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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, 1995 or
---------------------
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to __________
Commission file number ............................................ 0-14232
SunGard(R) Data Systems Inc.
(Exact name of registrant as specified in its charter)
Delaware 51-0267091
(State of incorporation) (I.R.S. Employer Identification No.)
1285 Drummers Lane, Wayne, Pennsylvania 19087
(Address of principal executive offices, including zip code)
(610) 341-8700
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x . No .
--- ---
The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant as of March 15, 1996 was $1,431,072,000.(1) There
were 42,000,220 shares of the registrant's Common Stock outstanding as of March
15, 1996.
Parts II and IV of this Form 10-K incorporate by reference certain information
from the registrant's annual report to stockholders for the fiscal year ended
December 31, 1995, and Part III of this Form 10-K incorporates by reference
certain information from the registrant's definitive proxy statement, for its
1996 annual meeting of stockholders, filed with the Securities and Exchange
Commission not later than 120 days after the end of the registrant's fiscal year
covered by this report.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in the definitive proxy statement
incorporated by reference into Part III of this Form 10-K. [x]
(1) This equals the number of outstanding shares of the registrant's Common
Stock, reduced by the number of shares that may be deemed beneficially owned
by the registrant's directors, nominees and officers, multiplied by the last
sale price for the registrant's Common Stock reported on March 15, 1996.
This information is provided solely for record keeping purposes of the
Securities and Exchange Commission and shall not be construed as an
admission that any of the registrant's directors, nominees or officers is an
affiliate of the registrant or is the beneficial owner of any such shares.
Any such inference is hereby disclaimed.
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TABLE OF CONTENTS
Page
----
PART I
Item 1. Business...................................................... 1
Overview................................................... 1
Investment Considerations.................................. 2
Investment Support Systems................................. 3
Disaster Recovery Services................................. 8
Computer Services and Other................................ 11
Product Development........................................ 11
Acquisitions and Offerings................................. 12
Competition................................................ 13
Marketing.................................................. 14
Employees.................................................. 14
Proprietary Protection..................................... 14
Item 2. Properties.................................................... 15
Item 3. Legal Proceedings............................................. 16
Item 4. Submission of Matters to a Vote of Security Holders........... 16
Item 4.1 Certain Executive Officers of the Registrant.................. 17
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters..................................................... 19
Item 6. Selected Financial Data....................................... 19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 19
Item 8. Financial Statements and Supplementary Data................... 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 19
PART III
Item 10. Directors and Executive Officers of the Registrant............ 20
Item 11. Executive Compensation........................................ 20
Item 12. Security Ownership of Certain Beneficial Owners and Management 20
Item 13. Certain Relationships and Related Transactions................ 20
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................... 21
Signatures.................................................... 23
List of Exhibits.............................................. 24
Consent of Independent Accountants............................ 26
Report of Independent Accountants on
Financial Statement Schedule................................. 26
Financial Statement Schedule.................................. 27
PART I
Item 1. Business
Overview
SunGard Data Systems Inc. (the "Company") is a computer services and software
company that specializes in proprietary investment support systems,
comprehensive computer disaster recovery services and proprietary healthcare
information systems. The Company believes that it is the only large specialized
provider of investment support systems to the financial services industry, as
well as the pioneer and a leading provider of comprehensive computer disaster
recovery services. The Company's business approach is to focus on markets in
which it has opportunities to develop or acquire leading products and
advantageous market positions.
The Company seeks to maximize recurring revenues by selling most of its
computer services under fixed-term contracts and by emphasizing customer support
and product quality in order to establish long-term relationships with
customers. The Company's recurring revenues are derived primarily under
contracts for remote processing services, disaster recovery services and
software maintenance services, which together accounted for approximately 82% of
the Company's total revenues during the last three years (80% in 1995). Of the
total number of the Company's remote processing and disaster recovery services
contracts that were scheduled to expire during the last three years,
approximately 80% were renewed or replaced with new contracts (77% in 1995).
While there can be no assurance that this renewal rate will not decline, the
Company believes that it will continue to renew a high percentage of these
contracts. None of the Company's customers individually accounted for more than
two percent of the Company's revenues in 1995.
The Company's operations are decentralized, and its management philosophy is
one of "controlled entrepreneurship." The Company's services are provided
through separate business units, which are organized into six groups of related
businesses, as follows:
Investment Support Systems:
SunGard Financial Systems Group: Portfolio management and securities trading
-------------------------------
and accounting systems for financial institutions, broker/dealers, insurance
companies, governments and corporations. Business units: SunGard Brokerage
Systems, SunGard Global Systems, SunGard Government Systems, SunGard Insurance
Systems and SunGard Securities Systems.
SunGard Trading Systems Group (formerly known as the SunGard Capital Markets
-----------------------------
Group): Trading, risk management and accounting systems for derivative
instruments, securities and foreign exchange for international financial
institutions, brokerage firms and corporations. Business units: Front Capital
Systems, Prosoftia, Renaissance Software, SunGard Capital Markets and SunGard
Futures Systems.
SunGard Trust and Shareholder Systems Group: Trust and investment accounting,
-------------------------------------------
portfolio management and administration, securities trading, custody and
employee benefit plan systems for financial institutions, stockbrokers and
corporations; mutual fund, stock and bond accounting systems for mutual funds,
transfer agents and corporations; accounting systems for nonprofit
organizations. Business units: All Solutions, Bi-Tech Software, Portfolio
Administration Limited, Shaw Data Services, SunGard Asset Management Systems,
SunGard/DML, SunGard Employee Benefit Systems, SunGard Investment Systems,
SunGard Shareholder Systems, SunGard Trust Systems and Worrall Miller &
Associates.
1
Disaster Recovery Services:
SunGard Recovery Services Group: Comprehensive business recovery services for
-------------------------------
mainframe and midrange computer platforms; work-group, mobile and quick-ship
recovery services; recovery planning software, and related consulting and
educational services. Business units: SunGard Planning Solutions and SunGard
Recovery Services.
Computer Services and Other:
SunGard Computer Services Group: Remote-access computer processing and
-------------------------------
outsourcing, and automated mailing services. Business units: SunGard Computer
Services and SunGard Mailing Services.
SunGard Healthcare Information Systems Group: Work-flow management and
--------------------------------------------
document-imaging systems for healthcare and financial institutions. Business
units: Intelus Corporation and MACESS Corporation.
Each business is directed by its own management team and has its own sales,
marketing, product development, operations and customer support personnel.
Overall corporate control and coordination are achieved through centralized
budgeting, financial and legal reporting, cash management and strategic
planning. The Company believes that this approach has facilitated more focused
marketing, specialized product development, responsive customer service and
highly motivated management.
The Company is a Delaware corporation that was organized in 1982. The
Company's principal executive offices are located at 1285 Drummers Lane, Suite
300, Wayne, Pennsylvania, 19087, and its telephone number is (610) 341-8700.
Investment Considerations
Statements about the Company's expectations and all other statements in this
Report and other Company communications other than historical facts are forward-
looking statements. Since these statements involve risks and uncertainties and
are subject to change at any time, the Company's actual results could differ
materially from expected results. The Company derives most of its forward-
looking statements from its operating budgets and forecasts, which are based
upon many detailed assumptions. While the Company believes that its assumptions
are reasonable, it cautions that there are inherent difficulties in predicting
certain important factors, especially the timing and magnitude of software
sales, the timing and scope of technological advances, the performance of
recently acquired businesses, the prospects for future acquisitions, and the
overall condition of the financial services industry. Certain of these factors
are further discussed below and should be considered in evaluating the Company's
forward-looking statements and any investment in the Company's common stock.
Acquisitions. The Company seeks to grow both internally and by acquisition.
The Company's growth depends, in part, upon its ability to identify suitable
acquisition candidates, negotiate acceptable acquisition terms and consummate
acquisitions of successful, complementary businesses. Increased competition for
acquisitions, whether from other acquirors or the public equities market, could
adversely affect the terms of future acquisitions. Continued acquisitions,
especially of larger companies, may require the Company to use debt or equity
financing. Furthermore, there can be no assurance that acquired businesses will
perform as expected. Poor performance by an acquired business could adversely
affect the Company's results and cause an impairment of part of the Company's
goodwill.
Technological Changes. The Company's success depends, in part, upon its
ability to continue adapting its proprietary software and recovery services to
new computer and telecommunications technology on a timely and cost effective
basis. Rapid or unpredictable technological developments, in particular, could
have a material adverse effect on the Company's business and prospects.
2
Product Development. The Company must continually enhance and evolve its
proprietary software to keep pace with developments in the financial services
and healthcare industries. There can be no assurance that the Company will not
experience unforeseen delays in updating its software or developing new systems,
or that newly developed products will be successfully marketed and sold.
Financial Services Industry. The Company sells most of its computer services
and software to the financial services industry and is generally dependent upon
the continued vitality of that industry. A material adverse change in the
condition of the financial services industry, such as a significant decline in
securities or derivatives trading activities or in the number or value of
managed portfolios, could have a material adverse effect on the Company's
business and prospects.
New Business Line. In 1995, the Company established its new Healthcare
Information Systems Group by acquiring two providers of work-flow management and
document-imaging systems to the healthcare industry (see Computer Services and
Other). Although the Company has experience managing software businesses, the
Company has no prior experience in the healthcare information systems market.
In addition, a number of the Company's competitors in this market have
substantially greater financial, technological and marketing resources than the
Company.
Investment Support Systems
The Company designs, markets and maintains a comprehensive family of
proprietary investment support systems for the financial services industry. The
fundamental purpose of these systems is to automate the complex accounting
calculations, record keeping and reporting associated with investment
operations. The Company markets its investment support systems throughout the
United States, and many are marketed internationally as well.
The Company delivers its investment support systems primarily as remote
processing services using the Company's computers and also through software
licenses for use on customers' computers. The Company provides investment
support remote processing services primarily from its computer centers in
Birmingham (Alabama), Boston, Charlotte, Fairfield (New Jersey), London (two
centers), Los Angeles, Minneapolis, Sydney (Australia) and Voorhees (New Jersey)
(see Properties). As of December 31, 1995, the Company had approximately 1,740
remote processing contracts in force. These contracts generally have initial
terms of one or more years and then continue for successive, one-year renewal
terms, although some allow the customer to terminate on relatively short notice.
The Company's investment support systems business has continued to increase in
both size and scope, due primarily to acquisitions (see Acquisitions and
Offerings). During 1995, the Company continued its product unification and
enhancement efforts to provide customers with access to multiple systems and
data through common graphical interfaces and shared databases. The Company also
continued evolving its mainframe computer systems by converting some systems to
client-server technology and by developing sophisticated personal computer and
workstation front-end products for others. Also during 1995, the Company
continued to add multi-currency functionality to its systems and pursue
opportunities to market more of its systems internationally.
Investment Accounting and Portfolio Management Systems. The Company's
investment accounting and portfolio management systems maintain the books of
record for all types of large investment portfolios such as those managed by
banks, mutual funds, employee retirement plans and insurance companies. The
primary functions of these systems are to accept investment transactions, value
portfolios using transmissions of security prices received from various
worldwide sources, perform complex accounting calculations and general ledger
postings, and generate a variety of accounting, audit, tax and regulatory
reports. In addition, some of these products are used by investment advisers
and other portfolio managers to manage large investment portfolios. These
systems track investment activities such as purchases and sales, combine these
activities with outside market data such as security prices and quality ratings,
and provide analytical models to assist with investment strategy and
3
management decisions. The Company's principal investment accounting and
portfolio management systems, some of which have multi-currency capabilities,
are described in the following table:
- --------------------------------------------------------------------------------
System Platform Mode of Delivery Primary Markets
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INVEST ONE(R) IBM mainframe remote processing international
service and software banks, large
license bank trust
------------------------------------------ departments,
UNIX workstation software license mutual funds,
insurance
companies and
other financial
institutions
- --------------------------------------------------------------------------------
ON-LINE(TM) Bull mainframe remote processing institutional
service and retail
- ------------------------------------------------------------- investment
ON-SITE(TM) UNIX workstation software license advisers and
- ------------------------------------------------------------- other portfolio
ON-CORE(TM) microcomputer software license managers
- --------------------------------------------------------------------------------
MONEYMAX(R)/ UNIX workstation remote processing government
SERIES 2(TM) service treasurers and
financial
institutions
- --------------------------------------------------------------------------------
PAL(TM) IBM midrange remote processing United Kingdom
service stockbroking
firms and fund
managers
- --------------------------------------------------------------------------------
PMS(TM)/APS(TM) microcomputer software license small banks,
thrifts and
other financial
institutions
- --------------------------------------------------------------------------------
PAR EX(R) microcomputer software license and insurance
remote processing companies
service
- -------------------------------------------------------------
PRISM(TM) IBM mainframe software license
- -------------------------------------------------------------
SDIM(TM) microcomputer software license
- -------------------------------------------------------------
SERIES 1(TM) microcomputer software license
- --------------------------------------------------------------------------------
A new module to INVEST ONE that was introduced during 1995 added the
capability to process unit trust accounts in the United Kingdom. In August
1995, the Company expanded its investment accounting systems product line for
insurance companies with the addition of the PAR EX and SDIM products. This
resulted from the acquisition of the business of Market Investment Solutions,
Inc., a provider of microcomputer investment management, accounting and
reporting systems for the insurance industry (see Acquisitions and Offerings).
The Company also provides certain general ledger accounting systems to
insurance companies and nonprofit organizations, which are markets where the
Company has opportunities to cross-sell its investment accounting systems. The
Company's general ledger accounting products include ABC(TM) (Accounting Budget
and Cost System), CDS(TM) (Cash Disbursement System) and EAS(TM) (Enterprise
Accounting System) for insurance companies, and IFAS(TM) (Interactive Fund
Accounting System) for educational institutions, state and local governments and
other nonprofit organizations. The IFAS product was added in July 1995 when the
Company acquired the business of Bi-Tech Software, Inc. (see Acquisitions and
Offerings).
Securities Trading and Accounting Systems. The Company's securities trading
and accounting systems are used primarily by the so-called "sell side" of the
investment business. The users of these products generally are traders or
dealers of securities (including those trading for their own accounts) and their
back-office operations. In addition to performing many investment accounting
functions, the Company's securities trading and accounting systems maintain
inventories of unsold securities, process trade activities and assist users in
monitoring compliance with audit limits, trading limits and government
regulations. The Company's principal software products in this category are:
4
- --------------------------------------------------------------------------------
System Platform Mode of Primary Markets
Delivery
================================================================================
BOLT(R) 1 & BOLT(R) 2 IBM mainframe remote capital markets
processing departments of
service domestic banks,
- ------------------------------------------------------------ broker/dealers
GSM GLOBAL SECURITIES DEC VAX software and other
MANAGER(R) UNIX license financial
workstation institutions
- ------------------------------------------------------------
INTRADER(R) UNIX software
workstation license
- ------------------------------------------------------------
MONEYMARKET II(R) DEC VAX remote
processing
service and
software
license
- ------------------------------------------------------------
OMNI SA(TM) IBM mainframe remote
IBM AS 400 processing
IBM RS 6000 service and
software
license
- ------------------------------------------------------------
PHASE3(R) Tandem remote
processing
service and
software
license
- --------------------------------------------------------------------------------
During 1995, the Company began development of foreign securities functionality
for its PHASE3 System. Also during 1995, the Company introduced the SUNGARD
SOLUTIONS NETWORK(SM) which, through strategic alliances, provides customers
with third-party services such as securities descriptions, pricing, analytics
and clearing.
Derivatives Trading Systems. The Company provides software applications
encompassing most aspects of risk management, trading and processing for capital
markets globally. The Company's derivatives trading systems are used primarily
by the so-called "sell side" of the investment business, although "buy side"
demand for these systems is growing. Generally, these products are used by
traders and market-makers of over-the-counter and exchange-traded derivative
instruments, securities and foreign exchange contracts, and their middle- and
back-office operations. These systems provide trading support, risk management,
trade processing and accounting functions, and assist users in determining
hedging strategies and monitoring compliance with capital requirements, trading
limits and government regulations. The Company's principal software products in
this category are:
- --------------------------------------------------------------------------------
System Platform Mode of Primary Markets
Delivery
================================================================================
DEVON DERIVATIVES SYSTEM(TM) Windows NT software trading rooms
UNIX workstation license and capital
- ------------------------------------------------------------ markets
DEVON FOREX SYSTEM(TM) UNIX workstation software departments of
license international
- ------------------------------------------------------------ banks, and
PANORAMA(TM) Windows NT software trading rooms
license of other
- ------------------------------------------------------------ financial
DEVON SECURITIES SYSTEM(TM) Windows NT software institutions
license
- ------------------------------------------------------------
INTAS(R) UNIX workstation software
OPTAS(R) DEC workstation license
- ------------------------------------------------------------
OPUS(R) UNIX workstation software
license
- ------------------------------------------------------------
TRADENET(TM) Windows/Windows NT software
UNIX workstation license
- --------------------------------------------------------------------------------
OCTAGON(TM) FUTURES SYSTEM UNIX workstation software international
DEC workstation license and banks and
remote brokerage firms
processing active in the
service futures markets
for principal
and customer
business
- --------------------------------------------------------------------------------
5
The PANORAMA product, which is a Windows NT-based module that provides
integrated firm-wide financial risk management across the fixed income, foreign
exchange and equity and money markets, including related derivative instruments,
was introduced by the Company during 1995.
The OPUS product was added to the Company's derivatives trading systems
product line with the acquisition of Renaissance Software Inc. in November, 1995
(see Acquisitions and Offerings). OPUS is a family of risk management and
interest rate derivatives applications that are marketed principally to large
banks and other large market-makers. OPUS applications provide a front- to
back-office trading and support system for valuing, hedging, analyzing and
processing interest rate derivatives and the hedging instruments used by a
derivatives desk.
Trust, Global Custody and Securities Lending Systems. The Company's trust
systems automate the investment, administrative and operations areas unique to
the bank trust business, including cash management, management and investment of
assets, preparation of tax returns for taxable trusts, payment of trust
expenses, payment of benefits to retirees, beneficiary distributions, customer
statement production, and other customer service duties. The Company's global
custody systems automate the functions associated with the worldwide custody and
safekeeping of investment assets, such as trade settlement, investment income
collection, preparation of client statements, tax reclamation, foreign exchange,
and reconciliation of depository and sub-custodian positions. The Company's
securities lending systems automate the functions associated with worldwide
securities lending activities. The Company's principal trust, global custody
and securities lending systems are:
- --------------------------------------------------------------------------------
System Platform Mode of Primary Markets
Delivery
================================================================================
AUTOTRUST(R) IBM mainframe remote small and medium
processing size bank trust
service departments
- --------------------------------------------------------------------------------
OMNI ES(TM) IBM mainframe software large and medium
license and size bank trust,
remote custody and
processing securities
service departments
- --------------------------------------------------------------------------------
OMNI IC(TM) scalable, software bank global
multiplatform license custody
departments
- --------------------------------------------------------------------------------
OMNILEND(TM) IBM mainframe software banks,
UNIX workstation license and broker/dealers
remote and other
processing financial
service institutions
- --------------------------------------------------------------
OMNI IFS(TM) microcomputer software
UNIX workstation license
- --------------------------------------------------------------------------------
MICROTRUST(R) microcomputer software small bank trust
license departments
- --------------------------------------------------------------------------------
The Company offers specialized trust asset custody services to its AUTOTRUST
customers and other banks and trust companies. These services are provided
under a master contract with The Bank of New York (the "Bank"). The Bank holds
the customers' trust assets, and the Company handles account record keeping and
customer communications. The Company is liable to the Bank for any unpaid
obligations of the Company's custody services customers that exceed the value of
their assets held in the Bank's custody.
During 1995, the Company completed the first major phase of development of a
Windows version of AUTOTRUST known as the CHARLOTTE(TM) system. Also during
1995, the Company consolidated its single-currency large bank trust department
product, OMNITRUST(R), and its multi-currency global custody product, OMNI
GS(R), into a single comprehensive product, OMNI ES.
6
The Company's principal securities lending product, OMNILEND, was acquired in
February 1995 when the Company purchased the business of DML, a provider of
securities lending and brokerage accounting systems (see Acquisitions and
Offerings).
The Company also markets EXPEDITER(TM) to its trust accounting systems
customers. EXPEDITER is a product that facilitates the automated entry of mutual
fund transactions. Since its introduction in 1993, EXPEDITER has continued to
expand its selection of mutual funds and to gain market acceptance. During 1995,
EXPEDITER was upgraded to automate manual trading activities including pricing,
confirmations and dividend rates, and to provide balance tracking and billing
reports. EXPEDITER is marketed not only to users of the Company's trust
accounting systems, but also to users of the Company's securities trading
systems and participant accounting systems.
Participant Accounting Systems. The Company's participant accounting systems
automate the investment operations associated with defined contribution
retirement plans such as 401(k) plans. These systems maintain the books of
record for each participant's share of the cash and securities in the plan,
monitor compliance with government regulations and plan restrictions, process
payments of benefits to retirees, and produce tax reports for plan sponsors and
participants. The Company's principal participant accounting systems are:
- --------------------------------------------------------------------------------
System Platform Mode of Delivery Primary Markets
================================================================================
OMNIPLAN(R) IBM mainframe remote corporate,
OMNIPAY(R) processing bank and other
OMNIDBEN(TM) service, retirement
software plan managers
license and
full service
bureau
processing
-----------------------------------
UNIX workstation software license
-----------------------------------
IBM AS/400 software license
-----------------------------------
microcomputer software license
- --------------------------------------------------------------------------------
MPR(TM) microcomputer software license small and
medium size
banks
- --------------------------------------------------------------------------------
During 1995, the Company continued development of OMNIPLUS(TM), which will
succeed OMNIPLAN and be the Company's next generation participant accounting
system. OMNIPLUS will support all types of defined contribution plans. In 1995,
the Company introduced OMNIDBEN, a defined benefit administration system,
OMNIIMPORT(TM), a microcomputer data conversion system, OMNIREMOTE(TM), a remote
data entry system for plan sponsors, and Windows NT versions of many products.
As an expanded offering of services, during late 1995 and early 1996, the
Company entered into two facilities management agreements to manage customers'
retirement plan processing operations using the OMNIPLAN product line.
The Company expanded its activities in the Pacific Rim with the September 1995
acquisition of the business of All Solutions Financial Systems, a provider of
fund and asset administration systems primarily in Australia, and the January
1996 acquisition of the business of Worrall Miller & Associates, a provider of
pension plan administration software in Australia (see Acquisitions and
Offerings).
Investment Reporting and Analysis Systems. The Company's investment reporting
and analysis systems accept accounting data from other investment support
systems and perform special analyses for fund managers and customers. These
systems analyze the performance of portfolios, perform other types of investment
measurement and analysis, and produce regulatory reports for retirement plan
sponsors and participants. The Company's principal software products in this
category are:
7
- --------------------------------------------------------------------------------
System Platform Mode of Delivery Primary Markets
================================================================================
DATAPREP(TM) IBM mainframe remote corporate,
EMBERS(R) processing bank and other
service and retirement
software license plan managers
- ----------------------------------------------------------------
SUPERF4(R) IBM mainframe remote
processing
service and
software license
- --------------------------------------------------------------------------------
OMNISTATION(TM) UNIX workstation software license large and
medium size
banks
- --------------------------------------------------------------------------------
During 1995, the Company introduced a new system, GLOBAL CLIENT REPORTING(TM),
which provides comprehensive investment reporting of all assets and liabilities
for both master trust and global custody accounts. Currently, this is sold with
INVEST ONE.
Shareholder Accounting Systems. The Company's shareholder accounting systems
automate the transfer agent process for stock, bond and mutual fund issues.
These systems maintain shareholder and bondholder positions, process dividend
and interest distributions, generate proxy materials, tabulate votes, and
produce tax reports and periodic shareholder statements. The Company's
principal software products in this category are:
- --------------------------------------------------------------------------------
System Platform Mode of Delivery Primary Markets
================================================================================
INVESTAR(R) IBM mainframe remote large mutual
processing fund managers
service and transfer
agents
- --------------------------------------------------------------------------------
SUNSTAR(R) IBM mainframe remote large bank,
processing corporate and
service and utility stock
software license and bond
----------------- transfer agents
UNIX workstation
- --------------------------------------------------------------------------------
During 1995, the Company signed a SUNSTAR contract with The National Registry
Company in Russia to provide shareholder record keeping services for the Russian
securities market. Also during 1995, the Company began offering, as either a
complementary product to SUNSTAR or as a stand-alone product, CORPORATE TRUST
MANAGEMENT SYSTEM(TM), which extends corporate trust functionality to the front
office.
The Company also markets a work-flow management and document-imaging software
system to users of its shareholder accounting systems. Known as PowerImage(R),
this product uses electronic document-imaging to improve work flow and to
enhance levels of service and efficiency.
Disaster Recovery Services
Many businesses depend upon computers to perform critical tasks and use
communications networks to transmit data between a centralized computer facility
and distant offices. If a natural disaster, fire, power failure or other
emergency disrupts a company's computer operations or interrupts communications
between its data processing center and remote locations, its ability to stay in
business may be jeopardized. To address this problem, the Company maintains
alternate data processing sites for use by customers whenever they are unable to
operate or communicate with their own computer systems.
The primary alternate sites provided by the Company are fully equipped and
operational computer centers known as "hotsites," where customers may restore
their critical applications using the Company's installed computer equipment.
The Company also provides environmentally prepared computer centers known as
"coldsites," in which customers may install and operate their own computer
equipment, and remote operations centers for using the Company's alternate sites
from long distance.
8
In addition, the Company provides mobile recovery resources that may be
delivered or shipped directly to customer-specified locations.
The Company also provides general office space equipped with office equipment,
which customers may use alone or in conjunction with the use of a hotsite or
coldsite. This service offering, known as Work Group Recovery(SM), also includes
MegaVoice(R), a centralized voice communications recovery service that backs up
customers' automated telephone call distribution systems. During 1995, the
Company introduced Program Management Services(SM), which encompasses the
design, coordination and management of all aspects of customers' disaster
recovery programs.
Most of the Company's larger disaster recovery customers purchase a basic
package of services that includes use of a hotsite for six weeks to recover from
any computer center failure, use of a coldsite for six months if recovery
operations must continue for more than six weeks, use of a hotsite to regularly
test disaster recovery procedures, use of general office space during recovery
operations and tests, technical assistance when conducting recovery operations
and tests, and technical assistance with designing and implementing a backup
communications network.
The Company provides disaster recovery services to users of IBM (and
compatible) mainframe computers and also to users of DEC, Hewlett Packard, IBM
midrange (AS/400, RS/6000 and Systems/3X), NCR, Prime, Sequent, Stratus, Sun
Microsystems, Tandem and Unisys computers. These services are marketed,
directly and through representatives, primarily to IBM (and compatible), DEC,
Hewlett Packard and Unisys mainframe and various midrange computer installations
in North America.
In December 1995, the Company expanded the customer base of its Unisys
platform offerings through the acquisition of the disaster recovery business of
the Newtrend Division of Electronic Data Systems Corporation (see Acquisitions
and Offerings). In 1995, the Company continued to expand its disaster recovery
offerings to users of midrange computers and further enlarged its midrange sales
force. Also in 1995, the Company continued to expand its marketing partner
program by establishing alliances with hardware providers and others and by
signing certain agreements with third parties to expand and enhance its recovery
services and capabilities.
As of December 31, 1995, the Company had approximately 6,300 disaster recovery
contracts in force. These contracts generally require the payment of monthly
fees and range in duration from one to five years. The amount of the monthly
fees depends upon the type of facilities and services selected, contract
duration and competitive factors.
During 1995, for the tenth consecutive year, the Company successfully
supported all customers who experienced computer center failures.
Disaster Recovery Facilities. The Company believes that it conceived and
first implemented the concept of the MegaCenter(R), a multiple hotsite and
coldsite facility that customers may use directly or remotely. The Company
operates five MegaCenters, located in Atlanta, Chicago, Philadelphia, Scottsdale
(Arizona) and Warminster (Pennsylvania) (see Properties). The Company believes
that its Philadelphia MegaCenter, which houses DEC, Hewlett Packard, IBM
mainframe, Sequent, Stratus and Tandem hotsites, and mobile Hewlett Packard, IBM
midrange, NCR and Sun Microsystems computer systems, is the largest commercial
disaster recovery facility in the world.
The Company also operates MetroCenter(R) facilities in strategic locations
throughout North America to provide Work Group Recovery services, enhanced
remote operations capabilities, and recovery operations and testing support for
mobile computer systems. MetroCenters are located in Boston, Beechwood (Ohio),
Dallas, Herndon (Virginia), Jersey City (New Jersey), Los Angeles, Northvale
(Michigan), St. Louis, St. Paul and Toronto. The St. Paul and Toronto
MetroCenters also have coldsites that can be used in conjunction with the remote
operations capability.
9
The Company periodically opens new facilities or expands existing facilities
to accommodate both the growth in its customer base and the addition of
different types of computer systems and service offerings. Also, the Company
regularly upgrades its systems to offer the most advanced computer equipment
generally used by its customers. During 1995, the Company opened two new
MetroCenters in Beechwood (Ohio) and Northvale (Michigan), upgraded the central
processing units in its Philadelphia, Chicago and Warminster MegaCenters and
upgraded many mobile midrange systems at various facilities. During 1995, the
Company installed an IBM ES9000 962 central processing unit (H5 technology) in
the Chicago MegaCenter, IBM's largest AS/400 midrange computer and a Sequent
computer in the Philadelphia MegaCenter, and new Unisys processors in the
Warminster MegaCenter. The Philadelphia MegaCenter also opened a local area
network (LAN) server center, which the Company believes is one of the largest
LAN recovery centers in the disaster recovery industry. The disk access, tape
cartridge and other peripheral equipment at all facilities were upgraded or
augmented, and the capability of storage and retrieval systems were increased.
During late 1995 and early 1996, the Company began offering IBM's Parallel
Sysplex Configuration that links multiple mainframes to expand greatly the
amount of processing power the Company can provide.
The Company believes that, by operating a relatively small number of large
facilities linked by a comprehensive communications network, it can provide
superior disaster recovery services in the most effective manner. All
MegaCenters and MetroCenters, as well as other remote operations centers, are
linked by a communications network that is capable of handling a full range of
digital and analog data transmission methods, including satellite and fiber-
optic applications. The Company regularly upgrades this network to offer the
communications technology generally used by its customers. During 1995, the
Company continued expanding its matrix switching capabilities to allow for more
efficient and reliable communications during customer tests and recovery
operations. The Company also is implementing a synchronous optical network
(SONET) in the New York, northern New Jersey and Philadelphia markets to provide
a high-speed, fiber-optic connection into its backup systems. This SONET
network will be operational in early 1996.
The Company markets its comprehensive disaster recovery facilities and
services on a component pricing basis, allowing each customer to select the
specific items of equipment and other recovery services needed to satisfy its
individual disaster recovery requirements. The Company's disaster recovery
equipment is covered by maintenance contracts to assure that it is properly
functioning at all times.
Planning Services. The Company provides professional consulting and
educational services for disaster recovery and business resumption planning, not
only for computer operations, but also for company-wide purposes encompassing
all important business operations. This includes the development of customized
disaster recovery and business resumption plans for customers. The Company also
performs risk analyses to determine customers' exposure to the disruption or
loss of critical operations and resources, audits customers' disaster recovery
and business resumption procedures, and recommends improvements. In addition,
the Company conducts regular seminars on disaster recovery, business resumption
and related topics.
The Company also markets a Windows-based microcomputer software product,
CBR(TM) Comprehensive Business Recovery, which automates the preparation and
maintenance of disaster recovery and business resumption plans, including
comprehensive company-wide planning capabilities. The Company released a new
version of CBR during 1995 that provided several enhancements and reporting
improvements. The Company also continues to support its DOS-based microcomputer
disaster recovery planning software product known as DP/90 PLUS(R). In March
1995, the Company acquired the disaster recovery planning software business of
CHI/COR Information Management, Inc. (see Acquisitions and Offerings).
10
Computer Services and Other
Computer Services. The Company provides remote-access computer services
primarily to software developers and government agencies and also provides
outsourcing services. In addition, the Company provides direct marketing
computer services and automated mass mailing and printing services. These
activities are supported at the Company's computer centers in Voorhees and
Birmingham (see Properties), which also are used to provide remote processing
services for several of the Company's investment support systems business units.
In 1995, the Company expanded its services to encompass client-server
environments, upgraded its IBM ES9000 model computer and added a new IBM 3090-
400J model computer at its Voorhees facility, and added UNIX capabilities and
the support of wide-area-network access.
Healthcare Information Systems. The Company's recently formed Healthcare
Information Systems Group provides work-flow management and document-imaging
systems primarily to healthcare institutions and health insurance companies. In
addition, the Company provides such systems to financial institutions,
corporations and government agencies, and the Company believes that there will
be additional market opportunities for these products. The Healthcare
Information Systems Group is comprised of Intelus Corporation, acquired by the
Company in August 1995, and MACESS Corporation, acquired by the Company in
October 1995 (see Acquisitions and Offerings). Through the use of electronic
data files that are typically created by scanning procedures, the Company's
healthcare information systems replace manual, paper-based systems to facilitate
the integration of broad databases of patient, customer and claims records,
while enhancing efficiencies and maintaining strict control of operations. The
Company's principal systems of this type are:
- --------------------------------------------------------------------------------
System Platform Mode of Delivery Primary Markets
================================================================================
I-MAX(TM) microcomputer software health insurance
license companies
- --------------------------------------------------------------------------------
ChartFlo(R) 2000 UNIX workstation software hospitals,
AccountFlo(TM) microcomputer license healthcare
institutions and
medical clinics
- --------------------------------------------------------------------------------
ProcessFlo(R) UNIX workstation software banks and other
microcomputer license financial
institutions, and
government
agencies
- --------------------------------------------------------------------------------
Product Development
The investment support systems needs of the financial services industry are
complex and substantial, and continually evolve as a result of changes in laws,
introductions of new types of investment vehicles and technology and increased
competition. For these reasons, the Company believes that it is important to
continually maintain, enhance and evolve its proprietary investment support
systems. The Company funds most of its routine ongoing software maintenance and
support activities through the software maintenance fees paid by its investment
support systems license customers and a portion of the monthly fees paid by its
investment support systems remote processing customers. As of December 31,
1995, the Company had in force approximately 4,500 remote processing and
software maintenance contracts for its investment support systems.
The Company's expenditures for software development during 1995, 1994 and
1993, including amounts that were capitalized, totalled approximately
$53,908,000, $38,684,000 and $37,581,000, respectively. These amounts do not
include routine software maintenance and support costs that are included in cost
of sales, nor do they include costs incurred in performing certain custom
development projects for individual customers in the ordinary course of
business.
11
During 1996, the Company expects to develop Windows versions of several
products including ON-SITE, to continue development of the Windows-based
CHARLOTTE system, and to complete development of a client-server version of
IFAS. Also during 1996, the Company plans to add an optional relational data
base module and evolve to the next generation of Windows compatible front- and
back-end components of INVEST ONE. These developments are examples of the
Company's strategy of using the established functionality of its existing
systems to develop state-of-the-art systems for new technological environments.
Also in 1996, the Company expects to complete development of OMNIPLUS, its
next generation participant accounting system for employee benefit plans, and to
continue developing enhanced functionality for its derivatives trading, foreign
exchange and consolidated risk management systems. In 1996, the Company plans
to continue to expand the application of EXPEDITER, which facilitates the
automated entry of mutual fund transactions for users of AUTOTRUST, OMNI ES,
OMNIPLAN, BOLT and eventually other investment support systems, and to enhance
its functionality. With respect to the PHASE3 system, the Company expects to
complete new foreign securities functionality during early 1996, and to continue
developing enhancements to better support retail brokerage functionality
throughout 1996. In 1996, the Company also will continue the development of EAS
(Enterprise Accounting System), a client-server general accounting system that
is being developed in conjunction with four insurance industry partners.
Continual software upgrading and enhancement also are important in the
Company's healthcare information systems business. Development plans for 1996
in this business encompass enhanced document output capability, document capture
capability and document searches and viewing for ChartFlo and AccountFlo, plus a
Windows version of ChartFlo. The Company's 1996 plans for ProcessFlo include
developing Novell- and Windows NT-based servers and porting to additional
relational databases.
The Company expands its disaster recovery services by adding new hotsites at
existing facilities, upgrading its computer equipment, developing new services
and opening new facilities. In 1996, the Company plans to expand its midrange
product lines and customer office space in the Philadelphia MegaCenter and to
open new MetroCenters in Northbrook (Illinois) and northern California. The
Company plans to complete the implementation of its new Sequoia recovery
services offering by mid-1996. Also during 1996, the Company plans to continue
to expand its electronic vaulting product offerings, to continue upgrading its
disk storage, tape cartridge and other peripheral hotsite equipment and to
continue opening new MetroCenters where the demand exists.
The Company expands its disaster recovery communications network by upgrading
its communications equipment, adding new communications capabilities and
establishing additional remote operations centers where the demand exists.
Acquisitions and Offerings
The Company seeks to grow through internal development, the acquisition of
businesses that broaden or complement its existing product lines, and, more
recently, the acquisitions of businesses with new product and business lines.
Since its initial public offering in 1986, the Company has acquired twenty-one
investment support systems businesses, fourteen disaster recovery businesses,
two computer services businesses and two healthcare information systems
businesses. Also during this period, the Company completed two additional
public offerings, a common stock offering in 1987 and a convertible debenture
offering in 1990. The debentures were converted into common stock in 1993.
During 1995, the Company spent approximately $23,962,000 in cash, net of cash
acquired, to acquire four investment support systems businesses and two disaster
recovery services businesses. In addition, the Company issued during 1995 a
total of 4,253,000 shares of its common stock to
12
acquire one investment support systems business and two healthcare information
systems businesses in transactions that were accounted for as poolings-of-
interests.
The Financial Systems Group purchased the business of Market Investment
Solutions, Inc., a Colorado-based provider of microcomputer investment
management, accounting and reporting systems for the insurance industry, in
August 1995.
The Trading Systems Group expanded in November 1995 by acquiring Renaissance
Software Inc., headquartered in Los Altos, California, a provider of trading,
risk management and accounting systems to large banks and other market-makers
that trade over-the-counter interest rate derivatives.
The Trust and Shareholder Systems Group also grew by acquisition. In February
1995, the Company acquired the business of DML, a New York-based provider of
securities lending and brokerage accounting software systems, and, in July 1995,
the Company purchased the business of Bi-Tech Software, Inc., a California-based
provider of accounting systems to nonprofit organizations. In addition, the
Trust and Shareholder Systems Group significantly expanded its international
operations by acquiring the business of All Solutions Financial Systems, a
provider of fund and asset administration systems in Australia and New Zealand,
in September 1995, and the business of Worrall Miller & Associates Pty. Ltd., a
provider of pension plan administration software in Australia, in January 1996.
The Recovery Services Group acquired, in March 1995, the disaster recovery
software business of CHI/COR Information Management, Inc. and, in December 1995,
the disaster recovery business of the Newtrend Division of Electronic Data
Systems Corporation, which consists primarily of recovery services for users of
Unisys and Unisys-compatible mainframe computers.
The Healthcare Information Systems Group was formed during 1995 as a result of
the acquisitions of Intelus Corporation in August and MACESS Corporation in
October. Both Intelus and MACESS provide work-flow management and document-
imaging systems to the healthcare industry.
In July 1995, the Company's common stock split two-for-one.
Competition
Since most of the Company's computer services and software are specialized and
technical in nature, the various markets in which the Company competes have a
relatively small number of significant competitors. Some of the Company's
existing competitors and some potential competitors have substantially greater
financial, technological and marketing resources than the Company. The Company
believes that, for most of its businesses, service, quality and reliability are
more important competitive factors than price.
In its investment support systems business, the Company competes with numerous
other data processing and financial software vendors, which may be broadly
categorized into two groups. One group is comprised of specialized investment
support systems companies, most of which are much smaller than the Company. The
other group is comprised of large computer services companies whose principal
businesses are not in the investment support systems area, such as Automatic
Data Processing, Inc. and First Data Corporation, both of whom are also active
acquirors. The Company also faces competition from the internal processing and
development capabilities of its customers and prospects.
The key competitive factors in marketing investment support systems are the
accuracy and timeliness of processed information provided to customers, features
and adaptability of the software, level and quality of customer support, level
of software development expertise and overall net cost. The Company believes
that it competes effectively as to each of these factors and that its reputation
and experience in these markets are important competitive advantages.
13
The computer disaster recovery business remains highly competitive. The
Company's principal competitors in this business are Comdisco Disaster Recovery
Services, Inc. and IBM Corporation, each of which have substantially greater
financial and other resources than the Company. The Company also faces
potential competition from major companies that have computer facilities that
could be made available for disaster recovery use. The Company believes that it
competes effectively as to the key competitive factors in this market, namely
quality of facilities, scope and quality of services, level and quality of
customer support, level of technical expertise and price. The Company also
believes that its experience and reputation as the innovator in this business
are important competitive advantages.
The Company's healthcare information systems business competes primarily with
larger companies who provide imaging systems to multiple industries. Some of
these vendors sell directly into the healthcare industry, and some are
represented in that industry by smaller, specialized resellers. The Company
believes that it competes effectively as to the key competitive factors in
marketing work-flow management and document-imaging systems to healthcare and
financial institutions. These factors include features and adaptability of the
software, level and quality of customer support, level of software development
expertise and overall net cost.
Marketing
All of the Company's specialized computer services and software are marketed
throughout the United States, and many are marketed internationally as well.
The Company's export sales during 1995, 1994 and 1993 totalled approximately
$51,273,000, $33,505,000 and $29,061,000, respectively. In addition, the
Company's foreign subsidiaries had sales that for those years totalled
approximately $43,612,000 $26,652,000 and $18,437,000, respectively. Export and
foreign sales during 1995 totalled $95 million and increased by 58% over 1994
export and foreign sales. As a percentage of total revenues, export and foreign
sales have grown from 12% in 1993 to 18% in 1995, and the Company expects this
percentage to continue growing.
The Company develops and maintains proprietary marketing information by
identifying prospective customers through a variety of data bases and other
sources, and then canvassing the prospects by direct mail, telephone calls and
personal visits. The Company also attempts to identify and attract customers by
conducting seminars and participating in industry conferences. Customer
references have been an important aid in obtaining new business.
Employees
At December 31, 1995, the Company had approximately 2,900 full-time employees.
The Company believes that its success depends, in part, on its continuing
ability to attract and retain skilled technical, marketing and management
personnel. While data processing professionals and software developers are in
high demand, the Company believes that, to date, it has been able to attract and
retain highly qualified personnel. None of the Company's employees is covered
by a collective bargaining contract. The Company believes that its employee
relations are excellent.
Proprietary Protection
The Company owns registered marks for the SunGard name and owns or has applied
for registration for many of its service and software names. The Company has
few registrations of its copyrights and has no patents. The Company believes
that registered copyrights and patents are of less significance in its business
than software development skills, technological expertise and marketing
capabilities, although the Company intends to consider the advisability of
software patents in view of ongoing developments in that area. The Company
relies primarily on contractual restrictions and trade secret laws for the
protection of its proprietary services and software. The Company also has
established policies requiring its personnel to maintain the confidentiality of
the Company's proprietary property.
14
Item 2. Properties
The following table indicates the location, purpose and size of the Company's
principal offices, principal computer facilities, business unit headquarters and
disaster recovery MegaCenters.
- --------------------------------------------------------------------------------
Location Purpose Square Feet
================================================================================
Wayne, PA Executive offices of SunGard Data 44,500
(near Philadelphia) Systems Inc., and headquarters for
SunGard Recovery Services and SunGard
Planning Solutions.
- --------------------------------------------------------------------------------
Atlanta, GA Offices of SunGard Insurance Systems. 26,000
- --------------------------------------------------------------------------------
Aurora, CO Headquarters for SunGard Insurance 17,900
(near Denver) Systems.
- --------------------------------------------------------------------------------
Birmingham, AL Headquarters for SunGard Asset 85,000
Management Systems, SunGard Employee
Benefit Systems and SunGard Mailing
Services, and related computer center
with one IBM-compatible mainframe
computer.
- --------------------------------------------------------------------------------
Birmingham, AL Headquarters for MACESS Corporation. 26,600
- --------------------------------------------------------------------------------
Canoga Park, CA Headquarters for SunGard Government 12,000
(near Los Angeles) Systems and related computer center
with one Prime computer and seven
UNIX servers.
- --------------------------------------------------------------------------------
Carshalton, England Headquarters for Portfolio 10,000
(near London) Administration Limited and related
computer centers with eight IBM
midrange computers.
- --------------------------------------------------------------------------------
Charlotte, NC Headquarters for SunGard Trust 36,100
Systems and related computer center
with one IBM-compatible mainframe
computer.
- --------------------------------------------------------------------------------
Chico, CA Headquarters for Bi-Tech Software. 12,000
- --------------------------------------------------------------------------------
Chicago, IL Headquarters for SunGard Futures 7,000
Systems.
- --------------------------------------------------------------------------------
Fairfield, NJ Computer center for Shaw Data 22,000
(near New York) Services with four Bull mainframe,
four Hewlett Packard and one Sun
Microsystems computers.
- --------------------------------------------------------------------------------
Hinsdale, IL Headquarters for SunGard Investment 24,900
(near Chicago) Systems.
- --------------------------------------------------------------------------------
Hopkins, MN Headquarters for SunGard Securities 46,200
(near Minneapolis) Systems and related computer center
with two IBM or IBM-compatible
mainframe computers.
- --------------------------------------------------------------------------------
London, England European offices of SunGard Capital 14,500
Markets and SunGard Futures Systems
and related computer center with one
DEC VAX computer.
- --------------------------------------------------------------------------------
Los Altos, CA Headquarters for Renaissance Software. 11,000
- --------------------------------------------------------------------------------
New York, NY Headquarters for Shaw Data Services. 16,000
- --------------------------------------------------------------------------------
New York, NY Headquarters for SunGard Capital 12,500
Markets.
- --------------------------------------------------------------------------------
Northbrook, IL SunGard Recovery Services MegaCenter 84,000
(near Chicago) with two IBM mainframe and two Tandem
computers, and three Hewlett Packard,
five IBM midrange, four Sun
Microsystems and one Unisys mobile
computers.
- --------------------------------------------------------------------------------
Philadelphia, PA SunGard Recovery Services MegaCenter 213,500
with five DEC, seven Hewlett Packard,
four IBM or IBM-compatible mainframe,
one Sequent, four Stratus and two
Tandem computers, and nine Hewlett
Packard, ten IBM midrange, one NCR
and six Sun Microsystems mobile
computers.
- --------------------------------------------------------------------------------
Rockville, MD Headquarters for Intelus Corporation. 20,600
- --------------------------------------------------------------------------------
Roswell, GA SunGard Recovery Services MegaCenter 37,800
(near Atlanta) with ten DEC computers, and four DEC,
one Hewlett Packard, nine IBM
midrange and one Sun Microsystems
mobile computers.
- --------------------------------------------------------------------------------
San Mateo, CA Headquarters for SunGard Shareholder 18,200
Systems.
- --------------------------------------------------------------------------------
15
- --------------------------------------------------------------------------------
Location Purpose Square Feet
================================================================================
Scottsdale, AZ SunGard Recovery Services MegaCenter 13,800
with five Prime and five Unisys
computers, and one Unisys mobile
computer.
- --------------------------------------------------------------------------------
Stockholm, Sweden Headquarters for Front Capital 40,000
Systems and Prosoftia.
- --------------------------------------------------------------------------------
Sydney, Australia Australian offices of SunGard Capital 6,700
Markets, SunGard Futures Systems and
the SunGard Trust and Shareholder
Systems Group, and related computer
center with one DEC VAX computer.
- --------------------------------------------------------------------------------
Voorhees, NJ Headquarters for SunGard Computer 51,000
(near Philadelphia) Services and related computer center
with four IBM or IBM-compatible
mainframe computers.
- --------------------------------------------------------------------------------
Waltham, MA Headquarters for SunGard Brokerage 31,300
(near Boston) Systems and related computer center
with five Tandem computers.
- --------------------------------------------------------------------------------
Waltham, MA Headquarters for SunGard Global 16,400
(near Boston) Systems and related computer center
with thirteen DEC computers and two
IBM RS-6000 workstations.
- --------------------------------------------------------------------------------
Warminster, PA SunGard Recovery Services MegaCenter 20,000
(near Philadelphia) with six Unisys computers.
- --------------------------------------------------------------------------------
The Company leases all of the offices and facilities listed in the preceding
table, with the exception of its 85,000 square-foot Birmingham facility and its
Voorhees and Warminster facilities, which are owned, and its Hopkins facility,
which consists of two connected buildings, one leased and the other owned. The
Company also owns its MetroCenters in St. Paul, Minnesota and Northbrook,
Illinois. The Company also leases space, primarily for sales offices, customer
support offices, MetroCenters and remote operations centers, in many locations
in the United States and internationally. The Company believes that its leased
and owned facilities are adequate for the Company's present operations.
Item 3. Legal Proceedings
The Company is presently a party to certain lawsuits arising in the ordinary
course of its business. The Company believes that none of its current legal
proceedings will be material to its business or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
None.
16
Item 4.1 Certain Executive Officers of the Registrant
The executive officers of the Company who are not also directors are listed
below.
- --------------------------------------------------------------------------------
Name Age Principal Positions with the Company
================================================================================
Kenneth R. Adams 60 Chief Executive Officer, SunGard Healthcare
Information Systems Group
- --------------------------------------------------------------------------------
Bruce H. Battjer 45 Chief Executive Officer, SunGard Computer
Services Group
- --------------------------------------------------------------------------------
Andrew P. Bronstein 37 Vice President and Controller, SunGard Data
Systems Inc.
- --------------------------------------------------------------------------------
Cristobal I. Conde 35 Chief Executive Officer, SunGard Trading
Systems Group
- --------------------------------------------------------------------------------
Philip L. Dowd 54 Chief Executive Officer, SunGard Trust and
Shareholder Systems Group
- --------------------------------------------------------------------------------
Lawrence A. Gross 43 Vice President and General Counsel, SunGard
Data Systems Inc.
- --------------------------------------------------------------------------------
Michael F. Mulholland 46 Chief Executive Officer, SunGard Recovery
Services Group
- --------------------------------------------------------------------------------
Michael K. Muratore 49 Chief Executive Officer, SunGard Financial
Systems Group
- --------------------------------------------------------------------------------
Donna J. Pedrick 46 Vice President-Human Resources, SunGard Data
Systems Inc.
- --------------------------------------------------------------------------------
Michael J. Ruane 42 Chief Financial Officer and Vice
President-Finance, SunGard Data Systems Inc.
- --------------------------------------------------------------------------------
Richard C. Tarbox 43 Vice President-Corporate Development, SunGard
Data Systems Inc.
- --------------------------------------------------------------------------------
Mr. Adams has been Chairman and Chief Executive Officer of Intelus Corporation
since September 1995 and of MACESS Corporation since October 1995. Before that,
he was Chairman and Chief Executive Officer of SunGard Recovery Services Inc.
since 1988 and was its President from 1990 to 1992. From 1983 to 1988, Mr.
Adams was President and a director of SunGard Trust Systems Inc.
Mr. Battjer has been Chief Executive Officer and a director of SunGard
Computer Services Inc. since October 1995. Before that, Mr. Battjer served in
various executive positions in SunGard's Recovery Services Group, most recently
as President of Planning Solutions.
Mr. Bronstein has been Vice President and Controller of the Company since
February 1994. Before that, he was Corporate Controller since 1992. From 1985
to 1992, he was a manager with Coopers & Lybrand L.L.P., Philadelphia, where he
served as senior manager on the Company's account and as director of the firm's
Philadelphia high technology group. Mr. Bronstein is a director and officer of
most of the Company's domestic subsidiaries.
Mr. Conde has been Chief Executive Officer and a director of SunGard Systems
International Inc. (formerly named SunGard Capital Markets Inc.) since 1991. He
was one of the founders of that company in 1983 and was its Executive Vice
President from 1983 to 1991. Before it was acquired by the Company in 1987,
SunGard Systems International Inc., originally named Devon Systems
International, Inc., was an independent software company. Mr. Conde is a
director and/or officer of some of the Company's domestic subsidiaries and many
of its foreign subsidiaries.
Mr. Dowd has been Chief Executive Officer of SunGard Investment Systems Inc.
since 1990 and one of its directors since 1982. He was President of SunGard
Investment Systems Inc. from 1982 to 1990. Mr. Dowd is a director and/or officer
of many of the Company's investment support systems subsidiaries.
Mr. Gross has been Vice President and General Counsel of the Company since
1986 and Secretary of the Company since 1987. From 1979 to 1986, he was a
lawyer with Blank, Rome, Comisky &
17
McCauley, Philadelphia, and he has represented the Company since 1983.
Mr. Gross is a director and officer of most of the Company's domestic
subsidiaries and some of its foreign subsidiaries.
Mr. Mulholland has been Chairman and Chief Executive Officer of SunGard
Recovery Services Inc. since October 1995 and was its President and Chief
Operating Officer since 1992. From 1987 to 1992, Mr. Mulholland served in
various executive capacities in the Company and the Recovery Services Group.
Mr. Muratore has been Chief Executive Officer and a director of SunGard
Financial Systems Inc. since October 1995. Before that, he was Chief Executive
Officer and a director of SunGard Computer Services Inc. since 1989 and
President-Processing Divisions of SunGard Business Systems Inc. since 1990.
From 1985 to 1988, Mr. Muratore was President of the Company's Central Computer
Facility, which was consolidated with SunGard Computer Services Inc. at the end
of 1988.
Ms. Pedrick has been Vice President-Human Resources of the Company since 1988.
From 1983 to 1988, she was Director-Human Resources of the Company.
Mr. Ruane has been Chief Financial Officer, Vice President-Finance and
Treasurer of the Company since 1994. From 1992 until 1994, Mr. Ruane was Chief
Financial Officer and Vice President-Finance of SunGard Systems International
Inc. (formerly named SunGard Capital Markets Inc.) Before that, he was Vice
President-Controller of the Company from 1990 through 1992, and Corporate
Controller of the Company from 1985 to 1990. Mr. Ruane is a director and
officer of most of the Company's domestic and foreign subsidiaries.
Mr. Tarbox has been Vice President-Corporate Development of the Company since
1987. He is an officer of several of the Company's domestic subsidiaries.
18
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
This information is incorporated by reference to the section entitled Stock
Information in the Company's 1995 Annual Report to Stockholders (included in
Exhibit 13.1 to this Report on Form 10-K).
Item 6. Selected Financial Data
This information is incorporated by reference to the section entitled Selected
Financial Information in the Company's 1995 Annual Report to Stockholders
(included in Exhibit 13.1 to this Report on Form 10-K).
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This information is incorporated by reference to the section entitled
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's 1995 Annual Report to Stockholders (included in
Exhibit 13.1 to this Report on Form 10-K).
Item 8. Financial Statements and Supplementary Data
The financial statements of the Company, financial statement schedule of the
Company, supplementary data and related documents that are included in this
Report on Form 10-K are listed in Item 14(a), Part IV, of this Report.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
19
PART III
This Part incorporates certain information from the Company's definitive proxy
statement for its 1996 Annual Meeting of Stockholders ("1996 Proxy Statement")
to be filed with the Securities and Exchange Commission not later than 120 days
after the end of the Company's fiscal year covered by this Report on Form 10-K.
Notwithstanding such incorporation, the sections of the Company's 1996 Proxy
Statement entitled Compensation Committee Report and Performance Graph shall not
be deemed to be "filed" as part of this Report.
Item 10. Directors and Executive Officers of the Registrant
Information concerning the directors of the Company is incorporated by
reference to the Company's 1996 Proxy Statement including but not necessarily
limited to the section of such proxy statement entitled Election of Directors.
Information concerning executive officers of the Company who are not also
directors is included in Item 4.1, Part I, of this Report on Form 10-K.
Item 11. Executive Compensation
This information is incorporated by reference to the Company's 1996 Proxy
Statement including but not necessarily limited to the section of such proxy
statement entitled Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is incorporated by reference to the Company's 1996 Proxy
Statement including but not necessarily limited to the section of such proxy
statement entitled Beneficial Ownership of Common Stock.
Item 13. Certain Relationships and Related Transactions
This information is incorporated by reference to the Company's 1996 Proxy
Statement including but not necessarily limited to the sections of such proxy
statement entitled Executive Compensation, Beneficial Ownership of Common Stock
and Election of Directors.
20
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements
The following financial statements of the Company, supplementary data and
related documents are incorporated by reference to the Company's 1995 Annual
Report to Stockholders (included in Exhibit 13.1 to this Report on Form 10-K):
Report of Independent Accountants on Financial Statements, dated February 8,
1996
Consolidated Statements of Income for each of the years ended December 31,
1995, 1994 and 1993
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Cash Flows for each of the years ended December 31,
1995, 1994 and 1993
Consolidated Statement of Stockholders' Equity for each of the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Quarterly Financial Information (unaudited)
(a)(2) Financial Statement Schedule
The following financial statement schedule of the Company and related
documents are included in this Report on Form 10-K:
Page
----
Report of Independent Accountants on Financial Statement Schedule, dated
February 8, 1996......................................................... 26
Schedule II--Valuation and Qualifying Accounts........................... 27
(a)(3) Exhibits
The Exhibits that are incorporated by reference in this Report on Form 10-K,
or are filed with this Report, are listed in the List of Exhibits beginning on
page 24 of this Report. Exhibits 10.10 through 10.19 are the management
contracts and compensatory plans and arrangements that are required to be filed
as Exhibits to this Report.
(b) Reports on Form 8-K
The following Current Reports on Form 8-K were filed by the Company with the
Securities and Exchange Commission during the last quarter of 1995:
Form 8-K (dated September 29, 1995) filed on October 6, 1995 relating to the
Company's entering into a definitive agreement to acquire MACESS Corporation
("MACESS"). That Report included
21
audited financial statements of MACESS, Renaissance Software Inc.
("Renaissance") and Intelus Corporation ("Intelus") and unaudited pro forma
combined condensed income statement data of the Company, MACESS, Renaissance
and Intelus.
Form 8-K (dated September 30, 1995) filed on October 20, 1995 relating to the
Company's third quarter results, recent acquisitions and management changes.
Form 8-K (dated October 31, 1995) filed on November 1, 1995 relating to the
consummation of the Company's acquisition by merger of MACESS.
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SunGard Data Systems Inc.
Date: March 29, 1996 By: /s/ James L. Mann
----------------------------------
James L. Mann,
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ James L. Mann Chief Executive Officer, March 29, 1996
- -------------------------------- President, and Chairman
James L. Mann of the Board of Directors
(principal executive officer)
/s/ Michael J. Ruane Chief Financial Officer and March 29, 1996
- -------------------------------- Vice President-Finance
Michael J. Ruane (principal financial officer)
/s/ Andrew P. Bronstein Vice President and Controller March 29, 1996
- -------------------------------- (principal accounting officer)
Andrew P. Bronstein
/s/ Gregory S. Bentley Director March 29, 1996
- --------------------------------
Gregory S. Bentley
/s/ Michael C. Brooks Director March 29, 1996
- --------------------------------
Michael C. Brooks
/s/ Albert A. Eisenstat Director March 29, 1996
- --------------------------------
Albert A. Eisenstat
/s/ Bernard Goldstein Director March 29, 1996
- --------------------------------
Bernard Goldstein
/s/ Michael Roth Director March 29, 1996
- --------------------------------
Michael Roth
/s/ Malcolm I. Ruddock Director March 29, 1996
- --------------------------------
Malcolm I. Ruddock
/s/ Lawrence J. Schoenberg Director March 29, 1996
- --------------------------------
Lawrence J. Schoenberg
23
LIST OF EXHIBITS
Number Document
- ------ ----------------------------------------------------------------------
3.1/1/ Amended and Restated Certificate of Incorporation of the Company.
3.2/2/ Amended and Restated Bylaws of the Company.
4.1/2/ Specimen Common Stock Certificate of the Company.
10.1/2/ Lease, dated June 18, 1981, between the Company and American National
Bank and Trust Company of Chicago, relating to the Company's facility
in Northbrook, Illinois ("First Northbrook Lease").
10.2/3/ Amendment to the First Northbrook Lease, dated September 16, 1986.
10.3/4/ Amendment to the First Northbrook Lease, dated October 14, 1987.
10.4/5/ Amendment to the First Northbrook Lease, dated October 1, 1988.
10.5/5/ Lease, dated October 1, 1988, between the Company and American
National Bank and Trust Company of Chicago, relating to the Company's
facility in Northbrook, Illinois ("Second Northbrook Lease").
10.6/6/ Amendment to the Second Northbrook Lease, dated September 15, 1989.
10.7/7/ Lease, dated April 12, 1984, between the Company and Broad and Noble
Associates, Inc., relating to the Company's facility at 401 North
Broad Street, Philadelphia, Pennsylvania, and Amendments thereto,
dated October 18, 1989, September 30, 1991 and November 19, 1992 ("401
Lease").
10.8 Amendment to 401 Lease, dated October 9, 1995 (filed with this
Report).
10.9/1/ Lease, dated May 19, 1989, between the Company and Northmeadow
Associates, relating to the Company's facility in Roswell, Georgia,
Amendment thereto, dated June 1989, and Assignment and Assumption
thereof, dated December 31, 1990.
10.10/1/ The Company's 1982 Incentive Stock Option Plan and Amendments thereto,
dated January 1, 1987 and November 8, 1991./11/
10.11/8/ The Company's 1986 Stock Option Plan, Amendments thereto, dated
January 1, 1987, November 1, 1988, February 6, 1990, November 8, 1991,
February 16, 1993 and February 13, 1995, and United Kingdom Addendum
thereto, dated February 12, 1991./11/
10.12/1/ The Company's 1988 Nonqualified Stock Option Plan and Amendment
thereto, dated October 30, 1990./11/
10.13/6/ The Company's 1990 Amended and Restated Restricted Stock Incentive
Plan./11/
10.14/9/ The Company's Restricted Stock Award Plan for Outside Directors./11/
10.15/10/ The Company's 1994 Equity Incentive Plan./11/
10.16 The Company's 1996 Equity Incentive Plan (filed with this Report)./11/
24
NUMBER DOCUMENT
- ------ ---------------------------------------------------------------------
10.17/10/ Summary Description of the Company's Annual Executive Incentive
Compensation Program./11/
10.18 Summary Description of the Company's Long-Term Executive Incentive
Compensation Plan (filed with this Report)./11/
10.19/1/ Form of Indemnification Agreement entered into by the Company with
its directors and officers./11/
11.1 Statement Re Computation of Per Share Earnings (filed with this
Report).
13.1 Portions of the Company's Annual Report to Stockholders for the
fiscal year ended December 31, 1995 expressly incorporated herein by
reference (filed with this Report).
21.1 Subsidiaries of the Registrant (filed with this Report).
23.1 Consent of Independent Accountants, regarding the Company's
consolidated financial statements and financial statement schedule
(included at page 26 of this Report).
27.1 Financial Data Schedule for the year ended December 31, 1995 (filed
with this Report).
- ---------------
(1) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1991 (Commission
File No. 0-14232).
(2) Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-1 and Amendments No. 1, No. 2, and No. 3
thereto (Registration No. 33-3181).
(3) Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-1 and Amendment No. 1 thereto
(Registration No. 33-12536).
(4) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987 (Commission
File No. 0-14232).
(5) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1988 (Commission
File No. 0-14232).
(6) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989 (Commission
File No. 0-14232).
(7) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992 (Commission
File No. 0-14232).
(8) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 (Commission
File No. 0-14232).
(9) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission
File No. 0-14232).
(10) Incorporated by reference to the Exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 (Commission
File No. 0-14232).
(11) Management contract or compensatory plan or arrangement.
25
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference into the Company's Registration
Statements on Form S-8 (Registration Nos. 33-6425, 33-14984, 33-33602, 33-42345,
33-69650 and 33-64901) of our reports dated February 8, 1996 on our audits of
the consolidated financial statements and consolidated financial statement
schedule of SunGard Data Systems Inc. and subsidiaries as of December 31, 1995
and 1994, and for each of the years in the three-year period ended December 31,
1995, which report on the consolidated financial statements is incorporated by
reference in this Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 27, 1996
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders
SunGard Data Systems Inc.
Our report on the consolidated financial statements of SunGard Data Systems
Inc. and subsidiaries is incorporated by reference in this Report on Form 10-K
from page 56 of the 1995 Annual Report to Stockholders of SunGard Data Systems
Inc. In connection with our audit of such consolidated financial statements, we
also have audited the related consolidated financial statement schedule listed
in Item 14(a)(2), Part IV, of this Report on Form 10-K.
In our opinion, the consolidated financial statement schedule referred to
above, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 8, 1996
26
SunGard Data Systems Inc. and Subsidiaries
Financial Statement Schedule
- --------------------------------------------------------------------------------
SCHEDULE II
Valuation and Qualifying Accounts
Allowance for Doubtful Accounts
-------------------------------
Year Ended Beginning Charged Ending
December 31, Balance to Expense Other/(1)/ Write-offs Balance
- -------------- ---------- ---------- ----------- ------------ ----------
1995.......... $7,276,000 $1,705,000 $565,000 ($3,120,000) $6,426,000
1994.......... 6,969,000 4,014,000 71,000 ( 3,778,000) 7,276,000
1993.......... 4,491,000 4,963,000 (21,000) ( 2,464,000) 6,969,000
(1) Net impact of acquired companies, foreign currency translation, and, in
1993, the sale of a product line.
27
INDEX OF EXHIBITS FILED WITH THIS REPORT
Number Document
- ------ ------------------------------------------------------------------------
10.8 Amendment to 401 Lease, dated October 9, 1995.
10.16 The Company's 1996 Equity Incentive Plan./(1)/
10.18 Summary Description of the Company's Long-Term Executive Incentive
Compensation Plan./(1)/
11.1 Statement Re Computation of Per Share Earnings.
13.1 Portions of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1995 expressly incorporated herein by reference.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants, regarding the Company's consolidated
financial statements and financial statement schedule (included at page
26 of this Report).
27.1 Financial Data Schedule for the year ended December 31, 1995.
_______________
(1) Management contract or compensatory plan or arrangement.