SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 2002
Commission file number 0-11521
A. Full title of the plan and address of the plan, if different
from that of the issuer named below:
SCT 401(k) SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office:
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
4 Country View Road
Malvern, PA 19355
SCT 401(k) Savings Plan
Financial Statements and Supplemental Schedule
Years ended December 31, 2002 and 2001
The following financial statements and exhibits are filed as part of this
report:
(a) Item 4 - Financial Statements
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Statements of Assets Available for Benefits,
December 31, 2002 and 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Changes in Assets Available for Benefits,
for the years ended December 31, 2002 and 2001 . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Supplemental Schedule
Schedule H Line 4i- Schedule of Assets (Held at End of Year). . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Exhibits:
23 Consent of Independent Auditors
99.1 Certification of Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Financial statement schedules not included with this report have been omitted
because they are not applicable or the required information is shown in the
financial statements or notes thereto.
Report of Independent Auditors
Plan Administrator
SCT 401(k) Savings Plan
We have audited the accompanying statements of assets available for benefits of
the SCT 401(k) Savings Plan as of December 31, 2002 and 2001, and the related
statements of changes in assets available for benefits for the years then ended.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets available for benefits of the Plan at December
31, 2002 and 2001, and the changes in its assets available for benefits for the
years then ended, in conformity with accounting principles generally accepted in
the United States.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying schedule of assets (held at end of
year) as of December 31, 2002, is presented for purposes of additional analysis
and is not a required part of the financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The schedule is the responsibility of the Plan's management. The schedule
has been subjected to the auditing procedures applied in our audits of the
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
May 28, 2003
1
SCT 401(k) Savings Plan
Statements of Assets Available for Benefits
December 31
2002 2001
----------- -----------
Assets
Investments:
Registered investment companies $71,122,006 $81,189,706
Common stock 12,584,625 13,484,378
Participant loans 1,590,027 1,916,595
----------- -----------
Total investments 85,296,658 96,590,679
Receivables:
Participant contributions 734,062 686,949
Employer contribution 240,254 318,898
----------- -----------
Total receivables 974,316 1,005,847
----------- -----------
Assets available for benefits $86,270,974 $97,596,526
=========== ===========
See accompanying notes.
2
SCT 401(k) Savings Plan
Statements of Changes in Assets Available for Benefits
Year ended December 31
2002 2001
------------ ------------
Additions:
Investment income:
Interest and dividends $ 1,301,279 $ 2,113,038
Contributions:
Participants 10,927,534 12,542,005
Employer 3,000,891 2,029,940
------------ ------------
13,928,425 14,571,945
------------ ------------
Total additions 15,229,704 16,684,983
Deductions:
Net depreciation in fair value of investments 17,351,266 13,141,500
Benefits paid to participants 9,203,990 8,576,208
Transfers out of the plan - 15,602,617
------------ ------------
Total deductions 26,555,256 37,320,325
------------ ------------
Net decrease (11,325,552) (20,635,342)
Assets available for benefits at beginning of year 97,596,526 118,231,868
------------ ------------
Assets available for benefits at end of year $ 86,270,974 $ 97,596,526
============ ============
See accompanying notes.
3
SCT 401(k) Savings Plan
Notes to Financial Statements
December 31, 2002
1. Description of Plan
The following description of the SCT 401(k) Savings Plan (the Plan) provides
only general information. Participants should refer to the Plan agreement for a
more complete description of the Plan's provisions.
General
The Plan is a defined contribution, contributory savings plan covering all
salaried, clerical, and hourly employees of Systems & Computer Technology
Corporation (the Company) who are age 19 or older. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
In June 2001, the Company sold its Global Government Systems (GGS) business. In
connection with this sale, $15,602,617 of participant accounts were transferred
to the acquirer's 401(k) plan during 2001. Before the transfer, all participants
who were employed by GGS became fully vested in their account balances.
The Company amended and restated the Plan document effective January 1, 2002.
Certain provisions that could not be implemented retroactively became effective
July 1, 2002. The Plan's management does not believe that the amendment and
restatement will have a significant effect on the Plan's net assets.
Contributions
Effective July 1, 2002, participants may contribute up to 60 percent of their
pre-tax annual compensation, as defined in the Plan. Prior to that date,
participants could contribute up to 18 percent of their pre-tax compensation, as
so defined. Participants may also contribute amounts representing distributions
from other qualified defined benefit and defined contribution plans. The Company
contributes 50 percent of the first 6 percent of base compensation that a
participant contributes to the Plan. Contributions are subject to certain
limitations.
4
SCT 401(k) Savings Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Investment Options
Participants direct the investment of their contributions into various
investment options offered by the Plan. Until July 1, 2002, 50 percent of the
Company's matching contribution was invested in the Company's common stock, with
the remaining portion directed by the participant. Effective July 1, 2002,
participants may direct 100 percent of the Company's matching contribution
(whether such matching contribution was made on or before July 1, 2002 or
thereafter) into the various investment options offered by the Plan, although
the Company's contribution is initially invested in Company stock. Participants
may change their investment options at any time.
Participant Accounts
Each participant's account is credited with the participant's contributions,
earnings based on the participant's investment elections and allocations of the
Company's contributions. Forfeited balances of terminated participants'
nonvested accounts are placed in a cash reserve account to be used to reduce
future Company contributions. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's account.
Vesting
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company contribution portion of their accounts plus
actual earnings thereon is based on years of continuous service. A participant
is 100% vested after five years of credited service, upon normal or early
retirement or in the event of death or disability.
Participant Loans
Participants may borrow from their accounts a minimum of $1,000 up to a maximum
of $50,000 or 50% of their account balance, whichever is less. Loan terms range
from one to five years or up to ten years for the purchase of a primary
residence. The loans are secured by the balance in the participant's account and
bear interest at rates that range from 6 percent to 12 percent, which are
commensurate with the prime commercial lending rate in effect when the loans
were initiated. Principal and interest are paid ratably through payroll
deductions.
5
SCT 401(k) Savings Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Payment of Benefits
On termination of service, death, disability, or retirement, a participant may
receive a lump-sum amount equal to the vested value of his or her account.
Partial withdrawals are also permitted for participants meeting hardship
requirements or who have reached age 59 1/2.
Forfeited Accounts
At December 31, 2002 and 2001, forfeited nonvested accounts totaled $49,000 and
$92,000, respectively. These accounts are used to reduce future employer
contributions. Also, in 2002 and 2001, employer contributions were reduced by
$296,000 and $1,936,000, respectively, from forfeited nonvested accounts.
Administrative Expenses
Although not obligated to do so, the Company has paid all plan expenses during
2002 and 2001.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants would become 100% vested in their employer contributions.
2. Significant Accounting Policies
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Shares of registered investment
companies are valued at the net asset value of shares held by the Plan at
year-end. The Company's common stock is valued at the last reported sales price
on the last business day of the year. Participant loans are valued at the
outstanding loan balance at year-end.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on an accrual basis. Dividends are recorded on the
ex-dividend date. The Company's common stock is purchased at the market price at
the time of acquisition.
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SCT 401(k) Savings Plan
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
changes therein, and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Payment of Benefits
Benefits are recorded when paid. Amounts processed and approved for payment
prior to year-end but not yet paid at December 31, 2002 and 2001 were $0 and
$196,269, respectively.
3. Investments
Investments that represent 5% or more of the fair value of the Plan's assets are
as follows:
December 31
2002 2001
----------- ------------
Systems & Computer Technology Corporation
common stock * $12,584,625 $13,484,378
Shares of registered investment companies:
Fidelity Investments:
Managed Income Portfolio 6,299,870 5,654,763
Intermediate Bond Fund 6,482,110 4,812,707
Equity Income Fund 10,998,433 13,374,012
Magellan Fund 21,027,886 28,552,783
Disciplined Equity Fund 4,495,693 5,512,822
Growth Company Fund 4,459,860 5,875,111
* Majority is non participant-directed in 2001.
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SCT 401(k) Savings Plan
Notes to Financial Statements (continued)
3. Investments (continued)
During 2002 and 2001, the Plan's investments (including investments bought,
sold, or held during the year) depreciated in value as follows:
Year ended December 31
2002 2001
--------------------------
Net depreciation in fair value of investments as
determined by quoted market price:
Common stock $ (2,279,171) $ (1,673,585)
Registered investment companies (15,072,095) (11,467,915)
--------------------------
$(17,351,266) $(13,141,500)
==========================
4. Non Participant-Directed Investments
The only non participant-directed investment is in Company common stock.
However, effective July 1, 2002, the Company match contribution is initially
made in Company common stock but participants may subsequently direct their
portion of the Company match contribution (whether such Company match
contribution was made on or before July 1, 2002 or thereafter) into various
investment options offered by the Plan. The administrator does not track the
amount of Company common stock that is participant-directed and non
participant-directed. The amounts presented below represent the total assets and
changes in assets in Company common stock.
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SCT 401(k) Savings Plan
Notes to Financial Statements (continued)
December 31
2002 2001
--------------------------
Assets
Investment at fair value based on quoted market price:
Systems & Computer Technology Corporation Common Stock $ 12,584,625 $13,484,378
Contributions receivable 188,825 233,323
------------ -----------
$ 12,773,450 $13,717,701
============ ===========
Changes in assets:
Net depreciation in fair value of investment $ (2,279,171) $(1,673,585)
Contributions 2,605,193 3,221,095
Benefits paid to participants (926,560) (1,209,255)
Amounts transferred out of the Plan - (2,533,582)
Interfund transfers, net (354,778) (75,626)
------------ -----------
$ (955,316) $(2,270,953)
============= ===========
5. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated August 16, 1995 stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (IRC) and, therefore, the related trust is exempt from
taxation. Subsequent to this issuance of the determination letter, the Plan was
amended and restated. Once qualified, the Plan is required to operate in
conformity with the IRC to maintain its qualification. The Plan Administrator
believes the Plan is being operated in compliance with the applicable
requirements of the IRC and, therefore, believes that the Plan, as amended, is
qualified and the related trust is tax-exempt.
9
Supplemental Schedule
SCT 401(k) Savings Plan
EIN: 23-1701520 Plan: 56508
Schedule H, Line 4i -
Schedule of Assets (Held at End of Year)
December 31, 2002
Description of investment,
including maturity date,
Identity of issue, borrower, rate of interest, collateral, Current
lessor, or similar party par, or maturity value Cost value
--------------------------------------------------------------------------------------------------------------
*Systems & Computer Technology
Corporation:
Common stock Common stock $ 17,321,507 $12,584,625
*Fidelity Investments:
Cash reserves Registered investment company ** 3,507,398
Managed Income Portfolio Registered investment company ** 6,299,870
Intermediate Bond Fund Registered investment company ** 6,482,110
Equity Income Fund Registered investment company ** 10,998,433
Magellan Fund Registered investment company ** 21,027,886
Disciplined Equity Fund Registered investment company ** 4,495,693
Worldwide Fund Registered investment company ** 2,624,224
Puritan Fund Registered investment company ** 1,658,289
Growth Company Fund Registered investment company ** 4,459,860
PBHG Emerging Growth Fund Registered investment company ** 845,894
Founders Growth Fund Registered investment company ** 1,230,890
Contrafund Registered investment company ** 3,018,254
Templeton Foreign Fund I Registered investment company ** 889,798
Freedom Income Fund Registered investment company ** 228,899
Freedom 2000 Fund Registered investment company ** 296,041
Freedom 2010 Fund Registered investment company ** 973,583
Freedom 2020 Fund Registered investment company ** 1,049,790
Freedom 2030 Fund Registered investment company ** 964,352
Freedom 2040 Fund Registered investment company ** 70,742
*Participant loans Interest rates ranging from 6% to
12% ** 1,590,027
-----------
$85,296,658
===========
* Indicates party-in-interest to the Plan.
** Cost is not required for participant-directed investments.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the plan administrator has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
SCT 401(k) SAVINGS PLAN
Date: 06/27/03 By: /s/ Eric Haskell
---------------------------------
Eric Haskell
Executive Vice President - Finance &
Administration, Treasurer and
Chief Financial Officer
11