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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

For Annual and Transition Reports Pursuant to
Sections 13 or 15(d) of the Securities Exchange Act of 1934

(Mark One)

For the fiscal year ended December 31, 2001

For the transition period from                              to                             

Commission file number 000-21705

SANCHEZ COMPUTER ASSOCIATES, INC.
(Exact Name of Registrant as Specified in Its Charter)

Registrant's telephone number, including area code:    (610) 296-8877

Securities registered pursuant to Section 12(b) of the Act:    NONE

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class
Common Stock, no par value

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

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        The aggregate market value of shares of Common Stock held by non-affiliates (based on the closing price on NASDAQ) on March 15, 2002 was approximately $91 million.

        The number of shares of registrant's Common Stock outstanding as of March 15, 2002 was 26,008,420 shares.

Documents Incorporated by Reference

        Portions of registrant's Proxy Statement relating to the annual meeting of shareholders of registrant to be held on May 23, 2002 are incorporated by reference into Items 10, 11, 12 and 13 of Part III of this Form 10-K. Registrant expects to file the Proxy Statement within 120 days after the end of the year covered by this Form 10-K. Such Proxy Statement, except for the parts therein which have been specifically incorporated by reference, shall not be deemed "filed" for the purposes of this Form 10-K.

SANCHEZ COMPUTER ASSOCIATES, INC.

INDEX TO FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

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PART I

Item 1. Business.

        Sanchez Computer Associates, Inc. ("Sanchez" or "the Company") is a global leader in developing and marketing scalable and integrated software and services solutions that provide retail banking, brokerage and customer integration for financial institutions. Approximately 350 financial institutions in 18 countries use Sanchez banking software products. The Company maintains two business models—a software license business and an outsourcing business. The Company maintains its corporate headquarters in Malvern, Pa., its outsourced operations center in Seven Fields, Pa., which is a suburb of Pittsburgh, Pa., and runs its international operations from Chester in the United Kingdom. The Company also maintains sales offices in Madrid, Spain; Warsaw, Poland; Amsterdam, the Netherlands; and Singapore.

Products of the Software License Business

        The Sanchez integrated banking platform empowers financial institutions to accelerate business transformation and achieve a competitive advantage by lowering operating costs, reducing technology risks and improving customer management. The Sanchez integrated banking platform has multi-currency and multi-language capabilities, and can accommodate the retail and commercial requirements of financial service operations with global transaction requirements. An institution purchases a Sanchez banking solution by licensing one or more of Sanchez' application software products. Those products include: Sanchez Profile®, the highly flexible, multi-currency, multi-language, customer-centric, core banking and transaction processing application; Sanchez Xpress^TM, an enterprise customer and transaction management system, which empowers customer relationship management (CRM) and delivers business integration; Sanchez Webclient^TM, a Web-based, Internet customer front-end processor; and Sanchez FMS^TM, the Financial Management System, which is an online, real-time cost center-based accounting system with complete multi-company and multi-currency support. In addition, Sanchez offers Profile for Windows®, the 32-bit, Windows-based, graphical user interface designed as the front-end to Profile's core banking application, which is used by tellers, branch and call center personnel. Sanchez CRM^TM, a Web-based customer relationship management system, is available as a stand-alone application. It is the Company's intent to fully integrate Sanchez CRM with Sanchez' integrated banking platform. Software applications under development include Sanchez WebCSR^TM, a browser-based integrated customer servicing application that can be deployed across multiple retail delivery channels such as branches and call centers.

        The Company's success is heavily dependent upon the proprietary architecture and design of its Sanchez products, which are protected by a combination of copyright and trademark laws, as well as various contractual provisions. Despite these efforts to protect its proprietary rights, there can be no assurances that the Company's means of protecting its proprietary rights will be adequate or that the Company's competition will not develop similar technology independently. Similarly, while the Company is not aware that any of its products infringe upon the proprietary rights of third parties, there can be no assurances that third parties do not claim such infringement.

Application Product Overview—Sanchez Profile

        Sanchez Profile is an online, customer-centric, multi-currency, multi-channel strategic core processing system for deposits and loans. The Profile database is a proven enterprise-level associative memory datastore engineered for high speed and high volume transaction processing throughput, providing full ACID (Atomic, Consistent, Isolated, Durable) properties as well as logical dual site operation functionality for true 24x365 operation. A relational database model is built on the datastore by Sanchez proprietary DATA-QWIK^TM application. The database files contain all metadata describing the application (table, screen, report, data integrity, and validation rules) as well as the Profile

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application data itself (institution, customer and account data). In the Profile enterprise server model, access to the database always takes place through a defined service class and the application layer. Sanchez supports an open database model and is currently adding support for IBM® DB2 and Oracle databases.

        The application layer is made up of two elements Profile and DATA QWIK, an application development environment. The application layer consists of the business logic that makes up much of the Profile system. The DATA-QWIK application is Profile's application generator, providing flow control for Profile functions, report generation and query capabilities, data validation and referential integrity rules associated with files defined to the application. Through the use of Profile's automatic code generation tools, provided by DATA-QWIK, custom financial products can be constructed, by the financial institution's business users, without writing any code.

        Profile's open architecture provides access through a set of service classes. A service class categorizes a specific type of activity that is being requested by a client. Service classes are provided for financial transactions, remote procedure calls, and SQL access (client access via ODBC/JDBC). In addition, a service class is provided for network management functions (NMSP). Within each service class, other than SQL, it is possible to specify a service class specific format and protocol (FAP) handler. This FAP provides a message format translation mechanism that is specific to each service class. Profile defines standard message formats for each of the service classes.

        The Profile banking server is the generic Profile application message server. It analyzes the Profile message header information to invoke the proper service class. Multiple Profile banking servers can operate simultaneously. Each message is processed as an ACID transaction and the server handles all session and state context. An entry/exit format and protocol (FAP) can be specified for use at the server layer. This provides a user exit (which is part of the framework for upward compatibility) for message reformatting prior to the message being handled by Profile components. Profile provides standard message definitions. Messaging provides the ability for front ends to communicate with Profile. Profile can receive messages via IBM's WebSphere MQ®, Compaq's® RTR messaging applications, as well as Sanchez' own lightweight communications monitor (MTM), WebSphere MQ, RTR and MTM handle all client connections and message routing between the client and available application servers. Messages are buffered and passed to available servers. The MTM is designed to allow multiple service types, to route messages accordingly and to provide access to all Profile service classes. System configuration can provide instances of application servers that are targeted to specific services such as dedicated ATM services. Communication is supported via TCP/IP.

        The following is a key features list for Sanchez Profile.

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Application Product Overview—Sanchez Xpress

        Sanchez Xpress is a customer integration solution, which provides active customer aggregation, financial product distribution, and supports the real-time integration of all customer delivery channels to an institution's internal and external product processing systems. Sanchez Xpress is built on a pure Java^TM platform following the Java 2 Platform Enterprise Edition (J2EE) specifications. The product employs the use of standard HTML, JavaServer Pages^TM (JSP^TM) technology and JavaServlet^TM technology for user interface components of the application as well as an Enterprise JavaBean^TM (EJB) model to incorporate business logic into the technical infrastructure for maximum portability and scalability. By following the J2EE standards, Xpress is portable across many different middleware

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application server environments such as IBM's WebSphere application server, Hewlett-Packard's Application Server, or BEA Systems WebLogic application server. This also provides maximum portability across hardware platforms and operating systems since Java support is available on Unix or Linux platforms such as IBM's RS/6000 servers or Sun E series servers and on Intel based servers running Windows platforms or Linux. Support is also available on IBM's zSeries mainframe servers (formerly System 390) for Linux.

        Following the J2EE standards also provides integration capabilities for applications that may be written using other technologies. In addition, the J2EE framework also provides easy integration to other Java applications such as e-mail.

        Xpress contains a Universal Customer System (UCS), which is a combination of a virtual database design, a customer information application and a database independent data definition. The UCS application provides maximum portability across database platforms, such as Oracle and IBM's DB2 Universal Database platform, by utilizing the Java Database Connectivity (JDBC) interface to interact with a physical data store or database. The application logic is incorporated into Xpress with an Enterprise JavaBean (EJB) model. The UCS contains component-based features and functionality, providing financial institutions flexibility in deploying and offering these features to customers.

        Xpress provides a product distribution engine that manages and coordinates business processes and transactions across an institution's internal and third-party product processing systems. This capability also provides several services including messaging, application integration, transaction monitoring, directory services and authorization and authentication functions. These capabilities utilize various J2EE application server components such as the Java Naming and Directory Interface (JNDI), as well as messaging components such as IBM's WebSphere MQ.

        Xpress also acts as message-oriented middleware in that the messaging components natively assume XML is used as a standard protocol and data description language. These features support various industry standards, such as Open Financial Exchange (OFX). This also provides an easy mechanism to support Wireless Markup Language (WML) and Wireless Application Protocol (WAP). These types of components are readily available from various third-party application vendors and application server vendors such as IBM.

        The following is a key features list for Sanchez Xpress.

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Application Product Overview—Sanchez WebClient

        Sanchez Webclient is a Web-enabled integrated banking and brokerage application that provides customers with a single access point to their financial information by creating a personalized financial services portal for all transactions and products. Webclient integrates a financial institution's retail customer's financial products into a content rich Web site where the customer can view account information and perform transactions. By integrating Webclient's browser-enabled interface with an institution's existing Web site, an institution can offer its customers the following capabilities:

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Review an entire account portfolio



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View account balances and statements



•

Transfer funds between accounts



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Reorder checks



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Place, modify, delete or review a stop payment



•

Pay bills



•

Check stock quotes, news and events



•

Place and monitor stock trades



•

Use financial calculators for financial planning

        Webclient provides a dynamic page publishing framework that allows an institution to retain control over the appearance, navigational elements and content of theWeb site. Webclient also works with third-party applications to drive content presentation; e.g., Webclient supports download capabilities to popular personal finance packages such as Microsoft Money® and Quicken®. The software provides a mechanism for targeting banner ads and marketing messages, according to predefined customer information. From this data, Webclient applies user-defined business rules to influence the content presented to customers. For example, if a customer typically buys 6-month certificates of deposit, Webclient can serve up banner ads to that customer, showcasing the best 6-month CD rates. This functionality supports one-to-one marketing campaigns and allows for cross selling of different products, based on customer buying behaviors. Webclient provides customers with a fast and easy way to receive account information and place transactions, relieving dependence on call centers and branch offices. Reduced call volume and branch traffic results in increased operational efficiency. All customer information is fully protected in a secure environment. For customer login security, Webclient supports password as well as certificate authentication schemes. Data encryption techniques are applied to ensure sensitive financial data is safeguarded.

        Sanchez Webclient is built on a pure Java platform following the Java^TM 2 Platform Enterprise Edition (J2EE) specifications. It employs the use of standard HTML, JavaServer Page (JSP) technology and JavaServlet technology for user interface components of the application. Following these standards allows the application to be deployed using any HTTP Web server such as IBM's HTTP Server for WebSphereMQ, or the Apache HTTP Server for maximum portability and scalability. Using the JSP and JavaServlet model for the Webclient application provides for maximum integration capabilities into other Java-compliant, Web-enabled applications as well as maximum flexibility for customization allowing the institution to create a unique customer experience. To achieve maximum scalability and flexibility, the Webclient application is built on the Sanchez Xpress platform. The application also takes advantage of the advanced features of Xpress. It utilizes the Universal Customer System (UCS) for active customer aggregation, events, alerts and correspondence management, security and authentication, customer prospecting and personalization. It also utilizes the Xpress financial product distribution facility to allow the institution to provide one-to-one customer product personalization and packaging, regardless of the host systems involved. Xpress also provides the systems integration

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framework and messaging support allowing seamless access to various host processing systems and legacy environments, over a variety of message enabled middleware application servers. Webclient incorporates a SiteMap utility that allows an institution to create branding and changes to the look and feel of the user interface, without changing the application's programs. This also gives the institution the unique ability to rearrange the process flow of the application, without rebuilding application pages. The following is a key features list for Sanchez Webclient:

Sanchez e-PROFILE Outsourcing

        Sanchez also uses its integrated banking platform as the basis for a complete outsourced e-banking solution under the Sanchez e-PROFILE® brand. Sanchez' outsourcing solution provides an integrated end-to-end operations and technology platform that enables financial services companies to offer comprehensive on-line financial services to their customers. e-PROFILE Inc., which is the data center operations portion of the e-PROFILE outsourcing solution, is a wholly owned subsidiary of Sanchez and began operations in 1999. Sanchez e-PROFILE is a vertical services provider ("VSP") to the financial services industry. This solution integrates products and services from the industry's "best-in-class" vendors, including Sanchez products, and manages them under a single, outsourced operating umbrella. The Company believes the Sanchez e-PROFILE solution is the first vendor-developed answer that provides the ongoing technology, the operations and the pricing structures required to support an outsourced supply chain venue for on-line financial services. The outsourcing solution also provides the Company with a distribution channel for the suite of Sanchez products, related technologies and services. At December 31, 2001, there were eight clients processing their direct and Internet bank accounts on Sanchez' e-PROFILE platform. Some of those clients include: Juniper Bank, Morgan Stanley Dean Witter's BusinesScape, Lehman Brothers Bank, DeepGreen Bank, ING DIRECT USA, GMAC Bank and Allstate Bank. At December 31, 2001, MetLife Bank was in a phased-implementation and was scheduled to "go live" during 2002. The Company expects to add more large, branded institutions and continue to build its processing revenues from client institution customer account growth on the platform. The Company's forecast calls for the e-PROFILE outsourcing operation to begin to contribute toward earnings growth during the second half of 2002.

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        In addition to Sanchez products, the Sanchez e-PROFILE solution offers institutions a range of online financial capabilities including:

Revenues

        The Company derives its revenues from product fees, service fees, processing fees, and software maintenance and other fees produced from its software license business and outsourcing business. Product fees include software license and product enhancement fees. Service fees include client implementation-related services training and consulting fees. Processing fees, which are generated from the outsourcing model, consist primarily of monthly account-based fees for account maintenance and monthly servicing, transaction fees associated with transaction volume in a given period and origination fees in conjunction with opening new customer accounts. For Sanchez' software license contracts, fees are typically paid in stages upon the completion of defined deliverables or certain dates. Service fees associated with the license application model are generally billed monthly on a time and material basis. Maintenance fees are normally billed annually in advance.

Partners

        The Company has established and maintains strategic alliance/partnering agreements with Compaq Computer Corporation ("Compaq", previously Digital Equipment Corporation) since 1987, PricewaterhouseCoopers ("PwC") since 1996, International Business Machine Corporation ("IBM") since 1996, ComputerLand SA of Poland ("ComputerLand") since 1997, Sanchez/Capital Services since 1998, Deloitte Consulting since 2000, CMG and Perot Systems since 2001. The Company has had a strategic services and product distribution partnership with Datawest Solutions in Canada for more than 10 years. The Company continues to establish strategic relationships with partners whom it believes will help deliver a comprehensive banking solution to prospects and clients. To this end, the Company is continuing to leverage its third-party relationships to engage in joint marketing and project implementation activities. In addition, the Company anticipates forming additional strategic alliances with other complementary service and application provider organizations.

        In September 1998, the Company significantly expanded its relationship with IBM by entering into a global partnership agreement. In 2000, the Company strengthened its relationship with IBM by entering into a new strategic agreement that positions Sanchez as one of 40 strategic alliance partners in IBM's PartnerWorld for Developers Program worldwide. Under terms of the agreement, the two companies will jointly market and sell banking and financial services solutions on a worldwide basis. Specifically, Sanchez will lead with IBM's Unix-based, pSeries servers and IBM middleware products by integrating the Sanchez integrated banking platform with IBM Application Framework for e-business technologies, including: DB2 Universal Database, WebSphere application server, WebSphere MQ messaging software and Tivoli systems management software. Financial institutions are expected to benefit from IBM and Sanchez solutions that offer integrated core banking products through an open and scaleable architecture enabling improved time to market, real-time transaction processing and enhanced delivery of products and service over multiple delivery channels including branches, ATMs, Internet, and wireless application protocols (WAP). Under the new agreement, IBM will promote the core banking components of Sanchez' Profile core banking application as part of IBM's leading

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e-business solutions on the IBM pSeries servers. Additionally, IBM will provide consulting, customization and integration services for joint IBM and Sanchez solutions. The Company believes that the efforts and capabilities of IBM's marketing, sales and global service organizations will enhance the demand for Sanchez solutions and products.

        Since 1997, PwC and the Company have engaged in various global joint marketing, training and implementation activities. The Company has partnering relationships with various other domestic and international regional service organizations. In 1998, the Company formed a joint venture with Capital Services Inc., a financial services and distribution company based in Bangalore, India. The joint-venture company is named Sanchez/Capital Services and has distribution rights to Sanchez products in India and portions of the Middle East. Sanchez believes its alliance program facilitates its market expansion in its target markets. In addition, Sanchez plans to expand the Company's product distribution by contracting with its partners to market and implement banking solutions in traditional legacy replacement opportunities around the globe. Sanchez/Capital Services is also used as a programming resource for the Company.

        In December 2001, the Company also entered into a joint marketing agreement with Sun® Microsystems to offer the Sanchez integrated suite of banking, brokerage and customer integration solutions on Sun's Solaris^TM 8 Operating Environment. Earlier in 2001, as part of the agreement, Sanchez ported its Profile banking solution to the Solaris 8 Operating Environment. In high-performance testing in the Sun environment, Profile exceeded a transaction processing rate of approximately 1,900 online transactions per second (tps) and 5,000 tps for accounts processed in end-of-day accrual cycles on a database of one million accounts. Favorable results were also achieved with functional tests conducted on a 10-million account database.

        For the e-PROFILE outsourcing business, the Company has established relationships with many third-party vendors that provide a range of financial capabilities; e.g., Checkfree® & Princeton e-com for electronic bill payment; Teletech for call center services, Concord EFS and Midwest Payment Systems for ATM and debit card network management; e-Loyalty for desktop integration; Deluxe and Clarke American® for checkbook printing; Kana® for case management/workflow and DocuCorp® for document creation and fulfillment, to name several.

The Banking Market

        In the United States, the Company believes the reform of the Glass-Steagall Act and the passage of the Gram-Leach-Bliley Act, which occurred in late 1999, are catalysts for change in the financial services industry. As a result, the Company believes competition will intensify in the coming years as the differences between banks, brokerages, insurance companies and other financial services providers continue to blur, particularly for retail consumers of financial products and services. The Company believes the competitive challenges presented by the emergence of electronic commerce and the consumer demand for greater product and service flexibility are altering traditional retail banking practices in North America. The Company also believes Europe and Asia are predisposed to alternate financial services delivery channels including WAP, Internet and other forms of direct banking. The Company believes this process will accelerate as the speed and commercial use of alternate delivery channels increase with the development and deployment of higher bandwidth communication (the ability to transmit more information in a shorter time). Furthermore, expanded Internet access through a myriad of affordable devices (such as personal computers, Internet access terminals, televisions and personal digital assistants) will also contribute to greater use of the Internet. Another market factor impacting the worldwide banking market is the ongoing aggregation of financial service offerings. There is a blending of financial services industries as insurance firms, brokerage houses, real estate firms, large retailers and other non-banks see direct banking as the means by which they can more fully service, retain and expand their existing customer bases.

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        During the last five years, next-generation technologies associated with direct banking and Internet-based financial services exposed the weaknesses in legacy processing environments, particularly in the United States. Legacy environments generally are not capable of integrating products and services across the back-end; they do not link all delivery channels on the front end; and they have little or no customer consolidation in the middle. Due to the unique product tailoring capability and delivery channel independence of Sanchez solutions, the Company believes it is positioned to supply the next generation of infrastructure to these organizations. The Company believes many institutions do not have the modern systems infrastructure required to create the innovative products and services to service the transactional customer. Sanchez also believes that the current delivery cost structure of these organizations will impair their ability to competitively price products. The Company believes its most promising opportunity for growth will come from increasing the distribution of Sanchez products, technology and services. By expanding the Sanchez product suite, the Company is positioned to offer integrated solutions for retail banking and brokerage as well as a solution that supplies transactional integration across a financial institution's enterprise.

        The Company also believes its e-PROFILE outsourcing model has the opportunity to be the leader in the VSP category for forward-thinking institutions wanting to move out of a supply-chain infrastructure for direct and Internet bank initiatives. Sanchez also believes the e-PROFILE outsourcing model has several growth horizons and is gearing its operational and technology infrastructure to function across multiple financial services delivery channels, which, the Company believes, will broaden e-PROFILE's value to institutions.

Sanchez Services

        The Company derives significant revenues from its services. Services revenues are derived from Sanchez' license application model and its e-PROFILE outsourcing model. The Company's primary service offerings include the following:

Project Services

        Sanchez provides project services for clients implementing a Sanchez solution in-house and for clients implementing a Sanchez e-PROFILE outsourced solution. Project services include project management, training, system implementation, custom interfaces, data conversion, integrated testing, custom software, localization, and version upgrade services. Project services are delivered by trained, financial service industry professionals. They work primarily at client locations and follow a published methodology employing proven project management and measurement techniques. For institutions implementing Sanchez solutions in-house, project services are provided either during the initial implementation or as contracted for by clients after conversion to Profile. Implementation service revenues from an in-house implementation vary, but typically can range from $250,000 to more than $5 million for an individual project. Typically, an in-house implementation for a top-tier institution involves moving a large volume of customer data from existing systems onto the Sanchez platform. In these cases, implementation revenues are higher when compared against implementing a de novo solution where little or no data conversion work is required. Project services from an in-house implementation also generate revenues from project management and custom interface work. When an institution replaces its in-house, legacy transaction processing system with a Sanchez solution, data conversion and custom system interface projects typically are delivered in 10 to 18 months. Other project services delivered during the implementation period can include training, conversion, localization and software customization. On a client-by-client basis, Sanchez has supplemented its project services with third-party resources from its pool of partners; e.g., IBM, Compaq, Datawest Solutions and PricewaterhouseCoopers, to name several. Implementation services revenues from an e-PROFILE outsourcing project vary by the size and scope of the implementation, but typically range from $1 million to more than $2.5 million per project. An e-PROFILE outsourcing project, which

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typically involves creating an Internet bank from a clean slate and does not involve replacing a legacy system, includes project management and implementation services, some data conversion, dozens of system interfaces and integrated systems testing. An institution can implement an e-PROFILE solution in as few as 120 days if a basic approach is taken to implementation. The Company has found, however, that institutions frequently want to differentiate their direct and Internet bank offerings from the start. When additional requirements are placed on a project, the implementation period can extend beyond 120 days.

Consulting Services

        The Company provides its clients with analysis, design, programming and testing for customization projects associated with the Profile integrated core banking application product. The consulting services group is based in Malvern, Pa., and supplies its services on a time and material basis globally. The group is also available to assist clients with data conversions, customized training programs, interface projects to other third-party or in-house legacy applications and customized reporting. A common methodology is used to plan, document and execute custom projects.

Client Maintenance and Support Services

        The major portion of the worldwide customer service and support is delivered from the Company's Malvern, Pa. headquarters. The services organization is responsible for help desk, research, systems operations and application quality assurance. A response team made up of research, quality assurance and programming personnel is assigned when maintenance issues are identified. This team works together to ensure that the customer issue is understood and dispatched accordingly. All issues are tracked and measured, and daily and weekly reports are generated for management review and action. Each client is assigned an account manager. Account managers are located around the globe and work in conjunction with the services organization in Malvern. The account managers are responsible for issue resolution. The Company believes that service response considerations play a major role in an institution's selection of banking software products. To respond to this need, the Company continues to enhance its ability to deliver localized customer support and installation capability worldwide, either directly or through third-party partners. The Company provides local support services to clients in Poland through a partnership with ComputerLand, and in Asia through a partnership with OpenSys. For Sanchez e-PROFILE clients, customer service is primarily supported through a data and operations center located in Seven Fields, Pennsylvania. The e-PROFILE data and operations center is responsible for providing support services to clients from implementation through production. These services include project management and implementation support, technical support for data operations and network issues, programming and testing, Sanchez product application support and vendor integration services. In addition to those services, the bank operations departments provide call center support, maintenance, and item exception handling. e-PROFILE has client directors assigned to each client in support of issue management.

Sales and Marketing

        The Company has a worldwide direct sales, sales support and marketing force of approximately 75 people. Prior to 2001, the Company focused its sales and marketing attention primarily on selling Profile and its related applications to the global top-tier institutions (those with assets in excess of $4 billion) and e-PROFILE to large, branded, non-bank financials in the United States who wanted to outsource their direct or Internet bank. During 2001, the Company expanded its product line by adding Sanchez Xpress and Sanchez Webclient. Sanchez WebCSR was in development. During 2001, Sanchez' sales and marketing force expanded its focus and now supports a multi-product and multi-market segment approach.

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        First, the approach includes continuing to sell the Company's highly successful, end-to-end, e-PROFILE outsourcing solution for banking. As the Company moves to add more fixed pricing options for Sanchez products used in the outsourcing solution, the Company expects to further reduce the barriers to entry for those institutions looking to offer direct or Internet banking services. In addition, the Company has begun to offer outsourcing prospects the option of licensing Sanchez' software products.

        Second, the Company intends to initiate efforts to sell enterprise legacy system swap-outs to mid-tier institutions both domestically and abroad. Increasingly, the Company believes this option has appeal to mid-tier institutions as they attempt to rid themselves of antiquated technologies that hinder competitiveness, neglect their customers and cannot scale to meet growth. The Company's solution in this space is aimed at reducing operations and technology costs and providing a managed risk migration strategy that allows a more controlled implementation schedule. A Sanchez solution sale into this market segment would include most, if not all, of the Sanchez integrated banking platform as well as offerings from other best-in-class, third-party vendors with whom the Company has established partnerships.

        Third, the Company is offering components of its integrated banking platform as line of business solutions for retail banking and for mono-line opportunities with the world's largest institutions. This approach permits larger institutions to test Sanchez solutions on a limited basis by engaging the Company to solve an immediate need. Once successful, the Company believes it can then grow the relationship by offering more Sanchez products and services.

        Lastly, the Company is marketing customer relationship management ("CRM") and wealth management solutions to financial institutions focused on solving profitable customer retentions issues and improving profitability within targeted customer groups. The Company recently added two Web-enabled technologies (integration of CRM software developed by SEDONA® Corporation and the acquisition of Equidity Inc.'s online account origination software) that are expected to help leapfrog the Company's internal development efforts in these areas as those technologies are integrated with products contained in Sanchez' integrated banking platform. Together, with the introduction of mutual fund processing in 2001 and the continued development of the Company's front-end brokerage-servicing project, the Company believes it can provide an attractive banking and brokerage package for wealth management solutions.

Pricing Strategy

        The Company prices its software products in four primary components: (i) one-time license fees for the software up to a usage limit (for example, number of users or number of customer accounts); (ii) fees for a full range of services which complement its software products, including product enhancement fees and implementation, consulting, conversion, training and software customization services; (iii) for e-PROFILE outsourcing sales, a Sanchez software license fee is tied to the account growth of the financial services firm on the e-PROFILE platform. As an institution's direct or Internet bank account base and account activity grows, Sanchez' revenue stream grows. The Company's e-PROFILE outsourcing projects generate implementation service revenues, ongoing processing revenue and license revenue for Sanchez. In lieu of up-front, one-time license fees, e-PROFILE outsourcing contracts, generally, generate license revenue for Sanchez on a per account / per month basis over the life of the contract after the client "goes live" with the solution; (iv) recurring support and software maintenance revenue.

Engineering

        The Company believes that it must constantly evolve and enhance both the functional scope and technical foundation of its products to remain competitive. In order to accomplish this, the Company

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has historically incurred significant expenses related to development activities and may increase this investment in the future. Total development expenses for 2001, 2000, and 1999 were $17.2 million, $22.8 million, $15.7 million and million respectively. In addition to its internal investment, in certain cases the Company builds enhancements for its clients that are incorporated into future products.

        Engineering follows a formal software development life cycle process. The Company has developed and acquired products that assist it in defining, planning, tracking, measuring and managing the development process. The Company realizes that large software projects can incur substantial cost, schedule and technical risk. The engineering area provides Sanchez application development, technology and platform development, maintenance programming, documentation and quality assurance. Engineering is responsible for defining plans for new product versions, developing Sanchez product application enhancements, defining technology and platform layer enhancements to product architecture, evaluating and implementing operating system ports, programming languages, database systems, and development and productivity tools. After engineering successfully implements a new technology component under an existing application component, it is responsible for propagating the technology through the Company.

        Complex software products such as those offered by the Company can contain undetected errors or performance problems, particularly when first introduced or when new versions are released. The Company's products have, from time to time, contained software errors that were discovered after commercial introduction. There can be no assurance that performance problems or errors will not be discovered in the Company's products in the future.

Employees

        As of December 31, 2001, Sanchez employed 596 full-time employees at offices in Malvern, Pa., Seven Fields, Pa., Chester, U.K; Warsaw, Poland; and Singapore. Of the 596 Sanchez employees, 166 worked at Sanchez's e-PROFILE subsidiary. Sanchez employees are not represented by any collective bargaining agreements. Neither Sanchez nor e-PROFILE has experienced a work stoppage.

        The Company believes that its continued success will depend, to a significant extent, upon the efforts and abilities of its senior management, in particular Sanchez' chairman, chief executive officer and its president (and chief operating officer). Further, the Company believes that its future success will depend in large part upon its ability to attract and retain highly skilled technical, management and sales and marketing personnel. Competition for technical personnel is especially intense, and could potentially constrain the Company's growth rate. In 2001, the Company piloted an off-shore development effort, and it expects to expand this effort during 2002. In addition to full-time employees, the Company has historically utilized the services of various independent contractors, primarily for overseas implementation projects and certain product development efforts, and to supplement the Company's e-PROFILE implementation teams.

Competition

        Financial institutions have two fundamental alternatives for obtaining data processing capabilities: (i) in-house applications, either those that are developed internally or those that are purchased from third party vendors and (ii) outsourcing, either as a part of a total outsourcing solution or where a third party acts as a service bureau. Since 1999, with the addition of the Company's e-PROFILE outsourcing solution, Sanchez participates in both of these alternatives.

        In the core processing software space, the Company's primary competitors include ALLTEL (Systematics software), Fiserv, Accenture and Alnova Technologies Corporation, CSC (Hogan software), Misys International Banking Systems (Kindle Banking Systems), Temenos (Globus), InterCept Group Inc., i-Flex Solutions, Fincentric, Computer Associates (interBiz Banking Group—Infopoint), SAP, EDS, Kirchman Corporation, EastPoint Technologies LLC, Metavante (a subsidiary of Marshall &

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Illsley Corporation), Jack Henry, WebTone (TouchPoint—Broadway & Seymour), The BISYS Group Inc., Aurum Technology (Miser, Bank Management Information System, Morningside, Premier II), Open Solutions Inc (OSI) and London Bridge International (Phoenix software). Competing with Sanchez in the direct and Internet segment of the financial services market are many of the same vendors listed above plus S1 Corporation, Corillian, Sybase (Financial Fusion), InteliData (Interpose), Digital Insight and Online Resources Corporation. In-house bank legacy software systems are also considered competition.

        Many of the Company's competitors have longer operating histories and greater competitive resources than Sanchez. These resources may provide them with an advantage in terms of adapting to industry changes and emerging technologies. Further, the client/server software market is characterized by rapid technological change and frequent new product introductions. New technologies and emerging industry standards can render existing products and services obsolete in a very short period of time. The Company's future success will depend upon its ability to enhance its current products and to develop and introduce new products that keep pace with technological developments and emerging industry standards, while addressing the increasingly sophisticated needs of its customers.

Glossary

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Forward-looking Statements

        The information regarding "forward-looking statements" under Item 7. "Management's Discussion and Analysis of Financial Condition and Consolidated Financial Condition and Results of Operations," is incorporated herein by reference.

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Item 2.    Properties.

        The Company's headquarters and principal administrative, sales and marketing, and application development operations are located in approximately 102,000 square feet of leased space in Malvern, Pennsylvania. These leases expire alternately from 2003 to 2007. The Company runs it's international operations from an office in Chester in the United Kingdom. The Company also leases office space in Madrid, Spain; Warsaw, Poland; Amsterdam, The Netherlands; and Singapore. e-PROFILE's operations center is located outside of Pittsburgh, Pennsylvania in approximately 31,000 square feet of leased space, which expires in 2004. The Company anticipates that additional space will be required as the business expands and believes that it will be able to obtain suitable space as needed.

Item 3.    Legal Proceedings.

        In February 2001, e-PROFILE filed for arbitration in response to 1stWebbankdirect's October 2000 termination of its processing agreement in connection with the consolidation of its e-banking platforms. e-PROFILE is seeking payment of all outstanding receivables from this customer ($1,350,000 at December 31, 2001), as well as certain fees due for minimum processing obligations. 1stWebbankdirect has counterclaimed and is seeking a refund of the implementation fees they paid for the project. The Company has not recognized implementation revenue or direct costs related to this contract through December 31, 2001, in accordance with SAB No. 101. A decision from the arbitration panel is expected in the second quarter of 2002.

        During the fourth quarter of 2001, an unannounced client that was in the final stages of implementing an outsourced solution on the e-PROFILE platform notified us of their intent to discontinue their plans of launching a direct bank. As of December 31, 2001, e-PROFILE had a $2,871,000 receivable balance with this customer. e-PROFILE is seeking payment of all outstanding receivables from this customer as well as certain fees related to the customers termination of the relationship. In accordance with SAB No. 101, the Company has recognized a portion of the associated deferred revenue and costs during the period this client was live in a "friends and family" environment and prior to the client notifying the Company of their intent to discontinue their plans.

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

        No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of 2001.

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Item 4A.    Executive Officers of the Registrant.

        The executive officers of the Company are as follows:

        Michael A. Sanchez founded the company in 1979, serving as chief executive officer from inception until April 1997, as well as its chairman since inception. Mr. Sanchez also has served as chief executive officer of e-PROFILE since April 1999. In addition to assisting with the strategic direction for Sanchez, he is also responsible for the organizational growth and development of e-PROFILE. Michael Sanchez and Frank Sanchez are brothers.

        Frank R. Sanchez has been the chief executive officer since April 1999 and previously was president and chief operating officer of the company since 1994. In his capacity as chief executive officer, Mr. Sanchez is responsible for the overall strategy and performance of the company, as well as the engineering, sales and marketing departments. He was the principal architect of the PROFILE suite of enterprise banking and financial services products and continues to be responsible for providing the overall direction of the product suite and technical strategy. From 1980 until 1994, Mr. Sanchez was executive vice president in charge of technology and product development.

        Joseph F. Waterman has served as president and chief operating officer of Sanchez since April 1999 and is responsible for the day-to-day operation of the company, as well as the client services and administrative departments. Previously, he was senior vice president and chief financial officer from 1992 when he joined the company. Prior to joining Sanchez, Mr. Waterman was employed by Safeguard Scientifics, Inc. for 13 years.

        Douglas J. Enns has been employed by the Company since July 1999, serving as managing director, international operations. Mr. Enns has over 20 years of experience in the banking industry. He chaired the board of governors of the University of Victoria. Prior to working at the Company, Mr. Enns was chief executive officer of Pacific Coast Savings Bank in Victoria from August 1988 to June 1999.

        Michael D. Harris joined the Company in April 2000 as a vice president responsible for various business development projects for the suite of PROFILE software applications. He became the Company's senior vice president in charge of engineering in November 2000, a position in which he is responsible for delivering and maintaining Sanchez software products including all software development, testing and documentation activities. He manages approximately 200 staff responsible for six banking and brokerage software products. Before arriving at Sanchez, Mr. Harris was a senior vice president for MasterCard International where he was the head of MasterCard's global chip group.

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        Eric Panepinto has been president of e-PROFILE since May 2001, with responsibility for all aspects of the outsourcing business. Before assuming this position he was senior vice president of Client and Vendor Relations, beginning with the incorporation of e-PROFILE in February 1999. From May 1998 until he joined e-PROFILE, Mr. Panepinto was the Vice President of Marketing and Lead Product Manager of Citigroup, Global Consumer Bank. From September 1997 until May 1998, he was the Vice President of New Business Development at Citicorp Investment Services, Inc. Prior to holding that position he was the Vice President of CitiGold National Support for Citibank, U.S. Europe Consumer Bank.

        Richard Phillimore became chief marketing officer in June 2000. Previously, Mr. Phillimore was the executive vice president of Infineer Inc., and a former senior vice president for MasterCard International. Mr. Phillimore directed and led all public relations and investor relations activities, led the re-branding of the company and implemented the associated communication plan. At MasterCard, prior to heading the association's global smart card business, Mr. Phillimore was the inaugural General Manager of Maestro International, MasterCard's global on-line debit program.

        Todd A. Pittman became CFO in December 2000. Previously, Mr. Pittman was the CFO for Integrion, where he directed all financial activities, including business planning, accounting, financial management, human resources, pricing, and shareholder relations. Prior to Integrion, Mr. Pittman worked for Coopers and Lybrand Consulting in their consulting practice and at Arthur Andersen in their audit practice.

        Daniel W. Sollis has been employed by the Company since April 1996, serving as senior vice president of sales since November 1997. Mr. Sollis, who began his career with the Company as vice president of North American sales, now oversees worldwide sales activities and business development. Prior to working at the Company, Mr. Sollis spent 16 years with Digital Equipment Corporation, beginning as a sales representative and concluding his tenure there as general manager of financial service industry business in Canada.

        John H. Teaford has been senior vice president of Strategic Alliances with the Company since February 1998. Mr. Teaford's responsibilities include researching and establishing third-party partnerships, joint ventures and other business opportunities worldwide. From 1985 until February 1998, Mr. Teaford periodically worked in a consultant capacity with the Company. During that period, he was president of J.H. Teaford and Company, a financial advisory, marketing and management consulting company.

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PART II

Item 5.    Market For Registrant's Common Equity and Related Stockholder Matters.

        The Company's common stock has been listed on the National Market System of Nasdaq under the symbol "SCAI" since it began trading on November 14, 1996. The following table sets forth, on a per share basis for the periods shown, the range of high and low sales price of the Company's common stock as reported by Nasdaq.

        As of March 15, 2002 the Company had outstanding 26,008,420 shares of common stock held by approximately 11,100 shareholders including beneficial owners of the common stock whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.

        Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available therefore, subject to any preferential dividend rights of outstanding Preferred Stock. To date, the Company has not paid any cash dividends on its common stock and does not expect to declare or pay any cash or other dividends in the foreseeable future.

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Item 6.    Selected Financial Data

        The statement of operations and balance sheet data presented below have been derived from the Company's audited consolidated financial statements. The data presented below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Consolidated Financial Statements and the notes thereto and other financial information appearing elsewhere in this Annual Report on Form 10-K.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

        Sanchez Computer Associates, Inc. ("Sanchez" or "the Company") is a global leader in developing and marketing scalable and integrated software and services solutions that provide retail banking, brokerage and customer integration for financial institutions. Approximately 350 financial institutions in 18 countries use Sanchez banking software products. Sanchez maintains its corporate headquarters in Malvern, Pa., its outsourced operations center in Pittsburgh, Pa., and runs its international operations from Chester in the United Kingdom.

        The Sanchez integrated banking platform empowers financial institutions to accelerate business transformation and achieve a competitive advantage by lowering operating costs, reducing technology risks and improving customer management. These solutions include: Sanchez Profile®, the highly flexible, multi-currency, multi-language, customer-centric, core banking and transaction processing application; Sanchez Xpress™, an enterprise customer and transaction management system, which empowers CRM and delivers business integration; Sanchez Webclient™, a Web-based, Internet

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customer front-end processor; and Sanchez WebCSR™, a browser-based integrated customer servicing application that can be deployed across multiple retail delivery channels such as branches and call centers.

        Sanchez also uses its integrated banking platform as the basis for a complete outsourced e-banking solution under the e-PROFILE® brand. Sanchez' e-PROFILE solution provides an integrated end-to-end operations and technology platform that enables financial services companies to offer comprehensive on-line financial services to their customers. At December 31, 2001, the open account base was approximately 440,000 accounts.

        As of December 31, 2001, Sanchez was processing accounts for a number of marquee clients including, GMAC Bank, Allstate Bank, Juniper Bank, Morgan Stanley Dean Witter's BusinesScape, Lehman Brothers Bank, DeepGreen Bank and ING DIRECT USA. MetLife Bank became a client in the fourth quarter of 2001 and is in implementation.

Critical Accounting Policies

        Our significant accounting policies are described in Note 2 to the consolidated financial statements included in this Annual Report. We believe our most critical accounting policies, judgments and estimates include revenue recognition matters, determining the estimated lives of our processing contracts and determining our allowance for doubtful accounts.

        For Sanchez' software license contracts, a determination needs to be made for each contract regarding whether the percentage-of-completion contract accounting method should be used to recognize revenue or whether revenue can be recognized when the software is delivered and all of the conditions of the American Institute of Certified Public Accountants, Statement of Position ("SOP") 97-2, "Software Revenue Recognition," are met. Contract accounting is required if our services are essential to the arrangement. In many cases, our services are essential to the arrangement because they involve customization and interfaces, and our license fees are paid in stages based on the completion of defined service deliverables. As a result, we typically recognize revenue from these arrangements using contract accounting, which generally results in recording revenue over a longer period of time. In other cases, our services are not essential to the arrangement, such as arrangements where an unrelated third party performs implementation services and the realization of our license fee is not dependent on the completion of such services. In these situations, we recognize license fees when persuasive evidence of an arrangement exists, the software is delivered, our fee is fixed or determinable and collection is probable, which generally results in recording revenue earlier than when contract accounting is used. The determination of whether our services are essential involves significant judgment and could have a material impact on our quarterly results of operations to the extent that significant new contracts are not accounted for using contract accounting.

        Under the percentage-of-completion contract accounting method, the Company recognizes revenue from the entire arrangement based on the percentage of costs incurred related to the implementation and development services compared to the total cost of such services. Using the percentage-of-completion method requires management to make estimates about the future costs of services, which are subject to change for a variety of internal and external factors. A change in these estimates could result in a material adjustment to the amount of revenue recorded under an arrangement.

        The Company's e-PROFILE outsourced projects generate both product license revenues and implementation-related service revenues, which in accordance with Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements," are largely deferred during the implementation phase along with the related costs until the client begins processing its customer's accounts on the outsourced platform. Once a client "goes live," the deferred revenue and costs are amortized over the expected life of the processing arrangement. Until we have more historical

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experience related to the actual term of processing arrangements, we have determined that the expected life of the arrangements does not exceed their contractual term. As it becomes apparent that a client will renew its processing term, the expected life is extended prospectively. To date, the contract terms have ranged from one to three years. Should a client terminate early, all revenue and cost would be recognized as of the termination date, if the amount is determinable and collection probable, which could be significant. A change in the expected life of the contact could have a material impact on the timing of future revenue and margin recognized from the amortization of deferred implementation and license fees.

        Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. The majority of the Company's receivables are due from financial service organizations located throughout the United States, Europe and Canada. From time to time, our clients dispute the amounts due to us and in other cases our clients experience financial difficulties and cannot pay on a timely basis. In certain instances, these factors ultimately result in uncollectable accounts. The determination of the appropriate reserve needed for uncollectable accounts involves significant judgment. A change in the factors used to evaluate collectability could result in a significant change in the reserve needed. Such factors include changes in the financial condition of our customer as a result of industry, economic or customer-specific factors, the ultimate settlement of disputes and, in certain cases, the decisions of third party arbitrators or courts.

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Results of Operations

        The following table sets forth for the periods indicated selected statement of operations data:

Highlights for 2001

        For the year ended December 31, 2001, the Company grew revenue approximately 30 percent to $88.8 million, and posted net earnings of $3.9 million or $0.15 per diluted share, which was an earnings increase of $0.39 over the same period for 2000. The Company also grew its outsourced processing revenues 80 percent in 2001 to $14.9 million, which was up from $8.3 million recorded in 2000. The Company also reported the quarterly operating loss of Sanchez' outsourcing solution declined for the seventh consecutive quarter with the fourth quarter ending December 31, 2001. e-PROFILE's operating loss for 2001's fourth quarter was $538,000 compared to 2001's fourth quarter operating loss of $2.8 million. During 2001, the Company made several announcements regarding its e-PROFILE outsourcing solution. MetLife Bank, the nationally chartered bank subsidiary of MetLife Inc., selected to outsource the bank's operations and technology infrastructure using the Company's outsourcing

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platform. In addition, MetLife Bank licensed several Sanchez products including Sanchez Profile, Xpress, Webclient and WebCSR. GMAC Bank, a unit of GMAC Financial Services, launched the first phase of its multi-channel bank in 2001 and launched its web-based solution in early 2002.

        Additional highlights included the significant revenues the Company received from its application software business. ING's Postbank, one of the largest retail banks in the Netherlands, continued to grow its retail account base and contributed to Sanchez' revenue growth by purchasing services and license scope expansion. Lloyds TSB Bank plc, one of the 25 largest and most highly rated financial services groups in the world, contributed significant services revenues to the Company as the bank continued to roll out its e-commerce strategy for the UK and continental Europe. Patagon.com, a Madrid-based Internet provider of financial services for Latin America and backed by one of Spain's leading banks, Banco Santander Central Hispano, contributed significant product and service revenue during the year as it continued to implement Sanchez banking solutions in Latin America.

        Other announcements highlighting the year included the addition of ING DIRECT Italy, which became the fifth ING DIRECT institution to open its virtual banking doors using Sanchez' integrated banking solution. Sumitomo Mitsui Banking Corporation (SMBC), the world's second largest banking corporation, successfully converted its global corporate banking customer and deposit operation in Brussels to a Sanchez solution. Brussels joined SMBC's New York and London offices running Sanchez applications as part of acorporate banking systems solution. Górnoslaski Bank Gospodarczy S.A., of Katowice, Poland, selected a Sanchez integrated banking solution to replace the institution's retail banking environment with a fully integrated bank branch, ATM and agent processing system. Vysya Bank, one of India's largest and leading private sector banks, went live with its Sanchez solution making the bank the first Indian institution to replace its legacy banking environment with a fully integrated bank branch, ATM and Internet solution. Inteligo Financial Services S.A. and Bankgesellschaft Berlin (Polska) launched a joint, multi-channel, direct financial services venture in Poland using Sanchez' software.

        The Company expanded its partnerships with several leading vendors. The Company entered into a joint marketing agreement with Sun Microsystems to offer the Sanchez platform of integrated banking products on Sun's Solaris' 8 platform. The Company also ported its Profile banking solution to the Solaris 8 platform during the year and entered into a global marketing, sales and consulting services alliance with Perot Systems Corporation to sell integrated customer information solutions and retail banking systems to the world's top financial institutions. In addition the Company signed a strategic consulting services agreement with CMG, a leading global information and communications technology company, to focus on clients in Belgium, The Netherlands, and Luxemborg. During the year, the relationship with IBM was instrumental in the MetLife and Vysya transactions.

2001 Compared to 2000

        Revenues.    Revenues increased $20.4 million, or 29.8%, in 2001, as each revenue category increased over 2000. The primary reasons for the increase were processing and service revenues. Processing and service revenues each increased $6.6 million in 2001, which represented an increase over 2000 of 80.2% and 24.3%, respectively. The processing increase is mainly due to the number of clients that have gone live on our outsourcing solution, as well as an increase in per account processing revenues due to the expanded services selected by our clients. Most of the service growth was attributable to the accretion of SAB No. 101 revenue from the clients that went live on the outsourcing solution and service revenues associated with implementation support in our software application business. For the year ended December 31, 2001, product revenues increased $3.9 million, or 19.3%. This increase is primarily attributable to license recognition from implementing clients in the U.S./Caribbean market and license expansion for existing clients. Software maintenance and other revenues increased $3.2 million, or 25.3%, for the year ended December 31, 2001, as a result of an increase in the Company's supported client base and a one-time settlement reached with a former customer pertaining to disputed maintenance charges.

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        Product development.    Product development expenses decreased $5.6 million, or 24.6%, in 2001. This decrease is primarily attributable to the creation of a product management group that includes a number of employees previously assigned to the development function. This newly created organization, a portion of which is allocated to sales and marketing, is responsible for managing all facets of our individual product lines, managing product profitability and providing technical sales support to our internal and partner sales organizations. Also contributing to the decrease was the deferral, for the first time, of product expenses related to deferred SAB No. 101 product revenue and lower incentive compensation.

        Product support.    Product support expenses increased by $616,000, or 13.9%, for the year ended December 31, 2001, as compared to the same period last year. This increase was primarily due to costs required to support the larger converted client base.

        Services.    Service expenses increased by $6.7 million, or 36.6%, during 2001, as compared to 2000. The increase was primarily due to the accreted expenses associated with the SAB No. 101 revenue. The gross margin relative to associated revenues was 25.9% for 2001, compared to 32.5% for 2000. The decrease in margin is primarily attributable to the lower margin on the accreted SAB No. 101 revenue and continued contribution by our third-party e-PROFILE partners.

        Processing.    Processing expenses increased $6.8 million, or 101.6%, in 2001, as compared to 2000. This increase is attributable to third-party processing fees and increased staffing. Although gross processing margin increased in the second half of 2001, the 8.8% full year margin compared to 18.5% during 2000 reflects the continued investment in the processing operation in anticipation of client account growth.

        Sales and marketing.    Sales and marketing expenses increased by $2.7 million, or 23.5%, due to the re-deployment of product development resources to sales and marketing and increased sales and sales support staff. In addition, the Company increased its level of external marketing expenditures in an effort to create a greater market awareness of the Company's multi product offerings for the financial services industry. These increases were partially offset by lower consulting fees, third-party commissions and incentive compensation.

        General, administrative and other.    These expenses decreased by $5.3 million, or 35.5%, in 2001 primarily due to a decrease in consulting fees, lower incentive compensation, costs associated with the sale of third-party products and the write-off in 2000 of previously capitalized IPO costs.

        Income tax provision.    Taxes in 2001 were 30.2% of income before taxes, as compared to 33.0% for the year ended December 31, 2000. The decrease in rate was due to a better than expected benefit derived from our foreign sales corporation upon filing our 2000 tax return.

2000 Compared to 1999

        Revenues.    Revenues increased $12.0 million, or 21.3% in 2000. The primary reason for this increase was processing revenues, which increased $5.3 million or 181% in the year ended December 31, 2000. The increase in processing revenues was generated by the increased number of clients and accounts processing with the e-PROFILE solution. Service revenues increased $3.1 million in 2000, primarily as a result of additional implementation activity associated with e-banking projects. For the year ended December 31, 2000, product revenues increased $945,000 or 4.9% as a result of new license sales and one-time license expansions. Software maintenance and other revenues increased $2.7 million or 26.3% in 2000 as compared to 1999. This increase is primarily attributable to an increase in the Company's supported client base and higher sales of third-party products.

        Product development.    Product development expenses increased $7.1 million, or 44.9%, for 2000, due to costs associated with increased staffing to support the expansion of our new product offerings, e-PROFILE consulting fees related to product strategy development, expanded facilities and other

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overhead costs. Staffing increased 17% for this area of the Company primarily due to the Company's focus on extending its technology into areas that are targeted to become new revenue sources. The percent relationship to total revenue increased from 27.9% in 1999 to 33.3% in 2000.

        Product support.    Product support expenses increased by $599,000, or 15.6%, in the year ended December 31, 2000, due to cost required to support the larger converted client base.

        Services.    Services expenses increased by $4.9 million, or 36.5%, during 2000. The increase was primarily due to additional staffing and related overhead costs for both Sanchez and e-PROFILE needed to support the increased services delivered. The gross margin relative to associated revenues for the year ended December 31, 2000 was 32.5%, compared to 44.3% for the year ended December 31, 1999. The decrease was primarily attributable to the increased use of third party partners.

        Processing.    Processing expenses increased by $4.3 million, or 178%, during 2000, in conjunction with a corresponding increase in processing revenues.

        Sales and marketing.    Sales and marketing expenses increased by $3.4 million, or 41.3%, in the 2000 period due to costs associated with increased staffing, third-party commissions and consulting fees related to developing sales strategies and marketing plans.

        General, administrative and other.    These expenses increased by $8.6 million, or 136%, due to increased e-PROFILE staffing and subsequent one-time charges related to integrating certain portions of e-PROFILE back into Sanchez, the write-off of e-PROFILE initial public offering costs and higher bad debt reserves.

        Income tax provision.    Taxes in 2000 were 33.0% of income before income taxes, as compared to 30.5% for the year ended December 31, 1999. The 2000 rate is lower than statutory rates as a result of not recording a state tax benefit related to e-PROFILE's loss. The 1999 year was lower than historical rates due to a tax benefit realized from the recalculation of the impact of the Company's foreign sales corporation.

Liquidity and Capital Resources

        Cash and cash equivalents were $41.0 million at December 31, 2001. Cash flows from operations for 2001 were $4.9 million, $10.1 million in 2000, and $2.3 million in 1999. The net cash provided by operating activities in 2001 was primarily due to net earnings, depreciation, amortization and income tax refunds. The increases in cash were partially offset by an increase in accounts receivable due to the increase in billable milestones late in the fourth quarter and the decrease in accounts payable and accrued expenses. The 99 days sales outstanding as of December 31, 2001, is in line with our historical average. The receivable balance will continue to be significantly impacted by the timing of contract milestones and time and material billings.

        During 2001, the Company used $4.4 million for investing activities primarily related to the purchase of fixed assets due to increased staffing and additional equipment.

        Financing activities contributed cash of $546,000 in 2001, as a result of participation in the employee stock purchase plan and the exercise of options, which was partially offset by the repurchase of e-PROFILE outstanding stock. The $546,000 represents a significant reduction compared to $10.3 million in 2000. The primary reason for the decrease was a $6.0 million investment in e-PROFILE from two external sources in 2000, which were subsequently converted to Sanchez stock, as well as a reduction of stock options exercised.

        In April of 2001, the Company agreed to commit up to $10 million of capital contributions to a newly formed venture fund that invests in early stage technology companies. As of December 31, 2001, the Company has invested $1.5 million in the fund. The Company currently anticipates that cash generated from operations and existing cash balances will be sufficient to satisfy its operating and capital cash needs for the foreseeable future and at a minimum through the next year. Should the

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Company's business expand more rapidly than expected, the Company believes that additional capital, if necessary, would be available to fund such operating and capital requirements.

        The Company believes that its business is generally not seasonal; however, the Company has historically experienced, and can be expected to continue to experience, a certain degree of variability in its quarterly revenue, earnings and cash flow patterns. This variability is typically driven by significant events, which directly impact the recognition and billing of project related revenues. Examples of such events include the timing of new business contract closings and the initiation of product and service fee revenue recognition, one-time payments from existing clients relative to license expansion rights (required to process a greater number of customer accounts or expand the number of permitted users) and completion of implementation project roll outs and the related revenue recognition. Because a high percentage of the Company's expenses are relatively fixed, a variation in the timing of the initiation or the completion of client projects, particularly at or near the end of any quarter, can cause significant variations in operating results from quarter to quarter. The Company believes that over the course of time the ongoing monthly revenue stream associated with the e-PROFILE outsourcing operation will contribute toward more predictable quarter-to-quarter revenues.

Forward-looking Statements

        Certain matters discussed in this Form 10-K contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, but not limited to, statements concerning the Company's revenues, expenses and earnings, future operating and financial performance, growth rates, acquisition opportunities, and other similar forecasts and expectations. The words "anticipate," "estimate," "believe," "expect," "intend," "plan," "project" and variations of these words and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on operating budgets, forecasts, beliefs and assumptions of management and, as such, are subject to risks and uncertainties and are not guarantees of future performance. Actual outcomes could differ materially from those expressed in any such forward-looking statement due to a variety of factors including, but not limited to, the demand for products and services in the financial services industry, competition among software and technology companies serving that industry, the timing of new contract closings, potential delays in the implementation of products and services, the success of the Company's e-PROFILE business model, the extent to which the Internet will be used for financial services and products, the development of banking markets, market acceptance of the Company's products and services within these markets, the Company's ability to protect its intellectual property rights, the potential adverse impact of security breaches, and the Company's ability to continue to improve its products and services. In addition to these factors, actual performance, outcomes and results may differ materially because of other, more general factors including, without limitation, general industry and market conditions and growth rates, domestic and international economic conditions, governmental and public policy changes and the availability of financing in the amounts, at the terms and on the conditions necessary to support the Company's potential future needs.

7A.    Quantitative and Qualitative Disclosures About Market Risk

        Interest Rate Risk—The Company's exposure to market risk for changes in interest rates relates primarily to the Company's cash equivalents. The Company does not have any derivative financial instruments in its portfolio. The Company is averse to principal loss and ensures the safety and preservation of its invested funds by limiting default risk, market risk and reinvestment risk. The Company does not expect any material losswith respect to its cash equivalents.

        Foreign Currency Risk—The Company does not use foreign exchange forward contracts. Substantially all contractual arrangements with international customers are denominated in U.S. dollars.

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Item 8. Financial Statements and Supplementary Data.

Index to Consolidated Financial Statements

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Report of Independent Public Accountants

To Sanchez Computer Associates, Inc.:

        We have audited the accompanying consolidated balance sheets of Sanchez Computer Associates, Inc. (a Pennsylvania corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company'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 financial position of Sanchez Computer Associates, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

        As explained in Note 2 to the financial statements, effective January 1, 2000, the Company changed its method of recognizing revenue.

Arthur Andersen LLP        

Philadelphia, Pennsylvania
February 5, 2002

33

Sanchez Computer Associates, Inc.

Consolidated Balance Sheets

(In Thousands)

See notes to consolidated financial statements

34

Sanchez Computer Associates, Inc.

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

See notes to consolidated financial statements

35

Sanchez Computer Associates, Inc.

Consolidated Statements of Shareholders' Equity

(In Thousands, Except Per Share Amounts)

See notes to consolidated financial statements

36

Sanchez Computer Associates, Inc.

Consolidated Statements of Cash Flows

(In Thousands)