10-Q 1 c58575e10-q.txt QUARTERLY REPORT 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, 2000 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) 233 S. WACKER DRIVE, CHICAGO, ILLINOIS 60606 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE) REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (312) 651-3000 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 9, 2000, THERE WERE 10,014,024 SHARES OF COMMON STOCK OUTSTANDING, PAR VALUE $.01, OF THE REGISTRANT. =============================================================================== 2 SPSS INC. FORM 10-Q QUARTER ENDED SEPTEMBER 30, 2000 INDEX PART I - FINANCIAL INFORMATION PAGE ---- ITEM 1. FINANCIAL STATEMENTS INDEPENDENT AUDITORS' REVIEW REPORT 3 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND SEPTEMBER 30, 2000 (UNAUDITED) 4 CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED) 5 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED) 6 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED) 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 9 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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, 2000 and the related consolidated statements of income and comprehensive income for the three and nine-month periods ended September 30, 1999 and 2000 and the related consolidated statements of cash flows for the nine months ended September 30, 1999 and 2000. These consolidated financial statements are the responsibility of SPSS Inc. 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 consolidated balance sheet of SPSS Inc. and subsidiaries as of December 31, 1999, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated March 17, 2000, 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, 1999, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ KPMG LLP Chicago, Illinois November 1, 2000 3 4 SPSS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) DECEMBER 31, SEPTEMBER 30, 1999 2000 ------------ ------------- ASSETS (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 16,770 $ 8,712 Accounts receivable, net of allowances 42,901 49,438 Inventories 2,895 4,241 Deferred income taxes 3,042 3,228 Prepaid expenses and other current assets 2,833 4,790 ---------- ---------- Total current assets 68,441 70,409 ---------- ---------- EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost: Land and building 1,671 1,530 Furniture, fixtures, and office equipment 7,617 8,029 Computer equipment and software 25,982 33,719 Leasehold improvements 6,480 7,338 ---------- ---------- 41,750 50,616 Less accumulated depreciation and amortization 25,639 28,404 ---------- ---------- Net equipment and leasehold improvements 16,111 22,212 ---------- ---------- Capitalized software development costs, net of accumulated amortization 13,078 14,612 Goodwill, net of accumulated amortization 5,339 8,514 Other assets 3,746 4,677 ---------- ---------- $ 106,715 $ 120,424 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 9,000 $ 9,250 Accounts payable 5,670 7,906 Accrued royalties 488 447 Accrued rent 1,050 1,221 Other accrued liabilities 8,270 8,475 Income taxes and value added taxes payable 3,664 4,302 Customer advances 529 517 Deferred revenues 11,098 10,406 ---------- ---------- Total current liabilities 39,769 42,524 ---------- ---------- Deferred income taxes 3,809 3,809 Other non-current liabilities 1,595 1,188 STOCKHOLDERS' EQUITY: Common Stock, $.01 par value; 50,000,000 shares authorized; 9,597,641 and 9,973,291 shares issued and outstanding in 1999 and 2000, respectively 96 100 Additional paid-in capital 48,569 52,159 Accumulated other comprehensive loss (119) (4,978) Retained earnings 12,996 25,622 ---------- ---------- Total stockholders' equity 61,542 72,903 ---------- ---------- $ 106,715 $ 120,424 ========== ========== See accompanying notes to consolidated financial statements. 4 5 SPSS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ ------------------------ 1999 2000 1999 2000 ----------- ----------- ----------- ----------- Net revenues: Analytical solutions $ 4,189 $ 7,914 $ 11,466 $ 22,787 Market research 7,667 9,927 21,896 25,791 Statistics 22,763 21,730 67,900 65,951 ----------- ----------- ----------- ----------- Total net revenues 34,619 39,571 101,262 114,529 Operating expenses: Cost of revenues 3,253 2,960 9,062 8,938 Sales and marketing 16,109 20,335 49,370 59,157 Product development 6,581 6,609 18,505 19,552 General and administrative 2,607 2,358 8,007 6,656 ----------- ----------- ----------- ----------- Operating expenses 28,550 32,262 84,944 94,303 ----------- ----------- ----------- ----------- Operating income 6,069 7,309 16,318 20,226 Other income (expense): Net interest expense (332) (182) (483) (485) Other income 539 43 220 624 ----------- ----------- ----------- ----------- Other income (expense) 207 (139) (263) 139 ----------- ----------- ----------- ----------- Income before income taxes 6,276 7,170 16,055 20,365 Income tax expense 2,195 2,725 5,735 7,739 ----------- ----------- ----------- ----------- Net income $ 4,081 $ 4,445 $ 10,320 $ 12,626 =========== =========== =========== =========== Basic net income per share $ 0.42 $ 0.45 $ 1.08 $ 1.29 =========== =========== =========== =========== Shares used in computing basic net income per share 9,605,683 9,862,856 9,594,292 9,760,937 =========== =========== =========== =========== Diluted net income per share $ 0.40 $ 0.42 $ 1.01 $ 1.19 =========== =========== =========== =========== Shares used in computing diluted net income per share 10,282,765 10,638,494 10,175,576 10,592,970 =========== =========== =========== =========== See accompanying notes to consolidated financial statements. 5 6 SPSS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS) (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ ------------------------ 1999 2000 1999 2000 ----------- ----------- ----------- ----------- Net income $ 4,081 $ 4,445 $ 10,320 $ 12,626 Other comprehensive income (loss): Foreign currency translation adjustment 1,116 (1,769) 107 (4,859) ----------- ----------- ----------- ----------- Comprehensive income $ 5,197 $ 2,676 $ 10,427 $ 7,767 =========== =========== =========== =========== See accompanying notes to consolidated financial statements. 6 7 SPSS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) NINE MONTHS ENDED SEPTEMBER 30, ------------------------ 1999 2000 ----------- ----------- Cash flows from operating activities: Net income $ 10,320 $ 12,626 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 6,466 7,891 Deferred income taxes (830) (186) Gain on sale of product line -- (1,397) Income tax benefit from stock option exercise 85 1,705 Changes in assets and liabilities: Accounts receivable (3,425) (6,537) Inventories (148) (1,319) Accounts payable (350) 2,236 Accrued royalties (136) (41) Accrued expenses (1,842) 646 Accrued income taxes (2,329) 638 Deferred revenues (2,421) (692) Other (300) (7,606) ----------- ----------- Net cash provided by operating activities 5,090 7,964 ----------- ----------- Cash flows from investing activities: Capital expenditures, net (4,504) (10,049) Divesture of product line -- 1,700 Purchase cost-based investment -- (1,450) Capitalized software development costs (3,543) (4,480) 1999 acquisition earn-out payments -- (3,882) ----------- ----------- Net cash used in investing activities (8,047) (18,161) ----------- ----------- Cash flows from financing activities: Net (repayments) borrowings on notes payable (843) 250 Net proceeds from exercise of stock options 376 1,889 ----------- ----------- Net cash provided by (used in) financing activities (467) 2,139 ----------- ----------- Net change in cash and cash equivalents (3,424) (8,058) Cash and cash equivalents at beginning of period 16,297 16,770 ----------- ----------- Cash and cash equivalents at end of period $ 12,873 $ 8,712 =========== =========== Supplemental disclosures of cash flow information: Interest paid $ 767 $ 775 Income taxes paid 9,576 5,087 =========== =========== See accompanying notes to consolidated financial statements. 7 8 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. These consolidated financial statements should be read in conjunction with SPSS' audited consolidated financial statements and notes thereto for the year ended December 31, 1999, included in SPSS' Annual Report on Form 10-K filed with the Securities and Exchange Commission. NOTE 2 - RECLASSIFICATIONS Certain operating expenses of prior periods have been reclassified to conform to the current presentation. 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 REVENUES PERCENTAGE OF NET REVENUES -------------------------- -------------------------- THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- -------------------------- 1999 2000 1999 2000 ----------- ----------- ----------- ----------- Statement of Income Data: Net revenues: Analytical solutions 12% 20% 11% 20% Market research 22% 25% 22% 22% Statistics 66% 55% 67% 58% ----------- ----------- ----------- ----------- Net revenues 100% 100% 100% 100% Operating expenses: Cost of revenues 9% 8% 9% 8% Sales and marketing 47% 51% 49% 51% Product development 19% 17% 18% 17% General and administrative 7% 6% 8% 6% ----------- ----------- ----------- ----------- Operating expenses 82% 82% 84% 82% ----------- ----------- ----------- ----------- Operating income 18% 18% 16% 18% ----------- ----------- ----------- ----------- Other income (expense): Net interest expense (1%) -- -- -- Other income (expense) 1% -- -- -- ----------- ----------- ----------- ----------- Other income (expense) -- -- -- -- ----------- ----------- ----------- ----------- Income before income taxes 18% 18% 16% 18% Income tax expense 6% 7% 6% 7% ----------- ----------- ----------- ----------- Net income 12% 11% 10% 11% =========== =========== =========== ===========
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1999 TO THREE MONTHS ENDED SEPTEMBER 30, 2000. Net Revenues. Net revenues were $34,619,000 in the three months ended September 30, 1999 and $39,571,000 in the three months ended September 30, 2000, an increase of 14%. This increase was primarily due to growth in analytical solutions revenues of 89% and market research revenues of 29% over the corresponding period in 1999. Offsetting this revenue growth was a decrease in statistics revenue of 5%. The statistics revenue decline was primarily due to shifts in sales and marketing resources toward developing the higher-growth markets for analytical solutions, the divestiture of the Company's products for statistical quality control, and the elimination of certain products provided by third parties. Revenues were adversely effected by changes in foreign currency exchange rates. 9 10 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 $3,253,000 in the three months ended September 30, 1999 and $2,960,000 in the three months ended September 30, 2000, a decrease of 9%. Such costs decreased due to lower cost of goods sold, primarily shipping costs, and lower royalty expense on third party products resulting from the elimination of certain such products. These reductions were partially offset by an increase on amortized software development costs. As a percentage of net revenues, cost of revenues decreased from 9% to 8%. Sales and Marketing. Sales and marketing expenses were $16,109,000 in the three months ended September 30, 1999 and $20,335,000 in the three months ended September 30, 2000, an increase of 26%. This increase reflects the expansion of the sales management as well as other staff additions, particularly more senior sales representatives and professional services personnel. This increase was partially offset by changes in foreign currency exchange rates. As a percentage of net revenues, such expenses increased from 47% to 51%. Product Development. Product development expenses were $6,581,000 (net of capitalized software development costs of $712,000) in the three months ended September 30, 1999 and $6,609,000 (net of capitalized software development costs of $1,264,000) in the three months ended September 30, 2000. SPSS expense for amortization of capitalized software and product translations, included in cost of revenues, was $891,000 in the three months ended September 30, 1999 and $957,000 in the three months ended September 30, 2000. The slight increase in product development expenses was primarily due to staff additions and increases in staff compensation. As a percentage of net revenues, product development expenses decreased from 19% to 17%. General and Administrative. General and administrative expenses were $2,607,000 in the three months ended September 30, 1999 and $2,358,000 in the three months ended September 30, 2000, a decrease of 10%. The decrease was due to reduced costs by consolidating United States accounting functions in 1999 offset by the addition of amortization expense related to Integral Solutions Limited intangibles. As a percentage of net revenues, general and administrative expenses decreased from 7% to 6%. Net Interest Expense. Net interest expense was $332,000 in the three months ended September 30, 1999 and $182,000 in the three months ended September 30, 2000, primarily due to debt service on borrowings against SPSS' line-of-credit. Other Income. Other income was $539,000 in the three months ended September 30, 1999 and $43,000 in the three months ended September 30, 2000, primarily due to foreign currency transactions. Provision for Income Taxes. The provision for income taxes was $2,195,000 in the three months ended September 30, 1999 and $2,725,000 in the three months ended September 30, 2000. 10 11 During 1999 the provision for income taxes represented an effective tax rate of approximately 34.3%. In 2000, the effective tax rate has increased to approximately 38%. COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 TO NINE MONTHS ENDED SEPTEMBER 30, 2000. Net Revenues. Net revenues were $101,262,000 in the nine months ended September 30, 1999 and $114,529,000 in the nine months ended September 30, 2000, an increase of 13%. This increase was primarily due to growth in analytical solutions revenues of 99%, an 18% increase in market research and a decrease in statistics revenue of 3%. The statistics revenue decline was primarily due to shifts in sales and marketing resources toward developing the higher-growth markets for analytical solutions, the divestiture of the Company's products for statistical quality control, and the elimination of certain products provided by third parties. Revenues were adversely effected 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 $9,062,000 in the nine months ended September 30, 1999 and $8,938,000 in the nine months ended September 30, 2000, a decrease of 1%. Such costs decreased due to a decrease in shipping costs and royalties paid to third party software providers. As a percentage of net revenues, cost of revenues decreased from 9% to 8%. Sales and Marketing. Sales and marketing expenses were $49,370,000 in the nine months ended September 30, 1999 and $59,157,000 in the nine months ended September 30, 2000, an increase of 20%. This increase reflects the expansion of the sales management as well as other staff additions, particularly new sales and professional services personnel. This increase was partially offset by changes in foreign currency exchange rates. As a percentage of net revenues, such expenses increased from 49% to 51%. Product Development. Product development expenses were $18,505,000 (net of capitalized software development costs of $1,632,000) in the nine months ended September 30, 1999 and $19,552,000 (net of capitalized software development costs of $3,133,000) in the nine months ended September 30, 2000, an increase of 6%. SPSS expense for amortization of capitalized software and product translations, included in cost of revenues, was $2,222,000 in the nine months ended September 30, 1999 and $2,844,000 in the nine months ended September 30, 2000. The increase in product development expenses was primarily due to staff additions and increases in staff compensation. As a percentage of net revenues, product development expenses decreased from 18% to 17%. General and Administrative. General and administrative expenses were $8,007,000 in the nine months ended September 30, 1999 and $6,656,000 in the nine months ended September 30, 2000, a decrease of 17%. The decrease was due to reduced costs by consolidating United States based accounting functions offset by the addition of amortization expense related to Integral Solutions Limited intangibles. As a percentage of net revenues, general and administrative expenses decreased from 8% to 6%. 11 12 Net Interest Expense. Net interest expense was $483,000 in the nine months ended September 30, 1999 and $485,000 in the nine months ended September 30, 2000, primarily due to debt service on borrowings against SPSS' line-of-credit. Other Income. Other income was $220,000 in the nine months ended September 30, 1999, consisting mainly of foreign currency transactions. Other income was $624,000 in the nine months ended September 30, 2000 and consisted of the gain on the sale of the QI Analyst quality product line to Wonderware Corporation of $1,398,000 offset partially by $774,000 of foreign currency transactions. Provision for Income Taxes. The provision for income taxes was $5,735,000 in the nine months ended September 30, 1999 and $7,739,000 in the nine months ended September 30, 2000. During 1999, the provision for income taxes represented an effective tax rate of approximately 34.3%. In 2000, the effective tax rate has increased to approximately 38%. LIQUIDITY AND CAPITAL RESOURCES The Company's long-term debt as of September 30, 2000 is a mortgage on property in the United Kingdom, and the balance of the purchase price due to DataStat, S.A. for the acquisition of the VerbaStat product. As of September 30, 2000, SPSS held approximately $8,712,000 of cash and cash equivalents. Funds in the first nine months of 2000 were provided primarily by operations, as well as the exercise of stock options. Capital expenditures included, among other things, new computer systems for use in internal product development and sales, furniture and equipment related to the office expansions, and expenditures for implementing a new corporate-wide reporting system. In June 2000, SPSS revised its loan agreement with American National Bank and Trust Company of Chicago. Under the new loan agreement, SPSS has an available $20,000,000 unsecured line of credit with American National, under which borrowings bear interest at either the prime interest rate or the Eurodollar Rate, depending on the circumstances. As of September 30, 2000, SPSS had $9,250,000 outstanding under this line of credit. The Company's agreement with American National requires SPSS to comply with certain specified financial ratios and tests, and, among other things, restricts the Company's ability to: - incur additional indebtedness, - create liens on assets, - make investments, - engage in mergers, acquisitions or consolidations where SPSS is not the surviving entity, - sell assets, - engage in certain transactions with affiliates and - amend its organizational documents or make changes in capital structure. 12 13 SPSS anticipates that amounts available from cash and cash equivalents on hand, under its line of credit, and cash flows generated from operations, 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 SPSS on favorable terms or at all. INTERNATIONAL OPERATIONS Revenues from international operations were 46% of total net revenues in the three months ended September 30, 1999 and 44% in the three months ended September 30, 2000. The portion of revenues attributable to international operations were negatively affected by changes in foreign currency exchange rates. Net corporate revenues increased 14% in the three month period ended September 30, 2000, when compared to the three month period ended September 30, 1999. Net of the effects of changes in foreign currency rates, the increase would have been approximately 18% for the three months ended September 30, 2000 when compared to the three months ended September 30, 1999. RECENT ACCOUNTING PRONOUNCEMENTS Financial Accounting Standards Board Interpretation No. 44 (FIN 44), Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB Opinion No. 25, is effective for financial statements beginning after July 1, 2000. The Company determined that options were granted to an individual deemed to be a non-employee under FIN 44. This resulted in compensation expense charges of $56,000 in the third quarter of fiscal 2000. These options will be accounted for using variable plan accounting and the amounts of future compensation expense will be determined based upon the Company's stock price at each reporting date. During 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which is effective for all fiscal years beginning after June 15, 2000. SFAS No. 133 establishes a comprehensive standard for the recognition and measurement of derivative instruments and hedging activities. The Company does not expect the adoption of the new standard to have a material effect on its financial position, liquidity, or results of operations. FORWARD-LOOKING STATEMENTS This document contains forward-looking statements that involve risks and uncertainties that could cause the results of SPSS Inc. and its subsidiaries to differ materially from those expressed or implied by such forward-looking statements. These risks include the timely development, production, and acceptance of new products and services, market conditions, competition, the flow of products into third-party distribution channels, and other risks detailed from time to time in the Company's Securities and Exchange Commission filings. The words "anticipate," "believe," "estimate," "expect," "plan," "intend," "will," and similar expressions, as they relate to SPSS or its management, may identify forward-looking statements. Such statements reflect the current views of SPSS with respect to future events and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, or expected. SPSS does not intend to update these forward-looking statements. 13 14 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. SPSS' market risk disclosures pursuant to item 3 are not material and are therefore not required. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Currently there are no material pending legal proceedings to which SPSS or any of its subsidiaries is a party or to which any of their property is subject. 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 Inc., @2.1 SPSS ACSUB, Inc., Clear Software, Inc. and the shareholders named therein, dated September 23, 1996. 2.2 Agreement and Plan of Merger among SPSS Inc., @@Annex A SPSS Acquisition Inc. and Jandel Corporation, dated October 30, 1996. 2.3 Asset Purchase Agreement by and between SPSS Inc. ##2.3 and DeltaPoint, Inc., dated as of May 1, 1997 2.4 Stock Purchase Agreement among the Registrant, @@@2.1 Edward Ross, Richard Kottler, Norman Grunbaum, Louis Davidson and certain U.K.-Connected Shareholders or warrant holders of Quantime Limited named therein, dated as of September 30, 1997, together with a list briefly identifying the contents of omitted schedules. 2.5 Stock Purchase Agreement among the Registrant, @@@2.2 Edward Ross, Richard Kottler, Norman Grunbaum, Louis Davidson and certain Non-U.K. Shareholders or warrant holders of Quantime Limited named therein, dated as of September 30, 1997, together with a list briefly identifying the contents of omitted schedules. 2.6 Stock Purchase Agreement by and among SPSS Inc. and @@@@2.1 certain Shareholders of Quantime Limited listed on the signature pages thereto, dated November 21, 1997. 2.7 Stock Purchase Agreement by and among Jens Nielsen, @@@@2.2 Henrik Rosendahl, Ole Stangegaard, Lars Thinggaard, Edward O'Hara, Bjorn Haugland, 2M Invest and the Shareholders listed on Exhibit A thereto, dated November 21, 1997. 2.8 Stock Purchase Agreement by and among SPSS Inc. and #### 2.1 the Shareholders of Integral Solutions Limited listed on the signature pages hereof, dated as of December 31, 1998. 15 16 2.9 Share Purchase Agreement by and among SPSS Inc., $ 2.9 Surveycraft Pty Ltd. and Jens Meinecke and Microtab Systems Pty Ltd., dated as of November 1, 1998. 2.10 Stock Acquisition Agreement by and among SPSS Inc. $$ 2.1 Vento Software, Inc. and David Blyer, John Gomez and John Pappajohn, dated as of November 29, 1999. 2.11 Asset Purchase Agreement by and between SPSS Inc. %% 2.11 and DataStat, S.A., dated as of December 23, 1999. 3.1 Certificate of Incorporation of SPSS * 3.2 3.2 By-Laws of SPSS * 3.4 10.1 Employment Agreement with Jack Noonan + 10.1 10.2 Agreement with Valletta ** 10.2 10.3 Agreement between SPSS and ** 10.5 Prentice Hall 10.4 Software Distribution Agreement between ** 10.6 SPSS and IBM 10.5 HOOPS Agreement ** 10.7 10.6 Stockholders Agreement * 10.8 10.7 Agreements with CSDC * 10.9 10.8 Amended 1991 Stock Option Plan * 10.10 10.9 SYSTAT Asset Purchase Agreement ++10.9 10.10 1994 Bonus Compensation +++10.11 10.11 Lease for Chicago, Illinois Office +++10.12 10.12 Amendment to Lease for Chicago, Illinois Office +++10.13 10.13 1995 Equity Incentive Plan x 10.14 10.14 1995 Bonus Compensation xx 10.15 10.15 Lease for Chicago, Illinois Office xx 10.16 10.16 Amended and Restated 1995 Equity Incentive Plan xxx 10.17 10.17 1996 Bonus Compensation xxxx 10.18 16 17 10.18 Software Distribution Agreement between the xxxx 10.19 Company and Banta Global Turnkey 10.19 Lease for Chicago, Illinois in Sears Tower # 10.20 10.20 1997 Bonus Compensation ### 10.21 10.21 Norman H. Nie Consulting L.L.C. Agreement ### 10.22 10.22 Second Amended and Restated 1995 Equity &A Incentive Plan 10.23 1998 Bonus Compensation $ 10.24 Third Amended and Restated 1995 Equity $$$ 10.1 Incentive Plan 10.25 Loan Agreement dated June 1, 1999 between $$$$ 10.1 SPSS and American National Bank and Trust Company of Chicago 10.26 First Amendment to Loan Agreement dated $$$$ 10.2 June 1, 1999, between SPSS and American National Bank and Trust Company of Chicago 10.27 1999 Bonus Compensation % 10.27 ----------------------- 10.28 Amendment to Sears Tower Lease, Chicago, Illinois %% 10.28 10.29 Amended and Restated Loan Agreement dated %$ 10.29 June 1, 2000 Between SPSS and American National Bank and Trust Company of Chicago 10.30 Asset Purchase Agreement by and between SPSS and %$ 10.30 Wonderwear Corporation dated as of May 11, 2000 15.1 Acknowledgement of Independent Certified Public Accountants Regarding Independent Auditors' Review Report 27.1a Financial Data Schedule 27.1b Financial Data Schedule (Restated) 17 18 ------------------------------- @ Previously filed with SPSS Inc.'s Report on Form 8-K, dated September 26, 1996, filed on October 11, 1996, as amended on Form 8-K/A-1, filed November 1, 1996. (File No. 000-22194) @@ Previously filed with Amendment No. 1 to Form S-4 Registration Statement of SPSS Inc. filed on November 7, 1996. (File No. 333-15427) @@@ Previously filed with SPSS Inc.'s Report on Form 8-K, dated September 30, 1997, filed on October 15, 1997. (File No. 000-22194) @@@@ Previously filed with the Form S-3 Registration Statement of SPSS Inc. filed on November 26, 1997. (File No. 333-41207) * Previously filed with Amendment No. 2 to Form S-1 Registration Statement of SPSS Inc. filed on August 4, 1993. (File No. 33-64732) ** Previously filed with Amendment No. 1 to Form S-1 Registration Statement of SPSS Inc. filed on July 23, 1993. (File No. 33-64732) *** Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the Quarterly period ended September 30, 1993. (File No. 000-22194) + Previously filed with the Form S-1 Registration Statement of SPSS Inc. filed on June 22, 1993. (File No. 33-64732) ++ Previously filed with the Form S-1 Registration Statement of SPSS Inc. filed on December 5, 1994. (File No. 33-86858) +++ Previously cited with the Form 10-K Annual Report of SPSS Inc. for the year ended December 31, 1994. (File No. 000-22194) x Previously filed with SPSS Inc.'s 1995 Proxy Statement. (File No. 000-22194) xx Previously filed with the Form 10-K Annual Report of SPSS Inc. for the year ended December 31, 1995. (File No. 000-22194) xxx Previously filed with SPSS Inc.'s 1996 Proxy Statement. (File No. 000-22194) xxxx Previously filed with the Form 10-K Annual Report of SPSS Inc. for the year ended December 31, 1996. (File No. 000-22194) # Previously filed with the Form 10-Q Quarterly Report of SPSS Inc. for the quarterly period ended March 31, 1997. (File No. 000-22194) ## Previously filed with the Form 10-Q Quarterly Report of SPSS Inc. for the 18 19 quarterly period ended June 30, 1997. (File No. 000-22194) ### Previously filed with Form 10-K Annual Report of SPSS Inc. for the year ended December 31, 1997. (File No. 000-22194) #### Previously filed with SPSS Inc.'s Report on Form 8-K, dated December 31, 1998, filed on January 15, 1999, as amended on Form 8-K/A filed March 12, 1999. (File No. 000-22194) & Previously filed with SPSS Inc.'s 1998 Proxy Statement. (File No. 000-22194) $ Previously filed with Form 10-K Annual Report of SPSS Inc. for the year ended December 31, 1998. (File No. 000-22194) $$ Previously filed with SPSS Inc. Report on Form 8-K, dated November 29, 1999, filed December 10, 1999. (File No. 000-22194) $$$ Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the quarterly period ended June 30, 1999. (File No. 000-22194) $$$$ Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the quarterly period ended September 30, 1999. (File No. 000-22194) % Previously filed with SPSS Inc. Form 10-K Annual Report for year ended December 31, 1999. (File No. 000-22194) %% Previously filed with SPSS Inc. Form 10-Q Quarterly Report for the quarterly period ended March 31, 2000. (File No. 000-22194) %$ Previously filed with SPSS Inc. Form 10-Q Quarterly Report for the quarterly period ended June 30, 2000. (File No. 000-22194) (b) Reports on Form 8-K There were no reports on Form 8-K filed by SPSS during the fiscal quarter ended September 30, 2000. 19 20 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 14, 2000 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 14, 2000 BY: /s/ EDWARD HAMBURG --------------------------------------- EDWARD HAMBURG EXECUTIVE VICE-PRESIDENT, CORPORATE OPERATIONS AND CHIEF FINANCIAL OFFICER 20 21 EXHIBIT INDEX Exhibit Page Number Description of Document Number ------ ----------------------- ------ 15.1 Acknowledgement of Independent Certified Public Accountants Regarding Independent Auditors' Review Report 27.1a Financial Data Schedule 27.1b Financial Data Schedule (Restated) 21