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 June 30, 1995
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 August 3, 1995 there were 30,171,060 shares of the
Registrant's Common Stock without par value issued and
outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
(in thousands, except per share data)
Three Months Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue:
Software products and services $28,618 $28,922 $57,242 $52,371
Maintenance 11,853 8,915 21,719 17,617
Engineering services 6,306 4,872 11,628 9,516
Net revenue 46,777 42,709 90,589 79,504
Cost and expenses:
Cost of revenue 10,277 8,535 20,278 16,545
Research and development
expenses 8,200 7,943 15,460 15,983
Selling, general and
administrative expenses 22,040 22,724 46,261 46,796
Total cost and expenses 40,517 39,202 81,999 79,324
Operating income 6,260 3,507 8,590 180
Equity in losses of affiliates (1,362) (2,235) (3,002) (2,430)
Other income, principally
interest 593 679 1,086 1,090
Income (loss) before income taxes
and cumulative effect of
accounting change 5,491 1,951 6,674 (1,160)
Income tax expense 2,436 359 3,352 1,562
Income (loss) before cumulative
effect of accounting change 3,055 1,592 3,322 (2,722)
Cumulative effect of accounting
change -- -- -- (3,896)
Net income (loss) $ 3,055 $ 1,592 $ 3,322 $(6,618)
Earnings (loss) per share:
Before cumulative effect of
accounting change $ .10 $ .05 $ .11 $ (.09)
Cumulative effect of accounting
change -- -- -- (.13)<PAGE>
Net income (loss) per
share $ .10 $ .05 $ .11 $ (.22)
Common and common equivalent
shares 31,223 29,702 31,019 29,862
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)
(in thousands)
June 30, December
31,
1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 39,241 $ 21,885
Short-term investments 6,924 17,296
Trade accounts receivable, net 41,978 35,867
Other accounts receivable 8,580 6,760
Prepaid expenses 5,486 6,110
Total current assets 102,209 87,918
Long-term investments 13,764 7,059
Property and equipment, at cost:
Computer and other equipment 33,916 36,259
Office furniture and equipment 9,402 9,258
Leasehold improvements 3,855 3,799
47,173 49,316
Less accumulated depreciation
and amortization 36,020 35,537
Net property and
equipment 11,153 13,779
Computer software construction
costs, net 30,169 30,854
Investment in joint ventures 1,387 2,445
Other assets 739 644
Total assets $159,421 $142,699
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)
(in thousands, except per share data)
June 30, December
31,
1995 1994
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 5,061 $ 6,857
Accrued expenses 27,497 29,495
Accrued income taxes 4,623 4,262
Deferred revenues 30,013 19,714
Total current liabilities 67,194 60,328
Postemployment benefits and other 4,178 4,336
Cumulative share of losses in 4,438 5,883
affiliates, net
Shareholders' equity:
Common stock, stated value $.0069
per share Authorized 100,000 shares;
outstanding shares - 30,167 and
28,897 net of 1,494 and 1,652 shares
in treasury 210 201
Capital in excess of stated value 54,214 46,482
Retained earnings 30,050 26,728
Foreign currency translation
adjustment (598) (590)
Unrealized holding loss on
investments (265) (669)
Total shareholders' equity 83,611 72,152
Total liabilities and
shareholders' equity $159,421 $142,699
</TABLE>
<TABLE>
<CAPTION>
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(in thousands)
Six Months Ended June 30,
1995 1994
<S> <C> <C>
Net cash (used in) provided by $10,930 $ 2,866
operating activities
Cash flows from investing activities:
Sales (purchases) of investments, net 4,071 (7,024)
Additions to property and equipment, net (539) (2,235)
Additions to computer software
construction costs (3,513) (4,185)
Additions to purchased computer
software (230) (85)
Investment in joint ventures (1,000) (294)
(Increase) decrease in other assets, net (95) (191)
Net cash (used in) provided by
investing activities (1,306) (14,014)
Cash flows from financing activities:
Stock issued under employee benefit
plans 8,376 1,039
Purchases of treasury stock (636) (201)
Net cash provided by financing
activities 7,740 838
Effect of exchange rate changes on cash (8) 8
(Decrease) increase in cash and cash
equivalents 17,356 (10,302)
Cash and cash equivalents:
Beginning of period 21,885 34,783
End of period $39,241 $24,481
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
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
Standard (SFAS) No. 112 "Employers' Accounting for Postemployment
Benefits" for benefits attributable to employees' service
previously rendered and recognized a one-time charge of $3,896
net of income tax benefits.
(3) Formation of Central European Joint Venture
In March 1994, the Company formed a 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 Services 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.
(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 cause the effective tax rate to
differ from the expected statutory rate.
(5) Reclassification
Certain amounts have been reclassified in the 1994 financial
statements to conform with the current year presentation.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
(in thousands)
Revenue
The Company's consolidated net revenue increased 14% to $90,589
for the six months ended June 30, 1995 as compared to $79,504 for
the six months ended June 30, 1994. Quarterly revenue increased
10% to $46,777 for the three months ended June 30, 1995 as
compared to $42,709 for the three months ended June 30, 1994.
Software segment's revenue, including licenses, training and
services under maintenance contracts, increased 13% to $78,961
for the six months ended June 30, 1995 as compared to $69,988 for
the six months ended June 30, 1994. Quarterly software revenue
increased 7% to $40,471 for the three months ended June 30, 1995
as compared to $37,837 for the three months ended June 30, 1994.
This increase is due to the growing continued worldwide
acceptance of the Company's I-DEAS Master Series products.
Maintenance revenue increased 23% to $21,719 for the six months
ended June 30, 1995 as compared to $17,617 for the six months
ended June 30, 1994. Quarterly maintenance revenues increased
33% to $11,853 for the three months ended June 30, 1995 as
compared to $8,915 for the three months ended June 30, 1994.
This growth is due to revenue generated from maintenance
contracts for both new and existing customers.
Engineering services segment's revenue increased 22% to $11,628
for the six months ended June 30, 1995 as compared to $9,516 for
the six months ended June 30, 1994. Quarterly revenue increased
29% to $6,306 for the three months ended June 30, 1995 as
compared to $4,872 for the three months ended June 30, 1994.
This growth was primarily attributable to the increased level of
I-DEAS and Product Data Management implementation projects.
For the six month period ended June 30, 1995 and 1994, revenue in
North America accounted for 41% and 38%, Asia-Pacific 31% and 32%
and Europe 28% and 30%, respectively. The Company believes that
a significant portion of consolidated revenue will continue to be
generated from the international market.
Expenses
Cost of revenue increased 23% to $20,278 for the six months ended
June 30, 1995 as compared to $16,545 for the six months ended
June 30, 1994. Quarterly cost of revenue increased 20% to
$10,277 for the three months ended June 30, 1995 as compared to
$8,535 for the three months ended June 30, 1994. Cost of revenue
represents 22% of revenue for the six months ended June 30, 1995
as compared to 21% for the comparable 1994 period. The increase
was due to increased amortization of capitalized software and
other variable cost increases directly associated with software
revenue. With the January 1995 release of I-DEAS Master Series
2.0, amortization of software development costs increased 25% for
the six month period ended June 30, 1995 as compared to the
comparable 1994 period. External commissions for the six months
ended June 30, 1995 accrued under third party distribution
agreements increased 47% over the comparable 1994 period due to
the revenue growth in the Asia-Pacific region specifically those
countries where independent representatives are utilized. In
addition, Engineering Services' cost increased 19% over the prior
year's level consistent with the revenue growth.
Expenses (continued)
The Company continues to commit significant resources to the
technological advancement of its software product line. Research
and development expense decreased 3% to $15,460 for the six
months ended June 30, 1995 as compared to $15,983 for the six
months ended June 30, 1994. Quarterly research and development
expense increased 3% to $8,200 for the three months ended June
30, 1995 as compared to $7,943 for the three months ended June
30, 1994. Research and development expense represents 17% of
revenue for the six months ended June 30, 1995 as compared to 20%
for the comparable 1994 period. During this same period, a
decrease in research and development labor and associated
expenses was offset by an increase in third party author fees of
24%. The level of capitalized software construction costs at
June 30, 1995 decreased from June 30, 1994 by 16%. The lower
level of capitalized software construction costs and the higher
amount of amortization of capitalized software construction costs
reduced the capitalized software construction costs on the
balance sheet at June 30, 1995 by approximately $685 from
December 31, 1994.
Selling, general and administrative expenses were down slightly
from both the quarterly and annual 1994 level due to the impact
of the cost containment program instituted by management in the
fourth quarter of 1994. Selling, general and administrative
expenses represent 51% of revenue for the six months ended June
30, 1995 as compared to 59% for the comparable 1994 period. The
improvements from the cost containment program were offset by the
$2,000 accrual of severance costs recorded in the first half of
1995 related to a workforce reduction.
Other
The Company's equity in losses of affiliates represents its share
of Metaphase Technology. Inc. and SDRC GmbH losses, the majority
of which resulted from the SDRC GmbH joint venture.
In 1994, the Company adopted SFAS 112 "Employers' Accounting for
Postemployment Benefits" for benefits attributable to employees'
service previously rendered and recognized a one-time charge of
$3,896 net of income tax benefits.
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 cause the effective tax rate to
differ from the expected statutory rate.
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. The results of operations for the
three and six month periods ended June 30, 1995 are
not necessarily indicative of future expectations.
Liquidity and Capital Resources
At June 30, 1995, the Company had cash and investments of
$59,929. The increase in cash and investments is due from
results of operations and exercise of employee stock options.
The Company's working capital was $35,015 at June 30, 1995. In
addition, the Company has an unsecured bank line of credit of
$15,000. 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.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the April 18, 1995 Annual Meeting of Shareholders, the
Company's shareholders voted to approve the appointment of Price
Waterhouse LLP as the independent auditors of the Company for
1995. Out of a total of 29,191,175 shares eligible to vote for
the appointment, 26,398,325 voted in favor, 81,700 voted against
and 89,060 abstained with no broker non-votes.
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
(B) No report on Form 8-K has been filed during the second
quarter of 1995.
The information furnished in this report has not been audited.
It reflects all adjustments which are, in the opinion of
management, necessary for a fair statement of the results for the
interim periods reported. The results are not necessarily
indicative of results of operations to be expected for the full
fiscal year.
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
Date: August 8, 1995 By: /s/ Jeffrey J. Vorholt
Jeffrey J. Vorholt,
Vice President,
Chief Financial Officer and
Treasurer
* Pursuant to the last
sentence of General
Instruction G to Form 10-Q,
Mr. 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.
<PAGE>
EXHIBIT 11(a)
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Calculation of Primary Earnings (Loss) Per Common Share
(in thousands, except per share data)
Three Months Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
[S] [C] [C] [C] [C]
PRIMARY
Average shares outstanding 29,880 28,852 29,535 28,809
Net effect of dilutive stock
options after application of
the treasury stock method 1,270 850 741 1,053
Total 31,150 29,702 30,276 29,862
Income (loss) before
cumulative effect
of accounting change $ 3,055 $ 1,592 $ 3,322 $(2,722)
Cumulative effect of
accounting change -- -- -- (3,896)
Net income (loss) 3,055 1,592 3,322 (6,618)
Primary per share amount:
Before cumulative effect
of accounting change $ .10 $ .05 $ .11 $ (.09)
Cumulative effect of
accounting change -- -- -- (.13)
Net income (loss) per share $ .10 $ .05 $ .11 $ (.22)
<PAGE>
Exhibit 11(b)
<TABLE>
<CAPTION>
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Calculation of Fully Diluted Earning (Loss) Per Common Share
(in thousands, except per share data)
Three Months Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
FULLY DILUTED
Average shares outstanding 29,880 28,852 29,535 28,809
Net effect of dilutive stock
options after application of
the treasury stock method 1,343 850 1,484 1,053
Total 31,223 29,702 31,019 29,862
Income (loss) before
cumulative effect
of accounting change $ 3,055 $ 1,592 $ 3,322 $(2,722)
Cumulative effect of
accounting change -- -- -- (3,896)
Net income (loss) 3,055 1,592 3,322 (6,618)
Fully diluted per share
amount:
Before cumulative effect
of accounting change $ .10 $ .05 $ .11 $ (.09)
Cumulative effect of
accounting change -- -- -- (.13)
Net income (loss) per
share $ .10 $ .05 $ .11 $ (.22)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 39,241
<SECURITIES> 6,924
<RECEIVABLES> 45,364
<ALLOWANCES> (3,386)
<INVENTORY> 0
<CURRENT-ASSETS> 102,209
<PP&E> 47,173
<DEPRECIATION> 36,020
<TOTAL-ASSETS> 159,421
<CURRENT-LIABILITIES> 67,194
<BONDS> 0
<COMMON> 210
0
0
<OTHER-SE> 83,401
<TOTAL-LIABILITY-AND-EQUITY> 159,421
<SALES> 90,589
<TOTAL-REVENUES> 90,589
<CGS> 0
<TOTAL-COSTS> 81,999
<OTHER-EXPENSES> 1,916
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,674
<INCOME-TAX> 3,352
<INCOME-CONTINUING> 3,322
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,322
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
