-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, nHDiM8bjxqb/mVNgOzCx3soP+pIHwMp0VpeXNKmp8uRasl/244qRXJhqKKMM9Gr7 xOFQLRc++5kvm5QXVkYM/w== 0000906318-95-000003.txt : 19950606 0000906318-95-000003.hdr.sgml : 19950606 ACCESSION NUMBER: 0000906318-95-000003 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19950117 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STRUCTURAL DYNAMICS RESEARCH CORP /OH/ CENTRAL INDEX KEY: 0000820235 STANDARD INDUSTRIAL CLASSIFICATION: 7373 IRS NUMBER: 310733928 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-16230 FILM NUMBER: 95501552 BUSINESS ADDRESS: STREET 1: 2000 EASTMAN DR CITY: MILFORD STATE: OH ZIP: 45150 BUSINESS PHONE: 5135762400 MAIL ADDRESS: STREET 2: 2000 EASTMAN DRIVE CITY: MILFORD STATE: OH ZIP: 45212 10-K/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________ FORM 10-K/A __________________ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended Commission file number 33-16541 December 31, 1993 STRUCTURAL DYNAMICS RESEARCH CORPORATION An Ohio Corporation I.R.S. Employer Identification No. 31-0733928 2000 Eastman Drive, Milford, Ohio 45150 Telephone Number (513) 576-2400 __________________ Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of class Common Stock without par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __________________ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] __________________ As of March 7, 1994 the latest practicable date, 28,787,384 shares of Common Stock were outstanding. The aggregate market value of Common Stock held by non-affiliates was approximately $453,107,476 at that date. __________________ DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated: Registrant's definitive Proxy Statement dated March 16, 1994 -- Part III. Registrant's Form 8-K dated November 2, 1994 and Form 8-K/A dated November 15, 1994 -- Part III __________________ The Registrant hereby amends the following items and financial statements of its Annual Report on Form 10-K for the year ended December 31, 1993, as set forth below. Items not referenced below are not amended. Items referenced below are amended in their entirety as set forth below: PART I Item 1. Business. General Structural Dynamics Research Corporation (the "Company" or "SDRC") is a leading international supplier of mechanical design automation software and engineering services used by manufacturers for the design, analysis, testing and manufacturing of mechanical products. The Company's products and services significantly reduce product development time and cost, resulting in superior product quality by enabling customers to optimize product designs prior to production. The Company's strategy is to establish acknowledged technological leadership by marketing a highly functional set of mechanical design automation (MDA) software tools, and by providing related engineering consulting services. The Company operates in two business segments: software products and services, and engineering services. The Company was incorporated under the laws of the State of Ohio in 1967. During the past five years, it has restructured certain aspects of its business. In 1992, the Company and Control Data Systems, Inc. established a joint venture company, Metaphase Technology, Inc., to market product data management software. In 1989, the Company and Nissan Motor Co., Ltd. established a Japanese joint venture company, ESTECH Corporation, to provide engineering services in Japan and the Far East. Software Products and Services The Company develops and markets a comprehensive software system called I-DEAS (Trademark) (Integrated Design Engineering Analysis Software) which spans a broad range of applications for mechanical engineering including solid modeling, finite element modeling and analysis, computer-aided testing, drafting and manufacturing. I-DEAS software allows all members of the product development team to evaluate multiple product designs and manufacturing processes before final production. The latest release of the I-DEAS software, which began shipment in June 1993 is called the I-DEAS Master Series (Trademark). SDRC also markets a number of software products for product data management, allowing manufacturers to track, manage and control product information throughout the product development cycle. The Company's software is available on the leading engineering workstations. This hardware platform independence allows the Company's customers to operate in a heterogeneous environment, selecting and adding software modules for a broad range of hardware systems based upon their unique requirements. The productivity benefits of highly functional, integrated mechanical design automation software, when combined with the significant improvements in hardware price and performance, have increased the number of potential users who can utilize these design tools. The Company believes its products and services are of great value to companies which must accelerate design cycles in response to increased competition while simultaneously designing and manufacturing mechanical products in accordance with specific quality and cost criteria. A broad range of industries are potential users of these tools, with the highest concentration of users at aerospace, automotive, electronics and industrial equipment manufacturers. The Company's sales channels include a worldwide direct sales force which sells to end users, distributors, value-added resellers and hardware suppliers. In certain markets where the Company does not maintain a direct sales force, it sells its products through independent representatives. In 1993, one customer, Information Services International - - - Dentsu Ltd. ("ISID"), accounted for approximately 11% of the Company's consolidated revenues. In 1991, another customer, International Business Machines Corporation ("IBM"), accounted for approximately 10% of the Company's revenues. ISID is an independent distributor of the Company's I-DEAS software in the Japanese market. IBM was an OEM distributor of I-DEAS software worldwide. Competition The market for the Company's software products is highly competitive and the Company expects competitive pressure to increase in the future. To maintain its position of technological leadership, the Company must continually enhance its existing software products and pursue the development and introduction of new products. The Company competes against products in the CAE/CAD/CAM market including the CADAM and CATIA products marketed by IBM, the CADDS product marketed by Computervision Corporation, the UNIGRAPHICS product marketed by EDS, the I/EMS product marketed by Intergraph Corporation and the Pro/Engineer product marketed by Parametric Technology Corporation. The Company's future success will depend in a large part on its ability to further penetrate its installed customer base as well as the installed customer base of its competitors. The principal competitive factors in the mechanical design market for software are product functionality, product breadth, product performance, hardware platform independence, ease of use, price, customer support, technical reputation and size of installed customer base. Engineering Services Building on its extensive knowledge of mechanical design automation technology and engineering applications, the Company's engineering services division provides consulting services to improve the design of its customers' products, as well as to improve its customers' engineering and manufacturing processes. The segment also serves as a systems integrator providing advanced training and technology transfer to customers to enable them to integrate and optimize their mechanical design automation investment. The division applies advanced computer simulation methods and in-depth application expertise for several types of engineering services including design audits, product design, troubleshooting and engineering process design. The markets for the Company's engineering services are highly competitive and include manufacturers in the aerospace, automotive, electronics and industrial equipment segments. Marketing and sales activities for the Company's engineering services are conducted using a consultative sales strategy on a targeted key account basis. The Company's senior consultants maintain continuing contact with their client counterparts and serve as integral members of the customers' design and engineering teams. The principal competitive factors in the market are technical expertise, applications experience, availability of computer automation tools, price and responsiveness. The Company competes against in-house engineering departments, engineering consulting companies and systems integrators. Other Information Segment and geographic information is included in Note 9 to the Company's consolidated financial statements for the year ended December 31, 1993 - see Item 8. The Company has entered into various marketing, reference selling and similar arrangements with a number of hardware vendors including International Business Machines Corporation, Digital Equipment Corporation, Hewlett-Packard Company, Sun Microsystems, Inc. and Silicon Graphics, Inc. Under these agreements the Company's software products are generally licensed in conjunction with sales of hardware, either directly by the hardware manufacturers or by the Company in cooperation with the hardware vendors. The Company owns all the standard software products that it licenses with the exception of I-DEAS Documentation System, I-DEAS Drafting, I-DEAS View Markup, I-DEAS GNC, I-DEAS Post Writer, I-DEAS GNC Multi-Axis, I-DEAS Symbols Library, I-DEAS TMG, I-DEAS Wire EDM, DMCS, EDL, Metaphase 1.0 and portions of I-DEAS Mechanism Design, which it licenses from third parties. Under these license agreements, the Company pays a percentage royalty to the third parties. As is customary throughout the software industry, the Company relies both on copyrights and trade secrecy for proprietary protection of its software products. The duration of such protection is considered to be quite adequate given the constantly changing nature of the business. The Company also utilizes a number of trademarks, both registered and otherwise, with respect to its software products. The proprietary status of its trademarks lasts indefinitely, so long as the trademarks remain in use. Because of the nature of the Company's business, the Company does not believe that backlog is indicative of revenue for any succeeding period. The Company's engineering services business has contracts which vary in length from weeks to multiple years. Engineering services backlog, consisting of future payments under these contracts for work not yet performed, was approximately $4,300,000 at December 31, 1993 compared to approximately $3,600,000 at December 31, 1992 and $5,500,000 at December 31, 1991. The Company expects to complete a majority of the work required under the contracts included in the December 31, 1993 backlog figure during 1994. However, these contracts are subject to delays and/or cancellation by the customer and therefore engineering services' backlog at any given date is not necessarily reflective of actual engineering services' revenue for any future period. Research and development expense amounted to approximately $25,937,000, $25,369,000 and $20,966,000 in 1993, 1992 and 1991, respectively. As of December 31, 1993, the Company had 1,166 full-time employees, of whom 319 were engaged in research and development, 595 in sales and marketing, 165 in engineering services and 87 in general management and administration. In addition, the Company employed 21 part-time employees and cooperative students. PART II Item 6. Selected Financial Data. Selected financial data for the five-year period ended has been derived from the Company's consolidated financial statements. The data has been restated from that previously published to reflect corrections of errors in the accounting for (a) revenue recognition and revenue related expenses, (b) non- recoverable software construction costs, and (c) accrued expenses and losses. Additionally, the related income tax effects have been adjusted.
Years ended December 31 (in thousands, except share data) 1993 1992 1991 1990 1989 Statement of operations data: Net revenue $147,605 $149,041 $129,932 $114,269 $92,985 Income (loss) before income taxes and cumulative effect of accounting change (7,356) 13,907 14,525 16,378 14,711 Net income (loss) (11,732) 9,475 9,279 8,913 9,309 Earnings (loss) per share: Before cumulative effect of accounting change (.39) .29 .31 .32 .35 Net income (loss) (.39) .31 .31 .32 .35 Common and common equivalent shares outstanding 29,876 30,093 29,817 27,618 26,781 Balance sheet data: Working capital $ 27,474 $48,440 $45,207 $41,483 $32,874 Total assets 134,549 136,130 119,339 99,167 82,956 Long-term obligations, excluding current installments -- -- -- 2,604 2,752 Shareholders' equity 84,581 92,447 80,359 60,332 48,765
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company operates in two segments: software products and services, and engineering services. Revenue in the software products and services segment consists primarily of revenue from software licenses, software maintenance contracts and customer training. Revenue in the engineering services segment is provided by consulting activities which are undertaken on either a time and materials or a fixed fee contract basis. Software Products and Services The software products and services segment accounted for approximately 86%, 85% and 80% of SDRC's consolidated revenue for the years ended December 31, 1993, 1992 and 1991, respectively, and approximately (103)%, 99% and 96% of consolidated operating income (loss) for the same periods. Software segment revenue in 1993 was level with 1992. Management's expectation was that 1993 revenue would increase more than the performance ultimately achieved. The license revenue in 1993 suffered in part from technical problems associated with the I-DEAS Master Series initial product release in June 1993. As a result of the technical problems, a number of customers deferred large purchase decisions until after completion of their benchmark testing of the I-DEAS Master Series software after the Company had addressed the unforeseen problems. Additionally, revenue was impacted by difficult economic conditions in Europe and Japan and by a 42% decline from an OEM customer (see Note 2). Maintenance revenue derived from annual software maintenance contracts increased 9% primarily due to license increases in prior years. Software segment revenue outside of North America accounted for 61%, 64% and 62% of revenue in 1993, 1992 and 1991, respectively. The Company expects the international market to continue to account for a significant portion of total revenue. The software segment incurred an operating loss of $8,657,000 in 1993 compared to 1992 operating income of $12,084,000 resulting from certain increases in cost of revenue and selling, general and administrative expenses as described below. The 1992 revenue increase of 22% over 1991 in the software segment resulted from major customers selecting SDRC as their primary supplier for mechanical design automation software. In addition, value added resellers contributed to the increased revenue by targeting smaller customers, particularly in the United States. Maintenance revenue derived from annual software maintenance contracts increased 28% primarily due to the Company's expanding customer base. Operating income in 1992 of $12,084,000 remained unchanged in comparison to $11,751,000 in 1991. The revenue growth in 1992 of $22,956,000 was offset by increased expenses throughout the Company. The Company continued to invest in incremental resources in the sales, support and technical operations in anticipation of the I-DEAS Master Series marketing launch and release anticipated in the first half of 1993. Engineering Services In 1993, 1992 and 1991, the engineering services segment represented 14%, 15% and 20%, respectively, of the Company's consolidated revenue and (3%), 1% and 4% of consolidated operating income for the same periods. In 1993, 1992 and 1991, the engineering services segment revenue decreased 11%, 15% and 6%, respectively. The revenue reduction was due to the overall decline in consulting activities attributable to customers utilizing in-house engineering resources. The Company has continued to align the engineering services overhead cost structure with the anticipated revenue stream. Cost and Expenses Cost of Revenue. Cost of revenue consists principally of the amortization of capitalized costs for the construction of software, external commissions associated with indirect marketing channels, the cost of distributing software products and the cost of providing engineering services. Cost of revenue includes $9,539,000, $3,667,000 and $3,734,000 for amortization of software construction costs in 1993, 1992 and 1991, respectively. Cost of revenue in 1993 increased 13% over 1992 due to the commencement of amortization of software construction costs for the I-DEAS Master Series product upon its initial release in June 1993, and approximately $3,311,000 relating to software construction costs determined to be non-recoverable upon the release of the I-DEAS Master Series product. In addition, variable costs directly associated with software product licensing and distribution increased. Cost of revenue for 1992 decreased 4% from 1991 primarily due to the 15% decrease in engineering services consulting costs, consistent with the 15% decline in engineering services revenue. The decrease in the engineering services consulting costs was partially offset by an increase in the software segment's variable costs directly associated with the product licensing and distribution. Research and Development Expenses. Research and development expenses consist primarily of expenses for development of software products that, in accordance with the Statement of Financial Accounting Standards (SFAS) No. 86, cannot be capitalized. Research and development expenses exclude capitalized software development costs of $11,282,000, $9,365,000 and $7,514,000 in 1993, 1992 and 1991, respectively. Research and development expenses amounted to $25,937,000, $25,369,000, and $20,966,000, in 1993, 1992 and 1991, respectively. During 1991 and 1992, research and development expenses increased significantly in line with the Company's commitment to the technological advancement of its product line, primarily the development of the I-DEAS Master Series. Royalty fees paid to third parties under licensing agreements, another component of research and development expenses, increased significantly in each of the last three years. Third party royalty expenses increased 31% in 1993 over 1992 primarily due to fees associated with product data management (PDM) software developed by a joint venture investee. Selling, General and Administrative Expenses. Selling, general and administrative expenses consist principally of costs incurred in the software products and services segment and corporate staff. Selling, general and administrative expenses increased 18%, 26% and 25% in 1993, 1992 and 1991, respectively. During 1993, the Company incurred significant expenses from increased headcount in the sales and technical support organizations to promote direct sales and support new and existing customers. The primary focus was to assist the Company's customers in their transitioning efforts to the I-DEAS Master Series product introduced in June 1993. The Company anticipated higher revenue growth to offset the incremental headcount costs from sales and support activities. In 1993, the Company recognized expense of $4,200,000 for the settlement of a claim by a significant OEM customer. Certain discretionary employee benefits were reduced in 1993 to offset the lower than expected revenue growth as a result of technical issues associated with the initial introduction of I-DEAS Master Series. Throughout 1991 and 1992, the Company significantly increased headcount in the field organization to elevate sales and customer support in the upcoming transitioning efforts to I-DEAS Master Series and because of anticipated revenue growth which was ultimately less than had been expected. Continued focus and resources were placed on licensing its product through indirect channels aimed at increasing market share. Income Taxes During 1993, the Company recorded tax expense of $4,376,000 on a loss of $7,356,000. Although the Company incurred a loss in 1993, there was a provision for income taxes consisting primarily of taxes currently payable to foreign jurisdictions. Effective January 1, 1992, the Company adopted SFAS No. 109, "Accounting for Income Taxes." The cumulative effect (for periods prior to January 1, 1992) of applying this statement was to increase net income by $700,000 or $.02 per share for the year ended December 31, 1992. Liquidity and Capital Resources During 1993, 1992 and 1991, the Company generated cash flows from operations of $19,467,000, $21,855,000 and $14,968,000, respectively. The more significant sources of cash flows from operations for 1993 include amortization and depreciation, decrease in accounts receivable and increase in accounts payable and accrued expenses. Cash receipts greater than revenue in the fourth quarter resulted in the decrease in accounts receivable. The Company has working capital of $27,474,000 at December 31, 1993. As of December 31, 1993, the Company's principal sources of liquidity were $45,503,000 of cash and investments and an unsecured bank line of credit of $15,000,000. These existing sources of liquidity and funds anticipated to be generated from operations are expected to be adequate for the Company's cash requirements in the foreseeable future. See Note 8 to the consolidated financial statements for additional commitments and contingencies. The Company paid no dividends in 1991 through 1993 and intends to continue its policy of retaining earnings to finance future growth. The Company has no current commitments for material capital expenditures. The Company does not expect inflation to have a material impact on its future operations. Pending Changes in Accounting Principles In 1994 the Company will be required to adopt SFAS Nos. 112 and 115. See Notes 2 and 6 to the consolidated financial statements. Equity in Losses of Affiliate During 1992, the Company formed a corporate joint venture, Metaphase Inc. Metaphase is involved in developing and marketing PDM software. The Company's equity in the losses of affiliate represents its share of Metaphase start-up losses in 1992 and 1993. PART III Item 8. Financial Statements and Supplementary Data. Index to financial statements Financial statements Pages Report of independent accountants . . . . . . . . . . .13 Consolidated statement of operations for the three years ended December 31, 1993 . . . . . . . . . . . . . . . . . . . . . 14-15 Consolidated balance sheet at December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . 16-18 Consolidated statement of shareholders' equity for the three years ended December 31, 1993 . . . . . . . . . . . . . . . . . 19-20 Consolidated statement of cash flows for the three years ended December 31, 1993 . . . . . . 21-22 Notes to the consolidated financial statements . . 23-38 Financial statement schedules I Marketable securities - other investments . . .39 VIII Valuation and qualifying accounts . . . . . . . 44 X Supplementary income statement information . . 45 All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. Financial statements of companies in which the Company owns equity interests ranging from 30% to 50% have been omitted because the registrant's proportionate share of the income or losses from continuing operations before income taxes, and total assets of each such company is less than 20% of the respective consolidated amounts, and the investment in and advances to each company is less than 20% of consolidated total assets. Report of Independent Accountants To The Board of Directors and Shareholders of Structural Dynamics Research Corporation In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Structural Dynamics Research Corporation and its subsidiaries at December 31, 1993, 1992 and 1991, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As described in Note 2(i), in 1992 the Company changed its method of accounting for income taxes. Price Waterhouse LLP Cincinnati, Ohio January 13, 1995 CONSOLIDATED STATEMENT OF OPERATIONS Structural Dynamics Research Corporation
Year ended December 31 (in thousands, except share data) 1993 1992 1991 __________________________________________________ Revenue: Software products and services $ 93,591 $ 95,494 $79,297 Maintenance 33,882 31,023 24,264 Engineering services 20,132 22,524 26,371 Net revenue 147,605 149,041 129,932 Cost and expenses: Cost of revenue 37,503 33,141 34,570 Research and development expenses 25,937 25,369 20,966 Selling, general and administrative expenses 92,549 78,318 62,179 Total cost and expenses 155,989 136,828 117,715 Operating income (loss) (8,384) 12,213 12,217 Equity in losses of affiliate (614) (410) --- Other income, principally interest 1,642 2,104 2,308 Income (loss) before income taxes and cumulative effect of accounting change (7,356) 13,907 14,525 Income tax expense 4,376 5,132 5,246 Net income (loss) before cumulative effect of accounting change (11,732) 8,775 9,279 Cumulative effect of accounting change --- 700 --- Net income (loss) $(11,732) $9,475 $9,279 Earnings (loss) per share: Primary Before cumulative effect of accounting change $ (.39) $ .29 $ .33 Cumulative effect of accounting change --- .02 --- Net income (loss) $ (.39) $ .31 $ .33 Fully diluted Before cumulative effect of accounting change $ (.39) $ .29 $ .31 Cumulative effect of accounting change --- .02 --- Net income (loss) $ (.39) $ .31 $ .31 Common and common equivalent shares: Primary 29,876 30,093 28,424 Fully diluted 30,091 30,093 29,817
CONSOLIDATED BALANCE SHEET Structural Dynamics Research Corporation
December 31 (in thousands, except share data) 1993 1992 1991 Assets Current assets: Cash and cash equivalents $ 34,783 $ 31,661 $ 31,319 Investments 10,720 20,752 16,490 Trade accounts receivable, net 20,567 26,944 22,713 Other accounts receivable 5,902 7,993 4,235 Prepaid expenses 5,144 4,427 4,335 Total current assets 77,116 91,777 79,092 Long-term investments 10,547 --- --- Property and equipment, at cost: Computer and other equipment 36,055 32,248 29,515 Office furniture and equipment 9,079 8,217 6,958 Leasehold improvements 3,594 3,449 3,294 48,728 43,914 39,767 Less accumulated depreciation and amortization 32,897 27,243 24,853 Net property and equipment 15,831 16,671 14,914 Computer software construction costs, net 28,457 26,420 20,462 Other assets 2,598 1,262 4,871 Total assets $134,549 $136,130 $119,339
See accompanying notes to consolidated financial statements.
December 31 (in thousands, except share data) 1993 1992 1991 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 6,512 $ 4,037 $ 6,386 Accrued expenses 24,699 20,741 16,621 Accrued income taxes 5,371 5,358 438 Deferred revenue 13,060 13,201 10,440 Total current liabilities 49,642 43,337 33,885 Deferred income taxes and other 326 346 5,095 Commitments and contingencies (Note 8) Shareholders' equity: Common stock, stated value $.0069 per share. Authorized 100,000 shares in 1993 and 1992 and 50,000 shares in 1991; outstanding shares - 28,709, 28,136 and 27,081 net of 1,612, 1,762 and 2,036 shares in treasury 199 195 188 Capital in excess of stated value 45,376 41,474 38,440 Retained earnings 39,625 51,357 41,882 Foreign currency translation adjustment (619) (579) (151) Total shareholders' equity 84,581 92,447 80,359 Total liabilities and shareholders' equity $134,549 $136,130 $119,339
See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Structural Dynamics Research Corporation
Foreign Total Common stock Capital in currency share- outstanding excess of Retained translation holders' (in thousands) Shares Stated value stated value earnings adjustment equity Balances December 31, 1990 25,670 $ 178 $27,427 $32,603 $124 $ 60,332 Transactions involving employee stock plans 1,444 10 11,702 11,712 Purchases of treasury stock (33) (689) (689) Net income 9,279 9,279 Foreign currency translation adjustment (275) (275) Balances December 31, 1991 27,081 188 38,440 41,882 (151) 80,359 Transactions involving employee stock plans 1,178 8 4,621 4,629 Purchases of treasury stock (123) (1) (1,587) (1,588) Net income 9,475 9,475 Foreign currency translation adjustment (428) (428) Balances December 31, 1992 28,136 195 41,474 51,357 (579) 92,447 Transactions involving employee stock plans 582 4 4,067 4,071 Purchases of treasury stock (9) (165) (165) Net loss (11,732) (11,732) Foreign currency translation adjustment (40) (40) Balances December 31, 1993 28,709 $199 $45,376 $39,625 $(619) $ 84,581
See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENT OF CASH FLOWS Structural Dynamics Research Corporation
Year ended December 31 (in thousands) 1993 1992 1991 _____________________________________________________ Cash flows from operating activities: Net income (loss) $(11,732) $ 9,475 $ 9,279 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 6,990 7,009 6,885 Amortization of computer software construction costs 9,539 3,667 3,734 Provision for deferred income taxes --- (77) (5,929) Equity in losses of affiliate 614 410 --- Changes in assets and liabilities: (Increase) decrease in accounts receivable, net 8,468 (7,989) (1,497) Increase in prepaid expenses (717) (92) (1,254) Increase in accounts payable and accrued expenses 6,433 1,771 3,825 Increase (decrease) in accrued income taxes 13 4,920 (325) (Decrease) increase in deferred revenue (141) 2,761 250 _________________________ Net cash provided by operating activities 19,467 21,855 14,968 Cash flows from investing activities: Purchases of investments, net (515) (4,262) (16,490) Additions to property and equipment, net (6,150) (8,764) (10,940) Disposition of facilities --- --- 3,224 Additions to computer software construction costs (11,282) (9,365) (7,514) Additions to purchased computer software (296) (260) (3,540) Investment in joint venture (1,500) (1,477) --- Other, net (468) 2 404 ____________________________ Net cash used in investing activities (20,211) (24,126) (34,856) Cash flows from financing activities: Stock issued under employee benefit plans 4,071 4,629 11,712 Purchases of treasury stock (165) (1,588) (689) Decrease in long-term obligations --- --- (2,716) Net cash provided by financing activities 3,906 3,041 8,307 Effect of exchange rate changes on cash (40) (428) (275) Increase (decrease) in cash and cash equivalents 3,122 342 (11,856) Cash and cash equivalents: Beginning of period 31,661 31,319 43,175 End of period $34,783 $31,661 $31,319 Cash paid during the year for: Income taxes $ 4,450 $ 3,957 $ 3,915
See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Structural Dynamics Research Corporation (1) Introduction The financial statements included herein have been restated from those previously published to reflect corrections of errors in the accounting for (a) revenue recognition and revenue related expenses, (b) the write off of non-recoverable software construction costs, and (c) accrued expenses and losses. Additionally, the related income tax effects have been adjusted. (2) Summary of Significant Accounting Policies (a) Basis of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Investments in which the Company has significant influence, but not control, are accounted for under the equity method. All significant intercompany balances and transactions have been eliminated. (b) Revenue Recognition The use of software programs is licensed through the Company's direct sales force and by specific arrangements with certain hardware vendors and distributors. Revenue generated from licenses is recognized when the following criteria have been met: (a) a written order for the unconditional purchase of software has been received, (b) the Company has delivered the products and performed substantially all services for which it was committed, (c) the customer is obligated to pay and (d) realization of the amounts due is probable. When customers have the right to return products, revenue recognition is deferred until the right to return expires. Under the terms of a licensing agreement with an OEM customer, the Company was unable to determine the amount of revenue earned until cash was received from the customer. Amounts recorded as revenue on the cash basis were $7,877,000, $13,599,000 and $13,544,000 in 1993, 1992 and 1991, respectively. This licensing agreement was terminated subsequent to 1993. Maintenance revenue is recognized ratably over the term of the agreement and represents the substantial component of deferred revenue. The Company recognizes revenue and expense on engineering consulting contracts based on the percentage of completion method of accounting. When losses are estimated to occur on these contracts, the entire estimated loss is recognized at that time. (c) Earnings (Loss) Per Share Primary earnings (loss) per common and common equivalent share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares consist of stock option grants using the treasury stock method. Fully diluted earnings per share includes the additional dilutive effect of stock option grants using end of period market values, if that value is more dilutive. (d) Cash Equivalents The Company considers investments in certificates of deposit, commercial paper, overnight repurchase agreements with banks and interest bearing accounts with maturities of less than 90 days to be cash equivalents. Repurchase agreements totalled $15,566,000 $20,248,000 and $24,820,000 at December 31, 1993, 1992 and 1991, respectively. The Company takes possession of the securities underlying repurchase agreements and monitors the underlying market values to assure that sufficient collateral exists to cover the Company's initial investment and accrued interest. (e) Investments The Company invests in securities comprised of marketable securities and certificates of deposit which are carried at cost, approximating market value. Effective January 1, 1994, the Company will adopt Statement of Financial Accounting Standards (SFAS) No. 115. SFAS No. 115 will require the Company to distinguish between those securities held for sale and those for which the ability and intent to hold to maturity exist; the effect of adopting SFAS No. 115 is not material. (f) Property and Equipment Depreciation is primarily computed on the straight-line method. Leasehold improvements are amortized on the straight-line method over the lesser of the life of the lease or the estimated useful life of the improvement. The general ranges of years used in calculating depreciation and amortization are: computer and other equipment, 2-5 years; office furniture and equipment, 7 years; leasehold improvements, 1-10 years. (g) Computer Software Construction Costs The Company designs, develops and markets computer software products. Costs related to the construction of software are capitalized and are amortized over the useful lives of such software, which are estimated to be no more than five years. Computer software construction costs are shown net of accumulated amortization of approximately $27,357,000, $17,816,000 and $14,149,000 at December 31, 1993, 1992 and 1991, respectively. At December 31, 1993, computer software construction costs, net, include only those costs related to current software products. Amortization is the greater of the amount computed using (a) the ratio that current gross revenue bears to the total of current and anticipated future years' revenue, or (b) the straight-line method over the remaining estimated economic lives of the software products. The Company included in amortization expense approximately $3,311,000, $68,000 and $95,000 for the years ended December 31, 1993, 1992 and 1991, respectively, related to software construction costs determined to be non-recoverable. (h) Foreign Currency Translation and Hedging Contracts The functional currency of the engineering services foreign operations is their local currency and their assets and liabilities are translated at year-end exchange rates. Translation gains and losses are not included in determining net income but are accumulated in a separate component of shareholders' equity. For foreign software products and services operations, the U.S. dollar is the functional currency and foreign currency gains and losses, which are not material, are included in determining net income. In 1993, the Company began hedging certain portions of its exposure to foreign currency fluctuations by utilizing forward foreign exchange contracts. At December 31, 1993, the Company had contracts maturing in January, 1994 to exchange foreign currencies for $12,100,000. Gains and losses associated with these financial instruments are recorded currently in income to offset the foreign exchange gains and losses on the assets and liabilities being hedged. The interest element of the foreign currency instruments is recognized over the life of the contract. Should the counterparty to these contracts fail to meet its obligations, the Company would be exposed to foreign currency fluctuations, along with the cost, if any, to extinguish the contracts. (i) Income Taxes The Financial Accounting Standards Board has issued SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires a change from the deferred method of accounting for income taxes to the asset and liability method of accounting for income taxes. Under SFAS No. 109, 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. The standard requires that a valuation allowance be provided against a deferred tax asset when the Company believes it is more likely than not that the deferred tax amount will not be realized. Effective January 1, 1992, the Company adopted SFAS No. 109. The cumulative effect of applying this statement was to increase net income by $700,000 or $.02 per share in 1992. Previously, income taxes were accounted for under the deferred method. The Company does not accrue Federal income taxes on undistributed earnings of its foreign subsidiaries that have been, or are intended to be, permanently reinvested. Undistributed earnings amounted to approximately $2,986,000 at December 31, 1993. (j) Concentration of Credit Risk The Company's revenue is generated from customers in diversified industries, primarily in North America, Europe and the Far East. In 1993 and 1991 the Company generated revenue from a significant customer aggregating 11% and 10%, respectively. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains allowances for potential credit losses which management believes to be adequate in the circumstances. The Company invests its excess cash with major financial institutions with strong credit ratings and, by policy, limits the amount of credit exposure in any one such institution. (k) Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, investments, accounts receivable, accounts payable, accrued expenses and forward foreign exchange contracts approximate fair value. (3) Supplemental Consolidated Balance Sheet Data (in thousands)
December 31 Trade accounts receivable, net, consists of: 1993 1992 1991 Trade accounts receivable $22,918 $28,641 $23,453 Allowance for doubtful accounts and reserve for returns and allowances (2,351) (1,697) (740) $20,567 $26,944 $22,713 Accrued expenses consist of: Accrued compensation $9,470 $10,009 $9,284 Accrued taxes other than income taxes 2,036 1,406 1,289 Accrued marketing costs 3,936 223 -- Accrued royalties 102 1,548 1,277 Other 9,155 7,555 4,771 $24,699 $20,741 $16,621
(4) Leases Future minimum lease payments under noncancellable operating leases for the five years ending December 31, 1998 approximate $9,967,000, $6,678,000, $4,918,000, $3,877,000 and $3,505,000, respectively, and thereafter $58,198,000. Total rental expense under operating leases for the years ended December 31, 1993, 1992 and 1991 approximated $10,673,000, $9,673,000 and $8,226,000, respectively. (5) Shareholders' Rights Plan On July 19, 1988, the Board of Directors adopted a Shareholders' Rights Plan to protect shareholders' interests in the event of an unsolicited attempt to gain control of the Company. The Rights become exercisable if a person acquires 20% or more of the Company's outstanding common stock (Common Stock) or announces a tender offer which would result in a person or group acquiring 20% or more of the Common Stock (Distribution Date). If, at any time following the Distribution Date, and the Company has not redeemed the Rights, the Company becomes the surviving corporation in a merger or a person becomes the beneficial owner of 20% or more of the Common Stock (Triggering Date), each holder of a Right will have the right to purchase shares of Common Stock having a value equal to two times the Right's exercise price of $110. If, at any time following the Triggering Date, the Company is acquired in a merger or other business combination transaction in which the Company is not the surviving corporation, each holder of a Right shall have the right to purchase shares of Common Stock of the acquiring company having a value equal to two times the exercise price of the Right. The Rights expire on August 10, 1998, and may be redeemed by the Company for $.01 per Right. As a result of two stock splits, each outstanding share of Common Stock is now entitled to one fourth (1/4) of a Right. (6) Common Stock and Employee Benefit Plans On April 16, 1991, the shareholders adopted the 1991 Employee Stock Option Plan. Under the 1991 plan, the Company has reserved 5,300,000 shares of previously unissued common stock. Options to purchase such shares may be granted to key employees and executive officers at the fair market value at the date of grant. Also, on April 16, 1991, the shareholders adopted the Director's Non-Discretionary Stock Option Plan which converted the Amended and Restated 1986 Stock Option Plan into a non- discretionary plan allowing future grants to outside directors at the fair market value at the date of grant. Under the original 1986 plan, the Company had reserved 7,000,000 shares of previously unissued common stock. The status of all outstanding options previously granted to employees remained unchanged. Under the plans, employee options expire ten years from the date of grant and are exercisable as follows: 33% on the first anniversary of the grant date; 67% on the second anniversary; and all or any remaining options on the third anniversary until expiration. Director options expire five years from the date of grant and are exercisable 50% upon expiration of six months from the grant date and all or any remaining options on the first anniversary of the grant date until expiration. As of December 31, 1993 there were approximately 4,287,000 shares on which options were exercisable. (6) Common Stock and Employee Benefit Plans cont. Transactions with respect to the Company's stock options for the years ended December 31, 1991, 1992 and 1993 were as follows: Option Price Shares Per Share Shares under option December 31, 1990 5,491,000 $ 1.25-11.75 Granted 1,893,000 $13.09-24.44 Exercised 1,373,000 $ 1.25-11.75 Cancelled 71,000 $ 1.38-20.13 Shares under option December 31, 1991 5,940,000 $ 1.25-24.44 Granted 1,684,000 $10.59-28.75 Exercised 1,103,000 $ 1.25-20.13 Cancelled 135,000 $ 9.88-23.75 Shares under option December 31, 1992 6,386,000 $ 1.25-28.75 Granted 1,627,000 $13.06-20.18 Exercised 439,000 $ 1.25-16.25 Cancelled 164,000 $ 9.88-28.75 Shares under option December 31, 1993 7,410,000 $ 1.38-28.75 On December 12, 1990 the Company's Board of Directors established a Stock Purchase Plan. Under the plan all domestic full-time employees who are non-executive officers are entitled to purchase the Company's common stock at 90% of fair market value. Employees electing to participate must contribute at least one percent with a maximum of ten percent of the participants' base salary and commissions each month. All incidental expenses related to the issuance of these shares including the 10% discount have been charged to income. The plan has no fixed expiration date, may be terminated by the Company at any time and has no limitation on the number of shares that may be issued. The Company provides retirement benefits to employees principally through contributory defined contribution retirement plans. Expenses related to these plans totaled $943,000, $1,686,000, and $1,237,000 in 1993, 1992 and 1991, respectively. In 1993 the Financial Accounting Standards Board adopted SFAS No. 112, which requires that employers accrue for post-employment benefits other than pensions when certain criteria are met. The Company provides such benefits to certain employees pursuant to statutorily mandated programs and Company policy. The Company will adopt SFAS No. 112 in 1994. The cumulative impact of the adoption will be to reduce income by $3,896,000 in the first quarter of 1994. (7) Income Taxes (in thousands) The provision for income taxes consists of the following: Year ended December 31 1993 1992 1991 Federal: Current $ -- $ 387 $7,130 Deferred -- (77) (5,929) ___________________________________ -- 310 1,201 State 500 979 1,384 Foreign 3,876 3,843 2,661 _____________________________________ $4,376 $5,132 $5,246 Deferred state and foreign taxes are not material. The provision for income taxes differs from the amounts computed by using the statutory U.S. Federal income tax rate. The reasons for the differences are as follows: Computed expected income tax expense (benefit) ($2,575) $4,728 $4,938 Increase (reduction) resulting from: Losses without tax benefit 2,575 -- -- State taxes, net of federal benefit 500 646 914 Research and experimentation credit -- (354) (579) Foreign taxes, without current benefit 3,876 -- -- Other, net -- 112 (27) _________________________________ $4,376 $5,132 $5,246 The tax effects of temporary differences that gave rise to the deferred tax assets and deferred tax liabilities were as follows: Year ended December 31 1993 1992 Deferred tax assets: Revenue recognition and accounts receivable $18,276 $9,363 Property and equipment 959 895 Other liabilities and reserves 998 45 Tax credit carryforwards 2,661 2,823 Other 802 938 Total deferred tax assets 23,696 14,064 Valuation Allowance (14,628) (6,095) Net deferred tax assets 9,068 7,969 Deferred tax liabilities: Computer software construction costs, net of amortization (9,068) (7,969) Total net deferred taxes $ 0 $ 0 For the year ended December 31, 1991, the sources of deferred taxes were primarily the expensing of computer software construction costs, timing of revenue recognition and depreciation differences between financial statement and tax purposes. Of the $2,661 in credit carryforwards available at December 31, 1993, $360 of foreign tax credits expire in 1997, $750 and $800 of research and experimentation credits expire in 2007 and 2008, respectively, and $751 of alternative minimum taxes never expire. The net change in the valuation allowance for deferred tax assets was an increase of $8,533 in 1993 and $6,095 in 1992. Of these amounts, $1,692 and $6,057 respectively, are attributable to stock option deductions, the benefit of which will be credited to capital in excess of stated value when realized. (8) Commitments and Contingencies The Company had an unsecured $15,000,000 bank line of credit that may be used from time to time to facilitate short-term cash flow. The line of credit expired in December 1994. In September 1994, the Company announced that in the course of an internal examination, it had discovered that a number of purported sales to or through third-party distribution channels apparently did not reflect actual sales and that, as a result, it would be necessary to restate the Company's financial results (see Note 1). The Company also announced that it had terminated its Vice President and General Manager of Far East Operations. On September 15, 1994, the first of a total of 12 class action lawsuits and two derivative lawsuits was filed. All of these suits were filed in the United States District Court, Southern District of Ohio and alleged a variety of causes of action under the federal securities laws and Ohio corporate law. Two of the class action lawsuits were later voluntarily dismissed. The remaining cases were then consolidated into one proceeding entitled In Re: Structural Dynamics Research Corporation Securities Litigation, Consolidated Master File No. C-1-94-630. The complaint demands money damages in an unspecified amount. The plaintiffs in this case presently consist of 22 individuals who allegedly purchased shares of the Company's Common Stock between February 3, 1992 and September 14, 1994. The consolidated complaint contains allegations intended to support the certification of a class of plaintiffs. The defendants include the Company, certain directors and former officers. The Securities and Exchange Commission has commenced a formal private investigation of the Company arising out of the same facts which gave rise to the above-described litigation. The Company intends to defend itself vigorously in this litigation but is unable, at this time, to determine the amount of loss, if any, that may result from these matters. Management does not believe the ultimate outcome of these matters will have a material adverse impact on the Company's financial position. The Company is involved in other legal proceedings arising from the normal course of business, none of which, in management's opinion, is expected to have a material adverse impact on the Company's financial position. Pursuant to certain contractual obligations, the Company has agreed to indemnify its directors and officers under certain circumstances against claims arising from lawsuits. The Company may be obligated to indemnify certain of its directors and officers for the costs they may incur as a result of the lawsuits. (9) Segment and Geographic Information (in thousands)
Year ended December 31, 1993 Depreciation and Financial data Operating Identifiable Amortization Capital by segment Revenue Income (loss) Assets Expense Expenditures Software products and services $127,473 $(8,657) $ 67,922 $4,521 $ 4,340 Engineering services 20,132 273 8,455 1,316 1,323 Corporate -- -- 58,172 1,153 487 Consolidated $147,605 $(8,384) $134,549 $6,990 $ 6,150 Year ended December 31, 1992 Software products and services $126,517 12,084 $ 63,562 $4,270 $ 7,101 Engineering services 22,524 129 9,721 1,453 750 Corporate -- -- 62,847 1,285 913 Consolidated $149,041 $12,213 $136,130 $7,008 $ 8,764 Year ended December 31, 1991 Software products and services $103,561 $11,751 $ 52,774 $3,743 $ 2,628 Engineering services 26,371 466 12,409 2,314 1,957 Corporate -- -- 54,156 828 6,355 Consolidated $129,932 $12,217 $119,339 $6,885 $10,940
Financial data by geographic area (Corporate general expenses are not allocated to operating income by geographic area): Year ended December 31, 1993 Operating Identifiable Revenue Income (loss) Assets North America $ 57,760 $ 1,407 $ 41,821 Europe 47,497 (8,142) 30,352 Far East 42,348 4,209 4,204 Corporate -- (5,858) 58,172 Consolidated $147,605 $(8,384) $134,549 Year ended December 31, 1992 North America $ 54,188 $ 3,875 $ 40,550 Europe 49,266 783 24,200 Far East 45,587 14,447 8,533 Corporate -- (6,892) 62,847 Consolidated $149,041 $12,213 $136,130 Year ended December 31, 1991 North America $ 49,975 $ 2,762 $ 35,345 Europe 44,451 4,965 18,869 Far East 35,506 10,932 10,969 Corporate -- (6,442) 54,156 Consolidated $129,932 $ 12,217 $119,339 (10) Quarterly Results of Operations (Unaudited) The following table sets forth selected unaudited quarterly financial information (in thousands, except per share data) for 1993 and 1992. The Company believes that all necessary adjustments have been included to present fairly the selected quarterly information. Three months ended Year ended March, June September December December 31, 1993 30, 1993 30, 1993 31, 1993 31, 1993 Net revenue $ 33,506 40,428 35,057 38,614 $147,605 Operating results $ (47) (2,456) (4,117) (1,764) $ (8,384) Net income (loss) $ (636) (3,657) (4,991) (2,448) $(11,732) Earnings (loss) per share: Primary $ (.02) (.12) (.16) (.08) $ (.39) Fully diluted $ (.02) (.12) (.16) (.08) $ (.39) Three months ended Year ended March June September December December 31, 1992 30, 1992 30, 1992 31, 1992 31, 1992 Net revenue $ 34,369 39,160 32,686 42,826 $149,041 Operating results $ 3,459 5,624 692 2,438 $ 12,213 Net income $ 3,285 4,089 734 1,367 $ 9,475 Earnings per share: Primary $ .11 .14 .02 .05 $ .31* Fully diluted $ .11 .14 .02 .05 $ .31* * Per share amounts are not additive. SCHEDULE I STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES MARKETABLE SECURITIES - OTHER INVESTMENTS DECEMBER 31, 1993, 1992 AND 1991 (in thousands) Cost, Market and Carrying Value 1993 1992 1991 Repurchase Agreements with The Fifth Third Bank of Cincinnati, OH secured by U.S. Government securities $15,566 $20,248 $24,820 Repurchase Agreements with Wells Fargo Bank San Francisco, CA secured by U.S. Government and corporate securities 1,046 -- -- Repurchase Agreements with Gabelli O'Connor Greenwich, CT secured by U.S. Government and corporate securities 3,131 -- -- Repurchase Agreements with Smith Barney Shearson Chicago, IL secured by U.S. Government securities 3,030 -- -- Repurchase Agreements with Merrill Lynch and The Bank of New York, NY secured by U.S. Government securities -- -- 500 Certificates of Deposit in institutions insured by the U.S. Government 10,233 20,752 16,490 U.S. Treasury Obligations with Gabelli O'Connor Greenwich, CT 487 -- -- U.S. Treasury Obligations with Wells Fargo Bank San Francisco, CA 6,563 -- -- Government/Agency Variable Rate with Gabelli O'Connor Greenwich, CT 3,984 -- -- Total $44,040 $41,000 $41,810 Above amounts are included in the balance sheet captions of "cash and cash equivalents", "investments" and "long-term investments". SCHEDULE VIII STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (in thousands) Balance at Balance Beginning Charged to at End Description of Period Income Deductions of Period Accounts Receivable: Year ended December 31, 1991 $409 414 83 $ 740 Year ended December 31, 1992 $740 1,625 668 $1,697 Year ended December 31, 1993 $1,697 1,790 1,136 $2,351 SCHEDULE X STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (in thousands) 1993 1992 1991 Maintenance and repairs $ 3,245 $2,990 $2,920 Royalties $ 8,411 $6,422 $5,145 Advertising $ 4,297 $3,111 $2,763 Other items have been omitted in each year since they are less than 1% of total revenue or are disclosed elsewhere in the financial statements. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Reporting Matters Subsequent to the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 1993, KPMG Peat Marwick LLP withdrew its opinion with respect to the Company's financial statements for the years ended December 31, 1993, 1992 and 1991 and resigned as the Company's auditors under circumstances which may be deemed to have involved a disagreement. Such matters are described in the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 2, 1994, as amended by a Form 8-K/A filed with the Securities and Exchange Commission on November 15, 1994, each of which is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. A.1. and 2. Financial statements and financial statement schedules: See Part III, Item 8 for index to financial statements and related financial statement schedules, which is hereby incorporated herein by reference. A.3. Exhibits: Exhibit Reference 3(a) Amended Articles of Incorporation of Registrant, including subsequent updates Note (h) 3(b) Amended Code of Regulations of Registrant Note (a) 4 Shareholder Rights Plan Note (b) 10(a) Structural Dynamics Research Corporation Tax Deferred Capital Accumulation Plan dated January 1, 1989 Note (f) 10(b) Executive Employment Agreement between Registrant and Ronald J. Friedsam dated February 15, 1993 Note (h) 10(d) Form of Structural Dynamics Research Corporation Director Class A Common Stock Option Agreement Note (a) 10(e) Structural Dynamics Research Corporation 1991 Employee Stock Option Plan Note (e) 10(f) Structural Dynamics Research Corporation Directors' Non- Discretionary Stock Option Plan Note (e) 10(g) Joint Venture Agreement between Structural Dynamics Research Corporation and Nissan Motor Co., Ltd. Note (c) 10(h) Joint Venture Agreement between Structural Dynamics Research Corporation and Vickers, Inc., a Trinova Company Note (d) 10(i) Lease agreement (including amendments #1 and #2) between Park 50 Development Company Limited Partnership and Structural Dynamics Research Corporation Note (f) 10(j) Joint Venture Formation Agreement between Structural Dynamics Research Corporation and Control Data Systems, Inc. Note (g) 11 Statement regarding computation of per share earnings 22 Subsidiaries of the Registrant Note (h) 24 Consent of Independent Accountants NOTE REFERENCE: (a) Incorporated by reference to the Company's Registration Statement No. 33-16541,which was originally filed on August 17, 1987 and became effective on September 29, 1987. (b) Incorporated by reference to the Company's report on Form 8-K filed on August 3, 1988. (c) Incorporated by reference to the Company's report on Form 10-Q dated May 12, 1989. (d) Incorporated by reference to an exhibit filed in the Company's Annual Report on Form 10-K for the year ended December 31, 1989. (e) Incorporated by reference to the Company's definitive Proxy Statement dated March 11, 1991. (f) Incorporated by reference to an exhibit filed in the Company's Annual Report on Form 10-K for the year ended December 31, 1990. (g) Incorporated by reference to an exhibit filed in the Company's Annual Report on Form 10-K for the year ended December 31, 1992. (h) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 as originally filed on March 11, 1994. b. Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STRUCTURAL DYNAMICS RESEARCH CORPORATION January 13, 1995 By /s/ Albert F. Peter Date (Albert F. Peter, Acting Chief Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Albert F. Peter Acting Chief Executive January 13, 1995 (Albert F. Peter) Officer and Director (Date) (Principal Executive Officer) /s/ Jeffrey J. Vorholt Vice President January 13, 1995 (Jeffrey J. Vorholt) and Controller (Principal (Date) Financial and Accounting Officer) /s/ William P. Conlin Director January 13, 1995 (William P. Conlin) (Date) /s/ Ronald J. Friedsam Director January 13, 1995 (Ronald J. Friedsam) (Date) /s/ Robert P. Henderson Director January 13, 1995 (Robert P. Henderson) (Date) /s/ Ted H. McCourtney Director January 13, 1995 (Ted H. McCourtney) (Date) /s/ John E. McDowell Director January 13, 1995 (John E. McDowell) (Date) /s/ Gilbert R. Whitaker, Jr. Director January 13, 1995 (Gilbert R. Whitaker, Jr.) (Date) EX-11 2 EXHIBIT 11 STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS (LOSS) PER SHARE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (in thousands, except share data) 1993 1992 1991 PRIMARY Average shares outstanding 28,491 27,899 26,364 Net effect of dilutive stock options -- based on the treasury stock method using average market price 1,385 2,194 2,060 Total 29,876 30,093 28,424 Net income (loss) before cumulative effect of accounting change $(11,732) $ 8,775 $ 9,279 Cumulative effect of accounting change -- 700 -- Net income (loss) $(11,732) $ 9,475 $ 9,279 Primary per share amount: Before cumulative effect of accounting change $ (.39) $ .29 $ .33 Cumulative effect of accounting change -- .02 -- Net income (loss) $ (.39) $ .31 $ .33 FULLY DILUTED Average shares outstanding 28,491 27,899 26,364 Net effect of dilutive stock options -- based on the treasury stock method using the year-end market price, if higher than average market price 1,600 2,194 3,453 Total 30,091 30,093 29,817 Net income (loss) before cumulative effect of accounting change $(11,732) $ 8,775 $ 9,279 Cumulative effect of accounting change -- 700 -- Net income (loss) $(11,732) $ 9,475 $ 9,279 Fully diluted per share amount: Before cumulative effect of accounting change $ (.39) $ .29 $ .31 Cumulative effect of accounting change --- .02 --- Net income (loss) $ (.39) $ .31 $ .31 This computation is required by Regulation S-K Item 601 and is filed as an exhibit under Item 14a(3) of Form 10-K. SEC Release No. 33-5133 requires ". . . when per share earnings are disclosed, . . . the information with respect to the computation of per share earnings on both primary and fully diluted bases, presented by exhibit or otherwise, must be furnished even though the amounts of per share earnings on the fully diluted basis are not required to be stated under the provisions of Accounting Principles Board Opinion No. 15." EX-24 3 EXHIBIT 24 Consent of Independent Accountants The Board of Directors Structural Dynamics Research Corporation: We hereby consent to incorporation by reference in Registration Statement Nos. 33-20774, 33-22136, 33-40561, 33-41671 and 33-46011 on Form S-8 of Structural Dynamics Research Corporation of our report dated January 13, 1995, appearing Item 8 of this Form 10- K/A. Price Waterhouse LLP Cincinnati, Ohio January 13, 1995 -----END PRIVACY-ENHANCED MESSAGE-----