SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-K/A
Amendment No. 2
__________________
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, 1993
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 7, 1994 the latest practicable date, 28,787,384
shares of Common Stock were outstanding. The aggregate market value
of Common Stock held by non-affiliates was approximately
$453,107,476 at that date.
__________________<PAGE>
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 definitive Proxy Statement dated March 16, 1994 -- Part
III.
Registrant's Form 8-K dated November 2, 1994 and Form 8-K/A dated
November 15, 1994 -- Part III
__________________
The Registrant hereby amends the following items and financial
statements of its Annual Report on Form 10-K for the year ended
December 31, 1993, as set forth below. Items not referenced below
are not amended. Items referenced below are amended in their
entirety as set forth below:
PART III
Item 8. Financial Statements and Supplementary Data.
Index to financial statements
Financial statements Pages
Report of independent accountants . . . . . . . . . . .13
Consolidated statement of operations
for the three years ended December
31, 1993 . . . . . . . . . . . . . . . . . . . . . 14-15
Consolidated balance sheet at December
31, 1993, 1992 and 1991 . . . . . . . . . . . . . . 16-18
Consolidated statement of shareholders'
equity for the three years ended
December 31, 1993 . . . . . . . . . . . . . . . . . 19-20
Consolidated statement of cash flows for
the three years ended December 31, 1993 . . . . . . 21-22
Notes to the consolidated financial statements . . 23-38
Financial statement schedules
I Marketable securities - other investments . . .39
VIII Valuation and qualifying accounts . . . . . . . 44
X Supplementary income statement information . . 45
All other schedules are omitted because they are not
applicable or the required information is shown in the financial
statements or notes thereto.
Financial statements of companies in which the Company owns
equity interests ranging from 30% to 50% 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.
<PAGE>
Report of Independent Accountants
To The Board of Directors and
Shareholders of Structural Dynamics
Research Corporation
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the
financial position of Structural Dynamics Research Corporation and
its subsidiaries at December 31, 1993, 1992 and 1991, and the
results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, 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 audits 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 2(i), in 1992 the Company changed its method of
accounting for income taxes.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Cincinnati, Ohio
January 13, 1995
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
Structural Dynamics Research Corporation
Year ended December 31
(in thousands,
except share data) 1993 1992 1991
__________________________________________________
Revenue:
Software products
and services $ 93,591 $ 95,494 $79,297
Maintenance 33,882 31,023 24,264
Engineering services 20,132 22,524 26,371
Net revenue 147,605 149,041 129,932
Cost and expenses:
Cost of revenue 37,503 33,141 34,570
Research and
development expenses 25,937 25,369 20,966
Selling, general and
administrative
expenses 92,549 78,318 62,179
Total cost and
expenses 155,989 136,828 117,715
Operating income
(loss) (8,384) 12,213 12,217
Equity in losses of
affiliate (614) (410) ---
Other income,
principally interest 1,642 2,104 2,308
Income (loss) before
income taxes and
cumulative effect
of accounting change (7,356) 13,907 14,525
Income tax expense 4,376 5,132 5,246
Net income (loss)
before cumulative
effect of accounting
change (11,732) 8,775 9,279
Cumulative effect
of accounting change --- 700 ---
Net income (loss) $(11,732) $ 9,475 $ 9,279
Earnings (loss)
per share:
Primary
Before cumulative
effect of
accounting change $ (.39) $ .29 $ .33
Cumulative effect
of accounting
change --- .02 ---
Net income (loss) $ (.39) $ .31 $ .33
Fully diluted
Before cumulative
effect of
accounting change $ (.39) $ .29 $ .31
Cumulative effect
of accounting
change --- .02 ---
Net income (loss) $ (.39) $ .31 $ .31
Common and common
equivalent shares:
Primary 29,876 30,093 28,424
Fully diluted 30,091 30,093 29,817
CONSOLIDATED BALANCE SHEET
Structural Dynamics Research Corporation
December 31
(in thousands,
except share data) 1993 1992 1991
Assets
Current assets:
Cash and cash
equivalents $ 34,783 $ 31,661 $ 31,319
Investments 10,720 20,752 16,490
Trade accounts
receivable, net 20,567 26,944 22,713
Other accounts
receivable 5,902 7,993 4,235
Prepaid expenses 5,144 4,427 4,335
Total current assets 77,116 91,777 79,092
Long-term investments 10,547 --- ---
Property and equipment,
at cost:
Computer and
other equipment 36,055 32,248 29,515
Office furniture
and equipment 9,079 8,217 6,958
Leasehold improvements 3,594 3,449 3,294
48,728 43,914 39,767
Less accumulated
depreciation
and amortization 32,897 27,243 24,853
Net property
and equipment 15,831 16,671 14,914
Computer software
construction costs, net 28,457 26,420 20,462
Other assets 2,598 1,262 4,871
Total assets $134,549 $136,130 $119,339
See accompanying notes to consolidated financial statements.
December 31
(in thousands,
except share data) 1993 1992 1991
Liabilities and
Shareholders' Equity
Current liabilities:
Accounts payable $ 6,512 $ 4,037 $ 6,386
Accrued expenses 24,699 20,741 16,621
Accrued income taxes 5,371 5,358 438
Deferred revenue 13,060 13,201 10,440
Total current
liabilities 49,642 43,337 33,885
Deferred income
taxes and other 326 346 5,095
Commitments and
contingencies (Note 8)
Shareholders' equity:
Common stock, stated
value $.0069 per share.
Authorized 100,000
shares in 1993 and
1992 and 50,000 shares
in 1991; outstanding
shares - 28,709,
28,136 and 27,081 net
of 1,612, 1,762 and
2,036 shares
in treasury 199 195 188
Capital in excess
of stated value 45,376 41,474 38,440
Retained earnings 39,625 51,357 41,882
Foreign currency
translation adjustment (619) (579) (151)
Total shareholders'
equity 84,581 92,447 80,359
Total liabilities
and shareholders'
equity $134,549 $136,130 $119,339
See accompanying notes to consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Structural Dynamics Research Corporation
<CAPTION> Foreign Total
Common stock Capital in currency share-
outstanding excess of Retained translation holders'
(in thousands) Shares Stated value stated value earnings adjustment equity
<S> <C> <C> <C> <C> <C> <C>
Balances December
31, 1990 25,670 $ 178 $27,427 $32,603 $124 $ 60,332
Transactions
involving
employee stock
plans 1,444 10 11,702 11,712
Purchases of
treasury stock (33) (689) (689)
Net income 9,279 9,279
Foreign currency
translation
adjustment (275) (275)
Balances 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)
Balances 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)
Balances December
31, 1993 28,709 $199 $45,376 $39,625 $(619) $ 84,581
</TABLE>
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Structural Dynamics Research Corporation
Year ended December 31
(in thousands) 1993 1992 1991
_____________________________________________________
Cash flows from
operating activities:
Net income (loss) $(11,732) $ 9,475 $ 9,279
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization 6,990 7,009 6,885
Amortization of
computer software
construction
costs 9,539 3,667 3,734
Provision for
deferred income
taxes --- (77) (5,929)
Equity in losses
of affiliate 614 410 ---
Changes in assets
and liabilities:
(Increase) decrease
in accounts
receivable, net 8,468 (7,989) (1,497)
Increase in
prepaid expenses (717) (92) (1,254)
Increase in
accounts payable
and accrued expenses 6,433 1,771 3,825
Increase (decrease)
in accrued income
taxes 13 4,920 (325)
(Decrease) increase
in deferred revenue (141) 2,761 250
_________________________
Net cash provided
by operating
activities 19,467 21,855 14,968
Cash flows from
investing activities:
Purchases of
investments, net (515) (4,262) (16,490)
Additions to
property and
equipment, net (6,150) (8,764) (10,940)
Disposition of
facilities --- --- 3,224
Additions to
computer software
construction costs (11,282) (9,365) (7,514)
Additions to
purchased computer
software (296) (260) (3,540)
Investment in
joint venture (1,500) (1,477) ---
Other, net (468) 2 404
____________________________
Net cash used
in investing
activities (20,211) (24,126) (34,856)
Cash flows from
financing activities:
Stock issued under
employee benefit plans 4,071 4,629 11,712
Purchases of
treasury stock (165) (1,588) (689)
Decrease in
long-term obligations --- --- (2,716)
Net cash provided
by financing activities 3,906 3,041 8,307
Effect of exchange
rate changes on cash (40) (428) (275)
Increase (decrease)
in cash and cash
equivalents 3,122 342 (11,856)
Cash and
cash equivalents:
Beginning of period 31,661 31,319 43,175
End of period $ 34,783 $ 31,661 $ 31,319
Cash paid during
the year for:
Income taxes $ 4,450 $ 3,957 $ 3,915
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Structural Dynamics Research Corporation
(1) Introduction
The financial statements included herein have been restated
from those previously published to reflect corrections of errors in
the accounting for (a) revenue recognition and revenue related
expenses, (b) the write off of non-recoverable software construction
costs, and (c) accrued expenses and losses. Additionally, the
related income tax effects have been adjusted.
The reconciliation of previously reported results to restated
results for the years ended Deecember 31, 1993, 1992 and 1991 is as
follows:
December 31, 1993
---------------------------------
Previously
Reported Adustment As restated
Revenue $186,317 $(38,712) $147,605
Net income (loss) 14,284 (26,016) (11,732)
Income (loss) per share $ 0.48 $ (0.87) $ (0.39)
December 31, 1992
---------------------------------
Previously
Reported Adjustment As restated
Revenue $163,647 $(14,606) $149,041
Net income (loss) 14,490 (5,015) 9,475
Income (loss) per share $ 0.48 $ (0.17) $ 0.31
December 31, 1991
---------------------------------
Previously
Reported Adjustment As restated
Revenue $146,306 $(16,374) $129,932
Net income (loss) 17,917 (8,638) 9,279
come (loss) per share $ 0.60 $ (0.29) $ 0.31
(2) 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 purchase 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) realization of the amounts due
is probable. When customers have the right to return products,
revenue recognition is deferred until the right to return expires.
Under the terms of a 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 $7,877,000, $13,599,000 and
$13,544,000 in 1993, 1992 and 1991, respectively. This licensing
agreement was terminated subsequent to 1993.
Maintenance revenue is recognized ratably over the term of the
agreement and represents the substantial component of deferred
revenue.
The Company recognizes revenue and expense on 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
Primary 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. Fully diluted earnings per share includes
the additional dilutive effect of stock option grants using end of
period market values, if that value is more dilutive.
(d) Cash Equivalents
The Company considers investments in certificates of deposit,
commercial paper, overnight repurchase agreements with banks and
interest bearing accounts with maturities of less than 90 days to be
cash equivalents. Repurchase agreements totalled $15,566,000
$20,248,000 and $24,820,000 at December 31, 1993, 1992 and 1991,
respectively. The Company takes possession of the securities
underlying repurchase agreements and monitors the underlying market
values to assure that sufficient collateral exists to cover the
Company's initial investment and accrued interest.
(e) Investments
The Company invests in securities comprised of marketable
securities and certificates of deposit which are carried at cost,
approximating market value.
Effective January 1, 1994, the Company will adopt Statement of
Financial Accounting Standards (SFAS) No. 115. SFAS No. 115 will
require the Company to distinguish between those securities held for
sale and those for which the ability and intent to hold to maturity
exist; the effect of adopting SFAS No. 115 is not material.
(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 approximately $27,357,000, $17,816,000 and
$14,149,000 at December 31, 1993, 1992 and 1991, respectively. At
December 31, 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 $3,311,000, $68,000 and $95,000 for the years ended
December 31, 1993, 1992 and 1991, 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 by utilizing forward
foreign exchange contracts. At December 31, 1993, the Company had
contracts maturing in January, 1994 to exchange foreign currencies
for $12,100,000. 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.
<PAGE>
(i) Income Taxes
The Financial Accounting Standards Board has issued SFAS No.
109, "Accounting for Income Taxes." SFAS No. 109 requires a change
from the deferred method of accounting for income taxes to the asset
and liability method of 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 existing assets and
liabilities and their respective tax bases. The standard requires
that a valuation allowance be provided against a deferred tax asset
when the Company believes it is more likely than not that the
deferred tax amount will not be realized.
Effective January 1, 1992, the Company adopted SFAS No. 109.
The cumulative effect of applying this statement was to increase net
income by $700,000 or $.02 per share in 1992. Previously, income
taxes were accounted for under the deferred method.
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 $2,986,000 at December 31, 1993.
(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 1993 and 1991 the Company generated revenue from a
significant customer aggregating 11% and 10%, respectively. 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.
<PAGE>
(3) Supplemental Consolidated Balance Sheet Data
(in thousands)
December 31
Trade accounts
receivable, net,
consists of: 1993 1992 1991
Trade accounts receivable $22,918 $28,641 $23,453
Allowance for doubtful
accounts and reserve
for returns and allowances (2,351) (1,697) (740)
$20,567 $26,944 $22,713
Accrued expenses consist of:
Accrued compensation $9,470 $10,009 $9,284
Accrued taxes other than
income taxes 2,036 1,406 1,289
Accrued marketing costs 3,936 223 --
Accrued royalties 102 1,548 1,277
Other 9,155 7,555 4,771
$24,699 $20,741 $16,621
<PAGE>
(4) Leases
Future minimum lease payments under noncancellable operating
leases for the five years ending December 31, 1998 approximate
$9,967,000, $6,678,000, $4,918,000, $3,877,000 and $3,505,000,
respectively, and thereafter $58,198,000. Total rental expense
under operating leases for the years ended December 31, 1993, 1992
and 1991 approximated $10,673,000, $9,673,000 and $8,226,000,
respectively.
(5) Shareholders' Rights Plan
On July 19, 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 $.01 per Right. As a result of two stock splits, each
outstanding share of Common Stock is now entitled to one fourth
(1/4) of a Right.
(6) Common Stock and Employee Benefit Plans
On April 16, 1991, the shareholders adopted the 1991 Employee
Stock Option Plan. Under the 1991 plan, the Company has reserved
5,300,000 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.
Also, on April 16, 1991, the shareholders 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 7,000,000 shares of previously
unissued common stock. The status of all outstanding options
previously granted to employees remained unchanged.
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, 1993 there
were approximately 4,287,000 shares on which options were
exercisable.<PAGE>
(6) Common Stock and Employee Benefit Plans cont.
Transactions with respect to the Company's
stock options for the years ended December 31, 1991,
1992 and 1993 were as follows:
Option Price
Shares Per Share
Shares under option
December 31, 1990 5,491,000 $ 1.25-11.75
Granted 1,893,000 $13.09-24.44
Exercised 1,373,000 $ 1.25-11.75
Cancelled 71,000 $ 1.38-20.13
Shares under option
December 31, 1991 5,940,000 $ 1.25-24.44
Granted 1,684,000 $10.59-28.75
Exercised 1,103,000 $ 1.25-20.13
Cancelled 135,000 $ 9.88-23.75
Shares under option
December 31, 1992 6,386,000 $ 1.25-28.75
Granted 1,627,000 $13.06-20.18
Exercised 439,000 $ 1.25-16.25
Cancelled 164,000 $ 9.88-28.75
Shares under option
December 31, 1993 7,410,000 $ 1.38-28.75
On December 12, 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 $943,000,
$1,686,000, and $1,237,000 in 1993, 1992 and 1991, respectively.
In 1993 the Financial Accounting Standards Board adopted SFAS
No. 112, which requires that employers accrue for post-employment
benefits other than pensions when certain criteria are met. The
Company provides such benefits to certain employees pursuant to
statutorily mandated programs and Company policy. The Company will
adopt SFAS No. 112 in 1994. The cumulative impact of the adoption
will be to reduce income by $3,896,000 in the first quarter of 1994.
<PAGE>
(7) Income Taxes (in thousands)
The provision for
income taxes consists
of the following: Year ended December 31
1993 1992 1991
Federal:
Current $ -- $ 387 $7,130
Deferred -- (77) (5,929)
___________________________________
-- 310 1,201
State 500 979 1,384
Foreign 3,876 3,843 2,661
_____________________________________
$4,376 $5,132 $5,246
Deferred state and foreign
taxes are not material.<PAGE>
The provision for income
taxes differs from
the amounts computed by
using the statutory U.S.
Federal income tax rate.
The reasons for the
differences are as follows:
Computed expected income
tax expense (benefit) ($2,575) $4,728 $4,938
Increase (reduction)
resulting from:
Losses without tax benefit 2,575 -- --
State taxes, net of
federal benefit 500 646 914
Research and experimentation
credit -- (354) (579)
Foreign taxes, without
current benefit 3,876 -- --
Other, net -- 112 (27)
_________________________________
$4,376 $5,132 $5,246<PAGE>
The tax effects of temporary
differences that gave rise to
the deferred tax assets and deferred
tax liabilities were as follows:
Year ended December 31
1993 1992
Deferred tax assets:
Revenue recognition and
accounts receivable $18,276 $9,363
Property and equipment 959 895
Other liabilities and reserves 998 45
Tax credit carryforwards 2,661 2,823
Other 802 938
Total deferred tax assets 23,696 14,064
Valuation Allowance (14,628) (6,095)
Net deferred tax assets 9,068 7,969
Deferred tax liabilities:
Computer software construction
costs, net of amortization (9,068) (7,969)
Total net deferred taxes $ 0 $ 0
For the year ended December 31, 1991, the sources of deferred taxes
were primarily the expensing of computer software construction
costs, timing of revenue recognition and depreciation differences
between financial statement and tax purposes.
Of the $2,661 in credit carryforwards available at December 31,
1993, $360 of foreign tax credits expire in 1997, $750 and $800 of
research and experimentation credits expire in 2007 and 2008,
respectively, and $751 of alternative minimum taxes never expire.
The net change in the valuation allowance for deferred tax assets
was an increase of $8,533 in 1993 and $6,095 in 1992. Of these
amounts, $1,692 and $6,057 respectively, are attributable to stock
option deductions, the benefit of which will be credited to capital
in excess of stated value when realized.
(8) Commitments and Contingencies
The Company had an unsecured $15,000,000 bank line of credit
that may be used from time to time to facilitate short-term cash
flow. The line of credit expired in December 1994.
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 (see
Note 1). 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 entitled In Re: Structural
Dynamics Research Corporation Securities Litigation, Consolidated
Master File No. C-1-94-630. The complaint demands money damages in
an unspecified amount.
The plaintiffs in this case presently consist of 22 individuals
who allegedly purchased shares of the Company's Common Stock between
February 3, 1992 and September 14, 1994. The consolidated complaint
contains allegations intended to support the certification of a
class of plaintiffs.
The defendants include the Company, 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.
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.
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.
(9) Segment and Geographic Information (in thousands)
<TABLE>
<CAPTION>
Year ended December 31, 1993
Depreciation
and
Financial data Operating Identifiable Amortization Capital
by segment Revenue Income (loss) Assets Expense Expenditures
<S> <C> <C> <C> <C> <C>
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 $4,270 $ 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 $7,008 $ 8,764
Year ended December 31, 1991
Software products and services $103,561 $11,751 $ 52,774 $3,743 $ 2,628
Engineering services 26,371 466 12,409 2,314 1,957
Corporate -- -- 54,156 828 6,355
Consolidated $129,932 $12,217 $119,339 $6,885 $10,940
</TABLE>
Financial data by
geographic area
(Corporate general
expenses are not allocated
to operating income by
geographic area): Year ended December 31, 1993
Operating Identifiable
Revenue Income (loss) Assets
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
Year ended December 31, 1991
North America $ 49,975 $ 2,762 $ 35,345
Europe 44,451 4,965 18,869
Far East 35,506 10,932 10,969
Corporate -- (6,442) 54,156
Consolidated $129,932 $ 12,217 $119,339
(10) Quarterly Results of Operations (Unaudited)
The following table sets forth selected unaudited quarterly
financial information (in thousands, except per share data) for 1993
and 1992. The Company believes that all necessary adjustments have
been included to present fairly the selected quarterly information.
Three months ended Year ended
March, June September December December
31, 1993 30, 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 income (loss) $ (636) (3,657) (4,991) (2,448) $(11,732)
Earnings (loss) per
share:
Primary $ (.02) (.12) (.16) (.08) $ (.39)
Fully diluted $ (.02) (.12) (.16) (.08) $ (.39)
Three months ended Year ended
March June September December December
31, 1992 30, 1992 30, 1992 31, 1992 31, 1992
Net revenue $ 34,369 39,160 32,686 42,826 $149,041
Operating results $ 3,459 5,624 692 2,438 $ 12,213
Net income $ 3,285 4,089 734 1,367 $ 9,475
Earnings per share:
Primary $ .11 .14 .02 .05 $ .31*
Fully diluted $ .11 .14 .02 .05 $ .31*
* Per share amounts are not additive.
SCHEDULE I
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
MARKETABLE SECURITIES - OTHER INVESTMENTS
DECEMBER 31, 1993, 1992 AND 1991
(in thousands)
Cost, Market and Carrying Value
1993 1992 1991
Repurchase Agreements with
The Fifth Third Bank of
Cincinnati, OH secured by
U.S. Government securities $15,566 $20,248 $24,820
Repurchase Agreements with
Wells Fargo Bank
San Francisco, CA secured
by U.S. Government and
corporate securities 1,046 -- --
Repurchase Agreements with
Gabelli O'Connor
Greenwich, CT secured
by U.S. Government and
corporate securities 3,131 -- --
Repurchase Agreements with
Smith Barney Shearson
Chicago, IL secured
by U.S. Government securities 3,030 -- --
Repurchase Agreements with
Merrill Lynch and The Bank
of New York, NY secured
by U.S. Government securities -- -- 500
Certificates of Deposit in
institutions insured by the
U.S. Government 10,233 20,752 16,490
U.S. Treasury Obligations with
Gabelli O'Connor
Greenwich, CT 487 -- --
U.S. Treasury Obligations with
Wells Fargo Bank
San Francisco, CA 6,563 -- --
Government/Agency Variable Rate
with Gabelli O'Connor
Greenwich, CT 3,984 -- --
Total $44,040 $41,000 $41,810
Above amounts are included in the balance sheet captions of
"cash and cash equivalents", "investments" and "long-term
investments".<PAGE>
SCHEDULE VIII
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(in thousands)
Balance at Balance
Beginning Charged to at End
Description of Period Income Deductions of Period
Accounts Receivable:
Year ended December
31, 1991 $409 414 83 $ 740
Year ended December
31, 1992 $740 1,625 668 $1,697
Year ended December
31, 1993 $1,697 1,790 1,136 $2,351
<PAGE>
SCHEDULE X
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(in thousands)
1993 1992 1991
Maintenance and repairs $ 3,245 $2,990 $2,920
Royalties $ 8,411 $6,422 $5,145
Advertising $ 4,297 $3,111 $2,763
Other items have been omitted in each year since they are less than
1% of total revenue or are disclosed elsewhere in the financial
statements.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.
A.1. and 2. Financial statements and financial statement
schedules:
See Part III, Item 8 for index to financial statements and
related financial statement schedules, which is hereby
incorporated herein by reference.
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)
11 Statement regarding computation Note (i)
of per share earnings
22 Subsidiaries of the Registrant Note (h)
24 Consent of Independent Accountants
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.
(i) Previously provided in Annual Report on Form 10-K/A,
Amendment No. 1, for the year ended December 31,
1993.
b. Reports on Form 8-K
None.
Report on Form 10-K/A
for year ended
December 31, 1993
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
May 10, 1996 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 May 10, 1996 /s/ John E. McDowell May 10,1996
Albert F. Peter, (Date) John E. McDowell (Date)
President, Chief Director
Executive Officer
and Director
(Principal Executive
Officer)
/s/William P. Conlin May 10, 1996 /s/James W. Nethercott May 10,1996
William P. Conlin, (Date) James W. Nethercott (Date)
Chairman of the Board Director
/s/ Jeffrey J. Vorholt May 10, 1996 /s/Arthur B. Sims May 10, 1996
Jeffrey J. Vorholt, (Date) Arthur B. Sims (Date)
Vice President, Director
Chief Financial Officer
and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Gilbert R. Whitaker, Jr. May 10, 1996
Gilbert R. Whitaker, Jr. (Date)
Director
/s/ Bannus B. Hudson May 10, 1996
Bannus B. Hudson (Date)
Director
<PAGE>
EXHIBIT 24
Consent of Independent Accountants
The Board of Directors
Structural Dynamics Research Corporation:
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (Nos. 33-20774, 33-22136,
33-40561, 33-41671, 33-58701 and 33-72328) of Structural Dynamics
Research Corporation of our report dated January 13, 1995, appearing
in Item 8 of this Form 10-K/A.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Cincinnati, Ohio
May 10, 1996
