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 September 30, 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 x No ¨ |
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 September 30, 2012:
SunGard Capital Corp. |
256,829,370 shares of Class A common stock and 28,536,539 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
PAGE | ||||||
PART I. |
FINANCIAL INFORMATION | |||||
Item 1. |
Financial Statements: | |||||
SunGard Capital Corp. | ||||||
Consolidated Balance Sheets as of December 31, 2011 and September 30, 2012 (unaudited) |
2 | |||||
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2011 and 2012 (unaudited) | 3 | |||||
4 | ||||||
SunGard Capital Corp. II | ||||||
Consolidated Balance Sheets as of December 31, 2011 and September 30, 2012 (unaudited) |
5 | |||||
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2011 and 2012 (unaudited) | 6 | |||||
7 | ||||||
SunGard Data Systems Inc. | ||||||
Consolidated Balance Sheets as of December 31, 2011 and September 30, 2012 (unaudited) |
8 | |||||
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2011 and 2012 (unaudited) | 9 | |||||
10 | ||||||
11 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
30 | ||||
Item 3. |
42 | |||||
Item 4. |
42 |
PART II. |
OTHER INFORMATION | |||||
Item 1. |
Legal Proceedings | 43 | ||||
Item 1A. |
Risk Factors | 43 | ||||
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 43 | ||||
Item 3. |
Defaults upon Senior Securities | 43 | ||||
Item 4. |
Mine Safety Disclosures | 43 | ||||
Item 5. |
Other Information | 43 | ||||
Item 6. |
Exhibits | 43 | ||||
45 |
PART I. FINANCIAL INFORMATION
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
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
(In millions except share and per-share amounts)
(Unaudited)
December 31, 2011 |
September 30, 2012 |
|||||||
Assets |
||||||||
Current: |
||||||||
Cash and cash equivalents |
$ | 867 | $ | 752 | ||||
Trade receivables, less allowance for doubtful accounts of $38 and $39 |
794 | 678 | ||||||
Earned but unbilled receivables |
140 | 126 | ||||||
Prepaid expenses and other current assets |
117 | 136 | ||||||
Clearing broker assets |
213 | 21 | ||||||
Assets related to discontinued operations |
1,350 | | ||||||
|
|
|
|
|||||
Total current assets |
3,481 | 1,713 | ||||||
Property and equipment, less accumulated depreciation of $1,296 and $1,471 |
893 | 862 | ||||||
Software products, less accumulated amortization of $1,431 and $1,597 |
554 | 430 | ||||||
Customer base, less accumulated amortization of $1,254 and $1,425 |
1,574 | 1,414 | ||||||
Other intangible assets, less accumulated amortization of $22 and $26 |
144 | 112 | ||||||
Trade name, less accumulated amortization of $10 and $- |
1,019 | 1,019 | ||||||
Goodwill |
4,885 | 4,503 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 12,550 | $ | 10,053 | ||||
|
|
|
|
|||||
Liabilities and Equity |
||||||||
Current: |
||||||||
Short-term and current portion of long-term debt |
$ | 10 | $ | 9 | ||||
Accounts payable |
59 | 29 | ||||||
Accrued compensation and benefits |
291 | 268 | ||||||
Accrued interest expense |
92 | 69 | ||||||
Accrued income taxes |
24 | 85 | ||||||
Other accrued expenses |
313 | 294 | ||||||
Clearing broker liabilities |
179 | 7 | ||||||
Deferred revenue |
862 | 790 | ||||||
Deferred income taxes |
76 | | ||||||
Liabilities related to discontinued operations |
246 | | ||||||
|
|
|
|
|||||
Total current liabilities |
2,152 | 1,551 | ||||||
Long-term debt |
7,819 | 6,102 | ||||||
Deferred income taxes |
1,123 | 1,042 | ||||||
|
|
|
|
|||||
Total liabilities |
11,094 | 8,695 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Noncontrolling interest in preferred stock of SCCII subject to a put option |
28 | 29 | ||||||
Class L common stock subject to a put option |
47 | 46 | ||||||
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 $5,964 million; 50,000,000 shares authorized, 28,842,773 and 28,990,116 shares issued |
| | ||||||
Class A common stock, par value $.001 per share; 550,000,000 shares authorized, 259,589,718 and 260,915,801 shares issued |
| | ||||||
Capital in excess of par value |
2,768 | 2,781 | ||||||
Treasury stock, 387,638 and 453,576 shares of Class L common stock; and 3,492,925 and 4,086,430 shares of Class A common stock |
(39 | ) | (44 | ) | ||||
Accumulated deficit |
(3,346 | ) | (3,667 | ) | ||||
Accumulated other comprehensive income (loss) |
(46 | ) | (19 | ) | ||||
|
|
|
|
|||||
Total SunGard Capital Corp. stockholders equity (deficit) |
(663 | ) | (949 | ) | ||||
Noncontrolling interest in preferred stock of SCCII |
2,038 | 2,227 | ||||||
|
|
|
|
|||||
Total equity |
1,375 | 1,278 | ||||||
|
|
|
|
|||||
Total Liabilities and Equity |
$ | 12,550 | $ | 10,053 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
2
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2012 | 2011 | 2012 | |||||||||||||
Revenue: |
||||||||||||||||
Services |
$ | 1,028 | $ | 969 | $ | 3,016 | $ | 2,916 | ||||||||
License and resale fees |
52 | 53 | 193 | 168 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total products and services |
1,080 | 1,022 | 3,209 | 3,084 | ||||||||||||
Reimbursed expenses |
17 | 13 | 77 | 47 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue |
1,097 | 1,035 | 3,286 | 3,131 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Costs and expenses: |
||||||||||||||||
Cost of sales and direct operating |
465 | 430 | 1,416 | 1,321 | ||||||||||||
Sales, marketing and administration |
295 | 245 | 842 | 768 | ||||||||||||
Product development and maintenance |
101 | 90 | 302 | 273 | ||||||||||||
Depreciation and amortization |
67 | 70 | 204 | 211 | ||||||||||||
Amortization of acquisition-related intangible assets |
106 | 94 | 332 | 295 | ||||||||||||
Goodwill impairment charge |
| 385 | | 385 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total costs and expenses |
1,034 | 1,314 | 3,096 | 3,253 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
63 | (279 | ) | 190 | (122 | ) | ||||||||||
Interest income |
1 | 1 | 3 | 1 | ||||||||||||
Interest expense and amortization of deferred financing fees |
(130 | ) | (102 | ) | (396 | ) | (325 | ) | ||||||||
Loss on extinguishment of debt |
| | (2 | ) | (51 | ) | ||||||||||
Other income (expense) |
| | | 2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations before income taxes |
(66 | ) | (380 | ) | (205 | ) | (495 | ) | ||||||||
Benefit from (provision for) income taxes |
27 | 13 | 57 | 44 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations |
(39 | ) | (367 | ) | (148 | ) | (451 | ) | ||||||||
Income (loss) from discontinued operations, net of tax |
(108 | ) | 5 | (95 | ) | 316 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
(147 | ) | (362 | ) | (243 | ) | (135 | ) | ||||||||
Income attributable to the noncontrolling interest (including $- million $- million, $2 million and $- million in temporary equity) |
(57 | ) | (64 | ) | (166 | ) | (186 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) attributable to SunGard Capital Corp. |
(204 | ) | (426 | ) | (409 | ) | (321 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation |
(81 | ) | 27 | (6 | ) | 16 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Foreign currency translation, net |
(81 | ) | 27 | (6 | ) | 16 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Unrealized gain (loss) on derivative instruments |
(3 | ) | 1 | (13 | ) | 1 | ||||||||||
Less: gain (loss) on derivatives reclassified into income |
7 | 3 | 27 | 11 | ||||||||||||
Less: income tax benefit (expense) |
(2 | ) | 1 | (7 | ) | (1 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net unrealized gain (loss) on derivative instruments, net of tax |
2 | 5 | 7 | 11 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss) attributable to SunGard Capital Corp. |
$ | (283 | ) | $ | (394 | ) | $ | (408 | ) | $ | (294 | ) | ||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
3
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Nine Months Ended September 30, | ||||||||
2011 | 2012 | |||||||
Cash flow from operations: |
||||||||
Net income (loss) |
$ | (243 | ) | $ | (135 | ) | ||
Income (loss) from discontinued operations |
(95 | ) | 316 | |||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(148 | ) | (451 | ) | ||||
Reconciliation of income (loss) from continuing operations to cash flow from (used in) operations: |
||||||||
Depreciation and amortization |
536 | 506 | ||||||
Goodwill impairment charge |
| 385 | ||||||
Deferred income tax provision (benefit) |
(83 | ) | (29 | ) | ||||
Stock compensation expense |
23 | 29 | ||||||
Amortization of deferred financing costs and debt discount |
29 | 26 | ||||||
Loss on extinguishment of debt |
2 | 51 | ||||||
Other noncash items |
1 | (1 | ) | |||||
Accounts receivable and other current assets |
136 | 137 | ||||||
Accounts payable and accrued expenses |
(29 | ) | (99 | ) | ||||
Accrued income tax |
(11 | ) | (70 | ) | ||||
Clearing broker assets and liabilities, net |
(22 | ) | 20 | |||||
Deferred revenue |
(72 | ) | (78 | ) | ||||
|
|
|
|
|||||
Cash flow from (used in) continuing operations |
362 | 426 | ||||||
Cash flow from (used in) discontinued operations |
65 | (340 | ) | |||||
|
|
|
|
|||||
Cash flow from (used in) operations |
427 | 86 | ||||||
|
|
|
|
|||||
Investment activities: |
||||||||
Cash paid for acquired businesses, net of cash acquired |
(35 | ) | (10 | ) | ||||
Cash paid for property and equipment and software |
(183 | ) | (173 | ) | ||||
Other investing activities |
(2 | ) | 3 | |||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(220 | ) | (180 | ) | ||||
Cash provided by (used in) discontinued operations |
(7 | ) | 1,758 | |||||
|
|
|
|
|||||
Cash provided by (used in) investment activities |
(227 | ) | 1,578 | |||||
|
|
|
|
|||||
Financing activities: |
||||||||
Cash received from issuance of common stock |
1 | | ||||||
Cash received from issuance of preferred stock |
1 | | ||||||
Cash received from borrowings, net of fees |
1 | (17 | ) | |||||
Cash used to repay debt |
(218 | ) | (1,727 | ) | ||||
Premium paid to retire debt |
| (27 | ) | |||||
Cash used to purchase treasury stock |
(3 | ) | (9 | ) | ||||
Other financing activities |
(9 | ) | (10 | ) | ||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(227 | ) | (1,790 | ) | ||||
Cash provided by (used in) discontinued operations |
| | ||||||
|
|
|
|
|||||
Cash provided by (used in) financing activities |
(227 | ) | (1,790 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
(2 | ) | 5 | |||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(29 | ) | (121 | ) | ||||
Beginning cash and cash equivalents includes cash of discontinued operations: 2011, $23 2012, $6 |
778 | 873 | ||||||
|
|
|
|
|||||
Ending cash and cash equivalents includes cash of discontinued operations: 2011, $4; 2012, $- |
$ | 749 | $ | 752 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
4
Consolidated Balance Sheets
(In millions except share and per-share amounts)
(Unaudited)
December 31, 2011 |
September 30, 2012 |
|||||||
Assets |
||||||||
Current: |
||||||||
Cash and cash equivalents |
$ | 867 | $ | 752 | ||||
Trade receivables, less allowance for doubtful accounts of $38 and $39 |
794 | 678 | ||||||
Earned but unbilled receivables |
140 | 126 | ||||||
Prepaid expenses and other current assets |
117 | 136 | ||||||
Clearing broker assets |
213 | 21 | ||||||
Assets related to discontinued operations |
1,350 | | ||||||
|
|
|
|
|||||
Total current assets |
3,481 | 1,713 | ||||||
Property and equipment, less accumulated depreciation of $1,296 and $1,471 |
893 | 862 | ||||||
Software products, less accumulated amortization of $1,431 and $1,597 |
554 | 430 | ||||||
Customer base, less accumulated amortization of $1,254 and $1,425 |
1,574 | 1,414 | ||||||
Other intangible assets, less accumulated amortization of $22 and $26 |
144 | 112 | ||||||
Trade name, less accumulated amortization of $10 and $- |
1,019 | 1,019 | ||||||
Goodwill |
4,885 | 4,503 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 12,550 | $ | 10,053 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity |
||||||||
Current: |
||||||||
Short-term and current portion of long-term debt |
$ | 10 | $ | 9 | ||||
Accounts payable |
59 | 29 | ||||||
Accrued compensation and benefits |
291 | 268 | ||||||
Accrued interest expense |
92 | 69 | ||||||
Accrued income taxes |
25 | 86 | ||||||
Other accrued expenses |
313 | 294 | ||||||
Clearing broker liabilities |
179 | 7 | ||||||
Deferred revenue |
862 | 790 | ||||||
Deferred income taxes |
76 | | ||||||
Liabilities related to discontinued operations |
246 | | ||||||
|
|
|
|
|||||
Total current liabilities |
2,153 | 1,552 | ||||||
Long-term debt |
7,819 | 6,102 | ||||||
Deferred income taxes |
1,122 | 1,041 | ||||||
|
|
|
|
|||||
Total liabilities |
11,094 | 8,695 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Preferred stock subject to a put option |
23 | 24 | ||||||
Stockholders equity: |
||||||||
Preferred stock, par value $.001 per share; cumulative 11.5% per annum, compounded quarterly; aggregate liquidation preference of $2,046 million and $2,236 million; 14,999,000 shares authorized, 9,984,091 and 10,035,095 issued |
| | ||||||
Common stock, par value $.001 per share; 1,000 shares authorized, 100 shares issued and outstanding |
| | ||||||
Capital in excess of par value |
3,785 | 3,799 | ||||||
Treasury stock, 134,215 and 157,042 shares |
(18 | ) | (23 | ) | ||||
Accumulated deficit |
(2,288 | ) | (2,423 | ) | ||||
Accumulated other comprehensive income (loss) |
(46 | ) | (19 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
1,433 | 1,334 | ||||||
|
|
|
|
|||||
Total Liabilities and Stockholders Equity |
$ | 12,550 | $ | 10,053 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
5
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2011 | 2012 | 2011 | 2012 | |||||||||||||
Revenue: |
||||||||||||||||
Services |
$ | 1,028 | $ | 969 | $ | 3,016 | $ | 2,916 | ||||||||
License and resale fees |
52 | 53 | 193 | 168 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total products and services |
1,080 | 1,022 | 3,209 | 3,084 | ||||||||||||
Reimbursed expenses |
17 | 13 | 77 | 47 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue |
1,097 | 1,035 | 3,286 | 3,131 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Costs and expenses: |
||||||||||||||||
Cost of sales and direct operating |
465 | 430 | 1,416 | 1,321 | ||||||||||||
Sales, marketing and administration |
295 | 245 | 842 | 768 | ||||||||||||
Product development and maintenance |
101 | 90 | 302 | 273 | ||||||||||||
Depreciation and amortization |
67 | 70 | 204 | 211 | ||||||||||||
Amortization of acquisition-related intangible assets |
106 | 94 | 332 | 295 | ||||||||||||
Goodwill impairment charge |
| 385 | | 385 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total costs and expenses |
1,034 | 1,314 | 3,096 | 3,253 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
63 | (279 | ) | 190 | (122 | ) | ||||||||||
Interest income |
1 | 1 | 3 | 1 | ||||||||||||
Interest expense and amortization of deferred financing fees |
(130 | ) | (102 | ) | (396 | ) | (325 | ) | ||||||||
Loss on extinguishment of debt |
| | (2 | ) | (51 | ) | ||||||||||
Other income (expense) |
| | | 2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations before income taxes |
(66 | ) | (380 | ) | (205 | ) | (495 | ) | ||||||||
Benefit from (provision for) income taxes |
27 | 13 | 57 | 44 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations |
(39 | ) | (367 | ) | (148 | ) | (451 | ) | ||||||||
Income (loss) from discontinued operations, net of tax |
(108 | ) | 5 | (95 | ) | 316 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
(147 | ) | (362 | ) | (243 | ) | (135 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation |
(81 | ) | 27 | (6 | ) | 16 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Foreign currency translation, net |
(81 | ) | 27 | (6 | ) | 16 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Unrealized gain (loss) on derivative instruments |
(3 | ) | 1 | (13 | ) | 1 | ||||||||||
Less: gain (loss) on derivatives reclassified into income |
7 | 3 | 27 | 11 | ||||||||||||
Less: income tax benefit (expense) |
(2 | ) | 1 | (7 | ) | (1 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net unrealized gain (loss) on derivative instruments, net of tax |
2 | 5 | 7 | 11 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss) |
$ | (226 | ) | $ | (330 | ) | $ | (242 | ) | $ | (108 | ) | ||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
6
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Nine Months Ended September 30, | ||||||||
2011 | 2012 | |||||||
Cash flow from operations: |
||||||||
Net income (loss) |
$ | (243 | ) | $ | (135 | ) | ||
Income (loss) from discontinued operations |
(95 | ) | 316 | |||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(148 | ) | (451 | ) | ||||
Reconciliation of income (loss) from continuing operations to cash flow from (used in) operations: |
||||||||
Depreciation and amortization |
536 | 506 | ||||||
Goodwill impairment charge |
| 385 | ||||||
Deferred income tax provision (benefit) |
(84 | ) | (29 | ) | ||||
Stock compensation expense |
23 | 29 | ||||||
Amortization of deferred financing costs and debt discount |
29 | 26 | ||||||
Loss on extinguishment of debt |
2 | 51 | ||||||
Other noncash items |
1 | (1 | ) | |||||
Accounts receivable and other current assets |
136 | 137 | ||||||
Accounts payable and accrued expenses |
(29 | ) | (99 | ) | ||||
Accrued income tax |
(10 | ) | (70 | ) | ||||
Clearing broker assets and liabilities, net |
(22 | ) | 20 | |||||
Deferred revenue |
(72 | ) | (78 | ) | ||||
|
|
|
|
|||||
Cash flow from (used in) continuing operations |
362 | 426 | ||||||
Cash flow from (used in) discontinued operations |
65 | (340 | ) | |||||
|
|
|
|
|||||
Cash flow from (used in) operations |
427 | 86 | ||||||
|
|
|
|
|||||
Investment activities: |
||||||||
Cash paid for acquired businesses, net of cash acquired |
(35 | ) | (10 | ) | ||||
Cash paid for property and equipment and software |
(183 | ) | (173 | ) | ||||
Other investing activities |
(2 | ) | 3 | |||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(220 | ) | (180 | ) | ||||
Cash provided by (used in) discontinued operations |
(7 | ) | 1,758 | |||||
|
|
|
|
|||||
Cash provided by (used in) investment activities |
(227 | ) | 1,578 | |||||
|
|
|
|
|||||
Financing activities: |
||||||||
Cash received from issuance of preferred stock |
1 | | ||||||
Cash received from borrowings, net of fees |
1 | (17 | ) | |||||
Cash used to repay debt |
(218 | ) | (1,727 | ) | ||||
Premium paid to retire debt |
| (27 | ) | |||||
Cash used to purchase treasury stock |
(1 | ) | (5 | ) | ||||
Other financing activities |
(10 | ) | (14 | ) | ||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(227 | ) | (1,790 | ) | ||||
Cash provided by (used in) discontinued operations |
| | ||||||
|
|
|
|
|||||
Cash provided by (used in) financing activities |
(227 | ) | (1,790 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
(2 | ) | 5 | |||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(29 | ) | (121 | ) | ||||
Beginning cash and cash equivalents includes cash of discontinued operations: 2011, $23 2012, $6 |
778 | 873 | ||||||
|
|
|
|
|||||
Ending cash and cash equivalents includes cash of discontinued operations: 2011, $4; 2012, $- |
$ | 749 | $ | 752 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
7
Consolidated Balance Sheets
(In millions except share and per-share amounts)
(Unaudited)
December 31, 2011 |
September 30, 2012 |
|||||||
Assets |
||||||||
Current: |
||||||||
Cash and cash equivalents |
$ | 867 | $ | 752 | ||||
Trade receivables, less allowance for doubtful accounts of $38 and $39 |
794 | 678 | ||||||
Earned but unbilled receivables |
140 | 126 | ||||||
Prepaid expenses and other current assets |
117 | 136 | ||||||
Clearing broker assets |
213 | 21 | ||||||
Assets related to discontinued operations |
1,350 | | ||||||
|
|
|
|
|||||
Total current assets |
3,481 | 1,713 | ||||||
Property and equipment, less accumulated depreciation of $1,296 and $1,471 |
893 | 862 | ||||||
Software products, less accumulated amortization of $1,431 and $1,597 |
554 | 430 | ||||||
Customer base, less accumulated amortization of $1,254 and $1,425 |
1,574 | 1,414 | ||||||
Other intangible assets, less accumulated amortization of $22 and $26 |
144 | 112 | ||||||
Trade name, less accumulated amortization of $10 and $- |
1,019 | 1,019 | ||||||
Goodwill |
4,885 | 4,503 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 12,550 | $ | 10,053 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity |
||||||||
Current: |
||||||||
Short-term and current portion of long-term debt |
$ | 10 | $ | 9 | ||||
Accounts payable |
59 | 29 | ||||||
Accrued compensation and benefits |
291 | 268 | ||||||
Accrued interest expense |
92 | 69 | ||||||
Accrued income taxes |
25 | 88 | ||||||
Other accrued expenses |
313 | 294 | ||||||
Clearing broker liabilities |
179 | 7 | ||||||
Deferred revenue |
862 | 790 | ||||||
Deferred income taxes |
76 | | ||||||
Liabilities related to discontinued operations |
246 | | ||||||
|
|
|
|
|||||
Total current liabilities |
2,153 | 1,554 | ||||||
Long-term debt |
7,819 | 6,102 | ||||||
Deferred income taxes |
1,117 | 1,034 | ||||||
|
|
|
|
|||||
Total liabilities |
11,089 | 8,690 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock, par value $.01 per share; 100 shares authorized, issued and outstanding |
| | ||||||
Capital in excess of par value |
3,793 | 3,803 | ||||||
Accumulated deficit |
(2,286 | ) | (2,421 | ) | ||||
Accumulated other comprehensive income (loss) |
(46 | ) | (19 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
1,461 | 1,363 | ||||||
|
|
|
|
|||||
Total Liabilities and Stockholders Equity |
$ | 12,550 | $ | 10,053 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
8
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2011 | 2012 | 2011 | 2012 | |||||||||||||
Revenue: |
||||||||||||||||
Services |
$ | 1,028 | $ | 969 | $ | 3,016 | $ | 2,916 | ||||||||
License and resale fees |
52 | 53 | 193 | 168 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total products and services |
1,080 | 1,022 | 3,209 | 3,084 | ||||||||||||
Reimbursed expenses |
17 | 13 | 77 | 47 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue |
1,097 | 1,035 | 3,286 | 3,131 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Costs and expenses: |
||||||||||||||||
Cost of sales and direct operating |
465 | 430 | 1,416 | 1,321 | ||||||||||||
Sales, marketing and administration |
295 | 245 | 842 | 768 | ||||||||||||
Product development and maintenance |
101 | 90 | 302 | 273 | ||||||||||||
Depreciation and amortization |
67 | 70 | 204 | 211 | ||||||||||||
Amortization of acquisition-related intangible assets |
106 | 94 | 332 | 295 | ||||||||||||
Goodwill impairment charge |
| 385 | | 385 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total costs and expenses |
1,034 | 1,314 | 3,096 | 3,253 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
63 | (279 | ) | 190 | (122 | ) | ||||||||||
Interest income |
1 | 1 | 3 | 1 | ||||||||||||
Interest expense and amortization of deferred financing fees |
(130 | ) | (102 | ) | (396 | ) | (325 | ) | ||||||||
Loss on extinguishment of debt |
| | (2 | ) | (51 | ) | ||||||||||
Other income (expense) |
| | | 2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations before income taxes |
(66 | ) | (380 | ) | (205 | ) | (495 | ) | ||||||||
Benefit from (provision for) income taxes |
27 | 13 | 57 | 44 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations |
(39 | ) | (367 | ) | (148 | ) | (451 | ) | ||||||||
Income (loss) from discontinued operations, net of tax |
(108 | ) | 5 | (95 | ) | 316 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
(147 | ) | (362 | ) | (243 | ) | (135 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation |
(81 | ) | 27 | (6 | ) | 16 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Foreign currency translation, net |
(81 | ) | 27 | (6 | ) | 16 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Unrealized gain (loss) on derivative instruments |
(3 | ) | 1 | (13 | ) | 1 | ||||||||||
Less: gain (loss) on derivatives reclassified into income |
7 | 3 | 27 | 11 | ||||||||||||
Less: income tax benefit (expense) |
(2 | ) | 1 | (7 | ) | (1 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net unrealized gain (loss) on derivative instruments, net of tax |
2 | 5 | 7 | 11 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss) |
$ | (226 | ) | $ | (330 | ) | $ | (242 | ) | $ | (108 | ) | ||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
9
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Nine Months Ended September 30, | ||||||||
2011 | 2012 | |||||||
Cash flow from operations: |
||||||||
Net income (loss) |
$ | (243 | ) | $ | (135 | ) | ||
Income (loss) from discontinued operations |
(95 | ) | 316 | |||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(148 | ) | (451 | ) | ||||
Reconciliation of income (loss) from continuing operations to cash flow from (used in) operations: |
||||||||
Depreciation and amortization |
536 | 506 | ||||||
Goodwill impairment charge |
| 385 | ||||||
Deferred income tax provision (benefit) |
(84 | ) | (30 | ) | ||||
Stock compensation expense |
23 | 29 | ||||||
Amortization of deferred financing costs and debt discount |
29 | 26 | ||||||
Loss on extinguishment of debt |
2 | 51 | ||||||
Other noncash items |
1 | (1 | ) | |||||
Accounts receivable and other current assets |
136 | 137 | ||||||
Accounts payable and accrued expenses |
(29 | ) | (99 | ) | ||||
Accrued income tax |
(10 | ) | (69 | ) | ||||
Clearing broker assets and liabilities, net |
(22 | ) | 20 | |||||
Deferred revenue |
(72 | ) | (78 | ) | ||||
|
|
|
|
|||||
Cash flow from (used in) continuing operations |
362 | 426 | ||||||
Cash flow from (used in) discontinued operations |
65 | (340 | ) | |||||
|
|
|
|
|||||
Cash flow from (used in) operations |
427 | 86 | ||||||
|
|
|
|
|||||
Investment activities: |
||||||||
Cash paid for acquired businesses, net of cash acquired |
(35 | ) | (10 | ) | ||||
Cash paid for property and equipment and software |
(183 | ) | (173 | ) | ||||
Other investing activities |
(2 | ) | 3 | |||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(220 | ) | (180 | ) | ||||
Cash provided by (used in) discontinued operations |
(7 | ) | 1,758 | |||||
|
|
|
|
|||||
Cash provided by (used in) investment activities |
(227 | ) | 1,578 | |||||
|
|
|
|
|||||
Financing activities: |
||||||||
Cash received from borrowings, net of fees |
1 | (17 | ) | |||||
Cash used to repay debt |
(218 | ) | (1,727 | ) | ||||
Premium paid to retire debt |
| (27 | ) | |||||
Other financing activities |
(10 | ) | (19 | ) | ||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(227 | ) | (1,790 | ) | ||||
Cash provided by (used in) discontinued operations |
| | ||||||
|
|
|
|
|||||
Cash provided by (used in) financing activities |
(227 | ) | (1,790 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
(2 | ) | 5 | |||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(29 | ) | (121 | ) | ||||
Beginning cash and cash equivalents includes cash of discontinued operations: 2011, $23 2012, $6 |
778 | 873 | ||||||
|
|
|
|
|||||
Ending cash and cash equivalents includes cash of discontinued operations: 2011, $4; 2012, $- |
$ | 749 | $ | 752 | ||||
|
|
|
|
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 for SCC and SCCII and the Companys Registration Statement on Form S-1 dated June 4, 2012 for SunGard. 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.
On July 27, 2012, the FASB issued Accounting Standards Update No. 2012-02, IntangiblesGoodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The Update simplifies the guidance for testing the decline in the realizable value (impairment) of indefinite-lived intangible assets other than goodwill. Examples of intangible assets subject to the guidance include indefinite-lived trademarks, licenses, and distribution rights. The amendment allows an organization the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. An organization electing to perform a qualitative assessment is no longer required to calculate the fair value of an indefinite-lived intangible asset unless the organization determines, based on a qualitative assessment, that it is more likely than not that the asset is impaired. Under former guidance, an organization was required to test an indefinite-lived intangible asset for impairment on at least an annual basis by comparing the fair value of the asset with its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeded its fair value, an impairment loss was recognized in an amount equal to the difference. The amendments in this Update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company is currently evaluating the impact of this Update, but does not expect the Update to have a material impact on the consolidated financial statements.
11
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 nine months ended September 30, 2012, the Company completed one acquisition in its FS segment. Cash paid, net of cash acquired, was $9 million. The impact of this acquisition was not material to the consolidated financial statements. In addition, the Company paid approximately $1 million related to deferred purchase price from prior year acquisitions. At September 30, 2012, potential contingent purchase price obligations that depend on the operating performance of certain acquired businesses were $6 million, of which the Company has estimated that $3 million will be paid and which is included in other long-term debt.
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). In July 2012, the Company sold its FS subsidiary SunGard Global Services France for gross proceeds of 14 million. The results for the discontinued operations for the three and nine months ended September 30, 2011 and 2012 were as follows (in millions):
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2011 | 2012 | 2011 | 2012 | |||||||||||||
Revenue |
$ | 130 | $ | 5 | $ | 417 | $ | 55 | ||||||||
Operating income (loss) |
25 | (1 | ) | 67 | (4 | ) | ||||||||||
Gain on sale of business |
| 8 | | 571 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes |
25 | 7 | 67 | 567 | ||||||||||||
Benefit from (provision for) income taxes |
(133 | ) | (2 | ) | (162 | ) | (251 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from discontinued operations |
$ | (108 | ) | $ | 5 | $ | (95 | ) | $ | 316 | ||||||
|
|
|
|
|
|
|
|
Assets and liabilities related to discontinued operations consisted of the following (in millions) at December 31, 2011:
December 31, 2011 |
||||
Cash |
$ | 6 | ||
Accounts receivable, net |
105 | |||
Prepaid expenses and other current assets |
14 | |||
Property and equipment, net |
31 | |||
Software products, net |
77 | |||
Customer base, net |
188 | |||
Goodwill |
929 | |||
|
|
|||
Assets related to discontinued operations |
$ | 1,350 | ||
|
|
|||
Accounts payable |
$ | 1 | ||
Accrued compensation and benefits |
24 | |||
Other accrued expenses |
16 | |||
Deferred revenue |
106 | |||
Deferred income taxes |
99 | |||
|
|
|||
Liabilities related to discontinued operations |
$ | 246 | ||
|
|
12
Assets and liabilities related to the discontinued operations of HE consisted of the following (in millions) at the closing balance sheet on January 20, 2012:
January 20, 2012 |
||||
Cash |
$ | 7 | ||
Accounts receivable, net |
90 | |||
Prepaid expenses and other current assets |
14 | |||
Property and equipment, net |
31 | |||
Software products, net |
78 | |||
Customer base, net |
182 | |||
Goodwill |
929 | |||
|
|
|||
Assets related to discontinued operations |
$ | 1,331 | ||
|
|
|||
Accounts payable |
$ | 5 | ||
Accrued compensation and benefits |
21 | |||
Other accrued expenses |
9 | |||
Deferred revenue |
109 | |||
Deferred income taxes |
96 | |||
|
|
|||
Liabilities related to discontinued operations |
$ | 240 | ||
|
|
3. Intangible Assets and Goodwill:
Trade Name
The trade name intangible asset represents the fair value of the SunGard trade name and is an indefinite-lived asset not subject to amortization. The Company performed its annual impairment test of the SunGard trade name in the third quarter and based on the results of this test, the fair value of the trade name exceeded its carrying value, resulting in no impairment of the trade name. As a result of lower long term projections and from the sale of HE, future cash flows which drive the value of the trade name have decreased, and the amount by which the estimated fair value of the trade name exceeded its carrying value was lower in the current year impairment test compared to prior years. In addition to the projections, a critical assumption considered in the impairment test of the trade name is the implied royalty rate. A 50 basis point decrease in the assumed royalty rate would have resulted in an impairment of the trade name asset of approximately $108 million (100 basis point decrease would result in an impairment of approximately $336 million). A 100 basis point increase in the discount rate would result in an impairment of the trade name asset of approximately $5 million. Furthermore, to the extent that additional businesses are divested in the future, the cash flows supporting the trade name will continue to decline, which may result in impairment charges.
Goodwill
Generally accepted accounting principles in the United States require the Company to perform a goodwill impairment test annually and more frequently when negative conditions or a triggering event arise. In September 2011, the FASB issued amended guidance that simplified how entities test goodwill for impairment. After an 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. As allowed under the amended guidance, the Company chose not to assess the qualitative factors of its reporting units and, instead, performed the two-step quantitative test(s).
The Company completes its annual goodwill impairment test as of July 1 for each of its 11 reporting units. In step one, the estimated fair value of each reporting unit is compared to its carrying value. The Company estimated the fair values of each reporting unit by a combination of (i) estimation of the discounted cash flows of each of the reporting units based on projected earnings in the future (the income approach) and (ii) a comparative analysis of revenue and EBITDA multiples of public companies in similar markets (the market approach). If there is a deficiency (the estimated fair value of a reporting unit is less than its carrying value), a step two test is required. In step two, the amount of any goodwill impairment is measured by comparing the implied fair value of the reporting units goodwill to the carrying value of goodwill, with the resulting impairment reflected in operations. The implied fair value is determined in the same manner as the amount of goodwill recognized in a business combination.
Estimating the fair value of a reporting unit requires various assumptions including projections of future cash flows, perpetual growth rates and discount rates. The assumptions about future cash flows and growth rates are based on managements assessment of a number of factors including the reporting units recent performance against budget,
13
performance in the market that the reporting unit serves, as well as industry and general economic data from third party sources. Discount rate assumptions reflect an assessment of the risk inherent in those future cash flows. Changes to the underlying businesses could affect the future cash flows, which in turn could affect the fair value of the reporting unit. For the July 1, 2012 impairment test, the discount rates and perpetual growth rates used were between 10% and 12% and 3% and 4%, respectively.
Based on the results of the step one tests, the Company determined that the carrying value of the Availability Services North America (AS NA) reporting unit was in excess of its respective fair value and a step two test was required. The primary driver for the decline in the fair value of the AS NA reporting unit compared to the prior year is the decline in the cash flow projections for AS NA when compared to those used in the 2011 goodwill impairment test as a result of decline in the overall outlook of this reporting unit. The Company continues to expect to grow the AS NA business over the long-term, albeit at a slower rate than previously planned.
Prior to completing the step two test, the Company first evaluated certain long-lived assets, primarily the software, customer base and property and equipment, for impairment. In performing the impairment tests for long-lived assets, the Company estimated the undiscounted cash flows for the asset groups over the remaining useful lives of the reporting units primary asset and compared that to the carrying value of the asset groups. There was no impairment of the long-lived assets.
In completing the step two test to determine the implied fair value of goodwill and therefore the amount of impairment, management first determined the fair value of the tangible and intangible assets and liabilities. Based on the testing performed, the Company determined that the carrying value of goodwill exceeded its implied fair value and recorded a goodwill impairment charge of $385 million.
The following table summarizes the goodwill impairment charge by reporting unit (in millions):
Segment |
Reporting Unit | Net Goodwill balance before impairment |
Impairment charge |
Goodwill balance after impairment |
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Availability Services |
AS NA | $ | 914 | $ | (385 | ) | $ | 529 | ||||||
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The Company has one other reporting unit, whose goodwill balance in the aggregate totals $299 million as of September 30, 2012, where the excess of the estimated fair value over the carrying value of the reporting unit was less than 15% of the carrying value. A one hundred basis point decrease in the perpetual growth rate or a one hundred basis point increase in the discount rate would not cause this reporting unit to fail step one and require a step two analysis. However, if this unit fails to achieve expected performance levels in the near term or experiences a downturn in the business below current expectations, goodwill could be impaired.
The Companys remaining reporting units, whose goodwill balances in aggregate total $3.7 billion at September 30, 2012, each had estimated fair values which exceeded the carrying value of the reporting unit by at least 15% as of the July 1, 2012 impairment test.
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 |
5 | | | 5 | | | | 5 | ||||||||||||||||||||||||
Adjustments related to the LBO and prior year acquisitions |
(2 | ) | (2 | ) | (1 | ) | (5 | ) | | | | (5 | ) | |||||||||||||||||||
Impairment charges |
| | | | (385 | ) | | (385 | ) | (385 | ) | |||||||||||||||||||||
Effect of foreign currency translation |
(1 | ) | 4 | | 3 | | | | 3 | |||||||||||||||||||||||
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Balance at September 30, 2012 |
$ | 3,482 | $ | 2,241 | $ | 544 | $ | 6,267 | $ | (1,547 | ) | $ | (217 | ) | $ | (1,764 | ) | $ | 4,503 | |||||||||||||
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14
4. Clearing Broker Assets and Liabilities:
Clearing broker assets and liabilities are comprised of the following (in millions):
December 31, 2011 |
September 30, 2012 |
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Segregated customer cash and treasury bills |
$ | 23 | $ | 13 | ||||
Securities borrowed |
157 | | ||||||
Receivables from customers and other |
33 | 8 | ||||||
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Clearing broker assets |
$ | 213 | $ | 21 | ||||
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Payables to customers |
$ | 16 | $ | 2 | ||||
Securities loaned |
145 | | ||||||
Payable to brokers and dealers |
18 | 5 | ||||||
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Clearing broker liabilities |
$ | 179 | $ | 7 | ||||
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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.
The Company is currently winding-down the operations of its stock loan and clearing services business. As a result, the Company expects the balances of clearing broker assets and liabilities will continue to decrease through the remainder of 2012.
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 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 the $880 million 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 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.
On April 2, 2012, SunGard redeemed for $527 million plus accrued and unpaid interest to the redemption date, 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). In conjunction with the redemption of the 2015 Notes, the Company expensed approximately $7 million of unamortized deferred financing costs and the $3 million issue discount.
15
Debt consisted of the following at December 31, 2011 and September 30, 2012 (in millions):
December 31, 2011 |
September 30, 2012 |
|||||||
Senior Secured Credit Facilities: |
||||||||
Secured revolving credit facility |
$ | | $ | | ||||
Tranche A, effective interest rate of 3.33% and 1.97% |
1,386 | 255 | ||||||
Tranche B, effective interest rate of 4.32% and 4.36% |
2,407 | 1,719 | ||||||
Tranche C, effective interest rate of 4.18% |
| 908 | ||||||
Incremental term loan at 3.78% and 3.72% |
479 | 169 | ||||||
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Total Senior Secured Credit Facilities |
4,272 | 3,051 | ||||||
Senior Secured Notes due 2014 at 4.875%, net of discount of $8 and $5 |
242 | 245 | ||||||
Senior Notes due 2015 at 10.625%, net of discount of $3 and $- |
497 | | ||||||
Senior Notes due 2018 at 7.375% |
900 | 900 | ||||||
Senior Notes due 2020 at 7.625% |
700 | 700 | ||||||
Senior Subordinated Notes due 2015 at 10.25% |
1,000 | 1,000 | ||||||
Secured accounts receivable facility, at 3.79% and 3.72% |
200 | 200 | ||||||
Other, primarily acquisition purchase price and capital lease obligations |
18 | 15 | ||||||
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Total debt |
7,829 | 6,111 | ||||||
Short-term borrowings and current portion of long-term debt |
(10 | ) | (9 | ) | ||||
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Long-term debt |
$ | 7,819 | $ | 6,102 | ||||
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On November 1, 2012, SunGard successfully issued $1 billion aggregate principal amount of 6.625% Senior Subordinated Notes due 2019 (Senior Subordinated Notes) and used a portion of the proceeds from this offering to repurchase approximately $490 million of its 10.25% Senior Subordinated Notes due 2015 (Existing 10.25% Senior Subordinated Notes). SunGard intends to repurchase or redeem the remaining Existing 10.25% Senior Subordinated Notes in the fourth quarter of 2012. As a result of this transaction, the Company expects to incur a $30 million loss on the extinguishment of debt which will be reflected in the statement of comprehensive income in the fourth quarter of 2012.
On November 1, 2012, SunGard and the guarantors of the Senior Subordinated Notes entered into a registration rights agreement and have agreed that they will (i) file a registration statement with respect to a registered offer to exchange the Senior Subordinated Notes for new notes guaranteed by the guarantors on a senior subordinated unsecured basis, with terms substantially identical in all material respects to the Senior Subordinated Notes, and (ii) use their reasonable best efforts to cause the exchange offer registration statement to be declared effective under the Securities Act of 1933, as amended.
SunGard and the guarantors have agreed to use their reasonable best efforts to cause the exchange offer to be completed or, if required, to have one or more shelf registration statements declared effective, within 360 days after the issue date.
If SunGard fails to satisfy this obligation (a registration default), the annual interest rate on the Senior Subordinated Notes will increase by an additional 0.25% for each subsequent 90-day period during which the registration default continues, up to a maximum additional interest rate of 1.00% per year. If the registration default is corrected, the applicable interest rate will revert to the original level.
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) |
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February 2010 |
May 2013 | $ | 500 | 1.99 | % | 3-Month | ||||||||||
August-September 2012 |
February 2017 | 400 | 0.69 | % | 1-Month | |||||||||||
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Total / Weighted Average |
$ | 900 | 1.41 | % | ||||||||||||
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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 $7 million as of December 31, 2011 and September 30, 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 September 30, 2012.
16
6. Fair Value Measurements:
The following table summarizes assets and liabilities measured at fair value on a recurring basis at September 30, 2012 (in millions):
Fair Value Measures Using | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets |
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Cash and cash equivalentsmoney market funds |
$ | 220 | $ | | $ | | $ | 220 | ||||||||
Currency forward contracts |
| 7 | | 7 | ||||||||||||
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Total |
$ | 220 | $ | 7 | $ | | $ | 227 | ||||||||
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Liabilities |
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Interest rate swap agreements and other |
$ | | $ | 8 | $ | | $ | 8 | ||||||||
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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 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets |
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Cash and cash equivalentsmoney market funds |
$ | 351 | $ | | $ | | $ | 351 | ||||||||
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Liabilities |
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Interest rate swap agreements and other |
$ | | $ | 15 | $ | | $ | 15 | ||||||||
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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 equivalentsmoney 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 Company uses currency forward contracts to manage its exposure to fluctuations in costs caused by variations in Indian Rupee (INR) exchange rates. These INR forward contacts are designated as cash flow hedges. The fair value of these currency forward contracts is determined using currency exchange market rates, obtained from reliable, independent, third party banks, at the balance sheet date. This fair value of forward contracts is subject to changes in currency exchange rates. The Company has no ineffectiveness related to its use of currency forward contracts.
The following table summarizes assets and liabilities measured at fair value on a non-recurring basis at September 30, 2012 (in millions):
Fair Value Measures Using | Total Gains (Losses) |
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Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets |
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Goodwill |
$ | | $ | | $ | 529 | $ | (385 | ) | |||||||
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The fair value of goodwill is categorized in Level 3, fair value measurement using significant unobservable inputs, and is estimated by a combination of (i) discounted cash flows based on projected earnings in the future (the income approach) and (ii) a comparative analysis of revenue and EBITDA multiples of public companies in similar markets (the market approach). This requires the use of various assumptions including projections of future cash flows, perpetual growth rates and discount rates. The $385 million impairment loss, which is reflected in operations for the three and nine months ended September 30, 2012, relates to AS NA, as discussed in Note 2.
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 September 30, 2012 (in millions):
December 31, 2011 | September 30, 2012 | |||||||||||||||
Carrying Value |
Fair Value |
Carrying Value |
Fair Value |
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Floating rate debt |
$ | 4,472 | $ | 4,372 | $ | 3,251 | $ | 3,263 | ||||||||
Fixed rate debt |
3,357 | 3,454 | 2,860 | 3,003 |
The fair value of the Companys floating rate and fixed rate long-term debt (Level 2) is determined using actual market quotes and benchmark yields received from independent vendors.
17
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) |
| | (321 | ) | (321 | ) | | 186 | 186 | |||||||||||||||||||
Foreign currency translation |
| | 16 | 16 | | | | |||||||||||||||||||||
Net unrealized gain on derivative instruments |
| | 11 | 11 | | | | |||||||||||||||||||||
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Comprehensive income (loss) |
| | (294 | ) | (294 | ) | | 186 | 186 | |||||||||||||||||||
Stock compensation expense |
| | 29 | 29 | | | | |||||||||||||||||||||
Termination of put options due to employee terminations and other |
(16 | ) | (2 | ) | 20 | 2 | (8 | ) | 5 | (3 | ) | |||||||||||||||||
Issuance of common and preferred stock |
| | 1 | 1 | | | | |||||||||||||||||||||
Purchase of treasury stock |
| | (7 | ) | (7 | ) | | (2 | ) | (2 | ) | |||||||||||||||||
Transfer intrinsic value of vested restricted stock units |
15 | 1 | (25 | ) | (9 | ) | 9 | | 9 | |||||||||||||||||||
Other |
| | (10 | ) | (10 | ) | | | | |||||||||||||||||||
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Balance at September 30, 2012 |
$ | 46 | $ | 5 | $ | (949 | ) | $ | (898 | ) | $ | 29 | $ | 2,227 | $ | 2,256 | ||||||||||||
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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) |
| | (409 | ) | (409 | ) | 2 | 164 | 166 | |||||||||||||||||||
Foreign currency translation |
| | (6 | ) | (6 | ) | | | | |||||||||||||||||||
Net unrealized gain on derivative instruments |
| | 7 | 7 | | | | |||||||||||||||||||||
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Comprehensive income (loss) |
| | (408 | ) | (408 | ) | 2 | 164 | 166 | |||||||||||||||||||
Stock compensation expense |
| | 23 | 23 | | | | |||||||||||||||||||||
Termination of put options due to employee terminations and other |
(39 | ) | (5 | ) | 45 | 1 | (29 | ) | 28 | (1 | ) | |||||||||||||||||
Issuance of common and preferred stock |
(1 | ) | | 4 | 3 | (1 | ) | 1 | | |||||||||||||||||||
Purchase of treasury stock |
| | (2 | ) | (2 | ) | | (1 | ) | (1 | ) | |||||||||||||||||
Transfer intrinsic value of vested restricted stock units |
7 | 1 | (13 | ) | (5 | ) | 5 | | 5 | |||||||||||||||||||
Other |
| | (9 | ) | (9 | ) | | | | |||||||||||||||||||
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Balance at September 30, 2011 |
$ | 54 | $ | 7 | $ | (690 | ) | $ | (629 | ) | $ | 31 | $ | 1,974 | $ | 2,005 | ||||||||||||
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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 for other than death or disability, the value included in temporary equity is reclassified to permanent equity.
18
The components of accumulated other comprehensive income (loss) at December 31, 2011 and September 30, 2012 are as follows (in millions):
December 31, 2011 | September 30, 2012 | |||||||
Foreign currency translation |
$ | (37 | ) | $ | (21 | ) | ||
Net unrealized gain (loss) on derivative instruments |
(9 | ) | 2 | |||||
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Accumulated other comprehensive income (loss) |
$ | (46 | ) | $ | (19 | ) | ||
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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, 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 September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2012 | 2011 | 2012 | |||||||||||||
Revenue: |
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Financial Systems |
$ | 680 | $ | 640 | $ | 2,037 | $ | 1,928 | ||||||||
Availability Services |
365 | 345 | 1,095 | 1,052 | ||||||||||||
Other |
52 | 50 | 154 | 151 | ||||||||||||
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Total revenue |
$ | 1,097 | $ | 1,035 | $ | 3,286 | $ | 3,131 | ||||||||
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Depreciation and amortization: |
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Financial Systems |
$ | 20 | $ | 22 | $ | 62 | $ | 63 | ||||||||
Availability Services |
45 | 46 | 136 | 142 | ||||||||||||
Other |
2 | 1 | 6 | 5 | ||||||||||||
Corporate |
| 1 | | 1 | ||||||||||||
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Total depreciation and amortization |
$ | 67 | $ | 70 | $ | 204 | $ | 211 | ||||||||
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Operating income (loss): |
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Financial Systems (1) |
$ | 121 | $ | 136 | $ | 374 | $ | 388 | ||||||||
Availability Services (2) |
80 | 74 | 234 | 209 | ||||||||||||
Other |
15 | 13 | 43 | 41 | ||||||||||||
Corporate(3) |
(30 | ) | (11 | ) | (79 | ) | (39 | ) | ||||||||
Other costs (4) |
(123 | ) | (491 | ) | (382 | ) | (721 | ) | ||||||||
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Total operating income (loss) |
$ | 63 | $ | (279 | ) | $ | 190 | $ | (122 | ) | ||||||
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Cash paid for property and equipment and software: |
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Financial Systems |
$ | 18 | $ | 19 | $ | 62 | $ | 62 | ||||||||
Availability Services |
34 | 36 | 114 | 104 | ||||||||||||
Other |
2 | 2 | 4 | 6 | ||||||||||||
Corporate |
1 | 1 | 3 | 1 | ||||||||||||
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Total cash paid for property and equipment and software |
$ | 55 | $ | 58 | $ | 183 | $ | 173 | ||||||||
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(1) | Includes severance of $29 million, $9 million, $33 million and $15 million, respectively. |
(2) | Includes severance of $9 million, $1 million, $8 million and $2 million, respectively. |
(3) | Includes executive transition costs and severance of $8 million in the three months ended September 30, 2011 and $16 million in the nine months ended September 30, 2011. |
(4) | Includes goodwill impairment, stock compensation expense, management fees paid to the Sponsors, other items and amortization of acquisition-related intangible assets of $106 million and $94 million for the three months ended September 30, 2011 and 2012, respectively, and $332 million and $295 million for the nine months ended September 30, 2011 and 2012, respectively. |
19
Amortization of acquisition-related intangible assets by segment follows (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2012 | 2011 | 2012 | |||||||||||||
Amortization of acquisition-related intangible assets: |
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Financial Systems (5) |
$ | 59 | $ | 49 | $ | 189 | $ | 155 | ||||||||
Availability Services |
43 | 40 | 129 | 126 | ||||||||||||
Other |
4 | 5 | 14 | 14 | ||||||||||||
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Total amortization of acquisition-related intangible assets |
$ | 106 | $ | 94 | $ | 332 | $ | 295 | ||||||||
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(5) | Includes approximately $7 million in the nine months ended September 30, 2011 of impairment charges related to customer base and software. |
The FS Segment is organized to align by product offering. FS revenue by these business areas follows (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2012 | 2011 | 2012 | |||||||||||||
Capital Markets |
$ | 236 | $ | 228 | $ | 728 | $ | 691 | ||||||||
Asset Management |
120 | 113 | 343 | 339 | ||||||||||||
Wealth & Retirement Administration |
72 | 67 | 207 | 203 | ||||||||||||
Corporate Liquidity & Energy |
68 | 65 | 202 | 197 | ||||||||||||
Banking |
60 | 56 | 175 | 160 | ||||||||||||
Brokerage |
45 | 39 | 163 | 124 | ||||||||||||
Insurance |
45 | 41 | 126 | 122 | ||||||||||||
Other |
34 | 31 | 93 | 92 | ||||||||||||
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Total Financial Systems |
$ | 680 | $ | 640 | $ | 2,037 | $ | 1,928 | ||||||||
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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 $4 million and $3 million of management fees in sales, marketing and administration expenses during the three months ended September 30, 2011 and 2012, respectively. The Company recorded $9 million of management fees in sales, marketing and administration expenses during each of the nine months ended September 30, 2011 and 2012, respectively. At December 31, 2011 and September 30, 2012, $4 million and $3 million, respectively, was included in other accrued expenses.
During the first quarter of 2012, in addition to the fees above, 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.
In November 2012, one of the Companys Sponsors, Goldman Sachs & Co. and/or its respective affiliates, served as a joint book-running manager in connection with SunGards 2012 debt offering of Senior Subordinated Notes. In connection with serving in such capacity, Goldman Sachs & Co. was paid less than $1 million for customary fees and expenses.
20
10. Supplemental Cash Flow Information:
Supplemental cash flow information for the nine months ended September 30, 2011 and 2012 follows (in millions):
Nine Months Ended September 30, | ||||||||
Supplemental information: | 2011 | 2012 | ||||||
Interest paid |
$ | 367 | $ | 321 | ||||
|
|
|
|
|||||
Income taxes paid, net of refunds of $20 million and $7 million (1) |
$ | 44 | $ | 397 | ||||
|
|
|
|
|||||
Acquired businesses: |
||||||||
Property and equipment |
$ | 1 | $ | | ||||
Software products |
21 | | ||||||
Customer base |
12 | 7 | ||||||
Goodwill |
6 | 5 | ||||||
Deferred income taxes |
(5 | ) | (2 | ) | ||||
Purchase price obligations and debt assumed |
(1 | ) | | |||||
Net current liabilities assumed |
1 | | ||||||
|
|
|
|
|||||
Cash paid for acquired businesses, net of cash acquired of $4 and $2 million, respectively |
$ | 35 | $ | 10 | ||||
|
|
|
|
(1) | Approximately $344 million is related to the sale of HE and the income tax provision was included in discontinued operations. |
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; |
| 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 September 30, 2012, and for the three and nine month periods ended September 30, 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.
21
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 | ) | $ | 353 | $ | | $ | 867 | |||||||||
Intercompany balances |
(5,247 | ) | 4,516 | 731 | | | ||||||||||||||
Trade receivables, net |
2 | 603 | (a) | 329 | | 934 | ||||||||||||||
Prepaid expenses, taxes and other current assets |
1,461 | 54 | 271 | (1,456 | ) | 330 | ||||||||||||||
Assets related to discontinued operations |
| 1,315 | 37 | (2 | ) | 1,350 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
(3,255 | ) | 6,473 | 1,721 | (1,458 | ) | 3,481 | |||||||||||||
Property and equipment, net |
| 588 | 305 | | 893 | |||||||||||||||
Intangible assets, net |
120 | 2,701 | 470 | | 3,291 | |||||||||||||||
Intercompany balances |
250 | 1 | (251 | ) | | | ||||||||||||||
Goodwill |
| 3,784 | 1,101 | | 4,885 | |||||||||||||||
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 | 887 | (1,456 | ) | 1,897 | ||||||||||||||
Liabilities related to discontinued operations |
| 219 | 27 | | 246 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
296 | 2,392 | 921 | (1,456 | ) | 2,153 | ||||||||||||||
Long-term debt |
7,612 | 2 | 205 | | 7,819 | |||||||||||||||
Intercompany debt |
82 | 19 | 16 | (117 | ) | | ||||||||||||||
Deferred income taxes |
337 | 714 | 66 | | 1,117 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
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 | |||||||||
|
|
|
|
|
|
|
|
|
|
(a) | This balance is primarily comprised of a receivable from the Companys Accounts Receivable Financing subsidiary, which is a non-Guarantor, resulting from the normal, recurring sale of accounts receivable under the receivables facility. In a liquidation, the first $200 million (plus interest) of collections of accounts receivable sold to this subsidiary are due to the receivables facility lender. The remaining balance would be available for collection for the benefit of the Guarantors. |
22
(in millions) | Supplemental Condensed Consolidating Balance Sheet September 30, 2012 |
|||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 429 | $ | (9 | ) | $ | 332 | $ | | $ | 752 | |||||||||
Intercompany balances |
(2,970 | ) | 2,268 | 702 | | | ||||||||||||||
Trade receivables, net |
3 | 559 | (a) | 242 | | 804 | ||||||||||||||
Prepaid expenses, taxes and other current assets |
1,431 | 133 | 97 | (1,504 | ) | 157 | ||||||||||||||
Assets related to discontinued operations |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
(1,107 | ) | 2,951 | 1,373 | (1,504 | ) | 1,713 | |||||||||||||
Property and equipment, net |
| 569 | 293 | | 862 | |||||||||||||||
Intangible assets, net |
92 | 2,471 | 412 | | 2,975 | |||||||||||||||
Intercompany balances |
247 | | (247 | ) | | | ||||||||||||||
Goodwill |
| 3,446 | 1,057 | | 4,503 | |||||||||||||||
Investment in subsidiaries |
8,557 | 2,079 | | (10,636 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Assets |
$ | 7,789 | $ | 11,516 | $ | 2,888 | $ | (12,140 | ) | $ | 10,053 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Short-term and current portion of long-term debt |
$ | | $ | 1 | $ | 8 | $ | | $ | 9 | ||||||||||
Accounts payable and other current liabilities |
133 | 2,306 | 610 | (1,504 | ) | 1,545 | ||||||||||||||
Liabilities related to discontinued operations |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
133 | 2,307 | 618 | (1,504 | ) | 1,554 | ||||||||||||||
Long-term debt |
5,895 | 2 | 205 | | 6,102 | |||||||||||||||
Intercompany debt |
83 | (4 | ) | (79 | ) | | | |||||||||||||
Deferred income taxes |
315 | 654 | 65 | | 1,034 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
6,426 | 2,959 | 809 | (1,504 | ) | 8,690 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total stockholders equity |
1,363 | 8,557 | 2,079 | (10,636 | ) | 1,363 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities and Stockholders Equity |
$ | 7,789 | $ | 11,516 | $ | 2,888 | $ | (12,140 | ) | $ | 10,053 | |||||||||
|
|
|
|
|
|
|
|
|
|
(a) | This balance is primarily comprised of a receivable from the Companys Accounts Receivable Financing subsidiary, which is a non-Guarantor, resulting from the normal, recurring sale of accounts receivable under the receivables facility. In a liquidation, the first $200 million (plus interest) of collections of accounts receivable sold to this subsidiary are due to the receivables facility lender. The remaining balance would be available for collection for the benefit of the Guarantors. |
23
(in millions) | Supplemental Condensed Consolidating Schedule of Comprehensive
Income Three Months Ended September 30, 2011 |
|||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Total revenue |
$ | | $ | 748 | $ | 455 | $ | (106 | ) | $ | 1,097 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales and administrative expenses |
40 | 556 | 371 | (106 | ) | 861 | ||||||||||||||
Depreciation and amortization |
| 45 | 22 | | 67 | |||||||||||||||
Amortization of acquisition-related intangible assets |
| 84 | 22 | | 106 | |||||||||||||||
Goodwill impairment charges |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total costs and expenses |
40 | 685 | 415 | (106 | ) | 1,034 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
(40 | ) | 63 | 40 | | 63 | ||||||||||||||
Net interest income (expense) |
(120 | ) | | (9 | ) | | (129 | ) | ||||||||||||
Other income (expense) |
65 | 23 | | (88 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(95 | ) | 86 | 31 | (88 | ) | (66 | ) | ||||||||||||
Benefit from (provision for) income taxes |
56 | (19 | ) | (10 | ) | | 27 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(39 | ) | 67 | 21 | (88 | ) | (39 | ) | ||||||||||||
Income (loss) from discontinued operations, net of tax |
(108 | ) | 25 | (4 | ) | (21 | ) | (108 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (147 | ) | $ | 92 | $ | 17 | $ | (109 | ) | $ | (147 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
$ | (226 | ) | $ | 36 | $ | (50 | ) | $ | 14 | $ | (226 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
(in millions) | Supplemental Condensed Consolidating Schedule of Comprehensive
Income Three Months Ended September 30, 2012 |
|||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Total revenue |
$ | | $ | 725 | $ | 394 | $ | (84 | ) | $ | 1,035 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales and administrative expenses |
20 | 506 | 323 | (84 | ) | 765 | ||||||||||||||
Depreciation and amortization |
| 48 | 22 | | 70 | |||||||||||||||
Amortization of acquisition-related intangible assets |
1 | 76 | 17 | | 94 | |||||||||||||||
Goodwill impairment charges |
| 385 | | | 385 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total costs and expenses |
21 | 1,015 | 362 | (84 | ) | 1,314 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
(21 | ) | (290 | ) | 32 | | (279 | ) | ||||||||||||
Net interest income (expense) |
(94 | ) | | (7 | ) | | (101 | ) | ||||||||||||
Other income (expense) |
(292 | ) | 16 | | 276 | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(407 | ) | (274 | ) | 25 | 276 | (380 | ) | ||||||||||||
Benefit from (provision for) income taxes |
40 | (18 | ) | (9 | ) | | 13 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(367 | ) | (292 | ) | 16 | 276 | (367 | ) | ||||||||||||
Income (loss) from discontinued operations, net of tax |
5 | 5 | 9 | (14 | ) | 5 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (362 | ) | $ | (287 | ) | $ | 25 | $ | 262 | $ | (362 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
$ | (330 | ) | $ | (265 | ) | $ | 45 | $ | 220 | $ | (330 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
24
(in millions) | Supplemental Condensed Consolidating
Schedule of Comprehensive Income Nine Months Ended September 30, 2011 |
|||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Total revenue |
$ | | $ | 2,219 | $ | 1,389 | $ | (322 | ) | $ | 3,286 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales and administrative expenses |
104 | 1,652 | 1,126 | (322 | ) | 2,560 | ||||||||||||||
Depreciation and amortization |
| 137 | 67 | | 204 | |||||||||||||||
Amortization of acquisition-related intangible assets |
| 265 | 67 | | 332 | |||||||||||||||
Goodwill impairment charges |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total costs and expenses |
104 | 2,054 | 1,260 | (322 | ) | 3,096 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
(104 | ) | 165 | 129 | | 190 | ||||||||||||||
Net interest income (expense) |
(367 | ) | (1 | ) | (25 | ) | | (393 | ) | |||||||||||
Other income (expense) |
159 | 72 | | (233 | ) | (2 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(312 | ) | 236 | 104 | (233 | ) | (205 | ) | ||||||||||||
Benefit from (provision for) income taxes |
164 | (74 | ) | (33 | ) | | 57 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(148 | ) | 162 | 71 | (233 | ) | (148 | ) | ||||||||||||
Income (loss) from discontinued operations, net of tax |
(95 | ) | 38 | (2 | ) | (36 | ) | (95 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (243 | ) | $ | 200 | $ | 69 | $ | (269 | ) | $ | (243 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
$ | (242 | ) | $ | 218 | $ | 73 | $ | (291 | ) | $ | (242 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
(in millions) | Supplemental Condensed Consolidating
Schedule of Comprehensive Income Nine Months Ended September 30, 2012 |
|||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Total revenue |
$ | | $ | 2,170 | $ | 1,218 | $ | (257 | ) | $ | 3,131 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales and administrative expenses |
69 | 1,562 | 988 | (257 | ) | 2,362 | ||||||||||||||
Depreciation and amortization |
| 144 | 67 | | 211 | |||||||||||||||
Amortization of acquisition-related intangible assets |
1 | 245 | 49 | | 295 | |||||||||||||||
Goodwill impairment charges |
| 385 | | | 385 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total costs and expenses |
70 | 2,336 | 1,104 | (257 | ) | 3,253 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
(70 | ) | (166 | ) | 114 | | (122 | ) | ||||||||||||
Net interest income (expense) |
(303 | ) | | (21 | ) | | (324 | ) | ||||||||||||
Other income (expense) |
(225 | ) | 60 | 2 | 114 | (49 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(598 | ) | (106 | ) | 95 | 114 | (495 | ) | ||||||||||||
Benefit from (provision for) income taxes |
147 | (68 | ) | (35 | ) | | 44 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(451 | ) | (174 | ) | 60 | 114 | (451 | ) | ||||||||||||
Income (loss) from discontinued operations, net of tax |
316 | 91 | 5 | (96 | ) | 316 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (135 | ) | $ | (83 | ) | $ | 65 | $ | 18 | $ | (135 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
$ | (108 | ) | $ | (65 | ) | $ | 80 | $ | (15 | ) | $ | (108 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
25
(in millions) | Supplemental Condensed Consolidating Schedule of Cash Flows Nine Months ended September 30, 2011 |
|||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Cash flow from operations: |
||||||||||||||||||||
Net income (loss) |
$ | (243 | ) | $ | 200 | $ | 69 | $ | (269 | ) | $ | (243 | ) | |||||||
Income (loss) from discontinued operations |
(95 | ) | 38 | (2 | ) | (36 | ) | (95 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(148 | ) | 162 | 71 | (233 | ) | (148 | ) | ||||||||||||
Non cash adjustments |
(123 | ) | 283 | 114 | 233 | 507 | ||||||||||||||
Changes in operating assets and liabilities |
(226 | ) | 207 | 22 | | 3 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flow from (used in) continuing operations |
(497 | ) | 652 | 207 | | 362 | ||||||||||||||
Cash flow from (used in) discontinued operations |
| 75 | (10 | ) | | 65 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flow from (used in) operations |
(497 | ) | 727 | 197 | | 427 | ||||||||||||||
Investment activities: |
||||||||||||||||||||
Intercompany transactions |
649 | (590 | ) | (59 | ) | | | |||||||||||||
Cash paid for acquired businesses, net of cash acquired |
| (14 | ) | (21 | ) | | (35 | ) | ||||||||||||
Cash paid for property and equipment and software |
(1 | ) | (124 | ) | (58 | ) | | (183 | ) | |||||||||||
Other investing activities |
(3 | ) | | 1 | | (2 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
645 | (728 | ) | (137 | ) | | (220 | ) | ||||||||||||
Cash provided by (used in) discontinued operations |
| (7 | ) | | | (7 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) investment activities |
645 | (735 | ) | (137 | ) | | (227 | ) | ||||||||||||
Financing activities: |
||||||||||||||||||||
Intercompany dividends of HE sale proceeds |
| | | | | |||||||||||||||
Net repayments of long-term debt |
(5 | ) | | (212 | ) | | (217 | ) | ||||||||||||
Premium paid to retire debt |
| | | | | |||||||||||||||
Other financing activities |
(10 | ) | | | | (10 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
(15 | ) | | (212 | ) | | (227 | ) | ||||||||||||
Cash provided by (used in) discontinued operations |
| | | | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) financing activities |
(15 | ) | | (212 | ) | | (227 | ) | ||||||||||||
Effect of exchange rate changes on cash |
| | (2 | ) | | (2 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Increase (decrease) in cash and cash equivalents |
133 | (8 | ) | (154 | ) | | (29 | ) | ||||||||||||
Beginning cash and cash equivalents |
179 | 1 | 598 | | 778 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending cash and cash equivalents |
$ | 312 | $ | (7 | ) | $ | 444 | $ | | $ | 749 | |||||||||
|
|
|
|
|
|
|
|
|
|
26
(in millions) | Supplemental Condensed Consolidating Schedule of Cash Flows Nine Months ended September 30, 2012 |
|||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Cash flow from operations: |
||||||||||||||||||||
Net income (loss) |
$ | (135 | ) | $ | (83 | ) | $ | 65 | $ | 18 | $ | (135 | ) | |||||||
Income (loss) from discontinued operations |
316 | 91 | 5 | (96 | ) | 316 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(451 | ) | (174 | ) | 60 | 114 | (451 | ) | ||||||||||||
Non cash adjustments |
311 | 658 | 111 | (114 | ) | 966 | ||||||||||||||
Changes in operating assets and liabilities |
(175 | ) | 92 | (6 | ) | | (89 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flow from (used in) continuing operations |
(315 | ) | 576 | 165 | | 426 | ||||||||||||||
Cash flow from (used in) discontinued operations |
(338 | ) | (5 | ) | 3 | | (340 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flow from (used in) operations |
(653 | ) | 571 | 168 | | 86 | ||||||||||||||
Investment activities: |
||||||||||||||||||||
Intercompany transactions |
2,342 | (411 | ) | (160 | ) | (1,771 | ) | | ||||||||||||
Cash paid for acquired businesses, net of cash acquired |
| (1 | ) | (9 | ) | | (10 | ) | ||||||||||||
Cash paid for property and equipment and software |
| (125 | ) | (48 | ) | | (173 | ) | ||||||||||||
Other investing activities |
(1 | ) | 1 | 3 | | 3 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
2,341 | (536 | ) | (214 | ) | (1,771 | ) | (180 | ) | |||||||||||
Cash provided by (used in) discontinued operations |
| 1,744 | 14 | | 1,758 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) investment activities |
2,341 | 1,208 | (200 | ) | (1,771 | ) | 1,578 | |||||||||||||
Financing activities: |
||||||||||||||||||||
Intercompany dividends of HE sale proceeds |
| (1,771 | ) | | 1,771 | | ||||||||||||||
Net repayments of long-term debt |
(1,742 | ) | (2 | ) | | | (1,744 | ) | ||||||||||||
Premium paid to retire debt |
(27 | ) | | | | (27 | ) | |||||||||||||
Other financing activities |
(19 | ) | | | | (19 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
(1,788 | ) | (1,773 | ) | | 1,771 | (1,790 | ) | ||||||||||||
Cash provided by (used in) discontinued operations |
| | | | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) financing activities |
(1,788 | ) | (1,773 | ) | | 1,771 | (1,790 | ) | ||||||||||||
Effect of exchange rate changes on cash |
| | 5 | | 5 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Increase (decrease) in cash and cash equivalents |
(100 | ) | 6 | (27 | ) | | (121 | ) | ||||||||||||
Beginning cash and cash equivalents |
529 | (15 | ) | 359 | | 873 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending cash and cash equivalents |
$ | 429 | $ | (9 | ) | $ | 332 | $ | | $ | 752 | |||||||||
|
|
|
|
|
|
|
|
|
|
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. The preceding tables for the three and nine months ended September 30, 2011 have been revised to reflect the correction of these errors.
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.
27
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 September 30, 2011 |
||||||||||||||||||||||||||||||||
Revenue |
$ | | $ | | $ | 751 | $ | 748 | (c) | $ | 359 | $ | 455 | (c) | $ | | $ | (106 | ) (c) | |||||||||||||
Operating income (loss) |
(40 | ) | (40 | ) | 168 | 63 | (c) | (67 | ) | 40 | (c) | | | |||||||||||||||||||
Other income |
71 | 65 | (a) | (80 | ) | 23 | (a) | (51 | ) | | (a) | 8 | (88 | ) (a) | ||||||||||||||||||
Income (loss) from continuing operations before income taxes |
(58 | ) | (95 | ) (a) | 100 | 86 | (a) | (118 | ) | 31 | (a) | 8 | (88 | ) (a) | ||||||||||||||||||
Income (loss) from continuing operations |
(14 | ) | (39 | ) (a) | 44 | 67 | (a) | (79 | ) | 21 | (a) | 8 | (88 | ) (a) | ||||||||||||||||||
Net loss |
(147 | ) | (147 | ) (a) | 71 | 92 | (a) | (81 | ) | 17 | (a) | 10 | (109 | ) (a) | ||||||||||||||||||
Nine Months Ended September 30, 2011 |
||||||||||||||||||||||||||||||||
Revenue |
$ | | $ | | $ | 2,219 | $ | 2,219 | $ | 1,110 | $ | 1,389 | (c) | $ | | $ | (322 | ) (c) | ||||||||||||||
Operating income (loss) |
(104 | ) | (104 | ) | 487 | 165 | (c) | (196 | ) | 129 | (c) | | | |||||||||||||||||||
Other income |
148 | 159 | (b) | (132 | ) | 72 | (b) | | | (18 | ) | (233 | ) (b) | |||||||||||||||||||
Income (loss) from continuing operations before income taxes |
(250 | ) | (312 | ) (b) | 254 | 236 | (b) | (194 | ) | 104 | (b) | (18 | ) | (233 | ) (b) | |||||||||||||||||
Income (loss) from continuing operations |
(110 | ) | (148 | ) (b) | 110 | 162 | (b) | (132 | ) | 71 | (b) | (18 | ) | (233 | ) (b) | |||||||||||||||||
Net loss |
(243 | ) | (243 | ) | 150 | 200 | (b) | (132 | ) | 69 | (b) | (18 | ) | (269 | ) (b) |
In addition to the change in the presentation of a Financial Systems business 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 $32 million, $117 million and $(149) million for Parent, guarantor subsidiaries and non-guarantor subsidiaries, respectively. |
(b) | Impact of the correction of intercompany dividends of $74 million, $222 million and $(296) million for Parent, guarantor subsidiaries and non-guarantor subsidiaries, respectively. |
(c) | 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 September 30, 2011: $106 million; |
| Nine months ended September 30, 2011: $322 million. |
28
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 |
||||||||||||||||||||||||
Nine Months Ended September 30, 2011 |
||||||||||||||||||||||||||||||||
Cash Flow from Operations: |
||||||||||||||||||||||||||||||||
Net income (loss) |
$ | (243 | ) | $ | (243 | ) | $ | 150 | $ | 200 | $ | (132 | ) | $ | 69 | $ | (18 | ) | $ | (269 | ) | |||||||||||
Income (loss) from continuing operations |
(110 | ) | (148 | ) | 110 | 162 | (132 | ) | 71 | (18 | ) | (233 | ) | |||||||||||||||||||
Non-cash adjustments |
(71 | ) | (123 | ) | 446 | 283 | 115 | 114 | 18 | 233 | ||||||||||||||||||||||
Changes in operating assets and liabilities |
(202 | ) | (226 | ) | 277 | 207 | (79 | ) | 22 | | | |||||||||||||||||||||
Cash flow from (used in) continuing operations |
(383 | ) | (497 | ) | 833 | 652 | (96 | ) | 207 | | | |||||||||||||||||||||
Cash flow from (used in) operations |
(383 | ) | (497 | ) | 908 | 727 | (98 | ) | 197 | | | |||||||||||||||||||||
Investment activities: |
||||||||||||||||||||||||||||||||
Intercompany transactions |
535 | 649 | (772 | ) | (590 | ) | 237 | (59 | ) | | | |||||||||||||||||||||
Cash provided by (used in) continuing operations |
531 | 645 | (910 | ) | (728 | ) | 159 | (137 | ) | | | |||||||||||||||||||||
Cash provided by (used in) operations in investment activities |
531 | 645 | (916 | ) | (735 | ) | 158 | (137 | ) | | |
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.
See Note 11 of Notes to Consolidated Financial Statements included in the Companys Form 10-Q for the three months ended March 31, 2012 for other periods corrected as a result of the errors.
29
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Introduction
The following discussion and analysis supplements 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 that 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 exclude 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.
30
Results of Operations:
Three Months Ended September 30, 2012 Compared To Three Months Ended September 30, 2011
The following table sets forth, for the periods indicated, certain amounts included in our Consolidated Statements of Comprehensive Income, the relative percentage that those amounts represent to consolidated revenue (unless otherwise indicated), and the percentage change in those amounts from period to period.
Three
Months Ended September 30, 2011 |
Three
Months Ended September 30, 2012 |
Percent Increase (Decrease) 2012 vs. 2011 |
Constant Currency | |||||||||||||||||||||||||||||
Three Months Ended September 30, 2012 |
Percent Increase (Decrease) 2012 vs. 2011 |
|||||||||||||||||||||||||||||||
percent of revenue |
percent of revenue |
percent of revenue |
||||||||||||||||||||||||||||||
(in millions) |
||||||||||||||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||||||
Financial Systems (FS) |
$ | 680 | 62 | % | $ | 640 | 62 | % | (6 | )% | $ | 655 | 62 | % | (4 | )% | ||||||||||||||||
Availability Services (AS) |
365 | 33 | % | 345 | 33 | % | (5 | )% | 350 | 33 | % | (4 | )% | |||||||||||||||||||
Other (1) |
52 | 5 | % | 50 | 5 | % | (3 | )% | 50 | 5 | % | (3 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 1,097 | 100 | % | $ | 1,035 | 100 | % | (6 | )% | $ | 1,055 | 100 | % | (4 | )% | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Costs and Expenses |
||||||||||||||||||||||||||||||||
Cost of sales and direct operating |
$ | 465 | 42 | % | $ | 430 | 42 | % | (7 | )% | $ | 438 | 42 | % | (6 | )% | ||||||||||||||||
Sales, marketing and administration |
295 | 27 | % | 245 | 24 | % | (16 | )% | 252 | 24 | % | (14 | )% | |||||||||||||||||||
Product development and maintenance |
101 | 9 | % | 90 | 9 | % | (12 | )% | 96 | 9 | % | (6 | )% | |||||||||||||||||||
Depreciation and amortization |
67 | 6 | % | 70 | 7 | % | 4 | % | 70 | 7 | % | 4 | % | |||||||||||||||||||
Amortization of acquisition-related intangible assets |
106 | 10 | % | 94 | 9 | % | (12 | )% | 94 | 9 | % | (12 | )% | |||||||||||||||||||
Goodwill impairment |
| | % | 385 | 37 | % | 385 | 36 | % | |||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 1,034 | 94 | % | $ | 1,314 | 127 | % | 27 | % | $ | 1,335 | 127 | % | 29 | % | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Operating Income |
||||||||||||||||||||||||||||||||
Financial Systems (2) |
$ | 121 | 17.7 | % | $ | 136 | 21.2 | % | 13 | % | $ | 133 | 20.3 | % | 10 | % | ||||||||||||||||
Availability Services (2) |
80 | 22.1 | % | 74 | 21.4 | % | (8 | )% | 76 | 21.6 | % | (6 | )% | |||||||||||||||||||
Other (1)(2) |
15 | 29.4 | % | 13 | 26.2 | % | (14 | )% | 13 | 26.2 | % | (14 | )% | |||||||||||||||||||
Corporate |
(30 | ) | (2.7 | )% | (11 | ) | (1.0 | )% | 64 | % | (11 | ) | (1.0 | )% | 64 | % | ||||||||||||||||
Amortization of acquisition-related intangible assets |
(106 | ) | (9.7 | )% | (94 | ) | (9.1 | )% | 12 | % | (94 | ) | (8.9 | )% | 12 | % | ||||||||||||||||
Goodwill impairment |
| | % | (385 | ) | (37.2 | )% | (385 | ) | (36.5 | )% | |||||||||||||||||||||
Stock compensation expense |
(9 | ) | (0.8 | )% | (9 | ) | (0.9 | )% | (3 | )% | (9 | ) | (0.9 | )% | (3 | )% | ||||||||||||||||
Other costs (3) |
(8 | ) | (0.7 | )% | (3 | ) | (0.3 | )% | 59 | % | (3 | ) | (0.3 | )% | 59 | % | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 63 | 5.7 | % | $ | (279 | ) | (27.0 | )% | (547 | )% | $ | (280 | ) | (26.6 | )% | (548 | )% | ||||||||||||||
|
|
|
|
|
|
(1) | Other includes our Public Sector and 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. |
31
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.
Three Months Ended September 30, 2011 |
Three Months Ended September 30, 2012 |
Percent Increase (Decrease) 2012 vs. 2011 |
Constant Currency | |||||||||||||||||||||||||||||
Three
Months Ended September 30, 2012 |
Percent Increase (Decrease) 2012 vs. 2011 |
|||||||||||||||||||||||||||||||
Revenue (in millions) |
percent of revenue |
percent of revenue |
percent of revenue |
|||||||||||||||||||||||||||||
Financial Systems |
||||||||||||||||||||||||||||||||
Services |
$ | 626 | 57 | % | $ | 585 | 56 | % | (7 | )% | $ | 599 | 57 | % | (5 | )% | ||||||||||||||||
License and resale fees |
44 | 4 | % | 47 | 5 | % | 8 | % | 48 | 5 | % | 11 | % | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total products and services |
670 | 61 | % | 632 | 61 | % | (6 | )% | 647 | 61 | % | (3 | )% | |||||||||||||||||||
Reimbursed expenses |
10 | 1 | % | 8 | 1 | % | (17 | )% | 8 | 1 | % | (16 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 680 | 62 | % | $ | 640 | 62 | % | (6 | )% | $ | 655 | 62 | % | (4 | )% | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Availability Services |
||||||||||||||||||||||||||||||||
Services |
$ | 358 | 33 | % | $ | 341 | 33 | % | (5 | )% | $ | 346 | 33 | % | (4 | )% | ||||||||||||||||
License and resale fees |
1 | | % | | | % | 2 | % | | | % | 3 | % | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total products and services |
359 | 33 | % | 341 | 33 | % | (5 | )% | 346 | 33 | % | (4 | )% | |||||||||||||||||||
Reimbursed expenses |
6 | 1 | % | 4 | | % | (33 | )% | 4 | | % | (28 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 365 | 33 | % | $ | 345 | 33 | % | (5 | )% | $ | 350 | 33 | % | (4 | )% | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||
Services |
$ | 44 | 4 | % | $ | 43 | 4 | % | (2 | )% | $ | 43 | 4 | % | (2 | )% | ||||||||||||||||
License and resale fees |
7 | 1 | % | 6 | 1 | % | (11 | )% | 6 | 1 | % | (11 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total products and services |
51 | 5 | % | 49 | 5 | % | (3 | )% | 49 | 5 | % | (3 | )% | |||||||||||||||||||
Reimbursed expenses |
1 | | % | 1 | | % | (4 | )% | 1 | | % | (4 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 52 | 5 | % | $ | 50 | 5 | % | (3 | )% | $ | 50 | 5 | % | (3 | )% | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total Revenue |
||||||||||||||||||||||||||||||||
Services |
$ | 1,028 | 94 | % | $ | 969 | 94 | % | (6 | )% | $ | 988 | 94 | % | (4 | )% | ||||||||||||||||
License and resale fees |
52 | 5 | % | 53 | 5 | % | 5 | % | 54 | 5 | % | 8 | % | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total products and services |
1,080 | 98 | % | 1,022 | 99 | % | (5 | )% | 1,042 | 99 | % | (4 | )% | |||||||||||||||||||
Reimbursed expenses |
17 | 2 | % | 13 | 1 | % | (22 | )% | 13 | 1 | % | (20 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 1,097 | 100 | % | $ | 1,035 | 100 | % | (6 | )% | $ | 1,055 | 100 | % | (4 | )% | ||||||||||||||||
|
|
|
|
|
|
Operating Income:
Our total operating margin was (26.6)% for the three months ended September 30, 2012, compared to 5.7% for the three months ended September 30, 2011. The most significant factor impacting the 32.3 margin point decrease in operating margin is the $385 million goodwill impairment charge related to AS NA, which had a (36.5) margin point impact. The more significant factors impacting the remaining 4.2 margin point improvement are a $34 million decrease in severance, which had a 3.1 margin point impact on the operating margin; a 1.1 margin point impact, or $13 million, from the decrease in amortization of acquisition-related intangible assets; and the 0.6 margin point impact, or $5 million, from the increase in software license fee revenue. Excluding the severance charges discussed above, FS improved the total operating margin by 0.6 points due mainly to expense management primarily from reduced external services fees and currency transaction losses. Also excluding the severance charges, degradation of total margin by AS of 1.4 points was due primarily to the decrease in recovery services and professional services revenue.
Financial Systems:
The FS operating margin was 20.3% and 17.7% for the three months ended September 30, 2012 and 2011, respectively. The more significant factors impacting the 2.6 margin point increase in operating margin are a 1.2 margin point impact, or $8 million, from the decrease in external services fees; the 0.9 margin point impact, or $6 million, from the decrease in currency transaction losses; and the 0.7 margin point impact from the $6 million increase in software license fee revenue.
32
Availability Services:
The AS operating margin was 21.6% and 22.1% for the three months ended September 30, 2012 and 2011, respectively, a decrease of 0.5 margin points. In North America, recovery services, which typically uses shared resources, had a (2.2) margin point impact on AS operating margin in 2012 due primarily to a $14 million decrease in higher margin recovery services revenue, partially offset by a $5 million decrease in equipment expense. Professional services had a (0.5) margin point impact in 2012 due primarily to a $1 million increase in employment-related expenses on $2 million of lower revenue. A decrease in severance of $8 million had a 2.2 margin point impact in 2012.
Other:
The operating margin from Other was 26.2% and 29.4% for the three months ended September 30, 2012 and 2011, respectively, and operating income decreased $2 million. The operating margin decreased due primarily to unchanged costs on lower revenue.
Revenue:
Total reported revenue decreased $62 million or 6% for the three months ended September 30, 2012 compared to the third quarter of 2011. On a constant currency basis, revenue decreased $42 million, or 4%. The $42 million decrease is due mainly to a $22 million decrease in FS professional services revenue and a $14 million decrease in AS recovery services, partially offset by an increase in FS software license revenue of $5 million. Also, approximately $6 million of the $42 million decrease was due to a decrease in revenue from one of our FS businesses, a legacy broker/dealer (the Broker/Dealer,) which was heavily influenced by service to one very large customer. That customer has since begun to self-clear its broker/dealer operations.
Financial Systems:
FS reported revenue decreased $40 million, or 6%, in the third quarter of 2012 from the prior year period, and decreased $25 million, or 4%, on a constant currency basis. Professional services revenue decreased $22 million, or 15%, due primarily to successful completion of projects during 2011 and relatively lower demand in 2012 driven by economic conditions and related customer budget constraints. One percentage point of the decrease was related to lower revenues from the Broker/Dealer as mentioned above. Reported revenue from license and resale fees included software license revenue of $43 million, an increase of $4 million, or 12%, compared to the same quarter in 2011. On a constant currency basis, software license fees increased $5 million, or 15%, due primarily to an increase in high-value, multi-year license renewal transactions with some scope expansion.
Availability Services:
AS reported revenue decreased $20 million, or 5%, in the third quarter of 2012 from the prior year period. On a constant currency basis, revenue decreased $15 million, or 4%, in the quarter. In North America, which accounts for over 75% of our AS business, revenue decreased 5%, where decreases in recovery services revenue exceeded growth in managed services revenue. Revenue in Europe, primarily from our U.K. operations, decreased 2%, where a decrease in recovery services revenue was partially offset by an increase in managed services revenue. Our recovery services revenue has been declining due to customers shifting from traditional backup and recovery to either in-house solutions or disk-, cloud-based or managed 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 decreased $2 million, or 3%, for the three months ended September 30, 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 September 30, 2012, a decrease of approximately $0.5 million from the prior year period.
33
Costs and Expenses:
Cost of sales and direct operating expenses as a percentage of total revenue was 42% in each of the three-month periods ended September 30, 2012 and 2011 and decreased $27 million. Impacting the period was a $20 million decrease in FS and AS employment-related expenses, including a decrease of $9 million of severance; and a $6 million decrease in AS equipment costs associated with lower equipment leases, equipment and software maintenance and decreased network costs.
Sales, marketing and administration expenses as a percentage of total revenue was 24% and 27% in the three months ended September 30, 2012 and 2011, respectively, and decreased $43 million. Decreases in sales, marketing and administration expenses were due primarily to decreases in corporate and FS employment-related expenses of $22 million due primarily to the impact from severance actions taken in 2011; FS currency transaction losses of $8 million; external services fees of $6 million and FS facilities costs.
Because AS product development and maintenance costs are insignificant, it is more meaningful to measure product development and maintenance expenses as a percentage of revenue excluding AS. For the three months ended September 30, 2012 and 2011, product development and maintenance costs were 13% and 14%, respectively, of revenue excluding AS and decreased $6 million. The decrease is primarily related to a $2 million increase in FS costs capitalized as software assets in the third quarter of 2012 from the prior year period.
Amortization of acquisition-related intangible assets was 9% and 10% of total revenue in the three months ended September 30, 2012 and 2011, respectively, and decreased $12 million. The decrease is due primarily to the $13 million impact of software assets that were fully amortized in the prior year.
We recorded a goodwill impairment charge of $385 million in AS in the three months ended September 30, 2012. See note 3 of Notes to Consolidated Financial Statements for further discussion.
Interest expense was $102 million and $130 million for the three months ended September 30, 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, the early extinguishment in April 2012 of $500 million 10.625% senior notes due 2015 (2015 Notes) and interest rate decreases resulting from the expiration of interest rate swaps in each of February 2011 and 2012.
The effective income tax rates for the three months ended September 30, 2012 and 2011 were 3% and 41%, respectively. The Companys effective tax rate fluctuates from period to period due to changes in the mix of income or losses in jurisdictions with a wide range of tax rates, permanent differences between GAAP and local tax laws, and the timing of recording discrete items. The effective tax rate for the three months ended September 30, 2012 was also impacted by the goodwill impairment charge, which is largely nondeductible, and by the application of the loss limitation guidance, which requires that when the interim period loss before taxes exceeds the forecasted loss before taxes for the annual period, the tax benefit recognized associated with the interim period loss should be limited to the tax benefit associated with the loss expected to be recognized for the annual period.
Accreted dividends on SCCIIs cumulative preferred stock were $64 million and $57 million for the three months ended September 2012 and 2011, respectively. The increase in dividends is due to compounding. No dividends have been declared by SCCII.
Nine Months Ended September 30, 2012 Compared To Nine Months Ended September 30, 2011
The following table sets forth, for the periods indicated, certain amounts included in our Consolidated Statements of Comprehensive Income, the relative percentage that those amounts represent to consolidated revenue (unless otherwise indicated), and the percentage change in those amounts from period to period.
34
Nine Months Ended September 30, 2011 |
Nine Months Ended September 30, 2012 |
Percent Increase (Decrease) 2012 vs. 2011 |
Constant Currency | |||||||||||||||||||||||||||||
Nine Months
Ended September 30, 2012 |
Percent Increase (Decrease) 2012 vs. 2011 |
|||||||||||||||||||||||||||||||
(in millions) | percent of revenue |
percent of revenue |
percent of revenue |
|||||||||||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||||||
Financial Systems (FS) |
$ | 2,037 | 62 | % | $ | 1,928 | 62 | % | (5 | )% | $ | 1,965 | 62 | % | (4 | )% | ||||||||||||||||
Availability Services (AS) |
1,095 | 33 | % | 1,052 | 34 | % | (4 | )% | 1,065 | 33 | % | (3 | )% | |||||||||||||||||||
Other (1) |
154 | 5 | % | 151 | 5 | % | (2 | )% | 151 | 5 | % | (2 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 3,286 | 100 | % | $ | 3,131 | 100 | % | (5 | )% | $ | 3,181 | 100 | % | (3 | )% | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Costs and Expenses |
||||||||||||||||||||||||||||||||
Cost of sales and direct operating |
$ | 1,416 | 43 | % | $ | 1,321 | 42 | % | (7 | )% | $ | 1,340 | 42 | % | (5 | )% | ||||||||||||||||
Sales, marketing and administration |
842 | 26 | % | 768 | 25 | % | (9 | )% | 785 | 25 | % | (7 | )% | |||||||||||||||||||
Product development and maintenance |
302 | 9 | % | 273 | 9 | % | (10 | )% | 287 | 9 | % | (5 | )% | |||||||||||||||||||
Depreciation and amortization |
204 | 6 | % | 211 | 7 | % | 3 | % | 211 | 7 | % | 3 | % | |||||||||||||||||||
Amortization of acquisition-related intangible assets |
332 | 10 | % | 295 | 9 | % | (11 | )% | 295 | 9 | % | (11 | )% | |||||||||||||||||||
Goodwill impairment |
| | % | 385 | 12 | % | 385 | 12 | % | |||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 3,096 | 94 | % | $ | 3,253 | 104 | % | 5 | % | $ | 3,303 | 104 | % | 7 | % | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Operating Income |
||||||||||||||||||||||||||||||||
Financial Systems (2) |
$ | 374 | 18.3 | % | $ | 388 | 20.1 | % | 4 | % | $ | 383 | 19.5 | % | 2 | % | ||||||||||||||||
Availability Services (2) |
234 | 21.4 | % | 209 | 19.9 | % | (11 | )% | 214 | 20.1 | % | (8 | )% | |||||||||||||||||||
Other (1)(2) |
43 | 28.2 | % | 41 | 26.8 | % | (7 | )% | 41 | 26.8 | % | (7 | )% | |||||||||||||||||||
Corporate |
(79 | ) | (2.4 | )% | (39 | ) | (1.3 | )% | 50 | % | (39 | ) | (1.2 | )% | 50 | % | ||||||||||||||||
Amortization of acquisition-related intangible assets |
(332 | ) | (10.1 | )% | (295 | ) | (9.4 | )% | 11 | % | (295 | ) | (9.3 | )% | 11 | % | ||||||||||||||||
Goodwill impairment |
| | % | (385 | ) | (12.3 | )% | (385 | ) | (12.1 | )% | |||||||||||||||||||||
Stock compensation expense |
(23 | ) | (0.7 | )% | (29 | ) | (0.9 | )% | (27 | )% | (29 | ) | (0.9 | )% | (27 | )% | ||||||||||||||||
Other costs (3) |
(27 | ) | (0.9 | )% | (12 | ) | (0.4 | )% | 58 | % | (12 | ) | (0.4 | )% | 58 | % | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 190 | 5.8 | % | $ | (122 | ) | (3.9 | )% | (165 | )% | $ | (122 | ) | (3.9 | )% | (165 | )% | ||||||||||||||
|
|
|
|
|
|
(1) | Other includes our Public Sector and 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. |
35
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.
Nine Months Ended September 30, 2011 |
Nine Months Ended September 30, 2012 |
Percent Increase (Decrease) 2012 vs. 2011 |
Constant Currency | |||||||||||||||||||||||||||||
Nine Months Ended September 30, 2012 |
Percent Increase (Decrease) 2012 vs. 2011 |
|||||||||||||||||||||||||||||||
Revenue (in millions) |
percent of revenue |
percent of revenue |
percent of revenue |
|||||||||||||||||||||||||||||
Financial Systems |
||||||||||||||||||||||||||||||||
Services |
$ | 1,805 | 55 | % | $ | 1,750 | 56 | % | (3 | )% | $ | 1,780 | 56 | % | (1 | )% | ||||||||||||||||
License and resale fees |
171 | 5 | % | 148 | 5 | % | (13 | )% | 155 | 5 | % | (10 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total products and services |
1,976 | 60 | % | 1,898 | 61 | % | (4 | )% | 1,935 | 61 | % | (2 | )% | |||||||||||||||||||
Reimbursed expenses |
61 | 2 | % | 30 | 1 | % | (51 | )% | 30 | 1 | % | (51 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 2,037 | 62 | % | $ | 1,928 | 62 | % | (5 | )% | $ | 1,965 | 62 | % | (4 | )% | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Availability Services |
||||||||||||||||||||||||||||||||
Services |
$ | 1,081 | 33 | % | $ | 1,036 | 33 | % | (4 | )% | $ | 1,048 | 33 | % | (3 | )% | ||||||||||||||||
License and resale fees |
1 | | % | 1 | | % | 30 | % | 1 | | % | 31 | % | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total products and services |
1,082 | 33 | % | 1,037 | 33 | % | (4 | )% | 1,049 | 33 | % | (3 | )% | |||||||||||||||||||
Reimbursed expenses |
13 | | % | 15 | | % | 18 | % | 16 | | % | 23 | % | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 1,095 | 33 | % | $ | 1,052 | 34 | % | (4 | )% | $ | 1,065 | 33 | % | (3 | )% | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||
Services |
$ | 130 | 4 | % | $ | 130 | 4 | % | (1 | )% | $ | 130 | 4 | % | (1 | )% | ||||||||||||||||
License and resale fees |
21 | 1 | % | 19 | 1 | % | (7 | )% | 19 | 1 | % | (7 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total products and services |
151 | 5 | % | 149 | 5 | % | (2 | )% | 149 | 5 | % | (2 | )% | |||||||||||||||||||
Reimbursed expenses |
3 | | % | 2 | | % | (14 | )% | 2 | | % | (14 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 154 | 5 | % | $ | 151 | 5 | % | (2 | )% | $ | 151 | 5 | % | (2 | )% | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total Revenue |
||||||||||||||||||||||||||||||||
Services |
$ | 3,016 | 92 | % | $ | 2,916 | 93 | % | (3 | )% | $ | 2,958 | 93 | % | (2 | )% | ||||||||||||||||
License and resale fees |
193 | 6 | % | 168 | 5 | % | (13 | )% | 175 | 6 | % | (9 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total products and services |
3,209 | 98 | % | 3,084 | 98 | % | (4 | )% | 3,133 | 98 | % | (2 | )% | |||||||||||||||||||
Reimbursed expenses |
77 | 2 | % | 47 | 2 | % | (39 | )% | 48 | 2 | % | (37 | )% | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total |
$ | 3,286 | 100 | % | $ | 3,131 | 100 | % | (5 | )% | $ | 3,181 | 100 | % | (3 | )% | ||||||||||||||||
|
|
|
|
|
|
Operating Income:
Our total operating margin was (3.9)% for the nine months ended September 30, 2012, compared to 5.8% for the nine months ended September 30, 2011. The most significant factor impacting the 9.7 margin point decrease is the $385 million goodwill impairment charge related to AS NA, which had a (12.1) margin point impact. The more significant factors impacting the remaining 2.4 margin point improvement are a $52 million decrease in severance and corporate executive transition and other employment-related costs, which had a 1.6 margin point impact; a 1.2 margin point impact, or $37 million, from the decrease in amortization of acquisition-related intangible assets; a 0.5 margin point impact, or $16 million, from the decrease in other costs, primarily from capitalizing more software costs in 2012; partially offset by a (0.8) margin point impact from the decrease in the AS margin, which excludes the impact of severance; and a (0.4) margin point impact, or $15 million, from the decrease in software license fee revenue. Excluding the severance charges discussed above, FS improved the total operating margin by 0.2 points due mainly to expense management primarily from reduced external services fees and consultant expenses. Also excluding the severance charges, degradation of total margin by AS of 0.9 points was due primarily to the decrease in recovery services and professional services revenue, partially offset by an increase in revenue from managed services.
Financial Systems:
The FS operating margin was 19.5% and 18.3% for the nine months ended September 30, 2012 and 2011, respectively. The more significant factors impacting the 1.2 margin point change in the operating margin are the 0.8 margin point impact, or $15 million, from the decrease in external services fees; the 0.5 margin point impact, or $9 million, from the decrease in consultant expense; the 0.3 margin point impact from the lower activity level of the Broker/Dealer; partially offset by the (0.6) margin point impact from the $15 million decrease in software license fee revenue.
36
Availability Services:
The AS operating margin was 20.1% and 21.4% for the nine months ended September 30, 2012 and 2011, respectively, a decrease of 1.3 margin points. In North America, recovery services, which typically uses shared resources, had a (2.4) margin point impact on AS operating margin in 2012 due primarily to a $43 million decrease in higher margin recovery services revenue, partially offset by a $14 million decrease in equipment expense. Professional services had a (0.3) margin point impact in 2012 due primarily to a $2 million increase in employment-related expenses on $2 million of lower revenue. A decrease in severance of $8 million had a 0.7 margin point impact in 2012. Managed services helped the margin in 2012 by 0.7 margin points due primarily to a $13 million increase in typically lower margin managed services revenue, which uses dedicated resources, and a $2 million decrease in facilities costs, partially offset by a $2 million increase in depreciation and amortization and a $4 million increase in employment-related expenses.
Other:
The operating margin from Other was 26.8% and 28.2% for the nine months ended September 30, 2012 and 2011, respectively. The operating margin decreased 1.4 margin points due primarily to a $3 million decrease in revenue and a $2 million increase in employment-related expenses, partially offset by a $1 million decrease in external services fees.
Revenue:
Total reported revenue decreased $155 million or 5% for the nine months ended September 30, 2012 compared to the third quarter of 2011. On a constant currency basis, revenue decreased $105 million, or 3%. Approximately $53 million of the $105 million decrease, or 1.5 of the three percentage points of decrease, was due to a decrease in revenue from the Broker/Dealer discussed above. The remaining decrease is due mainly to a $42 million decrease in AS recovery services, a $30 million decrease in FS professional services revenue, and a $15 million decrease in FS software license revenue, partially offset by a $13 million increase in AS managed services, an $11 million increase from FS acquisitions, and an $8 million increase in FS processing revenue.
Financial Systems:
FS reported revenue decreased $109 million or 5% in the nine months ended September 30, 2012 from the prior year period, and decreased 4% on a constant currency basis. Three percentage points of the decrease was related to lower revenues from the Broker/Dealer discussed above. Professional services revenue decreased $30 million, or 7%, due primarily to successful completion of projects during 2011 and relatively lower demand in 2012 driven by economic conditions and related customer budget constraints, and was offset in part by a $4 million increase from acquisitions. Reported revenue from license and resale fees included software license revenue of $136 million, a decrease of $21 million, or 13%, compared to the nine months of 2011. On a constant currency basis, software license revenue decreased $15 million, or 9%, due mainly to high-value, multi-year license renewal transactions with some scope expansion recognized in 2011. Also, one deal in 2011 worth $14 million was recognized for which there were no similarly sized transactions in 2012. Processing revenue increased $8 million, or 1%, due mainly to the impact of new business signed in 2011, higher volumes in 2012 and annual rate increases and increased $4 million due to acquisitions.
Availability Services:
AS reported revenue decreased $43 million, or 4%, in the nine months ended September 30, 2012 from the prior year period. On a constant currency basis, revenue decreased 3% in the nine month period ended September 30, 2012. In North America, which accounts for over 75% of our AS business, revenue decreased 4%, where decreases in recovery services revenue exceeded growth in managed services revenue. Revenue in Europe, primarily from our U.K. operations, increased 1%, where an increase in managed services revenue was mostly offset by a decrease in recovery services revenue. Our recovery services revenue has been declining due to customers shifting from traditional backup and recovery to either in-house solutions or disk-, cloud-based or managed 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.
37
Other:
Reported revenue and constant currency revenue from Other decreased $3 million, or 2%, for the nine months ended September 30, 2012, from the corresponding period in 2011. Reported revenue from license and resale fees included software license revenue of $6 million in the nine months ended September 30, 2012, a decrease of $1 million from the prior year period.
Costs and Expenses:
Cost of sales and direct operating expenses as a percentage of total revenue was 42% and 43% in the nine months ended September 30, 2012 and 2011, respectively, and decreased $76 million. Impacting the period was a $42 million decrease in reimbursed expenses relating to the operations of the Broker/Dealer businesses 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; a $31 million decrease in FS employment-related expenses; a $19 million decrease in AS equipment costs associated with lower equipment leases, equipment and software maintenance and decreased network costs; partially offset by a $7 million increase from FS acquisitions.
Sales, marketing and administration expenses as a percentage of total revenue was 25% and 26% in the nine months ended September 30, 2012 and 2011, and decreased $57 million. Decreases in sales, marketing and administration expenses were due primarily to decreases of $37 million of corporate and FS employment-related expenses mainly as a result of executive transition costs incurred in the second quarter of 2011 and other severance actions taken in 2011; $12 million of external services fees; $10 million of advertising expense and related costs mainly resulting from cost savings initiatives; and $4 million of costs related to the shutdown of the Broker/Dealer professional trading business in 2011; partially offset by increases of $6 million of stock compensation expense.
Because AS product development and maintenance costs are insignificant, it is more meaningful to measure product development and maintenance expenses as a percentage of revenue excluding AS. For the nine months ended September 30, 2012 and 2011, product development and maintenance costs were 13% and 14%, respectively, of revenue excluding AS, respectively, and decreased $15 million. The decrease is primarily related to a $8 million increase in FS costs capitalized as software assets.
Depreciation and amortization was 7% and 6% of total revenue in the nine months ended September 30, 2012 and 2011, respectively, and increased $7 million due mainly to AS capital expenditures over the past twelve months.
Amortization of acquisition-related intangible assets was 9% and 10% of total revenue in the nine months ended September 30, 2012 and 2011, respectively, and decreased $37 million. The decrease is due primarily to the $33 million impact of software assets that were fully amortized in the prior year and $7 million of impairment charges in the prior year period.
We recorded a goodwill impairment charge of $385 million in AS in the nine months ended September 30, 2012. See note 3 of Notes to Consolidated Financial Statements for further discussion.
Interest expense was $325 million and $396 million for the nine months ended September 30, 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, the early extinguishment in April 2012 of the 2015 Notes 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 $51 million and $2 million for the nine months ended September 30, 2012 and 2011, respectively. This increase was due primarily to the partial repayment of term loans in January 2012 and the early extinguishment of the 2015 Notes discussed above.
The effective income tax rates for the nine months ended September 30, 2012 and 2011 were 9% and 28%, respectively. The rate fluctuates from period to period due to changes in the mix of income or losses in jurisdictions with a wide range of tax rates, permanent differences between GAAP and local tax laws and the timing of recording discrete items. The effective tax rate for the nine months ended September 30, 2012 was also impacted by the goodwill impairment charge, which is largely nondeductible, and the application of the loss limitation guidance, which requires that when the interim period loss before taxes exceeds the forecasted loss before taxes for the annual period, the tax benefit recognized associated with the interim period loss should be limited to the tax benefit associated with the loss expected to be recognized for the annual period.
Accreted dividends on SCCIIs cumulative preferred stock were $186 million and $166 million for the nine months ended September 30, 2012 and 2011, respectively. The increase in dividends is due to compounding. No dividends have been declared by SCCII.
38
Liquidity and Capital Resources:
At September 30, 2012, cash and equivalents were $752 million. Cash flow from continuing operations was $426 million in the nine months ended September 30, 2012 compared to $362 million in the nine months ended September 30, 2011. Impacting cash flow from continuing operations was a $49 million increase in cash earned from operations, defined as operating income adjusted for certain noncash expenses and the cash portion of other income (expense), $44 million less of interest payments made in the nine months ended September 30, 2012 from the prior year period, due primarily to the partial repayment in January 2012 of $1.22 billion of term loans resulting from the sale of HE, the retirement of $500 million 10.625% senior notes due 2015 in April 2012 and the expiration of certain of our interest rate swaps, partially offset by an $18 million increase in income tax payments, net of refunds, and $11 million less cash provided by working capital.
Net cash used by continuing operations in investing activities was $180 million in the nine months ended September 30, 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 $220 million in the nine months ended September 30, 2011, comprised mainly of cash paid for property and equipment and other assets and five 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 of income taxes in 2012 as a result of the HE sale, of which approximately 75% has been paid through the third quarter, and the remainder is expected to be paid in the fourth quarter net of any benefit from continuing operations.
Net cash used by continuing operations in financing activities was $1.79 billion for the nine months ended September 30, 2012, primarily related to repayments of $1.22 billion of term loans resulting from the sale of HE and $527 million related to the early retirement of the 10.625% senior notes due 2015. Net cash provided by continuing operations in financing activities was $227 million for the nine months ended September 30, 2011, primarily related to repayments under the revolving portion of our receivables facility and the partial retirement of $100 million of £-denominated term loans. At September 30, 2012, no amount was outstanding under the revolving credit facility, and $200 million was outstanding under the receivables facility.
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.
On April 2, 2012, SunGard redeemed for $527 million plus accrued and unpaid interest to the redemption date all of its outstanding 10.625% senior notes due 2015 under the Indenture dated as of September 29, 2008 (as amended or supplemented from time to time, the 2015 Indenture) among SunGard, the guarantors named therein, and The Bank of New York Mellon, as trustee.
In July 2012, we sold one of our European consulting businesses for approximately 14 million.
On August 10, 2012, SunGard executed an interest rate swap derivative with a notional amount of $200 million. This swap, which matures on February 28, 2017, is designated as a cash flow hedge, and it effectively swaps floating rate debt (1-month LIBOR) to fixed rate debt of 0.73%. On September 14, 2012, SunGard executed an interest rate swap derivative with a notional amount of $200 million. This swap, which matures on February 28, 2017, is designated as a cash flow hedge, and it effectively swaps floating rate debt (1-month LIBOR) to fixed rate debt of 0.66%.
At September 30, 2012, we have outstanding $6.11 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 $39 million at September 30, 2012. Also at September 30, 2012, we have outstanding letters of credit and bid bonds that total approximately $42 million.
On November 1, 2012, SunGard successfully issued $1 billion aggregate principal amount of 6.625% Senior Subordinated Notes due 2019 (Senior Subordinated Notes) and used a portion of the proceeds from this offering to repurchase approximately $490 million of its 10.25% Senior Subordinated Notes due 2015 (Existing 10.25% Senior Subordinated Notes). SunGard intends to repurchase or redeem the remaining Existing 10.25% Senior Subordinated Notes in the fourth quarter of 2012. As a result of this transaction, the Company expects to incur a $30 million loss on the extinguishment of debt which will be reflected in the statement of comprehensive income in the fourth quarter of 2012.
On November 1, 2012, SunGard and the guarantors of the Senior Subordinated Notes entered into a registration rights agreement and have agreed that they will (i) file a registration statement with respect to a registered offer to exchange the Senior Subordinated Notes for new notes guaranteed by the guarantors on a senior subordinated unsecured basis, with terms substantially identical in all material respects to the Senior Subordinated Notes, and (ii) use their reasonable best efforts to cause the exchange offer registration statement to be declared effective under the Securities Act of 1933, as amended.
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SunGard and the guarantors have agreed to use their reasonable best efforts to cause the exchange offer to be completed or, if required, to have one or more shelf registration statements declared effective, within 360 days after the issue date.
If SunGard fails to satisfy this obligation (a registration default), the annual interest rate on the Senior Subordinated Notes will increase by an additional 0.25% for each subsequent 90-day period during which the registration default continues, up to a maximum additional interest rate of 1.00% per year. If the registration default is corrected, the applicable interest rate will revert to the original level.
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.
A 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.
Adjusted EBITDA is calculated as follows (in millions):
Last Twelve Months September 30, 2012 |
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
2011 | 2012 | 2011 | 2012 | |||||||||||||||||
Income (loss) from continuing operations |
$ | (39 | ) | $ | (367 | ) | $ | (148 | ) | $ | (451 | ) | $ | (372 | ) | |||||
Interest expense, net |
129 | 101 | 393 | 324 | 452 | |||||||||||||||
Taxes |
(27 | ) | (13 | ) | (57 | ) | (44 | ) | (105 | ) | ||||||||||
Depreciation and amortization |
173 | 164 | 536 | 506 | 676 | |||||||||||||||
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EBITDA |
236 | (115 | ) | 724 | 335 | 651 | ||||||||||||||
Goodwill impairment charge |
| 385 | | 385 | 433 | |||||||||||||||
Purchase accounting adjustments (a) |
3 | 2 | 8 | 7 | 9 | |||||||||||||||
Non-cash charges (b) |
9 | 10 | 23 | 30 | 41 | |||||||||||||||
Restructuring and other (c) |
53 | 16 | 79 | 29 | 45 | |||||||||||||||
Acquired EBITDA, net of disposed EBITDA |
| | | | 1 | |||||||||||||||
Loss on extinguishment of debt (d) |
| | 2 | 51 | 52 | |||||||||||||||
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Adjusted EBITDAsenior secured credit facilities, senior notes due 2018 and 2020 and senior subordinated notes due 2015 |
$ | 301 | $ | 298 | $ | 836 | $ | 837 | $ | 1,232 | ||||||||||
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(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 or exit 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 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 $1.22 billion of our US$-denominated term loans and the April 2, 2012 retirement of $500 million, 10.625% senior notes due 2015. |
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The covenant requirements and actual ratios for the twelve months ended September 30, 2012 are as follows. All covenants are in compliance.
Covenant Requirements |
Actual Ratios |
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Senior secured credit facilities (1) |
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Minimum Adjusted EBITDA to consolidated interest expense ratio |
1.95 | x | 3.39 | x | ||||
Maximum total debt to Adjusted EBITDA |
5.75 | x | 4.23 | x | ||||
Senior notes due 2018 and 2020 and senior subordinated notes due 2015 (2) |
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Minimum Adjusted EBITDA to fixed charges ratio required to incur additional debt pursuant to ratio provisions |
2.00 | x | 3.38 | x |
(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 facilities 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 facilities 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. |
(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 September 30, 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
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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 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 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 September 30, 2012, we had total debt of $6.11 billion, including $3.25 billion of variable rate debt. We have entered into interest rate swap agreements which fix the interest rates for $900 million of our variable rate debt. Swap agreements expiring in May 2013 with a notional value of $500 million effectively fix our interest rates at 1.99%. Swap agreements expiring in February 2017 with a notional value of $400 million effectively fix our interest rates at 0.69%. Our remaining variable rate debt of $2.35 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 $24 million per year. Upon the expiration of each interest rate swap agreement in May 2013 and February 2017, a 1% change in interest rates would result in a change in interest of approximately $28 million and $33 million per year, respectively.
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 September 30, 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 September 30, 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.
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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 hired a new Vice President of Tax, effective June 1, 2012, and several additional qualified tax personnel have recently joined the Company. The Company is continuing to review all areas of the income tax accounting process, strengthening controls, and increasing the level of certain income tax review activities during the financial close process. The Company is enhancing reporting tools in its existing systems to improve the quality of data used in the analysis of deferred income tax accounts and related disclosures.
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 regularly 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 continues 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 September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Part II Other Information:
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.
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) The stockholder of each of SunGard, SCC and SCCII approved, by written consent dated September 12, 2012, the election of the following persons as directors to serve in such capacity until his or her successor is designated and qualified, or until he or she sooner dies, resigns, is removed or becomes disqualified: Chinh Chu, John Connaughton, Russell Fradin, James H. Greene, Jr., Glenn Hutchins, James L. Mann, John Marren, Sanjeev Mehra and Julie Richardson. Subsequently, as previously reported, R. Davis Noell was elected to the boards of directors , on October 2, 2012, succeeding Ms. Richardson.
(b) None.
Item 6. | Exhibits: |
Number |
Document | |
10.1 | Time-Based Restricted Stock Unit Award Agreement dated July 2, 2012 granted to Charles Neral. | |
10.2 | Time-Based Restricted Stock Unit Award Agreement dated September 12, 2012 granted to Charles Neral. | |
10.3 | Performance-Based Restricted Stock Unit Award Agreement dated September 12, 2012 granted to Charles Neral. | |
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. |
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31.2 | Certification of Charles J. Neral, 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 Charles J. Neral, 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 September 30, 2012, (ii) Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2011 and 2012, (iii) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 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 SUNGARD DATA SYSTEMS INC. | ||||||
Dated: November 9, 2012 | By: | /s/ Charles J. Neral | ||||
Charles J. Neral | ||||||
Senior Vice President-Finance and Chief Financial Officer | ||||||
(Principal Financial Officer) |
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EXHIBIT INDEX
Exhibit No. |
Document | |
10.1 | Time-Based Restricted Stock Unit Award Agreement dated July 2, 2012 granted to Charles Neral. | |
10.2 | Time-Based Restricted Stock Unit Award Agreement dated September 12, 2012 granted to Charles Neral. | |
10.3 | Performance-Based Restricted Stock Unit Award Agreement dated September 12, 2012 granted to Charles Neral. | |
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 Charles J. Neral, 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 Charles J. Neral, 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 September 30, 2012, (ii) Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2011 and 2012, (iii) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2012 and (iv) Notes to Consolidated Financial Statements. |
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Exhibit 10.1
Name: Charles Neral Number of Stock Units: 116,660 Date of Grant: July 2, 2012 |
SUNGARD CAPITAL CORP. AND SUNGARD CAPITAL CORP. II
MANAGEMENT TIME-BASED RESTRICTED STOCK UNIT AGREEMENT
THIS AWARD AND ANY SECURITIES ISSUED UPON THE PAYMENT OF THIS RESTRICTED STOCK UNIT AWARD ARE SUBJECT TO RESTRICTIONS ON VOTING AND TRANSFER AND REQUIREMENTS OF SALE AND OTHER PROVISIONS AS SET FORTH IN THE STOCKHOLDERS AGREEMENT AMONG SUNGARD CAPITAL CORP., SUNGARD CAPITAL CORP. II, SUNGARD HOLDING CORP., SOLAR CAPITAL CORP. AND CERTAIN STOCKHOLDERS OF SUNGARD CAPITAL CORP. AND SUNGARD CAPITAL CORP. II, DATED AS OF AUGUST 10, 2005 (AS IN EFFECT FROM TIME TO TIME, THE STOCKHOLDERS AGREEMENT).
SUNGARD CAPITAL CORP. AND SUNGARD CAPITAL CORP. II STRONGLY ENCOURAGE YOU TO SEEK THE ADVICE OF YOUR OWN LEGAL AND FINANCIAL ADVISORS WITH RESPECT TO YOUR AWARD AND ITS TAX CONSEQUENCES.
This agreement (the Agreement) evidences Restricted Stock Units granted by SunGard Capital Corp., a Delaware corporation (the Company), and SunGard Capital Corp. II, a Delaware corporation (Lowerco and together with the Company, the Companies), to the undersigned (the Grantee), pursuant to, and subject to the terms of, the SunGard 2005 Management Incentive Plan (as amended from time to time, the Plan) which is incorporated herein by reference and of which the Grantee hereby acknowledges receipt.
1. Grant of Restricted Stock Units. The Company and Lowerco (as applicable) grant to the Grantee, as of the above Date of Grant, Restricted Stock Units for the number of Stock Units stated above (the Stock Units), on the terms provided herein and in the Plan. The Stock Units represent a conditional right to receive Units (as defined below) consisting of Class A Common shares, Class L Common shares and Lowerco Preferred shares (the Shares). The Stock Units evidenced by this Agreement are granted to the Grantee in an Employment capacity as an Employee.
2. Stock Unit Account. The Company shall establish and maintain a Stock Unit account (the Account) as a bookkeeping account on its records for the Grantee and shall record in the Account the number of Stock Units awarded to the Grantee. No Shares shall be issued to the Grantee at the time the Award is made, and the Grantee shall not be, nor have any of the rights or privileges of, a shareholder of the Companies with respect to any Stock Units recorded in the Account or amounts credited to the Account pursuant to Section 8. The Grantee shall not have any interest in any fund or specific assets of the Companies by reason of this Award or the Account established for the Grantee.
Neral Form Initial
3. Meaning of Certain Terms. Except as otherwise defined herein, all capitalized terms used in this Agreement shall have the same meaning as in the Plan. The terms Change of Control, Disability and Fair Market Value shall have the same meaning as set forth in the Stockholders Agreement and without regard to any subsequent amendment thereof. The terms Cause and Good Reason shall have the same meaning as set forth in the Grantees employment agreement with SunGard Data Systems Inc., dated July 2, 2012, as it may be amended from time to time (the Employment Agreement). The following terms shall have the following meanings:
(a) | Adjustment Event means (i) a cash distribution with respect to Shares paid to all or substantially all holders of Shares, other than cash dividends in respect of Shares declared by the Board as part of a regular dividend payment practice or stated cash dividend policy of the Company following an IPO, or (ii) a substantially pro rata redemption or substantially pro rata repurchase (in each case, as applicable, by the Company, Lowerco or any of their subsidiaries) of all or part of any class of Shares; |
(b) | CEO means the Chief Executive Officer of the Company. |
(c) | Date of Termination means the date that the termination of the Grantees Employment with Employer is effective on account of the Grantees death, the Grantees Disability, termination by Employer for Cause or without Cause, or by the Grantee, as the case may be; |
(d) | Employer means the Company or, as the case may be, its Affiliate with whom the Grantee has entered into an Employment relationship; |
(e) | Restrictive Covenant means the restrictive covenants set forth in the Employment Agreement; |
(f) | Tax or Taxes means any income tax, social insurance, payroll tax, contributions, payment on account obligations or other payments; and |
(g) | Unit means an undivided interest in 1.3 Class A shares, 0.1444 Class L shares and 0.05 Lowerco Preferred shares, determined at the Date of Grant, as it may be adjusted as provided herein; and |
As used herein with respect to the Stock Units, the term vest means that the restrictions on the right to receive payment pursuant to the Stock Units lapse in whole or in specified part.
4. Vesting of Stock Units. The Stock Units shall be subject to forfeiture until the Stock Units vest. One hundred percent (100%) of the Stock Units shall vest on the first anniversary of the Date of Grant (the Vesting Date), based on the Grantees continued Employment; provided, however, that:
(a) | upon the Grantees Employment being terminated prior to the Vesting Date for any reason other than Cause or Grantees resignation without Good Reason, the Stock Units shall become fully vested; |
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(b) | if the Grantees Employment terminates as a result of termination by Employer for Cause or Grantees resignation without Good Reason, then the Stock Units will be immediately forfeited by the Grantee and terminate as of the Date of Termination. |
5. Payment of Stock Units. The Grantees vested Stock Units shall be paid in Shares upon the first to occur of (i) a Change of Control that meets the requirements of a change in control event under Section 409A of the Code, (ii) the Grantees separation from service for any reason other than for Cause, or (iii) the date that is one year after the Date of Grant. If a Change of Control occurs before the Stock Units are fully vested, any Stock Units that subsequently vest shall be paid upon the first to occur of (i) the Grantees separation from service for any reason other than for Cause or (ii) the date that is one year after the Date of Grant. Notwithstanding the foregoing, all distributions of Shares under this Agreement upon separation from service shall only be made upon the Grantees separation from service within the meaning of Section 409A of the Code and a distribution shall be made at a time and in a manner consistent with Section 409A. Subject to Sections 15, 16 and 20, when the vested Stock Units become payable, the Companies will issue to the Grantee Shares representing the Units underlying the vested Stock Units, subject to satisfaction of the Grantees Tax withholding obligations as described below, within 30 days after the payment event.
6. Certain Calls and Puts. The Stock Units granted hereunder and the related Shares are subject to the call and put rights contained in Section 6 of the Stockholders Agreement, except that such put rights shall be granted only if and to the extent permitted by the Code (including Section 409A thereof); provided, however, that the call rights contained in Section 6 of the Stockholders Agreement shall not apply in the event of a termination resulting from Disability or death.
7. Share Restrictions, etc. Except as expressly provided herein, the Grantees rights hereunder and with respect to Shares received upon payment in accordance with Section 5 herein are subject to the restrictions and other provisions contained in the Stockholders Agreement.
8. Distributions, Redemptions, etc.
(a) | Upon the occurrence of an Adjustment Event, there shall be credited to the Account an amount equal to the product of (i) the per-Share amount paid with respect to Shares underlying the Stock Units in connection with the Adjustment Event, multiplied by (ii) the number of Shares of the class of stock affected by the Adjustment Event that are included in each Unit immediately prior to the Adjustment Event, multiplied by (iii) the number of Units underlying the Grantees Stock Units pursuant to this Award. |
(b) | If any other cash dividend or distribution is paid with respect to Shares underlying the Stock Units, there shall be credited to the Account an amount equal to the product of (i) the per-Share amount paid with respect to Shares underlying the Stock Units, multiplied by (ii) the number of Shares of the applicable class of stock that are included in each Unit, multiplied by (iii) the number of Units underlying the Grantees Stock Units pursuant to this Award. |
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(c) | The amount credited to the Account pursuant to this Section 8 with respect to Stock Units is referred to as the Bonus Value. The Bonus Value shall vest on the same terms as the Stock Units to which it relates, as set forth in this Agreement, and the vested Bonus Value shall be paid to the Grantee, in cash, Shares or such other securities or assets as the Compensation Committee or Board shall determine, at the same time as the vested Stock Units are paid pursuant to Section 5 herein, consistent with Section 409A of the Code. |
(d) | In the case of a redemption or repurchase of Shares, the number of Shares of the class of stock redeemed or repurchased that are subject to outstanding Stock Units will be automatically reduced by an amount proportionate to the percentage reduction in outstanding Shares of the affected class resulting from the redemption or repurchase. The Grantee shall be entitled to receive any information reasonably requested regarding the composition of a Unit, as adjusted in accordance with this Section 8. |
9. Forfeiture. Upon delivery of Shares pursuant to the Stock Units, the Grantee shall certify on a form acceptable to the Committee that the Grantee is, and at all times during and after Employment has been, in compliance with the Restrictive Covenants, the Employment Agreement and all other agreements between the Grantee and the Company or any of its Affiliates. If the Company determines that the Grantee is not, or at any time during or after Employment has not been, in compliance with one or more of the Restrictive Covenants, the Employment Agreement or with the provisions of any agreement between the Grantee and the Company or any of its Affiliates, and such non-compliance has not been authorized in advance in a specific written waiver from the Company or the applicable party, the Committee may cancel any unpaid Stock Units. The Company shall also have the following (and only the following) additional remedies:
(a) | During the six months after any delivery of Shares pursuant to the Stock Units, such delivery may be rescinded at the Companys option if the Grantee fails, or at any time during or after Employment has failed, to comply in any material respect with the terms of the Restrictive Covenants, the Employment Agreement or of any other agreement with the Company or any of its Affiliates or if the Grantee breaches, or at any time during or after Employment has breached, any duty to the Company or any of its Affiliates. The Company shall notify the Grantee in writing of any such rescission within one year after such delivery. Within ten days after receiving such a notice from the Company, the Grantee shall remit or deliver to the Company (i) the amount of any gain realized upon the sale of any Shares, (ii) any consideration received upon the exchange of any Shares (or to the extent that such consideration was not received in the form of cash, the cash equivalent thereof valued at the time of the exchange), and (iii) the number of Shares received in connection with the rescinded delivery. |
(b) | The Company shall have the right to offset, against any Shares and any cash amounts due to the Grantee under or by reason of the Grantees holding the Stock Units, any amounts to which the Company is entitled as a result of the Grantees violation of the terms of the Restrictive Covenants, the Employment Agreement or of any other agreement with the Company or any of its Affiliates or the |
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Grantees breach of any duty to the Company or any of its Affiliates; provided, however, that no offset shall accelerate or defer the distribution date of amounts payable under this Agreement in violation of Section 409A of the Code, and any offset in violation of Section 409A shall be null and void. Accordingly, the Grantee acknowledges that (i) the Company may withhold delivery of Shares, (ii) the Company may place the proceeds of any sale or other disposition of Shares in an escrow account of the Companys choosing pending resolution of any dispute with the Company, and (iii) the Company has no liability for any attendant market risk caused by any such withholding, or escrow, subject, however, to compliance with the requirements of Section 409A of the Code. |
The Grantee acknowledges and agrees that the calculation of damages from a breach of any of the Restrictive Covenants, the Employment Agreement or of any other agreement with the Company or any of its Affiliates or of any duty to the Company or any of its Affiliates would be difficult to calculate accurately and that the right to offset or other remedy provided for herein is reasonable and not a penalty. The Grantee further agrees not to challenge the reasonableness of such provisions even where the Company rescinds, delays, withholds or escrows Shares or proceeds or uses those Shares or proceeds as a setoff.
10. Legends, etc. Shares issued upon the lapse of any restrictions on the Stock Units shall bear such legends as may be required or provided for under the terms of the Stockholders Agreement.
11. Transfer of Stock Units. The Stock Units may only be transferred by the laws of descent and distribution, or to a legal representative in the event of the Grantees incapacity and in accordance with the terms of the Stockholders Agreement.
12. Withholding. The payment of the Shares and other amounts in accordance with this Agreement will give rise to compensation income which may be subject to withholding. The Grantee expressly acknowledges and agrees that the Grantees rights hereunder, including the right to be issued Shares in accordance with Section 5 herein and paid cash in accordance with Section 8 hereof, are subject to the Grantee promptly paying to the Companies all Taxes required to be withheld, at the Grantees election, in cash or by Share withholding as described below (or by such other means as may be acceptable to the Administrator in its discretion). The Grantee also authorizes the Companies and their Affiliates to withhold such amount from any amounts otherwise owed to the Grantee. Unless the Grantee elects otherwise by providing written notice to the Company not later than 30 days after the payment event, any tax withholding obligation with respect to the payment of Shares shall be satisfied by having Shares withheld up to an amount that does not exceed the minimum applicable withholding Tax. Accordingly, unless the Grantee timely elects to pay the withholding Taxes in cash, the Grantee shall be deemed to have elected to pay such Taxes through Share withholding as described above. In addition, the Companies may require the Grantee to pay any taxes or other amounts required to be paid by the Companies or any Affiliate with respect to the grant or vesting of the Stock Units or the payment of the Shares. Any such taxes or amounts must be paid at such time and in such form as determined by the Companies.
13. Grant Subject to Plan Provisions. This Award is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in
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accordance with the Plan. The Award and payment of the Stock Units are subject to interpretations, regulations and determinations concerning the Plan established from time to time by the Administrator in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) the registration, qualification or listing of the shares issued under the Plan, (ii) changes in capitalization and (iii) other requirements of applicable law. The Administrator shall have the authority to interpret and construe the Stock Units pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.
14. Effect on Employment. Neither the grant of the Stock Units, nor the issuance of Shares or other payments in accordance with this Agreement, shall give the Grantee any right to be retained in the employ of the Company, Lowerco or any of their Affiliates, affect the right of the Company, Lowerco or any of their Affiliates to discharge or discipline the Grantee at any time, or affect any right of the Grantee to terminate his or her Employment at any time, subject to applicable local law and the terms of any employment agreement.
15. Delay in Payments for Specified Employees. Notwithstanding anything in this Agreement to the contrary, if the Grantee is a specified employee of a publicly traded corporation under Section 409A of the Code at the time of separation from service and if payment of any amount under this Agreement is required to be delayed for a period of six months after the separation from service pursuant to Section 409A of the Code, payment of such amount shall be delayed as required by Section 409A of the Code, and the accumulated postponed amount shall be paid in a lump sum payment within 10 days after the end of the six-month period. If the Grantee dies during the postponement period prior to the payment of postponed amount, the accumulated postponed amount shall be paid to the personal representative of the Grantees estate within 60 days after the date of the Grantees death.
16. Section 409A. It is intended that the Stock Units awarded hereunder shall comply with the requirements of Section 409A of the Code (and any regulations and guidelines issued thereunder), and this Agreement shall be interpreted on a basis consistent with such intent. Payments shall only be made on an event and in a manner permitted by Section 409A of the Code. Each payment under this Agreement is considered a separate payment for purposes of Section 409A of the Code. As provided under Section 409A, if calculation of the amount of a payment is not administratively practicable due to events beyond the control of the Grantee, the payment will be treated as made upon the date specified hereunder if the payment is made during the first calendar year in which calculation of the amount of the payment is administratively practicable. This Agreement may be amended without the consent of the Grantee in any respect deemed by the Committee to be necessary in order to preserve compliance with Section 409A of the Code.
17. Nature of Grant; No Entitlement; No Claim for Compensation. Grantee, in accepting the Stock Units, represents and acknowledges that Grantees participation in the Plan is voluntary; that participation in the Plan is discretionary and does not form any part of Grantees contract of employment, if any, with the Company or any of its subsidiaries; and that Grantee has not been induced to participate in the Plan by any expectation of employment or continued employment with the Company or any of its subsidiaries. Grantee furthermore understands and acknowledges that the grant of the Stock Units is discretionary and a one-time occurrence, does not constitute any portion of Grantees regular remuneration and is not intended to be taken into account in calculating service-related benefits, and bears no guarantee or
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implication that any additional grant will be made in the future. In consideration of the grant of the Stock Units, no claim or entitlement to compensation or damages shall arise from forfeiture of the Stock Units or diminution in value of the Stock Units or any of the Shares issuable under the Stock Units from termination of Grantees employment by the Company or his or her employer, as applicable (and for any reason whatsoever and whether or not in breach of contract or local labor laws), and Grantee irrevocably release his or her employer, the Company and its subsidiaries, as applicable, from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, Grantee shall be deemed to have irrevocably waived Grantees entitlement to pursue such claim.
18. Personal Data. Grantee understands and acknowledges that in order to perform its obligations under the Plan, the Company and its subsidiaries may process personal data and/or sensitive personal data relating to Grantee. Such data includes but is not limited to the information provided in this Agreement and any changes thereto, other personal and financial data relating to Grantee (including, without limitation, Grantees address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title), and information about Grantees participation in the Plan and the Shares acquired from time to time pursuant to the Plan. Grantee, in accepting the Stock Units, gives his or her explicit and voluntary consent to the Company and its subsidiaries to collect, use and process any such personal data and/or sensitive personal data (in electronic or other form). Grantee also hereby gives his or her explicit and voluntary consent to the Company and its subsidiaries to transfer any such personal data and/or sensitive personal data (in electronic or other form) outside the country in which Grantee works or is employed. The legal persons for whom Grantees personal data are intended include the Company and any of its subsidiaries, any outside plan administrator or service provider selected by the Company or any of its subsidiaries from time to time, and any other person that the Administrator may find in its administration of the Plan to be appropriate; such recipients may be located in countries that have different data privacy laws and protections than Grantees country. Grantee hereby acknowledges that he or she has been informed of his or her right of access and correction to his or her personal data by contacting his or her local human resources representative. Grantee understands that the transfer of the information described herein is important to the administration of the Plan and that failure to consent to the transmission of such information may limit or prohibit his or her participation in the Plan.
19. Governing Law. This Agreement and all claims arising out of or based upon this Agreement or relating to the subject matter hereof shall be governed by and construed in accordance with the domestic substantive laws of the State of Delaware without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.
20. Compliance with Laws, Regulations and Policies. The issuance of Shares pursuant to the vested Stock Units shall be subject to compliance by the Companies and the Grantee with all applicable requirements of law relating thereto (including, without limitation, foreign securities and exchange control requirements). The inability of the Companies to lawfully issue Shares or the inability of the Companies and/or the Grantee to obtain approval from any regulatory body having authority deemed by the Companies to be necessary to the lawful issuance of any Shares hereby shall relieve the Companies of any liability with respect to the non-issuance of the Shares. The Stock Units, and all Shares and other amounts payable pursuant to the Stock Units, are subject to the terms of any applicable clawback and other policies adopted by the Board.
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21. Amendment. In addition to the authority to make adjustments pursuant to Section 7(b) of the Plan, the Administrator may modify the terms of the Award as the Administrator deems appropriate, in good faith, to take account of a change in circumstances occasioned by a stock dividend or other similar distribution (whether in the form of stock, other securities or other property), stock split or combination of shares (including a reverse stock split), recapitalization, conversion, reorganization, consolidation, split-up, spin-off, combination, merger, exchange of stock, redemption or repurchase of all or part of the shares of any class of stock or any change in the capital structure of the Company or an Affiliate or other transaction or event, including the power to adjust the performance goals that are affected by such a transaction.
[SIGNATURE PAGE FOLLOWS]
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By acceptance of the Stock Units, the undersigned agrees hereby to become a party to, and be bound by the terms of, the Stockholders Agreement as a Manager as defined therein.
Executed as of the Date of Grant.
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SunGard Capital Corp. and | SUNGARD CAPITAL CORP. | |||
SunGard Capital Corp. II | SUNGARD CAPITAL CORP. II | |||
By: | /s/ Russell Fradin |
Grantee
I ACKNOWLEDGE THAT I HAVE RECEIVED A COPY OF THIS AGREEMENT AND CERTAIN RELATED INFORMATION, AND THAT I HAVE READ AND UNDERSTOOD THESE DOCUMENTS. I ACCEPT AND AGREE TO ALL OF THE PROVISIONS OF THIS AGREEMENT.
| ||||
Charles Neral |
Exhibit 10.2
Name: Charles J. Neral Number of Stock Units: 75,230 Date of Grant: September 12, 2012 |
SUNGARD CAPITAL CORP. AND SUNGARD CAPITAL CORP. II
MANAGEMENT TIME-BASED RESTRICTED STOCK UNIT AGREEMENT
THIS AWARD AND ANY SECURITIES ISSUED UPON THE PAYMENT OF THIS RESTRICTED STOCK UNIT AWARD ARE SUBJECT TO RESTRICTIONS ON VOTING AND TRANSFER AND REQUIREMENTS OF SALE AND OTHER PROVISIONS AS SET FORTH IN THE STOCKHOLDERS AGREEMENT AMONG SUNGARD CAPITAL CORP., SUNGARD CAPITAL CORP. II, SUNGARD HOLDING CORP., SOLAR CAPITAL CORP. AND CERTAIN STOCKHOLDERS OF SUNGARD CAPITAL CORP. AND SUNGARD CAPITAL CORP. II, DATED AS OF AUGUST 10, 2005 (AS IN EFFECT FROM TIME TO TIME, THE STOCKHOLDERS AGREEMENT).
SUNGARD CAPITAL CORP. AND SUNGARD CAPITAL CORP. II STRONGLY ENCOURAGE YOU TO SEEK THE ADVICE OF YOUR OWN LEGAL AND FINANCIAL ADVISORS WITH RESPECT TO YOUR AWARD AND ITS TAX CONSEQUENCES.
This agreement (the Agreement) evidences Restricted Stock Units granted by SunGard Capital Corp., a Delaware corporation (the Company), and SunGard Capital Corp. II, a Delaware corporation (Lowerco and together with the Company, the Companies), to the undersigned (the Grantee), pursuant to, and subject to the terms of, the SunGard 2005 Management Incentive Plan (as amended from time to time, the Plan) which is incorporated herein by reference and of which the Grantee hereby acknowledges receipt.
1. Grant of Restricted Stock Units. The Company and Lowerco (as applicable) grant to the Grantee, as of the above Date of Grant, Restricted Stock Units for the number of Stock Units stated above (the Stock Units), on the terms provided herein and in the Plan. The Stock Units represent a conditional right to receive Units (as defined below) consisting of Class A Common shares, Class L Common shares and Lowerco Preferred shares (the Shares). The Stock Units evidenced by this Agreement are granted to the Grantee in an Employment capacity as an Employee.
2. Stock Unit Account. The Company shall establish and maintain a Stock Unit account (the Account) as a bookkeeping account on its records for the Grantee and shall record in the Account the number of Stock Units awarded to the Grantee. No Shares shall be issued to the Grantee at the time the Award is made, and the Grantee shall not be, nor have any of the rights or privileges of, a shareholder of the Companies with respect to any Stock Units recorded in the Account or amounts credited to the Account pursuant to Section 8. The Grantee shall not have any interest in any fund or specific assets of the Companies by reason of this Award or the Account established for the Grantee.
3. Meaning of Certain Terms. Except as otherwise defined herein, all capitalized terms used in this Agreement shall have the same meaning as in the Plan. The terms Change of Control, Disability and Fair Market Value shall have the same meaning as set forth in the Stockholders Agreement and without regard to any subsequent amendment thereof. The terms Cause, Good Reason and In Contemplation Termination shall have the same meaning as set
forth in the Grantees employment agreement with SunGard Data Systems Inc., dated July 2, 2012, as it may be amended from time to time (the Employment Agreement). The following terms shall have the following meanings:
(a) | Adjustment Event means (i) a cash distribution with respect to Shares paid to all or substantially all holders of Shares, other than cash dividends in respect of Shares declared by the Board as part of a regular dividend payment practice or stated cash dividend policy of the Company following an IPO, or (ii) a substantially pro rata redemption or substantially pro rata repurchase (in each case, as applicable, by the Company, Lowerco or any of their subsidiaries) of all or part of any class of Shares; |
(b) | CEO means the Chief Executive Officer of the Company. |
(c) | Date of Termination means the date that the termination of the Grantees Employment with Employer is effective on account of the Grantees death, the Grantees Disability, termination by Employer for Cause or without Cause, or by the Grantee, as the case may be; |
(d) | Effective Date means July 2, 2012, Grantees date of hire. |
(e) | Employer means the Company or, as the case may be, its Affiliate with whom the Grantee has entered into an Employment relationship; |
(f) | Restrictive Covenant means the restrictive covenants set forth in the Employment Agreement; |
(g) | Tax or Taxes means any income tax, social insurance, payroll tax, contributions, payment on account obligations or other payments; |
(h) | Unit means an undivided interest in 1.3 Class A shares, 0.1444 Class L shares and 0.05 Lowerco Preferred shares, determined at the Date of Grant, as it may be adjusted as provided herein; and |
As used herein with respect to the Stock Units, the term vest means that the restrictions on the right to receive payment pursuant to the Stock Units lapse in whole or in specified part.
4. Vesting of Stock Units. The Stock Units shall be subject to forfeiture until the Stock Units vest. The Stock Units shall vest, in accordance with Schedule A, based on the Grantees continued Employment; provided, however, that:
(a) | except as provided in subsections 4(c) and (d) below, if the Grantees Employment terminates for any reason other than Cause, the Stock Units shall immediately stop vesting, and any unvested Stock Units shall be forfeited as of the Date of Termination. |
(b) | if the Grantees Employment terminates as a result of termination for Cause, all of the Stock Units will be immediately forfeited by the Grantee and terminate as of the Date of Termination. |
(c) | if a Change of Control occurs after the second anniversary of the Effective Date, the Stock Units will become fully vested (i) on the date of termination of |
employment if Grantees employment is terminated by Employer without Cause or by Grantee for Good Reason and such termination occurs on or within 18 months following the Change of Control or (ii) on the date of the Change of Control if an In Contemplation Termination has occurred. |
(d) | if a Change of Control occurs prior to the second anniversary of the Effective Date, 50% of the unvested Stock Units will vest upon (A) Grantees termination of employment by Employer without Cause or by Grantee for Good Reason if such termination occurs on or within 18 months following the Change of Control or (B) the date of the Change of Control if an In Contemplation Termination occurred, and the balance of the unvested Stock Units will be immediately forfeited by the Grantee and terminate. |
5. Payment of Stock Units. The Grantees vested Stock Units shall be paid in Shares upon the first to occur of (i) a Change of Control that meets the requirements of a change in control event under Section 409A of the Code (a 409A Change of Control), (ii) the Grantees separation from service for any reason other than for Cause, or (iii) the date that is four years after the Effective Date If a 409A Change of Control occurs before the Stock Units are fully vested, any Stock Units that subsequently vest shall be paid upon the first to occur of (i) the Grantees separation from service for any reason other than for Cause or (ii) the date that is four years after the Effective Date. Any Stock Units that vest as a result of an In Contemplation Termination under Section 4(c) or 4(d) shall be paid in Shares upon the Change of Control if the Change of Control is a 409A Change of Control and, if not, in accordance with the other provisions of this Section 5. Notwithstanding the foregoing, all distributions of Shares under this Agreement upon separation from service shall only be made upon the Grantees separation from service within the meaning of Section 409A of the Code and a distribution shall be made at a time and in a manner consistent with Section 409A. Subject to Sections 15, 16 and 20, when the vested Stock Units become payable, the Companies will issue to the Grantee Shares representing the Units underlying the vested Stock Units, subject to satisfaction of the Grantees Tax withholding obligations as described below, within 30 days after the payment event.
6. Certain Calls and Puts. The Stock Units granted hereunder and the related Shares are subject to the call and put rights contained in Section 6 of the Stockholders Agreement, except that such put rights shall be granted only if and to the extent permitted by the Code (including Section 409A thereof); provided, however, that the call rights contained in Section 6 of the Stockholders Agreement shall not apply in the event of a termination resulting from Disability or death.
7. Share Restrictions, etc. Except as expressly provided herein, the Grantees rights hereunder and with respect to Shares received upon payment in accordance with Section 5 herein are subject to the restrictions and other provisions contained in the Stockholders Agreement.
8. Distributions, Redemptions, etc.
(a) | Upon the occurrence of an Adjustment Event, there shall be credited to the Account an amount equal to the product of (i) the per-Share amount paid with respect to Shares underlying the Stock Units in connection with the Adjustment Event, multiplied by (ii) the number of Shares of the class of stock affected by the Adjustment Event that are included in each Unit immediately prior to the Adjustment Event, multiplied by (iii) the number of Units underlying the Grantees Stock Units pursuant to this Award. |
(b) | If any other cash dividend or distribution is paid with respect to Shares underlying the Stock Units, there shall be credited to the Account an amount equal to the product of (i) the per-Share amount paid with respect to Shares underlying the Stock Units, multiplied by (ii) the number of Shares of the applicable class of stock that are included in each Unit, multiplied by (iii) the number of Units underlying the Grantees Stock Units pursuant to this Award. |
(c) | The amount credited to the Account pursuant to this Section 8 with respect to Stock Units is referred to as the Bonus Value. The Bonus Value shall vest on the same terms as the Stock Units to which it relates, as set forth in this Agreement, and the vested Bonus Value shall be paid to the Grantee, in cash, Shares or such other securities or assets as the Compensation Committee or Board shall determine, at the same time as the vested Stock Units are paid pursuant to Section 5 herein, consistent with Section 409A of the Code. |
(d) | In the case of a redemption or repurchase of Shares, the number of Shares of the class of stock redeemed or repurchased that are subject to outstanding Stock Units will be automatically reduced by an amount proportionate to the percentage reduction in outstanding Shares of the affected class resulting from the redemption or repurchase. The Grantee shall be entitled to receive any information reasonably requested regarding the composition of a Unit, as adjusted in accordance with this Section 8. |
9. Forfeiture. Upon delivery of Shares pursuant to the Stock Units, the Grantee shall certify on a form acceptable to the Committee that the Grantee is, and at all times during and after Employment has been, in compliance with the Restrictive Covenants, the Employment Agreement and all other agreements between the Grantee and the Company or any of its Affiliates. If the Company determines that the Grantee is not, or at any time during or after Employment has not been, in compliance with one or more of the Restrictive Covenants, the Employment Agreement or with the provisions of any agreement between the Grantee and the Company or any of its Affiliates, and such non-compliance has not been authorized in advance in a specific written waiver from the Company or the applicable party, the Committee may cancel any unpaid Stock Units. The Company shall also have the following (and only the following) additional remedies:
(a) | During the six months after any delivery of Shares pursuant to the Stock Units, such delivery may be rescinded at the Companys option if the Grantee fails, or at any time during or after Employment has failed, to comply in any material respect with the terms of the Restrictive Covenants, the Employment Agreement or of any other agreement with the Company or any of its Affiliates or if the Grantee breaches, or at any time during or after Employment has breached, any duty to the Company or any of its Affiliates. The Company shall notify the Grantee in writing of any such rescission within one year after such delivery. Within ten days after receiving such a notice from the Company, the Grantee shall remit or deliver to the Company (i) the amount of any gain realized upon the sale of any Shares, (ii) any consideration received upon the exchange of any Shares (or to the extent that such consideration was not received in the form of cash, the cash equivalent thereof valued at the time of the exchange), and (iii) the number of Shares received in connection with the rescinded delivery. |
(b) | The Company shall have the right to offset, against any Shares and any cash amounts due to the Grantee under or by reason of the Grantees holding the Stock |
Units, any amounts to which the Company is entitled as a result of the Grantees violation of the terms of the Restrictive Covenants, the Employment Agreement or of any other agreement with the Company or any of its Affiliates or the Grantees breach of any duty to the Company or any of its Affiliates; provided, however, that no offset shall accelerate or defer the distribution date of amounts payable under this Agreement in violation of Section 409A of the Code, and any offset in violation of Section 409A shall be null and void. Accordingly, the Grantee acknowledges that (i) the Company may withhold delivery of Shares, (ii) the Company may place the proceeds of any sale or other disposition of Shares in an escrow account of the Companys choosing pending resolution of any dispute with the Company, and (iii) the Company has no liability for any attendant market risk caused by any such withholding, or escrow, subject, however, to compliance with the requirements of Section 409A of the Code. |
The Grantee acknowledges and agrees that the calculation of damages from a breach of any of the Restrictive Covenants, the Employment Agreement or of any other agreement with the Company or any of its Affiliates or of any duty to the Company or any of its Affiliates would be difficult to calculate accurately and that the right to offset or other remedy provided for herein is reasonable and not a penalty. The Grantee further agrees not to challenge the reasonableness of such provisions even where the Company rescinds, delays, withholds or escrows Shares or proceeds or uses those Shares or proceeds as a setoff.
10. Legends, etc. Shares issued upon the lapse of any restrictions on the Stock Units shall bear such legends as may be required or provided for under the terms of the Stockholders Agreement.
11. Transfer of Stock Units. The Stock Units may only be transferred by the laws of descent and distribution, or to a legal representative in the event of the Grantees incapacity and in accordance with the terms of the Stockholders Agreement.
12. Withholding. The payment of the Shares and other amounts in accordance with this Agreement will give rise to compensation income which may be subject to withholding. The Grantee expressly acknowledges and agrees that the Grantees rights hereunder, including the right to be issued Shares in accordance with Section 5 herein and paid cash in accordance with Section 8 hereof, are subject to the Grantee promptly paying to the Companies all Taxes required to be withheld, at the Grantees election, in cash or by Share withholding as described below (or by such other means as may be acceptable to the Administrator in its discretion). The Grantee also authorizes the Companies and their Affiliates to withhold such amount from any amounts otherwise owed to the Grantee. Unless the Grantee elects otherwise by providing written notice to the Company not later than 30 days after the payment event, any tax withholding obligation with respect to the payment of Shares shall be satisfied by having Shares withheld up to an amount that does not exceed the minimum applicable withholding Tax. Accordingly, unless the Grantee timely elects to pay the withholding Taxes in cash, the Grantee shall be deemed to have elected to pay such Taxes through Share withholding as described above. In addition, the Companies may require the Grantee to pay any taxes or other amounts required to be paid by the Companies or any Affiliate with respect to the grant or vesting of the Stock Units or the payment of the Shares. Any such taxes or amounts must be paid at such time and in such form as determined by the Companies.
13. Grant Subject to Plan Provisions. This Award is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in
accordance with the Plan. The Award and payment of the Stock Units are subject to interpretations, regulations and determinations concerning the Plan established from time to time by the Administrator in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) the registration, qualification or listing of the shares issued under the Plan, (ii) changes in capitalization and (iii) other requirements of applicable law. The Administrator shall have the authority to interpret and construe the Stock Units pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.
14. Effect on Employment. Neither the grant of the Stock Units, nor the issuance of Shares or other payments in accordance with this Agreement, shall give the Grantee any right to be retained in the employ of the Company, Lowerco or any of their Affiliates, affect the right of the Company, Lowerco or any of their Affiliates to discharge or discipline the Grantee at any time, or affect any right of the Grantee to terminate his or her Employment at any time, subject to applicable local law and the terms of any employment agreement.
15. Delay in Payments for Specified Employees. Notwithstanding anything in this Agreement to the contrary, if the Grantee is a specified employee of a publicly traded corporation under Section 409A of the Code at the time of separation from service and if payment of any amount under this Agreement is required to be delayed for a period of six months after the separation from service pursuant to Section 409A of the Code, payment of such amount shall be delayed as required by Section 409A of the Code, and the accumulated postponed amount shall be paid in a lump sum payment within 10 days after the end of the six-month period. If the Grantee dies during the postponement period prior to the payment of postponed amount, the accumulated postponed amount shall be paid to the personal representative of the Grantees estate within 60 days after the date of the Grantees death.
16. Section 409A. It is intended that the Stock Units awarded hereunder shall comply with the requirements of Section 409A of the Code (and any regulations and guidelines issued thereunder), and this Agreement shall be interpreted on a basis consistent with such intent. Payments shall only be made on an event and in a manner permitted by Section 409A of the Code. Each payment under this Agreement is considered a separate payment for purposes of Section 409A of the Code. As provided under Section 409A, if calculation of the amount of a payment is not administratively practicable due to events beyond the control of the Grantee, the payment will be treated as made upon the date specified hereunder if the payment is made during the first calendar year in which calculation of the amount of the payment is administratively practicable. This Agreement may be amended without the consent of the Grantee in any respect deemed by the Committee to be necessary in order to preserve compliance with Section 409A of the Code.
17. Nature of Grant; No Entitlement; No Claim for Compensation. Grantee, in accepting the Stock Units, represents and acknowledges that Grantees participation in the Plan is voluntary; that participation in the Plan is discretionary and does not form any part of Grantees contract of employment, if any, with the Company or any of its subsidiaries; and that Grantee has not been induced to participate in the Plan by any expectation of employment or continued employment with the Company or any of its subsidiaries. Grantee furthermore understands and acknowledges that the grant of the Stock Units is discretionary and a one-time occurrence, does not constitute any portion of Grantees regular remuneration and is not intended to be taken into account in calculating service-related benefits, and bears no guarantee or implication that any additional grant will be made in the future. In consideration of the grant of the Stock Units, no claim or entitlement to compensation or damages shall arise from forfeiture of the Stock Units or diminution in value of the Stock Units or any of the Shares issuable under the Stock Units from termination of Grantees employment by the Company or his or her employer, as applicable (and
for any reason whatsoever and whether or not in breach of contract or local labor laws), and Grantee irrevocably release his or her employer, the Company and its subsidiaries, as applicable, from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, Grantee shall be deemed to have irrevocably waived Grantees entitlement to pursue such claim.
18. Personal Data. Grantee understands and acknowledges that in order to perform its obligations under the Plan, the Company and its subsidiaries may process personal data and/or sensitive personal data relating to Grantee. Such data includes but is not limited to the information provided in this Agreement and any changes thereto, other personal and financial data relating to Grantee (including, without limitation, Grantees address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title), and information about Grantees participation in the Plan and the Shares acquired from time to time pursuant to the Plan. Grantee, in accepting the Stock Units, gives his or her explicit and voluntary consent to the Company and its subsidiaries to collect, use and process any such personal data and/or sensitive personal data (in electronic or other form). Grantee also hereby gives his or her explicit and voluntary consent to the Company and its subsidiaries to transfer any such personal data and/or sensitive personal data (in electronic or other form) outside the country in which Grantee works or is employed. The legal persons for whom Grantees personal data are intended include the Company and any of its subsidiaries, any outside plan administrator or service provider selected by the Company or any of its subsidiaries from time to time, and any other person that the Administrator may find in its administration of the Plan to be appropriate; such recipients may be located in countries that have different data privacy laws and protections than Grantees country. Grantee hereby acknowledges that he or she has been informed of his or her right of access and correction to his or her personal data by contacting his or her local human resources representative. Grantee understands that the transfer of the information described herein is important to the administration of the Plan and that failure to consent to the transmission of such information may limit or prohibit his or her participation in the Plan.
19. Governing Law. This Agreement and all claims arising out of or based upon this Agreement or relating to the subject matter hereof shall be governed by and construed in accordance with the domestic substantive laws of the State of Delaware without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.
20. Compliance with Laws, Regulations and Policies. The issuance of Shares pursuant to the vested Stock Units shall be subject to compliance by the Companies and the Grantee with all applicable requirements of law relating thereto (including, without limitation, foreign securities and exchange control requirements). The inability of the Companies to lawfully issue Shares or the inability of the Companies and/or the Grantee to obtain approval from any regulatory body having authority deemed by the Companies to be necessary to the lawful issuance of any Shares hereby shall relieve the Companies of any liability with respect to the non-issuance of the Shares. The Stock Units, and all Shares and other amounts payable pursuant to the Stock Units, are subject to the terms of any applicable clawback and other policies adopted by the Board.
21. Amendment. In addition to the authority to make adjustments pursuant to Section 7(b) of the Plan, the Administrator may modify the terms of the Award as the Administrator deems appropriate, in good faith, to take account of a change in circumstances occasioned by a stock dividend or other similar distribution (whether in the form of stock, other securities or other property), stock split or combination of shares (including a reverse stock split), recapitalization, conversion, reorganization, consolidation, split-up, spin-off, combination, merger,
exchange of stock, redemption or repurchase of all or part of the shares of any class of stock or any change in the capital structure of the Company or an Affiliate or other transaction or event, including the power to adjust the performance goals that are affected by such a transaction.
[SIGNATURE PAGE FOLLOWS]
By acceptance of the Stock Units, the undersigned agrees hereby to become a party to, and be bound by the terms of, the Stockholders Agreement as a Manager as defined therein.
Executed as of the Date of Grant.
SunGard Capital Corp. and | SUNGARD CAPITAL CORP. | |||||
SunGard Capital Corp. II | SUNGARD CAPITAL CORP. II | |||||
By: | /s/ Russell Fradin |
Grantee
I ACKNOWLEDGE THAT I HAVE RECEIVED A COPY OF THIS AGREEMENT AND CERTAIN RELATED INFORMATION, AND THAT I HAVE READ AND UNDERSTOOD THESE DOCUMENTS. I ACCEPT AND AGREE TO ALL OF THE PROVISIONS OF THIS AGREEMENT.
/s/ Charles Neral |
Charles Neral |
Schedule A
Vesting Schedule
28% of the Stock Units shall vest on the first anniversary of the Effective Date (Initial Vesting Date); and
The remaining 72% of the Stock Units shall vest in equal monthly installments of 2% over the 36 months following the Initial Vesting Date starting with the first monthly anniversary of the Initial Vesting Date.
Exhibit 10.3
Name: Charles J. Neral | ||||
Number of Stock Units: 75,230 | ||||
Date of Grant: September 12, 2012 |
SUNGARD CAPITAL CORP. AND SUNGARD CAPITAL CORP. II
MANAGEMENT PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT
THIS AWARD AND ANY SECURITIES ISSUED UPON THE PAYMENT OF THIS RESTRICTED STOCK UNIT AWARD ARE SUBJECT TO RESTRICTIONS ON VOTING AND TRANSFER AND REQUIREMENTS OF SALE AND OTHER PROVISIONS AS SET FORTH IN THE STOCKHOLDERS AGREEMENT AMONG SUNGARD CAPITAL CORP., SUNGARD CAPITAL CORP. II, SUNGARD HOLDING CORP., SOLAR CAPITAL CORP. AND CERTAIN STOCKHOLDERS OF SUNGARD CAPITAL CORP. AND SUNGARD CAPITAL CORP. II, DATED AS OF AUGUST 10, 2005 (AS IN EFFECT FROM TIME TO TIME, THE STOCKHOLDERS AGREEMENT).
SUNGARD CAPITAL CORP. AND SUNGARD CAPITAL CORP. II STRONGLY ENCOURAGE YOU TO SEEK THE ADVICE OF YOUR OWN LEGAL AND FINANCIAL ADVISORS WITH RESPECT TO YOUR AWARD AND ITS TAX CONSEQUENCES.
This agreement (the Agreement) evidences Restricted Stock Units granted by SunGard Capital Corp., a Delaware corporation (the Company), and SunGard Capital Corp. II, a Delaware corporation (Lowerco and together with the Company, the Companies), to the undersigned (the Grantee), pursuant to, and subject to the terms of, the SunGard 2005 Management Incentive Plan (as amended from time to time, the Plan) which is incorporated herein by reference and of which the Grantee hereby acknowledges receipt.
1. Grant of Restricted Stock Units. The Company and Lowerco (as applicable) grant to the Grantee, as of the above Date of Grant, Restricted Stock Units for the number of Stock Units stated above (the Stock Units), on the terms provided herein and in the Plan. The Stock Units represent a conditional right to receive Units (as defined below) consisting of Class A Common shares, Class L Common shares and Lowerco Preferred shares (the Shares). The Stock Units evidenced by this Agreement are granted to the Grantee in an Employment capacity as an Employee.
2. Stock Unit Account. The Company shall establish and maintain a Stock Unit account (the Account) as a bookkeeping account on its records for the Grantee and shall record in the Account the number of Stock Units awarded to the Grantee. No Shares shall be issued to the Grantee at the time the Award is made, and the Grantee shall not be, nor have any of the rights or privileges of, a stockholder of the Companies with respect to any Stock Units recorded in the Account or amounts credited to the Account pursuant to Section 8. The Grantee shall not have any interest in any fund or specific assets of the Companies by reason of this Award or the Account established for the Grantee.
3. Meaning of Certain Terms. Except as otherwise defined herein, all capitalized terms used in this Agreement shall have the same meaning as in the Plan. The terms Change of Control, Disability and Fair Market Value shall have the same meaning as set forth in the Stockholders Agreement and without regard to any subsequent amendment thereof. The terms Cause, Good Reason and In Contemplation Termination shall have the same meaning as set forth in the Grantees employment agreement with SunGard Data Systems Inc., dated July 2, 2012, as it may be amended from time to time (the Employment Agreement). The term Performance Period is defined in Schedule A. The following terms shall have the following meanings:
(a) | Adjustment Event means (i) a cash distribution with respect to Shares paid to all or substantially all holders of Shares, other than cash dividends in respect of Shares declared by the Board as part of a regular dividend payment practice or stated cash dividend policy of the Company following an IPO, or (ii) a substantially pro rata redemption or substantially pro rata repurchase (in each case, as applicable, by the Company, Lowerco or any of their subsidiaries) of all or part of any class of Shares; |
(b) | CEO means the Chief Executive Officer of the Company. |
(c) | Date of Termination means the date that the termination of the Grantees Employment with Employer is effective on account of the Grantees death, the Grantees Disability, termination by Employer for Cause or without Cause, or by the Grantee, as the case may be; |
(d) | Effective Date means July 2, 2012, Grantees date of hire. |
(e) | Employer means the Company or, as the case may be, its Affiliate with whom the Grantee has entered into an Employment relationship; |
(f) | Investors means investment funds advised by Silver Lake Partners, Bain Capital, The Blackstone Group, Goldman, Sachs & Co., Kohlberg Kravis Roberts, Providence Equity Partners and TPG that own capital stock of the Company; |
(g) | Restrictive Covenant means the restrictive covenants set forth in the Employment Agreement; |
(h) | Unit means an undivided interest in 1.3 Class A shares, 0.1444 Class L shares and 0.05 Lowerco Preferred shares, determined at the Date of Grant, as it may be adjusted as provided herein; |
(i) | Vest on a Pro Rata Basis means, with respect to the Grantees termination of Employment described in Section 4(a) during the Performance Period, that the Grantees Stock Units shall continue to be earned through the end of the Year of Termination, provided that only a portion of the Stock Units subject to this Restricted Stock Unit Agreement that otherwise would have been earned at the end of the Year of Termination shall be earned as of the end of such year, such portion being determined by multiplying (i) the number of Stock Units that otherwise would have been earned at the end of such year based upon attainment of the pre-determined performance goal, by (ii) (A) the number of days in which the Grantee |
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was employed by Employer during the Year of Termination divided by (B) 365 (rounded to the nearest whole number of Stock Units); and the Stock Units that are earned for the Year of Termination as described in this paragraph shall vest as of the last day of the Year of Termination pursuant to Section 4(a); and |
(j) | Year of Termination means the fiscal year during which the Grantees Date of Termination occurs. |
As used herein with respect to the Stock Units, the Stock Units shall be earned based on performance and shall vest based on Section 4 below, and the term vest means that the restrictions on the right to receive payment pursuant to the Stock Units lapse in whole or in specified part.
4. Vesting of Stock Units. The Stock Units shall be subject to forfeiture until the Stock Units vest. The Stock Units shall vest, in accordance with Schedule A, based on the Grantees continued Employment; provided, however, that:
(a) | except as provided in subsections 4(d) and (e) below, if the Grantees Employment terminates as a result of (i) termination of the Grantee by Employer without Cause or (ii) the Grantees Disability or death, then the Stock Units shall Vest on a Pro Rata Basis. |
(b) | except as provided in subsections 4(d) and (e) below, if the Grantees Employment terminates as a result of the Grantees resignation, then the Stock Units shall be deemed to have stopped vesting as of the beginning of the year containing the Date of Termination of such Grantee. |
(c) | if the Grantees Employment terminates as a result of termination by Employer for Cause, all of the Stock Units will be immediately forfeited by the Grantee and terminate as of the Date of Termination. |
(d) | if a Change of Control occurs after the second anniversary of the Effective Date, the Stock Units will become fully vested (i) on the date of termination of employment if Grantees employment is terminated by Employer without Cause or by Grantee for Good Reason and such termination occurs on or within 18 months following the Change of Control or (ii) on the date of the Change of Control if an In Contemplation Termination has occurred. |
(e) | if a Change of Control occurs prior to the second anniversary of the Effective Date, 50% of the unvested Stock Units will vest upon (A) Grantees termination of employment by Employer without Cause or by Grantee for Good Reason if such termination occurs on or within 18 months following the Change of Control or (B) the date of the Change of Control if an In Contemplation Termination occurred, and the balance of the unvested Stock Units will be immediately forfeited by the Grantee. |
5. Payment of Stock Units. The Grantees vested Stock Units shall be paid in Shares upon the first to occur of (i) a Change of Control that meets the requirements of a change in
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control event under Section 409A of the Code (a 409A Change of Control), (ii) the Grantees separation from service for any reason other than for Cause, or (iii) the date that is four years after the Effective Date. If a 409A Change of Control occurs before the Stock Units are fully vested, any Stock Units that subsequently vest shall be paid upon the first to occur of (i) the Grantees separation from service for any reason other than for Cause or (ii) the date that is four years after the Effective Date. Any Stock Units that vest as a result of an In Contemplation Termination under Section 4(d) or 4(e) shall be paid in Shares upon the Change of Control if the Change of Control is a 409A Change of Control and, if not, in accordance with the other provisions of this Section 5. Notwithstanding the foregoing, all distributions of Shares under this Agreement upon separation from service shall only be made upon the Grantees separation from service within the meaning of Section 409A of the Code, and all distributions shall be made at a time and in a manner consistent with Section 409A. When the vested Stock Units become payable, the Companies will issue to the Grantee Shares representing the Units underlying the vested Stock Units, subject to satisfaction of the Grantees tax withholding obligations as described below, within 30 days after the payment event.
6. Certain Calls and Puts. The Stock Units granted hereunder and the related Shares are subject to the call and put rights contained in Section 6 of the Stockholders Agreement, except that such put rights shall be granted only if and to the extent permitted by the Code (including Section 409A thereof); provided, however, that the call rights contained in Section 6 of the Stockholders Agreement shall not apply in the event of a termination resulting from Disability or death.
7. Share Restrictions, etc. Except as expressly provided herein, the Grantees rights hereunder and with respect to Shares received upon payment in accordance with Section 5 herein are subject to the restrictions and other provisions contained in the Stockholders Agreement.
8. Distributions, Redemptions, etc.
(a) | Upon the occurrence of an Adjustment Event, there shall be credited to the Account an amount equal to the product of (i) the per-Share amount paid with respect to Shares underlying the Stock Units in connection with the Adjustment Event, multiplied by (ii) the number of Shares of the class of stock affected by the Adjustment Event that are included in each Unit immediately prior to the Adjustment Event, multiplied by (iii) the number of Units underlying the Grantees Stock Units pursuant to this Award. |
(b) | If any other cash dividend or distribution is paid with respect to Shares underlying the Stock Units, there shall be credited to the Account an amount equal to the product of (i) the per-Share amount paid with respect to Shares underlying the Stock Units, multiplied by (ii) the number of Shares of the applicable class of stock that are included in each Unit, multiplied by (iii) the number of Units underlying the Grantees Stock Units pursuant to this Award. |
(c) | The amount credited to the Account pursuant to this Section 8 with respect to Stock Units is referred to as the Bonus Value. The Bonus Value shall vest on the same terms as the Stock Units to which it relates, as set forth in this Agreement, and the |
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vested Bonus Value shall be paid to the Grantee, in cash, Shares or such other securities or assets as the Compensation Committee or Board shall determine, at the same time as the vested Stock Units are paid pursuant to Section 5 herein, consistent with Section 409A of the Code. |
(d) | In the case of a redemption or repurchase of Shares, the number of Shares of the class of stock redeemed or repurchased that are subject to outstanding Stock Units will be automatically reduced by an amount proportionate to the percentage reduction in outstanding Shares of the affected class resulting from the redemption or repurchase. The Grantee shall be entitled to receive any information reasonably requested regarding the composition of a Unit, as adjusted in accordance with this Section 8. |
9. Forfeiture. Upon delivery of Shares pursuant to the Stock Units, the Grantee shall certify on a form acceptable to the Committee that the Grantee is, and at all times during and after Employment has been, in compliance with the Restrictive Covenants, the Employment Agreement and all other agreements between the Grantee and the Company or any of its Affiliates. If the Company determines that the Grantee is not, or at any time during or after Employment has not been, in compliance with one or more of the Restrictive Covenants, the Employment Agreement or with the provisions of any agreement between the Grantee and the Company or any of its Affiliates, and such non-compliance has not been authorized in advance in a specific written waiver from the Company or the applicable party, the Committee may cancel any unpaid Stock Units. The Company shall also have the following (and only the following) additional remedies:
(a) | During the six months after any delivery of Shares pursuant to the Stock Units, such delivery may be rescinded at the Companys option if the Grantee fails, or at any time during or after Employment has failed, to comply in any material respect with the terms of the Restrictive Covenants, the Employment Agreement or of any other agreement with the Company or any of its Affiliates or if the Grantee breaches, or at any time during or after Employment has breached, any duty to the Company or any of its Affiliates. The Company shall notify the Grantee in writing of any such rescission within one year after such delivery. Within ten days after receiving such a notice from the Company, the Grantee shall remit or deliver to the Company (i) the amount of any gain realized upon the sale of any Shares, (ii) any consideration received upon the exchange of any Shares (or to the extent that such consideration was not received in the form of cash, the cash equivalent thereof valued at the time of the exchange), and (iii) the number of Shares received in connection with the rescinded delivery. |
(b) | The Company shall have the right to offset, against any Shares and any cash amounts due to the Grantee under or by reason of the Grantees holding the Stock Units, any amounts to which the Company is entitled as a result of the Grantees violation of the terms of the Restrictive Covenants, the Employment Agreement or of any other agreement with the Company or any of its Affiliates or the Grantees breach of any duty to the Company or any of its Affiliates; provided, however, that no offset shall accelerate or defer the distribution date of amounts payable under this Agreement in violation of Section 409A of the Code, and any offset in violation |
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of Section 409A shall be null and void. Accordingly, the Grantee acknowledges that (i) the Company may withhold delivery of Shares, (ii) the Company may place the proceeds of any sale or other disposition of Shares in an escrow account of the Companys choosing pending resolution of any dispute with the Company, and (iii) the Company has no liability for any attendant market risk caused by any such withholding, or escrow, subject, however, to compliance with the requirements of Section 409A of the Code.
The Grantee acknowledges and agrees that the calculation of damages from a breach of any of the Restrictive Covenants, the Employment Agreement or of any other agreement with the Company or any of its Affiliates or of any duty to the Company or any of its Affiliates would be difficult to calculate accurately and that the right to offset or other remedy provided for herein is reasonable and not a penalty. The Grantee further agrees not to challenge the reasonableness of such provisions even where the Company rescinds, delays, withholds or escrows Shares or proceeds or uses those Shares or proceeds as a setoff.
10. Legends, etc. Shares issued upon the lapse of any restrictions on the Stock Units shall bear such legends as may be required or provided for under the terms of the Stockholders Agreement.
11. Transfer of Stock Units. The Stock Units may only be transferred by the laws of descent and distribution, or to a legal representative in the event of the Grantees incapacity and in accordance with the terms of the Stockholders Agreement.
12. Withholding. The payment of the Shares and other amounts in accordance with this Agreement will give rise to wages or other compensation income subject to withholding. The Grantee expressly acknowledges and agrees that the Grantees rights hereunder, including the right to be issued Shares in accordance with Section 5 herein and paid cash in accordance with Section 8 hereof, are subject to the Grantee promptly paying to the Companies in cash or by Share withholding as described below (or by such other means as may be acceptable to the Administrator in its discretion) all taxes required to be withheld. The Grantee also authorizes the Companies and their subsidiaries to withhold such amount from any amounts otherwise owed to the Grantee. Unless the Grantee elects otherwise by providing written notice to the Company not later than 30 days after the payment event, any tax withholding obligation with respect to the payment of Shares shall be satisfied by having Shares withheld up to an amount that does not exceed the minimum applicable withholding tax rate for federal (including FICA), state, and local tax liabilities. Accordingly, unless the Grantee timely elects to pay the withholding Taxes in cash, the Grantee shall be deemed to have elected to pay such Taxes through Share withholding as described above.
13. Grant Subject to Plan Provisions. This Award is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. The Award and payment of the Stock Units are subject to interpretations, regulations and determinations concerning the Plan established from time to time by the Administrator in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) the registration, qualification or listing of the shares issued under the Plan, (ii) changes in capitalization and (iii) other requirements of applicable law. The
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Administrator shall have the authority to interpret and construe the Stock Units pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.
14. Effect on Employment. Neither the grant of the Stock Units, nor the issuance of Shares or other payments in accordance with this Agreement, shall give the Grantee any right to be retained in the employ of the Company, Lowerco or any of their Affiliates, affect the right of the Company, Lowerco or any of their Affiliates to discharge or discipline the Grantee at any time, or affect any right of the Grantee to terminate his or her Employment at any time.
15. Delay in Payments for Specified Employees. Notwithstanding anything in this Agreement to the contrary, if the Grantee is a specified employee of a publicly traded corporation under Section 409A of the Code at the time of separation from service and if payment of any amount under this Agreement is required to be delayed for a period of six months after the separation from service pursuant to Section 409A of the Code, payment of such amount shall be delayed as required by Section 409A of the Code, and the accumulated postponed amount shall be paid in a lump sum payment within 10 days after the end of the six-month period. If the Grantee dies during the postponement period prior to the payment of postponed amount, the accumulated postponed amount shall be paid to the personal representative of the Grantees estate within 60 days after the date of the Grantees death.
16. Section 409A. It is intended that the Stock Units awarded hereunder shall comply with the requirements of Section 409A of the Code (and any regulations and guidelines issued thereunder), and this Agreement shall be interpreted on a basis consistent with such intent. Payments shall only be made on an event and in a manner permitted by Section 409A of the Code. Each payment under this Agreement is considered a separate payment for purposes of Section 409A of the Code. As provided under Section 409A, if calculation of the amount of a payment is not administratively practicable due to events beyond the control of the Grantee, the payment will be treated as made upon the date specified hereunder if the payment is made during the first calendar year in which calculation of the amount of the payment is administratively practicable. This Agreement may be amended without the consent of the Grantee in any respect deemed by the Committee to be necessary in order to preserve compliance with Section 409A of the Code.
17. Nature of Grant; No Entitlement; No Claim for Compensation. Grantee, in accepting the Stock Units, represents and acknowledges that Grantees participation in the Plan is voluntary; that participation in the Plan is discretionary and does not form any part of Grantees contract of employment, if any, with the Company or any of its subsidiaries; and that Grantee has not been induced to participate in the Plan by any expectation of employment or continued employment with the Company or any of its subsidiaries. Grantee furthermore understands and acknowledges that the grant of the Stock Units is discretionary and a one-time occurrence, does not constitute any portion of Grantees regular remuneration and is not intended to be taken into account in calculating service-related benefits, and bears no guarantee or implication that any additional grant will be made in the future. In consideration of the grant of the Stock Units, no claim or entitlement to compensation or damages shall arise from forfeiture of the Stock Units or diminution in value of the Stock Units or any of the Shares issuable under the Stock Units from termination of Grantees employment by the Company or his or her employer, as applicable (and for any reason whatsoever and whether or not in breach of contract or local labor laws), and Grantee irrevocably release his or her employer, the Company and its subsidiaries, as applicable,
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from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, Grantee shall be deemed to have irrevocably waived Grantees entitlement to pursue such claim.
18. Personal Data. Grantee understands and acknowledges that in order to perform its obligations under the Plan, the Company and its subsidiaries may process personal data and/or sensitive personal data relating to Grantee. Such data includes but is not limited to the information provided in this Agreement and any changes thereto, other personal and financial data relating to Grantee (including, without limitation, Grantees address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title), and information about Grantees participation in the Plan and the Shares acquired from time to time pursuant to the Plan. Grantee, in accepting the Stock Units, gives his or her explicit and voluntary consent to the Company and its subsidiaries to collect, use and process any such personal data and/or sensitive personal data (in electronic or other form). Grantee also hereby gives his or her explicit and voluntary consent to the Company and its subsidiaries to transfer any such personal data and/or sensitive personal data (in electronic or other form) outside the country in which Grantee works or is employed. The legal persons for whom Grantees personal data are intended include the Company and any of its subsidiaries, any outside plan administrator or service provider selected by the Company or any of its subsidiaries from time to time, and any other person that the Administrator may find in its administration of the Plan to be appropriate; such recipients may be located in countries that have different data privacy laws and protections than Grantees country. Grantee hereby acknowledges that he or she has been informed of his or her right of access and correction to his or her personal data by contacting his or her local human resources representative. Grantee understands that the transfer of the information described herein is important to the administration of the Plan and that failure to consent to the transmission of such information may limit or prohibit his or her participation in the Plan.
19. Governing Law. This Agreement and all claims arising out of or based upon this Agreement or relating to the subject matter hereof shall be governed by and construed in accordance with the domestic substantive laws of the State of Delaware without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.
20. Compliance with Laws, Regulations and Policies. The issuance of Shares pursuant to the vested Stock Units shall be subject to compliance by the Companies and the Grantee with all applicable requirements of law relating thereto (including, without limitation, foreign securities and exchange control requirements). The inability of the Companies to lawfully issue Shares or the inability of the Companies and/or the Grantee to obtain approval from any regulatory body having authority deemed by the Companies to be necessary to the lawful issuance of any Shares hereby shall relieve the Companies of any liability with respect to the non-issuance of the Shares. The Stock Units, and all Shares and other amounts payable pursuant to the Stock Units, are subject to the terms of any applicable clawback and other policies adopted by the Board.
21. Amendment. In addition to the authority to make adjustments pursuant to Section 7(b) of the Plan, the Administrator may modify the terms of the Award as the Administrator deems appropriate, in good faith, to take account of a change in circumstances occasioned by a stock dividend or other similar distribution (whether in the form of stock, other
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securities or other property), stock split or combination of shares (including a reverse stock split), recapitalization, conversion, reorganization, consolidation, split-up, spin-off, combination, merger, exchange of stock, redemption or repurchase of all or part of the shares of any class of stock or any change in the capital structure of the Company or an Affiliate or other transaction or event, including the power to adjust the performance goals that are affected by such a transaction.
[SIGNATURE PAGE FOLLOWS]
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By acceptance of the Stock Units, the undersigned agrees hereby to become a party to, and be bound by the terms of, the Stockholders Agreement as a Manager as defined therein.
Executed as of the Date of Grant.
SunGard Capital Corp. and | SUNGARD CAPITAL CORP. | |||||
SunGard Capital Corp. II | SUNGARD CAPITAL CORP. II | |||||
By: | /s/ Russell Fradin |
Grantee
I ACKNOWLEDGE THAT I HAVE RECEIVED A COPY OF THIS AGREEMENT AND CERTAIN RELATED INFORMATION, AND THAT I HAVE READ AND UNDERSTOOD THESE DOCUMENTS. I ACCEPT AND AGREE TO ALL OF THE PROVISIONS OF THIS AGREEMENT.
/s/ Charles Neral |
Grantee |
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Schedule A
Vesting Schedule
(1) | With respect to each of the calendar years in the Performance Period, the Stock Units shall be exercisable to the extent that the Target is achieved during such period as follows, and the portion of the Stock Units that is earned for such calendar year shall vest in accordance with the vesting schedule set forth in paragraph (2) below: |
(a) | if Actual Internal EBITA for such calendar year is less than or equal to 95% of the Target for that year, none of the Stock Units will be earned at the end of that year; |
(b) | if Actual Internal EBITA for such calendar year is between 95% and 100% of the Target for that year, the number of Stock Units that vest and become exercisable at the end of that year will be determined by linear interpolation between 95% and 100% of the number of Stock Units; and |
(c) | if Actual Internal EBITA for such calendar year is equal to or greater than 100% of the Target for that year, 1/4 of the Stock Units shall be earned (rounded to the nearest .0001 of a Stock Unit) at the end of that year. |
(2) | The Stock Units shall vest up to 25% annually as of the end of the applicable calendar year, to the extent earned, and subject to the other terms of the Agreement. |
For purposes of this Vesting Schedule:
Performance Period means the four-year period beginning on January 1 of the year of grant.
Actual Internal EBITA means the Companys actual earnings before interest, taxes and amortization for a year, determined based on the Companys audited financials. Actual Internal EBITA shall not be reduced by costs of the Companys proposed spin-off of its availability services business or related items, management and transaction fees payable to the Investors or their affiliates, extraordinary items (as determined by the Compensation Committee in consultation with the CEO) or non-cash equity incentive expenses. Actual Internal EBITA shall be calculated without giving effect to purchase accounting and shall be adjusted in good faith by the Compensation Committee in consultation with the CEO to reflect the consequences of acquisitions and dispositions. Unless otherwise determined by the Board or Compensation Committee and agreed to by the CEO, the adjustment for acquisitions and dispositions shall be based on a cost of funds used for acquisitions and released by dispositions at a rate of 11%, compounded at the rate of 7.5% per annum, provided that transactions with a purchase price in excess of $50 million may merit an alternative adjustment, in which case the rate will be as mutually agreed by the CEO and the Board or Compensation Committee. Actual Internal EBITA targets shall be appropriately adjusted by the Compensation Committee in consultation with the CEO in case of changes in GAAP promulgated by FASB or the SEC or changes in depreciation methodology.
Target means the Companys final consolidated budgeted Actual Internal EBITA, as approved by the Board or Compensation Committee and as appears in the Companys operating budget for each of the applicable calendar years in the Performance Period.
Exhibit 12.1
SunGard Capital Corp.
SunGard Capital Corp. II
SunGard Data Systems Inc.
Computation of Ratio of Earnings to Fixed Charges (Unaudited)
($ in millions)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2012 | 2011 | 2012 | |||||||||||||
Fixed charges |
||||||||||||||||
Interest expense |
$ | 120 | $ | 95 | $ | 366 | $ | 299 | ||||||||
Amortization of debt issuance costs and debt discount |
10 | 7 | 29 | 26 | ||||||||||||
Portion of rental expense representative of interest |
20 | 17 | 59 | 54 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed charges |
$ | 150 | $ | 119 | $ | 454 | $ | 379 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings |
||||||||||||||||
Income (loss) from continuing operations before income taxes |
$ | (66 | ) | $ | (380 | ) | $ | (205 | ) | $ | (495 | ) | ||||
Fixed charges per above |
150 | 119 | 454 | 379 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total earnings |
$ | 84 | $ | (261 | ) | $ | 249 | $ | (116 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||
Ratio of earnings to fixed charges |
* | * | * | * |
* | Earnings for the three months ended September 30, 2011 and 2012 were inadequate to cover fixed charges by $66 million and $380 million, respectively. Earnings for the nine months ended September 30, 2011 and 2012 were inadequate to cover fixed charges by $205 million and $495 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: November 9, 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 Charles J. Neral
Required by Rule 13a-14(a) or Rule 15d-14(a) and
Section 302 of the Sarbanes-Oxley Act of 2002
I, Charles J. Neral, 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: November 9, 2012 |
/s/ Charles J. Neral |
Charles J. Neral |
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 September 30, 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: November 9, 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 Charles J. Neral
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, Charles J. Neral, 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 September 30, 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: November 9, 2012 |
/s/ Charles J. Neral |
Charles J. Neral |
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.
Interest Rate Swaps (Detail) (Interest Rate Swap, USD $)
In Millions, unless otherwise specified |
9 Months Ended |
---|---|
Sep. 30, 2012
|
|
Derivative [Line Items] | |
Notional Amount | $ 900 |
Interest rate paid | 1.41% |
Derivative Instrument 1
|
|
Derivative [Line Items] | |
Inception | 2010-02 |
Maturity | 2013-05 |
Notional Amount | 500 |
Interest rate paid | 1.99% |
Interest rate received (LIBOR) | 3 months |
Derivative Instrument 2
|
|
Derivative [Line Items] | |
Maturity | 2017-02 |
Notional Amount | $ 400 |
Interest rate paid | 0.69% |
Interest rate received (LIBOR) | 1 month |
Minimum | Derivative Instrument 2
|
|
Derivative [Line Items] | |
Inception | 2012-08 |
Maximum | Derivative Instrument 2
|
|
Derivative [Line Items] | |
Inception | 2012-09 |
Supplemental Guarantor Condensed Consolidating Financial Statements - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2012
|
Dec. 31, 2010
|
|
Condensed Financial Statements, Captions [Line Items] | ||
Percentage of each of the Guarantors owned by SunGard | 100.00% | |
Misclassification of expense between Guarantor subsidiaries and Non-Guarantor subsidiaries | $ 91 |
Amortization of Acquisition-Related Intangible Assets by Segment (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||
Amortization of acquisition-related intangible assets | $ 94 | $ 106 | $ 295 | $ 332 | ||||||
Financial Systems
|
||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||
Amortization of acquisition-related intangible assets | 49 | [1] | 59 | [1] | 155 | [1] | 189 | [1] | ||
Availability Services
|
||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||
Amortization of acquisition-related intangible assets | 40 | 43 | 126 | 129 | ||||||
Other
|
||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||||||
Amortization of acquisition-related intangible assets | $ 5 | $ 4 | $ 14 | $ 14 | ||||||
|
Operating Results (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Revenues | $ 1,035 | $ 1,097 | $ 3,131 | $ 3,286 | ||||||||||||
Depreciation and amortization | 70 | 67 | 211 | 204 | ||||||||||||
Income (loss) from operations | (279) | 63 | (122) | 190 | ||||||||||||
Cash paid for property and equipment and software | 58 | 55 | 173 | 183 | ||||||||||||
Financial Systems
|
||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Revenues | 640 | 680 | 1,928 | 2,037 | ||||||||||||
Depreciation and amortization | 22 | 20 | 63 | 62 | ||||||||||||
Income (loss) from operations | 136 | [1] | 121 | [1] | 388 | [1] | 374 | [1] | ||||||||
Cash paid for property and equipment and software | 19 | 18 | 62 | 62 | ||||||||||||
Availability Services
|
||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Revenues | 345 | 365 | 1,052 | 1,095 | ||||||||||||
Depreciation and amortization | 46 | 45 | 142 | 136 | ||||||||||||
Income (loss) from operations | 74 | [2] | 80 | [2] | 209 | [2] | 234 | [2] | ||||||||
Cash paid for property and equipment and software | 36 | 34 | 104 | 114 | ||||||||||||
Other
|
||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Revenues | 50 | 52 | 151 | 154 | ||||||||||||
Depreciation and amortization | 1 | 2 | 5 | 6 | ||||||||||||
Income (loss) from operations | 13 | 15 | 41 | 43 | ||||||||||||
Cash paid for property and equipment and software | 2 | 2 | 6 | 4 | ||||||||||||
Corporate
|
||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Depreciation and amortization | 1 | 1 | ||||||||||||||
Income (loss) from operations | (11) | [3] | (30) | [3] | (39) | [3] | (79) | [3] | ||||||||
Cash paid for property and equipment and software | 1 | 1 | 1 | 3 | ||||||||||||
Other costs
|
||||||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||||||
Income (loss) from operations | $ (491) | [4] | $ (123) | [4] | $ (721) | [4] | $ (382) | [4] | ||||||||
|
Goodwill Impairment Charge by Reporting Unit (Detail) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Goodwill [Line Items] | ||
Goodwill balance after impairment | $ 4,503 | $ 4,885 |
Availability Services
|
||
Goodwill [Line Items] | ||
Net Goodwill balance before impairment | 914 | |
Impairment charge | (385) | |
Goodwill balance after impairment | $ 529 |
Supplemental Condensed Consolidating Schedule of Comprehensive Income (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||||||
Total revenue | $ 1,035 | $ 1,097 | $ 3,131 | $ 3,286 | ||||||||
Costs and expenses: | ||||||||||||
Depreciation and amortization | 70 | 67 | 211 | 204 | ||||||||
Amortization of acquisition-related intangible assets | 94 | 106 | 295 | 332 | ||||||||
Goodwill impairment charges | 385 | 385 | ||||||||||
Total costs and expenses | 1,314 | 1,034 | 3,253 | 3,096 | ||||||||
Operating income (loss) | (279) | 63 | (122) | 190 | ||||||||
Benefit from (provision for) income taxes | 13 | 27 | 44 | 57 | ||||||||
Income (loss) from continuing operations | (367) | (39) | (451) | (148) | ||||||||
Income (loss) from discontinued operations, net of tax | 5 | (108) | 316 | (95) | ||||||||
Net income (loss) | (362) | (147) | (135) | (243) | ||||||||
Comprehensive income (loss) | (394) | (283) | (294) | (408) | ||||||||
Parent
|
||||||||||||
Costs and expenses: | ||||||||||||
Cost of sales and administrative expenses | 20 | 40 | 69 | 104 | ||||||||
Amortization of acquisition-related intangible assets | 1 | 1 | ||||||||||
Total costs and expenses | 21 | 40 | 70 | 104 | ||||||||
Operating income (loss) | (21) | (40) | (70) | (104) | ||||||||
Net interest income (expense) | (94) | (120) | (303) | (367) | ||||||||
Other income (expense) | (292) | 65 | (225) | 159 | ||||||||
Income (loss) from continuing operations before income taxes | (407) | (95) | (598) | (312) | ||||||||
Benefit from (provision for) income taxes | 40 | 56 | 147 | 164 | ||||||||
Income (loss) from continuing operations | (367) | (39) | [1] | (451) | (148) | [2] | ||||||
Income (loss) from discontinued operations, net of tax | 5 | (108) | 316 | (95) | ||||||||
Net income (loss) | (362) | (147) | [1] | (135) | (243) | |||||||
Comprehensive income (loss) | (330) | (226) | (108) | (242) | ||||||||
Guarantor Subsidiaries
|
||||||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||||||
Total revenue | 725 | 748 | [3] | 2,170 | 2,219 | |||||||
Costs and expenses: | ||||||||||||
Cost of sales and administrative expenses | 506 | 556 | 1,562 | 1,652 | ||||||||
Depreciation and amortization | 48 | 45 | 144 | 137 | ||||||||
Amortization of acquisition-related intangible assets | 76 | 84 | 245 | 265 | ||||||||
Goodwill impairment charges | 385 | 385 | ||||||||||
Total costs and expenses | 1,015 | 685 | 2,336 | 2,054 | ||||||||
Operating income (loss) | (290) | 63 | [3] | (166) | 165 | [3] | ||||||
Net interest income (expense) | (1) | |||||||||||
Other income (expense) | 16 | 23 | 60 | 72 | ||||||||
Income (loss) from continuing operations before income taxes | (274) | 86 | (106) | 236 | ||||||||
Benefit from (provision for) income taxes | (18) | (19) | (68) | (74) | ||||||||
Income (loss) from continuing operations | (292) | 67 | [1] | (174) | 162 | [2] | ||||||
Income (loss) from discontinued operations, net of tax | 5 | 25 | 91 | 38 | ||||||||
Net income (loss) | (287) | 92 | [1] | (83) | 200 | [2] | ||||||
Comprehensive income (loss) | (265) | 36 | (65) | 218 | ||||||||
Non-Guarantor Subsidiaries
|
||||||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||||||
Total revenue | 394 | 455 | [3] | 1,218 | 1,389 | [3] | ||||||
Costs and expenses: | ||||||||||||
Cost of sales and administrative expenses | 323 | 371 | 988 | 1,126 | ||||||||
Depreciation and amortization | 22 | 22 | 67 | 67 | ||||||||
Amortization of acquisition-related intangible assets | 17 | 22 | 49 | 67 | ||||||||
Total costs and expenses | 362 | 415 | 1,104 | 1,260 | ||||||||
Operating income (loss) | 32 | 40 | [3] | 114 | 129 | [3] | ||||||
Net interest income (expense) | (7) | (9) | (21) | (25) | ||||||||
Other income (expense) | 2 | |||||||||||
Income (loss) from continuing operations before income taxes | 25 | 31 | 95 | 104 | ||||||||
Benefit from (provision for) income taxes | (9) | (10) | (35) | (33) | ||||||||
Income (loss) from continuing operations | 16 | 21 | [1] | 60 | 71 | [2] | ||||||
Income (loss) from discontinued operations, net of tax | 9 | (4) | 5 | (2) | ||||||||
Net income (loss) | 25 | 17 | [1] | 65 | 69 | [2] | ||||||
Comprehensive income (loss) | 45 | (50) | 80 | 73 | ||||||||
Eliminations
|
||||||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||||||
Total revenue | (84) | (106) | [3] | (257) | (322) | [3] | ||||||
Costs and expenses: | ||||||||||||
Cost of sales and administrative expenses | (84) | (106) | (257) | (322) | ||||||||
Total costs and expenses | (84) | (106) | (257) | (322) | ||||||||
Other income (expense) | 276 | (88) | 114 | (233) | ||||||||
Income (loss) from continuing operations before income taxes | 276 | (88) | 114 | (233) | ||||||||
Income (loss) from continuing operations | 276 | (88) | [1] | 114 | (233) | [2] | ||||||
Income (loss) from discontinued operations, net of tax | (14) | (21) | (96) | (36) | ||||||||
Net income (loss) | 262 | (109) | [1] | 18 | (269) | [2] | ||||||
Comprehensive income (loss) | 220 | 14 | (15) | (291) | ||||||||
SunGard Data Systems Inc.
|
||||||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||||||
Total revenue | 1,035 | 1,097 | 3,131 | 3,286 | ||||||||
Costs and expenses: | ||||||||||||
Cost of sales and administrative expenses | 765 | 861 | 2,362 | 2,560 | ||||||||
Depreciation and amortization | 70 | 67 | 211 | 204 | ||||||||
Amortization of acquisition-related intangible assets | 94 | 106 | 295 | 332 | ||||||||
Goodwill impairment charges | 385 | 385 | ||||||||||
Total costs and expenses | 1,314 | 1,034 | 3,253 | 3,096 | ||||||||
Operating income (loss) | (279) | 63 | (122) | 190 | ||||||||
Net interest income (expense) | (101) | (129) | (324) | (393) | ||||||||
Other income (expense) | (49) | (2) | ||||||||||
Income (loss) from continuing operations before income taxes | (380) | (66) | (495) | (205) | ||||||||
Benefit from (provision for) income taxes | 13 | 27 | 44 | 57 | ||||||||
Income (loss) from continuing operations | (367) | (39) | (451) | (148) | ||||||||
Income (loss) from discontinued operations, net of tax | 5 | (108) | 316 | (95) | ||||||||
Net income (loss) | (362) | (147) | (135) | (243) | ||||||||
Comprehensive income (loss) | $ (330) | $ (226) | $ (108) | $ (242) | ||||||||
|
Segment Information: (Tables)
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
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Operating Results | The operating results for each segment follow (in millions):
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Amortization of Acquisition-Related Intangible Assets by Segment | Amortization of acquisition-related intangible assets by segment follows (in millions):
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FS Revenue by Business Areas | The FS Segment is organized to align by product offering. FS revenue by these business areas follows (in millions):
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Financial Service Revenue by Business Areas (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Revenue from External Customer [Line Items] | ||||
Revenues | $ 1,035 | $ 1,097 | $ 3,131 | $ 3,286 |
Financial Systems
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||||
Revenue from External Customer [Line Items] | ||||
Revenues | 640 | 680 | 1,928 | 2,037 |
Financial Systems | Capital Markets
|
||||
Revenue from External Customer [Line Items] | ||||
Revenues | 228 | 236 | 691 | 728 |
Financial Systems | Asset Management
|
||||
Revenue from External Customer [Line Items] | ||||
Revenues | 113 | 120 | 339 | 343 |
Financial Systems | Wealth and Retirement Administration
|
||||
Revenue from External Customer [Line Items] | ||||
Revenues | 67 | 72 | 203 | 207 |
Financial Systems | Corporate Liquidity & Energy
|
||||
Revenue from External Customer [Line Items] | ||||
Revenues | 65 | 68 | 197 | 202 |
Financial Systems | Banking
|
||||
Revenue from External Customer [Line Items] | ||||
Revenues | 56 | 60 | 160 | 175 |
Financial Systems | Brokerage
|
||||
Revenue from External Customer [Line Items] | ||||
Revenues | 39 | 45 | 124 | 163 |
Financial Systems | Insurance
|
||||
Revenue from External Customer [Line Items] | ||||
Revenues | 41 | 45 | 122 | 126 |
Financial Systems | Other
|
||||
Revenue from External Customer [Line Items] | ||||
Revenues | $ 31 | $ 34 | $ 92 | $ 93 |
Fair Value Measurements - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2012
|
Sep. 30, 2012
|
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Fair Value Measurements [Line Items] | ||
Goodwill impairment loss | $ 385 | $ 385 |
Debt (Detail) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Debt Instrument [Line Items] | ||
Total debt | $ 6,111 | $ 7,829 |
Short-term borrowings and current portion of long-term debt | (9) | (10) |
Long-term debt | 6,102 | 7,819 |
Senior Secured Credit Facility
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||
Debt Instrument [Line Items] | ||
Debt agreement, outstanding amount | 3,051 | 4,272 |
Senior Secured Credit Facility | Tranche A
|
||
Debt Instrument [Line Items] | ||
Debt agreement, outstanding amount | 255 | 1,386 |
Senior Secured Credit Facility | Tranche B
|
||
Debt Instrument [Line Items] | ||
Debt agreement, outstanding amount | 1,719 | 2,407 |
Senior Secured Credit Facility | Tranche C
|
||
Debt Instrument [Line Items] | ||
Debt agreement, outstanding amount | 908 | |
Senior Secured Credit Facility | Incremental Term Loan
|
||
Debt Instrument [Line Items] | ||
Debt agreement, outstanding amount | 169 | 479 |
Senior Secured Notes 4.875% due 2014
|
||
Debt Instrument [Line Items] | ||
Senior Notes or Senior Subordinated Notes | 245 | 242 |
Senior Notes 10.625% due 2015
|
||
Debt Instrument [Line Items] | ||
Senior Notes or Senior Subordinated Notes | 497 | |
Senior Notes 7.375% due 2018
|
||
Debt Instrument [Line Items] | ||
Senior Notes or Senior Subordinated Notes | 900 | 900 |
Senior Notes 7.625% due 2020
|
||
Debt Instrument [Line Items] | ||
Senior Notes or Senior Subordinated Notes | 700 | 700 |
Senior Subordinated Notes Ten Point Two Five Percent Due Twenty Fifteen
|
||
Debt Instrument [Line Items] | ||
Senior Notes or Senior Subordinated Notes | 1,000 | 1,000 |
Accounts Receivable Facilities
|
||
Debt Instrument [Line Items] | ||
Debt agreement, outstanding amount | 200 | 200 |
Debt and Capital Lease Obligations, Other
|
||
Debt Instrument [Line Items] | ||
Other, primarily acquisition purchase price and capital lease obligations | $ 15 | $ 18 |
Supplemental Cash Flow Information (Detail) (USD $)
In Millions, unless otherwise specified |
9 Months Ended | |||||
---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
|||||
Supplemental information: | ||||||
Interest paid | $ 321 | $ 367 | ||||
Income taxes paid, net of refunds | 397 | [1] | 44 | [1] | ||
Cash paid for acquired businesses, net of cash acquired | 10 | 35 | ||||
Property and equipment
|
||||||
Supplemental information: | ||||||
Cash paid for acquired businesses, net of cash acquired | 1 | |||||
Software products
|
||||||
Supplemental information: | ||||||
Cash paid for acquired businesses, net of cash acquired | 21 | |||||
Customer base
|
||||||
Supplemental information: | ||||||
Cash paid for acquired businesses, net of cash acquired | 7 | 12 | ||||
Goodwill
|
||||||
Supplemental information: | ||||||
Cash paid for acquired businesses, net of cash acquired | 5 | 6 | ||||
Deferred Income Taxes
|
||||||
Supplemental information: | ||||||
Cash paid for acquired businesses, net of cash acquired | (2) | (5) | ||||
Purchase price obligations and debt assumed
|
||||||
Supplemental information: | ||||||
Cash paid for acquired businesses, net of cash acquired | (1) | |||||
Net current liabilities assumed
|
||||||
Supplemental information: | ||||||
Cash paid for acquired businesses, net of cash acquired | $ 1 | |||||
|
Error Corrections and Prior Period Adjustment on Supplemental Condensed Consolidating Schedule of Cash Flows (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|||||||
Cash flow from operations: | ||||||||||
Net income (loss) | $ (362) | $ (147) | $ (135) | $ (243) | ||||||
Income (loss) from continuing operations | (367) | (39) | (451) | (148) | ||||||
Cash flow from (used in) continuing operations | 426 | 362 | ||||||||
Cash flow from (used in) operations | 86 | 427 | ||||||||
Investment activities: | ||||||||||
Cash provided by (used in) continuing operations | (180) | (220) | ||||||||
Cash provided by (used in) operations in investment activities | 1,578 | (227) | ||||||||
Parent
|
||||||||||
Cash flow from operations: | ||||||||||
Net income (loss) | (362) | (147) | [1] | (135) | (243) | |||||
Income (loss) from continuing operations | (367) | (39) | [1] | (451) | (148) | [2] | ||||
Non-cash adjustments | 311 | (123) | ||||||||
Changes in operating assets and liabilities | (175) | (226) | ||||||||
Cash flow from (used in) continuing operations | (315) | (497) | ||||||||
Cash flow from (used in) operations | (653) | (497) | ||||||||
Investment activities: | ||||||||||
Intercompany transactions | 2,342 | 649 | ||||||||
Cash provided by (used in) continuing operations | 2,341 | 645 | ||||||||
Cash provided by (used in) operations in investment activities | 2,341 | 645 | ||||||||
Guarantor Subsidiaries
|
||||||||||
Cash flow from operations: | ||||||||||
Net income (loss) | (287) | 92 | [1] | (83) | 200 | [2] | ||||
Income (loss) from continuing operations | (292) | 67 | [1] | (174) | 162 | [2] | ||||
Non-cash adjustments | 658 | 283 | ||||||||
Changes in operating assets and liabilities | 92 | 207 | ||||||||
Cash flow from (used in) continuing operations | 576 | 652 | ||||||||
Cash flow from (used in) operations | 571 | 727 | ||||||||
Investment activities: | ||||||||||
Intercompany transactions | (411) | (590) | ||||||||
Cash provided by (used in) continuing operations | (536) | (728) | ||||||||
Cash provided by (used in) operations in investment activities | 1,208 | (735) | ||||||||
Non-Guarantor Subsidiaries
|
||||||||||
Cash flow from operations: | ||||||||||
Net income (loss) | 25 | 17 | [1] | 65 | 69 | [2] | ||||
Income (loss) from continuing operations | 16 | 21 | [1] | 60 | 71 | [2] | ||||
Non-cash adjustments | 111 | 114 | ||||||||
Changes in operating assets and liabilities | (6) | 22 | ||||||||
Cash flow from (used in) continuing operations | 165 | 207 | ||||||||
Cash flow from (used in) operations | 168 | 197 | ||||||||
Investment activities: | ||||||||||
Intercompany transactions | (160) | (59) | ||||||||
Cash provided by (used in) continuing operations | (214) | (137) | ||||||||
Cash provided by (used in) operations in investment activities | (200) | (137) | ||||||||
Eliminations
|
||||||||||
Cash flow from operations: | ||||||||||
Net income (loss) | 262 | (109) | [1] | 18 | (269) | [2] | ||||
Income (loss) from continuing operations | 276 | (88) | [1] | 114 | (233) | [2] | ||||
Non-cash adjustments | (114) | 233 | ||||||||
Investment activities: | ||||||||||
Intercompany transactions | (1,771) | |||||||||
Cash provided by (used in) continuing operations | (1,771) | |||||||||
Cash provided by (used in) operations in investment activities | (1,771) | |||||||||
Scenario, Previously Reported | Parent
|
||||||||||
Cash flow from operations: | ||||||||||
Net income (loss) | (147) | (243) | ||||||||
Income (loss) from continuing operations | (14) | (110) | ||||||||
Non-cash adjustments | (71) | |||||||||
Changes in operating assets and liabilities | (202) | |||||||||
Cash flow from (used in) continuing operations | (383) | |||||||||
Cash flow from (used in) operations | (383) | |||||||||
Investment activities: | ||||||||||
Intercompany transactions | 535 | |||||||||
Cash provided by (used in) continuing operations | 531 | |||||||||
Cash provided by (used in) operations in investment activities | 531 | |||||||||
Scenario, Previously Reported | Guarantor Subsidiaries
|
||||||||||
Cash flow from operations: | ||||||||||
Net income (loss) | 71 | 150 | ||||||||
Income (loss) from continuing operations | 44 | 110 | ||||||||
Non-cash adjustments | 446 | |||||||||
Changes in operating assets and liabilities | 277 | |||||||||
Cash flow from (used in) continuing operations | 833 | |||||||||
Cash flow from (used in) operations | 908 | |||||||||
Investment activities: | ||||||||||
Intercompany transactions | (772) | |||||||||
Cash provided by (used in) continuing operations | (910) | |||||||||
Cash provided by (used in) operations in investment activities | (916) | |||||||||
Scenario, Previously Reported | Non-Guarantor Subsidiaries
|
||||||||||
Cash flow from operations: | ||||||||||
Net income (loss) | (81) | (132) | ||||||||
Income (loss) from continuing operations | (79) | (132) | ||||||||
Non-cash adjustments | 115 | |||||||||
Changes in operating assets and liabilities | (79) | |||||||||
Cash flow from (used in) continuing operations | (96) | |||||||||
Cash flow from (used in) operations | (98) | |||||||||
Investment activities: | ||||||||||
Intercompany transactions | 237 | |||||||||
Cash provided by (used in) continuing operations | 159 | |||||||||
Cash provided by (used in) operations in investment activities | 158 | |||||||||
Scenario, Previously Reported | Eliminations
|
||||||||||
Cash flow from operations: | ||||||||||
Net income (loss) | 10 | (18) | ||||||||
Income (loss) from continuing operations | 8 | (18) | ||||||||
Non-cash adjustments | $ 18 | |||||||||
|
Operating Results (Parenthetical) (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Income (loss) from operations | $ (279) | $ 63 | $ (122) | $ 190 | ||||||||
Amortization of acquisition-related intangible assets | 94 | 106 | 295 | 332 | ||||||||
Financial Systems
|
||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Income (loss) from operations | 136 | [1] | 121 | [1] | 388 | [1] | 374 | [1] | ||||
Financial Systems | Employee Severance
|
||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Income (loss) from operations | 9 | 29 | 15 | 33 | ||||||||
Availability Services
|
||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Income (loss) from operations | 74 | [2] | 80 | [2] | 209 | [2] | 234 | [2] | ||||
Availability Services | Employee Severance
|
||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Income (loss) from operations | 1 | 9 | 2 | 8 | ||||||||
Corporate | Employee Severance
|
||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Income (loss) from operations | $ 8 | $ 16 | ||||||||||
|
Acquisitions and Discontinued Operations:
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 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 nine months ended September 30, 2012, the Company completed one acquisition in its FS segment. Cash paid, net of cash acquired, was $9 million. The impact of this acquisition was not material to the consolidated financial statements. In addition, the Company paid approximately $1 million related to deferred purchase price from prior year acquisitions. At September 30, 2012, potential contingent purchase price obligations that depend on the operating performance of certain acquired businesses were $6 million, of which the Company has estimated that $3 million will be paid and which is included in other long-term debt. 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). In July 2012, the Company sold its FS subsidiary SunGard Global Services France for gross proceeds of €14 million. The results for the discontinued operations for the three and nine months ended September 30, 2011 and 2012 were as follows (in millions):
Assets and liabilities related to discontinued operations consisted of the following (in millions) at December 31, 2011:
Assets and liabilities related to the discontinued operations of HE consisted of the following (in millions) at the closing balance sheet on January 20, 2012:
|