UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 0-16230
STRUCTURAL DYNAMICS RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0733928
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2000 Eastman Drive, Milford, Ohio 45150
(Address of principal executive offices)
(Zip Code)
(513) 576-2400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
As of October 31, 1994 there were 28,883,873 shares of the
Registrant's Common Stock without par value issued and outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
For the Three Month and Nine Month Periods
Ended September 30, 1994 and 1993
(Unaudited)
(in thousands, except share data)
Three Months Nine Months
Ended September 30, Ended September
30,
1994 1993 1994 1993
Revenue:
Software products
and services $29,043 $21,722 $ 81,414 $ 68,353
Maintenance 8,587 8,612 26,204 25,189
Engineering services 4,860 4,723 14,386 15,449
Net revenue 42,500 35,057 122,004 108,991
Cost and expenses:
Cost of revenue 8,440 8,639 24,985 29,052
Research and
development expenses 10,048 6,703 26,031 19,467
Selling, general and
administrative expenses 22,477 23,832 69,273 67,092
Total cost
and expenses 40,965 39,174 120,289 115,611
Operating
income (loss) 1,535 (4,117) 1,715 (6,620)
Equity in losses
of affiliates (1,070) (134) (3,500) (530)
Other income,
principally interest 548 482 1,638 1,257
Income (loss) before
income taxes and
cumulative effect
of accounting
change 1,013 (3,769) (147) (5,893)
Income taxes 1,005 1,222 2,567 3,391
Income (loss) after
income taxes and
before cumulative
effect of
accounting change 8 (4,991) (2,714) (9,284)
Cumulative effect
of accounting change -- -- (3,896) --
Net income (loss) $ 8 $(4,991) $(6,610) $(9,284)
Earnings (loss)
per share:
Before cumulative
effect of
accounting change $ .00 $ (.16) $ (.09) $ (.30)
Cumulative effect
of accounting
change -- -- (.13) --
Earnings (loss)
per share $ .00 $ (.16) $ (.22) $ (.30)
Average number of
shares of common
stock and common
stock equivalents
outstanding 29,339 30,378 29,474 30,786
See accompanying notes to consolidated financial statements.
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
September 30, 1994 and December 31, 1993
(Unaudited)
(in thousands)
September 30, December 31,
1994 1993
Assets
Current Assets:
Cash and cash equivalents $ 24,646 $ 34,783
Investments 19,271 10,720
Trade accounts receivable, net 28,102 20,567
Other accounts receivable 8,639 5,902
Prepaid expenses 6,125 5,144
Total current assets 86,783 77,116
Long-term investments 8,667 10,547
Property and equipment, at cost:
Computer and other equipment 38,079 36,055
Office furniture and equipment 9,192 9,079
Leasehold improvements 3,701 3,594
50,972 48,728
Less accumulated depreciation and
amortization 36,328 32,897
Net property and equipment 14,644 15,831
Computer software construction
costs, net 29,722 28,457
Other assets 2,361 2,598
Total assets $142,177 $134,549
See accompanying notes to consolidated financial statements.
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
September 30, 1994 and December 31, 1993
(Unaudited)
(in thousands, except share data)
September 30, December 31,
1994 1993
Liabilities and
Shareholders' Equity
Current liabilities:
Accounts payable $ 5,831 $ 6,512
Accrued expenses 31,500 24,699
Accrued income taxes 3,821 5,371
Deferred revenue 17,159 13,060
Total current liabilities 58,311 49,642
Cumulative share of losses
in affiliate 4,561 --
Deferred income taxes and other 312 326
Shareholders' equity:
Common stock, stated value $.0069
per share; 100,000 authorized
shares in 1994 and 1993;
28,843 issued shares in 1994
and 28,709 issued shares in
1993 net of 1,632 treasury
shares in 1994 and 1,612
in 1993 201 199
Capital in excess of stated value 46,835 45,376
Retained earnings 33,015 39,625
Unrealized loss
on investments (457) --
Foreign currency translation
adjustment (601) (619)
Total shareholders' equity 78,993 84,581
Total liabilities and
shareholders' equity $142,177 $134,549
See accompanying notes to consolidated financial statements.
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
For the Nine Month Period Ended September 30, 1994 and 1993
(Unaudited)
(in thousands)
Nine Months Ended September 30,
1994 1993
Net cash provided by
operating activities $ 4,843 $12,165
Cash flows from investing activities:
Purchases of investments, net (7,128) (1,859)
Additions to property and
equipment, net (3,999) (5,014)
Additions to computer software
construction costs (6,516) (8,153)
Additions to purchased
computer software (97) (284)
Change in joint venture
investments 1,452 (1,170)
Other, net (171) (189)
Net cash used in
investing activities (16,459) (16,669)
Cash flows from financing activities:
Stock issued under employee
benefit plans 1,819 3,547
Purchases of treasury stock (358) (38)
Net cash provided by
financing activities 1,461 3,509
Effect of exchange rate changes
on cash 18 (33)
Decrease in cash and
cash equivalents (10,137) (1,028)
Cash and cash equivalents:
Beginning of period 34,783 31,661
End of period $24,646 $30,633
See accompanying notes to consolidated financial statements.
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(in thousands)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission. As permitted by the
rules of the Securities and Exchange Commission applicable to
quarterly reports on Form 10-Q, these notes are condensed and do
not contain all disclosures required by generally accepted
accounting principles. In the opinion of management, these
financial statements contain all adjustments (consisting of only
normal recurring adjustments, unless otherwise noted) necessary to
present fairly the Company's financial position, results of
operations and cash flows as of the dates and for the periods
indicated.
(2) Change in Accounting Principle
In 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 112 "Employers' Accounting for Postemployment
Benefits" for benefits attributable to employees' service
previously rendered. As such, the Company has recognized a one-
time charge of $3,896 net of income tax benefits. The annual
incremental charge for future periods is not anticipated to be
material.
(3) Formation of Central European Joint Venture
In March 1994, the Company formed a Central European joint venture
with Siemens Nixdorf Informationssysteme AG (SNI). The Company and
SNI contributed certain assets, cash and loans to the venture,
known as SDRC Software and Service GmbH ("SDRC GmbH"), along with
the rights to certain software products owned by SNI. Although the
Company received a 50.1% interest in the venture, it does not
exercise sufficient control to treat SDRC GmbH as a consolidated
subsidiary. Under the certain loss sharing provisions of the
venture agreement the Company may be required to make additional
capital investments in SDRC GmbH.
(4) Taxes
The provision for income taxes reflects taxes currently payable.
Deferred tax benefits relating to temporary differences have been
offset by a valuation allowance due to doubt as to their ultimate
realization. These factors have the impact of disturbing the
effective tax rate from the expected statutory rate.
Net earnings in the nine months ended September 30, 1995 were
positively impacted by the receipt of a federal income tax refund
related to foreign tax credits. The refund increased net income by
$1,754 or $.06 per share.
(5) Contingencies
Part II, Item 1 of this Form 10Q describes certain litigation to
which the Company is subject, and is incorporated herein by
reference. With respect to these matters, the Company intends to
defend itself vigorously. The Company is not able to determine the
ultimate outcome of these matters nor the degree of loss (if any)
which could arise therefrom; however, these matters are not
expected to have a materially adverse impact on the Company's
financial position.
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
(in thousands)
Revenue
Consolidated revenue increased by $7,443 (or 21%) and $13,013 (or
12%) for the three and nine months ended September 30, 1994,
respectively, as compared to the corresponding 1993 periods.
During the third quarter and nine months, the software segment's
revenue in 1994 increased $7,296 (or 24%) and $14,076 (or 15%) for
the comparable periods over 1993 due to the mid-1993 release of the
I-DEAS Master Series product. This growth comparison excludes the
SDRC GmbH's revenue beginning in second quarter of 1994 as it is
accounted for under the equity method. Engineering services
segment revenue increased 3% for the three months and decreased 7% for
the nine months ended September 30, 1994, respectively, as compared to the
corresponding 1993 periods.
Expenses
During the third quarter and nine months ended September 30, 1994,
cost of revenue decreased 2% and 14%, respectively, from the
comparable prior year periods. Engineering services costs declined
by 19% and 17% for the three month and nine month periods ended
September 30, 1994, as compared to prior year periods, in alignment
with the decline in engineering services revenue. The significant
year to date decrease from prior year resulted from the second
quarter 1993 write-off of unamortized software construction costs
associated with previously capitalized software construction costs
determined to be nonrecoverable upon release of I-DEAS Master
Series.
Research and development expenses which cannot be capitalized in
accordance with Statement of Financial Accounting Standards No. 86
increased 50% for the third quarter and 34% for the nine months.
Third party author fees included in research and development
expenses increased by $2,054 or 81% over the prior year quarter due
to increased software revenues, particularly from product
management (PDM) software licenses. Capitalized software
construction costs increased slightly from the prior year quarter.
The Company continues to commit significant resources to the
technological advancement of its software product line.
Selling, general and administrative expenses decreased 6% for the
third quarter and increased 3% for the nine months in 1994 over
1993. These comparisons exclude the German joint venture expenses
beginning in the second quarter of 1994 as its results of
operations are now accounted for under the equity method.
Taxes
The provision for income taxes reflects taxes currently payable.
Deferred tax benefits relating to temporary differences have been
offset by a valuation allowance due to doubt as to their ultimate
realization. These factors have the impact of disturbing the
effective tax rate from the expected statutory rate.
Other
Other income (principally interest income) has increased for the
third quarter and nine months ended September 30, 1994 due to
higher interest rates and from interest received on the second
quarter federal income tax refund.
Quarterly Results
Future quarterly results could be impacted by factors such as order
deferrals, a slower growth rate in the market, increased
competition or adverse changes in general economic conditions in
any of the countries in which the Company does business. Any
shortfall in revenue or earnings could have an immediate and
significant adverse effect on the trading price of the company's
stock in any given period.
Liquidity and Capital Resources
On September 30, 1994, the Company had cash and investments of
$52,584. The Company has no current commitments for material
capital expenditures. These existing sources of liquidity and
funds anticipated to be generated from operations are expected to
provide adequate cash to fund the Company's projected needs for the
foreseeable future. The Company believes that its cash resources
are adequate for its capital requirements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 14, 1994, the Company announced that in the course of
an internal examination it had discovered that a number of
purported sales to or through third party distribution channels
apparently did not reflect actual sales and that, as a result, it
would be necessary to restate the Company's financial results for
the years 1992 and 1993 and the first two quarters of 1994. The
Company also announced that it had terminated its Vice President
and General Manager of Far East Operations.
On September 15, 1994, the first of a total of 12 class action
lawsuits and two derivative lawsuits was filed. All of these suits
were filed in the United States District Court, Southern District
of Ohio and alleged a variety of causes of action under the federal
securities laws and Ohio corporate law. Two of the class action
lawsuits were subsequently dismissed. The remaining cases were
subsequently consolidated into one proceeding entitled In Re:
Structural Dynamics Research Corporation Securities Litigation,
Consolidated Master File No. C-1-94-630. The complaint demands
money damages in an unspecified amount.
The plaintiffs in this case presently consist of 22 individuals who
allegedly purchased shares of the Company's Common Stock between
February 3, 1992 and September 14, 1994. The consolidated
complaint contains allegations intended to support the
certification of a class of plaintiffs.
The defendants include the Company, Ronald J. Friedsam (a director
and the former chief executive officer of the Company), Robert A.
Fischer (a former Senior Vice President of the Company), Albert F.
Peter (a director and the current acting chief executive officer of
the Company), Gilbert R. Whitaker (a director of the Company),
Ronald H. Hoffman (former chief financial officer of the Company),
Tony Tolani (former Vice President and General Manager of Far East
Operations of the Company), and KPMG Peat Marwick (the Company's
former independent auditors).
The Securities and Exchange Commission has commenced a formal
private investigation of the Company arising out of the same facts
which gave rise to the above-described litigation.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits filed as part of this report:
11(a) Calculation of Primary Earnings (Loss) Per Common
Share
11(b) Calculation of Fully Diluted Earnings (Loss) Per
Common Share
27 Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter ended
September 30, 1994: None
SIGNATURE
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.
STRUCTURAL DYNAMICS RESEARCH CORPORATION
January 13, 1995 By: /s/ Jeffrey J. Vorholt
(Date) (Jeffrey J. Vorholt,
Vice President and Controller)
*Pursuant to the last sentence
of General Instruction G to
Form 10-Q, Jeffrey J. Vorholt
has executed this Quarterly
Report on Form 10-Q both on
behalf of the registrant and
in his capacity as its
principal financial and
accounting officer.
EXHIBIT 11(a)
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Calculation of Primary Earnings (Loss) Per Common Share
(in thousands, except share data)
Three Months Nine Months
Ended September 30, Ended September 30,
1994 1993 1994 1993
Income (loss) after
income taxes and
before cumulative
effect of
accounting change $ 8 $ (4,991) $ (2,714) $ (9,284)
Cumulative effect
of accounting
change -- -- (3,896) --
Net income (loss) $ 8 $ (4,991) $ (6,610) $ (9,284)
Average Number of
Shares of Common
Stock Outstanding 28,860 28,572 28,826 28,432
Average Number of
Common Stock
Equivalents:
Effect of stock
options
outstanding
after application
of the treasury
stock method 479 1,806 648 2,354
29,339 30,378 29,474 30,786
Primary Earnings
(loss)
Per Common Share
Before cumulative
effect of
accounting change $ .00 $ (.16) $ (.09) $ (.30)
Cumulative effect
of accounting
change -- -- (.13) --
Earnings (loss)
per share $ .00 $ (.16) $ (.22) $ (.30)
Exhibit 11(b)
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Calculation of Fully Diluted Earnings (Loss) Per Common Share
(in thousands, except share data)
Three Months Nine Months
Ended September 30, Ended September 30,
1994 1993 1994 1993
Income (loss)
after taxes and
before cumulative
effect of
accounting change $ 8 $ (4,991) $ (2,714) $ (9,284)
Cumulative effect
of accounting
change -- -- (3,896) --
Earnings (loss) $ 8 $ (4,991) $ (6,610) $ (9,284)
Average Number of
Shares of Common
Stock Outstanding 28,860 28,572 28,826 28,432
Average Number of
Common Stock
Equivalents:
Effect of stock
options outstanding
after application
of the treasury
stock method 479 1,806 648 2,354
29,339 30,378 29,474 30,786
Fully Diluted
Earnings (Loss)
Per Common Share:
Before cumulative
effect of
accounting change $ -- $ (.16) $ (.09) $ (.30)
Cumulative effect
of accounting
change -- -- (.13) --
Earnings (loss)
per share $ -- $ (.16) $ (.22) $ (.30)
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED
FINANCIAL STATEMENTS FRO THE QUARTER ENDED SEPTEMBER 30, 1994
CONTAINED IN THE
QUARTERLY REPORT ON FORM 10-Q OF STRUCTURAL DYNAMICS RESEARCH
CORPORATION
RELATIN TO SUCH PERIOD AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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<PERIOD-END> SEP-30-1994
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<SECURITIES> 19,271
<RECEIVABLES> 29,197
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0
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<OTHER-SE> 78,792
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<SALES> 122,004
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