-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SMEcRqefts1+46sOhT3aMny5vFAsfvuXAcaG8ibOpC5h4/3eLVbOmsn6gYgK2zdv DxggPa6uSLAS+mAWRDyNHw== 0000906318-96-000018.txt : 19960513 0000906318-96-000018.hdr.sgml : 19960513 ACCESSION NUMBER: 0000906318-96-000018 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19960510 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STRUCTURAL DYNAMICS RESEARCH CORP /OH/ CENTRAL INDEX KEY: 0000820235 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [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: 96559991 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 Amendment No. 2 __________________ 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 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. /s/ Price Waterhouse LLP 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. The reconciliation of previously reported results to restated results for the years ended Deecember 31, 1993, 1992 and 1991 is as follows: December 31, 1993 --------------------------------- Previously Reported Adustment As restated Revenue $186,317 $(38,712) $147,605 Net income (loss) 14,284 (26,016) (11,732) Income (loss) per share $ 0.48 $ (0.87) $ (0.39) December 31, 1992 --------------------------------- Previously Reported Adjustment As restated Revenue $163,647 $(14,606) $149,041 Net income (loss) 14,490 (5,015) 9,475 Income (loss) per share $ 0.48 $ (0.17) $ 0.31 December 31, 1991 --------------------------------- Previously Reported Adjustment As restated Revenue $146,306 $(16,374) $129,932 Net income (loss) 17,917 (8,638) 9,279 come (loss) per share $ 0.60 $ (0.29) $ 0.31 (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. 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 Note (i) 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. (i) Previously provided in Annual Report on Form 10-K/A, Amendment No. 1, for the year ended December 31, 1993. b. Reports on Form 8-K None. Report on Form 10-K/A for year ended December 31, 1993 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 May 10, 1996 By: /s/ Jeffrey J. Vorholt Date Jeffrey J. Vorholt, Vice President, Chief Financial Officer and Treasurer 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 May 10, 1996 /s/ John E. McDowell May 10,1996 Albert F. Peter, (Date) John E. McDowell (Date) President, Chief Director Executive Officer and Director (Principal Executive Officer) /s/William P. Conlin May 10, 1996 /s/James W. Nethercott May 10,1996 William P. Conlin, (Date) James W. Nethercott (Date) Chairman of the Board Director /s/ Jeffrey J. Vorholt May 10, 1996 /s/Arthur B. Sims May 10, 1996 Jeffrey J. Vorholt, (Date) Arthur B. Sims (Date) Vice President, Director Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) /s/ Gilbert R. Whitaker, Jr. May 10, 1996 Gilbert R. Whitaker, Jr. (Date) Director /s/ Bannus B. Hudson May 10, 1996 Bannus B. Hudson (Date) Director EXHIBIT 24 EX-24 2 Consent of Independent Accountants The Board of Directors Structural Dynamics Research Corporation: We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 33-20774, 33-22136, 33-40561, 33-41671, 33-58701 and 33-72328) of Structural Dynamics Research Corporation of our report dated January 13, 1995, appearing in Item 8 of this Form 10-K/A. /s/ Price Waterhouse LLP Price Waterhouse LLP Cincinnati, Ohio May 10, 1996 -----END PRIVACY-ENHANCED MESSAGE-----