UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 0-16230
STRUCTURAL DYNAMICS RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
Ohio
31-0733928
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
2000 Eastman Drive, Milford, Ohio 45150
(Address of principal executive offices)
(Zip Code)
(513) 576-2400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of April 30, 1996 there were 31,434,515 shares of the
Registrant's Common Stock without par value issued and
outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
(in thousands, except per share data)
Three Months Ended
March 31,
1996
1995
Revenue:
Software licenses $31,317 $26,534
Software maintenance and services 29,654 17,278
Total revenue 60,971 43,812
Cost of revenue:
Cost of licenses 6,283 4,187
Cost of maintenance and services 12,464 8,835
Total cost of revenue 18,747 13,022
Gross profit 42,224 30,790
Operating expenses:
Selling and marketing 23,934 20,928
Research and development 6,810 4,658
General and administrative 3,653 2,924
Total operating expenses 34,397 28,510
Operating income 7,827 2,280
Equity in earnings (losses) of 995 (1,640)
affiliates
Other income (loss) (173) 543
Income before income taxes 8,649 1,183
Income tax expense $ 1,789 $ 916
Net income 6,860 267
Earnings per share:
Primary: $ .20 $ .01
Fully diluted .20 .01
Common and common equivalent shares:
Primary 33,544 29,805
Fully diluted 33,791 30,163
See accompanying notes to consolidated financial statements.
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(in thousands)
March December
31,1996 31, 1995
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 65,548 $ 59,397
Short-term investments 8,518 14,305
Trade accounts receivable, net 40,707 53,897
Other accounts receivable 10,984 10,164
Prepaid expenses 5,829 5,882
Total current assets 131,586 143,645
Long-term investments 8,820 4,465
Property and equipment, at cost:
Computer and other equipment 36,905 34,678
Office furniture and equipment 11,098 10,064
Leasehold improvements 3,749 4,058
51,752 48,800
Less accumulated depreciation and 37,856 36,604
amortization
Net property and equipment 13,896 12,196
Computer software construction 29,346 30,568
costs, net
Other assets 4,217 2,648
Total assets $187,865 $193,522
See accompanying notes to consolidated financial statements.
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(in thousands, except per share data)
March December
31, 1996 31, 1995
Liabilities and Shareholders' Equity (unaudited)
Current liabilities:
Accounts payable $ 10,426 $ 9,938
Accrued expenses 29,798 31,411
Accrued litigation settlement and 11,692 28,600
related costs
Accrued income taxes 4,211 6,396
Deferred revenues 31,750 31,605
Total current liabilities 87,877 107,950
Long-term liabilities 8,039 8,163
Shareholders' equity:
Common stock, stated value $.0069
per share Authorized 100,000 shares;
outstanding shares - 218 213
31,353 and 30,617 net of 1,556 and
1,510 shares in treasury
Capital in excess of stated value 66,689 59,116
Retained earnings 25,121 18,261
Foreign currency translation 12 --
adjustment
Unrealized holding loss on (91) (181)
investments
Total shareholders' equity 91,949 77,409
Total liabilities and $187,865 $193,522
shareholders' equity
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1996 1995
Net cash provided by operating $ 1,629 $(4,211)
activities
Cash flows from investing activities:
Sales of investments, net 1,522 4,589
Additions to property and equipment, (3,335) (414)
net
Additions to computer software (1,255) (1,438)
construction costs
Net cash (used in) provided by (3,068) 2,737
investing activities
Cash flows from financing activities:
Stock issued under employee benefit 9,291 1,642
plans
Purchases of treasury stock (1,713) (33)
Net cash provided by financing 7,578 1,609
activities
Effect of exchange rate changes on cash 12 (1)
Increase in cash and cash equivalents 6,151 134
Cash and cash equivalents:
Beginning of period 59,397 21,885
End of period $65,548 $22,019
See accompanying notes to consolidated financial statements.
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(in thousands)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. As
permitted by the rules of the Securities and Exchange Commission
applicable to quarterly reports on Form 10-Q, these notes are
condensed and do not contain all disclosures required by
generally accepted accounting principles. In the opinion of
management, these financial statements contain all adjustments
(consisting of only normal recurring adjustments, unless
otherwise noted) necessary to present fairly the Company's
financial position, results of operations and cash flows as of
the dates and for the periods indicated.
(2) Acquisition of CAMAX Manufacturing Technologies, Inc.
On January 16, 1996, the Company entered into a definitive
agreement to acquire CAMAX Manufacturing Technologies, Inc.
(CAMAX) and its wholly owned subsidiaries. The acquisition is
expected to be accounted for under the pooling of interests method.
Condensed combined proforma data (unaudited) is based on the
respective consolidated
historical financial statements of SDRC and CAMAX adjusted to
give effect to the transaction as though it had occurred as of
January 1, 1993.
Condensed combined proforma data (unaudited) for the three months
ended March 31, 1996 is as follows:
Net revenue $65,049
Income before income taxes and cumulative effect 8,403
of accounting changes
Income before cumulative effect of accounting 6,614
changes
Net income 6,614
Income per share $ .19
(3) Foreign Currency Translation
The functional currency of the foreign software operations has
been changed to the operations' local currency from the U.S.
dollar based upon changes in the Company's operating and
economic environment. Recently the Company's European operations
have become more autonomous due to improved profitability of the
subsidiaries. The European operations have generated sufficient cash
flows from operations to support their operating and capital needs.
Utilization of local European resources have been expanded due to
the local European customer demand of implementation, support and
customization of the Company's software products. In addition,
a European product development staff has been established. For the
first quarter of 1996, the translation gains and losses, were not
included in determining net income but were accumulated in a separate
component of shareholders' equity.
(4) Taxes
The provision for income taxes reflects taxes currently payable.
Based on the Company's historical tax position and estimates of
taxable income for the next four years, 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. These factors cause the effective tax rate to
differ from the expected statutory rate.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Structural Dynamics Research Corporation is a leading
international supplier of mechanical design automation (MDA)
software, product data management (PDM) software and related
services. The Company provides software and related services to
manufacturers to optimize product performance and reduce cost,
while streamlining the product development process from concept
through manufacturing.
Results of Operations (in thousands)
Revenue
The Company's consolidated net revenue increased 39% to $60,971
for the three months ended March 31, 1996 as compared to $43,812
for the three months ended March 31, 1995. During March 1996,
the Company released the newest version of its CAD/CAM/CAE
product, I-DEAS Master Series 3.0.
Software license revenue increased 18% to $31,317 for the three
months ended March 31, 1996 as compared to $26,534 for the three
months ended March 31, 1995. Software license growth is due to
continued acceptance of the I-DEAS Master Series product
enhancements and increased demand for the PDM product. For the
three months ended March 31, 1996, the increase was primarily
attributable to substantial growth of PDM revenue. License
revenue for the three month period ended March 31, 1996 also
included revenue generated by SDRC GmbH, the wholly owned German
subsidiary which has been consolidated upon acquisition in the
third quarter of 1995.
Software maintenance and services revenue increased 72% to
$29,654 for the three months ended March 31, 1996 as compared to
$17,278 for the three months ended March 31, 1995. A significant
portion of the increase in maintenance revenue was due to the
increase in the Company's installed customer base from both new
and existing customers. In addition, during the three months
ended March 31, 1996, the Company recognized revenue from
finalized contracts for prior maintenance periods and from a
negotiated settlement with a large customer. Software services
revenue growth was positively impacted by revenue generated from
a large contract from one of the Company's major automotive
customers as well as an overall increase in the level of I-
DEAS and Product Data Management implementation projects.
For the three month period ended March 31, 1996 and 1995, revenue
in North America accounted for 46% and 39%, Europe 28% and 27%
and Asia-Pacific 26% and 34%, respectively, of consolidated
revenues. The Company expects the international market to
continue to account for a significant portion of total revenue.
Expenses
Cost of revenue consists principally of the staff and related
costs associated with the generation and support of software
service revenue, amortization of capitalized software
construction costs, royalty fees paid to third parties under
licensing agreements and the cost of distributing software
products. Cost of revenue increased 44% to $18,747 for the three
months ended March 31, 1996 as compared to $13,022 for the three
months ended March 31, 1995. Cost of revenue represented 31% of
revenue for the three months ended March 31, 1996 as compared to
30% for the comparable 1995 period. Beginning in the first
quarter of 1996, the Company began amortizing the software
construction costs related to new releases of its I-DEAS Master
Series product over a three year period based upon an evaluation
of the estimated future economic life of the product.
Expenses (continued)
Cost of licenses increased 50% while the associated revenue
increased 18%. The percentage increase in 1996 was due primarily
to increased author fees related to the Company's PDM revenue
which are paid to the Company's joint venture investee. Cost of
maintenance and services in 1996 increased 41% while the
associated revenue increased 72%. The dollar increase in cost of
maintenance and services is primarily due to staff and related
expenses incurred in order to satisfy the growing customer demand
for software services.
Selling and marketing expenses consist of the costs associated
with the world-wide sales and marketing staff, advertising and
product localization. These expenses increased 14% for the
three months ended March 31, 1996 as compared to the three months
ended March 31, 1995. Selling and marketing expenses represented
39% of revenue for the three months ended March 31, 1996 as
compared to 48% for the comparable 1995 period. The dollar
increase in selling and marketing expenses was due to an increase
in staff and associated expenses to meet the growing customer
demand for the Company's products and services. Included in the
costs for the three month period ended March 31, 1996 are the
staff costs from SDRC GmbH. The ratio of selling and marketing
expenses to total revenue improved in 1996 due to the significant
increase in services revenue without a proportional increase in
selling and marketing expenses.
Research and development expenses consist of expenses for the
development of software products which cannot be capitalized in
accordance with Statement of Financial Accounting Standards
No. 86. These expenses increased 46% to $6,810 for the three
months ended March 31, 1996 as compared to $4,658 for the three
months ended March 31, 1995. Research and development expenses
represent 11% of revenue for the three months ended March 31,
1996 and 1995. The increase in the dollar amount was due
primarily to a increase in development staff and associated
expenses which includes the development staff added as a result
of the acquisition of SDRC GmbH. In addition, the dollar amount
of software construction costs capitalized for the three month
period ended March 31, 1996 decreased slightly as compared to the
comparable period ended March 31, 1995.
General and administrative expenses consist of costs associated
with the corporate, finance, legal, human resource and
administrative staffs. These expenses increased 25% to $3,653
for the three months ended March 31, 1996 as compared to $2,924
for the three months ended March 31, 1995. General and
administrative expenses represent 6% of revenue for the three
months ended March 31, 1996 and 7% for the three months
ended March 31, 1995. The increase in the dollar amount of
general and administrative expenses was due to an increase in
corporate administrative staff and related expenses incurred to
support the Company's growth.
Other Income
For the three month period ended March 31, 1996 equity in
earnings of affiliates represented the Company's share of
operating results of its joint venture investee Metaphase
Technology. Inc. (Metaphase). For the three month period ended
March 31, 1995 equity in losses of affiliates represented the
Company's share of operating results for Metaphase and SDRC GmbH.
In the third quarter of 1995, the Company purchased the remaining
49.9% interest of SDRC GmbH, previously a joint venture company
with the Company and Siemens Nixdorf Informationssysteme AG. As
of the acquisition date, 100% of the operating results of SDRC
GmbH are included in the consolidated financial statements.
Prior to the acquisition of the remaining 49.9% interest, the
Company accounted for its 50.1% interest under the equity method.
For the three month period ended March 31, 1996, other income
(loss) includes a charge of approximately $950 for the
settlement of the derivative lawsuit. Other income (loss) also
includes interest income which has increased $209 as compared to
1995 due to increased interest earned from higher interest rates
on higher cash and short term investment balances.
Taxes
The provision for income taxes reflects taxes currently payable.
Deferred tax benefits relating to temporary differences have been
offset by a valuation allowance due to doubt as to their ultimate
realization. These factors cause the effective tax rate to
differ from the expected statutory rate.
Quarterly Results
Future quarterly results could be impacted by factors such as
customer order delays, a slower growth rate in the market,
increased competition or adverse changes in general economic
conditions in any of the countries in which the Company does
business. Any shortfall in revenue or earnings could have an
immediate and significant adverse effect on the trading price of
the Company's stock in any given period. In addition, future
results could be impacted by the integration of the Company and
CAMAX Manufacturing Technologies, Inc. (see Note 2 to the
Consolidated Financial Statements). The results of operations
for the three month periods ended March 31, 1996 are not
necessarily indicative of future financial performance.
Liquidity and Capital Resources
At March 31, 1996, the Company had cash and investments of
$82,886 as compared to $78,167 at December 31, 1995. The
increase in cash and investments from December 31, 1995 is due to
proceeds from the exercise of employee stock options and results
of operations. The Company's working capital was $43,709 at
March 31, 1996. In addition, the Company has an unused, unsecured
bank line of credit of $15,000. The Company has no current
commitments for material capital expenditures. These existing
sources of liquidity and funds anticipated to be generated from
operations are expected to provide adequate cash to fund the
Company's projected needs for the foreseeable future.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
As previously reported, the Company was a defendant in a class
action suit alleging violations of certain federal securities
laws, captioned In Re: Structural Dynamics Research Corporation
Securities Litigation, United States District Court, Southern
District of Ohio, Consolidated Master File No. C-1-94-630. In
December 1995, the parties to this matter entered into a
Memorandum of Understanding for settlement, subject to final
Court approval. On March 22, 1996, the Court approved the
proposed settlement and a final order was entered. Pursuant to
the order, a settlement fund of $37.5 million was established,
consisting of $17.6 million cash provided by the Company, $10
million in shares of the Company's Common Stock (to be valued
based on the market price at the time of distribution), and $9.9
million cash provided by KPMG Peat Marwick LLP, the Company's
former audit firm. The settlement does not constitute an
admission of liability on the part of any defendant. The
Company's Board of Directors determined that the settlement was
in the best interest of the Company and its shareholders in light
of the uncertainty of the outcome, the high cost of continued
litigation, and the high level of management time and attention
continued litigation would require which could be better spent on
the Company's business.
The Company has also previously reported that it is a party to
shareholders' derivative litigation captioned In Re: Structural
Dynamics Research Corporation Derivative Litigation, United
States District Court, Southern District of Ohio, Consolidated
Master File No. C-1-94-650. While the case remains pending, in
April 1996 the parties tentatively agreed to a proposed
settlement pursuant to which the Company will pay the plaintiffs'
counsel fees of $900,000 and up to $50,000 for their out-of-
pocket expenses in full settlement of the matter. The parties'
agreement is subject to final approval of the United States
District Court.
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits filed as part of this report:
11(a) Calculation of Primary Earnings Per Common
Share
11(b) Calculation of Fully Diluted Earnings Per
Common Share
(B) No report on Form 8-K was filed during the first quarter of
1996.
The information furnished in this report has not been audited.
It reflects all adjustments which are, in the opinion of
management, necessary for a fair statement of the results for the
interim periods reported. The results are not necessarily
indicative of results of operations to be expected for the full
fiscal year.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
STRUCTURAL DYNAMICS RESEARCH CORPORATION
Date: May 10, 1996 By: /s/ Jeffrey J. Vorholt
Jeffrey J. Vorholt,
Vice President,
Chief Financial Officer and
Treasurer
* Pursuant to the last sentence of
General Instruction G to Form 10-
Q, Mr. Jeffrey J. Vorholt has executed
this Quarterly Report on Form 10-Q
both on behalf of the registrant and in
his capacity as its principal financial
and accounting officer.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
STRUCTURAL DYNAMICS RESEARCH CORPORATION
Date: May 10, 1996 By:/s/ Jeffrey J. Vorholt
Jeffrey J. Vorholt,
Vice President,
Chief Financial Officer and
Treasurer
* Pursuant to the last sentence of
General Instruction G to Form 10-
Q, Mr. Jeffrey J. Vorholt has
executed this Quarterly Report on
Form 10-Q both on behalf of the
registrant and in his capacity
as its principal financial and
accounting officer.
<PAGE>
EXHIBIT 11(a)
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Calculation of Primary Earnings Per Common Share
(in thousands, except per share data)
Three Months Ended March 31,
1996 1995
PRIMARY
Average shares outstanding 30,974 29,185
Net effect of dilutive stock
options after application of the
treasury stock method 2,570 620
Total 33,544 29,805
Net income $6,860 $ 267
Net income per share $ .20 $ .01
<PAGE>
Exhibit 11(b)
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Calculation of Fully Diluted Earnings Per Common Share
(in thousands, except per share data)
Three Months Ended March 31,
1996 1995
FULLY DILUTED
Average shares outstanding 30,974 29,185
Net effect of dilutive
stock options after
application of the treasury
stock method 2,817 978
Total 33,791 30,163
Net income $ 6,860 $ 267
Net income per share $ .20 $ .01
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<PERIOD-END> MAR-31-1996
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<SECURITIES> 8,518
<RECEIVABLES> 43,778
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<INVENTORY> 0
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<PP&E> 51,752
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<TOTAL-ASSETS> 187,865
<CURRENT-LIABILITIES> 87,877
<BONDS> 0
218
0
<COMMON> 0
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<TOTAL-REVENUES> 60,971
<CGS> 18,747
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<INCOME-TAX> 1,789
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