<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
Commission file Number: 33-64732
SPSS Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-2815480
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
233 S. Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices and zip code)
Registrant's telephone number including area code: (312) 651-3000
Indicate by check mark whether the registrant (1) has filed all reports
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 filing requirements
for the past 90 days. Yes X No
--- ---
As of November 2, 1998, there were 9,028,753 shares of common stock
outstanding, par value $.01, of the registrant.
================================================================================
<PAGE> 2
SPSS Inc.
Form 10-Q
QUARTER ENDED SEPTEMBER 30, 1998
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements
Independent Auditors' Review Report 3
Consolidated Balance Sheets
as of December 31, 1997 and
September 30, 1998 (unaudited) 4
Consolidated Statements of Operations
for the three and nine months ended September 30, 1997
(unaudited) and 1998 (unaudited) 5
Consolidated Statements of Comprehensive Income for
the three and nine months ended September 30, 1997
(unaudited) and 1998 (unaudited) 6
Consolidated Statements of Cash Flows
for the nine months ended September 30, 1997
(unaudited) and 1998 (unaudited) 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
2
<PAGE> 3
Item 1. FINANCIAL STATEMENTS
Independent Auditors' Review Report
The Board of Directors
SPSS Inc.:
We have reviewed the consolidated balance sheet of SPSS Inc. and subsidiaries as
of September 30, 1998, the related consolidated statement of operations and
comprehensive income for the three and nine-month periods ended September 30,
1997 and 1998, and the related consolidated statements of cash flows for the
nine-month periods ended September 30, 1997 and 1998. These consolidated
financial statements are the responsibility of SPSS Inc.'s management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above, for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of SPSS Inc. and subsidiaries as of
December 31, 1997, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 18, 1998, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 1997, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
November 2, 1998
3
<PAGE> 4
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,079 $ 12,930
Accounts receivable, net of allowances 27,872 28,160
Inventories 2,520 2,769
Prepaid expenses and other current assets 2,811 2,589
-------- --------
Total current assets 41,282 46,448
-------- --------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost:
Land and building 1,700 1,758
Furniture, fixtures and office equipment 6,044 7,162
Computer equipment and software 18,032 21,243
Leasehold improvements 2,627 6,092
-------- --------
28,403 36,255
Less accumulated depreciation and amortization 18,974 21,991
-------- --------
Net equipment and leasehold improvements 9,429 14,264
-------- --------
Capitalized software development costs,
net of accumulated amortization 6,703 8,148
Goodwill, net of accumulated amortization 1,062 938
Deferred income tax assets 2,588 2,586
Other assets 1,681 1,578
-------- --------
$ 62,745 $ 73,962
======== ========
CURRENT LIABILITIES:
Notes payable $ 71 $ --
Accounts payable 5,013 5,201
Accrued royalties 482 450
Accrued rent 428 523
Other accrued liabilities 9,912 8,648
Income taxes and value added taxes payable 1,299 3,521
Customer advances 208 353
Deferred revenues 9,715 8,635
-------- --------
Total current liabilities 27,128 27,331
-------- --------
Deferred income taxes 1,936 1,936
Other noncurrent liabilities
1,219 1,182
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 50,000,000 shares
authorized; 8,811,644 and 9,023,304 shares issued and
outstanding in 1997 and 1998, respectively 88 90
Additional paid-in capital 44,313 45,929
Accumulated other comprehensive income -
cumulative foreign currency translation adjustments (1,065) (1,172)
Accumulated deficit (10,874) (1,334)
-------- --------
Total stockholders' equity 32,462 43,513
-------- --------
$ 62,745 $ 73,962
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1997 1998 1997 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net revenues:
Desktop products $ 19,836 $ 21,328 $ 59,521 $ 63,487
Large System products 3,630 3,981 11,521 11,973
Other products and services 3,180 4,302 9,642 11,809
------------- -------------- -------------- --------------
Net revenues 26,646 29,611 80,684 87,269
Cost of revenues 2,252 2,516 7,267 7,525
------------- -------------- -------------- --------------
Gross profit 24,394 27,095 73,417 79,744
------------- -------------- -------------- --------------
Operating expenses:
Sales and marketing 13,040 14,108 39,335 43,648
Product development 4,713 5,334 13,309 15,075
General and administrative 3,078 2,620 9,547 6,625
Nonrecurring items 2,413 -- 2,413 --
Acquisition-related charges 6,053 -- 7,118 --
------------- -------------- -------------- --------------
Operating expenses 29,297 22,062 71,722 65,348
------------- -------------- -------------- --------------
Operating income (loss) (4,903) 5,033 1,695 14,396
------------- -------------- -------------- --------------
Other income (expense):
Net interest income 16 85 226 171
Other income (expense) (100) 153 (116) (46)
------------- -------------- -------------- --------------
Other income (expense) (84) 238 110 125
------------- -------------- -------------- --------------
Income (loss) before income taxes (4,987) 5,271 1,805 14,521
Income tax expense (benefit) (965) 1,807 1,636 4,980
------------- -------------- -------------- --------------
Net income (loss) $ (4,022) $ 3,464 $ 169 $ 9,541
============= ============== ============== ==============
Basic earnings (loss) per share $ (0.46) $ 0.38 $ 0.02 $ 1.07
============= ============== ============== ==============
Shares used in computing basic
earnings (loss) per share 8,799,099 9,022,720 8,764,512 8,949,088
============= ============== ============== ==============
Diluted earnings (loss) per share $ (0.46) $ 0.36 $ 0.02 $ 1.00
============= ============== ============== ==============
Shares used in computing diluted
earnings (loss) per share 8,799,099 9,591,083 9,643,429 9,565,561
============== ============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1997 1998 1997 1998
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net income (loss) $ (4,022) $ 3,464 $ 169 $ 9,541
Other comprehensive loss -
foreign currency translation adjustment (78) (106) (804) (107)
------------ ------------- ------------ ------------
Comprehensive income (loss) $ (4,100) $ 3,358 $ (635) $ 9,434
============ ============= ============ ============
</TABLE>
6
<PAGE> 7
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 169 $ 9,541
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 5,259 4,815
Write-off of software development costs and other assets 3,011 -
Write-off of acquired and in-process technology 1,287 -
Changes in assets and liabilities, net of effects of
acquisitions:
Deferred income taxes (107) -
Accounts receivable (2,899) (288)
Inventories (244) (249)
Prepaid income taxes (1,772) -
Accounts payable (605) 188
Accrued royalties (134) (32)
Accrued expenses (196) (1,097)
Accrued income taxes (3,551) 2,222
Other (1,744) (1,279)
------------ ------------
Net cash (used in) provided by operating activities (1,526) 13,821
------------ ------------
Cash flows from investing activities:
Capital expenditures, net (4,067) (7,551)
Capitalized software development costs (908) (2,893)
Net payments for acquisitions (958) (72)
------------ ------------
Net cash used in investing activities (5,933) (10,516)
------------ ------------
Cash flows from financing activities:
Net borrowings (repayments) on notes payable 391 (71)
Net proceeds from issuance of common stock 427 1,303
Income tax benefit from stock option exercises 300 314
------------ ------------
Net cash provided by financing activities 1,118 1,546
------------ ------------
Net change in cash and cash equivalents (6,341) 4,851
Cash and cash equivalents at beginning of period 13,491 8,079
------------ ------------
Cash and cash equivalents at end of period $ 7,150 $ 12,930
============ ============
Supplemental disclosures of cash flow information:
Interest paid $ 226 $ 161
Income taxes paid 6,503 3,995
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
SPSS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements
reflect all adjustments which, in the opinion of management, are necessary for a
fair presentation of the results of the interim periods presented. All such
adjustments are of a normal recurring nature.
These consolidated financial statements should be read in conjunction
with the Company's audited consolidated financial statements and notes thereto
for the year ended December 31, 1997, included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following table sets forth the percentages that selected items in
the Consolidated Statements of Operations bear to net revenues:
<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUES PERCENTAGE OF NET REVENUES
-------------------------------- ------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- ------------------------------
1997 1998 1997 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Statement of Income Data:
Net revenues:
Desktop products 74% 72% 74% 73%
Large System products 14% 13% 14% 14%
Other products and services 12% 15% 12% 13%
-------------- -------------- -------------- --------------
Net revenues 100% 100% 100% 100%
Cost of revenues 8% 8% 9% 9%
-------------- -------------- -------------- --------------
Gross profit 92% 92% 91% 91%
Operating expenses:
Sales and marketing 49% 48% 49% 50%
Product development 18% 18% 16% 17%
General and administrative 11% 9% 12% 8%
Nonrecurring items 9% -- 3% --
Acquisition-related charges 23% -- 9% --
-------------- -------------- -------------- --------------
Operating expenses 110% 75% 89% 75%
-------------- -------------- -------------- --------------
Operating income (loss) -18% 17% 2% 16%
Other income (expense):
Net interest income -- -- -- 1%
Other income -- 1% -- --
-------------- -------------- -------------- --------------
Other income -- 1% -- 1%
-------------- -------------- -------------- --------------
Income before income taxes -18% 18% 2% 17%
Income tax expense (benefit) -3% 6% 2% 6%
-------------- -------------- -------------- --------------
Net income (loss) -15% 12% -- 11%
============== ============== ============== ==============
</TABLE>
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THREE MONTHS ENDED
SEPTEMBER 30, 1998.
Net Revenues. Net Revenues were $26,646,000 and $29,611,000 in the three months
ended September 30, 1997 and 1998, respectively, an increase of 11%. Revenues
from products designed for desktop computers ("Desktop products") increased
$1,492,000 (8%) over the corresponding period in 1997. In addition, revenues
from annual license renewals of Desktop
9
<PAGE> 10
products increased by $973,000, reflecting a $406,000 increase in annual license
renewals for SPSS for Windows. Revenues from products designed for mainframes,
minicomputers, and UNIX workstations ("Large System products") increased 10%
over the corresponding period in 1997 primarily due to new sales of SPSS
software on mainframes domestically and new sales of Quantime software. Other
products and services revenues increased 35% due to growth in training and
consulting services domestically, as well as the return of royalties from
Prentice Hall related to their distribution agreement for certain SPSS products
and student software. Revenues for the third quarter of 1998 were adversely
effected by changes in foreign currency exchange rates.
Cost of Revenues. Cost of revenues consists of costs of goods sold, amortization
of capitalized software development costs, and royalties paid to third parties.
Cost of revenues was $2,252,000 and $2,516,000 in the three months ended
September 30, 1997 and 1998, respectively, an increase of 12%. Such costs
increased due to higher cost of goods sold resulting from increased sales and
increased amortization of capitalized software. As a percentage of net revenues,
cost of revenues remained constant at 8%.
Sales and Marketing. Sales and marketing expenses were $13,040,000 and
$14,108,000 in the three months ended September 30, 1997 and 1998, respectively,
an increase of 8%. This increase was due to the expansion of the domestic and
international sales organizations and increased media placement, promotional
costs and training and consulting fees. As a percentage of net revenues, such
expenses decreased from 49% to 48%.
Product Development. Product development expenses were $4,713,000 and $5,334,000
(net of capitalized software development costs of $431,000 and $499,000) in the
three months ended September 30, 1997 and 1998, respectively, an increase of
13%. In the corresponding periods in 1997 and 1998, the Company's expense for
amortization of capitalized software and product translations, included in cost
of revenues, was $363,000 and $480,000, respectively. The increase in product
development expenses was primarily due to the higher cost of development
personnel and additions to the product development staff. As a percentage of net
revenues, product development expenses remained constant at 18%.
General and Administrative. General and administrative expenses were $3,078,000
and $2,620,000 in the three months ended September 30, 1997 and 1998,
respectively, a decrease of 15%. Such expenses decreased primarily due to a
reduction in administrative staff and other efficiencies gained in connection
with the acquisitions of the Quantime Limited ("Quantime") and In2itive
Technologies A/S entities. As a percentage of net revenues, general and
administrative expenses decreased from 11% to 9%.
Non-recurring charges. Non-recurring charges of $2,413,000 in 1997 resulted from
the revaluation of certain assets associated with the Company's Macintosh and
BMDP product lines.
Acquisition-related Charges. Acquisition-related charges of $6,053,000 in 1997
related primarily to the acquisition of Quantime ($5,985,000) and represented
the write-off of duplicate
10
<PAGE> 11
software products, professional fees and various other integration expenses, and
other acquisition related charges.
Net Interest Income. Net interest income was $16,000 and $85,000 in the three
months ended September 30, 1997 and 1998, respectively. This favorable variance
was primarily due to higher interest earned on short-term investments resulting
from higher cash balances in the three months ended September 30, 1998 compared
to September 30, 1997.
Other Income (Expense). Other income (expense) was ($100,000) and $153,000 in
the three months ended September 30, 1997 and 1998, respectively. Such
transactions consist primarily of foreign currency gains (losses).
Provision for Income Taxes. The provision for income taxes was ($965,000) and
$1,807,000 in the three months ended September 30, 1997 and 1998, respectively.
The ($965,000) income tax benefit for the three months ended September 30, 1997
reflects an effective tax rate of approximately 34 % for SPSS on a stand alone
basis, offset by an effective tax rate of approximately 132% for Quantime, due
to the non-deductibility of certain third quarter expenses. The $1,807,000
income tax expense for the three months ended September 30, 1998 reflects an
approximate tax rate of 34.3%.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
Net Revenues. Net Revenues were $80,684,000 and $87,269,000 in the nine months
ended September 30, 1997 and 1998, respectively, an increase of 8%. Revenues
from Desktop products increased 7% over the corresponding period in 1997 and
revenues from Large System products increased 4%. Revenues from annual license
renewals of Desktop products increased by $2,634,000 reflecting a $1,168,000
increase in annual license renewals for SPSS for Windows. Other products and
services revenues increased 22% due to the increase in training and consulting
services and revenues received from publications and student products.
Cost of Revenues. Cost of revenues were $7,267,000 and $7,525,000 in the nine
months ended September 30, 1997 and 1998, respectively, an increase of 4%. Such
costs increased due to higher cost of goods sold resulting from increased sales
and increased amortization of capitalized software. As a percentage of net
revenues, cost of revenues remained constant at 9%.
Sales and Marketing. Sales and marketing expenses were $39,335,000 and
$43,648,000 in the nine months ended September 30, 1997 and 1998, respectively,
an increase of 11%. This increase was due to the expansion of the domestic and
international sales organizations, increased media placement and promotional
costs and training and consulting fees. As a percentage of net revenues, sales
and marketing expenses increased from 49% to 50%.
Product Development. Product development expenses were $13,309,000 and
$15,075,000 (net of capitalized software development costs of $1,154,000 and
$1,526,000) in the nine months ended September 30, 1997 and 1998, respectively,
an increase of 13%. In the corresponding
11
<PAGE> 12
period in 1997 and 1998, the Company's expense for amortization of capitalized
software and product translations, included in cost of revenues, was $1,246,000
and $1,449,000, respectively. The increase in product development expense was
primarily due to the higher cost of development personnel and additions to the
product development staff. As a percentage of net revenues, product development
expense increased from 16% to 17%.
General and Administrative. General and administrative expenses were $9,547,000
and $6,625,000 in the nine months ended September 30, 1997 and 1998,
respectively, a decrease of 31%. Such expenses decreased primarily due to
reduction in the administrative staff and other efficiencies gained in
connection with the acquisitions of the Quantime and In2itive Technologies A/S
entities. As a percentage of net revenues, general and administrative expenses
decreased from 12% to 8%.
Non-recurring charges. Non-recurring charges of $2,413,000 in 1997 resulted from
the revaluation of certain assets associated with the Company's Macintosh and
BMDP product lines.
Acquisition-related Charges. Acquisition related charges of $7,118,000 related
primarily to the acquisition of Quantime and represented the write-off of
duplicate software products, professional fees and various other integration
expenses, as well as charges related to the acquisition of DeltaGraph software
from DeltaPoint, Inc. representing a one-time write-off of in-process technology
and other acquisition-related charges.
Net Interest Income. Net interest income was $226,000 and $171,000 in the nine
months ended September 30, 1997 and 1998, respectively. The unfavorable variance
was primarily due to lower interest earned on short-term investments resulting
from lower cash balances maintained in 1998.
Other Income (Expense). Other (expense) was ($116,000) and ($46,000) in the nine
months ended September 30, 1997 and 1998, respectively. Such transactions
consist of foreign currency losses.
Provision for Income Taxes. The provision for income taxes was $1,636,000 for
the nine months ended September 30, 1997 reflecting an effective tax rate of
approximately 33% for SPSS on a stand-alone basis and 111% for Quantime, due to
the nondeductibility of certain third quarter expenses. The provision for income
taxes were $4,980,000, for the nine months ended September 30, 1998, reflecting
an effective tax rate of 34.3%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's only long-term debt as of September 30, 1998 is a mortgage on
property in the UK and held approximately $12,930,000 in cash and cash
equivalents.
Funds in the first nine months of 1998 were used in operations and for payments
related to the Company's acquisition of Quantime and In2itive Technologies A/S,
as well as for capital expenditures including, among other things, new computer
systems for use in internal product
12
<PAGE> 13
development and leasehold improvements and furnishings for the Company's new
office space in the Sears Tower in Chicago, Illinois.
In May 1998, the Company entered into a new loan agreement (the "Agreement")
with American National Bank and Trust Company of Chicago ("American National")
to replace its existing agreement with Bank of America, N.T.S.A. Under the
Agreement, the Company has an available $10,000,000 unsecured line of credit
with American National, under which borrowings bear interest at either the prime
interest rate or the Eurodollar Rate, depending on the circumstances. As of
September 30, 1998, the Company had no borrowings under this line of credit. The
Company's Agreement with American National requires the Company to comply with
certain specified financial ratios and tests, and, among other things, restricts
the Company's ability to (i) incur additional indebtedness, (ii) create liens on
assets, (iii) make investments, (iv) engage in mergers, acquisitions or
consolidations where the Company is not the surviving entity, (v) sell assets,
(vi) engage in certain transactions with affiliates and (vii) amend its
organizational documents or make changes in capital structure.
The Company anticipates that amounts available under its line of credit,
existing sources of liquidity and cash flows generated from operations will be
sufficient to fund the Company's operations and capital requirements for the
foreseeable future. However, no assurance can be given that changing business
circumstances will not require additional capital for reasons that are not
currently anticipated or that the necessary additional capital will then be
available to the Company on favorable terms, or at all.
INTERNATIONAL OPERATIONS
Revenues from international operations were 44% of total net revenues in the
three months ended September 30, 1998 compared to 47% in the three months ended
September 30, 1997. For the first nine months, revenues from international
operations were 48% compared to 51% in 1997. The portion of 1998 revenues
attributable to international operations was negatively affected by changes in
foreign currency exchange rates. Net corporate revenues increased 11% in the
three months ended September 30, 1998 and 8% in the nine months ended September
30, 1998 when compared to the three and nine months ended September 30, 1997.
Net of the effects of changes in foreign currency rates, the increases would
have been approximately 13% for the quarter and 10% for the first nine months.
SAFE HARBOR
"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995: Certain statements in this report constitute "forward-looking
statements" within the meaning of Section 21E of the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"). Such statements involve known and
unknown risks and uncertainties which may cause the Company's actual results,
performance or achievements, or industry results, to be materially different
than any future results, performance or achievements expressed or implied in or
by such forward-looking statements. By way of example and not limitation, known
risks and uncertainties include the Company's ability to successfully integrate
or improve the performance
13
<PAGE> 14
of acquired businesses, change in market conditions or product demand,
competition and currency fluctuations, changes in product release schedules and
product acceptance. In light of these and other risks and uncertainties, the
inclusion of a forward-looking statements in this report should not be regarded
as a representation by the Company that any future results, performance or
achievements will be attained.
YEAR 2000 DISCLOSURE
Many computer systems and applications currently use two digits to define the
applicable year. As a result, date-sensitive systems may recognize the year 2000
as 1900 or not at all, which could cause miscalculations or system failures.
SPSS has not completed its assessment of its computerized systems to determine
their ability to correctly identify the year 2000, but currently believes that
costs of addressing this issue will not have a material adverse impact on SPSS'
financial position. However, if SPSS and third parties upon which it relies are
unable to address this issue in a timely manner, it could result in a material
financial risk to SPSS. In order to assure that this does not occur, SPSS plans
to devote all resources required to resolve any significant year 2000 issues in
a timely manner.
For information about SPSS products and the year 2000, visit SPSS' Web Site at
www.spss.com.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Currently there are no material pending legal proceedings to which
the Company or any of its subsidiaries is a party or to which any of
their property is subject.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits (Note: Management contracts and compensatory plans or
arrangements are underlined in the following list.)
Incorporation
Exhibit by Reference
Number Description of Document (if applicable)
- ------ ----------------------- ---------------
3.1 Certificate of Incorporation of the Company * 3.2
3.2 By-Laws of the Company * 3.4
4.1 Loan Agreement between the Company and + 4.1
American National Bank and Trust Company
Of Chicago
14
<PAGE> 15
4.2 Rights Agreement, dated June 18, 1998 between ** Exhibit 1
SPSS Inc. and Harris Trust and Savings Bank
15.1 Acknowledgment of Independent Certified
Public Accountants Regarding Independent
Auditors' Review Report
27.1 Financial Data Schedule
27.1a Financial Data Schedule (Restated)
- -------------------------------
* Previously filed with Amendment No. 2 to Form S-1 Registration
Statement of SPSS Inc. filed on August 4, 1993 (Registration No.
33-64732)
+ Previously filed with SPSS' Form 10-Q Quarterly Report for the
Quarterly period ended June 30, 1998.
** Previously filed with SPSS' Registration Statement on Form 8-A filed
on June 18, 1998
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during
the fiscal quarter ended September 30, 1998
15
<PAGE> 16
'
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
SPSS INC.
DATE: NOVEMBER 12, 1998 BY: /S/ JACK NOONAN
---------------------------------------------
JACK NOONAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BY THE UNDERSIGNED, IN HIS CAPACITY AS THE PRINCIPAL
FINANCIAL OFFICER OF THE REGISTRANT.
DATE: NOVEMBER 12, 1998 BY: /S/ EDWARD HAMBURG
---------------------------------------------
EDWARD HAMBURG
EXECUTIVE VICE-PRESIDENT, CORPORATE
OPERATIONS AND CHIEF FINANCIAL OFFICER
16
<PAGE> 17
EXHIBIT INDEX
Exhibit Page
Number Description of Document Number
- ------ ----------------------- ------
15.1 Acknowledgement of Independent Certified Public
Accountants Regarding Independent Auditors' Review
Report
27.1 Financial Data Schedule
27.1a Financial Data Schedule (Restated)
17
<PAGE> 1
EXHIBIT 15.1
ACKNOWLEDGMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
REGARDING INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors
SPSS Inc.:
With respect to the Registration Statements on Form S-8 (nos. 333-63167,
333-25869, 33-73130, 33-80799, 33-73120, and 33-74402) of SPSS Inc., we
acknowledge our awareness of the use therein of our report dated November 2,
1998 related to our review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an account
or a report prepared or certified by an accountant within the meaning of
sections 7 and 11 of the Act.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
November 11, 1998
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPSS INC.
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1998 AND
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 0 12,930
<SECURITIES> 0 0
<RECEIVABLES> 0 29,849
<ALLOWANCES> 0 1,689
<INVENTORY> 0 2,769
<CURRENT-ASSETS> 0 46,448
<PP&E> 0 36,255
<DEPRECIATION> 0 21,991
<TOTAL-ASSETS> 0 73,962
<CURRENT-LIABILITIES> 0 27,331
<BONDS> 0 0
0 0
0 0
<COMMON> 0 90
<OTHER-SE> 0 43,423
<TOTAL-LIABILITY-AND-EQUITY> 0 73,962
<SALES> 29,611 87,269
<TOTAL-REVENUES> 29,611 87,269
<CGS> 2,516 7,525
<TOTAL-COSTS> 2,516 7,525
<OTHER-EXPENSES> 22,062 65,348
<LOSS-PROVISION> 173 301
<INTEREST-EXPENSE> 36 134
<INCOME-PRETAX> 5,271 14,521
<INCOME-TAX> 1,807 4,980
<INCOME-CONTINUING> 3,464 9,541
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,464 9,541
<EPS-PRIMARY> 0.38 1.07
<EPS-DILUTED> 0.36 1.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPSS INC.
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1997 AND
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 0 7,150
<SECURITIES> 0 0
<RECEIVABLES> 0 25,814
<ALLOWANCES> 0 1,319
<INVENTORY> 0 2,332
<CURRENT-ASSETS> 0 37,779
<PP&E> 0 27,396
<DEPRECIATION> 0 18,107
<TOTAL-ASSETS> 0 57,463
<CURRENT-LIABILITIES> 0 25,485
<BONDS> 0 0
0 0
0 0
<COMMON> 0 88
<OTHER-SE> 0 28,453
<TOTAL-LIABILITY-AND-EQUITY> 0 57,463
<SALES> 26,646 80,684
<TOTAL-REVENUES> 26,646 80,684
<CGS> 2,252 7,267
<TOTAL-COSTS> 2,252 7,267
<OTHER-EXPENSES> 29,297 71,722
<LOSS-PROVISION> 118 271
<INTEREST-EXPENSE> 166 231
<INCOME-PRETAX> (4,987) 1,805
<INCOME-TAX> (965) 1,636
<INCOME-CONTINUING> (4,022) 169
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,022) 169
<EPS-PRIMARY> (0.46) 0.02
<EPS-DILUTED> (0.46) 0.02
</TABLE>
