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Ss&C Technologies Holdings, Inc PART IV Item 15.

The following excerpt is from the company's SEC filing.

Exhibits and Financial Statement Schedules

Financial Statements

The following financial statements are filed as part of this annual report:

Document

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2015 and 2014

Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2015, 2014 and 2013

Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013

Consolidated Statements of Changes in Stockholders Equity for the years ended December 31, 2015, 2014 and 2013

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of SS&C Technologies Holdings, Inc.:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of SS&C Technologies Holdings, Inc. and its subsidiaries at December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control over Financial Reporting appearing under Item 9A of SS&C Technologies Holdings, Inc.s Annual Report on Form 10-K for the year ended December 31, 2015. Our responsibility is to express opinions on these financial statements and on the Companys internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it presents debt issuance costs in the consolidated balance sheets in 2015.

A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in the Report of Management on Internal Control Over Financial Reporting, management has excluded Advent Software, Inc. (Advent) from its assessment of internal control over financial reporting as of December 31, 2015 because they were acquired by the Company in a purchase business combination during 2015. We have also excluded Advent from our audit of internal control over financial reporting. Advent, and its related entities are wholly owned subsidiaries of the Company whose total assets and total revenues represent 2% and 16%, respectively, of the consolidated financial statement amounts as of and for the year ended December 31, 2015.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut

February 26, 2016, except with respect to our opinion on the consolidated financial statements insofar as it relates to the guarantor and non-guarantor financial information discussed in Note 16, as to which the date is April 8, 2016

SS&C TECHNOLOGIES HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

ASSETS

Current assets:

Cash and cash equivalents

434,159

109,577

Accounts receivable, net of allowance for doubtful accounts of $2,957 and $2,241, respectively (Note 3)

169,951

94,359

Prepaid expenses and other current assets

27,511

14,927

Prepaid income taxes

40,627

11,857

Deferred income taxes

Restricted cash

Total current assets

675,066

235,172

Property, plant and equipment:

Building and improvements

37,855

28,521

Equipment, furniture, and fixtures

97,274

79,564

137,784

110,740

Less: accumulated depreciation

(70,641

(56,463

Net property, plant and equipment

67,143

54,277

Goodwill

3,549,212

1,573,227

Intangible and other assets, net of accumulated amortization of $536,929 and $416,708, respectively (Note 2)

1,508,622

402,344

Total assets

5,802,242

2,266,155

LIABILITIES AND STOCKHOLDERS EQUITY

Current liabilities:

Current portion of long-term debt (Note 6)

32,281

20,470

Accounts payable

11,957

12,004

Income taxes payable

Accrued employee compensation and benefits

83,894

53,975

Interest payable

28,903

Other accrued expenses

36,231

30,666

Deferred revenue

222,024

73,254

Total current liabilities

416,718

191,595

Long-term debt, net of current portion (Note 6)

2,719,070

599,268

Other long-term liabilities

51,434

26,446

509,574

102,176

Total liabilities

3,696,796

919,485

Commitments and contingencies (Note 12)

Stockholders equity (Notes 2 and 4):

Common stock:

Class A non-voting common stock, $0.01 par value per share, 5,000,000 shares authorized; 2,703,846 shares issued and outstanding

Common stock, $0.01 par value per share, 200,000,000 shares and 100,000,000 shares authorized, respectively; 96,552,226 shares and 82,268,722 shares issued, respectively, and 95,765,787 shares and 81,482,283 shares outstanding, respectively, of which 12,438 and 17,188 are unvested, respectively

Additional paid-in capital

1,794,115

964,845

Accumulated other comprehensive income

(83,170

(15,121

Retained earnings

411,493

414,082

2,123,431

1,364,655

Less: cost of common stock in treasury, 786,439 shares

(17,985

Total stockholders equity

2,105,446

1,346,670

Total liabilities and stockholders equity

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Year Ended December 31,

(In thousands, except per share data)

Revenues:

Software-enabled services

670,170

592,528

552,565

Maintenance and term licenses

246,422

115,609

112,889

Total recurring revenues

916,592

708,137

665,454

Perpetual licenses

31,467

26,328

19,207

Professional services

33,396

28,041

Total non-recurring revenues

83,693

59,724

47,248

Total revenues

1,000,285

767,861

712,702

Cost of revenues:

373,394

342,625

322,719

113,865

41,424

41,215

Total recurring cost of revenues

487,259

384,049

363,934

41,975

23,151

19,733

Total non-recurring cost of revenues

45,091

26,682

24,866

Total cost of revenues

532,350

410,731

388,800

Gross profit

467,935

357,130

323,902

Operating expenses:

Selling and marketing

94,950

48,592

41,885

Research and development

110,415

57,287

53,862

General and administrative

97,832

50,879

45,187

Total operating expenses

303,197

156,758

140,934

Operating income

164,738

200,372

182,968

Interest income

Interest expense

(79,333

(27,177

(42,395

Other income, net

Loss on extinguishment of debt

(30,417

Income before income taxes

60,842

177,654

145,187

Provision for income taxes (Note 5)

17,980

46,527

27,292

Net income

42,862

131,127

117,895

Basic earnings per share

Basic weighted average number of common shares outstanding

91,098

83,314

81,195

Diluted earnings per share

Diluted weighted average number of common and common equivalent shares outstanding

95,448

87,331

85,616

Other comprehensive loss, net of tax:

Foreign currency exchange translation adjustment

(68,049

(45,495

(21,144

Total comprehensive loss, net of tax

Comprehensive (loss) income

(25,187

85,632

96,751

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Cash flow from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

150,834

99,831

99,780

Stock-based compensation expense

44,079

11,483

Income tax benefit related to exercise of stock options

(32,960

(15,454

(24,194

Amortization and write-offs of loan origination costs

Loss on sale or disposition of property and equipment

(39,806

(13,583

(11,069

Provision for doubtful accounts

Changes in operating assets and liabilities, excluding effects from acquisitions:

(12,160

(6,019

(6,419

(4,695

(5,586

(4,032

Accrued expenses

10,140

Income taxes prepaid and payable

11,514

21,560

18,060

60,240

(1,184

Net cash provided by operating activities

230,624

252,532

208,269

Cash flow from investing activities:

Additions to property and equipment

(13,600

(15,040

(11,921

Proceeds from sale of property and equipment

Cash paid for business acquisitions, net of cash acquired (Note 11)

(2,730,956

(86,911

(3,657

Additions to capitalized software

(4,273

(3,517

(2,399

Net changes in restricted cash

Net cash used in investing activities

(2,748,312

(104,443

(17,910

Cash flow from financing activities:

Cash received from debt borrowings, net of original issue discount

3,068,075

75,000

Repayments of debt

(903,448

(212,000

(239,000

Proceeds from exercise of stock options

30,092

24,110

27,817

Withholding taxes related to equity award net share settlement

(6,939

Payment of contingent consideration

Proceeds from common stock issuance, net

717,802

Purchase of common stock for treasury

(11,223

Payment of fees related to refinancing activities

(46,025

(1,917

Dividends paid on common stock

(45,451

(10,494

Net cash provided by (used in) financing activities

2,847,066

(120,165

(189,849

Effect of exchange rate changes on cash and cash equivalents

(4,796

(2,817

(2,200

Net increase in cash and cash equivalents

324,582

25,107

(1,690

Cash and cash equivalents, beginning of period

84,470

86,160

Cash and cash equivalents, end of period

Supplemental disclosure of cash paid for:

42,221

21,330

36,551

Income taxes, net of refunds

42,210

33,414

21,584

Supplemental disclosure of non-cash investing activities:

See Note 11 for a discussion of acquisitions.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

Class A

Common Stock

Common Stock

Number

Issued

Paid-in

Treasury

Shares

Amount

Capital

Earnings

Balance, at December 31, 2012

78,141

853,455

175,554

51,518

(5,819

1,075,503

Foreign exchange translation adjustment

Exercise of options

27,781

Issuance of common stock

Balance, at December 31, 2013

80,478

913,816

293,449

30,374

(6,762

1,231,708

24,092

Cash dividends declared - $0.125 per share (Note 4)

Balance, at December 31, 2014

43,746

Exercise of options, net of withholding taxes

23,131

23,153

Non-cash purchase price consideration (Note 11)

11,753

Cash dividends declared - $0.50 per share (Note 4)

12,077

717,680

Balance, at December 31, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SS&C Technologies Holdings, Inc., or Holdings, is our top-level holding company. SS&C Technologies, Inc., or SS&C, is our primary operating company and a wholly-owned subsidiary of SS&C Technologies Holdings, Inc. The Company means SS&C Technologies Holdings, Inc. and its consolidated subsidiaries, including SS&C.

Note 1Organization

The Company provides software products and software-enabled services to the financial services industry, primarily in North America. The Company also has operations in Europe, Asia, Australia and Africa. The Companys portfolio of over 90 products and software-enabled services allows its clients to automate and integrate front-office functions such as trading and modeling, middle-office functions such as portfolio management and reporting, and back-office functions such as accounting, performance measurement, reconciliation, reporting, processing and clearing. The Company provides its products and related services in eight vertical markets in the financial services industry:

Alternative investments;

Insurance and pension funds;

Asset and wealth management;

Financial institutions;

Commercial lenders;

Real estate property management;

Municipal finance; and

Financial markets.

Note 2Summary of Significant Accounting Policies

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to, collectability of accounts receivable, costs to complete certain contracts, valuation of acquired assets and liabilities, valuation of stock options, income tax accruals and the value of deferred tax assets. Estimates are also used to determine the remaining economic lives and carrying value of fixed assets, goodwill and intangible assets. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant accounts, transactions and profits between the consolidated companies have been eliminated in consolidation. Unconsolidated investments in entities over which the Company does not have control but has the ability to exercise influence over operating and financial policies, if any, are accounted for under the equity method of accounting. Earnings and losses from such investments are recorded on a pre-tax basis, if any.

Reclassifications

In connection with the acquisition of Advent and the related increase in term license revenues, the Company condensed its presentation of revenues on its Consolidated Statements of Comprehensive Income to illustrate its two types of revenue streams: recurring revenues and non-recurring revenues. Recurring revenues consist of software-enabled services and maintenance and term licenses. Non-recurring revenues consist of professional services and perpetual licenses.

The Companys prior presentation required that revenues from term license agreements be allocated between license revenue and maintenance revenue, with the license portion being reported together with revenue from perpetual license agreements as Software licenses, and the maintenance portion being reported together with maintenance revenue related to perpetual licenses as Maintenance. The Company reclassified $10.0 million and $9.5 million from Software licenses to Maintenance and term licenses for the years ended December 31, 2014 and 2013, respectively. In connection with the reclassification of revenues, the Company reclassified the related costs of revenues, which were immaterial. The revised presentation better illustrates the nature of the Companys revenues and costs of revenues by indicating the recurring nature of the license portion of revenue from maintenance and term license agreements. The Company has not changed its accounting methods for revenue recognition.

Revenue Recognition

The Companys payment terms for software licenses typically require that the total fee be paid upon signing of the contract. Maintenance services are typically due in full at the beginning of the maintenance period. Professional services and software-enabled services are typically due and payable monthly in arrears. Normally, the Companys arrangements do not provide for any refund rights, and payments are not contingent on specific milestones or customer acceptance conditions. For arrangements that do contain such provisions, the Company defers revenue until the rights or conditions have expired or have been met.

Unbilled accounts receivable primarily relates to professional services and software-enabled services revenue that has been earned as of month end but is not invoiced until the subsequent month, and to software license revenue that has been earned and is realizable but not invoiced to clients until future dates specified in the client contract.

Deferred revenue consists of payments received related to product delivery, maintenance and other services, which have been paid by customers prior to the recognition of revenue. Deferred revenue relates primarily to cash received for maintenance contracts in advance of services being performed over the contractual term.

Software-enabled Services Revenue

The Company primarily offers software-enabled outsourcing services in which the Company utilizes its own software to offer comprehensive fund administration services for alternative investment managers, including fund manager services, transfer agency services, funds-of-funds services, tax processing and accounting. The Company also offers subscription-based on-demand software applications that are managed and hosted at our facilities. The software-enabled services arrangements provide an alternative for clients who do not wish to install, run and maintain complicated financial software. Under these arrangements, the client does not have the right to take possession of the software, rather, the Company agrees to provide access to its applications, remote use of its equipment to process transactions, access to clients data stored on its equipment, and connectivity between its environment and the clients computing systems.

Software-enabled services are generally provided under non-cancelable contracts with initial terms of one to five years that require monthly or quarterly payments, and are subject to automatic annual renewal at the end of the initial term unless terminated by either party.

The Company recognizes software-enabled services revenues on a monthly basis as the software-enabled services are provided and when pervasive evidence of an arrangement exists, the price is fixed or determinable and collectability is reasonably assured. The Company does not recognize any revenue before services are performed. Certain contracts contain additional fees for increases in market value, pricing and trading activity. Revenues related to these additional fees are recognized in the month in which the activity occurs based upon the Companys summarization of account information and trading volume.

Maintenance and Term Licenses Revenue Agreements

Maintenance agreements generally require the Company to provide technical support and software updates (on a when-and-if-available basis) to its clients. Such services are generally provided under one-year renewable contracts. Maintenance revenues are recognized ratably over the term of the maintenance agreement.

The Company also sells term licenses ranging from one to seven years, many of which include bundled maintenance services. For those arrangements with bundled maintenance services, VSOE does not exist for the maintenance element and therefore the total fee is recognized ratably over the contractual term of the arrangement.

Perpetual Licenses Revenue

The Company follows the principles of accounting standards relating to software revenue recognition, which provide guidance on applying GAAP in recognizing revenue on software transactions. Accounting standards require that revenue recognized from software transactions be allocated to each element of the transaction based on the relative fair values of the elements, such as software products, specified upgrades, enhancements, post-contract client support, installation or training. The determination of fair value is based upon vendor-specific objective evidence (VSOE). The Company recognizes perpetual licenses revenues allocated to software products and enhancements generally upon delivery of each of the related products or enhancements, assuming all other revenue recognition criteria are met. In the rare occasion that a perpetual license agreement includes the right to a specified upgrade or product, the Company defers all revenues under the arrangement until the specified upgrade or product is delivered, since typically VSOE does not exist to support the fair value of the specified upgrade or product.

The Company generally recognizes revenue from sales of software or products including proprietary software upon product shipment and receipt of a signed contract, provided that collection is probable and all other revenue recognition criteria are met. The Company sells perpetual software licenses in conjunction with professional services for installation and maintenance. For these arrangements, the total contract value is attributed first to the maintenance arrangement based on its fair value, which is derived from stated renewal rates. The contract value is then attributed to professional services based on estimated fair value, which is derived from the rates charged for similar services provided on a stand-alone basis. The Companys software license agreements generally do not require significant modification or customization of the underlying software, and, accordingly, implementation services provided by the Company are not considered essential to the functionality of the software. The remainder of the total contract value is then attributed to the software license based on the residual method.

The Company occasionally enters into license agreements requiring significant customization of the Companys software. The Company accounts for the license fees under these agreements on the percentage-of-completion basis. This method requires estimates to be made for costs to complete the agreement utilizing an estimate of development man-hours remaining. Revenue is recognized each period based on the hours incurred to date compared to the total hours expected to complete the project. Due to uncertainties inherent in the estimation process, it is at least reasonably possible that completion costs may be revised. Such revisions are recognized in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are determined on a contract-by-contract basis, and are made in the period in which such losses are first estimated or determined.

Professional Services Revenue

The Company provides consulting and training services to its clients. Revenues for such services are generally recognized over the period during which the services are performed. The Company typically charges for professional services on a time-and-materials basis. However, some contracts are for a fixed fee. For the fixed-fee arrangements, an estimate is made of the total hours expected to be incurred to complete the project. Due to uncertainties inherent in the estimation process, it is at least reasonably possible that completion costs may be revised. Such revisions are recognized in the period in which the revisions are determined. Revenues are recognized each period based on the hours incurred to date compared to the total hours expected to complete the project.

Research and Development

Research and development costs associated with computer software are charged to expense as incurred. Capitalization of internally developed computer software costs begins upon the establishment of technological feasibility based on a working model. Net capitalized software costs of $4.7 million and $4.2 million are included in the December 31, 2015 and 2014 balance sheets, respectively, under Intangible and other assets.

The Companys policy is to amortize these costs upon a products general release to the client. Amortization of capitalized software costs is calculated by the greater of (a) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or (b) the straight-line method over the remaining estimated economic life of the product, including the period being reported on, typically two to five years. It is reasonably possible that those estimates of anticipated future gross revenues, the remaining estimated economic life of the product, or both could be reduced significantly due to competitive pressures. Amortization expense related to capitalized software development costs was $2.4 million, $1.8 million, and $1.0 million for each of the years ended December 31, 2015, 2014, and 2013, respectively.

Stock-based Compensation

Using the fair value recognition provisions of relevant accounting literature, stock-based compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as expense over the appropriate service period. Determining the fair value of stock-based awards requires considerable judgment, including estimating the expected term of stock options, expected volatility of the Companys stock price, and the number of awards expected to be forfeited. Differences between actual results and these estimates could have a material effect on the Companys financial results. A deferred income tax asset is recorded over the vesting period as stock compensation expense is recorded for non-qualified option awards. The realizability of the deferred tax asset is ultimately based on the actual value of the stock-based award upon exercise. If the actual value is lower than the fair value determined on the date of grant, then there could be an income tax expense for the portion of the deferred tax asset that is not realizable.

Other Income, Net

Other income, net for 2015 consists primarily of foreign currency transaction gains of $3.4 million and the liquidation of an investment. Other income, net for 2014 consists primarily of foreign currency transaction gains of $2.9 million. The gains...


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