10-Q 1 y49133e10-q.txt 10-Q 1 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 MARCH 31, 2001 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 OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 80 LAMBERTON ROAD WINDSOR, CT 06095 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE) 860-298-4500 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) 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 [_] Number of shares outstanding of the issuer's classes of common stock as of May 10, 2001:

Class Number of Shares Outstanding ----- ---------------------------- Common Stock, par value $0.01 per share 15,069,016

2 SS&C TECHNOLOGIES, INC. INDEX

Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets at March 31, 2001 and December 31, 2000 2 Consolidated Statements of Operations for the three-month periods ended March 31, 2001 and 2000 3 Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2001 and 2000 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURE 12

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 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)

March 31, 2001 December 31, (unaudited) 2000 ----------- ------------ ASSETS Current assets Cash and cash equivalents $ 25,656 $ 20,690 Investments in marketable securities 31,817 35,840 Accounts receivable, net of allowance for doubtful accounts 10,152 10,509 Income taxes receivable 337 144 Prepaid expenses and other current assets 1,861 1,955 Deferred income taxes 3,315 3,391 ----------- ------------ Total current assets 73,138 72,529 ----------- ------------ Property and equipment: Leasehold improvements 3,093 2,983 Equipment, furniture, and fixtures 16,667 16,338 ----------- ------------ 19,760 19,321 Less accumulated depreciation (11,213) (10,429) ----------- ------------ Net property and equipment 8,547 8,892 ----------- ------------ Deferred income taxes 6,924 7,179 Goodwill, net of accumulated amortization 113 129 Intangible and other assets, net of accumulated amortization 2,157 2,129 ----------- ------------ Total assets $ 90,879 $ 90,858 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 6 $ 94 Accounts payable 1,345 1,121 Accrued employee compensation and benefits 1,574 1,071 Other accrued expenses 1,445 3,492 Deferred maintenance and other revenue 15,240 12,421 ----------- ------------ Total current liabilities 19,610 18,199 Long-term debt 3 5 ----------- ------------ Total liabilities 19,613 18,204 ----------- ------------ Stockholders' equity: Common stock 162 162 Treasury stock (6,204) (5,700) Additional paid in capital 88,812 88,852 Accumulated other comprehensive income 1,004 2,434 Accumulated deficit (12,508) (13,094) ----------- ------------ Total stockholders' equity 71,266 72,654 ----------- ------------ Total liabilities and stockholders' equity $ 90,879 $ 90,858 =========== ============

See accompanying Notes to Consolidated Financial Statements. 2 4 SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)

Three months ended March 31, March 31, 2001 2000 -------- -------- Revenues: Software licenses $ 3,212 $ 4,138 Maintenance 6,413 6,572 Professional services 1,786 3,410 Outsourcing 1,418 1,000 -------- -------- Total revenues 12,829 15,120 -------- -------- Cost of revenues: Software licenses 180 238 Maintenance 1,815 1,640 Professional services 1,858 2,826 Outsourcing 1,432 1,461 -------- -------- Total cost of revenues 5,285 6,165 -------- -------- Gross profit 7,544 8,955 -------- -------- Operating expenses: Selling and marketing 2,881 3,543 Research and development 3,173 4,081 General and administrative 2,529 2,621 -------- -------- Total operating expenses 8,583 10,245 -------- -------- Operating loss (1,039) (1,290) -------- -------- Interest income, net 721 614 Other income, net 1,234 693 -------- -------- Income before income taxes 916 17 Provision for income taxes 330 6 -------- -------- Net income $ 586 $ 11 ======== ======== Basic earnings per share $ 0.04 $ 0.00 ======== ======== Basic weighted average number of common shares outstanding 15,105 16,044 ======== ======== Diluted earnings per share $ 0.04 $ 0.00 ======== ======== Diluted weighted average number of common and common equivalent shares outstanding 15,166 16,113 ======== ========

See accompanying Notes to Consolidated Financial Statements. 3 5 SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)

Three months ended March 31, March 31, 2001 2000 --------- --------- Cash flow from operating activities: Net income $ 586 $ 11 --------- --------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 880 1,105 Gain on sales of equity investments (1,219) (482) Gain on sale of property and equipment (3) -- Deferred income taxes 331 6 Provision for doubtful accounts 332 317 Changes in operating assets and liabilities, excluding effects from acquisitions: Accounts receivable (183) (1,763) Prepaid expenses and other current assets 54 (348) Taxes receivable (193) 245 Accounts payable 224 (157) Accrued expenses (1,544) (986) Deferred maintenance and other revenues 2,819 2,999 --------- --------- Total adjustments 1,498 936 --------- --------- Net cash provided by operating activities 2,084 947 --------- --------- Cash flow from investing activities: Additions to property and equipment (479) (613) Proceeds from sale of property and equipment 16 7 Issuance of convertible note receivable -- (1,000) Additions to capitalized software and other intangibles (81) (93) Purchases of marketable securities (12,807) (7,150) Sales of marketable securities 16,827 3,982 --------- --------- Net cash provided by (used in) investing activities 3,476 (4,867) --------- --------- Cash flow from financing activities: Repayment of debt (90) (1) Purchase of common stock for treasury (504) -- --------- --------- Net cash used in financing activities (594) (1) --------- --------- Net (decrease) increase in cash and cash equivalents 4,966 (3,921) Cash and cash equivalents, beginning of period 20,690 14,304 --------- --------- Cash and cash equivalents, end of period $ 25,656 $ 10,383 ========= =========

See accompanying Notes to Consolidated Financial Statements. 4 6 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 March 31, 2001 and the results of its operations for the three months ended March 31, 2001 and 2000. 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, 2000 which were included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. The December 31, 2000 consolidated balance sheet data were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the expected results for the full year. 2. 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 during the period. Common equivalent shares are comprised of stock options using the treasury stock method. Common equivalent shares are excluded from the computations of earnings per share if the effect of including such common equivalent shares is antidilutive. Outstanding options to purchase 2.7 million and 2.3 million shares at March 31, 2001 and 2000, respectively, were not included in the computation of diluted earnings per share because the effect of including the options would be 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):

March 31, March 31, 2001 2000 --------- --------- Basic weighted average shares outstanding 15,105 16,044 Weighted average common stock equivalents -- options 61 69 --------- --------- Diluted weighted average shares outstanding 15,166 16,113 ========= =========

3. Comprehensive Income Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130") 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 (loss) (in thousands):

Three months ended ------------------------------------ March 31, 2001 March 31, 2000 -------------- -------------- Net income $ 586 $ 11 Foreign currency translation losses (209) (90) Unrealized gains (losses) on marketable securities (1,221) 3,310 -------- -------- Total comprehensive income (loss) $ (844) $ 3,231 ======== ========

5 7 4. Stock Repurchase Program On May 23, 2000, the Company's Board of Directors approved a plan, which provided for to repurchase of its Common Stock for a total expenditure of up to $20 million. During the three months ended March 31, 2001, 93,100 shares of Common Stock were repurchased for approximately $0.5 million. To date, under the repurchase plan, the Company has purchased a total of 1,154,219 shares of Common Stock for a total of approximately $6.2 million. 5. Reclassifications Certain amounts in the Company's 2000 consolidated financial statements have been reclassified to be comparable with the 2001 presentation. These classifications have had no effect on net income, working capital or net equity. 6. 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. In the opinion of management, the Company is not a party to any litigation that it believes could have a material effect on the Company or its business. 7. International Sales and Geography Information The Company manages its business primarily on a geographic basis. The Company attributes net sales to a particular country based upon location of the customer. The Company's geographic segments consist of the Americas and Europe. The Americas segment includes both North and South America. The European segment includes European countries as well as the Middle East and Africa. Other operating segments include Asia Pacific and Japan. Revenues by geography for the three months ended March 31, were (in thousands):

(Unaudited) 2001 2000 -------- -------- Americas $ 10,363 $ 12,139 Europe 1,700 2,298 Other 766 683 -------- -------- $ 12,829 $ 15,120 ======== ========

6 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenues The Company's revenues are derived from software licenses, related maintenance and professional services and outsourcing services provided by SS&C Direct. Revenues for the three months ended March 31, 2001 were $12.8 million, representing a decrease of 15% from the $15.1 million in the respective period in 2000. The decrease of $2.3 million was primarily due to a decrease in software licenses and professional services offset by an increase in outsourcing revenue. Software Licenses. Software license revenues for the three months ended March 31, 2001 was $3.2 million, representing a decrease of 22% from the $4.1 million in the comparable period of the prior year. The decrease of $0.9 million in license revenue was primarily attributable to lower sales of Total Return 2000, AdvisorWare 2000 and Mabel, offset by increases in sales of CAMRA 2000 and PTS 2000. Maintenance. Maintenance revenues for the three months ended March 31, 2001 were $6.4 million, representing a decrease of 2% from the $6.6 million in the comparable period of the prior year. The decrease was mainly attributable to lower SKYLINE and CAMRA 2000 maintenance renewals. Professional Services. Professional services revenues for the three months ended March 31, 2001 were $1.8 million, representing a decrease of 48% from the $3.4 million in the comparable period of the prior year. Demand for the Company's implementation, conversion and training services has decreased primarily due to the decrease in sales of the Company's software license. The professional services revenues will continue to be affected by the overall license revenue levels. Outsourcing. Outsourcing revenues for the three months ended March 31, 2001 were $1.4 million, representing an increase of 42% from the $1.0 million in the comparable period of the prior year. The increases is primarily due to increased demand by customers for outsourcing services as an alternative to license purchases. Cost of Revenues Total cost of revenues decreased by 14% from $6.2 million in the three months ended March 31, 2000 to $5.3 million in the three months ended March 31, 2001. Total gross margins were 59% for the three months ended March 31, 2001, which was unchanged from the comparable period of the prior year. Cost of Software Licenses. Cost of software license revenues relates primarily to royalties, the costs of product media, packaging, documentation and labor involved in the distribution of the Company's software and the amortization of completed technology. The cost of software licenses decreased 24% from $238 thousand in the three months ended March 31, 2000 to $180 thousand in the three months ended March 31, 2001. The decrease in costs was mainly due to the reduction of amortization of completed technology. The amortization, which was related to the 1998 Savid International acquisition, was completed in the second quarter of 2000. The cost of software license revenues as a percentage of such revenues remained the same at 6% for the three months ended March 31, 2001 and 2000. Cost of Maintenance. Cost of maintenance primarily consists of technical customer support and the engineering costs associated with product and regulatory updates. The cost of maintenance increased 11% from $1.6 million in the three months ended March 31, 2000 to $1.8 million in the three months ended March 31, 2001. The increase was primarily due to increased personnel required to support the installed client base. The cost of maintenance as a percentage of such revenues increased from 25% in the three months ended March 31, 2000 to 28% in the same period of 2001. Cost of Professional Services. Cost of professional services revenues consists primarily of the cost related to 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 services revenues decreased 34% from $2.8 million in the three months ended March 31, 2000 to $1.9 million in the three months ended March 31, 2001. The cost of professional services revenues as a percentage of such revenues increased from 83% in the three months ended March 31, 2000 to 104% in the three months ended March 31, 2001. The Company has significantly reduced its professional consulting organization due to the decrease in demand for the Company's implementation services, which was a result of the 7 9 lower license revenues as compared to prior periods. The increase in the cost of professional services as a percentage of professional services revenues was due to lower overall efficiencies as a result of lower revenues. Cost of Outsourcing. Cost of outsourcing revenues consists primarily of the cost related to personnel utilized in servicing the Company's outsourcing clients. The cost of outsourcing revenues decreased 2% from $1.5 million in the three months ended March 31, 2000 to $1.4 million in the three months ended March 31, 2001, representing 146% and 101% of outsourcing revenue in those periods, respectively. The decrease in costs of outsourcing as a percentage of outsourcing revenues was due primarily to improved operating efficiencies. Operating Expenses Total operating costs decreased 16% from $10.2 million in the three months ended March 31, 2000 to $8.6 million in the three months ended March 31, 2001, representing 68% and 67% of total revenues in those periods, respectively. The decrease in total operating costs was due primarily to the cost reduction steps that the Company has undertaken to align its operating expenses with revenues. Selling and Marketing. Selling and marketing expenses consist primarily 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 19% from $3.5 million in the three months ended March 31, 2000 to $2.9 million in the three months ended March 31, 2001, representing 23% of total revenues for both periods. The dollar decrease was largely attributable to lower personnel related costs due to a reduction of personnel. 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 decreased 22% from $4.1 million in the three months ended March 31, 2000 to $3.2 million in the three months ended March 31, 2001, representing 27% and 25%, respectively, of those revenues for those periods. The dollar decrease was mainly due to lower personnel-related costs associated with the reduction in the number of research and development personnel and the elimination of redundant costs. General and Administrative. General and administrative expenses are primarily composed of personnel 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 4% from $2.6 million in the three months ended March 31, 2000 to $2.5 million in the three months ended March 31, 2001, representing 17% and 20%, respectively, of total revenues for those periods. The dollar decrease was largely attributable to lower personnel costs due to a reduction in administration personnel. Interest and Other Income, Net. Interest and other income, net consists primarily of interest income and other non-operational income and expenses. Interest income, net was $721 thousand for the three months ended March 31, 2001 compared to $614 thousand in the same period of 2000. Included in other income, net for the periods ended March 31, 2001 and March 31, 2000 were non-operational gains of $1.2 million and $482 thousand, respectively, resulting from the sale of an equity investment. Provision for Income Taxes. The Company had an effective tax rate of 33% and 36% in the periods ending March 31, 2000 and 2001, respectively. The increase in the effective tax rate was primarily due to lower research and development tax credits and the impact of the shift in marketable securities investments from non-taxable to taxable securities. LIQUIDITY AND CAPITAL RESOURCES The Company's cash, cash equivalents and marketable securities at March 31, 2001 were $57.5 million, increasing $1.0 million from the $56.5 million at December 31, 2000. Included in marketable securities at March 31, 2001 was an equity investment valued at $2.1 million that is subject to considerable market risk due to its volatility. Net cash provided by operating activities was $2.1 million for the three months ended March 31, 2001. Cash provided by operating activities was primarily due to earnings adjusted for non-cash items and an increase in deferred maintenance and other revenues. Investing activities provided cash of $3.5 million for the three months ended March 31, 2001. This was primarily due to the net 8 10 proceeds from the sale of marketable securities of $4.0 million, offset by capital expenditures of $0.5 million. Financing activities used net cash of $0.6 million. This was primarily due to the Company's stock repurchase plan. The Company purchased 93,100 shares of Common Stock for treasury in the three-month period ended March 31, 2001 for a total cost of $0.5 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 twelve months. CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS Fluctuations in Quarterly Performance. Historically, the Company's revenues and operating results have varied 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; personnel changes; 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 is in the process of modifying 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 SS&C Direct outsourcing services. Due to this change in the business model, the Company's revenues will increasingly depend on its ability to attract customers to SS&C Direct and 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. Thus, 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 CAMRA 2000, AdvisorWare 2000, Total Return 2000, LMS 2000, and SKYLINE software and the provision of maintenance and consulting services in support of such software. The Company expects that the licensing of CAMRA 2000, AdvisorWare 2000, Total Return 2000, LMS 2000, SKYLINE, and Antares 2000 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 its competitors will not compete against the Company in the future in additional markets. In addition, 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 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 9 11 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. Dependence on Database Supplier. The relational database design used in one of the Company's software products incorporates PFXplus, a "C"-based database management system licensed to the Company by POWERflex Corporation Proprietary Limited, an Australian vendor ("Powerflex"). If Powerflex were to increase its fees under the license agreement, the Company's results of operations could be materially adversely affected. Moreover, if Powerflex were to terminate the license agreement, the Company would have to seek an alternative relational database for its software products. Even though the Company believes that it could migrate its products to an alternative database, there can be no assurance that the Company would be able to license a database in a timely fashion with similar features and on terms acceptable to the Company. Dependence on Proprietary Technology. The Company's success and ability to compete is dependent 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, from time to time, 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. 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 has no derivative financial instruments. The Company generally places its marketable security investments in high credit quality instruments, primarily U.S. Government and Federal Agency obligations, tax-exempt municipal obligations and corporate obligations. The Company does not expect any material loss from its marketable security investments and therefore believes that its potential interest rate exposure is not material. 10 12 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 when customers are invoiced in local currency until collection occurs. Through March 31, 2001, foreign currency fluctuations have not had a material impact 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 mitigate risk discussed above should not be considered projections of future events or losses. PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS The following information relates to the use of the $52.8 million of net 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 March 31, 2001, the Company has used the net offering proceeds to the Company as follows (in thousands): Corporate move and equipment purchases $ 15,497 Acquisition of other business 5,333 Repayment of indebtedness 3,627 Purchase of common stock for treasury 6,204 Marketable securities 22,139 -------- Total $ 52,800 ======== 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. EXHIBITS AND REPORTS ON FORM 8-K a. No exhibits are being filed as part of this Report. b. There were no reports filed on Form 8-K in the quarter ended March 31, 2001. 11 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. SS&C TECHNOLOGIES, INC. Date: May 14, 2001 By:/s/ Anthony R. Guarascio Anthony R. Guarascio Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 12