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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 DECEMBER 31, 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
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
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
---- ---
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K 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. [ ]
THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT (BASED UPON THE PER SHARE CLOSING SALE PRICE OF
$17.875 ON MARCH 16, 2001, AND FOR THE PURPOSE OF THIS CALCULATION ONLY, THE
ASSUMPTION THAT ALL REGISTRANT'S DIRECTORS AND EXECUTIVE OFFICERS ARE
AFFILIATES) WAS APPROXIMATELY $137 MILLION.
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK, PAR
VALUE $.01, AS OF MARCH 16, 2001, WAS 10,037,584.
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SPSS INC.
TABLE OF CONTENTS
PART I
Item 1. Business.................................................................... 3
Item 2. Properties.................................................................. 19
Item 3. Legal Proceedings........................................................... 19
Item 4. Submission of Matters to a Vote of Security Holders......................... 19
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.................................................................. 20
Item 6. Selected Consolidated Financial Data........................................ 21
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................. 22
Item 7A. Quantitative and Qualitative Disclosures About Market Risks................. 28
Item 8. Financial Statements and Supplementary Data................................. 29
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................................... 53
PART III
Item 10. Directors and Executive Officers of the Registrant.......................... 53
Item 11. Executive Compensation...................................................... 56
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................................ 63
Item 13. Certain Relationships and Related Transactions.............................. 65
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports
on Form 8-K.......................................................... 67
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SPSS INC.
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
PART I
ITEM 1. BUSINESS
SPSS Inc. was incorporated in Illinois in 1975 under the name "SPSS,
Inc." and was reincorporated in Delaware in May 1993 under the name "SPSS Inc."
Unless the context otherwise requires, the terms "SPSS" or the "Company" refers
to SPSS Inc., a Delaware corporation, its Illinois predecessor and its
subsidiaries. SPSS is a multinational computer software company that develops
and distributes technology essential to the analysis of data in decision-making.
Approximately two-thirds of the Company's customers are commercial
organizations, many of which use SPSS technology and related professional
services to improve their marketing and sales programs by:
- Attracting new customers more efficiently;
- Increasing sales to existing customers through better
cross-selling, up-selling and retention;
- Forecasting and monitoring results, such as sales performance;
- Facilitating more effective electronic commerce; and
- Better allocating scarce resources across marketing programs.
Among its customers in the public sector, the Company's offerings are
primarily used to improve interactions between government agencies and their
constituents as well as detect fraud and other forms of non-compliance. SPSS
products are often a standard at colleges and universities throughout the world
as tools for academic research and the teaching of data analysis techniques.
SPSS technology offers:
- A wide array of data access and data management capabilities;
- An extensive range of advanced data analytical techniques for use
in what in many contemporary business settings is known as "data
mining;" and
- Various capabilities for the delivery of the results of analyses to
executives and managers in organizations, the integration of these
results into databases and operational systems such as call-center
software and sales force automation programs, as well as the use of
these results by automated decision-making systems operating on the
worldwide web.
The Company's major offerings include:
- CustomerCentric, the SPSS branded analytical solution specifically
for CRM (customer relationship management) applications,
particularly in the retail and telco industries;
- The SPSS and Clementine product lines for general data mining and
data analysis across a range of industries; and
- The MR Dimensions solution and Quantime product line for use by
professional market research firms.
In its 26 years of operation, SPSS has become a widely recognized name
in analytical software. The Company is continuing to leverage this leadership
position to take advantage of the increased demand for software and services
that enable organizations to systematically analyze and present data for use in
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decision-making. This increased demand is particularly apparent in decisions
related to developing programs for attracting or retaining customers, as well as
forecasting and monitoring the results of these programs. The management of SPSS
believes that growth in the availability of information about, and competition
for, customers has substantially expanded the market for its analytical
solutions and products. Further contributing to this increased market potential
are new developments in SPSS technology that more effectively process large
volumes of data as well as distribute analytical results in real-time to
decision makers and web-based decision-making systems. SPSS also recently
introduced offerings that enable its technology to be integrated into analytical
applications developed and marketed by other independent software vendors,
opening additional channels of distribution for SPSS.
In Summer 1993, SPSS completed an initial public offering of common
stock, $.01 par value. The common stock is listed on the Nasdaq National Market
under the symbol "SPSS". In early 1995, SPSS and certain stockholders sold
1,865,203 shares of common stock in a public offering.
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.
RECENT DEVELOPMENTS
In September 1997, SPSS acquired approximately 97% of the outstanding
shares of capital stock of Quantime Limited, a corporation organized under the
laws of England in exchange for 863,049 shares of common stock of SPSS. As a
result of this transaction, Edward Sherman Ross, formerly a director of
Quantime, beneficially acquired 441,635 shares of SPSS common stock. In November
1997, SPSS acquired the remaining shares of capital stock of Quantime in
exchange for 28,175 shares of common stock of SPSS. Quantime was a developer of
market research software products. Within SPSS, Quantime is a part of a business
unit focused exclusively on market research companies worldwide.
In November 1997, SPSS acquired all of the outstanding shares of
capital stock of In2itive Technologies A/S, a corporation organized under the
laws of Denmark, in exchange for 140,727 shares of common stock of SPSS.
In2itive was a computer software company specializing in market research
software. Within SPSS, In2itive joins Quantime as part of a business unit
focused exclusively on market research companies worldwide.
In November 1998, SPSS acquired all of the outstanding shares of
capital stock of Surveycraft Pty Ltd., a corporation organized under the laws of
Australia, for approximately $1,700,000. Surveycraft developed products for
market research and was the first global research software to support Asian
languages. Within SPSS, Surveycraft joins In2itive and Quantime as part of a
business unit focused exclusively on market research companies worldwide.
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On December 31, 1998, SPSS acquired all of the outstanding shares of
capital stock of Integral Solutions Limited, a corporation organized under the
laws of England, for an aggregate purchase price of approximately $7,000,000.
SPSS was required to make additional payments up to approximately $7,000,000 in
future years to the former owners of Integral Solutions based upon the
attainment of specific operating results by Integral Solutions. Additional
payments of approximately $3,900,000 and $2,900,000 were made in January 2000
and February 2001, respectively. The additional payments were recorded as
adjustments to the purchase price paid by SPSS for the stock of Integral
Solutions in the periods in which the payments are determinable. Integral
Solutions was a developer of technology for data mining, including its flagship
Clementine product. SPSS is further developing this ISL technology for continued
distribution as analysis products or integrated into more comprehensive
analytical solutions.
On November 29, 1999, SPSS acquired all of the outstanding shares of
Vento Software, Inc. in exchange for approximately 546,060 shares of common
stock of SPSS. Vento's assets include the VentoMap product line, a series of
industry-specific software products for business performance management, and a
proprietary methodology for the delivery of related professional services. SPSS
is further developing the Vento technology and using the Vento professional
services methodology for supporting the implementation of its analytical
solutions.
On December 24, 1999, SPSS acquired the VerbaStat software program from
DataStat, S.A., a corporation organized under the laws of Belgium, for
approximately $1,000,000. VerbaStat is a software tool for computer aided coding
of open-ended survey questions. SPSS is further developing this product and
integrating its capabilities into its MR Dimensions solution for professional
market research firms.
On November 6, 2000, SPSS Inc. and SPSS Acquisition Sub Corp., each
Delaware corporations, and ShowCase Corporation, a Minnesota corporation,
entered into an Agreement and Plan of Merger pursuant to which ShowCase
shareholders would receive .333 shares of SPSS Common Stock for each share of
ShowCase Common Stock after the closing of the transaction. This share exchange
ratio for the merger was established through negotiations between SPSS and
ShowCase. The closing of the merger occurred on February 26, 2001 with SPSS
issuing approximately 3,725,000 shares of Common Stock for substantially all the
outstanding shares of ShowCase. The merger will be accounted for as a pooling of
interests. ShowCase is a leading provider of business intelligence software and
services, and is the dominant supplier of these capabilities for IBM I-Series
(AS/400) computing systems.
INDUSTRY BACKGROUND
The analysis of data using advanced analytical techniques, whether
traditional statistical methods such as factor analysis and regression, or other
methods, such as neural networks and decision trees, enables decision-makers to
draw reliable conclusions from numerical information. Such systematic analysis
of numbers goes back to the seventeenth century, when political leaders used
statistics to develop and implement more effective public policy. The
fundamental purpose and power of this kind of data analysis remains the same
today: to help decision makers understand and resolve problems by uncovering the
causes underlying current conditions and predicting future events. These
benefits are particularly apparent in contemporary data mining applications,
which often involve the examination of extremely large amounts of data stored in
specialized databases known as "data warehouses" or "data marts," as well as in
analyzing data directly related to activities on the world wide web.
SPSS has historically developed and marketed its software and services
for a wide range of data analysis applications. Recently, SPSS focused more
specifically upon the analysis of data related to customer attitudes and
behavior. SPSS believes that demand for its analytical capabilities will
continue to
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grow as decision-making becomes more complex, as the consequences of decisions
(particularly those related to customer requirements) become more significant,
and as more data is available for analysis. To meet this demand, colleges and
universities are training increasing numbers of people in the use of appropriate
analytical methods. In addition, new technology has made more usable and
affordable the application of advanced analysis to extremely large data sets as
well as the distribution of analytical results to wider audiences within an
organization.
Vendors providing spreadsheets, query and reporting tools, and what is
known in the software industry as OLAP (On-Line Analytical Processing)
capability serve the largest part of the general market for data analysis
software. The widespread use of these tools is due to their effectiveness in
providing basic summaries of historical data, such as what sales were by region,
how many customers purchased a particular product, or what the default rate was
on loans.
A smaller yet sizable and growing part of the market uses more advanced
analytical capabilities for dealing with issues of causality and prediction.
Such capabilities enable corporations to predict sales for the upcoming season,
determine the best targets for a new product, or distinguish good and bad credit
risks prior to extending credit terms. Spreadsheet, query and reporting, and
OLAP software usually lack the advanced analytical capabilities to build the
predictive models needed to address these types of questions.
SPSS believes the demand for its analytical solutions and products will
grow as:
- Competition for customers accelerates dramatically due to the
combination of increasingly global markets, deregulation in many
industries, and the ubiquity of the information on the Web;
- Organizations require more useful information from the increasing
amount of data being collected, organized and stored;
- The number of people with a working knowledge of analytical methods
continues to grow significantly; and
- Easier-to-use software, increases in computing power, and
additional options for delivering results to decision-makers
eliminate many historical barriers to the use of advanced
analytical capabilities.
MARKETS
SPSS customers come from various industries and use SPSS software in a
wide range of applications. SPSS focuses, however, on the following market
areas:
Customer Relationship Management. Firms in various industries use SPSS
software and services to improve customer interactions, including:
- Targeting promotional campaigns;
- Test-marketing new products;
- Identifying changing customer characteristics;
- Measuring customer satisfaction;
- Forecasting sales; and
- Streamlining and personalizing web sites and other applications.
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Business Intelligence. Firms in various industries use SPSS software
and services to analyze information in corporate databases, particularly data
warehouses, for an extensive range of applications. The Company's technology
extends the capabilities provided by other business intelligence tools such as
OLAP software, query and reporting programs, ETL
(extraction-transformation-load) products, and database systems. Moreover, SPSS
software for business performance management gives executives the ability to
monitor critical day-to-day operations by viewing key performance indicators and
drilling down for more information as needed.
Market Research. Almost all of the top market research firms worldwide
use SPSS software and services to conduct the process of survey research, from
designing questionnaires to collecting data through multiple sources (especially
telephone and the Web) to producing customized tabulations to developing
advanced analytical models.
Government. SPSS software and services are used in almost every country
of the world, at all levels of government, in civilian as well as defense
agencies. SPSS software, for example, is used as part of the efforts of the
Internal Revenue Service of the United States to modernize their tracking
systems, provides critical information used by many municipal public safety
agencies, has become the standard marketing tools in the recruitment programs of
the United States Armed Forces, and is employed by many national census
programs.
Education. SPSS software is used at virtually every major college and
university. In addition to their use in teaching statistics at the undergraduate
and graduate levels, SPSS software is used in academic research of all types.
Academic administrators also use SPSS software to monitor such aspects of their
operations as attrition rates, changes in demographic profile of student
populations, and the success of fund-raising activities.
Scientific Research. SPSS products are used in a wide variety of
research and development efforts across academic, government, and corporate
institutions. SPSS software provides data analysis and presentation tools in
such applications as pharmacology, clinical trials, environmental monitoring,
and experimental modeling.
ANALYTICAL SOLUTIONS AND SOFTWARE PRODUCTS
SPSS software enables its customers to analyze data, including the
generation of reports, graphs, and models on a wide variety of computing
platforms. This technology can be used as stand-alone products or as part of
integrated analytical solutions. SPSS also provides professional services along
with its products and solutions, such as developing plans to align analytical
efforts with organizational goals, collecting and storing data, building
predictive models, and deploying the results of analyses throughout an
organization.
In general, SPSS software is:
- Comprehensive in function, spanning the process of analysis from
data access to advanced predictive techniques;
- Modular, allowing customers to purchase only the functionality they
need;
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- Integrated, enabling the use of various parts of the SPSS
technology in combination to tackle particularly complex problems;
- Embeddable, facilitating the integration of SPSS analytical
capabilities into other systems, including web sites;
- Tailored to desktop operating environments for greater ease-of-use,
including browser-based environments for delivery of results;
- Available on most popular computing platforms; and
- For some products, localized for use in France, Germany, Italy,
Poland, Japan, Taiwan, Korea, China and Spanish-speaking countries.
SPSS currently offers CustomerCentric, a comprehensive analytical CRM solution
that applies data mining techniques in delivering customer intelligence to
personnel throughout an organization. CustomerCentric uses automated scoring
engines to integrate this information into web sites and various operational
systems, such as call-center software and sales force automation programs,
driving personalized customer interactions. CustomerCentric also applies data
mining techniques for improving the effectiveness of web sites, not only
measuring web site performance but also detecting critical traffic patterns and
identifying different visitor types.
For clients with more limited requirements, SPSS also provides a
variety of targeted analytical solutions, including those for:
- Business Performance Management, giving executives the ability to
monitor the effectiveness of their operations by viewing different
key performance indicators and then drilling down for more detailed
information;
- Clickstream analysis, the analysis of activity data from a web
site, typically to develop more personalized interactions or
improve the overall organization of the site;
- Scoring and deployment, offering application developers components
to be plugged into other software applications that enable
real-time or batch scoring of customers, such as applicants for
loans prior to extending credit or insurance claims before their
evaluation by investigators;
- Forecasting and scenarios, allowing managers as well as analysts to
use their business knowledge in making better forecasts; and
- Automated web surveys, a powerful solution for conducting surveys
on the Web and reporting the results of these surveys in real-time.
There are three categories of SPSS analytical products:
(1) Data mining and analysis products, for examining data in databases,
data warehouses and other file types. In customer relationship management
applications, these products are primarily used to segment customers by various
outcomes, such as the purchase of a product or the renewal of a contract, as
well as
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to predict their future behavior and the actions of prospects with similar
profiles. SPSS offerings for data mining and analysis are in either the SPSS or
Clementine product lines.
- The SPSS product line provides a broad range of statistical
methods. Users create tables, graphs, OLAP reports, and predictive
models in both desktop and distributed computing environments.
While there are some variations according to the version and
computing platform, a typical configuration in a customer
relationship management application is an SPSS Base and related
add-on and other optional products. The SPSS Base includes the user
interface, data connectivity, data editing, reporting, graphing and
general statistical capabilities. Add-on products require the SPSS
Base to operate and become seamlessly integrated with it upon
installation; these offerings provide additional functionality
specific to a particular type of analysis. Other optional products
do not require the SPSS Base to operate and perform specific
applications, such as facilitating certain types of data entry or
performing certain kinds of advanced analysis. Some of these other
optional products in the SPSS product line are particularly notable
because their capabilities provide value to organizations beyond
what is typically realized with general-purpose statistical
products. AnswerTree, for example, enables highly visual
decision-trees to be used for developing customer profiles.
DecisionTime creates time-series forecasts, which can then be
distributed for review and scenario analysis by managers and
executives with its companion product, WhatIf? SmartViewer Web
Server distributes the results of analyses to decision makers via
the Web. SmartScore deploys the results of analyses into
operational systems, including call centers and web sites, as well
as into databases or data warehouses.
- The Clementine product line offers advanced analytical capabilities
for a variety of data mining applications in desktop and
distributed computing environments. With its unique user interface,
Clementine enables operating managers to easily incorporate their
business knowledge with data to develop predictive models. Models
built in Clementine can be deployed for use in other software
applications with the Clementine Solution Publisher. While the SPSS
and Clementine product families are already usable together, SPSS
plans to more tightly integrate their functionality in the future.
(2) Market research products. The Quantime, In2itive, and SurveyCraft
product lines provide comprehensive solutions for professionals in the market
research industry. These sets of offerings have their particular strengths: the
Quantime products, for example, are distinguished by their extensive
functionality, while the In2itive products feature more modern user interfaces
and the Surveycraft products are more easily localized for use in Asian markets.
SPSS is combining the strengths of these product lines, as well as improve their
ability to communicate with other SPSS products, in the MR Dimensions solution
for market research professionals.
(3) Scientific products. Scientists and engineers in various technical
applications use the SigmaPlot and SYSTAT product lines for data presentation
and analysis.
SOFTWARE PRICING
The Company's licensing and pricing alternatives vary widely depending
upon the analytical solution or product required as well as the computing
platform involved and the number of users licensed.
Initial implementations of CustomerCentric usually cost between
$750,000 and $1.5 million, while those of more targeted analytical solutions
usually vary between $100,000 and $300,000. All such implementations carry
additional maintenance fees providing for updates to the technologies included.
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For the SPSS product line, list prices in North America for perpetual
single-user licenses of desktop products are approximately $999 for the SPSS
Base and range from $299 to $2,499 for other products. Multi-user network and
site licenses can be significantly higher and require annual payments. List
prices of annual licenses for SPSS product line products on mainframes,
minicomputers, UNIX workstations, and Windows NT servers range from $4,500 to
$15,000, while perpetual licenses run from $10,000 to over $30,000.
Clementine is available under all license types listed above, with a
typical sale of between $50,000 and $75,000.
The market research products are licensed on an annual and perpetual
basis, where the amount of the annual or perpetual fee depends on the number of
modules involved in the customer's configuration and the number of users of each
module. Such fees range from approximately $1,000 to over $1 million. The rate
of renewal of these licenses has historically been very high (over 90%).
Science products are usually sold as perpetual licenses for prices
between $500 and $1,300, with discounts for volume purchases. Multi-user and
site licenses are also available and require annual payments.
PUBLICATIONS AND STUDENT SOFTWARE
SPSS authors and regularly updates a number of publications that
include user manuals and instructional texts. SPSS also develops student
versions of its SPSS Base and SYSTAT products, which are designed for classroom
use with SPSS textbooks or other instructional materials. Since February 1993,
the College Division of Prentice Hall, under the terms of a semi-exclusive,
worldwide agreement, has arrangements with other publishers to include the SPSS
Student Version in textbooks with data sets specific to the text.
TRAINING AND CONSULTING
SPSS offers a comprehensive training program with courses covering
product operations, data analytical concepts, and particular analytical
applications. These courses are regularly scheduled in cities around the world.
Organizations may also contract for on-site SPSS training tailored to their
specific requirements.
SPSS offers consulting and customization services, where an engagement
may involve the development of plans to align analytical efforts with
organizational goals, the collection and organization of data, the building of
predictive models, and the deployment of the results of analyses throughout an
organization.
SALES AND MARKETING
The SPSS sales and marketing strategy emphasizes its ability to deliver
high value products and analytical solutions, particularly for customer
relationship management, business intelligence, and market research
applications. The management of SPSS believes its data mining and other advanced
analysis capabilities are the key to differentiating the Company from its
competitors.
SPSS markets and sells its solutions, products, and services primarily
through worldwide field sales and telesales organizations. Historically, product
sales have been made by the telesales organizations
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from leads driven by advertising, direct mail, tradeshow attendance, and
customer references. Although varying widely, sales made by the telesales
organization are typically completed within 30 days and average about $1,400.
The Company's database of existing customers provides an effective source for
selling add-on products, upgrades, and training or consulting services.
As SPSS increases its emphasis on the sale of higher-priced products
and analytical solutions, SPSS is increasing the size of its field sales force
along with its pre-sales support staff and consulting personnel. Most of this
field sales force is now organized by industry to better understand the business
issues facing executives in that industry and more effectively relate SPSS
products and analytical solutions to their needs. For large sales opportunities,
SPSS sales representatives and technical sales personnel visit prospects to make
presentations, give product demonstrations, and provide pre-sales consulting.
SPSS also has partner relationships with other leading companies, which
represent additional channels for sales and leads for the Company's
higher-priced offerings.
In addition to its headquarters in Chicago, SPSS has sales offices
across the United States, including New York City, the Washington, D.C. area,
Miami, Cincinnati, Denver and San Francisco. The SPSS international sales
operation consists of thirteen sales offices in Europe and the Pacific Rim, as
well as over 60 licensed distributors. Overall, SPSS is represented in over 50
countries. Transactions are customarily made in local currencies.
Student versions of SPSS products are published by Prentice Hall and
sold by more than 300 Prentice Hall sales representatives working directly with
faculty on college campuses worldwide. The arrangement also permits Prentice
Hall to bundle its various textbooks on statistics, market research, and quality
improvement with student versions of SPSS products.
Current users of SPSS products comprise a significant source of new
sales leads. Also important are the expert reviews of SPSS software in trade and
market-specific publications. The Company's marketing communications program
includes advertising in trade and market-specific publications, advertising on
the Web, direct mail, exhibiting at trade shows, participating in and speaking
at professional association meetings, sponsoring seminars for prospects and
customers, and conducting user group meetings.
CUSTOMER SERVICE AND TECHNICAL SUPPORT
SPSS provides extensive customer service and technical support either
on-site or by telephone, fax, mail and the Web, promoting customer satisfaction
and obtaining feedback on new software. Technical support services provided to
all licensees include assistance in software installation and operation, as well
as limited consulting in the selection of different analytical methods and the
interpretation of results. Additional technical support services are available
on a fee basis.
RESEARCH AND DEVELOPMENT
SPSS plans to continue expanding its software offerings through the
development of new software technologies and products, the enhancement of
existing software technologies and products, the acquisition of complementary
technologies, and the formation of partnerships with value-added resellers or
other third parties serving selected markets. The SPSS research and development
strategy is primarily focused on:
- Improving the scalability of its software to work with larger data
sets;
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- Expanding the ability of its software to integrate with other
applications and be tailored to customer-specific requirements;
- Enhancing the ways results of analyses can be deployed throughout
an organization, making them readily accessible to decision-makers
as well as usable in various operational systems and web sites; and
- Extending the analytical capacity already available in its
software.
SPSS specialists in user interface design, software engineering,
quality assurance, product documentation, and the development of analytical
algorithms are responsible for maintaining and enhancing the quality, usability,
and statistical accuracy of all SPSS software. The research and development
organization is also responsible for authoring and updating all user
documentation and other publications. In addition, SPSS maintains ongoing
relationships with third-party software developers for the development of
specialized software products and the acquisition of technology that can be
embedded in SPSS software.
Most statistical algorithms used by SPSS in its software are published
for the convenience of its customers. SPSS employs full-time statisticians who
regularly research and evaluate new algorithms and statistical techniques for
inclusion in its software. SPSS also employs statistically-trained professionals
in its documentation, quality assurance, software design and software
engineering groups.
SPSS intends to continue to invest in research and development. In
particular, the Company's 2001 development plan includes a recommendation engine
for integration into its CustomerCentric analytical solution, additional server
versions of offerings in the SPSS product line, and updates to the SPSS product
line (including related server versions), Clementine, SmartViewer Web Server,
Quantime, In2itive, SYSTAT, SigmaPlot, and other products. SPSS also intends to
further develop analytical components and other technology for integration into
analytical applications developed and distributed by other independent software
vendors.
In the past, SPSS has experienced delays in the introduction and
enhancement of products and technologies primarily due to difficulties with
particular operating environments and problems with technology provided by third
parties. These delays have varied depending upon the size and scope of the
project and the nature of the problems encountered. From time to time SPSS
discovers "bugs" in its products, which are resolved through maintenance
releases or periodic updates, depending on the seriousness of the defect. See
"Risk Factors - Risk Factors Relating to SPSS - SPSS Relies on Third Parties for
Certain Software."
The SPSS research and development staff currently includes
approximately 200 professionals organized into groups for software design,
algorithm development, software engineering, documentation, quality assurance,
and product localization. The Company's expenditures for research and
development, including capitalized software, were approximately $22.8 million in
1998, $27.6 million in 1999 and $31.5 million in 2000.
SPSS also uses independent contractors in its research and development
efforts. Sometimes SPSS uses these contractors to obtain technical knowledge and
capability that it lacks internally. SPSS has also outsourced maintenance,
conversion, and new programming for some products to enable its internal
development staff to focus on products that are of greater strategic
significance. SPSS sometimes uses independent contractors to augment its
development capacity at a lower cost.
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MANUFACTURING AND ORDER FULFILLMENT
To assure speed and efficiency in the manufacturing, order fulfillment,
and delivery of its products, SPSS entered into an agreement with Banta Global
Turnkey ("Banta") in January 1997. Banta performs all diskette and CD-ROM
duplication, documentation printing, packaging, warehousing, fulfillment, and
shipping of SPSS products worldwide. SPSS believes that, because of the capacity
of these third-party distribution centers and their around-the-clock operation,
SPSS can easily adapt to peak period demand, quickly manufacture new products
for distribution, and effectively respond to anticipated sales volumes.
COMPETITION
The historical market for SPSS statistical software is both highly
competitive and fragmented. SPSS is among the largest companies in the
statistical software market, and, based upon sales and comparative assessments
in trade publications, SPSS believes that it competes effectively against its
competitors, particularly on desktop computing platforms. SPSS considers its
primary worldwide competitor to be the larger and better-financed SAS Institute,
although SPSS believes that the revenues of SAS are derived principally from
products for purposes other than statistical analysis and operate primarily on
large computing platforms. StatSoft Inc. and Minitab, Inc. are also competitors,
although their annual revenues from statistical products are believed to be
considerably less than the revenues of SPSS. In addition to competition from
other statistical software companies, SPSS also faces competition from providers
of software for specific statistical applications.
In the data mining, customer relationship management and business
performance measurement markets, SPSS faces competition from many larger and
more well-funded companies, including SAS, IBM, Informix, NCR, Oracle, and
others, and recent entrants, such as Attune, Broadbase, E.piphany and
NetPerceptions, many of whom specialize in customer relationship management in
e-commerce settings. With the exception of SAS, these competitors do not
currently offer the range of analytical capability SPSS offers, and as a result
are both competitors and potential partners for SPSS technology.
SPSS holds a dominant position in the market for solutions to the
market research industry. SPSS believes that there are no competitors in this
market who are larger and better financed; the annual revenues of such vendors
as Sawtooth Software, Computers for Marketing Corporation, and Pulse Train
Technology are estimated to be considerably less than SPSS revenues from its
market research products and services.
In all markets, SPSS competes primarily on the basis of the usability,
functionality, performance, reliability, and connectivity of its software. The
significance of each of these factors varies depending upon the anticipated use
of the software and the analytical training and expertise of the customer. To a
lesser extent, SPSS competes on the basis of price and thus maintains pricing
and licensing policies to meet market demand. SPSS believes it is able to
compete successfully because of its highly usable interfaces, comprehensive
analytical capabilities, efficient performance characteristics, local language
versions, consistent quality, and connectivity features of its software, as well
as its worldwide distribution capabilities and widely recognized name.
In the future, SPSS may face competition from other new entrants into
its markets. SPSS could also experience competition from companies in other
sectors of the broader market for business intelligence software, such as
providers of OLAP and analytical application software, as well as from companies
in other sectors of the broader market for customer relationship management
applications, such as providers of sales force automation and collaborative
software, who could add enhanced analytical functionality to their existing
products. Some of these potential competitors have significantly more capital
resources, marketing experience, and research and development capabilities than
SPSS. Competitive pressures from the introduction of new products by these
companies or other companies could have a material adverse effect on SPSS.
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INTELLECTUAL PROPERTY
SPSS attempts to protect its proprietary software with trade secret
laws and internal nondisclosure safeguards, as well as copyrights and
contractual restrictions on copying, disclosure and transferability that are
incorporated into its software license agreements. SPSS licenses its software
only in the form of executable code, with contractual restrictions on copying,
disclosures and transferability. Except for licenses of its products to users of
large system products and annual licenses of its desktop products, SPSS licenses
its products to end-users by use of a "shrink-wrap" license, as is customary in
the industry. It is uncertain whether these license agreements are legally
enforceable. The source code for all SPSS products is protected as a trade
secret and as unpublished copyrighted work. In addition, SPSS has entered into
confidentiality and nondisclosure agreements with its key employees. Despite
these restrictions, the possibility exists for competitors or users to copy
aspects of SPSS products or to obtain information which SPSS regards as a trade
secret. SPSS has no patents, and judicial enforcement of copyright laws and
trade secrets may be uncertain, particularly outside of North America.
Preventing unauthorized use of computer software is difficult, and software
piracy is expected to be a persistent problem for the packaged software
industry. These problems may be particularly acute in international markets.
SPSS uses a variety of trademarks with its products. Management
believes the following are material to its business:
- SPSS is a registered trademark used in connection with virtually
all of the Company's technology, solutions, and products;
- CustomerCentric is a trademark pending registration and is used
in connection with the Company's comprehensive analytical CRM
solution;
- Clementine is a trademark pending registration and used in
connection with the Company's acquired product line from Integral
Solutions;
- WhatIf? and DecisionTime are the subject of pending applications
for registration;
- AnswerTree is a registered trademark and is an add-on product to
the SPSS product family;
- SmartViewer is a registered trademark and is an add-on product to
the SPSS product family;
- Vento and VentoMap are registered trademarks used in connection
with the Company's acquired Vento products on all platforms;
- Quantime is an unregistered trademark used in connection with the
Company's acquired Quantime products on all platforms;
- In2itive Technologies is a registered trademark in Denmark and is
used in connection with the Company's acquired In2itive products
on all platforms;
- Surveycraft is an unregistered trademark used in connection with
the Company's acquired Surveycraft products;
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- SYSTAT is a registered trademark used in connection with the
Company's SYSTAT products on all platforms; and
- SigmaPlot is a registered trademark used in connection with the
Company's recently acquired Jandel products on all platforms.
Some of these trademarks comprise portions of other SPSS trademarks.
SPSS has registered some of its trademarks in the United States and some of its
trademarks in a number of other countries, including the Benelux countries,
France, Germany, the United Kingdom, Japan, Singapore and Spain.
Due to the rapid pace of technological change in the software industry,
SPSS believes that patent, trade secret, and copyright protection are less
significant to its competitive position than factors such as the knowledge,
ability, and experience of the Company's personnel, new research and
development, frequent technology and product enhancements, name recognition and
ongoing reliable technology maintenance and support.
SPSS believes that its solutions, products, and trademarks and other
proprietary rights do not infringe the proprietary rights of third parties.
There can be no assurance, however, that third parties will not assert
infringement claims in the future.
RELIANCE ON THIRD PARTIES
HOOPS
SPSS has entered into a perpetual nonexclusive license agreement, the
HOOPS agreement, with Autodesk, Inc. that permits SPSS to incorporate a graphics
software program known as the HOOPS Graphics System into SPSS products. Under
the terms of the HOOPS agreement, SPSS is required to pay royalties to Autodesk
based on the amount of revenues received by SPSS from products that incorporate
the HOOPS Graphics System. SPSS may terminate the HOOPS agreement at any time.
Autodesk may terminate the HOOPS agreement on the occurrence of a material,
uncured breach of the HOOPS agreement by SPSS.
SPSS also licenses certain other software programs from third-party
developers and incorporates them into SPSS' products. Many of these are
exclusive worldwide licenses that terminate on various dates. SPSS believes that
it will be able to renew non-perpetual licenses or obtain substitute products if
needed.
BANTA GLOBAL TURNKEY DISTRIBUTION AGREEMENT
In January 1997, SPSS entered into an agreement with Banta under which
Banta manufactures, packages, and distributes SPSS software products to its
customers worldwide. The Banta agreement had an initial three-year term, and
automatically renews thereafter for successive periods of one year. The Banta
agreement was renewed in January 2000. Either party may terminate this agreement
with 180 days written notice. If Banta terminates the agreement for convenience
or for any reason other than for cause, then during the 180-day notice period
Banta will assist SPSS in finding a new vendor. If either party materially
breaches its obligations, the other party may terminate the Banta agreement for
cause by written notice. This termination notice for cause must specifically
identify the breach or breaches, upon which the termination based and will be
effective 180 days after the notice is received by the other party, unless the
breach(es) is (are) corrected during the 180 days.
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PRENTICE HALL AGREEMENT
SPSS entered into an agreement with Prentice Hall in February 1993.
Under this agreement, SPSS granted to Prentice Hall the exclusive, worldwide
right to publish and distribute all SPSS publications, including student
versions of SPSS for DOS and Windows. The initial agreement had a five-year term
that ended in 1998.
SPSS entered into a new five-year contract with Prentice Hall in April
1998. Prentice Hall has an option to renew this contract for five additional
years if it pays SPSS $2,750,000 or more during the term of this agreement. If
Prentice Hall does not pay SPSS $1,100,000 by the end of the second year of the
contract, SPSS has the option to make Prentice Hall's right to distribute
Student Versions non-exclusive. The key differences in the new contract
vis-a-vis the old contract are: (1) Prentice Hall may publish and distribute
SPSS publications in certain geographic territories only, instead of worldwide;
(2) Prentice Hall has rights only to certain books and SPSS may sell any book
(rather than SPSS having to purchase the books from Prentice Hall); and (3) SPSS
can, within certain guidelines, license other publishers to bundle versions of
the SPSS Student Version with their textbooks.
COMPUTER SOFTWARE DEVELOPMENT COMPANY
In 1981, SPSS entered into a software development agreement with the
Computer Software Development Company to obtain funding of approximately $2
million for development of software including two large system products, SPSS
Graphics and SPSS Tables, and one desktop product, SPSS/PC+ Tables. SPSS entered
into two software purchase agreements with Computer Software Development under
which SPSS is required to pay Computer Software Development royalties through
the year 2001 based on a percentage of "net revenues" (as defined in the
agreements) from large system software products developed with Computer Software
Development funds. Under these agreements, SPSS incurred royalty payments of
approximately $234,000 in 1998, $237,000 in 1999 and $252,000 in 2000 to
Computer Software Development. Norman Nie, the Chairman of the Board of SPSS, is
a limited partner of Computer Software Development.
SEASONALITY
SPSS quarterly operating results fluctuate due to several factors,
including:
- The number and timing of product updates and new product
introductions;
- Delays in product development and introduction of new
technologies;
- Purchasing schedules of its customers;
- Changes in foreign currency exchange rates;
- Research and development as well as market development
expenditures;
- The timing of product shipments and solution implementations;
- Changes in mix of product and solutions revenues; and
- Timing and cost of acquisitions and general economic conditions.
If forecasts of future revenues fall below expectations, operating results may
be adversely affected because the Company's expense levels are to a large extent
based on these forecasts. Accordingly, SPSS believes that quarter-to-quarter
comparisons of its results of operations may not be meaningful and should not be
relied upon as an indication of future performance. SPSS has historically
operated with very little backlog because its products are generally shipped as
orders are received. As a result, revenues in any quarter are dependent on
orders shipped and licenses renewed in that quarter. In addition, the timing and
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amount of the Company's revenues are affected by a number of factors that make
estimation of operating results prior to the end of a quarter uncertain. A
significant portion of the Company's operating expenses is relatively fixed, and
planned expenditures are based primarily on revenue forecasts. If SPSS fails to
achieve these revenue forecasts, then a material reduction in net income for the
given quarter and fiscal year could result. SPSS cannot provide assurance that
profitability will be achieved on a quarterly or annual basis in the future.
EMPLOYEES
As of December 31, 2000, SPSS has approximately 1,029 employees,
approximately 570 domestically, and 459 internationally. Of the approximately
1,029 employees, there are approximately 639 in sales, marketing, and
professional services, 200 in product development and 190 in general and
administrative. SPSS believes it has generally good relationships with its
employees. None of the Company's employees are members of labor unions.
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FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The following table sets forth financial information about foreign and
domestic operations. This information may not necessarily be indicative of
trends for future periods.
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1998 1999 2000
------------- ------------- -------------
Sales to unaffiliated customers:
United States $ 64,870,000 $ 70,409,000 $ 73,330,000
Europe & India 45,337,000 52,341,000 46,054,000
Pacific Rim 13,265,000 19,180,000 21,396,000
------------- ------------- -------------
Total $ 123,472,000 $ 141,930,000 $ 140,780,000
============= ============= =============
Sales or transfers between
geographic areas:
United States $ 18,365,000 $ 22,707,000 $ 20,885,000
Europe & India (12,714,000) (14,296,000) (13,209,000)
Pacific Rim (5,651,000) (8,411,000) (7,676,000)
------------- ------------- -------------
Total $ -- $ -- $ --
============= ============= =============
Operating income
United States $ 4,581,000 $ 7,272,000 $ 2,630,000
Europe & India 10,799,000 12,747,000 4,551,000
Pacific Rim 1,397,000 4,476,000 4,358,000
------------- ------------- -------------
Total $ 16,777,000 $ 24,495,000 $ 11,539,000
============= ============= =============
------------- ------------- -------------
1998 1999 2000
------------- ------------- -------------
Identifiable assets:
United States $ 67,014,000 $ 70,792,000 $ 95,805,000
Europe & India 21,694,000 28,250,000 37,160,000
Pacific Rim 5,595,000 7,673,000 9,665,000
------------- ------------- -------------
Total $ 94,303,000 $ 106,715,000 $ 142,630,000
============= ============= =============
SPSS revenues from operations outside of North America accounted for
approximately 47% in 1998, 50% in 1999 and 48% in 2000. SPSS expects that
revenues from international operations will continue to represent a large
percentage of its net revenues and that this percentage may increase,
particularly as the Company further "localizes" the SPSS product line by
translating its products into additional languages. Various risks impact
international operations. Those risks include greater difficulties in accounts
receivable collection, longer payment cycles, exposure to currency fluctuations,
political and economic instability and the burdens of complying with a wide
variety of foreign laws and regulatory requirements. SPSS also believes that it
is exposed to greater levels of software piracy in international markets because
of the weaker protection afforded intellectual property in some foreign
jurisdictions. As SPSS expands its international operations, the risks described
above could increase and could have a material adverse effect on SPSS. See
"Business - Sales and Marketing," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and Note 2, Domestic and Foreign
Operations, of the "Notes to Consolidated Financial Statements."
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ITEM 2. PROPERTIES
The Company's principal administrative, marketing, training and product
development and support facilities are located in Chicago, Illinois. During
1997, SPSS entered into a 15-year sublease agreement to sublease approximately
100,000 square feet of office space in the Sears Tower. This space became the
principal Chicago offices of SPSS in 1998. During 2000, SPSS entered into a
6-year sublease for an additional 41,577 square feet of office space in the
Sears Tower. The aggregate annual gross rental payments on these leases were
approximately $1,931,000 in 2000.
In addition, SPSS leases office space in California, Colorado,
Virginia, New York, Pennsylvania, Ohio, and Florida in the United States, and in
The Netherlands, The United Kingdom, Germany, Sweden, France, Singapore,
Australia, Japan, and Denmark.
SPSS believes its facilities are suitable and adequate for its present
needs. The Company plans to expand its facilities in 2001 in Chicago, New York,
Virginia, Florida, and Ohio, as well as in the United Kingdom.
ITEM 3. LEGAL PROCEEDINGS
Marija J. Norusis v. SPSS Inc., Case No. 98 C 3344, Circuit Court of
Cook County, Illinois. Plaintiff and SPSS entered into a series of publishing
agreements pursuant to which Plaintiff agreed to author portions of certain
software manuals and statistical guides. Plaintiff alleges that SPSS has
published and sold certain manuals which contain Plaintiff's work and/or which
Plaintiff had the right to prepare under the terms of the parties' agreements,
without paying Plaintiff royalties on such sales. Plaintiff filed a complaint on
April 13, 1998, and an amended complaint on April 16, 1999. In the amended
complaint, Plaintiff asserts claims for a declaratory judgment, an accounting,
breach of contract, quantum meruit, and violation of the Illinois Deceptive
Trade Practices Act. Plaintiff currently seeks unspecified damages in an amount
in excess of $100,000 together with prejudgment interest and attorney's fees. On
motion by SPSS, the court dismissed Plaintiff's declaratory claim, but all of
the other claims are pending.
SPSS filed an Answer to the Amended Complaint on May 28, 1999 denying
material allegations of the Amended Complaint. Plaintiff has filed several
motions against SPSS complaining that the records it keeps and has produced are
inadequate for her needs, seeking additional document production, additional
depositions and sanctions. In July 2000, the Court ordered the parties to retain
an independent third party to analyze SPSS' records and to prepare a report of
SPSS' sales of the software manuals and statistical guides for which Plaintiff
claims a right to royalties. That report was completed in December 2000, and the
parties are currently engaged in settlement discussions based on the report.
With the exception of the additional depositions requested by the Plaintiff,
fact discovery is closed, but expert discovery is not. No trial date has been
set. SPSS intends to pursue settlement negotiations with Plaintiff, and, if
those negotiations are unsuccessful, to vigorously contest Plaintiff's claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth
quarter of 2000.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the over-the-counter market on
the Nasdaq National Market under the symbol "SPSS." The following table shows,
for the periods indicated, the high and low closing sale prices for the
Company's common stock.
YEAR ENDED DECEMBER 31, 1999 HIGH LOW
------------------------------------------ ----------- -----------
First Quarter 22 16 3/8
Second Quarter 25 11/16 16 3/8
Third Quarter 26 5/8 18
Fourth Quarter 25 3/4 16 5/16
YEAR ENDED DECEMBER 31, 2000
------------------------------------------
First Quarter 33 3/4 23 1/2
Second Quarter 32 1/2 22
Third Quarter 31 1/2 23 1/4
Fourth Quarter 28 9/16 16 1/16
YEAR ENDED DECEMBER 31, 2001
------------------------------------------
First Quarter (through March 16, 2001) 23 1/2 17 7/8
As of March 16, 2001, there were 507 holders of record of the Company's
common stock.
SPSS has never declared or paid any cash dividends on its capital
stock. SPSS currently intends to retain its earnings to fund future ongoing
operations and future capital requirements of its businesses. SPSS does not
anticipate paying any cash dividends in the foreseeable future. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- Liquidity and Capital Resources."
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for each of
the years in the five-year period ended December 31, 2000 are derived from the
Consolidated Financial Statements of SPSS. The Consolidated Financial Statements
as of December 31, 1999 and 2000, and for each of the years in the three-year
period ended December 31, 2000, and the report thereon of KPMG LLP, are included
elsewhere in this Form 10-K.
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1997 1998 1999 2000
-------- --------- --------- --------- ----------
(IN THOUSANDS, EXCEPT NET INCOME PER SHARE DATA)
Net revenues:
Analytical solutions (1) $ 3,298 $ 3,982 $ 8,836 $ 17,540 $ 31,246
Market research (2) 18,327 21,687 25,551 32,674 29,688
Statistics (3) 79,318 85,437 89,085 91,716 79,846
--------- --------- --------- --------- ----------
Net revenues (4) 100,943 111,106 123,472 141,930 140,780
Operating expenses:
Cost of revenues 9,738 9,835 10,048 12,663 12,234
Sales and marketing 48,792 54,503 60,413 68,277 81,181
Product development 16,116 18,081 20,862 24,983 26,613
General and administrative 12,139 12,283 9,427 9,773 9,213
Special general and administrative
charges (5) - 5,616 445 - -
Merger-related (6) 3,636 4,306 1,948 1,611 -
Acquired in-process technology (7) - 421 3,552 128 -
--------- --------- --------- --------- ----------
Operating expenses 90,421 105,045 106,695 117,435 129,241
--------- --------- --------- --------- ----------
Operating income 10,522 6,061 16,777 24,495 11,539
Net interest income (expense) 296 375 333 (529) (642
Other income (expense) (134) (503) (128) 157 1,173
--------- --------- --------- --------- ----------
Income before income taxes 10,684 5,933 16,982 24,123 12,070
Provision for income taxes 3,854 3,189 8,404 8,621 3,534
--------- --------- --------- --------- ----------
Net income $ 6,830 $ 2,744 $ 8,578 $ 15,502 $ 8,536
========= ========= ========= ========= ==========
Basic net income per share $ 0.74 $ 0.29 $ 0.90 $ 1.61 $ 0.87
========= ========= ========= ========= ==========
Shares used in basic per share
calculation 9,226 9,333 9,515 9,601 9,824
========= ========= ========= ========= ==========
Diluted net income per share $ 0.69 $ 0.27 $ 0.85 $ 1.52 $ 0.81
========= ========= ========= ========= ==========
Shares used in diluted per share
calculation 9,928 10,172 10,104 10,192 10,542
========= ========= ========= ========= ==========
DECEMBER 31,
----------------------------------------------------------------------
1996 1997 1998 1999 2000
---------- ---------- ------------- ------------- -------------
(IN THOUSANDS)
Balance Sheet Data:
Working capital $8,964 $13,988 $12,408 $28,672 $20,361
Total assets 63,840 65,189 94,303 106,715 142,630
Deferred revenue 9,825 12,128 12,516 11,098 28,794
Long-term obligations,
less current portion 3,680 3,194 3,860 5,404 1,973
Total stockholders' equity 29,051 32,321 44,317 61,542 73,372
- - -------------
(1) Analytical solutions include products and services, sold separately or in
combination, for customer relationship management, business intelligence,
and business performance measurement applications.
(2) Market research includes products and services, sold separately or in
combination, for survey design, implementation, and analysis in the market
research industry.
(3) Statistics includes products and services, sold separately or in
combination, for general purpose statistical analysis.
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(4) The decrease in 2000 results was due to the negative effects of deferring
revenues in accordance with the American Institute of Certified Public
Accountants ("AICPA") Technical Practice Aids regarding software revenue
recognition in the fourth quarter of 2000. This application resulted in a
$16,975,000 reduction in net revenues; and corresponding increase in
deferred revenue.
(5) Write-off principally of particular software assets capitalized more than
two years prior to 1997, charges principally from the revaluation of some
assets associated with the Company's Macintosh and BMDP product lines in
1997 and write-off principally of software assets associated with the
Company's Unix and Open VMS products duplicated through the acquisitions of
Surveycraft and Integral Solutions in 1998.
(6) Includes costs related to acquisitions accounted for as
poolings-of-interests, such as investment banking and other professional
fees, management and sales force restructuring, employee sign-on bonuses,
employee severance and costs of closing excess office facilities and
certain expenses associated with the closing of other acquisitions.
(7) Includes costs relating to acquired in-process technology.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - -------------------------------------------------------------------------------
OVERVIEW
The original Statistical Package for the Social Sciences was introduced
in 1969, and SPSS was incorporated in 1975. The first SPSS products were almost
exclusively used by academic researchers working on mainframe computing systems.
SPSS subsequently transformed and enhanced its core product technology,
broadened its customer base into the corporate and government sectors,
significantly expanded its sales and marketing capabilities, acquired twelve
corporate entities and product offerings, and adapted its products to changing
hardware and software technologies. Approximately 64% of 2000 revenues came from
sales to customers in corporate settings, with another 22% in academic
institutions and 14% in government agencies.
In recent years SPSS has experienced a significant shift in the sources
of its revenues. Between 1996 and 2000, revenues from its analytical solutions
increased from 3% to over 22% of total net revenues and market research revenues
rose from 18% to 21%. In contrast, revenue from SPSS statistical products and
services declined from 79% to 57% of net revenues. Management expects these
trends to continue in 2001.
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RESULTS OF OPERATIONS
The following table shows select statement of income data as a percentage
of net revenues for the years indicated.
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
Net revenues:
Analytical solutions 3.3% 3.6% 7.2% 12.4% 22.2%
Market research 18.1% 19.5% 20.7% 23.0% 21.1%
Statistics 78.6% 76.9% 72.1% 64.6% 56.7%
------ ------ ------ ------ ------
Net revenues 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of revenues 9.6% 8.9% 8.1% 8.9% 8.7%
Sales and marketing 48.3% 49.0% 48.9% 48.1% 57.7%
Product development 16.0% 16.3% 16.9% 17.6% 18.9%
General and administrative 12.0% 11.0% 7.6% 6.9% 6.5%
Special general and administrative charges - 5.1% 0.4% - -
Merger-related 3.6% 3.9% 1.6% 1.1% -
Acquired in-process technology - 0.4% 2.9% 0.1% -
------ ------ ------ ------ ------
Operating expenses 89.5% 94.6% 86.4% 82.7% 91.8%
------ ------ ------ ------ ------
Operating income 10.5% 5.4% 13.6% 17.3% 8.2%
Net interest income (expense) 0.2% 0.3% 0.3% (0.4%) (0.5%)
Other income (expense) (0.1%) (0.4%) (0.1%) 0.1% 0.8%
------ ------ ------ ------ ------
Income before income taxes 10.6% 5.3% 13.8% 17.0% 8.5%
Provision for income taxes 3.8% 2.8% 6.8% 6.1% 2.5%
------ ------ ------ ------ ------
Net income 6.8% 2.5% 7.0% 10.9% 6.0%
====== ====== ====== ====== ======
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000.
Net Revenues. Net revenues increased from $123,472,000 in 1998 to $141,930,000
in 1999, an increase of 15% from 1998, and decreased to $140,780,000 in 2000, a
decrease of 1% from 1999. The 1999 increase was primarily due to growth in
analytical solutions revenues of 99%, primarily due to additional new data
mining products and sales of the newly acquired Clementine products, as well as
increases in market research revenues of 28%, primarily due to the introduction
of a new web data collection product, revenues from the newly acquired
Surveycraft products and an increased number of large transactions with major
customers. Offsetting this revenue growth was an increase in statistics revenue
of only 3% in 1999, primarily due to shifts in sales and marketing resources
toward developing the higher-growth markets for analytical solutions, as well as
reflecting the lower overall growth rate in the market for general-purpose
statistical products. The 2000 decrease was due primarily to the negative
effects of deferring revenues in accordance with AICPA Technical Practice Aids
regarding software revenue recognition. This application resulted in a
$16,975,000 reduction in net revenues. Growth in analytical solutions revenues
increased 78% due to increases in data mining products and sales. Market
research revenues declined 9% in 2000 primarily due to the negative effects of
the deferred revenues adjustment previously mentioned. Statistics revenue
decreased 13% in 2000 due to the deferred revenue adjustment and a lower overall
growth rate in the market for general-purpose statistical products. Revenues
were adversely affected by foreign currency exchange rates for the three years
described.
During 2000, the AICPA staff released several Technical Practice Aids
("TPA") for the software industry, consisting of questions and answers related
to the financial accounting and reporting issues of
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Statement of Position 97-2, Software Revenue Recognition. As a result of the
issuance of these TPA's, SPSS performed a comprehensive review of their revenue
recognition policies to ensure compliance with recent authoritative literature.
On a prospective basis from the fourth quarter of 2000, SPSS applied the
standards set forth in TPA 5100.53 - Fair value of PCS in a short-term
time-based license and software revenue recognition and TPA 5100.68 - Fair value
of PCS in perpetual and multi-year time-based licenses and software revenue
recognition. As a result of the application of the TPA's, SPSS began to
recognize the revenue from short-term time-based licenses and perpetual licenses
with multi-year maintenance terms ratable over the term of the contract. SPSS
recorded a one-time adjustment of approximately $16,975,000 to defer revenue for
contracts entered into during the fourth quarter of 2000.
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 increased from $10,048,000 in 1998 to $12,663,000 in 1999, and
decreased to $12,234,000 in 2000. These costs increased 26% in 1999 due to
higher sales levels and higher amounts of capitalized software amortized. Cost
of revenues decreased 3% in 2000 due to a decrease in shipping costs and
royalties paid to third party software providers. As a percentage of net
revenues, cost of revenues increased from 8% in 1998, to 9% in 1999 and 2000.
Sales and Marketing. Sales and marketing expenses increased from $60,413,000 in
1998 to $68,277,000 in 1999 and to $81,181,000 in 2000, an increase of 13% in
1999 and 19% in 2000. These increases reflect the Company's strategy of
expanding sales management, recruiting additional, more senior sales
representatives, and hiring more professional services personnel. Sales and
marketing expenses were partially offset by the effects of changes in foreign
currency exchange rates in 1999 and 2000. As a percentage of net revenues, sales
and marketing expenses decreased from 49% in 1998 to 48% in 1999, and increased
to 58% in 2000.
Product Development. Product development expenses increased from $20,862,000 in
1998 to $24,983,000 in 1999 and to $26,613,000 in 2000 (net of the effect of
capitalized software development costs of $1,933,000 in 1998, $2,593,000 in 1999
and $4,930,000 in 2000) an increase of 20% in 1999 and an increase of 7% in
2000. In the same periods, the Company's expense for amortization of capitalized
software and product translations, included in cost of revenues, was $1,892,000
in 1998, $3,182,000 in 1999 and $4,161,000 in 2000. The increases in product
development expenses were primarily due to staff increases, salary increases and
recruiting fees. As a percentage of net revenues, product development expenses
increased from 17% in 1998 to 18% in 1999 and to 19% in 2000.
General and Administrative. General and administrative expenses increased from
$9,427,000 in 1998 to $9,773,000 in 1999 and decreased to $9,213,000 in 2000, an
increase of 4% in 1999 and a decrease of 6% in 2000. The increase in 1999 was
due to additional administrative staff, primarily information systems personnel.
The decrease in 2000 was due to reduced costs by consolidating the United States
accounting functions and lower bad debt expense. This expense decreased as a
percentage of net revenues from 8% in 1998 to 7% in 1999 and 6% in 2000.
Special General and Administrative Charges. Special general and administrative
charges were $445,000 in 1998 and represented the write-off of duplicate
capitalized software development costs of platforms such as UNIX and Open VMS
products as a result of the acquisitions of Surveycraft and Integral Solutions.
Merger-related. SPSS incurred merger-related costs of $1,948,000 in 1998 and
$1,611,000 in 1999 related to acquisitions accounted for as
pooling-of-interests, which costs include employee sign-on bonuses, employee
severance, facility costs, and various other expenses. Included in these costs
is a charge for the consolidation of the Company's United Kingdom facilities of
$1,307,000 in 1997 and a recovery of $280,000 in 1998 when the plan was revised
based on the acquisition of Integral Solutions. The United
24
25
Kingdom facility consolidation plan was established to achieve cost efficiencies
through the elimination of redundant facilities and includes accruals of
$526,000 for estimated lease charges, $286,000 for estimated property tax
charges, $207,000 for the write-off of leasehold improvements and $8,000 for
dilapidation charges. The United Kingdom facility consolidation plan was revised
in 1999 when SPSS was unable to secure suitable facilities in a competitive
London real estate market. This led to a recovery of $803,000 in 1999. Included
in 1999 merger-related costs were expenses related to management and sales force
restructuring, employee sign-on bonuses, professional fees, and various other
expenses.
Acquired In-Process Technology. Acquired in-process technology costs were
$3,552,000 in 1998 and related to the acquisitions of Surveycraft and Integral
Solutions accounted for under the purchase method. Acquired in-process
technology costs were $128,000 in 1999 and related to an acquisition of the
VerbaStat software product from DataStat.
In November 1998, SPSS acquired all of the outstanding capital stock of
Surveycraft, a provider of market research software in the Pacific Rim. A
portion of the purchase price was attributable to acquired in-process
technology, as the development work associated with the project had not reached
technological feasibility and was believed to have no alternative future use
other than as market research software. SPSS carefully assessed the fair value
of the acquired in-process technology using an income approach. Future cash
flows were projected over five years discounted to present value using a
discount rate of 18%. SPSS believes the discount rate is appropriate given the
level of risk of unsuccessful completion of the technology as it was estimated
to be approximately 85% complete, both in terms of costs invested as of the
acquisition date relative to completion costs and technical achievements. In
projecting the future revenue streams from the project, SPSS considered many
factors including competition, market growth estimates, time to market and
additional sales and marketing leverage which SPSS could provide to the
Surveycraft products.
In December 1998, SPSS acquired all of the outstanding capital stock of Integral
Solutions, a leading provider of data mining software. A portion of the purchase
price was attributable to acquired in-process technology, as the development
work associated with several projects had not reached technological feasibility
and were believed to have no alternative future use other than as data mining
tools. SPSS carefully assessed the fair value of the acquired in-process
technology using an income approach. Future cash flows were projected over five
years discounted to present value using discount rates ranging from 34% to 37%
depending on the project and the market risks associated with each of the
research and development projects and resulting products. Specific consideration
was given to the stage of development of each research and development effort,
which ranged from 23% to 82% complete, both in terms of costs invested as of the
acquisition date relative to completion costs and technical achievements. In
projecting the future revenue streams from the projects, SPSS considered many
factors including competition, market growth estimates, time to market and
additional sales and marketing leverage that SPSS could provide to the Integral
Solutions products.
In December 1999, SPSS acquired the VerbaStat software program, a software tool
for computer aided coding of open-ended survey questions, from DataStat. A
portion of the purchase price was attributable to acquired in-process
technology, as the development work associated with the program had not reached
technological feasibility and were believed to have no alternative future use.
SPSS carefully assessed the fair value of the acquired in-process technology
using an income approach. Future cash flows were projected over five years
discounted to present value using a discount rate of 20% based on the project
and the market risks associated with the research and development project and
resulting product. Specific consideration was given to the stage of development
of the research and development effort, which was 75% complete, both in terms of
costs invested as of the acquisition date relative to completion costs and
technical achievements. In projecting future revenue streams from the project,
SPSS considered many
25
26
factors including competition, market growth estimates, time to market and
additional sales and marketing leverage that SPSS could provide to the VerbaStat
product.
Net Interest Income (Expense). Net interest income was $333,000 in 1998
primarily due to interest earned on short-term investments. Net interest
(expense) was ($529,000) in 1999 and ($642,000) in 2000 primarily due to
interest expense incurred on line-of-credit borrowings.
Other Income (Expense). Other income (expense) was ($128,000) in 1998 and
$157,000 in 1999 and consists mainly of foreign exchange transactions. Other
income was $1,173,000 in 2000, due primarily to the $1,397,000 gain on the
divestiture of the statistical quality control product line offset partially by
foreign exchange transactions.
Provision for Income Taxes. The provision for income taxes consisted of
$8,404,000 in 1998, $8,621,000 in 1999 and $3,534,000 in 2000. During 1998, the
provision for income taxes represented a tax rate of approximately 38%,
excluding the effect of Japanese withholding taxes on monies transferred out of
Japan in 1998, and certain expenses related to the Surveycraft Limited and
Integral Solutions Limited acquisitions. During 1999, the provision for income
taxes represented a tax rate of approximately 36%, excluding the effect of
Japanese monies transferred out of Japan in 1999. During 2000, the provision for
income taxes represented a tax rate of approximately 29%, excluding the effect
of Japanese monies transferred out of Japan in 2000. The 2000 tax rate benefited
from the reduction of the deferred tax valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
SPSS' long-term debt as of December 31, 2000 consists of a mortgage on
property in the United Kingdom and the balance of the purchase price due
DataStat, S.A. for the acquisition of the VerbaStat product. As of December 31,
2000, SPSS held approximately $10,282,000 of cash and cash equivalents. Funds in
1999 were used primarily for payments related to SPSS' acquisitions, as well as
new computer systems for use in internal product development and expenditures
made for an office move in Sweden. Funds in 2000 were used primarily for
payments related to office space expansions, new sales force automation and
accounting system, upgrades of computing systems, integration of previous
acquisitions, strategic investments, and the hiring of sales and professional
services personnel in advance of revenues.
In May 2000, the Company renewed its loan agreement with American National
Bank and Trust Company of Chicago. Under the loan agreement, SPSS has an
available $20,000,000 unsecured line of credit, under which borrowings bear
interest at either the prime interest rate or the Eurodollar Rate, depending on
the circumstances. As of December 31, 2000, SPSS had $16,000,000 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 select transactions with affiliates; and
- Amend its organizational documents or make changes in its capital
structure.
26
27
As a result of the Company's merger with Showcase in February 2001, SPSS
expects to extinguish its borrowings under the line of credit during 2001. At
December 31, 2000, Showcase had cash and cash equivalents of over $17,000,000.
SPSS anticipates the 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.
The Company's capital expenditures, primarily for computer systems,
leasehold improvements and office furniture totaled approximately $13,500,000 in
2000 and are projected to total approximately $8,000,000 in 2001 and $7,000,000
in 2002. SPSS intends capital expenditures during 2001 to include new computers,
primarily for use in internal product development, replacement of its systems
for accounting and order entry, as well as furnishings and other equipment
related to the move of the Company's facilities in Kilburn, UK, and expansion of
facilities in Chicago, Miami, Woking, UK, Denmark, and Australia. SPSS does not
believe that the implementation of its business strategy will require
substantial additional capital expenditures in comparison with historical levels
of product development costs and other expenses.
INTERNATIONAL OPERATIONS
Significant growth in the Company's international operations also occurred
from 1996 to 2000. Revenues from international operations comprised
approximately 47% to 52% of total net revenues between 1996 and 2000. They were
approximately 48% of total net revenues in 2000.
Following the reorganization of its international operations in 1990, SPSS
has maintained substantially the same direct sales and telesales organizations
worldwide. The international sales organization uses more independent
distributors than the domestic sales organization, primarily in countries
without an SPSS sales office. Management believes the profit margins associated
with the Company's domestic and international operations are essentially the
same.
As international revenues increase, SPSS may experience additional foreign
currency exchange risk. To mitigate these effects, SPSS hedges its transaction
exposure (i.e., the effect on earnings and cash flows of changes in foreign
exchange rates on receivables and payables denominated in foreign currencies).
SPSS does not hedge its foreign currency exposure in a manner that would
entirely eliminate the effects of changes in foreign exchange rates on the
Company's consolidated net income. Accordingly, the Company's reported revenues
and net income have been and in the future may be affected by the changes in
foreign exchange rates.
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28
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISKS
The Company is exposed to market risk from fluctuations in interest rates
on borrowings under our unsecured line of credit that bears interest at either
the prime rate or the Eurodollar rate. As of December 31, 2000, the Company had
$16,000,000 outstanding under this line of credit. A 100 basis point increase in
interest rates would result in an additional $160,000 of annual interest
expense, assuming the same level of borrowing.
The Company is exposed to market risk from fluctuations in foreign currency
exchange rates. Since a substantial portion of the Company's operations and
revenue occur outside the United States, and in currencies other than the U.S.
dollar, the Company's results can be significantly impacted by changes in
foreign currency exchange rates. To manage the Company's exposure to
fluctuations to currency exchange rates, the Company enters into various
financial instruments, such as options. These instruments generally mature
within 12 months. Gains and losses on these instruments are recognized in other
income or expense. Were the foreign currency exchange rates to depreciate
immediately and uniformly against the U.S. dollar by 10 percent from levels at
December 31, 2000, management expects this would have a materially adverse
effect on the Company's financial results.
28
29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SPSS INC. AND SUBSIDIARIES
INDEX
PAGE
----
Independent Auditors' Report.............................................. 30
Consolidated Balance Sheets as of December 31, 1999 and 2000.............. 31
Consolidated Statements of Income for the years ended
December 31, 1998, 1999 and 2000...................................... 32
Consolidated Statements of Comprehensive Income for the years ended
December 31, 1998, 1999 and 2000..................................... 33
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1998, 1999 and 2000...................................... 34
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1999 and 2000...................................... 35
Notes to Consolidated Financial Statements................................ 36
Financial Statement Schedule:
Schedule II Valuation and qualifying accounts.......................... 52
Schedules not filed
All schedules other than that indicated in the index have been omitted as the
required information is inapplicable or the information is presented in the
consolidated financial statements or related notes.
29
30
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
SPSS Inc.:
We have audited the consolidated financial statements of SPSS Inc. and
subsidiaries (the "Company") as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have audited
the consolidated financial statement schedule as listed in the accompanying
index. These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SPSS Inc. and
subsidiaries as of December 31, 1999 and 2000, and the results of their
operations, and their cash flows for each of the years in the three-year period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
/s/KPMG LLP
Chicago, Illinois
March 30, 2001
30
31
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, DECEMBER 31,
1999 2000
------------ -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 16,770 $ 10,282
Accounts receivable, net of allowances of $2,510 in 1999 and $2,611 in 2000 42,901 59,635
Inventories 2,895 4,463
Deferred income taxes 3,042 7,027
Prepaid expenses and other current assets 2,833 6,239
------------ -----------
Total current assets 68,441 87,646
------------ -----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost:
Land and building 1,671 1,551
Furniture, fixtures, and office equipment 7,617 8,363
Computer equipment and software 25,982 34,783
Leasehold improvements 6,480 8,601
------------ -----------
41,750 53,298
Less accumulated depreciation and amortization 25,639 29,824
------------ -----------
Net equipment and leasehold improvements 16,111 23,474
------------ -----------
Capitalized software development costs, net of accumulated amortization 13,078 16,225
Goodwill, net of accumulated amortization 5,339 8,095
Other assets 3,746 7,190
------------ -----------
$ 106,715 $ 142,630
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 9,000 $ 16,000
Accounts payable 5,670 8,612
Accrued royalties 488 571
Accrued rent 1,050 1,438
Other accrued liabilities 8,270 8,476
Income taxes and value added taxes payable 3,664 2,952
Customer advances 529 442
Deferred revenues 11,098 28,794
------------ -----------
Total current liabilities 39,769 67,285
------------ -----------
Deferred income taxes 3,809 749
Other non-current liabilities 1,595 1,224
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value; 50,000,000 shares authorized; 9,652,665
and 10,024,457 shares issued and outstanding in 1999 and
2000, respectively 96 100
Additional paid-in capital 48,569 54,966
Accumulated other comprehensive loss (119) (3,226)
Retained earnings 12,996 21,532
------------ -----------
Total stockholders' equity 61,542 73,372
------------ -----------
$ 106,715 $ 142,630
============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
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32
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
YEAR ENDED DECEMBER 31,
------------------------------------------------
1998 1999 2000
------------ ------------ ------------
Net revenues:
Analytical solutions $ 8,836 $ 17,540 $ 31,246
Market research 25,551 32,674 29,688
Statistics 89,085 91,716 79,846
------------ ------------ ------------
Net revenues 123,472 141,930 140,780
Operating expenses:
Cost of revenues 10,048 12,663 12,234
Sales and marketing 60,413 68,277 81,181
Product development 20,862 24,983 26,613
General and administrative 9,427 9,773 9,213
Special general and administrative charges 445 -- --
Merger-related 1,948 1,611 --
Acquired in-process technology 3,552 128 --
------------ ------------ ------------
Operating expenses 106,695 117,435 129,241
------------ ------------ ------------
Operating income 16,777 24,495 11,539
------------ ------------ ------------
Other income (expense):
Net interest income (expense) 333 (529) (642)
Other (128) 157 1,173
------------ ------------ ------------
Other income (expense) 205 (372) 531
------------ ------------ ------------
Income before income taxes 16,982 24,123 12,070
Income tax expense 8,404 8,621 3,534
------------ ------------ ------------
Net income $ 8,578 $ 15,502 $ 8,536
============ ============ ============
Basic net income per share $ 0.90 $ 1.61 $ 0.87
============ ============ ============
Shares used in computing basic net
income per share 9,515,191 9,600,983 9,824,135
============ ============ ============
Diluted net income per share $ 0.85 $ 1.52 $ 0.81
============ ============ ============
Shares used in computing diluted net
income per share 10,104,015 10,191,674 10,542,441
============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
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33
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1999 2000
------- ------- -------
Net income $ 8,578 $15,502 $ 8,536
Other comprehensive income (loss):
Foreign currency translation adjustment 188 758 (3,107)
------- ------- -------
Comprehensive income $ 8,766 $16,260 $ 5,429
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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34
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
YEAR ENDED DECEMBER 31,
------------------------------------
1998 1999 2000
-------- -------- --------
Common stock, $.01 par value:
Balance at beginning of period $ 93 $ 95 $ 96
Sale of 18,663, 18,249 and 16,545 shares of common
stock to the Employee Stock Purchase Plan in
1998, 1999 and 2000, respectively -- -- --
Exercise of stock options and other 2 1 4
-------- -------- --------
Balance at end of period $ 95 $ 96 $ 100
-------- -------- --------
Additional paid-in capital:
Balance at beginning of period $ 44,376 $ 47,605 $ 48,569
Sale of 18,663, 18,249 and 16,545 shares of common
stock to the Employee Stock Purchase Plan
in 1998, 1999 and 2000, respectively 410 365 444
Sale of 54,606 shares of common stock
in 1998 488 -- --
Exercise of stock options and other 1,323 248 3,890
Stock-based compensation -- -- 304
Income tax benefit related to stock options 1,008 351 1,759
-------- -------- --------
Balance at end of period $ 47,605 $ 48,569 $ 54,966
-------- -------- --------
Accumulated other comprehensive income:
Balance at beginning of period $ (1,065) $ (877) $ (119)
Translation adjustment 188 758 (3,107)
-------- -------- --------
Balance at end of period $ (877) $ (119) $ (3,226)
-------- -------- --------
Retained earnings (accumulated deficit):
Balance at beginning of period $(11,084) $ (2,506) $ 12,996
Net income 8,578 15,502 8,536
-------- -------- --------
Balance at end of period $ (2,506) $ 12,996 $ 21,532
-------- -------- --------
Total stockholders' equity $ 44,317 $ 61,542 $ 73,372
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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35
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
------------------------------------
1998 1999 2000
-------- -------- --------
Cash flows from operating activities:
Net income $ 8,578 $ 15,502 $ 8,536
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,807 8,703 11,166
Compensation expense related to options 304
Deferred income taxes (546) 374 (7,822)
Gain on sale of product line -- -- (1,397)
Income tax benefit from stock options exercised 1,008 351 1,759
Write-off of software development costs and
other assets 445 -- --
Write-off of acquired in-process technology 3,552 128 --
Changes in assets and liabilities, net of effects of
acquisitions:
Accounts receivable (5,771) (8,086) (16,734)
Inventories (164) (24) (1,541)
Deferred offering costs -- -- (2,232)
Accounts payable 960 (592) 2,942
Accrued royalties 89 (83) 83
Accrued expenses (1,494) (2,208) 864
Accrued income taxes 4,423 (2,213) (712)
Deferred revenue (208) (1,418) 17,696
Other (39) (1,228) (3,545)
-------- -------- --------
Net cash provided by operating activities 17,828 9,964 9,367
-------- -------- --------
Cash flows from investing activities:
Capital expenditures, net (10,319) (4,382) (12,852)
Divesture of product line -- -- 1,700
Purchase of cost-basis investment -- -- (1,450)
Capitalized software development costs (4,070) (5,597) (7,602)
Acquisition earn-out payments -- -- (3,882)
Net payments related to acquisitions (8,404) (83) --
-------- -------- --------
Net cash used in investing activities (22,793) (10,062) (24,086)
-------- -------- --------
Cash flows from financing activities:
Net (repayments) borrowings under 8,972 (43) 7,000
line-of-credit agreements
Proceeds from issuance of common stock 2,223 614 4,338
-------- -------- --------
Net cash provided by financing activities 11,195 571 11,338
-------- -------- --------
Effect of exchange rate on cash 188 758 (3,107)
Net change in cash and cash equivalents 6,230 473 (6,488)
Cash and cash equivalents at beginning of period 10,067 16,297 16,770
-------- -------- --------
Cash and cash equivalents at end of period $ 16,297 $ 16,770 $ 10,282
======== ======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 199 $ 938 $ 1,058
Income taxes paid 5,642 11,271 9,273
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
35
36
SPSS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
SPSS Inc. ("SPSS" or the "Company") is a multinational company that
provides software and professional services for discovering what customers want
and predicting what they will do. The Company's products and services,
individually and in combination, are primarily used by commercial organizations
to integrate and analyze market, customer, and operational data in the process
of formulating strategies and programs to interact with their customers more
effectively. This process is commonly called "data mining" or "data analysis
using advanced analytical techniques."
Analytical solutions include products and services, sold separately or in
combination, for customer relationship management, business intelligence, and
business performance measurement applications. Market research includes products
and services, sold separately or in combination, for survey design,
implementation, and analysis in the market research industry. Statistics include
products and services, sold separately or in combination, for general purpose
statistical analysis.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of SPSS Inc.
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(c) Use of Estimates
Management of SPSS has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
(d) Software Revenue Recognition
The Company applies AICPA Statement of Position ("SOP") 97-2, Software
Revenue Recognition, which specifies the criteria that must be met prior to SPSS
recognizing revenues from software sales.
SPSS primarily recognizes revenue from product licenses, net of an
allowance for estimated returns and cancellations, at the time the software is
delivered. Revenue from certain product license agreements is recognized upon
contract execution, product delivery, and customer acceptance.
36
37
Revenue from postcontract customer support ("PCS" or "maintenance")
agreements, including PCS bundled with product licenses, is recognized ratably
over the term of the related PCS agreements. Some product licenses include
commitments for insignificant obligations, such as technical and other support,
for which an accrual is provided.
Revenue from training, consulting, publications, and other items is
recognized as the related products or services are delivered or rendered.
Revenues from fixed-price contracts are recognized using the
percentage-of-completion method of contract accounting as services are performed
to develop, customize and install the Company's software products. The
percentage completed is measured by the percentage of labor hours incurred to
date in relation to estimated total labor hours for each contract. Management
considers labor hours to be the best available measure of progress on these
contracts.
During 2000, the AICPA staff released several Technical Practice Aids
("TPA") for the software industry, consisting of questions and answers related
to the financial accounting and reporting issues of Statement of Position 97-2,
Software Revenue Recognition. As a result of the issuance of these TPA's, SPSS
performed a comprehensive review of their revenue recognition policies to ensure
compliance with recent authoritative literature. On a prospective basis
beginning in the fourth quarter of 2000, SPSS applied the standards set forth in
TPA 5100.53 - Fair value of PCS in a short-term time-based license and software
revenue recognition and TPA 5100.68 - Fair value of PCS in perpetual and
multi-year time-based licenses and software revenue recognition. As a result of
the application of the TPA's, SPSS recognized the revenue from short-term
time-based licenses and perpetual licenses with multi-year maintenance terms
ratable over the term of the contract. The Company recorded a one-time
adjustment of approximately $16,975,000 to defer revenue for contracts entered
into during the fourth quarter of 2000.
(e) Software Development Costs
Software development costs incurred by SPSS in connection with the
Company's long-term development projects are capitalized in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86, Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed. SPSS has
not capitalized software development costs relating to development projects
where the net realizable value is of short duration, as the effect would be
immaterial. SPSS reviews capitalized software development costs each period and,
if necessary, reduces the carrying value of each product to its net realizable
value.
(f) Earnings per Share
Basic earnings per share ("EPS") is based on the weighted average number
of shares outstanding and excludes the dilutive effect of unexercised common
stock equivalents. Diluted EPS is based on the weighted average number of shares
outstanding and includes the dilutive effect of unexercised common stock
equivalents.
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38
YEAR ENDED DECEMBER 31,
-------------------------------------------
1998 1999 2000
------------ ------------ -----------
BASIC EPS
Income available to common shareholders $ 8,578,000 $ 15,502,000 $ 8,536,000
Weighted-average number of common shares outstanding 9,515,191 9,600,983 9,824,135
Basic EPS $ 0.90 $ 1.61 $0.87
=========== ============ ===========
DILUTED EPS
Income available to common shareholders $ 8,578,000 $ 15,502,000 $ 8,536,000
Weighted-average number of common shares outstanding 9,515,191 9,600,983 9,824,135
Effect of dilutive securities-stock options
588,824 590,691 718,306
----------- ------------ -----------
Weighted-average number of common shares and
common share options that would be issued upon exercise 10,104,015 10,191,674 10,542,441
----------- ------------ -----------
Diluted EPS $ 0.85 $ 1.52 $ 0.81
Anti-dilutive shares not included in diluted EPS calculation 191,014 157,753 19,934
=========== ============ ===========
(g) Depreciation and Amortization
Depreciation of buildings is provided over thirty years on a straight-line
method. Furniture and equipment is depreciated using the straight-line method
over the estimated useful lives of the assets, which range from three to eight
years. Leasehold improvements are amortized on the straight-line method over the
remaining terms of the respective leases. Capitalized software costs are
amortized on a straight-line method over three to five years based upon the
expected life of each product. This method results in greater amortization than
the method based upon the ratio of current year gross product revenue to current
and anticipated future gross product revenue.
As of January 1, 1998, SPSS adopted SOP 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. This standard requires
that certain costs related to the development or purchase of internal-use
software be capitalized and amortized over the estimated useful life of the
software. SOP 98-1 also requires that costs related to the preliminary project
stage and post-implementation/operations stage of an internal-use computer
software development project be expensed as incurred. During 1998, 1999 and 2000
SPSS capitalized $873,000, $739,000 and $1,229,000 and amortized $6,000, $23,000
and $40,000 of internal-use computer software.
(h) Income Taxes
SPSS applies the asset and liability method of accounting for income taxes
in which deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
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expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
(i) Stock Option Plans
The Company accounts for its stock options under the provisions of SFAS
No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 permits entities
to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to apply the provisions of Accounting Principles Board Opinion ("APB")
No. 25, Accounting for Stock Issued to Employees and provide pro forma net
income (loss) disclosures for employee stock option grants made as if the fair
value-based method defined in SFAS No. 123 had been applied. Under APB No. 25,
compensation expense would be recorded on the date of the grant only if the
current market price of the underlying stock exceeded the exercise price. The
Company has elected to apply the provisions of APB No. 25 and provide the pro
forma disclosures required by SFAS No. 123.
(j) Inventories
Inventories, consisting of finished goods, are stated at the lower of cost
or market. Cost is determined using the first-in, first-out method.
(k) Goodwill
The excess of the cost over the fair value of net assets acquired is
recorded as goodwill and amortized on a straight-line basis over 10 to 15 years.
Accumulated amortization was $1,331,000 and $2,429,000 as of December 31, 1999
and 2000, respectively.
(l) Foreign Currency Translation
The translation of the applicable foreign currencies into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using the average
exchange rates during the period. The gains or losses resulting from such
translation are included in stockholders' equity. Gains or losses resulting from
foreign currency transactions are included in "other income and expense" in the
statement of income.
(m) Fair Value of Financial Instruments
The fair values of financial instruments were not materially different
from their carrying values.
(n) Cash and Cash Equivalents
Cash and cash equivalents are comprised of highly liquid investments with
original maturity dates of three months or less.
(o) Long-Lived Assets
Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
should be evaluated. Factors leading to impairment include a combination of
historical losses, anticipated future losses and inadequate cash flow. The
assessment of recoverability is based on management's estimate. Impairment is
measured by comparing the carrying value to the estimated and undiscounted
future cash flows expected to result from the use of the assets and
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their eventual disposition. SPSS has determined that as of December 31, 2000,
there has been no impairment in the carrying values of long-lived assets.
(p) Advertising Expenses
Advertising expenses are charged to operations during the year in which
they are incurred. The total amount of advertising expenses charged to
operations was $4,291,000, $3,557,000 and $2,623,000 for the years ended
December 31, 1998, 1999 and 2000, respectively.
(q) Reclassifications
Where appropriate, some items relating to the prior years have been
reclassified to conform to the presentation in the current year.
(2) DOMESTIC AND FOREIGN OPERATIONS
The net assets, net revenues and net income of international subsidiaries
as of and for the years ended December 31, 1998, 1999 and 2000 included in the
consolidated financial statements are summarized as follows:
DECEMBER 31,
----------------------------------------
1998 1999 2000
----------- ----------- -----------
Working capital $ 7,752,000 $18,042,000 $26,354,000
=========== =========== ===========
Excess of noncurrent assets over
noncurrent liabilities $ 3,468,000 $ 3,996,000 $ 5,582,000
=========== =========== ===========
Net revenues $58,602,000 $71,521,000 $67,450,000
=========== =========== ===========
Net income $ 7,017,000 $ 4,655,000 $ 5,756,000
=========== =========== ===========
Net revenues(1) per geographic region are summarized as follows:
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1998 1999 2000
------------- ------------- -------------
United States $ 64,870,000 $ 70,409,000 $ 73,330,000
United Kingdom 22,499,000 24,038,000 22,301,000
The Netherlands 11,978,000 13,505,000 9,989,000
Japan 9,750,000 11,900,000 13,346,000
Germany 7,651,000 8,691,000 6,978,000
Other 6,724,000 13,387,000 14,836,000
------------- ------------- -------------
$ 123,472,000 $ 141,930,000 $ 140,780,000
============= ============= =============
(1) Revenues are attributed to countries based on point-of-sale.
Long-lived assets per geographic region are summarized as follows:
DECEMBER 31,
--------------------------------------------
1998 1999 2000
------------ ------------ ------------
United States $ 31,455,000 $ 33,912,000 $ 45,828,000
United Kingdom 2,122,000 1,968,000 2,657,000
The Netherlands 318,000 224,000 240,000
Japan 1,049,000 1,066,000 936,000
Germany 269,000 211,000 242,000
Other 556,000 893,000 1,418,000
------------ ------------ ------------
$ 35,769,000 $ 38,274,000 $ 51,321,000
============ ============ ============
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(3) SOFTWARE DEVELOPMENT COSTS AND PURCHASED SOFTWARE
Activity in capitalized software is summarized as follows:
DECEMBER 31,
-------------------------------------------------
1998 1999 2000
-------------- ------------- --------------
Balance, net - beginning of year $ 6,703,000 $10,658,000 $13,078,000
Additions 5,500,000 3,961,000 7,101,000
Product translations 792,000 1,641,000 501,000
Write-down to net realizable value (445,000) -- --
Sale of assets -- -- (294,000)
Amortization expense charged to
cost of revenues (1,892,000) (3,182,000) (4,161,000)
-------------- ------------- --------------
Balance, net - end of year $10,658,000 $13,078,000 $16,225,000
============== ============= ==============
The components of net capitalized software are summarized as follows:
DECEMBER 31,
-----------------------------
1999 2000
------------ -------------
Product translations $ 2,798,000 $ 2,489,000
Acquired software technology 4,720,000 5,560,000
Capitalized software development costs 5,560,000 8,176,000
------------ ------------
Balance, net -- end of year $ 13,078,000 $ 16,225,000
============ ============
Total software development costs, including amounts expensed as incurred,
amounted to approximately $24,932,000, $30,580,000 and $34,215,000, for the
years ended December 31, 1998, 1999 and 2000, respectively.
Included in acquired software technology at December 31, 1999 and 2000 is
$1,782,000 and $1,337,000 of technology resulting from the purchase of
Surveycraft Party Ltd., Integral Solutions Ltd. and the VerbaStat product. (See
Note 4)
(4) ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
In November 1998, SPSS acquired all of the outstanding shares of capital
stock of Surveycraft Pty. Ltd. ("Surveycraft") for an aggregate purchase price
of approximately $1,700,000. The Surveycraft acquisition was accounted for as a
purchase and, accordingly, the acquired assets and liabilities have been
recorded at their estimated fair values. In the fourth quarter of 1998, SPSS
recorded charges of approximately $863,000 representing a one-time write-off of
acquired in-process technology and other merger-related costs. Surveycraft is a
computer software company specializing in market research
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software. In 1999, SPSS consolidated the Surveycraft business into its Australia
and Cincinnati offices. Also in 1999, some assumed liabilities were revalued,
and goodwill was decreased by $371,000.
On December 31, 1998, SPSS acquired all of the outstanding shares of
capital stock of Integral Solutions Limited ("Integral Solutions"), a
corporation incorporated under the laws of England, from the shareholders of
Integral Solutions (the "Shareholders"). The stock purchase occurred pursuant to
the Stock Purchase Agreement between SPSS and the Shareholders in the United
Kingdom (the "Agreement") dated as of December 31, 1998. SPSS acquired Integral
Solutions from the Shareholders for approximately $7,000,000 plus contingent
payments (as defined in the Agreement) of up to approximately $7,000,000 based
on future results of the acquired business (the "Purchase Price"). Additional
payments of approximately $3,900,000 and $2,900,000 were made in January 2000
and February 2001, respectively. Additional payments were recorded as an
adjustment to purchase price in the periods in which such payments were
determinable. The Integral Solutions acquisition was accounted for as a purchase
and, accordingly, the acquired assets and liabilities have been recorded at
their estimated fair values. In the fourth quarter of 1998, SPSS recorded
charges of approximately $5,053,000 representing a one-time write-off of
acquired in-process technology and other merger-related costs. Integral
Solutions is a leading full-service data mining company, supplying consultancy
and training. In 1999, Integral Solutions office lease expired and personnel
were moved to the existing SPSS UK Ltd. Offices in Woking, England. Also in
1999, some assumed liabilities were revalued, and goodwill was increased by
$227,000.
The following summary presents information concerning the purchase price
allocations for the acquisitions accounted for under the purchase method for the
year ended December 31, 1998.
ACQUIRED
PURCHASED IN-PROCESS PURCHASE
COMPANY NAME SOFTWARE TECHNOLOGY GOODWILL OTHER PRICE (1)
- - ------------- ---------- ----------- ---------- ----------- -----------
Surveycraft $ 202,000 $ 312,000 $1,974,000 $ 533,000 $ 3,021,000
Integral Solutions 2,020,000 3,240,000 2,239,000 1,741,000 9,240,000
----------- ----------- ---------- ----------- -----------
$ 2,222,000 $ 3,552,000 $4,213,000 $ 2,274,000 $12,261,000
=========== =========== ========== =========== ===========
(1) Purchase price includes costs associated with the acquisition and
acquired deferred tax liabilities.
SPSS incurred significant costs and expenses in connection with these
acquisitions, including professional fees, employees' severance and various
other expenses. Such expenses were recorded as part of the purchase price in
connection with the Surveycraft and Integral Solutions acquisitions accounted
for as purchases.
On November 29, 1999, SPSS acquired all of the outstanding shares of
capital stock of Vento Software, Inc. ("Vento"), a corporation incorporated
under the laws of Florida, from the shareholders of Vento in exchange for
546,060 shares of Common Stock in a stock acquisition accounted for as a pooling
of interests and, accordingly, the consolidated financial statements have been
restated as if SPSS and Vento had been combined for all periods presented. In
the fourth quarter of 1999, SPSS recorded charges of approximately $1,948,000
representing merger-related costs for expenses relating to management and sales
force restructuring, employee sign-on bonuses, professional fees and various
other expenses. Vento is an analytical solutions company whose assets include
the VentoMap product line, a series of industry-specific software products for
business performance measurement, and a proprietary methodology for the delivery
of related professional services.
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On December 24, 1999, SPSS acquired certain assets related to the
VerbaStat software program from DataStat, S.A., a corporation organized under
the laws of Belgium, for approximately $1,000,000. VerbaStat is a software tool
for computer aided coding of open-ended survey questions.
The following summary presents information concerning the purchase price
allocation for the VerbaStat acquisition accounted for under the purchase price
method for the year ended December 31, 1999.
ACQUIRED
PURCHASED IN-PROCESS PURCHASE
COMPANY NAME SOFTWARE TECHNOLOGY GOODWILL OTHER PRICE
VerbaStat $ 5,000 $ 128,000 $883,000 $ 138,000 $1,154,000
DIVESTITURES
On May 11, 2000, SPSS sold substantially all of the assets of its QI
Analyst business to Wonderware Corporation for approximately $2,000,000,
recording a gain in other income of $1,397,000.
(5) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
SPSS leases its office facilities, storage space, and some data
processing equipment under lease agreements expiring through the year 2012.
Minimum lease payments indicated below do not include costs such as property
taxes, maintenance, and insurance.
The following is a schedule of future noncancellable minimum lease
payments required under operating leases as of December 31, 2000:
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ------------------
2001 $ 5,184,000
2002 4,582,000
2003 4,248,000
2004 3,855,000
2005 3,268,000
Thereafter 15,262,000
-------------------
$ 36,399,000
===================
Rent expense related to operating leases was approximately $5,210,000,
$5,262,000 and $6,062,000 during the years ended December 31, 1998, 1999, and
2000, respectively.
LITIGATION
SPSS is subject to certain legal proceedings and claims that have arisen
in the ordinary course of business and have not been adjudicated. Marija J.
Norusis ("Plaintiff") and SPSS entered into a series of publishing agreements
pursuant to which Plaintiff agreed to author portions of certain software
manuals and statistical guides. Plaintiff alleges that SPSS has published and
sold certain manuals which contain Plaintiff's work and/or which Plaintiff had
the right to prepare under the terms of the parties' agreements,
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without paying the Plaintiff royalties on such sales. Plaintiff filed a
complaint, as amended, in which Plaintiff asserts claims for a declaratory
judgment, an accounting, breach of contract, quantum meruit, and violation of
the Illinois Deceptive Trade Practices Act. Plaintiff currently seeks
unspecified damages in an amount in excess of $100,000 together with prejudgment
interest and attorney's fees. On motion by SPSS, the court dismissed Plaintiff's
declaratory claim, but all of the other claims are pending. In July 2000, the
Court ordered the parties to retain an independent third party to analyze SPSS'
records and to prepare a report of SPSS' sales of the software manuals and
statistical guides for which Plaintiff claims a right to royalties. That report
was completed in December 2000, and the parties are currently engaged in
settlement discussions based on the report. SPSS intends to pursue settlement
negotiations with Plaintiff, and, if those negotiations are unsuccessful, to
vigorously contest Plaintiff's claims. Management currently believes the
ultimate outcome of these matters will not have a material adverse effect on
SPSS' results of operations or financial position.
(6) OTHER NON-CURRENT LIABILITIES
SPSS has a mortgage on its freehold property, which houses the SPSS
Limited Quantime offices in London, England. The mortgage is held by Norwich
Union Investment Management of Norwich, England and is a fixed 12.04%, 30-year
mortgage expiring in January 2010. The annual principal and interest payments
total British Pounds Sterling (GBP) 109,692 (approximately $166,000). The
current portion of this debt is GBP 33,106 (approximately $50,000) and is
included in "Other Accrued Liabilities" as of December 31, 2000. The non-current
balance as of December 31, 2000 is GBP 553,510 (approximately $828,000).
In December 1999, SPSS entered into an asset purchase agreement with
DataStat, S.A. for the purchase of the VerbaStat product. Under the terms of the
agreement, SPSS will pay DataStat twelve quarterly installment payments of
$83,333. The current portion of this debt is approximately $250,000, and is
included in "Other accrued liabilities." The non-current balance as of December
31, 2000 is $417,000.
(7) FINANCING ARRANGEMENTS
The Company has a loan agreement with American National Bank and Trust
Company of Chicago. Under the agreement, SPSS has an available $20,000,000
unsecured line of credit. At December 31, 2000, SPSS had $16,000,000 in
borrowings under this credit agreement. Borrowings against the line of credit
bear interest at either the prime interest rate or the Eurodollar Rate (varying
between 8.21% and 8.37% at December 31, 2000), depending on the circumstances.
As of January 26, 2001, the Company amended its June 1, 2000 line of credit to
make an additional $5,000,000 available until April 30, 2001.
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(8) OTHER INCOME (EXPENSE)
Other income (expense) consists of the following:
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1999 2000
---------- --------- -----------
Interest income $1,087,000 $ 193,000 $ 446,000
Interest expense (754,000) (722,000) (1,088,000)
Exchange gain (loss) on foreign currency
Transactions (238,000) 119,000 (224,000)
Gain on sale of product line -- -- 1,397,000
Other 110,000 38,000 --
---------- --------- -----------
Total other income (expense) $ 205,000 $(372,000) $ 531,000
========== ========= ===========
(9) INCOME TAXES
Income before income tax consists of the following:
YEAR ENDED DECEMBER 31,
--------------------------------------------
1998 1999 2000
------------ ------------ ------------
Domestic $ 5,391,000 $ 7,347,000 $ 469,000
Foreign 11,591,000 16,776,000 11,601,000
------------ ------------ ------------
$ 16,982,000 $ 24,123,000 $ 12,070,000
============ ============ ============
Income tax expense (benefit) consists of the following:
CURRENT DEFERRED TOTAL
------------ ------------ ------------
Year ended December 31, 1998
U.S. Federal $ 4,029,000 $ (1,141,000) $ 2,888,000
State 884,000 (161,000) 723,000
Foreign 4,037,000 756,000 4,793,000
------------ ------------- ------------
$ 8,950,000 $ (546,000) $ 8,404,000
============ ============= ============
Year ended December 31, 1999
U.S. Federal $ 2,549,000 $ 178,000 $ 2,727,000
State 495,000 19,000 514,000
Foreign 5,203,000 177,000 5,380,000
------------ ------------- ------------
$ 8,247,000 $ 374,000 $ 8,621,000
============ ============= ============
Year ended December 31, 2000
U.S. Federal $ 2,856,000 $ (7,142,000) $ (4,286,000)
State 926,000 (845,000) 81,000
Foreign 7,574,000 165,000 7,739,000
------------ ------------- ------------
$ 11,356,000 $ (7,822,000) $ 3,534,000
============ ============= ============
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For the years ended December 31, 1998, 1999 and 2000, the reconciliation
of statutory to effective income taxes is as follows:
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1999 2000
----------- ----------- -----------
Income taxes using the Federal
statutory rate of 34% $ 5,774,000 $ 8,202,000 $ 4,104,000
State income taxes, net of Federal tax
Benefit 477,000 339,000 (215,000)
Foreign taxes at net rates different
from U.S. Federal rates 524,000 (324,000) 1,763,000
Foreign tax credit (642,000) - (703,000)
Nondeductible write-off of in-process
research and development 1,208,000 128,000 -
Acquisition costs 785,000 404,000 -
Change in valuation allowance - (867,000) (1,179,000)
Other, net
278,000 739,000 (236,000)
----------- ----------- -----------
$ 8,404,000 $ 8,621,000 $ 3,534,000
=========== =========== ===========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1999 and
2000, are presented below:
1999 2000
------------- -------------
Deferred tax assets:
Accounts receivable principally due to allowance for doubtful accounts $ 428,000 $ 389,000
Inventories, principally due to additional costs inventoried for tax
purposes pursuant to the Tax Reform Act of 1986 51,000 55,000
Compensated absences, principally due to accrual for financial reporting 161,000 290,000
Research and experimentation credit carryforwards 523,000 478,000
Deferred rent 550,000 626,000
Plant and equipment, principally due to differences in depreciation and
capitalized interest - 850,000
Deferred revenues 2,272,000 8,789,000
Foreign currency loss 66,000 375,000
Acquisition-related items 2,345,000 1,994,000
U.S. net operating loss carryforwards 110,000 425,000
Non-U.S. net operating loss carryforwards 915,000 750,000
Other 246,000 1,550,000
------------- -------------
Total gross deferred tax assets 7,667,000 16,571,000
Less valuation allowance (2,770,000) (1,591,000)
------------- -------------
Net deferred tax assets 4,897,000 14,980,000
------------- -------------
Deferred tax liabilities:
Capitalized software costs 3,413,000 5,439,000
Acquisition-related items 1,389,000 1,053,000
Post-retirement benefits 544,000 1,320,000
Plant and equipment 204,000 -
Other 114,000 114,000
------------- -------------
Net deferred tax asset (liability) $ (767,000) $ 7,054,000
============= =============
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The valuation allowance remained unchanged in 1998, decreased $867,000
in 1999, and decreased by $1,179,000 in 2000. In assessing the realizability of
deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversals of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment.
As of December 31, 2000, SPSS A/S, a Danish subsidiary, had a net
operating loss carryforward of approximately $2,206,000, which begins to expire
in 2001.
As of December 31, 2000, SPSS had a Federal research and experimentation credit
carryforward of approximately $478,000, which begins to expire in 2001.
(10) EMPLOYEE BENEFIT PLANS
Effective February 1, 1995, SPSS amended its 401(k) savings plan.
Qualified employees may participate in the savings plan by contributing up to
the lesser of 15% of eligible compensation or limits imposed by the U.S.
Internal Revenue Code in a calendar year. Beginning in 1999, SPSS makes a
matching contribution of $500 for employees in the plan the entire year, which
resulted in a $288,000 contribution by SPSS recorded as compensation expense.
Also in 1999, the plan year was changed to begin on December 31 of each year and
end on December 30.
In 1993, SPSS implemented an employee stock purchase plan. The SPSS
purchase plan provides that eligible employees may contribute up to 10% of their
base salary per quarter towards the quarterly purchase of SPSS common stock. The
employee's purchase price is 85% of the fair market value of the stock at the
close of the first business day after the quarterly offering period. The total
number of shares issuable under the purchase plan is 100,000. Effective October
2000, the plan was amended to calculate the share price as 85% of the lower of
i) the closing market price of the stock on the first trading day of the
quarter, or ii) the closing market price for the stock on the last trading day
after the end of the quarter. During 1998, 18,663 shares were issued under the
purchase plan at market prices ranging from $19.25 to $23.75. During 1999,
18,249 shares were issued under the purchase plan at market prices ranging from
$16.75 to $25.50. During 2000, 16,545 shares were issued under the purchase plan
at market prices ranging from $22.06 to $31.00. SPSS recorded $54,000, $52,000
and $73,000 in compensation expense related to the purchase of these shares in
1998, 1999 and 2000, respectively.
(11) RESEARCH AND DEVELOPMENT LIMITED PARTNERSHIPS
SPSS entered into agreements with limited partnerships in 1981, 1982 and
1985 to perform research and development for new and existing computer software.
Certain of the general and limited partners of these partnerships are officers
of SPSS and under these agreements, SPSS incurred royalty expense to the
partnerships of $235,000, $237,000 and $252,000, for the years ended December
31, 1998, 1999 and 2000, respectively.
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(12) STOCK OPTIONS
On January 16, 1992, SPSS adopted a Stock Option Plan for some key
employees. Options vest either immediately or over a four-year period. In
September 1994, SPSS granted options to purchase 150,000 shares of common stock
to the principal owners of SYSTAT. In addition, in June 1995, the stockholders
of SPSS adopted the 1995 Equity Incentive Plan which authorizes the Board of
Directors, under some conditions, to grant stock options and shares of
restricted stock to directors, officers, other key executives, employees and
independent contractors.
At the 1996 meeting of SPSS shareholders, the shareholders ratified the
Second Amended and Restated 1995 Equity Incentive Plan, which was amended, among
other things, to increase the shares allowed to be granted under the Plan from
600,000 to 1,050,000. In May 1999, SPSS approved the Third Amended and Restated
1995 Equity Incentive Plan, which was amended to clarify the rules governing the
treatment of attestation of shares given to SPSS for the exercise price of
options.
In May 1999, SPSS adopted the 1999 Employee Equity Incentive Plan, which
authorizes the Board, under some conditions, to grant stock options and shares
of restricted stock to non-executive officer employees and independent
contractors of SPSS.
The Company recognized general and administrative expense of $304,000 in
compensation expense during 2000 related to accelerated vesting of options and
change of employee status in accordance with Financial Accounting Standards
Board Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensation - an interpretation of APB Opinion No. 25.
SPSS applies APB Opinion No. 25 and related interpretations in accounting
for its plans. All options under the plans have been granted at exercise prices
not less than the market value at the date of the grant. Accordingly, no
compensation cost has been recognized for its fixed stock option plans. Had
compensation cost for SPSS' stock option plans been determined consistent with
SFAS No. 123, SPSS' net income available to stockholders would have been
decreased to the pro forma amounts indicated below:
YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1999 2000
------------ ------------ -----------
Net income:
As reported $ 8,578,000 $ 15,502,000 $ 8,536,000
Pro forma 5,597,000 12,296,000 5,883,000
Net earnings per share:
Basic as reported 0.90 1.61 0.87
Basic pro forma 0.63 1.28 0.60
Diluted as reported 0.85 1.52 0.81
Diluted pro forma 0.59 1.21 0.56
Under the stock option plans, the exercise price of each option equals the
market value of the Company's stock on the date of grant. For purposes of
calculating the compensation costs consistent with SFAS No. 123, the fair value
of each grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in fiscal 1998, 1999 and 2000, respectively; no expected dividend yield;
expected volatility of 25 percent in 1998, 39 percent in 1999 and 38 percent in
2000; risk free interest rates of 5.30%, 6.43% and 4.90%, respectively, and
expected lives of 8 years. Additional information regarding options is as
follows:
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1998 1999 2000
----------------------- --------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------------ --------- --------- --------- --------- ---------
Outstanding at beginning
of year 1,699,106 $ 13.99 1,861,093 $ 16.43 2,248,164 $ 17.11
Granted 413,500 21.36 478,468 18.80 544,500 23.52
Forfeited (52,494) 26.21 (32,367) 24.49 (123,254) 20.17
Exercised (199,019) 6.66 (59,030) 4.21 (355,539) 10.94
--------- --------- --------- --------- --------- ---------
Outstanding at end of year 1,861,093 16.43 2,248,164 17.11 2,313,871 19.19
Options exercisable at
year end 1,115,749 12.21 1,413,790 14.89 1,401,489 17.41
The weighted average fair value of options granted during 1998, 1999 and
2000 was $21.36, $18.80 and $23.52, respectively.
The following table summarizes information about stock options outstanding
at December 31, 2000:
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- - ------------------------ ----------- ----------- ------------ ----------- --------
$ 1.05 146,544 1.59 $ 1.05 146,544 $ 1.05
8.00-9.125 118,817 2.88 8.53 118,817 8.53
12.875-15.375 385,377 4.71 14.11 385,377 14.11
17.5-23.25 1,020,334 8.45 20.19 384,571 20.31
25.125-29.00 642,799 7.60 26.73 366,180 27.29
---------- ---------- ------------ ----------- --------
2,313,871 6.87 $ 19.19 1,401,489 $ 17.41
(13) SUBSEQUENT EVENTS
On November 6, 2000, SPSS Inc., SPSS Acquisition Sub Corp., each a
Delaware corporation, and ShowCase Corporation ("ShowCase"), a Minnesota
corporation, entered into an Agreement and Plan of Merger pursuant to which
ShowCase shareholders would receive .333 shares of SPSS Common Stock for each
share of ShowCase Common Stock after the closing of the transaction. The share
exchange ratio for the merger was established through negotiations between SPSS
and ShowCase. The closing of the merger occurred on February 26, 2001 with SPSS
issuing approximately 3,725,000 shares of Common Stock for substantially all of
the outstanding shares of ShowCase. The merger will be accounted for as a
pooling of interests. ShowCase is a leading provider of enterprise intelligence
services.
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The following unaudited pro forma information shows total revenues and net
income of SPSS and ShowCase for the three years ended December 31, 1998, 1999,
and 2000, as if the transactions had been consummated as of the earliest period
presented. This summary is provided for informational purposes only. It does not
necessarily reflect the actual results that would have occurred had the merger
been made as of those dates or of results that may occur in the future.
1998 1999 2000
-------------- ------------- -------------
Net revenues:
SPSS (1) $ 123,472,000 $ 141,930,000 $ 140,780,000
ShowCase 32,268,000 38,915,000 47,214,000
-------------- ------------- -------------
Total $ 155,740,000 $ 180,845,000 $ 187,994,000
============== ============= =============
Net income (loss):
SPSS (1) $ 8,578,000 $ 15,502,000 $ 8,536,000
ShowCase (1,830,000) (2,667,000) (741,000)
-------------- ------------- ------------
Total $ 6,748,000 $ 12,835,000 $ 7,795,000
============== ============= ============
Diluted net
income per share $ 0.59 $ 1.10 $ 0.58
=============== ============= ============
The unaudited pro forma information for the year ended December 31, 1999
includes the impact of ShowCase's operating results for the quarter ended March
31, 2000, which is also included in the unaudited pro forma information for the
year ended December 31, 2000 due to differences in reporting periods relative
to SPSS. The revenues and net loss of ShowCase included in the unaudited pro
forma information for the year ended December 31, 1999 and 2000 are as follows:
Revenues $10,865,000
Net loss (1,210,000)
(1) Represents the historical results of SPSS without considering the
effect of the ShowCase pooling of interests transaction.
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(14) UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is a summary of the unaudited interim results of operations
for each of the quarters ended in 1999 and 2000.
(IN THOUSANDS, EXCEPT PERCENTAGE AND SHARE DATA)
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1999 1999 1999 1999 2000 2000 2000 2000
-------- -------- -------- -------- -------- -------- -------- --------
Net revenues:
Analytical solutions $ 3,680 $ 3,597 $ 4,189 $ 6,074 $ 7,074 $ 7,799 $ 7,914 $ 8,459
Market research 7,030 7,199 7,667 10,778 7,435 8,429 9,927 3,897
Statistics 22,287 22,850 22,763 23,816 23,294 20,927 21,730 13,895
-------- -------- -------- -------- -------- -------- -------- --------
Net revenues 32,997 33,646 34,619 40,668 37,803 37,155 39,571 26,251
Operating expenses:
Cost of revenues 2,683 3,126 3,253 3,601 3,174 2,804 2,960 3,296
Sales and marketing 16,904 16,357 16,109 18,907 19,341 18,994 20,335 22,511
Product development 5,709 6,215 6,581 6,478 6,162 6,692 6,609 7,150
General and administrative 2,415 2,985 2,607 1,766 2,481 2,393 2,358 1,981
Merger-related (a) - - - 1,611 - - - -
Acquired in-process technology (b) - - - 128 - - - -
-------- -------- -------- -------- -------- -------- -------- --------
Operating expenses 27,711 28,683 28,550 32,491 31,158 30,883 32,262 34,938
-------- -------- -------- -------- -------- -------- -------- --------
Operating income 5,286 4,963 6,069 8,177 6,645 6,272 7,309 (8,687)
Net interest income (expense) (65) (86) (332) (46) (173) (131) (182) (156)
Other income (expenses) (115) (204) 539 (63) (377) 959 43 548
-------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes 5,106 4,673 6,276 8,068 6,095 7,100 7,170 (8,295)
Income tax expense (benefit) 1,766 1,774 2,195 2,886 2,316 2,698 2,725 (4,205)
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) $ 3,340 $ 2,899 $ 4,081 $ 5,182 $ 3,779 $ 4,402 $ 4,445 ($ 4,090)
======== ======== ======== ======== ======== ======== ======== ========
Basic net income (loss) per $ 0.35 $ 0.30 $ 0.42 $ 0.54 $ 0.39 $ 0.45 $ 0.45 ($ 0.41)
share
======== ======== ======== ======== ======== ======== ======== ========
Shares used in basic per share 9,581 9,656 9,606 9,621 9,679 9,740 9,863 10,012
======== ======== ======== ======== ======== ======== ======== ========
Diluted net income (loss) per $ 0.33 $ 0.28 $ 0.40 $ 0.51 $ 0.36 $ 0.42 $ 0.42 ($ 0.41)
share
======== ======== ======== ======== ======== ======== ======== ========
Shares used in diluted per share 10,091 10,145 10,283 10,227 10,582 10,548 10,638 10,012
======== ======== ======== ======== ======== ======== ======== ========
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1999 1999 1999 1999 2000 2000 2000 2000
-------- -------- -------- -------- -------- -------- -------- --------
Net revenues:
Analytical solutions 11% 11% 12% 15% 19% 21% 20% 32%
Market research 21% 21% 22% 26% 20% 23% 25% 15%
Statistics 68% 68% 66% 59% 61% 56% 55% 53%
-------- -------- -------- -------- -------- -------- -------- --------
Net revenues 100% 100% 100% 100% 100% 100% 100% 100%
Operating expenses:
Cost of revenues 8% 9% 9% 9% 8% 8% 8% 13%
Sales and marketing 51% 49% 47% 47% 51% 51% 51% 86%
Product development 17% 18% 19% 16% 17% 18% 17% 27%
General and administrative 8% 9% 7% 4% 7% 6% 6% 7%
Merger-related (a) - - - 4% - - - -
Acquired in-process technology (b) - - - - - - - -
-------- -------- -------- -------- -------- -------- -------- --------
Operating expenses 84% 85% 82% 80% 83% 83% 82% 133%
-------- -------- -------- -------- -------- -------- -------- --------
Operating income 16% 15% 18% 20% 17% 17% 18% (33%)
Net interest income (expense) - - (1%) - - - - (1%)
Other income (expense) (1%) (1%) 1% - (1%) 2% - 2%
-------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes 15% 14% 18% 20% 16% 19% 18% (32%)
Income tax expense (benefit) 5% 5% 6% 7% 6% 7% 7% (16%)
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) 10% 9% 12% 13% 10% 12% 11% (16%)
======== ======== ======== ======== ======== ======== ======== ========
(a) Includes costs related to acquisitions accounted for as
poolings-of-interests, such as investment banking and other professional fees,
employee severance and costs of closing excess office facilities and certain
expenses associated with the closing of other acquisitions.
(b) Includes costs related to acquired in-process technology in conjunction with
business combinations accounted for as purchases.
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SCHEDULE II
SPSS INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
ADDITIONS
------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- - -------------------------------------- ------------ ------------ ------------ ----------- -------------
1998
Allowance for doubtful accounts,
product returns, and cancellations $ 1,714,000 $ 724,000 $ 1,867,000 $ 2,199,000 $ 2,106,000
Inventory obsolescence reserve 67,000 50,000 -- 102,000 15,000
1999
Allowance for doubtful accounts,
product returns, and cancellations $ 2,106,000 $ 1,768,000 $ 1,124,000 $ 2,488,000 $ 2,510,000
Inventory obsolescence reserve 15,000 25,000 -- 23,000 17,000
2000
Allowance for doubtful accounts,
product returns, and cancellations $ 2,510,000 $ 719,000 $ 2,372,000 $ 2,990,000 $ 2,611,000
Inventory obsolescence reserve 17,000 108,000 -- 99,000 26,000
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants during
fiscal year 2000.
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS
BOARD OF DIRECTORS AND MANAGEMENT OF SPSS
OFFICES AND DIRECTORS
The following table shows information as of March 16, 2001 with respect to
each person who is to be an executive officer or director of SPSS following the
merger with Showcase Corporation.
NAME AGE POSITION
- - ---- --- --------
Norman Nie ............................. 57 Chairman of the Board of Directors
Jack Noonan ............................ 53 Director, President and Chief Executive Officer
Edward Hamburg ......................... 49 Executive Vice President, Corporate Operations
Chief Financial Officer, and Secretary
Mark Battaglia ......................... 41 Executive Vice President, Corporate Marketing
Ian Durrell ........................... 58 Executive Vice President, SPSS Market Research
Susan Phelan ........................... 44 Executive Vice President, SPSS Business Intelligence
Bernard Goldstein (1) (2)............... 70 Director
Merritt Lutz (1)........................ 58 Director
Michael Blair (1) (2) .................. 56 Director
Promod Haque ........................... 52 Director
William Binch .......................... 60 Director
Kenneth Holec .......................... 45 Director
- - ------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Norman Nie, Chairman of the Board and co-founder of SPSS, designed SPSS'
original statistical software beginning in 1967 and has been a Director and
Chairman of the Board since SPSS' inception in 1975. He served as Chief
Executive Officer of SPSS from 1975 to 1991. In addition to his current
responsibilities as Chairman of the Board, Dr. Nie is a research professor at
Stanford University and a professor emeritus in the Political Science Department
at the University of Chicago. His research specialties include public opinion,
voting behavior and citizen participation. He has received three national awards
for his books in these areas. During 1998, he became a technology partner in Oak
Investment Partners and, in his role at Oak, is a director of several
privately-held companies. Dr. Nie received his Ph.D. from Stanford University.
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Jack Noonan has served as Director as well as President and Chief Executive
Officer since joining SPSS in January 1992. Mr. Noonan was President and Chief
Executive Officer of Microrim Corp., a developer of database software products,
from 1990 until December 1991. Mr. Noonan served as Vice President of the
Product Group of Candle Corporation, a developer of IBM mainframe system
software, from 1985 to 1990. Mr. Noonan is a Director of ShowCase Corporation,
Morningstar, Inc., Repository Technologies, Inc., and Visual Insights, Inc. Mr.
Noonan is a member of the advisory committee to Napersoft, Inc.
Edward Hamburg, Executive Vice President, Corporate Operations, Chief
Financial Officer and Secretary, was elected Senior Vice President, Corporate
Operations in July 1992, Chief Financial Officer in June 1993 and Secretary in
June 1994. Dr. Hamburg previously served as Senior Vice President, Business
Development, and was responsible for product and technology acquisitions as well
as joint venture opportunities. Dr. Hamburg first joined SPSS in 1978 and served
in a variety of marketing and product management capacities. He joined the
faculty at the University of Illinois at Chicago in 1982, and returned to SPSS
in 1986. Dr. Hamburg received his Ph.D. from the University of Chicago.
Mark Battaglia, Executive Vice President, Corporate Marketing, joined SPSS
in October 1988. Mr. Battaglia served as Vice President of Marketing at London
House, a publisher in the Maxwell Communications family, from June 1987 until
joining SPSS. Mr. Battaglia received his MBA in 1984 from the University of
Chicago.
Ian Durrell, Executive Vice President SPSS Market Research, joined SPSS in
February 1991. Before that time, he served as head of European marketing for
Unify Corporation, a supplier of relational database management systems, and was
a partner of Partner Development International, a strategic partnering firm from
1987 to 1989. Mr. Durrell graduated from the Royal Military Academy, Sandhurst,
in the United Kingdom.
Susan Phelan, Executive Vice President, SPSS Business Intelligence, joined
SPSS in 1980 as a sales representative. She assumed her current position in
1987. Ms. Phelan received her MBA from the University of Illinois at Chicago.
Bernard Goldstein has been a Director of SPSS since 1987. He is a Director
of Broadview International, LLC, which he joined in 1979. He is a past President
of the Information Technology Association of America, the industry trade
association of the computer service industry, and past Chairman of the
Information Technology Foundation. Mr. Goldstein was a Director of Apple
Computer Inc. until August 1997, and is currently a Director of Sungard Data
Systems, Inc., Giga Information Group, Inc, and several privately held
companies. He is a graduate of both the Wharton School of the University of
Pennsylvania and the Columbia University Graduate School of Business.
Merritt Lutz has been a Director of SPSS since 1988. He is currently
Chairman of Morgan Stanley Technology Holdings, Inc. and he manages the
strategic technology investments and partnerships for the firm. Previously, he
was President of Candle Corporation, a worldwide supplier of systems software
from 1989 to November 1993. Mr. Lutz is a Director of Interlink Electronics,
Inc., a Nasdaq company, and four privately held software companies:
Algorithmics, Business Engine, ThruPoint and Beacon International. He is a
former Director of the Information Technology Association of American and the
NASD Industry Advisory Committee. He holds a bachelors and masters degree from
Michigan State University.
Michael Blair has been a Director of SPSS since July 1997. Since April
1974, he has been Chairman, Chief Executive, and founder of Cyborg Systems,
Inc., a human resource management software company. Mr. Blair is a Director of
Computer Corporation of America, and Repository Technologies, Inc. He is a
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board member of the Chicago Software Association and a board member of Benefits
& Compensation Magazine. Mr. Blair holds a bachelor's degree in mathematics and
physics from the University of Missouri.
Promod Haque has been a director of SPSS since the merger with ShowCase
Corporation on February 26, 2001. Dr. Haque was a director of ShowCase from
March 1992 until the merger with SPSS. Dr. Haque joined Norwest Venture
Partners, a venture capital firm, in November 1990 and is currently managing
general partner of Norwest Venture Partners VIII & VII, general partner of
Norwest Venture Partners VI and general partner of Norwest Equity Partners V &
VI. Dr. Haque is a director of Extreme Networks, Inc., On Display, Primus
Knowledge Solutions, Redback Networks, Annuncio Software and several privately
held companies.
William Binch has been a director of SPSS since the merger with ShowCase
Corporation on February 26, 2001. Mr. Binch was a director of ShowCase from 1999
until the merger with SPSS. Mr. Binch was senior vice president of worldwide
operations for Hyperion Solutions from July 1997 to May 1999. Prior to Hyperion,
he was a senior executive for Business Objects and Prism, two business
intelligence and data-warehousing companies. In addition, Mr. Binch served as
vice president of strategic accounts at Oracle Corporation and has held sales
and management positions at IBM, Intel and Fortune. He also is a director of
five other technology companies: Market-Touch, On-Link Technology, seeCommerce,
Adflight, and Closedloop Solutions.
Kenneth Holec has been a director of SPSS since the merger with ShowCase
Corporation on February 26, 2001. Mr. Holec was president and chief executive
officer and a member of the board of directors of ShowCase from November 1993
until the merger with SPSS. From 1985 to 1993, Mr. Holec was president and chief
executive officer of Lawson Software, a provider of high-end financial and human
resource management software solutions. Currently, Mr. Holec is a director of
IntraNet Solutions, Inc., a maker of Web-based document management products for
corporate intranets.
SPSS's Board of Directors is divided into three classes serving
staggered three-year terms. Mr. Lutz and Mr. Holec are each serving a three-year
term expiring at the 2001 annual meeting. Mr. Goldstein, Mr. Binch and Dr. Nie
are each serving a three-year term expiring at the 2002 annual meeting. Mr.
Noonan, Dr. Haque and Mr. Blair are each serving a three-year term expiring at
the 2003 annual meeting. For a discussion of the nomination rights granted to
specific stockholders of SPSS, see "Related Transactions-Stockholders
Agreement." The executive officers named herein have terms expiring at the next
annual meeting or when their successors are duly elected and qualified.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and holders of more than 10% of our common stock
to file with the Securities and Exchange Commission reports regarding their
ownership and changes in ownership of our securities. SPSS believes, during
fiscal year 2000, its directors, executive officers and 10% shareowners complied
with all Section 16(a) filing requirements with the following exceptions: (i) a
late report on Form 5 filed by Dr. Norman H. Nie regarding sales of a total of
120,000 shares of SPSS common stock in February and March, 2000, and (ii) a late
report of the exercise of 25,000 options and sale of the stock underlying those
options during June and August, 2000. In making this statement, SPSS has relied
upon examination of the copies of Forms 3, 4 and 5 provided to SPSS and the
written representations of its directors, officers and 10% shareowners.
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ITEM 11. EXECUTIVE COMPENSATION
The following tables show (a) the compensation paid or accrued by SPSS to
the Chief Executive Officer, and each of the four most highly compensated
officers of SPSS, other than the CEO, serving on December 31, 2000 (the "named
executive officers") for services rendered to SPSS in all capacities during
1998, 1999, and 2000, (b) information relating to option grants made to the
named executive officers in 2000 and (c) certain information relating to options
held by the named executive officers. SPSS made no grants of freestanding stock
appreciation rights ("SARs") in 1998, 1999, or 2000, nor did SPSS make any
awards in 1998, 1999 or 2000 under any long-term incentive plan.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------- -----------------------------------------
AWARDS PAYOUTS
------------------------ -------
OTHER RESTRICTED SECURITIES
SALARY ANNUAL STOCK UNDERLYING LTIP ALL
COMPENSATION BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)((1) (#)(2) ($) ($)
- - ----------------------------- ---- ------------- -------- ------------- ---------- ------------ ------- -------
Jack Noonan,.......................... 2000 $275,000 $132,750 None None 50,000 None None
President and Chief 1999 $256,500 $ 96,125 None None 50,000 None None
Executive Officer 1998 $242,500 $185,679 None None 50,000 None None
Ian Durrell,.......................... 2000 $197,000 $ 90,825 None None 25,000 None None
Executive Vice President, 1999 $197,000 $141,500 None None 25,000 None None
SPSS Market Research(3) 1998 $197,000 $ 27,229 None None 25,000 None None
Edward Hamburg,....................... 2000 $200,000 $ 56,000 None None 25,000 None None
Executive Vice President, 1999 $156,000 $ 46,375 None None 25,000 None None
Corporate Operations and 1998 $156,000 $ 82,922 None None 25,000 None None
Chief Financial Officer
Mark Battaglia,....................... 2000 $176,000 $ 47,000 None None 25,000 None None
Executive Vice President, 1999 $127,000 $ 41,375 None None 25,000 None None
Corporate Marketing 1998 $110,000 $ 70,262 None None 25,000 None None
Susan Phelan,......................... 2000 $150,000 $ 62,620 None None 25,000 None None
Executive Vice President, 1999 $127,000 $ 84,080 None None 25,000 None None
SPSS Products and 1998 $120,000 $ 57,743 None None 25,000 None None
Services
For the year ended December 31, 2000, non-employee directors of SPSS were
entitled to receive 5,000 options. Each director was also reimbursed by SPSS for
reasonable expenses incurred in connection with services provided as a director.
During 2000, Dr. Nie received compensation of $80,800 for consultant work on a
part-time basis.
- - ------------------------------------------
(1) On December 31, 2000, Dr. Hamburg held 8,800 shares and Ms. Phelan held
1,986 shares of restricted common stock having a market value, based on the
closing price of the common stock on that date, of $194,150 for Dr. Hamburg's
shares and $43,816 for Ms. Phelan's shares.
(2) Amounts reflected in this column are for grants of stock options for the
common stock of SPSS. No stock appreciation rights have been issued by SPSS.
(3) Payments and options shown in the table for Mr. Durrell reflect payments
and option grants to Valletta Investments Limited, a consulting company
controlled by Mr. Durrell. Mr. Durrell does not receive any personal benefits or
perquisites, payments of salary and bonus, awards of options or other
compensation from SPSS in his individual capacity.
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The following table shows the number of options to purchase common stock
granted to each of the named executive officers during 2000.
2000 OPTION/STOCK APPRECIATION RIGHTS GRANTS(1)
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL
SECURITIES OPTIONS/SARS EXERCISE LATEST RATES OF STOCK PRICE
UNDERLYING GRANTED TO OR BASE POSSIBLE APPRECIATION FOR
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION OPTION TERM (2)
NAME GRANTED(#) 2000 ($/SH) DATE 5% ($) 10% ($)
---------------------------- --------------- ---------------- --------- ----------- ----------- -------------
Jack Noonan................ 50,000 9.18% $25.250 01/03/10 $793,979 $2,012,100
Ian Durrell(3)............. 25,000 4.59% $25.250 01/03/10 $396,990 $1,006,050
Edward Hamburg............. 25,000 4.59% $25.250 01/03/10 $396,990 $1,006,050
Mark Battaglia............. 25,000 4.59% $25.250 01/03/10 $396,990 $1,006,050
Susan Phelan............... 25,000 4.59% $25.250 01/03/10 $396,990 $1,006,050
- - -------------------------------
(1) The options were granted as of January 3, 2000, and had a seven-year
cliff-vesting provision. However, that vesting period has been accelerated to
four-year vesting, which acceleration was contingent upon achievement of certain
performance conditions for the year ended December 31, 2000. The Board of
Directors of SPSS may, at its discretion, grant additional options to the option
holders in the event the option holders pay for the exercise price of the
options by tendering by attestation SPSS common stock. In that case, the Board
could grant these "reload" options in an amount equal to the number of shares of
SPSS common stock that the option holder tendered by attestation.
(2) In satisfaction of applicable SEC regulations, the table shows the
potential realizable values of these options, upon their latest possible
expiration date, at arbitrarily assumed annualized rates of stock price
appreciation of five and ten percent over the term of the options. The potential
realizable value columns of the table illustrate values that might be realized
upon exercise of the options at the end of the ten-year period starting with
their vesting commencement dates, based on the assumptions shown above. Because
actual gains will depend upon the actual dates of exercise of the options and
the future performance of the common stock in the market, the amounts shown in
this table may not reflect the values actually realized. No gain to the named
executive officers is possible without an increase in stock price which will
benefit all stockholders proportionately. Actual gains, if any, on option
exercises and common stock holdings are dependent on the future performance of
the common stock and general stock market conditions. There can be no assurance
that the potential realizable values shown in this table will be achieved, or
that the stock price will not be lower or higher than projected at five and ten
percent assumed annualized rates of appreciation.
(3) Options shown in the table for Mr. Durrell are options granted to Valletta.
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AGGREGATED OPTION/STOCK APPRECIATION RIGHT EXERCISES IN 2000 AND
YEAR-END OPTION/STOCK APPRECIATION RIGHT VALUES
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Year-End Year-End
Shares (#)(1) ($)(1)(2)
Acquired on Value --------------------- -----------------------
Exercise Realized Exercisable/ Exercisable/
Name (#) ($)(1)(4) Unexercisable Unexercisable
- - --------- ----------------- ------------- --------------------- -----------------------
Jack Noonan.................... None N/A 343,268/90,399 $7,573,350/$1,994,428
Ian Durrell (3)................ 25,000 378,800 79,800/45,200 $1,760,588/$997,225
Edward Hamburg................. 1,600 43,196 169,831/45,202 $3,746,896/$997,269
Mark Battaglia................. 20,000 471,500 139,131/45,202 $3,069,578/$997,269
Susan Phelan................... None N/A 140,798/45,202 $3,106,356/$997,269
- - ----------------------------------
(1) All information provided is with respect to stock options. No stock
appreciation rights have been issued by SPSS.
(2) These amounts have been determined by multiplying the aggregate number of
options by the difference between $22.0625, the closing price of the common
stock on the Nasdaq National Market on December 31, 2000, and the exercise
price for that option.
(3) Options shown in the table for Mr. Durrell are options granted to Valletta.
(4) These amounts have been determined by multiplying the aggregate number of
options exercised by the difference between the closing price of the common
stock on the Nasdaq National Market on the date of exercise and the
exercise price for that option.
EMPLOYMENT AGREEMENTS
SPSS entered into an employment agreement with Jack Noonan on January 14,
1992. This employment agreement provides for a one-year term with automatic
one-year extensions unless Mr. Noonan or SPSS gives a written termination notice
at least 90 days before the expiration of the initial term or any extension. It
also provides for a base salary of $225,000 during the initial term, together
with the same benefits provided to other employees of SPSS. The Board of
Directors annually reviews Mr. Noonan's base compensation and increased it to
$235,000 for 1993, 1994, 1995, 1996 and 1997 and to $242,500 in 1998, $256,500
in 1999 and $275,000 in 2000. If SPSS terminates Mr. Noonan's employment without
cause, SPSS must pay Mr. Noonan an amount equal to 50% of Mr. Noonan's annual
base salary in effect at the time of termination. This amount is payable in 12
equal monthly installments. However, if Mr. Noonan finds other employment at a
comparable salary the Company's obligation to make these payments ceases. The
employment agreement requires Mr. Noonan to refrain from disclosing confidential
information of SPSS and to abstain from competing with SPSS during his
employment and for a period of one year after employment ceases. Only Mr. Noonan
and Mr. Durrell, through a management services agreement with Valletta described
in "Management Services Agreement" below, are employed through an employment or
similar agreement. However, SPSS does have confidentiality and work-for-hire
agreements with many of its key management and technical personnel.
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MANAGEMENT SERVICES AGREEMENT
SPSS has entered into a management services agreement with Valletta, which
requires that Ian Durrell's services are provided to SPSS. Either Valletta or
SPSS may terminate the agreement at any time upon 30 days' written notice. If
SPSS terminates the agreement under the 30-day notice provision without cause,
Valletta is entitled to termination payments equal to 50% of its annual
compensation then in effect in six equal monthly installments. The agreement
further provides that if specified performance standards are satisfied, Valletta
is to receive annual compensation at a rate established by the Board of
Directors plus incentive compensation. For 2000, Valletta's aggregate
compensation, including bonus, was $287,825. The management services agreement
requires Valletta to refrain from disclosing confidential information about SPSS
and to abstain from competing with SPSS during the term of the management
services agreement and for a period of eighteen months thereafter. Mr. Durrell
has agreed to be bound by the terms and conditions of the management services
agreement and to act as Vice-President, International and to head the Company's
non-western hemisphere operations.
CONSULTING AGREEMENT
SPSS has entered into a consulting agreement, dated as of January 1, 1997,
with Norman H. Nie Consulting L.L.C., an Illinois Limited Liability Company. Nie
Consulting is to provide thirty (30) hours per month of consulting services on
various matters relating to the business of SPSS. This consulting agreement
provides for a one-year term with automatic one-year extensions unless Nie
Consulting or SPSS gives a written notice of termination at least 30 days prior
to the expiration of the initial term or any extension. SPSS may terminate this
consulting agreement for cause, in which event SPSS shall pay Nie Consulting all
accrued but unpaid compensation. The agreement also provides that Nie Consulting
is to receive annual compensation of $80,800 and reimbursement of reasonable out
of pocket expenses incurred in performing services under the consulting
agreement. The consulting agreement requires that the Nie Consulting refrain
from disclosing confidential information about SPSS during the term of the
consulting agreement and for a period of five years after its expiration. In
addition, the consulting agreement requires that Nie Consulting abstain from
competing with SPSS during his consultancy and for a period of one-year after
the consultancy ceases.
CHANGE OF CONTROL AGREEMENTS
On November 30, 2000, SPSS entered into revised change of control
agreements with its named executive officers. These agreements provide certain
benefits to any one or more officers who is terminated or constructively
terminated following a change of control. The agreements provide that, if the
executive is terminated without cause or constructively terminated within two
years following a change of control, then the executive may receive benefits
including a severance package equal to the greater of (a) the aggregate cash
compensation received in the immediately preceding fiscal year, or (b) the
aggregate cost compensation scheduled to be received during the current fiscal
year; the accelerated vesting of all previously unvested options; and
participation in the same health and welfare benefits he or she received at any
time within 120 days of the change of control for eighteen months following that
date of such termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Goldstein, Blair and Lutz were directors and members of the
Compensation Committee during the last fiscal year. None of the members of the
Compensation Committee has ever been an officer or employee of SPSS or any of
its subsidiaries.
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REPORT OF THE SPSS COMPENSATION COMMITTEE
To: The Board of Directors
The Compensation Committee of the Board of Directors is composed entirely
of directors who have never served as officers of SPSS. The Compensation
Committee develops and administers the compensation programs for SPSS' executive
officers. After consideration of the Compensation Committee's recommendations,
the entire Board of Directors reviews and approves the base salaries, bonuses
and the stock option and benefit programs for SPSS' executive officers. In 2000,
the Board approved the Compensation Committee's recommendations in all material
respects.
Compensation Philosophy. SPSS has three principal objectives in its
executive compensation programs:
1. It strives to relate its total compensation for senior management
to the achievement of financial benchmarks designed to build shareholder
value.
2. It rewards outstanding individual performance.
3. It strives to structure its entire compensation package in a manner
which is competitive with other executive compensation packages in the
software industry, so that it will attract and retain highly capable key
executives responsible for the success of SPSS and provide fair
compensation for the responsibilities undertaken by those executives.
These goals are met through a combination of salary, bonuses, stock options and
other benefits. SPSS is committed to increasing the proportion of the senior
executives' compensation which is performance-based, and therefore variable, and
to focus on building shareholder value as the primary measure of performance. To
the extent practicable, the Compensation Committee's objective is to align the
executive officers' financial interests with those of shareholders by focusing
on specific financial objectives that the Compensation Committee believes will
enhance shareholder value and through the grant of additional options pursuant
to SPSS' option plan, the opportunity for management to purchase additional
shares on advantageous terms under the SPSS' Stock Purchase Plan and through
present stock ownership and options.
The Compensation Committee focuses principally on SPSS' financial
performance--specifically operating and net income--in determining the amount of
bonuses for the executive officers. Therefore, bonuses for these officers are a
function of SPSS' overall financial performance relative to budgeted goals. In
keeping with SPSS' commitment to increasing the proportion of the senior
executives' compensation which is performance-based, base salary levels are
designed to increase in comparatively small amounts and bonus compensation is
designed so that it can increase or decrease significantly depending on SPSS'
overall financial performance.
The Compensation Committee works with the Chief Executive Officer (the
"CEO") to determine the base salary of the other executive officers, to
establish targets for the annual bonus program and to allocate the bonus pool
among the executive officers. Consistent with the Compensation Committee's
philosophy of shifting the proportion of compensation away from fixed to
variable types of compensation, the Compensation Committee has targeted growth
in total compensation to come from the bonus and other incentive forms of
compensation. At the beginning of each year, the Compensation Committee
establishes certain budgeted objectives for operating income. The total amount
allocated to the annual bonus pool is dependent upon the degree to which
budgeted goals are achieved.
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Under SPSS' Third Amended and Restated 1995 Equity Incentive Plan and 2000
Equity Incentive Plan, the Compensation Committee is authorized to make grants
of stock options to executive officers. The Compensation Committee normally
approves grants once a year and occasionally in connection with significant
corporate events. During 2000, the Compensation Committee awarded stock options
to executive officers under the Third Amended and Restated Equity Incentive
Plan. In determining the size of the option grants, the Compensation Committee
considers the impact of the grants on existing shareholders' stock ownership
positions and the prospective value of the options as a performance incentive.
The number of options previously awarded to and held by executive officers is
reviewed and is one factor in determining the size of current option grants.
The Compensation Committee has established a stock option program for
which only policy-making senior executives of SPSS are eligible. Acceleration of
the vesting of the options granted to the executive officers as of January 2000,
which vesting would otherwise be 100% on the seventh anniversary of the grant,
was contingent upon SPSS achieving certain 2000 revenue and profit levels
established by the Board of Directors. Such options are customarily granted in
the first half of the calendar year after budgetary targets have been
established. The acceleration of these options is earned only if SPSS exceeds,
by a significant percentage established by the Compensation Committee, the
budgeted performance goals for SPSS operating and net income approved by the
Board. In the event of a major corporate event, the Compensation Committee may
change these goals.
In addition to SPSS performance, the Compensation Committee also takes
into account exceptional individual performance in determining bonus awards,
although it does not assign a specified percentage of senior executive bonus
compensation to this.
Chief Executive Officer Compensation. The Compensation Committee also
determines the CEO's base salary and bonus, employing largely the same
principles described above, except that the amount of the CEO's bonus is purely
a function of the financial performance of SPSS measured against the operating
and net income goals established by the Compensation Committee and approved by
the Board at the beginning of each year. The Compensation Committee believes
that it has established a total compensation package which compares favorably to
industry standards. The Compensation Committee considers the total salary and
incentive compensation provided to chief executives of similar companies,
although it does not target a specific percentile range within this group of
similar companies' chief executive compensation in determining the CEO's
compensation.
The Compensation Committee recommends stock option grants reflecting the
importance of Mr. Noonan's contribution to SPSS and the importance of aligning
Mr. Noonan's interest in SPSS with that of stockholders. In 2000, Mr. Noonan
received twice the number of stock options received by the other policy-making
senior executives. The Compensation Committee recommended grants to Mr. Noonan
of stock options to acquire 50,000 shares of common stock at $25.25 per share
effective January 3, 2000. These options vest in the same manner as the stock
options for the other senior executives.
Mr. Noonan's bonus is determined in the same manner as the other
policy-making senior executives, except that no portion of Mr. Noonan's bonus is
based on exceptional individual performance. It is the Compensation Committee's
view that the CEO's compensation should be based solely on the financial
performance of SPSS and that, for the CEO, exceptional individual performance is
so closely
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aligned with SPSS financial performance that the CEO's bonus should be based
solely on overall SPSS financial performance.
Tax Considerations. To the extent readily determinable and as one of the
factors in its consideration of compensation matters, the Compensation Committee
considers the anticipated tax treatment to SPSS and to the executive officers of
various payments and benefits. Some types of compensation payments and their
deductibility (e.g., the spread on exercise of non-qualified options) depend
upon the timing of an executive's vesting or exercise of previously granted
rights. Interpretations of and changes in the tax laws and other factors beyond
the Compensation Committee's control also affect the deductibility of
compensation. For these and other reasons, SPSS will not necessarily and in all
circumstances limit executive compensation to the amount which is permitted to
be deductible as an expense of SPSS under Section 162(m) of the Internal Revenue
Code. The Compensation Committee will consider various alternatives to
preserving the deductibility of compensation payments and benefits to the extent
reasonably practicable and to the extent consistent with its other compensation
objectives.
Compensation Committee of SPSS Inc.
Bernard Goldstein
Michael Blair
Merritt Lutz
EQUITY INCENTIVE PLANS
Pursuant to the Third Amended and Restated 1995 Equity Incentive Plan (the
"1995 Equity Incentive Plan") and the 2000 Equity Incentive Plan (the "2000
Equity Incentive Plan"), SPSS may award stock options and a variety of other
equity incentives to directors, executive officers, other key executives,
employees and independent contractors of SPSS and any of its subsidiaries. The
Board is authorized to delegate to the Compensation Committee the administration
of the either Equity Incentive Plan. The purpose of both Equity Incentive Plans
is to further the success of SPSS by attracting and retaining key management and
other talent and providing to such persons incentives and rewards tied to SPSS'
business success.
The maximum number of shares of SPSS common stock that may be issued or
transferred to such persons under the 1995 Equity Incentive Plan may not exceed
1,800,000 and may not exceed 500,000 shares under the 2000 Equity Incentive
Plan. In order to encourage executives to exercise vested options and thereby
increase direct ownership of SPSS common stock by management, the Board has
approved the grant of "reload options" at the then-current market price to the
exercising individual in an amount equal to the sum of the number of shares of
SPSS common stock tendered, actually or by attestation, in payment of the
exercise price of the equity incentives or any applicable withholding taxes.
Pursuant to the 1999 Employee Equity Incentive Plan, SPSS may award
nonqualified stock options and a variety of other equity incentives to
non-executive officer, non-director employees and independent contractors of
SPSS and any of its subsidiaries. The Board is authorized to delegate to the
Compensation Committee the administration of the 1999 Employee Equity Incentive
Plan. The purpose of the 1999 Employee Equity Incentive Plan is to further the
success of SPSS by attracting outstanding employees and other talent and
providing to such persons incentives and rewards tied to SPSS' business success.
The
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maximum number of shares of SPSS common stock that may be issued or transferred
to such persons in any given calendar year is three percent (3%) of the greatest
number of total SPSS common stock outstanding in the previous calendar year.
PERFORMANCE GRAPH
The following graph shows the changes in $100 invested since December 31,
1995, in SPSS' common stock, the Nasdaq 100 Stocks Index and S&P Computer
Software and Services Index, a specialized industry focus group, assuming that
all dividends were reinvested.
[GRAPH OMITTED]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
SPSS (NASDAQ: SPSS) $ 100.00 $ 142.95 $ 98.72 $ 96.79 $ 129.49 $ 113.14
NASDAQ 100 Stock Index $ 100.00 $ 186.96 $ 171.95 $ 318.63 $ 643.49 $ 406.40
S&P Computer Software & Services Index $ 100.00 $ 118.35 $ 216.32 $ 391.85 $ 593.55 $ 342.33
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of March 16, 2001, the number and
percentage of shares of common stock beneficially owned by:
- each person known by SPSS to own beneficially more than 5% of the
outstanding shares of the common stock;
- each director of SPSS;
- each named executive officer of SPSS; and
- all directors and executive officers of SPSS as a group.
Unless otherwise indicated in a footnote, each person possesses sole voting and
investment power with respect to the shares indicated as beneficially owned.
The business address for Mr. Lutz is the office of Morgan Stanley Dean
Witter & Co. at 750 Seventh Avenue, 16th floor, New York, New York 10019. The
business address of Mr. Goldstein is the office of
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Broadview Associates, L.P., One Bridge Plaza, Fort Lee, New Jersey 07024. The
business address for Michael Blair is the office of Cyborg Systems, Inc., Two
North Riverside Plaza, 12th floor, Chicago, Illinois 60606. The business address
of Fidelity Management & Research Company is 82 Devonshire Street, Boston,
Massachusetts 02109. The business address for the T. Rowe Price Associates, Inc.
is 100 East Pratt Street, Baltimore, Maryland 21202. The business address for
Daruma Asset Management, Inc. is 60 East 42nd Street, Suite 1111, New York, New
York 10165. The business address for Brown Capital Management, Inc. is 1201 N.
Calvert Street, Baltimore, Maryland 21202. The business address of each other
person listed below is 233 South Wacker Drive, Chicago, Illinois 60606.
SHARES
BENEFICIALLY OWNED
------------------
Name NUMBER PERCENT
- - ---- ------ -------
Norman H. Nie, individually, as Trustee of the
Nie Trust and as a Director and President
of the Norman and Carol Nie Foundation, Inc.(1)...... 1,110,343 11.0%
Brown Capital Management, Inc. (2)....................... 1,207,900 12.0%
T. Rowe Price Associates, Inc. (3)....................... 876,400 8.7%
Fidelity Management & Research Company (4)............... 874,300 8.7%
Daruma Asset Management, Inc. (5)........................ 877,300 8.7%
Jack Noonan (6).......................................... 390,442 3.7%
Bernard Goldstein (7).................................... 54,210 *
Edward Hamburg (8)....................................... 190,568 1.9%
Mark Battaglia (9)....................................... 171,451 1.7%
Susan Phelan (10)........................................ 154,721 1.5%
Ian Durrell (11)......................................... 91,737 *
Merritt M. Lutz (12)..................................... 37,099 *
Michael D. Blair (13).................................... 18,163 *
Promod Haque (14)........................................ 936,499 9.3%
William Binch (15)....................................... 9,114 *
Kenneth Holec (16)....................................... 295,929 2.9%
All directors and executive officers as
a group (12 persons)(17)............................... 3,460,276 31.1%
- - ----------------------------------
* The percentage of shares beneficially owned does not exceed 1% of the Common
Stock.
(1) Includes 53,710 shares which are through options exercisable within 60
days; 90,433 shares held of record by the Norman and Carol Nie
Foundation, Inc.; and 851,200 shares held by the Nie Trust and 35,000
shares held individually. Dr. Nie shares voting and investment power
over the 90,433 shares held by the Nie Foundation with Carol Nie.
(2) Brown Capital Management, Inc. is the beneficial owner of 1,207,900
shares of SPSS common stock and an investment advisor in accordance
with Section 203 of the Investment Advisor Act. This information was
taken from Brown's Schedule 13G dated February 15, 2001.
(3) T. Rowe Price Associates, Inc. is the beneficial owner of 876,400
shares of SPSS common stock and an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940. This information
was taken from T. Rowe Price' Schedule 13G dated February 12, 2001.
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(4) Fidelity Management & Research Company, a wholly-owned subsidiary of
FMR Corp. and an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, is the beneficial owner of 874,300
shares of SPSS common stock 806,800 of which are owned as a result of
acting as investment adviser to several investment companies registered
under Section 8 of the Investment Company Act of 1940. The ownership of
one investment company, Fidelity Low-Priced Stock Fund, amounted to
806,800 shares of SPSS common stock. FMR Corp. has the power to dispose
of the shares of SPSS common stock. The Board of Trustees directs the
voting of the shares of SPSS common stock. This information was taken
from FMR Corporation's Schedule 13G, filed on February 14, 2001.
(5) Daruma Asset Management, Inc. is the beneficial owner of 877,300
shares of SPSS common stock and an investment advisor in accordance
with Section 203 of the Investment Advisor Act. This information was
taken from Daruma's Schedule 13G dated February 6, 2001.
(6) Includes 379,364 shares through options exercisable within 60 days.
(7) Includes 23,766 shares through options exercisable within 60 days.
(8) Includes 181,768 shares through options exercisable within 60 days.
(9) Includes 151,068 shares through options exercisable within 60 days.
(10) Includes 152,735 shares through options exercisable within 60 days.
(11) Mr. Durrell is the beneficial owner of these shares, which consist
solely of 91,737 shares through options exercisable within 60 days
held of record by Valletta.
(12) Includes 23,766 shares through options exercisable within 60 days.
(13) Includes 18,163 shares through options exercisable within 60 days.
(14) Dr. Haque's beneficial ownership includes 631,044 shares held by
Norwest Equity Partners IV, L.P. and 305,455 shares held by Norwest
Equity Partners V, L.P. Dr. Haque, one of the Company's directors, is
a general partner of Norwest Equity Partners V. Dr. Haque shares
voting and dispositive power shares held by the Norwest funds with
other general and managing partners of the Norwest funds. Dr. Haque
disclaims beneficial ownership of shares held by Norwest Equity
Partners IV, L.P. and Norwest Equity Partners V, L.P.
(15) Includes 9,114 shares through options exercisable within 60 days.
(16) Mr. Holec's beneficial ownership includes 50,000 shares registered in
the name of Kenneth H. Holec 1999 Trust and 1,244 shares registered in
the name of each of Mr. Holec's three minor children.
(17) Includes 1,081,914 shares through options exercisable within 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH NORMAN NIE
Dr. Nie received 5,000 options for his services as Chairman of the Board
in 2000 and $80,800 for product development work on a part-time basis. Dr. Nie
is a limited partner in Computer Software Development Company, a research and
development limited partnership to which SPSS incurred royalty expense of
$235,000 in 1998, $237,000 in 1999 and $252,000 in 2000.
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STOCKHOLDERS AGREEMENT
In connection with the Company's initial public offering, SPSS and the
individuals and entities who were stockholders before the initial public
offering entered into an agreement containing registration rights with respect
to outstanding capital stock of SPSS and granting to each of the Nie Trust and
Morgan Stanley Venture Capital Fund, so long as they own beneficially more than
12.5% of the capital stock of SPSS, the right to designate one nominee (as part
of the management slate) in each election of directors at which directors of the
class specified for the holder are to be elected. Since the completion of the
February 1995 offering, Morgan Stanley Venture Capital Fund owned less than
12.5% and currently owns no capital stock of SPSS. Currently, the Nie Trust owns
less than 12.5% of the Capital Stock of SPSS.
As required by the stockholders agreement, the holders of restricted
securities constituting more than seven percent of the outstanding shares at any
time may require SPSS to register under the Securities Act all or any portion of
the restricted securities held by the requesting holder or holders for sale in
the manner specified in the notice. SPSS is not bound to honor the request
unless the proceeds from the registered sale can reasonably be expected to
exceed $5,000,000. SPSS estimates that the cost of complying with demand
registration rights would be approximately $50,000 for a single registration.
All of the stockholders who acquired their shares before the initial
public offering have piggyback registration rights, which entitle them to seek
inclusion of their common stock in any registration by SPSS, whether for its own
account or for the account of other security holders or both (except with
respect to registration on Forms S-4 or S-8 or another form not available for
registering restricted securities for sale to the public). In the event of a
request to have shares included in a registration statement filed by SPSS for
its own account, the Company's underwriters may generally reduce, pro rata, the
amount of common stock to be sold by the stockholders if the inclusion of all
such securities would be materially detrimental to the Company's offering.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) (1) Financial statements commence on page 29:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1999 and 2000
Consolidated Statements of Income for the years ended
December 31, 1998, 1999 and 2000
Consolidated Statements of Comprehensive Income for the years
ended December 31, 1998, 1999 and 2000
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1998, 1999 and 2000
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1999 and 2000
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule -- see page 52:
Schedule II Valuation and qualifying accounts
Schedules not filed:
All schedules other than that indicated in the index
have been omitted as the required information is
inapplicable or the information is presented in the
financial statements or related notes.
(3) Exhibits required by Item 601 of Regulation S-K.
(Note: Management contracts and compensatory plans or
arrangements are underlined in the following list.)
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Incorporation
Exhibit by Reference
Number Description of Document (if applicable)
- - ------ ----------------------- ---------------
2.1 Agreement and Plan of Merger among SPSS Inc., (1), Ex. 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., (2), Annex A
SPSS Acquisition Inc. and Jandel Corporation,
dated October 30, 1996.
2.3 Asset Purchase Agreement by and between SPSS Inc. (16), Ex. 2.3
and DeltaPoint, Inc., dated as of May 1, 1997.
2.4 Stock Purchase Agreement among the Registrant, (3), Ex. 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, (3), Ex. 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 (4), Ex. 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, (4), Ex. 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 (18), Ex. 2.1
the Shareholders of Integral Solutions Limited listed
on the signature pages hereof, dated as of
December 31, 1998.
2.9 Share Purchase Agreement by and among SPSS Inc., (20), Ex. 2.9
Surveycraft Pty Ltd. and Jens Meinecke and
Microtab Systems Pty Ltd., dated as of
November 1, 1998.
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Incorporation
Exhibit by Reference
Number Description of Document (if applicable)
- - ------ ----------------------- ---------------
2.10 Stock Acquisition Agreement by and among SPSS Inc. (21), Ex. 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. (24), Ex. 2.11
and DataStat, S.A., dated as of December 23, 1999.
2.12 Agreement and Plan of Merger dated as of November 6, (25), Ex. 2.1
2.13 2000, among SPSS, SPSS Acquisition Sub Corp., and
2.14 ShowCase.
3.1 Certificate of Incorporation of SPSS. (5), Ex. 3.2
3.2 By-Laws of SPSS. (5), Ex. 3.4
10.1 Employment Agreement with Jack Noonan. (8), Ex. 10.1
-------------------------------------
10.2 Agreement with Valletta. (6), Ex. 10.2
-----------------------
10.3 Agreement between SPSS and (6), Ex. 10.5
Prentice Hall.
10.5 HOOPS Agreement. (6), Ex. 10.7
10.6 Stockholders Agreement. (5), Ex. 10.8
10.7 Agreements with CSDC. (5), Ex. 10.9
10.8 Amended 1991 Stock Option Plan. (5), Ex. 10.10
------------------------------
10.9 SYSTAT Asset Purchase Agreement. (9), Ex. 10.9
10.10 1994 Bonus Compensation. (10), Ex. 10.11
-----------------------
10.11 Lease for Chicago, Illinois Office. (10), Ex. 10.12
10.12 Amendment to Lease for Chicago, Illinois Office. (10), Ex. 10.13
10.13 1995 Equity Incentive Plan. (11), Ex. 10.14
--------------------------
10.14 1995 Bonus Compensation. (12), Ex. 10.15
-----------------------
10.15 Amended and Restated 1995 Equity Incentive Plan. (13), Ex. 10.17
-----------------------------------------------
10.16 1996 Bonus Compensation. (14), Ex. 10.18
-----------------------
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Incorporation
Exhibit by Reference
Number Description of Document (if applicable)
- - ------ ----------------------- ---------------
10.17 Software Distribution Agreement between the (14), Ex. 10.19
Company and Banta Global Turnkey.
10.18 Lease for Chicago, Illinois in Sears Tower. (15), Ex. 10.20
10.19 1997 Bonus Compensation. (17), Ex. 10.21
-----------------------
10.20 Norman H. Nie Consulting L.L.C. Agreement with (17), Ex. 10.22
SPSS.
10.21 Second Amended and Restated 1995 Equity
---------------------------------------
Incentive Plan. (19), Ex. A
--------------
10.22 1998 Bonus Compensation.
-----------------------
10.23 Third Amended and Restated 1995 Equity (22), Ex. 10.1
--------------------------------------
Incentive Plan.
--------------
10.24 Loan Agreement dated June 1, 1999 between (23), Ex. 10.1
SPSS and American National Bank and Trust
Company of Chicago.
10.25 First Amendment to Loan Agreement dated (23), Ex. 10.2
June 1, 1999, between SPSS and American
National Bank and Trust Company of Chicago.
10.26 1999 Bonus Compensation. (24), Ex. 10.27
-----------------------
10.27 2000 Equity Incentive Plan. (26), Ex. 10.45
--------------------------
10.28 SPSS Qualified Employee Stock Purchase Plan (26), Ex. 10.46
-------------------------------------------
10.29 SPSS Nonqualified Employee Stock Purchase Plan (26), Ex. 10.47
----------------------------------------------
10.30 2000 Bonus Compensation
-----------------------
21.1 Subsidiaries of SPSS.
23.1 Consent of Independent Certified Public Accountants.
- - -------------------------------
(1) 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)
(2) Previously filed with Amendment No. 1 to Form S-4 Registration
Statement of SPSS Inc. filed on November 7, 1996. (File No. 333-15427)
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(3) Previously filed with SPSS Inc.'s Report on Form 8-K, dated September
30, 1997, filed on October 15, 1997. (File No. 000-22194)
(4) Previously filed with the Form S-3 Registration Statement of SPSS Inc.
filed on November 26, 1997. (File No. 333-41207)
(5) Previously filed with Amendment No. 2 to Form S-1 Registration
Statement of SPSS Inc. filed on August 4, 1993. (File No. 33-64732)
(6) Previously filed with Amendment No. 1 to Form S-1 Registration
Statement of SPSS Inc. filed on July 23, 1993. (File No. 33-64732)
(7) Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the
Quarterly period ended September 30, 1993. (File No. 000-22194)
(8) Previously filed with the Form S-1 Registration Statement of SPSS Inc.
filed on June 22, 1993. (File No. 33-64732)
(9) Previously filed with the Form S-1 Registration Statement of SPSS Inc.
filed on December 5, 1994. (File No. 33-86858)
(10) Previously cited with the Form 10-K Annual Report of SPSS Inc. for the
year ended December 31, 1994. (File No. 000-22194)
(11) Previously filed with SPSS Inc.'s 1995 Proxy Statement. (File No.
000-22194)
(12) Previously filed with the Form 10-K Annual Report of SPSS Inc. for the
year ended December 31, 1995. (File No. 000-22194)
(13) Previously filed with SPSS Inc.'s 1996 Proxy Statement. (File No.
000-22194)
(14) Previously filed with the Form 10-K Annual Report of SPSS Inc. for the
year ended December 31, 1996. (File No. 000-22194)
(15) Previously filed with the Form 10-Q Quarterly Report of SPSS Inc. for
the quarterly period ended March 31, 1997. (File No. 000-22194)
(16) Previously filed with the Form 10-Q Quarterly Report of SPSS Inc. for
the quarterly period ended June 30, 1997. (File No. 000-22194)
(17) Previously filed with Form 10-K Annual Report of SPSS Inc. for the year
ended December 31, 1997. (File No. 000-22194)
(18) 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)
(19) Previously filed with SPSS Inc.'s 1998 Proxy Statement. (File No.
000-22194)
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(20) Previously filed with Form 10-K Annual Report of SPSS Inc. for the
year ended December 31, 1998. (File No. 000-22194)
(21) Previously filed with SPSS Inc. Report on Form 8-K, dated November 29,
1999, filed December 10, 1999. (File No. 000-22194)
(22) Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the
quarterly period ended June 30, 1999. (File No. 000-22194)
(23) Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the
quarterly period ended September 30, 1999. (File No. 000-22194)
(24) Previously filed with Form 10-K Annual Report of SPSS Inc. for the
year ended December 21, 1999. (File No. 000-22194).
(25) Previously filed with SPSS Inc.'s Form 8-K , filed November 15, 2000.
(File No. 000-22194).
(26) Previously filed with SPSS Inc.'s Form 5-4, filed December 19, 2000.
(b) SPSS filed the following reports on Form 8-K during the fourth
quarter of fiscal year 2000.
(i) Report on Form 8-K. Report on Form 8-K dated November 6, 2000, filed
November 15, 2000. The Report on Form 8-K stated that on November 6,
2000, SPSS Inc., SPSS Acquisition Sub Corp., each a Delaware
corporation, and ShowCase Corporation, a Minnesota corporation,
entered in an Agreement and Plan of Merger pursuant to which ShowCase
shareholders would receive .333 shares of SPSS common stock for each
share of ShowCase common stock held by them. The closing of the merger
occurred on February 26, 2001 with SPSS issuing approximately
3,725,000 Shares of Common Stock for substantially all the outstanding
shares of ShowCase. The merger will be accounted for as a pooling of
interests. ShowCase is a leading provider of enterprise intelligence
services.
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SIGNATURES
Pursuant to 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 as of March 30, 2001.
SPSS Inc.
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 following persons on behalf of the Registrant and
in the capacities indicated as of March 30, 2001.
Signature Title(s)
- - --------- --------
/s/ Norman H. Nie Chairman of the Board of
- - ------------------------------ Directors
Norman H. Nie
/s/ Jack Noonan President, Chief Executive
- - ------------------------------ Officer and Director
Jack Noonan
/s/ Edward Hamburg Executive Vice President,
- - ------------------------------ Corporate Operations,
Edward Hamburg Chief Financial Officer and
Secretary
/s/ Robert Brinkmann Vice President, Finance and
- - ------------------------------ Controller
Robert Brinkmann
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74
/s/ Bernard Goldstein Director
- - ------------------------------
Bernard Goldstein
/s/ Merritt Lutz Director
- - ------------------------------
Merritt Lutz
/s/ Michael Blair Director
- - ------------------------------
Michael Blair
/s/ Promod Haque Director
- - ------------------------------
Promod Haque
/s/ William B. Binch Director
- - ------------------------------
William B. Binch
/s/ Kenneth H. Holec Director
- - ------------------------------
Kenneth H. Holec
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EXHIBIT INDEX
EXHIBIT SEQUENTIAL
NUMBER DOCUMENT DESCRIPTION PAGE NUMBER
10.30 2000 Bonus Compensation........................................
21.1 Subsidiaries of the Company....................................
23.1 Consent of Independent Public Accountants......................
75