SPSS INC
10-Q, 2000-11-14
PREPACKAGED SOFTWARE
Previous: RURAL CELLULAR CORP, 10-Q, EX-27, 2000-11-14
Next: SPSS INC, 10-Q, EX-15.1, 2000-11-14



<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, 2000


                        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 9, 2000, THERE WERE 10,014,024 SHARES OF COMMON STOCK
OUTSTANDING, PAR VALUE $.01, OF THE REGISTRANT.

===============================================================================


<PAGE>   2


                                    SPSS INC.
                                    FORM 10-Q
                        QUARTER ENDED SEPTEMBER 30, 2000

                                      INDEX

PART I - FINANCIAL INFORMATION                                            PAGE
                                                                          ----

     ITEM 1.  FINANCIAL STATEMENTS

                  INDEPENDENT AUDITORS' REVIEW REPORT                       3

                  CONSOLIDATED BALANCE SHEETS
                  AS OF DECEMBER 31, 1999 AND
                  SEPTEMBER 30, 2000 (UNAUDITED)                            4

                  CONSOLIDATED STATEMENTS OF INCOME FOR THE
                  THREE AND NINE MONTHS ENDED SEPTEMBER 30,
                  1999 (UNAUDITED) AND 2000 (UNAUDITED)                     5

                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
                  1999 (UNAUDITED) AND 2000 (UNAUDITED)                     6

                  CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
                  MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
                  AND 2000 (UNAUDITED)                                      7

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                8

     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION              9

     ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
                  ABOUT MARKET RISK                                         14

PART II - OTHER INFORMATION

     ITEM 1.  LEGAL PROCEEDINGS                                             14

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                              15




                                       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, 2000 and the related consolidated statements of income and
comprehensive income for the three and nine-month periods ended September 30,
1999 and 2000 and the related consolidated statements of cash flows for the nine
months ended September 30, 1999 and 2000. These consolidated financial
statements are the responsibility of SPSS Inc. management.

We conducted our review 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 review, 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, 1999, and the related consolidated statements of income,
comprehensive income, stockholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated March 17, 2000, 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, 1999, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.




/s/ KPMG LLP

Chicago, Illinois
November 1, 2000


                                       3


<PAGE>   4



                           SPSS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                                    DECEMBER 31,  SEPTEMBER 30,
                                                        1999           2000
                                                    ------------  -------------
                                      ASSETS                       (unaudited)
CURRENT ASSETS:
     Cash and cash equivalents                       $   16,770    $    8,712
     Accounts receivable, net of allowances              42,901        49,438
     Inventories                                          2,895         4,241
     Deferred income taxes                                3,042         3,228
     Prepaid expenses and other current assets            2,833         4,790
                                                     ----------    ----------
          Total current assets                           68,441        70,409
                                                     ----------    ----------

EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost:
     Land and building                                    1,671         1,530
     Furniture, fixtures, and office equipment            7,617         8,029
     Computer equipment and software                     25,982        33,719
     Leasehold improvements                               6,480         7,338
                                                     ----------    ----------
                                                         41,750        50,616
     Less accumulated depreciation and amortization      25,639        28,404
                                                     ----------    ----------
Net equipment and leasehold improvements                 16,111        22,212
                                                     ----------    ----------
Capitalized software development costs, net
  of accumulated amortization                            13,078        14,612
Goodwill, net of accumulated amortization                 5,339         8,514
Other assets                                              3,746         4,677
                                                     ----------    ----------
                                                     $  106,715    $  120,424
                                                     ==========    ==========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Notes payable                                   $    9,000    $    9,250
     Accounts payable                                     5,670         7,906
     Accrued royalties                                      488           447
     Accrued rent                                         1,050         1,221
     Other accrued liabilities                            8,270         8,475
     Income taxes and value added taxes payable           3,664         4,302
     Customer advances                                      529           517
     Deferred revenues                                   11,098        10,406
                                                     ----------    ----------
          Total current liabilities                      39,769        42,524
                                                     ----------    ----------

Deferred income taxes                                     3,809         3,809
Other non-current liabilities                             1,595         1,188
STOCKHOLDERS'  EQUITY:
     Common Stock, $.01 par value; 50,000,000 shares
       authorized; 9,597,641 and 9,973,291 shares
       issued and outstanding in 1999 and 2000,
       respectively                                          96           100
     Additional paid-in capital                          48,569        52,159
     Accumulated other comprehensive loss                  (119)       (4,978)
     Retained earnings                                   12,996        25,622
                                                     ----------    ----------

          Total stockholders'  equity                    61,542        72,903
                                                     ----------    ----------
                                                     $  106,715    $  120,424
                                                     ==========    ==========


          See accompanying notes to consolidated financial statements.


                                       4

<PAGE>   5



                           SPSS INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)


                             THREE MONTHS ENDED         NINE MONTHS ENDED
                                 SEPTEMBER 30,            SEPTEMBER 30,
                           ------------------------  ------------------------

                              1999         2000         1999         2000
                           -----------  -----------  -----------  -----------

  Net revenues:
   Analytical solutions    $     4,189  $     7,914  $    11,466  $    22,787
   Market research               7,667        9,927       21,896       25,791
   Statistics                   22,763       21,730       67,900       65,951
                           -----------  -----------  -----------  -----------

  Total net revenues            34,619       39,571      101,262      114,529

  Operating expenses:
   Cost of revenues              3,253        2,960        9,062        8,938
   Sales and marketing          16,109       20,335       49,370       59,157
   Product development           6,581        6,609       18,505       19,552
   General and
     administrative              2,607        2,358        8,007        6,656
                           -----------  -----------  -----------  -----------

  Operating expenses            28,550       32,262       84,944       94,303
                           -----------  -----------  -----------  -----------

  Operating income               6,069        7,309       16,318       20,226

  Other income (expense):
   Net interest expense           (332)        (182)        (483)        (485)
   Other income                    539           43          220          624
                           -----------  -----------  -----------  -----------

  Other income (expense)           207         (139)        (263)         139
                           -----------  -----------  -----------  -----------

  Income before
     income taxes                6,276        7,170       16,055       20,365
  Income tax expense             2,195        2,725        5,735        7,739
                           -----------  -----------  -----------  -----------

  Net income               $     4,081  $     4,445  $    10,320  $    12,626
                           ===========  ===========  ===========  ===========

  Basic net income
     per share             $      0.42  $      0.45  $      1.08  $      1.29
                           ===========  ===========  ===========  ===========

  Shares used in
     computing basic net
     income per share        9,605,683    9,862,856    9,594,292    9,760,937
                           ===========  ===========  ===========  ===========

  Diluted net income
     per share             $      0.40  $      0.42  $      1.01  $      1.19
                           ===========  ===========  ===========  ===========

  Shares used in computing
     diluted net income
     per share              10,282,765   10,638,494   10,175,576   10,592,970
                           ===========  ===========  ===========  ===========


          See accompanying notes to consolidated financial statements.


                                       5



<PAGE>   6




                           SPSS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (IN THOUSANDS)
                                   (UNAUDITED)



                             THREE MONTHS ENDED         NINE MONTHS ENDED
                                 SEPTEMBER 30,             SEPTEMBER 30,
                           ------------------------  ------------------------

                              1999         2000          1999        2000
                           -----------  -----------  -----------  -----------

Net income                 $     4,081  $     4,445  $    10,320  $    12,626

Other comprehensive
  income (loss):
     Foreign currency
       translation
       adjustment                1,116       (1,769)         107       (4,859)
                           -----------  -----------  -----------  -----------
Comprehensive income       $     5,197  $     2,676  $    10,427  $     7,767
                           ===========  ===========  ===========  ===========


          See accompanying notes to consolidated financial statements.

                                       6


<PAGE>   7



                           SPSS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

                                                       NINE MONTHS ENDED
                                                          SEPTEMBER 30,
                                                     ------------------------
                                                         1999         2000
                                                     -----------  -----------

 Cash flows from operating activities:
     Net income                                      $    10,320  $    12,626
     Adjustments to reconcile net income to net cash
       (used in) provided by operating activities:
           Depreciation and amortization                   6,466        7,891
           Deferred income taxes                            (830)        (186)
           Gain on sale of product line                       --       (1,397)
           Income tax benefit from stock
             option exercise                                  85        1,705
           Changes in assets and liabilities:
              Accounts receivable                         (3,425)      (6,537)
              Inventories                                   (148)      (1,319)
              Accounts payable                              (350)       2,236
              Accrued royalties                             (136)         (41)
              Accrued expenses                            (1,842)         646
              Accrued income taxes                        (2,329)         638
              Deferred revenues                           (2,421)        (692)
              Other                                         (300)      (7,606)
                                                     -----------  -----------

 Net cash provided by operating activities                 5,090        7,964
                                                     -----------  -----------

 Cash flows from investing activities:
      Capital expenditures, net                           (4,504)     (10,049)
      Divesture of product line                               --        1,700
      Purchase cost-based investment                          --       (1,450)
      Capitalized software development costs              (3,543)      (4,480)
      1999 acquisition earn-out payments                      --       (3,882)
                                                     -----------  -----------

 Net cash used in investing activities                    (8,047)     (18,161)
                                                     -----------  -----------

 Cash flows from financing activities:
      Net (repayments) borrowings on notes payable          (843)         250
      Net proceeds from exercise of stock options            376        1,889
                                                     -----------  -----------

 Net cash provided by (used in) financing activities        (467)       2,139
                                                     -----------  -----------

 Net change in cash and cash equivalents                  (3,424)      (8,058)
 Cash and cash equivalents at beginning of period         16,297       16,770
                                                     -----------  -----------
 Cash and cash equivalents at end of period          $    12,873  $     8,712
                                                     ===========  ===========

 Supplemental disclosures of cash flow information:
      Interest paid                                  $       767  $       775
      Income taxes paid                                    9,576        5,087
                                                     ===========  ===========

          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 SPSS'
audited consolidated financial statements and notes thereto for the year ended
December 31, 1999, included in SPSS' Annual Report on Form 10-K filed with the
Securities and Exchange Commission.

NOTE 2 - RECLASSIFICATIONS

Certain operating expenses of prior periods have been reclassified to conform to
the current presentation.




                                       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 Income bear to net revenues:

<TABLE>
<CAPTION>
                                        PERCENTAGE OF NET REVENUES    PERCENTAGE OF NET REVENUES
                                        --------------------------    --------------------------
                                           THREE MONTHS ENDED             NINE MONTHS ENDED
                                             SEPTEMBER 30,                  SEPTEMBER 30,
                                        --------------------------    --------------------------
                                           1999            2000           1999           2000
                                        -----------    -----------    -----------    -----------
<S>                                     <C>            <C>            <C>            <C>

      Statement of Income Data:
      Net revenues:
           Analytical solutions                  12%            20%            11%            20%
           Market research                       22%            25%            22%            22%
           Statistics                            66%            55%            67%            58%
                                        -----------    -----------    -----------    -----------

      Net revenues                              100%           100%           100%           100%

      Operating expenses:
           Cost of revenues                       9%             8%             9%             8%
           Sales and marketing                   47%            51%            49%            51%
           Product development                   19%            17%            18%            17%
           General and administrative             7%             6%             8%             6%
                                        -----------    -----------    -----------    -----------

      Operating expenses                         82%            82%            84%            82%
                                        -----------    -----------    -----------    -----------

      Operating income                           18%            18%            16%            18%
                                        -----------    -----------    -----------    -----------
      Other income (expense):
           Net interest expense                 (1%)            --             --             --
           Other income (expense)                1%             --             --             --
                                        -----------    -----------    -----------    -----------

      Other income (expense)
                                                 --             --             --             --
                                        -----------    -----------    -----------    -----------

      Income before income taxes                 18%            18%            16%            18%
      Income tax expense                          6%             7%             6%             7%
                                        -----------    -----------    -----------    -----------

      Net income                                 12%            11%            10%            11%
                                        ===========    ===========    ===========    ===========
</TABLE>


COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1999 TO THREE MONTHS ENDED
SEPTEMBER 30, 2000.

Net Revenues. Net revenues were $34,619,000 in the three months ended September
30, 1999 and $39,571,000 in the three months ended September 30, 2000, an
increase of 14%. This increase was primarily due to growth in analytical
solutions revenues of 89% and market research revenues of 29% over the
corresponding period in 1999. Offsetting this revenue growth was a decrease in
statistics revenue of 5%. The statistics revenue decline was primarily due to
shifts in sales and marketing resources toward developing the higher-growth
markets for analytical solutions, the divestiture of the Company's products for
statistical quality control, and the elimination of certain products provided
by third parties. Revenues were adversely effected by changes in foreign
currency exchange rates.



                                       9




<PAGE>   10
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 $3,253,000 in the three months ended September 30, 1999 and
$2,960,000 in the three months ended September 30, 2000, a decrease of 9%. Such
costs decreased due to lower cost of goods sold, primarily shipping costs, and
lower royalty expense on third party products resulting from the elimination of
certain such products. These reductions were partially offset by an increase on
amortized software development costs. As a percentage of net revenues, cost of
revenues decreased from 9% to 8%.

Sales and Marketing. Sales and marketing expenses were $16,109,000 in the three
months ended September 30, 1999 and $20,335,000 in the three months ended
September 30, 2000, an increase of 26%. This increase reflects the expansion of
the sales management as well as other staff additions, particularly more senior
sales representatives and professional services personnel. This increase was
partially offset by changes in foreign currency exchange rates. As a percentage
of net revenues, such expenses increased from 47% to 51%.

Product Development. Product development expenses were $6,581,000 (net of
capitalized software development costs of $712,000) in the three months ended
September 30, 1999 and $6,609,000 (net of capitalized software development costs
of $1,264,000) in the three months ended September 30, 2000. SPSS expense for
amortization of capitalized software and product translations, included in cost
of revenues, was $891,000 in the three months ended September 30, 1999 and
$957,000 in the three months ended September 30, 2000. The slight increase in
product development expenses was primarily due to staff additions and increases
in staff compensation. As a percentage of net revenues, product development
expenses decreased from 19% to 17%.

General and Administrative. General and administrative expenses were $2,607,000
in the three months ended September 30, 1999 and $2,358,000 in the three months
ended September 30, 2000, a decrease of 10%. The decrease was due to reduced
costs by consolidating United States accounting functions in 1999 offset by the
addition of amortization expense related to Integral Solutions Limited
intangibles. As a percentage of net revenues, general and administrative
expenses decreased from 7% to 6%.

Net Interest Expense. Net interest expense was $332,000 in the three months
ended September 30, 1999 and $182,000 in the three months ended September 30,
2000, primarily due to debt service on borrowings against SPSS' line-of-credit.

Other Income. Other income was $539,000 in the three months ended September 30,
1999 and $43,000 in the three months ended September 30, 2000, primarily due to
foreign currency transactions.

Provision for Income Taxes. The provision for income taxes was $2,195,000 in the
three months ended September 30, 1999 and $2,725,000 in the three months ended
September 30, 2000.



                                       10
<PAGE>   11
During 1999 the provision for income taxes represented an effective tax rate of
approximately 34.3%. In 2000, the effective tax rate has increased to
approximately 38%.

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 TO NINE MONTHS ENDED
SEPTEMBER 30, 2000.

Net Revenues. Net revenues were $101,262,000 in the nine months ended September
30, 1999 and $114,529,000 in the nine months ended September 30, 2000, an
increase of 13%. This increase was primarily due to growth in analytical
solutions revenues of 99%, an 18% increase in market research and a decrease in
statistics revenue of 3%. The statistics revenue decline was primarily due to
shifts in sales and marketing resources toward developing the higher-growth
markets for analytical solutions, the divestiture of the Company's products for
statistical quality control, and the elimination of certain products provided by
third parties. Revenues 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 $9,062,000 in the nine months ended September 30, 1999 and
$8,938,000 in the nine months ended September 30, 2000, a decrease of 1%. Such
costs decreased due to a decrease in shipping costs and royalties paid to third
party software providers. As a percentage of net revenues, cost of revenues
decreased from 9% to 8%.

Sales and Marketing. Sales and marketing expenses were $49,370,000 in the nine
months ended September 30, 1999 and $59,157,000 in the nine months ended
September 30, 2000, an increase of 20%. This increase reflects the expansion of
the sales management as well as other staff additions, particularly new sales
and professional services personnel. This increase was partially offset by
changes in foreign currency exchange rates. As a percentage of net revenues,
such expenses increased from 49% to 51%.

Product Development. Product development expenses were $18,505,000 (net of
capitalized software development costs of $1,632,000) in the nine months ended
September 30, 1999 and $19,552,000 (net of capitalized software development
costs of $3,133,000) in the nine months ended September 30, 2000, an increase of
6%. SPSS expense for amortization of capitalized software and product
translations, included in cost of revenues, was $2,222,000 in the nine months
ended September 30, 1999 and $2,844,000 in the nine months ended September 30,
2000. The increase in product development expenses was primarily due to staff
additions and increases in staff compensation. As a percentage of net revenues,
product development expenses decreased from 18% to 17%.

General and Administrative. General and administrative expenses were $8,007,000
in the nine months ended September 30, 1999 and $6,656,000 in the nine months
ended September 30, 2000, a decrease of 17%. The decrease was due to reduced
costs by consolidating United States based accounting functions offset by the
addition of amortization expense related to Integral Solutions Limited
intangibles. As a percentage of net revenues, general and administrative
expenses decreased from 8% to 6%.



                                       11
<PAGE>   12



Net Interest Expense. Net interest expense was $483,000 in the nine months ended
September 30, 1999 and $485,000 in the nine months ended September 30, 2000,
primarily due to debt service on borrowings against SPSS' line-of-credit.

Other Income. Other income was $220,000 in the nine months ended September 30,
1999, consisting mainly of foreign currency transactions. Other income was
$624,000 in the nine months ended September 30, 2000 and consisted of the gain
on the sale of the QI Analyst quality product line to Wonderware Corporation of
$1,398,000 offset partially by $774,000 of foreign currency transactions.

Provision for Income Taxes. The provision for income taxes was $5,735,000 in the
nine months ended September 30, 1999 and $7,739,000 in the nine months ended
September 30, 2000. During 1999, the provision for income taxes represented an
effective tax rate of approximately 34.3%. In 2000, the effective tax rate has
increased to approximately 38%.

LIQUIDITY AND CAPITAL RESOURCES

The Company's long-term debt as of September 30, 2000 is a mortgage on property
in the United Kingdom, and the balance of the purchase price due to DataStat,
S.A. for the acquisition of the VerbaStat product. As of September 30, 2000,
SPSS held approximately $8,712,000 of cash and cash equivalents.

Funds in the first nine months of 2000 were provided primarily by operations, as
well as the exercise of stock options. Capital expenditures included, among
other things, new computer systems for use in internal product development and
sales, furniture and equipment related to the office expansions, and
expenditures for implementing a new corporate-wide reporting system.

In June 2000, SPSS revised its loan agreement with American National Bank and
Trust Company of Chicago. Under the new loan agreement, SPSS has an available
$20,000,000 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, 2000, SPSS had
$9,250,000 outstanding under this line of credit. The Company's agreement with
American National requires SPSS to comply with certain specified financial
ratios and tests, and, among other things, restricts the Company's ability to:

     - incur additional indebtedness,
     - create liens on assets,
     - make investments,
     - engage in mergers, acquisitions or consolidations where SPSS is not the
       surviving entity,
     - sell assets,
     - engage in certain transactions with affiliates and
     - amend its organizational documents or make changes in capital structure.



                                       12


<PAGE>   13
SPSS anticipates that amounts available from cash and cash equivalents on hand,
under its line of credit, 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 SPSS on favorable terms or at all.

INTERNATIONAL OPERATIONS

Revenues from international operations were 46% of total net revenues in the
three months ended September 30, 1999 and 44% in the three months ended
September 30, 2000. The portion of revenues attributable to international
operations were negatively affected by changes in foreign currency exchange
rates. Net corporate revenues increased 14% in the three month period ended
September 30, 2000, when compared to the three month period ended September 30,
1999. Net of the effects of changes in foreign currency rates, the increase
would have been approximately 18% for the three months ended September 30, 2000
when compared to the three months ended September 30, 1999.

RECENT ACCOUNTING PRONOUNCEMENTS

Financial Accounting Standards Board Interpretation No. 44 (FIN 44), Accounting
for Certain Transactions Involving Stock Compensation, an interpretation of APB
Opinion No. 25, is effective for financial statements beginning after July 1,
2000. The Company determined that options were granted to an individual deemed
to be a non-employee under FIN 44. This resulted in compensation expense charges
of $56,000 in the third quarter of fiscal 2000. These options will be accounted
for using variable plan accounting and the amounts of future compensation
expense will be determined based upon the Company's stock price at each
reporting date.

During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended, which is effective for all
fiscal years beginning after June 15, 2000. SFAS No. 133 establishes a
comprehensive standard for the recognition and measurement of derivative
instruments and hedging activities. The Company does not expect the adoption of
the new standard to have a material effect on its financial position,
liquidity, or results of operations.

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements that involve risks and
uncertainties that could cause the results of SPSS Inc. and its subsidiaries to
differ materially from those expressed or implied by such forward-looking
statements. These risks include the timely development, production, and
acceptance of new products and services, market conditions, competition, the
flow of products into third-party distribution channels, and other risks
detailed from time to time in the Company's Securities and Exchange Commission
filings. The words "anticipate," "believe," "estimate," "expect," "plan,"
"intend," "will," and similar expressions, as they relate to SPSS or its
management, may identify forward-looking statements. Such statements reflect the
current views of SPSS with respect to future events and are subject to certain
risks, uncertainties, and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, or expected. SPSS does not intend to update these
forward-looking statements.

                                       13


<PAGE>   14


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         SPSS' market risk disclosures pursuant to item 3 are not material and
are therefore not required.

                           PART II - OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

            Currently there are no material pending legal proceedings to
            which SPSS or any of its subsidiaries is a party or to which
            any of their property is subject.




                                       14


<PAGE>   15


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)
------       -----------------------                            ---------------

    2.1      Agreement and Plan of Merger among SPSS Inc.,              @2.1
             SPSS ACSUB, Inc., Clear Software, Inc. and the
             shareholders named therein, dated
             September 23, 1996.

    2.2      Agreement and Plan of Merger among SPSS Inc.,         @@Annex A
             SPSS Acquisition Inc. and Jandel Corporation,
             dated October 30, 1996.

    2.3      Asset Purchase Agreement by and between SPSS Inc.         ##2.3
             and DeltaPoint, Inc., dated as of May 1, 1997

    2.4      Stock Purchase Agreement among the Registrant,           @@@2.1
             Edward Ross, Richard Kottler, Norman Grunbaum,
             Louis Davidson and certain U.K.-Connected
             Shareholders or warrant holders of Quantime
             Limited named therein, dated as of September 30,
             1997, together with a list briefly identifying
             the contents of omitted schedules.

    2.5      Stock Purchase Agreement among the Registrant,           @@@2.2
             Edward Ross, Richard Kottler, Norman Grunbaum,
             Louis Davidson and certain Non-U.K. Shareholders or
             warrant holders of Quantime Limited named therein,
             dated as of September 30, 1997, together with a
             list briefly identifying the contents of omitted
             schedules.

    2.6      Stock Purchase Agreement by and among SPSS Inc. and     @@@@2.1
             certain Shareholders of Quantime Limited listed
             on the signature pages thereto, dated November 21,
             1997.

    2.7      Stock Purchase Agreement by and among Jens Nielsen,     @@@@2.2
             Henrik Rosendahl, Ole Stangegaard, Lars Thinggaard,
             Edward O'Hara, Bjorn Haugland, 2M Invest and the
             Shareholders listed on Exhibit A thereto, dated
             November 21, 1997.

    2.8      Stock Purchase Agreement by and among SPSS Inc. and    #### 2.1
             the Shareholders of Integral Solutions Limited
             listed on the signature pages hereof, dated as of
             December 31, 1998.



                                       15

<PAGE>   16


    2.9      Share Purchase Agreement by and among SPSS Inc.,         $  2.9
             Surveycraft Pty Ltd. and Jens Meinecke and Microtab
             Systems Pty Ltd., dated as of November 1, 1998.

   2.10      Stock Acquisition Agreement by and among SPSS Inc.      $$  2.1
             Vento Software, Inc. and David Blyer, John Gomez and
             John Pappajohn, dated as of November 29, 1999.

   2.11      Asset Purchase Agreement by and between SPSS Inc.       %% 2.11
             and DataStat, S.A., dated as of December 23, 1999.

    3.1      Certificate of Incorporation of SPSS                      * 3.2

    3.2      By-Laws of SPSS                                           * 3.4

   10.1      Employment Agreement with Jack Noonan                    + 10.1

   10.2      Agreement with Valletta                                 ** 10.2

   10.3      Agreement between SPSS and                             **  10.5
             Prentice Hall

   10.4      Software Distribution Agreement between                **  10.6
             SPSS and IBM

   10.5      HOOPS Agreement                                        **  10.7

   10.6      Stockholders Agreement                                  *  10.8

   10.7      Agreements with CSDC                                    *  10.9

   10.8      Amended 1991 Stock Option Plan                         *  10.10

   10.9      SYSTAT Asset Purchase Agreement                          ++10.9

  10.10      1994 Bonus Compensation                                +++10.11

  10.11      Lease for Chicago, Illinois Office                     +++10.12

  10.12      Amendment to Lease for Chicago, Illinois Office        +++10.13

  10.13      1995 Equity Incentive Plan                              x 10.14

  10.14      1995 Bonus Compensation                                xx 10.15

  10.15      Lease for Chicago, Illinois Office                     xx 10.16

  10.16      Amended and Restated 1995 Equity Incentive Plan       xxx 10.17

  10.17      1996 Bonus Compensation                              xxxx 10.18




                                       16


<PAGE>   17


  10.18      Software Distribution Agreement between the          xxxx 10.19
             Company and Banta Global Turnkey

  10.19      Lease for Chicago, Illinois in Sears Tower              # 10.20

  10.20      1997 Bonus Compensation                               ### 10.21

  10.21      Norman H. Nie Consulting L.L.C. Agreement             ### 10.22

  10.22      Second Amended and Restated 1995 Equity                      &A
             Incentive Plan

  10.23      1998 Bonus Compensation                                       $

  10.24      Third Amended and Restated 1995 Equity                 $$$ 10.1
             Incentive Plan

  10.25      Loan Agreement dated June 1, 1999 between             $$$$ 10.1
             SPSS and American National Bank and Trust
             Company of Chicago

  10.26      First Amendment to Loan Agreement dated               $$$$ 10.2
             June 1, 1999, between SPSS and American
             National Bank and Trust Company of Chicago

  10.27      1999 Bonus Compensation                                 % 10.27
                 -----------------------

  10.28      Amendment to Sears Tower Lease, Chicago, Illinois      %% 10.28

  10.29      Amended and Restated Loan Agreement dated              %$ 10.29
             June 1, 2000 Between SPSS and American
             National Bank and Trust Company of Chicago

  10.30      Asset Purchase Agreement by and between SPSS and       %$ 10.30
             Wonderwear Corporation dated as of May 11, 2000

   15.1      Acknowledgement of Independent Certified
             Public Accountants Regarding Independent
             Auditors' Review Report

  27.1a      Financial Data Schedule

  27.1b      Financial Data Schedule (Restated)



                                       17




<PAGE>   18



-------------------------------


   @    Previously filed with SPSS Inc.'s Report on Form 8-K, dated September
        26, 1996, filed on October 11, 1996, as amended on Form 8-K/A-1, filed
        November 1, 1996. (File No. 000-22194)

  @@    Previously filed with Amendment No. 1 to Form S-4 Registration
        Statement of SPSS Inc. filed on November 7, 1996. (File No. 333-15427)

 @@@    Previously filed with SPSS Inc.'s Report on Form 8-K, dated September
        30, 1997, filed on October 15, 1997. (File No. 000-22194)

@@@@    Previously filed with the Form S-3 Registration Statement of SPSS Inc.
        filed on November 26, 1997. (File No. 333-41207)

   *    Previously filed with Amendment No. 2 to Form S-1 Registration
        Statement of SPSS Inc. filed on August 4, 1993. (File No. 33-64732)

  **    Previously filed with Amendment No. 1 to Form S-1 Registration
        Statement of SPSS Inc. filed on July 23, 1993. (File No. 33-64732)

 ***    Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the
        Quarterly period ended September 30, 1993. (File No. 000-22194)

   +    Previously filed with the Form S-1 Registration Statement of SPSS Inc.
        filed on June 22, 1993. (File No. 33-64732)

  ++    Previously filed with the Form S-1 Registration Statement of SPSS Inc.
        filed on December 5, 1994. (File No. 33-86858)

 +++    Previously cited with the Form 10-K Annual Report of SPSS Inc. for
        the year ended December 31, 1994.  (File No. 000-22194)

   x    Previously filed with SPSS Inc.'s 1995 Proxy Statement.
        (File No. 000-22194)

  xx    Previously filed with the Form 10-K Annual Report of SPSS Inc. for
        the year ended December 31, 1995. (File No. 000-22194)

 xxx    Previously filed with SPSS Inc.'s 1996 Proxy Statement.
       (File No. 000-22194)

xxxx    Previously filed with the Form 10-K Annual Report of SPSS Inc. for
        the year ended December 31, 1996. (File No. 000-22194)

   #    Previously filed with the Form 10-Q Quarterly Report of SPSS Inc.
        for the quarterly period ended March 31, 1997. (File No. 000-22194)

  ##    Previously filed with the Form 10-Q Quarterly Report of SPSS Inc.
        for the


                                       18

<PAGE>   19



        quarterly period ended June 30, 1997. (File No. 000-22194)

 ###    Previously filed with Form 10-K Annual Report of SPSS Inc. for the
        year ended December 31, 1997. (File No. 000-22194)

####    Previously filed with SPSS Inc.'s Report on Form 8-K, dated December
        31, 1998, filed on January 15, 1999, as amended on Form 8-K/A filed
        March 12, 1999. (File No. 000-22194)

   &    Previously filed with SPSS Inc.'s 1998 Proxy Statement.
        (File No. 000-22194)

   $    Previously filed with Form 10-K Annual Report of SPSS Inc. for the
        year ended December 31, 1998.  (File No. 000-22194)

  $$    Previously filed with SPSS Inc. Report on Form 8-K, dated November 29,
        1999, filed December 10, 1999. (File No. 000-22194)

 $$$    Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the
        quarterly period ended June 30, 1999.  (File No. 000-22194)

$$$$    Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the
        quarterly period ended September 30, 1999. (File No. 000-22194)

   %    Previously filed with SPSS Inc. Form 10-K Annual Report for year ended
        December 31, 1999. (File No. 000-22194)

  %%    Previously filed with SPSS Inc. Form 10-Q Quarterly Report for the
        quarterly period ended March 31, 2000.  (File No. 000-22194)

  %$    Previously filed with SPSS Inc. Form 10-Q Quarterly Report for the
        quarterly period ended June 30, 2000.  (File No. 000-22194)

        (b)  Reports on Form 8-K

             There were no reports on Form 8-K filed by SPSS during the
        fiscal quarter ended September 30, 2000.

                                       19


<PAGE>   20



                                   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 14, 2000       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 14, 2000       BY:  /s/ EDWARD HAMBURG
                                        ---------------------------------------
                                        EDWARD HAMBURG
                                        EXECUTIVE VICE-PRESIDENT, CORPORATE
                                        OPERATIONS AND CHIEF FINANCIAL OFFICER


                                       20


<PAGE>   21



                                  EXHIBIT INDEX


Exhibit                                                                 Page
Number     Description of Document                                     Number
------     -----------------------                                     ------

  15.1     Acknowledgement of Independent Certified Public
           Accountants Regarding Independent Auditors' Review Report

 27.1a     Financial Data Schedule

 27.1b     Financial Data Schedule (Restated)



                                       21





© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission