United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2012
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 numbers:
SunGard Capital Corp. | 000-53653 | |||||
SunGard Capital Corp. II | 000-53654 | |||||
SunGard Data Systems Inc. | 001-12989 |
SunGard® Capital Corp.
SunGard® Capital Corp. II
SunGard® Data Systems Inc.
(Exact name of registrant as specified in its charter)
Delaware | 20-3059890 | |
Delaware | 20-3060101 | |
Delaware | 51-0267091 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
680 East Swedesford Road, Wayne, Pennsylvania 19087
(Address of principal executive offices, including zip code)
484-582-2000
(Registrants telephone number, including area code)
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.
SunGard Capital Corp. | Yes x No ¨ | |||||
SunGard Capital Corp. II | Yes x No ¨ | |||||
SunGard Data Systems Inc. | Yes ¨ No x |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
SunGard Capital Corp. | Yes x No ¨ | |||||
SunGard Capital Corp. II | Yes x No ¨ | |||||
SunGard Data Systems Inc. | Yes x No ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
SunGard Capital Corp. Large accelerated filer ¨. Accelerated filer ¨. Non-accelerated filer x. Smaller reporting company ¨.
SunGard Capital Corp. II Large accelerated filer ¨. Accelerated filer ¨. Non-accelerated filer x. Smaller reporting company ¨.
SunGard Data Systems Inc. Large accelerated filer ¨. Accelerated filer ¨. Non-accelerated filer x. Smaller reporting company ¨.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
SunGard Capital Corp. | Yes ¨ No x | |||||
SunGard Capital Corp. II | Yes ¨ No x | |||||
SunGard Data Systems Inc. | Yes ¨ No x |
The number of shares of the registrants common stock outstanding as of March 31, 2012:
SunGard Capital Corp. | 256,651,923 shares of Class A common stock and 28,516,817 shares of Class L common stock | |||||
SunGard Capital Corp. II | 100 shares of common stock | |||||
SunGard Data Systems Inc. | 100 shares of common stock |
SunGard Capital Corp. II
SunGard Data Systems Inc.
And Subsidiaries
INDEX
Explanatory Note
This Form 10-Q is a combined quarterly report being filed separately by three registrants: SunGard Capital Corp. (SCC), SunGard Capital Corp. II (SCCII) and SunGard Data Systems Inc. (SunGard). SCC and SCC II are collectively referred to as the Parent Companies. Unless the context indicates otherwise, any reference in this report to the Company, we, us and our refer to the Parent Companies together with their direct and indirect subsidiaries, including SunGard. Each registrant hereto is filing on its own behalf all of the information contained in this quarterly report that relates to such registrant. Each registrant hereto is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information.
1
(In millions except share and per-share amounts)
(Unaudited)
December 31, 2011 |
March
31, 2012 |
|||||||
Assets |
||||||||
Current: |
||||||||
Cash and cash equivalents |
$ | 868 | $ | 1,378 | ||||
Trade receivables, less allowance for doubtful accounts of $38 and $46 |
802 | 714 | ||||||
Earned but unbilled receivables |
149 | 146 | ||||||
Prepaid expenses and other current assets |
117 | 144 | ||||||
Clearing broker assets |
213 | 217 | ||||||
Assets held for sale |
1,326 | | ||||||
|
|
|
|
|||||
Total current assets |
3,475 | 2,599 | ||||||
Property and equipment, less accumulated depreciation of $1,296 and $1,361 |
893 | 894 | ||||||
Software products, less accumulated amortization of $1,431 and $1,492 |
554 | 510 | ||||||
Customer base, less accumulated amortization of $1,269 and $1,331 |
1,580 | 1,532 | ||||||
Other intangible assets, less accumulated amortization of $22 and $25 |
144 | 127 | ||||||
Trade name, less accumulated amortization of $10 and $1 |
1,019 | 1,019 | ||||||
Goodwill |
4,885 | 4,904 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 12,550 | $ | 11,585 | ||||
|
|
|
|
|||||
Liabilities and Equity |
||||||||
Current: |
||||||||
Short-term and current portion of long-term debt |
$ | 10 | $ | 508 | ||||
Accounts payable |
60 | 35 | ||||||
Accrued compensation and benefits |
300 | 215 | ||||||
Accrued interest expense |
92 | 101 | ||||||
Accrued income taxes |
24 | 434 | ||||||
Other accrued expenses |
317 | 310 | ||||||
Clearing broker liabilities |
179 | 178 | ||||||
Deferred revenue |
862 | 872 | ||||||
Deferred income taxes |
76 | | ||||||
Liabilities related to assets held for sale |
230 | | ||||||
|
|
|
|
|||||
Total current liabilities |
2,150 | 2,653 | ||||||
Long-term debt |
7,819 | 6,101 | ||||||
Deferred income taxes |
1,125 | 1,103 | ||||||
|
|
|
|
|||||
Total liabilities |
11,094 | 9,857 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Noncontrolling interest in preferred stock of SCCII subject to a put option |
28 | 26 | ||||||
Class L common stock subject to a put option |
47 | 43 | ||||||
Class A common stock subject to a put option |
6 | 5 | ||||||
Stockholders equity: |
||||||||
Class L common stock, convertible, par value $.001 per share; cumulative 13.5% per annum, compounded quarterly; aggregate liquidation preference of $5,383 million and $5,575 million; 50,000,000 shares authorized, 28,842,773 and 28,923,575 shares issued |
|
|
|
| ||||
Class A common stock, par value $.001 per share; 550,000,000 shares authorized, 259,589,718 and 260,316,932 shares issued |
|
|
|
|
|
| ||
Capital in excess of par value |
2,768 | 2,776 | ||||||
Treasury stock, 387,638 and 406,757 shares of Class L common stock; and 3,492,925 and 3,665,008 shares of Class A common stock |
|
(39 |
) |
|
(41 |
) | ||
Accumulated deficit |
(3,346 | ) | (3,173 | ) | ||||
Accumulated other comprehensive income (loss) |
(46 | ) | (10 | ) | ||||
|
|
|
|
|||||
Total SunGard Capital Corp. stockholders equity (deficit) |
(663 | ) | (448 | ) | ||||
Noncontrolling interest in preferred stock of SCCII |
2,038 | 2,102 | ||||||
|
|
|
|
|||||
Total equity |
1,375 | 1,654 | ||||||
|
|
|
|
|||||
Total Liabilities and Equity |
$ | 12,550 | $ | 11,585 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
2
SunGard Capital Corp.
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2012 | |||||||
Revenue: |
||||||||
Services |
$ | 995 | $ | 989 | ||||
License and resale fees |
61 | 31 | ||||||
|
|
|
|
|||||
Total products and services |
1,056 | 1,020 | ||||||
Reimbursed expenses |
30 | 19 | ||||||
|
|
|
|
|||||
1,086 | 1,039 | |||||||
|
|
|
|
|||||
Costs and expenses: |
||||||||
Cost of sales and direct operating |
494 | 469 | ||||||
Sales, marketing and administration |
262 | 258 | ||||||
Product development and maintenance |
95 | 88 | ||||||
Depreciation and amortization |
69 | 71 | ||||||
Amortization of acquisition-related intangible assets |
117 | 102 | ||||||
|
|
|
|
|||||
1,037 | 988 | |||||||
|
|
|
|
|||||
Operating income (loss) |
49 | 51 | ||||||
Interest income |
1 | | ||||||
Interest expense and amortization of deferred financing fees |
(137 | ) | (122 | ) | ||||
Loss on extinguishment of debt |
(2 | ) | (15 | ) | ||||
Other income (expense) |
| 2 | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations before income taxes |
(89 | ) | (84 | ) | ||||
Benefit from (provision for) income taxes |
11 | 7 | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(78 | ) | (77 | ) | ||||
Income (loss) from discontinued operations, net of tax |
55 | 312 | ||||||
|
|
|
|
|||||
Net income (loss) |
(23 | ) | 235 | |||||
Income attributable to the noncontrolling interest (including $1 million and $- million in temporary equity) |
(54 | ) | (62 | ) | ||||
|
|
|
|
|||||
Net income (loss) attributable to SunGard Capital Corp. |
(77 | ) | 173 | |||||
|
|
|
|
|||||
Other Comprehensive income (loss): |
||||||||
Foreign currency translation |
57 | 33 | ||||||
|
|
|
|
|||||
Foreign currency translation, net |
57 | 33 | ||||||
|
|
|
|
|||||
Unrealized gain (loss) on derivative instruments |
(1 | ) | | |||||
Less: gain (loss) on derivatives reclassified into income |
13 | 4 | ||||||
Less: income tax benefit (expense) |
(4 | ) | (1 | ) | ||||
|
|
|
|
|||||
Net Unrealized gain (loss) on derivative instruments, net of tax |
8 | 3 | ||||||
|
|
|
|
|||||
Comprehensive income (loss) attributable to SunGard Capital Corp. |
$ | (12 | ) | $ | 209 | |||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
3
SunGard Capital Corp.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2012 | |||||||
Cash flow from operations: |
||||||||
Net income (loss) |
$ | (23 | ) | $ | 235 | |||
Income (loss) from discontinued operations |
55 | 312 | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(78 | ) | (77 | ) | ||||
Reconciliation of income (loss) from continuing operations to cash flow from (used in) operations: |
||||||||
Depreciation and amortization |
186 | 173 | ||||||
Deferred income tax provision (benefit) |
(23 | ) | 34 | |||||
Stock compensation expense |
6 | 11 | ||||||
Amortization of deferred financing costs and debt discount |
10 | 12 | ||||||
Loss on extinguishment of debt |
2 | 15 | ||||||
Other noncash items |
1 | (2 | ) | |||||
Accounts receivable and other current assets |
73 | 87 | ||||||
Accounts payable and accrued expenses |
(109 | ) | (117 | ) | ||||
Accrued income tax |
(2 | ) | (66 | ) | ||||
Clearing broker assets and liabilities, net |
(4 | ) | (4 | ) | ||||
Deferred revenue |
5 | 1 | ||||||
|
|
|
|
|||||
Cash flow from (used in) continuing operations |
67 | 67 | ||||||
Cash flow from (used in) discontinued operations |
(14 | ) | 8 | |||||
|
|
|
|
|||||
Cash flow from (used in) operations |
53 | 75 | ||||||
|
|
|
|
|||||
Investment activities: |
||||||||
Cash paid for acquired businesses, net of cash acquired |
(19 | ) | (6 | ) | ||||
Cash paid for property and equipment and software |
(61 | ) | (60 | ) | ||||
Other investing activities |
1 | 3 | ||||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(79 | ) | (63 | ) | ||||
Cash provided by (used in) discontinued operations |
(3 | ) | 1,740 | |||||
|
|
|
|
|||||
Cash provided by (used in) investment activities |
(82 | ) | 1,677 | |||||
|
|
|
|
|||||
Financing activities: |
||||||||
Cash received from borrowings, net of fees |
14 | (19 | ) | |||||
Cash used to repay debt |
(1 | ) | (1,225 | ) | ||||
Cash used to purchase treasury stock |
| (3 | ) | |||||
Other financing activities |
(2 | ) | (7 | ) | ||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
11 | (1,254 | ) | |||||
Cash provided by (used in) discontinued operations |
| | ||||||
|
|
|
|
|||||
Cash provided by (used in) financing activities |
11 | (1,254 | ) | |||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
16 | 7 | ||||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(2 | ) | 505 | |||||
Beginning cash and cash equivalents, includes cash of discontinued operations: 2011, $7; 2012, $5 |
|
778 |
|
|
873 |
| ||
|
|
|
|
|||||
Ending cash and cash equivalents, includes cash of discontinued operations: 2011, $7; 2012, $- |
$ | 776 | $ | 1,378 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
4
(In millions except share and per-share amounts)
(Unaudited)
December 31, 2011 |
March 31, 2012 |
|||||||
Assets |
||||||||
Current: |
||||||||
Cash and cash equivalents |
$ | 868 | $ | 1,378 | ||||
Trade receivables, less allowance for doubtful accounts of $38 and $46 |
802 | 714 | ||||||
Earned but unbilled receivables |
149 | 146 | ||||||
Prepaid expenses and other current assets |
117 | 144 | ||||||
Clearing broker assets |
213 | 217 | ||||||
Assets held for sale |
1,326 | | ||||||
|
|
|
|
|||||
Total current assets |
3,475 | 2,599 | ||||||
Property and equipment, less accumulated depreciation of $1,296 and $1,361 |
893 | 894 | ||||||
Software products, less accumulated amortization of $1,431 and $1,492 |
554 | 510 | ||||||
Customer base, less accumulated amortization of $1,269 and $1,331 |
1,580 | 1,532 | ||||||
Other intangible assets, less accumulated amortization of $22 and $25 |
144 | 127 | ||||||
Trade name, less accumulated amortization of $10 and $1 |
1,019 | 1,019 | ||||||
Goodwill |
4,885 | 4,904 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 12,550 | $ | 11,585 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity |
||||||||
Current: |
||||||||
Short-term and current portion of long-term debt |
$ | 10 | $ | 508 | ||||
Accounts payable |
60 | 35 | ||||||
Accrued compensation and benefits |
300 | 215 | ||||||
Accrued interest expense |
92 | 101 | ||||||
Accrued income taxes |
24 | 434 | ||||||
Other accrued expenses |
318 | 310 | ||||||
Clearing broker liabilities |
179 | 178 | ||||||
Deferred revenue |
862 | 872 | ||||||
Deferred income taxes |
76 | | ||||||
Liabilities related to assets held for sale |
230 | | ||||||
|
|
|
|
|||||
Total current liabilities |
2,151 | 2,653 | ||||||
Long-term debt |
7,819 | 6,101 | ||||||
Deferred income taxes |
1,124 | 1,103 | ||||||
|
|
|
|
|||||
Total liabilities |
11,094 | 9,857 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Preferred stock subject to a put option |
23 | 21 | ||||||
Stockholders equity: |
||||||||
Preferred stock, par value $.001 per share; cumulative 11.5% per annum, compounded quarterly; aggregate liquidation preference of $2,046 million and $2,110 million; 14,999,000 shares authorized, 9,984,091 and 10,012,061 issued |
| | ||||||
Common stock, par value $.001 per share; 1,000 shares authorized, 100 shares issued and oustanding |
| | ||||||
Capital in excess of par value |
3,785 | 3,790 | ||||||
Treasury stock, 134,215 and 140,834 shares |
(18 | ) | (20 | ) | ||||
Accumulated deficit |
(2,288 | ) | (2,053 | ) | ||||
Accumulated other comprehensive income (loss) |
(46 | ) | (10 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
1,433 | 1,707 | ||||||
|
|
|
|
|||||
Total Liabilities and Stockholders Equity |
$ | 12,550 | $ | 11,585 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
5
SunGard Capital Corp. II
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2012 | |||||||
Revenue: |
||||||||
Services |
$ | 995 | $ | 989 | ||||
License and resale fees |
61 | 31 | ||||||
|
|
|
|
|||||
Total products and services |
1,056 | 1,020 | ||||||
Reimbursed expenses |
30 | 19 | ||||||
|
|
|
|
|||||
1,086 | 1,039 | |||||||
|
|
|
|
|||||
Costs and expenses: |
||||||||
Cost of sales and direct operating |
494 | 469 | ||||||
Sales, marketing and administration |
262 | 258 | ||||||
Product development and maintenance |
95 | 88 | ||||||
Depreciation and amortization |
69 | 71 | ||||||
Amortization of acquisition-related intangible assets |
117 | 102 | ||||||
|
|
|
|
|||||
1,037 | 988 | |||||||
|
|
|
|
|||||
Operating income (loss) |
49 | 51 | ||||||
Interest income |
1 | | ||||||
Interest expense and amortization of deferred financing fees |
(137 | ) | (122 | ) | ||||
Loss on extinguishment of debt |
(2 | ) | (15 | ) | ||||
Other income (expense) |
| 2 | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations before income taxes |
(89 | ) | (84 | ) | ||||
Benefit from (provision for) income taxes |
11 | 7 | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(78 | ) | (77 | ) | ||||
Income (loss) from discontinued operations, net of tax |
55 | 312 | ||||||
|
|
|
|
|||||
Net income (loss) |
(23 | ) | 235 | |||||
|
|
|
|
|||||
Other Comprehensive income (loss): |
||||||||
Foreign currency translation |
57 | 33 | ||||||
|
|
|
|
|||||
Foreign currency translation, net |
57 | 33 | ||||||
|
|
|
|
|||||
Unrealized gain (loss) on derivative instruments |
(1 | ) | | |||||
Less: gain (loss) on derivatives reclassified into income |
13 | 4 | ||||||
Less: income tax benefit (expense) |
(4 | ) | (1 | ) | ||||
|
|
|
|
|||||
Net Unrealized gain (loss) on derivative instruments, net of tax |
8 | 3 | ||||||
|
|
|
|
|||||
Comprehensive income (loss) |
$ | 42 | $ | 271 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
6
SunGard Capital Corp. II
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2012 | |||||||
Cash flow from operations: |
||||||||
Net income (loss) |
$ | (23 | ) | $ | 235 | |||
Income (loss) from discontinued operations |
55 | 312 | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(78 | ) | (77 | ) | ||||
Reconciliation of net income (loss) from continuing operations to cash flow from (used in) operations: |
||||||||
Depreciation and amortization |
186 | 173 | ||||||
Deferred income tax provision (benefit) |
(23 | ) | 34 | |||||
Stock compensation expense |
6 | 11 | ||||||
Amortization of deferred financing costs and debt discount |
10 | 12 | ||||||
Loss on extinguishment of debt |
2 | 15 | ||||||
Other noncash items |
1 | (2 | ) | |||||
Accounts receivable and other current assets |
73 | 87 | ||||||
Accounts payable and accrued expenses |
(109 | ) | (117 | ) | ||||
Accrued income tax |
(2 | ) | (66 | ) | ||||
Clearing broker assets and liabilities, net |
(4 | ) | (4 | ) | ||||
Deferred revenue |
5 | 1 | ||||||
|
|
|
|
|||||
Cash flow from (used in) continuing operations |
67 | 67 | ||||||
Cash flow from (used in) discontinued operations |
(14 | ) | 8 | |||||
|
|
|
|
|||||
Cash flow from (used in) operations |
53 | 75 | ||||||
|
|
|
|
|||||
Investment activities: |
||||||||
Cash paid for acquired businesses, net of cash acquired |
(19 | ) | (6 | ) | ||||
Cash paid for property and equipment and software |
(61 | ) | (60 | ) | ||||
Other investing activities |
1 | 3 | ||||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(79 | ) | (63 | ) | ||||
Cash provided by (used in) discontinued operations |
(3 | ) | 1,740 | |||||
|
|
|
|
|||||
Cash provided by (used in) investment activities |
(82 | ) | 1,677 | |||||
|
|
|
|
|||||
Financing activities: |
||||||||
Cash received from borrowings, net of fees |
14 | (19 | ) | |||||
Cash used to repay debt |
(1 | ) | (1,225 | ) | ||||
Cash used to purchase treasury stock |
| (1 | ) | |||||
Other financing activities |
(2 | ) | (9 | ) | ||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
11 | (1,254 | ) | |||||
Cash provided by (used in) discontinued operations |
| | ||||||
|
|
|
|
|||||
Cash provided by (used in) financing activities |
11 | (1,254 | ) | |||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
16 | 7 | ||||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(2 | ) | 505 | |||||
Beginning cash and cash equivalents, includes cash of discontinued operations: 2011, $7; 2012, $5 |
778 | 873 | ||||||
|
|
|
|
|||||
Ending cash and cash equivalents, includes cash of discontinued operations: 2011, $7; 2012, $- |
$ | 776 | $ | 1,378 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
7
(In millions except share and per-share amounts)
(Unaudited)
December 31, 2011 |
March 31, 2012 |
|||||||
Assets |
||||||||
Current: |
||||||||
Cash and cash equivalents |
$ | 868 | $ | 1,378 | ||||
Trade receivables, less allowance for doubtful accounts of $38 and $46 |
802 | 714 | ||||||
Earned but unbilled receivables |
149 | 146 | ||||||
Prepaid expenses and other current assets |
117 | 144 | ||||||
Clearing broker assets |
213 | 217 | ||||||
Assets held for sale |
1,326 | | ||||||
|
|
|
|
|||||
Total current assets |
3,475 | 2,599 | ||||||
Property and equipment, less accumulated depreciation of $1,296 and $1,361 |
893 | 894 | ||||||
Software products, less accumulated amortization of $1,431 and $1,492 |
554 | 510 | ||||||
Customer base, less accumulated amortization of $1,269 and $1,331 |
1,580 | 1,532 | ||||||
Other intangible assets, less accumulated amortization of $22 and $25 |
144 | 127 | ||||||
Trade name, less accumulated amortization of $10 and $1 |
1,019 | 1,019 | ||||||
Goodwill |
4,885 | 4,904 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 12,550 | $ | 11,585 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity |
||||||||
Current: |
||||||||
Short-term and current portion of long-term debt |
$ | 10 | $ | 508 | ||||
Accounts payable |
60 | 35 | ||||||
Accrued compensation and benefits |
300 | 215 | ||||||
Accrued interest expense |
92 | 101 | ||||||
Accrued income taxes |
24 | 434 | ||||||
Other accrued expenses |
318 | 310 | ||||||
Clearing broker liabilities |
179 | 178 | ||||||
Deferred revenue |
862 | 872 | ||||||
Deferred income taxes |
76 | | ||||||
Liabilities related to assets held for sale |
230 | | ||||||
|
|
|
|
|||||
Total current liabilities |
2,151 | 2,653 | ||||||
Long-term debt |
7,819 | 6,101 | ||||||
Deferred income taxes |
1,119 | 1,098 | ||||||
|
|
|
|
|||||
Total liabilities |
11,089 | 9,852 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock, par value $.01 per share; 100 shares authorized, issued and oustanding |
| | ||||||
Capital in excess of par value |
3,793 | 3,794 | ||||||
Accumulated deficit |
(2,286 | ) | (2,051 | ) | ||||
Accumulated other comprehensive income (loss) |
(46 | ) | (10 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
1,461 | 1,733 | ||||||
|
|
|
|
|||||
Total Liabilities and Stockholders Equity |
$ | 12,550 | $ | 11,585 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
8
SunGard Data Systems Inc.
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2012 | |||||||
Revenue: |
||||||||
Services |
$ | 995 | $ | 989 | ||||
License and resale fees |
61 | 31 | ||||||
|
|
|
|
|||||
Total products and services |
1,056 | 1,020 | ||||||
Reimbursed expenses |
30 | 19 | ||||||
|
|
|
|
|||||
1,086 | 1,039 | |||||||
|
|
|
|
|||||
Costs and expenses: |
||||||||
Cost of sales and direct operating |
494 | 469 | ||||||
Sales, marketing and administration |
262 | 258 | ||||||
Product development and maintenance |
95 | 88 | ||||||
Depreciation and amortization |
69 | 71 | ||||||
Amortization of acquisition-related intangible assets |
117 | 102 | ||||||
|
|
|
|
|||||
1,037 | 988 | |||||||
|
|
|
|
|||||
Operating income (loss) |
49 | 51 | ||||||
Interest income |
1 | | ||||||
Interest expense and amortization of deferred financing fees |
(137 | ) | (122 | ) | ||||
Loss on extinguishment of debt |
(2 | ) | (15 | ) | ||||
Other income (expense) |
| 2 | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations before income taxes |
(89 | ) | (84 | ) | ||||
Benefit from (provision for) income taxes |
11 | 7 | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(78 | ) | (77 | ) | ||||
Income (loss) from discontinued operations, net of tax |
55 | 312 | ||||||
|
|
|
|
|||||
Net income (loss) |
(23 | ) | 235 | |||||
|
|
|
|
|||||
Other Comprehensive income (loss): |
||||||||
Foreign currency translation |
57 | 33 | ||||||
|
|
|
|
|||||
Foreign currency translation, net |
57 | 33 | ||||||
|
|
|
|
|||||
Unrealized gain (loss) on derivative instruments |
(1 | ) | | |||||
Less: gain (loss) on derivatives reclassified into income |
13 | 4 | ||||||
Less: income tax benefit (expense) |
(4 | ) | (1 | ) | ||||
|
|
|
|
|||||
Net Unrealized gain (loss) on derivative instruments, net of tax |
8 | 3 | ||||||
|
|
|
|
|||||
Comprehensive income (loss) |
$ | 42 | $ | 271 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
9
SunGard Data Systems Inc.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2012 | |||||||
Cash flow from operations: |
||||||||
Net income (loss) |
$ | (23 | ) | $ | 235 | |||
Income (loss) from discontinued operations |
55 | 312 | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(78 | ) | (77 | ) | ||||
Reconciliation of net income (loss) from continuing operations to cash flow from (used in) operations: |
||||||||
Depreciation and amortization |
186 | 173 | ||||||
Deferred income tax provision (benefit) |
(23 | ) | 34 | |||||
Stock compensation expense |
6 | 11 | ||||||
Amortization of deferred financing costs and debt discount |
10 | 12 | ||||||
Loss on extinguishment of debt |
2 | 15 | ||||||
Other noncash items |
1 | (2 | ) | |||||
Accounts receivable and other current assets |
73 | 87 | ||||||
Accounts payable and accrued expenses |
(109 | ) | (119 | ) | ||||
Accrued income tax |
(2 | ) | (64 | ) | ||||
Clearing broker assets and liabilities, net |
(4 | ) | (4 | ) | ||||
Deferred revenue |
5 | 1 | ||||||
|
|
|
|
|||||
Cash flow from (used in) continuing operations |
67 | 67 | ||||||
Cash flow from (used in) discontinued operations |
(14 | ) | 8 | |||||
|
|
|
|
|||||
Cash flow from (used in) operations |
53 | 75 | ||||||
|
|
|
|
|||||
Investment activities: |
||||||||
Cash paid for acquired businesses, net of cash acquired |
(19 | ) | (6 | ) | ||||
Cash paid for property and equipment and software |
(61 | ) | (60 | ) | ||||
Other investing activities |
1 | 3 | ||||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(79 | ) | (63 | ) | ||||
Cash provided by (used in) discontinued operations |
(3 | ) | 1,740 | |||||
|
|
|
|
|||||
Cash provided by (used in) investment activities |
(82 | ) | 1,677 | |||||
|
|
|
|
|||||
Financing activities: |
||||||||
Cash received from borrowings, net of fees |
14 | (19 | ) | |||||
Cash used to repay debt |
(1 | ) | (1,225 | ) | ||||
Other financing activities |
(2 | ) | (10 | ) | ||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
11 | (1,254 | ) | |||||
Cash provided by (used in) discontinued operations |
| | ||||||
|
|
|
|
|||||
Cash provided by (used in) financing activities |
11 | (1,254 | ) | |||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
16 | 7 | ||||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(2 | ) | 505 | |||||
Beginning cash and cash equivalents, includes cash of discontinued operations: 2011, $7; 2012, $5 |
778 | 873 | ||||||
|
|
|
|
|||||
Ending cash and cash equivalents, includes cash of discontinued operations: 2011, $7; 2012, $- |
$ | 776 | $ | 1,378 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
10
SUNGARD CAPITAL CORP. II
SUNGARD DATA SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation:
SunGard Data Systems Inc. (SunGard) was acquired on August 11, 2005 (the LBO) in a leveraged buy-out by a consortium of private equity investment funds associated with Bain Capital Partners, The Blackstone Group, Goldman Sachs & Co., Kohlberg Kravis Roberts & Co., Providence Equity Partners, Silver Lake and TPG (collectively, the Sponsors).
SunGard is a wholly owned subsidiary of SunGard Holdco LLC, which is wholly owned by SunGard Holding Corp., which is wholly owned by SunGard Capital Corp. II (SCCII), which is a subsidiary of SunGard Capital Corp. (SCC). All four of these companies were formed for the purpose of facilitating the LBO and are collectively referred to as the Holding Companies. SCC, SCCII and SunGard are separate reporting companies and, together with their direct and indirect subsidiaries, are collectively referred to as the Company.
The Company has three reportable segments: Financial Systems (FS), Availability Services (AS) and Other, which is comprised of K-12 Education (K-12) and Public Sector (PS). The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated.
The accompanying interim consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), consistent in all material respects with those applied in the Companys Annual Report on Form 10-K for the year ended December 31, 2011. Interim financial reporting does not include all of the information and footnotes required by GAAP for annual financial statements. The interim financial information is unaudited, but, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments necessary to provide a fair statement of results for the interim periods presented. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.
The presentation of certain prior year amounts has been revised to conform to the current year presentation.
Recent Accounting Pronouncements
In October 2011, the Financial Accounting Standards Board (FASB) announced that the specific requirement to present items that are reclassified from other comprehensive income to net income alongside their respective components of net income and other comprehensive income will be deferred. Therefore, those requirements related to the presentation of comprehensive income have not been adopted by the Company.
In September 2011, the FASB issued amended guidance that will simplify how entities test goodwill for impairment. After assessment of certain qualitative factors, if it is determined to be more likely than not that the fair value of a reporting unit is less than its carrying amount, entities must perform the quantitative analysis of the goodwill impairment test. Otherwise, the quantitative test(s) become optional. The guidance is effective January 1, 2012 with early adoption permitted. The Company expects to adopt this guidance for the annual goodwill impairment test performed as of July 1, 2012.
2. Acquisitions and Discontinued Operations:
Acquisitions
The Company seeks to acquire businesses that broaden its existing product lines and service offerings by adding complementary products and service offerings and by expanding its geographic reach. During the three months ended March 31, 2012, the Company completed one acquisition in its FS segment. Cash paid, net of cash acquired and subject to certain adjustments, was $6 million. The impact of this acquisition was not material to the consolidated financial statements.
At March 31, 2012, contingent purchase price obligations that depend on the operating performance of certain acquired businesses were $6 million, of which $3 million is included in other accrued expenses.
11
Discontinued Operations
In January 2012, the Company sold its Higher Education (HE) business and used the net cash proceeds (as defined in its senior secured credit agreement (Credit Agreement)) of $1.222 billion, which is the gross transaction value of $1.775 billion less applicable taxes and fees, to repay a pro-rata portion of its outstanding term loans (see note 5). The results for the discontinued operations for the three months ended March 31, June 30, September 30, and December 31, 2011 and March 31, 2012 were as follows (in millions):
Three Months ended | ||||||||||||||||||||
March 31, 2011 |
June 30, 2011 |
September 30, 2011 |
December 31, 2011 |
March 31, 2012 |
||||||||||||||||
Revenue |
$ | 124 | $ | 133 | $ | 116 | $ | 119 | $ | 23 | ||||||||||
Operating income (loss), excluding goodwill impairment |
14 | 30 | 26 | 28 | (2 | ) | ||||||||||||||
Goodwill impairment charge |
| | | (3 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
14 | 30 | 26 | 25 | (2 | ) | ||||||||||||||
Gain on sale of business |
| | | | 563 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) before income taxes |
14 | 30 | 26 | 25 | 561 | |||||||||||||||
Benefit from (provision for) income taxes |
41 | (72 | ) | (132 | ) | (8 | ) | (249 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from discontinued operations |
$ | 55 | $ | (42 | ) | $ | (106 | ) | $ | 17 | $ | 312 | ||||||||
|
|
|
|
|
|
|
|
|
|
Assets held for sale and liabilities related to assets held for sale consisted of the following (in millions) at December 31, 2011 and for the closing balance sheet on January 20, 2012:
December 31, 2011 |
January 20, 2012 |
|||||||
Cash |
$ | 5 | $ | 7 | ||||
Accounts receivable, net |
88 | 90 | ||||||
Prepaid expenses and other current assets |
13 | 14 | ||||||
Property and equipment, net |
31 | 31 | ||||||
Software products, net |
78 | 78 | ||||||
Customer base, net |
182 | 182 | ||||||
Goodwill |
929 | 929 | ||||||
|
|
|
|
|||||
Assets held for sale |
$ | 1,326 | $ | 1,331 | ||||
|
|
|
|
|||||
Accounts payable |
$ | 1 | $ | 5 | ||||
Accrued compensation and benefits |
15 | 21 | ||||||
Other accrued expenses |
12 | 9 | ||||||
Deferred revenue |
106 | 109 | ||||||
Deferred income taxes |
96 | 96 | ||||||
|
|
|
|
|||||
Liabilities related to assets held for sale |
$ | 230 | $ | 240 | ||||
|
|
|
|
12
3. Goodwill:
The following table summarizes changes in goodwill by segment (in millions):
Cost | Accumulated Impairment | |||||||||||||||||||||||||||||||
FS | AS | Other | Subtotal | AS | Other | Subtotal | Total | |||||||||||||||||||||||||
Balance at December 31, 2011 |
$ | 3,480 | $ | 2,239 | $ | 545 | $ | 6,264 | $ | (1,162 | ) | $ | (217 | ) | $ | (1,379 | ) | $ | 4,885 | |||||||||||||
2012 acquisitions |
2 | | | 2 | | | | 2 | ||||||||||||||||||||||||
Adjustments related to the LBO and prior year acquisitions |
(2 | ) | (2 | ) | | (4 | ) | | | | (4 | ) | ||||||||||||||||||||
Effect of foreign currency translation |
18 | 3 | | 21 | | | | 21 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at March 31, 2012 |
$ | 3,498 | $ | 2,240 | $ | 545 | $ | 6,283 | $ | (1,162 | ) | $ | (217 | ) | $ | (1,379 | ) | $ | 4,904 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. Clearing Broker Assets and Liabilities:
Clearing broker assets and liabilities are comprised of the following (in millions):
December 31, 2011 |
March 31, 2012 | |||||||
Segregated customer cash |
$ | 23 | $ | 10 | ||||
Securities borrowed |
157 | 161 | ||||||
Receivables from customers and other |
33 | 46 | ||||||
|
|
|
|
|||||
Clearing broker assets |
$ | 213 | $ | 217 | ||||
|
|
|
|
|||||
Payables to customers |
$ | 16 | $ | 10 | ||||
Securities loaned |
145 | 140 | ||||||
Payable to brokers and dealers |
18 | 28 | ||||||
|
|
|
|
|||||
Clearing broker liabilities |
$ | 179 | $ | 178 | ||||
|
|
|
|
Segregated customer cash is held by the Company on behalf of customers. Securities borrowed and loaned are collateralized financing transactions which are cash deposits made to or received from other broker/dealers. Receivables from and payables to customers represent amounts due or payable on cash and margin transactions.
5. Debt and Derivatives:
On January 20, 2012, the Company completed the sale of HE and used net cash proceeds (as defined in the Credit Agreement) of $1.22 billion to repay, on a pro-rata basis, outstanding term loans.
On February 21, 2012, SunGard announced its intention to redeem all of its outstanding $500 million 10.625% senior notes due 2015 (2015 Notes) under the Indenture dated as of September 29, 2008 among SunGard, the guarantors named therein, and The Bank of New York Mellon, as trustee (as amended or supplemented from time to time, the 2015 Indenture). On April 2, 2012, SunGard redeemed the 2015 Notes for $527 million plus accrued and unpaid interest to the redemption date, pursuant to Section 3.07(d) of the 2015 Indenture. In connection with the redemption of the 2015 Notes, the Company will write off in the second quarter of 2012 approximately $7 million of unamortized deferred financing costs and the $3 million discount.
13
On March 2, 2012, SunGard amended its Credit Agreement to, among other things, extend the maturity date of approximately $908 million of tranche A and incremental term loans from February 28, 2014 to February 28, 2017, extend the maturity of $880 million of revolving credit facility commitments from May 11, 2013 to November 29, 2016, and amend certain covenants and other provisions, in order to, among other things, permit the potential spin-off of AS. The tranche B, tranche C and revolving credit facility each have certain springing maturity provisions which are described in the Companys Credit Agreement as amended and filed with the Companys Form 8-K dated March 2, 2012.
Debt consisted of the following at December 31, 2011, March 31, 2012 and, on a pro forma basis at March 31, 2012 adjusting for the redemption on April 2, 2012 of the 2015 Notes (in millions):
December 31, 2011 | March 31, 2012 | Pro Forma March 31, 2012 |
||||||||||
Senior Secured Credit Facilities: |
||||||||||||
Secured revolving credit facility |
$ | | $ | | $ | | ||||||
Tranche A, effective interest rate of 3.33% and 1.99% |
1,386 | 255 | 255 | |||||||||
Tranche B, effective interest rate of 4.32% and 3.98% |
2,407 | 1,719 | 1,719 | |||||||||
Tranche C, effective interest rate of 3.99% |
| 908 | 908 | |||||||||
Incremental term loan at 3.78% and 3.74% |
479 | 169 | 169 | |||||||||
|
|
|
|
|
|
|||||||
Total Senior Secured Credit Facilities |
4,272 | 3,051 | 3,051 | |||||||||
Senior Notes due 2014 at 4.875%, net of discount of $8 and $7 |
242 | 243 | 243 | |||||||||
Senior Notes due 2015 at 10.625%, net of discount of $3 and $3 |
497 | 497 | | |||||||||
Senior Notes due 2018 at 7.375% |
900 | 900 | 900 | |||||||||
Senior Notes due 2020 at 7.625% |
700 | 700 | 700 | |||||||||
Senior Subordinated Notes due 2015 at 10.25% |
1,000 | 1,000 | 1,000 | |||||||||
Secured accounts receivable facility, at 3.79% and 3.74% |
200 | 200 | 200 | |||||||||
Other, primarily acquisition purchase price and capital lease obligations |
18 | 18 | 18 | |||||||||
|
|
|
|
|
|
|||||||
Total debt |
7,829 | 6,609 | 6,112 | |||||||||
Short-term borrowings and current portion of long-term debt |
(10 | ) | (508 | ) | (11 | ) | ||||||
|
|
|
|
|
|
|||||||
Long-term debt |
$ | 7,819 | $ | 6,101 | $ | 6,101 | ||||||
|
|
|
|
|
|
The Company uses interest rate swap agreements to manage the amount of its floating rate debt in order to reduce its exposure to variable rate interest payments associated with the Credit Agreement. Each of these swap agreements is designated as a cash flow hedge. SunGard pays a stream of fixed interest payments for the term of the swap, and in turn, receives variable interest payments based on LIBOR. The net receipt or payment from the interest rate swap agreements is included in interest expense. The Company does not enter into interest rate swaps for speculative or trading purposes. A summary of the Companys interest rate swaps follows:
Inception |
Maturity | Notional Amount (in millions) |
Interest rate paid |
Interest rate received (LIBOR) |
||||||||||||
February 2010 |
May 2013 | $ | 500 | 1.99 | % | 3-Month |
The fair values of interest rate swaps designated as cash flow hedging instruments, included in other accrued expenses on the consolidated balance sheets, are $11 million and $8 million as of December 31, 2011 and March 31, 2012, respectively.
The Company has no ineffectiveness related to its swap agreements. The Company expects to reclassify in the next twelve months approximately $7 million from other comprehensive income (loss) into earnings related to the Companys interest rate swaps based on the borrowing rates at March 31, 2012.
14
6. Fair Value Measurements:
The following table summarizes assets and liabilities measured at fair value on a recurring basis at March 31, 2012 (in millions):
Fair Value Measures Using | Total | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets |
||||||||||||||||
Cash and cash equivalents - money market funds |
$ | 824 | $ | | $ | | $ | 824 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Interest rate swap agreements and other |
$ | | $ | 9 | $ | | $ | 9 | ||||||||
|
|
|
|
|
|
|
|
The following table summarizes assets and liabilities measured at fair value on a recurring basis at December 31, 2011 (in millions):
Fair Value Measures Using | Total | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets |
||||||||||||||||
Cash and cash equivalents - money market funds |
$ | 351 | $ | | $ | | $ | 351 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Interest rate swap agreements and other |
$ | | $ | 15 | $ | | $ | 15 | ||||||||
|
|
|
|
|
|
|
|
A Level 1 fair value measure is based upon quoted prices in active markets for identical assets or liabilities. A Level 2 fair value measure is based upon quoted prices for similar assets and liabilities in active markets or inputs that are observable. A Level 3 fair value measure is based upon inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).
Cash and cash equivalents money market funds is recognized and measured at fair value in the Companys financial statements. Fair values of the interest rate swap agreements are calculated using a discounted cash flow model using observable applicable market swap rates and assumptions and are compared to market valuations obtained from brokers.
The following table presents the carrying amount and estimated fair value of the Companys debt, including current portion and excluding the interest rate swaps, as of December 31, 2011 and March 31, 2012 (in millions):
December 31, 2011 | March 31, 2012 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | |||||||||||||
Floating rate debt |
$ | 4,472 | $ | 4,372 | $ | 3,251 | $ | 3,252 | ||||||||
Fixed rate debt |
3,357 | 3,454 | 3,358 | 3,533 |
The fair value of the Companys floating rate and fixed rate long-term debt (level 2) is primarily based on market rates.
15
7. Equity:
A rollforward of SCCs equity for 2012 follows (in millions):
SunGard Capital Corp. stockholders | Noncontrolling interest | |||||||||||||||||||||||||||
Class L - temporary equity |
Class A - temporary equity |
Permanent equity |
Total | Temporary equity |
Permanent equity |
Total | ||||||||||||||||||||||
Balance at December 31, 2011 |
$ | 47 | $ | 6 | $ | (663 | ) | $ | (610 | ) | $ | 28 | $ | 2,038 | $ | 2,066 | ||||||||||||
Net income (loss) |
| | 173 | 173 | | 62 | 62 | |||||||||||||||||||||
Foreign currency translation |
| | 33 | 33 | | | | |||||||||||||||||||||
Net unrealized gain on derivative instruments |
| | 3 | 3 | | | | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Comprehensive income (loss) |
| | 209 | 209 | | 62 | 62 | |||||||||||||||||||||
Stock compensation expense |
| | 11 | 11 | | | | |||||||||||||||||||||
Termination of put options due to employee terminations and other |
(7 | ) | (1 | ) | 9 | 1 | (3 | ) | 2 | (1 | ) | |||||||||||||||||
Purchase of treasury stock |
| | (1 | ) | (1 | ) | | (1 | ) | (1 | ) | |||||||||||||||||
Transfer intrinsic value of vested restricted stock units |
3 | | (5 | ) | (2 | ) | 1 | | 1 | |||||||||||||||||||
Other |
| | (8 | ) | (8 | ) | | 1 | 1 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at March 31, 2012 |
$ | 43 | $ | 5 | $ | (448 | ) | $ | (400 | ) | $ | 26 | $ | 2,102 | $ | 2,128 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A rollforward of SCCs equity for 2011 follows (in millions):
SunGard Capital Corp. stockholders | Noncontrolling interest | |||||||||||||||||||||||||||
Class L - temporary equity |
Class A - temporary equity |
Permanent equity |
Total | Temporary equity |
Permanent equity |
Total | ||||||||||||||||||||||
Balance at December 31, 2010 |
$ | 87 | $ | 11 | $ | (330 | ) | $ | (232 | ) | $ | 54 | $ | 1,782 | $ | 1,836 | ||||||||||||
Net income (loss) |
| | (77 | ) | (77 | ) | 1 | 53 | 54 | |||||||||||||||||||
Foreign currency translation |
| | 57 | 57 | | | | |||||||||||||||||||||
Net unrealized gain on derivative instruments |
| | 8 | 8 | | | | |||||||||||||||||||||
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|
|||||||||||||||
Comprehensive income (loss) |
| | (12 | ) | (12 | ) | 1 | 53 | 54 | |||||||||||||||||||
Stock compensation expense |
| | 6 | 6 | | | | |||||||||||||||||||||
Termination of put options due to employee terminations and other |
(20 | ) | (2 | ) | 22 | | (8 | ) | 8 | | ||||||||||||||||||
Transfer intrinsic value of vested restricted stock units |
2 | | (3 | ) | (1 | ) | 1 | | 1 | |||||||||||||||||||
Other |
| | (2 | ) | (2 | ) | | | | |||||||||||||||||||
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Balance at March 31, 2011 |
$ | 69 | $ | 9 | $ | (319 | ) | $ | (241 | ) | $ | 48 | $ | 1,843 | $ | 1,891 | ||||||||||||
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In the case of termination of employment resulting from disability or death, an employee or his/her estate may exercise a put option which would require the Company to repurchase vested shares at the current fair market value. These common or preferred shares must be classified as temporary equity (between liabilities and equity) on the balance sheet of SCC and SCCII. At vesting or exercise, grant-date intrinsic value or exercise value, respectively, is reclassified to temporary equity. On termination of employment, the value included in temporary equity is reclassified to permanent equity.
The components of accumulated other comprehensive income (loss) at December 31, 2011 and March 31, 2012 are as follows (in millions):
December 31, 2011 |
March 31, 2012 | |||||||
Foreign currency translation |
$ | (37 | ) | $ | (4 | ) | ||
Net unrealized gain (loss) on derivative instruments |
(9 | ) | (6 | ) | ||||
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|||||
Accumulated other comprehensive income (loss) |
$ | (46 | ) | $ | (10 | ) | ||
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8. Segment Information:
The Company has three reportable segments: FS, AS and Other. The Company evaluates the performance of its segments based on operating results before interest, income taxes, amortization of acquisition-related intangible assets,
16
stock compensation and certain other costs. The operating results apply to each of SCC, SCCII and SunGard unless otherwise noted. The operating results for each segment follow (in millions):
Three Months Ended March 31, | ||||||||
2011 | 2012 | |||||||
Revenue: |
||||||||
Financial Systems |
$ | 672 | $ | 632 | ||||
Availability Services |
364 | 356 | ||||||
Other |
50 | 51 | ||||||
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|||||
$ | 1,086 | $ | 1,039 | |||||
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Depreciation and amortization: |
||||||||
Financial Systems |
$ | 21 | $ | 21 | ||||
Availability Services |
46 | 48 | ||||||
Other |
2 | 2 | ||||||
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|||||
$ | 69 | $ | 71 | |||||
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Operating income (loss): |
||||||||
Financial Systems |
$ | 115 | $ | 105 | ||||
Availability Services |
73 | 63 | ||||||
Other |
14 | 14 | ||||||
Corporate |
(19 | ) | (15 | ) | ||||
Other costs (1) |
(134 | ) | (116 | ) | ||||
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|||||
$ | 49 | $ | 51 | |||||
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Cash paid for property and equipment and software: |
||||||||
Financial Systems |
$ | 23 | $ | 20 | ||||
Availability Services |
35 | 38 | ||||||
Other |
1 | 2 | ||||||
Corporate |
2 | | ||||||
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|||||
$ | 61 | $ | 60 | |||||
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(1) | Includes stock compensation expense, management fees paid to the Sponsors, other items and amortization of acquisition-related intangible assets of $117 million and $102 million for the three months ended March 31, 2011 and 2012, respectively. |
Amortization of acquisition-related intangible assets by segment follows (in millions):
Three Months Ended March 31, | ||||||||
2011 | 2012 | |||||||
Amortization of acquisition-related intangible assets: |
||||||||
Financial Systems |
$ | 69 | (1) | $ | 55 | |||
Availability Services |
43 | 43 | ||||||
Other |
5 | 4 | ||||||
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|||||
$ | 117 | $ | 102 | |||||
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(1) | Includes approximately $7 million of impairment charges related to customer base and software. |
17
The FS Segment is organized to align with customer-facing business areas. FS revenue by these business areas follows (in millions):
Three Months Ended March 31, | ||||||||
2011 | 2012 | |||||||
Capital Markets |
$ | 285 | $ | 238 | ||||
Asset Management |
108 | 113 | ||||||
Wealth Management |
86 | 85 | ||||||
Corporate Liquidity & Energy |
61 | 65 | ||||||
Banking |
52 | 47 | ||||||
Insurance |
39 | 41 | ||||||
Other |
41 | 43 | ||||||
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|||||
Total Financial Systems |
$ | 672 | $ | 632 | ||||
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9. Related Party Transactions:
In accordance with the Management Agreement between the Company and affiliates of the Sponsors, the Company recorded $3 million and $2 million of management fees in sales, marketing and administration expenses during the three months ended March 31, 2011 and 2012, respectively. At December 31, 2011 and March 31, 2012, $4 million and $2 million, respectively, was included in other accrued expenses.
During the first quarter of 2012, the Company paid to the Sponsors $17.8 million of management fees, which are included in the results of discontinued operations, related to the sale of HE.
10. Supplemental Cash Flow Information:
Supplemental cash flow information for the three months ended March 31, 2011 and 2012 follows (in millions):
Three Months Ended March 31, | ||||||||
Supplemental information: | 2011 | 2012 | ||||||
Interest paid |
$ | 123 | $ | 101 | ||||
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Income taxes paid, net of refunds of $3 million and $3 million, respectively |
$ | 19 | $ | 19 | ||||
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|||||
Acquired businesses: |
||||||||
Property and equipment |
$ | 1 | $ | | ||||
Software products |
11 | | ||||||
Customer base |
8 | 6 | ||||||
Goodwill |
4 | 2 | ||||||
Deferred income taxes |
(4 | ) | | |||||
Purchase price obligations and debt assumed |
(1 | ) | (3 | ) | ||||
Net current liabilities assumed |
| 1 | ||||||
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|||||
Cash paid for acquired businesses, net of cash acquired of $3 and $2 million, respectively |
$ | 19 | $ | 6 | ||||
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11. Supplemental Guarantor Condensed Consolidating Financial Statements:
SunGards senior unsecured notes are jointly and severally, fully and unconditionally guaranteed on a senior unsecured basis and the senior subordinated notes are jointly and severally, fully and unconditionally guaranteed on an unsecured senior subordinated basis, in each case, subject to certain exceptions, by substantially all wholly owned, domestic subsidiaries of SunGard (collectively, the Guarantors). Each of the Guarantors is 100% owned, directly or indirectly, by SunGard. None of the other subsidiaries of SunGard, either direct or indirect, nor any of the Holding Companies, guarantee the senior notes and senior subordinated notes (Non-Guarantors). The Guarantors and SunGard Holdco LLC also unconditionally guarantee the senior secured credit facilities. The Guarantors are subject to release under certain circumstances as described below.
The indentures evidencing the guarantees provide for a Guarantor to be automatically and unconditionally released and discharged from its guarantee obligations in certain circumstances, including upon the earliest to occur of:
| The sale, exchange or transfer of the subsidiarys capital stock or all or substantially all of its assets; |
| Designation of the Guarantor as an unrestricted subsidiary for purposes of the indenture covenants; |
18
| Release or discharge of the Guarantors guarantee of certain other indebtedness; or |
| Legal defeasance or covenant defeasance of the indenture obligations when provision has been made for them to be fully satisfied. |
The following tables present the financial position, results of operations and cash flows of SunGard (referred to as Parent Company for purposes of this note only), the Guarantor subsidiaries, the Non-Guarantor subsidiaries and Eliminations as of December 31, 2011 and March 31, 2012, and for the three month periods ended March 31, 2011 and 2012 to arrive at the information for SunGard on a consolidated basis. SCC and SCCII are neither parties to nor guarantors of the debt issued as described in the notes to consolidated financial statements included in the Companys Form 10-K for the year ended December 31, 2011.
Supplemental Condensed Consolidating Balance Sheet | ||||||||||||||||||||
(in millions) | December 31, 2011 | |||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 529 | $ | (15 | ) | $ | 354 | $ | | $ | 868 | |||||||||
Intercompany balances |
(5,247 | ) | 4,516 | 731 | | | ||||||||||||||
Trade receivables, net |
2 | 603 | 346 | | 951 | |||||||||||||||
Prepaid expenses, taxes and other current assets |
1,461 | 54 | 271 | (1,456 | ) | 330 | ||||||||||||||
Assets held for sale |
| 1,315 | 13 | (2 | ) | 1,326 | ||||||||||||||
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|
|
|
|
|
|
|||||||||||
Total current assets |
(3,255 | ) | 6,473 | 1,715 | (1,458 | ) | 3,475 | |||||||||||||
Property and equipment, net |
| 588 | 305 | | 893 | |||||||||||||||
Intangible assets, net |
120 | 2,701 | 476 | | 3,297 | |||||||||||||||
Intercompany balances |
250 | 1 | (251 | ) | | | ||||||||||||||
Goodwill |
| 3,784 | 1,101 | | 4,885 | |||||||||||||||
Investment in subsidiaries |
12,673 | 2,253 | | (14,926 | ) | | ||||||||||||||
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|
|||||||||||
Total Assets |
$ | 9,788 | $ | 15,800 | $ | 3,346 | $ | (16,384 | ) | $ | 12,550 | |||||||||
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|
|||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Short-term and current portion of long-term debt |
$ | | $ | 3 | $ | 7 | $ | | $ | 10 | ||||||||||
Accounts payable and other current liabilities |
296 | 2,170 | 901 | (1,456 | ) | 1,911 | ||||||||||||||
Liabilities related to assets held for sale |
| 219 | 11 | | 230 | |||||||||||||||
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|
|
|
|
|||||||||||
Total current liabilities |
296 | 2,392 | 919 | (1,456 | ) | 2,151 | ||||||||||||||
Long-term debt |
7,612 | 2 | 205 | | 7,819 | |||||||||||||||
Intercompany debt |
82 | 19 | 16 | (117 | ) | | ||||||||||||||
Deferred income taxes |
337 | 714 | 68 | | 1,119 | |||||||||||||||
|
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|
|
|
|
|
|
|
|||||||||||
Total liabilities |
8,327 | 3,127 | 1,208 | (1,573 | ) | 11,089 | ||||||||||||||
|
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|
|
|
|
|
|
|||||||||||
Total stockholders equity |
1,461 | 12,673 | 2,138 | (14,811 | ) | 1,461 | ||||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities and Stockholders Equity |
$ | 9,788 | $ | 15,800 | $ | 3,346 | $ | (16,384 | ) | $ | 12,550 | |||||||||
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|
19
Supplemental Condensed Consolidating Balance Sheet | ||||||||||||||||||||
(in millions) | March 31, 2012 | |||||||||||||||||||
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 1,053 | $ | (15 | ) | $ | 340 | $ | | $ | 1,378 | |||||||||
Intercompany balances |
(5,358 | ) | 4,624 | 734 | | | ||||||||||||||
Trade receivables, net |
6 | 552 | 302 | | 860 | |||||||||||||||
Prepaid expenses, taxes and other current assets |
986 | 133 | 316 | (1,074 | ) | 361 | ||||||||||||||
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|
|
|
|
|||||||||||
Total current assets |
(3,313 | ) | 5,294 | 1,692 | (1,074 | ) | 2,599 | |||||||||||||
Property and equipment, net |
| 586 | 308 | | 894 | |||||||||||||||
Intangible assets, net |
105 | 2,627 | 456 | | 3,188 | |||||||||||||||
Intercompany balances |
258 | | (258 | ) | | | ||||||||||||||
Goodwill |
| 3,833 | 1,071 | | 4,904 | |||||||||||||||
Investment in subsidiaries |
11,699 | 2,221 | | (13,920 | ) | | ||||||||||||||
|
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|
|
|
|
|
|
|
|||||||||||
Total Assets |
$ | 8,749 | $ | 14,561 | $ | 3,269 | $ | (14,994 | ) | $ | 11,585 | |||||||||
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|
|||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Short-term and current portion of long-term debt |
$ | 497 | $ | 3 | $ | 8 | $ | | $ | 508 | ||||||||||
Accounts payable and other current liabilities |
212 | 2,140 | 867 | (1,074 | ) | 2,145 | ||||||||||||||
|
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|
|
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|
|
|||||||||||
Total current liabilities |
709 | 2,143 | 875 | (1,074 | ) | 2,653 | ||||||||||||||
Long-term debt |
5,894 | 2 | 205 | | 6,101 | |||||||||||||||
Intercompany debt |
83 | 17 | 17 | (117 | ) | | ||||||||||||||
Deferred income taxes |
330 | 700 | 68 | | 1,098 | |||||||||||||||
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|
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|
|||||||||||
Total liabilities |
7,016 | 2,862 | 1,165 | (1,191 | ) | 9,852 | ||||||||||||||
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|
|||||||||||
Total stockholders equity |
1,733 | 11,699 | 2,104 | (13,803 | ) | 1,733 | ||||||||||||||
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|
|
|
|
|
|
|||||||||||
Total Liabilities and Stockholders Equity |
$ | 8,749 | $ | 14,561 | $ | 3,269 | $ | (14,994 | ) | $ | 11,585 | |||||||||
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20
Supplemental Condensed Consolidating Schedule of Comprehensive Income | ||||||||||||||||||||
(in millions) | Three Months ended March 31, 2011 | |||||||||||||||||||
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Total revenue |
$ | | $ | 726 | $ | 444 | $ | (84 | ) | $ | 1,086 | |||||||||
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|||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales and administrative expenses |
26 | 521 | 388 | (84 | ) | 851 | ||||||||||||||
Depreciation and amortization |
| 47 | 22 | | 69 | |||||||||||||||
Amortization of acquisition-related intangible assets |
| 91 | 26 | | 117 | |||||||||||||||
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|||||||||||
26 | 659 | 436 | (84 | ) | 1,037 | |||||||||||||||
|
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|
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|
|
|
|||||||||||
Operating income (loss) |
(26 | ) | 67 | 8 | | 49 | ||||||||||||||
Net interest income (expense) |
(127 | ) | (1 | ) | (8 | ) | | (136 | ) | |||||||||||
Other income (expense) |
21 | | | (23 | ) | (2 | ) | |||||||||||||
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|||||||||||
Income (loss) from continuing operations before income taxes |
(132 | ) | 66 | | (23 | ) | (89 | ) | ||||||||||||
Benefit from (provision for) income taxes |
54 | (43 | ) | | | 11 | ||||||||||||||
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|
|||||||||||
Income (loss) from continuing operations |
(78 | ) | 23 | | (23 | ) | (78 | ) | ||||||||||||
Income (loss) from discontinued operations, net of tax |
55 | 55 | | (55 | ) | 55 | ||||||||||||||
|
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|
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|
|
|
|||||||||||
Net income (loss) |
$ | (23 | ) | $ | 78 | $ | | $ | (78 | ) | $ | (23 | ) | |||||||
|
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|
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|
|||||||||||
Comprehensive income (loss) |
$ | 42 | $ | 134 | $ | 53 | $ | (187 | ) | $ | 42 | |||||||||
|
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Supplemental Condensed Consolidating Schedule of Comprehensive Income | ||||||||||||||||||||
(in millions) | Three Months ended March 31, 2012 | |||||||||||||||||||
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Total revenue |
$ | | $ | 713 | $ | 413 | $ | (87 | ) | $ | 1,039 | |||||||||
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|
|||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales and administrative expenses |
25 | 534 | 343 | (87 | ) | 815 | ||||||||||||||
Depreciation and amortization |
| 48 | 23 | | 71 | |||||||||||||||
Amortization of acquisition-related intangible assets |
| 84 | 18 | | 102 | |||||||||||||||
|
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|||||||||||
25 | 666 | 384 | (87 | ) | 988 | |||||||||||||||
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|
|||||||||||
Operating income (loss) |
(25 | ) | 47 | 29 | | 51 | ||||||||||||||
Net interest income (expense) |
(114 | ) | | (8 | ) | | (122 | ) | ||||||||||||
Other income (expense) |
52 | 23 | 2 | (90 | ) | (13 | ) | |||||||||||||
|
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|
|||||||||||
Income (loss) from continuing operations before income taxes |
(87 | ) | 70 | 23 | (90 | ) | (84 | ) | ||||||||||||
Benefit from (provision for) income taxes |
10 | (3 | ) | | | 7 | ||||||||||||||
|
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|
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|
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|
|||||||||||
Income (loss) from continuing operations |
(77 | ) | 67 | 23 | (90 | ) | (77 | ) | ||||||||||||
Income (loss) from discontinued operations, net of tax |
312 | 93 | 4 | (97 | ) | 312 | ||||||||||||||
|
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|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | 235 | $ | 160 | $ | 27 | $ | (187 | ) | $ | 235 | |||||||||
|
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|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
$ | 271 | $ | 185 | $ | 49 | $ | (234 | ) | $ | 271 | |||||||||
|
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|
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|
21
Supplemental Condensed Consolidating Schedule of Cash Flows | ||||||||||||||||||||
(in millions) | Three Months ended March 31, 2011 | |||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Cash flow from operations: |
||||||||||||||||||||
Net income (loss) |
$ | (23 | ) | $ | 78 | $ | | $ | (78 | ) | $ | (23 | ) | |||||||
Income (loss) from discontinued operations |
55 | 55 | | (55 | ) | 55 | ||||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(78 | ) | 23 | | (23 | ) | (78 | ) | ||||||||||||
Non cash adjustments |
(10 | ) | 120 | 49 | 23 | 182 | ||||||||||||||
Changes in operating assets and liabilities |
54 | (79 | ) | (12 | ) | | (37 | ) | ||||||||||||
|
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|
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|
|
|
|
|||||||||||
Cash flow from (used in) continuing operations |
(34 | ) | 64 | 37 | | 67 | ||||||||||||||
Cash flow from (used in) discontinued operations |
| (14 | ) | | | (14 | ) | |||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||
Cash flow from (used in) operations |
(34 | ) | 50 | 37 | | 53 | ||||||||||||||
Investment activities: |
||||||||||||||||||||
Intercompany transactions |
86 | 6 | (92 | ) | | | ||||||||||||||
Cash paid for acquired businesses, net of cash acquired |
| (6 | ) | (13 | ) | | (19 | ) | ||||||||||||
Cash paid for property and equipment and software |
(1 | ) | (40 | ) | (20 | ) | | (61 | ) | |||||||||||
Other investing activities |
| 1 | | | 1 | |||||||||||||||
|
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|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
85 | (39 | ) | (125 | ) | | (79 | ) | ||||||||||||
Cash provided by (used in) discontinued operations |
| (3 | ) | | | (3 | ) | |||||||||||||
|
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|
|
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|
|
|
|
|||||||||||
Cash provided by (used in) investment activities |
85 | (42 | ) | (125 | ) | | (82 | ) | ||||||||||||
Financing activities: |
||||||||||||||||||||
Net repayments of long-term debt |
(5 | ) | (1 | ) | 19 | | 13 | |||||||||||||
Other financing activities |
(2 | ) | | | | (2 | ) | |||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
(7 | ) | (1 | ) | 19 | | 11 | |||||||||||||
Cash provided by (used in) discontinued operations |
| | | | | |||||||||||||||
|
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|
|
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|
|
|
|||||||||||
Cash provided by (used in) financing activities |
(7 | ) | (1 | ) | 19 | | 11 | |||||||||||||
Effect of exchange rate changes on cash |
| | 16 | | 16 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Increase (decrease) in cash and cash equivalents |
44 | 7 | (53 | ) | | (2 | ) | |||||||||||||
Beginning cash and cash equivalents |
179 | 1 | 598 | | 778 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending cash and cash equivalents |
$ | 223 | $ | 8 | $ | 545 | $ | | $ | 776 | ||||||||||
|
|
|
|
|
|
|
|
|
|
22
Supplemental Condensed Consolidating Schedule of Cash Flows | ||||||||||||||||||||
(in millions) | Three Months ended March 31, 2012 | |||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Cash flow from operations: |
||||||||||||||||||||
Net income (loss) |
$ | 235 | $ | 160 | $ | 27 | $ | (187 | ) | $ | 235 | |||||||||
Income (loss) from discontinued operations |
312 | 93 | 4 | (97 | ) | 312 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(77 | ) | 67 | 23 | (90 | ) | (77 | ) | ||||||||||||
Non cash adjustments |
18 | 98 | 37 | 90 | 243 | |||||||||||||||
Changes in operating assets and liabilities |
7 | (68 | ) | (38 | ) | | (99 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flow from (used in) continuing operations |
(52 | ) | 97 | 22 | | 67 | ||||||||||||||
Cash flow from (used in) discontinued operations |
(2 | ) | | 10 | | 8 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flow from (used in) operations |
(54 | ) | 97 | 32 | | 75 | ||||||||||||||
Investment activities: |
||||||||||||||||||||
Intercompany transactions |
1,828 | (24 | ) | (33 | ) | (1,771 | ) | | ||||||||||||
Cash paid for acquired businesses, net of cash acquired |
| | (6 | ) | | (6 | ) | |||||||||||||
Cash paid for property and equipment and software |
| (41 | ) | (19 | ) | | (60 | ) | ||||||||||||
Other investing activities |
1 | | 2 | | 3 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
1,829 | (65 | ) | (56 | ) | (1,771 | ) | (63 | ) | |||||||||||
Cash provided by (used in) discontinued operations |
| 1,740 | | | 1,740 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) investment activities |
1,829 | 1,675 | (56 | ) | (1,771 | ) | 1,677 | |||||||||||||
Financing activities: |
||||||||||||||||||||
Intercompany dividends of HE sale proceeds |
| (1,771 | ) | | 1,771 | | ||||||||||||||
Net repayments of long-term debt |
(1,241 | ) | (1 | ) | (2 | ) | | (1,244 | ) | |||||||||||
Other financing activities |
(10 | ) | | | | (10 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
(1,251 | ) | (1,772 | ) | (2 | ) | 1,771 | (1,254 | ) | |||||||||||
Cash provided by (used in) discontinued operations |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) financing activities |
(1,251 | ) | (1,772 | ) | (2 | ) | 1,771 | (1,254 | ) | |||||||||||
Effect of exchange rate changes on cash |
| | 7 | | 7 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Increase (decrease) in cash and cash equivalents |
524 | | (19 | ) | | 505 | ||||||||||||||
Beginning cash and cash equivalents |
529 | (15 | ) | 359 | | 873 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending cash and cash equivalents |
$ | 1,053 | $ | (15 | ) | $ | 340 | $ | | $ | 1,378 | |||||||||
|
|
|
|
|
|
|
|
|
|
During the first quarter of 2012, the Company determined that it had incorrectly accounted for intercompany dividend income and the related eliminations presented in the Supplemental Condensed Consolidating Schedules of Operations in the Companys Form 10-K for the periods ended December 31, 2009, 2010 and 2011. The Company determined that the incorrect presentation resulted in an understatement of income (or overstatement of loss) from continuing operations and net income (loss) for both the Non-Guarantor subsidiaries and the Guarantor subsidiaries. It was further determined that cash flows from operations and cash flows from investment activities for Parent (SunGard), Guarantor subsidiaries and Non-Guarantor subsidiaries were each affected between operating and investing. The Company also identified a misclassification of expense between Guarantor subsidiaries and Non-Guarantor subsidiaries in 2010 totaling $91 million. In addition, the Company also determined that it had incorrectly recorded intercompany transactions between certain Guarantor and Non-Guarantor subsidiaries as a component of net interest income (expense) resulting in an understatement of operating expenses for the Guarantor subsidiaries and an understatement of revenues for the Non-Guarantor subsidiaries. These errors had no impact on the consolidated financial statements of SunGard or any debt covenants and had no impact on the ability of SunGards subsidiaries to dividend cash to SunGard for debt service requirements. The Company assessed the materiality of these items on previously issued annual and interim financial statements in accordance with SEC Staff Accounting Bulletin No. 99, and concluded that the errors were not material to the consolidated financial statements.
23
The Company will revise the June 30, 2011 and September 30, 2011 financial statements to reflect the revisions discussed above, the next time such financial statements are included in future reports for comparable purposes.
The following is a summary of the impacts of the errors on each of the statements that were included in the Quarterly Report on Form 10-Q for the periods indicated or the Annual Report on Form 10-K for the period ended December 31, 2011 (n/c = no change).
Supplemental Condensed Consolidating Schedule of Operations
Parent Company | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | |||||||||||||||||||||||||||||
(in millions) |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
||||||||||||||||||||||||
Three Months Ended March 31, 2011 |
||||||||||||||||||||||||||||||||
Revenue |
n/c | n/c | $ | 845 | $ | 726 | (f) | $ | 366 | $ | 444 | (f) | $ | (1 | ) | $ | (84 | )(f) | ||||||||||||||
Operating income (loss) |
n/c | n/c | 165 | 67 | (f) | (76 | ) | 8 | (f) | | | |||||||||||||||||||||
Other income (loss) |
$ | 49 | $ | 21 | (a) | (62 | ) | | (a) | n/c | n/c | (a) | 11 | (23 | )(a) | |||||||||||||||||
Income (loss) from before income taxes |
(64 | ) | n/a | 68 | n/a | (90 | ) | n/a | 11 | n/a | ||||||||||||||||||||||
Income (loss) from continuing operations before income taxes |
n/a | (132 | )(a) | n/a | 66 | (a) | n/a | | (a) | n/a | (23 | )(a) | ||||||||||||||||||||
Income (loss) from continuing operations |
n/a | (78 | )(a) | n/a | 23 | (a) | n/a | | (a) | n/a | (23 | )(a) | ||||||||||||||||||||
Net income (loss) |
n/c | n/c | 51 | 78 | (a) | (62 | ) | | (a) | 11 | (78 | )(a) | ||||||||||||||||||||
Three Months Ended June 30, 2011 |
||||||||||||||||||||||||||||||||
Revenue |
n/c | n/c | $ | 866 | $ | 742 | (f) | $ | 399 | $ | 523 | (f) | $ | 1 | $ | (132 | )(f) | |||||||||||||||
Operating income (loss) |
n/c | n/c | 194 | 36 | (f) | (49 | ) | 79 | (f) | | | |||||||||||||||||||||
Other income (loss) |
$ | 29 | $ | 85 | (b) | 12 | 94 | (b) | n/c | n/c | (b) | (40 | ) | (178 | )(b) | |||||||||||||||||
Income (loss) from before income taxes |
(128 | ) | n/a | 129 | n/a | 18 | n/a | (40 | ) | n/a | ||||||||||||||||||||||
Income (loss) from continuing operations before income taxes |
n/a | (73 | )(b) | n/a | 130 | (b) | n/a | 70 | (b) | n/a | (178 | )(b) | ||||||||||||||||||||
Income (loss) from continuing operations |
n/a | (31 | )(b) | n/a | 85 | (b) | n/a | 93 | (b) | n/a | (178 | )(b) | ||||||||||||||||||||
Net income (loss) |
n/c | n/c | 28 | 43 | (b) | 12 | 95 | (b) | (40 | ) | (138 | )(b) | ||||||||||||||||||||
Six Months Ended June 30, 2011 |
||||||||||||||||||||||||||||||||
Revenue |
n/c | n/c | $ | 1,711 | $ | 1,468 | (f) | $ | 765 | $ | 967 | (f) | $ | | $ | (216 | )(f) | |||||||||||||||
Operating income (loss) |
n/c | n/c | 359 | 103 | (f) | (125 | ) | 87 | (f) | | | |||||||||||||||||||||
Other income (loss) |
$ | 78 | $ | 106 | (c) | (50 | ) | 94 | (c) | n/c | n/c | (c) | (29 | ) | (201 | )(c) | ||||||||||||||||
Income (loss) from before income taxes |
(192 | ) | n/a | 197 | n/a | (72 | ) | n/a | (29 | ) | n/a | |||||||||||||||||||||
Income (loss) from continuing operations before income taxes |
n/a | (205 | )(c) | n/a | 196 | (c) | n/a | 70 | (c) | n/a | (201 | )(c) | ||||||||||||||||||||
Income (loss) from continuing operations |
n/a | (109 | )(c) | n/a | 108 | (c) | n/a | 93 | (c) | n/a | (201 | )(c) | ||||||||||||||||||||
Net income (loss) |
n/c | n/c | 79 | 121 | (c) | (50 | ) | 95 | (c) | (29 | ) | (216 | )(c) | |||||||||||||||||||
Three Months Ended September 30, 2011 |
||||||||||||||||||||||||||||||||
Revenue |
n/c | n/c | n/c | n/c | $ | 359 | $ | 465 | (f) | $ | | $ | (106 | )(f) | ||||||||||||||||||
Operating income (loss) |
n/c | n/c | 168 | 62 | (f) | (67 | ) | 39 | (f) | | | |||||||||||||||||||||
Other income (loss) |
$ | 71 | $ | 75 | (d) | (80 | ) | 70 | (d) | n/c | n/c | (d) | 8 | (146 | )(d) | |||||||||||||||||
Income (loss) from continuing operations before income taxes |
(58 | ) | (85 | )(d) | 100 | 132 | (d) | (118 | ) | 31 | (d) | 8 | (146 | )(d) | ||||||||||||||||||
Income (loss) from continuing operations |
(14 | ) | (41 | )(d) | 44 | 76 | (d) | (79 | ) | 70 | (d) | 8 | (146 | )(d) | ||||||||||||||||||
Net income (loss) |
n/c | n/c | 71 | 103 | (d) | (81 | ) | 68 | (d) | 10 | (171 | )(d) | ||||||||||||||||||||
Nine Months Ended September 30, 2011 |
||||||||||||||||||||||||||||||||
Revenue |
n/c | n/c | n/c | n/c | $ | 1,110 | $ | 1,432 | (f) | $ | | $ | (322 | )(f) | ||||||||||||||||||
Operating income (loss) |
n/c | n/c | 487 | 165 | (f) | (196 | ) | 126 | (f) | | | |||||||||||||||||||||
Other income (loss) |
$ | 148 | $ | 181 | (e) | (132 | ) | 164 | (e) | n/c | n/c | (e) | (18 | ) | (347 | )(e) | ||||||||||||||||
Income (loss) from continuing operations before income taxes |
(250 | ) | (290 | )(e) | 254 | 328 | (e) | (194 | ) | 101 | (e) | (18 | ) | (347 | )(e) | |||||||||||||||||
Income (loss) from continuing operations |
(110 | ) | (150 | )(e) | 110 | 184 | (e) | (132 | ) | 163 | (e) | (18 | ) | (347 | )(e) | |||||||||||||||||
Net income (loss) |
n/c | n/c | 150 | 224 | (e) | (132 | ) | 163 | (e) | (18 | ) | (387 | )(e) |
In addition to the change in the presentation of HE as a discontinued operation subsequent to the initial reporting, the changes outlined below have been made in the amounts presented As Revised.
(a) | Impact of the correction of intercompany dividends of $40 million, $51 million and $(91) million for Parent, guarantor subsidiaries and non-guarantor subsidiaries, respectively. |
(b) | Impact of the correction of intercompany dividends of $2 million, $54 million and $(56) million for Parent, guarantor subsidiaries and non-guarantor subsidiaries, respectively. |
(c) | Impact of the correction of intercompany dividends of $42 million, $105 million and $(147) million for Parent, guarantor subsidiaries and non-guarantor subsidiaries, respectively. |
(d) | Impact of the correction of intercompany dividends of $32 million, $117 million and $(149) million for Parent, guarantor subsidiaries and non-guarantor subsidiaries, respectively. |
(e) | Impact of the correction of intercompany dividends of $74 million, $222 million and $(296) million for Parent, guarantor subsidiaries and non-guarantor subsidiaries, respectively. |
(f) | The correction of the error related to intercompany transactions caused an increase in Non-Guarantor Revenue and an increase in Guarantor Costs of sales and administrative expenses. As the amounts are intercompany charges, the related eliminations also increased by an equal amount. These amounts had previously been reported in the caption Interest Income (Expense) and correction of the error decreases Interest income for the Non-Guarantor subsidiaries and decreases Interest expense for the Guarantor subsidiaries. The impacts to each of the periods presented in the table above for this error were as follows: |
| Three months ended March 31, 2011: $84 million; |
| Three months ended June 30, 2011: $132 million; |
| Six months ended June 30, 2011: $216 million; |
| Three months ended September 30, 2011: $106 million; |
| Nine months ended September 30, 2011: $322 million. |
24
Supplemental Condensed Consolidating Schedule of Cash Flows
Parent Company | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | |||||||||||||||||||||||||||||
(in millions) |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
||||||||||||||||||||||||
Three Months Ended March 31, 2011 |
||||||||||||||||||||||||||||||||
Cash Flow from Operations: |
||||||||||||||||||||||||||||||||
Net income (loss) |
n/c | n/c | $ | 51 | $ | 78 | $ | (62 | ) | $ | | $ | 11 | $ | (78 | ) | ||||||||||||||||
Income (loss) from continuing operations |
n/a | $ | (78 | ) | n/a | 23 | n/a | | n/a | (23 | ) | |||||||||||||||||||||
Non-cash adjustments |
$ | (38 | ) | (10 | ) | 198 | 120 | n/c | n/c | (11 | ) | 23 | ||||||||||||||||||||
Changes in operating assets and liabilities |
73 | 54 | (160 | ) | (79 | ) | (35 | ) | (12 | ) | n/c | n/c | ||||||||||||||||||||
Cash flow from (used in) continuing operations |
n/a | (34 | ) | n/a | 64 | n/a | 37 | n/a | | |||||||||||||||||||||||
Cash flow from (used in) operations |
12 | (34 | ) | 89 | 50 | (48 | ) | 37 | n/c | n/c | ||||||||||||||||||||||
Investment activities: |
||||||||||||||||||||||||||||||||
Intercompany transactions |
39 | 86 | (33 | ) | 6 | (6 | ) | (92 | ) | n/c | n/c | |||||||||||||||||||||
Cash provided by (used in) continuing operations |
n/a | 85 | n/a | (39 | ) | n/a | (125 | ) | n/a | | ||||||||||||||||||||||
Cash provided by (used in) investment activities |
38 | 85 | (81 | ) | (42 | ) | (39 | ) | (125 | ) | n/c | n/c | ||||||||||||||||||||
Six Months Ended June 30, 2011 |
||||||||||||||||||||||||||||||||
Cash Flow from Operations: |
||||||||||||||||||||||||||||||||
Net income (loss) |
n/c | n/c | $ | 79 | $ | 121 | $ | (50 | ) | $ | 95 | $ | (29 | ) | $ | (216 | ) | |||||||||||||||
Income (loss) from continuing operations |
n/a | * | n/a | * | n/a | * | n/a | * | ||||||||||||||||||||||||
Non-cash adjustments |
$ | (53 | ) | * | 322 | * | 98 | * | 29 | * | ||||||||||||||||||||||
Changes in operating assets and liabilities |
82 | * | (131 | ) | * | (74 | ) | * | | * | ||||||||||||||||||||||
Cash flow from (used in) continuing operations |
n/a | * | n/a | * | n/a | * | n/a | * | ||||||||||||||||||||||||
Cash flow from (used in) operations |
(67 | ) | * | 270 | * | (26 | ) | * | | * | ||||||||||||||||||||||
Investment activities: |
||||||||||||||||||||||||||||||||
Intercompany transactions |
127 | * | (165 | ) | * | 38 | * | | * | |||||||||||||||||||||||
Cash provided by (used in) continuing operations |
n/a | * | n/a | * | n/a | * | n/a | * | ||||||||||||||||||||||||
Cash provided by (used in) investment activities |
123 | * | (267 | ) | * | (16 | ) | * | | * | ||||||||||||||||||||||
Nine Months Ended September 30, 2011 |
||||||||||||||||||||||||||||||||
Cash Flow from Operations: |
||||||||||||||||||||||||||||||||
Net income (loss) |
n/c | n/c | $ | 150 | $ | 224 | $ | (132 | ) | $ | 163 | $ | (18 | ) | $ | (387 | ) | |||||||||||||||
Income (loss) from continuing operations |
$ | (110 | ) | $ | (150 | ) | 110 | 184 | (132 | ) | 163 | (18 | ) | (348 | ) | |||||||||||||||||
Non-cash adjustments |
(71 | ) | (145 | ) | 446 | 190 | 115 | 115 | 18 | 348 | ||||||||||||||||||||||
Cash flow from (used in) continuing operations |
(383 | ) | (497 | ) | 833 | 651 | (96 | ) | 200 | n/c | n/c | |||||||||||||||||||||
Cash flow from (used in) operations |
(383 | ) | (497 | ) | 908 | 726 | (98 | ) | 198 | n/c | n/c | |||||||||||||||||||||
Investment activities: |
||||||||||||||||||||||||||||||||
Intercompany transactions |
535 | 649 | (772 | ) | (590 | ) | 237 | (59 | ) | n/c | n/c | |||||||||||||||||||||
Cash provided by (used in) continuing operations |
531 | 645 | (910 | ) | (728 | ) | 159 | (137 | ) | n/c | n/c | |||||||||||||||||||||
Cash provided by (used in) investment activities |
531 | 645 | (916 | ) | (734 | ) | 158 | (138 | ) | n/c | n/c |
The impact of the dividend elimination error is shown above as the difference between As Reported and As Revised Cash flow from (used in) operations and Cash provided by (used in) investment activities. Other captions presented above have been adjusted to reflect both the error and the presentation of HE as a discontinued operation.
* | The Company has not yet provided financial information for the three and six months ended June 30, 2011 which reflects HE as a discontinued operation. When the Form 10-Q for the period ended June 30, 2012 is filed, in addition to the changes in presentation of HE as a discontinued operation subsequent to the initial reporting, the impact of the correction of intercompany dividends of $42 million, $105 million and $(147) million for Parent, Guarantor subsidiaries and Non-guarantor subsidiaries, respectively, will be reflected. |
n/a = not applicable as the Company did not report discontinued operations in the original filing.
25
Supplemental Condensed Consolidating Schedule of Operations
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | ||||||||||||||||||||||
(in millions) |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
||||||||||||||||||
Year ended December 31, 2009 |
||||||||||||||||||||||||
Revenue |
n/c | n/c | $ | 1,981 | $ | 2,089 | $ | (103 | ) | $ | (211 | ) | ||||||||||||
Operating income (loss) |
$ | (640 | ) | $ | (748 | ) | 52 | 160 | | | ||||||||||||||
Other income |
39 | 71 | (87 | ) | 10 | 808 | 679 | |||||||||||||||||
Income (loss) from continuing operations before income taxes |
(714 | ) | (682 | ) | 28 | 125 | 808 | 679 | ||||||||||||||||
Income (loss) from continuing operations |
(777 | ) | (745 | ) | (31 | ) | 66 | 808 | 679 | |||||||||||||||
Net income (loss) |
(710 | ) | (678 | ) | (26 | ) | 71 | 736 | 607 | |||||||||||||||
Year ended December 31, 2010 |
||||||||||||||||||||||||
Revenue |
$ | 3,148 | $ | 2,985 | $ | 1,505 | $ | 1,885 | $ | (163 | ) | $ | (380 | ) | ||||||||||
Operating income (loss) |
582 | 111 | (267 | ) | 204 | | | |||||||||||||||||
Other income |
(12 | ) | 80 | (267 | ) | 3 | 213 | (149 | ) | |||||||||||||||
Income (loss) from continuing operations before income taxes |
188 | 189 | (197 | ) | 164 | 213 | (149 | ) | ||||||||||||||||
Income (loss) from continuing operations |
71 | 72 | (284 | ) | 77 | 213 | (149 | ) | ||||||||||||||||
Net income (loss) |
(85 | ) | (84 | ) | (470 | ) | (109 | ) | 555 | 193 | ||||||||||||||
Year ended December 31, 2011 |
||||||||||||||||||||||||
Revenue |
n/c | n/c | $ | 1,513 | $ | 1,935 | $ | | $ | (422 | ) | |||||||||||||
Operating income (loss) |
$ | 659 | $ | 237 | (193 | ) | 229 | | | |||||||||||||||
Other income |
(791 | ) | 122 | (1,895 | ) | (7 | ) | 2,354 | (447 | ) | ||||||||||||||
Income (loss) from continuing operations before income taxes |
(555 | ) | 358 | (1,697 | ) | 191 | 2,354 | (447 | ) | |||||||||||||||
Income (loss) from continuing operations |
(588 | ) | 325 | (1,766 | ) | 122 | 2,354 | (447 | ) | |||||||||||||||
Net income (loss) |
(529 | ) | 384 | (1,767 | ) | 121 | 2,296 | (505 | ) |
26
Supplemental Condensed Consolidating Schedule of Cash Flows
Parent Company | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | |||||||||||||||||||||||||||||
(in millions) |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
||||||||||||||||||||||||
Year ended December 31, 2009 |
||||||||||||||||||||||||||||||||
Cash Flow from Operations: |
||||||||||||||||||||||||||||||||
Net income (loss) |
n/c | n/c | $ | (710 | ) | $ | (678 | ) | $ | (26 | ) | $ | 71 | $ | 736 | $ | 607 | |||||||||||||||
Income (loss) from continuing operations |
n/c | n/c | (777 | ) | (745 | ) | (31 | ) | 66 | 808 | 679 | |||||||||||||||||||||
Non-cash adjustments |
$ | 845 | $ | 813 | 1,614 | 1,517 | n/c | n/c | (808 | ) | (679 | ) | ||||||||||||||||||||
Cash flow from (used in) continuing operations |
(649 | ) | (681 | ) | 734 | 669 | 464 | 561 | n/c | n/c | ||||||||||||||||||||||
Cash flow from (used in) operations |
(649 | ) | (681 | ) | 791 | 726 | 497 | 594 | n/c | n/c | ||||||||||||||||||||||
Investment activities: |
||||||||||||||||||||||||||||||||
Intercompany transactions |
1,046 | 1,078 | (513 | ) | (448 | ) | (533 | ) | (630 | ) | n/c | n/c | ||||||||||||||||||||
Cash provided by (used in) continuing operations |
1,046 | 1,078 | (749 | ) | (684 | ) | (620 | ) | (717 | ) | n/c | n/c | ||||||||||||||||||||
Cash provided by (used in) investment activities |
1,111 | 1,143 | (808 | ) | (743 | ) | (636 | ) | (733 | ) | n/c | n/c | ||||||||||||||||||||
Year ended December 31, 2010 |
||||||||||||||||||||||||||||||||
Cash Flow from Operations: |
||||||||||||||||||||||||||||||||
Net income (loss) |
n/c | n/c | n/c | n/c | $ | (471 | ) | $ | (109 | ) | $ | 555 | $ | 193 | ||||||||||||||||||
Income (loss) from continuing operations |
n/c | n/c | n/c | n/c | (285 | ) | 77 | 213 | (149 | ) | ||||||||||||||||||||||
Non-cash adjustments |
n/c | n/c | $ | 959 | $ | 597 | n/c | n/c | (213 | ) | 149 | |||||||||||||||||||||
Cash flow from (used in) continuing operations |
n/c | n/c | 1,395 | 1,033 | (112 | ) | 250 | n/c | n/c | |||||||||||||||||||||||
Cash flow from (used in) operations |
n/c | n/c | 1,507 | 1,145 | (106 | ) | 256 | n/c | n/c | |||||||||||||||||||||||
Investment activities: |
||||||||||||||||||||||||||||||||
Intercompany transactions |
n/c | n/c | (1,099 | ) | (737 | ) | 392 | 30 | n/c | n/c | ||||||||||||||||||||||
Cash provided by (used in) continuing operations |
n/c | n/c | (1,379 | ) | (1,017 | ) | 299 | (63 | ) | n/c | n/c | |||||||||||||||||||||
Cash provided by (used in) investment activities |
n/c | n/c | (1,491 | ) | (1,129 | ) | 274 | (88 | ) | n/c | n/c | |||||||||||||||||||||
Year ended December 31, 2011 |
||||||||||||||||||||||||||||||||
Cash Flow from Operations: |
||||||||||||||||||||||||||||||||
Net income (loss) |
n/c | n/c | $ | (528 | ) | $ | 384 | $ | (1,768 | ) | $ | 121 | $ | 2,296 | $ | (505 | ) | |||||||||||||||
Income (loss) from continuing operations |
n/c | n/c | (587 | ) | 325 | (1,767 | ) | 122 | 2,354 | (447 | ) | |||||||||||||||||||||
Non-cash adjustments |
$ | 651 | $ | (261 | ) | 2,224 | 335 | n/c | n/c | (2,354 | ) | 447 | ||||||||||||||||||||
Cash flow from (used in) continuing operations |
397 | (515 | ) | 1,788 | 811 | (1,583 | ) | 306 | n/c | n/c | ||||||||||||||||||||||
Cash flow from (used in) operations |
396 | (516 | ) | 1,865 | 888 | (1,583 | ) | 306 | n/c | n/c | ||||||||||||||||||||||
Investment activities: |
||||||||||||||||||||||||||||||||
Intercompany transactions |
(90 | ) | 822 | (1,605 | ) | (628 | ) | 1,695 | (194 | ) | n/c | n/c | ||||||||||||||||||||
Cash provided by (used in) continuing operations |
(94 | ) | 818 | (1,807 | ) | (830 | ) | 1,586 | (303 | ) | n/c | n/c | ||||||||||||||||||||
Cash provided by (used in) investment activities |
(26 | ) | 886 | (1,881 | ) | (904 | ) | 1,581 | (308 | ) | n/c | n/c |
The following revised tables present the financial position, results of operations and cash flows of SunGard (referred to as Parent Company for purposes of this note only), the Guarantor subsidiaries, the Non-Guarantor subsidiaries and Eliminations as of December 31, 2010 and 2011, and for the years ended December 31, 2009, 2010 and 2011 to arrive at the information for SunGard on a consolidated basis.
27
Supplemental Condensed Consolidating Balance Sheet
December 31, 2010 | ||||||||||||||||||||
(in millions) |
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
Assets |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 179 | $ | 4 | $ | 588 | $ | | $ | 771 | ||||||||||
Intercompany balances |
(6,865 | ) | 6,028 | 837 | | | ||||||||||||||
Trade receivables, net |
2 | 617 | 349 | | 968 | |||||||||||||||
Prepaid expenses, taxes and other current assets |
2,544 | 72 | 307 | (2,520 | ) | 403 | ||||||||||||||
Assets held for sale |
| 1,327 | 20 | (8 | ) | 1,339 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
(4,140 | ) | 8,048 | 2,101 | (2,528 | ) | 3,481 | |||||||||||||
Property and equipment, net |
| 576 | 316 | | 892 | |||||||||||||||
Intangible assets, net |
150 | 3,050 | 539 | | 3,739 | |||||||||||||||
Goodwill |
| 3,739 | 1,117 | | 4,856 | |||||||||||||||
Intercompany balances |
(4 | ) | | 4 | | | ||||||||||||||
Investment in subsidiaries |
13,562 | 2,444 | | (16,006 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Assets |
$ | 9,568 | $ | 17,857 | $ | 4,077 | $ | (18,534 | ) | $ | 12,968 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Short-term and current portion of long-term debt |
$ | | $ | 2 | $ | 7 | $ | | $ | 9 | ||||||||||
Accounts payable and other current liabilities |
203 | 3,343 | 928 | (2,520 | ) | 1,954 | ||||||||||||||
Liabilities related to assets held for sale |
| 235 | 11 | | 246 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
203 | 3,580 | 946 | (2,520 | ) | 2,209 | ||||||||||||||
Long-term debt |
7,607 | 2 | 437 | | 8,046 | |||||||||||||||
Intercompany debt |
(195 | ) | 65 | 249 | (119 | ) | | |||||||||||||
Deferred income taxes |
346 | 648 | 112 | | 1,106 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
7,961 | 4,295 | 1,744 | (2,639 | ) | 11,361 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total stockholders equity |
1,607 | 13,562 | 2,333 | (15,895 | ) | 1,607 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities and Stockholders Equity |
$ | 9,568 | $ | 17,857 | $ | 4,077 | $ | (18,534 | ) | $ | 12,968 | |||||||||
|
|
|
|
|
|
|
|
|
|
28
Supplemental Condensed Consolidating Balance Sheet
December 31, 2011 | ||||||||||||||||||||
(in millions) |
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
Assets |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 529 | $ | (15 | ) | $ | 354 | $ | | $ | 868 | |||||||||
Intercompany balances |
(5,247 | ) | 4,516 | 731 | | | ||||||||||||||
Trade receivables, net |
2 | 603 | 346 | | 951 | |||||||||||||||
Prepaid expenses, taxes and other current assets |
1,461 | 54 | 271 | (1,456 | ) | 330 | ||||||||||||||
Assets held for sale |
| 1,315 | 13 | (2 | ) | 1,326 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
(3,255 | ) | 6,473 | 1,715 | (1,458 | ) | 3,475 | |||||||||||||
Property and equipment, net |
| 588 | 305 | | 893 | |||||||||||||||
Intangible assets, net |
120 | 2,701 | 476 | | 3,297 | |||||||||||||||
Goodwill |
| 3,784 | 1,101 | | 4,885 | |||||||||||||||
Intercompany balances |
250 | 1 | (251 | ) | | | ||||||||||||||
Investment in subsidiaries |
12,673 | 2,253 | | (14,926 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Assets |
$ | 9,788 | $ | 15,800 | $ | 3,346 | $ | (16,384 | ) | $ | 12,550 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Short-term and current portion of long-term debt |
$ | | $ | 3 | $ | 7 | $ | | $ | 10 | ||||||||||
Accounts payable and other current liabilities |
296 | 2,170 | 901 | (1,456 | ) | 1,911 | ||||||||||||||
Liabilities related to assets held for sale |
| 219 | 11 | | 230 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
296 | 2,392 | 919 | (1,456 | ) | 2,151 | ||||||||||||||
Long-term debt |
7,612 | 2 | 205 | | 7,819 | |||||||||||||||
Intercompany debt |
82 | 19 | 16 | (117 | ) | | ||||||||||||||
Deferred income taxes |
337 | 714 | 68 | | 1,119 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
8,327 | 3,127 | 1,208 | (1,573 | ) | 11,089 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total stockholders equity |
1,461 | 12,673 | 2,138 | (14,811 | ) | 1,461 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities and Stockholders Equity |
$ | 9,788 | $ | 15,800 | $ | 3,346 | $ | (16,384 | ) | $ | 12,550 | |||||||||
|
|
|
|
|
|
|
|
|
|
29
Supplemental Condensed Consolidating Schedule of Operations
Year ended December 31, 2009 | ||||||||||||||||||||
(in millions) |
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
Total revenue |
$ | | $ | 2,928 | $ | 2,089 | $ | (211 | ) | $ | 4,806 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales and administrative expenses |
96 | 1,978 | 1,732 | (211 | ) | 3,595 | ||||||||||||||
Depreciation and amortization |
| 201 | 74 | | 275 | |||||||||||||||
Amortization of acquisition-related intangible assets |
2 | 371 | 123 | | 496 | |||||||||||||||
Goodwill impairment charges |
| 1,126 | | | 1,126 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
98 | 3,676 | 1,929 | (211 | ) | 5,492 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
(98 | ) | (748 | ) | 160 | | (686 | ) | ||||||||||||
Net interest income (expense) |
(580 | ) | (5 | ) | (45 | ) | | (630 | ) | |||||||||||
Other income (expense) |
(745 | ) | 71 | 10 | 679 | 15 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(1,423 | ) | (682 | ) | 125 | 679 | (1,301 | ) | ||||||||||||
Benefit from (provision for) income taxes |
238 | (63 | ) | (59 | ) | | 116 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(1,185 | ) | (745 | ) | 66 | 679 | (1,185 | ) | ||||||||||||
Income (loss) from discontinued operations, net of tax |
67 | 67 | 5 | (72 | ) | 67 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (1,118 | ) | $ | (678 | ) | $ | 71 | $ | 607 | $ | (1,118 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
Supplemental Condensed Consolidating Schedule of Operations
Year ended December 31, 2010 | ||||||||||||||||||||
(in millions) |
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
Total revenue |
$ | | $ | 2,985 | $ | 1,885 | $ | (380 | ) | $ | 4,490 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales and administrative expenses |
109 | 2,103 | 1,519 | (380 | ) | 3,351 | ||||||||||||||
Depreciation and amortization |
| 193 | 85 | | 278 | |||||||||||||||
Amortization of acquisition-related intangible assets |
1 | 373 | 77 | | 451 | |||||||||||||||
Goodwill impairment charges |
| 205 | | | 205 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
110 | 2,874 | 1,681 | (380 | ) | 4,285 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
(110 | ) | 111 | 204 | | 205 | ||||||||||||||
Net interest income (expense) |
(591 | ) | (2 | ) | (43 | ) | | (636 | ) | |||||||||||
Other income (expense) |
15 | 80 | 3 | (149 | ) | (51 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(686 | ) | 189 | 164 | (149 | ) | (482 | ) | ||||||||||||
Benefit from (provision for) income taxes |
272 | (117 | ) | (87 | ) | | 68 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(414 | ) | 72 | 77 | (149 | ) | (414 | ) | ||||||||||||
Income (loss) from discontinued operations, net of tax |
(156 | ) | (156 | ) | (186 | ) | 342 | (156 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (570 | ) | $ | (84 | ) | $ | (109 | ) | $ | 193 | $ | (570 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
30
Supplemental Condensed Consolidating Schedule of Operations
Year ended December 31, 2011 | ||||||||||||||||||||
(in millions) |
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
Total revenue |
$ | | $ | 2,986 | $ | 1,935 | $ | (422 | ) | $ | 4,499 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales and administrative expenses |
132 | 2,170 | 1,528 | (422 | ) | 3,408 | ||||||||||||||
Depreciation and amortization |
| 183 | 89 | | 272 | |||||||||||||||
Amortization of acquisition-related intangible assets |
1 | 348 | 89 | | 438 | |||||||||||||||
Goodwill impairment charges |
| 48 | | | 48 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
133 | 2,749 | 1,706 | (422 | ) | 4,166 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
(133 | ) | 237 | 229 | | 333 | ||||||||||||||
Net interest income (expense) |
(489 | ) | (1 | ) | (31 | ) | | (521 | ) | |||||||||||
Other income (expense) |
329 | 122 | (7 | ) | (447 | ) | (3 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(293 | ) | 358 | 191 | (447 | ) | (191 | ) | ||||||||||||
Benefit from (provision for) income taxes |
220 | (33 | ) | (69 | ) | | 118 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(73 | ) | 325 | 122 | (447 | ) | (73 | ) | ||||||||||||
Income (loss) from discontinued operations, net of tax |
(76 | ) | 59 | (1 | ) | (58 | ) | (76 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (149 | ) | $ | 384 | $ | 121 | $ | (505 | ) | $ | (149 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
31
Supplemental Condensed Consolidating Schedule of Cash Flows
Year ended December 31, 2009 | ||||||||||||||||||||
(in millions) |
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
Cash flow from operations: |
||||||||||||||||||||
Net income (loss) |
$ | (1,118 | ) | $ | (678 | ) | $ | 71 | $ | 607 | $ | (1,118 | ) | |||||||
Income (loss) from discontinued operations |
67 | 67 | 5 | (72 | ) | 67 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(1,185 | ) | (745 | ) | 66 | 679 | (1,185 | ) | ||||||||||||
Non cash adjustments |
813 | 1,517 | 148 | (679 | ) | 1,799 | ||||||||||||||
Changes in operating assets and liabilities |
(309 | ) | (103 | ) | 347 | | (65 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flow from (used in) continuing operations |
(681 | ) | 669 | 561 | | 549 | ||||||||||||||
Cash flow from (used in) discontinued operations |
| 57 | 33 | | 90 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flow from (used in) operations |
(681 | ) | 726 | 594 | | 639 | ||||||||||||||
Investment activities: |
||||||||||||||||||||
Intercompany transactions |
1,078 | (448 | ) | (630 | ) | | | |||||||||||||
Cash paid for acquired businesses, net of cash acquired |
| (13 | ) | | | (13 | ) | |||||||||||||
Cash paid for property and equipment and software |
| (223 | ) | (92 | ) | | (315 | ) | ||||||||||||
Other investing activities |
| | 5 | | 5 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
1,078 | (684 | ) | (717 | ) | | (323 | ) | ||||||||||||
Cash provided by (used in) discontinued operations |
65 | (59 | ) | (16 | ) | | (10 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) investment activities |
1,143 | (743 | ) | (733 | ) | | (333 | ) | ||||||||||||
Financing activities: |
||||||||||||||||||||
Net repayments of long-term debt |
(844 | ) | (8 | ) | 229 | | (623 | ) | ||||||||||||
Other financing activities |
(3 | ) | | | | (3 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
(847 | ) | (8 | ) | 229 | | (626 | ) | ||||||||||||
Cash provided by (used in) discontinued operations |
| | (2 | ) | | (2 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) financing activities |
(847 | ) | (8 | ) | 227 | | (628 | ) | ||||||||||||
Effect of exchange rate changes on cash |
| | 11 | | 11 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Increase (decrease) in cash and cash equivalents |
(385 | ) | (25 | ) | 99 | | (311 | ) | ||||||||||||
Beginning cash and cash equivalents |
511 | 16 | 448 | | 975 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending cash and cash equivalents |
$ | 126 | $ | (9 | ) | $ | 547 | $ | | $ | 664 | |||||||||
|
|
|
|
|
|
|
|
|
|
32
Supplemental Condensed Consolidating Schedule of Cash Flows
Year ended December 31, 2010 | ||||||||||||||||||||
(in millions) |
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
Cash flow from operations: |
||||||||||||||||||||
Net income (loss) |
$ | (570 | ) | $ | (84 | ) | $ | (109 | ) | $ | 193 | $ | (570 | ) | ||||||
Income (loss) from discontinued operations |
(156 | ) | (156 | ) | (186 | ) | 342 | (156 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(414 | ) | 72 | 77 | (149 | ) | (414 | ) | ||||||||||||
Non cash adjustments |
51 | 597 | 186 | 149 | 983 | |||||||||||||||
Changes in operating assets and liabilities |
(317 | ) | 364 | (13 | ) | | 34 | |||||||||||||
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Cash flow from (used in) continuing operations |
(680 | ) | 1,033 | 250 | | 603 | ||||||||||||||
Cash flow from (used in) discontinued operations |
| 112 | 6 | | 118 | |||||||||||||||
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Cash flow from (used in) operations |
(680 | ) | 1,145 | 256 | | 721 | ||||||||||||||
Investment activities: |
||||||||||||||||||||
Intercompany transactions |
707 | (737 | ) | 30 | | | ||||||||||||||
Cash paid for acquired businesses, net of cash acquired |
| (82 | ) | | | (82 | ) | |||||||||||||
Cash paid for property and equipment and software |
(1 | ) | (207 | ) | (90 | ) | | (298 | ) | |||||||||||
Other investing activities |
(2 | ) | 9 | (3 | ) | | 4 | |||||||||||||
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Cash provided by (used in) continuing operations |
704 | (1,017 | ) | (63 | ) | | (376 | ) | ||||||||||||
Cash provided by (used in) discontinued operations |
253 | (112 | ) | (25 | ) | | 116 | |||||||||||||
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Cash provided by (used in) investment activities |
957 | (1,129 | ) | (88 | ) | | (260 | ) | ||||||||||||
Financing activities: |
||||||||||||||||||||
Net repayments of long-term debt |
(212 | ) | (6 | ) | (114 | ) | | (332 | ) | |||||||||||
Other financing activities |
(12 | ) | | | | (12 | ) | |||||||||||||
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Cash provided by (used in) continuing operations |
(224 | ) | (6 | ) | (114 | ) | | (344 | ) | |||||||||||
Cash provided by (used in) discontinued operations |
| | | | | |||||||||||||||
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Cash provided by (used in) financing activities |
(224 | ) | (6 | ) | (114 | ) | | (344 | ) | |||||||||||
Effect of exchange rate changes on cash |
| | (3 | ) | | (3 | ) | |||||||||||||
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Increase in cash and cash equivalents |
53 | 10 | 51 | | 114 | |||||||||||||||
Beginning cash and cash equivalents |
126 | (9 | ) | 547 | | 664 | ||||||||||||||
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Ending cash and cash equivalents |
$ | 179 | $ | 1 | $ | 598 | $ | | $ | 778 | ||||||||||
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33
Supplemental Condensed Consolidating Schedule of Cash Flows
Year ended December 31, 2011 | ||||||||||||||||||||
(in millions) |
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
Cash flow from operations: |
||||||||||||||||||||
Net income (loss) |
$ | (149 | ) | $ | 384 | $ | 121 | $ | (505 | ) | $ | (149 | ) | |||||||
Income (loss) from discontinued operations |
(76 | ) | 59 | (1 | ) | (58 | ) | (76 | ) | |||||||||||
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Income (loss) from continuing operations |
(73 | ) | 325 | 122 | (447 | ) | (73 | ) | ||||||||||||
Non cash adjustments |
(261 | ) | 335 | 157 | 447 | 678 | ||||||||||||||
Changes in operating assets and liabilities |
(181 | ) | 151 | 27 | | (3 | ) | |||||||||||||
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Cash flow from (used in) continuing operations |
(515 | ) | 811 | 306 | | 602 | ||||||||||||||
Cash flow from (used in) discontinued operations |
(1 | ) | 77 | | | 76 | ||||||||||||||
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Cash flow from (used in) operations |
(516 | ) | 888 | 306 | | 678 | ||||||||||||||
Investment activities: |
||||||||||||||||||||
Intercompany transactions |
822 | (628 | ) | (194 | ) | | | |||||||||||||
Cash paid for acquired businesses, net of cash acquired |
| (14 | ) | (21 | ) | | (35 | ) | ||||||||||||
Cash paid for property and equipment and software |
| (189 | ) | (87 | ) | | (276 | ) | ||||||||||||
Other investing activities |
(4 | ) | 1 | (1 | ) | | (4 | ) | ||||||||||||
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Cash provided by (used in) continuing operations |
818 | (830 | ) | (303 | ) | | (315 | ) | ||||||||||||
Cash provided by (used in) discontinued operations |
68 | (74 | ) | (5 | ) | | (11 | ) | ||||||||||||
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Cash provided by (used in) investment activities |
886 | (904 | ) | (308 | ) | | (326 | ) | ||||||||||||
Financing activities: |
||||||||||||||||||||
Net repayments of long-term debt |
(5 | ) | | (233 | ) | | (238 | ) | ||||||||||||
Other financing activities |
(15 | ) | | | | (15 | ) | |||||||||||||
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Cash provided by (used in) continuing operations |
(20 | ) | | (233 | ) | | (253 | ) | ||||||||||||
Cash provided by (used in) discontinued operations |
| | | | | |||||||||||||||
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Cash provided by (used in) financing activities |
(20 | ) | | (233 | ) | | (253 | ) | ||||||||||||
Effect of exchange rate changes on cash |
| | (4 | ) | | (4 | ) | |||||||||||||
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Increase (decrease) in cash and cash equivalents |
350 | (16 | ) | (239 | ) | | 95 | |||||||||||||
Beginning cash and cash equivalents |
179 | 1 | 598 | | 778 | |||||||||||||||
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Ending cash and cash equivalents |
$ | 529 | $ | (15 | ) | $ | 359 | $ | | $ | 873 | |||||||||
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34
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion and analysis supplement the managements discussion and analysis in the Companys Annual Report on Form 10-K for the year ended December 31, 2011 and presumes that readers have read or have access to the discussion and analysis in this filing. The following discussion and analysis includes historical and certain forward-looking information that should be read together with the accompanying Consolidated Financial Statements, related footnotes, and the discussion below of certain risks and uncertainties that could cause future operating results to differ materially from historical results or from the expected results indicated by forward-looking statements. The following discussion reflects the results of operations and financial condition of SCC, which are materially the same as the results of operations and financial condition of SCCII and SunGard. Therefore, the discussions provided are applicable to each of SCC, SCCII and SunGard unless otherwise noted.
Except as otherwise noted, all explanations below refer to changes in results excluding the impacts from changes in currency translation, which we refer to as constant currency, a non-GAAP measure. We believe presenting our results on a constant currency basis is meaningful for assessing how our underlying businesses have performed due to the fact that we have international operations that are material to our overall operations. As a result, total revenues and expenses are affected by changes in the U.S. Dollar against international currencies. To present this information, current period results for entities reporting in currencies other than U.S. Dollars are converted to U.S. Dollars at the average exchange rate used in the prior year period rather than the actual exchange rates in effect during the current year period. In each of the tables below, we present the percent change based on actual, unrounded results in reported currency and in constant currency. Also, percentages may not add due to rounding.
35
Results of Operations:
Three Months Ended March 31, 2012 Compared To Three Months Ended March 31, 2011
The following table sets forth, for the periods indicated, certain amounts included in our Consolidated Statements of Operations, the relative percentage that those amounts represent to consolidated revenue (unless otherwise indicated), and the percentage change in those amounts from period to period.
Constant Currency | ||||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Percent Increase (Decrease) |
Three Months Ended | Percent Increase (Decrease) |
||||||||||||||||||||||||||||
March 31, | March 31, | March 31, | ||||||||||||||||||||||||||||||
2011 | 2012 | 2012 vs. 2011 | 2012 | 2012 vs. 2011 | ||||||||||||||||||||||||||||
(in millions) | percent of revenue |
percent of revenue |
percent of revenue |
|||||||||||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||||||
Financial systems (FS) |
$ | 672 | 62 | % | $ | 632 | 61 | % | (6 | ) % | $ | 636 | 61 | % | (5 | ) % | ||||||||||||||||
Availability services (AS) |
364 | 34 | % | 356 | 34 | % | (2 | ) % | 358 | 34 | % | (2 | ) % | |||||||||||||||||||
Other (1) |
50 | 5 | % | 51 | 5 | % | 1 | % | 51 | 5 | % | 1 | % | |||||||||||||||||||
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|||||||||||||||||||||||||||
$ | 1,086 | 100 | % | $ | 1,039 | 100 | % | (4 | ) % | $ | 1,045 | 100 | % | (4 | ) % | |||||||||||||||||
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Costs and Expenses |
||||||||||||||||||||||||||||||||
Cost of sales and direct operating |
$ | 494 | 45 | % | $ | 469 | 45 | % | (5 | ) % | $ | 472 | 45 | % | (4 | ) % | ||||||||||||||||
Sales, marketing and administration |
262 | 24 | % | 258 | 25 | % | (3 | ) % | 260 | 25 | % | (2 | ) % | |||||||||||||||||||
Product development and maintenance |
95 | 9 | % | 88 | 8 | % | (7 | ) % | 90 | 9 | % | (6 | ) % | |||||||||||||||||||
Depreciation and amortization |
69 | 6 | % | 71 | 7 | % | 3 | % | 71 | 7 | % | 3 | % | |||||||||||||||||||
Amortization of acquisition- related intangible assets |
117 | 11 | % | 102 | 10 | % | (12 | ) % | 102 | 10 | % | (12 | ) % | |||||||||||||||||||
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|
|||||||||||||||||||||||||||
$ | 1,037 | 96 | % | $ | 988 | 95 | % | (5 | ) % | $ | 995 | 95 | % | (4 | ) % | |||||||||||||||||
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Operating Income |
||||||||||||||||||||||||||||||||
Financial systems (2) |
$ | 115 | 17 | % | $ | 105 | 17 | % | (9 | ) % | $ | 103 | 16 | % | (11 | ) % | ||||||||||||||||
Availability services (2) |
73 | 20 | % | 63 | 18 | % | (13 | ) % | 64 | 18 | % | (12 | ) % | |||||||||||||||||||
Other (1)(2) |
14 | 27 | % | 14 | 29 | % | 7 | % | 14 | 29 | % | 7 | % | |||||||||||||||||||
Corporate |
(19 | ) | (2 | ) % | (15 | ) | (1 | ) % | 21 | % | (15 | ) | (1 | ) % | 21 | % | ||||||||||||||||
Amortization of acquisition- related intangible assets |
(117 | ) | (11 | ) % | (102 | ) | (10 | ) % | 12 | % | (102 | ) | (10 | ) % | 12 | % | ||||||||||||||||
Stock Compensation expense |
(5 | ) | | % | (11 | ) | (1 | ) % | (100 | ) % | (11 | ) | (1 | ) % | (100 | ) % | ||||||||||||||||
Other costs (3) |
(12 | ) | (1 | ) % | (3 | ) | | % | 72 | % | (3 | ) | | % | 72 | % | ||||||||||||||||
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$ | 49 | 4 | % | $ | 51 | 5 | % | 6 | % | $ | 50 | 5 | % | 4 | % | |||||||||||||||||
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|
|
(1) | Other includes our Public Sector and our K-12 businesses. |
(2) | Percent of revenue is calculated as a percent of revenue from FS, AS and Other, respectively. |
(3) | Other costs include management fees paid to the Sponsors, purchase accounting adjustments and certain other costs, partially offset in each year by capitalized software development costs. |
36
The following table sets forth, for the periods indicated, certain supplemental revenue data, the relative percentage that those amounts represent to total revenue and the percentage change in those amounts from period to period.
Constant Currency | ||||||||||||||||||||||||||||||||
Percent Increase (Decrease) |
Percent Increase (Decrease) |
|||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||||||||||||||||||||
March 31, | March 31, | March 31, | ||||||||||||||||||||||||||||||
2011 | 2012 | 2012 vs. 2011 | 2012 | 2012 vs. 2011 | ||||||||||||||||||||||||||||
(in millions) | percent of revenue |
percent of revenue |
percent of revenue |
|||||||||||||||||||||||||||||
Financial Systems |
||||||||||||||||||||||||||||||||
Services |
$ | 592 | 54 | % | $ | 598 | 58 | % | 1 | % | $ | 602 | 58 | % | 1 | % | ||||||||||||||||
License and resale fees |
54 | 5 | % | 24 | 2 | % | (55 | ) % | 24 | 2 | % | (55 | ) % | |||||||||||||||||||
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Total products and services |
646 | 59 | % | 622 | 60 | % | (4 | ) % | 626 | 60 | % | (3 | ) % | |||||||||||||||||||
Reimbursed expenses |
26 | 2 | % | 10 | 1 | % | (59 | ) % | 10 | 1 | % | (59 | ) % | |||||||||||||||||||
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|
|||||||||||||||||||||||||||
$ | 672 | 62 | % | $ | 632 | 61 | % | (6 | ) % | $ | 636 | 61 | % | (5 | ) % | |||||||||||||||||
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|||||||||||||||||||||||||||
Availability Services |
||||||||||||||||||||||||||||||||
Services |
$ | 361 | 33 | % | $ | 348 | 34 | % | (4 | ) % | $ | 350 | 34 | % | (3 | ) % | ||||||||||||||||
License and resale fees |
| | % | | | % | | % | | | % | | % | |||||||||||||||||||
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|
|||||||||||||||||||||||||||
Total products and services |
361 | 33 | % | 348 | 34 | % | (3 | ) % | 350 | 34 | % | (3 | ) % | |||||||||||||||||||
Reimbursed expenses |
3 | | % | 8 | 1 | % | 112 | % | 8 | 1 | % | 115 | % | |||||||||||||||||||
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|
|||||||||||||||||||||||||||
$ | 364 | 34 | % | $ | 356 | 34 | % | (2 | ) % | $ | 358 | 34 | % | (2 | ) % | |||||||||||||||||
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|||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||
Services |
$ | 42 | 4 | % | $ | 43 | 4 | % | 2 | % | $ | 43 | 4 | % | 2 | % | ||||||||||||||||
License and resale fees |
7 | 1 | % | 7 | 1 | % | 2 | % | 7 | 1 | % | 2 | % | |||||||||||||||||||
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|
|||||||||||||||||||||||||||
Total products and services |
49 | 5 | % | 50 | 5 | % | 2 | % | 50 | 5 | % | 2 | % | |||||||||||||||||||
Reimbursed expenses |
1 | | % | 1 | | % | (20 | ) % | 1 | | % | (20 | ) % | |||||||||||||||||||
|
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|
|||||||||||||||||||||||||||
$ | 50 | 5 | % | $ | 51 | 5 | % | 1 | % | $ | 51 | 5 | % | 1 | % | |||||||||||||||||
|
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|
|||||||||||||||||||||||||||
Total Revenue |
||||||||||||||||||||||||||||||||
Services |
$ | 995 | 92 | % | $ | 989 | 95 | % | (1 | ) % | $ | 995 | 95 | % | | % | ||||||||||||||||
License and resale fees |
61 | 6 | % | 31 | 3 | % | (48 | ) % | 31 | 3 | % | (48 | ) % | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total products and services |
1,056 | 97 | % | 1,020 | 98 | % | (3 | ) % | 1,026 | 98 | % | (3 | ) % | |||||||||||||||||||
Reimbursed expenses |
30 | 3 | % | 19 | 2 | % | (38 | ) % | 19 | 2 | % | (38 | ) % | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
$ | 1,086 | 100 | % | $ | 1,039 | 100 | % | (4 | ) % | $ | 1,045 | 100 | % | (4 | ) % | |||||||||||||||||
|
|
|
|
|
|
Income from Operations:
Our total operating margin was 5% for the three months ended March 31, 2012, compared to 4% for the three months ended March 31, 2011. The more significant factors impacting the 40 basis point operating margin increase are a 130 basis point impact, or $14 million, from the decrease in amortization of acquisition-related intangible assets; a 60 basis point impact, or $6 million, from the decrease in AS equipment expense; a combined 60 basis point impact, or $6 million, from the decrease in professional services expense and advertising expense; a 20 basis point impact, or $2 million, from the decrease in shutdown costs for the professional trading business of the Broker/Dealer, defined below; a (260) basis point impact, or $28 million, from the decrease in software license fee revenue in 2012 and a (50) basis point impact, or $5 million, from the increase in stock compensation expense.
Financial Systems:
The FS operating margin was 16% and 17% for the three months ended March 31, 2012 and 2011, respectively. The more significant factors impacting the operating margin decrease of (90) basis points are a $29 million decrease in software license fee revenue, which had a (380) basis point impact on the operating margin; the combined 120 basis point impact, or $8 million, from the decrease in employment-related and consultant expenses; the impact of the lower activity in the low margin Broker/Dealer, defined below, which had a 60 basis point impact on the operating margin; and the 30 basis point impact, or $2 million, from the decrease in professional services expense.
37
Availability Services:
The AS operating margin was 18% and 20% for the three months ended March 31, 2012 and 2011, respectively. In North America, recovery services, which typically uses shared resources, had a (350) basis point impact on AS operating margin in 2012 due primarily to a $15 million decrease in higher margin recovery services revenue, partially offset by a $4 million decrease in equipment expense due to lower equipment leases, lower hardware/software maintenance, and lower network costs. Also in North America, professional services decreased the operating margin in 2012 by (70) basis points due primarily to a combined $2 million increase in severance and consultant expense on unchanged revenue. Managed services helped the margin in 2012 by 170 basis points due primarily to a $6 million increase in typically lower margin managed services revenue, which uses dedicated resources, and decreases of $2 million of facilities, primarily lower utilities and building-related maintenance expenses.
Other:
The operating margin from Other was 29% and 27% for the three months ended March 31, 2012 and 2011, respectively. The operating margin increased due primarily to the $1 million improvement in revenue and $1 million decrease in professional services expense, partially offset by a $1 million increase in employment-related expense.
Revenue:
Total reported revenue decreased $47 million or 4% for the three months ended March 31, 2012 compared to the first quarter of 2011. On a constant currency basis, revenue decreased $41 million, or 4%. Software license revenue decreased $28 million, primarily in FS. In addition, approximately $23 million of the $41 million decrease was due to a decrease in revenue from one of our capital markets businesses, a broker/dealer with an inherently lower margin than our other financial systems businesses, whose performance is a function of market volatility and customer mix (the Broker/Dealer.) This $23 million decrease was due primarily to no longer providing correspondent clearing services for a large, former Broker/Dealer customer that has since begun to self-clear its broker/dealer operations.
Financial Systems:
FS reported revenue decreased $40 million or 6% in the first quarter of 2012 from the prior year period, and decreased 5% on a constant currency basis. Three percentage points of the decrease in constant currency was related to lower revenues from the Broker/Dealer. Processing revenue increased $10 million, or 5%, due mainly to the impact of new business signed in 2011, higher volumes in 2012 and annual rate increases, and increased $3 million due to acquisitions. Reported revenue and constant currency revenue from license and resale fees included software license revenue of $21 million, a decrease of $29 million, or 58%, compared to the same quarter in 2011, due mainly to high-value, multi-year license renewal transactions with scope expansion recognized in 2011, including one deal worth $14 million, for which there were no similar sized transactions in 2012.
Availability Services:
AS reported revenue decreased $8 million in the first quarter of 2012 from the prior year period. On a constant currency basis, revenue decreased 2% in the quarter. In North America, which accounts for over 75% of our AS business, revenue decreased 3%, where decreases in recovery services revenue exceeded growth in managed services revenue. Revenue in Europe, primarily from our U.K. operations, increased 2%, where an increase in managed services revenue was partially offset by a decrease in recovery services revenue. Most of our recovery services revenue, which is derived from tape-based solutions, has been declining due primarily to attrition to other service providers and customer internal solutions, and demand for recovery services has been shifting from tape-based solutions to disk- and cloud-based advanced recovery solutions. Separately, in managed services, demand has been increasing for outsourced management of IT operations and applications. We expect these trends to continue in the future.
Other:
Reported revenue and constant currency revenue from Other increased $1 million, or 1%, for the three months ended March 31, 2012, from the corresponding period in 2011. Reported revenue from license and resale fees included software license revenue of $2 million in the three months ended March 31, 2012, unchanged from the prior year period.
Costs and Expenses:
Cost of sales and direct operating expenses as a percentage of total revenue was 45% in each of the three-month periods ended March 31, 2012 and 2011, and decreased $22 million. Impacting the period was a $16 million decrease in reimbursed expenses relating to the operations of the Broker/Dealer business due primarily to no longer providing
38
correspondent clearing services for a large, former Broker/Dealer customer that has since begun to self-clear its broker/dealer operations; a $6 million decrease in AS equipment costs associated with lower equipment leases, equipment and software maintenance and decreased network costs; and a $3 million decrease in FS employment-related expenses due primarily to severance actions taken in 2011; partially offset by the increase from FS acquired businesses of $3 million.
Sales, marketing and administration expenses as a percentage of total revenue was 25% and 24% in the three months ended March 31, 2012 and 2011, respectively, and decreased $2 million. The increase in the percentage of revenue is due primarily to the decrease in revenue.
Because AS product development and maintenance costs are less significant, it is more meaningful to measure product development and maintenance expenses as a percentage of revenue excluding AS. For each of the three months ended March 31, 2012 and 2011, product development and maintenance costs were 13% of revenue excluding AS, respectively, and decreased $5 million. The decrease is primarily related to a combined $5 million decrease in FS employment-related and consultant expenses partially as a result of severance actions taken in 2011.
Amortization of acquisition-related intangible assets was 10% and 11% of total revenue in the three months ended March 31, 2012 and 2011, respectively, and decreased $15 million. The decrease is due primarily to the $10 million impact of software assets that were fully amortized in the prior year and $7 million of impairment charges in the prior year period.
Interest expense was $122 million and $137 million for the three months ended March 31, 2012 and 2011, respectively. The decrease in interest expense was due primarily to the repayment in January 2012 of $1.22 billion of our outstanding term loans as a result of the sale of HE and interest rate decreases resulting from the expiration of interest rate swaps in each of February 2011 and 2012.
Loss on extinguishment of debt was $15 million and $2 million for the three months ended March 31, 2012 and 2011, respectively. This increase was due primarily to the write-off of unamortized costs due to the partial repayment of term loans in January 2012 discussed above.
The effective income tax rates for the three months ended March 31, 2012 and 2011 were 8% and 12%, respectively. The rate in each period reflects the expected mix of taxable income in various jurisdictions. Given the small base of overall projected pretax income, changes in the mix of income or the total amount of income for 2012 may significantly impact the estimated effective income tax rate for the year.
Accreted dividends on SCCIIs cumulative preferred stock were $62 million and $54 million for the three months ended March 31, 2012 and 2011, respectively. The increase in dividends is due to compounding. No dividends have been declared by SCCII.
Liquidity and Capital Resources:
At March 31, 2012, cash and equivalents were $1.378 billion, an increase of $510 million from December 31, 2011. The cash balance is higher compared to recent trends due to expected income tax payments related to the sale of HE and the early retirement of the 2015 Notes (defined below), each as discussed below. Cash flow from continuing operations was unchanged at $67 million in the three months ended March 31, 2012. Impacting cash flow from continuing operations is an $11 million increase in income tax payments, net of refunds, a $7 million decrease in cash earned from operations, defined as operating income adjusted for certain noncash expenses and the cash portion of other income (expense), and $3 million net cash used for working capital, offset by $21 million less of interest payments made in the three months ended March 31, 2012 from the prior year period, due primarily to the repayment in January 2012 of $1.222 billion of term loans resulting from the sale of HE and the expiration of certain of our interest rate swaps.
Net cash used by continuing operations in investing activities was $63 million in the three months ended March 31, 2012, comprised of cash paid for property and equipment and other assets and one business acquired in our FS segment. Net cash used by continuing operations in investing activities was $79 million in the three months ended March 31, 2011, comprised mainly of cash paid for property and equipment and other assets and two businesses acquired in our FS segment. In January 2012, we sold our HE business for gross proceeds of approximately $1.775 billion less applicable taxes and fees. We expect to pay approximately $450 million in income taxes in 2012 as a result of the HE sale, of which approximately 50% will be in the second quarter and 25% will be in each of the third and fourth quarters.
Net cash used by continuing operations in financing activities was $1.25 billion for the three months ended March 31, 2012, primarily related to repayments of $1.222 billion of term loans resulting from the sale of HE. Net cash provided by
39
continuing operations in financing activities was $11 million for the three months ended March 31, 2011, primarily related to borrowing under our accounts receivables facility. At March 31, 2012, no amount was outstanding under the revolving credit facility, and $200 million was outstanding under the receivables facility.
On February 21, 2012, SunGard announced its intention to redeem all of its outstanding $500 million 10.625% senior notes due 2015 (2015 Notes) under the Indenture dated as of September 29, 2008 among SunGard, the guarantors named therein, and The Bank of New York Mellon, as trustee (as amended or supplemented from time to time, the 2015 Indenture). On April 2, 2012, SunGard paid $527 million to redeem the 2015 Notes plus accrued and unpaid interest to the redemption date, pursuant to Section 3.07(d) of the 2015 Indenture.
On March 2, 2012, SunGard amended its Credit Agreement to, among other things, extend the maturity date of approximately $908 million of tranche A and incremental term loans from February 28, 2014 to February 28, 2017, extend the maturity of $880 million of revolving credit facility commitments from May 11, 2013 to November 29, 2016, and amend certain covenants and other provisions, in order to, among other things, permit the potential spin-off of AS. The tranche B, tranche C and revolving credit facility each have certain springing maturity provisions which are described in the Companys Credit Agreement as amended and filed with the Companys Form 8-K dated March 2, 2012.
At March 31, 2012, we had outstanding $6.61 billion in aggregate indebtedness, with additional borrowing capacity of $858 million under the revolving credit facility (after giving effect to outstanding letters of credit). Under the receivables facility, there was an additional borrowing capacity of $32 million at March 31, 2012. Also at March 31, 2012, we had outstanding letters of credit and bid bonds that total approximately $39 million.
We expect our available cash balances and cash flows from operations, combined with availability under the revolving credit facility and receivables facility, to provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital spending for a period that includes at least the next 12 months.
Covenant Compliance
Adjusted EBITDA is used to determine compliance with certain covenants contained in the indentures governing SunGards senior notes due 2018 and 2020 and senior subordinated notes due 2015 and in SunGards senior secured credit facilities. Adjusted EBITDA is defined as EBITDA, which we define as earnings before interest, taxes, depreciation and amortization, further adjusted to exclude certain adjustments permitted in calculating covenant compliance under the indentures and senior secured credit facilities. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors to demonstrate compliance with the financing covenants.
The breach of covenants in SunGards senior secured credit facilities that are tied to ratios based on Adjusted EBITDA could result in a default under that agreement and the lenders could elect to declare all amounts borrowed due and payable. Any such acceleration would also result in a default under the indentures. Additionally, under SunGards debt agreements, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is also tied to ratios based on Adjusted EBITDA.
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Adjusted EBITDA is calculated as follows (in millions):
Last Twelve Months |
||||||||||||
Three Months Ended March 31, | March 31, | |||||||||||
2011 | 2012 | 2012 | ||||||||||
Income (loss) from continuing operations |
$ | (78 | ) | $ | (77 | ) | $ | (72 | ) | |||
Interest expense, net |
136 | 122 | 507 | |||||||||
Taxes |
(11 | ) | (7 | ) | (114 | ) | ||||||
Depreciation and amortization |
186 | 173 | 697 | |||||||||
|
|
|
|
|
|
|||||||
EBITDA |
233 | 211 | 1,018 | |||||||||
Goodwill impairment charge |
| | 48 | |||||||||
Purchase accounting adjustments (a) |
3 | 2 | 10 | |||||||||
Non-cash charges (b) |
5 | 11 | 40 | |||||||||
Restructuring and other (c) |
11 | 3 | 92 | |||||||||
Loss on extinguishment of debt (d) |
2 | 15 | 16 | |||||||||
|
|
|
|
|
|
|||||||
Adjusted EBITDA - senior secured credit facilities, senior notes due 2018 and 2020 and senior subordinated notes due 2015 |
$ | 254 | $ | 242 | $ | 1,224 | ||||||
|
|
|
|
|
|
(a) | Purchase accounting adjustments include the adjustment of deferred revenue and lease reserves to fair value at the date of the LBO and subsequent acquisitions made by the Company and certain acquisition-related compensation expense. |
(b) | Non-cash charges include stock-based compensation and loss on the sale of assets. |
(c) | Restructuring and other charges include severance and related payroll taxes, reserves to consolidate certain facilities, strategic initiative expenses, certain other expenses associated with acquisitions made by the Company, management fees paid to the Sponsors (see Note 9 of Notes to Consolidated Financial Statements) and franchise and similar taxes reported in operating expenses, partially offset by certain charges relating to the receivables facility. |
(d) | Loss on extinguishment of debt includes the write-off of deferred financing fees associated with the January 2012 repayment of $1.22 billion of term loans. |
The covenant requirements and actual ratios for the twelve months ended March 31, 2012 are as follows. All covenants are in compliance.
Covenant Requirements |
Actual Ratios |
|||||||
Senior secured credit facilities (1) |
||||||||
Minimum Adjusted EBITDA to consolidated interest expense ratio |
1.95x | 2.92x | ||||||
Maximum total debt to Adjusted EBITDA |
5.75x | 4.16x | ||||||
Senior notes due 2018 and 2020 and senior subordinated notes due 2015 (2) |
||||||||
Minimum Adjusted EBITDA to fixed charges ratio required to incur additional debt pursuant to ratio provisions |
2.00x | 2.90x |
(1) | The senior secured credit facilities require us to maintain an Adjusted EBITDA to consolidated interest expense ratio starting at a minimum of 1.95x for the four-quarter period ended December 31, 2011 and increasing over time to 2.10x by the end of 2012 and 2.20x by the end of 2013. Consolidated interest expense is defined in the senior secured credit agreement as consolidated cash interest expense less cash interest income further adjusted for certain non-cash or non-recurring interest expense and the elimination of interest expense and fees associated with SunGards receivables facility. Beginning with the four-quarter period ending December 31, 2011, we are required to maintain a consolidated total debt to Adjusted EBITDA ratio of 5.75x and decreasing over time to 5.25x by the end of 2012 and to 4.75x by the end of 2013. Consolidated total debt is defined in the senior secured credit agreement as total debt less certain indebtedness and further adjusted for cash and cash equivalents on our balance sheet in excess of $50 million. Failure to satisfy these ratio requirements would constitute a default under the senior secured credit facilities. If our lenders failed to waive any such default, our repayment obligations under the senior secured credit facilities could be accelerated, which would also constitute a default under our indentures. |
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(2) | SunGards ability to incur additional debt and make certain restricted payments under our indentures, subject to specified exceptions, is tied to an Adjusted EBITDA to fixed charges ratio of at least 2.0x, except that we may incur certain debt and make certain restricted payments and certain permitted investments without regard to the ratio, such as the ability to incur up to an aggregate principal amount of $5.75 billion under credit facilities (inclusive of amounts outstanding under the senior credit facilities from time to time; as of March 31, 2012, we had $3.05 billion outstanding under the term loan facilities and available commitments of $858 million under the revolving credit facility), to acquire persons engaged in a similar business that become restricted subsidiaries and to make other investments equal to 6% of our consolidated assets. Fixed charges is defined in the indentures governing the Senior Notes due 2018 and 2020 and the Senior Subordinated Notes due 2015 as consolidated interest expense less interest income, adjusted for acquisitions, and further adjusted for non-cash interest and the elimination of interest expense and fees associated with the receivables facility. |
Certain Risks and Uncertainties
Certain of the matters we discuss in this Report on Form 10-Q may constitute forward-looking statements. You can identify forward-looking statements because they contain words such as believes, expects, may, will, should, seeks, approximately, intends, plans, estimates, or anticipates or similar expressions which concern our strategy, plans or intentions. All statements we make relating to estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. All of these forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those we expected. We derive most of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Some of the factors that we believe could affect our results include: general economic and market conditions; the overall condition of the financial services industry, including the effect of any further consolidation among financial services firms; our high degree of leverage; the effect of war, terrorism, natural disasters or other catastrophic events; the effect of disruptions to our systems and infrastructure; the timing and magnitude of software sales; the timing and scope of technological advances; customers taking their information availability solutions in-house; the trend in information availability toward solutions utilizing more dedicated resources; the market and credit risks associated with broker/dealer operations; the ability to retain and attract customers and key personnel; risks relating to the foreign countries where we transact business; the integration and performance of acquired businesses; the ability to obtain patent protection and avoid patent-related liabilities in the context of a rapidly developing legal framework for software and business-method patents; a material weakness in our internal controls; and unanticipated changes in our income tax provision or the adoption of new tax legislation. The factors described in this paragraph and other factors that may affect our business or future financial results are discussed in our filings with the U.S. Securities and Exchange Commission, including this Form 10-Q. We assume no obligation to update any written or oral forward-looking statement made by us or on our behalf as a result of new information, future events or other factors.
Item 3. Quantitative and Qualitative Disclosures about Market Risk:
We do not use derivative financial instruments for trading or speculative purposes. We have invested our available cash in short-term, highly liquid financial instruments, with a substantial portion having initial maturities of three months or less. When necessary, we have borrowed to fund acquisitions.
At March 31, 2012, we had total debt of $6.61 billion, including $3.25 billion of variable rate debt. We have entered into interest rate swap agreements which expire in May 2013 and effectively fix the interest rates for $500 million of our variable rate debt at 1.99%. Our remaining variable rate debt of $2.75 billion is subject to changes in underlying interest rates, and, accordingly, our interest payments will fluctuate. During the period when all of our interest rate swap agreements are effective, a 1% change in interest rates would result in a change in interest of approximately $28 million per year. Upon the expiration of the interest rate swap agreements in May 2013, a 1% change in interest rates would result in a change in interest of approximately $33 million per year.
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Item 4. Controls and Procedures:
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuers management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow for timely decisions regarding required disclosure.
The Company previously reported a material weakness in internal control over financial reporting related to accounting for deferred income taxes, which was described in Item 9A including Managements Annual Report on Internal Control Over Financial Reporting in the Companys Annual Report on Form 10-K for the year ended December 31, 2011. As a result of this material weakness, which was not remediated as of March 31, 2012, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that the Companys disclosure controls and procedures were not effective as of March 31, 2012.
Notwithstanding the material weakness in accounting for deferred income taxes, we concluded that the interim financial statements included in this Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with generally accepted accounting principles.
Remediation of Material Control Weakness
The Company is continuing to implement steps to remediate the material weakness discussed above and to improve its internal control over financial reporting related to accounting for deferred income taxes. Specifically, the Company is in the process of searching for additional qualified tax personnel and is: continuing to review all areas of the tax accounting process, including deferred income taxes; strengthening controls and improving the reporting tools and quality of data used in the analysis of deferred income tax accounts and related disclosures; and increasing the level of certain income tax review activities during the financial close process.
Management is committed to improving the Companys internal control processes and has developed and presented to the Audit Committee a plan and timetable for the implementation of the remediation measures described above and is meeting frequently with the Committee to monitor the status of remediation activities. Management believes that the measures described above should remediate the material weakness identified and strengthen the Companys internal control over financial reporting related to accounting for deferred income taxes. As the Company continues to evaluate and improve its internal control over financial reporting related to accounting for deferred income taxes, additional measures to remediate the material weakness or modifications to certain of the remediation procedures described above may be necessary. The Company expects to make progress each quarter and expects to achieve remediation of the material weakness when it completes its year end procedures in connection with filing the Companys Annual Report on Form 10-K for 2012.
Change in Internal Control Over Financial Reporting
Other than changes related to the ongoing remediation of the material weakness in accounting for deferred income taxes, no change in our internal control over financial reporting occurred during our most recent fiscal quarter ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 1. Legal Proceedings: We are presently a party to certain lawsuits arising in the ordinary course of our business. We believe that none of our current legal proceedings will be material to our business, financial condition or results of operations.
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Item 1A. Risk Factors: There have been no material changes to SCCs, SCCIIs or SunGards Risk Factors as previously disclosed in their Form 10-K for the year ended December 31, 2011.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds: None.
Item 3. Defaults Upon Senior Securities: None.
Item 4. Mine Safety Disclosures: None.
(a) None.
(b) None.
Number |
Document | |
10.1 | Employment Agreement between Vincent Coppola and SunGard Data Systems Inc., dated and effective as of October 16, 2011. | |
12.1 | Computation of Ratio of Earnings to Fixed Charges. | |
31.1 | Certification of Russell P. Fradin, Chief Executive Officer of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. required by Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Robert F. Woods, Chief Financial Officer of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. required by Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of Russell P. Fradin, Chief Executive Officer of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Robert F. Woods, Chief Financial Officer of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | Interactive Data Files for SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of December 31, 2011 and March 31, 2012, (ii) Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2011 and 2012, (iii) Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2012 and (iv) Notes to Consolidated Financial Statements. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SUNGARD CAPITAL CORP. | ||||||
SUNGARD CAPITAL CORP. II | ||||||
Dated: May 15, 2012 | By: | /s/ Robert F. Woods | ||||
Robert F. Woods | ||||||
Executive Vice President and Chief Financial Officer | ||||||
(Principal Financial Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SUNGARD DATA SYSTEMS INC. | ||||||
Dated: May 15, 2012 | By: | /s/ Robert F. Woods | ||||
Robert F. Woods | ||||||
Senior Vice President-Finance and Chief Financial Officer | ||||||
(Principal Financial Officer) |
45
EXHIBIT INDEX
Exhibit No. |
Document | |
10.1 | Employment Agreement between Vincent Coppola and SunGard Data Systems Inc., dated and effective as of October 16, 2011. | |
12.1 | Computation of Ratio of Earnings to Fixed Charges. | |
31.1 | Certification of Russell P. Fradin, Chief Executive Officer of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. required by Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Robert F. Woods, Chief Financial Officer of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. required by Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of Russell P. Fradin, Chief Executive Officer of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Robert F. Woods, Chief Financial Officer of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | Interactive Data Files for SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of December 31, 2011 and March 31, 2012, (ii) Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2011 and 2012, (iii) Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2012 and (iv) Notes to Consolidated Financial Statements. |
46
Exhibit 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the Agreement) is entered into, by and between SunGard Data Systems Inc. (collectively with its successors and assigns, SunGard) and Vincent Coppola (Executive) effective as of October 16, 2011 (the Effective Date). SunGard, its parents, subsidiaries and other affiliates, and their respective successors and assigns, are collectively referred to as the Company.
WHEREAS, Executive and SunGard Systems International Inc. are currently parties to an Offer Letter dated as of August 5, 2011 (the Existing Agreement), which provides for severance payments according to the terms described in this Agreement.
WHEREAS, Executive has agreed to certain confidentiality, non-competition and non-solicitation covenants contained hereunder, in consideration of the benefits provided to Executive under this Agreement.
WHEREAS, certain capitalized terms shall have the meanings given those terms in Section 3 of this Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive, and Executive hereby accepts such employment and agrees to perform Executives duties and responsibilities, in accordance with the terms, conditions and provisions hereinafter set forth.
1.1 Employment Term. This Agreement shall be effective as of the Effective Date, and shall continue until two years from the Effective Date, unless the Agreement is terminated sooner in accordance with Section 2 below. In addition, the term of the Agreement shall automatically renew for periods of one year unless the Company gives written notice to Executive, at least 60 days prior to the end of the initial term or at least 60 days prior to the end of any one-year renewal period, that the Agreement shall be terminated. The period commencing on the Effective Date and ending on the date on which the term of Executives employment under the Agreement shall terminate is hereinafter referred to as the Employment Term. The Companys termination of this Agreement upon the two year anniversary of the Effective Date or at the end of any one-year renewal period shall be considered an involuntary termination of Executives employment under this Agreement if (i) Executive is willing and able to continue performing services under terms similar to those in this Agreement, (ii) neither the Company nor any other entity described in Section 2.2(d) offers Executive continued Comparable Employment (as defined in Section 3), and (iii) Executives employment terminates without Cause (as defined in Section 3) at the date of such termination of the Agreement.
1.2 Duties and Responsibilities. During the Employment Term, Executive shall serve as Senior Vice President, Operations, or shall render executive and managerial services in such other position as Executives supervisor determines. For purposes of this Agreement, Executives supervisor is the person or persons in executive management of the Company to whom Executive reports from time to time. Executive shall perform all duties and accept all responsibilities incident to such position or as may be reasonably assigned to Executive by Executives supervisor.
1.3 Extent of Service. During the Employment Term, Executive agrees to use Executives full and best efforts to carry out Executives duties and responsibilities as set forth in Section 1.2 hereof with the highest degree of loyalty and the highest standards of care and, consistent with the other provisions of this Agreement, Executive agrees to devote substantially all of Executives business time,
1
1.4 attention and energy thereto. The foregoing shall not be construed as preventing Executive from making investments in other businesses or enterprises, provided that Executive agrees not to become engaged in any other business activity which, in the reasonable judgment of Executives supervisor, is likely to interfere with Executives ability to discharge Executives duties and responsibilities to the Company. Executive will not serve on the board of directors of an entity unrelated to the Company (other than a non-profit charitable organization) without the prior written consent of Executives supervisor and the Companys Chief Compliance Officer as detailed in the Companys written code of business conduct and ethics, including the Companys Global Business Conduct and Compliance Program.
1.5 Base Salary. During the Employment Term, for all the services rendered by Executive hereunder, the Company shall pay Executive a base salary (Base Salary), at the annual rate in effect on the Effective Date, as specified in the Offer Letter, payable in installments at such times as the Company customarily pays its other employees. Executives Base Salary shall be reviewed periodically for appropriate adjustments, if any, by Executives supervisor pursuant to the Companys normal performance review policies for executives. Base Salary may be decreased only as part of an overall Company reduction of compensation for other similarly situated employees of the Company.
1.6 Retirement, Welfare and Other Benefit Plans and Programs. During the Employment Term, Executive shall be entitled to participate in the employee retirement and welfare benefit plans and programs (or similar retirement and welfare benefit plans and programs) made available to the Companys employees, as such retirement and welfare plans may be in effect from time to time and subject to the eligibility requirements of such plans. During the Employment Term, Executive shall be provided with executive fringe benefits and perquisites under the same terms as those made available to the Companys employees, as such programs may be in effect from time to time. During the Employment Term, Executive shall be entitled to vacation and sick leave in accordance with the Companys vacation, holiday and other pay for time not worked policies. Nothing in this Agreement or otherwise shall prevent the Company from amending or terminating any retirement, welfare or other employee benefit plans, programs, policies or perquisites from time to time as the Company deems appropriate.
1.7 Reimbursement of Expenses. During the Employment Term, Executive shall be provided with reimbursement of reasonable expenses related to Executives employment by the Company on a basis no less favorable than that which may be authorized from time to time for the Companys other employees.
1.8 Incentive Compensation. During the Employment Term, Executive shall be entitled to participate in short-term and long-term incentive programs established by the Company, at such levels as Executives supervisor determines. Executives incentive compensation shall be subject to the terms of the applicable plans and shall be determined based on Executives individual performance and the Company or Company performance as determined by Executives supervisor. No minimum incentive is guaranteed. The Offer Letter sets forth the terms of the 2011 Target Incentive Bonus (as defined in Section 3) and initial equity grant.
2. Termination. Executives employment shall terminate upon the occurrence of any of the following events:
2.1 Termination without Cause. The Company may terminate Executives employment with the Company at any time without Cause (in which case the Employment Term shall be deemed to have ended) effective upon not less than 30 days prior written notice to Executive pursuant to Section 11 (or upon another mutually agreed upon date).
2
2.2 Benefits Payable upon Termination without Cause.
(a) In the event the Company terminates Executives employment with the Company without Cause during the Employment Term, subject to subsection (d) below, if Executive executes and does not revoke a Release (as defined in Section 3), Executive shall be entitled to receive the following severance benefits:
(i) Executive shall receive a lump sum cash payment equal to the sum of (A) Executives annual Base Salary and (B) Executives Target Incentive Bonus (as defined in Section 3) in effect immediately before the Termination Date (as defined in Section 3).
(ii) Executive shall receive a lump sum cash payment equal to 50% of the Target Incentive Bonus for the fiscal year in which the Termination Date occurs.
(iii) Executive shall receive a lump sum cash payment equal to the cost (calculated as described below) that Executive would incur if Executive continued medical, dental and vision coverage for Executive, and, where applicable, Executives spouse and dependents, for the one-year period following the Termination Date under the Companys applicable benefit plans. For this purpose, the monthly cost shall be determined as 100% of the applicable monthly premium for the cost of medical, dental and vision coverage for Executive and, where applicable, Executives spouse and dependents, less the monthly premium charge that is paid by active Company employees for similar coverage as in effect at Executives Termination Date. The cash payment shall be increased by a tax gross up payment such that after payment of Executives Federal, state and local income taxes and FICA tax imposed on the payment and the tax gross up payment, Executive retains an amount under this subsection (ii) sufficient to pay such cost. Executive may elect COBRA continuation coverage according to the terms of the Companys applicable benefit plans.
(b) Payment of the lump sum benefits described in subsection (a) above shall be made on the first regularly scheduled payroll date that occurs after the 55th day following Executives Termination Date, subject to Executives delivery of an effective Release.
(c) In addition to the foregoing, Executive shall receive any other amounts earned, accrued or owing but not yet paid under Section 1 above (including any annual bonus earned for the fiscal year preceding that in which the Termination Date occurs, but unpaid as of the Termination Date) and any other benefits in accordance with the terms of any applicable plans and programs of the Company; provided that Executive shall not be entitled to receive severance benefits under any Company severance plan.
(d) Notwithstanding the foregoing, no payments shall be made to Executive under this Section 2.2 with respect to a termination of employment if Executive is offered Comparable Employment by (i) any Company entity or (ii) any entity that acquires a Company entity or business to which Executive provides services, on a regular basis, as an employee of the Company or is otherwise a party to a transaction relating to such a Company entity or business (or any affiliate of the foregoing), in each case regardless of whether Executive accepts or rejects such offer of Comparable Employment.
2.3 Retirement or Other Voluntary Termination. Executive may voluntarily terminate employment for any reason, including voluntary retirement, effective upon 30 days prior written notice in accordance with Section 11. In such event, after the effective date of such termination, no further payments shall be due under this Agreement. However, Executive shall receive any amounts earned, accrued or owing but not yet paid under Section 1 above through the Termination Date and shall be entitled to any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company.
3
2.4 Disability. The Company may terminate Executives employment if Executive incurs a Disability (as defined in Section 3). Executive agrees, in the event of a dispute relating to Executives Disability, to submit to a physical examination by a licensed physician selected by the Company. If Executives employment terminates on account of Disability, no further payments shall be due under this Agreement. However, Executive shall receive any amounts earned, accrued or owing but not yet paid under Section 1 above through the Termination Date and shall be entitled to any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company.
2.5 Death. If Executive dies while employed by the Company, the Company shall pay to Executives executor, legal representative, administrator or designated beneficiary, as applicable, any amounts earned, accrued or owing but not yet paid under Section 1 above through the Termination Date and any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company. Otherwise, the Company shall have no further liability or obligation under this Agreement to Executives executors, legal representatives, administrators, heirs or assigns.
2.6 Cause. The Company or Executives supervisor may terminate Executives employment at any time for Cause upon written notice to Executive, in which event all payments under this Agreement shall cease, except for Base Salary to the extent already accrued. Executive shall be entitled to any benefits accrued or earned before Executives termination in accordance with the terms of any applicable benefit plans and programs of the Company; provided that Executive shall not be entitled to receive any unpaid short-term or long-term cash incentive payments and Executive shall forfeit any outstanding equity grants in accordance with the terms of the applicable grant agreements.
3. Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 3:
3.1 Cause shall mean any of the following grounds for termination of Executives employment:
(a) Executive is convicted of (or pleads guilty or nolo contendre to) a felony;
(b) Executive willfully neglects, refuses or fails to substantially perform Executives material duties to the Company (other than a failure resulting from Executives incapacity due to physical or mental illness), which failure has continued for a period of at least 30 days after a written notice of demand for substantial performance, signed by a duly authorized officer of the Company, has been delivered to Executive specifying the manner in which Executive has failed substantially to perform, without remedial action by Executive within such 30 day period, unless such remedial action would not have been meaningful under the circumstances in the sole judgment of the Company, in which case no remedial period need be provided;
(c) Executive commits an act of dishonesty or breach of trust or otherwise engages in misconduct in the performance of Executives duties;
(d) Executive engages in public conduct that is harmful to the reputation of the Company;
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(e) Executive breaches any written non-competition, non-disclosure or non-solicitation agreement, or any other agreement in effect with the Company, including without limitation the provisions of Section 5 of this Agreement; or
(f) Executive materially breaches the Companys written code of business conduct and ethics, including the Global Business Conduct and Compliance Program.
3.2 Code shall mean the Internal Revenue Code of 1986, as amended.
3.3 Comparable Employment shall mean an offer of employment (i) at a Base Salary and Target Incentive Bonus opportunity at least equal to the Base Salary and Target Incentive Bonus opportunity then in effect for Executive (ii) at a position in which Executives authority, duties and responsibilities are not materially less than those then in effect, (iii) at a principal office location not more than 100 miles from Executives principal office location as then in effect and (iv) pursuant to which either this Agreement will continue in effect or the Company (or other employer) offers Executive a new employment agreement on terms that are substantially similar in the aggregate to the terms of this Agreement.
3.4 Disability shall mean Executive has been unable to perform the essential functions of Executives position with the Company by reason of physical or mental incapacity for a period of six consecutive months, subject to any obligations or limitations imposed by federal, state or local laws, including any duty to accommodate Executive under the federal Americans with Disabilities Act.
3.5 Release shall mean a release substantially in the form of Exhibit A attached to this Agreement, which may be subsequently modified based on recommendations of the Companys counsel to reflect changes in applicable law after the Effective Date.
3.6 Target Incentive Bonus shall mean Executives target annual incentive bonus amount (measured at the target level, identified goal target or other similar target, without taking into account any incentive override for above goal performance, or any project-specific or other non-standard incentives) in effect under the Companys applicable Executive Incentive Plan for the year of termination. In the event that the Company has notified Executive in writing that Executive will be eligible for a Target Incentive Bonus for the year of termination, but a plan has not yet been put into effect, the Target Incentive Bonus shall be the prior years target annual incentive bonus amount ; provided that if Executives employment is terminated in 2012 and an annual incentive plan has not been put in effect for the 2012 fiscal year, the Target Incentive Bonus shall be based on Executives annualized 2011 Target Incentive Bonus The Company may adjust the Target Incentive Bonus as appropriate to reflect adjustments made to the target bonuses for other executives of the Company in the current year.
3.7 Termination Date shall mean the effective date of the termination of Executives employment relationship with the Company pursuant to this Agreement.
4. Notice of Termination. Any termination of Executives employment shall be communicated by a written notice of termination to the other party hereto given in accordance with Section 11. The notice of termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) briefly summarize the facts and circumstances deemed to provide a basis for a termination of employment if for Cause, and (iii) specify the Termination Date in accordance with the requirements of this Agreement.
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5. Restrictive Covenants.
5.1 Non-Disclosure.
(a) At all times during the Employment Term and continuing at all times after Executives termination of employment for any reason, and except as required by applicable law or in a judicial or administrative proceeding, Executive shall not disclose to anyone outside the Company, or use for the benefit of anyone other than the Company, any confidential or proprietary information relating to the business of the Company, whether acquired by Executive before, during or after employment with the Company. Executive acknowledges that the proprietary and confidential information of the Company includes, by way of example: (a) the identity of customers and prospects, their specific requirements, and the names, addresses and telephone numbers of individual contacts; (b) prices, renewal dates and other detailed terms of customer and supplier contracts and proposals; (c) pricing policies, information about costs, profits and sales, methods of delivering software and services, marketing and sales strategies, and software and service development strategies; (d) source code, object code, specifications, user manuals, technical manuals and other documentation for software products; (e) screen designs, report designs and other designs, concepts and visual expressions for software products; (f) employment and payroll records; (g) forecasts, budgets, acquisition models and other non public financial information; (h) expansion plans, business or development plans, management policies, information about possible acquisitions or divestitures, potential new products, markets or market extensions, and other business and acquisition strategies and policies; and (i) terms of employment, compensation and performance levels of Company employees. Proprietary and confidential information shall not include any information that is generally known to the industry or the public other than as a result of Executives breach of this Section 5.1.
(b) Without limiting the foregoing, Executive agrees, at all times, not to disclose to anyone, whether or not an employee of the Company, any confidential information about any transaction involving an acquisition or disposition of the Company or any Company businesses, including the potential of any such transaction, without prior written authorization from Executives supervisor or the General Counsel of SunGard.
5.2 Works and Ideas.
(a) Executive shall promptly communicate to the Company, in writing, all marketing strategies, product ideas, software designs and concepts, software enhancement and improvement ideas, works of authorship, developments, discoveries, trade secrets, improvements to trade secrets, other ideas and inventions and any know-how related to any such items (collectively, Works and Ideas) pertaining to the business of the Company, whether or not patentable or copyrightable, that are made, written, developed or conceived by Executive, alone or with others, at any time (during or after business hours) while Executive is employed by the Company (including at any time prior to the date of this Agreement) or during the six months after Executives termination of employment for any reason. Executive agrees to communicate all Works and Ideas to the Company within a reasonable period of time that allows the Company to exploit the Works and Ideas in the existing and reasonably contemplated operation of the Company. Works and Ideas shall not include general industry knowledge, ideas of a general nature not specific to the Company and general business experience. Executive acknowledges that all Works and Ideas will be the exclusive property of the Company, and hereby assigns and agrees to assign to the Company all of Executives right, title and interest in the Works and Ideas and all applications for intellectual property protection, including, without limitation, all copyrights, patents, and trademarks which may hereafter be filed for the Works and Ideas in any country.
(b) Executive shall reasonably cooperate with the Company, at the Companys expense, to allow the Company to take full advantage of the Works and Ideas, to assist the Company in every reasonable way to secure the Companys ownership in the Works and Ideas and to defend and enforce the Works and Ideas and any copyrights, patents, trademarks or other intellectual property rights
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relating thereto in any and all countries, including, without limitation, the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, declarations, assignments and all other instruments which the Company shall deem necessary in order for the Company to own, apply for, obtain and enforce such rights. Executive shall give testimony regarding such Works and Ideas and other intellectual property when requested by the Company. Executive shall be obligated to execute or cause to be executed, when it is in Executives power to do so, any such instrument, papers or testimony even after Executives Termination Date. Executive shall keep the Company apprised of Executive mailing address and telephone number for five years after Executives Termination Date to assist in execution of any such instrument or papers.
5.3 Non-Competition and Non-Solicitation.
(a) During Executives employment with the Company and within one year after Executives termination of employment with the Company for any reason, whether or not payments are being made under this Agreement, Executive shall not, directly or indirectly, (x) anywhere in the world render any material services for any organization, or engage in any business, that competes in any material respect with the business of the Company for which Executive has performed material services in any material respect during the two years preceding the Termination Date (a Competing Business), or (y) solicit or contact, for the purpose or with the effect of competing or interfering with the business of the Company for which Executive has performed material services in any material respect during the two years preceding the Termination Date (i) any customer or acquisition target under contract with the Company at any time during the last two years of Executives employment with the Company, (ii) any prospective customer or acquisition target that received or requested a proposal, offer or letter of intent from the Company at any time during the last two years of Executives employment with the Company, (iii) any affiliate of any such customer or prospect, or (iv) any of the individual contacts at customers or acquisition targets established by the Company, Executive or others at the Company during the period of Executives employment with the Company.
(b) During Executives employment with the Company and for a period of one year after Executives termination of employment with the Company for any reason, whether or not payments are being made under this Agreement, Executive shall not directly or indirectly hire, or encourage or solicit any employee, consultant or independent contractor to leave the employment or service of the Company for any reason or interfere in any other manner with such relationships at the time existing between the Company and its employees, consultants and independent contractors. As part of this restriction, Executive is prohibited from interviewing or providing any input to any third party regarding any such employee, consultant or independent contractor of the Company. However, this obligation shall not affect any responsibility Executive may have as an employee of the Company with respect to the bona fide hiring and firing of Company personnel.
(c) Notwithstanding the foregoing, nothing herein shall prohibit Executive from commencing employment with a subsidiary, division or unit of any entity that engages in a Competing Business so long as Executive and such subsidiary, division or unit do not, directly or indirectly, engage in a Competing Business, as determined by the Companys Chief Executive Officer in good faith on a timely basis after Executive has notified the Company in writing of his commencing, or intention to commence, employment with such subsidiary, division or unit.
6. Equitable Relief; Survival.
6.1 Executive acknowledges and agrees that the restrictions contained in Section 5 are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, that SunGard would not have entered into this Agreement in the absence of
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such restrictions and that irreparable injury will be suffered by the Company should Executive breach any of the provisions of that Section. Executive represents and acknowledges that (i) Executive has been advised by the Company to consult Executives own legal counsel with respect to this Agreement, and (ii) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executives counsel.
6.2 Executive further acknowledges and agrees that a breach of any of the restrictions in Section 5 cannot be adequately compensated by monetary damages. Executive agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages or posting of any bond, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Section 5 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the provisions of Section 5 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law.
6.3 Notwithstanding anything in this Agreement to the contrary, if Executive breaches any of Executives obligations under Section 5, the Company shall thereafter be obligated only for the compensation and other benefits provided in any Company benefit plans, policies or practices then applicable to Executive in accordance with the terms thereof, Executive shall have no right to receive any payments under Section 2.2(a) of this Agreement, and all payments under Section 2.2(a) of this Agreement shall immediately cease.
6.4 Executive irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 5, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in a United States District Court for Pennsylvania, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Chester County, Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any such court. Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 11 hereof.
6.5 The provisions of Sections 5, 6 and 7 of this Agreement shall survive any termination or expiration of this Agreement and shall inure to the benefit of any successors or assigns of the Company. For the avoidance of doubt, if any entity that assumes this Agreement ceases to be an affiliate of SunGard, references to the Company in Sections 5, 6 and 7 shall continue to include SunGard and its affiliates.
7. Dispute Resolution. In the event of any dispute relating to Executives employment, the termination thereof, or this Agreement, other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, and unless prohibited by applicable law, the parties shall be required to have the dispute, controversy or claim settled by alternative dispute resolution conducted by JAMS (or, if JAMS is not available, another mutually agreeable alternative dispute resolution organization), in the city of Executives principal place of employment. Any award entered by JAMS (or such other organization) shall be final, binding and nonappealable, and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This Section 7 shall be specifically enforceable. JAMS (or such other organization) shall have no authority to modify any provision of this Agreement. In the event of a dispute, each party shall be responsible for its own
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expenses (including attorneys fees) relating to the conduct of the arbitration, and the parties shall share equally the fees of JAMS. THE PARTIES IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY AS TO ALL CLAIMS HEREUNDER.
8. Non-Exclusivity of Rights; Resignation from Boards; Clawback.
8.1 Nothing in this Agreement shall prevent or limit Executives continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company and for which Executive may qualify; provided, however, that if Executive becomes entitled to the payments described in Section 2.2(a) of this Agreement, Executive hereby waives Executives right to receive payments under any severance plan or similar program applicable to employees of the Company.
8.2 If Executives employment with the Company terminates for any reason, Executive shall immediately resign from all boards of directors of the Company, and any other entities for which Executive serves as a representative of the Company.
8.3 Executive agrees that Executive will be subject to any compensation clawback, recoupment and anti-hedging policies that may be applicable to Executive as an executive of the Company, as in effect from time to time and as approved by the Board of Directors of any Company entity or a duly authorized committee thereof. The Company confirms that, as of the date of this Agreement, no clawback or recoupment policies are in effect with respect to Executive other than clawback or recoupment provisions of equity grants and the provisions of this Agreement.
9. Survivorship. The respective rights and obligations of the parties under this Agreement (including without limitation Sections 5, 6 and 7) shall survive any termination of Executives employment or termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.
10. Mitigation. Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain.
11. Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, or by a nationally recognized overnight delivery service, as follows (provided that notice of change of address shall be deemed given only when received):
If to SunGard, to:
SunGard Data Systems Inc.
680 East Swedesford Road
Wayne, PA 19087
Attention: Chief Legal Officer
If to Executive, to:
Vincent Coppola
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or to such other names or addresses as SunGard or Executive, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section.
12. Contents of Agreement; Amendment and Assignment.
12.1 This Agreement and the Offer Letter set forth the entire understanding between the parties hereto with respect to the subject matter hereof, including employment, termination and severance. This Agreement supersedes any and all employment agreements, offer letters and other documents otherwise relating to the subject matter hereof, other than the Offer Letter, provided, however, that this Agreement shall not in any way replace or supersede any equity agreements or any written agreements, contractual terms or existing duties regarding confidentiality, works and ideas, intellectual property, non-solicitation or non-competition. In the event of any conflict between this Agreement and the Offer Letter, the terms of this Agreement shall be controlling and shall supersede the Offer Letter. This Agreement cannot be changed, modified, extended or terminated except upon written amendment approved by Executives supervisor and executed on behalf of SunGard by a duly authorized officer of SunGard and by Executive.
12.2 All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Executive under this Agreement are of a personal nature and shall not be assignable or delegatable in whole or in part by Executive. The Company shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of SunGard, expressly to assume and agree to perform SunGards obligations under this Agreement in the same manner and to the same extent as SunGard would be required to perform if no such succession or assignment had taken place. In the event of a spinoff, sale or other transaction, or a reorganization, with respect to one or more businesses of the Company, SunGard may assign all of its rights and obligations under this Agreement to the entity that controls such businesses after the spinoff, sale or other transaction, or reorganization, and SunGard may determine that after such assignment all references in this Agreement to SunGard shall be deemed to refer to or include the entity that controls such businesses.
13. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.
14. Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.
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15. Cooperation. At the Companys request, Executive agrees, to the extent permitted by law, to assist, consult with, and cooperate with the Company in any litigation, investigation, administrative procedures, or legal proceedings or inquiries that involve the Company, either now existing or which may hereafter be instituted by or against the Company, including but not limited to, appearing upon the Companys reasonable request as a witness and/or consultant in connection with any litigation, investigation, administrative procedures, or legal proceedings or inquiries.
16. Beneficiaries/References. Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable under this Agreement following Executives death by giving SunGard written notice thereof. In the event of Executives death or a judicial determination of Executives incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to Executives beneficiary, estate or other legal representative.
17. Miscellaneous. All section headings used in this Agreement are for convenience only. This Agreement may be executed in counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.
18. Withholding Taxes. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Executive shall be responsible for all taxes applicable to amounts payable under this Agreement.
19. Section 409A of the Code; Section 162(m) of the Code.
19.1 This Agreement is intended to comply with Section 409A of the Code and its corresponding regulations, to the extent applicable. Severance benefits under the Agreement are intended to be exempt from Section 409A under the short term deferral exemption, to the extent applicable. Notwithstanding anything in this Agreement to the contrary, payments may only be made under this Agreement upon an event and in a manner permitted by Section 409A of the Code, to the extent applicable. As used in the Agreement, the term termination of employment shall mean Executives separation from service with the Company within the meaning of Section 409A of the Code and the regulations promulgated thereunder. In no event may Executive, directly or indirectly, designate the calendar year of a payment. For purposes of Section 409A, each payment hereunder shall be treated as a separate payment.
19.2 Notwithstanding anything in this Agreement to the contrary, if securities of the Company become publicly traded, if Executive is considered a specified employee under Section 409A and if payment of any amounts under this Agreement is required to be delayed for a period of six months after separation from service in order to avoid taxation under Section 409A of the Code, payment of such amounts shall be delayed as required by Section 409A, and the accumulated amounts shall be paid in a lump sum payment within five business days after the end of the six-month period. If Executive dies during the postponement period prior to the payment of benefits, the amounts withheld on account of Section 409A shall be paid to the personal representative of Executives estate within 60 days after the date of Executives death.
19.3 Executive agrees that if the stock of the Company becomes publicly traded, Executive will make any amendments to the Agreement that the Company deems necessary to allow performance-based compensation to qualify for the qualified performance-based compensation exception to Section 162(m) of the Code.
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20. Governing Law. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the Effective Date.
SUNGARD DATA SYSTEMS INC. | ||||||
Date: 10/16/11 |
By: | /s/ Kathleen Weslock | ||||
Name: | Kathleen Weslock | |||||
Title: | Chief Human Resources Officer | |||||
Date: 9/9/11 |
/s/ Vincent R. Coppola | |||||
Executive |
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EXHIBIT A
EXECUTIVE RELEASE TO BE PROVIDED TO THE COMPANY
Separation of Employment Agreement and General Release
THIS SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE (the Agreement) is made as of this day of , , by and between Vincent Coppola (Executive) and SunGard Data Systems Inc. (the Company).
WHEREAS, Executive is employed by the Company as ;
WHEREAS, Executive and the Company entered into an Employment Agreement, dated , 20 , (the Employment Agreement) which provides for certain benefits in the event that Executives employment is terminated on account of a reason set forth in the Employment Agreement;
WHEREAS, Executives employment with the Company will terminate effective (the Termination Date); and
WHEREAS, in connection with the termination of Executives employment, the parties have agreed to a separation package and the resolution of any and all disputes between them.
NOW, THEREFORE, IT IS HEREBY AGREED by and between Executive and the Company as follows:
1. Executive, for and in consideration of the commitments of the Company as set forth in paragraph 6 of this Agreement, and intending to be legally bound, does hereby REMISE, RELEASE AND FOREVER DISCHARGE the Company, its stockholders, predecessors, affiliates, former affiliates, subsidiaries and parents, their respective officers, directors, investors, employees, and agents, and their respective successors and assigns, heirs, executors, and administrators (collectively, Releasees) from all causes of action, suits, debts, claims and demands whatsoever in law or in equity, which Executive ever had, now has, or hereafter may have, whether known or unknown, or which Executives heirs, executors, or administrators may have, by reason of any matter, cause or thing whatsoever, from the beginning of time to the date of this Agreement, including without limitation matters arising from or relating in any way to Executives employment relationship with the Company, the terms and conditions of that employment relationship, and/or the termination of that employment relationship, including, but not limited to, any claims arising under the Age Discrimination in Employment Act (ADEA), the Older Workers Benefit Protection Act (OWBPA), Title VII of The Civil Rights Act of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, the Employee Retirement Income Security Act of 1974, as amended, any applicable state fair employment practice laws, and any other claims under any federal, state or local common law, statutory, or regulatory provision, now or hereafter recognized, and any claims for attorneys fees and costs; provided, however, the foregoing shall in no event apply to (i) enforcement by Executive of Executives rights under this Agreement, (ii) Executives rights as a stockholder in the Company or any of its affiliates, (iii) Executives rights to indemnification under any applicable separate written contract or insurance policy covering employees or officers of the Company, or (iv) any claims that, as a matter of applicable law, are not waivable. This Agreement is effective without regard to the legal nature of the claims raised and without regard to whether any such claims are based upon tort, equity, implied or express contract or discrimination of any sort.
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2. Executive specifically releases the Releasees from any claims that Executive might have under the ADEA and any rights under the OWBPA; provided however, Executive is not waiving or releasing any rights Executive may have to challenge the knowing and voluntary nature of the release of ADEA claims pursuant to the OWBPA. Nothing in this Agreement shall be construed to prohibit Executive from filing a charge with or participating in any investigation or proceeding conducted by the EEOC or a comparable state or local agency. Notwithstanding the foregoing, Executive agrees to waive Executives right to recovery monetary damages in any charge, complaint or lawsuit filed by Executive or by anyone else on Executives behalf.
3. Executive further agrees and recognizes that Executive has permanently and irrevocably severed Executives employment relationship with the Company, that Executive shall not seek employment with the Company or any affiliated entity at any time in the future, and that neither the Company nor any affiliate has any obligation to employ Executive in the future.
4. Executive agrees that Executive will not disparage or subvert the Company or the Releasees, or make any statement reflecting negatively on the Company or the Releasees, including, but not limited to, any matters relating to the operation or management of the Company, Executives employment and the termination of Executives employment, irrespective of the truthfulness or falsity of such statement.
5. In consideration of Executives agreement to comply with the covenants described in Section 5 of the Employment Agreement, and other agreements as set forth herein, the Company agrees to pay and provide Executive with the severance benefits described in Section 2.2 of Executives Employment Agreement. Executive agrees that Executive is not entitled to any payments, benefits, severance payments or other compensation beyond that expressly provided in Section 2.2 of Executives Employment Agreement.
6. Executive understands and agrees that the payments, benefits and agreements provided in this Agreement are being provided to Executive in consideration for Executives acceptance and execution of, and in reliance upon Executives representations in, this Agreement. Executive acknowledges that if Executive had not executed this Agreement containing a release of all claims against the Company and the Releasees, Executive would only have been entitled to the payments provided in the Companys standard severance pay plan for employees.
7. Executive acknowledges and agrees that the Company previously has satisfied any and all obligations owed to Executive under any employment agreement or offer letter Executive has with the Company or a Releasee and, further, that this Agreement supersedes any and all prior agreements or understandings, whether written or oral, between the parties, excluding only Executives post-termination obligations under Executives Employment Agreement, and other written agreements, contractual terms or existing duties regarding confidentiality, works and ideas, intellectual property, non-solicitation or non-competition, Executives rights under any outstanding equity grants in accordance with the terms of the applicable grant agreements, any obligations relating to the securities of the Company or any of its affiliates and the Companys obligations under Section 2.2 of Executives Employment Agreement, all of which shall remain in full force and effect to the extent not inconsistent with this Agreement, and further, that, except as set forth expressly herein, no promises or representations have been made to Executive in connection with the termination of Executives Employment Agreement or the terms of this Agreement.
8. Except as may be necessary to obtain approval or authorization to fulfill its obligations hereunder or as required by applicable law, (a) Executive agrees not to disclose the terms of this Agreement to anyone, except Executives spouse, attorney and, as necessary, tax/financial advisor, and (b) the Company agrees that the terms of this Agreement will not be disclosed. It is expressly understood that any violation of the confidentiality obligation imposed hereunder constitutes a material breach of this Agreement.
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9. Executive represents that Executive does not presently have in Executives possession any records and business documents, whether on computer or hard copy, and other materials (including but not limited to computer disks and tapes, computer programs and software, office keys, correspondence, files, customer lists, technical information, customer information, pricing information, business strategies and plans, sales records and all copies thereof) (collectively, the Corporate Records) provided by the Company and/or its predecessors, parents, subsidiaries or affiliates or obtained as a result of Executives employment with the Company and/or its predecessors, parents, subsidiaries or affiliates, or created by Executive while employed by or rendering services to the Company and/or its predecessors, parents, subsidiaries or affiliates. Executive acknowledges that all such Corporate Records are the property of the Company. In addition, Executive shall promptly return in good condition any and all Company owned equipment or property, including, but not limited to, automobiles, personal data assistants, facsimile machines, copy machines, pagers, credit cards, cellular telephone equipment, business cards, laptops and computers. As of the Termination Date, the Company will make arrangements to remove, terminate or transfer any and all business communication lines including network access, cellular phone, fax line and other business numbers.
10. Executive expressly waives all rights afforded by any statute which expressly limits the effect of a release with respect to unknown claims. Executive acknowledges the significance of this release of unknown claims and the waiver of statutory protection against a release of unknown claims which provides that a general release does not extend to claims which the creditor does not know or suspect to exist in Executives favor at the time of executing the release, which if known by it must have materially affected its settlement with the debtor.
11. Nothing in this Agreement shall prohibit or restrict Executive from: (a) making any disclosure of information required by law; (b) providing information to, or testifying or otherwise assisting in any investigation or proceeding brought by, any federal regulatory or law enforcement agency or legislative body, any self-regulatory organization, or the Companys designated legal, compliance or human resources officers; (c) filing, testifying, participating in or otherwise assisting in a proceeding relating to an alleged violation of any federal, state or municipal law relating to fraud, or any rule or regulation of the Securities and Exchange Commission or any self-regulatory organization or (d) challenging the knowing and voluntary nature of the release of ADEA claims pursuant to the OWBPA.
12. The parties agree and acknowledge that the agreements by the Company described herein, and the settlement and termination of any asserted or unasserted claims against the Releasees, are not and shall not be construed to be an admission of any violation of any federal, state or local statute or regulation, or of any duty owed by any of the Releasees to Executive.
13. Executive agrees and recognizes that should Executive breach any of the obligations or covenants set forth in this Agreement, the Company will have no further obligation to provide Executive with the consideration set forth herein, and will have the right to seek repayment of all consideration paid up to the time of any such breach. Further, Executive acknowledges in the event of a breach of this Agreement, Releasees may seek any and all appropriate relief for any such breach, including equitable relief and/or money damages, attorneys fees and costs.
14. All payments made, and benefits provided, hereunder shall be net of all legally required taxes and other withholdings. Executive acknowledges and agrees that Executive shall be solely responsible for all taxes that result from Executives receipt of the payments and benefits to be provided under this Agreement, and none of the Company nor any of the other Releasees makes or has made any
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representation, warranty or guarantee of any federal, state or local tax consequences to Executive of Executives receipt of any payment or benefit hereunder, including, but not limited to, under Section 409A of the Internal Revenue Code of 1986, as amended.
15. This Agreement and the obligations of the parties hereunder shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Pennsylvania.
16. This Agreement shall be binding on the parties successors and assigns.
17. This Agreement may be executed in counterparts, each of which is an original.
18. Executive certifies and acknowledges as follows:
(a) That Executive has read the terms of this Agreement, and that Executive understands its terms and effects, including the fact that Executive has agreed to RELEASE AND FOREVER DISCHARGE the Company and each of the Releasees from any legal action arising out of Executives employment relationship with the Company and the termination of that employment relationship;
(b) That Executive has signed this Agreement voluntarily and knowingly in exchange for the consideration described herein, which Executive acknowledges is adequate and satisfactory to Executive and which Executive acknowledges is in addition to any other benefits to which Executive is otherwise entitled;
(c) That Executive has been and is hereby advised in writing to consult with an attorney prior to signing this Agreement;
(d) That Executive does not waive rights or claims that may arise after the date this Agreement is executed;
(e) That the Company has provided Executive with a period of [twenty-one (21)] or [forty-five (45)] days within which to consider this Agreement, and that Executive has signed on the date indicated below after concluding that this Separation of Employment Agreement and General Release is satisfactory to Executive; and
(f) Executive acknowledges that this Agreement may be revoked by Executive within seven (7) days after execution, and it shall not become effective until the expiration of such seven (7) day revocation period. In the event of a timely revocation by Executive, this Agreement will be deemed null and void and the Company will have no obligations hereunder.
A-4
Intending to be legally bound hereby, Executive and the Company executed the foregoing Separation of Employment Agreement and General Release this day of , .
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[Executive] | ||||||||
SUNGARD DATA SYSTEMS INC. | ||||||||
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A-5
Exhibit 12.1
SunGard Capital Corp.
SunGard Capital Corp. II
SunGard Data Systems Inc.
Computation of Ratio of Earnings to Fixed Charges (Unaudited)
($ in millions)
Three Months Ended March 31, | ||||||||
2011 | 2012 | |||||||
Fixed charges |
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Interest expense |
$ | 127 | $ | 110 | ||||
Amortization of debt issuance costs and debt discount |
10 | 12 | ||||||
Portion of rental expense representative of interest |
19 | 18 | ||||||
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Total fixed charges |
$ | 156 | $ | 140 | ||||
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Earnings |
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Income (loss) from continuing operations before income taxes |
$ | (89 | ) | $ | (84 | ) | ||
Fixed charges per above |
156 | 140 | ||||||
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Total earnings |
$ | 67 | $ | 56 | ||||
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Ratio of earnings to fixed charges |
* | * |
* | Earnings for the three months ended March 31, 2011 and 2012 were inadequate to cover fixed charges by $89 million and $84 million, respectively. |
Exhibit 31.1
Certification of Russell P. Fradin
Required by Rule 13a-14(a) or Rule 15d-14(a) and
Section 302 of the Sarbanes-Oxley Act of 2002
I, Russell P. Fradin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. (collectively, registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: May 15, 2012 |
/s/ Russell P. Fradin |
Russell P. Fradin |
President and Chief Executive Officer |
SunGard Capital Corp., SunGard Capital Corp. II & SunGard Data Systems Inc. |
Exhibit 31.2
Certification of Robert F. Woods
Required by Rule 13a-14(a) or Rule 15d-14(a) and
Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert F. Woods, certify that:
1. I have reviewed this quarterly report on Form 10-Q of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. (collectively, registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: May 15, 2012 |
/s/ Robert F. Woods |
Robert F. Woods |
Chief Financial Officer |
SunGard Capital Corp., SunGard Capital Corp. II & SunGard Data Systems Inc. |
Exhibit 32.1
Certification of Russell P. Fradin
Required by Rule 13a-14(b) or Rule 15d-14(b) and
Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.(S) 1350, as adopted), I, Russell P. Fradin, Chief Executive Officer of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. (collectively, the Company), hereby certify that to my knowledge:
1. The Companys Quarterly Report on Form 10-Q for the period ended March 31, 2012 (the Periodic Report) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 15, 2012 |
/s/ Russell P. Fradin |
Russell P. Fradin |
Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided to SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. and will be retained by SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Certification of Robert F. Woods
Required by Rule 13a-14(b) or Rule 15d-14(b) and
Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.(S) 1350, as adopted), I, Robert F. Woods, Chief Financial Officer of SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. (collectively, the Company), hereby certify that to my knowledge:
1. The Companys Quarterly Report on Form 10-Q for the period ended March 31, 2012 (the Periodic Report) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 15, 2012 |
/s/ Robert F. Woods |
Robert F. Woods |
Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. and will be retained by SunGard Capital Corp., SunGard Capital Corp. II and SunGard Data Systems Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Acquisitions and Discontinued Operations
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Mar. 31, 2012
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Acquisitions and Discontinued Operations | 2. Acquisitions and Discontinued Operations: Acquisitions The Company seeks to acquire businesses that broaden its existing product lines and service offerings by adding complementary products and service offerings and by expanding its geographic reach. During the three months ended March 31, 2012, the Company completed one acquisition in its FS segment. Cash paid, net of cash acquired and subject to certain adjustments, was $6 million. The impact of this acquisition was not material to the consolidated financial statements. At March 31, 2012, contingent purchase price obligations that depend on the operating performance of certain acquired businesses were $6 million, of which $3 million is included in other accrued expenses.
Discontinued Operations In January 2012, the Company sold its Higher Education (“HE”) business and used the net cash proceeds (as defined in its senior secured credit agreement (“Credit Agreement”)) of $1.222 billion, which is the gross transaction value of $1.775 billion less applicable taxes and fees, to repay a pro-rata portion of its outstanding term loans (see note 5). The results for the discontinued operations for the three months ended March 31, June 30, September 30, and December 31, 2011 and March 31, 2012 were as follows (in millions):
Assets held for sale and liabilities related to assets held for sale consisted of the following (in millions) at December 31, 2011 and for the closing balance sheet on January 20, 2012:
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