-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D664PYTtSRLBuetVcxviV+BOXaO/Wt9nniXIflOCZVeT+cp/hhAGz5qndFaWK2tn hK5GpMT4wwLSMRMEPjEq6Q== 0000950124-96-004966.txt : 19961115 0000950124-96-004966.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950124-96-004966 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPSS INC CENTRAL INDEX KEY: 0000869570 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 362815480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22194 FILM NUMBER: 96661830 BUSINESS ADDRESS: STREET 1: 444 NORTH MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3123292400 MAIL ADDRESS: STREET 1: 444 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 10-Q 1 3RD QUARTER REPORT 9/30/96 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 COMMISSION FILE NUMBER: 33-64732 SPSS INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 36-2815480 (STATE OR OTHER JURISDICTION (IRS EMPLOYER IDENTIFICATION NO.) OF INCORPORATION OR ORGANIZATION) 444 N. MICHIGAN AVENUE, CHICAGO, ILLINOIS 60611 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE) REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (312)329-2400 INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS 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 FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ---- ------ AS OF NOVEMBER 1, 1996, THERE WERE 7,379,858 SHARES OF COMMON STOCK OUTSTANDING, PAR VALUE $.01, OF THE REGISTRANT. ================================================================================ 2 SPSS INC. FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1996 INDEX
PART I - FINANCIAL INFORMATION PAGE ---- ITEM 1. FINANCIAL STATEMENTS INDEPENDENT AUDITORS' REVIEW REPORT 3 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1995 AND SEPTEMBER 30, 1996 (UNAUDITED) 4 CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996 (UNAUDITED) 5 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996 (UNAUDITED) 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 14 ITEM 5. OTHER INFORMATION 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
2 3 ITEM 1. FINANCIAL STATEMENTS INDEPENDENT AUDITORS' REVIEW REPORT The Board of Directors SPSS Inc.: We have reviewed the consolidated balance sheet of SPSS Inc. and subsidiaries as of September 30, 1996, and the related consolidated statements of income for the three-month and nine-month periods ended September 30, 1995 and 1996 and cash flows for the nine-month periods ended September 30, 1995 and 1996. These consolidated financial statements are the responsibility of SPSS Inc.'s management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above, for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the supplemental consolidated balance sheet of SPSS Inc. and subsidiaries as of December 31, 1995, and the related supplemental consolidated statements of income, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated September 26, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1995 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG PEAT MARWICK LLP Chicago, Illinois October 28, 1996 3 4 SPSS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT FOR SHARE DATA)
DECEMBER 31, SEPTEMBER 30, 1995 * 1996 ------------ -------------- (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents $ 10,924 $ 12,258 Accounts receivable, net of allowances 12,543 14,526 Inventories 1,614 1,355 Prepaid expenses and other current assets 1,469 2,210 -------- -------- 26,550 30,349 -------- -------- EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost: Furniture, fixtures and office equipment 3,501 3,786 Computer equipment and software 8,711 10,528 Leasehold improvements 1,413 1,562 -------- -------- 13,625 15,876 Less: Accumulated depreciation and amortization 9,283 10,478 -------- -------- Net equipment and leasehold improvements 4,342 5,398 -------- -------- Capitalized software development costs, net of accumulated amortization 6,839 6,798 Goodwill, net of accumulated amortization 2,113 1,928 Other assets 1,999 1,718 -------- -------- $ 41,843 $ 46,191 ======== ======== CURRENT LIABILITIES: Accounts payable $ 2,602 $ 2,828 Accrued royalties 496 396 Accrued rent 921 731 Other accrued liabilities 8,787 7,497 Income taxes and value added taxes 2,262 3,499 Customer advances 295 164 Deferred revenues 6,485 5,980 -------- -------- 21,848 21,095 -------- -------- Deferred income taxes 2,015 2,015 Other non-current liabilities 288 98 STOCKHOLDERS' EQUITY Common stock, $.01 par value; 50,000,000 shares authorized; 7,316,230 and 7,362,949 shares issued and outstanding in 1995 and 1996, respectively 73 74 Additional paid-in-capital 37,317 37,850 Cumulative foreign currency translation adjustments (699) (1,118) Accumulated deficit (18,999) (13,823) -------- -------- 17,692 22,983 -------- -------- $ 41,843 $ 46,191 ======== ========
* The consolidated balance sheet as of December 31, 1995 has been restated to give retroactive effect to the merger with CLEAR Software, Inc., which is accounted for under the pooling-of-interests method. See accompanying notes to consolidated financial statements. 4 5 SPSS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT FOR SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ---------------------- 1995 1996 1995 1996 ---------- ---------- ---------- ---------- Net revenues: Desktop products $ 12,224 $ 14,451 $ 34,784 $ 41,730 Large System products 2,782 2,674 7,892 8,141 Other products and services 1,187 1,873 4,745 5,003 --------- --------- ---------- --------- Net revenues 16,193 18,998 47,421 54,874 Cost of revenues 1,718 1,840 4,629 5,236 --------- --------- ---------- --------- Gross profit 14,475 17,158 42,792 49,638 Operating expenses: Sales and marketing 8,573 9,234 26,025 27,820 Product development 2,464 3,097 6,755 8,557 General and administrative 1,157 1,585 3,522 4,268 --------- --------- ---------- --------- Operating expenses 12,194 13,916 36,302 40,645 --------- --------- ---------- --------- Operating income 2,281 3,242 6,490 8,993 Other income (expense): Net interest income (expense) 68 83 79 307 Other income (expense) (1) (84) 141 (190) Merger costs - (980) - (980) --------- --------- ---------- --------- Other income (expense) 67 (981) 220 (863) --------- --------- ---------- --------- Income before income taxes 2,348 2,261 6,710 8,130 Income tax expense 788 773 2,206 2,702 --------- --------- ---------- --------- Net income $ 1,560 $ 1,488 $ 4,504 $ 5,428 ========= ========= ========== ========= Net income per share $ 0.20 $ 0.18 $ 0.59 $ 0.68 ========= ========= ========== ========= Shares used in computing net income per share 7,911,353 8,078,012 7,697,217 8,031,684 ========= ========= ========== =========
The consolidated results of operations for the three months and nine months ended September 30, 1995 and 1996 have been restated to give retroactive effect to the merger with CLEAR Software, Inc., which is accounted for under the pooling-of-interests method. See accompanying notes to consolidated financial statements. 5 6 SPSS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, --------------------- 1995 1996 ------- ------- Cash flows from operating activities: Net income $ 4,504 $ 5,428 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,079 3,428 Changes in assets and liabilities, net of effects of the purchase of BMDP Statistical Software, Inc.: Accounts receivable (159) (1,983) Inventories 252 259 Accounts payable (1,323) 226 Accrued royalties (113) (100) Accrued expenses (1,267) (1,236) Other 204 (1,298) ------- ------- Net cash provided by operating activities 5,177 4,724 ------- ------- Cash flows from investing activities: Capital expenditures, net (1,804) (2,684) Capitalized software development costs (1,799) (995) Net payments for acquisitions -- (244) ------- ------- Net cash used in investing activities (3,603) (3,923) ------- ------- Cash flows from financing activities: Net repayments under line-of-credit agreement (2,868) -- Net proceeds from issuance of common stock 9,269 345 Income tax benefit from stock option exercises -- 188 Other (19) -- ------- ------- Net cash provided by financing activities 6,382 533 ------- ------- Net change in cash 7,956 1,334 Cash and cash equivalents at beginning of period 1,780 10,924 ------- ------- Cash and cash equivalents at end of period $ 9,736 $12,258 ======= ======= Supplemental disclosures of cash flow information: Interest paid $ 128 $ 19 Income taxes paid 2,082 1,280 ======= ======= Supplemental disclosures of noncash activity: Declaration of Clear dividends $ 99 $ --
The consolidated statements of cash flows for the nine months ended September 30, 1995 and 1996 have been restated to give retroactive effect to the merger with CLEAR Software, Inc., which is accounted for under the pooling-of-interests method. See accompanying notes to consolidated financial statements 6 7 SPSS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods presented. All such adjustments are of a normal recurring nature. Because the Company's merger with CLEAR Software, Inc. ("CLEAR") is being treated as a pooling of interests for accounting purposes, all consolidated financial statements for the periods prior to the merger have been restated to include the assets, liabilities and operating results of CLEAR (See "Business Combination" at Note 3). These consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 1995, included in the Company's Form 10-K filed with the Securities and Exchange Commission. NOTE 2 - NET INCOME PER SHARE Net income per common and common equivalent share has been computed using the weighted average number of common and dilutive common equivalent shares outstanding for each period (8,078,012 shares for the three months ended September 30, 1996, 8,031,684 shares for the nine months ended September 30, 1996, and 7,911,353 and 7,697,217 shares for the comparable periods in 1995). Common equivalent shares consist of the shares issuable upon exercise of stock options (using the treasury stock method). NOTE 3 - BUSINESS COMBINATION On September 26, 1996, SPSS acquired CLEAR, a Massachusetts corporation, for SPSS common stock valued at approximately $4.5 million in a merger accounted for as a pooling of interests. Pursuant to an Agreement and Plan of Merger, dated September 23, 1996, among SPSS, CLEAR and Vadim Yasinovsky, Marina Goldberg, Ella Kroll and six other minority shareholders of CLEAR, a wholly owned subsidiary of SPSS was merged into CLEAR, with CLEAR as the surviving corporation. It is expected that this transaction will qualify as a tax-free reorganization. The Company incurred significant costs and expenses in connection with this merger, including professional fees, employees' severance and various other expenses. These costs were expensed in the third quarter of 1996. 7 8 The acquisition of CLEAR was accounted for as a pooling of interests. The following unaudited information reconciles total revenues and net income of SPSS Inc. and subsidiaries as previously reported in the Company's annual report on Form 10-K with the amounts presented in the accompanying unaudited statements of operations for the three months and nine months ended September 30, 1995, as well as the separate results of operations for the three months and nine months ended September 30, 1996, of CLEAR.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1995 SEPTEMBER 30, 1995 --------------------------- --------------------------- REVENUES NET INCOME REVENUES NET INCOME ------------ ------------- ------------ ------------- SPSS Inc.(1) $15,563 $1,513 $45,349 $4,229 CLEAR 630 47 2,072 275 ------------ ------------- ------------ ------------- $16,193 $1,560 $47,421 $4,504 ============ ============= ============ =============
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1996 SEPTEMBER 30, 1996 --------------------------- --------------------------- REVENUES NET INCOME REVENUES NET INCOME ------------ ------------- ------------ ------------- CLEAR $ 708 $ 34 $ 2,368 $ 252 ============ ============= ============ =============
(1) Represents the historical results of SPSS Inc. and subsidiaries without considering the effect of the pooling of interest of CLEAR. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following table sets forth the percentages that selected items in the Consolidated Statements of Income bear to net revenues:
PERCENTAGE OF NET PERCENTAGE OF NET REVENUES REVENUES ----------------------- ----------------------- THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 1995 1996 1995 1996 ---------- ----------- ---------- ----------- Statement of Income Data: Net revenues: Desktop products 76% 76% 73% 76% Large System products 17% 14% 17% 15% Other products and services 7% 10% 10% 9% --------- --------- --------- --------- Net revenues 100% 100% 100% 100% Cost of revenues 11% 10% 10% 10% --------- --------- --------- --------- Gross profit 89% 90% 90% 90% Operating expenses: Sales and marketing 53% 49% 55% 51% Product development 15% 16% 14% 15% General and administrative 7% 8% 7% 8% --------- --------- --------- --------- Operating expenses 75% 73% 76% 74% --------- --------- --------- --------- Operating income 14% 17% 14% 16% Other income (expense): Net interest income (expense) 1% -- -- 1% Other income (expense) -- -- -- -- Merger costs -- 5% -- 2% --------- --------- --------- --------- Other income (expense) 1% (5%) -- (1%) --------- --------- --------- --------- Income before income taxes 15% 12% 14% 15% Income tax expense 5% 4% 4% 5% --------- --------- --------- --------- Net income 10% 8% 10% 10% ========= ========= ========= =========
9 10 COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1995 TO THREE MONTHS ENDED SEPTEMBER 30, 1996. Net Revenues. Net revenues were $16,193,000 and $18,998,000 for the three months ended September 30, 1995 and 1996, respectively, an increase of 17%. This revenue increase was influenced, in part by the acquisition of BMDP Statistical Software, Inc. ("BMDP"), effective December 29, 1995. Net of BMDP revenue of approximately $559,000, the Company's increase in sales was 14%. Revenues from products designed for desktop computers ("Desktop products") increased by 18% over the corresponding period in 1995, but there was a 4% decrease in revenues from products designed for mainframes, minicomputers, and UNIX workstations ("Large System products"). The increase in revenues from Desktop products reflected a $1,566,000 increase in new revenues from SPSS for Windows. In addition, revenues from annual license renewals of Desktop products resulted in a net increase of $651,000, reflecting an $899,000 increase in annual license renewals of SPSS for Windows. The decrease in revenues from Large System products was primarily due to a decrease in recurring revenues partially offset by new UNIX licenses as a result of the BMDP acquisition. Other products and services revenues increased by 58% due primarily to increases of $543,000 in revenues from training and consulting services and $140,000 in publication sales. Revenues for the third quarter of 1996 were adversely affected by changes in foreign currency exchange rates. Cost of Revenues. Cost of revenues consists of costs of goods sold, amortization of capitalized software development costs, and royalties paid to third parties. Cost of revenues was $1,718,000 and $1,840,000 in the three months ended September 30, 1995 and 1996, respectively. Such costs increased due primarily to higher sales levels. As a percentage of net revenues, cost of revenues decreased from 11% to 10%. Sales and Marketing. Sales and marketing expenses were $8,573,000 and $9,234,000 for the three months ended September 30, 1995 and 1996, respectively, an increase of 8%. This increase was due to the expansion of the domestic and international sales organizations, and salary and commission increases. As a percentage of net revenues, such expenses decreased from 53% to 49%. Product Development. Product development expenses were $2,464,000 and $3,097,000 (net of capitalized software development costs of $276,000 and $257,000) in the three months ended September 30, 1995 and 1996, respectively, an increase of 26%. In the corresponding periods in 1995 and 1996, the Company's expense for amortization of capitalized software and product translations, included in cost of revenues, was $475,000 and $374,000, respectively. The increase in product development expenses was primarily due to salary and recruiting fee increases, depreciation expense, and other additions to the product development staff. As a percentage of net revenues, product development expenses increased from 15% to 16%. 10 11 General and Administrative. General and administrative expenses were $1,157,000 and $1,585,000 in the three months ended September 30, 1995 and 1996, respectively, an increase of 37%. Such expenses increased primarily due to increases in bad debt, employment taxes, and employee insurance expenses. As a percentage of net revenues, general and administrative expenses increased from 7% to 8%. Net Interest Income. Net interest income was $68,000 and $83,000 for the three months ended September 30, 1995 and 1996, respectively. This variance was primarily due to SPSS' investment of higher cash balances in 1996. Other Income (Expense). Other income (expense) consists of a foreign currency loss for the three months ended September 30, 1995. Other income (expense) consists primarily of foreign currency losses for the three months ended September 30, 1996. Merger costs. Charges related to the merger of CLEAR totaled $980,000 and represented professional fees, severance pay, and other related costs. Provision for Income Taxes. The provision for income taxes was $788,000 and $773,000 for the three months ended September 30, 1995 and 1996, respectively, reflecting an approximate effective tax rate of 34%. COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1995 TO NINE MONTHS ENDED SEPTEMBER 30, 1996. Net Revenues. Net revenues were $47,421,000 and $54,874,000 in the nine months ended September 30, 1995 and 1996, respectively, an increase of 16%. This increase in revenue was influenced, in part, by the acquisition of BMDP, effective December 29, 1995. Net of BMDP revenue of approximately $1,055,000, the Company's increase in sales was 13%. Revenues from Desktop products increased 20% over the corresponding period in 1995 and revenues from Large System products increased 3%. The increase in revenues from Desktop products reflected $4,491,000 in new revenues from SPSS for Windows. In addition, revenues from annual license renewals of Desktop products resulted in a net increase of $2,390,000, reflecting a $2,945,000 increase in annual license renewals of SPSS for Windows. The increase in revenues from Large System products was primarily due to an increase in revenues from new UNIX licenses as a result of the BMDP acquisition. Other products and services revenues increased 5% primarily due to the increase in training and consulting revenues. This increase was partially offset by the decrease in revenues previously received from publications and student products due to the end payment of guaranteed royalty payments related to the Prentice Hall Agreement in July 1995. Revenues for the first nine months of 1996 were adversely affected by changes in foreign currency exchange rates. 11 12 Cost of Revenues. Cost of revenues were $4,629,000 and $5,236,000 for the nine months ended September 30, 1995 and 1996, respectively, an increase of 13%. Such costs increased due to higher sales levels and higher royalty expense paid to third parties. As a percentage of net revenues, such expenses remained constant at 10%. Sales and Marketing. Sales and marketing expenses were $26,025,000 and $27,820,000 in the nine months ended September 30, 1995 and 1996, respectively, an increase of 7%. This increase was due to expansion of the domestic and international sales organizations, and salary and commission increases. As a percentage of net revenues, such expenses decreased from 55% to 51%. Product Development. Product development expenses were $6,755,000 and $8,557,000 (net of capitalized software development costs of $1,218,000 and $716,000) for the nine months ended September 30, 1995 and 1996, respectively, an increase of 27%. In the corresponding periods in 1995 and 1996, the Company's expense for amortization of capitalized software and product translations, included in cost of revenues, was $1,194,000 and $1,067,000, respectively. The increase in product development expenses was primarily due to salary and recruiting fee increases, depreciation expense, and other additions to the product development staff. As a percentage of net revenues, such expenses increased from 14% to 15%. General and Administrative. General and administrative expenses were $3,522,000 and $4,268,000 in the nine months ended September 30, 1995 and 1996, respectively, an increase of 21%. Such expenses increased primarily due to increases in bad debt expense, employment taxes, employee insurance, and temporary employment and rent expenses. As a percentage of net revenues, general and administrative expenses increased from 7% to 8%. Net Interest Income. Net interest income was $79,000 and $307,000 for the nine months ended September 30, 1995 and 1996, respectively. This favorable variance can be attributed to the elimination of interest expense related to the line of credit, which was repaid with the net proceeds from the Company's follow-on public offering of common stock, in February 1995. Other Income (Expense). Other income (expense) was $141,000 and $(190,000) for the nine months ended September 30, 1995 and 1996, respectively. These amounts are comprised primarily of foreign currency gains (losses) in the corresponding nine month periods. Merger costs. Charges related to the merger of CLEAR totaled $980,000 and represented professional fees, severance pay, and other related costs. Provision for Income Taxes. Provision for income taxes was $2,206,000 and $2,702,000 in the nine months ended September 30, 1995 and 1996, respectively, reflecting an approximate effective tax rate of 33%. 12 13 LIQUIDITY AND CAPITAL RESOURCES The Company had no long-term debt as of September 30, 1996 and held approximately $12,258,000 of cash and cash equivalents. Funds in the first nine months of 1996 were used in operations and for payments related to the Company's acquisition of BMDP. Capital expenditures were also made for furniture, computer equipment and leasehold improvements for newly hired employees and product development. The Company currently has an available $5,000,000 secured line of credit with Bank of America N.T.S.A. ("B of A"), under which borrowings bear interest at the reference rate (currently 8.25%). As of September 30, 1996, the Company had no borrowings under this line of credit. The credit agreement with B of A requires the Company to comply with certain specified financial ratios and tests, and restricts the Company's ability to, among other things (i) pay dividends or make distributions, (ii) incur additional indebtedness, (iii) create liens on assets, (iv) make investments, (v) engage in mergers, acquisitions or consolidations, (vi) sell assets and (vii) engage in certain transactions with affiliates. The Company anticipates that amounts available under its line of credit, existing sources of liquidity, cash flows generated from operations, and the net proceeds from the February 1995 public offering of common stock will be sufficient to fund the Company's operations and capital requirements for the foreseeable future. However, no assurance can be given that changing business circumstances will not require additional capital for reasons that are not currently anticipated or that the necessary additional capital will then be available to the Company on favorable terms, or at all. INTERNATIONAL OPERATIONS Significant growth in the Company's international operations continued during the third quarter of 1996. The portion of revenues attributable to international operations was adversely affected by the relationship of the U.S. dollar when compared to other foreign currencies. Consolidated net revenues increased 17% in the three months ended September 30, 1996, when compared to the three months ended September 30, 1995 and 16% for the nine months ended September 30, 1996 when compared to the same period of 1995. Net of the effects of changes in foreign currency rates, the increases would have been approximately 19% and 18%, respectively. 13 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Currently there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or to which any of their property is subject. ITEM 5. OTHER INFORMATION On October 30, 1996, SPSS entered into an agreement to acquire Jandel Corporation, a California corporation ("Jandel"), for SPSS common stock valued at approximately $9,000,000 (or such lower figure as is obtained by subtracting the amount to be paid to any dissenting shareholders) less the expenses of Jandel in respect of the transaction, in a merger which will be done as a pooling of interests. Pursuant to an Agreement and Plan of Merger, dated October 30, 1996, among SPSS, SPSS Acquisition, Inc., a wholly-owned subsidiary of SPSS ("SPSS Acquisition") and Jandel, SPSS Acquisition will be merged into Jandel, with Jandel as the surviving corporation. Jandel is a privately held producer of software tools for scientists. SPSS will continue to operate the Jandel business from the Jandel offices in San Rafael, California. 14 15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits (Note: Management contracts and compensatory plans or arrangements are underlined in the following list.)
Incorporation Exhibit by Reference Number Description of Document (if applicable) - ------- ------------------------------------------------------- --------------- 2.1 Agreement and Plan of Merger among SPSS, SPSS ACSUB, Inc., Clear Software, Inc. and the shareholders named therein dated September 23, 1996. +2.1 2.2 Agreement and Plan of Merger among SPSS, SPSS Acquisition and Jandel, dated October 30, 1996 ++2.1 3.1 Certificate of Incorporation of the Company * 3.2 3.2 By-Laws of the Company * 3.4 4.1 Credit Agreement ** 4.1 10.1 Amended and Restated 1995 Equity Incentive Plan xx 15.1 Acknowledgment of Independent Certified Public Accountants Regarding Independent Auditors' Review Report 27.1 Financial Data Schedule
_______________________________ + Previously filed with SPSS' Report on Form 8-K, dated September 26, 1996, filed October 11, 1996, as amended on Report on Form 8-K/A-1, filed on November 1, 1996 ++ Previously filed with Form S-4 Registration Statement of SPSS Inc. filed on November 1, 1996. * Previously filed with Amendment No. 2 to Form S-1 Registration Statement of SPSS Inc. filed on August 4, 1993 (Registration No. 33-64732) ** Previously filed with SPSS' Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31, 1996 15 16 xx Previously filed as Appendix A to the Company's 1996 Proxy Statement, filed on May 16, 1996 (b) SPSS Inc. filed the following report on Form 8-K during the quarterly period ended September 30, 1996: (i) Report on Form 8-K, dated September 26, 1996, filed October 11, 1996, as amended on Report on Form 8-K/A-1, filed on November 1, 1996. The Report on Form 8-K reported that on September 26, 1996, SPSS acquired CLEAR, a Massachusetts corporation, for SPSS common stock valued at approximately $4.5 million in a merger accounted for as a pooling of interests. Pursuant to an Agreement and Plan of Merger, dated September 23, 1996, among SPSS, CLEAR and Vadim Yasinovsky, Marina Goldberg, Ella Kroll and six other minority shareholders of CLEAR, a wholly owned subsidiary of SPSS was merged into CLEAR, with CLEAR as the surviving corporation. The Report on Form 8-K and Form 8-K/A-1 was filed under Items 2 and 7 and included financial statements of CLEAR and certain pro forma financial information for SPSS which give effect to the merger applying the pooling of interests method of accounting. 16 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SPSS Inc. Date: November 8, 1996 By: /s/ Jack Noonan ------------------------------------- Jack Noonan President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned, in his capacity as the principal financial officer of the Registrant. Date: November 8, 1996 By: /s/ Edward Hamburg -------------------------------------- Edward Hamburg Senior Vice-President, Corporate Operations and Chief Financial Officer 17 18 EXHIBIT INDEX
Exhibit Page Number Description of Document Number ------- ----------------------------------------- ------ 15.1 Acknowledgment of Independent Certified Public Accountants Regarding Independent Auditors' Review Report 27.1 Financial Data Schedule
18 EX-15.1 2 ACKNOWLEDGEMENT OF CPA/KPMG 1 EXHIBIT 15. 1 ACKNOWLEDGMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS REGARDING INDEPENDENT AUDITORS' REVIEW REPORT The Board of Directors SPSS Inc.: With respect to the registration statements on Form S-3, Form S-4 and Form S-8 of SPSS Inc., we acknowledge our awareness of the use therein of our report dated October 28, 1996 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. KPMG PEAT MARWICK LLP Chicago, Illinois November 8, 1996 19 EX-27.1 3 FDS - 30 SEPTEMBER 1996
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPSS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1996 AND CONSOLIDATED STATEMENT OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS YEAR DEC-31-1996 DEC-31-1996 JAN-01-1996 JAN-01-1996 SEP-30-1996 SEP-30-1996 12,258 0 0 0 15,469 0 943 0 1,355 0 30,349 0 15,876 0 10,478 0 46,191 0 21,095 0 0 0 0 0 0 0 74 0 22,909 0 46,191 0 18,998 54,874 18,998 54,874 1,840 5,236 1,840 5,236 13,916 40,645 218 565 19 30 2,261 8,130 773 2,702 1,488 5,428 0 0 0 0 0 0 1,488 5,428 0.18 0.68 0.18 0.68
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