EX-99.2 5 dex992.htm UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENT Prepared by R.R. Donnelley Financial -- Unaudited Pro Forma Combined Financial Statement
EXHIBIT 99.2
 
SunGard Data Systems Inc.
Pro Forma Combined Condensed Balance Sheet
June 30, 2002
(Unaudited)
(In thousands)
 
    
Historical SunGard (1)
     
Historical Guardian (2)
     
Pro Forma Adjustments 
         
Pro Forma Combined
  
Assets:
                                        
Cash, cash equivalents and short-term investments
   
$
438,797
 
   
$
3,145
 
   
$
(102,120
)
  (3)     
$
339,822
 
Accounts receivable, net
   
 
542,274
 
   
 
36,738
 
   
 
—  
 
       
 
579,012
 
Prepaid expenses and other current assets
   
 
69,007
 
   
 
54,273
 
   
 
(1,914
)
  (5)     
 
121,366
 
Deferred income taxes
   
 
45,767
 
   
 
—  
 
   
 
—  
 
       
 
45,767
 
    
  
  
      
Total current assets
   
 
1,095,845
 
   
 
94,156
 
   
 
(104,034
)
       
 
1,085,967
 
Property and equipment, net
   
 
501,761
 
   
 
86,683
 
   
 
(3,988
)
  (4)     
 
584,456
 
Software products
   
 
133,552
 
   
 
1,256
 
   
 
(863
)
  (4)     
 
133,945
 
Customer base
   
 
255,160
 
   
 
—  
 
   
 
73,000
 (4)     
 
328,160
 
Goodwill
   
 
639,348
 
   
 
305,228
 
   
 
(48,987
)
  (4)     
 
895,589
 
Other tangible and intangible assets
   
 
77,232
 
   
 
325
 
   
 
(18,235
)
  (4)     
 
59,322
 
Deferred income taxes
   
 
135,808
 
   
 
—  
 
   
 
(21,900
)
  (4)     
 
113,908
 
    
  
  
      
Total assets
   
$
2,838,706
 
   
$
487,648
 
   
$
(125,007
)
       
$
3,201,347
 
    
  
  
      
Liabilities and Stockholders’ Equity:
                                        
Short-term and current portion of long-term debt
   
$
3,101
 
   
$
86,288
 
   
$
(19,473
)
  (3)     
$
164,128
 
                      
 
55,000
 (3)           
                      
 
39,212
 (3)           
Accounts payable
   
 
32,864
 
   
 
29,953
 
   
 
10,000
 (6)     
 
72,817
 
Accrued compensation and benefits
   
 
111,026
 
   
 
3,231
 
   
 
3,255
 (6)     
 
117,512
 
Other accrued expenses
   
 
102,637
 
   
 
11,414
 
   
 
59,003
 (6)     
 
173,054
 
Accrued income taxes
   
 
24,325
 
   
 
—  
 
   
 
—  
 
       
 
24,325
 
Deferred revenues
   
 
338,828
 
   
 
65,086
 
   
 
4,350
 (3)     
 
408,264
 
    
  
  
      
Total current liabilities
   
 
612,781
 
   
 
195,972
 
   
 
151,347
 
       
 
960,100
 
Long-term debt
   
 
230,470
 
   
 
124,592
 
   
 
(70,058
)
  (3)     
 
245,792
 
                      
 
(39,212
)
  (3)           
    
  
  
      
Total liabilities
   
 
843,251
 
   
 
320,564
 
   
 
42,077
 
       
 
1,205,892
 
    
  
  
      
Stockholders’ Equity:
                                        
Preferred stock
   
 
—  
 
   
 
—  
 
   
 
—  
 
       
 
—  
 
Common stock
   
 
2,833
 
   
 
16,159
 
   
 
(16,159
)
  (7)     
 
2,833
 
Capital in excess of par value
   
 
797,172
 
   
 
269,158
 
   
 
(269,158
)
  (7)     
 
797,172
 
Restricted stock plans and notes receivable for common stock
   
 
(2,268
)
   
 
—  
 
   
 
—  
 
       
 
(2,268
)
Retained earnings
   
 
1,222,745
 
   
 
(118,233
)
   
 
118,233
 (7)     
 
1,222,745
 
Foreign currency translation adjustment
   
 
(10,292
)
   
 
—  
 
   
 
—  
 
       
 
(10,292
)
    
  
  
      
    
 
2,010,190
 
   
 
167,084
 
   
 
(167,084
)
       
 
2,010,190
 
Treasury stock
   
 
(14,735
)
   
 
—  
 
   
 
—  
 
       
 
(14,735
)
    
  
  
      
Total stockholders’ equity
   
 
1,995,455
 
   
 
167,084
 
   
 
(167,084
)
       
 
1,995,455
 
    
  
  
      
Total liabilities and stockholders’ equity
   
$
2,838,706
 
   
$
487,648
 
   
$
(125,007
)
       
$
3,201,347
 
    
  
  
      
 
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.

 
SunGard Data Systems Inc.
Pro Forma Combined Condensed Statement of Income
For the six months ended June 30, 2002
(Unaudited)
(In thousands, except per share data)
 
    
Historical SunGard (1)
     
Historical Guardian (2)
     
Pro Forma Adjustments
     
Pro Forma Combined
  
Revenues
   
$
1,231,551
 
   
$
75,573
 
   
$
—  
 
   
$
1,307,124
 
    
  
  
  
Operating expenses, excluding merger and restructuring costs
   
 
975,949
 
   
 
76,008
 
   
 
2,920
(4)
   
 
1,054,877
 
Merger and restructuring costs
   
 
1,677
 
   
 
8,806
 
   
 
—  
(8)
   
 
10,483
 
    
  
  
  
Operating income (loss)
   
 
253,925
 
   
 
(9,241
)
   
 
(2,920
 )
  
 
241,764
 
Interest and other income
   
 
4,717
 
   
 
38
 
   
 
(1,447
 )
(3)
   
 
3,308
 
Interest expense
   
 
(6,979
)
   
 
(7,064
)
   
 
(935
 )
(3)
   
 
(14,978
)
Other income
   
 
590
 
   
 
—  
 
   
 
—  
 
   
 
590
 
    
  
  
  
Income (loss) before income taxes
   
 
252,253
 
   
 
(16,267
)
   
 
(5,302
 )
  
 
230,684
 
Income taxes
   
 
100,548
 
   
 
419
 
   
 
(1,591
 )
(9)
   
 
99,376
 
    
  
  
  
Net income (loss)
   
$
151,705
 
   
$
(16,686
)
   
$
(3,711
 )
  
$
131,308
 
    
  
  
  
Basic net income per common share
   
$
0.54
 
                     
$
0.47
 
    
                    
Diluted net income per common share
   
$
0.52
 
                     
$
0.45
 
    
                    
Shares used to compute net income per common share:
                                    
Basic
   
 
281,760
 
                     
 
281,760
 
    
                    
Diluted
   
 
290,974
 
                     
 
290,974
 
    
                    
 
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.

SunGard Data Systems Inc.
Pro Forma Combined Condensed Statement of Income
For the year ended December 31, 2001
(Unaudited)
(In thousands, except per share data)
 
    
Historical SunGard (1)
     
Historical Guardian (2)
     
Pro Forma Adjustments 
     
Pro Forma Combined
  
Revenues
   
$
1,928,673
 
   
$
165,358
 
   
$
—  
 
   
$
2,094,031
 
    
  
  
  
Operating expenses, excluding merger and restructuring costs
   
 
1,522,240
 
   
 
165,580
 
   
 
5,840
  (4)
   
 
1,693,660
 
Merger and restructuring costs
   
 
7,223
 
   
 
124,512
 
   
 
—  
  (8)
   
 
131,735
 
    
  
  
  
Operating income (loss)
   
 
399,210
 
   
 
(124,734
)
   
 
(5,840
)
   
 
268,636
 
Interest and other income
   
 
26,793
 
   
 
267
 
   
 
(3,066
) (3)
   
 
23,994
 
Interest expense
   
 
(3,641
)
   
 
(8,380
)
   
 
(1,870
) (3)
   
 
(13,891
)
Loss on write-off of investment
   
 
(11,890
)
   
 
—  
 
   
 
—  
 
   
 
(11,890
)
    
  
  
  
Income (loss) before income taxes
   
 
410,472
 
   
 
(132,847
)
   
 
(10,776
)
   
 
266,849
 
Income taxes
   
 
164,417
 
   
 
1,724
 
   
 
(3,233
) (9)
   
 
162,908
 
    
  
  
  
Net income (loss)
   
$
246,055
 
   
$
(134,571
)
   
$
(7,543
)
   
$
103,941
 
    
  
  
  
Basic net income per common share
   
$
0.89
 
                     
$
0.38
 
    
                    
Diluted net income per common share
   
$
0.86
 
                     
$
0.36
 
    
                    
Shares used to compute net income per common share:
                                    
Basic
   
 
276,057
 
                     
 
276,057
 
    
                    
Diluted
   
 
285,112
 
                     
 
285,112
 
    
                    
 
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.

SunGard Data Systems Inc.
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
(Unaudited)
 
The unaudited pro forma combined condensed financial information is presented for illustrative purposes only and assumes that the acquisition had occurred as of the beginning of each period presented. This financial information should not be relied upon as necessarily being indicative of the historical results that would have been obtained if the companies had been combined during those periods or the results that may be obtained in the future.
 
Note 1—SunGard historical financial information
 
SunGard Data Systems Inc. (SunGard) historical financial information as previously filed with the Securities and Exchange Commission.
 
Note 2—Guardian iT plc historical financial information
 
The Guardian iT plc (Guardian) historical financial information as presented in accordance with the generally accepted accounting principles in the United States of America. Prior to acquisition by SunGard, Guardian was a publicly listed company that traded on the London Stock Exchange. The following exchange rates were used in translating Guardian’s financial statements in British pounds sterling to US dollars:
 
Average rate for the year ended December 31, 2001
   
1.443923
Average rate for the six months ended June 30, 2002
   
1.450629
At June 30, 2002
   
1.532100
 
Refer to Note 32 of Notes to Guardian’s consolidated financial statements for the year ended December 31, 2001.
 
Note 3—Acquisition financing and preliminary purchase price allocation
 
The purchase price values Guardian at approximately $274.1 million, consisting of $86.8 million for the shares of Guardian plus $187.3 million of Guardian bank debt and finance lease obligations. SunGard acquired 24.9% of Guardian shares during the second quarter of 2002 for $20.5 million, and purchased the remaining shares and repaid Guardian bank debt totaling approximately $157.1 million, and expects to pay the remaining balances under most of Guardian’s finance leases, totaling approximately $96.5 million by September 30, 2002. The Company borrowed $55.0 million under its unsecured revolving credit agreement (Credit Agreement) at a rate of approximately 2.9%, with an effective interest rate of approximately 3.4%. For every one-eighth percent adjustment to the interest rate, interest expense increases or decreases by $69,000 per year. The pro forma rules require using current borrowing rates and do not reflect rates that would have been charged during the periods presented. The interest rate used to calculate lost interest income from use of previously existing cash is 2.5%, and represents the estimated rate of interest earned on cash and investment balances during the periods presented.
 
The allocation of the purchase price is preliminary and is subject to change based on the completion of independent appraisals of tangible and intangible assets, possible changes to the preliminary decisions about which facilities to close, the difference between actual costs and estimated costs (including facility closure costs) used in the preliminary purchase price allocation (also see Note 8), and the completion of financial information as of July 1, 2002, the date of closing of the acquisition. The finalization of the allocation of the purchase price will result in adjustment to certain assets acquired and liabilities assumed, with an offsetting increase or decrease to goodwill. The preliminary estimated allocation of the purchase price follows (in millions):
 
Cash paid from existing cash balances
   
$
102.1
 
Cash paid from borrowings under Credit Agreement
   
 
55.0
 
Cash paid during the second quarter 2002 to acquire 24.9% of Guardian
   
 
20.5
 
    
Total cash paid
   
 
177.6
 
Finance leases assumed
   
 
96.5
 
    
Total cash paid plus finance leases assumed
   
 
274.1
 
Acquisition costs
   
 
10.0
 
Equity in loss of Guardian during May and June
   
 
(2.3
)
Restructuring accruals
   
 
39.7
 
Unfavorable leases assumed
   
 
13.8
 
Liabilities assumed
   
 
147.7
 
Deferred income taxes
   
 
21.9
 
    
Total cash paid and liabilities assumed and created
   
$
504.9
 
    
Assets acquired:
         
Tangible assets at estimated fair value
   
$
175.7
 
Customer base (life of 12.5 years)
   
 
73.0
 
Goodwill
   
 
256.2
 
    
Total assets acquired
   
$
504.9
 
    
 
 
 
Note 4—Valuation of property and equipment and other tangible and intangible assets
 
The pro forma adjustment is based on preliminary results of an independent inventory and appraisal of facilities and equipment. An independent appraisal is also underway in connection with acquired contracts and customer relationships. The fair value of acquired contracts and customer relationships will be amortized over their estimated useful lives. In accordance with Statement of Financial Accounting Standards Number 142, goodwill is not amortized and will be evaluated for impairment at least annually. In addition, the Company purchased 24.9% of Guardian’s outstanding common stock on May 1, 2002. The investment in Guardian common stock purchased by the Company on May 1, 2002 is reclassified to goodwill upon completion of the acquisition, net of the Company’s equity in Guardian’s net loss during May and June of 2002.
 
Note 5—Commissions
 
Guardian records commissions as an asset when paid, and then expenses the commission over the contract period. SunGard expenses commissions when paid. Pro forma adjustments conforms Guardian’s deferred commissions to SunGard’s accounting policy. For pro forma purposes, the amount of commission expense is assumed to approximate the amount of commissions paid.
 
Note 6—Other pro forma adjustments
 
Other pro forma adjustments include estimates for acquisition costs ($10.0 million), costs for termination of certain Guardian employees ($3.3 million), closure of certain Guardian facilities ($35.7 million), accrual for unfavorable leases ($13.8 million), lease termination fees ($8.8 million) and exit costs associated with certain other businesses ($0.7 million).
 
Note 7—Equity
 
Removes historical equity of Guardian.
 
Note 8—Restructuring
 
As a result of the acquisition of Guardian, SunGard will eliminate certain positions and plans to close certain Guardian and SunGard facilities. While estimated restructuring costs related to SunGard employee terminations and SunGard facilities closures are not included in these pro forma financial statements, such costs will be expensed in the third quarter of 2002. Costs related to Guardian employee terminations and Guardian facility closures are included in the allocation of purchase price (see Notes 3 and 6 above).
 
Note 9—Income taxes
 
Assumes an effective income tax rate of 30%.