UNITED STATES
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, 1997
STRUCTURAL DYNAMICS RESEARCH CORPORATION
An Ohio Corporation I.R.S. Employer
Identification No. 31-0733928
2000 Eastman Drive, Telephone Number (513) 576-2400
Milford, Ohio 45150
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. [ ]
As of March 18, 1998, 36,018,754 shares of Common Stock were
outstanding. The aggregate market value of Common Stock held
by non-affiliates was $771,621,688 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, 1997.
Part I, Part II and Part IV
Registrant's definitive Proxy Statement dated April 1, 1998.
Part II, Part III and Part IV
PART I
Factors That May Affect Future Results
Information provided by the Company or by its spokespersons
may contain forward-looking statements. Such statements, made
pursuant to the safe harbor established by securities
legislation, are based on the estimates and assumptions of
management at the time such statements are made. Forward-
looking statements are subject to risks and uncertainties that
may cause the Company's future results to differ from those
disclosed in any forward-looking statement. Important
information about the basis for management's estimates and
assumptions is contained in "Factors That May Affect Future
Results" included in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section in the
SDRC 1997 Annual Report to Shareholders, which is incorporated by
reference.
Item 1: Business
General
Structural Dynamics Research Corporation (the Company or
SDRC) is a leading supplier of mechanical design automation (MDA)
software, product data management (PDM) software and related
services within the worldwide mechanical computer-aided design,
manufacturing and engineering (CAD/CAM/CAE) industry. The
Company's mission is to provide software tools and services to
significantly enhance SDRC's customers' mechanical product
development and engineering processes.
The Company's software products and services provide its
customers with an integrated solution for a concurrent
engineering design, computerized manufacturing, and the
management of product life cycle information. The Company's
principal MDA software product, I-DEAS Master Series(TM), is an
integrated CAD/CAM/CAE solution which allows manufacturers to
optimize product performance and reduce costs by streamlining the
product development process. The Company's I-DEAS Artisan Series(TM)
product is aimed at the mid-level CAD/CAM/CAE market. SDRC's PDM
product, Metaphase Enterprise(TM) software, provides a
comprehensive, company-wide tool for the management and control
of product information, configuration, release management and
work flow. The Company's products and services are valuable 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 in the automotive, consumer and
industrial electronics, industrial machinery and aerospace
industries.
Background
The Company was incorporated under the laws of the State of
Ohio in 1967. The Company was founded to provide advanced
engineering consulting services, and over time, developed some of
the industry's first mechanical engineering software packages to
assist in its consulting efforts. After receiving strong
customer interest in these software packages, the Company began
marketing its software in the early 1970s.
Background - Continued
In recent years, the Company has made business acquisitions
to expand its ability to develop and market new products to
customers. In 1992, the Company and Control Data Systems, Inc.
established Metaphase Technology, Inc. (Metaphase) as a joint
venture company to develop product data management software. In
January 1997, the Company acquired the remaining stock of
Metaphase and certain assets of Control Data Systems, Inc.'s
global PDM software sales and support business. In 1994, the
Company and Siemens Nixdorf Informationssysteme AG formed the
joint venture, SDRC Software and Services GmbH (SDRC GmbH), to
supply mechanical CAD/CAM/CAE software and services in Central
Europe. In 1995, the Company purchased the remaining interest of
SDRC GmbH. Also in 1995, the Company merged its software
products marketing and engineering services subsidiaries into a
single subsidiary to provide both software products and related
services. In June 1996, the Company completed the acquisition of
Camax Manufacturing Technologies, Inc. (Camax) and its wholly
owned subsidiaries. Camax provided the Company technology for
computer-aided manufacturing software including computerized
numerical control machining operations. In 1997, the Company
acquired Computer Aided Systems for Engineering, Inc. which had
been a third party author of certain I-DEAS drafting modules.
The acquisition provided SDRC with full control of its product
development for drafting and opportunity to facilitate the
creation of new products.
Product Development
The Company works closely with its customers to identify
their needs and define software enhancements to be incorporated
into SDRC products. The Company generally develops new
functionality internally through its product development staff.
The Company also arranges with third party developers to provide
specific functionality through royalty arrangements and software
purchase agreements.
Development of CAD/CAM/CAE and PDM technology is competitive
and advances can occur rapidly. There are no assurances that the
Company will be successful in developing new products and that
new products will achieve sufficient market acceptance. Research
and development expense were approximately $49,415,000,
$34,018,000, and $26,507,000 in 1997, 1996, and 1995,
respectively.
I-DEAS Product Suite
The Company develops, markets and supports a comprehensive
MDA software product called I-DEAS (Integrated Design Engineering
Analysis Software) Master Series and a mid priced software
product called I-DEAS Artisan Series. I-DEAS software allows
engineers to design, simulate, test and manufacture product
concepts faster than the time required using stand-alone or
partially integrated software tools. As a result, the software
is a tool to assist customers in developing higher quality
products faster, at a lower cost, and to deliver products to the
market in less time. The I-DEAS software is specifically
designed and optimized to meet the needs of engineers who design
products by using solid modeling technology. With the easy to
learn user interface, users are able to create and view a "master
model," a solid representation of a product that precisely
defines its geometry and material characteristics.
I-DEAS Product Suite - Continued
I-DEAS Master Series software allows product development team
members to work concurrently on the same project sharing this
common master model. The master model can be easily understood by
everyone concerned with the product, including representatives
from management, marketing and manufacturing. It can be analyzed
to evaluate the mechanical performance and structural integrity of
the design concept, as well as to provide information that can be
used to optimize product performance, study assembly sequences and
assess "manufacturability".
The Artisan Series was specifically created to address the
growing mid-price CAD market. Artisan provides high level design
functionality to smaller design groups and companies while
ensuring upward data compatibility and user migration to I-DEAS
Master Series.
Metaphase Enterprise
SDRC also develops, markets, implements and supports
Metaphase Enterprise product data management software, which helps
create, manage and control data associated with product
information as it evolves through the product life cycle.
Metaphase Enterprise is a modular PDM system designed to provide
the depth and breadth of functionality customers require to meet
current and future data management needs.
Metaphase Enterprise software helps customers improve the way
they create, share, access, define and support their product data.
For product developers, this means fast, reliable access to the
application used to create them. Managers can accurately and
reliably access information about work-in-process as well as
documentation of the entire product life cycle. Metaphase
Enterprise(TM) is compatible with client/server environments
with distributed design and engineering departments.
Services
The Company provides customers with process automation and
implementation services as well as technical applications software
support, maintenance and training. Building on its extensive
knowledge of mechanical design automation technology and
engineering applications and processes, the Company offers a
"total solution" by providing process automation and software
implementation services for I-DEAS and PDM software. Engineering
consulting services assist in the optimization of customers'
product design and in the improvement of customers' development
process. In addition, advanced training and knowledge transfer
are provided to customers to enable them to integrate and optimize
their MDA and PDM investment. Advanced computer simulation methods
and in-depth application expertise are utilized for traditional or
highly specialized computer technologies including design audits,
product design, troubleshooting and engineering process design.
Services - Continued
Technical applications software support and maintenance
service provides telephone "hotline" support and software
maintenance corrections for licensed products and features.
Software enhancement versions are also released during the term of
the contract with documentation updates. In addition, other
services are provided that enhance and maintain the customer's
software investment.
The Company provides basic training for each major software
package. Advanced training classes are offered for selected
applications to support continued growth of customer skills and to
increase the productivity of those who utilize SDRC software.
Heterogeneous Environment/Platforms
The Company's software is available on the leading engineering
workstations using UNIX and Microsoft NT operating systems. 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, performance
simulation and integrated applications, have increased the number
of potential users who can utilize these tools.
Sales Channels
The Company markets its products and services through a
worldwide direct sales and support force. In addition, the
Company utilizes distributors, value-added resellers and other
independent representatives for its selling and marketing efforts.
Telemarketing is also used to complement both the direct and
indirect marketing channels. The Company employs highly skilled
engineers and technically proficient sales support personnel
people, capable of understanding the sophisticated needs of the
customer. The Company has an established relationship with a
distributor in Japan, Information Services International - Dentsu
Ltd., which accounted for approximately 11%, 12% and 13% of the
Company's consolidated revenues in 1997, 1996 and 1995,
respectively. Revenues from the Ford Motor Company represented 14%
and 11% of consolidated revenue in 1997 and 1996.
Seasonality
Historically, the Company has generally realized a
disproportionate amount of its quarterly revenue during the last
month of each quarter, and realized a disproportionate amount of
its total annual revenue during the fourth quarter of each year.
Future quarterly results could be impacted by factors such as
order deferrals, a slower growth rate in the market, increased
competition or adverse changes in general economic conditions in
any of the countries in which the Company does business. Any
shortfall in revenue or earnings could have an immediate and
significant adverse effect on the trading price of the Company's
stock in any given period.
Competition
The market for the Company's software products is highly
competitive and the Company expects competitive pressure to
increase in the future. To remain technologically competitive,
the Company continually enhances its existing software products
and pursues the development and introduction of new products.
The Company competes against products in the CAD/CAM/CAE
market including the CATIA products marketed by IBM and
Dassault, the UNIGRAPHICS product marketed by EDS, the CADDS
product marketed by Computervision Corporation, the I/EMS
product marketed by Intergraph Corporation and the Pro/ENGINEER
product marketed by Parametric Technology Corporation. In the
PDM market, the Company competes against such products as the
Optegra product marketed by Computervision Corporation, products
marketed by SAP, the IBM Product Manager marketed by IBM,
Information Manager marketed by EDS and others. 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 CAD/CAM/CAE and PDM
market for software and related services are product
functionality, product breadth and integration, product
performance, product quality, hardware platform support, ease of
product use, price, customer support, technical reputation and
size of installed customer base. The Company's employees are an
important component of the SDRC "total solution" approach in
providing MDA and PDM software tools and related engineering
consulting services to customers. The Company's success will
depend in part on its ability to attract and retain a work force
whose skills are in great demand.
Other Information
Segment and geographic information is included on page 50 of
the Company's Annual Report to Shareholders for the year ended
December 31, 1997, which is incorporated herein by reference.
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 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, as long as the trademarks remain
in use.
The Company does not anticipate any significant problems
associated with the year 2000 consequences for its internal
software or the software which it markets. The software which
will be the basis of the Company's new information management
system is year 2000 compliant. The Company's primary software
offerings are also year 2000 compliant.
The Company typically ships product within two weeks after
acceptance of a customer purchase order and execution of a
license agreement. A substantial portion of quarterly shipments
tend to be made in the last month of the quarter. The Company
does not believe that backlog is indicative of potential revenue
for any future period.
As of December 31, 1997, the Company had 2,067 full-time
employees, of whom 565 were engaged in research and development,
1,081 in sales, services support and marketing, and 421 in
general management and administration.
<PAGE>
<TABLE>
Item 2: Properties
The following table sets forth certain information, as of
December 31, 1997, with respect to principal properties in which
the Company and its subsidiaries conduct their operations:
<CAPTION>
Space Used
In
Ownership Operations
Location Or Lease (Square
Feet) Principal Activities
<S> <C> <C> <C>
Cincinnati, Lease 221,000 Corporate Headquarters Office
Ohio (expires Facilities, Technical Development
2011) Center, and Administration
Cincinnati, Lease 93,000 Sales and Marketing Office
Ohio (expires Facilities
2007)
Dearborn, Lease 39,000 Technical Development Center,
Michigan (expires Support and Training Facilities
2000)
Minneapolis, Lease 27,000 Office Facilities and Technical
Minnesota (expires Development Center
2000)
Minneapolis, Lease 27,000 Sales Office Facilities and
Minnesota (expires Technical Development Center
1998)
San Diego, Lease 25,000 Sales Office Facilities
California (expires
1999)
Eugene, Lease 22,000 Office Facilities and Technical
Oregon (expires Development Center
1999)
Frankfurt, Lease 19,000 Central Europe Office Facilities
Germany (expires
1999)
Paris, Lease 18,000 Southern Europe Office Facilities
France (expires
2002)
Madison Lease 16,000 Sales Office Facilities and Test
Heights, (expires Center
Michigan 2000)
Hitchin, Lease 15,000 European Headquarters Office
England (expires Facilities
2017)
Seattle, Lease 12,000 Technical Development Center,
Washington (expires Support and Training Facilities
2002)
Tokyo, Lease 8,000 Technical Support Office Facilities
Japan (expires
1999)
Munich, Lease 7,000 Central Europe Development
Germany (expires Facilities
2001)
New Delhi, Lease 6,000 Technical Support Office Facilities
India (expires
2000)
Seoul, Lease 3,000 Sales and Technical Support Office
South Korea (expires Facilities
1998)
</TABLE>
<PAGE>
Management of the Company considers the above properties to
be adequate and suitable for present purposes, but will continue
to evaluate the need for additional facilities to meet the
continued growth of the business.
Item 3: Legal Proceedings
The Company is not a party to any litigation other than
ordinary routine litigation incidental to its business.
While the outcome of these ordinary, routine legal matters
cannot be predicted with certainty, management does not
believe that the outcome of any of these legal matters will
have a material adverse effect on the Company's consolidated
results of operations or consolidated financial position.
Item 4: Submission of Matters to a Vote of Security Holders
None.
Additional Executive Officers of the Registrant (at March 18, 1998)
Item:
Name Age Position
William J. Weyand 53 Chairman of the Board, President and Chief
Executive Officer
Mark C. Goldstein 41 Vice President, Products Group
John A. Mongelluzzo 39 Vice President, Secretary and General
Counsel
Robert M. Nierman 53 Executive Vice President and Chief
Operating Officer
Bryan M. Valentine 50 Vice President, Human Resources
Jeffrey J. Vorholt 45 Vice President, Chief Financial Officer
and Treasurer
Mr. Weyand has served as President and Chief Executive
Officer since he joined the Company in June 1997. He has served
as Chairman of the Board since March 1998. From April 1995 until
June 1997, he was Executive Vice President of Measurex
Corporation where he had worldwide responsibility for all sales
and customer service operations. While at Measurex Corporation,
Mr. Weyand had been Senior Vice President of Worldwide Sales and
Service from December 1994 to April 1995; President, North and
South America from February to December 1994; Senior Vice
President, U.S. and Canada Sales and Service from 1993 to
February 1994; Senior Vice President, U.S. Sales and Service from
1991 to 1993.
Mr. Goldstein has served as Vice President, Products Group
since January 1998. From July 1997 until January 1998, he served
as Vice President, I-DEAS, Product Development. From December
1995 to July 1997, he served as Vice President, SDRC Ford Program
Office. Prior to assuming that role, Mr. Goldstein was a Vice
President in the Company's Product Development group.
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. Nierman has served as Executive Vice President and Chief
Operating Officer since January 1998 and served as Vice
President, of the Company's Metaphase Technology Group from
February 1997 until January 1998. Prior to the acquisition of
Metaphase Technology, Inc. in January 1997 by SDRC, Mr. Nierman
was President and CEO of Metaphase Technology, Inc. since 1992.
Mr. Nierman's previous experience included a variety of senior
executive positions in the sales and marketing organizations of
Control Data Systems, Inc.
Mr. Valentine has served as Vice President, Human Resources
since October 1995 and became a board-elected officer of the
Company in December 1995. Prior to accepting his position with
the Company, he was employed by AM International, Inc. as Vice
President, Human Resources from October 1986 to June 1995.
Additional Executive Officers of the Registrant (at March 18, 1998)
- - - Continued
Item:
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
In December, 1997, the Company issued one million five
hundred thousand shares of common stock to the shareholders of
Lookout Drafting, Inc. and Computer Aided Systems of
Engineering, Inc. in exchange for all of the stock of these two
companies. The securities are exempt from registration under
regulation D, rule 506 of the Securities Act. The securities
were subsequently registered on February 3, 1998 per prior
agreement with the security holders.
The Company's common stock is listed and traded on the
National Association of Securities Dealers, Inc. Automatic
Quotation (NASDAQ) National Market System. Additional
information, which appears on page 51 of the Company's Annual
Report to Shareholders for the year ended December 31, 1997, is
incorporated by reference in this Form 10-K Annual Report.
Item 6: Selected Financial Data
The selected financial data for the five years ended December
31, 1997, which appears on page 26 of the Company's Annual Report
to Shareholders for the year ended December 31, 1997, 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 27 to
32 of the Company's Annual Report to Shareholders for the year
ended December 31, 1997, 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 33 to 51 of the
Company's Annual Report to Shareholders for the year ended
December 31, 1997, are incorporated by reference in this Form 10-
K Annual Report. (The 1997 Annual Report to Shareholders is not
to be deemed filed as part of this Form 10-K Annual Report except
for portions thereof which are expressly incorporated by
reference.)
Item 9: Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures
None.
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 April 1, 1998 which relates to
its May 7, 1998 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, 1997, are incorporated by reference
in Item 8 of Part II:
Report of Independent Accountants.
Consolidated Statement of Operations - Years ended December 31,
1997, 1996 and 1995.
Consolidated Balance Sheet - December 31, 1997 and 1996.
Consolidated Statement of Shareholders' Equity - Years ended
December 31, 1997, 1996 and 1995.
Consolidated Statement of Cash Flows - Years ended December 31,
1997, 1996 and 1995.
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 Schedule II in this
Form 10-K.
The following financial statement schedule of Structural
Dynamics Research Corporation and subsidiaries is included in
this Item 14:
Schedule
II 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 Estech Corporation in which the
Company owned an equity interest of 30% as of December 31, 1997,
have been omitted because the registrant's proportionate share of
the income or losses from continuing operations before income
taxes, and total assets of 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.
a.3. List of Exhibits:
Exhibit Reference
3.01 Amended Articles of Incorporation of
Registrant, including subsequent updates Note (f)
3.02 Amended Code of Regulations of Note (a)
Registrant
4 Shareholder Rights Plan Note (b)
10.01 Structural Dynamics Research Corporation
Tax Deferred Capital Accumulation Plan dated
January 1, 1989 Note (e)
10.02 Structural Dynamics Research Corporation
1991 Employee Stock Option Plan Note (d)
10.03 Structural Dynamics Research Corporation
1996 Directors' Non-Discretionary Stock Option
Plan Note (h)
10.04 Joint Venture Agreement between
Structural Dynamics Research Corporation and
Nissan Motor Co., Ltd. Note (c)
10.05 Lease agreement (including amendments #1
and #2) between Park 50 Development
Company Limited Partnership and
Structural Dynamics Research Corporation Note (e)
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K (continued)
a.3. List of Exhibits:
Exhibit Reference
10.06 Structural Dynamics Research Corporation
1994 Long-Term Stock Incentive Plan Note (g)
10.07 Agreement of Merger and Plan of Note (j)
Reorganization
10.08 Acquisition Agreement Note (k)
10.09 Incentive Compensation Plan; filed
herewith
10.10 Employment Agreement with William J.
Weyand dated June 30, 1997; filed
herewith
10.11 Form of Severance Compensation Agreement
contracted with each named Executive of
the Company; filed herewith
10.12 Non-Qualified Unfunded Deferred
Compensation Plan for outside directors
of Structural Dynamics Research
Corporation; filed herewith
10.13 1998 Long-Term Stock Incentive Plan Note (l)
10.14 Agreement of Merger and Plan Note (m)
Reorganization
11 Statement regarding computation of per Note (i)
share earnings
13 Portions of the Annual Report to
Shareholders for the year ended December
31, 1997, filed herewith
21 Subsidiaries of the Registrant; filed
herewith
23 Consent of Independent Accountants;
filed herewith
27 Financial Data Schedules
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. Amendments incorporated by reference
to the Company's definitive Proxy Statements dated March
26, 1996 and March 25, 1997.
(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 the Company's
definitive Proxy Statement dated March 11, 1991.
(e) Incorporated by reference to an exhibit filed in the
Company's Annual Report on Form 10-K for the year ended
December 31, 1990.
(f) 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.
(g) Incorporated by reference to the Company's definitive Proxy
Statement dated March 16, 1994. Amendment to the plan is
incorporated by reference to the Company's definitive Proxy
Statement dated March 26, 1996.
NOTE REFERENCE (continued):
(h) Incorporated by reference to the Company's definitive Proxy
Statement dated March 26, 1996.
(i) Information regarding computation of per share earnings is
included on page 41 of the Company's Annual Report to
Shareholders for the year ended December 31, 1997.
(j) Incorporated by reference to the Company's Form 8-K effective
December 31, 1997 pertaining to the acquisition of Lookout
Drafting, Inc. and Computer Aided Systems for Engineering, Inc.
(k) Incorporated by reference to the Company's Form 8-K effective
January 22, 1997 pertaining to the acquisition of Metaphase
Technology, Inc.
(l)Incorporated by reference to the Company's definitive Proxy
Statement dated April 1, 1998.
(m) Incorporated by reference to the Company's Registration
Statement on Form S-4 effective on May 28, 1996 pertaining to
the acquisition of Camax Manufacturing Technologies, Inc.
b. Reports on Form 8-K
None.
c. Exhibits as required by Item 601 of Regulation S-K
The Company hereby files within this Annual Report on
Form 10-K, Exhibits in the List of Exhibits.
d. Financial Schedules
The Company hereby files with this Annual Report
on Form 10-K, the financial statement schedule listed in
item 14.a.2.
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
March 23, 1998 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/William J. Weyand March 27, 1998
William J. Weyand (Date)
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
/s/Jeffrey J. Vorholt March 23, 1998
Jeffrey J. Vorholt (Date)
Vice President,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
/s/William P. Conlin March 24, 1998
William P. Conlin (Date)
Director
/s/Bannus B. Hudson March 24, 1998
Bannus B. Hudson (Date)
Director
/s/John E. McDowell March 27, 1998
John E. McDowell (Date)
Director
/s/James W. Nethercott March 24, 1998
James W. Nethercott (Date)
Director
/s/Arthur B. Sims March 24, 1998
Arthur B. Sims (Date)
Director
/s/Gilbert R. Whitaker, Jr. March 27, 1998
Gilbert R.Whitaker, Jr. (Date)
Director
Exhibit 10.09
SDRC
Incentive Compensation Plan
I. Plan Objectives
A.To provide competitive levels of compensation to enable SDRC to
attract and retain the key contributors, needed to successfully
manage the business.
B.To provide annual incentive opportunities linked to meeting
predetermined corporate and individual/functional goals.
II. Plan
It is SDRC's plan to pay base salaries and annual Incentive
Compensation Plan (ICP) awards which are competitive and which are
substantially in accordance with the following objectives.
Naturally, length of service and performance in the position will
impact individuals differently.
Element Objective
Base Salary Middle of the range of Comparable Companies
ICP Award Up to 90th percentile for outstanding
performance
Total Cash Compensation 75th percentile for outstanding performance
Under this plan, each participant's annual ICP award will be based
first on the degree to which SDRC achieves its goals and then on the
degree to which the participant contributed to achievement of that
goal as measured by his or her individual performance.
III. Eligibility
Participants in the ICP are to be selected from that group of
employees whose activities are determined by the Compensation
Committee to have a significant impact on SDRC's results.
IV. Target Bonus Pool
Each plan year a target bonus pool will be established based upon
specific performance measures approved by the Board of Directors.
This will include a test of reasonableness for incentive pay as
a percentage of pre-tax income.
The target bonus pool is the sum of individual participants' awards
at target performance levels. Individual bonus targets will vary as
a percent of base annual salary at target.
V. Awards
Without prior Compensation Committee and Board approval, no payouts
will be made under this plan unless the minimum financial
performance goals set by the Board of Directors have been met.
Upon reaching the threshold performance goals, a participant will be
eligible for up to 50% of his or her target bonus. Actual bonus
payments will be interpolated between threshold (50%) -- target
(100%) -- outstanding (150%-200%) and will not exceed 200% of the
target bonus.
VI. Individual Performance
Individual participants' bonus awards may be adjusted upward or
downward by up to 20% depending upon individual performance, as long
as the total bonus pool is not increased.
VII. Approval and Timing of Award Payouts
No participant shall have any claim or right to be granted an award
under this plan. Neither the plan nor any action taken pursuant to
the plan shall be construed as giving to any employee the right to
be retained in the employ of the Corporation. Except as otherwise
provided herein, the Compensation Committee of the Corporation's
Board of Directors ("Compensation Committee") shall have full power
and authority to interpret, construe and administer the plan
including the right to adjust the amount payable under any award to
reflect any special circumstances that the Compensation Committee
deems relevant. All approved award payments will be made no later
than sixty (60) days after the end of the award fiscal year, with
exception for administrative difficulties.
VIII. Administrative Decisions & Procedures
A.The plan year will be the same as the Company's fiscal year.
B.Current Awards
All awards will be paid in cash.
C.Salary
The salary of each participant on January 1st of the plan year
will be used as the salary of record for all calculations.
D.Change in Status During the Plan Year
1. New Hire, Transfer, Promotion (into and within the plan)
A newly-hired employee or an employee transferred or promoted
during the plan year to a position qualifying for participation
may receive a pro rata award based on the percentage of the
plan year (actual months/full year times the amount granted for
a full-year award for that position) the employee is in the
participating position.
2. Discharge
An employee discharged during the plan year shall not be
eligible for an award, even if his or her severance arrangement
extends past year-end.
3. Resignation
An employee must be an active employee as of the bonus
payment date to be eligible for an award. An employee who
resigns or is terminated prior to the payment date will not be
entitled to an award.
4. Death, Disability, Retirement, Leave of Absence
An employee whose status as an active employee is changed
during the plan year for any of the reasons cited may, at the
discretion of the Compensation Committee, be eligible to be
paid for a pro rata award.
E. Miscellaneous
1. The Compensation Committee shall have the right to modify
the plan from time to time.
2. The decision of the Compensation Committee with respect to
any issues concerning individuals selected for awards, the
amount, terms, form and time of payment of awards and
interpretation of any plan guidelines or requirement shall be
final and binding.
3. By acceptance of an award, each employee agrees that such
award is special additional compensation and that it will not
affect any employee benefit, e.g., life insurance, savings
plan, etc., in which the employee participates except as
provided in paragraph 4 below.
4. Payments of awards made under the plan will be included in
the employee's compensation for purposes of the 401 (k) plan.
5. The receipt of an award shall not give an employee any
right to continued employment and the right and power to
dismiss any employee is specifically reserved to the Company.
The receipt of an award shall not entitle an employee to an
award with respect to any subsequent plan year.
6. When a performance goal is based on income, it may be
necessary to exclude significant non-budgeted or non-
controllable gains or losses from actual results or to make
adjustments for stock splits or stock dividends in order to
properly measure performance. The Compensation Committee will
decide those items that shall be considered in adjusting
actual results.
Exhibit 10.10
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 19th day of June, 1997,
between STRUCTURAL DYNAMICS RESEARCH CORPORATION, an Ohio
corporation with principal offices at 2000 Eastman Drive,
Milford, Ohio 45150 (hereinafter called the "Company") and
WILLIAM J. WEYAND, whose address is 5290 North Powers Ferry Road,
Atlanta, Georgia 30327 (hereinafter called "Executive"), with
regard to employment of the Executive by the Company.
1. (a) During the period of employment under this Agreement,
the Company agrees to employ Executive and Executive agrees to
serve the Company, including its subsidiaries, in a senior
executive capacity with such title and duties as may be fixed
by the Company from time to time, but consistent with, and
initially as President and Chief Executive Officer of the Company.
Executive acknowledges that he will serve in that capacity
at the discretion of the Board of Directors of the Company and
may be assigned to other senior executive positions during the
term of this Agreement.
(b) During the period of employment under this Agreement, Executive
also agrees to devote to the Company's business and affairs his full
business time and attention, so as to assure full and efficient
performance of his duties hereunder; to give and devote his best and
loyal efforts and skills to the Company; and, in all other respects,
to do his utmost to enhance the Company's welfare. During the term
of this Agreement, Executive shall not, without the Company's prior
written consent, engage or participate, directly or indirectly, in
any other business as a sole proprietor, partner, employee,
officer,shareholder, trustee, advisor or consultant, or accept
appointment or years or fractional years remaining in the initial
term of this agreement, or (ii) 100% of his then current annual
salary and his annual bonus for the fiscal year preceding
the year of termination.
The applicable termination payment under this Section 3 shall be
payable in 12 equal monthly installments on the last day of each
month beginning with the month immediately following termination
of the Agreement, and Executive shall not be required to seek or
accept other employment while receiving such payment. Upon
request by Executive, the Company also will continue to provide
health and dental insurance coverage after such termination of
employment, similar to that provided to its salaried employees,
in accordance with the requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985 (COBRA).
4. The Company and Executive have entered into a
Severance Compensation Agreement dated of even date herewith (the
"Severance Compensation Agreement") which provides that Executive
shall have the right to terminate his employment for Good Reason
following a Change of Control, as provided and defined in such
Severance Compensation Agreement. In the event Executive shall
exercise his right to terminate his employment for Good Reason
under the Severance Compensation Agreement, this Agreement shall
also terminate. If Executive shall terminate his employment for
Good Reason pursuant to the Severance Compensation Agreement and
becomes entitled to payments thereunder, he will not be eligible to
receive termination payments pursuant to Section 3 of this
Agreement.
5. The Company agrees to pay Executive during the term of
his employment an annual salary of not less than $400,000,
prorated in the partial fiscal year 1997, adjusted by annual
increases as provided in the next succeeding sentence and payable
in equal monthly installments; provided, however, that if this
Agreement is terminated due to Executive's death or disability,
by the Company for Cause or by mutual agreement or the
Executive terminates for other than Good Reason under the
Severance Compensation Agreement, Executive's salary shall be
prorated to the date of such termination. Executive's salary
shall be reviewed by the Compensation Committee of the Board of
Directors each year of the term hereof and may be increased
at the discretion of the Board of Directors when warranted by
Company performance. Executive also will receive an initial stock
option award of 200,000 shares of the Company's common stock
pursuant to the Company's 1994 Long-Term Performance Plan (the
"Plan"), effective on the date of commencement of Executive's
employment, vesting in four annual increments of 50,000 shares each,
with the first such increment becoming exercisable on February 28,
1998, and the remaining three increments becoming exercisable on
the three successive anniversaries of February 28, 1998.
Executive also will receive a supplemental stock option award of
150,000 shares of the Company's common stock under the Plan,
vesting in three annual increments of 50,000 shares each, with
the first such increment becoming exercisable on February 28, 2002,
and the two remaining increments becoming exercisable on the
two successive anniversaries of February 28, 2002, provided
however, that in the event Executive has not purchased at least
20,000 shares of the Company's common stock on the open market
either prior to or within six months following the commencement
of employment hereunder, all options under the supplemental stock
option award shall be forfeited and terminate. Both option
awards will be granted for the standard ten year term under the
Plan, and all other terms and conditions of the plan shall be
applicable. Executive will receive four weeks paid vacation each
year. In addition, Executive shall be entitled to participate,
on a basis and to the extent consistent with his senior executive
position, in any deferred compensation program, retirement plan,
stock option plan, group insurance and other so-called fringe
benefit programs from time to time in force for the benefit of
Company employees generally and/or for any group of employees of
which Executive is a member, provided that he meets the
eligibility requirements of any such program or plan. Summary of
the benefits plans and programs currently in force is attached as
Exhibit A. In addition, the Company will provide (i) tax-covered
allowance of $2,000 per month for financial planning, medical
reimbursement, auto and club membership dues, (ii) up to $15,000
of the initiation fees for a country club membership, and (iii)
initiation and dues of a downtown business club.
6. In addition to Executive's annual salary set forth in Section
5 above, Executive may earn incentive compensation in each of the
fiscal years of the Company during the term hereof, equal to an
amount of up to 120% of annual salary for each such fiscal year,
pursuant to the Company's Executive Incentive Compensation plan.
Executive will receive the payments of incentive compensation upon
distribution of executive bonuses for each fiscal year. The basis
for incentive compensation for each such fiscal year shall be
annually determined unless the Company's Executive Incentive
Compensation Plan is modified for all of the group of senior
executive employees of which Executive is a member.
7. If, during initial term or renewal term of this Agreement,
Executive shall become permanently disabled so as to be unable to
substantially perform his duties and responsibilities hereunder
for a period of six consecutive months ("Disability"), this
Agreement shall terminate at the end of such six-month period.
If Executive and the Company are unable to agree as to whether or
not Executive is permanently disabled so as to be unable to
substantially perform his duties and responsibilities hereunder,
the question of Disability shall be submitted to three doctors,
one of whom shall be appointed by Executive or his legal
representative, one by the Company and the third by the first two
appointed, and the decision of any two of them shall be final and
binding. If the question of Disability is raised, Executive
agrees to submit to medical examination of such three doctors and
to permit the Company to have access to their findings, provided
that the Company shall bear all costs of the medical examinations
and preparation of the medical reports by the three doctors
required for the determination of Disability.
8. In the event of the sale of all or substantially all of
the Company's assets to another corporation (hereinafter called
the "Assignee"), the Company shall assign all of its right, title
and interest under this Agreement to the Assignee, and shall require
such Assignee by agreement in form and substance satisfactory to
the Executive, expressly, absolutely and unconditionally to assume
and agree to perform all of the terms and conditions and provisions
of this Agreement in the same manner and to the same extent that
Company would be required to perform them if the assignment had not
taken place.
The Company represents that in the event of the merger or
consolidation of the Company into another corporation
(hereinafter called the "Successor Corporation"), all right,
title and interest of the Company under this Agreement and the
Company's obligations to the Executive hereunder shall transfer
by operation of law to the Successor Corporation.
As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any Assignee of its business and/or
assets as aforesaid which executes and delivers the Agreement
provided for in this Section 8 or any Successor Corporation which
becomes bound by all the terms and provisions of this Agreement
by operation of law.
9. The Company may terminate this Agreement for Cause. Cause
is defined as a material breach of this Agreement, fraud,
misappropriation, theft or embezzlement of the Company's assets
or intentional violations of law or Company policies by
Executive. In the event the Company terminates this Agreement
for Cause, or in the event Executive terminates this Agreement
other than for Good Reason, the Company shall pay to Executive
only the base salary and benefits accrued prior to the date of
his termination and Executive shall have no right to receive any
compensation or any benefits for any period after such
termination.
10. Any termination by the Company for Cause or by the Executive
for Good Reason under the Severance Compensation Agreement shall
be communicated in writing to the other party by a notice of
termination (the "Notice of Termination"). The Notice of
Termination shall indicate those specific provisions in this
Agreement which have been violated thereby giving rise to "Cause"
or "Good Reason," as the case may be, and shall set forth in
reasonable detail the facts and circumstances deemed to provide
the basis for termination of Executive's employment under the
provision so indicated. The Notice of Termination shall specify
that the party to whom the Notice of Termination is addressed
(the "Receiving Party") shall be entitled to a period of 30 days
from the date thereof to cure the facts and circumstances
addressed therein. In the event such cure is effected to the
reasonable satisfaction of the party sending the Notice of
Termination within such 30 day period, the Notice of Termination
shall thereafter be rendered null and void ab initio. Date of
Termination as used herein should mean the last day of the cure
period specified above when no satisfactory cure has been
effected.
11. Executive agrees that, for the period commencing on the date
of termination of his employment and ending twelve months
thereafter, he will not, without the prior written consent of the
Company, directly or indirectly, as sole proprietor, stockholder,
partner, employee, officer, director, trustee, advisor,
consultant or independent contractor, or in any other manner or
capacity whatsoever, engage or participate in manufacture,
development, advertising, promotion, licensing, sale or
distribution of any products or services anywhere in the world
which are competitive with any product or service of the
Company's, its subsidiaries, divisions or affiliates; Executive
understands that the provisions of this Section 11 may limit his
ability to earn a livelihood in a business similar to the
business of the Company but nevertheless agrees and hereby
acknowledges that (I) such provisions do not impose a greater
restraint than is necessary to protect the goodwill, trade
secrets, and other business interests of the Company; (ii) such
provisions contain reasonable limitations as to time,
geographical area and the scope of activity to be restrained; and
(iii) the consideration provided under this Agreement, is
sufficient to compensate Executive for the restrictions contained
in this Section 11. In consideration of the foregoing and in
light of Executive's education, skills and abilities, Executive
agrees that he will not assert that, and it should not be
considered that, any provisions of this Section 11 preventing him
from earning a living or otherwise are void, voidable or
unenforceable or should be voided or held unenforceable. For a
period of 12 months following the date of termination of
Executive's employment by the Company for any reason whatsoever,
Executive will not, without the express written consent of the
Company, recruit, solicit or induce any employees of the Company
to terminate their employment with the Company.
12. Confidentiality:
Executive expressly covenants and agrees that he will not at any
time, either during the term of this Agreement or thereafter,
directly or indirectly use, convey or permit the use of any trade
secrets or other proprietary and/or confidential information of,
or relating to, the Company or any of its subsidiaries, in
connection with any activity or business, except the business of
the Company or any such subsidiary. Executive also agrees that
during the term of this Agreement and thereafter he will not
divulge such information to any person, firm or corporation
whatsoever, except as may be necessary in the performance of his
duties hereunder. The obligations of Executive contained in this
Section 12 shall not apply to any information which was known to
the public at the time of its receipt by Executive or shall
become known generally to the public in any manner other than by
an improper act of Executive.
13. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representative,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive dies while any amounts
are still payable to him hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or
other designee including a trust or trustee or, if there be no
such designee, to the Executive's estate.
14. For purposes of this Agreement notices and all
other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States certified or registered
mail, return receipt requested, postage prepared, as follows:
If to the Company:
Structural Dynamics Research Corporation
2000 Eastman Drive
Milford, Ohio 45150
Attention: John A. Mongelluzzo, Vice President, General Counsel
and Secretary
If to the Executive:
William J. Weyand
5290 North Powers Ferry Road
Atlanta, Georgia 30327
or such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only on receipt.
15. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge
is agreed to in writing signed by the Executive and the Company.
No waiver by either party hereto at any time of any breach by
the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in
this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
16. If any of the provisions of this Agreement shall
otherwise contravene or be invalid under the laws of any state
or other jurisdiction where it is applicable but for such
contravention or invalidity, such contravention or invalidity shall
not invalidate all of the provisions of this Agreement, but rather
the Agreement shall be reformed and construed, insofar as the laws
of the state or jurisdiction are concerned, as not containing the
provision or provisions, but only to the extent that they are
contravening or are invalid under the laws of that state or
jurisdiction, and the rights and obligations created hereby
shall be reformed and construed and enforced accordingly.
17. No Duty to Mitigate:
In the event of a breach of this Agreement by Employer, Executive
shall have no duty to mitigate his damages and any amounts earned
or received after such breach shall not reduce or be offset
against amounts due to Executive from Employer as a result of the
breach.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
STRUCTURAL DYNAMICS RESEARCH
CORPORATION
ATTEST:
/s/Thomas F. Eberle By /s/John A. Mongelluzzo
Thomas F. Eberle John A. Mongelluzzo
Vice President, Secretary and
General Counsel
EXECUTIVE
/s/William J. Weyand
William J. Weyand
Exhibit 10.11
SEVERANCE COMPENSATION AGREEMENT
THIS AGREEMENT, dated as of , is between
Structural Dynamics Research Corporation, an Ohio corporation
(the "Company") and (the "Executive").
The Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention
and dedication of members of the Company's management to their
assigned duties without distraction in potentially disturbing
circumstances arising from the possibility of a change in control
of the Company.
This Agreement sets forth the severance compensation which the
Company agrees it will pay to the Executive if the Executive's
employment with the Company terminates under one of the
circumstances described herein following a Change in Control of
the Company (as defined herein).
1. Term. This Agreement shall terminate, except to the extent
that any obligation of the Company hereunder remains unpaid
as of such time, upon the earliest of (i) June 30 of any
year after 1997, provided that either party has given at
least 60 days prior written notice to the other party of its
or his intention to terminate this Agreement under this
clause (i); (ii) the termination of the Executive's
employment with the Company based on death, Disability (as
defined in Section 3(b)) and Retirement (as defined in
Section 3(c)) or Cause (as defined in Section 3(d)) or by
the Executive other than for Good Reason (as defined in
Section 3(e)); and (iii) two-years from the date of a Change
in Control of the Company if the Executive has not
terminated his employment for Good Reason as of such time.
2. Change in Control. No compensation shall be payable under
this Agreement unless and until (a) there shall have been a
Change in Control of the Company, while the Executive is
still an employee of the Company and (b) the Executive's
employment by the Company thereafter shall have been
terminated in accordance with Section 3. For purposes of
this Agreement, a Change in Control of the Company shall be
deemed to have occurred if:
(i) there shall be consummated any consolidation or merger of
the Company and, as a result of such consolidation or merger
(x) less than 50% of the outstanding common shares and 50%
of the voting shares of the surviving or resulting
corporation are owned, immediately after such consolidation
or merger, by the owners of the Company's common shares
immediately prior to such consolidation or merger, or (y)
any person (as such term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") shall become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of
20% or more of the surviving or resulting corporation's
outstanding common shares, or
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company shall be
consummated, or
(iii) the shareholders of the Company shall approve any plan
or proposal for the liquidation or dissolution of the
Company, or
(iv) any person (as such term is used in Section 13(d) and
14(d)(2) of the Exchange Act) shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange
Act) of 20% or more of the company's outstanding common, or
(v) during any period of two consecutive years, individuals who
at the beginning of such period constitute the entire Board
of Directors shall cease for any reason to constitute a
majority thereof unless the election or the nomination for
election by the Company's shareholders of each new director
was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the
beginning of the period.
3. Termination Following Change in Control.
(a) If a Change in Control of the Company shall have occurred
while the Executive is still an employee of the Company, the
Executive shall be entitled to the compensation provided in
Section 4 upon the subsequent termination of the Executive's
employment with the Company by the Executive or by the
Company unless such termination is as a result of (i) the
Executive's death; (ii) the Executive's Disability (as
defined in Section 3(b) below); (iii) the Executive's
Retirement (as defined in Section 3(c) below); (iv) the
Executive's termination by the Company for Cause (as defined
in Section 3(d) below); or (v) the Executive's decision to
terminate employment other than for Good Reason (as defined
in Section 3(e) below).
(b) Disability. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have
been absent from his duties with the Company on a full-time
basis for six months and within 30 days after written notice
of termination is thereafter given by the Company the
Executive shall not have returned to the full-time
performance of the Executive's duties, the Company may
terminate this Agreement for "Disability."
(c) Retirement. The term "Retirement" as used in this Agreement
shall mean termination by the Company or the Executive of
the Executive's employment based on the Executive's having
reached age 65 or such other age as shall have been fixed in
any arrangement established with the Executive's consent
with respect to the Executive.
(d) Cause. The Company may terminate the Executive's employment
for Cause. For purposes of this Agreement only, the Company
shall have "Cause" to terminate the Executive's employment
hereunder only on the basis of fraud, misappropriation or
embezzlement on the part of the Executive. Notwithstanding
the foregoing, the Executive shall not be deemed to have
been terminated for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Company's Board of
Directors at a meeting of the Board called and held for the
purpose (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board), finding that in the
good faith opinion of the Board the Executive was guilty of
conduct set forth in the second sentence of this Section
3(d) and specifying the particulars thereof in detail.
(e) Good Reason. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of
this Agreement. For purposes of this Agreement "Good
Reason" shall mean any of the following (without the
Executive's express written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties,
responsibilities and status with the Company immediately
prior to a Change in Control of the Company, or a change in
the Executive's titles or offices as in effect immediately
prior to a Change in Control of the Company, or any removal
of the Executive from or any failure to reelect the
Executive to any of such positions, except in connection
with the termination of his employment for Disability,
Retirement or Cause or as a result of the Executive's death
or by the Executive other than for Good Reason;
(ii) a reduction by the Company in the Executive's base salary as
in effect on the date hereof;
(iii) any failure by the Company to continue in effect any
benefit plan or arrangement (including, without limitation,
the Company's retirement plan, group life insurance plan,
and medical, dental, accident and disability plans) in which
the Executive is participating at the time of a Change in
Control of the Company (or any other plans providing the
Executive with substantially similar benefits) (hereinafter
referred to as "Benefit Plans"), or the taking of any action
by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's
benefits under any such Benefit Plan or deprive the
Executive of any material fringe benefit enjoyed by the
Executive at the time of a Change in Control of the Company;
(iv) any failure by the Company to continue the Executive's
eligibility to participate in annual executive bonus
arrangements in which the Executive is participating at the
time of a Change in Control of the Company (or any plans or
arrangements providing him with substantially similar
benefits) (hereinafter referred to as "Incentive Plans") or
the taking of any action by the Company which would
significantly reduce the Executive's opportunity to earn
incentive compensation which is related to performance
results as compared to performance exceptions periodically
determined by the Company;
(v) a relocation of the Company's principal executive offices to
a location outside of Cincinnati, Ohio, or the Executive's
relocation to any place other than the location at which the
Executive performed the Executive's duties prior to a Change
in Control of the Company, except for required travel by the
Executive on the Company's business to an extent
substantially consistent with the Executive's business
travel obligations at the time of a Change in Control of the
Company;
(vi) any failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is
entitled at the time of a Change in Control of the Company;
(vii) any material breach by the Company of any provision of
this Agreement;
(viii) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; or
(ix) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 3(f), and for
purposes of this Agreement, no such purported termination
shall be effective.
(f) Notice of Termination. Any termination by the Company
pursuant to Section 3(b), 3(c) or 3(d) shall be communicated
by a Notice of Termination. For purposes of this Agreement,
a "Notice of Termination" shall mean a written notice which
shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable
detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under
the provision so indicated. For purposes of this Agreement,
such purported termination by the Company shall be effective
without such Notice of Termination.
(g) Date of Termination. "Date of Termination" shall mean (a)
if this Agreement is terminated by the Company for
Disability, 30 days Notice of Termination is given to the
Executive (provided that the Executive shall not have
returned to the performance of the Executive's duties on a
full-time basis during such 30-day period) or (b) if the
Executive's employment is terminated by the Company for any
other reason, the date on which a Notice of Termination is
given; provided that if within 30 days after any Notice of
Termination is given to the Executive by the Company the
Executive notifies the Company that a dispute exists
concerning the termination, the Date of Termination shall be
the date the dispute is finally determined, whether by
mutual agreement by the parties or upon final judgment,
order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal
having been perfected).
4. Compensation Under this Agreement.
(a) If within two years after a Change in Control of the Company
a Notice of Termination is given either by the Company to
the Executive or by the Executive to the Company, and if
such termination is not be reason of the Executive's death,
Disability or Retirement, or by the Company for Cause, or by
the Executive other than for Good Reason, the Company shall
make the following payments to the Executive:
(i) the full base salary to which the Executive is entitled
through the Date of Termination;
(ii) credit for unused vacation;
(iii) an amount equal to the Executive's EICP Bonus Award
under the Company's Executive Incentive Compensation Plan
for the fiscal year in which the Notice of Termination is
given, multiplied by the percentage determined by dividing
the number of days in the Company's fiscal year that have
elapsed prior to the date on which the Notice of Termination
is given by the total number of days in such fiscal year.
As used in this clause (iii) the Executive's Annual EICP
Bonus Award means the dollar amount which would have been
paid to Executive for the fiscal year in which the Notice of
Termination is given under the Company's Executive Incentive
Compensation Plan, based on the assumption that the
Outstanding Level of performance would be reached by the
Company and the Executive.
(iv) an amount equal to two and one-half (2.5) times the sum of
the Executive's annualized base salary and EICP Bonus Award
(as defined in clause (iii) above) for the year in which the
Notice of Termination is given, provided, however, that the
amounts to be paid to the Executive under this clause (iv)
shall be reduced by the amounts payable to the Executive
under clauses (ii) and (iii) of this Section 4(a).
(b) If it is finally determined under the procedures set forth
in Section 4(c) that the amount of "excess parachute
payments," if any, exceeds the Executive's "base amount" (as
such terms are defined in Section 280G of the Internal
Revenue Code of 1986 (the "Code")) by more than 3 times, the
aggregate amount of the payments required to be made by the
Company under clauses (iv), (iii) and (ii) of Section 4(a)
that constitute excess parachute payments shall be reduced,
in that order, to $100 less than the largest amount that
will result in no portion of such payment being subject to
the excise tax imposed by Section 4999 of the Code (the
"Excise Tax").
(c) The Company shall notify the Executive in writing within 10
days after a Notice of Termination is given either by the
Company or the Executive, of the amount of the payments to
be made by the Company under this Agreement, together with
any other payments made or to be made by the Company to the
Executive, that constitute "parachute payments" (as such
terms are defined in Section 280G of the Code) and excess
parachute payments and of the amount of the reduction, if
any, required by Section 4(b). Within 20 days after the
Notice of Termination is given, the Executive shall notify
the Company in writing whether he agrees with the Company's
calculation of the amount of parachute payments and excess
parachute payments, and with the amount of any reduction.
If the Executive does not agree with the Company's
calculations, the Executive shall inform the Company of the
amounts that he believes to be the correct amounts. If the
Company and the Executive cannot agree within 30 days after
the Notice of Termination is given on the amount of the
parachute payments and excess parachute payments, and on the
amount of any reduction, the calculation of such amounts
(and any reduction) shall be made by independent tax
counsel selected by the Company's independent auditors.
Such determination shall be completed within 15 days after
it is submitted to such independent tax counsel and shall be
conclusive and binding on the parties.
(d) The amounts requires to be paid under Section 4(a), less the
amount of any reduction determined by the Company under
Section 4(b) and 4(c), shall be paid by the Company to the
Executive in cash in a lump sum on the 10th day after the
Date of Termination. If it is later determined, under the
procedure set forth in Section 4(c), that the amount of any
reduction is less than that initially determined by the
Company, the Company shall pay the difference to the
Executive in cash within five days after the amount of any
reduction is finally determined. If it is later determined,
under the procedures set forth in Section 4(c), that the
amount of any reduction is more than that initially
determined by the Company, the Executive shall repay the
difference to the Company in cash within five days after the
amount of any reduction is finally determined.
(e) Any payments required under this Section 4 shall be paid net
of applicable federal, state and local tax withholding.
(f) If the Company is required to make payments to the Executive
under Section 4(a), the Company, until the earlier of (i)
one year after the Date of Termination or (ii) commencement
of full-time employment by the Executive with a new
employer, shall maintain in full force and effect, for the
continued benefit of the Executive, medical and dental
programs or arrangements in which the Executive was entitled
to participate immediately prior to the Date of Termination,
provided that continue participation by the Executive is
possible under the general terms and provisions of such
plans and programs.
(g) Except for the payment referred to in clause (i) of Section
4(a) none of the payments to the Executive under this
Section 4 shall be counted for the purpose of computing the
Executive's benefits under any pension, profit sharing,
deferred compensation or other employee benefit plan
maintained by the Company.
5. No Obligation to Mitigate Damages; No Effect on Other
Contractual Rights.
The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise
payable, or in any way diminish the Executive's existing
rights, or rights which would accrue solely as a result of
the passage of time, under any Benefit Plan, Incentive Plan
or Securities Plan, employment agreement or other contract,
plan or arrangement.
6. Successor to the Company.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and
substance satisfactory to the Executive, expressly,
absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if
not such succession or assignment had taken place. Any
failure of the Company to obtain such agreement prior to the
effectiveness of any such succession or assignment shall be
a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good
Reason. As used in this Agreement, "Company" shall mean the
Company as herein before defined and any successor or assign
to its business and/or assets as aforesaid which executes
and delivers the agreement provided for in this Section 6 or
which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law. If at any
time during the term of this Agreement the Executive is
employed by any corporation a majority of the voting
securities of which is then owned by the Company, "Company"
as used in Section 3, 4, 11 and 12 hereof shall in addition
include such employer. In such event, the Company agrees
that it shall pay or shall cause such employer to pay any
amounts owed to the Executive pursuant to Section 4 hereof.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to
him hereunder, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the
Executive's estate.
7. Notice. For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when
delivered or mailed by United States certified or registered
mail, return receipt requested, postage prepaid, as follows:
If to the Company: Structural Dynamics Research Corporation
Vice President, Secretary and General
Counsel
2000 Eastman Drive
Milford, OH 45150
If to the Executive: Address of The Executive
or such other address as either party may have furnished to
the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
8. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by
the Executive and the Company. No waiver by either party
hereto at anytime of any breach by the other party hereto
of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
No agreements or representatives, oral or otherwise, express
or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly
in this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
9. Validity. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity
or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and
the same instrument.
11. Legal Fees and Expenses. The Company shall pay all legal
fees and expenses which the Executive may incur as a result
of the Company's contesting the validity, enforceability or
the Executive's interpretation of, or determinations under,
this Agreement.
12. Confidentiality. The Executive shall retain in confidence
any and all confidential information known to the Executive
concerning the Company and its business so long as such
information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
ATTEST:
By:
By:
Vice President, Secretary and
General Counsel
Exhibit 10.12
NON-QUALIFIED UNFUNDED DEFERRED COMPENSATION PLAN
FOR OUTSIDE DIRECTORS OF
STRUCTURAL DYNAMICS RESEARCH CORPORATION
SECTION 1. PARTICIPATION.
(a) A director of Structural Dynamics Research Corporation
("SDRC") who is not an employee may elect to defer
compensation earned for services as a director that such
director has not elected to receive in a form other than
cash ("Annual Cash Retainer"). All or a portion in
increments of not less than 25% of the quarterly fees which
would otherwise be payable at the end of each three month
period ending on March 31, June 30, September 30 and
December 31 ("Retainer Payment Dates") but for this election
to participate in this Plan, may be deferred in accordance
with the terms and conditions of this Non-Qualified Deferred
Compensation Plan for Outside Directors of Structural
Dynamics Research Corporation ("Plan").
(b) A director who shall elect to participate in this Plan
("Participating Director") shall make his or her annual
election to defer his or her Annual Cash Retainer by giving
written notice to the Secretary of SDRC at least seven (7)
business days prior to January 1 of the Plan Year for which
the election is made ("Annual Election Notice") attached
hereto as Exhibit A. The Participating Director shall not
be entitled to defer any future Annual Cash Retainer fees in
addition to those elected to be deferred for the remaining
portion of the current Plan Year for which the Annual
Election Notice is delivered. "Plan Year" is defined as a
twelve-month period beginning on January 1 and ending on
December 31.
(c) The deferred Annual Cash Retainer fees (Deferred
Compensation") shall be paid on such future date or dates
and in such manner as a Participating Director shall elect
in the initial Annual Election Form; PROVIDED, (i) such form
of payment election shall be irrevocable and (ii) that no
Deferred Compensation shall be paid in the same calendar
year in which any portion of the Annual Cash Retainer
representing the Deferred Compensation is earned.
SECTION 2. ADMINISTRATION. This Plan, which was approved by
the board of directors of the Company on December 9, 1997, shall
be administered by a committee comprised of the Chief Financial
Officer and the Secretary respectively, of SDRC ("Committee").
The Committee may delegate certain administrative authority to
other employees of SDRC, but shall retain the ultimate
responsibility for the interpretation of, and amendments to, the
Plan. The members of the Committee shall not be liable for any
of their actions or determinations made in good faith with
respect to the administration of the Plan.
SECTION 3. ESTABLISHMENT AND MAINTENANCE OF DEFERRED
COMPENSATION ACCOUNTS.
(a) The Company shall establish and maintain a separate
Deferred Compensation account ("Account") for each
Participating Director. The Deferred Compensation
shall be credited to the Account as of the following
dates: march 31, June 30, September 30, and December
31, the Retainer Payment Dates, following the Annual
Election.
(b) The Participating Director shall elect one of the
following Account appreciation alternatives:
(i) STOCK EQUIVALENT ACCOUNT. Under this alternative, the
values of the Stock Equivalent Account shall be
determined as if the Deferred Compensation is invested
in SDRC common stock equivalents on the Credit Dates.
The number of SDRC common stock equivalents shall be
determined by dividing the Deferred Compensation
credited to the Account on the Credit Dates by the
lowest quoted selling price of SDRC Common Stock on the
applicable day on the Nasdaq National Market System
Composite transaction tape ("Market Value").
Fractional stock equivalents will be computed to four
decimal places. An amount equal to all dividends paid
on the shares of SDRC common stock will be converted
into whole or fractional shares of common stock
equivalents at the Market Value as of the dividend
payment dates and credited to the Account. The amount
of Deferred Compensation to be paid to a Participating
Director form the Stock Equivalent Account on the
payment date(s) specified in the Initial Annual
Election Form shall be equal to (a) the number of
shares equivalents accumulated in the Account; (b)
multiplied by the Market Value on the date upon which
the Deferred Compensation is scheduled to be paid; and
then (c) divided by the total number of payments to be
made (or remaining to be paid), as specified in the
Initial Annual Election Form.
(ii) INTEREST ACCOUNT - Under this alternative, the rate of
interest payable on the balance of the Interest Account
will be a fluctuating rate equal to the prime rate made
available by The Fifth Third Bank of Cincinnati, Ohio
to its preferred customers on each of the Retainer
Payment Dates. Interest will be credited to the
Account quarterly on the Retainer Payment Dates and on
the date of the final payment on the outstanding
balance of the Account (which would include all
principal and interest accrued to that date), as
specified in the Initial Annual Election Form. If
installments payments are specified in the Initial
Annual Election Form, the amount of Deferred
Compensation to be paid to the Participating Director
form the Interest Account shall be determined by
dividing the current balance of the Interest Account
(including all interest allocated as of the Retainer
Payment Date) by the number of remaining installments
payments.
(c) The Participating Director may elect to apportion in
increments of not less than 25% of the Deferred
Compensation between a Stock Equivalent Account and an
Interest Account, but the balances cannot be
transferred between accounts after the apportionment
has been made.
SECTION 4. PAYMENTS OF DEFERRED COMPENSATION.
(a) A Participating Director may elect to receive payments
of Deferred Compensation either in a lump sum payment
or in annual installments as specified in the Initial
Annual Election Form.
(b) The Account shall continue to be maintained for the
benefit of the Participating Director and paid in
accordance with the Initial Annual Election Form in the
event that the Participating Director's service as a
director shall terminate prior to all of the
outstanding balance in the Account being paid out.
(c) If a Participating Director shall die prior to all the
payments being made form the Account, the unpaid
balance of the Account shall be paid on the 30th day
after the Secretary of SDRC has been duly notified of
his or her death to his or her designated beneficiary
or beneficiaries, as specified in the Beneficiary
Designation Form (attached hereto as Exhibit B), or in
the absence of such designation, to his or her personal
representative. Such death payment shall be made in a
single lump sum, irrespective of the time and manner of
payment specified in the initial Annual Election Form.
SECTION 5. UNFUNDED OBLIGATION OF SDRC. The balances
accumulated in the Accounts shall constitute general contractual
obligations of SDRC to the Participating Directors. SDRC shall
not segregate assets, create any security interest or encumber
its assets in order to provide for or fund the payment (s) of the
balance(s) accumulated in the Accounts.
SECTION 6. NON-ASSIGNABILITY. The rights and benefits of a
Participating Director under the Plan are personal and cannot be
pledged, transferred or assigned except by designation of a
beneficiary (or beneficiaries), will or the laws of descent and
distribution.
SECTION 7. AMENDMENTS. Any substantive amendment to the Plan
shall be approved by the Committee. No amendment shall be made
which would adversely affect the tax status of the Deferred
Compensation accumulated in the Accounts or reduce amounts
credited to the Accounts.
SECTION 8. EFFECTIVE DATE; TERMINATION. This Plan was
approved by the Board of Directors on December 9, 1997, and
became effective on the same date. The Board of Directors of
SDRC may terminate this Plan at any time; PROVIDED THAT, such
termination shall not affect the rights of Participating
Directors which have accrued under this Plan prior to such
termination. In the event of termination, the payment schedule
specified in the initial Annual Election Form shall continue to
be followed.
EXHIBIT A
STRUCTURAL DYNAMICS RESEARCH CORPORATION
NON-QUALIFIED UNFUNDED DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
Annual Election Form
I hereby irrevocably elect to have % [fill in 0%; 25%; 50%;
75% or 100%] of my total compensation as a non-employee director
of Structural Dynamics Research Corporation payable to me in the
calendar year immediately following the calendar year of this
election deferred in accordance with the provisions of the Plan.
Of the amount so deferred, I elect to allocate % [fill in
0%; 25%; 50%, 75% or 100%] to my Stock Equivalent Account and
% [fill in 0%, 25%; 50%; 75% or 100%] to my Interest Account.
In accordance with Section 4 of the Plan, I hereby elect the
following payment method for Deferred Compensation to myself
(initial one box):
___ As a lump sum including interest accrued as of the day
preceding payment, payable on the first day of the
second month following the later of my 65th birthday or the
date I cease to be a director of SDRC.
____ In ____ (insert number of installments between
12 and 60) commencing on the first day of the month
following the later of the month of my 65th birthday or
the month I cease to be a direct of SDRC.
I understand that I may change or revoke the deferral election
and the allocation between accounts each year, but the above
payment election shall be irrevocable.
Date:
Signature:
Print/Type Name:
EXHIBIT B
STRUCTURAL DYNAMICS RESEARCH CORPORATION
NON-QUALIFIED UNFUNDED DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
Beneficiary Designation Form
In accordance with Section 4 of the Plan, I hereby designate
as my beneficiary. This designation supersedes all previous
designations made by me.
Date:
Signature:
Print/Type Name:
<PAGE>
<PAGE>
<TABLE>
Exhibit 13
SELECTED FINANCIAL DATA
Structural Dynamics Research Corporation
<CAPTION>
Year ended December 31
(in thousands, except per share 1997(3) 1996 1995(4) 1994 1993
data)
<S> <C> <C> <C> <C> <C>
Operating data: (1)
Total revenue $351,322 $285,256 $224,138 $185,358 $165,893
Operating income (loss) $ 37,059 $ 44,900 $ 28,355 $ (1,239) (4,104)
Net income (loss) before
cumulative effect
of accounting change $ 30,030 $ 38,148 $ (2,809) $ (8,295) $ (8,573)
Net income (loss) $ 30,030 $ 38,148 $ (2,809) $(12,191) $ (8,573)
Common Share data: (1)
Basic net income (loss) per
share $ .85 $ 1.11 $ (.09) $ (.39) $ (.28)
Dilutive net income (loss)
per share $ .81 $ 1.05 $ (.09) $ (.39) $ (.28)
Common and common equivalent
shares 36,947 36,290 32,430 31,352 30,999
Balance sheet data: (1)
Working capital $102,329 $ 68,574 $ 42,412 $ 31,322 $ 30,623
Total assets $293,196 $239,372 $207,673 $152,192 $145,278
Long-term liabilities $ 7,751 $ 9,281 $ 9,730 $ 5,640 $ 1,029
Total shareholders' equity $177,837 $130,547 $ 85,144 $ 76,414 $ 89,922
Pro forma data: (2)
Net income (loss) $ 28,096 $ 36,632 $ (4,394) $(13,307) $ (9,522)
Basic net income (loss) per
share $ .80 $ 1.07 $ (.14) $ (.42) $ (.31)
Dilutive net income (loss)
per share $ .76 $ 1.01 $ (.14) $ (.42) $ (.31)
<FN>
(1) All information has been restated to reflect the 1997
acquisition of Computer Aided Systems for Engineering (CASE),
accounted for as a pooling-of-interests. (See Note 2 to the
consolidated financial statements).
(2) Pro forma net income and pro forma net income per share was
computed using pro forma net income which reflects the tax expense
that would have been reported if CASE (an S corporation for income
tax reporting purposes prior to acquisition) had been a C
corporation.
(3) In 1997, a charge of $20,850 for purchased in-process
research and development associated with the acquisition of
Metaphase Technologies, Inc. was included in the results of
operations. (See Note 2 to the consolidated financial
statements).
(4) In 1995, cost of $24,300 for the class action lawsuit
settlement, net of estimated insurance proceeds, was included in
the net loss. (See Note 8 to the consolidated financial
statements).
</FN>
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Structural Dynamics Research Corporation
(in thousands)
Structural Dynamics Research Corporation is a leading supplier
of software tools and software related services to
manufacturers worldwide. The software tools are used for the
development and manufacture of mechanical products and the
management of product information. The Company's primary
software offerings are I-DEAS Master Series(TM) and Metaphase(R)
Enterprise(TM). I-DEAS Master Series is an integrated CAD/CAM/CAE
(computer-aided design, manufacturing and engineering) system which
improves the speed and reliability of the design and production
of mechanical products. Metaphase Enterprise is product data
management (PDM) software which tracks and manages enterprise-wide
data and processes associated with the life cycle of products.
Certain statements in this report are forward-looking statements
that involve risks and uncertainties which could cause the
Company's future results to differ from the expectations
described herein. Forward looking statements should be evaluated in
the context of risk factors and uncertainties, some of which are
described in more detail in "Factors That May Affect Future
Results".
Results of Operations
Net income for 1997 was $30,030 including a non-recurring charge
of $20,850 for purchased in-process research and development
associated with the acquisition of Metaphase Technologies, Inc.
(Metaphase). Net income excluding this charge increased to $50,880
compared to $38,148 for 1996. Net income for 1995, adjusted to
exclude a non-recurring charge of $24,300 from a litigation
settlement, was $21,491. (See "Litigation Settlement").
Revenue
Consolidated revenue, including licenses, maintenance and
services, increased to $351,322 for 1997 compared to 1996 revenue
of $285,256 and 1995 revenue of $224,138. This represents
increases of 23% in 1997, 27% in 1996, and 21% in 1995. Price
increases have not been a material factor in the Company's revenue
growth.
Software license revenue increased 12% in 1997, 17% in 1996 and
14% in 1995. The revenue growth reflects ongoing worldwide
acceptance of the Company's software products, including
continual product enhancements. Software license revenue
growth for CAD/CAM/CAE products was 3% and 18% for 1997 and
1996, respectively. PDM software license revenue, while on
a much smaller base than CAD/CAM/CAE software, grew 82%
and 10% in 1997 and 1996, respectively. License revenue
growth rates for 1997 were negatively affected by the
strengthening of the U.S. dollar against major European and
Asian currencies. The stronger dollar reduced demand by making
software products relatively more expensive to foreign
customers who order in U.S. dollars. The stronger dollar
also resulted in a lower translation of foreign currency
denominated orders into U.S. dollars. PDM license sales have been
facilitated by a streamlined distribution channel since the
Company purchased Metaphase in January 1997.
Revenue from software maintenance contracts and services grew
37%, 42% and 32% in 1997, 1996 and 1995, respectively. The growth
was a result of progressive demand for upgrade rights on
software, implementation projects, customer support services
and training associated with a larger base of customer
installations with I-DEAS Master Series and Metaphase Enterprise
softwares. The percentage of the Company's total revenue
derived from software maintenance and services increased to 51% in
1997 from 46% in 1996 and 41% in 1995. This trend reflects the
larger size of customer support and service projects which the
Company has undertaken since 1995.
Total revenue from international operations accounted for 51%,
52% and 54% of consolidated total revenue in 1997, 1996 and
1995, respectively. In 1997 and 1996, significant increases in
domestic revenue from a major automotive customer, the stronger U.S.
dollar in 1997 and slower revenue increases in Asia-Pacific
resulted in declining international revenue as a percentage of
total revenue.
The Company expects that revenues will increase in 1998 for
its CAD/CAM/CAE and PDM product lines, and that the international
market will continue to account for a significant portion of total
revenue. The rate of growth will depend, in part, on the Company's
abililty to expand its sales and support infrastructures and on
foreign exchange rates.
Cost of Revenue
Cost of revenue consists principally of the staff and related
costs associated with the generation and support of software
services 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 was $120,444, $80,499 and $58,420
for 1997, 1996 and 1995, respectively. The cost of licenses
represented 15% of license revenue for 1997, 1996 and 1995. The
cost of license revenue was not impacted by the strengthening of
the U.S. dollar in 1997 against foreign currencies because the cost
was primarily incurred in U.S. dollars. The cost of services and
maintenance represented 53%, 44% and 41% of the associated
revenue for 1997, 1996 and 1995, respectively. Relative to the
associated sales, cost of services and maintenance increased due to
the hiring, training and integration cost associated with
expanding the workforce to meet the growing demand for
software implementation, training and post license sales support.
Also in 1997, the Company allocated more fixed facility and common
overhead expenses to the cost of services and maintenance
due to the significant growth of the implementation and
customer support workforces.
Selling and Marketing Expenses
Selling and marketing expenses consist of the costs associated
with the worldwide sales and marketing staff, advertising and
product localization. These expenses were $105,756, $109,700 and
$97,272 in 1997, 1996 and 1995, respectively. These amounts
represented 30%, 38% and 43% of total revenue for 1997, 1996 and
1995, respectively. While the Company expanded its sales force 31%
since December 31, 1996, the net decrease in selling and
marketing expense in 1997 resulted from certain non-recurring
charges incurred during 1996. Those charges included
significant expense for a corporate advertising campaign,
bad debt expense and special commission programs. In 1997,
the Company allocated less facility and overhead costs to selling
and marketing expenses, and more to the cost of services and
maintenance as discussed under cost of revenue. The 1996 selling
costs as a percentage of revenue decreased due to relatively
fixed selling and marketing costs associated with the increased
maintenance and services revenue. In 1998, the Company plans to
expand its sales infrastructures and spend more on marketing and
advertising programs.
Research and Development Expenses
Research and development expenses consist primarily of
salaries, benefits, computer equipment costs and facilities
associated with the product development staff. It excludes costs
which are capitalized in accordance with Statement of Financial
Accounting Standards No. 86. The Company continued to invest
significant resources in the research and development of
product advancements. Research and development expense increased
to $49,415 in 1997 from $34,018 in 1996 and $26,507 in 1995,
representing 14%, 12% and 12% of total revenue for 1997, 1996 and
1995, respectively. The increases were due to additions in the
development staff from the Metaphase acquisition as well as staff
additions for I-DEAS product development. During 1997, the Company
incurred $7,153 of product development costs which were reimbursed
by other companies. Research and development expenses also
excluded capitalized internal software costs of $12,957, $9,679 and
$6,928 for 1997, 1996 and 1995, respectively. The increase in
capitalized costs reflected the higher level of development staff
and timing differences for the release of new products among the
three years. Capitalized amounts represented 21%, 24% and 22% of
gross research and development cost in 1997, 1996 and 1995,
respectively. The Company expects research and development costs
to increase in 1998.
General and Administrative Expenses
General and administrative expenses consist of costs associated
with the corporate, finance, human resource and administrative
staffs. General and administrative expenses amounted to $17,798,
$16,139 and $13,584 in 1997, 1996 and 1995, respectively. The
increases were primarily a result of a larger workforce needed
to support the Company's growth. These amounts represent 5%, 6%
and 6% of total consolidated revenue for 1997, 1996 and 1995,
respectively. The Company expects general and administrative
expenses to remain stable as a percent of revenue in 1998.
Acquisition of Metaphase Technology, Inc.
The Company and Control Data Systems, Inc. (CDSI) formed Metaphase
as a joint venture in 1992. In January 1997, the Company acquired
the remaining stock of Metaphase and certain assets of CDSI's global
PDM software sales and support business. The purchase price
of approximately $33,000 included cash and a stock warrant.
The acquisition was accounted for as a purchase. The Company
recorded a one-time charge of $20,850 to write off in-process
research and development acquired in the acquisition that did
not have an alternative future use and had not reached
technological feasibility.
Acquisition of Computer Aided Systems for Engineering
In December 1997, the Company acquired all of the outstanding
stock of two privately held companies doing business together as
Computer Aided Systems for Engineering (CASE) by issuing one
million, five hundred thousand shares of common stock having an
aggregate market value of approximately $25,000. The acquisition
was accounted for as a pooling-of-interests, and accordingly, all
prior periods have been restated to include the results of CASE.
CASE had been a third party developer of drafting software for the
Company since 1984.
Acquisition of Camax Manufacturing Technologies, Inc.
In June 1996, the Company finalized the acquisition of
Camax Manufacturing Technologies, Inc. (Camax) and issued nine
hundred sixty-seven thousand shares of common stock having a market
value of $30,000 in exchange for 100 percent ownership of Camax
common stock. The acquisition was accounted for as a
pooling-of-interests and, accordingly, all prior periods were
restated to reflect Camax results. Camax provides
computer-aided manufacturing software for
computerized-numerical-control machining operations with products
and services designed to simplify, automate and optimize the
machining process to streamline production and accelerate
time-to-market.
Equity in Losses of Affiliates
Equity in losses of affiliates for 1996 primarily represented
SDRC's share of the Metaphase joint venture losses. Until the
Company acquired Metaphase in January 1997, the Company paid royalty
fees to Metaphase based upon the amount of PDM sales.
During 1994, the Company formed a joint venture with Siemens
Nixdorf Informationssysteme AG (SNI), SDRC Software and Services,
GmbH (SDRC GmbH) to market the Company's software products in
Central Europe. For 1995, the majority of the Company's
equity in losses of affiliates represented its share of SDRC
GmbH joint venture losses. In 1995, the Company purchased the
remaining shares in SDRC GmbH at its net book value. As of
the acquisition date, 100% of the operating results of SDRC
GmbH were included in the consolidated financial statements.
Litigation Settlement
In December 1995, the Company and plaintiffs' counsel, in a
class action lawsuit, entered into a Memorandum of Understanding
setting forth the terms of a proposed settlement. Pursuant to the
proposed settlement, the Company agreed to contribute $17,600 of
cash and $10,000 in the form of shares of the Company's common
stock to a settlement fund. The amount of the settlement and
other litigation cost, net of estimated insurance proceeds,
were recorded as an expense in 1995. The insurance proceeds of
$5,000 were received in 1996. In 1996, $17,600 was transferred
to a settlement fund in accordance with the Memorandum of
Understanding, and a final settlement between the Company and
the plaintiffs was accepted by the Court. During 1997, the
Company issued common stock valued at $10,000 to finalize its
distributions to the settlement fund.
Other Income, Net
Other income, net, consists principally of interest income
and foreign currency losses. Interest income increased sequentially
over the past three years primarily due to higher levels of
investment balances. Other income for 1996 was offset by a $950
settlement of the shareholders' derivative litigation. In 1995,
other income, net, was offset by a net loss of $1,878 resulting
from the sale of the United Kingdom test and analysis division.
Income Taxes
The Company recorded tax expense of $11,509, $8,636 and $7,179
in 1997, 1996 and 1995, respectively. In each of these years,
the Company's provision for income taxes consisted 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. The Company is
not currently in a position to utilize all of these foreign tax
credits (FTCs) on its U.S. return. The FTCs and other tax
carryforwards are available to offset future U.S. income tax
liabilities, subject to various restrictions. No benefit was
currently recognized for a substantial portion of the Company's
U.S. deferred tax assets since it is more likely than not that
they will not be realized based upon the Company's current and
anticipated mix of domestic and foreign pre-tax accounting income,
tax credits and deductions from non-qualified stock option
exercises. As of December 31, 1997, $18,732 of the valuation
allowance of $31,538 is attributable to the tax benefits of stock
option exercises and such benefits will be credited to capital in
excess of stated value if realized.
Pro forma income tax expense reflects the income tax expense
that would have been reported if CASE (an S corporation for
income tax reporting purposes prior to the acquisition) had been a
C corporation for the years ended December 31, 1997, 1996 and 1995.
Liquidity and Capital Resources
As of December 31, 1997, the Company had $109,011 in cash,
cash equivalents and liquid investments. The Company's working
capital was $102,329 and the Company had no material borrowings.
The Company also has an unsecured bank line of credit of $15,000.
Cash flows generated from operations increased to $62,981 for
1997, compared to $36,593 and $39,913 for 1996 and 1995,
respectively. For 1996, operating cash flows, excluding the
$17,600 payout for the class action litigation settlement, were
$54,193. Cash flows for 1997 increased over 1996 primarily
due to higher net income, excluding the write off of
purchased in-process research and development, partially offset
by increases in accounts receivable.
Liquidity and Capital Resources - (continued)
The Company used $55,261 of cash for investing activities in
1997, including $29,689 for the Metaphase acquisition.
Investing activities totalled $34,278 and $8,822 during 1996
and 1995, respectively. The Company added capital equipment of
$13,640, $14,290 and $5,827, respectively in 1997, 1996 and
1995 primarily for furniture and computer equipment to
accommodate the increase in employee headcount. The increase
in cash used for investing activities between 1995 to 1996 was
also due to the conversion of more marketable securities into
cash during 1995.
Net cash provided by financing activities was $5,275, $4,519
and $9,434 during 1997, 1996 and 1995, respectively,
primarily representing proceeds from the Company's stock option
programs. Financing activities included cash distributions to CASE
shareholders prior to the Company's acquisition of CASE in December,
1997.
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 has never paid a cash dividend and intends to continue its
policy of retaining earnings to finance future growth. The
Company has no other current commitments for material capital
expenditures. See Note 8 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.
Recent Accounting Pronouncements
In August 1997, the American Institute of Certified
Public Accountants issued Statement of Position 97-2 "Software
Revenue Recognition," (SOP), which is effective for fiscal years
beginning after December 15, 1997. The Company's adoption of the
new SOP in 1998 is not expected to have a material impact on
its financial position or results of operations.
In June 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and display of comprehensive income and
its components (revenue, expenses, gains and losses) in a full
set of general-purpose financial statements. SFAS No. 130 is
effective for the Company's fiscal year beginning January 1,
1998. The Company is currently evaluating the effects of this
change on its consolidated financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information," which
changes the way public companies report information about
operating segments. SFAS No. 131, which is based on the
management approach to segment reporting, establishes
requirements to report selected segment information quarterly
and to report entity-wide disclosures about products and services,
major customers and the material countries in which the Company
operates. SFAS No. 131 is effective for the Company's fiscal
year beginning January 1, 1998. The Company is currently
evaluating the effects of this change on its reporting of financial
information.
Factors That May Affect Future Results
Forward-looking statements and the Company's results are subject
to certain risks and uncertainties, including but not limited to
those discussed below, that could cause future results to differ
from those projected. Risks and uncertainties posed by
competitive, technological or financial factors could have an
immediate and significant adverse effect on the trading price of
the Company's stock in any given period.
Product Distribution
Future results could be impacted by a slower growth rate in
the market than anticipated. Besides its own sales force, the
Company relies on distributors, representatives and value-added
resellers to market a significant portion of its products. The
loss of a major customer or a reduction in orders from a major
customer, distributor, representative or value-added reseller,
could have a significant impact to the results of operations
in any particular quarter. Historically, a significant portion
of the Company's revenue is generated from shipments in the
last month of a quarter. In addition, higher volumes of
orders have been experienced in the fourth quarter. The
concentration of orders makes projections of
Factors That May Affect Future Results - (continued)
Product Distribution - Continued
quarterly financial results difficult. If customers delay
their orders or a disruption in the Company's distribution
occurs, quarterly results of operations in any particular quarter
may be negatively impacted. The Company usually ships software
licenses within one to two weeks after receipt of a
customer order. Typically, orders exist at the end of a quarter
which have not been shipped; however, the value of such orders
is not indicative of revenue results for any future period.
Competition
The software industry is highly competitive. The entire industry
may experience pricing and margin pressure which could adversely
affect the Company's operating results and financial
position. The Company's success is dependent on its ability to
continue to develop, enhance and market new products to meet its
customers' sophisticated needs within competitive pricing
structures and in a timely manner. As product development cycles
become shorter, product quality, performance, reliability, ease
of use, functionality, breadth and integration may be impacted.
Therefore, customer preference for the Company's new products
cannot be assured. The Company's success also depends in part on
its ability to attract and retain technical and other key
employees who are in great demand, to protect the
intellectual property rights of its products and to continue
key relationships with product development partners.
International Business
A significant portion of the Company's revenues are
from international markets. As a result, the Company's financial
results could be impacted by weakened general economic conditions,
differing technological advances or preferences, volatile
foreign exchange rates and government trade restrictions in any
country in which the Company does business. The Company has
invested sizable resources in the Asia Pacific region,
particularly in Japan and South Korea. Economic instability in
this region could lead to an adverse impact on the Company's
operation results and financial position.
Expense Management
The Company continues to increase its expense levels to support
its revenue growth and to invest in product development. The
Company's expense levels are based, in part, on its
future revenue expectations. If future revenues are less than
expected, net income may be disproportionately affected because
the Company's expense levels are generally committed in advance
and a relatively small portion of the Company's expenses vary
with revenue. During the third quarter of 1997, the Company
initiated steps to expand its sales infrastructure and to invest
more in marketing efforts with the objective of increasing the
distribution of license products. Future results could be impacted
by lags in sales productivity as additional salespeople are hired or
by the cost of new marketing programs.
Technology
The Company is in the process of upgrading its world-wide
information management system. Such a major undertaking could
cause significant disruption as a result of unexpected delays in the
implementation of this project. There are no assurances that
the project will be completed within the projected time frame
and budget. The Company does not anticipate any significant
problems associated with the year 2000 consequences for its internal
software or the software which it markets. The software which
will be the basis of the Company's new information management
system is year 2000 compliant. The Company's primary software
offerings are also year 2000 compliant.
Stock Market Volatility
The trading price of the Company's stock, like other software
and technology stocks, is subject to significant volatility.
The historical results of operations and financial position
of the Company are not necessarily indicative of future
financial performance. If revenues or earnings fail to meet
securities analysts' expectations, there could be an immediate and
significant adverse impact on the trading price of the Company's
stock. In addition, the Company's stock price may be affected by
broader market factors that may be unrelated to the Company's
performance.
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.
/s/William J. Weyand
William J. Weyand
Chairman of the Board,
President and Chief Executive Officer
/s/Jeffrey J. Vorholt
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, 1997 and 1996,
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, 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.
/s/Price Waterhouse LLP
Price Waterhouse LLP
Cincinnati, Ohio
January 23, 1998
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
Structural Dynamics Research Corporation
<CAPTION>
Year ended December 31
(in thousands, except per share data) 1997 1996 1995
<S> <C> <C> <C>
Revenue:
Software licenses $170,727 $153,058 $131,211
Software maintenance and services 180,595 132,198 92,927
--------- ------- -------
Total revenue 351,322 285,256 224,138
--------- -------- -------
Cost of revenue:
Software licenses 25,518 22,578 20,250
Software maintenance and services 94,926 57,921 38,170
-------- ------- -------
Total cost of revenue 120,444 80,499 58,420
-------- ------- -------
Gross profit 230,878 204,757 165,718
Operating expenses:
Selling and marketing 105,756 109,700 97,272
Research and development 49,415 34,018 26,507
General and administrative 17,798 16,139 13,584
Purchased in-process research and
development 20,850 -- --
------- ------- --------
Total operating expenses 193,819 159,857 137,363
------- ------- --------
Operating income 37,059 44,900 28,355
Equity in losses of affiliates (39) (230) (951)
Acquisition costs -- (1,102) --
Litigation settlement -- -- (24,300)
Other income, net 4,519 3,216 1,266
------- ------ -------
Income before income taxes 41,539 46,784 4,370
Income tax expense 11,509 8,636 7,179
-------- ------ -------
Net income (loss) $ 30,030 $ 38,148 $ (2,809)
Basic net income (loss) per share $ .85 $ 1.11 $ (.09)
Dilutive net income (loss) per share $ .81 $ 1.05 $ (.09)
------- ------ -------
Pro forma net income (loss) and per
share data:
Income before income taxes as
reported 41,539 46,784 4,370
Pro forma income tax expense 13,443 10,152 8,764
------- ------- ------
Pro forma net income (loss) $ 28,096 $ 36,632 $ (4,394)
Pro forma basic net income (loss)
per share $ .80 $ 1.07 $ (.14)
Pro forma dilutive net income
(loss) per share $ .76 $ 1.01 $ (.14)
======= ======= =======
Weighted average common shares
outstanding 36,947 36,290 32,430
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
CONSOLIDATED BALANCE SHEET
Structural Dynamics Research Corporation
<CAPTION>
December 31
(in thousands, except per share data) 1997 1996
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 81,056 $ 72,026
Marketable securities 13,030 18,502
Trade accounts receivable, net of
allowances of $3,529 and $3,281 88,954 61,743
Other accounts receivable 17,815 7,929
Prepaid expenses and other current
assets 9,082 7,918
------- -------
Total current assets 209,937 168,118
======= =======
Marketable securities 14,925 10,509
Net property and equipment 24,627 21,025
Computer software construction
costs, net 31,610 28,614
Other assets 12,097 11,106
------- -------
Total assets $293,196 $239,372
======= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 12,230 $ 9,695
Accrued expenses 17,327 14,084
Accrued compensation 22,263 21,119
Accrued litigation settlement and
related costs -- 10,104
Accrued income taxes 9,182 8,082
Deferred revenue 46,606 36,460
------- -------
Total current liabilities 107,608 99,544
======= =======
Other long-term liabilities 7,751 9,281
Commitments and contingencies (Note 8)
Shareholders' equity:
Common stock, stated value $.0069
per share
Authorized 100,000 shares;
outstanding shares - 35,654 and
34,260 net of 1,500 and 1,542
shares in treasury 248 238
Capital in excess of stated value 114,132 87,302
Retained earnings 67,135 42,738
Foreign currency translation
adjustment (3,667) 298
Unrealized holding loss on
investments (11) (29)
------- --------
Total shareholders' equity 177,837 130,547
======= =======
Total liabilities and
shareholders' equity $293,196 $239,372
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Structural Dynamics Research Corporation
<CAPTION>
in thousands, except per share data
Unrealized
Common Stock Foreign holding Total
Outstanding Capital in currency gain (loss) share-
Stated excess of Retained translation on holders'
(in thousands, except Shares value stated value earnings adjustment investments equity
per share data) ------- ------ ------------ -------- ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1994,
As previously
reported 29,864 $208 $ 60,638 $15,292 $ (590) $(669) $ 74,879
Pooling-of-interests
(Note 2) 1,500 10 10 1,515 -- -- 1,535
------ ---- -------- ------ ------ ----- -------
December 31, 1994, as
restated 31,364 218 60,648 16,807 (590) (669) 76,414
Transactions involving
employee stock plans 1,720 12 12,874 12,886
Distributions of CASE
S corporation (2,425) (2,425)
Net loss (2,809) (2,809)
Foreign currency
translation adjustment 590 590
Unrealized holding gain
on marketable
securities 488 488
------ ----- ------- ------- ------ ------- ------
December 31, 1995, as
restated 33,084 230 73,522 11,573 -- (181) 85,144
Transactions involving
employee stock plans 1,176 8 15,016 15,024
Payment for Camax
dissenter's rights (1,236) (1,236)
Distributions of CASE
S corporation (6,983) (6,983)
Net income 38,148 38,148
Foreign currency
translation adjustment 298 298
Unrealized holding gain
on marketable
securities 152 152
----- ----- -------- ------- ------- ----- _______
December 31, 1996, as
restated 34,260 238 87,302 42,738 298 (29) 130,547
Transactions involving
employee stock plans 1,025 7 13,333 13,340
Stock warrant
(See Note 2) 3,500 3,500
Distribution for
lawsuit
settlement 369 3 9,997 10,000
Distributions of CASE
S corporation (5,633) (5,633)
Net income 30,030 30,030
Foreign currency
translation adjustment (3,965) (3,965)
Unrealized holding gain
on marketable
securities 18 18
------ ----- ------- -------- ------- ---- --------
December 31, 1997 35,654 $248 $114,132 $67,135 $(3,667) $(11) $177,837
====== ===== ======== ======== ======== ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Structural Dynamics Research
Corporation
(in thousands)
<CAPTION>
Year ended December 31
1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 30,030 $ 38,148 $ (2,809)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Purchased in-process research
and development 20,850 -- --
Depreciation and amortization 11,032 8,136 7,729
Amortization of computer software
construction costs 15,810 11,779 8,475
Deferred taxes (740) (2,125) 563
Litigation settlement -- -- 24,300
Loss on sale of UK test and analysis
division -- -- 1,878
Stock contributions to 401(k)
plan 2,249 1,606 1,990
Other 205 213 669
Changes in assets and liabilities, net
of acquisitions:
Increase in accounts receivable, net (31,439) (1,369) (10,827)
(Increase) decrease in prepaid
expenses (1,032) (1,635) 696
(Increase) decrease in other
assets 4,379 (7,261) 564
(Decrease) increase in accounts
payable and accrued expenses 2,049 (16,624) (4,248)
Increase in accrued income taxes 1,100 1,686 2,134
Increase in deferred revenue 9,835 1,683 10,623
Increase (decrease) in other long-
term liabilities (1,347) 2,356 (1,824)
------- ------- --------
Net cash provided by operating
activities 62,981 36,593 39,913
------ ------ --------
Cash flows from investing activities:
Purchases of marketable securities (20,079) (25,612) (32,781)
Proceeds from sales of marketable
securities 21,153 16,949 38,492
Additions to property and equipment,
net (13,640) (14,290) (5,827)
Additions to computer software
construction costs (13,006) (9,825) (8,189)
Proceeds from sale of UK test and
analysis division -- -- 524
Acquisition of remaining shares of
SDRC GmbH,
net of cash received -- -- 1,152
Acquisition of Metaphase
Technology, Inc. (29,689)
Investment in and advances to joint
ventures (1,500) (2,193)
-------- ------- --------
Net cash used in investing
activities (55,261) (34,278) (8,822)
-------- ------- --------
Cash flows from financing activities:
Issuance of common stock 11,091 13,418 10,896
Distributions of CASE S corporation (5,633) (6,983) (2,425)
Payment for Camax dissenter's rights -- (1,236) --
Issuance of long-term debt -- -- 1,738
Repayment of long-term debt (183) (680) (775)
------ ----- -------
Net cash provided by financing
activities 5,275 4,519 9,434
------ ------ --------
Effect of exchange rate changes on cash (3,965) 298 --
------ ------ --------
Increase in cash and cash equivalents 9,030 7,132 40,525
Cash and cash equivalents:
Beginning of period 72,026 64,894 24,369
------- -------- --------
End of period $ 81,056 $ 72,026 $ 64,894
------- ------- ---------
Cash paid during the year for income
taxes $ 11,960 $ 10,462 $ 5,941
------- ------- --------
</TABLE>
See accompanying notes to consolidated financial statements.<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Structural Dynamics Research Corporation
(in thousands, except per share data)
(1) Summary of Significant Accounting Policies
Business
Structural Dynamics Research Corporation (the "Company" or "SDRC")
is a leading international supplier of CAD/CAM/CAE (computer
aided design, manufacturing and engineering) software used for
mechanical design automation, product data management (PDM) software
and related services.
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.
Use of Estimates
The financial statements, which are prepared in conformity
with generally accepted accounting principles, require management to
make estimates and assumptions that affect the reported amounts
in the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates. Significant
estimates based on the facts and circumstances existing at the
date of the financial statements include the estimated useful
lives of computer software construction costs and the likelihood of
realization of the deferred tax assets.
Pro Forma Net Income and Pro Forma Net Income Per Share
Pro forma net income and pro forma net income per share reflect
the tax expense that would have been reported if Computer Aided
Systems for Engineering (an S corporation for income tax reporting
purposes prior to its 1997 acquisition-See Note 2) had been a C
corporation.
Revenue Recognition
The use of software programs is licensed through the Company's
direct sales force and by specific arrangements with certain
distributors, value-added resellers and other marketing
representatives. Revenue generated from licenses is recognized
when the following criteria have been met: (a) a written order
for the unconditional license of software and a software license
agreement have been received, (b) the Company has shipped the
products to the customer and performed substantially all services
for which it was committed, (c) the customer is obligated to
pay and (d) collectibility is probable.
Revenue from maintenance contracts is recognized ratably over
the term of the agreement and the deferred portion represents
the substantial component of deferred revenue. Revenue
from implementation services, training and other services is
recognized as the service is performed.
In August 1997, the American Institute of Certified
Public Accountants issued Statement of Position 97-2 "Software
Revenue Recognition," (SOP), which is effective for fiscal years
beginning after December 15, 1997. The Company's adoption of the
new SOP in 1998 is not expected to have a material impact on
its financial position or results of operations.
(1) Summary of Significant Accounting Policies - (continued)
Cost of Revenue
The cost of licenses primarily consists of the cost of
distributing the software products, an allocation of the
amortization of capitalized software construction costs and an
allocation of royalty fees paid to third parties under licensing
agreements. Cost of maintenance and services primarily consists
of the staff and related costs associated with the generation and
support of software service revenue, an allocation of the
amortization of capitalized software construction costs and an
allocation of royalty fees paid to third parties under licensing
agreements. The allocations between cost of license revenues and
maintenance and services revenues are based upon the percentage of
the related revenue to total revenue. Management believes that the
methodology for allocating the costs is reasonable.
Cash Equivalents and Marketable Securities
Cash equivalents include highly liquid investments in
interest bearing accounts and commercial paper with an original
maturity of less than 90 days. Marketable securities consist of
U.S. Treasury and U.S. Government agency obligations.
Short-term marketable securities have a maturity term in excess of
90 days but less than one year. Long-term marketable securities
have a maturity term in excess of one year. The Company also
has an unused, unsecured $15,000 bank line of credit.
Cash equivalents and marketable securities classified as
available-for-sale are recorded at market value, and any related
unrealized gains and losses are included in a separate
component of shareholders' equity. Marketable securities
classified as held-to-maturity are recorded at amortized cost,
which approximates market values. Realized and unrealized gains
and losses are determined based on the specific identification
method.
Financial Instruments
The carrying amounts of cash and cash equivalents,
marketable securities, accounts receivable, accounts payable,
accrued expenses and forward foreign exchange contracts approximate
fair value due to the short-term nature of these financial
instruments.
Concentrations of Credit Risk
Cash equivalents, marketable securities and accounts
receivable represent a potential credit risk to the Company.
The Company invests its excess cash with government and
major financial institutions having strong credit ratings.
Company policy sets credit ratings and maturity terms that
limit the risk of credit exposure and maintain necessary
liquidity.
The Company's revenue is generated from a significant customer
base in diversified industries across different geographic
areas. Revenue from a customer represented 14% and 11% of
consolidated revenue in 1997 and 1996, respectively and a
distributor represented 11%, 12% and 13% of consolidated revenue
in 1997, 1996 and 1995, respectively. The Company performs
ongoing credit evaluations of its customers and has not experienced
any material losses related to an individual customer or
groups of customers in any particular geographic area.
Management believes allowances for potential credit losses are
adequate.
Foreign Currency Translation
Financial statements of foreign subsidiaries whose local currency
is the functional currency are translated to U.S. dollars at
period-end exchange rates for assets and liabilities and at
weighted average exchange rates for the results of
operations. The resulting translation gains and
losses are accumulated
(1) Summary of Significant Accounting Policies - (continued)
Foreign Currency Translation - Continued
in a separate component of shareholders' equity. For major
foreign subsidiaries, the functional currency changed in 1996
to the subsidiaries' local currency from the U.S. dollar based
upon changes in the Company's operating and economic environment.
The Company's European subsidiaries became more autonomous
due to improved profitability and have generated sufficient cash
flows to meet their operating and capital needs. Utilization of
European resources has been expanded due to the local customer
demand for implementation, support and customization of the
Company's software products and the establishment of a European
product development staff. Prior to 1996, for foreign
subsidiaries where the functional currency was the U.S. dollar,
the foreign currency gains and losses were included in determining
the results of operations.
Foreign Exchange Contracts
The Company enters into forward foreign exchange
contracts denominated in foreign currencies to hedge certain
foreign currency denominated receivables. Any foreign exchange
gains and losses associated with these financial instruments are
recorded currently in income to offset any gains and losses arising
from foreign currency transactions. The resulting gains and losses
were not material. The interest element of the foreign currency
instruments is recognized over the life of the contract. As of
December 31, 1997, the Company had approximately $12,251 of foreign
exchange contracts outstanding. All contracts mature within one
year. 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.
Property and Equipment
Depreciation for property and equipment is primarily computed
using the straight-line method over the estimated useful life of the
asset. Leasehold improvements are amortized using 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 lives used
in calculating depreciation and amortization are: computer and other
equipment, 2-5 years; office furniture and equipment, 7
years; and leasehold improvements, 1-10 years.
Computer Software Construction Costs
The Company designs, develops and markets computer software
products. Costs related to the construction of software that are
incurred after the technological feasibility of the product has
been demonstrated are capitalized and amortized over the useful
lives of such software. Computer software construction costs are
shown net of accumulated amortization of $47,813 and $32,022 at
December 31, 1997 and 1996, respectively. Beginning in 1996, the
Company began amortizing the software construction costs related
to new releases of the I-DEAS Master Series product over a
three year period based upon the estimated future economic
life of the product. Amortization is calculated on a
product-by-product basis and is the greater of the ratio that the
current product revenue bears to the total of current and
anticipated future years' revenue or the straight-line method
over the remaining estimated economic lives of the software
products.
Income Taxes
In accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," 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. As of December 31, 1997, no benefit was
currently recognized for a substantial portion of the Company's
U.S. deferred tax assets since it is more likely than not that
they will not be realized based upon the Company's current and
anticipated mix over the next four years of domestic and foreign
pre-tax accounting income, tax credits, and deductions from
non-qualified stock option exercises. The Company does not accrue
Federal income taxes on undistributed earnings of its foreign
subsidiaries that (1) have been, or are intended to be,
permanently reinvested or (2) if remitted, would not have
material income tax consequences. Undistributed earnings of
foreign subsidiaries amounted to approximately $17,111 at December
31, 1997.
Earnings Per Share
Effective December 31, 1997, the Company adopted Statement
of Financial Accounting Standards No 128, (SFAS 128) "Earnings
Per Share" which establishes new methods for the computation
and disclosure of earnings per common share. All earnings per share
data presented has been restated to conform with the provisions of
SFAS 128. Basic earnings per common share and dilutive earnings per
share are computed using the weighted average number of common and
dilutive common equivalent shares outstanding during the period,
respectively. Dilutive common equivalent shares are calculated
using the treasury stock method and consist of stock option grants.
The reconcilations of amounts used for the basic and
dilutive earnings per share calculations are as follows:
Income Shares Per-Share
(Numerator) (Denominator) Amount
1997
Basic net income per
share $30,030 35,265 $ .85
Effect of stock options -- 1,682
------- ------
Dilutive net income per
share $30,030 36,947 $ .81
1996
Basic net income per
share $38,148 34,315 $1.11
Effect of stock options -- 1,975
------- ------
Dilutive net income per
share $38,148 36,290 $1.05
1995
Basic net income per
share $(2,809) 32,430 $(.09)
Effect of stock options -- --
-------- ------
Dilutive income per share $(2,809) 32,430 $(.09)
Options to purchase 3,524 and 1,737 shares of common stock
at December 31, 1997 and 1996 respectively, were not included in
the computation of dilutive earnings per share because the
options' exercise price was greater than the average market price
of common shares.
Reclassification
Certain amounts reported in previous years have been reclassified
to conform to the 1997 presentation.
(2) Business Acquisitions
Metaphase Technology, Inc.
In 1992, the Company and Control Data Systems, Inc.
(CDSI) established a joint venture company, Metaphase
Technology, Inc., (Metaphase), to develop and market PDM
software worldwide. The Company initially owned a 35% interest
and increased such interest to 50% during 1993. The Company's
investment in Metaphase was accounted for on the equity basis.
In January 1997, the Company acquired the remaining stock
of Metaphase and certain assets of CDSI's global PDM software sales
and support business. The purchase price of approximately
$33,000 included cash and a stock warrant. The warrant is
exercisable for 750 shares of the Company's common stock without
par value at the exercise price of $28 per share and expires on
December 31, 1998. A value of $3,500 has been assigned to the
warrant and recorded in Shareholders' equity. The acquisition
was accounted for using the purchase method. The Company's
consolidated statement of operations includes the operating
results of Metaphase and the CDSI assets acquired, beginning
January 1, 1997. The excess of purchase price over the fair
values of the net assets acquired of approximately $2,816 was
recorded as goodwill. Certain other intangibles, including
computer software construction costs, totalled approximately
$8,555. All intangibles associated with the acquisition
are being amortized over their useful lives, which do not exceed
seven years. Also in connection with the acquisition, the
Company recorded a one-time charge to operations of $20,850 for
the write off of in-process research and development acquired in
the transaction that did not have an alternative future use and had
not reached technological feasibility. Pro forma results of the
purchase are not presented as the amounts are not material to the
consolidated financial statements.
Computer Aided Systems for Engineering
In December 1997, the Company acquired all the outstanding stock
of two privately held companies doing business together as
Computer Aided Systems for Engineering, (CASE), by issuing 1,500
shares of common stock having an aggregate market value of
approximately $25,000. The acquisition was accounted for as
a pooling-of-interests, and accordingly, all prior periods have
been restated to include CASE results. CASE, an S corporation
prior to acquisition, had been a third party developer of drafting
software for the Company since 1984.
Revenue and net income (loss) of the separate companies for
the periods before the acquisition are as follows:
1997 1996 1995
Revenue:
SDRC $351,322 $285,256 $224,138
CASE 8,749 7,674 6,581
Less intercompany sales (8,749) (7,674) (6,581)
-------- ------- -------
Total revenue $351,322 $285,256 $224,138
-------- ------- --------
Net income (loss):
SDRC $ 24,342 $ 33,689 $ (7,471)
CASE 5,688 4,459 4,662
------- ------- --------
Net income (loss) $ 30,030 $ 38,148 $ (2,809)
======= ======= ========
Adjustments recorded to adopt the same accounting practices were
not material to the consolidated financial statements.
Acquisition charges were not material.
(2) Business Acquisitions - (continued)
Camax Manufacturing Technologies, Inc.
In June 1996, the Company completed the acquisition of
Camax Manufacturing Technologies, Inc. (Camax) and its
wholly-owned subsidiaries. Camax provides computer-aided
manufacturing software for computerized-numerical-control
machining operations. The Camax products and services are designed
to simplify, automate and optimize the machining process to
streamline production and accelerate time-to-market.
In exchange for 100 percent ownership of Camax common stock,
SDRC issued approximately 967 shares of SDRC common stock and
paid approximately $1,236 to a Camax shareholder who exercised
dissenter's rights. The market value of the shares and
cash paid was approximately $30,000. Acquisition charges of
$1,102 were recorded in the second quarter of 1996. The
acquisition was accounted for as a pooling-of-interests. All
historical financial data of the Company was restated to
include the results of Camax for all periods presented.
Revenue and net income (loss) of the separate companies for
the periods before the acquisition are as follows:
Three months ended Year ended
March 31, December 31,
1996 1995
Revenue:
SDRC $60,971 $204,084
Camax 4,078 20,054
------- ---------
Total revenue $65,049 $224,138
Net income (loss):
SDRC $ 7,919 $ (3,805)
Camax (504) 996
-------- --------
Net income (loss) $ 7,415 $ (2,809)
======== ========
Adjustments recorded to adopt the same accounting practices were
not material to the consolidated financial statements.
SDRC Software and Services, GmbH
In 1994, the Company formed a joint venture with Siemens
Nixdorf Informationssysteme AG and in 1995, purchased the remaining
interest of SDRC GmbH. The acquisition was accounted for using
the purchase method. As of the acquisition date, 100% of the
operating results of SDRC GmbH are included in the consolidated
financial statements. Pro forma results of the purchase are not
presented as the amounts are not material to the consolidated
financial statements.
ESTECH Corporation
In 1989 the Company and Nissan Motor Co., Ltd. established a
Japanese joint venture company, ESTECH Corporation (ESTECH)
to provide engineering services in Japan and the Asia-Pacific
areas. The Company owns a 30% interest in ESTECH and accounts for
it under the equity method. The impact of its results are not
material to the Company's results of operations.
(3) Marketable Securities
Marketable Securities consist of the following:
December 31, 1997
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
Current:
Available
for sale $12,916 $ 9 $ (2) $12,923
Held to maturity 107 -- -- 107
------ ----- ------ ------
$13,023 $ 9 $ (2) $13,030
Non Current:
Available
for sale $14,943 $ 42 $ (60) $14,925
(3) Marketable Securities - (continued)
December 31, 1996
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
Current:
Available for sale $18,468 $ 34 - $18,502
Non Current:
Available for sale $10,572 $ 12 $ (75) $10,509
Non current, available-for-sale marketable securities at December
31, 1997, have maturities of $14,029 in 1999 and $896 in 2013.
Realized gains and losses on the sale of marketable
securities were immaterial.
(4) Property and Equipment
December 31
Property and equipment,
recorded at cost, consist of the following:
1997 1996
Property and equipment, at cost:
Computer and other equipment $57,364 $49,580
Office furniture and equipment 16,983 14,535
Leasehold improvements 6,685 5,695
------ ------
81,032 69,810
Less accumulated depreciation and
amortization (56,405) (48,785)
------- -------
Net property and equipment $24,627 $21,025
======= =======
Future minimum lease payments under noncancelable operating
leases for the five years ending December 31, 2002 approximate
$17,538, $14,400, $9,530, $6,961 and $6,081, respectively, and
$42,512 thereafter. Total rental expenses under operating leases
for the years ended December 31, 1997, 1996 and 1995 were $19,604,
$16,426, and $14,576, respectively.
(5) Income Taxes
Pre-tax accounting income (loss) consists
of the following:
Year ended December 31
1997 1996 1995
Domestic $25,741 $32,236 $(1,502)
Foreign 15,798 14,548 5,872
------ ------ ------
$41,539 $46,784 $ 4,370
The provision for income taxes consists
of the following:
Year ended December 31
1997 1996 1995
Federal:
Current $ 740 $ 1,234 $ 35
Deferred (740) (2,125) 563
------- ------- -------
-- (891) 598
State: 1,200 1,418 282
Foreign:
Income taxes 5,520 3,125 2,215
Withholding taxes 4,789 4,984 4,084
------ ------ ------
Actual income tax expense $11,509 $ 8,636 $7,179
Deferred state and foreign taxes are not material.
<PAGE>
<TABLE>
(5) Income Taxes - (continued)
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:
<CAPTION>
Year ended December 31
1997 1996 1995
<S> <C> <C> <C>
Computed expected income tax expense $14,539 $16,374 $ 1,530
Increase (reduction) resulting from:
Purchased in-process research and
development 7,297 -- --
Foreign withholding taxes,
without current benefit -- -- 4,084
Foreign income taxed at other than the
U.S. statutory rate 57 (1,966) 160
U.S. losses without tax benefit -- -- 2,157
Utilization of U.S. tax carryforwards (9,721) (4,806) --
S corporation benefit (1,934) (1,516) (1,585)
Change in net deferred taxes (828) (2,125) 563
Alternative minimum taxes 740 1,125 --
State taxes, net of federal benefit 780 922 282
Other 579 628 (12)
------- ------ -------
Actual Income tax expense $11,509 $ 8,636 $ 7,179
</TABLE>
<TABLE>
The tax effects of temporary differences that give rise to the
deferred tax assets and deferred tax liabilities are as follows:
<CAPTION>
December 31
1997 1996
<S> <C> <C>
Deferred tax assets:
Revenue recognition and accounts receivable $ 2,753 $ 2,580
Property and equipment 1,663 1,114
Computer software construction costs and
capitalized research expenses, net of
amortization 15,624 10,794
Accrued lawsuit settlement - 3,536
Other liabilities and reserves 4,526 5,006
Tax credit and net operating loss
carryforwards 9,291 12,482
Other 608 1,450
------ ------
Total deferred tax assets 34,465 36,962
Valuation allowance (31,538) (34,837)
------- -------
Net deferred tax assets 2,927 2,125
------- -------
Deferred tax liabilities -- --
------- -------
Total net deferred taxes $ 2,927 $ 2,125
======= =======
</TABLE>
<PAGE>
Of the $9,291 in tax carryforwards available at December 31,
1997, $252 expire in the years 1998 through 2000 and the remainder
expire thereafter. Alternative minimum tax carryforwards of
$2,927 never expire.
The net change in the valuation allowance for deferred tax assets
was a decrease of $3,299 and $1,676 in 1997 and 1996, respectively.
Of the $31,538 in valuation allowance at December 31, 1997,
$18,732 is attributable to the tax benefit of stock option
exercises. Such benefits will be credited to capital in excess
of stated value if realized.
(6) 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. Under the
Shareholders' Rights Plan, shareholders are granted certain rights
in the event of a triggering event (Rights). The Rights become
exercisable if a person acquires 20% or more of the Company's
outstanding 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, 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 Company's
common stock (Triggering Date), each holder of a Right will have
the right to purchase shares of the Company's 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.
(7) Common Stock and Employee Benefit Plans
Stock Option Plans
Under the 1991 Employee Stock Option Plan, the Company has
reserved 5,300 shares of previously unissued common stock. Under
the plan, options to purchase shares may be granted to key
employees and executive officers at the fair market value at the
date of grant.
In 1991, the adoption of the Director's Non-Discretionary
Stock Option Plan 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.
(7) Common Stock and Employee Benefit Plans - (continued)
Stock Option Plans - continued
In 1994, the shareholders adopted the 1994 Long-Term Stock
Incentive Plan, allowing stock incentives including stock
options, stock appreciation rights, stock awards, and any
combination 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; an additional 34% 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.
With the acquisition of Camax on June 30, 1996, the Company
assumed approximately 175 outstanding stock options representing
all of Camax's obligations under five existing stock option
plans and certain out-of-plan options. The assumed stock options
and stock appreciation rights were generally granted to employees
and directors of Camax at 100% of the market value at the date of
grant and expire ten years from date of grant. No additional
stock options will be granted under the Camax plans.
<PAGE>
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996 December 31, 1995
Weighted Weighted Weighted
Average Average Average
Stock Exercise Stock Exercise Stock Exercise
Options Price Options Price Options Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning
of the year 4,945 $17.10 5,008 $12.09 7,289 $12.58
Granted 2,190 $22.33 1,337 $30.09 1,143 $ 7.54
Exercised (931) $11.74 (1,169) $11.11 (1,510) $ 7.90
Cancelled (407) $22.81 (231) $13.93 (1,914) $14.90
Outstanding at
end of the year 5,797 $19.54 4,945 $17.10 5,008 $12.09
Options
exercisable
at yearend 2,891 $15.89 2,935 $13.71 3,227 $13.36
</TABLE>
(7) Common Stock and Employee Benefit Plans - (continued)
Stock Option Plans - continued
<TABLE>
Information regarding options outstanding as of December 31, 1997 is
as follows:
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
<S> <C> <C> <C> <C> <C>
$ 3.44 - $ 6.31 680 5.45 5.96 494 5.84
$ 7.22 - $11.13 581 4.89 10.76 577 10.77
$12.19 - $16.25 880 4.55 15.39 878 15.39
$16.63 - $20.06 598 8.70 18.18 129 17.39
$20.13 - $22.44 513 4.82 20.68 362 20.17
$22.50 877 9.12 22.50 -- --
$22.63 - $26.31 613 9.13 25.10 32 24.30
$26.75 - $29.13 59 5.90 28.77 44 28.81
$29.53 6 9.71 29.53 -- --
$31.25 990 8.05 31.25 375 31.25
- - --------------- ----- ---- ----- ------ -----
$ 3.44 - $31.25 5,797 6.93 $19.54 2,891 $15.89
</TABLE>
<PAGE>
Stock Purchase Plan
Under the Stock Purchase 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 1% with a maximum
of 10% of the participant's 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.
Other Employee Benefit Plans
The Company provides retirement benefits to substantially
all employees through defined contribution plans. The
Company's contributions are primarily based on employee compensation
and years of service. Expenses related to the 401(k) Plan and
other defined contribution plans were approximately $3,967, $3,225
and $3,044 in 1997, 1996 and 1995, respectively.
The Structural Dynamics Research Corporation Tax Deferred
Capital Accumulation Plan (401(k) Plan) is a defined
contribution plan covering all salaried employees of the domestic
divisions of the Company. Employees may make contributions to
the 401(k) Plan by authorizing a reduction of their compensation
of at least 1% up to a maximum of 15%. The Company may provide a
matching contribution in the form of Company stock or cash
equal to 50% of the employee contribution, up to a maximum of
6% of the employee compensation. Participants are immediately
vested in their voluntary contributions and are vested in the
Company contributions after three years of continuous service.
The Company provides severance benefits for involuntarily
terminated employees based on employees' prior years of service.
The Company's obligation for these post employment benefits is
recorded in other long-term liabilities.
(7) Common Stock and Employee Benefit Plans - (continued)
Stock-Based Compensation
The Company accounts for stock options in accordance with APB No.
25, "Accounting for Stock Issued to Employees." Accordingly,
no compensation cost has been recognized in results of operations
for stock option grants. The Company has adopted the
disclosure-only provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation." Had compensation cost for the
Company's stock option plans been determined based on the fair
value at the grant date for awards in 1997, 1996 and 1995, and
allocated over the options' vesting date consistent with the
provisions of SFAS No. 123, the Company's net income (loss) and
income (loss) per share would have been reduced to the pro forma
amounts as follows:
1997 1996 1995
Net income (loss) - as reported $30,030 $38,148 $(2,809)
Net income (loss) - pro forma 19,758 32,727 (3,885)
Dilutive income (loss) per
share - as reported $ .81 $ 1.05 $ (.09)
Dilutive income (loss) per
share - pro forma $ .53 $ .90 $ (.12)
The pro forma effect on the Company's net income (loss) and
income (loss) per share for 1997, 1996 and 1995 is not
representative of the pro forma effect in future years. The pro
forma effect does not take into consideration compensation expense
related to grants made prior to 1995 or additional grants in future
years which are anticipated.
The fair value of each option is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants: dividend yield of 0%;
expected terms of 3 years; expected volatility of 57% for 1997 and
63% for 1996 and 1995; and risk-free interest rate of 5.7% for
1997 and 5.6% for 1996 and 1995. The weighted average fair
value of options granted was $10.07, $13.76 and $3.69 in
1997, 1996 and 1995, respectively.
(8) Commitments and Contingencies
Except for the following matters, SDRC is not a party to
any litigation other than ordinary routine litigation incidental to
its business. 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,
$10.0 million in shares of the Company's common stock (valued
on the market price at the time of distribution), and $9.9 million
cash provided by the Company's former accountants. During 1997,
the Company issued common stock of $10 million to finalize its
contribution to the settlement fund. 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 have
required which could be better spent on the Company's business.
The Company was 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. The Company paid the plaintiffs' counsel fees of
approximately $900 and $50 for their out-of-pocket expenses in full
settlement of the matter. The parties' agreement was approved by
the United States District Court on July 19, 1996.
(8) Commitments and Contingencies - (continued)
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) Other Income, Net
Year ended December 31
Other income, net consists of: 1997 1996 1995
Interest income $5,201 $ 4,593 $ 3,697
Loss on sale of UK test and
analysis division -- -- (1,878)
Other (682) (1,377) (553)
------- ------- -------
Other income, net $4,519 $ 3,216 $ 1,266
======= ======= =======
In July 1995, SDRC sold its test and analysis division located in
the United Kingdom to MascoTech Engineering Europe Limited for
net proceeds of $524 and realized a loss on the sale of $1,878. The
loss includes foreign currency losses and estimated costs pertaining
to a lease commitment.
Other consists of net foreign currency exchange gains and losses
and, in 1996, the derivative litigation settlement.
(10) Segment and Geographic Information
The Company operates in a single industry segment providing
software and related services to manufacturers for the design,
analysis, testing, and manufacture of mechanical products and the
management of associated product information.
<PAGE>
<TABLE>
<CAPTION>
Operating Identifiable
Financial data by geographic Revenue Income (Loss) Assets
area is as follows:
<S> <C> <C> <C>
Year ended December 31, 1997
North America $171,003 $ 30,323 $105,178
Europe 107,153 18,951 57,629
Asia-Pacific 73,166 24,303 22,754
Corporate -- (15,668) 107,635
Purchased in-process research
and development -- (20,850) --
-------- -------- ---------
Consolidated $351,322 $ 37,059 $293,196
======== ========= =========
Year ended December 31, 1996
North America $136,532 $ 21,570 $ 82,433
Europe 80,275 17,360 47,470
Asia-Pacific 68,449 17,929 18,737
Corporate -- (11,959) 90,732
------- -------- --------
Consolidated $285,256 $ 44,900 $239,372
======= ======== ========
Year ended December 31, 1995
North America $102,271 $ 14,443 $ 71,063
Europe 61,420 9,195 39,024
Asia-Pacific 60,447 16,155 14,637
Corporate -- (11,438) 82,949
-------- ------- --------
Consolidated $224,138 $ 28,355 $207,673
======== ======= ========
</TABLE>
<PAGE>
(11) Quarterly Results of Operations (Unaudited)
The following table sets forth selected unaudited quarterly
financial information for 1997 and 1996. The Company believes
that all necessary adjustments have been included to present
fairly the selected quarterly information.
<PAGE>
<TABLE>
<CAPTION>
Three months ended Year ended
March 31, June 30, September 30, December 31, December 31,
1997 1997 1997 1997 1997 1997
<S> <C> <C> <C> <C> <C>
Revenue $ 80,864 $88,678 $86,738 $95,042 $351,322
Gross profit 52,904 58,507 55,729 63,738 230,878
Net income (loss) (11,167) 11,633 12,752 16,812 30,030
Basic earnings (loss)
per share (.32) .33 .36 .47 .85 *
Dilutive earnings
(loss) per share (.32) .32 .34 .46 .81 *
Three months ended Year ended
March 31, June 30, September 30, December 31, December 31,
1996 1996 1996 1996 1996 1996
<S> <C> <C> <C> <C> <C>
Revenue $ 65,049 $66,669 $71,777 $81,761 $285,256
Gross profit 47,728 47,460 51,524 58,045 204,757
Net income 7,415 7,697 9,616 13,420 38,148
Basic earnings per
share .22 .22 .28 .39 1.11 *
Dilutive earnings per
share .21 .21 .27 .37 1.05 *
* Per share amounts are not additive.
</TABLE>
<PAGE>
(12) Common Stock Information (Unaudited)
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 1997 or 1996 and intends to continue its
policy of retaining earnings to finance future growth. There were
approximately 2,400 shareholders of record as of December 31, 1997.
Three months ended
March 31, June 30, September 30, December 31,
1997 1997 1997 1997
High 26 27 5/8 30 25 7/8
Low 19 1/8 18 7/16 23 3/4 15 1/4
Three months ended
March 31, June 30, September 30, December 31,
1996 1996 1996 1996
High 35 1/2 37 3/8 27 1/4 24 1/4
Low 22 1/4 19 1/2 15 17 1/8
Exhibit 21
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
State or Other
Jurisdiction
Name of Incorporation
SDRC CASE/Inc. Ohio
SDRC Brasil Limitada Brazil
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
Point Control International Sales Virgin Islands
Corporation
Note: All of the above corporations are wholly owned subsidiaries
of the Registrant directly or indirectly.
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, 33-58701, 33-72328 and 33-07365) of Structural
Dynamics Research Corporation of our report dated January 23, 1998
appearing on page 33 of the 1997 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, which appears in this Form 10-K.
/s/Price Waterhouse LLP
Price Waterhouse LLP
Cincinnati, Ohio
March 27, 1998
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 January 23, 1998 appearing on page 33 of the 1997
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.
/s/Price Waterhouse LLP
Price Waterhouse LLP
Cincinnati, Ohio
January 23, 1998
Schedule II
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(in thousands)
Balance Charged Balance
at Beginning (Credited) Deductions/ at End
Description of Period to Income (Recoveries) of Period
Accounts
Receivable:
Year ended
December 31, $3,100 (273) 307 $2,520
1995
Year ended
December 31, $2,520 2,689 1,928 $3,281
1996
Year ended
December 31, $3,281 1,005 757 $3,529
1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 81,056
<SECURITIES> 27,955
<RECEIVABLES> 106,769
<ALLOWANCES> (3,529)
<INVENTORY> 0
<CURRENT-ASSETS> 209,937
<PP&E> 81,032
<DEPRECIATION> (56,405)
<TOTAL-ASSETS> 293,196
<CURRENT-LIABILITIES> 107,608
<BONDS> 0
0
0
<COMMON> 248
<OTHER-SE> 177,589
<TOTAL-LIABILITY-AND-EQUITY> 293,196
<SALES> 351,322
<TOTAL-REVENUES> 351,322
<CGS> 120,444
<TOTAL-COSTS> 193,819
<OTHER-EXPENSES> (4,480)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 41,539
<INCOME-TAX> 11,509
<INCOME-CONTINUING> 30,030
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,030
<EPS-PRIMARY> .85
<EPS-DILUTED> .81
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 89,732
<SECURITIES> 31,755
<RECEIVABLES> 86,249
<ALLOWANCES> (3,854)
<INVENTORY> 0
<CURRENT-ASSETS> 202,248
<PP&E> 78,579
<DEPRECIATION> (54,936)
<TOTAL-ASSETS> 281,913
<CURRENT-LIABILITIES> 117,659
<BONDS> 0
0
0
<COMMON> 244
<OTHER-SE> 155,964
<TOTAL-LIABILITY-AND-EQUITY> 281,913
<SALES> 256,280
<TOTAL-REVENUES> 256,280
<CGS> 89,140
<TOTAL-COSTS> 147,427
<OTHER-EXPENSES> (2,871)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,584
<INCOME-TAX> 9,366
<INCOME-CONTINUING> 13,218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,218
<EPS-PRIMARY> .38
<EPS-DILUTED> .36
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 83,253
<SECURITIES> 26,107
<RECEIVABLES> 80,742
<ALLOWANCES> (3,723)
<INVENTORY> 0
<CURRENT-ASSETS> 191,021
<PP&E> 77,716
<DEPRECIATION> (53,860)
<TOTAL-ASSETS> 265,602
<CURRENT-LIABILITIES> 118,220
<BONDS> 0
0
0
<COMMON> 241
<OTHER-SE> 138,666
<TOTAL-LIABILITY-AND-EQUITY> 265,602
<SALES> 169,542
<TOTAL-REVENUES> 169,542
<CGS> 58,131
<TOTAL-COSTS> 106,651
<OTHER-EXPENSES> (1,660)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,420
<INCOME-TAX> 5,954
<INCOME-CONTINUING> 466
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 466
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 48,268
<SECURITIES> 29,771
<RECEIVABLES> 85,137
<ALLOWANCES> (3,654)
<INVENTORY> 0
<CURRENT-ASSETS> 166,248
<PP&E> 74,040
<DEPRECIATION> (51,765)
<TOTAL-ASSETS> 240,281
<CURRENT-LIABILITIES> 107,838
<BONDS> 0
0
0
<COMMON> 239
<OTHER-SE> 123,251
<TOTAL-LIABILITY-AND-EQUITY> 240,281
<SALES> 80,864
<TOTAL-REVENUES> 80,864
<CGS> 27,960
<TOTAL-COSTS> 61,593
<OTHER-EXPENSES> (544)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,145)
<INCOME-TAX> 3,022
<INCOME-CONTINUING> (11,167)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,167)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 72,026
<SECURITIES> 29,011
<RECEIVABLES> 69,672
<ALLOWANCES> (3,281)
<INVENTORY> 0
<CURRENT-ASSETS> 168,118
<PP&E> 69,810
<DEPRECIATION> (48,785)
<TOTAL-ASSETS> 239,372
<CURRENT-LIABILITIES> 99,544
<BONDS> 0
0
0
<COMMON> 238
<OTHER-SE> 130,309
<TOTAL-LIABILITY-AND-EQUITY> 239,372
<SALES> 285,256
<TOTAL-REVENUES> 285,256
<CGS> 80,499
<TOTAL-COSTS> 159,857
<OTHER-EXPENSES> (1,884)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 46,784
<INCOME-TAX> 8,636
<INCOME-CONTINUING> 38,148
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,148
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 73,689
<SECURITIES> 29,481
<RECEIVABLES> 55,434
<ALLOWANCES> (2,948)
<INVENTORY> 0
<CURRENT-ASSETS> 153,328
<PP&E> 65,318
<DEPRECIATION> (46,693)
<TOTAL-ASSETS> 216,213
<CURRENT-LIABILITIES> 89,132
<BONDS> 0
0
0
<COMMON> 237
<OTHER-SE> 117,692
<TOTAL-LIABILITY-AND-EQUITY> 216,213
<SALES> 203,495
<TOTAL-REVENUES> 203,495
<CGS> 56,783
<TOTAL-COSTS> 117,184
<OTHER-EXPENSES> (853)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 30,381
<INCOME-TAX> 5,653
<INCOME-CONTINUING> 24,728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,728
<EPS-PRIMARY> .72
<EPS-DILUTED> .68
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 69,661
<SECURITIES> 29,804
<RECEIVABLES> 51,931
<ALLOWANCES> (4,061)
<INVENTORY> 0
<CURRENT-ASSETS> 143,998
<PP&E> 62,521
<DEPRECIATION> (45,028)
<TOTAL-ASSETS> 206,986
<CURRENT-LIABILITIES> 89,723
<BONDS> 0
0
0
<COMMON> 237
<OTHER-SE> 107,930
<TOTAL-LIABILITY-AND-EQUITY> 206,986
<SALES> 131,718
<TOTAL-REVENUES> 131,718
<CGS> 36,530
<TOTAL-COSTS> 76,414
<OTHER-EXPENSES> (155)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 18,929
<INCOME-TAX> 3,817
<INCOME-CONTINUING> 15,112
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,112
<EPS-PRIMARY> .44
<EPS-DILUTED> .42
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 70,460
<SECURITIES> 18,572
<RECEIVABLES> 55,112
<ALLOWANCES> (3,071)
<INVENTORY> 0
<CURRENT-ASSETS> 141,553
<PP&E> 59,452
<DEPRECIATION> (43,134)
<TOTAL-ASSETS> 200,387
<CURRENT-LIABILITIES> 92,413
<BONDS> 0
0
0
<COMMON> 235
<OTHER-SE> 98,267
<TOTAL-LIABILITY-AND-EQUITY> 200,387
<SALES> 65,049
<TOTAL-REVENUES> 65,049
<CGS> 17,321
<TOTAL-COSTS> 39,368
<OTHER-EXPENSES> (844)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,204
<INCOME-TAX> 1,789
<INCOME-CONTINUING> 7,415
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,415
<EPS-PRIMARY> .22
<EPS-DILUTED> .21
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 64,894
<SECURITIES> 20,196
<RECEIVABLES> 68,303
<ALLOWANCES> (2,520)
<INVENTORY> 0
<CURRENT-ASSETS> 155,211
<PP&E> 56,213
<DEPRECIATION> (41,589)
<TOTAL-ASSETS> 207,673
<CURRENT-LIABILITIES> 112,799
<BONDS> 0
0
0
<COMMON> 230
<OTHER-SE> 84,914
<TOTAL-LIABILITY-AND-EQUITY> 207,673
<SALES> 224,138
<TOTAL-REVENUES> 224,138
<CGS> 58,420
<TOTAL-COSTS> 137,363
<OTHER-EXPENSES> 23,985
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,370
<INCOME-TAX> 7,179
<INCOME-CONTINUING> (2,809)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,809)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
