8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported) November 4, 2008

SPSS Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	000-22194	36-2815480
(State or Other Jurisdiction of	(Commission	(I.R.S. Employer
Incorporation)	File Number)	Identification No.)

233 South Wacker Drive, Chicago, Illinois	60606
(Address of Principal Executive Offices)	(Zip Code)

(312) 651-3000

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02: RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

     On November 4, 2008, SPSS Inc. issued a press release announcing its results for its fiscal quarter ended September 30, 2008. The full text of the press release is attached as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

     The information in this Form 8-K and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section and shall not be deemed incorporated by reference in any filing made by SPSS under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as set forth by specific reference in such filing.

ITEM 9.01: FINANCIAL STATEMENTS AND EXHIBITS.

     (d) Exhibits.

99.1 SPSS Press Release, dated November 4, 2008 (furnished pursuant to Item 2.02)

2

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 hereunto duly authorized.

	SPSS INC.
	By:	/s/ Raymond H. Panza
		Raymond H. Panza
Dated: November 4, 2008		Executive Vice President, Corporate Operations, Chief Financial Officer and Secretary

3

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE
Contact: Janine Warell, SPSS
312-261-6535
jwarell@spss.com

SPSS Reports 2008 Third Quarter
Financial Results with Solid Operating Margin

CHICAGO, USA, November 4, 2008 — SPSS Inc. (Nasdaq: SPSS), a global provider of Predictive Analytics software and solutions, today announced results for the quarter and nine months ended September 30, 2008.

SPSS reported third quarter revenues of $74.9 million, a 4 percent increase from $72.3 million in the third quarter of 2007. Net income was $10.5 million, up 25 percent from $8.4 million in the same quarter last year, with diluted earnings per share (EPS) of $0.55, a 34 percent increase from $0.41 in the third quarter of 2007. License revenues were $33.7 million, down 2 percent from $34.5 million in the third quarter of 2007. Operating income increased 3 percent to $12.8 million, or 17 percent of total revenues, from $12.5 million, or 17 percent of total revenues, in the third quarter of 2007. Charges for share-based compensation were $0.06 and $0.03 per share in the third quarter of 2008 and 2007, respectively. Also included in the 2008 third quarter EPS results was a $0.02 charge related to cost management initiatives launched during the quarter. The effective income tax rate for the third quarter of 2008 was 24 percent, compared with 42.5 percent in the same quarter last year. Approximately 58 percent of total revenues in the third quarter of 2008 came from outside the United States. Excluding the effects of currency exchange rates, total revenues were up 1 percent over the third quarter of 2007.

“In the midst of these very challenging economic times, we met our revenue and earnings expectations for the third quarter,” said Jack Noonan, SPSS chairman, CEO and president. “With continuing declines in the global economy and unfavorable moves in foreign currency rates, we anticipated a difficult quarter. Yet, with our loyal customer base, we were able to offset much of the slowdown in larger, multi-user transactions with an increase in smaller and single-user license sales. In particular, we benefited from the 2008 third quarter release of our upgraded flagship product SPSS Statistics 17.0. Attracted by this version’s broader functionality, customers adopted SPSS Statistics 17.0 more quickly than they did with the release of SPSS 16.0 last year.”

Noonan added, “As a recognized market leader in Predictive Analytics, SPSS is well-positioned to manage through the current economic downturn. We have better aligned our sales organization around core distribution channels to leverage the strength and efficiencies of our inside sales organization. And, we will continue to focus on maintaining our healthy balance sheet and cash flow.”

Revenues for the nine months ended September 30, 2008, totaled $228.8 million, an 8 percent increase from $211.4 million in the same period last year. Net income was $28.2 million, up 19 percent from $23.7 million in the 2007 nine-month period, with EPS of $1.47, a 27 percent increase from $1.16 in 2007. License revenues were $107.0 million, up 5 percent from $101.8 million in the 2007 nine-month period. Operating income was $37.6 million, or 16 percent of revenues compared to $34.8 million, or 16 percent of revenues in the 2007 nine-month period. Charges for share-based compensation were $0.20 and $0.17 per share in the 2008 and 2007 nine-month periods, respectively. The effective income tax rate for the 2008 nine-month period was 32 percent, compared with 39 percent in the same period last year. Approximately 60 percent of total revenues in the 2008 nine-month period came from outside the United States. Excluding the effects of currency exchange rates, total revenues were up 3 percent over the 2007 nine-month period.

At September 30, 2008, cash and cash equivalents totaled $307.0 million. SPSS generated $16.7 million in cash from operations in the third quarter of 2008 compared with $16.9 million in the same quarter last year. Cash provided by operating activities in the first nine months of 2008 was $45.5 million, after payment of $7.4 million of a year-end 2007 accrued payable related to the Company’s share repurchase program, compared to $51.5 million for the same period in 2007.

Outlook and Guidance

“Although we anticipated a strengthening U.S. dollar and continuing slowdown in the economy, few expected the extensive changes in the global markets that have occurred over recent months,” said Raymond Panza, SPSS executive vice president and CFO. “Consistent with our demonstrated financial discipline, we have initiated actions to ensure continued solid operating margins and profitability, including a global staff reduction of nearly 10 percent to be completed during the fourth quarter.”

Panza added, “Looking to the 2008 fourth quarter, we expect continuing pressure from foreign exchange rates and a further slowing global economy to result in revenues of between $73.0 million and $78.0 million. Before considering estimated charges of between $3.5 million and $4.5 million, or $0.12 to $0.16 per share, related to the cost management and staff reduction initiatives, we expect 2008 fourth quarter EPS in the range of $0.41 to $0.49. For the 2008 fiscal year, we expect revenues of between $302.0 million and $308.0 million, with EPS in the range of $1.90 to $1.98, again before considering the special charges. This guidance assumes an effective income tax rate of 32 percent for the fourth quarter and fiscal year.

“Annual savings from the cost management initiatives and staff reductions are expected to exceed $10.0 million,” said Panza. “In 2009, we will continue to focus on the preservation of capital and the alignment of expenses to our revenue expectations. Specific guidance for 2009 will be provided with the announcement of our 2008 fiscal year results.”

Conference Call — 4 p.m. CT/5 p.m. ET

The Company will host a conference call at 4 p.m. CT/5 p.m. ET on Nov. 4, 2008, to discuss its financial results. The live call will be broadcast online at www.spss.com/invest. Those interested in participating in the live call should dial 866-700-7477 in the United States and 617-213-8840 internationally. The live call pass-code is 12634056. A replay will be available via phone for one week after the call. To access it, participants should dial in the United States 888-286-8010 or 617-801-6888 internationally. Access code 24435675 required for the replay. An archived version of the call will also be made available online at www.spss.com/invest approximately two hours after the live call.

About SPSS Inc.

SPSS Inc. (Nasdaq: SPSS) is a leading global provider of Predictive Analytics software and solutions. The Company’s Predictive Analytics technology improves business processes by giving organizations forward visibility for decisions made every day. By incorporating Predictive Analytics into their daily operations, organizations become Predictive Enterprises—able to direct and automate decisions to meet business goals and achieve a measurable competitive advantage. More than 250,000 public sector, academic, and commercial customers rely on SPSS technology to help increase revenue, reduce costs, and detect and prevent fraud. Founded in 1968, SPSS is headquartered in Chicago, Illinois. For more information, please visit www.spss.com.

Safe Harbor Statement

In addition to historical information, this press release contains 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 without limitation, statements regarding the Company’s expectations, beliefs, intentions or future strategies that are signified by the words “expects,” “anticipates,” “intends,” “believes,” “estimates” or similar language. All forward-looking statements included in this document are based on information available to the Company on the date hereof. The Company cautions investors that its business and financial performance and the matters described in these forward-looking statements are subject to substantial risks and uncertainties. Because of these risks and uncertainties, some of which may not be currently ascertainable and many of which are beyond the Company’s control, actual results could differ materially from those expressed in or implied by the forward-looking statements. The potential risks and uncertainties that could cause results to differ materially include, but are not limited to: the Company’s ability to predict revenue, the Company’s ability to respond to rapid technological changes, a potential loss of relationships with third parties from whom the Company licenses certain software, fluctuations in currency exchange rates, the impact of new accounting pronouncements, increased competition and risks associated with product performance and market acceptance of new products. A detailed discussion of other risk factors that affect the Company’s business is contained in the Company’s Annual Reports on Form 10-K, particularly under the heading “Risk Factors.” The Company does not intend to update these forward-looking statements to reflect actual future events.

SPSS Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)

	For the Three Months Ended September 30,
							Percent			% of Net Revenues
	2008			2007			Change			2008			2007
	(in thousands, except per share amounts)
Net revenues:
License	$	33,736		$	34,477			-2	%		45	%		48	%
Maintenance		33,519			28,475			18	%		45	%		39	%
Services		7,627			9,328			-18	%		10	%		13	%
Net revenues		74,882			72,280			4	%		100	%		100	%
Operating expenses:
Cost of license and maintenance revenues		5,716			4,277			34	%		8	%		6	%
Sales, marketing and services		37,109			35,176			5	%		50	%		49	%
Research and development		10,864			11,822			-8	%		15	%		16	%
General and administrative		8,390			8,555			-2	%		10	%		12	%
Operating expenses		62,079			59,830			4	%		83	%		83	%
Operating income		12,803			12,450			3	%		17	%		17	%
Other income (expense):
Net interest and investment income		1,044			2,302			-55	%		1	%		3	%
Other		(27	)		(190	)		-86	%		0	%		0	%
Other income		1,017			2,112			-52	%		1	%		3	%
Income before income taxes		13,820			14,562			-5	%		18	%		20	%
Income tax expense		3,319			6,190			-46	%		4	%		8	%
Net income	$	10,501		$	8,372			25	%		14	%		12	%
Basic net income per share	$	0.58		$	0.44			32	%
Diluted net income per share	$	0.55		$	0.41			34	%
Shares used in computing basic net income per share		18,117			19,071			-5	%
Shares used in computing diluted net income per share		19,214			20,304			-5	%

SPSS Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)

	For the Nine Months Ended September 30,
							Percent			% of Net Revenues
	2008			2007			Change			2008			2007
	(in thousands, except per share amounts)
Net revenues:
License	$	106,976		$	101,815			5	%		47	%		48	%
Maintenance		98,850			87,850			13	%		43	%		42	%
Services		22,998			21,703			6	%		10	%		10	%
Net revenues		228,824			211,368			8	%		100	%		100	%
Operating expenses:
Cost of license and maintenance revenues		16,236			13,070			24	%		7	%		6	%
Sales, marketing and services		115,036			101,839			13	%		50	%		48	%
Research and development		33,550			36,444			-8	%		15	%		17	%
General and administrative		26,421			25,245			5	%		12	%		13	%
Operating expenses		191,243			176,598			8	%		84	%		84	%
Operating income		37,581			34,770			8	%		16	%		16	%
Other income (expense):
Net interest and investment income		4,030			5,557			-27	%		2	%		3	%
Other		(195	)		(1,535	)		-87	%		0	%		-1	%
Other income		3,835			4,022			-5	%		2	%		2	%
Income before income taxes		41,416			38,792			7	%		18	%		18	%
Income tax expense		13,253			15,078			-12	%		6	%		7	%
Net income	$	28,163		$	23,714			19	%		12	%		11	%
Basic net income per share	$	1.57		$	1.24			27	%
Diluted net income per share	$	1.47		$	1.16			27	%
Shares used in computing basic net income per share		17,988			19,152			-6	%
Shares used in computing diluted net income per share		19,189			20,512			-6	%

SPSS Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(unaudited)

	September 30,			December 31,
	2008			2007
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	307,005		$	306,930
Accounts receivable, net		40,411			56,580
Inventories, net		692			698
Deferred income taxes		4,082			3,964
Prepaid income taxes		3,606			3,301
Other current assets		5,619			4,162
Total current assets		361,415			375,635
Net property, equipment and leasehold improvements, net		14,997			16,429
Capitalized software development costs, net		37,075			34,140
Goodwill		41,854			42,093
Intangibles, net		4,038			3,273
Noncurrent deferred income taxes		21,838			22,731
Other noncurrent assets		6,394			6,759
Total assets	$	487,611		$	501,060
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,887		$	7,759
Income taxes and value added taxes payable		10,836			14,737
Deferred revenues		81,790			83,862
Other accrued liabilities		22,766			32,988
Total current liabilities		122,279			139,346
Long-term debt		150,000			150,000
Noncurrent deferred income taxes		959			784
Other noncurrent liabilities		1,672			1,577
Stockholders’ equity:
Common Stock		182			189
Additional paid-in capital		145,921			175,267
Treasury stock		—			(12,680	)
Accumulated other comprehensive income		(5,446	)		2,696
Retained earnings		72,044			43,881
Total stockholders’ equity		212,701			209,353
Total liabilities and stockholders’ equity	$	487,611		$	501,060

SPSS Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)

	For the Nine Months Ended
	September 30,
	2008			2007
	(in thousands)
Cash flows from operating activities:
Net income	$	28,163		$	23,714
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,478			13,137
Deferred income taxes		2,390			7,676
Excess tax benefit from share-based compensation		(1,440	)		(5,361	)
Amortization of share-based compensation		6,339			5,543
Changes in assets and liabilities:
Accounts receivable		14,654			8,208
Inventories		4			12
Prepaid and other assets		(1,533	)		(146	)
Accounts payable		(783	)		(39	)
Accrued expenses		(10,073	)		(1,299	)
Income taxes		(4,029	)		914
Deferred revenue		756			296
Other, net		(4,421	)		(1,116	)
Net cash provided by operating activities		45,505			51,539
Cash flows from investing activities:
Capital expenditures		(4,084	)		(4,600	)
Capitalized software development costs		(12,575	)		(10,540	)
Purchase of business and intangible assets		(1,245	)		—
Net cash used in investing activities		(17,904	)		(15,140	)
Cash flows from financing activities:
Purchases of common stock		(27,870	)		(49,998	)
Proceeds from stock option exercises and employee stock purchase plan		6,110			15,611
Tax benefit from stock option exercises		1,440			5,361
Proceeds from issuance of long-term debt		—			150,000
Debt issuance costs		—			(4,281	)
Net cash provided by financing activities		(20,320	)		116,693
Effect of exchange rates on cash		(7,206	)		3,779
Net change in cash and cash equivalents		75			156,871
Cash and cash equivalents at beginning of period		306,930			140,203
Cash and cash equivalents at end of period	$	307,005		$	297,074

SPSS Inc. and Subsidiaries
Supplemental Information—Effect of Share-Based Compensation on Operating Income
(unaudited)

	For the Three Months Ended September 30,
													Adjusted To Exclude
	Reported—GAAP						Share-Based Compensation						Share-Based Compensation
	2008			2007			2008			2007			2008			2007
	(in thousands, except percent amounts)
Net revenues	$	74,882		$	72,280		$	—		$	—		$	74,882		$	72,280
Operating expenses:
Cost of license and maintenance revenues		5,716			4,277			—			—			5,716			4,277
Sales, marketing and services		37,109			35,176			449			4			36,660			35,172
Research and development		10,864			11,822			267			7			10,597			11,815
General and administrative		8,390			8,555			1,085			990			7,305			7,565
Operating expenses		62,079			59,830			1,801			1,001			60,278			58,829
Operating income	$	12,803		$	12,450		$	(1,801	)	$	(1,001	)	$	14,604		$	13,451
Operating income as % of revenues		17	%		17	%								20	%		19	%
Diluted net income per common share	$	0.55		$	0.41		$	(0.06	)	$	(0.03	)	$	0.61		$	0.44

	For the Nine Months Ended September 30,
													Adjusted To Exclude
	Reported—GAAP						Share-Based Compensation						Share-Based Compensation
	2008			2007			2008			2007			2008			2007
	(in thousands, except percent amounts)
Net revenues	$	228,824		$	211,368		$	—		$	—		$	228,824		$	211,368
Operating expenses:
Cost of license and maintenance revenues		16,236			13,070			—			—			16,236			13,070
Sales, marketing and services		115,036			101,839			1,259			959			113,777			100,880
Research and development		33,550			36,444			822			967			32,728			35,477
General and administrative		26,421			25,245			4,258			3,617			22,163			21,628
Operating expenses		191,243			176,598			6,339			5,543			184,904			171,055
Operating income	$	37,581		$	34,770		$	(6,339	)	$	(5,543	)	$	43,920		$	40,313
Operating income as % of revenues		16	%		16	%								19	%		19	%
Diluted net income per common share	$	1.47		$	1.16		$	(0.20	)	$	(0.17	)	$	1.67		$	1.33

NOTE — Share-Based Compensation

On January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), Share-Based Payment (“SFAS No. 123(R)” or the “Statement”) using the modified prospective method. SFAS No. 123(R) focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. Prior to the adoption of SFAS No. 123(R), the Company followed the intrinsic value method in accordance with APB No. 25 to account for its employee stock options and share-based awards issued before 2006. The Company has provided the effects of share-based compensation to show the effects of share-based compensation and the related effects on operating income and diluted net income per common share.