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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-28430
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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 NUMBER)
CORPORATE PLACE
705 BLOOMFIELD AVENUE
BLOOMFIELD, CONNECTICUT 06002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (860) 242-7887
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, $.01
par value per share
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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of March 23, 1998, the approximate aggregate market value of the common
stock held by non-affiliates of the Registrant was $129,151,719 based on the
closing sales price of $18.50 of the Registrant's Common Stock on the Nasdaq
National Market on such date.
As of March 23, 1998, 14,446,763 shares of the Registrant's Common Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PART OF REPORT INTO
DOCUMENT WHICH INCORPORATED
- -------------------------------------------- ---------------------------------
Portions of the Registrant's 1997 Annual Items 6, 7 & 8 of Part II
Report to Stockholders
Portions of the Registrant's Proxy Statement Items 10, 11, 12 & 13 of Part III
for the Annual
Meeting of Stockholders to be held April 30,
1998
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SS&C TECHNOLOGIES, INC.
TABLE OF CONTENTS
FORM 10-K
ITEM PAGE
--------- ----
PART I
Item 1. Business....................................................... 2
Item 2. Properties..................................................... 9
Item 3. Legal Proceedings.............................................. 9
Item 4. Submission of Matters to a Vote of Security Holders............ 10
Executive Officers of the Registrant........................... 10
PART II
Market for Registrant's Common Equity and Related Stockholder
Item 5. Matters........................................................ 11
Item 6. Selected Financial Data........................................ 12
Management's Discussion and Analysis of Financial Condition and
Item 7. Results of Operations.......................................... 12
Item 7A. Quantitative and Qualitative Disclosures about Market Risk..... 12
Item 8. Financial Statements and Supplementary Data.................... 12
Changes in and Disagreements with Accountants on Accounting and
Item 9. Financial Disclosure........................................... 12
PART III
Item 10. Directors and Executive Officers of the Registrant............. 13
Item 11. Executive Compensation......................................... 13
Security Ownership of Certain Beneficial Owners and
Item 12. Management..................................................... 13
Item 13. Certain Relationships and Related Transactions................. 13
PART IV
Exhibits, Financial Statement Schedules, and Reports on Form 8-
Item 14. K.............................................................. 13
FORWARD-LOOKING INFORMATION
This Annual Report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and Section
27A of the Securities Act of 1933, 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.
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PTS and Macro Pricing are registered trademarks, SS&C, CAMRA, CAMRA 2000,
FILMS, FILMS 2000, PTS 2000, FOTOS, Allocator Plus, EPN E-Z Link, Finesse
2000, SS&C GO Trading, Total Return, Mabel, and Antares are trademarks, and
SS&C Direct is a service mark of either SS&C Technologies, Inc. or one of its
subsidiaries. All other trademarks or trade names referred to in this Annual
Report are the property of their respective owners.
PART I
ITEM 1. BUSINESS
SS&C Technologies, Inc. (the "Company") was organized as a Connecticut
corporation in March 1986 and reincorporated in Delaware in April 1996. The
Company commenced the initial public offering of its common stock, $.01 par
value per share (the "Common Stock"), on May 31, 1996, pursuant to which the
Company sold 3,026,250 shares of Common Stock and selling stockholders sold an
aggregate of 723,750 shares of Common Stock.
The Company is a leading provider of client/server-based financial software
solutions, and related consulting services, designed to improve the efficiency
and effectiveness of investment management, actuarial and analytical functions
across a broad range of financial institutions. The Company has developed a
family of software products that provides a full range of mission-critical
information management and analysis, accounting, reporting and compliance
tools to help high-level investment and actuarial professionals make informed,
real-time decisions and automate many operational functions in today's
increasingly complex and fast-moving financial markets. The Company's products
are focused on improving the effectiveness of decision-making through open,
fully integrated access to meaningful data provided on a timely basis. The
Company provides products and services to more than 500 organizations
worldwide and its customers include asset managers, insurance companies,
banks, corporate treasuries and government agencies.
All of the Company's software products feature (i) an intuitive user
interface; (ii) a high degree of automation and integration with the Company's
other systems, legacy systems, data services and third-party tools; and (iii)
a highly scalable and flexible architecture. These features are intended to
enable clients to decrease staff learning time, integrate systems more
tightly, scale the technical environment to the appropriate size and tailor
the product suite to their business requirements.
RECENT EVENTS
On March 20, 1998, the Company completed its acquisition (the "Quantra
Acquisition") of substantially all of the assets of Quantra Corporation
("Quantra") pursuant to an Asset Purchase Agreement, dated as of March 20,
1998, among the Company, Quantra and AEGON USA Realty Advisors, Inc., the
controlling stockholder of Quantra. The purchase price for the Quantra
Acquisition consisted of 546,019 shares of the Company's Common Stock,
$3,500,000 in cash and the assumption of certain of the liabilities of
Quantra. The Company used authorized but previously unissued shares of Common
Stock and cash from the proceeds from the Company's initial public offering in
connection with the acquisition. The Quantra Acquisition will be accounted for
as a purchase. Quantra is a provider of real estate equity and debt investment
management systems with its major offices in Chicago and Atlanta. Quantra's
products include Mortgage Loan Management System ("MLMS"), PRO-JECT for
Windows, SKYLINE, Real Estate Management System ("REMS") and Portfolio
Strategy System ("PSS").
The Company and Quantra also entered into an Escrow Agreement pursuant to
which $1,230,200 of the cash consideration will be held in escrow to reimburse
the Company in connection with certain acquisition costs and the breaches of
representations, warranties or covenants by Quantra.
PRODUCTS AND SERVICES
The Company offers a family of application software products designed to
address the requirements of professionals in the financial services industry
for flexible, scalable and secure analysis and reporting tools to support
automation of the investment process. The Company's family of software
products supports trading, accounting, reporting and analysis requirements of
a broad range of users within financial organizations, including senior
executives, portfolio managers, actuaries, analysts, portfolio accountants and
traders.
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The following chart summarizes the Company's principal products and services
and typical users:
PRODUCTS AND SERVICES TYPICAL USERS
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PORTFOLIO MANAGEMENT, INVESTMENT Portfolio managers and investment
ACCOUNTING operations personnel of asset
CAMRA 2000 managers, hedge funds, family wealth
Total Return managers, insurance companies,
Mabel pension funds, public funds and
banks
TRADE ORDER MANAGEMENT Securities traders and portfolio
Antares (in Beta release) managers of asset managers, hedge
funds, family wealth managers,
pension funds and other financial
institutions
ASSET/LIABILITY MANAGEMENT Insurance company CEO's, CFO's,
PTS 2000 product managers and acturial
professionals
DYNAMIC FINANCIAL ANALYSIS CEO's, CFO's and risk managers of
Finesse 2000 property and casualty insurance
companies and other industries
LOAN MANAGEMENT Mortgage loan portfolio managers and
FILMS 2000 loan service businesses
CONSULTING SERVICES AND OUTSOURCING Asset management firms, insurance
SERVICES companies, pension funds, and banks
Consulting Services
SS&C Direct
The Company's software applications are compatible with Intel x86 platforms
(IBM PC compatible or emulators) and a wide range of popular topologies,
protocols and network operating systems, including Ethernet, Token Ring,
IPX/SPX, TCP/IP, NET BEUI, Novell Netware, Windows, Windows95, Windows NT,
Pathworks and UNIX.
The prices of the Company's software products vary depending upon the
product features included and, in the case of the Company's CAMRA 2000 and
FILMS 2000 products, on the assets under management by the client. The
Company's PTS 2000 software is available for purchase by site or as an
individual CPU license. The Company's Total Return software is available for
purchase by site or on the number of concurrent users.
PORTFOLIO MANAGEMENT, INVESTMENT ACCOUNTING
CAMRA 2000
The Company's complete asset management, reporting and accounting ("CAMRA
2000") software supports the integrated management of asset portfolios by
investment professionals operating across a wide range of institutional
investment entities. CAMRA 2000 is a 32-bit, multi-user, integrated solution
tailored to support the entire portfolio management function and includes
features to execute, account for and report on all typical securities
transactions.
CAMRA 2000 is designed to account for all the activity of the investment
operation and continually update through the processing of day-to-day
securities transactions. The product accounts for both transactions and
holdings and stores the results of most accounting calculations in the
product's open, relational database, thereby providing user-friendly, flexible
data access as well as supporting data warehousing. In addition to storing
transactions and holdings data on securities, cash, and foreign exchange
forward contracts, CAMRA 2000 also stores data on custodians, brokers and
broker budgets, analytical information, general ledger entries, alternative
accounting basis, tax information and other aspects of the investment
operation. To facilitate further automation of such extensive stored data, the
Company has developed interfaces to many custodian banks, data providers and
analytic data services.
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Other CAMRA 2000 features include the following:
Comprehensive Accounting and Reporting Capabilities. CAMRA 2000 supports
four distinct yet interrelated accounting bases--GAAP, statutory, management
and tax--and has the flexibility to provide multiple alternative accrual
methods, multiple sales methods, average cost or tax lot accounting and
multiple amortization methods.
Support of Trading Transactions. CAMRA 2000 supports a wide variety of
investment and accounting transactions, ranging from buy and sell to short and
cover, swap, put, call, redemption, return of capital, settlement, account
transfer and portfolio transfer. All transactions are recorded on a real-time
basis, permitting immediate enterprise-wide access to the most current
portfolio information by authorized users.
Multi-Currency Processing. CAMRA 2000 automatically calculates transaction
and translation values in accordance with applicable accounting and industry
conventions, supports calculation of market, accounting and foreign exchange
gains and losses, and provides a full foreign exchange trading capability with
forward pricing, while taking into account such critical parameters as global
calendars (with weekends and holidays defined by countries), multiple-based
currencies and required rounding techniques.
Regulatory Compliance. CAMRA 2000 includes standard reports to meet the
annual and quarterly regulatory reporting requirements of insurance
organizations as promulgated by the National Association of Insurance
Commissioners ("NAIC"). CAMRA 2000 also supports regulatory reporting
requirements of various other regulatory agencies such as the Securities and
Exchange Commission ("SEC") and the Office of the Comptroller of the Currency
("OCC").
CAMRA 2000 is designed to facilitate seamless integration with its software
modules. Modules to CAMRA 2000 are available for performance measurement using
computations consistent with the standards of the Association for Investment
Management and Research ("AIMR"), portfolio compliance, net asset value
computations for mutual funds, optimization of trading in mortgage-backed
securities on a to be announced ("TBA") basis, client fee billing, portfolio
rebalancing and interfacing with various products of Bloomberg Trade Book,
Open Bloomberg and other analytic data services.
Total Return
Total Return is a portfolio management and partnership accounting system
oriented toward the hedge fund and family wealth markets. It is a multi-
currency system which, like CAMRA 2000, is designed to provide securities
accounting and reporting for businesses with high transaction volumes.
Partnership accounting, including the generation of tax forms 1065 and K-1,
are provided through Total Return's TR1065 module. Total Return also
incorporates a comprehensive general ledger. Performance measurement using
computations consistent with AIMR standards is also provided through a module
to the system. Other modules to Total Return provide for tax reporting and
trust reporting. Total Return also has interfaces with brokers, pricing
services, data services and front-end trading systems.
Mabel
Mabel is a portfolio management system from the Company's Netherlands-based
Mabel Systems ("Mabel") subsidiary that is used by clients throughout Europe
and the Caribbean. Mabel's functionality includes accounting and reporting,
performance measurement consistent with AIMR standards, net asset value
calculations for mutual funds and support for stock brokering and custodial
services. The Mabel system is designed to automatically map data to and from
messages in the S.W.I.F.T. ("Society for Worldwide Interbank Financial
Communications") format.
TRADE ORDER MANAGEMENT
Antares (in Beta release)
Antares is in Beta release as of December 31, 1997 and is expected to be
generally released during the third quarter of 1998. Antares is a
comprehensive trading and trade modeling system designed to integrate trade
modeling with trade order management. Modeling scenarios can be customized and
stored, including trader-
4
defined formulas, in a familiar spreadsheet environment. Antares is designed
to transfer data seamlessly from modeling scenarios to trade orders. In
Antares, trades can be managed in the multiple steps of trade ordering,
filling the order and approving the trade or recorded in a single step.
Further, Antares can allocate trades across accounts at any step in the
process.
Trade blotters in Antares can be customized depending on client, product
type or trader. Full position accounting is provided across all types of
securities. Antares also accepts real-time pricing updates and can display
real-time positions and profit and loss statements. Portfolio rebalancing can
be set to occur automatically. As Antares uses an open relational database,
customized reporting is supported through its own report writing facilities or
through other third-party reporting tools. Antares also includes functionality
to automate the processing of options, futures and forward currency contracts.
For some financial institutions, the Antares trading system may serve as a
comprehensive, stand-alone investment management system. For financial
institutions with more accounting and historical reporting requirements,
Antares may serve as the front-end trading system connected to CAMRA 2000,
Total Return or other portfolio management investment accounting systems.
ASSET/LIABILITY MANAGEMENT
PTS 2000
PTS 2000 provides an economic model of insurance assets and liabilities,
generating option-adjusted cash flows to reflect the complex sets of options
and covenants frequently encountered in insurance contracts or comparable
agreements. PTS 2000 includes the following features:
Large-Scale Corporate Simulation Models. The Company and certain significant
clients have implemented a number of complex models of whole-company financial
performance. Unlike simpler systems, PTS 2000 maintains an internal
architecture patterned after the structure of insurance companies themselves,
making full-scale corporate models practical. Such corporate models are used
to facilitate capital structure decisions, revealing and measuring overall
financial performance and guiding overall risk management practice.
Option Pricing. The PTS 2000 option pricing model provides option-adjusted
valuation of assets and liabilities under a consistent conceptual framework.
The PTS 2000 option pricing model explicitly considers interest-sensitive
embedded options, providing valid interest rate risk analysis using price
behavior curves that graphically depict asset/liability performance over
shifts in the interest rate term structure.
Macro Pricing. The Company's proprietary Macro Pricing algorithm recognizes
the complex relationships within contemporary financial intermediaries and
provides a matrix of possible product and production quota options in
conformity with the profit expectations of the client.
DYNAMIC FINANCIAL ANALYSIS
Finesse 2000
The Company's Finesse 2000 system is a Dynamic Financial Analysis ("DFA")
tool designed and developed in cooperation with Ernst & Young LLP, to model
operating results, gauge the effects of reinsurance and validate pricing,
value business transactions such as mergers and acquisitions, measure the
impact of new products, predict cash flows, analyze the impact of investment
decisions and improve strategic planning. Finesse 2000 generates iterative,
computer-simulated scenarios in response to events that may have an impact on
a client's business. The results of this iterative process are stored in
Finesse 2000's "virtual general ledger," which mimics the financial accounting
that would occur if these scenarios were to occur. All simulated results are
recorded and can be easily viewed on Finesse 2000's "graphical palette," an
on-line facility that visually depicts the likely occurrence of one or more
specific events.
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LOAN MANAGEMENT
FILMS 2000
The Company's fully integrated loan management system ("FILMS 2000") enables
mortgage professionals to process, analyze and report on a comprehensive basis
information regarding their mortgage loan portfolios. Like CAMRA 2000, FILMS
2000 is a multi-user, integrated solution operating on a client/server
platform, which eliminates the need for separate, independent systems within
the mortgage loan area. FILMS 2000, which can be integrated with data stored
in the Company's CAMRA 2000 and PTS 2000 products, provides the following
features:
Application and Commitment Processing. FILMS 2000 supports the processing of
commercial and residential mortgage loans, providing on-line access to
critical evaluative information, including credit history, appraisals, LTV
ratio, broker information, duration, convexity, average life and discounted
cash flow valuation, permitting loan recommendations to be generated quickly,
consistently and easily.
Accounting and Servicing Support. FILMS 2000 supports accurate and
consistent servicing of loans, including general ledger entries at the sub-
portfolio level, with a direct interface to the corporate general ledger.
FILMS 2000 also maintains appraisals and operating statements at the proper
level to support loan and portfolio management.
Comprehensive Reports. FILMS 2000 generates and supports a wide range of
accounting, servicing and management reports. All reports can be viewed on-
line, downloaded or printed.
CONSULTING SERVICES AND OUTSOURCING SERVICES
Consulting Services
Building upon the capability and flexibility of its software products, the
Company offers a range of professional services to assist clients in
implementing the Company's software products and meeting their portfolio
management needs. To facilitate successful product implementation, the
Company's consultants assist clients with initial installation of a system,
conversion of the client's historical data and ongoing training and support.
The Company's team works closely with the client to ensure smooth transition
and operation of the Company's systems. The Company believes its commitment of
dedicated professionals to facilitate the transition process strengthens its
relationship with the client, provides the Company with valuable information
regarding client requirements and offers the opportunity for sales of
additional Company products and services to the client. The Company's
consultants have a broad range of experience in the financial services
industry and include certified public accountants, chartered financial
analysts, mathematicians and professionals in the real estate, investment,
insurance and banking industries. In addition, the Company also offers
actuarial consulting services to its insurance company and other financial
institution clients. The Company believes its commitment to professional
services facilitates the adoption of the Company's software products across
its target markets.
SS&C Direct
For those clients wishing to outsource certain portfolio accounting,
reporting and analysis functions, the Company also provides comprehensive
outsourcing services through its SS&C Direct operating unit. The Company's
consultants initially work with a client to research and evaluate data
sources, implement custodian and pricing interfaces and determine reporting
requirements and timing. The Company provides its clients with accurate,
processed data on a timely basis, enabling investment professionals to utilize
their time analyzing data and making investment decisions rather than managing
the back-office investment operations. The features of the Company's
outsourcing services include: (i) customized access rights to provide on-line
access for senior management; (ii) regular holdings reports and complete
regulatory support; (iii) disk mirroring, daily back-up of the system and
other data protection measures; and (iv) disaster recovery hot site services.
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PRODUCT SUPPORT
The Company believes its high level of service and support is critical to
its success, and an important competitive advantage. Furthermore, the Company
believes that a close and active service and support relationship is important
to client satisfaction and also provides the Company with important
information regarding evolving client requirements. For example, the Company
provides each of its significant clients with a dedicated client support
representative whose primary responsibility is to resolve questions and
concerns and act as a liaison between the client and the Company. In addition,
the Company provides direct telephone support from 8:30 a.m. to 7:00 p.m.
Eastern Time, Mondays through Thursdays, from 8:30 a.m. to 5:30 p.m. on
Fridays and also on weekends during year-end reporting, as well as use of
electronic bulletin boards and other forms of electronic data distribution
that provide clients with the latest information regarding the Company's
products. The Company also provides periodic maintenance releases of licensed
software to its clients, including regulatory updates, generally during the
fourth quarter, to enable them to meet industry reporting obligations and
other processing requirements as they evolve. The Company's service and
support activities are supplemented by a comprehensive training program,
including introductory training courses for new users and dedicated seminars
for investment professionals to familiarize them with the capabilities of the
Company's systems.
CLIENTS
The Company's clients include a wide range of financial institutions and
other organizations that require a full range of information management and
analysis, accounting, actuarial, reporting and compliance software on a timely
and flexible basis, and include asset managers, insurance companies, banks,
mutual funds, corporate treasuries, pension funds and government agencies. The
Company provides products and services to more than 500 organizations
worldwide.
SALES AND MARKETING
The Company believes that a direct sales organization is essential to the
successful implementation of its business strategy given the complexity and
importance of the operations and information the Company's products are
designed to manage and the extensive regulatory and reporting requirements of
its clients. The Company's dedicated direct sales and support staff, which is
supplemented by extensive ongoing product and sales training, is organized by
product area and situated in the Company's various sales offices.
The Company's marketing personnel are responsible for evaluating and
developing market opportunities and providing sales support. The Company's
marketing activities include generation of client leads, targeted direct mail
campaigns, seminars, advertising, trade shows, conferences and public
relations efforts. The marketing department also supports the sales force with
appropriate documentation or electronic materials for use during the sales
process.
PRODUCT DEVELOPMENT; RESEARCH AND DEVELOPMENT; BACKLOG
The Company believes that it must introduce new products and features into
the market on a regular basis to maintain its competitive advantage. To meet
these goals, the Company uses multidisciplinary teams of highly trained
finance, accounting, mathematical, actuarial, software and investment
personnel, and has invested heavily in developing a comprehensive product
analysis to meet rigorous requirements for product functionality and quality
across its target markets.
The Company's research and development engineers work closely with the
Company's marketing and support personnel to assure that product evolution
reflects developments in the marketplace and trends in client requirements.
Historically, the Company has issued a major functional release of its core
products during the third quarter of each fiscal year, including functional
enhancements, as well as an annual fourth quarter release to reflect evolving
regulatory changes in time to meet year-end reporting requirements of clients.
Although the Company has historically met its scheduled dates for product
releases and enhancements, software development is characterized by
unanticipated delays, and there can be no assurance that the Company will be
able to maintain future scheduled release dates as planned. Furthermore, there
can be no assurance that the Company's new product releases and product
enhancements will adequately address the needs of the
7
marketplace or will not contain "bugs" which could cause delays in product
introduction or shipments or, if discovered in the future, require
modification of the Company's products.
As of December 31, 1997, the Company's research and development staff
consisted of 100 employees. The Company's total expenses for research and
development, excluding purchased in-process research and development, for the
years ended December 31, 1995, 1996 and 1997 were $7.7 million, $8.4 million
and $10.2 million, respectively.
Backlog is not a significant factor in the Company's business.
COMPETITION
The market for financial services software is competitive, rapidly evolving
and highly sensitive to new product introductions and marketing efforts by
industry participants. The market is also highly fragmented and served by
numerous firms, many of which serve only their respective local markets or
specific customer types, and much of the Company's competition stems from
information systems or timesharing services developed and serviced internally
by the MIS departments of financial services firms. The Company currently
faces direct competition in various segments of the financial services
industry from Thomson Financial, SunGard Data Systems, Inc., Princeton
Financial Systems (a subsidiary of State Street Bank and Trust Company), DST
Systems, Inc. and Advent Software, Inc. The Company believes that none of its
competitors currently compete against it in all of the Company's target
industry segments, although there can be no assurance that one or more may not
compete against the Company in the future in additional industry segments.
Many of the Company's current and potential future competitors have
significantly greater financial, technical and marketing resources, generate
higher revenues and have greater name recognition than does the Company. There
can be no assurance that the Company's current or potential competitors will
not develop products comparable or superior to those developed by the Company
or adapt more quickly than the Company to new technologies, evolving industry
trends or changing client requirements. It is also possible that alliances
among competitors may emerge and rapidly acquire significant market share.
Increased competition may result in price reductions, reduced gross margins
and loss of market share, any of which would materially adversely affect the
Company's business, financial condition and results of operations.
The Company believes the principal competitive factors in its industry
include product performance and functionality, ease of use, scalability,
ability to integrate external data sources and processing systems, product and
company reputation, client service and support and price. Although the Company
believes that it currently competes effectively with respect to such factors,
there can be no assurance that the Company will be able to maintain its
competitive position against current and potential competitors.
PROPRIETARY RIGHTS
The Company primarily relies on a combination of copyright, trademark and
trade secret laws and license agreements to establish and protect proprietary
rights of its products. The source code for the Company's products is
protected as both a trade secret and an unpublished copyrighted work. In
addition, the Company generally enters into confidentiality and/or license
agreements with its employees, distributors, clients and potential clients and
limits access to, and distribution of, its software, documentation and other
proprietary information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's products or
technology without authorization or to develop similar technology
independently. In addition, effective copyright and trade protection may be
unavailable or limited in certain foreign countries. In January 1996, the
Company licensed the use of certain of its source code to General American
Life Insurance Company ("GALIC") and Conning Asset Management Company,
affiliates of certain stockholders of the Company.
Because the software development industry is characterized by rapid
technological change, the Company believes that factors such as technological
and creative skills of its personnel, new product developments, frequent
product enhancements, name recognition and reliable service and support are
more important to establishing and maintaining a leadership position than
legal protections of its technology.
8
EMPLOYEES
As of December 31, 1997, the Company had 318 full-time employees, consisting
of 100 employees in research and development, 70 employees in consulting and
services, 42 employees in sales and marketing, 32 employees in client support,
26 employees in finance and administration and 48 employees in the Company's
international operations. None of these employees are covered by any
collective bargaining agreements. The Company believes its relationship with
its employees is good. The future success of the Company will depend upon its
ability to attract and retain qualified personnel. Competition for such
personnel is often intense, and there can be no assurance that the Company
will be able to attract and retain adequate numbers of qualified personnel in
the future.
ITEM 2. PROPERTIES
The Company owns its corporate offices in Bloomfield, Connecticut, which
consist of approximately 14,800 square feet of office space. The Company also
leases an additional 18,000 square feet of office space in Bloomfield. The
Company has entered into a lease agreement for 54,000 square feet of office
space in Windsor, Connecticut and plans to relocate its corporate offices from
the Bloomfield location in the second quarter of 1998. The initial lease term
is for ten years and the Company has the right to extend the lease for one
additional term of five years. The lease requires annual payments of $717,000
for each of the first five years and annual payments of $757,000 for each of
the remaining five years. In support of its direct sales and service and
support operations, the Company utilizes facilities and offices in six
locations in the United States and Canada and also has offices in London,
England, Amsterdam, Netherlands and Kuala Lumpur, Malaysia.
ITEM 3. LEGAL PROCEEDINGS
On March 18, 1997, Elery G. Montagna and Marjory G. Montagna filed a
purported class action lawsuit in the United States District Court for the
Southern District of New York (the "New York Complaint") against the Company,
its Chief Executive Officer, its Executive Vice President and its Chief
Financial Officer, as well as against BT Alex.Brown Incorporated (as successor
to Alex. Brown & Sons Incorporated, "Alex.Brown") and Hambrecht & Quist LLC
("Hambrecht & Quist"), the lead managers of the Company's initial public
offering. On April 8, 1997, Marc A. Feiner filed a purported class action
lawsuit in the United States District Court for the District of Connecticut
(the "Connecticut Complaint") against the Company, its directors and its Chief
Financial Officer, as well as against Alex.Brown and Hambrecht & Quist. On
July 8, 1997, Marc A. Feiner, Joseph Aogiere, Arthur S. Davis, Theodore S.
Davis, James Gregory, Brian Kreidler, Daniel Kreidler, Robert Miller, Elery
Montagna, Marjory Montagna and Gilda Shapiro Trust filed a Consolidated
Amended Class Action Complaint in the United States District Court for the
District of Connecticut (the "Consolidated Complaint") in which the New York
Complaint and the Connecticut Complaint were consolidated and amended. The
Consolidated Complaint claims that the Prospectus for the Company's initial
public offering allegedly made material misrepresentations in violation of
Sections 11 and 12(2) of the Securities Act of 1933. The plaintiffs are
seeking an undetermined amount of damages and costs and expenses of the
litigation. On October 3, 1997, the Company filed a motion to dismiss the
Consolidated Complaint on the grounds that it failed to state a claim against
the Company or the individual defendants. On October 7, 1997, Alex.Brown and
Hambrecht & Quist filed a similar motion to dismiss the Consolidated Complaint
on the grounds that it failed to state a claim against them. On November 14,
1997, the plaintiffs filed an opposition to the motions to dismiss. On
December 10, 1997, Alex.Brown and Hambrecht & Quist filed a reply to such
opposition, and on December 11, 1997 the Company similarly filed a reply to
such opposition. The motions to dismiss were heard by the court on December
16, 1997 and have been taken under advisement. Although the Company believes
that it has meritorious defenses to the claims made in the lawsuit and intends
to contest the lawsuit vigorously, an adverse resolution of the lawsuit could
have a material adverse effect on the Company's financial condition and
results of operations in the period in which the litigation is resolved.
From time to time, the Company is subject to certain legal proceedings and
claims which arise in the normal course of its business. In the opinion of
management, the Company is not a party to any other litigation which it
believes could have a material adverse effect on the Company or its business.
9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
Chairman of the Board of Directors and
William C. Stone........ 42 Chief Executive Officer
David M. Stoner......... 56 President and Chief Operating Officer
Senior Vice President and Chief Technology
David A. Varsano........ 36 Officer
Marc W. Zimmerman....... 42 Senior Vice President, Strategic Sales
Senior Vice President, Europe, the Middle
Steven M. Helmbrecht.... 35 East and Africa ("EMEA")
Michael Morini.......... 35 Senior Vice President, Asset Management
Vice President, Chief Financial Officer
John S. Wieczorek....... 37 and Treasurer
William C. Stone founded the Company in 1986 and has served as Chairman of
the Board of Directors and Chief Executive Officer since the Company's
inception. He also served as the Company's President from inception through
April 1997. Prior to founding the Company, he directed the financial services
consulting practice of KPMG Peat Marwick LLP in Hartford, Connecticut and was
Vice President of Administration and Special Investment Services at Advest,
Inc.
David M. Stoner is President, Chief Operating Officer and a member of the
Board of Directors of the Company. Mr. Stoner joined the Company in April 1997
after serving as the President and Chief Operating Officer at The Dodge Group,
Inc., a software provider of PC-based general ledger systems, from August 1996
to February 1997. He formerly served as the Executive Vice President of
Worldwide Operations of Marcam Corporation, a provider of enterprise
applications and services from December 1987 to July 1996.
David A. Varsano is Senior Vice President and Chief Technology Officer of
the Company. Mr. Varsano joined the Company in September 1995, after serving
as Vice President at Dunn & Bradstreet Software, where he was responsible for
the client/server platform and decision support business from March 1994 to
September 1995. He formerly served as Vice President at Litle & Company, where
he managed product and systems development from March 1990 to March 1994.
Marc W. Zimmerman is Senior Vice President, Strategic Sales of the Company.
Mr. Zimmerman joined the Company in August 1995, from his position as Vice
President of Market Investment Solutions, Inc., an investment software and
consulting services provider, which he joined in 1993. From 1989 to 1993 he
served as Executive Vice President of Sales and Marketing and co-founder of
Princeton Financial Systems, Inc., a provider of investment software and
consulting services to the financial services industry.
Steven M. Helmbrecht is Senior Vice President, EMEA of the Company. From
November 1996 to October 1997, Mr. Helmbrecht served as Vice President,
International of the Company. From July 1993 to November 1996, Mr. Helmbrecht
served as a sales representative for the Company. From 1989 to 1992, Mr.
Helmbrecht served as Vice President of Prime Advisors, Inc., an investment
advisory firm, where he was responsible for investment accounting and
reporting. He formerly worked at Arthur Andersen & Co. as a tax accountant,
from 1985 to 1988.
10
Michael Morini is Senior Vice President, Asset Management of the Company.
Mr. Morini joined the Company in September 1997, after serving as the Senior
Vice President of Sales and Professional Services for Advent Software, Inc., a
provider of computer software and services, from October 1994 to August 1997.
From January 1994 to October 1994, he served as Vice President/General Manager
of the Northeast for American Software, Inc. He formerly served as a business
unit manager for J.D. Edwards & Co., where he managed sales, consulting and
project management teams, from January 1992 to January 1994.
John S. Wieczorek is Vice President, Chief Financial Officer and Treasurer
of the Company. Mr. Wieczorek joined the Company in October 1994 after serving
in various management positions from 1983 to 1994 and ultimately as Chief
Financial Officer at Vantage Computer Systems, Inc., a provider of computer
software and services (prior to the merger of Vantage with The Continuum
Company, Inc.).
Each officer serves at the discretion of the Board of Directors. There are
no family relationships among any of the directors and executive officers of
the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been trading on the Nasdaq National Market
under the symbol "SSNC" since the Company's initial public offering on May 31,
1996. The following table sets forth, for the fiscal periods indicated, the
high and low sales prices per share of Common Stock as reported on the Nasdaq
National Market:
FISCAL 1996 FISCAL 1997
------------- ------------
PRICE RANGE PRICE RANGE
------------- ------------
QUARTER HIGH LOW HIGH LOW
------- ------ ------ ------ -----
First......................................... N/A N/A $ 8.00 $5.13
Second........................................ $23.50 $13.00 7.25 5.13
Third......................................... 15.50 6.75 11.38 5.63
Fourth........................................ 10.38 5.50 12.38 9.50
There were 60 stockholders of record of the Company's Common Stock as of
March 17, 1998. The number of stockholders of record may not be representative
of the number of beneficial owners because many shares are held by
depositories, brokers or other nominees.
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings, if any, to support
its growth strategy and does not anticipate paying cash dividends in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of the Company's Board of Directors after taking into account
various factors, including the Company's financial condition, operating
results, current and anticipated cash needs and plans for expansion.
On December 31, 1997, the Company acquired Shepro Braun Systems, Inc.
("SBS") pursuant to an Agreement and Plan of Merger, dated as of December 31,
1997 (the "Merger Agreement"), among the Company, SBS, Securities Software
Acquisition Corp., a wholly owned subsidiary of the Company (the "Merger
Subsidiary") and Robert C. Shepro, Linda A. Shepro, Richard J. Moore, Mark L.
Seaman and Brian R. Shearer (collectively, the "SBS Stockholders"). Pursuant
to the Merger Agreement, the Merger Subsidiary was merged with and into SBS,
whereupon SBS became a wholly owned subsidiary of the Company. At that time,
the outstanding shares of capital stock of SBS were exchanged for an aggregate
of 1,000,000 shares of Common Stock of the Company (the "Shares"). The Shares
were issued and sold to the SBS Stockholders in reliance on Section 4(2) of
the Securities Act of 1933, as amended, as a sale by the Company not involving
a public offering. No underwriters were involved with the issuance and sale of
the Shares.
11
The following information relates to the use of proceeds from the Company's
initial public offering of Common Stock (the "Offering").
The effective date of the Company's Registration Statement on Form S-1 (File
No. 333-3094) (the "Registration Statement") relating to the Offering, for
which the following use of proceeds information is being disclosed, was May
30, 1996.
From the effective date of the Registration Statement through December 31,
1997, the Company has used the net Offering proceeds to the Company as
follows:
Acquisition of other business............................... $ 475,000
Repayment of indebtedness................................... $ 450,000
Working capital............................................. $ 5,859,425
Municipal bonds............................................. $37,880,775
Municipal bond funds........................................ $ 6,084,594
Corporate bonds............................................. $ 2,024,043
All of the above-listed payments were direct or indirect payments to persons
other than: directors, officers, general partners of the Company or their
associates; persons owning ten percent or more of any class of equity
securities of the Company; or affiliates of the Company.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is contained under the caption
"Selected Financial Data" appearing in the Company's 1997 Annual Report to
Stockholders (the "1997 Annual Report") and is incorporated herein by this
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is contained under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing in the 1997 Annual Report and is incorporated herein by
this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained in the Consolidated
Financial Statements and related footnotes appearing in the 1997 Annual Report
and is incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item 10 is set forth in the proxy statement to
be provided to stockholders in connection with the Company's 1998 Annual
Meeting of Stockholders (the "Proxy Statement") under the headings "Directors
and Nominees for Director" and "Section 16(a) Beneficial Ownership Reporting
Compliance," which information is incorporated herein by reference. The name,
age and position of each executive officer of the Company is set forth under
the heading "Executive Officers of the Registrant" in Part I of this Annual
Report on Form 10-K, which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item 11 is set forth in the Proxy Statement
under the headings "Compensation of Executive Officers," "Director
Compensation" and "Compensation Committee Interlocks and Insider
Participation," which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item 12 is set forth in the Proxy Statement
under the heading "Security Ownership of Certain Beneficial Owners and
Management," which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item 13 is set forth in the Proxy Statement
under the heading "Certain Transactions," which information is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed as a Part of this Form 10-K:
1. Financial Statements. The Consolidated Financial Statements are
included in the 1997 Annual Report, portions of which are filed as
an exhibit to this Annual Report on Form 10-K. The Consolidated
Financial Statements include: Consolidated Balance Sheets,
Consolidated Statements of Operations, Consolidated Statements of
Cash Flows, Consolidated Statements of Changes in Stockholders'
Equity, and Notes to Consolidated Financial Statements.
2. Exhibits. The Exhibits listed in the Exhibit Index immediately
preceding such Exhibits are filed as part of this Annual Report on
Form 10-K.
(b) Reports on Form 8-K:
On November 24, 1997, the Company filed a Current Report on Form 8-K, dated
November 14, 1997, to report under Item 2 (Acquisition or Disposition of
Assets) the Company's acquisition of Mabel Systems BV.
13
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
By /s/ William C. Stone
-----------------------------------
WILLIAM C. STONE
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
Date: March 31, 1998
14
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
/s/ William C. Stone Chairman of the Board of
_________________________________ Directors and Chief
WILLIAM C. STONE Executive Officer
(Principal Executive
Officer)
/s/ David M. Stoner President, Chief
_________________________________ Operating Officer and
DAVID M. STONER Director
/s/ John S. Wieczorek Vice President, Chief
_________________________________ Financial Officer and
JOHN S. WIECZOREK Treasurer (Principal
Financial and
Accounting Officer)
/s/ Peter L. Bloom Director March 31, 1998
_________________________________
PETER L. BLOOM
/s/ David W. Clark, Jr. Director
_________________________________
DAVID W. CLARK, JR.
/s/ Joseph H. Fisher Director
_________________________________
JOSEPH H. FISHER
Director
_________________________________
WILLIAM E. FORD
/s/ Jonathan M. Schofield Director
_________________________________
JONATHAN M. SCHOFIELD
/s/ William W. Wyman Director
_________________________________
WILLIAM W. WYMAN
15
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
2.1 Share Purchase Agreement, dated as of November 14, 1997, by and
among the Registrant, G.M. Hilhorst Holding B.V. and Lebam
Beheer B.V. is incorporated herein by reference to Exhibit 2 to
the Registrant's Current Report on Form 8-K, dated November 14,
1997 (File No. 0-28430).
2.2 Agreement and Plan of Merger, dated as of December 31, 1997, by
and among the Registrant, Shepro Braun Systems, Inc., Securities
Software Acquisition Corp. and Robert C. Shepro, Linda A.
Shepro, Richard J. Moore, Mark L. Seaman and Brian R. Shearer is
incorporated herein by reference to Exhibit 2 to the
Registrant's Current Report on
Form 8-K, dated December 31, 1997 (File No. 0-28430).
3.1 Amended and Restated Certificate of Incorporation of the
Registrant is incorporated herein by reference to Exhibit 3.2 to
the Registrant's Registration Statement on Form S-1, as amended
(File No. 333-3094) (the "Form S-1").
3.2 Amended and Restated By-Laws of the Registrant is incorporated
herein by reference to Exhibit 3.4 to the Form S-1.
4 Specimen Certificate for shares of Common Stock, $.01 par value
per share, of the Registrant is incorporated herein by reference
to Exhibit 4 to the Form S-1.
10.1* 1993 Stock Option Plan is incorporated herein by reference to
Exhibit 10.1 to the
Form S-1.
10.2* 1994 Stock Option Plan, as amended, is incorporated herein by
reference to Exhibit 10.2 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1996 (File No. 0-
28430).
10.3* 1996 Director Stock Option Plan, as amended, is incorporated
herein by reference to Exhibit 10.3 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996 (File
No. 0-28430).
10.4* 1996 Employee Stock Purchase Plan, as amended, is incorporated
herein by reference to Exhibit 10.4 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996 (File
No. 0-28430).
10.5* Employment Agreement between the Registrant and William C.
Stone, dated March 28, 1996, is incorporated herein by reference
to Exhibit 10.5 to the Form S-1.
10.6* Employment Agreement between the Registrant and Shane A. Chalke,
dated as of March 31, 1995, as amended, is incorporated herein
by reference to Exhibit 10.6 to the Form S-1.
10.7 Stock and Note Purchase Agreement, dated September 25, 1990, as
amended on September 20, 1994, among the Registrant and certain
stockholders of the Registrant is incorporated herein by
reference to Exhibit 10.10 to the Form S-1.
10.8 Series B Preferred Stock Purchase Agreement, dated September 20,
1994, among the Registrant and certain stockholders of the
Registrant is incorporated herein by reference to Exhibit 10.11
to the Form S-1.
10.9 Series C Preferred Stock Purchase Agreement, dated March 31,
1995, among the Registrant and certain stockholders of the
Registrant is incorporated herein by reference to Exhibit 10.12
to the Form S-1.
10.10+ Software License Agreement between the Registrant and Conning
Asset Management Company, dated January 27, 1996, is
incorporated herein by reference to Exhibit 10.15 to the Form S-
1.
10.11 Reseller Agreement between the Registrant and PFX(USA), Inc.,
dated June 22, 1993, is incorporated herein by reference to
Exhibit 10.16 to the Form S-1.
EXHIBIT
NO. DESCRIPTION
------- -----------
10.12* Employment Agreement between the Registrant and David M. Stoner,
dated April 2, 1997 is incorporated herein by reference to
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997 (File No. 0-28430).
10.13*+ Senior Officer Short-Term Incentive Plan is incorporated herein
by reference to Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997 (File
No. 0-28430).
10.14* Resignation Agreement and Release, dated as of October 1, 1997,
by and between the Registrant and Shane A. Chalke.
10.15 Lease Agreement, dated September 23, 1997, by and between the
Registrant and Monarch Life Insurance Company, as amended.
13 Portions of the Registrant's 1997 Annual Report to Stockholders
(which is not deemed to be "filed" except to the extent that
portions thereof are expressly incorporated by reference in this
Annual Report on Form 10-K).
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P.
27.1 Restated Financial Data Schedule for the year ended December 31,
1995.
27.2 Restated Financial Data Schedules for the three months ended
March 31, 1996 and six months ended June 30, 1996.
27.3 Restated Financial Data Schedules for the nine months ended
September 30, 1996 and year ended December 31, 1996.
27.4 Restated Financial Data Schedules for the three months ended
March 31, 1997 and six months ended June 30, 1997.
27.5 Restated Financial Data Schedule for the nine months ended
September 30, 1997.
27.6 Financial Data Schedule for the year ended December 31, 1997.
- --------
* Management contract or compensatory plan or arrangement filed herewith in
response to Item 14(a)(3) of the Instructions to the Annual Report on Form
10-K.
+ Confidential treatment previously granted as to certain portions of such
document.
2