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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
COMMISSION FILE NUMBER: 33-64732
SPSS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2815480
(STATE OR OTHER JURISDICTION (IRS EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
233 S. WACKER DRIVE, CHICAGO, ILLINOIS 60606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (312) 651-3000
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO FILING REQUIREMENTS
FOR THE PAST 90 DAYS. YES NO X
--- ---
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN EXCHANGE ACT RULE 12b-2.) YES X NO
--- ---
AS OF AUGUST 1, 2003, THERE WERE 17,316,356 SHARES OF COMMON STOCK
OUTSTANDING, PAR VALUE $.01, OF THE REGISTRANT.
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SPSS INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 2003
INDEX
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2002 (AUDITED) AND
JUNE 30, 2003 (UNAUDITED) 3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE THREE AND SIX MONTHS ENDED JUNE 30,
2002 (UNAUDITED) AND 2003 (UNAUDITED) 4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS) FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 2002 (UNAUDITED) AND 2003 (UNAUDITED) 5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED JUNE 30, 2002 (UNAUDITED) AND
2003 (UNAUDITED) 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 19
ITEM 4. CONTROLS AND PROCEDURES 20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 21
ITEM 5. OTHER INFORMATION 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 23
2
ITEM 1. FINANCIAL STATEMENTS
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, JUNE 30,
2002 2003
-------------- -------------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 15,589 $ 21,874
Accounts receivable, net of allowances 49,917 45,587
Inventories, net of allowances 2,775 2,398
Other current assets 28,108 27,316
------------- -------------
Total current assets 96,389 97,175
------------- -------------
Property, equipment, and leasehold improvements, at cost: 96,990 98,760
Less accumulated depreciation and amortization 59,360 63,611
------------- -------------
Net property, equipment, and leasehold improvements 37,630 35,149
------------- -------------
Restricted cash 1,594 861
Capitalized software development costs, net of accumulated amortization 27,629 29,123
Goodwill, net of accumulated amortization 53,560 53,560
Intangibles, net of accumulated amortization 14,153 12,466
Other noncurrent assets 17,781 14,845
------------- -------------
Total assets $ 248,736 $ 243,179
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 2,500 $ 2,500
Accounts payable 11,764 9,869
Merger consideration 7,250 7,250
Other accrued liabilities 27,138 20,992
Income taxes and value added taxes payable 6,680 4,002
Deferred revenues 43,603 46,468
------------- -------------
Total current liabilities 98,935 91,081
------------- -------------
Noncurrent notes payable 6,000 7,146
Noncurrent merger consideration 11,484 8,301
Other noncurrent liabilities 781 536
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value; 50,000,000 shares authorized; 17,214,515
and 17,302,309 shares issued and outstanding in 2002 and
2003, respectively 172 173
Additional paid-in capital 147,926 148,625
Accumulated other comprehensive loss (2,981) (2,708)
Accumulated deficit (13,581) (9,975)
------------- -------------
Total stockholders' equity 131,536 136,115
-------------- -------------
Total liabilities and stockholders' equity $ 248,736 $ 243,179
============== =============
See accompanying notes to consolidated financial statements
3
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ -----------------------------
2002 2003 2002 2003
------------- ------------- ------------- -----------
Net revenues:
License fees $ 22,623 $ 21,405 $ 44,302 $ 41,225
Maintenance 20,906 21,573 40,614 42,368
Services 9,464 8,349 17,687 16,784
------------- ------------- ------------ -----------
Total net revenues 52,993 51,327 102,603 100,377
------------- ------------- ------------ -----------
Operating expenses:
Cost of license and maintenance revenues 5,419 3,940 11,267 7,762
Sales, marketing, and services 30,627 28,089 61,381 56,443
Research and development 11,994 10,999 20,102 21,926
General and administrative 4,384 4,619 10,344 8,573
Special general and administrative 1,537 -- 3,192 --
Merger-related 357 -- 2,260 --
Acquired in-process technology -- -- 150 --
------------- ------------- ------------ -----------
Operating expenses 54,318 47,647 108,696 94,704
------------- ------------- ------------ -----------
Operating income (loss) (1,325) 3,680 (6,093) 5,673
------------- ------------- ------------ -----------
Other income (expense):
Net interest income (expense) (42) (389) 52 (386)
Other income 872 216 879 347
------------- ------------- ------------ -----------
Other income (expense) 830 (173) 931 (39)
------------- ------------- ------------ -----------
Income (loss) before income taxes and minority
interest (495) 3,507 (5,162) 5,634
Income tax expense (benefit) (178) 1,262 (1,858) 2,028
------------- ------------- ------------ -----------
Income (loss) after income taxes before minority
interest (317) 2,245 (3,304) 3,606
Minority interest 58 -- 497 --
------------- ------------- ------------ -----------
Net income (loss) $ (259) $ 2,245 $ (2,807) $ 3,606
============= ============= ============ ===========
Basic net income (loss) per share $ (0.02) $ 0.13 $ (0.17) $ 0.21
============= ============= ============ ===========
Diluted net income (loss) per share $ (0.02) $ 0.13 $ (0.17) $ 0.20
============= ============= ============ ===========
Share data:
Shares used in basic per share computation 16,821 17,272 16,801 17,254
============= ============= ============ ===========
Shares used in diluted per share computation 16,821 17,757 16,801 17,709
============= ============= ============= ===========
See accompanying notes to consolidated financial statements.
4
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- -------------------------
2002 2003 2002 2003
----------- ----------- ----------- -----------
Net income (loss) $ (259) $ 2,245 $ (2,807) $ 3,606
Other comprehensive income (net of tax):
Foreign currency translation adjustment 3,931 5 2,499 273
Unrealized holding gain on marketable
securities -- -- 11 --
---------- ----------- ---------- -----------
Comprehensive income (loss) $ 3,672 $ 2,250 $ (297) $ 3,879
========== =========== ========== ===========
See accompanying notes to consolidated financial statements.
5
SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------------------
2002 2003
------------ ----------
Cash flows from operating activities:
Net income (loss) $ (2,807) $ 3,606
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 8,896 8,779
Deferred income taxes (2,837) 825
Changes in assets and liabilities, net of impact of acquisitions:
Accounts receivable 7,827 5,260
Inventories 309 384
Restricted cash 28 733
Accounts payable 280 (2,017)
Accrued expenses (1,751) (6,683)
Accrued income taxes (240) (2,834)
Deferred revenues (5,805) 2,865
Other (3,434) 2,487
----------- ----------
Net cash provided by operating activities 466 13,405
----------- ----------
Cash flows from investing activities:
Capital expenditures, net (8,777) (1,599)
Capitalized software development costs (5,175) (4,308)
Consideration for AOL transaction (3,625) (3,625)
Consideration for LexiQuest (2,500) --
Proceeds from maturities and sales of marketable securities 9,792 --
Other investing activity (497) --
----------- ----------
Net cash used in investing activities (10,782) (9,532)
----------- ----------
Cash flows from financing activities:
Net borrowings under line-of-credit agreements 5,575 1,146
Proceeds from issuance of common stock 832 700
----------- ----------
Net cash provided by financing activities 6,407 1,846
----------- ----------
Effect of exchange rate on cash 2,510 566
----------- ----------
Net change in cash and cash equivalents (1,399) 6,285
Cash and cash equivalents at beginning of period 21,400 15,589
----------- ----------
Cash and cash equivalents at end of period $ 20,001 $ 21,874
=========== ==========
Supplemental disclosures of cash flow information:
Interest paid $ 228 $ 354
Income taxes paid 2,349 4,037
Cash received from income tax refunds 2,080 1,419
Supplemental disclosures of noncash investing activities -
Note payable recorded for netExs acquisition $ 1,000 $ --
See accompanying notes to consolidated financial statements.
6
SPSS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the results of the interim periods presented. All such
adjustments are of a normal recurring nature. These consolidated financial
statements should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto for the year ended December 31, 2002,
included in the SPSS Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
NOTE 2 - RECLASSIFICATIONS
Effective in the first quarter of 2003, SPSS began reporting revenues in three
categories used by most enterprise software companies:
- License fees, representing new sales of the Company's tools,
applications, and components on a perpetual, annual, or ASP
(applications services provider) basis;
- Maintenance, representing recurring revenues recognized by the
Company from renewals of maintenance agreements associated with
perpetual licenses or renewals of annual licenses;
- Services, representing revenues recognized from professional
services engagements, training, and other activities such as
publication sales and providing respondents to online surveys.
SPSS has reclassified prior period revenue to conform to this new reporting
classification.
NOTE 3 - EARNINGS PER COMMON SHARE
Earnings per common share (EPS) are computed by dividing net income by the
weighted average number of shares of common stock (basic) plus common stock
equivalents outstanding (diluted) during the period. Common stock equivalents
consist of contingently issuable shares and stock options, which have been
included in the calculation of weighted average shares outstanding using the
treasury stock method. Basic weighted average shares reconciles to diluted
weighted average shares as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2002 2003 2002 2003
----------- ------------ ---------- -----------
Basic weighted average common shares outstanding 16,821 17,272 16,801 17,254
Dilutive effect of stock options and --
contingently issuable shares -- 485 -- 455
------ ------- ------ ------
Diluted weighted average common shares outstanding 16,821 17,757 16,801 17,709
====== ====== ====== ======
7
In 2002, potentially dilutive securities excluded from the earnings per share
calculation due to the Company's net loss position consisted of contingently
issuable shares and stock options. Such contingently issuable shares and options
totaled 858,000 and 907,000 for the three and six months ended June 30, 2002
respectively.
NOTE 4 - STOCK OPTION PLANS
The Company maintains one stock incentive plan that is flexible and allows
various forms of equity incentives to be issued under it. The Company accounts
for this plan using the intrinsic value method under the recognition and
measurement principles of Accounting Principles Board Opinion ("APB") 25,
Accounting for Stock Issued to Employees, and related interpretations. In prior
years, the Company has recognized compensation cost for restricted stock and
restricted stock units to employees. No compensation is recognized for stock
option grants to employees, as options granted under the stock incentive plan
had an exercise price equal to the market value of the underlying common stock
on the date of grant. The following table illustrates the effects on net income
(loss) and net income (loss) per share if the Company had applied the fair value
recognition provisions of Financial Accounting Standards Board (FASB) Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, to stock-based compensation.
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2002 2003 2002 2003
----------- ----------- ----------- ----------
Net income (loss), as reported $ (259) $ 2,245 $ (2,807) $ 3,606
Deduct:
Total stock-based employee compensation expense
determined under the fair value based method for
all awards, net of related taxes (1,401) (1,122) (2,845) (2,485)
----------- ----------- ----------- ---------
Pro forma net income (loss) $ (1,660) $ 1,123 $ (5,652) $ 1,121
=========== =========== =========== =========
Net income (loss) per share:
Basic-- as reported $ (0.02) $ 0.13 $ (0.17) $ 0.21
Basic-- pro forma $ (0.10) $ 0.07 $ (0.34) $ 0.07
Diluted-- as reported $ (0.02) $ 0.13 $ (0.17) $ 0.20
Diluted-- pro forma $ (0.10) $ 0.06 $ (0.34) $ 0.06
Note 5 - Domestic and Foreign Operations
Net revenues per geographic region are summarized as follows (in 000's):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2002 2003 2002 2003
----------- ----------- ----------- ----------
United States $ 27,397 $ 26,497 $ 53,283 $ 48,440
United Kingdom 6,809 5,481 13,255 12,835
Other International Operations 18,787 19,349 36,065 39,102
----------- ----------- ----------- ----------
Total $ 52,993 $ 51,327 $ 102,603 $ 100,377
=========== =========== =========== ==========
NOTE 6 - SPECIAL GENERAL AND ADMINISTRATIVE CHARGES
Special general and administrative charges were $1,537,000 in the three months
ended June 30, 2002 and $3,192,000 in the six months ended June 30, 2002. In the
six months ended June 30, 2002, these charges were associated with the
NetGenesis and LexiQuest acquisitions, including professional fees of
$1,218,000, severance payments as well as retention and other bonuses of
$1,691,000, and travel, meeting, and other costs of $283,000 that did not meet
the definition of "merger-related" costs under established guidelines. No
special general and administrative charges were incurred in the three and six
month periods ended June 30, 2003.
8
NOTE 7 - MERGER-RELATED EXPENSES
Merger-related expenses were $357,000 in the three months ended June 30, 2002
and $2,260,000 in the six months ended June 30, 2002. In the six months ended
June 30, 2002, these charges were associated with the NetGenesis and neteXs
acquisitions, including, severance and merger-related bonuses of approximately
$1,464,000, professional fees of $596,000, as well as other costs of $200,000.
No merger-related expenses were incurred in the three and six month periods
ended June 30, 2003.
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133. The
new Statement amends Statement 133 for decisions made: 1) as part of the
Derivatives Implementation Group process that effectively required amendments to
Statement 133; 2) in connection with other Board projects dealing with financial
instruments; and 3) regarding implementation issues raised in relation to the
application of the definition of a derivative, particularly regarding the
meaning of an "underlying" and the characteristics of a derivative that contain
financing components. The statement is generally effective for contracts entered
into or modified after June 30, 2003 and is to be applied prospectively. The
Company is currently reviewing the impact that SFAS No. 149 will have on its
financial position and future results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 applies specifically to a number of financial instruments that companies
have historically presented within their financial statements either as equity
or between the liabilities section and the equity section, rather than as
liabilities. SFAS 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The Company is currently
evaluating the impact of this SFAS on its consolidated financial statements.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Results Of Operations
The following table shows select statements of operations data as a percentage
of net revenues for the periods indicated.
PERCENTAGE OF NET REVENUES
---------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- --------------------
2002 2003 2002 2003
-------- -------- ------ -------
Net revenues:
License fees 43% 42% 43% 41%
Maintenance 39% 42% 40% 42%
Services 18% 16% 17% 17%
---- ---- ---- ----
Net revenues 100% 100% 100% 100%
Operating expenses:
Cost of license and maintenance revenues 10% 8% 11% 8%
Sales, marketing, and services 58% 55% 60% 56%
Research and development 23% 21% 20% 22%
General and administrative 8% 9% 10% 8%
Special general and administrative 3% -- 3% --
Merger-related 1% -- 2% --
Acquired in-process technology -- -- -- --
---- ---- ---- ----
Operating expenses 103% 93% 106% 94%
---- ---- ---- ----
Operating income (loss) (3%) 7% (6%) 6%
---- ---- ---- ----
Other income (expense):
Net interest income (expense) -- (1%) -- --
Other income 2% 1% 1% --
---- ---- ---- ----
Other income (expense) 2% -- 1% --
---- ---- ---- ----
Income (loss) before income taxes and minority interest (1%) 7% (5%) 6%
Income tax expense (benefit) -- 3% (2%) 2%
---- ---- ---- ----
Income (loss) after income taxes and before minority
interest (1%) 4% (3%) 4%
Minority interest -- -- -- --
---- ---- ---- ----
Net income (loss) (1%) 4% (3%) 4%
==== ==== ==== ====
10
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2002 TO THREE MONTHS ENDED JUNE 30,
2003.
Net Revenues. Net revenues decreased 3% from $52,993,000 in the three
months ended June 30, 2002 to $51,327,000 in the three months ended June 30,
2003. Effective in the first quarter 2003, SPSS began reporting its revenues in
the following three categories used by most enterprise software companies.
- License fees, representing new sales of the Company's tools,
applications, and components on a perpetual, annual, or ASP
(application services provider) basis;
- Maintenance, representing recurring revenues recognized by the Company
from renewals of maintenance agreements associated with perpetual
licenses or renewals of annual licenses;
- Services, representing revenues recognized from professional services
engagements, training, and other activities such as publication sales
and providing respondents to online surveys.
SPSS has reclassified prior period revenues to conform to this new reporting
classification.
License Fees. Revenue from new software licenses declined 5% from
$22,623,000 in the three months ended June 30, 2002 to $21,405,000 in the three
months ended June 30, 2003. As a percentage of net revenues, software license
revenues decreased from 43% in the three months ended June 30, 2002 to 42% in
the three months ended June 30, 2003. This decrease was primarily due to a drop
in new sales of the Company's ShowCase business intelligence products and
applications for market research, partially offset by increased revenues from
the NetGenesis Web analytics application, higher sales of SPSS data mining and
statistical analysis tools, and changes in currency exchange rates.
Maintenance. Revenue from maintenance agreements and renewals of annual
licenses increased by 3% from $20,906,000 in the three months ended June 30,
2002 to $21,573,000 in the three months ended June 30, 2003. As a percentage of
net revenues, maintenance revenues increased from 39% in the three months ended
June 30, 2002 to 42% in the three months ended June 30, 2003. This increase was
due to strong renewal rates for the company's major offerings as well as changes
in currency exchange rates.
Services. Revenue from professional services engagements and training
decreased by 12% from $9,464,000 in the three months ended June 30, 2002 to
$8,349,000 in the three months ended June 30, 2003. As a percentage of net
revenues, services revenues decreased from 18% in the three months ended June
30, 2002 to 16% in the three months ended June 30, 2003. This decrease was
primarily due to the decline in implementation services associated with the
lower number of new licenses of ShowCase products as well as a decline in
training revenues. Revenues from the SPSS Online (AOL) business remained
relatively constant in the three months ended June 30, 2003, compared to the
same period in the prior year.
11
Cost of License and Maintenance Revenues. Cost of license and maintenance
revenues consists of costs of goods sold, amortization of capitalized software
development costs, and royalties paid to third parties. Cost of license and
maintenance revenues decreased 27% from $5,419,000 in the three months ended
June 30, 2002 to $3,940,000 in the three months ended June 30, 2003. As a
percentage of net revenues, cost of license and maintenance revenues decreased
from 10% in the three months ended June 30, 2002 to 8% in the three months ended
June 30, 2003. This decrease was due to the decline in license revenues, lower
Hyperion Solutions royalties and lower amortization of acquired technology
assets.
Sales, Marketing, and Services. Sales, marketing, and services expenses
decreased 8% from $30,627,000 in the three months ended June 30, 2002 to
$28,089,000 in the three months ended June 30, 2003. As a percentage of net
revenues, sales, marketing and services expenses decreased from 58% in the three
months ended June 30, 2002 to 55% in the three months ended June 30, 2003. This
decrease was primarily due to the reduction in the number of sales and
professional services personnel as a result of the field reorganization
implemented in August 2002, partially offset by increases due to changes in
foreign currency exchange rates.
Research and Development. Research and development expenses decreased by 8%
from $11,994,000 in the three months ended June 30, 2002 to $10,999,000 in the
three months ended June 30, 2003. As a percentage of net revenues, research and
development expenses were 23% in the three months ended June 30, 2002 and 21% in
the three months ended June 30, 2003. This decrease in research and development
expenses was primarily due to the reduction in the number of LexiQuest
development personnel and lower consulting costs for internal software
development projects, partially offset by increases due to changes in currency
foreign exchange rates.
General and Administrative. General and administrative expenses increased
by 5% from $4,384,000 in the three months ended June 30, 2002 to $4,619,000 in
the three months ended June 30, 2003. As a percentage of net revenues, general
and administrative expenses increased from 8% in three months ended June 30,
2002 to 9% in the three months ended June 30, 2003. This increase was primarily
due to the addition of finance professionals in the United States and changes in
foreign currency rates, partially offset by reduced expenses associated with the
cost reduction programs implemented in August 2002.
Special General and Administrative. Special general and administrative were
$1,537,000 in the three months ended June 30, 2002 and 3% of net revenues. These
charges were associated with the acquisition of NetGenesis and LexiQuest,
including professional fees of approximately $388,000, severance payments as
well as retention and other bonuses of approximately $1,017,000, and travel,
meeting, and other costs of approximately $132,000 that did not meet the
definition of "merger-related" costs under established guidelines. No special
general and administrative charges were incurred in three months ended June 30,
2003.
12
Merger-related Costs. Merger-related costs were $357,000 in the three
months ended June 30, 2002 and 1% of net revenues. Merger-related expenses were
associated with the NetGenesis and netExs acquisitions, including $254,000 of
professional fees and $103,000 of severance and merger-related employee bonuses.
No merger-related costs were incurred in the three months ended June 30, 2003.
Net Interest Income (Expense). Net interest expense increased from $42,000
in the three months ended June 30, 2002 to $389,000 in the three months ended
June 30, 2003. This increase was primarily due to higher net debt levels and
imputed interest related to the Company's transaction with AOL.
Other Income. Other income was $872,000 in the three months ended June 30,
2002 and $216,000 in the three months ended June 30, 2003. This decrease was
primarily due to lower gains from foreign currency transactions.
Income Tax Expense (Benefit). The provision for income taxes increased from
a net benefit of $178,000 in the three months ended June 30, 2002 to tax expense
of $1,262,000 in the three months ended June 30, 2003. This resulted from the
increase in pre-tax income. The income tax provision represents an effective tax
rate of approximately 36% in both 2002 and 2003.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2002 TO SIX MONTHS ENDED JUNE 30, 2003.
Net Revenues. Net revenues decreased by 2% from $102,603,000 in the six
months ended June 30, 2002 to $100,377,000 in the six months ended June 30,
2003.
License Fees. Revenue from new software licenses declined 7% from
$44,302,000 in the six months ended June 30, 2002 to $41,225,000 in the six
months ended June 30, 2003. These results were primarily due to a drop in new
sales of the Company's ShowCase business intelligence products and applications
for market research, partially offset by increased revenues of SPSS statistical
analysis tools and changes in currency exchange rates. As a percentage of net
revenues, software license revenues decreased from 43% in the six months ended
June 30, 2002 to 41% in the six months ended June 30, 2003.
Maintenance. Revenue from maintenance agreements and renewals of annual
licenses increased by 4% from $40,614,000 in the six months ended June 30, 2002
to $42,368,000 in the six months ended June 30, 2003. As a percentage of net
revenues, maintenance revenues increased from 40% in the six months ended June
30, 2002 to 42% in the six months ended June 30, 2003. This increase was due to
strong renewal rates for the Company's major offerings as well as changes in
currency exchange rates.
13
Services. Revenue from professional service engagements and training
decreased by 5% from $17,687,000 in the six months ended June 30, 2002 to
$16,784,000 in the six months ended June 30, 2003. This decrease was primarily
due to the decline in implementation services associated with the lower number
of new licenses of ShowCase products as well as a decline in training revenues.
Revenues from the SPSS Online (AOL) business remained relatively constant in the
six months ended June 30, 2003, compared to the comparable period of the prior
year. As a percentage of net revenues, services revenues remained flat at 17% in
the six months ended June 30, 2002 and the six months ended June 30, 2003.
Cost of License and Maintenance Revenues. Cost of license and maintenance
revenues consists of costs of goods sold, amortization of capitalized software
development costs, and royalties paid to third parties. Cost of license and
maintenance revenues decreased 31% from $11,267,000 in the six months ended June
30, 2002 to $7,762,000 in the six months ended June 30, 2003. As a percentage of
net revenues, cost of license and maintenance revenues decreased from 11% in the
six months ended June 30, 2002 to 8% in the six months ended June 30, 2003. The
decrease was due to the decline in license revenues, lower Hyperion Solutions
royalties, and lower amortization of acquired technology assets.
Sales, Marketing, and Services. Sales, marketing, and services expenses
decreased 8% from $61,381,000 in the six months ended June 30, 2002 to
$56,443,000 in the six months ended June 30, 2003. As a percentage of net
revenues, sales, marketing, and services expenses decreased from 60% in the six
months ended June 30, 2002 to 56% in the six months ended June 30, 2003. This
decrease was primarily a result of the reduction in the number of sales and
professional services personnel as a result of the field reorganization
implemented in August 2002, partially offset by increases due to changes in
foreign currency exchange rates.
Research and Development. Research and development expenses increased by 9%
from $20,102,000 in the six months ended June 30, 2002 to $21,926,000 in the six
months ended June 30, 2003. As a percentage of net revenues, research and
development expenses were 20% in the six months ended June 30, 2002 and 22% in
the six months ended June 30, 2003. This increase in research and development
expenses is primarily due to the addition of LexiQuest development personnel and
changes in currency exchange rates, partially offset by subsequent reductions in
the number of LexiQuest developers and lower consulting costs for internal
software development projects.
14
General and Administrative. General and administrative expenses decreased
by 17% from $10,344,000 in the six months ended June 30, 2002 to $8,573,000 in
the six months ended June 30, 2003. As a percentage of net revenues, general and
administrative expenses decreased from 10% in six months ended June 30, 2002 to
8% in the six months ended June 30, 2003. This decrease was primarily due to
cost reduction programs associated with the field reorganization implemented in
August 2002 and lower administrative costs associated with the NetGenesis and
LexiQuest acquisitions, partially offset by the addition of finance
professionals in the United States and changes in foreign currency rates.
Special General and Administrative. Special general and administrative were
$3,192,000 in six months ended June 30, 2002 and 3% of net revenues. These
charges were associated with the acquisitions of NetGenesis and LexiQuest,
including professional fees of approximately $1,218,000, severance payments as
well as retention and other bonuses of approximately $1,691,000, and travel,
meeting, and other costs of approximately $283,000 that did not meet the
definition of "merger-related" costs under established guidelines. No special
general and administrative charges were incurred in the six months ended June
30, 2003.
Merger-related Costs. Merger-related costs were $2,260,000 in the six
months ended June 30, 2002 and 2% of net revenues. Merger-related expenses were
associated with the NetGenesis and netExs acquisitions, including $1,464,000 of
severance and merger-related employee bonuses, $596,000 of professional fees,
and $200,000 of other costs. No merger-related costs were incurred in the six
months ended June 30, 2003.
Acquired In-Process Technology. Acquired in-process technology costs were
$150,000 in the six months ended June 30, 2002 related to the Company's
acquisition of netExs.
Net Interest Income (Expense). Net interest income was income of $52,000 in
the six months ended June 30, 2002 and an expense of $386,000 in the six months
ended June 30, 2003. The change was primarily due to higher net debt levels and
imputed interest related to the Company's transaction with AOL.
Other Income. Other income was $879,000 in the six months ended June 30,
2002 and $347,000 in the six months ended June 30, 2003. This decrease was
primarily due to lower gains from foreign currency transactions.
Income Tax Expense (Benefit). The provision for income taxes increased from
a net benefit of $1,858,000 in the six months ended June 30, 2002 to tax expense
of $2,028,000 in the six months ended June 30, 2003. This increase was due to
the increase in pre-tax income. The income tax provision represents an effective
tax rate of approximately 36% in both 2002 and 2003.
15
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2003, working capital was $6,094,000 with a current ratio of
1.1 to 1. Excluding current deferred revenue, working capital was $52,562,000
with a current ratio of 2.2 to 1.
Cash flow from operations totaled $13,405,000 in the six months ended June
30, 2003. In the six months of 2003, cash from operations came primarily from
net operating activities ($12,385,000 including net income of $3,606,000 and
depreciation/amortization of $8,779,000), receivable collections of $5,260,000
and deferred revenues of $2,865,000, partially offset by reductions in accrued
expenses of ($6,683,000). Average Days Sales Outstanding was 78 compared to 79
in the quarter ending December 31, 2002.
Cash flow from operations increased $12,939,000 from $466,000 in the six
months ended June 30, 2002 to $13,405,000 in the six months ended June 30, 2003.
This increase primarily reflected improved profitability of $6,413,000 resulting
from the decrease in operating expenses with the cost reduction programs
implemented in August 2002 as well as the timing of deferred revenue
($8,670,000). The cost reduction programs reduced the SPSS field sales force by
25%, total staff by 7%, and total payroll by 8%. In addition, the Company closed
its offices in Miami, Florida, and reduced its facilities in Chicago, Illinois;
London, England; Cambridge, Massachusetts; and Point Richmond, California. These
improvements were partially offset by reduction in accrued expenses including
royalty payments and the payment of certain acquisition and special general and
administrative charges established in 2002.
Investing activities resulted in the net use of $10,782,000 in the six
months ended June 30, 2002 and the net use of $9,532,000 in the six months ended
June 30, 2003. In 2002, cash was primarily used for capital expenditures of
$8,777,000 and capitalized software development costs of $5,175,000. SPSS also
paid $2,500,000 to acquire LexiQuest and made scheduled payments totaling
$3,625,000 to AOL, partially offset by proceeds of $9,792,000 from the
maturities and sales of marketable securities. In the six months ended June 30,
2003, $1,599,000 in cash was used for capital expenditures, along with
$4,308,000 for capitalized software development costs, and scheduled payments
totaling $3,625,000 related to the AOL transaction.
Cash provided by financing activities was $6,407,000 in the six months ended
June 30, 2002 and $1,846,000 the six months ended June 30, 2003. In the six
months ended June 30, 2002, financing activities provided cash of $5,575,000
from net borrowings under the line-of-credit agreement and proceeds of $832,000
from the issuance of common stock, primarily through the exercise of stock
options and employee stock purchases through the employee stock purchase plan.
In the six months ended June 30, 2003, financing activities provided proceeds of
$1,846,000, including $1,146,000 from net borrowings under the line-of-credit
agreement and $700,000 from the issuance of common stock, primarily through
employee stock purchases through the employee stock purchase plan.
16
At June 30, 2003, the Company's Borrowing Base under its credit facility
with Foothill Capital Corporation was $10,000,000 of which $9,646,000 was
borrowed at an annual interest rate of 6.25% per annum. In addition, SPSS has a
revolving line of credit with Foothill Capital Corporation, the maximum amount
under which SPSS may borrow depending upon the value of the Company's eligible
accounts receivable generated within the United States. At June 30, 2003, the
amount available under the revolving line of credit was $5,775,000, none of
which was borrowed.
The term loan portion of the facility bears interest at a rate of 2.5%
above prime, with potential future reductions of up to 0.5% in the interest rate
based upon SPSS achieving specified EBITDA targets. One component of the
revolving line of credit will bear interest at a rate of prime plus 3.0%. On the
remainder of the revolving line of credit, SPSS may select interest rates of
either prime plus 0.25% or LIBOR plus 2.5% with respect to each advance made by
Foothill. The term loan of $10,000,000 will be paid down evenly over the four
(4) year period (i.e., $2,500,000 per year over the next four years).
SPSS intends to fund its future capital needs through operating cash flows
and borrowings on its credit facility. The Company anticipates that amounts
available from cash and cash equivalents on hand, under its line of credit, and
cash flows generated from operations, will be sufficient to fund its 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.
SUMMARY DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following table reflects a summary of the Company's contractual cash
obligations (in thousands):
LESS THAN
TOTAL 1 YEAR 1-3 YEARS 4-5 YEARS AFTER 5 YEARS
---------- --------- ---------- ---------- -------------
United Kingdom mortgage........... $ 841 $ 305 $ 240 $ 205 $ 91
Litigation settlement............. 595 595 -- -- --
Notes payable..................... 9,646 2,500 7,146 -- --
Merger consideration.............. 15,551 7,250 8,301 -- --
Capital lease commitments......... 11 11 -- -- --
17
CRITICAL ACCOUNTING POLICIES
The Company's consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America. As
such, SPSS makes certain estimates, judgments and assumptions that it believes
are reasonable based upon the information available. These estimates and
assumptions affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the periods presented. The Company's critical accounting policies include
revenue recognition, capitalization of software development costs, impairment of
long-lived assets, the estimation of credit losses on accounts receivable and
the valuation of deferred tax assets. For a discussion of these critical
accounting policies, see "Critical Accounting Policies and Estimates" in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002, filed
with the Securities and Exchange Commission.
INTERNATIONAL OPERATIONS
Revenues from international operations were 48% of total net revenues in both
the three months ended June 30, 2002, and June 30, 2003, and 48% and 52% of
total revenues in the six months ended June 30, 2002 and 2003, respectively.
This percentage difference in the six month period was principally due to the
effects of foreign currency exchange rates.
RECENT ACCOUNTING PRONOUNCEMENTS
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133. The
new Statement amends Statement 133 for decisions made: 1) as part of the
Derivatives Implementation Group process that effectively required amendments to
Statement 133; 2) in connection with other Board projects dealing with financial
instruments; and 3) regarding implementation issues raised in relation to the
application of the definition of a derivative, particularly regarding the
meaning of an "underlying" and the characteristics of a derivative that contain
financing components. The statement is generally effective for contracts entered
into or modified after June 30, 2003 and is to be applied prospectively. The
Company is currently reviewing the impact that SFAS No. 149 will have on its
financial position and future results of operations.
18
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 applies specifically to a number of financial instruments that companies
have historically presented within their financial statements either as equity
or between the liabilities section and the equity section, rather than as
liabilities. SFAS 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The Company is currently
evaluating the impact of this SFAS on its consolidated financial statements.
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, currency fluctuations
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
SPSS is exposed to market risk from fluctuations in interest rates on
borrowings under its borrowing arrangement that bears interest at 2.5% above the
prime rate. As of June 30, 2003, the Company had $9,646,000 outstanding under
this line of credit. A 100 basis point increase in interest rates would result
in an additional $965,000 of annual interest expense, assuming the same level of
borrowing.
SPSS 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, its results can be significantly affected by changes in foreign
currency exchange rates. To manage the Company's exposure to fluctuations in
currency exchange rates, SPSS may enter into various financial instruments, such
as options. These instruments generally mature within 12 months. The Company's
derivative instruments do not qualify for hedge accounting treatment under SFAS
No. 133. Accordingly, gains and losses related to changes in the fair value of
these instruments are recognized in the statement of operations in each
accounting period. Were the foreign currency exchange rates to depreciate
immediately and uniformly against the U.S. dollar by 10 percent from levels at
June 30, 2003, SPSS management expects this change would have a materially
adverse effect on its financial results.
At June 30, 2003, SPSS did not have any option contracts outstanding.
19
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
SPSS maintains disclosure controls and procedures, which have been designed
to ensure that information related to the Company is recorded, processed,
summarized and reported by SPSS on a timely basis. SPSS has reviewed its
internal control structure and these disclosure controls and procedures. In
connection with the Company's review of its disclosure controls and procedures,
SPSS has established a compliance committee that is responsible for accumulating
potentially material information regarding its activities and considering the
materiality of this information. The compliance committee (or a subcommittee) is
also responsible for making recommendations regarding disclosure and
communicating this information to the Company's chief executive officer and
chief financial officer to allow timely decisions regarding required disclosure.
The SPSS compliance committee is comprised of the Company's senior legal
official, principal accounting officer, chief investor relations officer,
principal risk management officer, and certain other members of the SPSS senior
management.
As of the end of the period covered by this quarterly report, the Company's
Chief Executive Officer, Jack Noonan, and Chief Financial Officer, Edward
Hamburg, with the participation of the compliance committee, carried out an
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based upon this evaluation, Mr. Noonan and
Mr. Hamburg concluded that the disclosure controls and procedures of SPSS are
effective in causing material information to be recorded, processed, summarized,
and reported by the Company's management on a timely basis and ensuring that the
quality and timeliness of public disclosures by SPSS comply with its disclosure
obligations under the Securities Exchange Act of 1934.
Changes in Internal Controls
There were no significant changes in the internal controls over the
financial reporting of SPSS during the period covered by this quarterly report
or in other factors that could materially affect, or reasonably likely to
materially affect, these internal controls over financial reporting after the
date of the most recent evaluation.
20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
SPSS Inc. has been named as a defendant in a lawsuit filed on December 6,
2002 in the United States District Court for the Southern District of New York,
under the caption Basu v. SPSS Inc., et al., Case No. 02CV9694. The complaint
alleges that, in connection with the issuance and initial public offering of
shares of common stock of NetGenesis Corp., the registration statement and
prospectus filed with the Securities and Exchange Commission in connection with
the IPO contained material misrepresentations and/or omissions. The alleged
violations of the federal securities laws took place prior to the effective date
of the merger in which the acquisition subsidiary of SPSS merged with and into
NetGenesis Corp. NetGenesis Corp. is now a wholly owned subsidiary of SPSS.
Other defendants to this action include the former officers and directors of
NetGenesis Corp. and the investment banking firms that acted as underwriters in
connection with the IPO. The plaintiff is seeking unspecified compensatory
damages, prejudgment and post-judgment interest, reasonable attorney fees,
experts' witness fees and other costs and any other relief deemed proper by the
Court. SPSS intends to vigorously defend itself against the claims set forth in
the complaint.
SPSS may also become party to various claims and legal actions arising in
the ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on June 18, 2003. The
following persons were nominated and elected to serve as Directors of the
Company for a term of three years or until their successors have been duly
elected and qualified:
NOMINEE FOR WITHHELD
- ------- --- ---------
Jack Noonan 11,638,119 4,129,402
Michael Blair 14,912,497 855,024
Promod Haque 15,435,861 331,660
In addition, Norman Nie, Kenneth Holec, Merritt Lutz, Bernard Goldstein and
William Binch remained as directors of the Company after the meeting.
Furthermore, the Company's stockholders approved amendments to the 2002
Equity Incentive Plan which modified the formula grants to be made to each
Non-Employee Director by the following votes:
FOR AGAINST ABSTAIN
--- ------- -------
10,714,411 4,433,462 619,648
21
Finally, the Company's stockholders ratified the appointment of KPMG LLP to
serve as the Company's independent auditor for fiscal year 2003 at the meeting
by the following votes:
FOR AGAINST ABSTAIN
--- ------- -------
15,194,408 570,735 2,378
ITEM 5. OTHER INFORMATION
It has been determined that SPSS should have filed historical and pro forma
financial statements with the Securities and Exchange Commission in connection
with the AOL transaction. Until these financial statements are filed or are
granted other relief by the SEC, SPSS will not be allowed to file any
registration statements with the SEC.
During the fiscal quarter ended June 30, 2003, SPSS adopted a Code of
Ethics for its directors, officers and employees. This Code of Ethics satisfies
all of the requirements of Section 406 of the Sarbanes - Oxley Act of 2002 and
the rules and regulations of the SEC promulgated pursuant to Section 406. In
many respects, however, the Code of Ethics exceeds the scope of the SEC
requirements. SPSS believes that this Code of Ethics will assist the Company in
conducting its business with the highest level of integrity and honesty.
22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits (Note: Management contracts and compensatory plans or
arrangements are identified with a "+" in the following list.)
INCORPORATION
EXHIBIT BY REFERENCE
NUMBER DESCRIPTION OF DOCUMENT (IF APPLICABLE)
- -------- ----------------------------------------------------------------------- ----------------
2.1 Agreement and Plan of Merger among SPSS Inc., SPSS ACSUB, Inc., (1), Ex. 2.1
Clear Software, Inc. and the shareholders named therein, dated
September 23, 1996.
2.2 Agreement and Plan of Merger among SPSS Inc., SPSS Acquisition Inc. (2), Annex A
and Jandel Corporation, dated October 30,1996.
2.3 Asset Purchase Agreement by and between SPSS Inc. and eltaPoint, Inc., (16), Ex. 2.3
dated as of May 1, 1997.
2.4 Stock Purchase Agreement among the Registrant, Edward Ross, Richard (3), Ex. 2.1
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, Edward Ross, Richard (3), Ex. 2.2
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 certain (4), Ex. 2.1
Shareholders of Quantime Limited listed on the signature pages
thereto, dated November 21, 1997.
2.7 Stock Purchase Agreement by and among Jens Nielsen, Henrik (4), Ex. 2.2
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 the (18), Ex. 2.1
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., Surveycraft Pty (20), Ex. 2.9
Ltd. and Jens Meinecke and Microtab Systems Pty Ltd., dated as of
November 1, 1998.
23
2.10 Stock Acquisition Agreement by and among SPSS Inc., Vento Software, (21), Ex. 2.1
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. and DataStat, S.A., (24), Ex. 2.11
dated as of December 23, 1999.
2.12 Agreement and Plan of Merger dated as of November 6, 2000, among (25), Ex. 2.1
SPSS Inc., SPSS Acquisition Sub Corp., and ShowCase Corporation.
2.13 Agreement and Plan of Merger dated as of October 28, 2001, among (29), Ex. 99.1
SPSS Inc., Red Sox Acquisition Corp. and NetGenesis Corp.
2.14 Stock Purchase Agreement by and among SPSS Inc., LexiQuest, S.A. (33), Ex. 2.14
and the owners of all of the issued and outstanding shares of
capital stock of LexiQuest, S.A., dated as of January 31, 2002.
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 Prentice Hall. (6), Ex. 10.5
10.4 Intentionally omitted.
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
10.17 Software Distribution Agreement between the Company and Banta (14), Ex. 10.19
Global Turnkey.
24
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 SPSS. (17), Ex. 10.22
10.21+ Second Amended and Restated 1995 Equity Incentive Plan. (19), Ex. A
10.22+ 1998 Bonus Compensation. (20), Ex. 10.23
10.23+ Third Amended and Restated 1995 Equity Incentive Plan. (22), Ex. 10.1
10.24 Intentionally omitted
10.25 Intentionally omitted
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. (27), Ex. 10.30
10.31 Stock Purchase Agreement by and between SPSS Inc. and Siebel (28), Ex. 10.31
Systems, Inc.
10.32+ 1999 Employee Equity Incentive Plan. (30), Ex. 4.1
10.33 Stock Purchase Agreement by and between SPSS Inc. and (31), Ex. 10.33
America Online, Inc.
10.34 Strategic Online Research Services Agreement by and between SPSS (32), Ex. 99.1
Inc. and America Online, Inc.*
10.35+ SPSS Inc. 2002 Equity Incentive Plan (34), Ex. 4.1
10.36 Intentionally omitted
10.37 Intentionally omitted
10.38 Intentionally omitted
25
10.39 Intentionally omitted
10.40 Intentionally omitted
10.41 Intentionally omitted
10.42 Service Agreement dated March 17, 1998, amended as of January 1, 2002, (37), Ex. 10.41
by and between SPSS Inc. (as successor by merger to ShowCase Corporation)
and Patrick Dauga.
10.43 Loan and Security Agreement, dated as of March 31, 2003, by and (37), Ex. 10.41
between SPSS Inc. and each of SPSS's subsidiaries that may become
additional borrowers, as Borrower, and Foothill Capital Corporation,
as Lender.
31.1 Certification of the Chief Executive Officer and President pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer and President pursuant
to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Chief Financial Officer pursuant to 18. U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.1 SPSS Inc. Code of Business Conduct and Ethics
- ---------------
* Portions of this Exhibit are omitted and have been filed separately with
the Securities and Exchange Commission pursuant to Rule 406 promulgated
under the Securities Act of 1933.
(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)
(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)
26
(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 September 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)
(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)
27
(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) Intentionally Omitted
(24) Previously filed with Form 10-K Annual Report of SPSS Inc. for the year
ended December 31, 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 the Form S-4 Registration Statement of SPSS
Inc., filed on December 19, 2000. (File No. 333-52216)
(27) Previously filed with the Form 10-K Annual Report of SPSS Inc. for the
year ended December 31, 2000. (File No. 000-22194)
(28) Previously filed with the Form S-3 Registration Statement of SPSS
Inc. filed on October 9, 2001. (File No. 333-71236)
(29) Previously filed with SPSS Inc. Report on Form 8-K, dated October 28,
2001, filed on October 29, 2001. (File No. 000-22194)
(30) Previously filed with the Form S-8 Registration Statement of SPSS Inc.
filed on September 15, 2000. (File No. 333-45900)
(31) Previously filed with the Form S-3 Registration Statement of SPSS Inc.
filed on December 12, 2001. (File No. 333-74944)
(32) Previously filed with SPSS Inc. Report on Form 8-K/A (Amendment No. 1)
filed on December 12, 2001. (File No. 000-22194)
(33) Previously filed with SPSS Inc. Report on Form 8-K, dated February 6,
2002, filed on February 21, 2002. (File No. 000-22194)
(34) Previously filed with the Form S-8 Registration Statement of SPSS Inc.
filed on June 18, 2002. (File No. 333-90694)
(35) Intentionally omitted
(36) Intentionally omitted
(37) Previously filed with the Form 10-K Annual Report of SPSS Inc. for the
year ended December 31, 2002. (File No. 000-22194)
(b) Reports on Form 8-K
SPSS filed the following reports on Form 8-K during the three months
ended June 30, 2003
28
The current report of SPSS Inc. on Form 8-K, dated April 30, 2003,
filed with the SEC on May 2, 2003. The Form 8-K reported that SPSS had
issued a press release announcing its results for its fiscal quarter
ended March 31, 2003 and attached a copy of this press release as an
exhibit. The report also described certain non-GAAP financial measures
included in the press release.
The current report of SPSS Inc. on Form 8-K, dated April 30, 2003,
filed with the SEC on May 5, 2003. The Form 8-K reported that SPSS had
held its First Quarter 2003 Earnings Release Conference Call on April
30, 2003. The Form 8-K report attached a transcript of the conference
call as an exhibit because the Company's Form 8-K filed with the SEC on
May 2, 2003 was not filed with the SEC before commencement of the call.
The current report of SPSS Inc. on Form 8-K, dated July 29, 2003, filed
with the SEC on July 31, 2003. The Form 8-K reported that SPSS had
issued a press release announcing its results for its fiscal quarter
ended June 30, 2003 and attached a copy of this press release as an
exhibit. The report also described certain non-GAAP financial measures
included in the press release.
The current report of SPSS Inc. on Form 8-K, dated July 30, 2003, filed
with the SEC on August 1, 2003. The Form 8-K reported that SPSS had
held its Second Quarter 2003 Earnings Release Conference Call on July
30, 2003. The Form 8-K report attached a transcript of the conference
call as an exhibit.
29
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
SPSS INC.
DATE: AUGUST 13, 2003 BY: /s/ JACK NOONAN
---------------------------------------
JACK NOONAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BY THE UNDERSIGNED, IN HIS CAPACITY AS THE PRINCIPAL
FINANCIAL OFFICER OF THE REGISTRANT.
DATE: AUGUST 13, 2003 BY: /s/ EDWARD HAMBURG
----------------------------------------
EDWARD HAMBURG
EXECUTIVE VICE-PRESIDENT, CORPORATE
OPERATIONS AND CHIEF FINANCIAL OFFICER
30
SPSS INC.
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
31.1 Certification of the Chief Executive Officer and President pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer and President pursuant
to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Chief Financial Officer pursuant to 18. U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.1 SPSS Inc. Code of Business Conduct and Ethics
31