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Previous: CLANCY SYSTEMS INTERNATIONAL INC /CO/, 10QSB, EX-27, 2000-08-14 |
Next: SUNGARD DATA SYSTEMS INC, 10-Q, EX-27.1, 2000-08-14 |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| [X] |
Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2000 or |
| [_] |
Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to _________ |
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Commission file number 1-12989 |
| SunGard® Data Systems Inc.
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| (Exact name of registrant as specified in its charter)
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| Delaware
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51-0267091
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| (State or other jurisdiction of
incorporation or organization) |
(IRS Employer Identification No.)
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| 1285 Drummers Lane, Wayne, Pennsylvania 19087
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| (Address of principal executive offices, including zip code)
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| (610) 341-8700
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| (Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No
There were 131,951,052 shares of the registrant's common stock, par value $.01 per share, outstanding at June 30, 2000.
SunGard Data Systems Inc.
And Subsidiaries
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
SunGard Data Systems Inc.
Consolidated Balance Sheets
(In thousands, except per-share amounts)
| June 30,
2000 (Unaudited) |
December 31,
1999 |
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| Assets | |||||
| Current: | |||||
| Cash and equivalents | $ 241,552 | $ 286,990 | |||
| Short-term investments | 112,768 | 104,235 | |||
| Trade receivables, less allowance for doubtful accounts of $29,532 and $34,141 | 282,486 | 278,114 | |||
| Earned but unbilled receivables | 59,598 | 56,288 | |||
| Prepaid expenses and other current assets | 41,071 | 35,615 | |||
| Deferred income taxes | 26,910 | 25,565 | |||
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| Total current assets | 764,385 | 786,807 | |||
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| Investment in common stock | 23,650 | 49,902 | |||
| Property and equipment, less accumulated depreciation of $354,175 and $318,405 | 191,653 | 182,682 | |||
| Software products, less accumulated amortization of $161,224 and $146,185 | 140,172 | 110,355 | |||
| Goodwill, less accumulated amortization of $67,407 and $59,840 | 261,032 | 211,791 | |||
| Other tangible and intangible assets, less accumulated amortization of | |||||
| $83,440 and $77,740 | 143,045 | 93,393 | |||
| Deferred income taxes | 139,829 | 129,832 | |||
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| $ 1,663,766 | $1,564,762 | ||||
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| Liabilities and Stockholders' Equity | |||||
| Current: | |||||
| Short-term and current portion of long-term debt | $ 10,744 | $ 7,755 | |||
| Accounts payable | 14,931 | 14,924 | |||
| Accrued compensation and benefits | 79,260 | 84,971 | |||
| Other accrued expenses | 53,543 | 61,820 | |||
| Accrued income taxes | 12,831 | 13,142 | |||
| Deferred revenues | 174,541 | 165,866 | |||
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| Total current liabilities | 345,850 | 348,478 | |||
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| Long-term debt | 7,449 | 5,517 | |||
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| Commitments | |||||
| Stockholders' equity: | |||||
| Preferred stock, par value $.01 per share; 5,000 shares authorized, of which 3,200 | |||||
| shares are designated as Series A Junior Participating Preferred Stock | - | - | |||
| Common stock, par value $.01 per share; 320,000 shares authorized; | |||||
| 131,951 and 128,505 shares issued | 1,320 | 1,285 | |||
| Capital in excess of par value | 619,920 | 591,998 | |||
| Restricted stock plans and notes receivable for common stock | (1,358 | )
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(1,768 | )
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| Retained earnings | 702,291 | 608,519 | |||
| Accumulated other comprehensive income (loss) | (11,706 | )
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10,733 | ||
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| Total stockholders' equity | 1,310,467 | 1,210,767 | |||
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| $ 1,663,766 | $1,564,762 | ||||
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The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
SunGard Data Systems Inc.
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation:
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, and have been prepared in accordance with generally accepted accounting principles for interim financial reporting and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. All significant intercompany transactions and accounts have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the accompanying financial statements. Operating results for the six and three month periods ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1999.
During 1999, the Company acquired Automated Securities Clearance, Ltd. (ASC). ASC was a Subchapter S corporation before the Company acquired it; therefore, all income passed through directly to and substantially all income taxes were paid directly by the former shareholder of ASC. Net income and all net income per share amounts prior to the acquisition are presented on a pro forma basis since generally accepted accounting principles require the presentation of pro forma income tax expense for ASC as if ASC had been a Subchapter C corporation for all periods presented.
2. Acquisitions and Dispositions:
Acquisitions:
Pooling-of-Interests Transactions:
During the six months ended June 30, 2000, the Company completed the acquisition of Microbank Software, Inc. (Microbank). A total of 2.2 million shares of common stock were issued in connection with this acquisition, and outstanding options to buy shares of Microbank were converted into options to buy 0.3 million shares of the Company's common stock.
During the six months ended June 30, 1999, the Company completed the acquisitions of ASC, FDP Corp. (FDP) and Sterling Wentworth Corporation (SWC), as well as three other pooling-of-interests transactions. A total of 11.5 million shares of common stock were issued in connection with these acquisitions, and outstanding options to buy shares of the acquired companies were converted into options to buy 1.6 million shares of the Company's common stock. In addition, during the third quarter of 1999, the Company completed the acquisitions of Oshap Technologies Ltd. (Oshap) and Pentamation Enterprises, Inc. (PEI), as well as two other pooling-of-interests transactions.
All historical financial information of the Company has been restated to include the historical financial information of ASC, FDP, Oshap, PEI and SWC. Historical financial information is not restated for the other acquisitions due to immateriality. Each immaterial acquisition has been recorded as of the beginning of the quarter in which it was completed. Except for the merger costs described below, the Company does not expect that the immaterial acquisitions, individually or in the aggregate, will have a material effect on its financial condition or results of operations.
Purchase Transactions:
During the first six months of 2000, the Company completed six acquisitions. Total cash paid in connection with the six acquisitions was $115.1 million, subject to certain adjustments.
The Company has engaged an independent firm to perform a valuation of the intangible assets acquired in connection with the acquisition of Global Information Solutions Ltd. (GIS). The valuation will serve as the basis of allocation of the purchase price to the various classes of assets acquired, and will include a determination as to whether any purchased in-process research and development exists at the time of acquisition. At June 30, 2000, the allocation of the purchase price is still preliminary, and does not include an allocation to purchased in-process research and development. The allocation to purchased in-process research and development, if any, will be recorded as an acquisition-related expense when the valuation is completed. Purchased in-process research and development represents the value of software products still in development and not considered to have reached technological feasibility as of the date of acquisition. Cash paid in connection with the acquisition of GIS was $76.1 million, subject to certain adjustments.
Merger Costs:
During the six months ended June 30, 2000 and 1999, the Company recorded merger costs of $2.8 million and $90.4 million ($2.3 million after tax, or $0.02 per diluted share, and $62.6 million pro forma after tax, or $0.49 per pro forma diluted share), respectively. The merger costs are associated with pooling-of-interests transactions, and principally include investment banking, legal, accounting and printing fees that generally are not deductible for income tax purposes. The 1999 merger costs also include a noncash compensation charge of $71.5 million ($45.0 million pro forma after tax, or $0.35 per pro forma diluted share) in connection with a pre-existing employment agreement with an executive of ASC, which obligated ASC to issue to the executive 25% of the shares issued in the merger. The fair value of those shares and related payroll costs were recorded as one-time costs associated with the merger.
Dispositions and Extraordinary Items:
On March 31, 1999, the Company sold two wholly owned healthcare information systems (HIS) subsidiaries. Total cash received in connection with the sale of the HIS businesses was $25.0 million, resulting in an after-tax gain of $10.4 million ($0.08 per diluted share). The gain on the sale is reflected on the Consolidated Statements of Income as an extraordinary item in accordance with the reporting requirements for a sale of assets following a recently completed business combination that was accounted for as a pooling of interests. Also during the six months ended June 30, 1999, an extraordinary gain of
$0.3 million (less than $0.01 per diluted share) was recorded as a result of Oshap's early retirement of debt.
3. Comprehensive Income (Loss):
Comprehensive income (loss) consists of net income, adjusted for other increases and decreases affecting stockholders' equity that are excluded from the determination of net income. The calculation of comprehensive income (loss) for the six and three months ended June 30, 2000 and 1999 follows (in thousands):
| Six Months
Ended June 30, |
Three Months
Ended June 30, |
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|---|---|---|---|---|---|---|---|---|---|
| 2000 |
1999 |
2000 |
1999 |
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| Net income | $95,196 | $1,088 | $53,675 | $36,799 | |||||
| Foreign currency translation loss | (5,190 | ) | (4,088 | ) | (2,678 | ) | (1,333 | ) | |
| Unrealized gains (losses) on marketable | |||||||||
| securities | (26,536 | ) | 25 | (51,653 | ) | (24 | ) | ||
| Income tax benefit | 9,287 | - | 18,078 | - | |||||
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| Comprehensive net income (loss) | $72,757 | $(2,975 | ) | $17,422 | $35,442 | ||||
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The unrealized gains (losses) on marketable securities during 2000 result primarily from the Company's investment in 16.5% of the common stock in Tecnomatix Technologies Ltd. (NASDAQ: TCNO), which was acquired in connection with the 1999 pooling-of-interests transaction with Oshap.
4. Shares Used in Computing Pro Forma Net Income Per Common Share:
The computation of shares used in computing pro forma basic and diluted net income per common share for each of the six and three months ended June 30, 2000 and 1999 follows (in thousands):
| Six Months
Ended June 30, |
Three Months
Ended June 30, |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2000 |
1999 |
2000 |
1999 |
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| Weighted average common shares outstanding | 131,370 | 124,108 | 131,704 | 125,090 | |||||||||
| Contingent shares | 104 | 214 | - | 133 | |||||||||
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| Total shares used for calculation of pro forma basic | |||||||||||||
| net income per common share | 131,474 | 124,322 | 131,704 | 125,223 | |||||||||
| Employee stock options | 3,111 | 4,052 | 3,269 | 3,497 | |||||||||
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| Total shares used for calculation of pro forma diluted | |||||||||||||
| net income per common share | 134,585 | 128,374 | 134,973 | 128,720 | |||||||||
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5. Subsequent Event:
Stockholder Rights Plan:
During July 2000, the Company's board of directors adopted a Stockholder Rights Plan under which all stockholders of record as of July 20, 2000 received rights to purchase shares of Series A Junior Participating Preferred Stock ("Preferred Stock"). These rights were distributed as a dividend at the rate of one right for each share of common stock of the Company held by stockholders of record as of the close of business on July 20, 2000. Until the occurrence of certain events, the rights are represented by and traded in tandem with common stock, and cannot be separately traded. Each right will separate, become tradable, and entitle stockholders to buy common stock upon an occurrence of certain takeover or stock accumulation events. Should any person or group acquire beneficial ownership of 15% or more of the Company's common stock or announce a tender offer to acquire 15% or more of the Company's common stock ("Acquiring Person"), all rights except for those held by the Acquiring Person become rights to purchase one one-hundredth of one share of Preferred Stock for $175, or up to $175 of the Company's common stock at a 50% discount, subject to adjustment by the Company's board of directors. If, after such an event, the Company merges, consolidates or engages in a similar transaction in which the Company does not survive, each holder has a "flip over" right to buy discounted stock in a surviving entity.
Under certain circumstances, the rights are redeemable at a price of $0.01 per right. Further, upon the occurrence of certain events, the Company's board of directors has the option to exchange one share of common stock per right. The rights expire on July 20, 2010, and have no voting rights.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Statements about the outlook of SunGard Data Systems Inc. (the Company) and all other statements in this quarterly report on Form 10-Q other than historical facts are forward-looking statements. Since these statements involve risks and uncertainties and are subject to change at any time, actual results could differ materially from expected results. Forward-looking statements include information about possible or assumed future financial results of the Company. 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 timing and scope of technological advances, the integration and performance of acquired businesses, the prospect of future acquisitions, the ability to attract and retain key personnel, the effect of year 2000 issues on software and services buying decisions, and the overall condition of the financial services industry. These factors, as and when applicable, are discussed in the Company's filings with the Securities and Exchange Commission, including its most recent Form 10-K, a copy of which may be obtained from the Company without charge.
During 2000 and 1999, the Company completed certain acquisitions accounted for as poolings of interests. Five acquisitions completed in 1999 required restatement of prior-period results. Also during 2000 and 1999, the Company recorded merger costs associated with acquired companies, and, on March 31, 1999, the Company sold two wholly owned healthcare information systems (HIS) businesses, resulting in an extraordinary gain. See Note 2 of Notes to Unaudited Consolidated Financial Statements.
The following supplemental unaudited income statement information should be read along with the unaudited consolidated financial statements and notes thereto included in this report.
SunGard Data Systems Inc.
Supplemental Income Statement Information
(In thousands)
(Unaudited)
| Six Months
Ended June 30, |
Three Months
Ended June 30, |
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| 2000 |
1999 |
2000 |
1999 |
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| Revenues: | |||||||||||||
| Investment support systems | $572,919 | $513,762 | $291,564 | $255,004 | |||||||||
| Business continuity and Internet services | 196,942 | 172,700 | 100,579 | 90,512 | |||||||||
| Other businesses | 15,900 | 18,058 | 8,953 | 7,357 | |||||||||
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| $785,761 | $704,520 | $401,096 | $352,873 | ||||||||||
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| Operating income: | |||||||||||||
| Investment support systems | $106,170 | $95,893 | $59,444 | $44,710 | |||||||||
| Business continuity and Internet services | 52,406 | 40,448 | 29,358 | 25,582 | |||||||||
| Other businesses | 4,554 | 1,323 | 3,128 | 1,246 | |||||||||
| Corporate administration | (10,514 | ) | (8,153 | ) | (6,272 | ) | (4,056 | ) | |||||
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| 152,616 | 129,511 | 85,658 | 67,482 | ||||||||||
| Merger costs, including noncash charge of | |||||||||||||
| $71.5 million in 1999 | (2,756 | ) | (90,446 | ) | (1,156 | ) | (5,222 | ) | |||||
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| $149,860 | $39,065 | $84,502 | $62,260 | ||||||||||
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| Operating margins, excluding merger costs: | |||||||||||||
| Investment support systems | 18.5% | 18.7% | 20.4% | 17.5% | |||||||||
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| Business continuity and Internet services | 26.6% | 23.4% | 29.2% | 28.3% | |||||||||
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| Other businesses | 28.6% | 7.3% | 34.9% | 16.9% | |||||||||
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| Total | 19.4% | 18.4% | 21.4% | 19.1% | |||||||||
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Income from Operations:
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 that industry will continue, but it is unable to predict what effect, if any, this trend may have on the Company.
Certain of the Company's investment support systems (ISS) businesses derive a significant portion of revenues from software license sales. Since there are inherent difficulties in predicting the timing and magnitude of software sales, there is the potential for fluctuations in quarterly revenues and income.
Investment Support Systems (ISS):
The Company's ISS business is comprised of groups of related businesses that sell software and related services to the financial services industry. Historically, most of these groups have met or exceeded expectations, while some have not, yielding overall results for the entire segment at approximately the levels expected. During 1999, overall results were below expectations due primarily to a 36% decrease in revenues from license and resale fees in four of the Company's derivatives and risk management systems businesses. The Company's other ISS units performed well overall, but their results did not fully offset the decrease within the four affected businesses. The Company believes that much of the decrease is due to a slowdown in new system purchases by both large and medium-size financial institutions resulting from the industry's focus on Y2K testing and preparation during 1999.
The ISS operating margin was 18.5% and 20.4% for the six and three month periods ended June 30, 2000, respectively, as compared with 18.7% and 17.5% for the comparable periods in 1999. The small decline in the operating margin during the six month period is due primarily to an $18.0 million, or 40%, decrease in license and resale fees in the derivatives and risk management systems businesses, offset by an increase in revenues in the brokerage systems businesses, cost reductions in the derivatives and risk management systems businesses, and a contract cancellation fee. The increase in the operating margin during the three month period is due primarily to an increase in revenues in the employee benefits systems and brokerage systems businesses, and cost reductions in the derivatives and risk management systems businesses, partially offset by a decrease in revenues in the derivatives and risk management systems businesses.
The Company expects that the full-year 2000 ISS operating margin will increase from the full-year 1999 operating margin of 18.0%. The most important factors affecting the ISS operating margin continue to be the timing and magnitude of software license sales, the operating margins of recently acquired businesses and the level of product development spending.
Business Continuity and Internet Services (BCIS):
The BCIS operating margin was 26.6% and 29.2% during the six and three month periods ended June 30, 2000, as compared with 23.4% and 28.3% for the comparable periods in 1999. The increase in the operating margins are due primarily to increases in revenues, lower costs associated with equipment upgrades and facilities expenditures, and lower compensation expenses associated with severance costs and the Company's long-term incentive plan.
The Company expects that the full-year 2000 BCIS operating margin will be slightly lower than the full-year 1999 BCIS operating margin of 26.4%, as customer testing returns to pre-Y2K levels, and the Company makes additional investments in its new Web-hosting and co-location services during the last half of 2000. The most important factors affecting the BCIS operating margin are the rate of new contract signings and contract renewals, and the timing and magnitude of equipment and facilities expenditures.
Revenues:
Total revenues for the six and three month periods ended June 30, 2000 increased $81.2 million, or 12%, and $48.2 million, or 14%, as compared with the corresponding periods in 1999. Excluding acquired businesses, revenues increased approximately 7% and 8% during the six and three month periods ended June 30, 2000, as compared with 11% and 8% during the corresponding periods in the previous year. The slower revenue growth rate in 2000 is due primarily to lower revenues from derivatives and risk management systems, slower revenue growth in shareholder accounting systems, and, to a lesser extent, lower revenues resulting from the HIS sale. These decreases are partially offset by higher revenues in the brokerage systems and employee benefits systems businesses. The Company believes that Y2K compliance concerns caused some decline in software buying and conversion activity during the last half of 1999 and during the first half of 2000 and this has been a significant cause for the slower revenue growth during the first half of 2000.
During the six and three month periods ended June 30, 2000, recurring revenues derived from processing services, business continuity services, professional services, software maintenance, and software and hardware rentals increased 15% and 16%, respectively, to $668.1 million, or 85% of total revenues, and $338.9 million, or 84% of total revenues, respectively, as compared with $580.7 million, or 82% of total revenues, and $291.7 million, or 83% of total revenues, during the comparable periods in 1999.
Professional services revenues are $134.6 million and $70.3 million during the six and three month periods ended June 30, 2000, respectively, as compared with $135.5 million and $64.4 million during the comparable periods in 1999. The small decrease in the six month period is due primarily to a decrease in derivatives and risk management professional services, and conversion work on large shareholder accounting system projects in 1999. These decreases are partially offset by increases in professional services revenues from acquired businesses. The increase during the three month period is due primarily to acquired businesses.
During the six and three month periods ended June 30, 2000, nonrecurring revenues derived from software license fees and resales of third-party hardware and software are $117.7 million and $62.2 million, respectively, as compared with $123.8 million and $61.2 million during the comparable periods in 1999. Software license fees totaled $100.9 million and $54.4 million during the six and three month periods ended June 30, 2000, respectively, as compared with $106.5 million and $53.6 million during the comparable periods in 1999. Lower license fees during the six month period are due primarily to an $18.0 million decline in derivatives and risk management systems revenues, partially offset by the addition of revenues from acquired businesses, and a contract cancellation fee. Lower resale fees in the six month period are due primarily to lower resale fees in the public sector businesses, partially offset by higher resale fees in the brokerage systems businesses.
Investment Support Systems:
ISS revenues for the six and three month periods ended June 30, 2000 increased $59.2 million, or 12%, and $36.6 million, or 14%, respectively, as compared with the corresponding periods in 1999. During the six month period, recurring ISS revenues increased $63.2 million, or 16%, while nonrecurring ISS revenues decreased $4.0 million, or 4%. The increase in recurring ISS revenues is due primarily to
strong growth in the Company's brokerage systems and employee benefits systems businesses and to acquired businesses. These increases are partially offset by lower professional services revenues from derivatives and risk management systems and shareholder accounting systems. The decline in nonrecurring revenues in the six month period is due primarily to lower revenues from derivatives and risk management systems and to a decline in resale fees in the Company's public sector businesses, partially offset by revenues from acquired businesses, an increase in license fees from shareholder accounting systems due to a contract cancellation fee relating to industry consolidation, and an increase in brokerage systems resale fees.
During the three month period ended June 30, 2000, recurring ISS revenues increased $35.6 million, or 18%, while nonrecurring ISS revenues were essentially unchanged as compared with the comparable period in 1999. The increase is due primarily to revenues from acquired businesses and an increase in revenues from brokerage and employee benefits systems, partially offset by a decrease in revenues from derivatives and risk management systems.
Business Continuity and Internet Services:
BCIS revenues for the six and three month periods ended June 30, 2000 increased $24.2 million, or 14%, and $10.1 million, or 11%, as compared with the corresponding periods in 1999. The increases are due primarily to increases in revenues resulting from new contract signings and contract renewals, continued growth in demand for midrange platforms, network services and work-group recovery, partially offset by a decrease in revenues related to Y2K testing.
Costs and Expenses:
Cost of sales and direct operating expenses for the six and three month periods ended June 30, 2000 increased $15.6 million, or 5%, and $3.7 million, or 2%, respectively, as compared with the corresponding periods in 1999. The increases are due primarily to acquired businesses and equipment upgrades, partially offset by cost reductions in derivatives and risk management systems and shareholder accounting systems businesses.
Sales, marketing and administration expenses for the six and three month periods ended June 30, 2000 increased $23.9 million, or 16%, and $15.3 million, or 21%, respectively, as compared with the corresponding periods in 1999. The increases are due primarily to acquired businesses and the Company's new global account management and corporate marketing programs, partially offset by cost reductions in the Company's derivatives and risk management systems businesses.
Product development expenses for the six and three month periods ended June 30, 2000 increased $6.0 million, or 9%, and $3.5 million, or 11%, as compared with the corresponding periods in 1999. The increases are due primarily to acquired businesses and various ISS product development initiatives. Development costs capitalized during the six and three month periods ended June 30, 2000 are $4.1 million and $2.9 million, respectively, as compared with $2.0 million and $1.0 million in the comparable periods in 1999.
Depreciation and amortization for the six and three month periods ended June 30, 2000 increased $5.9 million, or 16%, and $3.5 million, or 19%, respectively, as compared with the corresponding periods in 1999. The increases are due primarily to equipment purchases and acquired businesses.
Amortization of acquisition-related intangible assets for the six and three month periods ended June 30, 2000 increased $6.8 million, or 32%, and $4.1 million, or 38%, as compared with the corresponding periods in 1999. The increases are due to recently acquired businesses.
Interest income for the six and three month periods ended June 30, 2000 increased $3.0 million, or 39%, and $1.3 million, or 32%, respectively, as compared with the corresponding periods in 1999. The increases are due to higher cash and short-term investment balances, and, to a lesser extent, an increase in interest rates.
Excluding the effect of merger costs and extraordinary gains resulting from the sale of the HIS businesses and early extinguishment of debt, the Company's effective income tax rate was 40.0% for the three month period ended June 30, 2000, as compared with 40.5% during the year ended December 31, 1999.
Liquidity and Capital Resources:
Cash and short-term investments are $354.3 million at June 30, 2000, a decrease of $36.9 million from December 31, 1999. The decrease is due primarily to net cash paid of $126.2 million in connection with acquisitions and minority interest investments, partially offset by an increase in net income and strong cash flow from operations.
The Company expects that its existing cash resources and cash generated from operations will be sufficient to meet its operating requirements, contingent payment obligations related to business acquisitions, and ordinary capital spending needs for at least the next twelve months. Furthermore, the Company has a $150.0 million credit agreement and believes it has the capacity to secure additional credit or issue equity to finance additional capital needs.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company does not use derivative financial instruments to manage 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. As of June 30, 2000, the Company continues to hold an equity investment equal to approximately 16.5% of the common stock in Tecnomatix Technologies Ltd. (NASDAQ: TCNO), which was acquired in connection with the 1999 pooling-of-interests transaction with Oshap. The risks associated with this investment include risks associated with the technology sector of the public finance markets, which has recently been volatile, foreign currency risk, and technology risk. The Company does not believe that it has a material exposure to the risks associated with this investment.
While approximately 20% of the Company's revenues come from sales to customers located outside of the United States, approximately one-half of those revenues are 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.
Part II. Other Information:
Item 1. Legal Proceedings: None.
Item 2. Changes in Securities and Use of Proceeds: None.
Item 3. Defaults Upon Senior Securities: None.
Item 4. Submission of Matters to a Vote of Security Holders:
| (a) |
The 2000 Annual Meeting of Stockholders of the registrant was held on May 12, 2000. |
| (b) |
At the 2000 Annual Meeting, the following were elected as directors: |
| Director | For | Withheld
|
|||
|---|---|---|---|---|---|
| Gregory S. Bentley
|
111,419,493 | 2,581,641 | |||
| Michael C. Brooks
|
111,456,793 | 2,544,341 | |||
| Cristobal Conde
|
111,558,907 | 2,442,227 | |||
| Albert A. Eisenstat
|
111,301,080 | 2,700,054 | |||
| Bernard Goldstein
|
111,285,655 | 2,715,479 | |||
| Till Guldimann
|
111,138,892 | 2,862,242 | |||
| James L. Mann
|
111,463,935 | 2,537,199 | |||
| Michael Roth
|
111,362,040 | 2,639,094 | |||
| Malcolm I. Ruddock
|
111,392,331 | 2,608,803 | |||
| Lawrence J. Schoenberg
|
111,327,907 | 2,673,227 | |||
| (c) |
(i) |
At the 2000 Annual Meeting, the Company's 2000 Equity Incentive Plan was approved by the following vote: |
| Votes in favor | 60,370,745 | ||
| Votes against | 33,700,819 | ||
| Votes abstaining | 182,045 | ||
| Broker non-votes | 19,747,525 | ||
| (ii) |
At the 2000 Annual Meeting, the Company's 2000 Employee Stock Purchase Plan was approved by the following vote: |
| Votes in favor | 91,433,781 | ||
| Votes against | 2,630,012 | ||
| Votes abstaining | 189,816 | ||
| Broker non-votes | 19,747,525 | ||
Item 5. Other Information: None.
Item 6. Exhibits and Reports on Form 8-K:
|
(a) Exhibits: |
|
27.1 Financial Data Schedule for the six months ended June 30, 2000. |
|
(b) Reports on Form 8-K: None. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SunGard Data Systems Inc.
Date: August 14, 2000
| By: | s/Michael J. Ruane |
| |
|
| Michael J. Ruane
|
|
| Vice President-Finance and Chief
Financial Officer |
|
| (Principal Financial Officer)
|
|
LIST OF EXHIBITS
| NUMBER | EXHIBIT
|
| 27.1 |
Financial Data Schedule for the six months ended June 30, 2000 |
|
|