-----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, BBCkZSeU1C/swL0O85Ir75tdVypt9vkeouunChrbWuHJvOzY0jvTVIzRAVCAcb82 sa0nthDgpe3lNsqhOwq90Q== 0000950137-99-002968.txt : 19990816 0000950137-99-002968.hdr.sgml : 19990816 ACCESSION NUMBER: 0000950137-99-002968 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: SEC FILE NUMBER: 000-22194 FILM NUMBER: 99686452 BUSINESS ADDRESS: STREET 1: 233 SOUTH WACKER DRIVE CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3123292400 MAIL ADDRESS: STREET 1: 233 SOUTH WACKER DRIVE CITY: CHICAGO STATE: IL ZIP: 60606 10-Q 1 FORM 10-Q 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 JUNE 30, 1999 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 AUGUST 10, 1999, THERE WERE 9,056,206 SHARES OF COMMON STOCK OUTSTANDING, PAR VALUE $.01, OF THE REGISTRANT. =============================================================================== 2 SPSS INC. FORM 10-Q QUARTER ENDED JUNE 30, 1999 INDEX PART I - FINANCIAL INFORMATION PAGE ---- ITEM 1. FINANCIAL STATEMENTS INDEPENDENT AUDITORS' REVIEW REPORT 3 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1998 AND JUNE 30, 1999 (UNAUDITED) 4 CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999 (UNAUDITED) 5 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999 (UNAUDITED) 6 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999 (UNAUDITED) 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 15 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15 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 June 30, 1999 and the related consolidated statements of income and comprehensive income for the three and six-month periods ended June 30, 1998 and 1999 and the related consolidated statements of cash flows for the six-months ended June 30, 1998 and 1999. These consolidated financial statements are the responsibility of SPSS Inc. management. We conducted our reviews 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 reviews, 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, 1998, 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 February 17, 1999, 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, 1998, 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 July 30, 1999 3 4 SPSS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) DECEMBER JUNE 30, 1998 1999 ----------- ----------- ASSETS (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 14,912 $ 12,969 Accounts receivable, net of allowances 33,825 34,031 Inventories 2,871 2,660 Deferred income tax assets, net 2,183 2,183 Prepaid expenses and other current assets 2,304 2,541 ----------- ----------- Total current assets 56,095 54,384 ----------- ----------- EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost: Land and building 1,721 1,631 Furniture, fixtures, and office equipment 7,252 7,199 Computer equipment and software 23,068 24,816 Leasehold improvements 6,434 7,441 ----------- ----------- 38,475 41,087 Less accumulated depreciation and amortization 22,783 24,441 ----------- ----------- Net equipment and leasehold improvements 15,692 16,646 ----------- ----------- Capitalized software development costs, net of accumulated amortization 10,658 11,696 Goodwill, net of accumulated amortization 5,110 4,864 Other assets 3,734 3,401 ----------- ----------- $ 91,289 $ 90,991 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 9,000 $ 8,000 Accounts payable 6,146 5,169 Accrued royalties 571 446 Accrued rent 847 954 Other accrued liabilities 10,431 9,082 Income taxes and value added taxes payable 5,822 4,827 Customer advances 579 785 Deferred revenues 10,310 8,307 ----------- ----------- Total current liabilities 43,706 37,570 ----------- ----------- Deferred income taxes 2,638 2,640 Other non-current liabilities 1,222 1,105 STOCKHOLDERS' EQUITY: Common Stock, $.01 par value; 50,000,000 shares authorized; 9,029,326 and 9,051,581 shares issued and outstanding in 1998 and 1999, respectively 90 91 Additional paid-in capital 47,054 47,381 Accumulated other comprehensive income (877) (1,886) Retained earnings (accumulated deficit) (2,544) 4,090 ----------- ----------- Total stockholders' equity 43,723 49,676 ----------- ----------- $ 91,289 $ 90,991 =========== =========== 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 SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------- ------------------------- 1998 1999 1998 1999 ----------- ----------- ----------- ----------- Net revenues: Desktop products $ 21,544 $ 25,166 $ 42,159 $ 49,201 Large System products 3,692 4,268 7,992 8,583 Other products and services 3,922 3,879 7,507 8,077 ------------ ----------- ----------- ----------- Net revenues 29,158 33,313 57,658 65,861 Cost of revenues 2,574 3,126 5,009 5,809 ------------ ----------- ----------- ----------- Gross profit 26,584 30,187 52,649 60,052 ----------- ----------- ----------- ----------- Operating expenses: Sales and marketing 15,259 16,157 29,540 32,914 Product development 4,787 6,101 9,741 11,740 General and administrative 2,221 2,503 4,005 4,715 ----------- ----------- ----------- ----------- Operating expenses 22,267 24,761 43,286 49,369 ----------- ----------- ----------- ----------- Operating income 4,317 5,426 9,363 10,683 ----------- ----------- ----------- ----------- Other income (expense): Net interest income (expense) 59 (94) 86 (169) Other expense (37) (250) (199) (417) ----------- ----------- ----------- ----------- Other income (expense) 22 (344) (113) (586) ------------ ----------- ----------- ----------- Income before income taxes 4,339 5,082 9,250 10,097 Income tax expense 1,488 1,743 3,173 3,463 ----------- ----------- ----------- ----------- Net income $ 2,851 $ 3,339 $ 6,077 $ 6,634 =========== =========== =========== =========== Basic net earnings per share $ 0.32 $ 0.37 $ 0.68 $ 0.73 =========== =========== =========== =========== Shares used in computing basic net earnings per share 8,978,576 9,050,091 8,911,628 9,042,530 =========== =========== =========== =========== Diluted net earnings per share $ 0.30 $ 0.35 $ 0.64 $ 0.69 =========== =========== =========== =========== Shares used in computing diluted net earnings per share 9,582,100 9,598,597 9,552,675 9,578,642 =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. 5 6 SPSS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------- ------------------------ 1998 1999 1998 1999 ----------- ----------- ----------- ----------- Net income $ 2,851 $ 3,339 $ 6,077 $ 6,634 Other comprehensive loss: Foreign currency translation adjustment (217) (727) (1) (1,009) ----------- ----------- ----------- ---------- Comprehensive income $ 2,634 $ 2,612 $ 6,076 $ 5,625 =========== =========== =========== ========== See accompanying notes to consolidated financial statements. 6 7 SPSS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) SIX MONTHS ENDED JUNE 30, ------------------------- 1998 1999 ----------- ----------- Cash flows from operating activities: Net income $ 6,077 $ 6,634 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,101 4,263 Deferred income taxes -- 2 Changes in assets and liabilities: Accounts receivable (1,578) (206) Inventories (454) 211 Accounts payable 1,446 (977) Accrued royalties (40) (125) Accrued expenses (1,436) (1,242) Accrued income taxes 737 (995) Deferred revenues (350) (2,003) Other (55) (1,261) ----------- ----------- Net cash provided by operating activities 7,448 4,301 ----------- ----------- Cash flows from investing activities: Capital expenditures, net (4,935) (3,204) Capitalized software development costs (1,920) (2,368) Net payments for acquisitions (48) -- ----------- ----------- Net cash used in investing activities (6,903) (5,572) ----------- ----------- Cash flows from financing activities: Net repayments on notes payable (71) (1,000) Net proceeds from issuance of common stock 1,235 328 Income tax benefit from stock option exercises 222 -- ----------- ----------- Net cash provided by (used in) financing activities 1,386 (672) ----------- ----------- Net change in cash and cash equivalents 1,931 (1,943) Cash and cash equivalents at beginning of period 8,079 14,912 ----------- ----------- Cash and cash equivalents at end of period $ 10,010 $ 12,969 =========== =========== Supplemental disclosures of cash flow information: Interest paid $ 91 $ 334 Income taxes paid 3,122 3,774 =========== =========== 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, 1998, included in SPSS' Annual Report on Form 10-K filed with the Securities and Exchange Commission. 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 SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------- ------------------------- 1998 1999 1998 1999 ----------- ----------- ----------- ----------- Statement of Income Data: Net revenues: Desktop products 74% 75% 73% 75% Large System products 13% 13% 14% 13% Other products and services 13% 12% 13% 12% ----------- ----------- ----------- ----------- Net revenues 100% 100% 100% 100% Cost of revenues 9% 9% 9% 9% ----------- ----------- ----------- ----------- Gross profit 91% 91% 91% 91% Operating expenses: Sales and marketing 52% 49% 51% 50% Product development 16% 18% 17% 18% General and administrative 8% 8% 7% 7% ----------- ----------- ----------- ----------- Operating expenses 76% 75% 75% 75% ----------- ----------- ----------- ----------- Operating income 15% 16% 16% 16% Other income (expense): Net interest income -- -- -- -- Other income (expense) -- (1%) -- (1%) ----------- ----------- ----------- ----------- Other income (expense) -- (1%) -- (1%) ----------- ----------- ----------- ----------- Income before income taxes 15% 15% 16% 15% Income tax expense 5% 5% 5% 5% ----------- ----------- ----------- ----------- Net income 10% 10% 11% 10% =========== =========== =========== ===========
8 9 COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 TO THREE MONTHS ENDED JUNE 30, 1999. Net Revenues. Net Revenues were $29,158,000 in the three months ended June 30, 1998 and $33,313,000 in the three months ended June 30, 1999, an increase of 14%. Revenues from products designed for desktop computers increased $3,622,000 (17%) over the corresponding period in 1998. In addition, revenues from annual license renewals of desktop products increased by $1,226,000, reflecting a $1,199,000 increase in annual license renewals for SPSS for Windows. Revenues from products designed for mainframes, minicomputers, and UNIX workstations ("Large System products") increased $576,000 (16%) compared to the corresponding period in 1998. Other products and services revenues decreased 1% due to a reduction in consulting and publication revenues. Revenues for the second quarter of 1999 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 $2,574,000 in the three months ended June 30, 1998 and $3,126,000 in the three months ended June 30, 1999, an increase of 21%. Such costs increased due to higher cost of goods sold resulting from increased sales, increased amortization of capitalized software and increased royalty expense. As a percentage of net revenues, cost of revenues remained constant at 9%. Sales and Marketing. Sales and marketing expenses were $15,259,000 in the three months ended June 30, 1998 and $16,157,000 in the three months ended June 30, 1999, an increase of 6%. This increase was due to the addition of the former Integral Solutions Limited ("ISL") and Surveycraft Pty Ltd. (Surveycraft) sales, marketing and services personnel, expansion of the domestic and international sales organizations, higher cost of new, more senior sales personnel and increased consulting expenses. These costs were partially offset by a reduction in advertising and printing expenses. As a percentage of net revenues, such expenses decreased from 52% to 49%. Product Development. Product development expenses were $4,787,000 in the three months ended June 30, 1998 and $6,101,000 (net of capitalized software development costs of $511,000 and $607,000) in the three months ended June 30, 1999, an increase of 27%. In the corresponding periods in 1998 and 1999, SPSS' expense for amortization of capitalized software and product translations, included in cost of revenues, was $518,000 and $681,000, respectively. The increase in product development expenses was primarily due to addition of the ISL development group, other additions to the product development staff and increases in staff compensation. As a percentage of net revenues, product development expenses increased from 16% to 18%. General and Administrative. General and administrative expenses were $2,221,000 in the three months ended June 30, 1998 and $2,503,000 in the three months ended June 30, 1999, an increase of 13%. Such expenses increased primarily due to the addition of amortization expense 9 10 related to ISL and Surveycraft intangibles and an increased administrative staff. As a percentage of net revenues, general and administrative expenses remained constant at 8%. Net Interest Income (Expense). Net interest income (expense) was $59,000 in the three months ended June 30, 1998 and ($94,000) in the three months ended June 30, 1999. This unfavorable variance was primarily due to the interest expense on the line-of-credit borrowing during the three months ended June 30, 1999 compared to no borrowing on the line-of-credit during the comparable period of 1998. Other Expense. Other expense was $37,000 in the three months ended June 30, 1998 and $250,000 in the three months ended June 30, 1999. Such transactions consist of foreign currency transactions. Provision for Income Taxes. Provision for income taxes was $1,488,000 in the three months ended June 30, 1998 and $1,743,000 in the three months ended June 30, 1999. During 1998 and 1999, the provision for income taxes represented an effective tax rate of approximately 34.3%. COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 TO SIX MONTHS ENDED JUNE 30, 1999. Net Revenues. Net Revenues were $57,658,000 in the six months ended June 30, 1998 and $65,861,000 in the six months ended June 30, 1999, an increase of 14%. Revenues from products designed for desktop computers increased $7,042,000 (17%) over the corresponding period in 1998. In addition, revenues from annual license renewals of desktop products increased by $1,828,000, reflecting a $1,933,000 increase in annual license renewals for SPSS for Windows. Revenues from products designed for mainframes, minicomputers, and UNIX workstations increased $591,000 (7%) compared to the corresponding period in 1998. Other products and services revenues increased 8% due to growth in training and consulting revenues partially offset by a reduction in publication revenues. Revenues for the six months of 1999 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 $5,009,000 in the six months ended June 30, 1998 and $5,809,000 in the six months ended June 30, 1999, an increase of 16%. Such costs increased due to higher cost of goods sold resulting from increased sales, increased amortization of capitalized software and increased royalty expense . As a percentage of net revenues, cost of revenues remained constant at 9%. Sales and Marketing. Sales and marketing expenses were $29,540,000 in the six months ended June 30, 1998 and $32,914,000 in the six months ended June 30, 1999, an increase of 11%. This increase was due to the addition of ISL and Surveycraft sales, marketing and services personnel, expansion of the domestic and international sales organizations, higher cost of new, more senior sales personnel and increased consulting expenses. These expenses were partially offset by reductions in advertising and printing expenses. As a percentage of net revenues, such expenses decreased from 51% to 50%. 10 11 Product Development. Product development expenses were $9,741,000 in the six months ended June 30, 1998 and $11,740,000 (net of capitalized software development costs of $1,027,000 and $920,000) in the six months ended June 30, 1999, an increase of 21%. SPSS' expense for amortization of capitalized software and product translations, included in cost of revenues, was $969,000 in the six months ended June 30, 1998 and $1,331,000 in the six months ended June 30, 1999. The increase in product development expenses was primarily due to the addition of the ISL development group, other additions to the product development staff and increases in staff compensation. As a percentage of net revenues, product development expenses increased from 17% to 18%. General and Administrative. General and administrative expenses were $4,005,000 in the six months ended June 30, 1998 and $4,715,000 in the six months ended June 30, 1999, an increase of 18%. Such expenses increased primarily due to the addition of amortization expense related to ISL and Surveycraft intangibles and an increased administrative staff. As a percentage of net revenues, general and administrative expenses remained constant at 7%. Net Interest Income (Expense). Net interest income (expense) was $86,000 in the six months ended June 30, 1998 and ($169,000) in the six months ended June 30, 1999. This unfavorable variance was primarily due to the interest expense on the line-of-credit borrowing during the six months ended June 30, 1999 compared to no borrowing on the line-of-credit during the comparable period of 1998. Other Expense. Other expense was $199,000 in the six months ended June 30, 1998 and $417,000 in the six months ended June 30, 1999. Such transactions consist of foreign currency transactions. Provision for Income Taxes. Provision for income taxes was $3,173,000 in the six months ended June 30, 1998 and $3,463,000 in the six months ended June 30, 1999. During 1998 and 1999, the provision for income taxes represented an effective tax rate of approximately 34.3%. LIQUIDITY AND CAPITAL RESOURCES SPSS' long-term debt as of June 30, 1999 is a mortgage on property in the United Kingdom. As of June 30, 1999, SPSS held approximately $12,969,000 of cash and short-term investments. Funds in the first six months of 1999 were provided by operations and offset by payments for acquisition related charges from SPSS' acquisitions of Quantime Limited, In2itive Technologies A/S, Surveycraft and ISL. Capital expenditures included, among other things, new computer systems for use in internal product development and sales. In May 1998, SPSS entered into a new loan agreement (the "Agreement") with American National Bank and Trust Company of Chicago ("American National") to replace its existing agreement with Bank of America, N.T.S.A. Under the Agreement, SPSS has an available 11 12 $10,000,000 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 June 30, 1999, SPSS had $8,000,000 outstanding under this line of credit. SPSS' Agreement with American National requires SPSS to comply with certain specified financial ratios and tests, and, among other things, restricts SPSS' 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. SPSS anticipates that amounts available under its line of credit, existing sources of liquidity and cash flows generated from operations will be sufficient to fund SPSS' 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 52% of total net revenues in the three months ended June 30, 1999 compared to 47% in the three months ended June 30, 1998. For the first six months, revenues from international operations were 54% in 1999 compared to 50% in 1998. 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 and six month periods ended June 30, 1999 when compared to the three and six month periods ended June 30, 1998. Net of the effects of changes in foreign currency rates, the increase would have been approximately 15% and 14% for the three and six months ended June 30, 1999 when compared to the three and six months ended June 30, 1998, respectively. SAFE HARBOR "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Certain statements in this report constitute "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Such statements involve known and unknown risks and uncertainties which may cause SPSS' actual results, performance or achievements, or industry results, to be materially different than any future results, performance or achievements expressed or implied in or by such forward-looking statements. By way of example and not limitation, known risks and uncertainties include SPSS' ability to successfully integrate or improve the performance of acquired businesses, changes in 12 13 market conditions or product demand, competition and currency fluctuations, changes in product release schedules and product acceptance. In light of these and other risks and uncertainties, the inclusion of forward-looking statements in this report should not be regarded as a representation by SPSS that any future results, performance or achievements will be attained. YEAR 2000 Many computer systems and applications currently use two digits to define the applicable year. As a result, date-sensitive systems may recognize the year 2000 as 1900 or not at all, which could cause miscalculations or system failures. SPSS uses software and other related technologies throughout its business and also sells computer software that will be affected by the date change in the year 2000. The four areas where year 2000 issues may affect SPSS include: - SPSS' information technology (IT) systems; - SPSS' non-IT systems; - the computer software SPSS sells; and - third parties with material relationships with SPSS, such as vendors and suppliers. To address the year 2000 issue, SPSS assembled a committee of representatives from all divisions and operating areas in early 1998. An inventory of the readiness of all major IT and non-IT systems has been completed and SPSS is in the process of testing and replacing non-compliant systems. This process is expected to be completed by September 1999. Likewise, SPSS has been testing the software it sells to third parties. The year 2000 compliance of SPSS products is detailed at SPSS' Web Site at www.spss.com. Finally, SPSS has sent compliance questionnaires to all its major suppliers. Virtually all have responded and most of those responding signed the standard compliance letter, as SPSS requested. Those responding suppliers that did not sign the SPSS standard compliance letter instead provided their own year 2000 compliance materials. These materials have been forwarded to the appropriate members of SPSS' year 2000 committee for evaluation. Thus far, the SPSS year 2000 committee has not encountered any material issues. The SPSS year 2000 committee will be developing contingency plans in the event of year 2000 non-compliance and expects to have this completed by September 1999. While SPSS' year 2000 readiness plans are underway, the consequences of non-compliance by SPSS, its major service providers, vendors or suppliers could have a material adverse effect on SPSS' operations. Although SPSS does not anticipate any major non-compliance issues, there can be no assurance that there will not be a delay in, or increased costs associated with, the implementation of SPSS' year 2000 readiness plan. 13 14 SPSS currently believes that the greatest risk of disruption in its business exists in the event of non-compliance by its material third parties. Some of the possible consequences of non-compliance by SPSS or its material third party suppliers include: - inability to efficiently contact customers to obtain orders: - inability to get orders to fulfillment houses; - inability to send product to customers; and - invoice and collection errors. Given these risks, SPSS is developing contingency plans intended to mitigate the possible disruption in business operations that may result from year 2000 non-compliance. It is currently estimated that the aggregate cost of SPSS' year 2000 efforts will be approximately $1.25 million to $1.5 million, of which $1,000,000 has been incurred to date. These costs do not include any costs associated with the implementation of contingency plans, which are in the process of being developed. SPSS' year 2000 readiness plan is an ongoing process and the estimates of costs and completion dates for various components of the program as described above are subject to change. 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. 14 15 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Stockholders was held on June 16, 1999. The following persons were nominated and elected to serve as Directors of the Company for a term of three years or until their successors have been duly elected and qualified: Nominee For Withheld ------- --- -------- Norman Nie 8,004,054 49,028 Bernard Goldstein 8,033,981 49,101 In addition, Merritt Lutz, Jack Noonan and Michael Blair remained as Directors of the Company after the meeting. Furthermore, the Company's appointment of KPMG LLP to serve as its independent auditor for fiscal year 1999 was ratified, at the Meeting, in accordance with the following votes: For Against Abstain --- ------- ------- 8,031,210 5,615 16,257 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) - ------ ----------------------- 3.1 Certificate of Incorporation of SPSS * 3.2 3.2 By-Laws of SPSS * 3.4 15 16 4.1 Loan Agreement between SPSS and + 4.1 American National Bank and Trust Company Of Chicago 4.2 Rights Agreement, dated June 18, 1998 between ** Exhibit 1 SPSS Inc. and Harris Trust and Savings Bank 10.1 Third Amended and Restated 1995 Equity Incentive Plan 15.1 Acknowledgment of Independent Certified Public Accountants Regarding Independent Auditors' Review Report 27.1 Financial Data Schedule - ------------------------------- * 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' Registration Statement on Form 8-A filed on June 18, 1998 + Previously filed with SPSS' 10-Q Quarterly Report for the quarterly period ended June 30, 1998. (b) Reports on Form 8-K There were no reports on Form 8-K filed by SPSS during the fiscal quarter ended June 30, 1999. 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: AUGUST 13, 1999 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: AUGUST 13, 1999 BY: /s/ EDWARD HAMBURG ------------------------------------------ EDWARD HAMBURG EXECUTIVE VICE-PRESIDENT, CORPORATE OPERATIONS AND CHIEF FINANCIAL OFFICER 17 18 EXHIBIT INDEX ------------- Exhibit Page Number Description of Document Number - ------ ----------------------- ------ 10.1 Third Amended and Restated 1995 Equity Incentive Plan 15.1 Acknowledgement of Independent Certified Public Accountants Regarding Independent Auditors' Review Report 27.1 Financial Data Schedule 18 EX-10.1 2 3RD AMENDED & RESTATED 1995 EQUITY INCENTIVE PLAN 1 EXHIBIT 10.1 ------------ THIRD AMENDED AND RESTATED 1995 EQUITY INCENTIVE PLAN 1. PURPOSE. The purpose of this Third Amended and Restated 1995 Equity Incentive Plan (the "Plan") is to further the success of SPSS Inc., a Delaware corporation (hereinafter called the "Company") by attracting and retaining directors, officers, and other key executives, employees and independent contractors of the Company and its subsidiaries and to provide to such persons incentives and rewards relating to the Company's business plans. 2. DEFINITIONS. As used in this Plan, in addition to the terms defined elsewhere herein, the following terms have the following meanings when used herein with initial capital letters: (a) "Board" means the Board of Directors of the Company or, pursuant to any delegation by the Board to the Compensation Committee pursuant to Section 10, the Compensation Committee. (b) "Change in Control" shall have the meaning set forth by the Board. (c) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (d) "Common Shares" means shares of Common Stock of the Company or any security into which such Common Shares may be changed by reason of any transaction or event of the type referred to in Section 7. (e) "Compensation Committee" means a committee appointed by the Board consisting of at least three Non-Employee Directors, each of whom will be a disinterested person within the meaning of Rule 16b-3. (f) "Date of Grant" means the date determined in accordance with the Board's authorization on which a grant of Option Rights or a grant of Restricted Shares, becomes effective. (g) "Form of Option Right Grant" means the form adopted by the Board for the granting of Option Rights pursuant to Section 4 hereof, which form may be amended by the Board from time to time. (h) "Form of Restricted Share Grant" means the form adopted by the Board for the transfer or issuance of Restricted Shares pursuant to Section 5 hereof, which form may be amended by the Board from time to time. (i) "Incentive Stock Options" means Option Rights that are intended to qualify as "incentive stock options" under Section 422 of the Code or any successor provision. 1 2 (j) "Market Value per Share", as applied to any date, means the price per share of the Common Shares in an amount equal to the closing price of the last sale of the Common Shares as reported by the Nasdaq National Market or the principal securities exchange or automated quotation system on which Common Shares were sold on the date when the Market Value per Share is to be determined or, if the date is a date on which the Common Shares did not trade, the closing price on the immediately preceding day on which the stock traded. (k) "Non-Employee Director" means a Director of the Company who is not a full-time employee of the Company or any Subsidiary. (l) "Nonqualified Stock Option" means Option Rights other than Incentive Stock Options. (m) "Optionee" means the optionee named in an agreement with the Company evidencing an outstanding Option Right. (n) "Option Price" means the purchase price payable on exercise of an Option Right. (o) "Option Right" means the right to purchase Common Shares upon exercise of an option granted pursuant to Section 4. (p) "Participant" means a person who is approved by the Board to receive benefits under this Plan and who is at the time an officer, executive, director or other employee or independent contractor of the Company or any one or more of its Subsidiaries, or who has agreed to commence serving in any of such capacities. (q) "Restricted Shares" means Common Shares issued pursuant to Section 5 as to which neither the substantial risk of forfeiture nor the prohibition on transfers referred to in Section 5 has expired. (r) "Rule 16b-3" means rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act") (or any successor rule substantially to the same effect), as in effect from time to time. (s) "Spread" means the excess of the Market Value per Share of the Common Shares on the date when Option Rights are surrendered in payment of the Option Price of other Option Rights, over the Option Price provided for in the related Option Right. (t) "Subsidiary" means any corporation with respect to which the Company directly or indirectly owns stock possessing 50% or more of the voting power as described in Section 424(f) of the Code. 2 3 3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in Section 7, the number of Common Shares that may be issued or transferred under this Plan upon the exercise of Option Rights or as Restricted Shares and released from substantial risks of forfeiture thereof, may not exceed a maximum of 1,800,000. Of these Common Shares, a maximum of 1,600,000 are reserved for grants to Participants who are officers, executives or other employees or independent contractors, and a maximum of 200,000 are reserved for grants to directors in lieu of the annual retainer to which directors are currently entitled. Common Shares issued under this Plan may be shares of original issuance or treasury shares or a combination of the foregoing. 4. OPTION RIGHTS. The Board may from time to time authorize the grant to Participants of options to purchase Common Shares upon such terms and conditions as it may determine in accordance with the following provisions: (a) Each grant will specify the number of Common Shares to which it pertains and the term during which the rights granted thereunder will exist. (b) Each grant will specify an Option Price per share, which may not be less than the Market Value per Share as of the Date of Grant. (c) Each grant will specify whether the Option Price is payable (i) in cash, (ii) by the actual or constructive transfer to the Company of nonforfeitable, unrestricted Common Shares already owned by the Optionees (or other consideration authorized pursuant to Section 4(d)) having an actual or constructive value as of the time of exercise as determined by the Board or in accordance with the applicable agreement referred to in Section 4(i), equal to the total Option Price, (iii) by having the Company reduce the number of Common Shares distributed to the Optionee by a number of Common Shares with a Market Value per Share, as of the date of exercise, equal to the Option Price of the Common Shares, (iv) by deferred payment of the full purchase price of the Common Shares from the proceeds of a sale, through a bank or broker, on the exercise date of some or all of the Common Shares underlying the Option Right to which such exercise relates, or (v) by a combination of such methods of payment. In connection with a constructive transfer pursuant to Section 4(c)(ii) hereof, a Participant may provide an attestation letter in form acceptable to the Company requesting that the Company issue and transfer to the Participant, in full satisfaction of such exercise, Common Shares having a value net of the exercise price and any applicable withholding taxes. (d) The Board may determine, at or after the Date of Grant, that payment of the Option Price of any option (other than an Incentive Stock Option) may also be made in whole or in part in the form of Restricted Shares or other Common Shares that are forfeitable or subject to restrictions on transfer, or other Option Rights (based on the Spread on the date of exercise). Unless otherwise determined by the Board at or after the Date or Grant, whenever any Option Price is paid in whole or in part by means of any of the forms of consideration specified in this paragraph, the Common Shares received upon the exercise of the Option Rights will be subject to such risks of forfeiture or restrictions 3 4 on transfer as may correspond to any that apply to the consideration surrendered, but only to the extent of (i) the number of shares surrendered in payment of the Option Price or (ii) the Spread of any unexercisable portion of Option Rights surrendered in payment of the Option Price. (e) Any grant may provide for deferred payment of the Option Price from the proceeds of sale through a bank or broker on the exercise date of some or all of the shares to which such exercise relates. (f) Successive grants may be made to the same Participant whether or not any Option Rights previously granted to such Participant remain unexercised. (g) Each grant will specify the period or periods of continuous service by the Optionee with the Company or any Subsidiary which is necessary before the Option Rights or installments thereof will become exercisable and may provide for the earlier exercise of such Option Rights in the event of a Change in Control or other event. (h) Option Rights granted under this Plan may be (i) Incentive Stock Options, (ii) Nonqualified Stock Options, or (iii) combinations of the foregoing. An Incentive Stock Option may be granted only to a Participant who, at the time the Incentive Stock Option is granted, is approved by the Board to receive an Incentive Stock Option and, at the time, is a key employee of the Company or of one or more of its Subsidiaries. An Incentive Stock Option may be granted only as permitted by the Code. (i) Each grant of Option Rights will be evidenced by an agreement executed on behalf of the Company by any officer, director, or, if authorized by the Board, employee of the Company and delivered to the Optionee and containing such terms and provisions as the Board may approve, except that in no event will any such agreement include any provision prohibited by the express terms of this Plan. The agreement shall be consistent with the Form of Option Right Grant adopted by the Board for the purpose of granting Option Rights. 5. RESTRICTED SHARES. The Board may also authorize the issuance or transfer of Restricted Shares to Participants in accordance with the following provisions. Each such grant will be in accordance with the following provisions: (a) Each such issuance or transfer will constitute an immediate transfer of the ownership of Common Shares to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend, and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer provided below. (b) Each such issuance or transfer may be made without additional consideration. (c) Each such issuance or transfer will provide that the Restricted Shares covered thereby will be subject, except (if the Board so determines) in the event of a Change in 4 5 Control or other event specified in the agreement referred to in Section 5(e), for a period to be determined by the Board at the Date of Grant, to a "substantial risk of forfeiture" within the meaning of Section 83 of the Code. (d) Each such issuance or transfer will provide that during the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Shares will be prohibited or restricted in the manner and to the extent prescribed in or pursuant to the agreement referred to in Section 5(e) (which restrictions may include, without limitation, rights of repurchase or first refusal or provisions subjecting the Restricted Shares to a continuing substantial risk of forfeiture in the hands of any transferee). (e) Each issuance or transfer of Restricted Shares will be evidenced by an agreement executed on behalf of the Company by any officer, director, or, if authorized by the Board, employee of the Company and delivered to and accepted by the Participant and containing such terms and provisions as the Board may approve except that in no event will any such agreement include any provision prohibited by the express terms of the Plan. The agreement shall be consistent with the Form of Restricted Share Grant adopted by the Board for the purpose of issuing Restricted Shares. All certificates representing Restricted Shares will be held in custody by the Company until all restrictions thereon have lapsed, together with a stock power executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such Restricted Shares, which may be executed by any officer of the Company upon a determination by the Board that an event causing the forfeiture of the Restricted Shares has occurred. 6. TRANSFERABILITY. (a) No Option Right granted, issued, or transferred under this Plan will be transferable by a Participant other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order, as that term is defined in the Code or the rules thereunder or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules thereunder, except (in the case of a Participant who is not a Director or officer of the Company) to a fully revocable trust of which the Optionee is treated as the owner for federal income tax purposes. Option rights will be exercisable during the Optionee's life only by him or by his guardian or legal representative. The Board may impose additional restrictions on transfer as well. (b) The Board may specify at the Date of Grant that part or all of the Common Shares that are (i) to be issued or transferred by the Company upon the exercise of Option Rights or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 5, will be subject to further restrictions on transfer. 7. ADJUSTMENTS. The Board may make or provide for such adjustments in the numbers of Common Shares covered by outstanding Option Rights granted hereunder, in the 5 6 prices per share applicable to such Option Rights and in the kind of shares covered thereby, as the Board may determine is equitably required to prevent dilution or enlargement of the rights of Participants that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization, or other change in the capital structure of the Company, (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation, or other distribution of assets or issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing; provided, further, however, that any adjustment which by reason of this Section 7 is not required to be made currently will be carried forward and taken into account in any subsequent adjustment. In the event of any such transaction or event, the Board may provide in substitution for any or all outstanding awards under this Plan such alternative consideration as it may determine to be equitable in the circumstances and may require in connection therewith the surrender of all awards so replaced. The Board may also make or provide for such adjustments in the numbers of shares specified in Section 3 as the Board may determine is appropriate to reflect any transaction or event described in this Section 7. 8. FRACTIONAL SHARES. The Company will not be required to issue any fractional Common Shares pursuant to this Plan. The Board may provide for the elimination of fractions and for the settlement of fractions in cash. 9. WITHHOLDING TAXES. To the extent that the Company is required to withhold federal, state, local, or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under this Plan, and the amounts available to the Company for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld, which arrangements may include relinquishment of a portion of such benefit. 10. ADMINISTRATION OF THE PLAN. (a) This Plan will be administered by the Board, which may from time to time delegate all or any part of its authority under this Plan to the Compensation Committee. Option Rights may be granted only by the Compensation Committee. (b) The Board will take such actions as are required to be taken by it hereunder, may take the actions permitted to be taken by it hereunder, and will have the authority from time to time to interpret this Plan and to adopt, amend, and rescind rules and regulations for implementing and administering this Plan. All such actions will be in the sole discretion of the Board, and when taken, will be final, conclusive, and binding. Without limiting the generality or effect of the foregoing, the interpretation and construction by the Board of any provision of this Plan or of any agreement, notification, or document evidencing the grant of Option Rights, or Restricted Shares, and any determination by the Board in its sole discretion pursuant to any provision of this Plan or of any such agreement, notification, or document will be final and conclusive. Without 6 7 limiting the generality or effect of any provision of the Certificate of Incorporation of the Company, no member of the Board will be liable for any such action or determination made in good faith. (c) The provisions of Sections 4 and 5 will be interpreted as authorizing the Board, in taking any action under or pursuant to this Plan, to take any action it determines in its sole discretion to be appropriate subject only to the express limitations therein contained and no authorization in any such Section or other provision of this Plan is intended or may be deemed to constitute a limitation on the authority of the Board. (d) The existence of this Plan or any right granted or other action taken pursuant hereto will not affect the authority of the Board or the Company to take any other action, including in respect of the grant or award of any option, security, or other right or benefit, whether or not authorized by this Plan, subject only to limitations imposed by applicable law as from time to time applicable thereto. 11. AMENDMENTS, ETC. (a) This Plan may be amended from time to time by the Board, but without further approval by a majority of the stockholders of the Company present in person or by proxy at a meeting of the Company's stockholders and entitled to vote generally in the election of directors, or as may be otherwise required by Rule 16b-3, no such amendment will (i) increase the maximum numbers of Common Shares or Restricted Shares pursuant to Section 3 (except that adjustments and additions authorized by this Plan will not be limited by this provision) or (ii) cause Rule 16b-3 to become inapplicable to this Plan during any period in which the Company has any class of equity securities registered pursuant to Section 13 or 15 of the Exchange Act. The Board may amend the Plan to set maximum limits on the number of shares with respect to which Option Rights may be granted during a specified period to any employee. (b) The Board may, with the concurrence of the affected Optionee, cancel any agreement evidencing Option Rights or any other award granted under this Plan. In the event of such cancellation, the Board may authorize the granting of new Option Rights or other awards hereunder (which may or may not cover the same number of Common Shares which had been the subject of the prior award) in such manner, at such option price, and subject to such other terms, conditions, and discretions as would have been applicable under this Plan had the canceled Option Rights or other award not been granted. (c) In case of termination of employment by reason of death, disability, or normal or early retirement, or in the case of hardship or other special circumstances, of a Participant who holds an Option Right not immediately exercisable in full, or any Restricted Shares as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or who holds Common Shares subject to any transfer restriction imposed pursuant to Section 6(b), the Board may take such action as it 7 8 deems equitable in the circumstances or in the best interests of the Company, including without limitation waiving or modifying any other limitation or requirement under any such award. (d) This Plan will not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate or modify the terms of such Participant's employment or other service at any time. (e) To the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision will be null and void with respect to such Option Right, but will remain in effect for other Option Rights and there will be no further effect on any provision of this Plan. (f) This Plan will be governed by and constructed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof. If any provision of this Plan is held to be invalid or unenforceable, no other provision of this Plan will be affected thereby. (g) The Plan shall be effective upon adoption by the Board of Directors, but the Plan shall be void unless it is approved by the Company's stockholders within the earlier of the date of the Company's next annual meeting of stockholders and twelve (12) months after the date the Plan is adopted by the Board of Directors. Subject to the foregoing condition, Option Rights and Restricted Shares may be granted pursuant to the Plan from time to time within the period commencing upon adoption of the Plan by the Board of Directors and ending ten (10) years after the earlier of such adoption and the approval of the Plan by the stockholders. 8 EX-15.1 3 ACKNOWLEDGEMENT OF INDEPENDENT C.P.A.S 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 of SPSS Inc. on Form S-8 (nos. 333-25869, 33-73130, 33-80799, 33-73120, 333-63167 and 33-74402), on Form S-3 (nos. 333-41207, 333-21025, 333-10423) and on Form S-4 (no. 333-15427), we acknowledge our awareness of the use therein of our report dated July 30, 1999 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. /s/ KPMG LLP Chicago, Illinois August 13, 1999 EX-27.1 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPPS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT JUNE 30, 1999 AND CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS 6-MOS DEC-31-1999 DEC-31-1999 JUN-30-1999 JUN-30-1999 0 12,969 0 0 0 36,882 0 1,823 0 2,660 0 54,384 0 41,087 0 24,441 0 90,991 0 37,570 0 0 0 0 0 0 0 91 0 49,585 0 90,991 33,313 65,861 33,313 65,861 3,126 5,809 3,126 5,809 24,761 49,369 313 554 180 332 5,082 10,097 1,743 3,463 3,339 6,634 0 0 0 0 0 0 3,339 6,634 0.37 0.73 0.35 0.69
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