Edgar Filing: SUNGARD DATA SYSTEMS INC

Form 10-Q

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2006

¨	Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 1-12989

SunGard^® Data Systems Inc.

(Exact name of registrant as specified in its charter)

Delaware

51-0267091

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

680 East Swedesford Road, Wayne, Pennsylvania 19087

(Address of principal executive offices, including zip code)

484-582-2000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨. Accelerated filer ¨. Non-accelerated filer x.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨. No x.

There were 100 shares of the registrant’s common stock outstanding as of September 30, 2006.

SUNGARD DATA SYSTEMS INC.

AND SUBSIDIARIES

INDEX


		PAGE
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Consolidated Balance Sheets as of December 31, 2005 and September 30, 2006 (unaudited) for the Successor	1

	Consolidated Statements of Operations (unaudited) for the period from January 1, 2005 through August 10, 2005 for the Predecessor and for the period from August 11, 2005 through September 30, 2005 and for the nine months ended September 30, 2006 for the Successor	2

	Consolidated Statements of Operations (unaudited) for the period from July 1, 2005 through August 10, 2005 for the Predecessor and for the period from August 11, 2005 through September 30, 2005 and for the three months ended September 30, 2006 for the Successor	3

	Consolidated Statements of Cash Flows (unaudited) for the period from January 1, 2005 through August 10, 2005 for the Predecessor and for the period from August 11, 2005 through September 30, 2005 and for the nine months ended September 30, 2006 for the Successor	4

	Notes to Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31

Item 4.	Controls and Procedures	31

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults upon Senior Securities	31

Item 4.	Submission of Matters to a Vote of Security Holders	31

Item 5.	Other Information	32

Item 6.	Exhibits	32

SIGNATURES		33

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SunGard Data Systems Inc.

Consolidated Balance Sheets

(In millions except share and per-share amounts)


	Successor
	December 31, 2005			September 30, 2006
				(unaudited)
*Assets*
Current:
Cash and cash equivalents	$	317		$	268
Trade receivables, less allowance for doubtful accounts of $9 and $11		190			161
Earned but unbilled receivables		38			51
Prepaid expenses and other current assets		166			140
Clearing broker assets		391			457
Retained interest in accounts receivable sold		224			256
Deferred income taxes		40			47

Total current assets		1,366			1,380

Property and equipment, less accumulated depreciation of $72 and $241		705			738
Software products, less accumulated amortization of $83 and $245		1,528			1,379
Customer base, less accumulated amortization of $68 and $215		2,817			2,855
Other tangible and intangible assets, less accumulated amortization of $3 and $10		248			228
Trade name		1,019			1,019
Goodwill		6,904			6,946

Total Assets	$	14,587		$	14,545

*Liabilities and Stockholder’s Equity*
Current:
Short-term and current portion of long-term debt	$	46		$	44
Accounts payable		67			60
Accrued compensation and benefits		218			173
Accrued interest expense		161			86
Other accrued expenses		282			289
Clearing broker liabilities		360			415
Deferred revenue		695			720

Total current liabilities		1,829			1,787

Long-term debt		7,383			7,384
Deferred income taxes		1,803			1,832

Total liabilities		11,015			11,003

Commitments and contingencies

Stockholder’s equity:
Common stock, par value $.01 per share; 100 shares authorized, issued and outstanding		—			—

Capital in excess of par value		3,629			3,654
Accumulated deficit		(29	)		(136	)
Accumulated other comprehensive income (loss)		(28	)		24

Total stockholder’s equity		3,572			3,542

Total Liabilities and Stockholder’s Equity	$	14,587		$	14,545

The accompanying notes are an integral part of these financial statements.

SunGard Data Systems Inc.

Consolidated Statements of Operations

(In millions)

(Unaudited)


	Predecessor			Successor
	Period from January 1, 2005 through August 10, 2005			Period from August 11, 2005 through September 30, 2005			Nine Months Ended September 30, 2006
Revenue:
Services	$	2,126		$	491		$	2,842
License and resale fees		179			42			214

Total products and services		2,305			533			3,056
Reimbursed expenses		66			15			79

		2,371			548			3,135

Costs and expenses:
Cost of sales and direct operating		1,119			247			1,460
Sales, marketing and administration		456			117			659
Product development		154			36			191
Depreciation and amortization		141			33			175
Amortization of acquisition-related intangible assets		84			51			297
Merger costs and other		121			18			5

		2,075			502			2,787

Income from operations		296			46			348
Interest income		9			2			10
Interest expense and amortization of deferred financing fees		(17	)		(88	)		(483	)
Other expense		—			(3	)		(22	)

Income (loss) before income taxes		288			(43	)		(147	)
Provision (benefit) for income taxes		142			(20	)		(40	)

Net income (loss)	$	146		$	(23	)	$	(107	)

The accompanying notes are an integral part of these financial statements.

SunGard Data Systems Inc.

Consolidated Statements of Operations

(In millions)

(Unaudited)


	Predecessor			Successor
	Period from July 1, 2005 through August 10, 2005			Period from August 11, 2005 through September 30, 2005			Three Months Ended September 30, 2006
Revenue:
Services	$	389		$	491		$	963
License and resale fees		17			42			81

Total products and services		406			533			1,044
Reimbursed expenses		11			15			24

		417			548			1,068

Costs and expenses:
Cost of sales and direct operating		205			247			493
Sales, marketing and administration		76			117			215
Product development		29			36			63
Depreciation and amortization		26			33			60
Amortization of acquisition-related intangible assets		15			51			99
Merger costs and other		103			18			2

		454			502			932

Income (loss) from operations		(37	)		46			136
Interest income		3			2			4
Interest expense and amortization of deferred financing fees		(3	)		(88	)		(165	)
Other expense		—			(3	)		(4	)

Loss before income taxes		(37	)		(43	)		(29	)
Provision (benefit) for income taxes		5			(20	)		2

Net loss	$	(42	)	$	(23	)	$	(31	)

The accompanying notes are an integral part of these financial statements.

SunGard Data Systems Inc.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)


	Predecessor			Successor
	Period from January 1, 2005 through August 10, 2005			Period from August 11, 2005 through September 30, 2005			Nine Months Ended September 30, 2006
*Cash flow from operations:*
Net income (loss)	$	146		$	(23	)	$	(107	)
Reconciliation of net income (loss) to cash flow from operations:
Depreciation and amortization		225			84			472
Deferred income tax benefit		(14	)		(24	)		(98	)
Stock compensation expense		59			8			27
Amortization of deferred financing costs and debt discount		—			6			25
Other noncash credits		(17	)		(4	)		(36	)
Accounts receivable and other current assets		79			105			43
Accounts payable and accrued expenses		106			58			(124	)
Clearing broker assets and liabilities, net		(3	)		15			(12	)
Deferred revenue		(10	)		32			24

Cash flow from operations		571			257			214

*Investment activities:*
Cash paid for businesses acquired by the Company, net of cash acquired		(419	)		(15	)		(24	)
Acquisition of SunGard by Solar Capital		—			(11,615	)		—
Cash paid for property and equipment and software		(152	)		(54	)		(222	)
Other investing activities		2			(1	)		8

Cash used in investment activities		(569	)		(11,685	)		(238	)

*Financing activities:*
Cash received from borrowings for the Transaction		—			7,333			—
Cash received from other borrowings, net of fees		75			13			—
Cash used to repay debt		(132	)		(71	)		(37	)
Investment by Parent Companies		—			3,450			—
Cash received from stock option and award plans		386			—			—
Other financing activities		—			—			(3	)

Cash provided by (used in) financing activities		329			10,725			(40	)

Effect of exchange rate changes on cash		—			—			15

Decrease in cash and cash equivalents		331			(703	)		(49	)
Beginning cash and cash equivalents		675			1,006			317

Ending cash and cash equivalents	$	1,006		$	303		$	268

*Supplemental information:*
Acquired businesses:
Property and equipment	$	66		$	—		$	—
Software products		57			6			6
Customer base		160			—			5
Goodwill		213			7			16
Other tangible and intangible assets		2			1			2
Deferred income taxes		(53	)		1			(1	)
Purchase price obligations and debt assumed		(21	)		(3	)		(2	)
Net current (liabilities) assets assumed		(5	)		3			(2	)

Cash paid for acquired businesses, net of cash acquired of $31, $0 and $2, respectively	$	419		$	15		$	24

The accompanying notes are an integral part of these financial statements.

SUNGARD DATA SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation:

SunGard Data Systems Inc. (“SunGard” or the “Company”) was acquired on August 11, 2005 (the “Transaction”) by a consortium of private equity investment funds associated with Bain Capital Partners, The Blackstone Group, Goldman Sachs & Co., Kohlberg Kravis Roberts & Co., Providence Equity Partners, Silver Lake Partners and Texas Pacific Group (collectively, the “Sponsors”). The Transaction was accomplished through the merger of Solar Capital Corp. into SunGard with SunGard being the surviving company.

SunGard is a wholly owned subsidiary of SunGard Holdco LLC, which is wholly owned by SunGard Holding Corp., which is wholly owned by SunGard Capital Corp. II, which is a subsidiary of SunGard Capital Corp. All four of these companies were formed for the purpose of facilitating the Transaction and are collectively referred to as the “Holding Companies.”

Although SunGard continued as the same legal entity after the Transaction, the accompanying consolidated statements of operations and cash flows are presented for two periods: Predecessor and Successor, which relate to the period preceding the Transaction and the period succeeding the Transaction, respectively. The Company refers to the operations of SunGard and subsidiaries for both the Predecessor and Successor periods.

SunGard has three segments: Financial Systems (“FS”), Higher Education and Public Sector Systems (“HEPS”) and Availability Services (“AS”). The Company’s Software & Processing Solutions business is comprised of the FS and HEPS segments. The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated. The consolidated financial statements exclude the accounts of the Holding Companies.

The accompanying interim consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), consistent in all material respects with those applied in the Successor’s Annual Report on Form 10-K for the year ended December 31, 2005. Interim financial reporting does not include all of the information and footnotes required by GAAP for complete financial statements. The interim financial information is unaudited, but reflects all normal adjustments which are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2006.

Effect of Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 prescribes a “more likely than not” threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on other topics related to accounting for income tax assets and liabilities, interest and penalties associated with tax positions and income taxes in interim periods as well as income tax disclosures. This Interpretation is effective as of January 1, 2007. The Company is currently evaluating FIN 48 and the related impact on the Company’s consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), which addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP. SFAS 157 is effective as of January 1, 2008. The Company is currently evaluating SFAS 157 and the related impact on the Company’s consolidated financial statements.

2. Acquisitions and Dispositions:

Acquisition of SunGard

As discussed in Note 1, the Transaction was completed on August 11, 2005 and was financed by a combination of borrowings under the Company’s senior secured credit facilities, the issuance of senior notes due 2013 and senior subordinated notes due 2015, the funding under the Company’s receivables facilities, and the equity investment of the Sponsors, co-investors and management.

The purchase price, including transaction costs that have been allocated as debt issuance costs or included in the overall purchase price, was approximately $11.73 billion. Under business combination accounting, the total purchase price was allocated to the Company’s net tangible and identifiable intangible assets based on their estimated fair values as of August 11, 2005. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill. The allocation of the purchase price for property and equipment, intangible assets and deferred income taxes was based upon valuation data and our estimates and assumptions.

The estimated amortization expense for each of the years 2006 to 2010 has been updated primarily to reflect changes in the purchase price allocation for the Transaction. Based on amounts recorded at September 30, 2006, total estimated amortization of all acquisition-related intangible assets for the year ended December 31, 2006 and for each of the years ended December 31, 2007 to 2010 follows (in millions):


2006	$	392
2007		384
2008		379
2009		375
2010		368

Acquisitions by the Company

The Company seeks to acquire businesses that broaden its existing product lines and service offerings by adding complementary products and service offerings and by expanding its geographic reach. During the nine months ended September 30, 2006, the Company completed three acquisitions in its FS segment. Cash paid, net of cash acquired and subject to certain adjustments, was $24 million.

The following table lists the businesses the Company acquired since January 1, 2006:


Acquired Company/Business	Date Acquired	Description
Dataware Solutions, Inc.	3/14/2006	Employee compliance solutions for financial institutions.

Armonys	4/28/2006	Consulting and IT professional services to financial institutions in France.

ProNvest Inc.	9/18/2006	Managed investment account services to 401(k) participants and electronic signature and authentication software.

System Access Limited	10/2/2006	Universal banking solutions for retail and wholesale banking based in Singapore.

During October 2006, the Company completed 4 acquisitions in its FS segment for aggregate cash paid of approximately $96 million, of which approximately $75 million was spent on the acquisition of System Access Ltd.

Dispositions by the Company

During the nine months ended September 30, 2006, the Company sold one of its FS segment businesses for cash proceeds of approximately $9 million.

Goodwill

The following table summarizes changes in goodwill by segment (in millions):


	FS			HEPS		AS		Total
Balance at December 31, 2005	$	3,104		$	1,794	$	2,006	$	6,904
2006 acquisitions		16			—		—		16
2006 dispositions		(7	)		—		—		(7	)
Adjustments related to the Transaction		(255	)		100		141		(14	)
Effect of foreign currency translation		11			7		29		47

Balance at September 30, 2006	$	2,869		$	1,901	$	2,176	$	6,946

3. Stock-Based Compensation:

Successor

Statement of Financial Accounting Standards (“SFAS”) Number 123R (revised 2004), Share-Based Payment (“SFAS 123R”), supersedes Accounting Principles Board Opinion Number 25 (“APB 25”) and requires companies to expense the fair value of employee stock options over the employee requisite service period. The Company adopted SFAS 123R as of the date of closing the Transaction using the modified prospective method, which requires companies to record stock compensation expense for all unvested and new awards as of the adoption date. Accordingly, prior period amounts presented herein have not been restated. Under the fair value recognition provisions of SFAS 123R, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the requisite service period. The Company recorded as a component of sales, marketing and administration expense non-cash stock compensation of $11 million, $27 million and $8 million for the three- and nine-month periods ended September 30, 2006 and for the period from August 11, 2005 through September 30, 2005, respectively.

Predecessor

Prior to the closing of the Transaction, the Company applied APB 25 in accounting for its stock option and award plans and the pro forma disclosure requirements of SFAS Number 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Accordingly, the Company recorded in merger costs a non-cash charge for stock compensation of approximately $60 million for the period from January 1, 2005 through August 10, 2005 as a result of the acceleration of vesting of all options and restricted stock in connection with the Transaction (see Note 1). Had the Company adopted the full provisions of SFAS 123, additional stock compensation expense of $102 million and $135 million, each net of tax, would have been recorded during the periods from July 1, 2005 through August 10, 2005 and January 1, 2005 through August 10, 2005, respectively, and the resulting pro forma net (loss) income would have been $(145) million and $11 million.

4. Clearing Broker Assets and Liabilities:

Clearing broker assets and liabilities are comprised of the following (in millions):


	Successor
	December 31, 2005		September 30, 2006
Segregated customer cash and treasury bills	$	42	$	41
Securities owned		36		53
Securities borrowed		261		326
Receivables from customers and other		52		37

Clearing broker assets	$	391	$	457

Payables to customers	$	60	$	63
Securities loaned		272		302
Customer securities sold short, not yet purchased		16		28
Payable to brokers and dealers		12		22

Clearing broker liabilities	$	360	$	415

Segregated customer cash and treasury bills are held by the Company on behalf of customers. Clearing broker securities consist of trading and investment securities at fair market values. Securities borrowed and loaned are collateralized financing transactions which are cash deposits made to or received from other broker/dealers. Receivables from and payables to customers represent amounts due or payable on cash and margin transactions.

5. Debt and Derivative Instruments:

Effective January 1, 2006, the Company adopted the provisions of two technical interpretations issued by the FASB Derivatives Implementation Group (DIG) in June 2005 (commonly known as DIG Issues B38 and B39). These interpretations outline circumstances in which a put or call option embedded in debt instruments need to be separated from the debt instrument and separately valued. As of September 30, 2006, the fair value of the put option in the Company’s senior notes due 2013 and senior subordinated notes due 2015 was determined to be immaterial.

In February 2006, the Company entered into its second interest rate swap for a notional amount of $800 million. The term of the swap agreement is five years and the Company is required to pay a stream of fixed interest payments of 5.0% and, in turn, receives variable interest payments based on LIBOR (5.5% at September 30, 2006). This swap increased the hedged portion of the Company’s $4.5 billion floating rate debt to $1.6 billion. Both interest rate swaps are designated and qualify as cash flow hedges under SFAS 133, Accounting for Derivative Instruments and Hedging Activities. As of September 30, 2006, the Company recorded a cumulative unrealized gain of $1 million in Other Comprehensive Income related to the change in the market value on the swaps, which may be recognized in the statement of operations if certain terms of the senior secured credit facility change, if the loan is extinguished or if the swap agreements are terminated prior to maturity.

6. Comprehensive Income (Loss):

Comprehensive income (loss) consists of net income (loss) adjusted for other increases and decreases affecting stockholder’s equity that are excluded from the determination of net income (loss). The calculation of comprehensive income (loss) follows (in millions):


	Predecessor			Successor
	Period from January 1, 2005 through August 10, 2005			Period from August 11, 2005 through September 30, 2005			Nine Months Ended September 30, 2006
Net income (loss)	$	146		$	(23	)	$	(107	)
Foreign currency translation gains (losses)		(69	)		(12	)		50
Unrealized gain on derivative instruments		—			—			2

Comprehensive income (loss)	$	77		$	(35	)	$	(55	)


	Predecessor			Successor
	Period from July 1, 2005 through August 10, 2005			Period from August 11, 2005 through September 30, 2005			Three Months Ended September 30, 2006
Net loss	$	(42	)	$	(23	)	$	(31	)
Foreign currency translation gains (losses)		5			(12	)		2
Unrealized loss on derivative instruments		—			—			(16	)

Comprehensive loss	$	(37	)	$	(35	)	$	(45	)

7. Segment Information:

The Company has three segments: FS and HEPS, which together form the Company’s Software & Processing Solutions business, and AS. The operating results for each segment follow (in millions):


	Predecessor						Successor
	Period from January 1, 2005 through August 10, 2005			Period from July 1, 2005 through August 10, 2005			Period from August 11, 2005 through September 30, 2005			Nine Months Ended September 30, 2006			Three Months Ended September 30, 2006
Revenue:
Financial systems	$	1,120		$	193		$	256		$	1,484		$	507
Higher education and public sector systems		471			83			110			644			221

Software & processing solutions		1,591			276			366			2,128			728
Availability services		780			141			182			1,007			340

	$	2,371		$	417		$	548		$	3,135		$	1,068

Income (loss) from operations:
Financial systems	$	183		$	24		$	24		$	143		$	61
Higher education and public sector systems		76			10			15			92			35

Software & processing solutions		259			34			39			235			96
Availability services		197			38			45			201			75
Corporate administration		(39	)		(6	)		(20	)		(83	)		(33	)
Merger and other costs		(121	)		(103	)		(18	)		(5	)		(2	)

	$	296		$	(37	)	$	46		$	348		$	136

Depreciation and amortization:
Financial systems	$	39		$	7		$	9		$	39		$	13
Higher education and public sector systems		8			1			2			11			4

Software & processing solutions		47			8			11			50			17
Availability services		94			18			22			125			43
Corporate administration		—			—			—			—			—

	$	141		$	26		$	33		$	175		$	60

Amortization of acquisition-related intangible assets:
Financial systems	$	39		$	7		$	29		$	155		$	52
Higher education and public sector systems		30			6			9			53			17

Software & processing solutions		69			13			38			208			69
Availability services		15			2			13			88			30
Corporate administration		—			—			—			1			—

	$	84		$	15		$	51		$	297		$	99

Cash paid for property and equipment and software:
Financial systems	$	40		$	8		$	9		$	59		$	21
Higher education and public sector systems		15			3			3			14			6

Software & processing solutions		55			11			12			73			27
Availability services		97			18			42			149			51
Corporate administration		—			—			—			—			—


	$	152		$	29		$	54		$	222		$	78

8. Related Party Transactions:

During the three- and nine-month periods ended September 30, 2006 and for the period from August 11, 2005 through September 30, 2005, in accordance with the Management Agreement between the Company and the Sponsors, the Company recorded $3 million, $10 million and $3 million, respectively, of management fees in sales, marketing and administration expenses in the statement of operations. At September 30, 2006 and December 31, 2005, $3 million and $4 million, respectively, was included in other accrued expenses on the balance sheet.

9. Supplemental Guarantor Condensed Consolidating Financial Statements:

On August 11, 2005, in connection with the Transaction, the Company issued $3.0 billion aggregate principal amount of the outstanding senior notes and the outstanding senior subordinated notes. The senior notes are jointly and severally and unconditionally guaranteed on a senior unsecured basis and the senior subordinated notes are jointly and severally and unconditionally guaranteed on an unsecured senior subordinated basis, in each case, subject to certain exceptions, by substantially all wholly owned domestic subsidiaries of the Company (collectively, the “Guarantors”). All other subsidiaries of the Company, either direct or indirect, do not guarantee the senior notes and senior subordinated notes (“Non-Guarantors”). The Guarantors also unconditionally guarantee the senior secured credit facilities.

The following tables present the financial position, results of operations and cash flows of the Company (Parent), the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries and Eliminations as of December 31, 2005 and September 30, 2006 and for each of the nine- and three-month periods ended September 30, 2006 and for the periods from January 1, 2005 through August 10, 2005 and July 1, 2005 through August 10, 2005, to arrive at the information for SunGard Data Systems Inc. on a consolidated basis.


(in millions)	Supplemental Condensed Consolidating Balance Sheet (Successor) September 30, 2006
(in millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current:
Cash and cash equivalents	$	16		$	(1	)	$	253		$	—		$	268
Intercompany balances		(2,013	)		1,973			40			—			—
Trade receivables, net		—			21			191			—			212
Prepaid expenses, taxes and other current assets		501			101			802			(504	)		900

Total current assets		(1,496	)		2,094			1,286			(504	)		1,380
Property and equipment, net		1			509			228			—			738
Intangible assets, net		194			4,800			487			—			5,481
Intercompany balances		(754	)		733			21			—			—
Goodwill		—			6,253			693			—			6,946
Investment in subsidiaries		12,815			1,628			—			(14,443	)		—

Total Assets	$	10,760		$	16,017		$	2,715		$	(14,947	)	$	14,545

Liabilities and Stockholder’s Equity
Current:
Short-term and current portion of long-term debt	$	37		$	2		$	5		$	—		$	44
Accounts payable and other current liabilities		116			1,302			829			(504	)		1,743

Total current liabilities		153			1,304			834			(504	)		1,787
Long-term debt		7,060			2			322			—			7,384
Intercompany debt		1			255			(130	)		(126	)		—
Deferred income taxes		4			1,642			186			—			1,832

Total liabilities		7,218			3,203			1,212			(630	)		11,003

Total stockholder’s equity		3,542			12,814			1,503			(14,317	)		3,542

Total Liabilities and Stockholder’s Equity	$	10,760		$	16,017		$	2,715		$	(14,947	)	$	14,545


(in millions)	Supplemental Condensed Consolidating Balance Sheet (Successor) December 31, 2005
(in millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current:
Cash and cash equivalents	$	74		$	(8	)	$	251		$	—		$	317
Intercompany balances		(1,536	)		1,442			94			—			—
Trade receivables, net		2			46			180			—			228
Prepaid expenses, taxes and other current assets		321			142			674			(316	)		821

Total current assets		(1,139	)		1,622			1,199			(316	)		1,366
Property and equipment, net		1			496			208			—			705
Intangible assets, net		215			4,877			520			—			5,612
Goodwill		—			6,272			632			—			6,904
Intercompany balances		(744	)		732			12			—			—
Investment in subsidiaries		12,568			1,563			—			(14,131	)		—

Total Assets	$	10,901		$	15,562		$	2,571		$	(14,447	)	$	14,587

Liabilities and Stockholder’s Equity
Current:
Short-term and current portion of long-term debt	$	37		$	3		$	6		$	—		$	46
Accounts payable and other current liabilities		204			1,158			737			(316	)		1,783

Total current liabilities		241			1,161			743			(316	)		1,829
Long-term debt		7,078			4			301			—			7,383
Intercompany debt		5			212			(134	)		(83	)		—
Deferred income taxes		5			1,617			181			—			1,803

Total liabilities		7,329			2,994			1,091			(399	)		11,015

Total stockholder’s equity		3,572			12,568			1,480			(14,048	)		3,572

Total Liabilities and Stockholder’s Equity	$	10,901		$	15,562		$	2,571		$	(14,447	)	$	14,587


(in millions)	Supplemental Condensed Consolidating Schedule of Operations (Successor) Nine Months Ended September 30, 2006
(in millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Total revenue	$	—		$	2,299		$	944		$	(108	)	$	3,135

Costs and expenses:
Cost of sales and direct operating		—			1,087			481			(108	)		1,460
Sales, marketing and administration		82			364			213			—			659
Product development		—			129			62			—			191
Depreciation and amortization		—			127			48			—			175
Amortization of acquisition-related intangible assets		2			246			49			—			297
Merger costs		5			—			—			—			5

		89			1,953			853			(108	)		2,787

Income (loss) from operations		(89	)		346			91			—			348
Net interest income (expense)		(465	)		(8	)		—			—			(473	)
Other income (expense)		160			51			(17	)		(216	)		(22	)

Income (loss) before income taxes		(394	)		389			74			(216	)		(147	)
Provision (benefit) for income taxes		(287	)		228			19			—			(40	)

Net income (loss)	$	(107	)	$	161		$	55		$	(216	)	$	(107	)


(in millions)	Supplemental Condensed Consolidating Schedule of Operations (Predecessor) Period from January 1 through August 10, 2005
(in millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Total revenue	$	—		$	1,755		$	694		$	(78	)	$	2,371

Costs and expenses:
Cost of sales and direct operating		—			847			350			(78	)		1,119
Sales, marketing and administration		39			271			146			—			456
Product development		—			104			50			—			154
Depreciation and amortization		—			103			38			—			141
Amortization of acquisition-related intangible assets		—			58			26			—			84
Merger costs		119			2			—			—			121

		158			1,385			610			(78	)		2,075

Income (loss) from operations		(158	)		370			84			—			296
Net interest income (expense)		(11	)		—			3			—			(8	)
Other income (expense)		286			62			—			(348	)		—

Income (loss) before income taxes		117			432			87			(348	)		288
Provision (benefit) for income taxes		(29	)		146			25			—			142

Net income (loss)	$	146		$	286		$	62		$	(348	)	$	146


(in millions)	Supplemental Condensed Consolidating Schedule of Operations (Successor) Period from August 11, 2005 through September 30, 2005
(in millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Total revenue	$	—		$	413		$	150		$	(15	)	$	548

Costs and expenses:
Cost of sales and direct operating		—			187			75			(15	)		247
Sales, marketing and administration		20			64			33			—			117
Product development		—			22			14			—			36
Depreciation and amortization		—			25			8			—			33
Amortization of acquisition-related intangible assets		—			41			10			—			51
Merger costs		14			—			4			—			18

		34			339			144			(15	)		502

Income (loss) from operations		(34	)		74			6			—			46
Net interest income (expense)		(82	)		(2	)		(2	)		—			(86	)
Other income (expense)		37			(6	)		(2	)		(32	)		(3	)

Income (loss) before income taxes		(79	)		66			2			(32	)		(43	)
Provision (benefit) for income taxes		(58	)		29			9			—			(20	)

Net income (loss)	$	(21	)	$	37		$	(7	)	$	(32	)	$	(23	)


(in millions)	Supplemental Condensed Consolidating Schedule of Operations (Successor) Three Months Ended September 30, 2006
(in millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Total revenue	$	—		$	782		$	313		$	(27	)	$	1,068

Costs and expenses:
Cost of sales and direct operating		—			353			167			(27	)		493
Sales, marketing and administration		29			117			69			—			215
Product development		—			43			20			—			63
Depreciation and amortization		—			43			17			—			60
Amortization of acquisition-related intangible assets		1			82			16			—			99
Merger costs		2			—			—			—			2

		32			638			289			(27	)		932

Income (loss) from operations		(32	)		144			24			—			136
Net interest income (expense)		(157	)		(1	)		(3	)		—			(161	)
Other income (expense)		5			17			(3	)		(23	)		(4	)

Income (loss) before income taxes		(184	)		160			18			(23	)		(29	)
Provision (benefit) for income taxes		(153	)		155			—			—			2

Net income (loss)	$	(31	)	$	5		$	18		$	(23	)	$	(31	)


(in millions)	Supplemental Condensed Consolidating Schedule of Operations (Predecessor) Period from July 1 through August 10, 2005
(in millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Total revenue	$	—		$	307		$	124	$	(14	)	$	417

Costs and expenses:
Cost of sales and direct operating		—			154			65		(14	)		205
Sales, marketing and administration		7			37			32		—			76
Product development		—			20			9		—			29
Depreciation and amortization		—			19			7		—			26
Amortization of acquisition-related intangible assets		—			10			5		—			15
Merger costs		102			1			—		—			103

		109			241			118		(14	)		454

Income (loss) from operations		(109	)		66			6		—			(37	)
Net interest income (expense)		—			(4	)		4		—			—
Other income (expense)		65			8			—		(73	)		—

Income (loss) before income taxes		(44	)		70			10		(73	)		(37	)
Provision (benefit) for income taxes		(2	)		5			2		—			5

Net income (loss)	$	(42	)	$	65		$	8	$	(73	)	$	(42	)


	Supplemental Condensed Consolidating Schedule of Cash Flows (Successor)
(in millions)	Nine Months Ended September 30, 2006
(in millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flow From Operations
Net income (loss)	$	(107	)	$	161		$	55		$	(216	)	$	(107	)
Non cash adjustments		(105	)		194			85			216			390
Changes in operating assets and liabilities		(271	)		235			(33	)		—			(69	)

Cash flow provided by (used in) operations		(483	)		590			107			—			214


Investment Activities
Intercompany transactions		462			(395	)		(67	)		—			—
Cash paid for businesses acquired by the Company, net of cash acquired		—			(24	)		—			—			(24	)
Cash paid for property and equipment and software		—			(169	)		(53	)		—			(222	)
Other investing activities		(6	)		8			6			—			8

Cash provided by (used in) investment activities		456			(580	)		(114	)		—			(238	)


Financing Activities
Net borrowings (repayments) of long-term debt		(28	)		(3	)		(6	)		—			(37	)
Cash advances to Parent		(3	)		—			—			—			(3	)

Cash provided by (used in) financing activities		(31	)		(3	)		(6	)		—			(40	)

Effect of exchange rate changes on cash		—			—			15			—			15

Increase (decrease) in cash and cash equivalents		(58	)		7			2			—			(49	)
Beginning cash and cash equivalents		74			(8	)		251			—			317

Ending cash and cash equivalents	$	16		$	(1	)	$	253		$	—		$	268


	Supplemental Condensed Consolidating Schedule of Cash Flows (Predecessor)
(in millions)	Period from January 1 through August 10, 2005
(in millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flow From Operations
Net income (loss)	$	146		$	286		$	62		$	(348	)	$	146
Non cash adjustments		(225	)		72			58			348			253
Changes in operating assets and liabilities		39			139			(6	)		—			172

Cash flow provided by (used in) operations		(40	)		497			114			—			571


Investment Activities
Intercompany transactions		(137	)		78			59			—			—
Cash paid for businesses acquired by the Company, net of cash acquired		—			(419	)		—			—			(419	)
Cash paid for property and equipment		7			(111	)		(48	)		—			(152	)
Other investing activities		—			2			—			—			2

Cash provided by (used in) investment activities		(130	)		(450	)		11			—			(569	)


Financing Activities
Net repayments of long-term debt		—			(43	)		(14	)		—			(57	)
Other financing activities		386			—			—			—			386

Cash provided by (used in) financing activities		386			(43	)		(14	)		—			329

Increase in cash and equivalents		216			4			111			—			331
Beginning cash and equivalents		396			5			274			—			675

Ending cash and equivalents	$	612		$	9		$	385		$	—		$	1,006


	Supplemental Condensed Consolidating Schedule of Cash Flows (Successor)
(in millions)	Period from August 11, 2005 through September 30, 2005
(in millions)	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flow From Operations
Net income (loss)	$	(21	)	$	37		$	(7	)	$	(32	)	$	(23	)
Non cash adjustments		7			47			16			—			70
Changes in operating assets and liabilities		(11	)		298			(109	)		32			210

Cash flow provided by (used in) operations		(25	)		382			(100	)		—			257

Investment Activities
Intercompany transactions		552			(324	)		(228	)		—			—
Cash paid for businesses acquired by the Company, net of cash acquired		—			(15	)		—			—			(15	)
Acquisition of SunGard		(11,615	)		—			—			—			(11,615	)
Cash paid for property and equipment and software		—			(49	)		(5	)		—			(54	)
Other investing activities		—			(1	)		—			—			(1	)

Cash provided by (used in) investment activities		(11,063	)		(389	)		(233	)		—			(11,685	)

Financing Activities
Cash received from borrowings for the Transaction		7,333			—			—			—			7,333
Investment by Parent Companies		3,450			—			—			—			3,450
Net borrowings (repayments) of long-term debt		(244	)		(5	)		191			—			(58	)

Cash provided by (used in) financing activities		10,539			(5	)		191			—			10,725

Increase (decrease) in cash and cash equivalents		(549	)		(12	)		(142	)		—			(703	)
Beginning cash and cash equivalents		612			9			385			—			1,006

Ending cash and cash equivalents	$	63		$	(3	)	$	243		$	—		$	303

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following discussion and analysis supplements the management’s discussion and analysis in the Successor’s Annual Report on Form 10-K for the year ended December 31, 2005 and presumes that readers have read or have access to the discussion and analysis in our Annual Report. The following discussion and analysis includes historical and certain forward-looking information that should be read together with the accompanying Consolidated Financial Statements, related footnotes, and the discussion below of certain risks and uncertainties that could cause future operating results to differ materially from historical results or from the expected results indicated by forward-looking statements.

Although SunGard Data Systems Inc. continued as the same legal entity after the Transaction, the accompanying consolidated statements of operations, cash flows and stockholder’s equity are presented for two periods: Predecessor and Successor, which relate to the period preceding the Transaction and the period succeeding the Transaction, respectively. The Company refers to the operations of SunGard and subsidiaries for both the Predecessor and Successor periods. We have prepared our discussion of the results of operations by comparing the mathematical combination of the Successor and Predecessor periods in the nine months and three months ended September 30, 2005 to the nine- and three-month periods ended September 30, 2006. Although this presentation does not comply with generally accepted accounting principles (“GAAP”), we believe that it provides a meaningful method of comparison. The combined operating results have not been prepared as pro forma results under applicable regulations and may not reflect the actual results we would have achieved absent the Transaction and may not be predictive of future results of operations.

Results of Operations:

Nine Months Ended September 30, 2006 Compared To Nine Months Ended September 30, 2005

The following table sets forth, for the periods indicated, certain amounts included in our Consolidated Statements of Operations, the relative percentage that those amounts represent to consolidated revenue (unless otherwise indicated), and the percentage change in those amounts from period to period.


	Predecessor			Successor			Combined ⁽¹⁾					Successor
(in millions)	Period from January 1, 2005 through August 10, 2005			Period from August 11, 2005 through September 30, 2005			Nine months ended September 30, 2005					Nine months ended September 30, 2006					Percent Increase (Decrease)
	Period from January 1, 2005 through August 10, 2005			Period from August 11, 2005 through September 30, 2005			Nine months ended September 30, 2005					Nine months ended September 30, 2006					2006 vs. 2005
										percent of revenue					percent of revenue
Revenue
Financial systems (FS)	$	1,120		$	256		$	1,376		47	%	$	1,484		47	%	8	%
Higher education and public sector systems (HEPS)		471			110			581		20	%		644		21	%	11	%

Software & processing solutions		1,591			366			1,957		67	%		2,128		68	%	9	%
Availability services (AS)		780			182			962		33	%		1,007		32	%	5	%

	$	2,371		$	548		$	2,919		100	%	$	3,135		100	%	7	%


Costs and Expenses
Cost of sales and direct operating	$	1,119		$	247		$	1,366		47	%	$	1,460		47	%	7	%
Sales, marketing and administration		456			117			573		20	%		659		21	%	15	%
Product development		154			36			190		7	%		191		6	%	1	%
Depreciation and amortization		141			33			174		6	%		175		6	%	1	%
Amortization of acquisition- related intangible assets		84			51			135		5	%		297		9	%	120	%
Merger and other costs		121			18			139		5	%		5		—	%	(96	)%

	$	2,075		$	502		$	2,577		88	%	$	2,787		89	%	8	%

Operating Income
Financial systems⁽²⁾	$	183		$	24		$	207		15	%	$	143		10	%	(31	)%
Higher education and public sector systems⁽²⁾		76			15			91		16	%		92		14	%	1	%

Software & processing solutions⁽²⁾		259			39			298		15	%		235		11	%	(21	)%
Availability services⁽²⁾		197			45			242		25	%		201		20	%	(17	)%
Corporate administration		(39	)		(20	)		(59	)	(2	)%		(83	)	(3	)%	41	%
Merger and other costs		(121	)		(18	)		(139	)	(5	)%		(5	)	—	%	(96	)%

	$	296		$	46		$	342		12	%	$	348		11	%	2	%

(1)

As described above, our combined results for the nine months ended September 30, 2005 represent the sum of the amounts for the Predecessor period from January 1, 2005 through August 10, 2005 and for the Successor period from August 11, 2005 through September 30, 2005. This combination does not comply with GAAP or with the rules for pro forma presentation, but is presented because we believe it enables a meaningful comparison of our results.

(2)	Percent of revenue is calculated as a percent of revenue from FS, HEPS, Software & Processing Solutions, and AS, respectively.

The following table sets forth, for the periods indicated, certain supplemental revenue data, the relative percentage that those amounts represent to total revenue and the percentage change in those amounts from period to period.


	Predecessor		Successor		Combined ⁽¹⁾				Successor
(in millions)	Period from January 1, 2005 through August 10, 2005		Period from August 11, 2005 through September 30, 2005		Nine months ended September 30, 2005				Nine Months Ended September 30, 2006				Percent Increase (Decrease) 2006 vs. 2005
	Period from January 1, 2005 through August 10, 2005		Period from August 11, 2005 through September 30, 2005		Nine months ended September 30, 2005				Nine Months Ended September 30, 2006				Percent Increase (Decrease) 2006 vs. 2005
							percent of revenue				Percent of revenue
Financial Systems
Services	$	968	$	222	$	1,190	41	%	$	1,312	42	%	10	%
License and resale fees		99		23		122	4	%		112	4	%	(8	)%

Total products and services		1,067		245		1,312	45	%		1,424	45	%	9	%
Reimbursed expenses		53		11		64	2	%		60	2	%	(6	)%

	$	1,120	$	256	$	1,376	47	%	$	1,484	47	%	8	%

Higher Education and Public Sector Systems
Services	$	393	$	90	$	483	17	%	$	537	17	%	11	%
License and resale fees		70		18		88	3	%		97	3	%	10	%

Total products and services		463		108		571	20	%		634	20	%	11	%
Reimbursed expenses		8		2		10	—	%		10	—	%	—	%

	$	471	$	110	$	581	20	%	$	644	21	%	11	%

Software & Processing Solutions
Services	$	1,361	$	312	$	1,673	57	%	$	1,849	59	%	11	%
License and resale fees		169		41		210	7	%		209	7	%	—	%

Total products and services		1,530		353		1,883	65	%		2,058	66	%	9	%
Reimbursed expenses		61		13		74	3	%		70	2	%	(5	)%

	$	1,591	$	366	$	1,957	67	%	$	2,128	68	%	9	%

Availability Services
Services	$	765	$	179	$	944	32	%	$	993	32	%	5	%
License and resale fees		10		1		11	—	%		5	—	%	(55	)%

Total products and services		775		180		955	33	%		998	32	%	5	%
Reimbursed expenses		5		2		7	—	%		9	—	%	29	%

	$	780	$	182	$	962	33	%	$	1,007	32	%	5	%

Total Revenue
Services	$	2,126	$	491	$	2,617	90	%	$	2,842	91	%	9	%
License and resale fees		179		42		221	8	%		214	7	%	(3	)%

Total products and services		2,305		533		2,838	97	%		3,056	97	%	8	%
Reimbursed expenses		66		15		81	3	%		79	3	%	(2	)%

	$	2,371	$	548	$	2,919	100	%	$	3,135	100	%	7	%

(1)

Income from Operations:

Our total operating margin was 11% for the nine months ended September 30, 2006, compared to 12% for the nine months ended September 30, 2005, due primarily to $143 million of incremental amortization of acquisition-related intangible assets resulting from the Transaction (“incremental amortization”), a $19 million increase in non-cash stock compensation cost and a $10 million decrease in software license fees, partially offset by a $134 million reduction in merger costs, a $12 million increase in revenue related to purchase accounting adjustments in 2005 recorded in connection with the Transaction (the “deferred revenue adjustment”) and an $11 million one-time charge related to the relocation of

an AS facility in the prior year period. The negative impact on the total operating margin of the incremental amortization, the increase in stock compensation cost and the decrease in software license fees were 460, 60 and 30 basis points, respectively, while the reduction in merger costs, the 2005 deferred revenue adjustment and the one-time facility relocation cost improved the operating margin by 460, 40 and 40 basis points, respectively (one hundred basis points equals one percentage point).

Financial Systems:

The FS operating margin was 10% and 15% for the nine months ended September 30, 2006 and 2005, respectively. The lower margin in 2006 was due primarily to $73 million of incremental amortization (490 basis points) and a $10 million decrease in software license fees (60 basis points).

Higher Education and Public Sector Systems:

The HEPS operating margin was 14% and 16% for the nine months ended September 30, 2006 and 2005, respectively. The lower margin in 2006 was due primarily to $11 million of incremental amortization (170 basis points) and a $2 million decrease in software license fees (30 basis points), partially offset by the effect of the 2005 deferred revenue adjustment of $3 million (50 basis points).

Availability Services:

The AS operating margin was 20% and 25% for the nine months ended September 30, 2006 and 2005, respectively. The lower margin in 2006 was due primarily to $59 million of incremental amortization (590 basis points). The operating margin in 2005 was reduced by 120 basis points because of an $11 million one-time charge related to the relocation of an AS facility and the effect of $6 million by the 2005 deferred revenue adjustment (40 basis points).

Revenue:

Total revenue increased $216 million for the nine months ended September 30, 2006 compared to the first nine months of 2005. The increase in total revenue in 2006 is due primarily to internal revenue growth. Internal revenue growth was approximately 5% and 6% for the first nine months of 2006 and 2005, respectively. Internal revenue is defined as revenue for businesses owned for at least one year and further adjusted for the effects of businesses sold in the previous twelve months and the $12 million deferred revenue adjustment in 2005.

For the nine months ended September 30, 2006, services revenue increased to $2,842 million from $2,617 million during the first nine months of 2005. Services revenue represented approximately 91% and 90% of total revenue in the first nine months of 2006 and 2005, respectively. The $225 million increase was due to internal revenue growth of $164 million across all segments and acquired revenue in FS and HEPS.

Professional services revenue was $542 million and $469 million for the nine months ended September 30, 2006 and 2005, respectively. The increase was due primarily to internal revenue growth in FS and HEPS.

Revenue from license and resale fees was $214 million and $221 million for the nine months ended September 30, 2006 and 2005, respectively, and included software license revenue of $155 million and $164 million, respectively. The decrease in software license revenue was mostly from FS, with a smaller decline in HEPS, and primarily reflects the impact of $17 million of software license backlog at December 31, 2004 which was recognized as revenue in the first quarter of 2005.

Financial Systems:

FS revenue increased $108 million in 2006. Internal revenue growth was 5% during each of the first nine months of 2006 and 2005. FS services revenue increased $122 million and FS license and resale fees decreased $10 million. The increase in services revenue is due primarily to internal revenue growth, and, to a lesser degree, to acquired businesses, partially offset by the deferred revenue adjustment of $3 million in the prior year period. Software license fees were $103 million in the nine months ended September 30, 2006, a decrease of $10 million. The decrease in software license fees was across the segment and primarily reflects the impact of $9 million of software license backlog at December 31, 2004 which was recognized as revenue in the first quarter of 2005, partially offset by a deferred revenue adjustment of $1 million in the prior year period.

Higher Education and Public Sector Systems:

Revenue from HEPS increased $63 million for the nine months ended September 30, 2006 compared to the corresponding period in 2005 due to both internal revenue growth and a business acquired in the first quarter of 2005, partially offset by a $3 million deferred revenue adjustment in the prior year period. HEPS services revenue increased $54 million and license and resale fees increased $9 million. Software license fees were $49 million in the nine months ended September 30, 2006, a decrease of $3 million, which primarily reflects the impact of $8 million of software license backlog at December 31, 2004 which was recognized as revenue in the first quarter of 2005. Resale fees increased $12 million compared to the prior year period due primarily to a business acquired in the first quarter of 2005. HEPS internal revenue growth was approximately 6% and 11% for the nine months ended September 30, 2006 and 2005, respectively.

Availability Services:

AS revenue increased $45 million in 2006 or 5%. AS internal revenue increased approximately 5% in 2006, reflecting the effect of the disposition of a U.K.-based value-added reseller. This compares to internal revenue growth of approximately 4% during the first nine months of 2005.

Costs and Expenses:

The increase of $210 million in total costs and expenses was due primarily to increased expenses across all segments, incremental amortization of $143 million and to acquired businesses, offset by a $134 million decrease in merger costs. Costs and expenses in 2005 includes the impact of a one-time charge of $11 million related to the relocation of a leased AS facility in North Bergen, New Jersey.

Cost of sales and direct operating expenses as a percentage of total revenue were consistent at 47% in each of the nine-month periods ended September 30, 2006 and 2005. Cost of sales and direct operating expenses increased $94 million due primarily to increases across all segments and the increase from acquired businesses, offset in part by a one-time charge of $11 million related to the relocation of an AS facility in 2005.

Sales, marketing and administration expenses increased as a percentage of total revenue to 21% for the nine months ended September 30, 2006 compared to 20% in 2005. The increase in sales, marketing and administration expenses of $86 million was due primarily to increases in all segments, mostly FS, to the increase in non-cash stock compensation of $19 million and to acquired businesses.

Because AS product development costs are insignificant, it is more meaningful to measure product development expenses as a percentage of revenue from Software and Processing Solutions. For each of the nine-month periods ended September 30, 2006 and 2005, product development costs were 9% and 10%, respectively, of revenue from Software and Processing Solutions.

Depreciation and amortization was consistent as a percentage of total revenue at 6% for the nine months ended September 30, 2006 and 2005.

Amortization of acquisition-related intangible assets was 9% of total revenue during the first nine months of 2006, compared to 5% in 2005. Amortization of acquisition-related intangible assets increased $162 million, of which $143 million is incremental amortization resulting from the Transaction with the balance from recent acquisitions.

Merger and other costs decreased $134 million during the nine months ended September 30, 2006 compared to the prior year period. The nine-month period ended September 30, 2005 included costs associated with the Transaction.

Interest income was $10 million and $11 million, respectively, for the nine-month periods ended September 30, 2006 and 2005. Interest expense was $483 million and $105 million for the nine months ended September 30, 2006 and 2005, respectively. The increase was due to the debt incurred in connection with the Transaction and includes amortization of debt issuance costs and debt discounts of $19 million.

Other expense was $22 million for the nine months ended September 30, 2006 from $3 million for the prior year period. The increase is primarily due to losses incurred related to our accounts receivable securitization program.

Three Months Ended September 30, 2006 Compared To Three Months Ended September 30, 2005


	Predecessor			Successor			Combined ⁽¹⁾					Successor					Percent Increase (Decrease) 2006 vs. 2005
	Period from July 1, 2005 through August 10, 2005			Period from August 11, 2005 through September 30, 2005			Three months ended September 30, 2005					Three months ended September 30, 2006
	Period from July 1, 2005 through August 10, 2005			Period from August 11, 2005 through September 30, 2005			Three months ended September 30, 2005					Three months ended September 30, 2006
(in millions)										percent of revenue					percent of revenue
Revenue
Financial systems (FS)	$	193		$	256		$	449		47	%	$	507		47	%	13	%
Higher education and public sector systems (HEPS)		83			110			193		20	%		221		21	%	15	%

Software & processing solutions		276			366			642		67	%		728		68	%	13	%
Availability services (AS)		141			182			323		33	%		340		32	%	5	%

	$	417		$	548		$	965		100	%	$	1,068		100	%	11	%

Costs and Expenses
Cost of sales and direct operating	$	205		$	247		$	452		47	%	$	493		46	%	9	%
Sales, marketing and administration		76			117			193		20	%		215		20	%	11	%
Product development		29			36			65		7	%		63		6	%	(3	)%
Depreciation and amortization		26			33			59		6	%		60		6	%	2	%
Amortization of acquisition- related intangible assets		15			51			66		7	%		99		9	%	50	%
Merger and other costs		103			18			121		13	%		2		—	%	(98	)%

	$	454		$	502		$	956		99	%	$	932		87	%	(3	)%

Operating Income
Financial systems⁽²⁾	$	24		$	24		$	48		11	%	$	61		12	%	27	%
Higher education and public sector systems⁽²⁾		10			15			25		13	%		35		16	%	40	%

Software & processing solutions⁽²⁾		34			39			73		11	%		96		13	%	32	%
Availability services⁽²⁾		38			45			83		26	%		75		22	%	(10	)%
Corporate administration		(6	)		(20	)		(26	)	(3	)%		(33	)	(3	)%	27	%
Merger and other costs		(103	)		(18	)		(121	)	(13	)%		(2	)	—	%	(98	)%

	$	(37	)	$	46		$	9		1	%	$	136		13	%	1411	%

(1)

As described above, our combined results for the three months ended September 30, 2005 represent the sum of the amounts for the Predecessor period from July 1, 2005 through August 10, 2005 and for the Successor period from August 11, 2005 through September 30, 2005. This combination does not comply with GAAP or with the rules for pro forma presentation, but is presented because we believe it enables a meaningful comparison of our results.

(2)	Percent of revenue is calculated as a percent of revenue from FS, HEPS, Software & Processing Solutions, and AS, respectively.


	Predecessor		Successor		Combined ⁽¹⁾				Successor
	Period from July 1, 2005 through August 10, 2005		Period from August 11, 2005 through September 30, 2005		Three months ended September 30, 2005				Three Months Ended September 30, 2006				Percent Increase (Decrease)
	Period from July 1, 2005 through August 10, 2005		Period from August 11, 2005 through September 30, 2005		Three months ended September 30, 2005				Three Months Ended September 30, 2006				2006 vs. 2005
(in millions)							percent of revenue				percent of revenue
Financial Systems
Services	$	174	$	222	$	396	41	%	$	448	42	%	13	%
License and resale fees		10		23		33	3	%		40	4	%	21	%

Total products and services		184		245		429	44	%		488	46	%	14	%
Reimbursed expenses		9		11		20	2	%		19	2	%	(5	)%

	$	193	$	256	$	449	47	%	$	507	47	%	13	%

Higher Education and Public Sector Systems
Services	$	75	$	90	$	165	17	%	$	178	17	%	8	%
License and resale fees		6		18		24	2	%		39	4	%	63	%

Total products and services		81		108		189	20	%		217	20	%	15	%
Reimbursed expenses		2		2		4	—	%		4	—	%	—	%

	$	83	$	110	$	193	20	%	$	221	21	%	15	%

Software & Processing Solutions
Services	$	249	$	312	$	561	58	%	$	626	59	%	12	%
License and resale fees		16		41		57	6	%		79	7	%	39	%

Total products and services		265		353		618	64	%		705	66	%	14	%
Reimbursed expenses		11		13		24	2	%		23	2	%	(4	)%

	$	276	$	366	$	642	67	%	$	728	68	%	13	%

Availability Services
Services	$	140	$	179	$	319	33	%	$	337	32	%	6	%
License and resale fees		1		1		2	—	%		2	—	%	—	%

Total products and services		141		180		321	33	%		339	32	%	6	%
Reimbursed expenses		—		2		2	—	%		1	—	%	(50	)%

	$	141	$	182	$	323	33	%	$	340	32	%	5	%

Total Revenue
Services	$	389	$	491	$	880	91	%	$	963	90	%	9	%
License and resale fees		17		42		59	6	%		81	8	%	37	%

Total products and services		406		533		939	97	%		1,044	98	%	11	%
Reimbursed expenses		11		15		26	3	%		24	2	%	(8	)%

	$	417	$	548	$	965	100	%	$	1,068	100	%	11	%

(1)

Income from Operations:

Our total operating margin was 13% for the three months ended September 30, 2006 compared to 1% for the three months ended September 30, 2005, due primarily to a decrease of $119 million in merger costs, a $12 million deferred revenue adjustment in the prior year period and a decrease of $9 million in software license fees, partially offset by $27 million of incremental amortization and $3 million of increased stock compensation cost. The impact on the total operating margin of the decrease in merger costs, the deferred revenue adjustment and the decrease in license fees was 1,240, 120 and 70 basis points, respectively, while the incremental amortization and the stock compensation cost reduced the operating margin by 250 and 30 basis points, respectively.

Financial Systems:

The FS operating margin was 12% and 11% for the three months ended September 30, 2006 and 2005, respectively. The higher margin in 2006 was due primarily to improved performance of the businesses in the segment, a $6 million increase in license fees (110 basis points) and the $3 million effect of the 2005 deferred revenue adjustment (60 basis points), partially offset by $11 million of incremental amortization (220 basis points).

Higher Education and Public Sector Systems:

The HEPS operating margin was 16% and 13% for the three months ended September 30, 2006 and 2005, respectively. The higher margin in 2006 was due primarily to strong performance in the quarter across all businesses in the segment and the net effect of 160 basis points related to the 2005 deferred revenue adjustment, a $2 million increase in license fees and $2 million of incremental amortization.

Availability Services:

The AS operating margin was 22% and 26% for the three months ended September 30, 2006 and 2005, respectively. The lower margin in 2006 was due primarily to $14 million of incremental amortization (400 basis points).

Revenue:

Total revenue increased $103 million for the three months ended September 30, 2006 compared to the third quarter of 2005. The increase in total revenue in 2006 is primarily due to internal revenue growth, which was approximately 8%, compared to a 4% increase in the third quarter of 2005.

For the three months ended September 30, 2006, services revenue increased to $963 million from $880 million in the third quarter of 2005. Services revenue represented approximately 90% and 91% of total revenue in the third quarter of 2006 and 2005, respectively. The $83 million increase was due primarily to increases in internal revenue in all three segments.

Professional services revenue was $189 million and $160 million for the three months ended September 30, 2006 and 2005, respectively.

Revenue from license and resale fees was $81 million and $59 million for the three months ended September 30, 2006 and 2005, respectively, and included software license revenue of $53 million and $42 million, respectively. The increase in software license revenue was primarily due to the internal revenue growth and the impact of acquired FS businesses.

Financial Systems:

FS revenue increased $58 million in 2006. FS services revenue increased $52 million, due primarily to internal revenue growth, $9 million from acquired businesses and $3 million as a result of the deferred revenue adjustment in the prior year period. License and resale fees increased $7 million to $40 million. Internal revenue growth was 9% in the third quarter of 2006 compared to 3% in the third quarter of 2005. FS professional services revenue increased $23 million from both internal revenue growth and from acquired businesses.

Higher Education and Public Sector Systems:

Revenue from HEPS increased $28 million, $3 million of which is related to the deferred revenue adjustment in the prior year period. The balance of the increase is due to 12% internal revenue growth in the third quarter of 2006. Internal revenue grew 5% in the third quarter of 2005.

Availability Services:

AS revenue increased $17 million in 2006 or 5%. AS internal revenue increased approximately 4% in 2006, reflecting the effect of the disposition of a U.K.-based value-added reseller and the $6 million deferred revenue adjustment in the prior year period. This compares to internal revenue growth of approximately 6% in the third quarter of 2005.

Costs and Expenses:

Total costs and expenses as a percentage of revenue for the three months ended September 30, 2006 decreased to 87% from 99% in 2005. This decrease is due primarily to the decrease in merger and other costs of $119 million, partially offset by increased expenses across all segments, incremental amortization of $27 million, incremental stock compensation expense of $3 million and to acquired businesses.

Cost of sales and direct operating expenses as a percentage of total revenue were 46% and 47% during the three-month periods ended September 30, 2006 and 2005, respectively. Cost of sales and direct operating expenses increased $41 million due primarily to increased expenses across all segments and from acquired businesses.

Sales, marketing and administration expenses as a percentage of total revenue remained unchanged at 20% for each of the three months ended September 30, 2006 and 2005. The increase in sales, marketing and administration expenses of $22 million was due primarily to internal growth of costs in FS to support the increase in business activity, to acquired businesses and to non-cash stock compensation of $3 million.

Because AS product development costs are insignificant, it is more meaningful to measure product development expenses as a percentage of revenue from software and processing solutions. For the three months ended September 30, 2006 and 2005, product development costs were 9% and 10%, respectively, of revenue from software and processing solutions.

Depreciation and amortization remained unchanged as a percentage of total revenue at 6% for each of the three months ended September 30, 2006 and 2005.

Amortization of acquisition-related intangible assets was 9% of total revenue in the third quarter of 2006, compared to 7% in 2005. Amortization of acquisition-related intangible assets increased $33 million, of which $27 million is incremental amortization with the balance from acquired businesses.

Merger and other costs decreased $119 million in the three months ended September 30, 2006 compared to the three months ended September 30, 2005, which included costs associated with the Transaction.

Interest income was $4 million and $5 million for the three months ended September 30, 2006 and 2005, respectively. Interest expense was $165 million and $91 million for the three months ended September 30, 2006 and 2005, respectively. The increase was due to the debt incurred in connection with the Transaction, and includes amortization of debt issuance costs and debt discounts of $2 million.

Provision for income taxes was $2 million for the three months ended September 30, 2006 compared to a $15 million benefit in the prior year period due to the income tax benefit resulting from the loss before income taxes being offset by a limitation on the use of foreign tax credits.

Liquidity and Capital Resources:

At September 30, 2006, cash and equivalents were $268 million, a decrease of $49 million from December 31, 2005. Cash flow from operations was $214 million in the nine months ended September 30, 2006 compared to cash flow from operations of $828 million in the nine months ended September 30, 2005. The decrease in cash flow from operations is due primarily to the increased interest payments in 2006 related to the debt incurred as a result of the Transaction and from the 2005 impact of the sale of accounts receivable under our long-term receivables facility.

Net cash used in investing activities was $238 million in the nine months ended September 30, 2006, comprised primarily of cash paid for property and equipment and other assets. During the nine months ended September 30, 2006, we spent $24 million (net of cash acquired) on three acquisitions and received approximately $9 million of cash proceeds from the sale of one business. Net cash used in investing activities was $12.25 billion in the nine months ended September 30, 2005. During the nine months ended September 30, 2005, we spent $11.62 billion in connection with the Transaction, $434 million (net of cash acquired) on eight acquisitions and $206 million for property and equipment and other assets.

Net cash used in financing activities was $40 million for the nine months ended September 30, 2006, primarily related to repayment of borrowings. At September 30, 2006, there were no borrowings outstanding under our revolving credit facility. Net cash provided by financing activities was $11.05 billion for the nine months ended September 30, 2005, of which $11.11 billion was Transaction-related financing activities, including $7.33 billion of debt and $3.45 billion of equity contributions by SunGard Holdco LLC, the Company’s parent.

At September 30, 2006, contingent purchase price obligations that depends upon the operating performance of two acquired businesses total $41 million, which we currently do not expect to pay. We also have outstanding letters of credit and bid bonds that total approximately $42 million.

As a result of the Transaction, we are highly leveraged and our debt service requirements are significant. At September 30, 2006, we have outstanding $7.4 billion in aggregate indebtedness, with additional borrowing capacity of $977 million under our revolving credit facility (after giving effect to outstanding letters of credit). Also, at September 30, 2006, $371 million was outstanding under our $450 million off-balance sheet receivables securitization facility.

We expect our cash flows from operations, combined with availability under our revolving credit facility and receivables facility, to provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital spending for a period that includes the next 12 months.

Covenant Compliance

Adjusted EBITDA is used to determine our compliance with certain covenants contained in the indentures governing the senior notes due 2013 and senior subordinated notes due 2015 and in our senior secured credit facilities. Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items and other adjustments permitted in calculating covenant compliance under the indentures and our senior secured credit facilities. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors to demonstrate compliance with our financing covenants.

The breach of covenants in our senior secured credit facilities that are tied to ratios based on Adjusted EBITDA could result in a default under that agreement and the lenders could elect to declare all amounts borrowed due and payable. Any such acceleration would also result in a default under our indentures. Additionally, under our debt agreements, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is also tied to ratios based on Adjusted EBITDA.

Adjusted EBITDA is calculated as follows:


	Predecessor					Successor
	Period from January 1, 2005 through August 10, 2005		Period from July 1, 2005 through August 10, 2005			Period from August 11, 2005 through September 30, 2005			Nine Months Ended September 30, 2006			Three Months Ended September 30, 2006			Last Twelve Months September 30, 2006
Net income (loss)	$	146	$	(42	)	$	(23	)	$	(107	)	$	(31	)	$	(113	)
Interest expense, net		8		—			86			473			161			629
Taxes		142		5			(20	)		(40	)		2			(53	)
Depreciation and amortization		225		41			84			472			159			624

EBITDA		521		4			127			798			291			1,087
Purchase accounting adjustments (a)		—		—			12			2			—			9
Non-cash charges (b)		61		60			8			28			10			50
Unusual or non-recurring charges (c)		61		43			19			16			5			18
Restructuring charges or reserves (d)		12		1			—			—			—			—
Acquired EBITDA, net of disposed EBITDA (e)		17		—			1			3			2			2
Other (f)		2		—			1			14			3			21

Adjusted EBITDA - senior secured credit facilities		674		108			168			861			311			1,187
Loss on sale of receivables (g)		—		—			4			20			7			34

Adjusted EBITDA - senior notes due 2013 and senior subordinated notes due 2015	$	674	$	108		$	172		$	881		$	318		$	1,221

(a)	Purchase accounting adjustments include the adjustment of deferred revenue to fair value at the date of the Transaction.

(b)	Non-cash charges include non-cash stock-based compensation resulting from the new stock-based compensation plans under SFAS 123R and loss on the sale of assets.

(c)	Unusual or non-recurring charges include merger costs associated with the Transaction, payroll taxes and certain compensation and other expenses associated with acquisitions made by the Company.

(d)	Restructuring charges or reserves include the relocation of a leased availability services facility in North Bergen, New Jersey to an expanded facility in Carlstadt, New Jersey.

(e)	Acquired EBITDA net of disposed EBITDA reflects the EBITDA impact of businesses that were acquired or disposed of during the period as if the acquisition or disposition occurred at the beginning of the period.

(f)	Other includes franchise and similar taxes reported in operating expenses and management fees paid to the Sponsors, offset by interest charges relating to the receivables facilities and gains related to fluctuation of foreign currency exchange rates.

(g)

The loss on sale of receivables under the long-term receivables facility is added back in calculating Adjusted EBITDA for purposes of the indentures governing the senior notes due 2013 and the senior subordinated notes due 2015 but is not added back in calculating Adjusted EBITDA for purposes of the senior secured credit facilities.

Our covenant requirements and actual ratios for the twelve months ended September 30, 2006 are as follows:


	Covenant Requirements	Actual Ratios
Senior secured credit facilities ⁽¹⁾

Minimum Adjusted EBITDA to consolidated interest expense ratio	1.40x	2.02x
Maximum total debt to Adjusted EBITDA	8.25x	6.11x

Senior notes due 2013 and senior subordinated notes due 2015 ⁽²⁾

Minimum Adjusted EBITDA to fixed charges ratio required to incur additional debt pursuant to ratio provisions	2.00x	2.06x

(1)

Our senior secured credit facilities require us to maintain an Adjusted EBITDA to consolidated interest expense ratio starting at a minimum of 1.40x for the four-quarter period ended December 31, 2005 and stepping up over time to 1.50x by the end of 2006 and 2.20x by the end of 2013. Consolidated interest expense is defined in the senior secured credit facilities as consolidated cash interest expense less cash interest income further adjusted for certain non-cash or nonrecurring interest expense and the elimination of interest expense and fees associated with our receivables facility. Beginning with the four-quarter period ending March 31, 2006, we are also required to maintain a consolidated total debt to Adjusted EBITDA ratio starting at a maximum of 8.25x and stepping down over time to 7.75x by the end of 2006 and 4.0x by the end of 2013. Consolidated total debt is defined in the senior secured credit facilities as total debt less certain indebtedness and further adjusted for cash and cash equivalents on our balance sheet in excess of $50 million. Failure to satisfy these ratio requirements would constitute a default under the senior secured credit facilities. If our lenders fail to waive any such default, our repayment obligations under the senior secured credit facilities could be accelerated, which would also constitute a default under our indentures.

(2)

Our ability to incur additional debt and make certain restricted payments under our indentures is tied to an Adjusted EBITDA to fixed charges ratio (“fixed charges coverage ratio”) of at least 2.00x, except that we may incur certain debt and make certain restricted payments in certain permitted investments without regard to the ratio, such as our ability to incur up to an aggregate principal amount of $5.75 billion under credit facilities (inclusive of amounts outstanding under our senior secured credit facilities from time to time; as of September 30, 2006, we have $3.96 billion outstanding under our term loan facilities and available commitments of $977 million under our revolving credit facility), to acquire persons engaged in a similar business that become restricted subsidiaries and to make other investments equal to 6% of our consolidated assets. Fixed charges is defined in the indentures governing the senior notes due 2013 and the senior subordinated notes due 2015 as consolidated interest expense less interest income, adjusted for acquisitions, and further adjusted for non-cash interest expense and the elimination of interest expense and fees associated with our receivables facility.

Certain Risks and Uncertainties

Certain of the matters we discuss in this Report on Form 10-Q may constitute forward-looking statements. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates” or similar expressions which concern our strategy, plans or intentions. All statements we make relating to estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. All of these forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those we expected. We derive most of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Some of the factors that we believe could affect our results include: our high degree of leverage; general economic and

market conditions; the condition of the financial services industry, including the effect of any further consolidation among financial services firms; the integration of acquired businesses, the performance of acquired businesses, and the prospects for future acquisitions; the effect of war, terrorism, natural disasters or other catastrophic events; the effect of disruptions to our systems and infrastructure; the timing and magnitude of software sales; the timing and scope of technological advances; customers taking their information availability solutions in-house; the trend in information availability toward solutions utilizing more dedicated resources; the market and credit risks associated with clearing broker operations; the ability to retain and attract customers and key personnel; risks relating to the foreign countries where we transact business; and the ability to obtain patent protection and avoid patent-related liabilities in the context of a rapidly developing legal framework for software and business-method patents. The factors described in this paragraph and other factors that may affect our business or future financial results are discussed in our filings with the Securities and Exchange Commission, including this Form 10-Q. We assume no obligation to update any written or oral forward-looking statement made by us or on our behalf as a result of new information, future events or other factors.

Item 3. Quantitative and Qualitative Disclosures about Market Risk:

We do not use derivative financial instruments for trading or speculative purposes. We have invested our available cash in short-term, highly liquid financial instruments, with a substantial portion having initial maturities of three months or less. When necessary, we have borrowed to fund acquisitions.

At September 30, 2006, we had total debt of $7.4 billion, including $4.4 billion of variable rate debt. We have entered into two interest rate swap agreements which fixed the interest rates for $1.6 billion of our variable rate debt. Our two swap agreements, each with a notional value of $800 million, effectively fix our interest rates at 4.85% and 5.00% and expire in February 2009 and February 2011, respectively. Our remaining variable rate debt of $2.8 billion is subject to market rate risk, as our interest payments will fluctuate as the underlying interest rates change as a result of market changes. During the period when both of our interest rate swap agreements are effective, a 1% change in interest rates would result in a change in interest of approximately $28 million per year. Upon the expiration of each interest rate swap agreement in February 2009 and February 2011, a 1% change in interest rates would result in a change in interest of approximately $36 million and $44 million per year, respectively.

Item 4. Controls and Procedures:

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Report were effective.

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II Other Information:

Item 1. Legal Proceedings: None.

Item 1A. Risk Factors: There have been no material changes to our Risk Factors as previously disclosed in our Form 10-K for the year ended December 31, 2005.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds: None.

Item 3. Defaults Upon Senior Securities: None.

Item 4. Submission of Matters to Vote of Security Holders: The Company’s sole stockholder, SunGard Holdco LLC, approved by written consent dated September 12, 2006, (1) an increase in the number of directors from eight to

nine and (2) the election of the following persons as directors to serve in such capacity until his or her successor is designated and qualified, or until he or she sooner dies, resigns, is removed or becomes disqualified: Chinh Chu, Cristóbal Conde, John Connaughton, James Greene, Jr., Glenn Hutchins, James L. Mann, John Marren, Sanjeev Mehra and Julie Richardson.

Item 5. Other Information: None.

Item 6. Exhibits:


Number		Document
12.1		Computation of Ratio of Earnings to Fixed Charges.

31.1		Certification of Cristóbal Conde required by Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Michael J. Ruane required by Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Cristóbal Conde required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Michael J. Ruane required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	SUNGARD DATA SYSTEMS INC.

Dated: November 2, 2006	By:	/s/ Michael J. Ruane
		Michael J. Ruane
		Senior Vice President-Finance and Chief Financial Officer
		(Principal Financial Officer)

EXHIBIT INDEX


Exhibit No.		Document
12.1		Computation of Ratio of Earnings to Fixed Charges.

31.1		Certification of Cristóbal Conde required by Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Michael J. Ruane required by Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Cristóbal Conde required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Michael J. Ruane required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002

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