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, 2013
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, 2013:
SunGard Capital Corp. | 256,905,469 shares of Class A common stock and 28,545,050 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.
SUNGARD CAPITAL CORP. II
SUNGARD DATA SYSTEMS INC.
AND SUBSIDIARIES
PAGE | ||||||
PART I. | FINANCIAL INFORMATION | 1 | ||||
Item 1. | Financial Statements: | 2 | ||||
SunGard Capital Corp. | ||||||
Consolidated Balance Sheets as of December 31, 2012 and September 30, 2013 |
2 | |||||
3 | ||||||
4 | ||||||
SunGard Capital Corp. II | ||||||
Consolidated Balance Sheets as of December 31, 2012 and September 30, 2013 (unaudited) | 5 | |||||
6 | ||||||
7 | ||||||
SunGard Data Systems Inc. | ||||||
Consolidated Balance Sheets as of December 31, 2012 and September 30, 2013 |
8 | |||||
9 | ||||||
10 | ||||||
Notes to Consolidated Financial Statements (unaudited) | 11 | |||||
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 32 | ||||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 44 | ||||
Item 4. | Controls and Procedures | 44 | ||||
PART II. | OTHER INFORMATION | 45 | ||||
Item 1. | Legal Proceedings | 45 | ||||
Item 1A. | Risk Factors | 45 | ||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 45 | ||||
Item 3. | Defaults upon Senior Securities | 45 | ||||
Item 4. | Mine Safety Disclosures | 45 | ||||
Item 5. | Other Information | 45 | ||||
Item 6. | Exhibits | 45 | ||||
SIGNATURES | 46 |
Explanatory Note
This Quarterly Report on Form 10-Q (Report) 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 SCCII 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
SunGard Capital Corp.
(In millions except share and per-share amounts)
(Unaudited)
December 31, 2012 |
September 30, 2013 |
|||||||
Assets |
||||||||
Current: |
||||||||
Cash and cash equivalents |
$ | 546 | $ | 689 | ||||
Trade receivables, less allowance for doubtful accounts of $30 and $25 |
781 | 593 | ||||||
Earned but unbilled receivables |
119 | 122 | ||||||
Prepaid expenses and other current assets |
230 | 228 | ||||||
|
|
|
|
|||||
Total current assets |
1,676 | 1,632 | ||||||
Property and equipment, less accumulated depreciation of $1,509 and $1,683 |
874 | 812 | ||||||
Software products, less accumulated amortization of $1,649 and $1,782 |
411 | 326 | ||||||
Customer base, less accumulated amortization of $1,481 and $1,640 |
1,367 | 1,205 | ||||||
Other intangible assets, less accumulated amortization of $27 and $24 |
132 | 125 | ||||||
Trade name |
1,019 | 1,019 | ||||||
Goodwill |
4,539 | 4,545 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 10,018 | $ | 9,664 | ||||
|
|
|
|
|||||
Liabilities and Equity |
||||||||
Current: |
||||||||
Short-term and current portion of long-term debt |
$ | 63 | $ | 342 | ||||
Accounts payable |
32 | 34 | ||||||
Accrued compensation and benefits |
297 | 253 | ||||||
Accrued interest expense |
41 | 89 | ||||||
Other accrued expenses |
238 | 212 | ||||||
Deferred revenue |
836 | 773 | ||||||
|
|
|
|
|||||
Total current liabilities |
1,507 | 1,703 | ||||||
Long-term debt |
6,599 | 6,106 | ||||||
Deferred and other income taxes |
1,127 | 1,032 | ||||||
Other long-term liabilities |
95 | 118 | ||||||
|
|
|
|
|||||
Total liabilities |
9,328 | 8,959 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Noncontrolling interest in preferred stock of SCCII subject to a put option |
26 | 34 | ||||||
Class L common stock subject to a put option |
45 | 52 | ||||||
Class A common stock subject to a put option |
5 | 4 | ||||||
Stockholders equity: |
||||||||
Class L common stock, convertible, par value $.001 per share; cumulative 13.5% per annum, compounded quarterly; aggregate liquidation preference of $6,154 million and $6,813 million; 50,000,000 shares authorized, 29,027,610 and 29,062,421 shares issued |
| | ||||||
Class A common stock, par value $.001 per share; 550,000,000 shares authorized, 261,251,822 and 261,565,118 shares issued |
| | ||||||
Capital in excess of par value |
2,483 | 2,488 | ||||||
Treasury stock, 541,886 and 517,371 shares of Class L common stock; and 4,880,305 and 4,659,649 shares of Class A common stock |
(50 | ) | (46 | ) | ||||
Accumulated deficit |
(3,391 | ) | (3,521 | ) | ||||
Accumulated other comprehensive income (loss) |
(3 | ) | 1 | |||||
|
|
|
|
|||||
Total SunGard Capital Corp stockholders equity (deficit) |
(961 | ) | (1,078 | ) | ||||
Noncontrolling interest in preferred stock of SCCII |
1,575 | 1,693 | ||||||
|
|
|
|
|||||
Total equity |
614 | 615 | ||||||
|
|
|
|
|||||
Total Liabilities and Equity |
$ | 10,018 | $ | 9,664 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
2
SunGard Capital Corp.
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2013 | 2012 | 2013 | |||||||||||||
Revenue: |
||||||||||||||||
Services |
$ | 969 | $ | 951 | $ | 2,916 | $ | 2,844 | ||||||||
License and resale fees |
53 | 65 | 168 | 166 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total products and services |
1,022 | 1,016 | 3,084 | 3,010 | ||||||||||||
Reimbursed expenses |
13 | 12 | 47 | 41 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue |
1,035 | 1,028 | 3,131 | 3,051 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Costs and expenses: |
||||||||||||||||
Cost of sales and direct operating (excluding depreciation) |
430 | 423 | 1,316 | 1,284 | ||||||||||||
Sales, marketing and administration |
237 | 232 | 751 | 716 | ||||||||||||
Product development and maintenance |
98 | 96 | 295 | 285 | ||||||||||||
Depreciation |
70 | 73 | 211 | 222 | ||||||||||||
Amortization of acquisition-related intangible assets |
94 | 82 | 295 | 255 | ||||||||||||
Goodwill impairment charge |
385 | | 385 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total costs and expenses |
1,314 | 906 | 3,253 | 2,762 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
(279 | ) | 122 | (122 | ) | 289 | ||||||||||
Interest income |
1 | 1 | 1 | 1 | ||||||||||||
Interest expense and amortization of deferred financing fees |
(102 | ) | (96 | ) | (325 | ) | (302 | ) | ||||||||
Loss on extinguishment of debt |
| (1 | ) | (51 | ) | (6 | ) | |||||||||
Other income (expense) |
| | 2 | (1 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations before income taxes |
(380 | ) | 26 | (495 | ) | (19 | ) | |||||||||
Benefit from (provision for) income taxes |
13 | (3 | ) | 44 | 10 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations |
(367 | ) | 23 | (451 | ) | (9 | ) | |||||||||
Income (loss) from discontinued operations, net of tax |
5 | | 316 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
(362 | ) | 23 | (135 | ) | (9 | ) | |||||||||
Income attributable to the noncontrolling interest (including $- million, $1 million, $- million and $2 million in temporary equity) |
(64 | ) | (49 | ) | (186 | ) | (121 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) attributable to SunGard Capital Corp |
(426 | ) | (26 | ) | (321 | ) | (130 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation, net |
27 | 54 | 16 | 10 | ||||||||||||
Unrealized gain (loss) on derivative instruments, net of tax |
5 | (1 | ) | 11 | | |||||||||||
Other, net of tax |
| (1 | ) | | (6 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss), net of tax |
32 | 52 | 27 | 4 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss) |
(330 | ) | 75 | (108 | ) | (5 | ) | |||||||||
Comprehensive income (loss) attributable to the noncontrolling interest |
(64 | ) | (49 | ) | (186 | ) | (121 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss) attributable to SunGard Capital Corp |
$ | (394 | ) | $ | 26 | $ | (294 | ) | $ | (126 | ) | |||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
3
SunGard Capital Corp.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Nine Months Ended September 30, |
||||||||
2012 | 2013 | |||||||
Cash flow from operations: |
||||||||
Net income (loss) |
$ | (135 | ) | $ | (9 | ) | ||
Income (loss) from discontinued operations |
316 | | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(451 | ) | (9 | ) | ||||
Reconciliation of income (loss) from continuing operations to cash flow from (used in) |
||||||||
Depreciation and amortization |
506 | 477 | ||||||
Goodwill impairment charge |
385 | | ||||||
Deferred income tax provision (benefit) |
(29 | ) | (106 | ) | ||||
Stock compensation expense |
29 | 35 | ||||||
Amortization of deferred financing costs and debt discount |
26 | 30 | ||||||
Loss on extinguishment of debt |
51 | 6 | ||||||
Other noncash items |
(1 | ) | 2 | |||||
Accounts receivable and other current assets |
157 | 176 | ||||||
Accounts payable and accrued expenses |
(169 | ) | 14 | |||||
Deferred revenue |
(78 | ) | (59 | ) | ||||
|
|
|
|
|||||
Cash flow from (used in) continuing operations |
426 | 566 | ||||||
Cash flow from (used in) discontinued operations |
(340 | ) | | |||||
|
|
|
|
|||||
Cash flow from (used in) operations |
86 | 566 | ||||||
|
|
|
|
|||||
Investment activities: |
||||||||
Cash paid for acquired businesses, net of cash acquired |
(10 | ) | (1 | ) | ||||
Cash paid for property and equipment, and software |
(173 | ) | (160 | ) | ||||
Other investing activities |
3 | 1 | ||||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(180 | ) | (160 | ) | ||||
Cash provided by (used in) discontinued operations |
1,758 | | ||||||
|
|
|
|
|||||
Cash provided by (used in) investment activities |
1,578 | (160 | ) | |||||
|
|
|
|
|||||
Financing activities: |
||||||||
Cash received from borrowings, net of fees |
(17 | ) | 2,173 | |||||
Cash used to repay debt |
(1,727 | ) | (2,419 | ) | ||||
Premium paid to retire debt |
(27 | ) | | |||||
Cash used to purchase treasury stock |
(9 | ) | (7 | ) | ||||
Other financing activities |
(10 | ) | (8 | ) | ||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(1,790 | ) | (261 | ) | ||||
Cash provided by (used in) discontinued operations |
| | ||||||
|
|
|
|
|||||
Cash provided by (used in) financing activities |
(1,790 | ) | (261 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
5 | (2 | ) | |||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(121 | ) | 143 | |||||
Beginning cash and cash equivalents includes cash of discontinued operations: 2012, $6; 2013, $- |
873 | 546 | ||||||
|
|
|
|
|||||
Ending cash and cash equivalents includes cash of discontinued operations: 2012, $-; 2013, $- |
$ | 752 | $ | 689 | ||||
|
|
|
|
|||||
Supplemental information: |
||||||||
Interest paid |
$ | 321 | $ | 223 | ||||
|
|
|
|
|||||
Income taxes paid, net of refunds of $7 million and $13 million, respectively |
$ | 397 | $ | 64 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
4
SunGard Capital Corp. II
(In millions except share and per-share amounts)
(Unaudited)
December 31, 2012 |
September 30, 2013 |
|||||||
Assets |
||||||||
Current: |
||||||||
Cash and cash equivalents |
$ | 546 | $ | 689 | ||||
Trade receivables, less allowance for doubtful accounts of $30 and $25 |
781 | 593 | ||||||
Earned but unbilled receivables |
119 | 122 | ||||||
Prepaid expenses and other current assets |
230 | 228 | ||||||
|
|
|
|
|||||
Total current assets |
1,676 | 1,632 | ||||||
Property and equipment, less accumulated depreciation of $1,509 and $1,683 |
874 | 812 | ||||||
Software products, less accumulated amortization of $1,649 and $1,782 |
411 | 326 | ||||||
Customer base, less accumulated amortization of $1,481 and $1,640 |
1,367 | 1,205 | ||||||
Other intangible assets, less accumulated amortization of $27 and $24 |
132 | 125 | ||||||
Trade name |
1,019 | 1,019 | ||||||
Goodwill |
4,539 | 4,545 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 10,018 | $ | 9,664 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity |
||||||||
Current: |
||||||||
Short-term and current portion of long-term debt |
$ | 63 | $ | 342 | ||||
Accounts payable |
32 | 34 | ||||||
Accrued compensation and benefits |
297 | 253 | ||||||
Accrued interest expense |
41 | 89 | ||||||
Other accrued expenses |
235 | 211 | ||||||
Deferred revenue |
836 | 773 | ||||||
|
|
|
|
|||||
Total current liabilities |
1,504 | 1,702 | ||||||
Long-term debt |
6,599 | 6,106 | ||||||
Deferred and other income taxes |
1,127 | 1,032 | ||||||
Other long-term liabilities |
76 | 100 | ||||||
|
|
|
|
|||||
Total liabilities |
9,306 | 8,940 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Preferred stock subject to a put option |
24 | 30 | ||||||
Stockholders equity: |
||||||||
Preferred stock, par value $.001 per share; cumulative 11.5% per annum, compounded quarterly; aggregate liquidation preference of $1,581 million and $1,703 million; 14,999,000 shares authorized, 10,048,018 and 10,060,069 issued |
| | ||||||
Common stock, par value $.001 per share; 1,000 shares authorized, 100 shares issued and outstanding |
| | ||||||
Capital in excess of par value |
3,492 | 3,501 | ||||||
Treasury stock, 187,576 and 179,089 shares |
(30 | ) | (28 | ) | ||||
Accumulated deficit |
(2,771 | ) | (2,780 | ) | ||||
Accumulated other comprehensive income (loss) |
(3 | ) | 1 | |||||
|
|
|
|
|||||
Total stockholders equity |
688 | 694 | ||||||
|
|
|
|
|||||
Total Liabilities and Stockholders Equity |
$ | 10,018 | $ | 9,664 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
5
SunGard Capital Corp. II
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2013 | 2012 | 2013 | |||||||||||||
Revenue: |
||||||||||||||||
Services |
$ | 969 | $ | 951 | $ | 2,916 | $ | 2,844 | ||||||||
License and resale fees |
53 | 65 | 168 | 166 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total products and services |
1,022 | 1,016 | 3,084 | 3,010 | ||||||||||||
Reimbursed expenses |
13 | 12 | 47 | 41 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue |
1,035 | 1,028 | 3,131 | 3,051 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Costs and expenses: |
||||||||||||||||
Cost of sales and direct operating (excluding depreciation) |
430 | 423 | 1,316 | 1,284 | ||||||||||||
Sales, marketing and administration |
237 | 232 | 751 | 716 | ||||||||||||
Product development and maintenance |
98 | 96 | 295 | 285 | ||||||||||||
Depreciation |
70 | 73 | 211 | 222 | ||||||||||||
Amortization of acquisition-related intangible assets |
94 | 82 | 295 | 255 | ||||||||||||
Goodwill impairment charge |
385 | | 385 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total costs and expenses |
1,314 | 906 | 3,253 | 2,762 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
(279 | ) | 122 | (122 | ) | 289 | ||||||||||
Interest income |
1 | 1 | 1 | 1 | ||||||||||||
Interest expense and amortization of deferred financing fees |
(102 | ) | (96 | ) | (325 | ) | (302 | ) | ||||||||
Loss on extinguishment of debt |
| (1 | ) | (51 | ) | (6 | ) | |||||||||
Other income (expense) |
| | 2 | (1 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations before income taxes |
(380 | ) | 26 | (495 | ) | (19 | ) | |||||||||
Benefit from (provision for) income taxes |
13 | (3 | ) | 44 | 10 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations |
(367 | ) | 23 | (451 | ) | (9 | ) | |||||||||
Income (loss) from discontinued operations, net of tax |
5 | | 316 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
(362 | ) | 23 | (135 | ) | (9 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation, net |
27 | 54 | 16 | 10 | ||||||||||||
Unrealized gain (loss) on derivative instruments, net of tax |
5 | (1 | ) | 11 | | |||||||||||
Other, net of tax |
| (1 | ) | | (6 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss), net of tax |
$ | (330 | ) | $ | 75 | $ | (108 | ) | $ | (5 | ) | |||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
6
SunGard Capital Corp. II
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Nine Months Ended September 30, |
||||||||
2012 | 2013 | |||||||
Cash flow from operations: |
||||||||
Net income (loss) |
$ | (135 | ) | $ | (9 | ) | ||
Income (loss) from discontinued operations |
316 | | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(451 | ) | (9 | ) | ||||
Reconciliation of income (loss) from continuing operations to cash flow from (used in) operations: |
||||||||
Depreciation and amortization |
506 | 477 | ||||||
Goodwill impairment charge |
385 | | ||||||
Deferred income tax provision (benefit) |
(29 | ) | (106 | ) | ||||
Stock compensation expense |
29 | 35 | ||||||
Amortization of deferred financing costs and debt discount |
26 | 30 | ||||||
Loss on extinguishment of debt |
51 | 6 | ||||||
Other noncash items |
(1 | ) | 2 | |||||
Accounts receivable and other current assets |
157 | 176 | ||||||
Accounts payable and accrued expenses |
(169 | ) | 17 | |||||
Deferred revenue |
(78 | ) | (59 | ) | ||||
|
|
|
|
|||||
Cash flow from (used in) continuing operations |
426 | 569 | ||||||
Cash flow from (used in) discontinued operations |
(340 | ) | | |||||
|
|
|
|
|||||
Cash flow from (used in) operations |
86 | 569 | ||||||
|
|
|
|
|||||
Investment activities: |
||||||||
Cash paid for acquired businesses, net of cash acquired |
(10 | ) | (1 | ) | ||||
Cash paid for property and equipment, and software |
(173 | ) | (160 | ) | ||||
Other investing activities |
3 | 1 | ||||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(180 | ) | (160 | ) | ||||
Cash provided by (used in) discontinued operations |
1,758 | | ||||||
|
|
|
|
|||||
Cash used in investment activities |
1,578 | (160 | ) | |||||
|
|
|
|
|||||
Financing activities: |
||||||||
Cash received from borrowings, net of fees |
(17 | ) | 2,173 | |||||
Cash used to repay debt |
(1,727 | ) | (2,419 | ) | ||||
Premium paid to retire debt |
(27 | ) | | |||||
Cash used to purchase treasury stock |
(5 | ) | (3 | ) | ||||
Other financing activities |
(14 | ) | (15 | ) | ||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(1,790 | ) | (264 | ) | ||||
Cash provided by (used in) discontinued operations |
| | ||||||
|
|
|
|
|||||
Cash provided by (used in) financing activities |
(1,790 | ) | (264 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
5 | (2 | ) | |||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(121 | ) | 143 | |||||
Beginning cash and cash equivalents includes cash of discontinued operations: 2012, $6; 2013, $- |
873 | 546 | ||||||
|
|
|
|
|||||
Ending cash and cash equivalents includes cash of discontinued operations: 2012, $-; 2013, $- |
$ | 752 | $ | 689 | ||||
|
|
|
|
|||||
Supplemental information: |
||||||||
Interest paid |
$ | 321 | $ | 223 | ||||
|
|
|
|
|||||
Income taxes paid, net of refunds of $7 million and $13 million, respectively |
$ | 397 | $ | 64 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
7
SunGard Data Systems Inc.
(In millions except share and per-share amounts)
(Unaudited)
December 31, 2012 |
September 30, 2013 |
|||||||
Assets |
||||||||
Current: |
||||||||
Cash and cash equivalents |
$ | 546 | $ | 689 | ||||
Trade receivables, less allowance for doubtful accounts of $30 and $25 |
781 | 593 | ||||||
Earned but unbilled receivables |
119 | 122 | ||||||
Prepaid expenses and other current assets |
230 | 228 | ||||||
|
|
|
|
|||||
Total current assets |
1,676 | 1,632 | ||||||
Property and equipment, less accumulated depreciation of $1,509 and $1,683 |
874 | 812 | ||||||
Software products, less accumulated amortization of $1,649 and $1,782 |
411 | 326 | ||||||
Customer base, less accumulated amortization of $1,481 and $1,640 |
1,367 | 1,205 | ||||||
Other intangible assets, less accumulated amortization of $27 and $24 |
132 | 125 | ||||||
Trade name |
1,019 | 1,019 | ||||||
Goodwill |
4,539 | 4,545 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 10,018 | $ | 9,664 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity |
||||||||
Current: |
||||||||
Short-term and current portion of long-term debt |
$ | 63 | $ | 342 | ||||
Accounts payable |
32 | 34 | ||||||
Accrued compensation and benefits |
297 | 253 | ||||||
Accrued interest expense |
41 | 89 | ||||||
Other accrued expenses |
238 | 214 | ||||||
Deferred revenue |
836 | 773 | ||||||
|
|
|
|
|||||
Total current liabilities |
1,507 | 1,705 | ||||||
Long-term debt |
6,599 | 6,106 | ||||||
Deferred and other income taxes |
1,120 | 1,025 | ||||||
Other long-term liabilities |
76 | 100 | ||||||
|
|
|
|
|||||
Total liabilities |
9,302 | 8,936 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock, par value $.01 per share; 100 shares authorized, issued and outstanding |
| | ||||||
Capital in excess of par value |
3,490 | 3,507 | ||||||
Accumulated deficit |
(2,771 | ) | (2,780 | ) | ||||
Accumulated other comprehensive income (loss) |
(3 | ) | 1 | |||||
|
|
|
|
|||||
Total stockholders equity |
716 | 728 | ||||||
|
|
|
|
|||||
Total Liabilities and Stockholders Equity |
$ | 10,018 | $ | 9,664 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
8
SunGard Data Systems Inc.
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2013 | 2012 | 2013 | |||||||||||||
Revenue: |
||||||||||||||||
Services |
$ | 969 | $ | 951 | $ | 2,916 | $ | 2,844 | ||||||||
License and resale fees |
53 | 65 | 168 | 166 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total products and services |
1,022 | 1,016 | 3,084 | 3,010 | ||||||||||||
Reimbursed expenses |
13 | 12 | 47 | 41 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue |
1,035 | 1,028 | 3,131 | 3,051 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Costs and expenses: |
||||||||||||||||
Cost of sales and direct operating (excluding depreciation) |
430 | 423 | 1,316 | 1,284 | ||||||||||||
Sales, marketing and administration |
237 | 232 | 751 | 716 | ||||||||||||
Product development and maintenance |
98 | 96 | 295 | 285 | ||||||||||||
Depreciation |
70 | 73 | 211 | 222 | ||||||||||||
Amortization of acquisition-related intangible assets |
94 | 82 | 295 | 255 | ||||||||||||
Goodwill impairment charge |
385 | | 385 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total costs and expenses |
1,314 | 906 | 3,253 | 2,762 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
(279 | ) | 122 | (122 | ) | 289 | ||||||||||
Interest income |
1 | 1 | 1 | 1 | ||||||||||||
Interest expense and amortization of deferred financing fees |
(102 | ) | (96 | ) | (325 | ) | (302 | ) | ||||||||
Loss on extinguishment of debt |
| (1 | ) | (51 | ) | (6 | ) | |||||||||
Other income (expense) |
| | 2 | (1 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations before income taxes |
(380 | ) | 26 | (495 | ) | (19 | ) | |||||||||
Benefit from (provision for) income taxes |
13 | (3 | ) | 44 | 10 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations |
(367 | ) | 23 | (451 | ) | (9 | ) | |||||||||
Income (loss) from discontinued operations, net of tax |
5 | | 316 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
(362 | ) | 23 | (135 | ) | (9 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation, net |
27 | 54 | 16 | 10 | ||||||||||||
Unrealized gain (loss) on derivative instruments, net of tax |
5 | (1 | ) | 11 | | |||||||||||
Other, net of tax |
| (1 | ) | | (6 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss) |
$ | (330 | ) | $ | 75 | $ | (108 | ) | $ | (5 | ) | |||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
9
SunGard Data Systems Inc.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Nine Months Ended September 30, |
||||||||
2012 | 2013 | |||||||
Cash flow from operations: |
||||||||
Net income (loss) |
$ | (135 | ) | $ | (9 | ) | ||
Income (loss) from discontinued operations |
316 | | ||||||
|
|
|
|
|||||
Income (loss) from continuing operations |
(451 | ) | (9 | ) | ||||
Reconciliation of income (loss) from continuing operations to cash flow from (used in) operations: |
||||||||
Depreciation and amortization |
506 | 477 | ||||||
Goodwill impairment charge |
385 | | ||||||
Deferred income tax provision (benefit) |
(30 | ) | (106 | ) | ||||
Stock compensation expense |
29 | 35 | ||||||
Amortization of deferred financing costs and debt discount |
26 | 30 | ||||||
Loss on extinguishment of debt |
51 | 6 | ||||||
Other noncash items |
(1 | ) | 2 | |||||
Accounts receivable and other current assets |
157 | 176 | ||||||
Accounts payable and accrued expenses |
(168 | ) | 17 | |||||
Deferred revenue |
(78 | ) | (59 | ) | ||||
|
|
|
|
|||||
Cash flow from (used in) continuing operations |
426 | 569 | ||||||
Cash flow from (used in) discontinued operations |
(340 | ) | | |||||
|
|
|
|
|||||
Cash flow from (used in) operations |
86 | 569 | ||||||
|
|
|
|
|||||
Investment activities: |
||||||||
Cash paid for acquired businesses, net of cash acquired |
(10 | ) | (1 | ) | ||||
Cash paid for property and equipment, and software |
(173 | ) | (160 | ) | ||||
Other investing activities |
3 | 1 | ||||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(180 | ) | (160 | ) | ||||
Cash provided by (used in) discontinued operations |
1,758 | | ||||||
|
|
|
|
|||||
Cash used in investment activities |
1,578 | (160 | ) | |||||
|
|
|
|
|||||
Financing activities: |
||||||||
Cash received from borrowings, net of fees |
(17 | ) | 2,173 | |||||
Cash used to repay debt |
(1,727 | ) | (2,419 | ) | ||||
Premium paid to retire debt |
(27 | ) | | |||||
Other financing activities |
(19 | ) | (18 | ) | ||||
|
|
|
|
|||||
Cash provided by (used in) continuing operations |
(1,790 | ) | (264 | ) | ||||
Cash provided by (used in) discontinued operations |
| | ||||||
|
|
|
|
|||||
Cash provided by (used in) financing activities |
(1,790 | ) | (264 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
5 | (2 | ) | |||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(121 | ) | 143 | |||||
Beginning cash and cash equivalents includes cash of discontinued operations: 2012, $6; 2013, $- |
873 | 546 | ||||||
|
|
|
|
|||||
Ending cash and cash equivalents includes cash of discontinued operations: 2012, $-; 2013, $- |
$ | 752 | $ | 689 | ||||
|
|
|
|
|||||
Supplemental information: |
||||||||
Interest paid |
$ | 321 | $ | 223 | ||||
|
|
|
|
|||||
Income taxes paid, net of refunds of $7 million and $13 million, respectively |
$ | 397 | $ | 64 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
10
SUNGARD CAPITAL CORP.
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 Holding Companies have no other operations beyond those of their ownership of SunGard.
SunGard is one of the worlds leading software and technology services companies and has three segments: Financial Systems (FS), Availability Services (AS) and Public Sector & Education (PS&E), which is comprised of the Companys Public Sector business and K-12 Education business. 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, 2012. 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, 2013.
As discussed in Note 2 and Note 13, the presentation of certain prior-year amounts has been revised to conform to the current-year presentation.
Recent Accounting Pronouncements
In July 2013, the FASB issued guidance regarding the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Under certain circumstances, unrecognized tax benefits should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The guidance is a change in financial statement presentation only and has no material impact in the consolidated financial results. The guidance is effective beginning January 1, 2014 on either a prospective or retrospective basis.
2. Expense Classification:
During a review of spending by functional area, the Company identified a misclassification of certain expenses in 2010, 2011 and 2012. The misclassification stems from the treatment of certain offshore resources by functional area. It resulted in an understatement of product development and maintenance expense with an
11
offsetting overstatement within cost of sales and direct operating expense and sales, marketing and administration expense. There was no impact on total reported expenses for any period and therefore no impact on operating or net income.
The impact within the functional expense areas is as follows for the three and nine months ended September 30, 2012:
Three months ended September 30, 2012 | ||||||||
As reported | As revised | |||||||
Cost of sales and direct operating |
$ | 430 | $ | 430 | ||||
Sales, marketing and administration |
245 | 237 | ||||||
Product development and maintenance |
90 | 98 | ||||||
|
|
|
|
|||||
Total functional expenses |
$ | 765 | $ | 765 | ||||
|
|
|
|
Nine months ended September 30, 2012 | ||||||||
As reported | As revised | |||||||
Cost of sales and direct operating |
$ | 1,321 | $ | 1,316 | ||||
Sales, marketing and administration |
768 | 751 | ||||||
Product development and maintenance |
273 | 295 | ||||||
|
|
|
|
|||||
Total functional expenses |
$ | 2,362 | $ | 2,362 | ||||
|
|
|
|
3. 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) of $1,222 million, which is the gross transaction value of $1,775 million less applicable taxes and fees, to repay a pro-rata portion of its outstanding term loans. In July 2012, the Company sold its FS subsidiary SunGard Global Services (France) for gross proceeds of 14 million. The results for discontinued operations for the three and nine months ended September 30, 2012 reflect the impact of these sales.
The results for the discontinued operations for the three and nine months ended September 30, 2012 and 2013 were as follows (in millions):
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2013 | 2012 | 2013 | |||||||||||||
Revenue |
$ | 5 | $ | | $ | 55 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
(1 | ) | | (4 | ) | | ||||||||||
Gain on sale of business |
8 | | 571 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes |
7 | | 567 | | ||||||||||||
Benefit from (provision for) income taxes |
(2 | ) | | (251 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from discontinued operations |
$ | 5 | $ | | $ | 316 | $ | | ||||||||
|
|
|
|
|
|
|
|
4. 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 of 2013. Based on the results of this test, the fair value of the trade name exceeded its
12
carrying value, resulting in no impairment of the trade name, but the excess of fair value over the carrying value was 6%. The sale of the HE business in January 2012 significantly decreased the estimated fair value of the Companys trade name. As compared to the July 1, 2012 test, projected future revenues have declined and the discount rate has increased. In addition to future revenue 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 $156 million (100 basis point decrease would result in an impairment of approximately $372 million). A 100 basis point increase in the discount rate would result in an impairment of the trade name asset of approximately $51 million. Furthermore, to the extent that additional businesses are divested in the future, the revenue supporting the trade name will decline, which may result in impairment charges.
Goodwill
GAAP requires the Company to perform a goodwill impairment test annually and more frequently when negative conditions or triggering events arise. The Company completes its annual goodwill impairment test as of July 1 for each of its 11 reporting units. In September 2011, the FASB issued amended guidance that simplified how entities test goodwill for impairment. After an assessment of certain qualitative factors (referred to as step zero), 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 to assess the qualitative factors of five of its reporting units and determined, for each of those five reporting units, a step-one test was not required. The five reporting units selected for a step-zero analysis each had a fair value of goodwill in excess of 25% of its respective carrying value as of the July 1, 2012 step-one test. The Company performed a step-one test for the remaining six 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). An equal weighting of the income approach and the market approach was used in the July 1, 2013 test. 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, 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, 2013 impairment test, the discount rates used were between 9% and 13.5% and the perpetual growth rates used were between 1.5% and 4%. Based on the results of the step-one tests, the Company determined that the fair values of each of the reporting units tested exceeded the respective carrying value and a step-two test was not required.
The Company determined that the excess of the estimated fair value over the carrying value of one of its reporting units was 9% of the carrying value as of the July 1, 2013 impairment test. This reporting units goodwill balance at July 1, 2013 was $527 million. As mentioned above, the Company uses a combination of the income approach and market approach to determine the fair value of each reporting unit. Under the income approach, which is subject to variability based on the discount and perpetual growth rate assumptions used, a 50 basis point decrease in the perpetual growth rate or a 50 basis point increase in the discount rate would not cause this reporting unit to fail the step-one test. A one hundred basis point decrease in the perpetual growth rate or a one hundred basis point increase in the discount rate would cause this reporting unit to fail the step-one test and require a step-two analysis, and some or all of this goodwill could be impaired. Furthermore, if this unit fails to achieve expected performance levels in the next twelve months or experiences a downturn in the business, goodwill could be impaired. The
13
other five reporting units for which the Company performed a step one test each had estimated fair values that exceeded the respective carrying value of the reporting unit by at least 25% as of the July 1, 2013 impairment test.
The following table summarizes changes in goodwill by segment (in millions):
Cost | Accumulated Impairment | |||||||||||||||||||||||||||||||
FS | AS | PS&E | Subtotal | AS | PS&E | Subtotal | Total | |||||||||||||||||||||||||
Balance at December 31, 2012 |
$ | 3,516 | $ | 2,243 | $ | 544 | $ | 6,303 | $ | (1,547 | ) | $ | (217 | ) | $ | (1,764 | ) | $ | 4,539 | |||||||||||||
Effect of foreign currency translation |
9 | (2 | ) | | 7 | | | | 7 | |||||||||||||||||||||||
Other |
(1 | ) | | | (1 | ) | | | | (1 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance at September 30, 2013 |
$ | 3,524 | $ | 2,241 | $ | 544 | $ | 6,309 | $ | (1,547 | ) | $ | (217 | ) | $ | (1,764 | ) | $ | 4,545 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Asset amortization
Based on amounts recorded at September 30, 2013, total expected amortization of all acquisition-related intangible assets in each of the years ended December 31 follows (in millions):
2013 |
$ | 341 | ||
2014 |
290 | |||
2015 |
235 | |||
2016 |
215 | |||
2017 |
207 |
5. Accumulated Other Comprehensive Income:
The following table summarizes the unrealized gains (losses) on derivative instruments including the impact of components reclassified into net income from accumulated other comprehensive income for the three and nine months ended September 30, 2012 and 2013 (in millions):
Other Comprehensive Income Components |
Three months ended September 30, |
Nine months ended September 30, |
Affected Line Item in the Statement of ComprehensiveIncome for Components | |||||||||||||||
2012 | 2013 | 2012 | 2013 | |||||||||||||||
Unrealized gain (loss) on derivative instruments and other |
$ | 1 | $ | (3 | ) | $ | 1 | $ | (3 | ) | ||||||||
Less: gain (loss) on derivatives reclassified into income |
||||||||||||||||||
Interest rate contracts |
2 | 1 | 8 | 5 | Interest expense and amortization of deferred financing fees | |||||||||||||
Forward currency hedges |
1 | 2 | 3 | | Cost of sales and direct operating | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total reclassified into income |
3 | 3 | 11 | 5 | ||||||||||||||
Less: income tax benefit (expense) |
1 | (1 | ) | (1 | ) | (2 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Unrealized gain (loss) on derivative instruments, net of tax |
$ | 5 | $ | (1 | ) | $ | 11 | $ | | |||||||||
|
|
|
|
|
|
|
|
14
The following table provides a rollforward of the components of accumulated other comprehensive loss, net of tax, through September 30, 2013 as follows (in millions):
Gains (Losses) on Derivative Instruments |
Currency Translation |
Other | Total Accumulated Other Comprehensive Income (loss) |
|||||||||||||
Balance at December 31, 2012 |
$ | 2 | $ | (4 | ) | $ | (1 | ) | $ | (3 | ) | |||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income before reclassifications |
(3 | ) | 10 | (6 | ) | 1 | ||||||||||
Amounts reclassified from accumulated other comprehensive income net of tax |
3 | | | 3 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net current-period other comprehensive income |
| 10 | (6 | ) | 4 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at September 30, 2013 |
$ | 2 | $ | 6 | $ | (7 | ) | $ | 1 | |||||||
|
|
|
|
|
|
|
|
6. Debt and Derivatives:
On January 2, 2013, SunGard repaid a $50 million revolving credit advance borrowed under its secured accounts receivable facility.
On March 8, 2013, SunGard amended and restated its senior secured credit agreement (Credit Agreement) to, among other things, (i) issue an additional term loan of $2,200 million (tranche E) maturing on March 8, 2020, the proceeds of which were used to (a) repay in full the $1,719 million tranche B term loan and (b) repay $481 million of the tranche C term loan; (ii) replace the $880 million of revolving commitments with $850 million of new revolving commitments, which will mature on March 8, 2018; and (iii) modify certain covenants and other provisions in order to, among other things (x) modify (and in the case of the term loan facility, remove) the financial maintenance covenants included therein and (y) permit the Company to direct the net cash proceeds of permitted dispositions otherwise requiring a pro rata prepayment of term loans to the prepayment of specific tranches of term loans at the Companys sole discretion. The interest rate on tranche E is LIBOR plus 3% with a 1% LIBOR floor, which at September 30, 2013 was 4%. SunGard is required to repay installments in quarterly principal amounts of 0.25% of its funded tranche E principal amount through the maturity date, at which time the remaining aggregate principal balance is due. Tranche E and the new revolving commitments are subject to certain springing maturities which are described in the Credit Agreement. As a result of this transaction, the Company incurred a loss on the extinguishment of debt of approximately $5 million.
SunGard voluntarily prepaid $50 million of its tranche A term loan in each of the first three quarters of 2013. The related loss on the extinguishment of debt was not material to the Companys operations, financial position or cash flows.
15
Debt consisted of the following (in millions):
December 31, 2012 |
September 30, 2013 |
|||||||
Senior Secured Credit Facilities: |
||||||||
Secured revolving credit facility |
$ | | $ | | ||||
Tranche A, effective interest rate of 1.96% and 1.93% |
207 | 57 | ||||||
Tranche B, effective interest rate of 4.35% |
1,719 | | ||||||
Tranche C, effective interest rate of 4.17% and 4.41% |
908 | 427 | ||||||
Tranche D, effective interest rate of 4.50% and 4.50% |
720 | 714 | ||||||
Tranche E, effective interest rate of 4.10% |
| 2,189 | ||||||
|
|
|
|
|||||
Total Senior Secured Credit Facilities |
3,554 | 3,387 | ||||||
Senior Secured Notes due 2014 at 4.875%, net of discount of $4 and $1 |
246 | 249 | ||||||
Senior Notes due 2018 at 7.375% |
900 | 900 | ||||||
Senior Notes due 2020 at 7.625% |
700 | 700 | ||||||
Senior Subordinated Notes due 2019 at 6.625% |
1,000 | 1,000 | ||||||
Secured accounts receivable facility, at 3.71% and 3.68% |
250 | 200 | ||||||
Other, primarily foreign bank debt and capital lease obligations |
12 | 12 | ||||||
|
|
|
|
|||||
Total debt |
6,662 | 6,448 | ||||||
Short-term borrowings and current portion of long-term debt |
(63 | ) | (342 | ) | ||||
|
|
|
|
|||||
Long-term debt |
$ | 6,599 | $ | 6,106 | ||||
|
|
|
|
SunGard 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 swap agreement 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. At September 30, 2013, one-month and three-month LIBOR was 0.18% and 0.25%, respectively. The net receipt or payment from the interest rate swap agreements is included in interest expense. The interest rates in the table above reflect the impact of the swaps.
A summary of the Companys interest rate swaps at September 30, 2013 follows (in millions):
Inception |
Maturity | Notional Amount (in millions) |
Interest rate paid |
Interest rate received (LIBOR) |
||||||||||
August-September 2012 |
February 2017 | $ | 400 | 0.69 | % | 1-Month | ||||||||
June 2013 |
June 2019 | 100 | 1.86 | % | 3-Month | |||||||||
September 2013 |
June 2019 | 100 | 2.26 | % | 3-Month | |||||||||
|
|
|||||||||||||
Total / Weighted Average |
$ | 600 | 1.15 | % | ||||||||||
|
|
The fair values of interest rate swaps designated as cash flow hedging instruments, included in other accrued expenses on the consolidated balance sheets, are $5 million as of December 31, 2012. At September 30, 2013, the fair values of interest rate swaps are $2 million and are included in other intangible assets.
The Company has no ineffectiveness related to its swap agreements. The Company expects to reclassify in the next twelve months approximately $4 million from other comprehensive income (loss) into earnings related to the Companys interest rate swaps based on the borrowing rates at September 30, 2013.
16
7. Fair Value Measurements:
The following table summarizes assets and liabilities measured at fair value on a recurring basis at September 30, 2013 (in millions):
Fair Value Measures Using | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets |
||||||||||||||||
Cash and cash equivalentsmoney market funds |
$ | 330 | $ | | $ | | $ | 330 | ||||||||
Interest rate swap agreements and other |
| 2 | | 2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 330 | 2 | | 332 | |||||||||||
|
|
|
|
|
|
|
|
The following table summarizes assets and liabilities measured at fair value on a recurring basis at December 31, 2012 (in millions):
Fair Value Measures Using | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets |
||||||||||||||||
Cash and cash equivalentsmoney market funds |
$ | 227 | $ | | $ | | $ | 227 | ||||||||
Currency forward contracts |
| 4 | | 4 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 227 | $ | 4 | $ | | $ | 231 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Interest rate swap agreements and other |
$ | | $ | 4 | $ | | $ | 4 | ||||||||
|
|
|
|
|
|
|
|
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 are 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 and British Pound Sterling exchange rates. These forward contracts are designated as cash flow hedges. The fair value of these currency forward contracts is determined using currency exchange market rates, obtained from 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 presents the carrying amount and estimated fair value of the Companys debt, including the current portion and excluding the interest rate swaps, as of December 31, 2012 and September 30, 2013 (in millions):
December 31, 2012 | September 30, 2013 | |||||||||||||||
Carrying Value |
Fair Value |
Carrying Value |
Fair Value |
|||||||||||||
Floating rate debt |
$ | 3,803 | $ | 3,826 | $ | 3,587 | $ | 3,601 | ||||||||
Fixed rate debt |
2,859 | 3,023 | 2,861 | 2,976 |
17
The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, to the extent the underlying liability will be settled in cash, approximate carrying values because of the short-term nature of these instruments. The derivative financial instruments are carried at fair value. 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.
8. Equity:
A rollforward of SCCs equity for 2013 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, 2012 |
$ | 45 | $ | 5 | $ | (961 | ) | $ | (911 | ) | $ | 26 | $ | 1,575 | $ | 1,601 | ||||||||||||
Net income (loss) |
| | (130 | ) | (130 | ) | 2 | 119 | 121 | |||||||||||||||||||
Foreign currency translation |
| | 10 | 10 | | | | |||||||||||||||||||||
Net unrealized gain on derivative instruments |
| | | | | | | |||||||||||||||||||||
Other |
| | (6 | ) | (6 | ) | | | | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Comprehensive income (loss) |
| | (126 | ) | (126 | ) | 2 | 119 | 121 | |||||||||||||||||||
Stock compensation expense |
| | 35 | 35 | | | | |||||||||||||||||||||
Termination of put options due to employee terminations and other |
(8 | ) | (1 | ) | 11 | 2 | (4 | ) | 2 | (2 | ) | |||||||||||||||||
Purchase of treasury stock |
| | (4 | ) | (4 | ) | | (3 | ) | (3 | ) | |||||||||||||||||
Transfer intrinsic value of vested restricted stock units |
15 | | (25 | ) | (10 | ) | 10 | | 10 | |||||||||||||||||||
Other |
| | (8 | ) | (8 | ) | | | | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at September 30, 2013 |
$ | 52 | $ | 4 | $ | (1,078 | ) | $ | (1,022 | ) | $ | 34 | $ | 1,693 | $ | 1,727 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
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 | | | | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
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 | ) | | | | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at September 30, 2012 |
$ | 46 | $ | 5 | $ | (949 | ) | $ | (898 | ) | $ | 29 | $ | 2,227 | $ | 2,256 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In June 2013, certain senior executives of the Company were granted a new form of long-term incentive equity award (Appreciation Units) to be settled in stock. The Appreciation Units vesting terms are either market-based dependent upon the performance of the Companys Unit price (Performance-based) or time-based. Performance-based Appreciation Units will vest only if the average value per Unit (defined as 1.3 shares of Class A common stock and 0.1444 shares of Class L common stock of SunGard Capital Corp. and 0.05 shares of preferred stock of SunGard Capital Corp. II) at each measurement date (as defined in the agreements) increases over a base Unit value specified in the agreements and may be subject to continued employment through June 1, 2017. Time-based Appreciation Units will vest in annual installments over a period of years as specified in the applicable award agreement, subject to continued employment. The Company determined the fair value of the Performance-based Appreciation Units using a Monte Carlo valuation model and will record the aggregate expense of $22 million over the four-year measurement period on a straight-line basis regardless of vesting, subject to continued employment, if applicable. Time-based Appreciation Units were valued using the Black-Scholes pricing model at $4 million in the aggregate, which will be expensed over the four-year service period on a straight-line basis.
9. Income Taxes:
Included in the benefit recorded in income tax expense for the nine months ended September 30, 2013 is a discrete item of $9 million related to a benefit associated with a tax accounting method change related to certain lease-related reserves.
19
10. Segment Information:
The Company has three reportable segments: FS, AS and PS&E. The Company evaluates the performance of its segments based on Adjusted EBITDA. Adjusted EBITDA, a non-GAAP measure, is defined as operating income before the following items:
| depreciation, |
| amortization of acquisition-related intangible assets, |
| goodwill impairment, |
| severance and facility closure charges, |
| stock compensation, |
| management fees, and |
| certain other costs. |
While these charges may be recurring, management excludes them in order to better analyze the segment results and evaluate the segment performance. This analysis is used extensively by management and is also used to communicate the segment results to the Companys board of directors. In addition, management reviews Adjusted EBITDA on a constant currency basis, especially when comparing to the prior year results. While Adjusted EBITDA is useful for analysis purposes, it should not be considered as an alternative to the Companys reported GAAP results. Also, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is similar, but not identical, to adjusted EBITDA as defined in the Credit Agreement for purposes of SunGards debt covenants. The operating results apply to each of SCC, SCCII and SunGard unless otherwise noted.
The operating results for the three months ended September 30, 2013 and 2012 for each segment follow (in millions):
Three Months Ended September 30, 2013 |
FS | AS | PS&E | Sum of segments |
||||||||||||
Revenue |
$ | 635 | (1) | $ | 340 | $ | 53 | $ | 1,028 | |||||||
Adjusted EBITDA |
194 | (1) | 108 | 16 | 318 | |||||||||||
Adjusted EBITDA margin |
30.5 | % | 31.6 | % | 31.4 | % | 30.9 | % | ||||||||
Year to year revenue change |
(1 | )% | (2 | )% | 6 | % | (1 | )% | ||||||||
Year to year Adjusted EBITDA change |
14 | % | (11 | )% | 10 | % | 4 | % |
Three Months Ended September 30, 2012 |
FS | AS | PS&E | Sum of segments |
||||||||||||
Revenue |
$ | 640 | $ | 346 | $ | 49 | $ | 1,035 | ||||||||
Adjusted EBITDA |
170 | 120 | 15 | 305 | ||||||||||||
Adjusted EBITDA margin |
26.6 | % | 34.8 | % | 30.4 | % | 29.5 | % |
20
Reconciliation of Adjusted EBITDA to income (loss) from continuing operations before income taxes:
Three Months Ended | ||||||||
September 30, 2012 | September 30, 2013 | |||||||
Adjusted EBITDA (sum of segments) |
$ | 305 | $ | 318 | ||||
Corporate |
(10 | ) | (12 | ) | ||||
Depreciation(3) |
(70 | ) | (73 | ) | ||||
Amortization of acquisition-related intangible assets |
(94 | ) | (82 | ) | ||||
Goodwill impairment charge |
(385 | ) | | |||||
Severance and facility closure costs |
(13 | ) | (9 | ) | ||||
Stock compensation expense |
(9 | ) | (12 | ) | ||||
Management fees |
(3 | ) | (3 | ) | ||||
Other costs (included in operating income) |
| (5 | ) | |||||
Interest expense, net |
(101 | ) | (95 | ) | ||||
Loss on extinguishment of debt |
| (1 | ) | |||||
|
|
|
|
|||||
Income (loss) from continuing operations before income tax |
$ | (380 | ) | $ | 26 | |||
|
|
|
|
Depreciation and amortization and capital expenditures by segment follow (in millions):
Three Months Ended September 30, 2013 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Capital expenditures |
$ | 23 | $ | 34 | $ | 2 | $ | 59 | $ | | $ | 59 | ||||||||||||
Depreciation(3) |
22 | 49 | 2 | 73 | | 73 | ||||||||||||||||||
Amortization of acquisition-related intangible assets |
40 | 38 | 3 | 81 | 1 | 82 |
Three Months Ended September 30, 2012 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Capital expenditures |
$ | 19 | $ | 36 | $ | 2 | $ | 57 | $ | 1 | $ | 58 | ||||||||||||
Depreciation(3) |
22 | 46 | 1 | 69 | 1 | 70 | ||||||||||||||||||
Amortization of acquisition-related intangible assets |
49 | 40 | 5 | 94 | | 94 |
The operating results for the nine months ended September 30, 2013 and 2012 for each segment follow (in millions):
Nine Months Ended September 30, 2013 |
FS | AS | PS&E | Sum of segments |
||||||||||||
Revenue |
$ | 1,867 | (1) | $ | 1,029 | $ | 155 | $ | 3,051 | |||||||
Adjusted EBITDA |
502 | (1)(2) | 325 | 48 | 875 | |||||||||||
Adjusted EBITDA margin |
26.9 | % | 31.5 | % | 31.2 | % | 28.7 | % | ||||||||
Year to year revenue change |
(3 | )% | (2 | )% | 2 | % | (3 | )% | ||||||||
Year to year Adjusted EBITDA change |
6 | % | (7 | )% | 3 | % | | % |
Nine Months Ended September 30, 2012 |
FS | AS | PS&E | Sum of Segments |
||||||||||||
Revenue |
$ | 1,928 | $ | 1,052 | $ | 151 | $ | 3,131 | ||||||||
Adjusted EBITDA |
474 | 351 | 47 | 872 | ||||||||||||
Adjusted EBITDA margin |
24.6 | % | 33.4 | % | 31.0 | % | 27.9 | % |
21
Reconciliation of Adjusted EBITDA to income (loss) from continuing operations before income taxes:
Nine Months Ended | ||||||||
September 30, 2012 | September 30, 2013 | |||||||
Adjusted EBITDA (sum of segments) |
$ | 872 | $ | 875 | ||||
Corporate |
(35 | ) | (36 | ) | ||||
Depreciation(3) |
(211 | ) | (222 | ) | ||||
Amortization of acquisition-related intangible assets |
(295 | ) | (255 | ) | ||||
Goodwill impairment charge |
(385 | ) | | |||||
Severance and facility closure costs |
(22 | ) | (15 | ) | ||||
Stock compensation expense |
(29 | ) | (35 | ) | ||||
Management fees |
(9 | ) | (8 | ) | ||||
Other costs (included in operating income) |
(8 | ) | (15 | ) | ||||
Interest expense, net |
(324 | ) | (301 | ) | ||||
Loss on extinguishment of debt |
(51 | ) | (6 | ) | ||||
Other income (expense) |
2 | (1 | ) | |||||
|
|
|
|
|||||
Income (loss) from continuing operations before income tax |
$ | (495 | ) | $ | (19 | ) | ||
|
|
|
|
Depreciation and amortization and capital expenditures by segment follow (in millions):
Nine Months Ended September 30, 2013 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Capital expenditures |
$ | 64 | $ | 89 | $ | 6 | $ | 159 | $ | 1 | $ | 160 | ||||||||||||
Depreciation(3) |
67 | 149 | 5 | 221 | 1 | 222 | ||||||||||||||||||
Amortization of acquisition-related intangible assets |
128 | 115 | 11 | 254 | 1 | 255 |
Nine Months Ended September 30, 2012 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Capital expenditures |
$ | 62 | $ | 104 | $ | 6 | $ | 172 | $ | 1 | $ | 173 | ||||||||||||
Depreciation(3) |
63 | 142 | 5 | 210 | 1 | 211 | ||||||||||||||||||
Amortization of acquisition-related intangible assets |
155 | 126 | 14 | 295 | | 295 |
(1) | SunGard received approximately $12 million in proceeds related to a bankruptcy claim assigned and sold to a third party in the third quarter of 2013. The claim related to a Financial Systems customer that filed for Chapter 11 bankruptcy in January 2013. The amount of the claim represented previously reserved revenue, which now has been recognized, and a termination charge related to the customer contract. |
(2) | During the second quarter of 2013, the Company completed a review of its accounting practices related to vacation pay obligations. In countries where the vacation policy stipulated that vacation days earned in the current year must be used in that same year, the Company adjusted its quarterly estimate of accrued vacation costs to better match expense recognition with amounts payable to employees when leaving the Company. The impact of the change in estimate was an aggregate decrease to costs and expenses of $9 million for the nine month period ended September 30, 2013. The impact of this change is expected to be negligible for the full year. |
(3) | Includes amortization of capitalized software. |
22
11. Employee Termination Benefits and Facility Closures:
The following table provides a rollforward of the liability balances for workforce reductions and facility closures, which occurred through September 30, 2013 (in millions):
Balance 12/31/2012 |
Expense Related to 2013 Actions |
Paid | Other Adjustments* |
Balance 09/30/2013 |
||||||||||||||||
Workforce-related |
$ | 32 | $ | 18 | $ | (23 | ) | $ | (6 | ) | $ | 21 | ||||||||
Facilities |
22 | 1 | (3 | ) | | 20 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 54 | $ | 19 | $ | (26 | ) | $ | (6 | ) | $ | 41 | ||||||||
|
|
|
|
|
|
|
|
|
|
* | The other adjustments column in the table principally relates to changes in estimates from when the initial charge was recorded and also foreign currency translation and other adjustments. |
The workforce related actions are expected to be paid out over the next 18 months (the majority within 12 months). The facilities accruals are for ongoing obligations to pay rent for vacant space and are net of sublease reserves. The lengths of these obligations vary by lease with the majority ending in 2019.
12. Related Party Transactions:
In accordance with the Management Agreement between the Company and affiliates of the Sponsors, the Company recorded $3 million of management fees in sales, marketing and administration expenses during each of the three months ended September 30, 2012 and 2013. The Company recorded $9 million and $8 million of management fees in sales, marketing and administration expenses during the nine months ended September 30, 2012 and 2013, respectively.
Regarding the timing of these payments, at December 31, 2012 and September 30, 2013, the Company had $4 million and $3 million, respectively, due to the Sponsors which were included in other accrued expenses.
During the first quarter of 2012, in connection with the sale of HE, the Company paid the Sponsors $17.8 million of management fees, which are included in the results of discontinued operations.
In addition to management fees, one of our Sponsors, Goldman Sachs & Co. and/or its respective affiliates, received fees of approximately $1 million for each of the nine months ended September 30, 2012 and 2013 in connection with amendments of SunGards Credit Agreement. For the three months ended September 30, 2012 and 2013, no fees were paid to Goldman Sachs & Co. and/or its respective affiliates.
13. 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; |
23
| 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, 2012 and September 30, 2013, and for the three and nine month periods ended September 30, 2012 and 2013 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 Note 5 of Notes to Consolidated Financial Statements included in the Companys Annual Report on Form 10-K for 2012.
(in millions) | Supplemental Condensed Consolidating Balance Sheet December 31, 2012 |
|||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 220 | $ | (3 | ) | $ | 329 | $ | | $ | 546 | |||||||||
Intercompany balances |
| 2,457 | 742 | (3,199 | ) | | ||||||||||||||
Trade receivables, net |
3 | 566 | (a) | 331 | | 900 | ||||||||||||||
Prepaid expenses, taxes and other current assets |
1,312 | 70 | 89 | (1,241 | ) | 230 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
1,535 | 3,090 | 1,491 | (4,440 | ) | 1,676 | ||||||||||||||
Property and equipment, net |
| 574 | 300 | | 874 | |||||||||||||||
Intangible assets, net |
112 | 2,413 | 404 | | 2,929 | |||||||||||||||
Deferred income taxes |
39 | | | (39 | ) | | ||||||||||||||
Intercompany balances |
254 | 7 | 76 | (337 | ) | | ||||||||||||||
Goodwill |
| 3,470 | 1,069 | | 4,539 | |||||||||||||||
Investment in subsidiaries |
8,620 | 2,101 | | (10,721 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Assets |
$ | 10,560 | $ | 11,655 | $ | 3,340 | $ | (15,537 | ) | $ | 10,018 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Short-term and current portion of long-term debt |
$ | 57 | $ | | $ | 6 | $ | | $ | 63 | ||||||||||
Intercompany balances |
3,199 | | | (3,199 | ) | | ||||||||||||||
Accounts payable and other current liabilities |
70 | 1,983 | 632 | (1,241 | ) | 1,444 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
3,326 | 1,983 | 638 | (4,440 | ) | 1,507 | ||||||||||||||
Long-term debt |
6,343 | 2 | 254 | | 6,599 | |||||||||||||||
Intercompany debt |
83 | | 254 | (337 | ) | | ||||||||||||||
Deferred and other income taxes |
92 | 1,000 | 67 | (39 | ) | 1,120 | ||||||||||||||
Other liabilities |
| 50 | 26 | | 76 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
9,844 | 3,035 | 1,239 | (4,816 | ) | 9,302 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total stockholders equity |
716 | 8,620 | 2,101 | (10,721 | ) | 716 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities and Stockholders Equity |
$ | 10,560 | $ | 11,655 | $ | 3,340 | $ | (15,537 | ) | $ | 10,018 | |||||||||
|
|
|
|
|
|
|
|
|
|
(a) | This balance is primarily comprised of a receivable from the borrower under the secured accounts receivable facility, which is a non-Guarantor subsidiary, resulting from the normal, recurring sale of accounts receivable under the receivables facility. In a liquidation, the first $250 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. |
24
(in millions) | Supplemental Condensed Consolidating Balance Sheet September 30, 2013 |
|||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 316 | $ | | $ | 373 | $ | | $ | 689 | ||||||||||
Intercompany balances |
| 2,951 | 694 | (3,645 | ) | | ||||||||||||||
Trade receivables, net |
10 | 473 | (b) | 232 | | 715 | ||||||||||||||
Prepaid expenses, taxes and other current assets |
1,432 | 73 | 104 | (1,381 | ) | 228 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
1,758 | 3,497 | 1,403 | (5,026 | ) | 1,632 | ||||||||||||||
Property and equipment, net |
| 540 | 272 | | 812 | |||||||||||||||
Intangible assets, net |
108 | 2,208 | 359 | | 2,675 | |||||||||||||||
Deferred income taxes |
38 | | | (38 | ) | | ||||||||||||||
Intercompany balances |
261 | 8 | 76 | (345 | ) | | ||||||||||||||
Goodwill |
| 3,468 | 1,077 | | 4,545 | |||||||||||||||
Investment in subsidiaries |
8,742 | 2,075 | | (10,817 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Assets |
$ | 10,907 | $ | 11,796 | $ | 3,187 | $ | (16,226 | ) | $ | 9,664 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||
Current: |
||||||||||||||||||||
Short-term and current portion of long-term debt |
$ | 335 | $ | 1 | $ | 6 | $ | | $ | 342 | ||||||||||
Intercompany balances |
3,646 | | | (3,646 | ) | | ||||||||||||||
Accounts payable and other current liabilities |
116 | 2,079 | 549 | (1,381 | ) | 1,363 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
4,097 | 2,080 | 555 | (5,027 | ) | 1,705 | ||||||||||||||
Long-term debt |
5,901 | 2 | 203 | | 6,106 | |||||||||||||||
Intercompany debt |
83 | | 261 | (344 | ) | | ||||||||||||||
Deferred and other income taxes |
98 | 924 | 41 | (38 | ) | 1,025 | ||||||||||||||
Other liabilities |
| 48 | 52 | | 100 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
10,179 | 3,054 | 1,112 | (5,409 | ) | 8,936 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total stockholders equity |
728 | 8,742 | 2,075 | (10,817 | ) | 728 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities and Stockholders Equity |
$ | 10,907 | $ | 11,796 | $ | 3,187 | $ | (16,226 | ) | $ | 9,664 | |||||||||
|
|
|
|
|
|
|
|
|
|
(b) | This balance is primarily comprised of a receivable from the borrower under the secured accounts receivable facility, which is a non-Guarantor subsidiary, 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. |
25
(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 (excluding depreciation) |
20 | 506 | 323 | (84 | ) | 765 | ||||||||||||||
Depreciation |
| 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 | ) | ||||||||||||
Equity in earnings of unconsolidated subsidiaries (c) |
(287 | ) | 25 | | 262 | | ||||||||||||||
Other income (expense) |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(402 | ) | (265 | ) | 25 | 262 | (380 | ) | ||||||||||||
Benefit from (provision for) income taxes |
40 | (18 | ) | (9 | ) | | 13 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(362 | ) | (283 | ) | 16 | 262 | (367 | ) | ||||||||||||
Income (loss) from discontinued operations, net of tax |
| (4 | ) | 9 | | 5 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (362 | ) | $ | (287 | ) | $ | 25 | $ | 262 | $ | (362 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
$ | (330 | ) | $ | (265 | ) | $ | 45 | $ | 220 | $ | (330 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
(c) | The Supplemental Condensed Consolidating Schedule of Comprehensive Income for Parent Company and Guarantor Subsidiaries for the three months ended September 30, 2012 has been revised to present all equity in earnings of unconsolidated subsidiaries in a single caption within Other income (expense). The portion of equity in earnings of unconsolidated subsidiaries which related to the investees income (loss) from discontinued operations had previously been presented separately in the Income (loss) from discontinued operations, net of tax caption for the Parent Company and Guarantor Subsidiaries. This revision has also been reflected in the Net income (loss) and Income (loss) from discontinued operations captions in the Supplemental Condensed Consolidating Schedule of Cash Flows for Parent Company and Guarantor Subsidiaries for the same periods. |
While these revisions have no impact on the previously reported Net income or total cash flows from operations of the Parent Company or Guarantor Subsidiaries, they resulted in the following changes to previously reported amounts. For the Parent Company in 2012, Equity in earnings of unconsolidated subsidiaries changed from $(292) million to $(287) million; Income (loss) from continuing operations changed from $(367) million to $(362) million; and Income (loss) from discontinued operations, net of tax changed from $5 million to $- million. For the Guarantor Subsidiaries in 2012, Equity in earnings of unconsolidated subsidiaries changed from $16 million to $25 million; Income (loss) from continuing operations changed from $(292) million to $(283) million; and Income (loss) from discontinued operations, net of tax changed from $5 million to $(4) million. These revisions had no impact on the consolidated results of the Company and were not material to the Supplemental Condensed Consolidating Schedule of Comprehensive Income or the Supplemental Condensed Consolidating Schedule of Cash Flows for any period.
26
(in millions) | Supplemental Condensed Consolidating Schedule of Comprehensive Income Three Months Ended September 30, 2013 |
|||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Total revenue |
$ | | $ | 712 | $ | 402 | $ | (86 | ) | $ | 1,028 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales and administrative expenses (excluding depreciation) |
25 | 498 | 314 | (86 | ) | 751 | ||||||||||||||
Depreciation |
1 | 50 | 22 | | 73 | |||||||||||||||
Amortization of acquisition-related intangible assets |
| 67 | 15 | | 82 | |||||||||||||||
Goodwill impairment charges |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total costs and expenses |
26 | 615 | 351 | (86 | ) | 906 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
(26 | ) | 97 | 51 | | 122 | ||||||||||||||
Net interest income (expense) |
(91 | ) | 1 | (5 | ) | | (95 | ) | ||||||||||||
Equity in earnings of unconsolidated subsidiaries |
99 | 32 | | (131 | ) | | ||||||||||||||
Other income (expense) |
(1 | ) | | | | (1 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(19 | ) | 130 | 46 | (131 | ) | 26 | |||||||||||||
Benefit from (provision for) income taxes |
42 | (31 | ) | (14 | ) | | (3 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
23 | 99 | 32 | (131 | ) | 23 | ||||||||||||||
Income (loss) from discontinued operations, net of tax |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
23 | 99 | $ | 32 | (131 | ) | 23 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
$ | 75 | $ | 144 | $ | 77 | $ | (221 | ) | $ | 75 | |||||||||
|
|
|
|
|
|
|
|
|
|
27
(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 (excluding depreciation) |
69 | 1,562 | 988 | (257 | ) | 2,362 | ||||||||||||||
Depreciation |
| 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 | ) | ||||||||||||
Equity in earnings of unconsolidated subsidiaries (d) |
(83 | ) | 65 | | 18 | | ||||||||||||||
Other income (expense) |
(51 | ) | | 2 | | (49 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(507 | ) | (101 | ) | 95 | 18 | (495 | ) | ||||||||||||
Benefit from (provision for) income taxes |
147 | (68 | ) | (35 | ) | | 44 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(360 | ) | (169 | ) | 60 | 18 | (451 | ) | ||||||||||||
Income (loss) from discontinued operations, net of tax |
225 | 86 | 5 | | 316 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (135 | ) | $ | (83 | ) | $ | 65 | $ | 18 | $ | (135 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
$ | (108 | ) | $ | (65 | ) | $ | 80 | $ | (15 | ) | $ | (108 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
(d) | The Supplemental Condensed Consolidating Schedule of Comprehensive Income for Parent Company and Guarantor Subsidiaries for the nine months ended September 30, 2012 has been revised to present all equity in earnings of unconsolidated subsidiaries in a single caption within Other income (expense). The portion of equity in earnings of unconsolidated subsidiaries which related to the investees income (loss) from discontinued operations had previously been presented separately in the Income (loss) from discontinued operations, net of tax caption for the Parent Company and Guarantor Subsidiaries. This revision has also been reflected in the Net income (loss) and Income (loss) from discontinued operations captions in the Supplemental Condensed Consolidating Schedule of Cash Flows for Parent Company and Guarantor Subsidiaries for the same periods. |
While these revisions have no impact on the previously reported Net income or total cash flows from operations of the Parent Company or Guarantor Subsidiaries, they resulted in the following changes to previously reported amounts. For the Parent Company in 2012, Equity in earnings of unconsolidated subsidiaries changed from $(174) million to $(83) million; Income (loss) from continuing operations changed from $(451) million to $(360) million; and Income (loss) from discontinued operations, net of tax changed from $316 million to $225 million. For the Guarantor Subsidiaries in 2012, Equity in earnings of unconsolidated subsidiaries changed from $60 million to $65 million; Income (loss) from continuing operations changed from $(174) million to $(169) million; and Income (loss) from discontinued operations, net of tax changed from $91 million to $86 million. These revisions had no impact on the consolidated results of the Company and were not material to the Supplemental Condensed Consolidating Schedule of Comprehensive Income or the Supplemental Condensed Consolidating Schedule of Cash Flows for any period.
28
(in millions) | Supplemental Condensed Consolidating Schedule of Comprehensive Income Nine Months Ended September 30 2013 |
|||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Total revenue |
$ | | $ | 2,112 | $ | 1,201 | $ | (262 | ) | $ | 3,051 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales and administrative expenses (excluding depreciation) |
74 | 1,518 | 955 | (262 | ) | 2,285 | ||||||||||||||
Depreciation |
1 | 150 | 71 | | 222 | |||||||||||||||
Amortization of acquisition-related intangible assets |
| 208 | 47 | | 255 | |||||||||||||||
Goodwill impairment charges |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total costs and expenses |
75 | 1,876 | 1,073 | (262 | ) | 2,762 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
(75 | ) | 236 | 128 | | 289 | ||||||||||||||
Net interest income (expense) |
(283 | ) | | (18 | ) | | (301 | ) | ||||||||||||
Equity in earnings of unconsolidated subsidiaries |
234 | 87 | | (321 | ) | | ||||||||||||||
Other income (expense) |
(6 | ) | | (1 | ) | | (7 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before income taxes |
(130 | ) | 323 | 109 | (321 | ) | (19 | ) | ||||||||||||
Benefit from (provision for) income taxes |
121 | (89 | ) | (22 | ) | | 10 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
$ | (9 | ) | $ | 234 | $ | 87 | $ | (321 | ) | $ | (9 | ) | |||||||
Income (loss) from discontinued operations, net of tax |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (9 | ) | $ | 234 | $ | 87 | $ | (321 | ) | $ | (9 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
$ | (5 | ) | $ | 232 | $ | 91 | $ | (323 | ) | $ | (5 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
29
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 |
225 | 86 | 5 | | 316 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(360 | ) | (169 | ) | 60 | 18 | (451 | ) | ||||||||||||
Non cash adjustments |
220 | 653 | 111 | (18 | ) | 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 (e) |
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 | | ||||||||||||||
Intercompany dividends |
| | | | | |||||||||||||||
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 | |||||||||
|
|
|
|
|
|
|
|
|
|
(e) | The intercompany cash transactions reflected above within investment activities largely reflect cash dividends or the return of capital, including the cash dividend of $1.8 billion from Guarantor Subsidiaries to Parent in connection with the sale of our Higher Education business. |
30
Supplemental Condensed Consolidating Schedule of Cash Flows Nine Months Ended September 30, 2013 |
||||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Cash flow from operations: |
||||||||||||||||||||
Net income (loss) |
$ | (9 | ) | $ | 234 | $ | 87 | $ | (321 | ) | $ | (9 | ) | |||||||
Income (loss) from discontinued operations |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(9 | ) | 234 | 87 | (321 | ) | (9 | ) | ||||||||||||
Non cash adjustments |
(164 | ) | 195 | 92 | 321 | 444 | ||||||||||||||
Changes in operating assets and liabilities |
(75 | ) | 184 | 25 | | 134 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flow from (used in) continuing operations |
(248 | ) | 613 | 204 | | 569 | ||||||||||||||
Cash flow from (used in) discontinued operations |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flow from (used in) operations |
(248 | ) | 613 | 204 | | 569 | ||||||||||||||
Investment activities: |
||||||||||||||||||||
Intercompany transactions |
555 | (386 | ) | 43 | (212 | ) | | |||||||||||||
Cash paid for acquired businesses, net of cash acquired |
| (1 | ) | | | (1 | ) | |||||||||||||
Cash paid for property and equipment and software |
| (116 | ) | (44 | ) | | (160 | ) | ||||||||||||
Other investing activities |
| | 1 | | 1 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
555 | (503 | ) | | (212 | ) | (160 | ) | ||||||||||||
Cash provided by (used in) discontinued operations |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) investment activities |
555 | (503 | ) | | (212 | ) | (160 | ) | ||||||||||||
Financing activities: |
||||||||||||||||||||
Intercompany dividends of HE sale proceeds |
| | | | | |||||||||||||||
Intercompany dividends |
| (106 | ) | (106 | ) | 212 | | |||||||||||||
Net repayments of long-term debt |
(193 | ) | (1 | ) | (52 | ) | | (246 | ) | |||||||||||
Premium paid to retire debt |
| | | | | |||||||||||||||
Other financing activities |
(18 | ) | | | | (18 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) continuing operations |
(211 | ) | (107 | ) | (158 | ) | 212 | (264 | ) | |||||||||||
Cash provided by (used in) discontinued operations |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by (used in) financing activities |
(211 | ) | (107 | ) | (158 | ) | 212 | (264 | ) | |||||||||||
Effect of exchange rate changes on cash |
| | (2 | ) | | (2 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Increase (decrease) in cash and cash equivalents |
96 | 3 | 44 | | 143 | |||||||||||||||
Beginning cash and cash equivalents |
220 | (3 | ) | 329 | | 546 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending cash and cash equivalents |
$ | 316 | $ | | $ | 373 | $ | | $ | 689 | ||||||||||
|
|
|
|
|
|
|
|
|
|
31
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, 2012 and presumes that readers are familiar with 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 SunGard, which are materially the same as the results of operations and financial condition of SCC and SCCII. Therefore, the discussions provided are applicable to each of SCC, SCCII and SunGard unless otherwise noted.
Our critical accounting estimate disclosure from our Annual Report on Form 10-K for the year ended December 31, 2012 has been updated as a result of our annual trade name and goodwill impairment tests as discussed in Note 4 of Notes to Consolidated Financial Statements.
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 constant currency 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.
We evaluate our performance using both GAAP and non-GAAP measures. Our primary non-GAAP measure is Adjusted EBITDA, whose corresponding GAAP measure is income from continuing operations before income taxes (see Note 10 of Notes to Consolidated Financial Statements). Adjusted EBITDA is defined as operating income excluding the following items:
| depreciation, |
| amortization of acquisition-related intangible assets, |
| goodwill impairment, |
| severance and facility closure charges, |
| stock compensation, |
| management fees, and |
| certain other costs. |
We believe Adjusted EBITDA is an effective tool to measure our operating performance since it excludes non-cash items and certain variable charges. We use Adjusted EBITDA extensively to measure both SunGard and its reportable segments within the Company and also to report our results to our board of directors.
While Adjusted EBITDA is useful for analysis purposes, it should not be considered as an alternative to our reported GAAP results. Also, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is similar, but not identical, to adjusted EBITDA as defined in the Credit Agreement (as defined above) for purposes of our debt covenants.
32
Results of Operations:
Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012
The following table sets forth, for the periods indicated, certain supplemental revenue data and the percentage change in those amounts from period to period (in millions).
Revenue:
Three Months Ended September 30, 2013 |
FS | AS | PS&E | Total | ||||||||||||
Total revenue |
$ | 635 | $ | 340 | $ | 53 | $ | 1,028 | ||||||||
Year to year revenue change |
(1 | )% | (2 | )% | 6 | % | (1 | )% | ||||||||
Year to year revenue change at constant currency |
(1 | )% | (1 | )% | 6 | % | (1 | )% | ||||||||
Services |
$ | 572 | $ | 334 | $ | 45 | $ | 951 | ||||||||
Year to year services revenue change |
(2 | )% | (2 | )% | 3 | % | (2 | )% | ||||||||
Year to year services revenue change at constant currency |
(2 | )% | (2 | )% | 3 | % | (2 | )% | ||||||||
License and resale fees |
$ | 57 | $ | | $ | 8 | $ | 65 | ||||||||
Year to year license and resale fees revenue change |
20 | % | (19 | )% | 29 | % | 21 | % | ||||||||
Year to year license and resale fees revenue change at constant currency |
19 | % | (19 | )% | 29 | % | 20 | % | ||||||||
Reimbursable expenses |
$ | 6 | $ | 6 | $ | | $ | 12 | ||||||||
Year to year reimbursable expenses revenue change |
(19 | )% | 55 | % | 7 | % | 4 | % | ||||||||
Year to year reimbursable expenses revenue change at constant currency |
(19 | )% | 56 | % | 7 | % | 4 | % | ||||||||
Three Months Ended September 30, 2012 |
FS | AS | PS&E | Total | ||||||||||||
Total revenue |
$ | 640 | $ | 346 | $ | 49 | $ | 1,035 | ||||||||
Services |
584 | 342 | 43 | 969 | ||||||||||||
License and resale fees |
48 | | 5 | 53 | ||||||||||||
Reimbursable expenses |
8 | 4 | 1 | 13 |
Total SunGard reported revenue and constant-currency revenue decreased $7 million, or 1%, for the three months ended September 30, 2013 compared to the third quarter of 2012. The $7 million decrease at constant-currency is due mainly to a $10 million decrease in FS professional services revenue, a $10 million decrease in AS recovery services, and a $9 million decrease in FS managed services revenue, partially offset by the sale of a $12 million customer bankruptcy claim, a $10 million increase in FS software license fee revenue and a $6 million increase in AS managed services revenue, primarily due to a new customer in Europe.
Financial Systems segment:
FS reported revenue decreased $5 million, or 1%, in the third quarter of 2013 from the prior year period. On a constant currency basis, revenue decreased $7 million, or 1%, in the quarter. Software license and resale fees were $57 million and increased $9 million, or 19%, year to year on a constant currency basis. The year to year increase in license sales reflects a combination of existing customer renewals and new customer sales. Services revenue benefited from the sale of the bankruptcy claim mentioned above and was impacted by a reduction in professional services reflecting the completion of large projects and continued cautious spending by our customers. Moreover, certain customer losses, in some cases due to bankruptcies and mergers, impacted services revenue. In many cases, these customer decisions occurred shortly after the financial crisis of 2008. However, migration from SunGard systems took multiple years to execute. We expect this attrition to mitigate as the financial services industry recovers. These trends were partially offset by a $4 million increase from the fourth quarter 2012 acquisition of a business.
33
Availability Services segment:
AS reported revenue decreased $6 million, or 2%, in the third quarter of 2013 from the prior year period. On a constant currency basis, revenue decreased $4 million, or 1%, in the quarter primarily due to decreases in recovery services and professional services revenue, partially offset by an increase in managed services particularly due to a new customer in Europe. Recovery services revenue has been declining due to customers shifting from traditional backup and recovery solutions to either in-house solutions or disk-based, cloud-based or managed recovery solutions. In this environment, we have introduced the Managed Recovery Program (MRP), which brings SunGards expertise to our customers disaster recovery operations. Demand has also been increasing for outsourced management of IT operations and applications. We expect these trends to continue in the future.
Public Sector & Education segment:
PS&E reported revenue and constant currency revenue increased $4 million, or 6%, for the three months ended September 30, 2013, from the corresponding period in 2012. Reported revenue from license and resale fees grew $3 million, or 29%, from the prior year period driven by strong acceptance of new public sector solutions.
Operating Income and Operating Margin:
The tables below set 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 (in millions).
Three Months Ended September 30, 2013 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Revenue |
$ | 635 | $ | 340 | $ | 53 | $ | 1,028 | $ | | $ | 1,028 | ||||||||||||
Adjusted EBITDA |
194 | 108 | 16 | 318 | (12 | ) | 306 | |||||||||||||||||
Adjusted EBITDA margin |
30.5 | % | 31.6 | % | 31.4 | % | 30.9 | % | (1.2 | )% | 29.7 | % | ||||||||||||
Adjusted EBITDA margin at constant currency |
29.8 | % | 31.7 | % | 31.4 | % | 30.5 | % | (1.2 | )% | 29.3 | % | ||||||||||||
Year to year revenue change |
(1 | )% | (2 | )% | 6 | % | (1 | )% | | % | (1 | )% | ||||||||||||
Year to year Adjusted EBITDA change |
14 | % | (11 | )% | 10 | % | 4 | % | (26 | )% | 3 | % | ||||||||||||
Year to year revenue change at constant currency |
(1 | )% | (1 | )% | 6 | % | (1 | )% | | % | (1 | )% | ||||||||||||
Year to year Adjusted EBITDA change at constant currency |
11 | % | (10 | )% | 10 | % | 3 | % | (27 | )% | 2 | % |
Three Months Ended September 30, 2012 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Revenue |
$ | 640 | $ | 346 | $ | 49 | $ | 1,035 | $ | | $ | 1,035 | ||||||||||||
Adjusted EBITDA |
170 | 120 | 15 | 305 | (10 | ) | 295 | |||||||||||||||||
Adjusted EBITDA margin |
26.6 | % | 34.8 | % | 30.4 | % | 29.5 | % | (0.9 | )% | 28.6 | % |
34
Reconciliation of Adjusted EBITDA to operating income:
Three Months Ended | ||||||||
September 30, 2012 |
September 30, 2013 |
|||||||
Adjusted EBITDA |
$ | 295 | $ | 306 | ||||
Depreciation(1) |
(70 | ) | (73 | ) | ||||
Amortization of acquisition-related intangible assets |
(94 | ) | (82 | ) | ||||
Goodwill impairment charge |
(385 | ) | | |||||
Severance and facility closure costs |
(13 | ) | (9 | ) | ||||
Stock compensation expense |
(9 | ) | (12 | ) | ||||
Management fees |
(3 | ) | (3 | ) | ||||
Other costs (included in operating income) |
| (5 | ) | |||||
|
|
|
|
|||||
Operating income |
$ | (279 | ) | $ | 122 | |||
|
|
|
|
|||||
Operating income margin |
(27.0 | )% | 11.9 | % | ||||
Operating income margin at constant currency |
11.4 | % |
Depreciation and amortization and capital expenditures by segment follow (in millions):
Three Months Ended September 30, 2013 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Capital expenditures |
$ | 23 | $ | 34 | $ | 2 | $ | 59 | $ | | $ | 59 | ||||||||||||
Depreciation(1) |
22 | 49 | 2 | 73 | | 73 | ||||||||||||||||||
Amortization of acquisition-related intangible assets |
40 | 38 | 3 | 81 | 1 | 82 |
Three Months Ended September 30, 2012 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Capital expenditures |
$ | 19 | $ | 36 | $ | 2 | $ | 57 | $ | 1 | $ | 58 | ||||||||||||
Depreciation(1) |
22 | 46 | 1 | 69 | 1 | 70 | ||||||||||||||||||
Amortization of acquisition-related intangible assets |
49 | 40 | 5 | 94 | | 94 |
(1) | Includes amortization of capitalized software. |
SunGard Total Operating Margin:
Our total operating margin was 11.4% for the three months ended September 30, 2013, compared to (27.0)% for the three months ended September 30, 2012. The more significant factors impacting the 38.4 margin point improvement are the following:
| The $385 million goodwill impairment in the third quarter of 2012 impacted that periods operating margin by 37.2 points. There was no impairment in third quarter 2013; |
| The improvement in the FS Adjusted EBITDA margin increased the total operating margin by 1.7 points primarily due to a shift in the revenue mix toward higher margin software licenses from lower margin professional services, the sale of the bankruptcy claim, increased capitalized software costs and decreased consultant and facilities expenses; |
| The decline in the AS Adjusted EBITDA margin decreased the total operating margin by 1.3 points due primarily to lower revenue in managed services and a decrease in recovery services revenue in North America, and the margin pressure of start-up costs for a new managed services customer in Europe; and |
| The decrease in amortization of acquisition-related intangible assets increased margin by 1.2 points, or $12 million, due primarily to the $13 million impact of software and customer base intangible assets that were fully amortized in 2012. |
35
Segment Adjusted EBITDA:
Financial Systems segment:
The FS Adjusted EBITDA margin was 29.8% and 26.6% for the three months ended September 30, 2013 and 2012, respectively. The more significant factors impacting the 3.2 margin point improvement are a change in the revenue mix to higher margin software licenses from lower margin professional services; the sale of a customer bankruptcy claim; an increase in capitalized software development costs; a reduction in certain personnel costs; and a $1 million increase in expense from the change in the second quarter of 2013 in the estimate for vacation liabilities as described in Note 10 of Notes to Consolidated Financial Statements.
Availability Services segment:
The AS Adjusted EBITDA margin was 31.7% and 34.8% for the three months ended September 30, 2013 and 2012, respectively. The 3.1 point reduction in AS Adjusted EBITDA margin was driven by lower managed services and recovery services revenue in North America, and investments made in MRP and other new AS offerings. In addition, margins were impacted by start-up costs for a significant, new managed services customer in Europe.
Public Sector & Education segment:
The PS&E Adjusted EBITDA margin was 31.4% and 30.4% for the three months ended September 30, 2013 and 2012, respectively, and Adjusted EBITDA increased $1 million. The $1 million increase resulted from customer acceptance of new solutions, partially offset by higher employment-related costs.
Non-operating Expenses:
Interest expense was $96 million and $102 million for the three months ended September 30, 2013 and 2012, respectively. The $6 million decrease in interest expense was due primarily to lower interest rates from the refinance of the Companys senior subordinated notes in November 2012, partially offset by higher average debt outstanding primarily as a result of the December 2012 $720 million tranche D term loan borrowing.
The effective income tax rates for the three months ended September 30, 2013 and 2012 were 14% and a benefit of 4%, respectively. The effective tax rate for the three months ended September 30, 2013 reflects the benefit of the rate differential between the U.S. and other countries, the benefit of a temporary reduction in statutory tax rates in certain jurisdictions, and the benefit of U.S. deductions associated with development and certain R&D tax credits. Changes in the jurisdictional mix of income or the total amount of income for 2013 may significantly impact the estimated effective income tax rate for the year. The effective tax rate for the three months ended September 30, 2012 was 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.
For SCC, accreted dividends on SCCIIs cumulative preferred stock were $49 million and $64 million for the three months ended September 30, 2013 and 2012, respectively. The decrease in accreted dividends is due to the declaration and payment of a dividend in December 2012, partially offset by compounding.
36
Nine months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012
The following table sets forth, for the periods indicated, certain supplemental revenue data and the percentage change in those amounts from period to period (in millions).
Revenue:
Nine Months Ended September 30, 2013 |
FS | AS | PS&E | Total | ||||||||||||
Total revenue |
$ | 1,867 | $ | 1,029 | $ | 155 | $ | 3,051 | ||||||||
Year to year revenue change |
(3 | )% | (2 | )% | 2 | % | (3 | )% | ||||||||
Year to year revenue change at constant currency |
(3 | )% | (2 | )% | 2 | % | (2 | )% | ||||||||
Services |
$ | 1,701 | $ | 1,011 | $ | 132 | $ | 2,844 | ||||||||
Year to year services revenue change |
(3 | )% | (2 | )% | 1 | % | (2 | )% | ||||||||
Year to year services revenue change at constant currency |
(3 | )% | (2 | )% | 1 | % | (2 | )% | ||||||||
License and resale fees |
$ | 144 | $ | 1 | $ | 21 | $ | 166 | ||||||||
Year to year license and resale fees revenue change |
(3 | )% | (9 | )% | 9 | % | (1 | )% | ||||||||
Year to year license and resale fees revenue change at constant currency |
(3 | )% | (9 | )% | 9 | % | (2 | )% | ||||||||
Reimbursable expenses |
$ | 22 | $ | 17 | $ | 2 | $ | 41 | ||||||||
Year to year reimbursable expenses revenue change |
(25 | )% | 14 | % | 8 | % | (11 | )% | ||||||||
Year to year reimbursable expenses revenue change at constant currency |
(25 | )% | 15 | % | 8 | % | (11 | )% | ||||||||
Nine Months Ended September 30, 2012 |
FS | AS | PS&E | Total | ||||||||||||
Total revenue |
$ | 1,928 | $ | 1,052 | $ | 151 | $ | 3,131 | ||||||||
Services |
1,750 | 1,036 | 130 | 2,916 | ||||||||||||
License and resale fees |
148 | 1 | 19 | 168 | ||||||||||||
Reimbursable expenses |
30 | 15 | 2 | 47 |
Total SunGard reported revenue decreased $80 million, or 3%, for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012. On a constant currency basis, revenue decreased $75 million, or 2%. The $75 million decrease is due mainly to a $34 million decrease in AS recovery services revenue, a combined $33 million decrease in FS and AS professional services revenue, a $23 million decrease in FS managed services, and a $12 million decrease in FS software rental revenue, partially offset by a $21 million increase in AS managed services, primarily due to a new customer in Europe, the sale of a $12 million customer bankruptcy claim and a $10 million increase from the fourth quarter 2012 FS acquisition of an business.
Financial Systems segment:
FS reported revenue and constant-currency revenue decreased $61 million, or 3%, in the nine months ended September 30, 2013 from the prior year period. Software license and resale fees were $143 million and decreased $5 million, or 3%, year to year on a constant currency basis. The decline in license sales reflects, to some degree, cautious spending patterns in some of our largest customers and the timing of license renewals. Services revenue benefitted from the sale of the bankruptcy claim mentioned above and was impacted by a reduction in professional services reflecting the completion of large projects and continued cautious spending by our customers. Moreover, certain customer losses, in some cases due to bankruptcies and mergers, impacted services revenue. In many cases, these customer decisions occurred shortly after the financial crisis of 2008. However, migration from SunGard systems took multiple years to execute. We expect this attrition to mitigate as the financial services industry recovers. These trends were partially offset by a $10 million increase from the fourth quarter 2012 acquisition of a business.
37
Despite the overall decline in revenue, emerging markets revenue grew year-to-year in the nine months ended September 2013 as customers continue to demand the world-class software and services that SunGard provides. Emerging markets revenue now comprises over 10% of total FS revenue. Emerging markets include China, India and countries located in Latin America, Central and Eastern Europe, Middle East, Africa and Southeast Asia.
Availability Services segment:
AS reported revenue decreased $23 million, or 2%, in the nine months ended September 30, 2013 from the prior year period. On a constant currency basis, revenue decreased $18 million, or 2%. Decreases in recovery services and professional services revenue in the nine months ended September 30, 2013 from the prior year period were partially offset by managed services, particularly due to a new customer in Europe.
Public Sector & Education segment:
PS&E reported revenue and constant currency revenue increased $4 million, or 2%, for the nine months ended September 30, 2013 from the corresponding period in 2012 driven by strong acceptance of new public sector solutions.
Operating Income and Operating Margin:
The tables below set 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 (in millions).
Nine Months Ended September 30, 2013 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Revenue |
$ | 1,867 | $ | 1,029 | $ | 155 | $ | 3,051 | $ | | $ | 3,051 | ||||||||||||
Adjusted EBITDA |
502 | 325 | 48 | 875 | (36 | ) | 839 | |||||||||||||||||
Adjusted EBITDA margin |
26.9 | % | 31.5 | % | 31.2 | % | 28.7 | % | (1.2 | )% | 27.5 | % | ||||||||||||
Adjusted EBITDA margin at constant currency |
26.4 | % | 31.6 | % | 31.2 | % | 28.4 | % | (1.2 | )% | 27.2 | % | ||||||||||||
Year to year revenue change |
(3 | )% | (2 | )% | 2 | % | (3 | )% | (3 | )% | ||||||||||||||
Year to year Adjusted EBITDA change |
6 | % | (7 | )% | 3 | % | | % | (4 | )% | | % | ||||||||||||
Year to year revenue change at constant currency |
(3 | )% | (2 | )% | 2 | % | (2 | )% | (2 | )% | ||||||||||||||
Year to year Adjusted EBITDA change at constant currency |
4 | % | (7 | )% | 3 | % | | % | (4 | )% | (1 | )% | ||||||||||||
Nine Months Ended September 30, 2012 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Revenue |
$ | 1,928 | $ | 1,052 | $ | 151 | $ | 3,131 | $ | | $ | 3,131 | ||||||||||||
Adjusted EBITDA |
474 | 351 | 47 | 872 | (35 | ) | 837 | |||||||||||||||||
Adjusted EBITDA margin |
24.6 | % | 33.4 | % | 31.0 | % | 27.9 | % | (1.1 | )% | 26.7 | % |
38
Reconciliation of Adjusted EBITDA to operating income:
Nine Months Ended | ||||||||
September 30, 2012 |
September 30, 2013 |
|||||||
Adjusted EBITDA |
$ | 837 | $ | 839 | ||||
Depreciation(1) |
(211 | ) | (222 | ) | ||||
Amortization of acquisition-related intangible assets |
(295 | ) | (255 | ) | ||||
Goodwill impairment charge |
(385 | ) | | |||||
Severance and facility closure costs |
(22 | ) | (15 | ) | ||||
Stock compensation expense |
(29 | ) | (35 | ) | ||||
Management fees |
(9 | ) | (8 | ) | ||||
Other costs (included in operating income) |
(8 | ) | (15 | ) | ||||
|
|
|
|
|||||
Operating income |
$ | (122 | ) | $ | 289 | |||
|
|
|
|
|||||
Operating income margin |
(3.9 | )% | 9.5 | % | ||||
Operating income margin at constant currency |
9.2 | % |
Depreciation and amortization and capital expenditures by segment follow (in millions):
Nine Months Ended September 30, 2013 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Capital expenditures |
$ | 64 | $ | 89 | $ | 6 | $ | 159 | $ | 1 | $ | 160 | ||||||||||||
Depreciation(1) |
67 | 149 | 5 | 221 | 1 | 222 | ||||||||||||||||||
Amortization of acquisition-related intangible assets |
128 | 115 | 11 | 254 | 1 | 255 |
Nine Months Ended September 30, 2012 |
FS | AS | PS&E | Sum of segments |
Corporate | Total | ||||||||||||||||||
Capital expenditures |
$ | 62 | $ | 104 | $ | 6 | $ | 172 | $ | 1 | $ | 173 | ||||||||||||
Depreciation(1) |
63 | 142 | 5 | 210 | 1 | 211 | ||||||||||||||||||
Amortization of acquisition-related intangible assets |
155 | 126 | 14 | 295 | | 295 |
(1) | Includes amortization of capitalized software. |
SunGard Total Operating Margin:
Our total operating margin was 9.2% for the nine months ended September 30, 2013, compared to (3.9)% for the nine months ended September 30, 2012. The more significant factors impacting the 13.1 margin point improvement are the following:
| The $385 million goodwill impairment in the third quarter of 2012 impacted the operating margin for the nine months ended September 30, 2012 by 12.3 points. There was no impairment in the nine months ended September 30, 2013; |
| The improvement in FS Adjusted EBITDA increased total operating margin by 0.5 points primarily due to lower employment and facility-related expenses due to 2012 restructuring actions, increased capitalized software costs, the sale of the bankruptcy claim, a $9 million change in estimate for vacation liabilities and a shift in the revenue mix toward higher margin software from professional services; |
| The decline in the AS Adjusted EBITDA margin decreased the total operating margin by 0.8 points due primarily to the decrease in recovery services revenue and the margin pressure of start-up costs reflecting the investment in a new managed services customer contract in Europe; and |
| The decrease in amortization of acquisition-related intangible assets increased margin by 1.3 points, or $40 million, due primarily to the $42 million impact of software and customer base intangible assets that were fully amortized in 2012. |
39
Segment Adjusted EBITDA:
Financial Systems segment:
The FS Adjusted EBITDA margin was 26.4% and 24.6% for the nine months ended September 30, 2013 and 2012, respectively. The more significant factors impacting the 1.8 margin point improvement are a change in the revenue mix to higher margin software from lower margin professional services; the sale of a customer bankruptcy claim; reduced labor and facility costs, partially as a result of our 2012 restructuring actions; an increase in capitalized software development costs; the $9 million impact from the change in estimate for vacation liabilities as described in Note 10 of Notes to Consolidated Financial Statements.
Availability Services segment:
The AS Adjusted EBITDA margin was 31.6% and 33.4% for the nine months ended September 30, 2013 and 2012, respectively. The 1.8 point reduction in AS Adjusted EBITDA margin was driven by lower recovery services revenue in North America, and investments made in MRP and other new AS offerings. In addition, margins were impacted by start-up costs for a new managed services customer in Europe.
Public Sector & Education segment:
The PS&E Adjusted EBITDA margin was 31.2% and 31.0% for the nine months ended September 30, 2013 and 2012, respectively. The Adjusted EBITDA margin increased by 0.2 points due primarily to a change in the mix of revenue to higher margin software and services from lower margin professional services and lower facilities costs, partially offset by an increase in external services expense reflecting a benefit received in the nine months ended September 30, 2012.
Non-operating Expenses:
Interest expense was $302 million and $325 million for the nine months ended September 30, 2013 and 2012, respectively. The $23 million decrease in interest expense was due primarily to lower interest rates from the refinancing of the Companys senior subordinated notes in November 2012 and lower average outstanding debt from the early extinguishment of the 2015 Notes in April 2012 and the December 2012 prepayment of the incremental term loan, partially offset by the December 2012 $720 million tranche D term loan borrowing.
Loss on extinguishment of debt was $6 million and $51 million for the nine months ended September 30, 2013 and 2012, respectively. The loss on extinguishment of debt in 2013 includes the loss related to the March 2013 refinance of $2.2 billion of term loans. The loss on extinguishment of debt in 2012 includes the loss related to the January 2012 repayment of $1.22 billion of term loans and the early extinguishment of the 2015 Notes.
The effective income tax rates for the nine months ended September 30, 2013 and 2012 were a benefit of 50% and 9%, respectively. The effective tax rate for the nine months ended September 30, 2013 reflects the benefit of the rate differential between the U.S. and other countries, the benefit of a temporary reduction in statutory tax rates in certain jurisdictions, and the benefit of U.S. deductions associated with development and certain R&D tax credits. Also included in the benefit recorded in tax expense for the year to date September 30, 2013 results is a discrete item of $9 million related to a benefit associated with a tax accounting method change related to certain lease-related reserves. Changes in the jurisdictional mix of income or the total amount of income for 2013 may significantly impact the estimated effective income tax rate for the year. The effective tax rate for the nine months ended September 30, 2012 was 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 $121 million and $186 million for the nine months ended September 30, 2013 and 2012, respectively. The decrease in accreted dividends is due to the declaration and payment of a dividend in December 2012, partially offset by compounding.
40
Liquidity and Capital Resources:
At September 30, 2013, our liquidity was $1.56 billion, comprised of cash and equivalents of $689 million capacity under our revolving credit facility of $827 million and capacity under our receivables facility of $42 million. Included in cash and cash equivalents at September 30, 2013 is $311 million invested in money market accounts in the United States. Cash flow from continuing operations was $569 million in the nine months ended September 30, 2013 compared to $426 million in the nine months ended September 30, 2012. Cash flow from continuing operations increased $143 million due to $98 million in lower interest payments reflecting lower average interest rates and the timing of payments partially offset by higher average debt outstanding. Cash flow also improved due to improved collections of accounts receivable and improved payables management.
Net cash used by continuing operations in investing activities was $160 million in the nine months ended September 30, 2013, comprised mainly of cash paid for property and equipment and software. Net cash used by continuing operations in investing activities was $180 million in the nine months ended September 30, 2012, comprised mainly of cash paid for property and equipment and software and one business 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.
Net cash used by continuing operations in financing activities was $264 million for the nine months ended September 30, 2013, primarily related to refinancing $2.2 billion of term loans and additional repayments of $166 million of term loans and $50 million of our receivables facility revolver borrowings. 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 $1.222 billion of term loans resulting from the sale of HE and $527 million related to the early retirement of the 2015 Notes.
At September 30, 2013, the contractual future maturities of debt, excluding the $12 million of other debt, are as follows (in millions):
2013 |
$ | 8 | ||
2014 |
335 | |||
2015 |
29 | |||
2016 |
29 | |||
2017 |
656 | |||
Thereafter |
5,379 | |||
|
|
|||
Total |
$ | 6,436 | ||
|
|
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
In connection with the March 2013 senior secured credit agreement amendment, we removed the financial maintenance covenants for the term loan facility and modified the financial maintenance covenants for the senior secured revolving credit facility. As amended, the financial maintenance covenant is applicable at quarter end only if there is an amount outstanding under the revolving credit facility that is greater than or equal to 15% of the total revolving commitments (see footnote 1 below for further details). If applicable, the financial maintenance covenant allows a maximum total leverage ratio of 5.75x at the end of such quarter.
41
If the financial maintenance covenant in the revolving credit facility were to apply and we failed to satisfy such covenant, then a default solely of the revolving credit facility would occur. If the revolving credit lenders fail to waive such default, then the revolving credit lenders could elect (upon a determination by a majority of the revolving credit lenders) to terminate their commitments and declare all amounts borrowed under the revolving credit facility due and payable. If this happens, all amounts borrowed under the senior secured term loan facilities would be due and payable as well. This acceleration would also result in a default under the indentures.
Under the indentures governing SunGards senior notes due 2018 and 2020 and senior subordinated notes due 2019 and SunGards senior secured credit agreement, our ability to incur additional indebtedness, make investments and pay dividends remains tied to a leverage or fixed charge ratio based on Adjusted EBITDA. 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. Adjusted EBITDA is similar, but not identical, to Adjusted EBITDA which we use to measure performance of our business and our segments.
Adjusted EBITDA is calculated as follows (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | Last Twelve Months Ended September 30, 2013 |
||||||||||||||||||
2012 | 2013 | 2012 | 2013 | |||||||||||||||||
Income (loss) from continuing operations |
$ | (367 | ) | $ | 23 | $ | (451 | ) | $ | (9 | ) | $ | 45 | |||||||
Interest expense, net |
101 | 95 | 324 | 301 | 404 | |||||||||||||||
Taxes |
(13 | ) | 3 | (44 | ) | (10 | ) | (4 | ) | |||||||||||
Depreciation and amortization |
164 | 155 | 506 | 477 | 643 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
EBITDA |
(115 | ) | 276 | 335 | 759 | 1,088 | ||||||||||||||
Goodwill impairment charge |
385 | | 385 | | | |||||||||||||||
Purchase accounting adjustments (a) |
2 | 1 | 7 | 6 | 8 | |||||||||||||||
Non-cash charges (b) |
10 | 12 | 30 | 36 | 45 | |||||||||||||||
Restructuring and other (c) |
16 | 16 | 29 | 33 | 68 | |||||||||||||||
Acquired EBITDA, net of disposed EBITDA (d) |
1 | | 2 | | 1 | |||||||||||||||
Loss on extinguishment of debt (e) |
| 1 | 51 | 6 | 36 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adjusted EBITDAsenior secured credit facilities, senior notes due 2018 and 2020 and senior subordinated notes due 2019 |
$ | 299 | $ | 306 | $ | 839 | $ | 840 | $ | 1,246 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(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 12 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) | Acquired EBITDA net of disposed EBITDA reflects the EBITDA impact of businesses that were acquired or disposed of during the period as if the acquisition or disposition occurred at the beginning of the period. |
42
(e) | Loss on extinguishment of debt for the nine months ended September 30, 2012 primarily 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 2012 retirement of the 2015 Notes. Loss on extinguishment of debt for the nine months ended September 30, 2013 primarily includes the write-off of deferred financing fees associated with the March 2013 refinance of $2.2 billion of term loans. Loss on extinguishment of debt for the last twelve months ended September 30, 2013 primarily includes the write-off of deferred financing fees associated with the December 2012 retirement of $1 billion, 10.25% senior subordinated notes due 2015, the December 2012 repayment of $217 million of US$-denominated term loans and the March 2013 refinance of $2.2 billion of term loans. |
The covenant requirements and actual ratios for the twelve months ended September 30, 2013 are as follows. All covenants are in compliance.
Covenant Requirements |
Actual Ratios |
|||||||
Senior secured credit facilities(1) |
||||||||
Maximum total debt to Adjusted EBITDA |
5.75x | 4.50x | ||||||
Senior notes due 2018 and 2020 and senior subordinated notes due 2019(2) |
||||||||
Minimum Adjusted EBITDA to fixed charges ratio required to incur additional debt pursuant to ratio provisions |
2.00x | 3.56x |
(1) | If on the last day of any four consecutive fiscal quarters our total revolving credit exposure minus the lesser of (x) the amount of outstanding letters of credit under the senior secured revolving credit facility and (y) $25 million, is equal to or greater than an amount equal to 15% of our aggregate revolving credit commitments, then on such day, we would be required to maintain a maximum consolidated total debt to Adjusted EBITDA ratio of 5.75x. Consolidated total debt is defined in the senior secured credit facilities as total debt less (i) certain indebtedness and (ii) cash and cash equivalents on our balance sheet in excess of $50 million. Failure to satisfy this ratio requirement would constitute a default solely under the senior secured revolving credit facility. If our revolving credit facility lenders failed to waive any such default and subsequently accelerated our obligations or terminated their commitments under the senior secured revolving credit facility, our repayment obligations under the senior secured term loan facilities would be accelerated as well, 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, 2013, we had $3.39 billion outstanding under the term loan facilities and available commitments of $827 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 2019 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 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
43
earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward- looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. All of these forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those we expected. We derive most of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Some of the factors that we believe could affect our results include: global economic and market conditions; the condition of the financial services industry, including the effect of any further consolidation among financial services firms; our high degree of debt-related leverage; the effect of war, terrorism, natural disasters or other catastrophic events; the effect of disruptions to our systems and infrastructure; the timing and magnitude of software sales; the timing and scope of technological advances; customers taking their information availability solutions in-house; the trend in information availability toward solutions utilizing more dedicated resources; the market and credit risks associated with broker/dealer operations; the ability to retain and attract customers and key personnel; risks relating to the foreign countries where we transact business; the integration and performance of acquired businesses; the ability to obtain patent protection and avoid patent-related liabilities in the context of a rapidly developing legal framework for software and business-method patents; a material weakness in our internal controls; and unanticipated changes in our income tax provision or the enactment of new tax legislation, issuance of regulations or relevant judicial decisions. 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, 2013, we had total debt of $6.45 billion, including $3.59 billion of variable rate debt. We have entered into interest rate swap agreements which fix the interest rates for $600 million of our variable rate debt. Swap agreements expiring in February 2017 with a notional value of $400 million effectively fix our interest rates at 0.69%. Swap agreements expiring in June 2019 with a notional value of $200 million effectively fix our interest rates at 2.06%. Our remaining variable rate debt of $2.99 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 $30 million per year. Upon the expiration of the interest rate swap agreements in February 2017 and June 2019, a 1% change in interest rates would result in a change in interest of approximately $34 million and $36 million per year, respectively.
Item 4. Controls and Procedures:
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Report. Based on that evaluation, the chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this Report were effective.
No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
44
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, 2012.
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.
Disclosure of Iranian Activities under Section 13(r) of the Securities Exchange Act of 1934
Because of the broad definition of affiliate in Rule 12b-2 of the Securities Exchange Act of 1934, certain of our Sponsors and the companies in which their affiliated funds are invested (portfolio companies) may be deemed to be affiliates of ours. Accordingly, we note that affiliates of one of our Sponsors, The Blackstone Group L.P., will include information in its Quarterly Report on Form 10-Q, as required by Section 13(r) of the Exchange Act, regarding activities of a portfolio company. These disclosures are reproduced on Exhibit 99.1 of this report, which disclosures are hereby incorporated by reference herein. We have no involvement in or control over such activities, and we have not independently verified or participated in the preparation of the disclosures described in that filing. To the extent any of our Sponsors make additional disclosures under Section 13(r), we will provide updates in our subsequent periodic filings.
Number |
Document | |
10.1 | Amendment dated October 1, 2013 to the Executive Employment Agreement effective as of August 11, 2005 by and between SunGard Data Systems Inc. and Victoria Silbey. | |
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. | |
99.1 | Section 13(r) Disclosure of Certain Sponsors | |
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, 2012 and September 30, 2013, (ii) Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2013, (iii) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2013 and (iv) Notes to Consolidated Financial Statements. |
45
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 6, 2013 | By:
|
/s/ Charles J. Neral | ||||
Charles J. Neral | ||||||
Senior Vice President-Finance and Chief Financial Officer (Principal Financial Officer) |
46
EXHIBIT INDEX
Exhibit |
Document | |
10.1 | Amendment dated October 1, 2013 to the Executive Employment Agreement effective as of August 11, 2005 by and between SunGard Data Systems Inc. and Victoria Silbey. | |
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. | |
99.1 | Section 13(r) Disclosure of Certain Sponsors | |
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, 2012 and September 30, 2013, (ii) Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2013, (iii) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2013 and (iv) Notes to Consolidated Financial Statements. |
47
Exhibit 10.1
Execution Copy
AMENDMENT 2013-1
TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT, dated as of October 1, 2013, is by and between SunGard Data Systems Inc., a Delaware corporation (SunGard) and Victoria E. Silbey (Executive).
WHEREAS, SunGard and Executive previously entered into an Employment Agreement, effective August 11, 2005, as amended by amendment 2008-1, effective January 1, 2008 (Employment Agreement), which sets forth the terms and conditions of Executives employment with SunGard;
WHEREAS, SunGard and Executive desire to amend the Employment Agreement to reflect a shift in the allocation of Executives cash to stock compensation ratio; and
WHEREAS, pursuant to Section 10(a) of the Employment Agreement, the Employment Agreement may be amended upon written amendment approved by the Board (as defined in the Employment Agreement) and executed on behalf of SunGard by a duly authorized officer of SunGard and by Executive.
NOW, THEREFORE, SunGard and Executive hereby agree that, effective as of the date of this Amendment, the Employment Agreement shall be amended as follows:
1. Section 1 of the Employment Agreement is hereby amended to add a new Section 1.9 to read as follows:
1.9 RSU Grants.
(a) Initial Grant. In exchange for a reduction in Executives target annual incentive bonus under the EIC plan for 2013 and later years from $650,000 to $500,000 in accordance with the terms of this Section 1.9, on June 1, 2013 (Grant Date), Executive shall receive an award of restricted stock units for units of Stock (as defined in the Incentive Plan) with a value of $450,000 on the Grant Date (Initial RSU Grant), subject to vesting and other terms and conditions set forth in the restricted stock unit grant agreement attached hereto as Exhibit E (the RSU Grant Agreement) and in the Incentive Plan, as it may be amended from time to time. Notwithstanding anything to the contrary in the Initial RSU Grant, upon distribution of the shares of Stock underlying the Initial RSU Grant (RSU Shares) and prior to the date that the capital stock of SunGard Capital Corp. and SunGard Capital Corp. II (collectively, Capital) is publicly traded in the open market (Open Public Market Date), Executive (or Executives estate or legal representatives in the case of Executives death or Disability) shall have the right to require SunGard, on 30 days prior notice, to repurchase for cash all or any portion of the RSU Shares on a date that is at least six months after the date on which Executive receives a distribution of such RSU Shares pursuant to the terms of the RSU Grant. The purchase price per RSU Share that has been distributed to Executive shall be equal to the fair market value of such RSU Share on the date of repurchase, based on the good faith determination of
fair market value by the Board. On and after the Open Public Market Date and following the expiration of any lockup or other limitation on Executives ability to sell the RSU Shares freely in the public market, Executive may sell the RSU Shares freely in the public market, subject to compliance with SunGards policy on trading by executives. Executives right (or the right of Executives estate or legal representatives in the event of Executives death or Disability) to sell the RSU Shares to SunGard pursuant to this Section 1.9 shall expire on the earlier of (i) the date immediately preceding the Open Public Market Date or (ii) the date that is one year after Executive ceases to be employed by SunGard for any reason.
(b) Follow-On Grant(s). SunGard has the option to make additional and successive follow-on grant(s) of equity for similar value as the Initial RSU Grant on or around January 1, 2016 and on the day following the last day of the vesting period of any successive grant, with similar terms and conditions as the Initial RSU Grant set forth in Section 1.9(a) and the RSU Grant Agreement (Follow-On Grant). If SunGard determines that it will not make a Follow-On Grant at the end of the vesting period of the then current grant made under this section 1.9, Executives Base Salary plus Target Incentive Bonus (Annual Cash Target) will increase by at least $150,000.
2. Section 2.1(b)(i) is hereby amended in its entirety to read as follows:
SunGard shall pay to Executive a lump sum cash payment equal to the Applicable Multiplier multiplied by the greater of (x) $1,128,000 or (y) Executives Annual Cash Target for the Year of Termination (which shall utilize, if applicable, such higher rate of Base Salary in effect immediately before any reduction thereof that constituted Good Reason), payable within ten (10) days after Executives Date of Termination.
3. The individual signing below on behalf of SunGard is a duly authorized officer of SunGard who has the authority to enter into this Amendment on behalf of SunGard.
4. In all respects not modified by this Amendment, the Employment Agreement is hereby ratified and confirmed.
[Signature Page Follows]
2
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Amendment, effective as of the date set forth above.
SUNGARD DATA SYSTEMS INC. | ||||||
Date: June 3, 2013 | By: | /s/ Russell P. Fradin | ||||
Name: | Russell P. Fradin | |||||
Title: | Chief Executive Officer | |||||
Date: October 1, 2013 | /s/ Victoria E. Silbey | |||||
Executive |
For good and valuable consideration, including Executives agreement to continue to serve as Senior Vice President Legal, and Chief Legal Officer of SunGard Data Systems Inc., the obligations of SunGard Data Systems Inc. under this Employment Agreement, dated August 11, 2005, as amended by amendment 2008-1, effective January 1, 2008 and this amendment 2013-1, effective October 1, 2013 (the Amended Employment Agreement), with Victoria E. Silbey shall be, jointly and severally, guaranteed by SunGard Capital Corp. and SunGard Capital Corp. II. In addition, SunGard Capital Corp. and SunGard Capital Corp. II agree to be bound by the terms of Section 1.9 of the Amended Employment Agreement which are expressly applicable to SunGard Capital Corp. and SunGard Capital Corp. II.
SUNGARD CAPITAL CORP. | ||||||
By: | /s/ Russell P. Fradin | |||||
Name: | Russell P. Fradin | |||||
Title: | Chief Executive Officer | |||||
Dated: June 3, 2013 | ||||||
SUNGARD CAPITAL CORP. II | ||||||
By: | /s/ Russell P. Fradin | |||||
Name: | Russell P. Fradin | |||||
Title: | Chief Executive Officer | |||||
Dated: June 3, 2013 |
3
Exhibit E
Name: Victoria E. Silbey
Number of Stock Units: 25,290
Date of Grant: June 1, 2013
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 AMENDED AND RESTATED STOCKHOLDERS AGREEMENT AMONG SUNGARD CAPITAL CORP., SUNGARD CAPITAL CORP. II, SUNGARD HOLDING CORP., SUNGARD HOLDCO LLC, SUNGARD DATA SYSTEMS INC. AND CERTAIN STOCKHOLDERS OF SUNGARD CAPITAL CORP. AND SUNGARD CAPITAL CORP. II, DATED AS OF NOVEMBER 7, 2012 (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 and Good Reason shall have the same meaning as set forth in the Employment Agreement by and between the Employer and the Grantee, effective August 11, 2005, as amended by amendment 2008-1 and amendment 2013-1 (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; Year of Termination means the calendar year during which the Grantees Date of Termination occurs; |
(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 any of the restrictive covenants set forth in Exhibit A, which is incorporated herein by reference; |
(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. |
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) | upon a Change of Control on or prior to December 30 of a calendar year and prior to the date that the Stock Units are fully vested, one-third of the Stock Units shall |
2
become vested, and any remaining unvested Stock Units shall continue to vest as provided for herein; |
(b) | if the Grantees Employment terminates as a result of death on or prior to December 30 of a calendar year and prior to the date that the Stock Units are fully vested, one-third of the Stock Units shall become vested as of the Date of Termination, and any remaining unvested Stock Units shall be forfeited as of the Date of Termination; |
(c) | other than as provided for in subsection (a), if the Grantees Employment terminates (i) as a result of termination by Employer without Cause or as a result of resignation by Grantee for Good Reason and, in either case, Grantee has executed and not revoked the release required by the Employment Agreement or Employer did not provide such release or (ii) as a result of Grantees disability, then the Stock Units to vest in that Year of Termination shall vest on a pro rata basis, with such portion vesting being determined by multiplying (x) 8,430 by (y) (A) the number of days in which the Grantee was employed by Employer during the Year of Termination divided by (B) 365 (rounded to the nearest whole number of Stock Units), and any remaining unvested Stock Units shall be forfeited as of the Date of Termination; and |
(d) | if the Grantees Employment terminates (i) as a result of termination by Employer without Cause or by Grantee for Good Reason and, in either case, Grantee has not executed the release required by the Employment Agreement or has revoked such release, (ii) as a result of termination by Employer for Cause, or (iii) as a result of Grantees resignation without Good Reason, then all of the unvested 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 as and when they vest in accordance with Section 4. Subject to Sections 15, 16 and 21, 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 rights contained in Section 6 of the Stockholders Agreement, while the Stockholders Agreement remains in effect; 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. In addition, the Stock Units granted hereunder and the related Shares are subject to the put rights contained in Section 1.9 of the Employment Agreement.
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, while the Stockholders Agreement remains in effect.
3
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 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 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 or of any other agreement with the |
4
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 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 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 Tax 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, Shares or other property in accordance with Section 8 hereof, are subject to the Grantee promptly paying to the
5
Companies all Taxes required to be withheld. The Administrator may require that the Grantee pay any Tax withholding 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 or other amounts under this Agreement at such time as the Administrator determines. The Grantee authorizes the Companies and their Affiliates to withhold all required tax withholding amounts from any amounts payable under this Agreement or otherwise owed to the Grantee. 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.
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 be exempt from Section 409A of the Code (and any regulations and guidelines issued thereunder) under the short-term deferral exception, and this Agreement shall be interpreted on a basis consistent with such intent. If applicable, 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
6
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. The Grantee, in accepting the Stock Units, represents and acknowledges the following:
(a) | The Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time. |
(b) | The grant of the Stock Units is voluntary and occasional and does not create any contractual or other right to receive future grants of awards, or benefits in lieu of awards, even if awards have been granted repeatedly in the past. |
(c) | All decisions with respect to future awards, if any, will be at the sole discretion of the Administrator. |
(d) | The Stock Units and any Shares acquired under the Plan are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or any Affiliate (including, as applicable, the Grantees Employer) and which are outside the scope of the your employment contract, if any. |
(e) | The Stock Units and any Shares acquired under the Plan are not part of the Grantees normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments. |
(f) | The Stock Units and the Shares subject to the Stock Units are not intended to replace any pension rights or compensation. |
(g) | The 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. |
(h) | In the event that the Grantees employer is not the Company, the grant of the Stock Units will not be interpreted to form an employment contract or relationship with the Company and, furthermore, the grant of the Stock Units will not be interpreted to form an employment contract with the Grantees Employer or any Affiliate. |
(i) | The future value of the underlying Shares is unknown and cannot be predicted with certainty. If the Grantee vests in the Stock Units and receives Shares, the value of the acquired Shares may increase or decrease. The Grantee understands that the Companies are not responsible for any foreign exchange fluctuation between the United States Dollar and the Grantees local currency that may affect the value of the Stock Units or the Shares. |
7
(j) | 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 the 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) or notice to terminate employment having been given by the Grantee or the Grantees Employer, and the Grantee irrevocably releases his or her Employer, the Company and its Affiliates, 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, the Grantee shall be deemed to have irrevocably waived the Grantees entitlement to pursue such claim. |
18. Data Privacy.
(a) | The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantees personal data as described in this Agreement by and among, as applicable, the Grantees Employer, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing the Grantees participation in the Plan. |
(b) | The Grantee understands that the Grantees Employer, the Company and its Affiliates, as applicable, hold certain personal information about the Grantee regarding the Grantees employment, the nature and amount of the Grantees compensation and the fact and conditions of the Grantees participation in the Plan, including, but not limited to, the Grantees name, home address, telephone number and e-mail address, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company and its Affiliates, details of all options, awards or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Grantees favor, for the purpose of implementing, administering and managing the Plan (the Data). |
(c) | The Grantee understands that the Data may be transferred to the Company, an Affiliate and any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Grantees country, or elsewhere, and that the recipients country may have different data privacy laws and protections than the Grantees country. The Grantee understands that the Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting the Grantees local human resources representative. The Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantees participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party. The Grantee understands that the Data will be held only as long as is |
8
necessary to implement, administer and manage the Grantees participation in the Plan. The Grantee understands that Grantee may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Grantees local human resources representative. The Grantee understands, however, that refusing or withdrawing the Grantees consent may affect the Grantees ability to participate in the Plan. For more information on the consequences of refusal to consent or withdrawal of consent, the Grantee understands that the Grantee may contact the Grantees local human resources representative. |
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. Severability. If any provision of this Agreement, or part thereof, is held to be unenforceable, then it shall be reformed so as to be enforceable consistent with the parties intent. Only if such unenforceable provision (or part thereof) cannot be reformed, shall such provision (or part thereof) be severed from this Agreement and such unenforceability will not affect any other provision (or part thereof) of this Agreement.
21. 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.
22. 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.
[SIGNATURE PAGE FOLLOWS]
9
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: |
|
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, INCLUDING THE RESTRICTIVE COVENANTS SET FORTH IN EXHIBIT A TO THIS AGREEMENT. I ACCEPT AND AGREE TO ALL OF THE PROVISIONS OF THIS AGREEMENT. I AGREE THAT ALL DECISIONS AND DETERMINATIONS OF THE ADMINISTRATOR SHALL BE FINAL AND BINDING ON ME AND ON ANY OTHER PERSON HAVING OR CLAIMING A RIGHT UNDER THIS AGREEMENT.
| ||||||
Victoria E. Silbey |
10
Schedule A
Vesting Schedule
Subject to continued Employment, one-third (1/3) of the Stock Units shall vest on each of December 31, 2013, December 31, 2014 and December 31, 2015.
Exhibit A
Restrictive Covenants
1. The Restricted Period means the period during the Grantees Employment and continuing until the date that is six months following the final delivery of Shares under this Agreement. The Post-Termination Restricted Period is that portion of the Restricted Period beginning on the Grantees Date of Termination and ending on the six month anniversary of the date of final delivery of Shares under this Agreement.
2. Except as noted in subsection 2(c),
a. The Grantee will not render services during the Restricted Period for any organization or engage directly or indirectly in any business which, in the judgment and sole determination of the CEO or another senior officer designated by the Committee, is or becomes competitive with any business of the Company and/or its Affiliates (together, for purposes of this Exhibit A, Company) with respect to which the Grantee had significant involvement or responsibility during his or her Employment (the Grantees Business), or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company with respect to the Grantees Business. The foregoing covenant shall apply to any such business or organization that operates in the same geographic location anywhere in the world in which the Grantees Business operates, unless Grantees responsibilities were limited to a defined territory or market. If Grantees responsibilities were limited to a defined territory or market, then this covenant will apply only to any territory or market for which Grantee was responsible during the last two years of Grantees employment with the Company. If the Grantees Employment with the Company has terminated, the judgment of the CEO or other designated officer will be based on the Grantees position and responsibilities while employed by the Company, the Grantees post-employment responsibilities and position with the other organization or business, the extent of past, current and potential competition or conflict between the Company and the other organization or business, the effect on the Companys customers, suppliers, employees and competitors of the Grantees assuming the post-employment position and such other considerations as are deemed relevant given the applicable facts and circumstances.
b. During the Restricted Period, the Grantee will not solicit or contact at any time, directly or through others, for the purpose or with the effect of competing or interfering with or harming any part of the Companys business, (a) any customer or acquisition target under contract with the Company at any time during the last two years of the Grantees Employment with the Company; (b) any prospective customer or acquisition target that received or requested a proposal, offer or letter of intent from the Company at any time during the last two years of the Grantees Employment with the Company; (c) any affiliate of any such customer or prospect; and (d) any of the individual contacts established by the Company or the Grantee or others at the Company during the period of the Grantees Employment with the Company.
c. The foregoing covenants shall apply to the Post-Termination Restricted Period only if Grantee was not a resident of California on the Grantees Date of Termination and is not a resident of California during the Post-Termination Restricted Period.
3. At all times during the Grantees Employment and after the Grantees Date of Termination, the Grantee will not disclose to anyone outside the Company, or use other than in and for the sole benefit of the Companys business, any confidential or proprietary information or material relating to the business of the Company (Proprietary Information), acquired or developed by the Grantee during Employment with the Company. The Grantee understands that the Companys Proprietary Information includes, by way of example and not limitation, the following information that is not generally available to the public nor readily ascertainable by the public, which has been subject to reasonable procedures of confidentiality, and has value to the Companys business and, if disclosed, likely would have value to the business of the Companys competitors: (a) the identity of customers and prospects, their specific requirements, and the names, addresses and telephone numbers of individual contacts; (b) prices, renewal dates and other detailed terms of customer and supplier contracts and
proposals; (c) pricing policies, information about costs, profits and sales, methods of delivering software and services, marketing and sales strategies, and software and service development strategies; (d) source code, object code, specifications, user manuals, technical manuals and other documentation for software products; (e) screen designs, report designs and other designs, concepts and visual expressions for software products; (f) employment and payroll records; (g) forecasts, budgets, acquisition models and other non-public financial information; and (h) expansion plans, business or development plans, management policies, information about possible acquisitions or divestitures, potential new products, markets or market extensions, and other business and acquisition strategies and policies. Proprietary Information does not include information that is generally available to, or known by, the public without violation of any applicable trade secret law or breach of a contractual covenant of confidentiality by Employee or any current or former employee, contractor or others in such relationships with the Company.
4. The Grantee will promptly communicate to the Company, in writing, all marketing strategies, product ideas, software designs and concepts, software enhancement and improvement ideas, and other ideas and inventions (collectively, works and ideas) pertaining to the Companys business, whether or not patentable or copyrightable, that are made, written, developed, conceived or reduced to practice by the Grantee, alone or with others, at any time (during or after business hours) while the Grantee is employed by the Company or during the three months after the Grantees Date of Termination. The Grantee understands that all of those works and ideas will be the Companys exclusive property, and by accepting the Stock Units the Grantee hereby assigns all the Grantees right, title and interest in those works and ideas to the Company. The Grantee will sign all documents which the Company deems necessary to confirm its ownership of those works and ideas, and the Grantee will cooperate fully with the Company to allow the Company to take full advantage of those works and ideas, including the securing of patent and/or copyright protection and/or other similar rights in the United States and in foreign countries. Works and ideas, whether or not patentable or copyrightable, made, written, developed, conceived or reduced to practice by the Grantee, alone or with others, not subject to compelled assignment under this Section 4 are those that meet each of the following criteria: (a) are or were developed entirely on Grantees own time; and (b) are or were developed without use of any equipment, supplies, facility or Proprietary Information of the Company; and (c) (i) do not relate, at the time made, written, developed, conceived or reduced to practice, to the Companys business or its actual or demonstrably anticipated research, development or business plans, or (ii) do not result from any service provided or work performed by Grantee for the Company.
5. During the Restricted Period, the Grantee will not solicit or encourage, directly or indirectly,
a. any individual who is an employee or independent contractor of the Company during the Restricted Period (Service Provider), and also was an employee or independent contractor of the Company within the six months before Grantees Date of Termination, to terminate or reduce such employee or independent contractors relationship with the Company.
b. by use of any Proprietary Information, any Service Provider to terminate or reduce his, her or its employment or independent contractor relationship with the Company.
6. If any provision of this Exhibit A, or part thereof, is held to be unenforceable due to being overbroad with respect to time, geography or scope, then it shall be reformed so as to be enforceable consistent with the Companys intent to award Stock Units only to Grantees who are contractually bound to protect, to the maximum extent permitted by applicable law, the Companys Proprietary Information, business goodwill, relationships with customers, prospective customers, vendors and Service Providers, as well as the Companys works and ideas. Only if such unenforceable provision (or part thereof) cannot be reformed, shall such provision (or part thereof) be severed from this Exhibit A and such unenforceability will not affect any other provision (or part thereof) of this Exhibit A or the Agreement of which this Exhibit A is a part.
13
Exhibit 12.1
SunGard Capital Corp.
Computation of Ratio of Earnings to Fixed Charges (Unaudited)
($ in millions)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2013 | 2012 | 2013 | |||||||||||||
Fixed charges |
||||||||||||||||
Interest expense |
$ | 95 | $ | 90 | $ | 299 | $ | 272 | ||||||||
Amortization of debt issuance costs and debt discount |
7 | 6 | 26 | 30 | ||||||||||||
Portion of rental expense representative of interest |
17 | 18 | 54 | 52 | ||||||||||||
Undeclared preferred stock dividend of SunGard Capital Corp. II before income taxes (at effective rate) |
37 | 154 | 204 | 255 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed charges |
$ | 156 | $ | 268 | $ | 583 | $ | 609 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings |
||||||||||||||||
Income (loss) from continuing operations before income taxes |
$ | (380 | ) | $ | 26 | $ | (495 | ) | $ | (19 | ) | |||||
Fixed charges per above |
156 | 268 | 583 | 609 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total earnings |
$ | (224 | ) | $ | 294 | $ | 88 | $ | 590 | |||||||
|
|
|
|
|
|
|
|
|||||||||
Ratio of earnings to fixed charges |
* | 1.1 | * | * |
* | Earnings for the three months ended September 30, 2012 and for the nine months ended September 30, 2012 and 2013 were inadequate to cover fixed charges by $380 million, $495 million and $19 million, respectively. |
SunGard Capital Corp. II
SunGard Data Systems Inc.
Computation of Ratio of Earnings to Fixed Charges (Unaudited)
($ in millions)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2013 | 2012 | 2013 | |||||||||||||
Fixed charges |
||||||||||||||||
Interest expense |
$ | 95 | $ | 90 | $ | 299 | $ | 272 | ||||||||
Amortization of debt issuance costs and debt discount |
7 | 6 | 26 | 30 | ||||||||||||
Portion of rental expense representative of interest |
17 | 18 | 54 | 52 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed charges |
$ | 119 | $ | 114 | $ | 379 | $ | 354 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings |
||||||||||||||||
Income (loss) from continuing operations before income taxes |
$ | (380 | ) | $ | 26 | $ | (495 | ) | $ | (19 | ) | |||||
Fixed charges per above |
119 | 114 | 379 | 354 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total earnings |
$ | (261 | ) | $ | 140 | $ | (116 | ) | $ | 335 | ||||||
|
|
|
|
|
|
|
|
|||||||||
Ratio of earnings to fixed charges |
* | 1.2 | * | * |
* | Earnings for the three months ended September 30, 2012 and for the nine months ended September 30, 2012 and 2013 were inadequate to cover fixed charges by $380 million, $495 million and $19 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 6, 2013 |
/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 6, 2013 |
/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, 2013 (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 6, 2013 |
/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, 2013 (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 6, 2013 |
/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.
Exhibit 99.1
Section 13(r) Disclosure of Certain Sponsors
The Blackstone Group L.P. (Blackstone) has reported to us that Travelport Limited (Travelport) provided the disclosure reproduced below for this fiscal quarter. We have not independently verified or participated in the preparation of this disclosure.
As part of our global business in the travel industry, we provide certain passenger travel related GDS and Airline IT Solutions services to Iran Air. We also provide certain Airline IT Solutions services to Iran Air Tours. All of these services are either exempt from applicable sanctions prohibitions pursuant to a statutory exemption in the International Emergency Economic Powers Act permitting transactions ordinarily incident to travel or, to the extent not otherwise exempt, specifically licensed by the U.S. Office of Foreign Assets Control (OFAC). Subject to any changes in the exempt/licensed status of such activities, we intend to continue these business activities, which are directly related to and promote the arrangement of travel for individuals.
Travelport has not provided Blackstone with gross revenues and net profits attributable to the activities described above.
S.0"Y0FB]J]D<0*"F2%9!B#-_7NK)'(Y*\<7$I0J^G,&WU),Y
MC5G-5L!M<'!9$605WFHYF5.A#5HU8/R86CC@-`7
M9,-"P(2'&2$/(-9&GL`W2`@TO">RH6%C\2.X(`\4$K*L#&'JHX5=4HAEF@A/
MUE_#\(418BR)%I_:%!K`YH]RDN34J//(^3,O!>EL28^"=#F964/PJ`3.D5N6
M(^!3_EG@V+1\1RZA$BB/SIT2R(1@!1$Q@P4AP*5BA*: F%RAS'"P2Y1<4R#LP
MYVW5NO-^BU&E)QZ4X()XYL L,73>H4KD/)?(4
MHH4)0]=G8KM+\5[.@P7F7JHCP"=F5;P@C.@C0>1=/R<'S&\0:TA?\,/'=AP&
MBB-X&Y1>/9)_*6[KL3=Z/XCX4JS7+;8V9S8G"KZM[A=288Q]B9`U!E1A(8+U
MJH98&^%&RY+7V-6.@E;\"?Q\^.TG;,;&?L)-"A5IU,.=)&WFF<19;PN)8M$9
MB3C63>%R;&;B6@]YU;.P]%QG;-M]V2S7HO@E5QUF ^.<9_TAOW#U^09!02P/B^C#`/,.9AS,.>=$U>#=EIS^YP$4?"[
ME,#(.JHV=7"WSHW>>)0^Z::B!?[)^UF4YN4;B).`8Z6"I0;'"N(D8*_;::\'
M!EAKL-9@K<%:@[5N6H9@K<%:[UM=7TWR"A..:SK2L0S&\5;Z(.:!Q58!-M1&
M>[#8FHJKDXD+$(["PBDYJS0$O_?4R@5%99R2J\;.<%9ESZ@W'MX<+]G.^<7=
M/$9+14FLU?K3;$;,@)^D/G,]P@A'9NAYQ#%?4>"Q5]LXH*YSJAM^@@QVJP_T
MU/P*EC:`U`<@]>$H'0^H5?BKE!:V/?0`F*<43]L9H4TQM.PWG-Q4"Y*R*NDW
MH*GV2J8"3SOA05X/C,'1^4K8?-NTC@(B`B("(E:XILZKY#LHI@WXI]`18/IA
M81-=YMNN>8"%E7N'H'O@]8'7IS]/`>D`Z0#IE.,,(!T@77U(5^9!81HPJ>R#
M2`$!\[DT@56MDO&43J!A:=$^P,42RQGA#+3CA/0UF&><>E;V=B)%CF@$!UAS
M`183FF9FY=RH3GQ09@2]'P`Y`/JU%V`GEA8GA90[LED*3C)0G&=*P0;@ON8"
M!-S7`[U492W8!]5XIA2\@'W078`0$MJ;T('PT&GA(3@MI?1JY':AB])ZWSF3
M`$L&"!7!4D`'GBD%&[`4T%R`@/N`^X#[.O!,*=@`W-=<@(#[^U?>G>NI67%U
M/MB#8_@W@?B/WA/@@*;+6@E0,Y-01GK@<"R#]$![>R[7R>D/V,:.21`.T`-9
M!F0Q)1X:]GMHT#>&)_NLAZ*/Y893FV3#CQ'!CT[G.+3O[!,M!%KS.6?M.]`9=DK:FGL&@EVZ37_9[TXY!V6_(B[6`ZP&N![@>X'JH*U!P/<#UZ*CK
M,1X='3%H+EL(YAW,.YAW,.]@WL&\@WF7F?=)]3F'=":Z[#?T3S@CN\J38C1S
M0^H_$49E;FB%:6H8*W!)6BO0!GT-'<57BH^QNYT"O,M62K[\RMIZ*VA[XU%>
M[^XC0Q_5U<>J70<+\2`MI[QJMAJ<+Q6L-UCLUDI; @.F67VT->/SF"R@.K@%4=817@
M%F@8L`I8I1NK`+=`PX!5P"K=6`6X!1IV8)@4V`9L`[:IP+9C0N\*;*,;3C*#
M\E4%W[_P9@7$#Y"'`R(.IO.P6;1;IYJ9<'655KD!J2%5%=PL+3BE4ZEA7@>R
MCB&'CN44;90#`&87U4TGP(3:;`!,A>0`@-E%==,),*\!,`$PU9$#`&87U4TG
MP!P?#IAM+P37$3S;+A,5$BNM8NAVH)_\7!+')Z+O'5ZX;)3_P@%U'>3.D$5F
MQ/-X,T/J8,=D)#4X(TI^TXR08](:T25%=W#4G"SZ['HOV&,3)F1*XIBO:$ZL
MIZ.X"L4&J@[H<*^JQ';M3,SCI.C! O6QJ2YKO;Y2,Q*5XOY;ZY^^9C_
M[J'12[UTZJ&WM0V`F>F\?@Q%9DJ78*@\?.D2UP"\.P#>E,LAQ-5O+O(K4OMDUJ50U6>
M_TE(OZ&_I'F08E-TOT9UNV="!1.N.^T*&F4>G",*?0$JA$5=)*'D.6HMLRTY
M`5*P-J6P42DX5='^2),38)$*,JKZ+4.'OESS`W]R5HJ5N1JK>N6['B*S&3%Y
MPY;=C1$S9%S>3/Y#5#17*VPQ)/:R&G9#P$JW"P%/A:)S*AK!7$4=]//:GK8S
M@*GSLDLW?D/^1BEWJ-4`MY]AZ[_&W4(\<.N53@U5[O!_D#K\E1O`T>6PABVA
MX.0W%K=5PEYJ$>)6T6[F*G=V,[!N1L9T7C2T1Q)*YVIT! HNFMFO^V`+HZ.&QL;A%_23F[(OISRLPA9(TH%&']1*S
MQJA/2U)+G364_$&=R@Z0RW]K`XN[];M_9Q?GE9U=H";-GQ@L6]TB^8$L`[*8
M$J];9`_[/33H&\-BCL'\*+BM-52E142J.'/72[QA%4N\HG8MBI%("C%*69:9
MA'=P:M[&?7Z`V5"(?^6IN0)<4U`1`4$T%=P=($@'$41#K@$XU`\.WQZB7[#_
M/H'"=P\F%%1)P!)-!?<0+KH5KW!GJ7=./?2VMO?'@?]T/%`K"`+@5IIKG:I[
M`ENBB"VY=[VEZ^$@G=^!6=IZ;%-0'P%(-!7LZF!I&7JA3'.JNL_=KCUT%U8EK*-/%=9];95T_T-O\9/X7Y`
M2*S?*)Y2FP:TG-WY`TGWU0LC?7K4<2.MG-K"`I;$#;(V$U5`Z\K'*/'PB(&D
M)>O%52ILO'=,99)06#*2K43C`FHH)8&YSO<,<;]Y+C]GW/KP^@^?.WF;.6D&
M]%E(+VO55(Z()%6[F56))PRX-N(+"U=2VS*IE/B"#\K>*U&*X"4=4R^&HY1/
M=M*`CQ5\.83F.T*91=L%QU8)34455]+M]"3%W=F]@5_%CN5'5S1\92NDT*<.
MX>TZ1)2./S3^1G+B["&BDIU`LTO5(:.KB*["XI*=O58=67$7E:,A,^NQVXT";%$V%,XVU$7@`H@3K;?.8^>
M@@.LCKK"XCJDL+XQT\YK31EP;]45%+6DB>Y$Q-.JW1:"D+;4-+'-A_8#B"ED%7,I\0B]#?RA.UH
MD]O=3^K_F?2]'T+G5^RQIR]I@.U[UUM^^?([64R)M]^]&TJ:Y1[KWJE#^SX5
MEG3;/=*UV=D\DRJHYW$/T?%-8NXJ%7>^CW%UG7)^9.-OG-)]PI4$;FY2`%6<
MTG\X4VK;?`N8$WC83/ZD&9'*FO&F\Z*2X3=-YQZ!2KKV9IS16YC.;QY9,N=O
M
]_G8D1B.?$
M-VSW)2@^@R7AH;576X1VO;FT#Q[RG:U-!5=Q+B5JGA*CJ:%X.$%1K5NSZR,T
MC0ZYOE15<.@Z#8@SUXG2F,JT+'.]J"JHO+,LRN`T<T+8Y3&ZR+L3W35>$11\8&L;F>4H*_M83I@8M*,I2^^&"
MC9;=YHMBA=!AH['91PL]8>KXZ)QID$_\-[R2PB(>?<8!9PG[*O#"!7%$O8-I
MAY9X)'L"72RQ&?#B!\:TI>N0N/;"QKY/9S2JF'"10P+^0\97-//GQ+08S(C2;P&56SM#3UR
MNUJC(JU?W(@:K]\>^0_=HULX3*D73SWTML9!5.ZOJ
:[MOC:`MX#UF9'-'23(V`MS'=@"``@`"``(,SW-CF;Z7!E=`5/;;*^
M*"Y9]'GKPBXW>2!1!!HWFA?'&`>C5>2^WF9F<\(NV[;[PI0%"8J0'R[8<-EM
M/L*^3P)?'%5A4SRE-@THN[P@V`\]8B$=?L7I\U$YW5,B6/.^67T2HEMK624
M<00`0PO'>SG3B=+17*B;
M'-_M2#?0.;!DLIW(6RD3`%,!4P%3WQG](S9I9D1ONHTMP!``V[U@6ST3&D31
M"L%S=P,8V!I-; !O_0Z;
MO,K[M8=>YM2<\]=AY+C.Q:\A]K`3N![RPRF;.A1[[":/^*$=L.FY>6'DTO.O
MV%L\_I6/V8/Y`#/>MQG5YJ*_'L4E^N*P]]OTKY!:.*"N\_^S][>];2-+URC\
M^6Q@_X>&L0_@/%`R(B7++YD,D,DD
_%G[Z(/Q02"<.U;=,1#01B]"-PCS=Z*12
MP;88)[[G.[&O/OG<14[C($[#8>@T(60C&/95#3-U)+B!5M?1,`B1,H1,5P2>
M[,52]._<<\&U>D!1NH$OZI!56>EIO6?Z"S\3]:L($?X9]:\..34++*SKY&
M=K>@08@EAQ[5(*0+T.!0DC&FV2TY)_EBE
W]X-OUZRU+[>%]UUO(YED^(*E99TBO6$'Z(D3?)=
M>Y9;O2