SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-K
__________________
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number 33-16541
December 31, 1994
STRUCTURAL DYNAMICS RESEARCH CORPORATION
An Ohio Corporation I.R.S. Employer Identification No. 31-0733928
2000 Eastman Drive, Milford, Ohio 45150
Telephone Number (513) 576-2400
__________________
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of class
Common Stock without par value
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
__________________
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (229.405 of this chapter) is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
__________________
As of March 6, 1995 the latest practicable date, 29,191,175 shares
of Common Stock were outstanding. The aggregate market value of
Common Stock held by non-affiliates was approximately $205,408,245
at that date.
__________________
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by
reference and the Part of the Form 10-K into which the document is
incorporated:
Registrant's Annual Report to Shareholders for the year ended
December 31, 1994.
Part I, Part II and Part IV
Registrant's definitive Proxy Statement dated March 20, 1995.
Part II, Part III and Part IV
Registrant's Form 8-K dated November 2, 1994 and Form 8-K/A dated
November 15, 1994
Part II
__________________
PART I.
Item 1. Business.
General
Structural Dynamics Research Corporation (the "Company" or "SDRC")
is a leading international supplier of mechanical design automation
software and engineering services used by manufacturers for the
design, analysis, testing and manufacturing of mechanical products.
SDRC is also a leader in product data management (PDM) systems,
which provide a comprehensive approach to the management and
control of engineering information. The Company's products and
services significantly reduce product development time and cost,
resulting in superior product quality by enabling customers to
optimize product designs prior to production.
The Company's strategy is to establish acknowledged technological
leadership in marketing a highly functional set of mechanical
design automation (MDA) and product data management software tools
and providing related engineering consulting services. The Company
operates in two business segments: software products and services
and engineering services.
The Company was incorporated under the laws of the State of Ohio in
1967. During the past five years, it has restructured certain
aspects of its business. In 1994, the Company and Siemens Nixdorf
Informationssysteme AG (SNI) formed a joint venture, SDRC Software
and Services GmbH, to supply mechanical CAE/CAD/CAM software and
services in Central Europe. In 1992, the Company and Control Data
Systems, Inc. established a joint venture company, Metaphase
Technology, Inc., to market product data management software. In
1989, the Company and Nissan Motor Co., Ltd. established a Japanese
joint venture company, ESTECH Corporation, to provide engineering
services in Japan and the Far East.
Software Products and Services
The Company develops and markets a comprehensive software system
called I-DEAS (Integrated Design Engineering Analysis Software)
which spans a broad range of applications for mechanical
engineering including solid modeling, finite element modeling and
analysis, computer-aided testing, drafting and manufacturing. The
latest release of the I-DEAS software, which began shipment in mid
1993 is called the I-DEAS Master Series. I-DEAS software allows all
members of the product development team to work together to study
multiple product concepts and performance characteristics when the
cost and complexity of change is minimal. The ability to design and
optimize a product concept as a solid model, before a physical
product exists, increases effectiveness of a team approach to new
product development.
SDRC also markets product data management software which helps
track and manage data associated with the product throughout the
development process. The latest release of product data management
software, Metaphase Series 2 was announced in September, 1994.
Metaphase Series 2 is based on the product line of Metaphase
Technology, Inc. First customer shipments occurred in the fourth
quarter of 1994.
The Company's software is available on the leading engineering
workstations. This hardware platform independence allows the
Company's customers to operate in a heterogeneous environment,
selecting and adding software modules for a broad range of hardware
systems based upon their unique requirements. The productivity
benefits of leading-edge capabilities, such as unprecedented
ease-of-use, team oriented product development, best-in-class
design, integrated simulation and integrated applications, have
increased the number of potential users who can utilize these
tools. The Company believes its products and services are of great
value to companies which must accelerate, improve and streamline
design processes in response to increased competition while
simultaneously designing and manufacturing mechanical products in
accordance with specific quality and cost criteria. A broad range
of industries are potential users of these tools, with the highest
concentration of users at automotive, electronics, aerospace, and
industrial equipment manufacturers.
The Company's sales channels include a worldwide direct sales
force, distributors, value-added resellers and hardware suppliers.
In certain markets where the Company does not maintain a direct
sales force, it licenses its products through independent
representatives.
In 1993 and 1994 one customer, Information Services
International-Dentsu Ltd. ("ISID"), accounted for approximately 11%
of the Company's consolidated revenues. ISID is an independent
distributor of the Company's I-DEAS software in the Japanese
market.
Seasonality
Historically, the Company has tended to realize a disproportionate
amount of its total revenue in each quarter during the last month
of the quarter, and to realize a disproportionate amount of its
total annual revenue during the fourth quarter of each year.
Competition
The market for the Company's software products is highly
competitive and the Company expects competitive pressure to
increase in the future. To maintain its position of technological
leadership, the Company must continually enhance its existing
software products and pursue the development and introduction of
new products. There can be no assurance that the Company will be
successful in developing or marketing new products. In addition,
there can be no assurance that any new products will adequately
achieve market acceptance. The Company expects that the adverse
publicity relating to the restatement of previously issued
financial results will result in increased competitive challenges.
There can be no assurances that competition will not have a
material adverse effect on the Company's results of operations.
The Company competes against products in the CAE/CAD/CAM market
including the CADAM and CATIA products marketed by IBM, the CADDS
product marketed by Computervision Corporation, the UNIGRAPHICS
product marketed by EDS, the I/EMS product marketed by Intergraph
Corporation and the Pro/Engineer product marketed by Parametric
Technology Corporation. The Company's future success will depend in
a large part on its ability to further penetrate its installed
customer base as well as the installed customer base of its
competitors.
The principal competitive factors in the mechanical design market
for software are product functionality, product breadth, product
performance, hardware platform independence, ease of use, price,
customer support, technical reputation and size of installed
customer base.
Engineering Services
Building on its extensive knowledge of mechanical design automation
technology and engineering applications, the Company's engineering
services division provides consulting services to improve the
design of its customers' products, as well as to improve its
customers' engineering and manufacturing processes. The segment
also serves as a systems integrator providing advanced training and
technology transfer to customers to enable them to integrate and
optimize their mechanical design automation investment. The
division applies advanced computer simulation methods and in-depth
application expertise for several types of engineering services
including design audits, product design, troubleshooting and
engineering process design.
The markets for the Company's engineering services are highly
competitive and include manufacturers in the automotive,
electronics, aerospace and industrial equipment segments. Marketing
and sales activities for the Company's engineering services are
conducted using a consultative sales strategy on a targeted key
account basis. The Company's senior consultants maintain continuing
contact with their client counterparts and serve as integral
members of the customers' design and engineering teams.
The principal competitive factors in the market are technical
expertise, applications experience, availability of computer
automation tools, price and responsiveness. The Company competes
against in-house engineering departments, engineering consulting
companies and systems integrators.
Other Information
Segment and geographic information is included on page 46 of the
Company's Annual report to Shareholders for the year ended December
31, 1994, which is incorporated herein by reference.
The Company has entered into various marketing, reference selling
and similar arrangements with a number of hardware vendors
including Digital Equipment Corporation, Hewlett-Packard Company,
Sun Microsystems, Inc. and Silicon Graphics, Inc. Under these
agreements the Company's software products are generally licensed
in conjunction with sales of hardware, either directly by the
hardware manufacturers or by the Company in cooperation with the
hardware vendors.
The Company owns all the standard software products that it
licenses with the exception of I-DEAS Documentation System, I-DEAS
Drafting, I-DEAS View Markup, I-DEAS GNC, I-DEAS Post Writer,
I-DEAS GNC Multi-Axis, I-DEAS Symbols Library, I-DEAS TMG, I-DEAS
Wire EDM, DMCS, EDL, Metaphase and portions of I-DEAS Mechanism
Design, which it licenses from third parties. Under these license
agreements, the Company pays a percentage royalty to the third
parties.
As is customary throughout the software industry, the Company
relies both on copyrights and trade secrecy for proprietary
protection of its software products. The duration of such
protection is considered to be quite adequate given the constantly
changing nature of the business. The Company also utilizes a number
of trademarks, both registered and otherwise, with respect to its
software products. The proprietary status of its trademarks lasts
indefinitely, so long as the trademarks remain in use.
Because of the nature of the Company's business, the Company does
not believe that backlog is indicative of revenue for any
succeeding period. The Company's engineering services business has
contracts which vary in length from weeks to multiple years.
Engineering services backlog, consisting of future payments under
these contracts for work not yet performed, was approximately
$8,843,000 at December 31, 1994 compared to approximately
$4,300,000 at December 31, 1993 and $3,600,000 at December 31,
1992. The Company expects to complete a majority of the work
required under the contracts included in the December 31, 1994
backlog figure. However, these contracts are subject to delays
and/or cancellation by the customer and therefore engineering
services' backlog at any given date is not necessarily reflective
of actual engineering services' revenue for any future period.
Research and development expense amounted to approximately
$33,560,000, $25,937,000 and $25,369,000 in 1994, 1993 and 1992,
respectively.
As of December 31, 1994, the Company had 1,162 full-time employees,
of whom 270 were engaged in research and development, 633 in sales
and marketing, 174 in engineering services and 85 in general
management and administration. In addition, the Company employed 8
part-time employees and cooperative students.
Special Charge
In the fourth quarter of 1994, the Company initiated a plan to cut
costs and strengthen its competitive position by reducing its
workforce by 87 people. These employees were primarily product
development, marketing and administrative personnel. As a result,
the Company recognized a charge of $1,247,000 for severance costs
and outplacement assistance for employees. In 1994, the Company
paid $303,000 to these employees. At December 31, 1994, the Company
had accrued severance benefits of $944,000 related to this matter.
In February, 1995, the Company further reduced its workforce and
will record a related charge to income of approximately $1,000,000.
Item 2. Properties.
The following table sets forth certain information, as of December
31, 1994, with respect to principal properties in which the Company
and its subsidiaries conduct their operations:
Space Used In
Ownership Operations
Location Or (Square Principal Activities
Lease Feet)
Cincinnati, Lease 221,000 Headquarters Office
Ohio (expires Facilities, Technical
2011) Development Center,
Marketing, Engineering
Consulting and
Administration
San Diego, Lease 25,000 Consulting Center
California (expires
1999)
Hitchin, Lease 18,000 European Headquarters
England (expires Office Facilities
2068)
Hitchin, Lease 15,000 European Headquarters
England (expires Office Facilities
2017)
Paris, Lease 18,000 Southern Europe
France (expires Office Facilities
2002)
Frankfurt, Lease 19,000 Central Europe Office
Germany (expires Facilities
1999)
Tokyo, Lease 8,000 Far East Office
Japan (expires Facilities
1995)
Management of the Company considers the above properties to be
adequate and suitable for present purposes.
Item 3. Legal Proceedings.
Securities Litigation and Related Matters
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. The
Company also announced that it had terminated its Vice President
and General Manager of Far East Operations. The Company issued its
restated financial statements for the years ended December 31,
1993, 1992, and 1991 on January 16, 1995.
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 later voluntarily dismissed. The remaining class
action cases were then consolidated into one proceeding. The
consolidated class action complaint demands money damages in an
unspecified amount.
The plaintiffs in the class action 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
defendants include the Company, certain directors and former
officers. The consolidated complaint contains allegations intended
to support the certification of a class of plaintiffs, and in
February 1995 the plaintiffs filed a motion to certify the class.
The court has not yet acted on this motion.
The shareholder derivative cases are proceeding separately from the
class action case. The plaintiffs in these cases consist of two
shareholders of the Company who are asserting claims on behalf of
the Company against various defendants consisting of certain of the
Company's directors and former officers. The Company is a nominal
defendant in these cases. The complaints seek unspecified money
damages.
The Company intends to defend itself vigorously in all such
litigation but is unable, at this time, to determine the amount of
loss that may result from these matters. In addition, 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. The Company is
cooperating with this investigation but is unable to determine, at
this time, the probable outcome.
Other Litigation
In December, 1994, Ashlar Incorporated ("Ashlar") filed a lawsuit
against the Company in the United States District Court for the
Northern District of California alleging that certain computer
aided design products made, used or sold by the Company infringe
certain patents held by Ashlar. The Company has denied the
allegations and filed a counterclaim for a judgment declaring that
it has not infringed, induced infringement or otherwise contributed
to the infringement of these patents. The counterclaim filed by the
Company also seeks to have the court declare that these patents are
invalid, void and unenforceable. The Company denies that any of its
products infringe the Ashlar patents and intends to vigorously
contest the Ashlar allegations.
Additional Executive Officers of the Registrant (at March 6, 1995).
Item.
Name Age Position
William P. Conlin* 61 Chairman of the Board
Albert F. Peter* 52 President and Chief Executive
Officer
Albert L. Klosterman 52 Senior Vice President and Chief
Scientist
Jack W. Martz 49 Senior Vice President - PDM
Business Development
John A. Mongelluzzo 36 Vice President, Secretary and
General Counsel
Martin Neads 46 Senior Vice President - SDRC
Operations
Edward P. Neenan 49 Senior Vice President - Human
Resources
Jeffrey J. Vorholt 42 Vice President, Chief Financial
Officer and Treasurer
* Member of Board of Directors
Mr. Conlin has served as Chairman of the Board since February,
1995. Prior to that time, Mr. Conlin has served on the Board of
Directors since April, 1993. Mr. Conlin is currently a private
consultant to CEOs of several advanced technology companies and
serves as an active board member of many privately-held
corporations. Mr. Conlin has 35 years experience in the computer
industry, with the last 20 being executive positions including his
election to corporate senior vice president and member of the
six-person executive committee at Burroughs. From November, 1983
through November, 1993, Mr. Conlin was president and chief
executive officer of CalComp, Inc.
Mr. Peter has served as President and Chief Executive Officer since
February, 1995. Prior to that time, Mr. Peter had been serving as
SDRC's acting Chief Executive Officer since November, 1994. Mr.
Peter was a founder of the Company who served in various capacities
until his election to the office of Vice President, a position he
held until his retirement in December, 1991. Mr. Peter continues to
serve on the Company's Board of Directors, a position he has held
since July, 1983.
Dr. Klosterman has served as Senior Vice President and Chief
Scientist since February, 1995. Prior to that time he has served as
Technical Director and Manager of Technical Development for the
Company since October, 1973. He has been a Vice President since
1979, was appointed Chief Technical Officer in 1983 and was elected
Senior Vice President in December, 1986.
Mr. Martz has served as Senior Vice President - PDM Business
Development since January, 1995. Prior to that time, Mr. Martz
served as Vice President and General Manager, Engineering Services
Division since October, 1983, and was elected Senior Vice President
in December, 1986. From April, 1981 to October, 1983 Mr. Martz was
General Manager, Eastern Region Consulting Operations.
Mr. Mongelluzzo has served as Vice President, Secretary and General
Counsel since October, 1991. From January 1, 1987 he served as
Secretary and Counsel for the Company. In May, 1986 he joined the
Company as Assistant Counsel, was elected Assistant Secretary in
October, 1986 and Secretary in December, 1986. From February, 1985
until May, 1986 Mr. Mongelluzzo was employed as Staff Attorney for
the Ohio Department of Commerce.
Mr. Neads has served as Senior Vice President - SDRC Operations
since November, 1994. Mr. Neads joined the Company in 1976 as a
project engineer in our UK Engineering Services Division. In 1981
he transferred to the Software Products Marketing Division as
General Manager, UK Operations and two years later was named
General Manager, European Operations, SPMD. In 1987 he was promoted
to the position of Vice President and General Manager, European
Operations, SPMD.
Mr. Neenan has served as the Company's Vice President - Human
Resources since February, 1987, and was elected Senior Vice
President in April, 1991. Prior to accepting his position with the
Company he was employed by Unisys Corporation (formerly Burroughs
Corporation) since 1969 where he served in a variety of positions,
most recently as Vice President Staffing and Human Resources
Planning from 1985 to 1986.
Mr. Vorholt has served as Vice President, Chief Financial Officer
and Treasurer since February, 1995. Prior to that time, Mr. Vorholt
was the Vice President and Controller since December, 1994. Prior
to accepting his position with the Company, he was employed by
Cincinnati Bell Telephone Company as Senior Vice President -
Accounting and Information Systems from 1991 - 1994, and by
Cincinnati Bell Information Systems, Inc. as Senior Vice President
and Director, 1989 - 1991. Mr. Vorholt is a licensed Certified
Public Accountant and Attorney- at-Law.
PART II.
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters.
The Company's common stock is listed and traded on the National
Association of Securities Dealers, Inc. Automatic Quotation
(NASDAQ) National Market System.
The high and low bid prices per share for the Company's common
stock as reported on the NASDAQ National Market System are
contained in the table below. Such quotations reflect inter-dealer
prices without retail mark-up, mark-down or commission. The Company
paid no dividends in 1994 or 1993 and intends to continue its
policy of retaining earnings to finance future growth. There were
approximately 1,800 shareholders of record as of December 31, 1994.
Three months ended
---------------------------------------------------
March 31, June 30, September 30, December 31,
1994 1994 1994 1994
==================================================================
High 17 1/8 13 7/8 10 6 3/4
Low 12 9 1/8 3 5/8 3 3/4
Three months ended
---------------------------------------------------
March 31, June 30, September 30, December 31,
1993 1993 1993 1993
==================================================================
High 18 1/4 21 1/2 21 1/2 19 7/8
Low 9 5/8 14 13 3/8 12 1/4
Item 6. Selected Financial Data.
The selected financial data for the five years ended December 31,
1994, which appears on page 27 of the Company's Annual Report to
Shareholders for the year ended December 31, 1994, is incorporated
by reference in this Form 10-K Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The Management's Discussion and Analysis of Financial Condition and
Results of Operations, which appears on pages 28 to 31 of the
Company's Annual Report to Shareholders for the year ended December
31, 1994, is incorporated by reference in this Form 10-K Annual
Report.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Financial Statements and Report of Independent
Accountants appearing on pages 32 to 47 of the Company's Annual
Report to Shareholders for the year ended December 31, 1994, are
incorporated by reference in this Form 10-K Annual Report. With the
exception of the aforementioned information and the information
incorporated in Items 6 and 7, the 1994 Annual Report to
Shareholders is not to be deemed filed as part of this Form 10-K
Annual Report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Subsequent to the filing of the Company's Annual Report on Form
10-K for the year ended December 31, 1993, KPMG Peat Marwick LLP
withdrew its opinion with respect to the Company's financial
statements for the years ended December 31, 1993, 1992, and 1991
and resigned as the Company's auditors under circumstances which
may be deemed to have involved a disagreement. Such matters are
described in the Company's Current Report on Form 8-K as filed with
the Securities and Exchange Commission on November 2, 1994, as
amended by a Form 8- K/A filed with the Securities and Exchange
Commission on November 15, 1994, each of which is incorporated
herein by reference.
PART III.
The information required by Item 10. "Directors and Executive
Officers of the Registrant," Item 11. "Executive Compensation,"
Item 12. "Security Ownership of Certain Beneficial Owners and
Management," and Item 13. "Certain Relationships and Related
Transactions" is incorporated by reference to the Company's
definitive Proxy Statement dated March 20, 1995 which relates to
its April 18, 1995 Annual Meeting of Shareholders.
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
a.1. Financial Statements
The following Consolidated Financial Statements and related notes
of Structural Dynamics Research Corporation and subsidiaries,
included in the Annual Report to Shareholders for the year ended
December 31, 1994, are incorporated by reference in Item 8. of Part
II:
Report of Independent Accountants.
Consolidated Statement of Operations - Years ended December 31,
1994, 1993 and 1992.
Consolidated Balance Sheet - December 31, 1994 and 1993.
Consolidated Statement of Shareholders' Equity - Years ended
December 31, 1994, 1993 and 1992.
Consolidated Statement of Cash Flows - Years ended December 31,
1994, 1993 and 1992.
Notes to Consolidated Financial Statements.
a. 2. Financial Statement Schedules
The Report of Independent Accountants on the financial statement
schedule of Structural Dynamics Research Corporation and
subsidiaries appears immediately prior to the Schedule VIII in this
Form 10-K.
The following financial statement schedule of Structural Dynamics
Research Corporation and subsidiaries is included in this Item 14:
Schedule
---------
VIII Valuation and qualifying accounts
All other schedules have been omitted because the information
either has been shown in the Consolidated Financial Statements or
notes thereto, or is not applicable or required under the
instructions.
Financial statements of Metaphase Technology, Inc. and Estech
Corporation in which the Company owns equity interests of 50% and
30%, respectively, have been omitted because the registrant's
proportionate share of the income or losses from continuing
operations before income taxes, and total assets of each such
company is less than 20% of the respective consolidated amounts,
and the investment in and advances to each company is less than 20%
of consolidated total assets. Audited financial statements of SDRC
Software and Services, GmbH are included in this Form 10-K as the
Registrant's proportionate share of losses from continuing
operations before income taxes exceeds 20% of the respective
consolidated amounts.
a.3. Exhibits:
Exhibit Reference
3(a) Amended Articles of Incorporation of
Registrant, including subsequent updates Note (h)
3(b) Amended Code of Regulations of Registrant Note (a)
4 Shareholder Rights Plan Note (b)
10(a) Structural Dynamics Research Corporation
Tax Deferred Capital Accumulation Plan
dated January 1, 1989 Note (f)
10(b) Executive Employment Agreement between
Registrant and Ronald J. Friedsam dated
February 15, 1993 Note (h)
10(d) Form of Structural Dynamics Research
Corporation Director Class A Common Stock
Option Agreement Note (a)
10(e) Structural Dynamics Research Corporation
1991 Employee Stock Option Plan Note (e)
10(f) Structural Dynamics Research Corporation
Directors' Non-Discretionary Stock Option
Plan Note (e)
10(g) Joint Venture Agreement between
Structural Dynamics Research Corporation
and Nissan Motor Co., Ltd. Note (c)
10(h) Joint Venture Agreement between
Structural Dynamics Research Corporation
and Vickers, Inc., a Trinova Company Note (d)
10(i) Lease agreement (including amendments #1
and #2) between Park 50 Development
Company Limited Partnership and
Structural Dynamics Research Corporation Note (f)
10(j) Joint Venture Formation Agreement between
Structural Dynamics Research Corporation
and Control Data Systems, Inc. Note (g)
10(k) Joint Venture Agreement between
Structural Dynamics Research Corporation
and Siemens Nixdorf Informationssysteme
AG
11 Statement regarding computation of per
share earnings
13 Portions of the Annual Report to
Shareholders incorporated herein by
reference
21 Subsidiaries of the Registrant
23 Consent of Independent Accountants
27 Financial Data Schedule
NOTE REFERENCE:
(a) Incorporated by reference to the Company's Registration
Statement No. 33-16541, which was originally filed on August 17,
1987 and became effective on September 29, 1987.
(b) Incorporated by reference to the Company's report on Form 8-K
filed on August 3, 1988.
(c) Incorporated by reference to the Company's report on Form 10-Q
dated May 12, 1989.
(d) Incorporated by reference to an exhibit filed in the Company's
Annual Report on Form 10-K for the year ended December 31, 1989.
(e) Incorporated by reference to the Company's definitive Proxy
Statement dated March 11, 1991.
(f) Incorporated by reference to an exhibit filed in the Company's
Annual Report on Form 10-K for the year ended December 31, 1990.
(g) Incorporated by reference to an exhibit filed in the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
(h) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993 as originally filed
on March 11, 1994.
b. Reports on Form 8-K
Subsequent to the filing of the Company's Annual Report on Form
10-K for the year ended December 31, 1993, KPMG Peat Marwick LLP
withdrew its opinion with respect to the Company's financial
statements for the years ended December 31, 1993, 1992, and 1991
and resigned as the Company's auditors under circumstances which
may be deemed to have involved a disagreement. Such matters are
described in the Company's Current Report on Form 8-K as filed with
the Securities and Exchange Commission on November 2, 1994, as
amended by a Form 8-K/A filed with the Securities and Exchange
Commission on November 15, 1994, each of which is incorporated
herein by reference.
c. Exhibits as required by Item 601 of Regulation S-K
None
d. Financial statements required by Regulation S-X
SDRC Software and Services, GmbH<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
_________________, 1995 By /s/Jeffrey J. Vorholt
Date Jeffrey J. Vorholt, Vice
President, Chief Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
/s/ Albert F. Peter March 27, 1995
Albert F. Peter, President, Chief (Date)
Executive Officer and Director
(Principal Executive Officer)
/s/ William P. Conlin March 27, 1995
William P. Conlin, Chairman of (Date)
the Board
/s/ Jeffrey J. Vorholt March 27, 1995
Jeffrey J. Vorholt, Vice President, (Date)
Chief Financial Officer and
Treasurer
(Principal Financial and Accounting
Officer)
/s/ Robert P. Henderson March 27, 1995
Robert P. Henderson (Date)
Director
/s/ Ted H. McCourtney March 27, 1995
Ted H. McCourtney (Date)
Director
/s/ John E. McDowell March 27, 1995
John E. McDowell (Date)
Director
/s/ James W. Nethercott March 27, 1995
James W. Nethercott
Director
/s/ Gilbert R. Whitaker, Jr. March 27, 1995
Gilbert R. Whitaker, Jr. (Date)
Director<PAGE>
Report of Independent Accountants
To the Board of Directors
of Structural Dynamics Research Corporation
Our audits of the consolidated financial statements referred to in
our report dated February 15, 1995 appearing on page 32 of the 1994
Annual Report to Shareholders of Structural Dynamics Research
Corporation (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also
included an audit of the Financial Statement Schedule listed in
Item 14 (a) of this Form 10-K. In our opinion, the Financial
Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
Price Waterhouse LLP
Cincinnati, Ohio
February 15, 1995
SCHEDULE VIII
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands)
Balance Balance
at at End
Beginning Charged Deductions/ of
Description of Period to Income (Recoveries) Period
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Accounts Receivable:
Year ended December
31, 1992 $ 740 1,625 668 $1,697
====== ===== ===== ======
Year ended December $1,697 1,790 1,136 $2,351
31, 1993 ====== ===== ===== ======
Year ended December $2,351 424 (132) $2,907
31, 1994 ====== ===== =====
Exhibit 10(k)
Joint Venture and Shareholders' Agreement
This Agreement, dated as of March 15, 1994 by and between
Siemens Nixdorf Informationssysteme Aktiengesellschaft, a German
corporation, with its registered seat in Paderborn and its
principal place of business at Ott-Hahn-Ring 6, 81739 Munchen,
Germany (hereinafter referred to as "SNI"), and
Structural Dynamics Research Corporation, an Ohio corporation, with
its principal place of business at 2000 Eastman Drive, Milford,
Ohio, USA 45150 (hereinafter referred to as "Structural Dynamics")
and
SDRC Software Products Marketing Division, Inc., an Ohio
corporation, with its principal place of business at 2000 Eastman
Drive, Milford, Ohio, USA 45150 (hereinafter referred to as "SPMD")
(Structural Dynamics and SPMD hereinafter referred to collectively
as "SDRC").
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Contents
Preamble
1. Definition
I. Formation of the Company
2. The Company
3. Share Participation
4. Capital Contribution
5. Contribution to the Capital Reserve
II. Organization of the Company
6. Bodies of the Company
7. Shareholders' Meeting
8. Shareholders' Council
9. Management
10. Staff
11. Organizational Structure
12. - 14. deleted
III. Operation of the Company
15. Contracts
16. Business Plans
17. Financing
18. Books and Records, Fiscal Year
19. Guarantee of SNI and SDRC
20. Other Obligations
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IV. Duration and Termination, Default, Dissolution
21. Duration and Termination
22. Events of Default
23. Remedies
24. Dissolution
25. deleted
V. Other Provisions
26. Use of Intellectual Property, Confidentiality
27. Representation and Warranties of SNI
28. Representations and Warranties of SDRC
29. Obligations Prior to Closing
30. Conditions to Closing
31. The Closing
32. Other Provisions
33. Miscellaneous
34. Annexes 1-22
35. Representation of SPMD
36. Notices
<PAGE>
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Preamble
Whereas
A SPMD has been engaged in the marketing and licensing of SDRC's
mechanical design automation software known as I-DEAS throughout
Central and Eastern Europe;
B SPMD is a 100% subsidiary of Structural Dynamics responsible
for all marketing activities with regard to SDRC's software;
C SNI is engaged in the development, marketing and licensing of
software products to its affiliates and to third party end-users
and distributors around the world;
D SNI is 100% owned by Siemens Aktiengesellschaft with its
registered seat in Berlin and Munich;
E SDRC and SNI desire to establish a company to be organized
under the laws of Germany for the purpose of developing,
supporting, marketing and distributing certain products;
F SDRC and SNI desire to increase penetration of SDRC's I-DEAS
software throughout SNI and Siemens and their affiliated companies
utilizing the know-how and technology described above and SNI and
SDRC desire to increase penetration of SNI's SIGRAPH-ET and
SIGRAPH-DESIGN in the world-market.
Now, therefore, in consideration of the mutual covenants and
agreements herein contained and intending to legally bound hereby,
the parties hereto agree as follows:
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1. Definitions
The following terms have the following meanings when used in this
Agreement, unless otherwise specified herein:
1.1 "Company" shall mean the joint venture company to be
incorporated by the signatories to this Agreement.
1.2 "SDRC Software" shall mean the proprietary software of SDRC
known as I-DEAS for use in the field of design automation.
1.3 "SNI Software" shall mean the proprietary software of SNI
known as SIGRAPH-ET and SIGRAPH-DESIGN.
1.4 "Shareholders" shall mean Structural Dynamics, SPMD and SNI.
1.5 "Initial Term" shall mean the first three years of the
Company according to Clause 21.1.
1.6 "Effective Date" shall mean the date on which the Company
becomes effective according to Clause 2.7, i.e. March 31st, 1994.
1. Formation of the Company
2. The Company
2.1 SDRC and SNI shall establish a joint venture in the legal
form of a "Gesellschaft mit beschrankter Haftung" (company with
limited liability) pursuant to the laws of Germany with statutes as
set out in Annex 1.
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The joint venture shall be established by way of
- purchasing the bare shell company named "GEL Gesellschaft zur
Erforschung von Laserlichtquellen mbH", a German company with its
registered seat in Munich, whose capital stock, of DM 50.000,-- is
held to 100% by Siemens Aktiengesellschaft; Structural Dynamics
will acquire a share of DM 25.100,-- and SNI will acquire a share
of DM 24.900,--;
- capital contributions of SDRC and SNI to GEL Gesellschaft zur
Erforschung von Laserlichtquellen mbH as set out in Section 4
hereof;
- resolutions of the Shareholders of GEL Gesellschaft zur
Erforschung von Laserlichtquellen mbH, as set out in Annex 2.
2.2 The name of the Company shall be "SDRC Software und Service
GmbH". The company shall be allowed to add the following
expression to its name: "Ein Gemeinschaftsunternehmen von
Structural Dynamics Research Corporation und Siemens Nixdorf
Informationssysteme Aktiengesellschaft".
2.3 The Company shall have its registered seat and its
administrative headoffice in Frankfurt/Main with its development
and service center in Munich. The costs necessary for the movement
of former offices within the Munich area within the first year
after the Effective Date shall be paid by each Shareholder for its
former offices. The Shareholders shall mutually agree upon the
terms and location of offices of the Company.
2.4 The object of the Company shall be developing, supporting,
marketing and distributing software for the Mechanical Design
Automation (MDA) and Electrical CAD (ECAD) market.
The object shall be in particular
- marketing, sales and services of SDRC Software, SNI
Software and software of the Company in the area of concurrent
engineering and CAE/CAD/CAM and PDM for the MDA and ECAD market
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- development of applications for the MDA and the ECAD market
especially the continuation of the development of the SIGRAPH-ET,
SIGRAPH-DESIGN.
The Company may perform all activities related to this
object.
2.5 The Company shall have a capital stock of Deutsche Mark
1.000.000,--, divided into one share of Deutsche Mark 499.000,--,
one share of Deutsche Mark 251.000,--, and one share of Deutsche
Mark 250.000,--.
2.6 If the profit of the Company is to be distributed it shall
be distributed among the Shareholders in proportion of their
respective shareholding.
2.7 The Company will be formed effective as of March 31st, 1994.
3. Share Participation
3.1 Structural Dynamics, SPMD and SNI shall subscribe for
shares of the capital stock of the Company as follows:
Structural Dynamics shall subscribe for one share of Deutsche Mark
225.900,-- (= 25,1% of the capital stock after consolidation with
the share of DM 25.100,-- to be acquired by Structural Dynamics as
described in Clause 2.1 above).
SPMD shall subscribe for one share of Deutsche Mark 250.000,-- (=
25,0% of the capital stock).
SNI shall subscribe for one share of Deutsche Mark 474.100,--(=
49,9% of the capital stock after consolidation with the share of DM
24.900,-- to be acquired by SNI as described in Clause 2.1 above).
3.2 The capital stock of the Company shall be paid up by way of
contribution in cash as set out in Section 4 hereof.
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3.3 Restrictions on Stock Transfer
3.3.1 SDRC and SNI (for purposes of this Section 3.3 "the
parties") shall not sell, assign, transfer, encumber or otherwise
dispose of all or part of its shares in the Company for the first
three years after the effective date of this Agreement. Following
this three-year-period, the sale of shares by either party hereto
to third parties shall be subject to the following provisions:
A If either party hereto proposes to sell or assign all or
part of its shares in the Company it shall first offer them in
writing to the other party hereto.
B If within two months from receipt of the offer the other
party hereto indicates in writing that it is not interested in
purchasing the shares or does not reply to the offer of the
offering party shall have the right to offer its shares to third
parties. The other party shall also provide the offering party
with a list of up to five third party names which the offering
party may not sell its shares to under any circumstances.
C If within two months from receipt of the offer the other
party hereto indicates in writing that it is interested in
purchasing the shares, the parties hereto shall seek to agree on a
reasonable purchase price.
D If the parties hereto fail to agree on the purchase price
within 4 months from the time the offer was received, they shall
forthwith ask the chartered accountants, Price Waterhouse or any
other chartered accountants agreed to by the parties to prepare an
opinion of the price to be paid for the shares. This price shall
be a reasonable arms' length price on the basis of a willing buyer
and a willing seller of the relevant number of shares. Each party
hereto shall pay 50% of the cost of the opinion.
E The party hereto contemplating sale shall inform the
other party hereto within one month from delivery of the opinion
whether it is prepared to sell the shares at the price resulting
from the opinion. If the party contemplating sale refuses to sell
the shares at that price, or if it does not inform the other party
hereto within said period, it shall not have the right to sell the
shares to third parties.
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F The other party hereto shall inform the party
contemplating sale, within one month after the latter has indicated
his willingness to sell pursuant to Clause 3.3.1 E hereof whether
it is prepared to purchase the shares at the price given in the
opinion. If the other party hereto refuses to purchase the shares
at the price or if it does not within the period set inform the
party contemplating the sale, the latter shall have the right to
offer its shares for sale to third parties. The other party shall
also provide the offering party with a list of up to five third
party names which the offering party may not sell its shares to
under any circumstances.
3.3.2 Before the transfer of the shares is completed to a third
party the non-offering party has the right to require the shares to
be sold to it on the same terms and price as offered to the third
party. Such right shall be exercisable in writing within a period
of six weeks after the party willing to sell has informed the party
in writing of the name of the third party and the terms of sale.
3.3.3 The restrictions on transfer contained in Clauses 3.3.1 and
3.3.2 hereof shall not apply to the transfer of shares in the
Company
- to any other body corporate of which more than 50% of
the issued voting share capital is owned directly or indirectly by
the selling party or which itself owns directly or indirectly more
than 50% of the issued voting share capital of the selling party
- to Siemens Aktiengesellschaft or to any other body
corporate of which more than 50% of the issued voting share capital
is owned directly or indirectly by Siemens Aktiengesellschaft in
the case of SNI being the selling party.
The sale of share according to Clause 3.3.3 hereof shall be
effected under the condition that the selling party procures that
the acquiring body corporate shall enter into an agreement to
retransfer the shares to the selling party if the holding by the
selling party of voting shares in the acquiring body corporate
decreases below 50%.
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3.4 Any shares issued by capital increase shall be offered by
the Company to Shareholders of the company exclusively. The
Shareholders have the preemptive right to subscribe the shares
issued thereby in proportion of their then respective Shareholding.
If one Shareholder refuses to accept such offer in whole or in part
the other Shareholders are entitled to subscribe to the portion of
shares not subscribed to, by the refusing Shareholder, in pro-
portion of their respective Shareholding.
If the participation of SNI decreases by reasons of
increase of capital not subscribed by SNI, SNI shall nevertheless
retain all rights and obligations stipulated in this Agreement.
The same shall apply in favour of SDRC.
3.5 If SDRC comes under outside control in that 50% or more
of SDRC's voting rights are held directly or indirectly by a third
party, SNI may require SDRC to buy or SDRC may require SNI to sell
all or part of SNl's shares in the Company at a price to be
determined in accordance with Clause 3.3 hereof. This price
however shall in any case not exceed DM 30 million. The above
mentioned right of SNI shall be exercised not later than 3 months
from the time SNI learned of the change in control and the above
mentioned right of SDRC shall be exercised not later than 3 months
from the time SDRC learned of the change in control. Should the
conditions as set out above in sentence 1 of this Clause 3.5 have
already been existing and have been disclosed in writing at the
time this Agreement is concluded, this shall not be deemed to be
outside control within the meaning of this provisions.
3.6 SDRC has the option to buy all of the shares of the Company
owned by SNI, at any time after the first three years if the
Company has decided to discontinue the SIGRAPH development
according to Clause 8.4 lit. B. The total purchase price for the
SNI shares shall be equal to 50% of the amount of any cumulative
Company loss from the Effective Date of the Company to the date of
discontinuance attributable to SDRC minus 50% of any cumulative
Company loss attributable to the SNI portion of the Company's
business as defined in Annex 21 for the same time period, but in no
event less than 1 DM. If SDRC exercises this option, this
Agreement and all
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contracts mentioned in Clause 15. shall terminate. SNI shall get
a nonexclusive, transferable source-code licence of then current
SNI Software as developed, modified or enhanced by the Company and
market it under any name. All other software and technology
remains with the Company.
3.7 Each party selling shares in accordance with the provision of
this Section 3 shall procure that prior to and as a precondition of
such transfer the buyer to whom its shares are intended to be sold
shall
- enter into a Confidentiality Agreement with the selling
party prior to any negotiations;
- enter into an agreement with the other party on
substantially the same terms as are set out in this Agreement
(including this Clause) so far as it is appropriate.
4. Capital Contribution
4.1 Structural Dynamics shall contribute DM 225.900,-- in cash to
the Company in return for one share of Deutsche Mark 225.900,--.
4.2 SPMD shall contribute DM 250.OOO,-- in cash to the Company in
return for one share of Deutsche Mark 250.000,--.
4.3 SNI shall contribute DM 474.100,-- in cash to the Company in
return for one share of Deutsche Mark 474.100,--.
5. Contribution to the Capital Reserve
5.1 Structural Dynamics shall contribute to the capital reserve
of the Company DM 402.000,-- in accordance with the Capital Reserve
Contribution Agreement as per Annex 3.
5.2 SPMD shall contribute to the capital reserve of the Company
DM 123.000,-- and the fixed assets as listed in Annex 4.
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Furthermore SPMD shall transfer to the Company all contracts
regarding the Frankfurt/Main office of SPMD for deliveries and
services between SPMD and third parties, which are not fulfilled
completely at the Effective Date and for which SPMD made or
received prepayments. The amounts of such prepayments are
specified in Annex 4 and shall be included in the calculation of
the total amount to be contributed to the capital reserve.
The total amount of all contributions according to this Clause 5.2
is DM 400.000,--. The details of all transactions referred to in
this Clause 5.2 shall be as set out in the Capital Reserve
Contribution Agreement as per Annex 5 and a list of all contracts
mentioned above shall be attached thereto.
5.3 SNI shall contribute to the capital reserve of the Company in
the fixed assets listed in Annex 6 in accordance with the Capital
Reserve Contribution Agreement as per Annex 7. The total amount of
all contributions according to this Clause 5.3 is DM 800.000,--.
II. Organization of the Company
6. Bodies of the Company
The executive bodies of the company are
- the Shareholders' Meeting (Gesellschafterversammlung)
- the Shareholders' Council (Gesellschafterdelegation)
- the Management (Geschaftsfuhrung)
7. Shareholders' Meeting
7.1 The Shareholders' Meeting shall be chaired by the chairman
of the Shareholders' Council or in case of his absence by a person
to be elected as chairman by the Shareholders' present or
represented.
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7.2 The Shareholders' Meeting shall only resolve upon the
following matters; all other matters are delegated to the
Shareholders' Council as per Clause 8.3:
- amendments to the statutes of the Company and to the
rules of procedure for the Shareholders' Council;
- sale of all or substantially all of the assets of the
Company;
- dissolution of the Company and disposition of the
Company's property in case of its dissolution;
- measures of capital increase or decrease;
- all other matters if so required by strictly binding
law.
7.3 Decisions of the Shareholders' Meeting shall be taken
unanimously.
7.4 Rules of procedure for the Shareholders' Meeting shall be as
set out in the statutes of the Company in Annex 1.
7.5 Each of the Shareholders agree to vote its stock so as to carry
out the provisions of this Agreement, to keep and to increase the
welfare of the Company, and to cause its representatives within the
Company to do the same.
8. Shareholders' Council
8.1 The Shareholders' Council shall consist of four
representatives of the Shareholders. SDRC shall appoint two
members and SNI shall appoint two members.
8.2 SDRC shall appoint the chairman of the Shareholders'
Council.
8.3 The Shareholders' Council shall exercise all rights and
duties of the Shareholders' Meeting except such rights and duties
which are assigned by law or this Agreement or its annexes to the
Shareholders' Meeting.
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The Shareholders' Council shall annually adopt a three-year
business plan which shall include at least the following items:
- budget for the next fiscal year, and financial plan for the
following two fiscal years, which includes investment, finance and
headcount plans and transfer prices to SDRC;
- software products to be developed, together with production
objectives;
- annual plans for the marketing and sublicensing of software
products.
8.4 Decisions of the Shareholders' Council shall be taken by
unanimous vote of all its members. If unanimity cannot be reached,
the chairman of the Shareholders' Council shall have a casting vote
(final decision), except the following matters, which require
unanimity in any case:
A Changes in the royalty rates between SDRC and the Company;
B Start-up of new, changes in and discontinuation of development
lines and any changes to the development budget, with the exception
of reductions limited to the SIGRAPH development budget if there
will be a need to avoid a change in planned profits due to a
shortfall of revenue in the SIGRAPH product lines and/or in SNI's
sale of I-DEAS. The casting vote may not be exercised however to
reduce the SIGRAPH development budget below the sum of
- all actual, planned or projected SNI royalties, including
guaranteed royalties, to the Company in the relevant budget year,
- all actual, planned or projected SDRC SIGRAPH royalties,
including guaranteed royalties, to the Company in the relevant
budget year,
- all actual, planned or projected the Company SIGRAPH revenue
in the relevant budget year;
C Acquisition and sale of investment in any other enterprise;
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D Establishment or winding-up of subsidiaries or affiliates;
E Issuance of debt securities exceeding DM 1.000.000,--;
F Discontinuation of or changes in the product lines SIGRAPH-ET
and SIGRAPH-DESIGN;
G Sale or assignment of source code rights and conclusion or
termination of agreements regarding proprietary rights or
copyrights of SIGRAPH-ET and SIGRAPH-DESIGN;
H Fundamental change in the structure, the scope or the character
of the Company business;
I Determination of the annual balance sheet and allocation of the
financial results, in particular the distribution of earnings and
dividends.
J Termination of former SNI employees, except as provided in
Clause B.
8.5 Rules of procedure for the Shareholders' Council shall be as
set out in Annex 8. Amendments to these rules of procedure shall
by the Shareholders' Meeting.
9. Management
9.1 The principal officers of the Company shall be the two
managers ("Geschaftsfuhrer") who legally represent the Company in
accordance with the statutes. One manager shall be proposed by
SDRC and one manager shall be proposed by SNI, subject to
consultations between SDRC and SNI before the respective proposals.
The two proposed managers as well as two "Prokurists", one proposed
by each party, shall be elected by the Shareholders' Council.
9.2 The manager nominated by SDRC (general manager) will be
responsible for all operations of the Company and will jointly with
the manager nominated by SNI legally represent the Company. The
authority of the managers to
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represent the Company to third parties and to enter into
external commitments and contracts is defined in more detail in the
statutes of the Company.
9.3 Decisions of the management shall be taken by the general
manager nominated by SDRC. He will keep informed the other manager
of all business matters and business decisions.
The following transactions of the manager require approval of the
Shareholders' Council:
A All business plans, including the financial budget, the
investment budget and the head count and sales plans and all other
plans mentioned in Clause 8.3 above;
B Agreements concerning general terms of employment and
specifications thereof;
C Investments (including capitalized leases) over DM 50.000,--)
except the investment of surplus cash for periods of less than one
year;
D Acquisition and sale of investment in any other enterprises
E Establishment of new business sites and change of the
administrative head-office;
F Establishment or winding-up of subsidiaries or affiliates;
G Sale or disposal of fixed assets other than in the ordinary
course of business;
H Issuance of debt securities exceeding DM 1.000.000,--;
I Sale or assignment of source code rights;
J Establishment or change of any significant accounting
principles and practices;
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K Startup of new lines, or discontinuation of or changes in
active product lines of the Company;
L Fundamental change in the structure, the scope or the character
of the Company business;
M Entering into, modification or termination of employment
contracts if the annual salary exceeds DM 200.000,-- or, in case of
a termination, if benefits of more than DM 100.000,-- shall be
granted;
N Termination of former SNI employees;
O Making of capital expenditures not contained in the approved
business plan;
9.4 The managers shall be bound vis-a-vis the Company to
adhere to the restrictions which the laws, the statutes, the rules
of procedure for the management or decisions of the Shareholders'
Meeting or the Shareholders' Council, may have defined; they have
to adhere to instructions given by the Shareholders' Meeting or the
Shareholders' Council.
9.5 Rules of procedure for the management shall be as set out in
Annex 9. Amendments to this rules of procedure shall be adopted by
the Shareholders' Council.
10. Staff
10.1 The Company shall employ former employees of SNI and SDRC as
listed in Annex 10. During the Initial Term, SNI and SDRC shall
use their best efforts to make members of their staff available to
the Company to consult to a reasonable extent on matters including,
but not limited to, tax, human resources, payroll, legal and
accounting.
10.2 Current terms and conditions of the employment contracts,
shall remain as they are at the Effective Date at least for one
year except for the SNI bonus plan, SNI pension plans,
"Belegschaftsaktien" for SNI employees and for the SNI company loan
programs. Regarding the bonus plan, "Belegschafts-
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aktien" and the company loan programs the stipulations in the SNI
letter to its former SNI employees (sample as per Annex 22) shall
apply. Regarding the pension plans see Clause 10.4
10.3 Before hiring new employees, the Company shall examine
whether employees from SDRC or SNI with the necessary
qualifications are available, however the Company in its sole
discretion will make the final hiring decision.
10.4 Any pensions liability resulting from the time before the
Effective Date shall be borne by the former parent company and each
parent company shall insofar indemnify the Company. SNI agrees to
continue the pension plan agreements with its former employees.
The Company shall make an employer contribution for each former SNI
employee to SNI in an amount defined by SNI. The above shall apply
until the Company and the former SNI employees agree on an
alternative pension plan.
10.5 The former parent company shall be responsible for the
portion of annual payments (13th salary, bonus,
"Erfolgsbeteiligung") to the employees according to the time of
employment with the parent company (further details see Annex 22).
10.6 Upon dissolution of the Company or termination of employment
from the Company, all costs relative to terminated employees will
be divided proportionately between the time the employee with the
Company and the time spent with SNI or SDRC and will be paid
proportionately by the Company and SNI or SDRC. This shall only
apply within the first three years after the Effective Date.
Upon termination of employment from the Company exceeding more than
five people, all costs relative to office space will be divided
proportionately between the former SNI employee and the former SDRC
employee and will be paid in this proportion by SNI or SDRC. This
shall only apply within the first three years after the Effective
Date.
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10.7 The parties agree, that - until all former SNI employees
listed in Annex 10 have moved into the offices of the Company - the
Company shall pay to SNI as remuneration for the office rent costs
including infrastructure related to the former SNI employees who
have not relocated a lump sum of DM 500,- per employee per month
starting from the Effective Date.
11. Organizational Structure
The Company shall have the organizational structure as set out in
Annex 11. Amendments to the organizational structure shall be
adopted by the Shareholders' Council.
12.-14. deleted
III. Operation of the Company
15. Contracts
15.1 SPMD shall assign all of its rights and obligations under the
contracts listed in Annex 12 to the Company.
15.2 SPMD shall assign all of its rights and obligations under the
real property leases described in Annex 13 to the Company.
15.3 SNI shall assign all of its rights and obligations under the
contracts listed in Annex 14 to the Company.
15.4 SPMD and SNI respectively and the Company shall inform
without delay the other contracting parties of the contracts listed
in Annex 12, 13 and 14 that the Company will be entering into such
contracts. SPMD, SNI and the Company shall use best efforts to get
any necessary consent of the other contracting parties.
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For as long as and insofar as any required consents of third
parties to the assignment of the contractual rights and liabilities
shall not have been obtained, the parties hereto shall in internal
relations act as if the assignment had become effective as of the
Effective Date.
15.5 SPMD and the Company shall enter into a distributor licence
agreement (the "SPMD Distribution Agreement") in the form appended
hereto as Annex 16 pursuant to which SPMD shall grant to the
Company the right to distribute the SDRC Software in the defined
territory upon the terms and conditions stated therein. To the
extent this right is exclusive there will be an exception for
Japan, existing contracts and for the International Business
Machines Corp. (IBM)
The SPMD Distribution Agreement shall be coterminous with this
Agreement, however if SNI acquires SDRC's shares in the Company
pursuant to Clause 21.5 hereof, the SPMD Distribution Agreement
shall continue for a three (3) years period on a non-exclusive
basis.
15.6 SPMD and the Company shall enter into a subdistribution
agreement (the "License Agreement SPMD") pursuant to which SPMD
shall be authorized to subdistribute the software of the Company in
the territory defined in the License Agreement SPMD which shall be
in the form as set forth in Annex 17 attached hereto.
15.7 SNI and the Company shall enter into a license agreement (the
"SNI Source Code License Agreement") pursuant to which SNI shall
licence the SNI Software in source code form to the Company. Such
licence will be exclusive to the Company and will continue in
effect until the dissolution of the Company. The SNI Source Code
Licence Agreement shall be in the form as set forth in Annex 18
attached hereto.
15.8 SNI and the Company shall enter into a subdistribution
agreement (the "License Agreement SNI") pursuant to which SNI shall
be authorized to subdistribute the SNI Software, SDRC Software and
the software of the Company in the territory defined in the License
Agreement SNI and throughout SNI and Siemens on a world-wide basis.
The License Agreement SNI shall be in the form as set fort in Annex
19 attached hereto.
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15.9 SNI is entitled to fulfill existing sales contracts
throughout the world by licensing SIGRAPH-ET and SIGRAPH-Design.
SNI will use its best efforts either to transfer those contracts to
the Company or to terminate those contracts as soon as possible.
The same shall apply to SDRC.
15.10 SNI and the Company shall enter into an agreement regarding
the permission to use in a reference tag line the name "Siemens
Nixdorf" (Reference Tag Line Agreement) as set forth in Annex 20 A
attached hereto.
Structural Dynamics and the Company shall enter into an agreement
regarding the permission to use in a reference tag line the name
"Structural Dynamics Research Corporation" and to use in the
Company name the abbreviation "SDRC" attached hereto as set forth
in Annex 20 B).
15.11 All contracts mentioned in this Clause 15 shall terminate
if this Agreement terminates, otherwise agreed upon in this
Agreement or its Annexes.
16. Business Plans
The initial business plans of the Company shall be as set out in
Annex 21.
17. Financing
At the closing, SNI and Structural Dynamics will each lend DM
1.625.000,-- to the Company. The capital loan will be evidenced by
promissory notes acceptable to SNI and Structural Dynamics, will
bear interest at the same rate and, subject to Clause 24.3 b)
hereof, will provide for repayment on identical terms. Beyond the
initial capital loans described herein, neither party shall be
obligated by virtue of this Agreement to make any additional loans
or contributions to the Company. To the extent either party makes
additional loans in the future, such loans shall not be senior to
the initial capital loans hereunder.
-22-
18. Books and Records, Fiscal Year
Full and accurate books of account and financial records shall be
kept at the principal office of the Company, showing the condition
of the business and finances of the Company and the share ownership
of each Shareholder. Each Shareholder, or its designated
representatives, shall have access to and may inspect and copy any
part thereof. In addition, the Company shall forward monthly
financial reports to each Shareholder, which reports shall be
presented in such format and shall contain such information as the
parties hereto shall agree. The fiscal year of the Company shall
be the calendar year. At the end of each fiscal year, an audit of
the Company's financial statements shall be performed by an
independent accounting firm designated by the Shareholders'
Meeting.
19. Guarantee of SNI and SDRC
19.1 SNI guarantees that the Company shall receive the following
minimum royalties due to licences sold by SNI: DM 9.375.000,-- in
1994 and DM 12.500.000, in each of the following two calendar years
and DM 3.125.000,-- in 1997. Details regarding such guarantee are
stipulated in Annex 19. This provision shall not apply if SDRC's
annual software revenue in the MDA-software-world-market decreases
below the 10th position according to International Data Corporation
or any similar report.
19.2 SDRC guarantees that the Company shall receive the following
minimum royalties due to SIGRAPH licenses sold by SDRC: DM
1.600.000,- in 1994 and DM 1.600.000,- in each of the following two
calendar years. Details regarding such guarantee are stipulated in
Annex 17.
19.3 If the pre-tax loss in either Shareholder's part of the
business as defined in Annex 21 exceeds DM 400.000,--, in 1994,
such Shareholder shall pay to the Company the amount in excess of
DM 400.000,--.
-23-
20. Other Obligations
20.1 SNI shall not develop, own, have any ownership interest in or
actively promote any mechanical three dimensional solid modelling
product for the Mechanical Design Automation market, except as
provided herein.
20.2 Three months before expiry of the Initial Term SNI shall give
an actual status to SDRC of all actual and planned revenues for the
Company of SIGRAPH-ET and SIGRAPH-DESIGN distributed by SNI.
20.3 Should Siemens AG notify SNI of its intent to purchase any
software products or services which are competitive with any
software products or services of the Company, SNI will use
reasonable efforts to persuade Siemens AG to reconsider its
decision and purchase the Company's products and services.
IV. Duration and Termination, Default, Dissolution
21 Duration and Termination
21.1 This Agreement and the rights and obligations of the parties
hereto shall continue for an initial term of three years from the
Effective Date (the "Initial Term"), unless previously terminated
by written agreement of the parties or in accordance with the terms
hereof, and shall be automatically renewed for successive one year
periods thereafter unless written notice of termination is given by
one party to the other at least six months in advance of the
conclusion of the Initial Term, and at least six months in advance
of the conclusion of each one year renewal period. Notwithstanding
the termination of this Agreement, the rights and obligations of
the parties hereto under Clause 26 hereof shall continue for a
period of five years after the date of termination.
- 24 -
21.2 SDRC or SNI shall have the right to terminate this Agreement
at any time during the Initial Term or any renewal period:
- upon the occurrence of an event of default of the other
Shareholder pursuant to Clause 22 hereof;
- if the Company becomes bankrupt, insolvent or shall have a
substantial part of its properties confiscated by the action of any
government.
21.3 Upon any termination of this Agreement the Company shall be
dissolved, unless otherwise provided herein, and therefore the
parties shall vote their respective shares and cause the
Shareholders' Meeting and Shareholders' Council to take such
actions as are necessary to dissolve the Company in accordance with
the provisions of Clause 24 herein and applicable laws. During
dissolution the provisions of this Agreement shall remain in
effect.
21.4 Within 30 days after receipt of notice of termination during
any renewal period the non-terminating party has the option to
notify the terminating party of its intent to purchase all of the
terminating party's Shares of the Company. The price for the
shares shall be calculated according to the procedure described in
Clause 23.2 herein.
If the non-terminating party does not notify the terminating party
of its intent to purchase the shares, the Company has to be
dissolved according to Clause 24.
21.5 SNI and SDRC shall both use their best efforts to encourage
the employees listed in Annex 10 to join the Company. If within
two (2) months from the Effective Date of the Company, any SNl or
SDRC key personnel as defined in Annex 10 do not accept employment
of the Company, SNI or SDRC may terminate this Agreement by
providing the other party with four (4) weeks prior written notice.
-25-
22. Events of Default
22.1 Any of the following events or circumstances shall constitute
an event of default under this Agreement:
a) Subject to Clause (e) below, if either Shareholder fails
to observe or per form any term or provision of this Agreement and
such failure is not remedied within fifteen days (sixty days in the
case of failure to make a required capital contribution) or such
other time period agreed to by the parties after notice of such
failure is given to the Shareholder responsible for such failure by
the other Shareholder; provided, however, if the failure cannot be
corrected within the fifteen day period, the time for remedy shall
be extended if it is possible to correct such failure and
corrective action is instituted by the defaulting party within said
fifteen day period and diligently pursued until the failure is
corrected.
b) If SDRC defaults under any written agreement between
SDRC and the Company, duly executed by the proper officers of SDRC
and the Company, respectively.
c) If SNI defaults under any written agreement between SNI
and the Company, duly executed by the proper officers of SNI and
the Company, respectively.
d) If either Shareholder, voluntarily or involuntarily,
sells, pledges, assigns, transfers, or hypothecates its shares in
the Company otherwise, than as provided in this Agreement.
e) The insolvency or bankruptcy of a Shareholder or the
admission by a Shareholder or its inability to pay its debts
generally as they become due or if a liquidator trustee in
bankruptcy, receiver or any other officer with similar powers shall
be appointed with respect to either Shareholder or any of its
assets; or
-26-
f) The default by either Shareholder of the provisions of Section
26 (Intellectual Property and Confidentiality) hereof by reason of
its own actions or those of its employees, parent or affiliates.
22.2 Upon the occurrence of an event of default by one of the
Shareholders hereunder the non-defaulting Shareholder shall have
remedies set forth in Section 23 (Remedies) of this Agreement, in
addition to its other remedies at law.
23. Remedies
23.1 If an event of default of or relating to a Shareholder (for
purposes of this Section 23, the "Defaulting Shareholder") occurs
under this Agreement at any time, then the other Shareholder (for
purposes of this Section 23, the "Non-Defaulting Shareholder") may,
at its option, in addition to its other remedies at law, by written
notice to the Defaulting Shareholder, purchase all of the shares
held by the Defaulting Shareholder at the price and on the terms
set forth in Section 23.2 below.
23.2 Upon notice from the Non-Defaulting Shareholder to the
Defaulting Shareholder under Section 23.1 above, the purchase price
of the shares to be sold shall be determined by Price Waterhouse or
any other chartered accountants agreed to by the parties as
appraiser on the basis of the fair market value of the shares
involved, valuing the Company on a going concern basis. The cost
of such appraisal shall be paid by the Company. The price which
the Non-Defaulting Shareholder shall pay the Defaulting Shareholder
shall be equal to such appraised value and shall be paid to the
Defaulting Shareholder by certified or cashier's check within
thirty days of the receipt of such appraisal. At the time such
purchase price is paid, the Defaulting Shareholder shall undertake
all necessary action to transfer ownership of its shares to the
Non-Defaulting Shareholder.
-27-
24. Dissolution
24.1 Dissolution due to termination within the Initial Term or at
the end of the Initial Term:
Following the dissolution of the Company the following shall apply:
a) All versions of the source code of the SNI Software
including all Documentation have to be returned to SNI. SNI shall
be granted for no charge all rights to the SNI Software in source
and object code form on an exclusive basis.
b) SNI shall enter into a non-exclusive distribution
agreement with SPMD regarding the SNI Software in object code form.
The conditions and the territory of this distribution agreement
shall be the same as in the License Agreement SPMD as per Annex 19.
The initial term shall be not less than three (3) years and the
royalties shall be 40%.
c) SPMD shall enter into a non-exclusive distribution
agreement with SNI regarding the SDRC Software in object code form.
The conditions and the territory of this distribution agreement
shall be the same as in the SPMD Distribution Agreement as per
Annex 16. The initial term shall be not less than three (3) years
and the royalties shall be 40%.
d) Regarding the costs relative to the termination of
employment from the Company Clause 10.6 shall apply, if the Company
is dissolved due to termination of this Agreement within the
Initial Term. In case of termination at the end of the Initial
Term each party shall bear all costs relative to termination of
employment for its former employees; this includes also the time
the employees spent with the Company.
-28-
24.2 Dissolution due to termination in any renewal period:
Following the dissolution of the Company the following shall
apply:
a) SPMD and SNI shall be granted a perpetual non-exclusive
transferable source code license to the SNI Software for no charge
as stipulated in the relevant license agreements as per Annex 17
and 19.
b) SPMD shall enter into a non-exclusive distribution agreement
with SNI regarding the SDRC Software in object code form. The
conditions and the territory shall be the same as in the SPMD
Distribution Agreement as per Annex 16. The initial term shall be
not less than three (3) years and the royalties shall not increase
more than 5% per year.
24.3 Dissolution due to any termination
Following any dissolution of the Company the following shall
apply:
a) With regard to the software and technology developed, acquired
and owned by the Company and all intellectual property rights
thereof, the parties shall, following any dissolution of the
Company, become equal owners of the software for no charge. The
stipulations of Clause 24.2 a) shall apply accordingly.
b) The parties hereby agree that all assets legally available for
the distribution to the parties, after payment in full of all third
party claims, shall be distributed in the following order of
priority:
- Payment to Structural Dynamics and SNI of all outstanding
loans made pursuant to Clause 17 hereof.
- Payment to each of the parties of the remaining outstanding
balance, if any, of any other loans or outstanding indebtedness of
the Company to the parties, in proportion to their respective
equity interests.
- 29-
Distribution of the remaining available assets in proportion to the
respective equity interests of the parties.
The parties agree to include appropriate provisions in the Statutes
of the Company, if necessary, in order to give effect to these
provisions.
c) All license and maintenance contracts between the Company and
its customers shall be transferred to SPMD, except such contracts
regarding SNI Software which are defined by SNI to be transferred
to SNI. If any customer opposes any transfer of any of its
contracts with the Company, the parties hereto will use all efforts
to come to an agreement with such customer.
25. deleted
V. Other Provisions
26. Use of Intellectual Property, Confidentiality
26.1 While this Agreement is in effect and for a period of five
years after termination of this Agreement, without the other
Shareholder's written consent, neither Shareholder shall use for
purposes other than as contemplated in this Agreement or disclose
to any person or entity (other than a parent or affiliate of such
Shareholder), any know-how or trade secret, kept in the other
Shareholder's or the Company's written records which was obtained
from the other Shareholder or the Company as a result of such
Shareholder's ownership of common stock; provided, however, that a
Shareholder may disclose to any other person or entity or use any
know-how or trade secret obtained from the other Shareholder or the
Company which was (i) known prior to the date of the
Confidentiality Agreement between SDRC and SNI to such Shareholder
as evidenced by dated or dateable written or printed records at the
time of its disclosure to such Shareholder by the other Shareholder
or by the Company, as the case may be; (ii) was in the public
domain prior to its disclosure hereunder, or after disclosures
hereunder becomes part of the public domain through publication or
otherwise through no fault of such Shareholder; (iii) becomes
lawfully
-30-
available to such Shareholders from a third party which has not
acquired it directly or indirectly from the other Shareholder or
the Company, and which third party has not required such
Shareholder to hold it in confidence; or (iv) is independently
developed or acquired by such Shareholder without the use of, or
reference to, the know-how or trade secrets of the other
Shareholder or the Company.
26.2 Each Shareholder shall inform its employees and/or its
parent or any affiliate, to whom it has disclosed know-how or trade
secrets of the Company or the other Shareholder, of the
confidential nature of such information and shall be responsible
for any disclosure of such information to a third party by its
employees, parent or affiliates in violation of the provisions of
this Agreement.
27. Representations and Warranties of SNI
27.1 SNI hereby represents and warrants to SDRC that the following
statements are true and correct:
- SNI has full corporate power and authority to enter this
Agreement without the consent of any other person, organization or
entity, and this Agreement represents the valid and binding
agreement of SNI enforceable in accordance with its terms. The
execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement
will not, with respect to SNI or its subsidiaries; (a) violate any
provision of their certificates of incorporation or by-laws (or
equivalent governing corporate documents); (b) violate terms of the
material agreement, law, regulation, order, arbitration, award
judgment or decree or other restrictions of any other kind or
character to or by which they are subject or bound or to which any
of their assets or stock is subject; (c) constitute an event which
would permit any party to terminate any agreement or to accelerate
the maturity of any indebtedness or obligations of its business; or
(d) result in the creation or imposition of any lien, charge, or
encumbrance on any of the assets transferred pursuant to this
Agreement for the benefit of a third party.
-31-
- -The execution and delivery of this Agreement and the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of SNI.
- SNI is the sole owner of the fixed assets to be transferred to
the Company pursuant to this Agreement free and clear of any
mortgage, lien, security interest, encumbrance or restriction of
any kind and SNI shall convey good and marketable title to such
assets to the Company at the closing.
- - SNI has complied in all material respects with all national,
regional and local laws in connection with the execution and
delivery of this Agreement and the completion of the transactions
contemplated hereby. SNI has obtained the approval of all
national, regional and local authorities necessary for this
Agreement to become effective and to give effect to the
transactions contemplated hereby.
28. Representations and Warranties of SDRC
28.1 SDRC hereby represents and warrants to SNI that the following
statements and true and correct:
- SDRC has full corporate power and authority to enter into this
Agreement without the consent of any other person, organization or
entity, and this Agreement represents the valid and binding
agreement of SDRC enforceable in accordance with its terms. The
execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement
will not, with respect to SDRC or its subsidiaries; (a) violate any
provisions of their certificates of incorporation or
by-laws (or equivalent governing corporate documents); (b) violate
terms of the material agreement, law, regulation, order,
arbitration award judgment or decree or other restrictions of any
other kind or character to or by which they are subject or bound or
to which any of their assets or stock is subject; (c) constitute an
event which would permit any party to terminate any agreement or to
accelerate the maturity of any
-32-
indebtedness or obligation of its business; or (d) result in the
creation or imposition of any lien, charge, or encumbrance on any
of the assets transferred pursuant to this Agreement for the
benefit of a third party.
- The execution and delivery of this Agreement and the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of SDRC.
- SDRC is the sole owner of the fixed assets to be transferred to
the Company pursuant to this Agreement free and clear of any
mortgage, lien, security interest, encumbrance or restriction of
any kind and SDRC shall convey good and marketable title to such
assets to the Company at the closing.
- SDRC has complied in all material respects with all national,
regional and local laws in connection with the execution and
delivery of this Agreement and the completion of the transactions
contemplated hereby. SDRC has obtained the approval of all
national, regional and local authorities necessary for this
Agreement to become effective and to give effect to the
transactions contemplated hereby.
29. Obligations Prior to Closing
29.1 SDRC and SNI shall each comply promptly with the notice and
reporting requirements of any applicable laws with respect to the
transactions.
29.2 Each party shall use its best efforts and cooperate with the
other in good faith to the extent reasonably required in order to
satisfy the conditions set forth in Section 30 (Conditions to
Closing) and fully to accomplish the transaction in an expeditious
fashion. Neither party shall take or fail to take any action
within such party's reasonable control, the effect of which would
be to prevent or unreasonably delay the satisfaction of any
condition to its or the other party's obligations contained in
Section 30 (Conditions to Closing) or the consummation of the
transaction in accordance with this Agreement.
-33-
30. Conditions to Closing
30.1 The obligation of SNI to complete the transaction is subject
to the satisfaction (or waiver by SNI) of all of the following
conditions:
- The representations and warranties of SDRC contained in Section
28 shall be true and correct in all material respects as of and at
the Closing Date with the same effect as though made on the Closing
Date, except for changes permitted or contemplated by this
Agreement and except to the extent that any representation or
warranty is made herein as of such specified date, in which case
such representation or warranty shall be true in all material
respects as of such specified date.
- - SDRC shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be
performed by it at or prior to the Closing Date.
- - SDRC shall have delivered to SNI duly executed copies of all
agreements, instruments and other items described in or deliverable
pursuant to this Agreement.
- - To the best of SDRC's knowledge no statute, ordinance,
regulation, order or injunction of any court or governmental agency
of competent jurisdiction shall be in effect that restrains or
prohibits SDRC from carrying out the transaction contemplated by
this Agreement.
- - There shall be no action or proceeding pending or threatened by
or before any court or governmental authority challenging the
transaction or any transaction related thereto or seeking to
restrain, prevent, or change the transaction or seeking damages in
conjunction with, or by reason of, the transaction.
-34-
30.2 The obligation of SDRC to complete the transaction is subject
to the satisfaction (or waiver by SDRC) of all the following
conditions:
- The representations and warranties of SNI contained in Section
27 shall be true and correct in all material respects as of and at
the Closing Date with the same effect as though made on the Closing
Date, except for changes permitted or contemplated by this
Agreement and except to the extent that any representation or
warranty is made herein as of such specified date, in which case
such representation or warranty shall be true in all material
respects as of such specified date.
- - SNI shall have performed or complied in all material respects
with all agreements and covenants required by the Agreement to be
performed by it at or prior to the Closing Date.
- - SNI shall have delivered to SDRC duly executed copies of all
agreements, instruments and other items described in or deliverable
pursuant to this Agreement.
- To the best of SNI's knowledge no statute, ordinance or
regulations, order or injunction of any court or Governmental
agency of competent jurisdiction shall be in effect which restrains
or prohibits SNI from carrying out the transaction contemplated by
this Agreement.
- There shall be no action or proceeding pending or threatened by
or before any court or governmental authority challenging the
transaction or any transaction related thereto or seeking to
restrain, prevent, or change the transaction or seeking damages in
conjunction with, or by reason of, the transaction.
-35-
31. The Closing
31.1 The transactions contemplated by this Agreement shall close
and all deliveries to be made at the closing shall take place on
March 15th, 1994 (Closing Date) at the offices of SNI, or at such
other time, date or place as the parties may agree. All actions
taken at the closing shall be deemed to occur simultaneously and
the closing shall be effective as of the close of business on the
Closing Date.
31.2 At Closing, SNI shall execute and/or deliver to SDRC, against
execution and/or delivery by SDRC of the items specified in Section
31.3:
- Certified copies, dated as of the Closing Date, of resolutions
of Management (Vorstand) of SNI and/or Siemens AG authorizing the
transaction;
- The agreements described in Section 15, together with the
payments and other items provided for in such agreements; and
- All other certificates, Schedules, Exhibits, and attachments, in
completed form, which are required by the provisions of this
Agreement, unless such obligations are waived at or prior to the
closing by SDRC.
31.3 At the closing, SDRC shall execute and/or deliver to SNI,
against execution and/or delivery by SNI of the items specified in
Section 31.2
- Certified copies of, dates as of the Closing Date, of
resolutions of the Board of Directors of SDRC authorizing the
Transaction;
- The agreements described in Section 15, together with the
payments and other items provided for in such agreements; and
- All other certificates, Schedules, Exhibits, and attachments, in
completed form, which are required by the provisions of this
Agreement, unless such obligations are waived at or prior to the
closing by SNI.
-36-
31.4 All instruments delivered at closing shall be dated as of the
Closing Date and shall be reasonably satisfactory to the party
receiving the benefit thereof.
32. Other Provisions
32.1 Federal Cartel Office
This Agreement shall not become effective unless the Federal
Cartel Office has informed one party in writing that the notified
merger plan is not prohibited by the terms of Section 24 (a) (1) of
the German Antitrust Law or if:
- no such clearance in writing is received, the Federal Cartel
Office does not within one month of acknowledgement by it of
receipt of the complete notification by the parties give notice
that it intends to begin or has begun an examination of the
notified merger plan, or
- the Federal Cartel Office does not prohibit the notified merger
plan within a four month period after receipt of the complete
notification or within the extended period as assented to by the
parties, or
- a prohibition notification by the Federal Cartel Office is
validly overruled.
32.2 Applicable Law
The substantive law applicable to this agreement and its annexes
is the law in force in Germany.
32.3 Arbitration
a) Any differences or disputes arising from this Agreement or
from agreements regarding its performance shall be settled by an
amicable effort on the part of the parties to this Agreement. An
attempt to arrive at a settlement shall be deemed to have failed as
soon as one of the parties hereto so notifies the other party in
writing.
-37-
b) If an attempt at settlement has failed, the disputes shall be
finally settled under the rules of conciliation and arbitration of
the International Chamber of Commerce in Paris (Rules) by three
arbitrators appointed in accordance with the rules.
c) The place of arbitration shall be Frankfurt/Main, Germany.
The procedural law of this place shall apply where the Rules are
silent. The arbitration shall be conducted in the English
language.
d) The arbitral award shall be substantiated in writing. The
arbitral tribunal shall decide on the matter of costs, of the
arbitration.
33. Miscellaneous
33.1 This Agreement constitutes the entire agreement and
understanding between the Shareholders pertaining to the matters
referred to herein, and supersedes all prior negotiations,
commitments, understandings, agreements, representations, and
warranties, whether oral or written, previously entered into by
them with respect thereto.
33.2 SNI and SDRC agree that the Distributor Agreement signed
between SNI and SDRC concerning the SIGRAPH product dated March
19th, 1993 shall forthwith terminate in its entirety. Furthermore
SNI and SDRC agree that the Distributor Agreement between SDRC and
SNI concerning the IDEAS product shall automatically terminate when
SDRC has delivered to SNI all updated copies of IDEAS for the $3.0
million shipment in 1993. SNI and SDRC agree that SDRC will
provide the updated copies for a value of $1.0 million (SNI
purchase price) per year.
33.3 No amendment or other modification to this Agreement shall
be valid or binding upon the Shareholders unless such amendment or
modification is in writing and signed by both Shareholders.
33.4 No waiver by a Shareholder of any breach, failure or default
in performance by the other Shareholder and no failure, refusal or
neglect by a Shareholder to exercise any right hereunder or to
insist upon strict compliance with or performance of the other
Shareholder's obligations hereunder, shall con-
-38-
stitute a waiver by such Shareholder of the provisions of the
Agreement with respect to any subsequent breach, failure or default
and shall not constitute a waiver by such Shareholder of its right
any time or thereafter to require strict compliance with the
provisions hereof.
33.5 This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their permitted successors and
assigns.
33.6. This Agreement has been jointly prepared by the parties
and the provisions of this Agreement shall not be construed more
strictly against either party hereto as a result of its
participation in such preparation.
33.7 Except after consultation and agreement with the other
party of this Agreement, neither SDRC nor SNI shall, and each of
the parties shall use its best efforts to assure that none of its
officers, directors, employees, agents or advisers of the Company
shall, publicize, advertise, announce or describe to any
governmental authority or other third person, the terms of this
Agreement, the parties hereto or the transactions contemplated
hereby, except as required by law or as required pursuant to this
Agreement. Further, each party agrees not to publicly disclose to
any third party for any reason the financial performance or
prospects of the Company (except as may be required by law) without
the consent of the other party.
33.8 Should any provision of this Agreement be invalid or
unenforceable, then such provision shall be given no effect and
shall be deemed not to be included within the terms of this
Agreement, but without invalidating any of the remaining terms of
this Agreement. The parties hereto shall then endeavour to replace
the invalid or unenforceable provision by a clause which is closest
to the intent of the invalid or unenforceable provision as may be
required to make the provision valid and enforceable.
In the event that any question is raised by any
governmental agency as to any one or more of the provisions, or a
portion of any such provision of this Agreement, the parties hereto
agree to use their best efforts to find an appropriate solution to
such question that is as close as possible to the parties original
intentions.
- 39 -
33.9 This Agreement may be executed in any number of
counterparts, each one of which shall be an original and all of
which shall constitute one and the same document.
33.10 Unless otherwise provided in this Agreement SNI and SDRC
shall each bear their own fees and expenses incurred in connection
with this Agreement and the transactions contemplated hereby
(including without limitation all fees and expenses of counsel).
34. The following Annexes are an integral part of this
agreement. In case of a contradiction between any Annex and this
Agreement, this Agreement shall prevail:
Annex 1: Statutes of the Company in German language.
The English translation is for convenience only.
Annex 2: Resolutions of the Shareholders of GEL
Gesellschaft zur Erforschung von Laserlichtquellen mbH (bare shell
company)
Annex 3: Capital Reserve Contribution Contract of
Structural Dynamics
Annex 4: Assets and liabilities contributed by SPMD
Annex 5: Capital Reserve Contribution Contract of SPMD
Annex 6: Assets contributed by SNI
Annex 7: Capital Reserve Contribution Contract of SNI
Annex 8: Rules of procedure for the Shareholders'
Council
Annex 9: Rules of procedure for the Management
Annex 10: List of employees
Annex 11: Org-chart
Annex 12: List of SPMD contracts
Annex 13: List of SPMD real property leases
Annex 14: List of SNI contracts
Annex 15: deleted
Annex 16: SPMD Distribution Agreement
Annex 17: License Agreement SPMD
Annex 18: SNI Source Code License Agreement
Annex 19: License Agreement SNI
- 40 -
Annex 20 A: Reference Tag Line Agreement
Annex 20 B: SDRC Name Agreement
Annex 21: Business plans
Annex 22: Sample Employment Conditions
35. Representation of SPMD
All rights of Structural Dynamics and SPMD under this
agreement and its Annexes can only be executed jointly by
Structural Dynamics and SPMD. The same applies to all actions
whatsoever, in particular to the voting in the bodies of the
Company. SPMD will be represented in any case by Structural
Dynamics.
36. Notices
All notices permitted or required to be given by either
Shareholder in accordance with the provisions of this Agreement
shall be in writing and shall be deemed duly given if (i) delivered
by hand; (ii) sent via overnight mail; or (iii) transmitted by
telex, fax or other wire service and confirmed by prepaid
registered or certified letter, properly addressed to the
Shareholder to whom notice is to be given, at its address as listed
below:
For Structural Dynamics and SPMD:
Structural Dynamics Research Corporation
2000 Eastman Drive
Milford, Ohio 45150
Attention: Vice President, General Counsel
- 41 -
For SNI:
Siemens Nixdorf Informationssysteme AG
Otto-Hahn-Ring 6
81739 Munchen
Attention: BU ES KL
Any notice so given or made shall be deemed to have been
given or made and received on the date of hand delivery, on the
fifth business day following the date of mailing of the same, on
the date of transmission by telex, fax or other wire service of the
same, or on the second business day after mailing if sent via
overnight mail, as the case may be. Any party may, from time to
time by notice in writing given pursuant to the terms hereof,
change its address for the purpose of this Agreement.
In witness whereof, the parties hereto have duly executed this
Agreement.
(place) (date)
Siemens Nixdorf Informationssysteme AG Structural Dynamics Research
Corporation
/S/
SDRC Software Products Marketing Division Inc.
/S/
EXHIBIT 11
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands, except share data)
1994 1993 1992
-----------------------------
PRIMARY
Average shares outstanding 28,844 28,491 27,899
Net effect of dilutive stock
options -- based on the treasury
stock method using average market
price -- 1,385 2,194
-----------------------------
Total 28,844 29,876 30,093
=============================
Income (loss) before cumulative
effect of accounting change $(9,001) $(11,732) $ 8,775
Cumulative effect of accounting
change (3,896) -- 700
-----------------------------
Net income (loss) $(12,897) $(11,732) $ 9,475
=============================
Primary per share amount:
Before cumulative effect of
accounting change $ (.31) $ (.39) $ .29
Cumulative effect of
accounting change (.14) -- .02
-----------------------------
Net income (loss) per share $ (.45) $ (.39) $ .31
=============================
FULLY DILUTED
Average shares outstanding 28,844 28,491 27,899
Net effect of dilutive stock
options -- based on the
treasury stock method using the
year-end market price, if higher
than average market price -- 1,600 2,194
-----------------------------
Total 28,844 30,091 30,093
=============================
Income (loss) before cumulative
effect of accounting change $(9,001) $(11,732) $ 8,775
Cumulative effect of
accounting change (3,896) -- 700
-----------------------------
Net income (loss) $(12,897) $(11,732) $ 9,475
Fully diluted per share amount:
Before cumulative effect of
accounting change $ (.31) $ (.39) $ .29
Cumulative effect of
accounting change (.14) -- .02
-----------------------------
Net income (loss) per share $ (.45) $ (.39) $ .31
=============================
This computation is required by Regulation S-K Item 601 and is
filed as an exhibit under Item 14a(3) of Form 10-K.
SEC Release No. 33-5133 requires ". . . when per share earnings are
disclosed, . . . the information with respect to the computation of
per share earnings on both primary and fully diluted bases,
presented by exhibit or otherwise, must be furnished even though
the amounts of per share earnings on the fully diluted basis are
not required to be stated under the provisions of Accounting
Principles Board Opinion No. 15."
SUMMARY OF SELECTED FINANCIAL DATA
Structural Dynamics Research Corporation
<TABLE>
<CAPTION>
Year ended December 31,
(in thousands except
per share data) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Statement of
operations data:
Net revenue $167,547 $147,605 $149,041 $129,932 $114,269
Income (loss) before
income taxes and
cumulative effect of
accounting changes (5,168) (7,356) 13,907 14,525 16,378
Income (loss) before
cumulative effect
of accounting changes (9,001) (11,732) 8,775 9,279 8,913
Net income (loss) (12,897) (11,732) 9,475 9,279 8,913
Earnings (loss)
per share:
Before cumulative
effect of accounting
changes (.31) (.39) .29 .31 .32
Net income (loss) (.45) (.39) .31 .31 .32
Common and common
equivalent shares 28,844 29,876 30,093 29,817 27,618
Balance sheet data:
Working capital $27,590 $27,474 $48,440 $45,207 $41,483
Total assets 142,699 134,549 136,130 119,339 99,167
Long-term
liabilities 10,219 326 -- -- 2,604
Total shareholders'
equity 72,152 84,581 92,447 80,359 60,332
</TABLE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Structural Dynamics Research Corporation
(in thousands)
The Company operates in two segments: software products and
services, and engineering services. Revenue in the software
products and services segment consists primarily of revenue from
software licenses, software maintenance contracts and customer
training. Revenue in the engineering services segment consists of
consulting activities which are undertaken on either a time and
materials or a fixed fee contract basis.
Software Products and Services
The software products and services segment accounted for
approximately 89%, 86% and 85% of SDRC's consolidated revenue for
the years ended December 31, 1994, 1993 and 1992, respectively, and
approximately (108)%, (103)% and 99% of consolidated operating
income (loss) for the same periods.
Software segment revenue in 1994 increased $20,977 or 16% over
1993. This growth comparison excludes $8,485 of revenue generated
by the SDRC Software and Services GmbH joint venture established in
the first quarter of 1994 and accounted for under the equity
method. Maintenance revenue derived from annual software
maintenance contracts increased 10% primarily due to license
increases in prior years. Revenue was negatively impacted by a 25%
decline from an OEM customer, whose software marketing agreement
was terminated in December 1994. Additionally, revenue was
impacted by difficult market conditions in Europe. Software segment
revenue outside of North America accounted for 62%, 63% and 69% of
software revenue in 1994, 1993 and 1992, respectively. The Company
expects the international market to continue to account for a
significant portion of total software segment revenue.
The software segment incurred operating losses of $2,247 in 1994
and $8,657 in 1993. This improvement was due primarily to
increased revenues partially offset by increased expenses.
Software segment revenue in 1993 was level with 1992. Management's
expectation was that 1993 revenue would increase more than the
performance ultimately achieved. The license revenue in 1993
suffered in part from technical problems associated with the I-DEAS
Master Series initial product release in June 1993. As a result of
the technical problems, a number of customers deferred large
purchase decisions until completion of their benchmark testing of
the I-DEAS Master Series software after the Company had addressed
the unforeseen problems. Additionally, revenue was impacted by
difficult economic conditions in Europe and Japan and by a 42%
decline from an OEM customer. Maintenance revenue derived from
annual software maintenance contracts increased 9% primarily due to
license increases in prior years.
The software segment incurred an operating loss of $8,657 in 1993
compared to operating income of $12,084 in 1992 resulting from
significant increases in cost of revenue and selling, general and
administrative expenses as described below.
Engineering Services
In 1994, 1993 and 1992, the engineering services segment
represented 11%, 14% and 15%, respectively, of the Company's
consolidated revenue and 8%, 3% and 1% of consolidated operating
income (loss) for the same periods.
In 1994, 1993 and 1992, the engineering services segment revenue
decreased 5%, 11% and 15%, respectively. The revenue reduction
was due to downsizing portions of the consulting business not
considered synergistic with the software segment. The Company has
continued to align the engineering services cost structure with the
anticipated revenue stream.
Cost and Expenses
Cost of Revenue. Cost of revenue consists principally of the
amortization of capitalized software construction costs, external
commissions associated with indirect marketing channels and the
cost of distributing software products and providing engineering
consulting services. Cost of revenue includes $7,137, $9,539 and
$3,667 for amortization of software construction costs in 1994,
1993 and 1992, respectively.
Cost of revenue for 1994 decreased 6% from 1993 primarily due to
the charge in 1993 of approximately $3,311 relating to software
construction costs determined to be non-recoverable upon the
release of the I-DEAS Master Series product. Engineering services
consulting costs also declined 5% which is consistent with the
decline in engineering services revenue. These reductions are
partially offset by a full year of amortization of software
construction costs for the I-DEAS Master Series product which was
initially released in June 1993 and an increase in the software
segment's variable costs directly associated with the product
licensing and distribution.
Cost of revenue in 1993 increased 13% over 1992 due to the
commencement of amortization of software construction costs for the
I-DEAS Master Series product upon its initial release in June 1993,
and approximately $3,311 relating to software construction costs
determined to be non-recoverable upon the release of the I-DEAS
Master Series product. In addition, variable costs directly
associated with software product licensing and distribution
increased.
Research and Development Expenses. Research and development
expenses consist primarily of expenses for development of software
products. These expenses cannot be capitalized in accordance with
Statement of Financial Accounting Standards (SFAS) No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased,
or Otherwise Marketed". Research and development expenses exclude
capitalized software development costs of $9,312, $11,282 and
$9,365 in 1994, 1993 and 1992, respectively.
Research and development expenses amounted to $33,560, $25,937 and
$25,369 in 1994, 1993 and 1992, respectively. During 1994, research
and development expenses increased significantly in line with the
Company's commitment to the technological advancement of its
product line. Specifically, the product development staff focused
on modifications to I-DEAS Master Series 1.0 and early product
development activities associated with I-DEAS Master Series 3.0.
Royalty fees paid to third parties under licensing agreements,
another component of research and development expenses, increased
significantly in each of the last three years. Third party royalty
expenses increased 53% in 1994 over 1993 primarily due to fees
associated with product data management (PDM) software developed by
a joint venture investee.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist principally of costs incurred in
the software products and services segment and corporate staff.
Selling, general and administrative expenses increased 9%, 18% and
26% in 1994, 1993 and 1992, respectively.
During 1994 and 1993, the Company incurred significant expenses
from increased headcount in the sales and technical support
organizations to promote direct sales and support new and existing
customers. The primary focus was to assist the Company's customers
in their transitioning efforts to the I-DEAS Master Series product
introduced in June 1993. The Company anticipated higher revenue
growth to offset the incremental headcount costs from sales and
support activities.
In the fourth quarter of 1994, the Company initiated a plan to cut
costs and strengthen its competitive position by reducing its
workforce by 87 people. These employees were primarily product
development, marketing and administrative personnel. As a result,
the Company recognized a charge of $1,247 for severance costs and
outplacement assistance for employees. In 1994, the Company paid
$303 to these employees. At December 31, 1994, the Company had
accrued severance benefits of $944 related to this matter. In
February, 1995, the Company further reduced its workforce and will
record a related charge to income of approximately $1,000.
Additionally, in 1994, the Company incurred severance costs of
$1,919 due to the termination of its former Chief Financial Officer
and the other managers and the resignation of its former Chief
Executive Officer. The former Chief Executive Officer was employed
pursuant to an employment agreement with the Company which provided
for specified severance benefits.
In 1993, the Company recognized expense of $4,200 for the
settlement of a claim by a significant OEM customer. Certain
discretionary employee benefits were reduced in 1993 to offset the
lower than expected revenue growth as a result of technical issues
associated with the initial introduction of I-DEAS Master Series.
Equity in Losses of Affiliates
During 1992, the Company formed a joint venture with Control Data
Systems, Inc., Metaphase Technology, Inc. Metaphase is involved in
developing and marketing product data management software. During
1994, the Company formed a joint venture with Siemens Nixdorf
Informationssysteme AG, SDRC Software and Services, GmbH (SDRC
GmbH) to market the Company's software products in Central Europe.
The Company's equity in the losses of affiliates represents its
share of Metaphase and SDRC GmbH losses, the majority of which
resulted from the SDRC GmbH joint venture.
Other Income
Other income consists principally of interest income. Increasing
interest rates in 1994 resulted in higher interest income. In 1994
the Company also received interest on an income tax refund.
Income Taxes
During 1994 and 1993, the Company recorded tax expense of $3,833
and $4,376 on pretax losses of $5,168 and $7,356, respectively.
Although the Company incurred losses in 1994 and 1993, there were
provisions for income taxes in both years consisting primarily of
income taxes currently payable to foreign jurisdictions and foreign
withholding taxes incurred on the Company's software licensing
revenue. These withholding taxes can be credited against the
Company's U.S. income tax liability. Due to U.S. tax net
operating losses (NOLs), the Company is not currently in a position
to utilize these foreign tax credits (FTCs). The FTCs and NOLs
are available to offset future U.S. income tax liabilities, subject
to various restrictions. No tax benefit was currently recognized
for these FTCs and NOLs as their realization is not assured.
Effective January 1, 1992, the Company adopted SFAS No. 109,
"Accounting for Income Taxes". The cumulative effect (for periods
prior to January 1, 1992) of applying this statement was to
increase net income by $700 or $.02 per share for the year ended
December 31, 1992.
In 1994, the Company received a tax refund of $1,754 for research
and experimentation credits not previously recorded.
Postemployment Benefits
Effective January 1, 1994, the Company adopted the provisions of
SFAS No. 112, "Employers' Accounting for Postemployment Benefits".
This statement requires that companies providing postemployment
benefits to their employees accrue the cost of benefits, if
attributable to employees' service already rendered. The Company
provides severance benefits for involuntarily terminated employees.
The cumulative effect of adopting SFAS 112 reduced 1994 income by
$3,896. The annual incremental charge for future periods is not
anticipated to be material.
Liquidity and Capital Resources
As of December 31, 1994, the Company had $46,240 in cash, cash
equivalents and investments. The Company's working capital was
$27,590. As of March 1, 1995, the Company also has an unsecured
bank line of credit of $15,000.
During 1994, 1993 and 1992 the Company generated cash flows from
operations of $6,176, $19,467 and $21,855, respectively. In 1994,
the sources of net cash provided by operating activities were
significantly reduced by the $16,158 increase in accounts
receivable. The 1994 growth in accounts receivable over 1993 was
due to the higher level of revenue in the 1994 fourth quarter,
primarily in North American and Far East operations.
The Company had no borrowings in 1994.
The Company's sources of liquidity and funds anticipated to be
generated from operations are expected to be adequate for the
Company's cash requirements in the foreseeable future. The Company
paid no dividends during the period 1992 through 1994 and intends
to continue its policy of retaining earnings to finance future
growth. The Company has no current commitments for material
capital expenditures. See Note 9 to the consolidated financial
statements for additional commitments and contingencies. The
Company does not expect inflation to have a material impact on its
future operations.
Report of Management
Responsibility for the integrity and objectivity of the financial
information presented in this Annual Report rests with Structural
Dynamics Research Corporation's management. The accompanying
financial statements have been prepared in conformity with
generally accepted accounting principles, applying certain
estimates and judgments as required. Financial information
contained elsewhere in this Annual Report is consistent with that
in the financial statements.
The management of the Company is responsible for establishing and
maintaining a system of internal accounting control that is
designed to provide reasonable assurance that assets are
safeguarded and transactions are properly recorded. This system is
supported by written policies and procedures, organizational
structures that provide an appropriate division of responsibility,
internal reviews, and the careful selection and training of
qualified personnel.
Our independent accountants, Price Waterhouse LLP, audit the
financial statements in accordance with generally accepted auditing
standards, which includes the consideration of the system of
internal control to the extent they deem necessary to express an
opinion on the financial statements.
The Board of Directors, through its Audit Committee, composed of
outside directors, meets regularly with the Company's independent
accountants and management to review the adequacy of internal
accounting controls, financial reporting and the extent and results
of the audit effort.
Albert F. Peter
President and Chief Executive Officer
Jeffrey J. Vorholt
Vice President,
Chief Financial Officer and Treasurer
Report of Independent Accountants
To the Board of Directors
and Shareholders of
Structural Dynamics Research Corporation
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, of cash flows and of
shareholders' equity present fairly, in all material respects, the
financial position of Structural Dynamics Research Corporation and
its subsidiaries at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
As described in Note 5, in 1994 the Company changed its method of
accounting for postemployment benefits.
Price Waterhouse LLP
Cincinnati, Ohio
February 15, 1995
CONSOLIDATED STATEMENT OF OPERATIONS
Structural Dynamics Research Corporation
Year ended December 31
(in thousands, except per share data) 1994 1993 1992
Revenue:
Software products and services $111,349 $ 93,591 $ 95,494
Maintenance 37,101 33,882 31,023
Engineering services 19,097 20,132 22,524
Net revenue 167,547 147,605 149,041
Cost and expenses:
Cost of revenue 35,354 37,503 33,141
Research and development expenses 33,560 25,937 25,369
Selling, general and
administrative expenses 100,715 92,549 78,318
Total cost and expenses 169,629 155,989 136,828
Operating income (loss) (2,082) (8,384) 12,213
Equity in losses of affiliates (5,329) (614) (410)
Other income, principally interest 2,243 1,642 2,104
Income (loss) before income taxes and
cumulative effect of
accounting changes (5,168) (7,356) 13,907
Income tax expense 3,833 4,376 5,132
Income (loss) before cumulative
effect of accounting changes (9,001) (11,732) 8,775
Cumulative effect of accounting
changes (3,896) -- 700
Net income (loss) $(12,897) $(11,732) $ 9,475
Earnings (loss) per share:
Before cumulative effect of
accounting changes $ (.31) $ (.39) $ .29
Cumulative effect of
accounting changes (.14) -- .02
Net income (loss) per share $ (.45) $ (.39) $ .31
Common and common equivalent shares 28,844 29,876 30,093
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEET
Structural Dynamics Research Corporation
December 31,
(in thousands) 1994 1993
Assets
Current assets:
Cash and cash equivalents $ 21,885 $ 34,783
Short-term investments 17,296 10,720
Trade accounts receivable, net 35,867 20,567
Other accounts receivable 6,760 5,902
Prepaid expenses 6,110 5,144
Total current assets 87,918 77,116
Long-term investments 7,059 10,547
Property and equipment, at cost:
Computer and other equipment 36,259 36,055
Office furniture and equipment 9,258 9,079
Leasehold improvements 3,799 3,594
49,316 48,728
Less accumulated depreciation
and amortization 35,537 32,897
Net property and equipment 13,779 15,831
Computer software construction costs, net 30,854 28,457
Other assets 3,089 2,598
Total assets $142,699 $134,549
See accompanying notes to consolidated financial statements.
December 31,
(in thousands, except per share data) 1994 1993
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 6,857 $ 6,512
Accrued expenses 29,495 24,699
Accrued income taxes 4,262 5,371
Deferred revenue 19,714 13,060
Total current liabilities 60,328 49,642
Postemployment benefits and other 4,336 326
Cumulative share of losses in affiliate, net 5,883 --
Commitments and contingencies (Note 9)
Shareholders' equity:
Common stock, stated value $.0069 per share
Authorized 100,000 shares; outstanding
shares - 28,897 and 28,709 net of 1,652
and 1,612 shares in treasury 201 199
Capital in excess of stated value 46,482 45,376
Retained earnings 26,728 39,625
Foreign currency translation adjustment (590) (619)
Unrealized holding loss on investments (669) --
Total shareholders' equity 72,152 84,581
Total liabilities and
shareholders' equity $142,699 $134,549<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Structural Dynamics Research Corporation
Foreign Unrealized Total
Common stock Capital in currency holding share-
outstanding excess of Retained translation loss on holders'
Shares Stated stated value earnings adjustment investments equity
value
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
December
31, 1991 27,081 $188 $38,440 $41,882 $(151) $ -- $80,359
Transactions
involving
employee stock
plans 1,178 8 4,621 4,629
Purchases of
treasury stock (123) (1) (1,587) (1,588)
Net income 9,475 9,475
Foreign currency
translation
adjustment (428) (428)
December 31,
1992 28,136 195 41,474 51,357 (579) -- 92,447
Transactions
involving
employee
stock plans 582 4 4,067 4,071
Purchases of
treasury stock (9) (165) (165)
Net loss (11,732) (11,732)
Foreign currency
translation
adjustment (40) (40)
December 31,
1993 28,709 199 45,376 39,625 (619) -- 84,581
Transactions
involving
employee stock
plans 228 2 1,463 1,465
Purchases of
treasury stock (40) (357) (357)
Net loss (12,897) (12,897)
Foreign currency
translation
adjustment 29 29
Unrealized holding
loss on
investments (669) (669)
December 31,
1994 28,897 $201 $46,482 $26,728 $(590) $(669) $72,152
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Structural Dynamics Research Corporation
Year ended December 31
<S> <C> <C> <C>
(in thousands) 1994 1993 1992
Cash flows from
operating activities:
Net income (loss) $(12,897) $(11,732) $ 9,475
Adjustments to
reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and
amortization 7,027 6,990 7,009
Amortization of computer
software construc-
tion costs 7,137 9,539 3,667
Equity in losses of
affiliates 5,329 614 410
Postemployment benefits
accounting change 3,896 -- --
Changes in assets
and liabilities:
(Increase) decrease
in accounts
receivable, net (16,158) 8,468 (7,989)
Increase in prepaid
expenses (966) (717) (92)
Increase in accounts
payable and accrued
expenses 5,141 6,433 1,771
(Decrease) increase
in accrued income
taxes (1,109) 13 4,920
Increase (decrease)
in deferred revenue 6,654 (141) 2,761
Increase (decrease) in
other long-term
liabilities 2,122 -- (77)
Net cash provided
by operating
activities 6,176 19,467 21,855
Cash flows from investing
activities:
Purchases of investments (32,007) (39,811) (14,890)
Proceeds from sales of
investments 28,250 39,296 10,628
Additions to property and
equipment, net (4,975) (6,150) (8,764)
Additions to computer
software construction costs (9,534) (11,578) (9,625)
Investment in joint ventures (1,823) (1,500) (1,477)
Other, net (122) (468) 2
Net cash used in investing
activities (20,211) (20,211) (24,126)
Cash flows from financing
activities:
Stock issued under employee
benefit plans 1,465 4,071 4,629
Purchases of treasury stock (357) (165) (1,588)
Net cash provided by
financing activities 1,108 3,906 3,041
Effect of exchange rate
changes on cash 29 (40) (428)
(Decrease) increase in cash
and cash equivalents (12,898) 3,122 342
Cash and cash equivalents:
Beginning of period 34,783 31,661 31,319
End of period $21,885 $ 34,783 $ 31,661
Cash paid during the year for
income taxes $ 3,528 $ 4,450 $ 3,957
See accompanying notes to consolidated financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Structural Dynamics Research Corporation
(in thousands, except per share data)
(1) Summary of Significant Accounting Policies
(a) Basis of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly- owned subsidiaries. Investments in which
the Company has significant influence, but not control, are
accounted for under the equity method. All significant
intercompany balances and transactions have been eliminated.
(b) Revenue Recognition
The use of software programs is licensed through the Company's
direct sales force and by specific arrangements with certain
hardware vendors and distributors. Revenue generated from licenses
is recognized when the following criteria have been met: (a) a
written order for the unconditional license of software has been
received, (b) the Company has delivered the products and performed
substantially all services for which it was committed, (c) the
customer is obligated to pay and (d) collectibility is probable.
Under the terms of a former licensing agreement with an OEM
customer, the Company was unable to determine the amount of revenue
earned until cash was received from the customer. Amounts recorded
as revenue on the cash basis were $5,877, $7,877 and $13,599 in
1994, 1993 and 1992, respectively. This licensing agreement was
terminated by the Company in 1994.
Maintenance revenue is recognized ratably over the term of the
agreement and represents the substantial component of deferred
revenue.
The Company recognizes revenue and expenses from engineering
consulting contracts based on the percentage of completion method
of accounting. When losses are estimated to occur on these
contracts, the entire estimated loss is recognized at that time.
(c) Earnings (Loss) Per Share
Earnings (loss) per common and common equivalent share is computed
using the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Dilutive common
equivalent shares consist of stock option grants using the treasury
stock method.
(d) Cash and Cash Equivalents
The Company considers investments in interest bearing accounts,
certificates of deposit, commercial paper and reverse repurchase
agreements with maturities of less than 90 days to be cash
equivalents. Reverse repurchase agreements of $11,549 and $19,555
were held at December 31, 1994 and 1993, respectively. Due to the
short-term nature of the agreements, the Company and the trustee do
not take possession of the securities, which are segregated in the
accounts of the trustee; the Company and the trustee monitor the
underlying market values to assure that sufficient collateral
exists to cover the initial investment and accrued interest.
(e) Investments
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" which requires
the Company to distinguish between those securities held for sale
and those for which the ability and intent to hold to maturity
exists. Unrealized gains and losses on assets held for sale are
included in a separate component of equity. The effect of adopting
SFAS No. 115 was not material.
The Company invests in marketable securities which are
available-for-sale and are recorded at market value. The Company
also invests in certificates of deposit which are held-to-maturity
and are recorded at amortized cost which approximates market value.
Realized and unrealized gains and losses are determined based on
the specific identification method.
(f) Property and Equipment
Depreciation is primarily computed on the straight-line method.
Leasehold improvements are amortized on the straight-line method
over the lesser of the life of the lease or the estimated useful
life of the improvement. The general ranges of years used in
calculating depreciation and amortization are: computer and other
equipment, 2-5 years; office furniture and equipment, 7 years;
leasehold improvements, 1-10 years.
(g) Computer Software Construction Costs
The Company designs, develops and markets computer software
products. Costs related to the construction of software are
capitalized and are amortized over the useful lives of such
software, which are estimated to be no more than five years.
Computer software construction costs are shown net of accumulated
amortization of $11,573 and $4,436 at December 31, 1994 and 1993,
respectively. As of December 31, 1994 and 1993, computer software
construction costs, net, include only those costs related to
current software products. Amortization is the greater of the
amount computed using (a) the ratio that current gross revenue
bears to the total of current and anticipated future years'
revenue, or (b) the straight-line method over the remaining
estimated economic lives of the software products. The Company
included in amortization expense approximately $3,311 and $68 for
the years ended December 31, 1993 and 1992, respectively, related
to software construction costs determined to be non-recoverable.
(h) Foreign Currency Translation and Hedging Contracts
The functional currency of the engineering services foreign
operations is their local currency and their assets and liabilities
are translated at year-end exchange rates. Translation gains and
losses are not included in determining net income but are
accumulated in a separate component of shareholders' equity. For
foreign software products and services operations, the U.S. dollar
is the functional currency and foreign currency gains and losses,
which are not material, are included in determining net income.
In 1993 the Company began hedging certain portions of its exposure
to foreign currency fluctuations, primarily the Company's net
assets in foreign subsidiaries, by utilizing forward foreign
exchange contracts. At December 31, 1994, the Company had
contracts to exchange foreign currencies totaling $16,500 which
matured in January 1995. Gains and losses associated with these
financial instruments are recorded currently in income to offset
the foreign exchange gains and losses on the assets and liabilities
being hedged. The interest element of the foreign currency
instruments is recognized over the life of the contract. Should
the counterparty to these contracts fail to meet its obligations,
the Company would be exposed to foreign currency fluctuations,
along with the cost, if any, to extinguish the contracts.
(i) Income Taxes
Effective January 1, 1992, the Company adopted SFAS No. 109,
"Accounting for Income Taxes". The cumulative effect of applying
this statement was to increase net income by $700 or $.02 per share
in 1992. Under SFAS No. 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
assets and liabilities and their respective tax bases. A valuation
allowance is provided against deferred tax assets when the Company
believes it is more likely than not that the deferred tax assets
will not be realized.
The Company does not accrue Federal income taxes on undistributed
earnings of its foreign subsidiaries that have been, or are
intended to be, permanently reinvested. Undistributed earnings
amounted to approximately $3,705 at December 31, 1994.
(j) Concentration of Credit Risk
The Company's revenue is generated from customers in diversified
industries, primarily in North America, Europe and the Far East.
In 1994 and 1993, the Company generated revenue from a significant
customer aggregating 11%. The Company performs ongoing credit
evaluations of its customers and generally does not require
collateral. The Company maintains allowances for potential credit
losses which management believes to be adequate in the
circumstances.
The Company invests its excess cash with major financial
institutions with strong credit ratings and, by policy, limits the
amount of credit exposure in any one such institution.
(k) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, investments,
accounts receivable, accounts payable, accrued expenses and forward
foreign exchange contracts approximate fair value.
(2) Supplemental Consolidated Balance Sheet Data
December 31
Trade accounts receivable,
net, consists of: 1994 1993
Trade accounts receivable $38,774 $22,918
Allowance for doubtful accounts
and reserve for returns and allowances (2,907) (2,351)
$35,867 $20,567
December 31, 1994
Fair Amortized
Investments consist of: Value Cost
Short-term:
Available-for-sale U.S.
government agency obligations $10,548 $10,741
Held-to-maturity certificates
of deposit 6,748 6,748
$17,296 $17,489
Long-term:
Available-for-sale U.S.
government agency obligations $ 7,059 $ 7,535
Investments available-for-sale have maturities of $10,548 in 1995,
$4,392 in 1996, $1,867 in 1997 and $800 in 2013.
<PAGE>
December 31
Accrued expenses consist of: 1994 1993
Accrued compensation $13,171 $ 9,470
Accrued royalties 3,020 102
Accrued marketing costs 2,715 3,936
Accrued taxes other than income taxes 1,776 2,036
Other 8,813 9,155
$29,495 $24,699
(3) Leases
Future minimum lease payments under noncancelable operating leases
for the five years ending December 31, 1999 approximate $8,958,
$6,770, $5,396, $4,118 and $3,262, respectively, and $36,568
thereafter. Total rental expenses under operating leases for the
years ended December 31, 1994, 1993 and 1992 were $13,042, $10,673
and $9,673, respectively.
(4) Income Taxes
<TABLE>
<CAPTION>
The provision for income taxes Year ended December 31
consists of the following: 1994 1993 1992
<S> <C> <C> <C>
Federal:
Current $(1,754) $ -- $ 387
Deferred -- -- (77)
(1,754) -- 310
State 411 500 979
Foreign:
Income taxes 1,113 444 1,010
Withholding taxes 4,063 3,432 2,833
$ 3,833 $4,376 $5,132
</TABLE>
Deferred state and foreign taxes are not material.
(4) Income Taxes - continued
The provision for income taxes
differs from the amounts computed
by using the statutory U.S.
Federal income tax rate. The Year ended December 31
reasons for the differences
are as follows: 1994 1993 1992
Computed expected income tax
expense (benefit) $(1,809) $(2,575) $4,728
Increase (reduction) resulting
from:
Foreign taxes, without current
benefit 5,176 3,876 --
U.S. losses without tax benefit 1,809 2,575 --
Receipt of research and
experimentation tax credit refund
not previously recorded (1,754) -- --
State taxes, net of federal benefit 411 500 646
Research and experimentation credit -- -- (354)
Other, net -- -- 112
$3,833 $4,376 $5,132
The tax effects of temporary differences
that give rise to the deferred tax assets
and deferred tax liabilities are as
follows: Year ended December 31,
1994 1993
Deferred tax assets:
Revenue recognition and
accounts receivable $ 730 $ 18,276
Property and equipment 1,028 959
Other liabilities and reserves 2,926 998
Tax credit and net operating
loss carryforwards 24,412 2,661
Other 792 802
Total deferred tax assets 29,888 23,696
Valuation allowance (19,537) (14,628)
Net deferred tax assets 10,351 9,068
Deferred tax liabilities:
Computer software construction
costs, net of amortization (10,351) (9,068)
Total net deferred taxes $ -- $ --
Of the $24,412 in tax credit and net operating loss carryforwards
available at December 31, 1994, $10,908 of foreign tax credits
expire in the years 1997 through 1999, $2,243 of research and
experimentation credits expire in the years 2007 through 2009,
$1,017 of alternative minimum taxes never expire and $10,244 of net
operating losses expire in the year 2009.
The net change in the valuation allowance for deferred tax assets
was an increase of $4,909 in 1994 and $8,533 in 1993. Of the
$19,537 in valuation allowance at December 31, 1994, $7,908 is
attributable to the tax benefit of stock option exercises. Such
benefits will be credited to capital in excess of stated value when
realized.
(5) Postemployment Benefits
In the first quarter of 1994, the Company adopted the provisions of
SFAS No. 112, "Employers' Accounting for Postemployment Benefits".
This statement requires that entities providing postemployment
benefits to their employees accrue the cost of benefits, if
attributable to employees' service already rendered. The Company
provides severance benefits for involuntarily terminated employees.
The cumulative effect of adopting SFAS 112 reduced income by
$3,896, net of zero tax benefit, in the first quarter of 1994.
In the fourth quarter of 1994 the Company initiated a plan to cut
costs and strengthen its competitive position by reducing its
workforce by 87 people. These employees were primarily product
development, marketing and administrative personnel. As a result,
the Company recognized a charge of $1,247 for severance costs and
outplacement assistance for employees. In 1994, the Company paid
$303 to these employees. At December 31, 1994, the Company had
accrued severance benefits of $944 related to this matter. In
February, 1995, the Company further reduced its workforce and will
record a related charge to income of approximately $1,000.
(6) Joint Venture Investments
In 1992 the Company and Control Data Systems, Inc. established a
joint venture company, Metaphase Technology, Inc. (Metaphase), to
develop and market product data management software worldwide. The
Company initially owned a 30% interest in Metaphase and increased
such interest to 50% during 1993. In March 1994 the Company and
Siemens Nixdorf Informationssysteme AG (SNI) formed a joint
venture, SDRC Software and Services GmbH (SDRC GmbH), to market
mechanical CAE/CAD/CAM software and services in Central Europe.
The Company has a 50% interest in the joint venture. Previously,
revenue from the Company's activities in this region was reported
on a consolidated basis. The SDRC GmbH joint venture agreement
requires each venture partner to make additional equity
contributions in the event of venture losses. SDRC's future
commitment is limited to $2,000 through 1996. The Company's
investments in the joint ventures are accounted for on the equity
basis.
Financial data for the year ended December 31, 1994 for Metaphase
and SDRC GmbH is presented below; data for 1993 and 1992 represents
only Metaphase:
Year ended and as of December 31
1994 1993 1992
Current assets $ 5,905 $ 764 $ 737
Non-current assets 4,426 2,185 836
Current liabilities 8,564 1,075 2,643
Non-current liabilities 6,760 4,670 --
Net revenue 14,379 6,412 737
Loss before income taxes (10,483) (1,756) (1,170)
Net loss $(10,502) $(1,756) $(1,170)
(7) Shareholders' Rights Plan
In 1988 the Board of Directors adopted a Shareholders' Rights Plan
to protect shareholders' interests in the event of an unsolicited
attempt to gain control of the Company. The Rights become
exercisable if a person acquires 20% or more of the Company's
outstanding common stock (Common Stock) or announces a tender offer
which would result in a person or group acquiring 20% or more of
the Common Stock (Distribution Date). If, at any time following the
Distribution Date, and the Company has not redeemed the Rights, the
Company becomes the surviving corporation in a merger or a person
becomes the beneficial owner of 20% or more of the Common Stock
(Triggering Date), each holder of a Right will have the right to
purchase shares of Common Stock having a value equal to two times
the Right's exercise price of $110. If, at any time following the
Triggering Date, the Company is acquired in a merger or other
business combination transaction in which the Company is not the
surviving corporation, each holder of a Right shall have the right
to purchase shares of Common Stock of the acquiring company having
a value equal to two times the exercise price of the Right. The
Rights expire on August 10, 1998, and may be redeemed by the
Company for $.0025 per Right.
(8) Common Stock and Employee Benefit Plans
In 1991 the shareholders adopted the 1991 Employee Stock Option
Plan. Under the 1991 plan, the Company has reserved 5,300 shares
of previously unissued common stock. Options to purchase such
shares may be granted to key employees and executive officers at
the fair market value at the date of grant.
In 1991 the shareholders also adopted the Director's
Non-Discretionary Stock Option Plan which converted the Amended and
Restated 1986 Stock Option Plan into a non-discretionary plan
allowing future grants to outside directors at the fair market
value at the date of grant. Under the original 1986 plan, the
Company had reserved 7,000 shares of previously unissued common
stock. The status of all outstanding options previously granted to
employees remained unchanged.
In 1994 the shareholders adopted the 1994 Long-Term Stock Incentive
Plan, allowing stock incentives including stock options, stock
appreciation rights, stock awards, and combinations thereof, to be
granted to employees. The number of shares with respect to which
stock incentives may be granted in one calendar year shall not
exceed 4% of the Company's issued and outstanding common stock.
No stock incentives other than non-qualified stock options have
been granted under the 1994 plan.
Under the plans, employee options expire ten years from the date of
grant and are exercisable as follows: 33% on the first anniversary
of the grant date; 67% on the second anniversary; and all or any
remaining options on the third anniversary until expiration.
Director options expire five years from the date of grant and are
exercisable 50% upon expiration of six months from the grant date
and all or any remaining options on the first anniversary of the
grant date until expiration. As of December 31, 1994 there were
approximately 5,318 shares on which options were exercisable.
(8) Common Stock and Employee Benefit Plans - continued
Transactions with respect to
the Company's stock options for
the years ended December 31, 1992, Option Price
1993 and 1994 are as follows: Shares Per Share
Shares under option December 31, 1991 5,940 $ 1.25-24.44
Granted 1,684 $10.59-28.75
Exercised 1,103 $ 1.25-20.13
Cancelled 135 $ 9.88-23.75
Shares under option December 31, 1992 6,386 $ 1.25-28.75
Granted 1,627 $13.06-20.18
Exercised 439 $ 1.25-16.25
Cancelled 164 $ 9.88-28.75
Shares under option December 31, 1993 7,410 $ 1.38-28.75
Granted 1,357 $ 4.31-15.94
Exercised 154 $ 1.38-15.94
Cancelled 1,368 $ 1.81-28.75
Shares under option December 31, 1994 7,245 $ 1.38-28.75
In 1990 the Company's Board of Directors established a Stock
Purchase Plan. Under the plan all domestic full-time employees who
are non-executive officers are entitled to purchase the Company's
common stock at 90% of fair market value. Employees electing to
participate must contribute at least one percent with a maximum of
ten percent of the participants' base salary and commissions each
month. All incidental expenses related to the issuance of these
shares including the 10% discount have been charged to income. The
plan has no fixed expiration date, may be terminated by the Company
at any time and has no limitation on the number of shares that may
be issued.
The Company provides retirement benefits to employees principally
through contributory defined contribution retirement plans.
Expenses related to these plans totaled $2,091, $943 and $1,686 in
1994, 1993 and 1992, respectively.
(9) Commitments and Contingencies
In September 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. The Company
issued its restated financial statements for the years ended
December 31, 1993, 1992 and 1991 on January 16, 1995. 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 later voluntarily dismissed. The remaining cases
were then consolidated into one proceeding. 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, certain directors and former officers.
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.
The Company intends to defend itself vigorously in this litigation
but is unable, at this time, to determine the amount of loss, if
any, that may result from these matters. Management does not
believe the ultimate outcome of these matters will have a material
adverse impact on the Company's financial position.
Pursuant to certain contractual obligations, the Company has agreed
to indemnify its directors and officers under certain circumstances
against claims arising from lawsuits. The Company may be obligated
to indemnify certain of its directors and officers for the costs
they may incur as a result of the lawsuits.
The Company is involved in other legal proceedings arising from the
normal course of business, none of which, in management's opinion,
is expected to have a material adverse impact on the Company's
financial position.
<PAGE>
(10) Segment and Geographic Information
Depreciation
and
Financial data Operating Identifiable Amortization Capital
by segment: Revenue Income (Loss) Assets Expense Expendi-
tures
Year ended December 31, 1994
Software products
and services $148,450 $ (2,247) $ 82,436 $4,852 $4,259
Engineering
services 19,097 165 9,030 1,061 391
Corporate -- -- 51,233 1,114 325
Consolidated $167,547 $( 2,082) $142,699 $7,027 $4,975
Year ended December 31, 1993
Software products
and services $127,473 $ (8,657) $ 67,922 $4,521 $4,340
Engineering
services 20,132 273 8,455 1,316 1,323
Corporate -- -- 58,172 1,153 487
Consolidated $147,605 $(8,384) $134,549 $6,990 $6,150
Year ended December 31, 1992
Software products
and services $126,517 $12,084 $ 63,562 $4,271 $7,101
Engineering
services 22,524 129 9,721 1,453 750
Corporate -- -- 62,847 1,285 913
Consolidated $149,041 $12,213 $136,130 $7,009 $8,764
Financial data by geographic
area (Corporate general
expenses are not allocated
to operating income by Operating Identifiable
geographic area): Revenue Income(Loss) Assets
Year ended December 31, 1994
North America $ 71,805 $ 5,615 $ 59,168
Europe 46,027 (599) 26,102
Far East 49,715 1,079 6,196
Corporate -- (8,177) 51,233
Consolidated $167,547 $(2,082) $142,699
Year ended December 31, 1993
North America $ 57,760 $ 1,407 $ 41,821
Europe 47,497 (8,142) 30,352
Far East 42,348 4,209 4,204
Corporate -- (5,858) 58,172
Consolidated $147,605 $(8,384) $134,549
Year ended December 31, 1992
North America $ 54,188 $ 3,875 $ 40,550
Europe 49,266 783 24,200
Far East 45,587 14,447 8,533
Corporate -- (6,892) 62,847
Consolidated $149,041 $12,213 $136,130
<PAGE>
(11) Quarterly Results of Operations (Unaudited)
The following table sets forth selected unaudited quarterly
financial information for 1994 and 1993. The Company believes
that all necessary adjustments have been included to present
fairly the selected quarterly information.
Three months ended Year ended
March 31, June 30, September December December
1994 1994 30, 1994 31, 1994 31, 1994
Net revenue $36,795 $42,709 $42,500 $45,543 $167,547
Operating
results (3,327) 3,507 1,535 (3,797) (2,082)
Net income
(loss) (8,210) 1,592 8 (6,287) (12,897)
Earnings (loss)
per share (.27) .05 -- (.22) (.45)*
Three months ended Year ended
March 31, June 30, September December December
1993 1993 30, 1993 31, 1993 31, 1993
Net revenue $33,506 $40,428 $35,057 $38,614 $147,605
Operating
results (47) (2,456) (4,117) (1,764) (8,384)
Net loss (636) (3,657) (4,991) (2,448) (11,732)
Loss per share (.02) (.12) (.16) (.08) (.39)*
*Per share amounts are not additive.
EXHIBIT 21
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
State or Other
Jurisdiction
Name of Incorporation
SDRC Engineering Services Division, Inc. Ohio
SDRC Software Products Marketing Division, Inc. Ohio
SDRC Systems, Inc. Ohio
SDRC U.K. Limited United Kingdom
SDRC Italia, Srl. Italy
SDRC Korea Limited South Korea
SDRC Svenska AB Sweden
SDRC Singapore Pte. Ltd. Singapore
SDRC Nederland B.V. Netherlands
SDRC AG Switzerland
SDRC Belgium N.V./S.A. Belgium
SDRC France S.A. France
SDRC Espaua, S.A. Spain
SDRC Japan K.K. Japan
SDRC Software and Services, GmbH Germany
Note: All of the above corporations are wholly-owned
subsidiaries of the Registrant except SDRC U.K. Limited, which is .1%
owned by the Registrant, 49.9% owned by SDRC Engineering Services
Division, Inc. and 50% owned by SDRC Software Products
Marketing Division, Inc., SDRC France S.A., which is a
majority owned subsidiary of SDRC Software Products Marketing
Division, Inc., SDRC Japan K.K. which is a wholly-owned subsidiary
of SDRC Software Products Marketing Division, Inc. and
SDRC Software and Services, GmbH which is a joint venture company
50.1% owned by the Registrant and 49.9% owned by Siemens
Nixdorf Informationssysteme AG.
EXHIBIT 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (Nos. 33-20774, 33-22136,
33- 40561, 33-41671 and 33-46011) of Structural Dynamics Research
Corporation of our report dated February 15, 1995
appearing on page 32 of the Annual Report to Shareholders
which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the
Financial Statement Schedule and our report dated March 24,
1995 on the financial statements of SDRC Software and Services,
GmbH which is included in this Form 10-K.
Price Waterhouse LLP
Cincinnati, Ohio
March 28, 1995
Report of Independent Accountants
To the Shareholder Council
and Shareholders of
SDRC Software and Services, GmbH
In our opinion, the accompanying balance sheet and the related
statements of operations, of cash flows and of shareholders'
equity present fairly, in all material respects, the financial
position of SDRC Software and Services, GmbH at December 31,
1994, and the results of its operations and its cash flows for
the nine months ended December 31, 1994, in conformity with
generally accepted accounting principles. These financial statements
are the responsibility of the Company's management;
our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Cincinnati, Ohio
March 24, 1995<PAGE>
STATEMENT OF OPERATIONS
SDRC Software and Services, GmbH
For the Nine Months Ended December 31, 1994
Revenue:
Software products and services $ 6,276
Maintenance 2,209
Net revenue 8,485
Cost and expenses:
Cost of revenue 3,011
Research and development expenses 4,329
Selling, general and administrative expenses 10,603
Total cost and expenses 17,943
Operating loss (9,458)
Other income, principally interest 63
Loss before income taxes (9,395)
Income tax expense 11
Net loss $(9,406)
See accompanying notes to financial statements.<PAGE>
BALANCE SHEET
SDRC Software and Services, GmbH
As of December 31, 1994
(in thousands, except per share data)
Assets
Current assets:
Cash $ 1,907
Trade accounts receivable, net 2,741
Other assets 6
Total current assets 4,654
Property and equipment, at cost:
Computer and other equipment 1,567
Office furniture and equipment 251
Leasehold improvements 169
1,987
Less accumulated depreciation and amortization (640)
Net property and equipment 1,347
Total assets $ 6,001
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable - trade $ 512
Accounts payable - related party 2,788
Accrued expenses - trade 1,482
Accrued expenses - related party 1,243
Deferred revenue 1,079
Total current liabilities 7,104
Shareholders' equity:
Common stock, nominal value 1,000,000 deutsche
marks per share.
Authorized and outstanding 1 share. 586
Capital in excess of stated value 7,717
Accumulated deficit (9,406)
Total shareholders' equity (1,103)
Total liabilities and shareholders' equity $ 6,001
See accompanying notes to financial statements.
STATEMENT OF SHAREHOLDERS' EQUITY
SDRC Software and Services, GmbH
Common stock Capital Total
outstanding in excess Retained share-
Share Stated of stated earnings holders'
(in thousands) Value value
Initial
capitalization
April 1, 1994 1 $586 $1,007 $ -- $ 1,593
Additional equity
contributions -- -- 6,710 -- 6,710
Net loss -- -- -- (9,406) (9,406)
December 31, 1994 1 $586 $7,717 $(9,406) $(1,103)
See accompanying notes to financial statements.<PAGE>
STATEMENT OF CASH FLOWS
SDRC Software and Services, GmbH
For the Nine Months Ended December 31, 1994
(in thousands)
Cash flows from operating activities:
Net loss $ (9,406)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation 640
Changes in assets and liabilities:
Increase in accounts receivable, net (2,741)
Increase in other assets (6)
Increase in accounts payable 3,300
Increase in accrued expenses 2,725
Increase in deferred revenue 1,079
Net cash used in operating activities (4,409)
Cash flows from investing activities:
Additions to property and equipment, net (1,987)
Net cash used in investing activities (1,987)
Cash flows from financing activities:
Stock issuance 1,593
Additional equity contributions 6,710
Net cash provided by financing activities 8,303
Increase in cash and cash equivalents 1,907
Cash and cash equivalents:
Beginning of period --
End of period $ 1,907
See accompanying notes to financial statements.<PAGE>
NOTES TO FINANCIAL STATEMENTS
SDRC Software and Services, GmbH
(in thousands)
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation
In 1994, Structural Dynamics Research Corporation (SDRC) and Siemens
Nixdorf Informationssysteme AG (SNI) formed a joint
venture company, SDRC Software and Services, GmbH to supply
mechanical CAE/CAD/CAM software and services in Central Europe.
SDRC owns 50.1% and SNI owns 49.9% of the Company. The initial
contribution was in the form of cash, assets, software and
software license agreements.
(b) Revenue Recognition
The use of software programs is licensed through the
Company's direct sales force and by specific arrangements with certain
hardware vendors and representatives. Revenue generated from licenses
is recognized when the following criteria have been
met: (a) a written order for the unconditional license of
software has been received, (b) the Company has delivered the
products and performed substantially all services for which it
was committed, (c) the customer is obligated to pay and (d)
collectibility is probable. When customers have the right to
return products, revenue recognition is deferred until the
right to return expires.
Maintenance revenue is recognized ratably over the term of the
agreement and represents the substantial component of
deferred revenue.
(c) Cash
The Company invests its excess cash with a major financial institution
with a strong credit rating. Excess cash, above
weekly operating needs, is deposited in a demand deposit account in order
to maximize interest income.
(d) Property and Equipment
Depreciation is primarily computed on the straight-line method. Leasehold
improvements are amortized on the straight-line
method over the lesser of the life of the lease or the estimated
useful life of the improvement. The general ranges of years
used in calculating depreciation and amortization are: computer and
other equipment, 2-5 years; office furniture and
equipment, 5 years; leasehold improvements, 2 - 5 years.
(e) Income Taxes
The Company complies with SFAS No. 109 "Accounting for Income Taxes."
Under SFAS No. 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of
assets and liabilities and their respective tax bases. A valuation
allowance is provided against deferred tax assets when
the Company believes it is more likely
than not that the deferred tax assets will not be realized.
(f) Concentration of Credit Risk
The Company's revenue is generated from customers in diversified industries,
primarily in Germany (91%) and Austria (9%). The Company performs
ongoing credit evaluations of its customers and generally does not
require collateral. The Company maintains allowances for potential
credit losses which management believes to be adequate in the circumstances.
(g) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate fair value.
(2) Supplemental Balance Sheet Data
Trade accounts receivable, net, as of December 31, 1994 consists of:
Trade accounts receivable $2,865
Allowance for doubtful accounts and reserve
for returns and allowances (124)
$2,741
Accrued expenses as of December 31, 1994
consist of:
Accrued compensation $1,072
External development expenses 470
Software distribution costs 359
Accrued royalties 191
Other 633
$2,725
(3) Leases
Future minimum lease payments under noncancelable operating leases
for the five years ending December 31, 1999 approximate $1,586,
$1,240, $696, $403, and $175, respectively. Total rental expense
under operating leases for the nine months ended December 31, 1994 was $1,271.
(4) Income Taxes
The Company has generated a net operating loss (NOL) of $9,406
for the nine months ending December 31, 1994. There was no income
tax provisions made in the financial statements for the nine months
ended December 31, 1994. No tax benefit has been currently recognized
for the NOL as the realization is not assured. Income tax expense
represents withholding taxes related to interest income.
(5) Related Party Transactions
The Company and SDRC have entered into an agreement whereby the
Company is entitled to license software products developed by SDRC
in exchange for royalty payments. The royalty payments are
calculated as a percentage of the current local country list price.
For 1994 the joint venture agreement requires each joint venture
partner to make additional equity contributions in the event of
venture losses. The agreement also stipulates additional contributions
denominated in deutsche marks (DM). SNI will contribute 28,125 DM or
$17,907 through 1997 and SDRC will contribute 3,200 DM or $2,037
through 1996.
The following transactions were recorded by the Company as a result of
transactions with SDRC and SNI/Siemens AG for the nine months
ended December 31, 1994:
SDRC SNI/Siemens AG
Royalty fees $2,668 $ 191
Development expenses -- 1,530
Software distribution -- 359
expenses
Facility and administrative
expenses -- 289
Management allocation to
Switzerland (174) --
Amounts owed or accrued, net
at December 31, 1994 $2,566 $1,465
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 21885
<SECURITIES> 17296
<RECEIVABLES> 45534
<ALLOWANCES> 2907
<INVENTORY> 0
<CURRENT-ASSETS> 87918
<PP&E> 49316
<DEPRECIATION> 35537
<TOTAL-ASSETS> 142699
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<COMMON> 201
0
0
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<TOTAL-LIABILITY-AND-EQUITY> 142699
<SALES> 167547
<TOTAL-REVENUES> 167547
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<OTHER-EXPENSES> 0
<LOSS-PROVISION> 424
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<INCOME-PRETAX> (5168)
<INCOME-TAX> 3833
<INCOME-CONTINUING> (9001)
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<EXTRAORDINARY> 0
<CHANGES> (3896)
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<EPS-PRIMARY> (.45)
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