772 $ 553,577
--------------------------------------------------
International:
Europe 193,894 138,688 107,034
Asia/Pacific 45,594 42,641 31,201
Canada 18,460 19,142 11,418
Other 11,728 14,787 8,627
--------------------------------------------------
269,676 215,258 158,280
--------------------------------------------------
$1,159,748 $ 925,030 $ 711,857
==================================================
11. 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 at
December 31, 1998 follow (in thousands):
1999 $ 69,479
2000 50,970
2001 35,574
2002 20,295
2003 11,190
Thereafter 34,845
--------
$222,353
========
Rent expense aggregated $77,589,000, $67,411,000 and $58,180,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
Report of Independent Accountants
To The Board of Directors and Stockholders
SunGard Data Systems Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity, and cash flows present
fairly, in all material respects, the financial position of SunGard Data Systems
Inc. and its subsidiaries at December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles. 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 of these financial
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentations. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 11, 1999, except as to the subsequent events information presented in
Note 2, for which the date is March 1, 1999.
50
<PAGE>
EXHIBIT 21.1
SUNGARD DATA SYSTEMS INC.
SUBSIDIARIES OF THE REGISTRANT
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
------------------ -----------------------------
SUNGARD DATA SYSTEMS INC.................................... DELAWARE
SUNGARD INVESTMENT VENTURES, INC....................... DELAWARE
ADS ASSOCIATES, INC................................. CALIFORNIA
ADS SERVICES, INC............................... BARBADOS
ADS SYSTEMS HONG KONG LIMITED................... HONG KONG
BANCWARE, INC....................................... MASSACHUSETTS
BI-TECH SOFTWARE INC................................ DELAWARE
COGNISOURCE LTD..................................... DELAWARE
CORBEL & CO......................................... FLORIDA
TOTAL ADMINISTRATIVE BENEFIT SYSTEMS, INC....... CALIFORNIA
FINANCE DEVELOPMENT INC............................. DELAWARE
AUTOMATED HOLDINGS INC.(1)...................... DELAWARE
AUTOMATED SECURITIES CLEARANCE LTD........... NEW JERSEY
AXIS GLOBAL LLC............................ NEW YORK
OLDWICK, LLC............................... NEW JERSEY
TOLL ASSOCIATES L.L.C...................... DELAWARE
THE BRASS UTILITY, L.L.C.(2)............. DELAWARE
ICMS INTERNATIONAL INC.............................. DELAWARE
MACESS CORPORATION.................................. ALABAMA
MAY CONSULTING INCORPORATED......................... ILLINOIS
MULTINATIONAL COMPUTER MODELS INC................... NEW JERSEY
PLAID BROTHERS SOFTWARE, INC........................ CALIFORNIA
PRIMO SYSTEMS INC................................... DELAWARE
SIS EUROPE HOLDINGS INC............................. DELAWARE
SUNGARD FINANCE S.A.S.(3)....................... FRANCE
SUNGARD INVESTMENT SYSTEMS S.A.................. SWITZERLAND
SSI 2 INC........................................... DELAWARE
STERLING WENTWORTH CORPORATION...................... UTAH
SUNGARD ASSET MANAGEMENT SYSTEMS INC................ DELAWARE
WORLD SYSTEMS INC............................... DELAWARE
SUNGARD BUSINESS SYSTEMS INC........................ DELAWARE
SUNGARD COMPUTER SERVICES INC....................... PENNSYLVANIA
SUNGARD CSS INC..................................... DELAWARE
SUNGARD DIS INC..................................... DELAWARE
DEALING INFORMATION SYSTEMS (M) SDN.BHD......... MALAYSIA
DEALING INFORMATION SYSTEMS (S) PTE LIMITED..... SINGAPORE
SUNGARD DEALING SYSTEMS (T) CO. LTD............. THAILAND
SUNGARD DEALING SYSTEMS PTY LIMITED............. AUSTRALIA
SUNGARD/DML INC..................................... DELAWARE
SUNGARD FINANCIAL SYSTEMS INC....................... DELAWARE
SUNGARD INSURANCE SYSTEMS INC................... DELAWARE
SUNGARD HOLDINGS LIMITED(4)......................... ENGLAND/WALES
ADS SYSTEMS U.K. LIMITED........................ ENGLAND/WALES
GMI SOFTWARE EUROPE LIMITED..................... ENGLAND/WALES
INFINITY FINANCIAL TECHNOLOGY U.K. LTD.......... ENGLAND/WALES
PORTFOLIO ADMINISTRATION LIMITED................ ENGLAND/WALES
<PAGE>
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
------------------ -----------------------------
LONSDALE CHETWYN HOLDINGS LIMITED............ ENGLAND/WALES
C.T. COMPUTER SERVICES LIMITED............. ENGLAND/WALES
PORTFOLIO ADMINISTRATION
(CHANNEL ISLANDS) LTD....................... CHANNEL ISLANDS
RENAISSANCE SOFTWARE (U.K.) LIMITED............. ENGLAND/WALES
SUNGARD SYSTEMS LIMITED......................... ENGLAND/WALES
SUNGARD INSTITUTIONAL BROKERAGE INC................. NEW YORK
SUNGARD INVESTMENT PRODUCTS INC..................... DELAWARE
SUNGARD INVESTMENT SYSTEMS INC...................... DELAWARE
SUNGARD NETWORK SOLUTIONS INC....................... DELAWARE
SUNGARD PORTFOLIO SOLUTIONS INC..................... DELAWARE
SHAW DATA SERVICES, LIMITED..................... ENGLAND/WALES
SHAW DATA SERVICES CANADA, INC.................. CANADA
SUNGARD RECOVERY SERVICES INC....................... PENNSYLVANIA
SRS DEVELOPMENT INC............................. DELAWARE
SUNGARD DEVELOPMENT CORPORATION.............. DELAWARE
SUNGARD LATINOAMERICA S.A. de C.V............... MEXICO
SUNGARD RECOVERY SERVICES LTD................... CANADA
SUNGARD/RPM CONSULTING INC.......................... PENNSYLVANIA
SUNGARD SHAREHOLDER SYSTEMS INC..................... DELAWARE
SUNGARD SYSTEMS INTERNATIONAL INC................... PENNSYLVANIA
ASPIRE TECHNOLOGY INC........................... DELAWARE
FPH, FRONT & PROSOFTIA HOLDING AB............... SWEDEN
FRONT CAPITAL SYSTEMS AB..................... SWEDEN
GMI SOFTWARE PTY, LTD........................... ILLINOIS
INFINITY FINANCIAL TECHNOLOGY GmbH.............. GERMANY
INFINITY FINANCIAL TECHNOLOGY JAPAN KK.......... JAPAN
INFINITY FINANCIAL TECHNOLOGY SARL.............. FRANCE
INFINITY FINANCIAL TECHNOLOGY
SINGAPORE PTE. LTD............................. SINGAPORE
INFINITY FINANCIAL TECHNOLOGY U.K. LIMITED...... ENGLAND/WALES
INFINITY INTERNATIONAL SUPPORT, INC............. CALIFORNIA
INFINITY SALES CORPORATION...................... BARBADOS
JAEGER & PARTNER ASSET- & LIABILITY
MANAGEMENT AG.................................. SWITZERLAND
RENAISSANCE SOFTWARE FRANCE S.A................. FRANCE
SUNGARD AG...................................... SWITZERLAND
SUNGARD FRANCE S.A.R.L.......................... FRANCE
SUNGARD GESELLESCHAFT m.b.H..................... AUSTRIA
SUNGARD ITALIA, S.R.L........................... ITALY
SUNGARD JAPAN INC............................... JAPAN
SUNGARD SOFTWARE, INC........................... DELAWARE
SUNGARD SYSTEMS GmbH............................ GERMANY
SUNGARD SYSTEMS HONG KONG LIMITED............... HONG KONG
SUNGARD SYSTEMS PTY LIMITED..................... AUSTRALIA
SUNGARD EBS ASIA PACIFIC PTY LIMITED......... AUSTRALIA
SUNGARD SUPERANNUATION PTY. LIMITED.......... AUSTRALIA
SUNGARD SYSTEMS SINGAPORE PTE LIMITED........... SINGAPORE
SUNGARD TREASURY INC................................ PENNSYLVANIA
SUNGARD TRUST SYSTEMS INC........................... NORTH CAROLINA
<PAGE>
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
------------------ -----------------------------
TIGER SYSTEMS, INC.................................. DELAWARE
TIGER SYSTEMS ASIA LIMITED...................... HONG KONG
TIGER SYSTEMS LTD............................... ENGLAND/WALES
TURN DEVELOPMENT CORPORATION........................ DELAWARE
WALL STREET CONCEPTS INC............................ NEW YORK
Notes:
- -----
(1) Jointly owned by Finance Development Inc. and Turn Development Corporation.
(2) Majority owned by Toll Associates L.L.C.
(3) 99% owned by SIS Europe Holdings Inc. and 1% owned by SunGard Investment
Ventures, Inc.
(4) Jointly owned by SunGard Investment Ventures, Inc., SunGard Systems
International Inc. and ADS Associates, Inc.
<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, 33-58515, 33-64901, 333-15641, 333-39151, 333-43969, 333-46187, 333-
53793, 333-57381 and 333-73159) and Registration Statements on Form S-3 (333-
45541, 333-59129 and 333-65831) of our report dated February 11, 1999, except
as to subsequent events information presented in Note 2, for which the date is
March 1, 1999, on our audits of the consolidated financial statements of
SunGard Data Systems Inc. and subsidiaries as of December 31, 1998 and 1997, and
for each of the years in the three-year period ended December 31, 1998, which
report on the consolidated financial statements is incorporated by reference in
this Report on Form 10-K.
/s/ PRICEWATERHOUSECOPPERS LLP
PRICEWATERHOUSECOOPERS LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 30, 1999
<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, 1998
and the consolidated statement of income for the twelve months ended December
31, 1998, both included in the Form 10-K of SunGard Data Systems Inc. for the
twelve months ended December 31, 1998 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-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 240,469
<SECURITIES> 17,566
<RECEIVABLES> 303,568
<ALLOWANCES> 26,657
<INVENTORY> 0
<CURRENT-ASSETS> 584,316
<PP&E> 382,323
<DEPRECIATION> 249,814
<TOTAL-ASSETS> 1,075,321
<CURRENT-LIABILITIES> 311,614
<BONDS> 2,816
0
0
<COMMON> 1,057
<OTHER-SE> 759,834
<TOTAL-LIABILITY-AND-EQUITY> 1,075,321
<SALES> 0
<TOTAL-REVENUES> 1,159,748
<CGS> 0
<TOTAL-COSTS> 697,029<F1>
<OTHER-EXPENSES> 11,847<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,741
<INCOME-PRETAX> 208,228
<INCOME-TAX> 89,295
<INCOME-CONTINUING> 118,933
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 118,933
<EPS-PRIMARY> 1.14<F3>
<EPS-DILUTED> 1.10<F3>
<FN>
<F1>Excludes selling, marketing and administrative costs, and merger and
restructuring costs.
<F2>Merger and restructuring costs.
<F3>Includes merger and restructuring costs totaling $0.09 per share.
</FN>
</TABLE>
