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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 000-28430
SS&C TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-1169696
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
80 LAMBERTON ROAD
WINDSOR, CT 06095
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
860-298-4500
(REGISTRANT'S 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. Yes [X] No [_]
Number of shares outstanding of the issuer's sole class of common stock as of
November 6, 2002:
Class Number of Shares Outstanding
----- ----------------------------
Common Stock, par value $0.01 per share 12,801,715
SS&C TECHNOLOGIES, INC.
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 2002 and
December 31, 2001 2
Consolidated Statements of Operations for the three
months and nine months ended September 30, 2002 and 2001 3
Consolidated Statements of Cash Flows for the nine
months ended September 30, 2002 and 2001 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Item 4 Controls and Procedures 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
CERTIFICATIONS 17
This Quarterly Report on Form 10-Q may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects" and similar
expressions are intended to identify forward-looking statements. The important
factors discussed below under the caption "Certain Factors That May Affect
Future Operating Results," among others, could cause actual results to differ
materially from those indicated by forward-looking statements made herein and
presented elsewhere by management from time to time.
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30, December 31,
2002 2001
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 18,329 $ 28,425
Investments in marketable securities 25,053 31,077
Accounts receivable, net of allowance
for doubtful accounts 10,843 8,944
Prepaid expenses and other current assets 989 1,459
Deferred income taxes 1,302 2,210
-------- --------
Total current assets 56,516 72,115
-------- --------
Property and equipment:
Leasehold improvements 3,276 3,225
Equipment, furniture, and fixtures 16,023 15,967
-------- --------
19,299 19,192
Less accumulated depreciation (13,051) (11,468)
-------- --------
Net property and equipment 6,248 7,724
-------- --------
Deferred income taxes 7,170 6,916
Intangible and other assets, net of
accumulated amortization 3,234 2,024
-------- --------
Total assets $ 73,168 $ 88,779
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 795 $ 1,079
Income taxes payable 1,324 696
Accrued employee compensation and 2,550 1,722
benefits
Other accrued expenses 1,913 3,055
Deferred maintenance and other revenue 11,475 9,279
-------- --------
Total current liabilities 18,057 15,831
-------- --------
Stockholders' equity:
Common stock 169 163
Additional paid-in capital 93,896 89,674
Accumulated other comprehensive (1,595) 186
(loss) income
Accumulated deficit (4,393) (9,072)
-------- --------
88,077 80,951
Less: Treasury shares (32,966) (8,003)
-------- --------
Total stockholders' equity 55,111 72,948
-------- --------
Total liabilities and stockholders' equity $ 73,168 $ 88,779
======== ========
See accompanying notes to Consolidated Financial Statements.
2
SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
Software licenses $ 3,605 $ 4,508 $ 10,982 $ 11,585
Maintenance 6,843 6,727 20,470 19,845
Professional services 1,605 1,695 5,120 6,176
Outsourcing 3,056 1,357 9,624 4,190
-------- -------- -------- --------
Total revenues 15,109 14,287 46,196 41,796
-------- -------- -------- --------
Cost of revenues:
Software licenses 306 180 934 548
Maintenance 1,294 1,708 4,118 5,323
Professional services 1,359 1,628 4,091 5,427
Outsourcing 2,147 1,329 6,492 4,100
-------- -------- -------- --------
Total cost of revenues 5,106 4,845 15,635 15,398
-------- -------- -------- --------
Gross profit 10,003 9,442 30,561 26,398
-------- -------- -------- --------
Operating expenses:
Selling and marketing 1,968 2,827 7,103 8,770
Research and development 2,799 2,790 8,764 8,827
General and administrative 1,897 2,601 5,834 7,969
Write-off of purchased
in-process research
and development -- -- 1,744 --
-------- -------- -------- --------
Total operating expenses 6,664 8,218 23,445 25,566
-------- -------- -------- --------
Operating income 3,339 1,224 7,116 832
-------- -------- -------- --------
Interest income, net 323 661 1,164 2,069
Other income (expense), net (84) (171) (483) 1,644
-------- -------- -------- --------
Income before income taxes 3,578 1,714 7,797 4,545
Provision for income taxes 1,432 687 3,119 1,735
-------- -------- -------- --------
Net income $ 2,146 $ 1,027 $ 4,678 $ 2,810
======== ======== ======== ========
Basic earnings per share $ 0.17 $ 0.07 $ 0.36 $ 0.19
======== ======== ======== ========
Basic weighted average number
of common shares outstanding 12,705 14,969 13,065 15,040
======== ======== ======== ========
Diluted earnings per share $ 0.16 $ 0.07 $ 0.34 $ 0.19
======== ======== ======== ========
Diluted weighted average
number of common and common
equivalent shares outstanding 13,499 15,234 13,809 15,168
======== ======== ======== ========
See accompanying notes to Consolidated Financial Statements.
3
SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
-----------------
September 30, September 30,
2002 2001
---- ----
Cash flow from operating activities:
Net income $ 4,678 $ 2,810
-------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,995 2,693
Net realized losses (gains) on
equity investments 424 (1,800)
Loss on sale of property and equipment 2 --
Deferred income taxes 654 908
Purchased in-process research and
development 1,744 --
Provision for doubtful accounts 338 696
Changes in operating assets and
liabilities, net of effects of
business acquisition:
Accounts receivable (1,812) 1,819
Prepaid expenses and other assets 368 298
Taxes receivable -- 147
Accounts payable (331) 388
Accrued expenses (371) (1,304)
Taxes payable 631 322
Deferred maintenance and
other revenues 2,050 (1,152)
-------- --------
Total adjustments 6,692 3,015
-------- --------
Net cash provided by operating activities 11,370 5,825
-------- --------
Cash flow from investing activities:
Additions to property and equipment (473) (1,691)
Proceeds from sale of property and
equipment 3 62
Cash paid for business acquisitions,
net of cash acquired (3,943) --
Additions to capitalized software and
other intangibles -- (159)
Purchases of marketable securities (13,121) (27,192)
Sales of marketable securities 16,687 28,366
-------- --------
Net cash used in investing activities (847) (614)
-------- --------
Cash flow from financing activities:
Repayment of debt and acquired debt (146) (77)
Issuance of common stock 120 188
Exercise of options 4,099 58
Purchase of common stock for treasury (24,963) (1,852)
-------- --------
Net cash used in financing activities (20,890) (1,683)
-------- --------
Effect of exchange rate changes on cash 271 (93)
-------- --------
Net increase (decrease) in cash and cash
equivalents (10,096) 3,435
Cash and cash equivalents, beginning of
period 28,425 20,690
-------- --------
Cash and cash equivalents, end of period $ 18,329 $ 24,125
======== ========
See accompanying notes to Consolidated Financial Statements.
4
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments, except as noted elsewhere in the notes to the consolidated
financial statements) necessary to present fairly its financial position as of
September 30, 2002 and the results of its operations for the three months and
nine months ended September 30, 2002 and 2001. These statements do not include
all of the information and footnotes required by generally accepted accounting
principles for annual financial statements. The financial statements contained
herein should be read in conjunction with the consolidated financial statements
and footnotes as of and for the year ended December 31, 2001, which were
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission. The December 31, 2001 consolidated balance sheet data
were derived from audited financial statements, but do not include all
disclosures required by generally accepted accounting principles for annual
financial statements. The results of operations for the three months and nine
months ended September 30, 2002 are not necessarily indicative of the expected
results for the full year.
2. Recent Accounting Policies
On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"). SFAS
No. 142 requires that goodwill and intangible assets with indefinite useful
lives no longer be amortized, but instead be tested for impairment at least
annually. The Company has completed the required transition impairment test for
goodwill and has determined that no impairment existed as of January 1, 2002.
The Company will perform the annual impairment test in the fourth quarter. Pro
forma net income and net income per share for the three months and nine months
ended September 30, 2001, adjusted to eliminate historical amortization of
goodwill and related tax effects, are as follows (in thousands except per share
data):
Three Months Nine Months
Ended Ended
September 30, September 30,
2001 2001
---- ----
Reported net income $ 1,027 $ 2,810
Add: goodwill amortization, net of tax 10 30
--------- ---------
Pro forma net income $ 1,037 $ 2,840
========= =========
Reported net income per share:
Basic $ 0.07 $ 0.19
Diluted $ 0.07 $ 0.19
Pro forma net income per share:
Basic $ 0.07 $ 0.19
Diluted $ 0.07 $ 0.19
In addition, effective January 1, 2002, the Company adopted Emerging Issues Task
Force Issue No. 01-14, "Income Statement Characterization of Reimbursements
Received for 'Out of Pocket' Expenses Incurred" ("Issue No. 01-14"), which
requires that customer reimbursements received for direct costs paid to third
parties and related expenses be characterized as revenue. Comparative financial
statements for prior periods have been reclassified to provide consistent
presentation. For the three months ended September 30, 2002 and 2001, the
Company has presented customer reimbursement revenue and expenses of $124,000
and $147,000, respectively, within professional services in accordance with
Issue No. 01-14. Customer reimbursements represent direct costs incurred during
the course of services that are reimbursed to the Company by its customers. For
the nine months ended September 30, 2002 and 2001, the Company has presented
customer reimbursement revenue and expenses of $373,000 and $548,000,
respectively. The adoption of Issue No. 01-14 did not impact the Company's
financial position, operating income or net income.
5
3. Basic and Diluted Earnings Per Share
Earnings per share is calculated in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share
includes no dilution and is computed by dividing income available to the
Company's common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share is computed by dividing
net income by the weighted average number of common and common equivalent shares
outstanding for the period. Common equivalent shares are comprised of stock
options using the treasury stock method. Common equivalent shares are excluded
from the computations of diluted earnings per share if the effect of including
such common equivalent shares is antidilutive. Income available to stockholders
is the same for basic and diluted earnings per share. A reconciliation of the
shares outstanding is as follows (in thousands):
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Basic weighted average shares outstanding 12,705 14,969 13,065 15,040
Weighted average common stock equivalents -- options 794 265 744 128
------ ------ ------ ------
Diluted weighted average shares
outstanding 13,499 15,234 13,809 15,168
====== ====== ====== ======
Antidilutive options outstanding
excluded from the computation of EPS 918 1,485 1,021 1,639
4. Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" requires that items defined as comprehensive income, such as foreign
currency translation adjustments and unrealized gains (losses) on marketable
securities, be separately classified in the financial statements and that the
accumulated balance of other comprehensive income be reported separately from
retained earnings and additional paid-in capital in the equity section of the
balance sheet.
The following table sets forth the components of comprehensive income (in
thousands):
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Net income $ 2,146 $ 1,027 $ 4,678 $ 2,810
Foreign currency translation (losses) gains 3 187 253 (77)
Unrealized losses on marketable securities (1,361) (615) (2,034) (1,859)
------- ------- ------- -------
Total comprehensive income $ 788 $ 599 $ 2,897 $ 874
======= ======= ======= =======
5. Stock Repurchase Program
On May 22, 2002, the Company's Board of Directors authorized the continued
repurchase of shares of the Company's common stock up to an additional
expenditure of $10 million. The Company initiated the repurchase program on May
23, 2000, pursuant to which it repurchased 1.2 million shares for $6.5 million
between that date and May 23, 2001. The Company continued the plan on May 24,
2001, pursuant to which it repurchased 2.9 million shares for $26.4 million
between that date and May 21, 2002. As of September 30, 2002, the Company had
repurchased a total of 4.1 million shares for approximately $33 million under
its repurchase programs.
6. Acquisitions
On January 15, 2002, the Company acquired the assets and business of Real-Time
USA, Inc. ("Real-Time"), a solution provider of sell-side fixed income
applications. Real-Time delivers a comprehensive suite of front-, mid-, and
back-office
6
applications via Application Service Provider ("ASP") or license, to commercial
banks and broker-dealers throughout the United States. The consideration for the
deal was $4.0 million in cash and the assumption of certain liabilities by the
Company, with a potential earn-out payment by the Company of up to $1.17 million
in cash if certain 2002 Real-Time revenue targets are achieved. A summary of the
allocation of the purchase price is as follows (in thousands):
Current assets, net of cash acquired $ 357
Fair value of equipment, 321
furniture and fixtures
Current liabilities (159)
Long-term liabilities (63)
Acquired in-process research and development 1,744
Acquired completed technology 1,743
-------
$ 3,943
=======
The acquisition was accounted for as a purchase and, accordingly, the net assets
and results of operations of Real-Time have been included in the consolidated
financial statements of the Company from January 1, 2002. The purchase price was
allocated to tangible and intangible assets, liabilities, and in-process
research and development ("IPR&D") based on their fair value on the date of the
acquisition. The fair value assigned to intangible assets acquired was based on
an independent appraisal. The fair value of acquired completed technology of
$1.7 million was determined based on the future cash flows method. The acquired
completed technology will be amortized on a straight-line basis over four years,
the estimated life of the product.
The Company recorded a one-time write-off of $1.7 million in the period ended
March 31, 2002 related to the value of IPR&D acquired as part of the purchase of
Real-Time that had not yet reached technological feasibility and had no
alternative future use. Accordingly, these costs were expensed upon acquisition.
At the acquisition date, Real-Time was developing Lightning, a full-service ASP
bond accounting solution designed specifically for large regional banks. The
allocation of $1.7 million to IPR&D represents the estimated fair value related
to this incomplete project based on risk-adjusted cash flows adjusted to reflect
the contribution of core technology. The net cash flows were then discounted
utilizing a weighted average cost of capital of 26%. This discount rate takes
into consideration the inherent uncertainties surrounding the successful
development of the in-process research and development, the profitability levels
of such technology and the potential for other competing technological advances
which could potentially impact the estimates. The Lightning project was
estimated to be 62% completed at the date of the acquisition. The project is
expected to be completed in the fourth quarter of 2002.
The unaudited pro forma condensed consolidated results of operations presented
below for the three and nine month periods ended September 30, 2002 and 2001
assume that the Real-Time acquisition occurred at the beginning of 2001. The
unaudited pro forma condensed consolidated results of operations for the nine
months ended September 30, 2002 excludes the $1.7 million write-off of purchased
IPR&D in the first quarter of 2002 (in thousands, except per share data):
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Total revenues $15,109 $15,259 $46,196 $44,745
Operating income 3,339 1,226 8,860 838
Net income 2,146 1,027 5,725 2,814
Basic earnings per share $ 0.17 $ 0.07 $ 0.44 $ 0.19
Diluted earnings per share $ 0.16 $ 0.07 $ 0.41 $ 0.19
7. Reclassifications
Certain amounts in the Company's 2001 consolidated financial statements have
been reclassified to be comparable with the 2002 presentation. These
reclassifications have had no effect on the Company's net income, working
capital or net equity.
7
8. Commitments and Contingencies
From time to time, the Company is subject to legal proceedings and claims that
arise in the normal course of its business. The Company is not a party to
litigation that management believes could have a material effect on the Company
or its business.
9. International Sales and Geography Information
The Company manages its business primarily on a geographic basis. The Company
sells to the Americas and Europe. Americas includes both North and South
America. Europe includes European countries as well as the Middle East and
Africa. Other includes Asia Pacific and Japan.
Revenues by geography were (in thousands):
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Americas $13,498 $12,568 $40,811 $35,922
Europe 1,052 1,147 3,453 4,044
Other 559 572 1,932 1,830
------- ------- ------- -------
$15,109 $14,287 $46,196 $41,796
======= ======= ======= =======
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CRITICAL ACCOUNTING POLICIES
The Company's significant accounting policies are summarized in Note 2 to its
consolidated financial statements. However, certain of the Company's accounting
policies require the application of significant judgment by its management, and
such judgments are reflected in the amounts reported in its consolidated
financial statements. In applying these policies, the Company's management uses
its judgment to determine the appropriate assumptions to be used in the
determination of estimates. Those estimates are based on the Company's
historical experience, terms of existing contracts, its observation of trends in
the industry, information provided by its clients, and information available
from other outside sources, as appropriate. Actual results may differ
significantly from the estimates contained in the Company's consolidated
financial statements. The Company's significant accounting policies include:
Revenue Recognition. The Company's revenues consist primarily of software
license revenues, maintenance revenues, and professional and outsourcing
services revenues.
The Company applies the provisions of Statement of Position No. 97-2, "Software
Revenue Recognition" ("SOP 97-2") to all software transactions. The Company
recognizes revenues from the sale of software licenses when persuasive evidence
of an arrangement exists, the product has been delivered, the fee is fixed and
determinable, and collection of the resulting receivable is reasonably assured.
SOP 97-2 requires that revenues recognized from software transactions be
allocated to each element of the transaction based on the relative fair values
of the elements, such as software products, specific upgrades, enhancements,
post-contract client support, installation, or training. The Company defers
revenues from the transaction fee equivalent to the fair value of the
undelivered elements. The determination of fair value of an element is based
upon vendor-specific objective evidence. The Company occasionally enters into
software license agreements requiring significant customization. The Company
accounts for these agreements on the percentage-of-completion basis and must
estimate the costs to complete the agreement utilizing an estimate of
development man-hours remaining. Due to uncertainties inherent in the estimation
process, it is at least reasonably possible that completion costs may be
revised. Such revisions are recognized in the period in which the revisions are
determined. Due to the complexity of some software license agreements, the
Company routinely applies judgments to the application of software recognition
accounting principals to specific agreements and transactions. Different
judgments and/or different contract structures could have led to different
accounting conclusions, which could have a material effect on the Company's
reported quarterly results of operations.
The Company recognizes revenues for maintenance services ratably over the
contract term. The Company's consulting, training, and outsourcing services are
generally billed based on hourly rates, and the Company generally recognizes
revenues over the period during which the applicable services are performed.
Allowance for Doubtful Accounts. The preparation of financial statements
requires the Company's management to make estimates relating to the
collectibility of its accounts receivable. Management establishes the allowance
for doubtful accounts based on historical bad debt experience. In addition,
management analyzes customer accounts, client concentrations, client
credit-worthiness, current economic trends, and changes in the Company's client
payment terms when evaluating the adequacy of the allowance for doubtful
accounts. Such estimates require significant judgment on the part of the
Company's management. Therefore, changes in the assumptions underlying the
Company's estimates or changes in the financial condition of the Company's
customers could result in a different required allowance, which could have a
material impact on the Company's reported quarterly results of operations.
Income Taxes. The carrying value of the Company's net deferred tax assets
assumes that the Company will be able to generate sufficient future taxable
income in certain tax jurisdictions, based on estimates and assumptions. If
these estimates and related assumptions change in the future, the Company may be
required to record additional valuation allowances against its deferred tax
assets resulting in additional income tax expense in the Company's consolidated
statement of operations. Management evaluates whether deferred tax assets are
realizable quarterly and assesses whether there is a need for additional
valuation allowances quarterly. Such estimates require significant judgment on
the part of the Company's management. In addition, management evaluates the need
to provide additional tax provisions for adjustments proposed by taxing
authorities.
9
Marketable Securities. The Company classifies its entire investment portfolio,
consisting of debt securities issued by federal government agencies, debt
securities issued by state and local governments of the United States, debt
securities issued by corporations and equities, as available for sale
securities. Carrying amounts approximate fair value, as estimated based on
market prices and any unrealized gain or loss is recognized in stockholder's
equity. Statement of Financial Accounting Standards 115, "Accounting for Certain
Investments in Debt and Equity Securities", and Securities and Exchange
Commission Staff Accounting Bulletin (SAB) 59, "Accounting for Noncurrent
Marketable Equity Securities", provide guidance on determining when an
investment is other than temporarily impaired. In making this judgment,
management evaluates, among other factors, the duration and extent to which the
fair value of the investment is less than its cost and the financial health of
and the business outlook for the investee, including factors in the industry and
financing cash flows. If management's assessments are incorrect, the Company's
working capital could be adversely affected.
RESULTS OF OPERATIONS
Revenues
The Company's revenues are derived from software licenses, related maintenance
and professional services and outsourcing services. Revenues for the three
months ended September 30, 2002 were $15.1 million, representing an increase of
6% from $14.3 million in the same period in 2001. The increase of $0.8 million
for the three months ended September 30, 2002 was mainly attributable to an
increase in outsourcing revenues partially offset by a decrease in license
revenues. Revenues for the nine months ended September 30, 2002 were $46.2
million, representing an increase of 11% from $41.8 million in the same period
in 2001. The increase of $4.4 million for the nine months ended September 30,
2002 was attributable to an increase in outsourcing revenues partially offset by
a decrease in professional services revenues.
Software Licenses. Software license revenues for the three and nine months ended
September 30, 2002 were $3.6 million and $11.0 million, respectively,
representing decreases of 20% and 5%, respectively, from $4.5 million and $11.6
million, respectively, for the comparable periods in 2001. The decrease in
license revenues for the three months ended September 30, 2002 was due primarily
to reduced sales of CAMRA, Total Return, and AdvisorWare, partially offset by
increased sales of SKYLINE and sales of RTS and Trade Desk as a result of the
Company's acquisition of Real-Time. The decrease in license revenues for the
nine months ended September 30, 2002 was due primarily to reduced sales of
CAMRA, Total Return, and PTS, partially offset by increased sales of LMS, RTS,
and Trade Desk as a result of the Company's Real-Time acquisition.
Maintenance. Maintenance revenues for the three months and nine months ended
September 30, 2002 were $6.8 million and $20.5 million, respectively,
representing increases of 2% and 3%, respectively, over the $6.7 million and
$19.8 million, respectively, for the comparable periods in 2001. The increases
for the three and nine months ended September 30, 2002 were mainly attributable
to higher maintenance renewal rates and higher average maintenance fees,
partially offset by discontinued products.
Professional Services. Professional services revenues for the three and nine
months ended September 30, 2002 were $1.6 million and $5.1 million,
respectively, representing decreases of 5% and 17%, respectively, from the $1.7
million and $6.2 million, respectively, for the comparable periods in 2001.
Professional services revenues were impacted by less services associated with
new license sales and lower demand for services from existing clients.
Outsourcing Services. Outsourcing services revenues for the three and nine month
periods ended September 30, 2002 were $3.1 million and $9.6 million,
respectively, representing increases of 125% and 130% over the $1.4 million and
$4.2 million, respectively, for the comparable periods in 2001. The increases
for the three- and nine-month periods ended September 30, 2002 were due to the
acquisitions of Real-Time and Digital Visions and increased demand for the SS&C
Direct services.
Cost of Revenues
Total cost of revenues for the three and nine months ended September 30, 2002
were $5.1 million and $15.6 million, respectively, representing increases of 5%
and 2%, respectively, from the $4.8 million and $15.4 million, respectively, for
the comparable periods in 2001. The gross margin remained unchanged at 66% for
the three months ended September 30, 2002 as compared to the corresponding
period in 2001. For the nine months ended September 30, 2002,
10
the gross margin increased to 66% from 63% for the comparable period in 2001.
Gross margin increases in maintenance, professional services, and outsourcing
services were offset by a decrease in software license margins.
Cost of Software Licenses. Cost of software license revenues relates primarily
to royalties, the costs of product media, packaging, documentation and the
amortization of completed technology. Cost of software license revenues
increased 70% from $180,000 in the three months ended September 30, 2001 to
$306,000 for the same period in 2002, representing 4% and 8% of license revenues
in each of those quarters, respectively. Cost of software license revenues in
the nine months ended September 30, 2001 and 2002 were $548,000 and $934,000,
respectively, representing 5% and 9% of license revenues in each of those
periods, respectively. The increase in costs in both the three and nine months
ended September 30, 2002 were mainly due to the increase in amortization of
completed technology associated with the Real-Time and Digital Visions
acquisitions.
Cost of Maintenance. Cost of maintenance revenues primarily consists of
technical customer support and the engineering costs associated with product and
regulatory updates. The cost of maintenance revenues decreased from $1.7 million
in the three months ended September 30, 2001 to $1.3 million in the three months
ended September 30, 2002. The cost of maintenance revenues decreased from $5.3
million in the nine months ended September 30, 2001 to $4.1 million in the nine
months ended September 30, 2002. The decreased costs for both the three and nine
months ended September 30, 2002 were primarily due to improved operating
efficiencies that resulted in lower personnel and facilities related costs.
Cost of Professional Services. Cost of professional services revenues primarily
consists of the cost of personnel utilized to provide implementation, conversion
and training services to the Company's software licensees, as well as custom
programming, system integration and actuarial consulting services. The cost of
professional service revenues decreased 17% from $1.6 million in the three
months ended September 30, 2001 to $1.4 million for the same period in 2002,
representing 85% and 96%, respectively, of professional services revenues in
each of those periods. Cost of professional services revenues in the nine months
ended September 30, 2001 and 2002 were $5.4 million and $4.1 million,
respectively, and represented 80% and 88%, respectively, of professional
services revenues in each of those periods. The Company has significantly
reduced its professional consulting organization due to the decrease in demand
for the Company's implementation services.
Cost of Outsourcing. Cost of outsourcing revenues primarily consists of the cost
of personnel utilized in servicing the Company's outsourcing clients. The cost
of outsourcing revenues increased 62% from $1.3 million in the three months
ended September 30, 2001 to $2.1 million for the same period in 2002,
representing 98% and 70%, respectively, of outsourcing revenues in each of those
periods. Cost of outsourcing revenues in the nine months ended September 30,
2001 and 2002 was $4.1 million and $6.5 million, respectively, representing 98%
and 67%, respectively, of outsourcing revenues in each of those periods. The
increase in costs for both the three and nine months ended September 30, 2002
was primarily due to the acquisitions of Real-Time and Digital Visions. The
decreases in cost of outsourcing revenues as a percentage of outsourcing
revenues was due primarily to improved operating efficiencies, and the higher
margins associated with the revenues from the Real-Time and Digital Visions
acquisitions.
Operating Expenses
Total operating expenses decreased 19% from $8.2 million in the three months
ended September 30, 2001 to $6.7 million in the three-months ended September 30,
2002, representing 58% and 44% of total revenues in those periods, respectively.
Total operating expenses decreased 8% from $25.6 million in the nine months
ended September 30, 2001 to $23.4 million in the nine-months ended September 30,
2002, representing 61% and 51% of total revenues, respectively. Included in the
nine-months ended September 30, 2002 is a charge of $1.7 million for purchased
in-process research and development associated with the Company's acquisition of
Real-Time in the first quarter of 2002. Excluding the IPR&D, total operating
expenses decreased from $25.6 million in the nine months ended September 30,
2001 to $21.7 million in the nine months ended September 30, 2002, representing
61% and 47% of total revenues in those periods, respectively. The decrease in
operating expenses was due primarily to the cost reduction steps the Company has
undertaken to align its personnel and operating expenses with revenues.
Selling and Marketing. Selling and marketing expenses primarily consist of the
cost of personnel associated with the selling and marketing of the Company's
products, including salaries, commissions, and travel and entertainment. Such
expenses also include the cost of branch sales offices, advertising, trade
shows, marketing and promotional materials. These expenses decreased 30% from
$2.8 million in the three months ended September 30, 2001 to $2.0 million in the
three months ended September 30, 2002, representing 20% and 13%, respectively,
of total revenues for those periods.
11
These expenses decreased 19% from $8.8 million in the nine months ended
September 30, 2001 to $7.1 million for the same period in 2002, representing 21%
and 15%, respectively, of total revenues for those periods. The decreases for
the three and nine month ended September 30, 2002 were mainly due to lower
personnel-related costs associated with the reduction in the number of sales and
marketing personnel, and lower marketing and promotional costs partially offset
by increased costs as a result of the acquisitions of Real-Time and Digital
Visions.
Research and Development. Research and development expenses consist primarily of
personnel costs attributable to the development of new software products and the
enhancement of existing products. Research and development expenses for the
three months ended September 30, 2002 were unchanged at $2.8 million compared to
the comparable period in 2001, representing 19% and 20%, respectively, of total
revenues for those periods. Research and development expenses for the nine
months ended September 30, 2002 were also unchanged at $8.8 million compared to
the same period in 2001, representing 21% and 19%, respectively, of total
revenue for those periods.
General and Administrative. General and administrative expenses are composed
primarily of costs related to management, accounting, information technology,
human resources and administration and associated overhead costs, as well as
fees for professional services. General and administrative expenses decreased
27% from $2.6 million in the three months ended September 30, 2001 to $1.9
million for the same period in 2002, representing 18% and 13%, respectively, of
total revenues for those periods. General and administrative expenses also
decreased 27% from $8.0 million in the nine months ended September 30, 2001 to
$5.8 million for the same period in 2002, representing 19% and 13%,
respectively, of total revenues for those periods. The decreases for the three
and nine months ended September 30, 2002 were mainly due to lower personnel
related costs, communications costs, professional fees, depreciation, and bad
debt expense.
Write-off of Purchased In-Process Research and Development. On January 15, 2002,
the Company acquired Real-Time. The acquisition was accounted for as a purchase
and, accordingly, the purchase price was allocated among tangible and intangible
assets, liabilities, and in-process research and development based on their fair
values on the date of the acquisition. The acquired IPR&D had not yet reached
technological feasibility and had no alternative future use and accordingly $1.7
million was expensed on the date of the acquisition.
Interest and Other Income (Expense), Net. Interest and other income (expense),
net consists primarily of interest income and other non-operational income and
expenses. Interest income, net was $323,000 for the three months ended September
30, 2002 compared to $661,000 for the same period in 2001. Interest income, net
decreased 44% from $2.1 million in the nine months ended September 30, 2001 to
$1.2 million for the same period in 2002. The decreases in interest income for
both the three and nine month ended September 30, 2002 are due to lower market
interest rates on investments and lower cash and marketable securities positions
due to the Company's stock repurchase plan during the past year, and the cash
paid for the acquisitions of Real-Time and Digital Visions. Included in other
income (expense), net for the nine months ended September 30, 2002 was a
non-operational $854,000 impairment charge associated with the decline in the
market value of WorldCom bonds held in the Company's investment portfolio and a
non-operational gain of $428,000 on the sale of equity investments. Other income
(expense), net for the nine months ended September 30, 2001 included a
non-operational gain on sale of equity investments of $1.8 million.
Provision for Income Taxes. The Company had effective tax rates of 40% and 38%
in the nine months ended September 30, 2002 and 2001, respectively. The higher
tax rate in 2002 was primarily due to lower tax credits in the period and the
impact of a settlement reached with the IRS in the third quarter of 2002 on the
deduction related to the 1999 litigation settlement payment of $9.3 million.
Payments totaling $6.8 million made pursuant to the settlement were deducted by
the Company on its 1997, 1998 and 1999 income tax returns. The Company reached a
settlement with the IRS that allowed the Company to deduct $5.5 million of the
original $6.8 million deduction. The impact of this settlement has been included
in the Company's estimated effective tax rate of 40% for 2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and marketable securities at September 30,
2002 were $43.4 million, which is a decrease of $16.1 million from the $59.5
million at December 31, 2001. The decrease was mainly due to the cash spent to
carry out the stock repurchase program and the cash paid for the acquisition of
Real-Time.
Net cash provided by operating activities was $11.4 million for the nine months
ended September 30, 2002. Cash provided by operating activities was primarily
due to earnings adjusted for non-cash items including the $1.7 million purchased
in-process research and development and $3.0 million in depreciation and
amortization, and an increase in
12
deferred maintenance and other revenues. These items were partially offset by an
increase in accounts receivable.
Investing activities used net cash of $847,000 for the nine months ended
September 30, 2002. Cash used in investing activities was primarily due to $3.9
million cash paid for the acquisition of Real-Time, net of cash acquired,
partially offset by the $3.6 million net sale of marketable securities.
Financing activities used cash of $20.9 million. Cash used in financing
activities was primarily due to the stock repurchase plan, which was partially
offset by cash received upon the exercise of employee options. The Company
repurchased 2.6 million shares of common stock for treasury in the nine months
ended September 30, 2002 for a total cost of $25.0 million.
The Company believes that its current cash balances and net cash provided by
operating activities will be sufficient to meet its working capital and capital
expenditure requirements for at least the next 12 months.
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
FLUCTUATIONS IN QUARTERLY PERFORMANCE. Historically, the Company's revenues and
operating results have fluctuated substantially from quarter to quarter. The
Company's quarterly operating results may continue to fluctuate due to a number
of factors, including the timing, size and nature of the Company's individual
license transactions; the timing of the introduction and the market acceptance
of new products or product enhancements by the Company or its competitors; the
relative proportions of revenues derived from license fees, maintenance,
consulting, and other recurring revenues and professional services; changes in
the Company's operating expenses; changes in the Company's personnel; and
fluctuations in economic and financial market conditions. The timing, size, and
nature of individual license transactions are important factors in the Company's
quarterly operating results. Many such license transactions involve large dollar
amounts, and the sales cycles for these transactions are often lengthy and
unpredictable. There can be no assurance that the Company will be successful in
closing large license transactions on a timely basis or at all.
DEPENDENCE ON THE FINANCIAL SERVICES INDUSTRY. The Company's clients include a
range of organizations in the financial services industry. The success of these
clients is intrinsically linked to the health of the financial markets. In
addition, because of the capital expenditures required in connection with an
investment in the Company's products, the Company believes that demand for its
products could be disproportionately affected by fluctuations, disruptions,
instability, or downturns in the financial markets, which may cause clients and
potential clients to exit the industry or delay, cancel, or reduce any planned
expenditures for investment management systems and software products. Any
resulting decline in demand for the Company's products could have a material
adverse effect on the Company's business, financial condition, and results of
operations.
BUSINESS MODEL CHANGE. The Company continues to modify its business model from
one based on license fees derived from licensing proprietary software to one
based on both licensing its software and transaction fees for the use of the
Company's outsourcing services. Due to this change in the business model, the
Company's revenues will increasingly depend on its ability to grow the number
and volume of users of the Company's outsourcing services. The number of users
and the volume of their activity are largely outside of the Company's control.
Accordingly, the Company's past operating results may not be a meaningful
indicator of its future performance.
PRODUCT CONCENTRATION. To date, substantially all of the Company's revenues have
been attributable to the licensing of its CAMRA, AdvisorWare, SKYLINE, PTS, and
LMS software and the provision of maintenance and consulting services in support
of such software. The Company expects that the revenue from these software
products will continue to account for a significant portion of its revenues for
the foreseeable future. As a result, factors adversely affecting the pricing of
or demand for such products and services, such as competition or technological
change, could have a material adverse effect on the Company's business,
financial condition and results of operations.
COMPETITION. The market for financial service software is competitive, rapidly
evolving and highly sensitive to new product introductions and marketing efforts
by industry participants. Although the Company believes that none of its
competitors currently competes against the Company in all of the markets served
by the Company, there can be no assurance that such competitors will not compete
against the Company in the future in additional markets. In addition,
13
many of the Company's current and potential future competitors have
significantly greater financial, technical and marketing resources, greater name
recognition, and higher revenues than the Company.
RAPID TECHNOLOGICAL CHANGE. The market for the Company's products and services
is characterized by rapidly changing technology, evolving industry standards and
new product introductions. The Company's future success will depend in part upon
its ability to enhance its existing products and services and to develop and
introduce new products and services to meet changing client needs. The process
of developing software products such as those offered by the Company is
extremely complex and is expected to become increasingly complex and expensive
in the future due to the introduction of new platforms and technologies. There
can be no assurance that the Company will successfully complete the development
of new products in a timely fashion or that the Company's current or future
products will satisfy the needs of the financial markets.
INTEGRATION OF OPERATIONS. The Company's success is dependent in part on its
ability to complete the integration of the operations of recently acquired
businesses, including Real-Time and Digital Visions, in an efficient and
effective manner. Successful integration in a rapidly changing financial
services industry may be more difficult to accomplish than in other industries.
The combination of these acquired businesses will require, among other things,
integration of product offerings and coordination of sales and marketing and
research and development efforts. There can be no assurance that such
integration will be accomplished smoothly or successfully. The difficulties of
such integration may be increased by the necessity of coordinating
geographically separated organizations. The integration of certain operations
will require the dedication of management resources that may temporarily
distract attention from the day-to-day business of the Company. The inability of
management to successfully integrate the operations of acquired companies could
have a material adverse effect on the Company's business, financial condition,
and results of operations of the Company.
DEPENDENCE ON PROPRIETARY TECHNOLOGY. The Company's success and ability to
compete depends in part upon its ability to protect its proprietary technology.
The Company relies on a combination of trade secret, copyright, and trademark
law, nondisclosure agreements and technical measures to protect its proprietary
technology. There can be no assurance that the steps taken by the Company to
protect its proprietary technology will be adequate to prevent misappropriation
or independent third-party development of such technology.
PRODUCT DEFECTS AND PRODUCT LIABILITY. The Company's software products are
highly complex and sophisticated and could contain design defects or software
errors that are difficult to detect and correct. Errors, bugs or viruses may
result in loss of or delay in market acceptance of the Company's software
products or loss of client data. Although the Company has not experienced
material adverse effects resulting from any software defects or errors, there
can be no assurance that, despite testing by the Company and its clients, errors
will not be found in new products, which errors could result in a delay in or an
inability to achieve market acceptance and thus could have a material adverse
effect upon the Company's business, financial condition, and results of
operations.
KEY PERSONNEL. The Company's success is dependent in part upon its ability to
attract, train and retain highly skilled technical, managerial, and sales
personnel. The loss of services of one or more of the Company's key employees
could have a material adverse effect on the Company's business, financial
condition and results of operations. Competition for the hiring of such
personnel in the software industry is intense. Locating candidates with the
appropriate qualifications, particularly in the desired geographic location, is
difficult. Although the Company expects to continue to attract and retain
sufficient numbers of highly skilled employees for the foreseeable future, there
can be no assurance that the Company will be able to do so.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. The Company has risks associated
with its foreign operations. An increase in the value of the U.S. dollar
relative to foreign currencies could make the Company's products more expensive
and, therefore, potentially less competitive in those foreign markets. A portion
of the Company's international sales is denominated in foreign currency, and the
Company occasionally hedges some of the risk associated with foreign exchange
fluctuations. Although the Company believes its foreign currency exchange rate
risk is minimal, significant fluctuations in the value of foreign currencies
could have a material adverse effect on the earnings of the Company. In
addition, the Company's international business may be subject to a variety of
other risks, including difficulties in obtaining U.S. export licenses,
potentially longer payment cycles, increased costs associated with maintaining
international marketing efforts, the introduction of non-tariff barriers and
higher duty rates, and difficulties in enforcement of third-party contractual
obligations and intellectual property rights. There can be no assurance that
such factors will not have a material adverse effect on the Company's business,
financial condition, or results of operations.
14
Because of these and other factors, past financial performance should not be
considered an indication of future performance. The Company's quarterly
operating results may vary significantly, depending on factors such as the
timing, size, and nature of licensing transactions and new product introductions
by the Company or its competitors. Investors should not use historical trends to
anticipate future results and should be aware that the trading price of the
Company's common stock may be subject to wide fluctuations in response to
quarterly variations in operating results and other factors, including those
discussed above.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate and securities price risks. These risks
are not hedged and fluctuations could impact the Company's results of operations
and financial position. Fixed income securities are subject to interest rate
risk. In order to minimize interest rate risk, the Company's portfolio is
diversified and consists primarily of investment grade securities, primarily
U.S. government and federal agency obligations, tax-exempt municipal obligations
and corporate obligations. The Company from time to time also holds equity
securities in its portfolio. These equity securities are subject to market price
risks.
The Company invoices customers primarily in U.S. dollars and in local currency
in those countries in which the Company has branch and subsidiary operations.
The Company is exposed to foreign exchange rate fluctuations from the time
customers are invoiced in local currency until collection occurs. Through
September 30, 2002, foreign currency fluctuations have not had a material effect
on the Company's financial position or results of operation, and therefore, the
Company believes that its potential foreign currency exchange rate exposure is
not material.
The foregoing risk management discussion and the effect thereof are
forward-looking statements. Actual results in the future may differ materially
from these projected results due to actual developments in global financial
markets. The analytical methods used by the Company to assess and minimize risk
discussed above should not be considered projections of future events or losses.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. Based on their evaluation as
of a date within 90 days of the filing date of this report, the Company's
principal executive officer and principal financial officer have concluded that
the Company's disclosure controls and procedures (as defined in Rules 13a-14(c)
and 15d-14(c) under the Securities Exchange Act of 1934 are effective to ensure
that information required to be disclosed by the Company in reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.
Changes in internal controls. There were no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation. There were no significant
deficiencies or material weaknesses in the Company's internal controls, and
therefore there were no corrective actions taken.
15
PART II - OTHER INFORMATION
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
a. The exhibit listed in the Exhibit Index immediately preceding such exhibit
is filed as part or is included in this Report.
b. There were no reports filed on Form 8-K in the quarter ended September 30,
2002.
16
SIGNATURE
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 thereunto duly authorized.
SS&C TECHNOLOGIES, INC.
Date: November 14, 2002 By:/s/ Patrick J. Pedonti
Patrick J. Pedonti
Vice President and Chief Financial Officer
(Principal Financial and
Accounting Officer)
CERTIFICATIONS
I, William C. Stone, certify that:
1. I have reviewed this quarterly report on Form 10-Q of SS&C
Technologies, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures 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 quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have
17
identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses
Date: November 14, 2002 By:/s/ William C. Stone
William C. Stone
Chief Executive Officer
CERTIFICATIONS
I, Patrick J. Pedonti, certify that:
1. I have reviewed this quarterly report on Form 10-Q of SS&C
Technologies, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures 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 quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
18
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses
Date: November 14, 2002 By:/s/ Patrick J. Pedonti
Patrick J. Pedonti
Chief Financial Officer
19
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
10.1 Employment Agreement between SS&C Technologies, Inc. and
Anthony R. Guarascio dated August 12, 2002.
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
20