EX-99.1 2 ex991sungard10-qq32015.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1

SUNGARD
SUNGARD CAPITAL CORP. II
SUNGARD DATA SYSTEMS INC.
AND SUBSIDIARIES
INDEX 
 
 
PAGE
 
 
 
PART I.
 
 
 
Item 1.
 
SunGard
 
 
 
 
 
 
 
 
 
 
 
 
 
SunGard Capital Corp. II
 
 
 
 
 
 
 
 
 
 
 
 
 
SunGard Data Systems Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





PART I. FINANCIAL INFORMATION

These financial statements have been extracted from the Quarterly Report on Form 10-Q (“Report”) of SunGard for the period ended September 30, 2015, which is a combined quarterly report that was filed separately by three registrants: SunGard and its subsidiaries, SunGard Capital Corp. II (“SCCII”) and SunGard Data Systems Inc. (“SDS”). SunGard and SCCII are collectively referred to as the “Parent Companies.” Unless the context indicates otherwise, any reference herein to the “Company,” “we,” “us” and “our” refer to the Parent Companies together with their direct and indirect subsidiaries, including SDS.


1



ITEM 1. FINANCIAL STATEMENTS
SunGard
Condensed Consolidated Balance Sheets
(In millions except share and per-share amounts)
(Unaudited)
 
 
December 31,
2014
 
September 30,
2015
Assets
 
 
 
 
Current:
 
 
 
 
Cash and cash equivalents
 
$
447

 
$
591

Trade receivables, less allowance for doubtful accounts of $22 and $21
 
572

 
439

Earned but unbilled receivables
 
114

 
108

Prepaid expenses and other current assets
 
116

 
149

Assets held for sale
 

 
24

Total current assets
 
1,249

 
1,311

Property and equipment, less accumulated depreciation of $414 and $428
 
152

 
142

Software products, less accumulated amortization of $1,754 and $1,756
 
224

 
210

Customer base, less accumulated amortization of $531 and $553
 
360

 
321

Other assets, less accumulated amortization of $22 and $23
 
94

 
69

Trade name
 
672

 
672

Goodwill
 
3,760

 
3,733

Total Assets
 
$
6,511

 
$
6,458

Liabilities and Equity
 
 
 
 
Current:
 
 
 
 
Accounts payable
 
$
21

 
$
7

Accrued compensation and benefits
 
227

 
183

Accrued interest expense
 
30

 
68

Other accrued expenses
 
131

 
124

Deferred revenue
 
589

 
507

Liabilities related to assets held for sale
 

 
8

Total current liabilities
 
998

 
897

Long-term debt
 
4,669

 
4,669

Deferred and other income taxes
 
616

 
618

Other long-term liabilities
 
39

 
27

Total liabilities
 
6,322

 
6,211

Commitments and contingencies
 
 
 
 
Noncontrolling interest in preferred stock of SCCII subject to a put option
 
37

 
44

Class L common stock subject to a put option
 
57

 
63

Class A common stock subject to a put option
 
3

 
3

Stockholders’ equity:
 
 
 
 
Class L common stock, convertible, par value $.001 per share; cumulative 13.5% per annum, compounded quarterly; aggregate liquidation preference of $8,064 million and $8,952 million; 50,000,000 shares authorized, 29,062,421 and 29,107,221 shares issued
 

 

Class A common stock, par value $.001 per share; 550,000,000 shares authorized, 261,565,118 and 261,965,007 shares issued
 

 

Capital in excess of par value
 
2,674

 
2,612

Treasury stock, 442,460 and 11,252 shares of Class L common stock; and 3,985,453 and 101,268 shares of Class A common stock
 
(38
)
 
(1
)
Accumulated deficit
 
(3,902
)
 
(3,921
)
Accumulated other comprehensive income (loss)
 
(132
)
 
(190
)
Total SunGard stockholders’ equity (deficit)
 
(1,398
)
 
(1,500
)
Non-controlling interest in preferred stock of SCCII
 
1,490

 
1,637

Total equity
 
92

 
137

Total Liabilities and Equity
 
$
6,511

 
$
6,458

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

2



SunGard
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In millions)
(Unaudited)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2015
 
2014
 
2015
Revenue
 
$
691

 
$
702

 
$
2,017

 
$
2,060

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of sales and direct operating (excluding items described in Note 1)
 
280

 
282

 
822

 
833

Sales, marketing and administration
 
167

 
163

 
493

 
476

Product development and maintenance
 
91

 
83

 
287

 
256

Depreciation
 
28

 
31

 
79

 
87

Amortization of acquisition-related intangible assets
 
30

 
23

 
114

 
65

Trade name impairment charge
 

 

 
339

 

Total costs and expenses
 
596

 
582

 
2,134

 
1,717

Operating income (loss)
 
95

 
120

 
(117
)
 
343

Other income (expense):
 
 
 
 
 
 
 
 
Interest income
 

 
1

 
1

 
2

Interest expense and amortization of deferred financing fees
 
(73
)
 
(73
)
 
(220
)
 
(215
)
Loss on extinguishment of debt
 

 

 
(61
)
 

Other income (expense)
 

 

 

 
1

Other income (expense)
 
(73
)
 
(72
)
 
(280
)
 
(212
)
Income (loss) from continuing operations before income taxes
 
22

 
48

 
(397
)
 
131

Benefit from (provision for) income taxes
 
(11
)
 
17

 
88

 
(7
)
Income (loss) from continuing operations
 
11

 
65

 
(309
)
 
124

Income (loss) from discontinued operations, net of tax
 

 
2

 
(17
)
 
4

Net income (loss)
 
11

 
67

 
(326
)
 
128

Income attributable to the non-controlling interest
 
(42
)
 
(60
)
 
(132
)
 
(147
)
Net income (loss) attributable to SunGard
 
(31
)
 
7

 
(458
)
 
(19
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Foreign currency translation, net
 
(56
)
 
(13
)
 
(35
)
 
(52
)
Unrealized gain (loss) on derivative instruments, net of tax
 
2

 
(3
)
 

 
(6
)
Other comprehensive income (loss), net of tax
 
(54
)
 
(16
)
 
(35
)
 
(58
)
Comprehensive income (loss)
 
(43
)
 
51

 
(361
)
 
70

Comprehensive (income) loss attributable to the non-controlling interest
 
(42
)
 
(60
)
 
(132
)
 
(147
)
Comprehensive income (loss) attributable to SunGard
 
$
(85
)
 
$
(9
)
 
$
(493
)
 
$
(77
)
The accompanying notes are an integral part of these condensed consolidated financial statements.


3



SunGard
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited) 
 
 
Nine Months Ended September 30,
 
 
2014
 
2015
Cash flow from operations:
 
 
 
 
Net income (loss)
 
$
(326
)
 
$
128

Income (loss) from discontinued operations
 
(17
)
 
4

Income (loss) from continuing operations
 
(309
)
 
124

Reconciliation of income (loss) from continuing operations to cash flow from (used in) operations:
 
 
 
 
Depreciation and amortization
 
193

 
152

Trade name impairment charge
 
339

 

Deferred income tax provision (benefit)
 
(105
)
 
(20
)
Stock compensation expense
 
33

 
36

Amortization of deferred financing costs and debt discount
 
14

 
12

Loss on extinguishment of debt
 
61

 

Other non-cash items
 

 
(1
)
Excess income tax benefit from equity compensation
 

 
(7
)
Changes in working capital:
 
 
 
 
Accounts receivable and other current assets
 
123

 
124

Accounts payable and accrued expenses
 
(80
)
 
(68
)
Accrued interest
 
34

 
38

Accrued income taxes
 
(7
)
 
4

Deferred revenue
 
(74
)
 
(71
)
Cash flow from (used in) continuing operations
 
222

 
323

Cash flow from (used in) discontinued operations
 
34

 

Cash flow from (used in) operations
 
256

 
323

Investment activities:
 
 
 
 
Cash paid for acquired businesses, net of cash acquired
 
(4
)
 
(25
)
Additions to property and equipment, and software
 
(52
)
 
(41
)
Additions to capitalized software
 
(46
)
 
(44
)
Other investing activities
 

 
1

Cash provided by (used in) continuing operations
 
(102
)
 
(109
)
Cash provided by (used in) discontinued operations
 
7

 
1

Cash provided by (used in) investment activities
 
(95
)
 
(108
)
Financing activities:
 
 
 
 
Cash received from borrowings, net of fees
 
(7
)
 

Cash used to repay debt
 
(1,324
)
 
(1
)
Excess income tax benefit from equity compensation
 

 
7

Cash used to purchase treasury stock
 
(7
)
 
(56
)
Other financing activities
 
(11
)
 
(4
)
Cash provided by (used in) continuing operations
 
(1,349
)
 
(54
)
Cash provided by (used in) discontinued operations
 
887

 

Cash provided by (used in) financing activities
 
(462
)
 
(54
)
Effect of exchange rate changes on cash
 
(9
)
 
(13
)
Increase (decrease) in cash and cash equivalents
 
(310
)
 
148

Beginning cash and cash equivalents, including cash of discontinued operations: 2014, $31; 2015, $0
 
706

 
447

Ending cash and cash equivalents, including cash held for sale: 2014, $0; 2015, $4
 
$
396

 
$
595

Supplemental information:
 
 
 
 
Interest paid
 
$
195

 
$
164

Income taxes paid, net of refunds of $17 million and $21 million, respectively
 
$
32

 
$
23

Non-cash financing activities:
 
 
 
 
Distribution of net assets of SpinCo (See Note 1)
 
$
229

 
$

Receipt of SpinCo Notes in connection with the AS Split-Off (See Note 1)
 
$
425

 
$

Exchange of SpinCo Notes for SDS Notes
 
$
389

 
$

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


4



SunGard Capital Corp. II
Condensed Consolidated Balance Sheets
(In millions except share and per-share amounts)
(Unaudited) 
 
 
December 31,
2014
 
September 30,
2015
Assets
 
 
 
 
Current:
 
 
 
 
Cash and cash equivalents
 
$
447

 
$
591

Trade receivables, less allowance for doubtful accounts of $22 and $21
 
572

 
439

Earned but unbilled receivables
 
114

 
108

Prepaid expenses and other current assets
 
116

 
149

Assets held for sale
 

 
24

Total current assets
 
1,249

 
1,311

Property and equipment, less accumulated depreciation of $414 and $428
 
152

 
142

Software products, less accumulated amortization of $1,754 and $1,756
 
224

 
210

Customer base, less accumulated amortization of $531 and $553
 
360

 
321

Other assets, less accumulated amortization of $22 and $23
 
94

 
69

Trade name
 
672

 
672

Goodwill
 
3,760

 
3,733

Total Assets
 
$
6,511

 
$
6,458

Liabilities and Equity
 
 
 
 
Current:
 
 
 
 
Accounts payable
 
$
21

 
$
7

Accrued compensation and benefits
 
227

 
183

Accrued interest expense
 
30

 
68

Other accrued expenses
 
127

 
118

Deferred revenue
 
589

 
507

Liabilities related to assets held for sale
 

 
8

Total current liabilities
 
994

 
891

Long-term debt
 
4,669

 
4,669

Deferred and other income taxes
 
616

 
618

Other long-term liabilities
 
32

 
26

Total liabilities
 
6,311

 
6,204

Commitments and contingencies
 
 
 
 
Preferred stock subject to a put option
 
31

 
30

Stockholders’ equity:
 
 
 
 
Preferred stock, par value $.001 per share; cumulative 11.5% per annum, compounded quarterly; aggregate liquidation preference of $1,498 million and $1,639 million; 14,999,000 shares authorized, 10,060,069 and 10,064,615 shares issued
 

 

Common stock, par value $.001 per share; 1,000 shares authorized, 100 shares issued and outstanding
 

 

Capital in excess of par value
 
3,519

 
3,485

Treasury stock, 2,516,374 and 2,395,453 preferred shares
 
(280
)
 
(261
)
Accumulated deficit
 
(2,939
)
 
(2,811
)
Accumulated other comprehensive income (loss)
 
(132
)
 
(190
)
Total stockholder’s equity
 
168

 
223

Non-controlling interest
 
1

 
1

Total Equity
 
169

 
224

Total Liabilities and Equity
 
$
6,511

 
$
6,458

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

5



SunGard Capital Corp. II
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In millions)
(Unaudited)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2015
 
2014
 
2015
Revenue
 
$
691

 
$
702

 
$
2,017

 
$
2,060

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of sales and direct operating (excluding items described in Note 1)
 
280

 
282

 
822

 
833

Sales, marketing and administration
 
167

 
163

 
493

 
476

Product development and maintenance
 
91

 
83

 
287

 
256

Depreciation
 
28

 
31

 
79

 
87

Amortization of acquisition-related intangible assets
 
30

 
23

 
114

 
65

Trade name impairment charge
 

 

 
339

 

Total costs and expenses
 
596

 
582

 
2,134

 
1,717

Operating income (loss)
 
95

 
120

 
(117
)
 
343

Other income (expense):
 
 
 
 
 
 
 
 
Interest income
 

 
1

 
1

 
2

Interest expense and amortization of deferred financing fees
 
(73
)
 
(73
)
 
(220
)
 
(215
)
Loss on extinguishment of debt
 

 

 
(61
)
 

Other income (expense)
 

 

 

 
1

Other income (expense)
 
(73
)
 
(72
)
 
(280
)
 
(212
)
Income (loss) from continuing operations before income taxes
 
22

 
48

 
(397
)
 
131

Benefit from (provision for) income taxes
 
(11
)
 
17

 
88

 
(7
)
Income (loss) from continuing operations
 
11

 
65

 
(309
)
 
124

Income (loss) from discontinued operations, net of tax
 

 
2

 
(17
)
 
4

Net income (loss)
 
11

 
67

 
(326
)
 
128

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Foreign currency translation, net
 
(56
)
 
(13
)
 
(35
)
 
(52
)
Unrealized gain (loss) on derivative instruments, net of tax
 
2

 
(3
)
 

 
(6
)
Other comprehensive income (loss)
 
(54
)
 
(16
)
 
(35
)
 
(58
)
Comprehensive income (loss)
 
$
(43
)
 
$
51

 
$
(361
)
 
$
70

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


6



SunGard Capital Corp. II
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited) 
 
 
Nine Months Ended September 30,
 
 
2014
 
2015
Cash flow from operations:
 
 
 
 
Net income (loss)
 
$
(326
)
 
$
128

Income (loss) from discontinued operations
 
(17
)
 
4

Income (loss) from continuing operations
 
(309
)
 
124

Reconciliation of income (loss) from continuing operations to cash flow from (used in) operations:
 
 
 
 
Depreciation and amortization
 
193

 
152

Trade name impairment charge
 
339

 

Deferred income tax provision (benefit)
 
(105
)
 
(20
)
Stock compensation expense
 
33

 
36

Amortization of deferred financing costs and debt discount
 
14

 
12

Loss on extinguishment of debt
 
61

 

Other non-cash items
 

 
(1
)
Excess income tax benefit from equity compensation
 

 
(7
)
Changes in working capital:
 
 
 
 
Accounts receivable and other current assets
 
123

 
124

Accounts payable and accrued expenses
 
(80
)
 
(68
)
Accrued interest
 
34

 
38

Accrued income taxes
 
(7
)
 
4

Deferred revenue
 
(74
)
 
(71
)
Cash flow from (used in) continuing operations
 
222

 
323

Cash flow from (used in) discontinued operations
 
34

 

Cash flow from (used in) operations
 
256

 
323

Investment activities:
 
 
 
 
Cash paid for acquired businesses, net of cash acquired
 
(4
)
 
(25
)
Additions to property and equipment, and software
 
(52
)
 
(41
)
Additions to capitalized software
 
(46
)
 
(44
)
Other investing activities
 

 
1

Cash provided by (used in) continuing operations
 
(102
)
 
(109
)
Cash provided by (used in) discontinued operations
 
7

 
1

Cash provided by (used in) investment activities
 
(95
)
 
(108
)
Financing activities:
 
 
 
 
Cash received from borrowings, net of fees
 
(7
)
 

Cash used to repay debt
 
(1,324
)
 
(1
)
Excess income tax benefit from equity compensation
 

 
7

Cash used to purchase treasury stock
 
(3
)
 
(20
)
Other financing activities
 
(15
)
 
(40
)
Cash provided by (used in) continuing operations
 
(1,349
)
 
(54
)
Cash provided by (used in) discontinued operations
 
887

 

Cash provided by (used in) financing activities
 
(462
)
 
(54
)
Effect of exchange rate changes on cash
 
(9
)
 
(13
)
Increase (decrease) in cash and cash equivalents
 
(310
)
 
148

Beginning cash and cash equivalents, including cash of discontinued operations: 2014, $31; 2015, $0
 
706

 
447

Ending cash and cash equivalents, including cash held for sale: 2014, $0; 2015, $4
 
$
396

 
$
595

Supplemental information:
 
 
 
 
Interest paid
 
$
195

 
$
164

Income taxes paid, net of refunds of $17 million and $21 million, respectively
 
$
32

 
$
23

Non-cash financing activities:
 
 
 
 
Distribution of net assets of SpinCo (See Note 1)
 
$
229

 
$

Receipt of SpinCo Notes in connection with the AS Split-Off (See Note 1)
 
$
425

 
$

Exchange of SpinCo Notes for SDS Notes
 
$
389

 
$

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

7



SunGard Data Systems Inc.
Condensed Consolidated Balance Sheets
(In millions except share and per-share amounts)
(Unaudited)
 
 
 
December 31,
2014
 
September 30,
2015
Assets
 
 
 
 
Current:
 
 
 
 
Cash and cash equivalents
 
$
447

 
$
591

Trade receivables, less allowance for doubtful accounts of $22 and $21
 
572

 
439

Earned but unbilled receivables
 
114

 
108

Prepaid expenses and other current assets
 
112

 
145

Assets held for sale
 

 
24

Total current assets
 
1,245

 
1,307

Property and equipment, less accumulated depreciation of $414 and $428
 
152

 
142

Software products, less accumulated amortization of $1,754 and $1,756
 
224

 
210

Customer base, less accumulated amortization of $531 and $553
 
360

 
321

Other assets, less accumulated amortization of $22 and $23
 
94

 
69

Trade name
 
672

 
672

Goodwill
 
3,760

 
3,733

Total Assets
 
$
6,507

 
$
6,454

Liabilities and Equity
 
 
 
 
Current:
 
 
 
 
Accounts payable
 
$
21

 
$
7

Accrued compensation and benefits
 
227

 
183

Accrued interest expense
 
30

 
68

Other accrued expenses
 
127

 
123

Deferred revenue
 
589

 
507

Liabilities related to assets held for sale
 

 
8

Total current liabilities
 
994

 
896

Long-term debt
 
4,669

 
4,669

Deferred and other income taxes
 
608

 
609

Other long-term liabilities
 
31

 
26

Total liabilities
 
6,302

 
6,200

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
 
3,380

 
3,359

Accumulated deficit
 
(3,044
)
 
(2,916
)
Accumulated other comprehensive income (loss)
 
(132
)
 
(190
)
Total stockholder’s equity
 
204

 
253

Non-controlling interest
 
1

 
1

Total Equity
 
205

 
254

Total Liabilities and Equity
 
$
6,507

 
$
6,454

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


8



SunGard Data Systems Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In millions)
(Unaudited)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2015
 
2014
 
2015
Revenue
 
$
691

 
$
702

 
$
2,017

 
$
2,060

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of sales and direct operating (excluding items described in Note 1)
 
280

 
282

 
822

 
833

Sales, marketing and administration
 
167

 
163

 
493

 
476

Product development and maintenance
 
91

 
83

 
287

 
256

Depreciation
 
28

 
31

 
79

 
87

Amortization of acquisition-related intangible assets
 
30

 
23

 
114

 
65

Trade name impairment charge
 

 

 
339

 

Total costs and expenses
 
596

 
582

 
2,134

 
1,717

Operating income (loss)
 
95

 
120

 
(117
)
 
343

Other income (expense):
 
 
 
 
 
 
 
 
Interest income
 

 
1

 
1

 
2

Interest expense and amortization of deferred financing fees
 
(73
)
 
(73
)
 
(220
)
 
(215
)
Loss on extinguishment of debt
 

 

 
(61
)
 

Other income (expense)
 

 

 

 
1

Other income (expense)
 
(73
)
 
(72
)
 
(280
)
 
(212
)
Income (loss) from continuing operations before income taxes
 
22

 
48

 
(397
)
 
131

Benefit from (provision for) income taxes
 
(11
)
 
17

 
88

 
(7
)
Income (loss) from continuing operations
 
11

 
65

 
(309
)
 
124

Income (loss) from discontinued operations, net of tax
 

 
2

 
(17
)
 
4

Net income (loss)
 
11

 
67

 
(326
)
 
128

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Foreign currency translation, net
 
(56
)
 
(13
)
 
(35
)
 
(52
)
Unrealized gain (loss) on derivative instruments, net of tax
 
2

 
(3
)
 

 
(6
)
Other comprehensive income (loss)
 
(54
)
 
(16
)
 
(35
)
 
(58
)
Comprehensive income (loss)
 
$
(43
)
 
$
51

 
$
(361
)
 
$
70

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


9



SunGard Data Systems Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
 
 
Nine Months Ended September 30,
 
 
2014
 
2015
Cash flow from operations:
 
 
 
 
Net income (loss)
 
$
(326
)
 
$
128

Income (loss) from discontinued operations
 
(17
)
 
4

Income (loss) from continuing operations
 
(309
)
 
124

Reconciliation of income (loss) from continuing operations to cash flow from (used in) operations:
 
 
 
 
Depreciation and amortization
 
193

 
152

Trade name impairment charge
 
339

 

Deferred income tax provision (benefit)
 
(105
)
 
(20
)
Stock compensation expense
 
33

 
36

Amortization of deferred financing costs and debt discount
 
14

 
12

Loss on extinguishment of debt
 
61

 

Other non-cash items
 

 
(1
)
Excess income tax benefit from equity compensation
 

 
(7
)
Changes in working capital:
 
 
 
 
Accounts receivable and other current assets
 
123

 
124

Accounts payable and accrued expenses
 
(80
)
 
(68
)
Accrued interest
 
34

 
38

Accrued income taxes
 
(7
)
 
4

Deferred revenue
 
(74
)
 
(71
)
Cash flow from (used in) continuing operations
 
222

 
323

Cash flow from (used in) discontinued operations
 
34

 

Cash flow from (used in) operations
 
256

 
323

Investment activities:
 
 
 
 
Cash paid for acquired businesses, net of cash acquired
 
(4
)
 
(25
)
Additions to property and equipment, and software
 
(52
)
 
(41
)
Additions to capitalized software
 
(46
)
 
(44
)
Other investing activities
 

 
1

Cash provided by (used in) continuing operations
 
(102
)
 
(109
)
Cash provided by (used in) discontinued operations
 
7

 
1

Cash provided by (used in) investment activities
 
(95
)
 
(108
)
Financing activities:
 
 
 
 
Cash received from borrowings, net of fees
 
(7
)
 

Cash used to repay debt
 
(1,324
)
 
(1
)
Excess income tax benefit from equity compensation
 

 
7

Other financing activities
 
(18
)
 
(60
)
Cash provided by (used in) continuing operations
 
(1,349
)
 
(54
)
Cash provided by (used in) discontinued operations
 
887

 

Cash provided by (used in) financing activities
 
(462
)
 
(54
)
Effect of exchange rate changes on cash
 
(9
)
 
(13
)
Increase (decrease) in cash and cash equivalents
 
(310
)
 
148

Beginning cash and cash equivalents, including cash of discontinued operations: 2014, $31; 2015, $0
 
706

 
447

Ending cash and cash equivalents, including cash held for sale: 2014, $0; 2015, $4
 
$
396

 
$
595

Supplemental information:
 
 
 
 
Interest paid
 
$
195

 
$
164

Income taxes paid, net of refunds of $17 million and $21 million, respectively
 
$
32

 
$
23

Non-cash Financing activities:
 
 
 
 
Distribution of net assets of SpinCo (See Note 1)
 
$
233

 
$

Receipt of SpinCo Notes in connection with the AS Split-Off (See Note 1)
 
$
425

 
$

Exchange of SpinCo Notes for SDS Notes
 
$
389

 
$

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

10



SUNGARD
SUNGARD CAPITAL CORP. II
SUNGARD DATA SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation:

SunGard (the “Company”), which was formerly named SunGard Capital Corp., is one of the world’s leading software and technology services companies and has two reportable segments: Financial Systems (“FS”) and Public Sector & Education (“PS&E”). The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated.

SunGard Data Systems, a wholly-owned subsidiary of SunGard, (“SDS”) was acquired on August 11, 2005 in a leveraged buy-out (the “LBO”) by a consortium of private equity investment funds associated with Bain Capital Partners, The Blackstone Group, Goldman Sachs & Co., Kohlberg Kravis Roberts & Co., Providence Equity Partners, Silver Lake and TPG (collectively, the “Sponsors”).

SDS is a wholly-owned, direct subsidiary of SunGard Holdco LLC, which is wholly owned by SunGard Holding Corp., which is wholly owned by SunGard Capital Corp. II (“SCCII”), which is a subsidiary of SunGard. All four of these companies were formed for the purpose of facilitating the LBO and are collectively referred to as the “Holding Companies.” SunGard, SCCII and SDS are separate reporting companies and, together with their direct and indirect subsidiaries, are collectively referred to as the “Company.” The Holding Companies have no other operations beyond those of their ownership of SDS.

On August 12, 2015, the Company and SCCII entered into an Agreement and Plan of Merger (“Merger Agreement”) with Fidelity National Information Services, Inc., a Georgia corporation (“FIS”) and other parties named therein. Under the terms of the Merger Agreement, FIS will acquire 100 percent of the equity of SunGard as well as assume $4.7 billion of debt representing an unaffected enterprise value of $9.1 billion. At closing, SunGard shareholders will receive an aggregate of 44,663,899 shares of common stock of FIS and $2,288,700,000 in cash, subject to certain adjustments and less the number of FIS shares representing unvested RSUs of SunGard that will be converted into RSUs of FIS at the closing. In addition, FIS will also assume, repay or refinance all of SunGard’s outstanding debt, totaling approximately $4.7 billion. The transaction is subject to certain customary closing conditions, including the approval by the stockholders of SunGard.

On March 31, 2014, the Company completed the split-off of its Availability Services (“AS”) business to its existing preferred stockholders, including its private equity owners, on a tax-free and pro-rata basis. As part of that transaction, the assets and liabilities of the AS business were contributed to a new subsidiary, and then SDS transferred all of its ownership interests in that subsidiary to Sungard Availability Services Capital, Inc. (“SpinCo”) in exchange for common stock of SpinCo, approximately $425 million of SpinCo senior notes (“SpinCo Notes”), and $1,005 million of net cash proceeds from the issuance of an AS term loan facility (“SpinCo Term Loan”). Immediately after these transactions, SDS distributed the common stock of SpinCo through SDS’ ownership chain ultimately to SCCII, and then all stockholders of preferred stock of SCCII exchanged a portion of their shares of preferred stock for all of the shares of common stock of SpinCo on a pro-rata basis (together, with the transactions described above, the “AS Split-Off”).

The AS business, which was split-off on March 31, 2014, and two small FS businesses, which were sold on January 31, 2014, have been included in our financial results as discontinued operations for all periods presented.

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 Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Interim financial reporting does not include all of the information and footnotes required by GAAP for annual financial statements. The interim financial information is unaudited, but, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments necessary to provide a fair statement of results for the interim periods presented. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

The Condensed Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2014 has been revised to present stock compensation expense and developer time spent on customer billable professional services projects in the correct functional expense categories. Refer to Note 2 for additional details.


11



All of the previously-issued interim financial statements included in Quarterly Reports on Form 10-Q for 2014 included an error in the Condensed Consolidated Statements of Comprehensive Income (Loss) related to the removal of the cumulative foreign currency translation loss associated with the AS businesses that were split-off on March 31, 2014. The removal of the cumulative foreign currency translation loss was reflected in both the Condensed Consolidated Statements of Comprehensive Income (Loss) and the rollforwards of stockholders’ equity included in the notes to the condensed consolidated financial statements in each of the Quarterly Reports. However, the inclusion of this item in the 2014 Condensed Consolidated Statements of Comprehensive Income (Loss) was not appropriate since it relates to the distribution of the AS businesses to the Company’s owners and should have been excluded from the 2014 Other Comprehensive Income according to GAAP. Management does not believe the error is material to any of the previously-issued financial statements. The table below shows the impact of the correction of this error for the three and nine months ended September 30, 2014. The following table presents the amounts as originally reported and as revised for each of SunGard, SCCII and SDS (in millions):
 
 
 
Three Months Ended September 30, 2014
 
Nine Months Ended September 30, 2014
 
 
As Reported
 
As Revised
 
As Reported
 
As Revised
Other comprehensive income (loss)
 
$
(47
)
 
$
(54
)
 
$
(110
)
 
$
(35
)
Comprehensive income (loss)
 
(36
)
 
(43
)
 
(436
)
 
(361
)
Comprehensive income (loss) attributable to SunGard
 
(78
)
 
(85
)
 
(568
)
 
(493
)

Cost of Sales and Direct Operating

Cost of sales and direct operating represents the cost of providing the Company’s software and services offerings to customers and excludes depreciation, amortization and the cost of maintenance.

Recent Accounting Pronouncements

Recently Adopted

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Auditing Standards Update (“ASU”) 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” that changes the criteria for reporting a discontinued operation. According to the new guidance, only disposals of a component that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results is a discontinued operation. The new guidance also requires expanded disclosures about discontinued operations and disposals of a significant part of an entity that does not qualify for discontinued operations reporting. ASU 2014-08 was effective beginning January 1, 2015, but only for disposals (or classifications as held for sale) that have not been reported in previously-issued financial statements. ASU 2014-08 will affect how the Company identifies and presents discontinued operations in the consolidated financial statements.

Recently Issued

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. This new guidance establishes a five step process that companies must use in order to recognize revenue properly. Those five steps are: (i) identifying contract(s) with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations in the contract, and (v) recognizing revenue when (or as) the entity satisfies a performance obligation. The new ASU will affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. ASU 2014-09 was to be effective for the Company starting in the first quarter of fiscal 2017. However, in July 2015, the FASB voted to defer the effective date of the new revenue standard by one year, and to permit entities to adopt one year earlier if they choose (i.e., the original effective date). ASU 2014-09 allows for two methods of adoption: (a) “full retrospective” adoption, meaning the standard is applied to all periods presented, or (b) “modified retrospective” adoption, meaning the cumulative effect of applying ASU 2014-09 is recognized as an adjustment to the opening retained earnings balance. The Company is in the process of determining the date of adoption, the adoption method as well as the effects the adoption of ASU 2014-09 will have on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” in conjunction with their initiative to reduce complexity in accounting standards. This new guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability,

12



consistent with presentation of a debt discount. The new standard is limited to the presentation of debt issuance costs and will not affect the recognition and measurement of debt issuance costs. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements.” ASU 2015-15 clarifies ASU 2015-03 by allowing the presentation of debt issuance costs related to a line-of-credit to be recorded as an asset instead of as a direct deduction of the carrying amount of the debt liability as required by ASU 2015-03, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-03 will be effective for the Company for the fiscal year beginning after December 15, 2015 and within those fiscal years with early adoption permitted. The adoption of ASU 2015-03 is not expected to have a material impact on the Company’s consolidated financial statements.

In April 2015, the FASB issued ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” Under the new standard, customers will apply the same criteria as vendors to determine whether a cloud computing arrangement contains a software license or is solely a service contract. For public companies, the new standard is effective for annual periods, including interim periods, beginning after December 15, 2015. The adoption of ASU 2015-05 is not expected to have a material impact on the Company’s consolidated financial statements.

In September 2015, the FASB issued ASU-2015-16 “Business Combination: Simplifying the Accounting for Measurement-Period Adjustments.” The new guidance eliminates the requirement to make retrospective adjustments and revise comparative information from prior periods when new information is obtained about facts and circumstances that existed as of the acquisition date. Instead, the acquiring entity is required to record adjustments in the reporting period they are determined. For public companies, the new standard is effective for annual periods, including interim periods, beginning after December 15, 2015. The adoption of ASU 2015-16 is not expected to have a material impact on the Company’s consolidated financial statements.

2. Expense Classification:

Effective December 31, 2014, within the Condensed Consolidated Statements of Comprehensive Income (Loss), the Company revised its presentation of stock compensation expense. Formerly, the Company presented this expense entirely within sales, marketing and administration expense. The Company’s revised presentation allocates these costs to the appropriate functional areas. Further, the Company has revised its presentation of the costs for developer time spent on customer billable professional services projects. Formerly, the Company presented this expense within product development and maintenance expense. The Company’s revised presentation records these amounts to cost of sales and direct operating. There was no impact on total reported costs and expenses for any period as a result of the changes. Management does not believe these revisions are material to the previously issued financial statements.

The impact of these items within the functional areas for the three and nine months ended September 30, 2014 is as follows (in millions):
 

13



 
 
Three Months Ended September 30, 2014
 
 
As reported
 
Revised
presentation of
stock
compensation
expense
 
Revised
presentation of
developer time
spent on
professional
services projects
 
As presented in the
statement of
comprehensive
income (loss)
Cost of sales and direct operating (See Note 1)
 
$
271

 
$
3

 
$
6

 
$
280

Sales, marketing and administration
 
171

 
(4
)
 

 
167

Product development and maintenance
 
96

 
1

 
(6
)
 
91

Total functional expenses
 
$
538

 
$

 
$

 
$
538

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2014
 
 
As reported
 
Revised
presentation of
stock
compensation
expense
 
Revised
presentation of
developer time
spent on
professional
services projects
 
As presented in the
statement of
comprehensive
income (loss)
Cost of sales and direct operating (See Note 1)
 
$
799

 
$
6

 
$
17

 
$
822

Sales, marketing and administration
 
503

 
(10
)
 

 
493

Product development and maintenance
 
300

 
4

 
(17
)
 
287

Total functional expenses
 
$
1,602

 
$

 
$

 
$
1,602



3. Acquisitions and Discontinued Operations:

Acquisitions

During March 2015, the Company completed one acquisition in its FS segment, and in June 2015, the Company completed one acquisition in its PS&E segment. Total combined cash paid, net of cash acquired was $25 million. Below is a summary of the combined purchase price allocation (in millions):
 
 
Nine months ended
September 30,
 
2015
Acquired businesses:
 
Software products
$
10

Customer base
6

Goodwill
16

Other intangible assets
2

Deferred income taxes
(6
)
Purchase price obligations and debt assumed
(1
)
Net current assets (liabilities) assumed
(2
)
 
 
Cash paid for acquired business
$
25

 
 

The acquisitions discussed above for March and June of 2015 were not material to the Company’s operations, financial position, or cash flows.

Discontinued Operations

On January 31, 2014, the Company completed the sale of two small businesses within the FS segment in exchange for €27 million paid at closing, €9 million to be paid no later than March 2016 (“deferred purchase price”) which is included in

14



trade receivables and €2 million to be paid upon the successful assignment of certain customer contracts. The deferred purchase price is unconditional and is secured by a bank guarantee. During the first quarter of 2015, the Company successfully assigned certain of these customer contracts and recognized a $2 million gain in discontinued operations. Also included in discontinued operations are the results of our former AS business as a result of the AS Split-Off (see Note 1), which was completed on March 31, 2014. These businesses have been included in our financial results as discontinued operations for all periods presented.

During the third quarter of 2015, a $2 million benefit for income taxes was included in discontinued operations.

The results for discontinued operations for the three and nine months ended September 30, 2014 and 2015 were as follows (in millions):
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2014
 
2015
 
2014
 
2015
Revenue
 
$

 
$

 
$
338

 
$

Operating income (loss)
 

 

 
(25
)
 

Interest expense
 

 

 
(18
)
 

Gain on sale of business
 

 

 
22

 
2

Income (loss) before income taxes
 

 

 
(21
)
 
2

Benefit from income taxes
 

 
2

 
4

 
2

Income (loss) from discontinued operations
 
$

 
$
2

 
$
(17
)
 
$
4


Assets and Liabilities Classified as Held for Sale

On October 1, 2015 the Company completed the sale of a small business within the FS segment in exchange for $12 million plus cash assumed, subject to a final working capital adjustment. During the three months ended September 30, 2015, the Company recognized a combined $3 million impairment of its customer base and software assets.

Assets held for sale and liabilities related to assets held for sale at September 30, 2015 include the following (in millions):
 
 
September 30, 2015
Cash
$
4

Trade receivables, net
9

Property and equipment, net
1

Software products, net
4

Goodwill
6

 
 
Assets classified as held for sale
$
24

 
 
Accrued compensation and benefits
$
2

Other accrued expenses
1

Deferred revenue
5

 
 
Liabilities related to assets held for sale
$
8

 
 

4. Intangible Assets and Goodwill:

Trade Name

The trade name intangible asset represents the fair value of the SunGard trade name and is an indefinite lived asset not subject to amortization. As of July 1, 2015, the Company performed its annual impairment test and determined that the fair value of the trade name exceeded its carrying value resulting in no impairment of the trade name.

15



The Company developed certain assumptions and estimates related to the calculation of the fair value of its trade name. The fair value assumptions and estimates primarily included projections of future revenues and growth rates, a royalty rate, a tax rate, and a discount rate. The assumptions about future revenues and growth rates are based on management’s assessment of a number of factors, including the Company’s recent performance against budget, performance in the markets that the company serves, as well as industry and general economic data from third party sources. In addition to future revenue projections, the assumed royalty rate and discount rate are critical assumptions considered in the trade name impairment test. Furthermore, to the extent that businesses are divested in the future, or projected revenues decline, the revenue supporting the trade name will decline which may result in impairment charges.

Goodwill

GAAP requires the Company to perform a goodwill impairment test annually and more frequently when negative conditions or triggering events arise. The Company completes its annual goodwill impairment test as of July 1 for each of its 10 reporting units. The Company has the option of performing an assessment of certain qualitative factors to determine if it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying value (referred to as a “step zero” test) or proceeding directly to a quantitative analysis (referred to as a “step one” test).

As a result of a 2015 re-organization impacting the makeup of its reporting units, the timing of the last step-one tests, and the evidence of an external valuation of SunGard, management chose to perform a step-one test for each SunGard reporting unit.

In these step-one tests, the estimated fair value of each reporting unit is compared to its carrying value. The Company estimated the fair values of each reporting unit by assigning an EBITDA multiple to each reporting unit (the market approach), based on an overall SunGard EBITDA multiple implied as a part of the planned acquisition of SunGard by FIS. Multiples were assigned to each reporting unit based on projected revenue and EBITDA growth, EBITDA margins, CAPEX, and other qualitative factors. The valuation for each reporting unit was based on three years of EBITDA (2014, 2015, and 2016) multiplied by the selected multiple and averaged over the three year period. If there is a deficiency (the estimated fair value of a reporting unit is less than its carrying value), a step-two test is required. For each reporting unit, the calculated fair value exceeded carrying value. Moreover, the reporting unit multiples as well as the overall valuation were consistent with the Company’s value implied as part of the planned acquisition of SunGard by FIS. Therefore, management determined that it was not necessary to perform any step-two tests.

Estimating the fair value of a reporting unit requires various assumptions including projections of future earnings, as well as the presumed multiple for each reporting unit. The assumptions about future earnings are based on management’s assessment of a number of factors, including the reporting unit’s recent performance against budget, performance in the market that the reporting unit serves, as well as industry and general economic data from third party sources. Changes to the underlying businesses could affect the future earnings, which in turn could affect the fair value of the reporting unit.

The following table summarizes the changes in goodwill, by segment, for the nine months ended September 30, 2015 (in millions):
 
 
 
Cost
 
Accumulated
impairment
 
 
 
 
FS
 
PS&E
 
Subtotal
 
PS&E
 
Total
Balance at December 31, 2014
 
$
3,433

 
$
544

 
$
3,977

 
$
(217
)
 
$
3,760

2015 acquisitions
 
1

 
15

 
16

 

 
16

Effect of foreign currency translation
 
(36
)
 

 
(36
)
 

 
(36
)
Transfer to assets held for sale
 
(6
)
 

 
(6
)
 

 
(6
)
Other
 
(1
)
 

 
(1
)
 

 
(1
)
Balance at September 30, 2015
 
$
3,391

 
$
559

 
$
3,950

 
$
(217
)
 
$
3,733


A portion of the Company’s goodwill is denominated in currencies other than the U.S. Dollar.

Intangible Asset amortization


16



The total expected amortization of acquisition-related intangible assets for years ended December 31 is as follows (in millions):
 
2015
$
85

2016
69

2017
61

2018
56

2019
48


5. Accumulated Other Comprehensive Income:

The following table provides a rollforward of the components of accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2015 (in millions):
 
 
 
Gains and Losses
on Cash Flow
Hedges
 
Currency
Translation
 
Other
 
Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2014
 
$
(1
)
 
$
(125
)
 
$
(6
)
 
$
(132
)
Other comprehensive loss before reclassifications
 
(18
)
 
(52
)
 

 
(70
)
Amounts reclassified from accumulated other comprehensive income, net of tax
 
12

 

 

 
12

Net current-period other comprehensive loss
 
(6
)
 
(52
)
 

 
(58
)
Balance at September 30, 2015
 
$
(7
)
 
$
(177
)
 
$
(6
)
 
$
(190
)

The following table summarizes the unrealized gains (losses) on derivative instruments, including the impact of components reclassified into net income from accumulated other comprehensive income, for the three and nine months ended September 30, 2014 and 2015 (in millions):
 

17



 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
Affected Line Item in the
Statement of
Comprehensive Income
(Loss) for Components
Reclassified from OCI
Other Comprehensive Income (Loss)
Components
 
2014
 
2015
 
2014
 
2015
 
Unrealized gain (loss) on derivative instruments
 
$

 
$
(8
)
 
$
(6
)
 
$
(18
)
 
 
Loss (gain) on derivatives reclassified into income:
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
3

 
2

 
6

 
6

 
Interest expense and amortization of deferred financing fees
Forward currency hedges
 

 

 

 
1

 
Cost of sales and direct operating
Total reclassified into income
 
3

 
2

 
6

 
7

 
 
Income tax benefit (expense)
 
(1
)
 
3

 

 
5

 
 
Amounts reclassified from accumulated other comprehensive income, net of tax
 
2

 
5

 
6

 
12

 
 
Unrealized gain (loss) on derivative instruments, net of tax
 
$
2

 
$
(3
)
 
$

 
$
(6
)
 
 

6. Debt and Derivatives:

On September 30, 2015, SDS had $593 million of available borrowing capacity and $7 million of outstanding letters of credit under its $600 million revolving credit facility. In addition, there were $4 million of letters of credit outstanding at September 30, 2015 that did not impact availability under the revolving credit facilities.

The ability to make dividend payments to SunGard’s equity holders is governed by the covenants in its debt agreements. Without obtaining an amendment to those documents, SunGard’s covenants currently limit such a dividend to a total of $200 million.

Debt consisted of the following (in millions):
 
 
 
December 31,
2014
 
September 30,
2015
Senior Secured Credit Facilities:
 
 
 
 
Secured revolving credit facility due March 8, 2018
 
$

 
$

Tranche C due February 28, 2017, effective interest rate of 4.44% and 4.44%
 
400

 
400

Tranche E due March 8, 2020, effective interest rate of 4.31% and 4.31%
 
1,918

 
1,918

Total Senior Secured Credit Facilities
 
2,318

 
2,318

Senior Notes due 2018 at 7.375%
 
511

 
511

Senior Notes due 2020 at 7.625%
 
700

 
700

Senior Subordinated Notes due 2019 at 6.625%
 
1,000

 
1,000

Secured Accounts Receivable Facility, at 3.16% and 3.22%
 
140

 
140

Total debt
 
$
4,669

 
$
4,669

Short-term borrowings and current portion of long-term debt
 
$

 
$

Long-term debt
 
4,669

 
4,669

Total debt
 
$
4,669

 
$
4,669


18




Future Maturities

At September 30, 2015, the contractual future maturities of debt are as follows (in millions):
 
 
Contractual Maturities
2015
$

2016

2017
400

2018
511

2019
1,140

Thereafter
2,618

 
 
Total debt
$
4,669

 
 

SDS uses interest rate swaps to manage the amount of its floating rate debt in order to reduce its exposure to variable rate interest payments associated with the Amended and Restated Credit Agreement dated as of August 11, 2005, as amended from time to time (“Credit Agreement”). Each swap agreement is designated as a cash flow hedge. SDS pays a stream of fixed interest payments for the term of the swap, and in turn, receives variable interest payments based on LIBOR. At September 30, 2015, one-month and three-month LIBOR were 0.19% and 0.33%, respectively. The net receipt or payment from the interest rate swap agreements is included in the Condensed Consolidated Statements of Comprehensive Income (Loss) as interest expense. The interest rates in the components of the debt table above reflect the impact of the swaps.

A summary of the Company’s interest rate swaps at September 30, 2015 follows (in millions):
 
Inception
 
Maturity
 
Notional
amount
(in millions)
 
Weighted-
average Interest
rate paid
 
Interest rate
received
(LIBOR)
August-September 2012
 
February 2017
 
$
400

 
0.69
%
 
1-Month
June 2013
 
June 2019
 
100

 
1.86
%
 
3-Month
September 2013
 
June 2019
 
100

 
2.26
%
 
3-Month
February-March 2014
 
March 2020
 
300

 
2.27
%
 
3-Month
Total / Weighted-Average Interest Rate
 
 
 
$
900

 
1.52
%
 
 

The fair values of the swap agreements at December 31, 2014 were $1 million and $5 million and were included in other assets and other accrued expenses, respectively. The fair value of the swap agreements at September 30, 2015 was $14 million and was included in other accrued expenses.

The Company has no ineffectiveness related to its swap agreements. During the next twelve months, the Company expects to reclassify approximately $8 million from accumulated other comprehensive income (loss) into earnings, specifically interest expense and amortization of deferred financing fees, related to the Company’s interest rate swaps based on the borrowing rates at September 30, 2015.

7. Fair Value Measurements:

Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under this guidance, the Company is required to classify certain assets and liabilities based on the following fair value hierarchy:
 
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date;
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3 – Unobservable inputs for the asset or liability.

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The following table summarizes assets and liabilities measured at fair value on a recurring basis at September 30, 2015 (in millions):
 
 
 
 
 
Fair Value Measures Using
 
 
 
 
Balance Sheet Caption
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
Money market funds
 
Cash and cash equivalents
 
$
134

 
$

 
$

 
$
134

Currency forward contracts
 
Prepaid expenses and other current assets
 

 
1

 

 
1

Total
 
 
 
$
134

 
$
1

 
$

 
$
135

Liabilities